FR Doc E6-21379

[Federal Register: December 19, 2006 (Volume 71, Number 243)]
[Proposed Rules]
[Page 75902-75916]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19de06-24]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[EPA-HQ-OAR-2003-0079, FRL-8256-8]
RIN 2060-AJ99

Phase 2 of the Final Rule To Implement the 8-Hour Ozone National
Ambient Air Quality Standard--Notice of Reconsideration

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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[[Page 75903]]

SUMMARY: On November 29, 2005, EPA published Phase 2 of the final rule
to implement the 8-hour ozone national ambient air quality standard
(NAAQS). Subsequently, EPA received a petition to reconsider specific
aspects of this final rule. In this action, EPA is announcing its
decision to reconsider and take additional comment on three provisions
in the final Phase 2 8-hour ozone implementation rule: The
determination that electric generating units (EGUs) that comply with
rules implementing the Clean Air Interstate Rule (CAIR) and that are
located in States where all required CAIR emissions reductions are
achieved from EGUs meet the 8-hour ozone State implementation plan
(SIP) requirement for application of reasonably available control
technology (RACT) for nitrogen oxide (NOX) emissions; a new
source review (NSR) requirement allowing sources to use certain
emission reductions as offsets under certain circumstances; and an NSR
provision addressing when requirements for the lowest achievable
emission rate (LAER) and emission offsets may be waived. In addition,
EPA requests comment on postponing the submission date for the RACT SIP
for RACT SIPs for EGUs in the CAIR region. The EPA is seeking comment
only on the three issues specifically identified in this notice and the
submission date issue. We do not intend to respond to comments
addressing other provisions of the final 8-hour ozone implementation
rule that we are not reconsidering.

DATES: Comments. Comments must be received on or before January 18,
2007.
If anyone contacts us requesting a public hearing by December 29,
2006, the hearing will be held on January 3, 2007. If a public hearing
is requested, the record for this action will remain open until
February 2, 2007 to accommodate submittal of information related to the
public hearing. For additional information on the public hearing, see
the SUPPLEMENTARY INFORMATION section of this notice of
reconsideration.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2003-0079, by one of the following methods:
http://www.regulations.gov: Follow the on-line instructions for

submitting comments.
E-mail: a-and-r-docket@epa.gov.
Mail: EPA Docket Center, EPA West (Air Docket), Attention
Docket ID No. EPA-HQ-OAR-2003-0079, Environmental Protection Agency,
Mail Code: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460.
Please include two copies if possible.
Hand Delivery: EPA Docket Center (Air Docket), Attention
Docket ID No. EPA-HQ-OAR-2003-0079, Environmental Protection Agency,
1301 Constitution Avenue, NW., Room 3334, Washington, DC. Such
deliveries are only accepted during the Docket Center's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
Instructions: Direct your comments to Docket ID No. EPA-
HQ-OAR-2003-0079. The EPA's policy is that all comments received will
be included in the public docket without change and may be made
available on-line 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 www.regulations.gov Web site 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, any form of encryption, and be free of
any defects or viruses. For additional information about EPA's public
docket, visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.
For additional instructions on submitting

comments, go to the SUPPLEMENTARY INFORMATION section of this document.
Public Hearing: If a hearing is held it will be held at the U.S.
Environmental Protection Agency, 109 TW Alexander Drive, Research
Triangle Park, North Carolina 27709, Building C.
Docket: All documents in the docket are listed in
http://www.regulations.gov. Although listed in the index, some information is

not publicly available, i.e., CBI or other information whose disclosure
is restricted by statute. Certain other material, such as copyrighted
material, is not placed on the Internet and will be publicly available
only in hard copy form. Publicly available docket materials are
available either electronically in http://www.regulations.gov or in hard copy

at the EPA Docket Center (Air Docket), EPA/DC, EPA West, Room 3334,
1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is
open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding
legal holidays. The telephone number for the Public Reading Room is
(202) 566-1744. For information on accessing docket materials during
the temporary closure of the EPA docket center see note above.

FOR FURTHER INFORMATION CONTACT: For further information on the issue
relating to NOX RACT for EGU sources in CAIR States, contact
Mr. John Silvasi, Office of Air Quality Planning and Standards, U.S.
Environmental Protection Agency, (C539-01), Research Triangle Park, NC
27711, phone number (919) 541-5666, fax number (919) 541-0824 or by e-
mail at silvasi.john@epa.gov or Ms. Denise Gerth, Office of Air Quality
Planning and Standards, U.S. Environmental Protection Agency, (C539-
01), Research Triangle Park, NC 27711, phone number (919) 541-5550, fax
number (919) 541-0824 or by e-mail at gerth.denise@epa.gov. For further
information on the NSR issues discussed in this notice, contact Mr.
David Painter, Office of Air Quality Planning and Standards, (C504-03),
U.S. EPA, Research Triangle Park, North Carolina 27711, telephone
number (919) 541-5515, fax number (919) 541-5509, e-mail:
painter.david@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does This Action Apply to Me?

1. Issue on Determination of CAIR/RACT Equivalency for NOX
EGUs
Entities potentially affected by the subject rule for today's
action include States (typically State air pollution control agencies),
and, in some cases, local governments that develop air pollution
control rules, in the region affected by the CAIR.\1\ The EGUs are also
potentially affected by virtue of State action in SIPs that implement
provisions resulting from final rulemaking on today's action; these
sources are in the following groups:
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\1\ Federal Register of May 12, 2005 (70 FR 25162).

[[Page 75904]]

2. NSR Issues
Entities potentially affected by the subject rule for today's
action include sources in all industry groups. The majority of sources
potentially affected are expected to be in the following groups.

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Industry group SIC \a\ NAICS \b\
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Electric Services............................ 492 221111, 221112, 221113, 221119, 221121, 221122.
Petroleum Refining........................... 291 324110.
Industrial Inorganic Chemicals............... 281 325181, 325120, 325131, 325182, 211112, 325998, 331311,
325188.
Industrial Organic Chemicals................. 286 325110, 325132, 325192, 325188, 325193, 325120, 325199.
Miscellaneous Chemical Products.............. 289 325520, 325920, 325910, 325182, 325510.
Natural Gas Liquids.......................... 132 211112.
Natural Gas Transport........................ 492 486210, 221210.
Pulp and Paper Mills......................... 261 322110, 322121, 322122, 322130.
Paper Mills.................................. 262 322121, 322122.
Automobile Manufacturing..................... 371 336111, 336112, 336211, 336992, 336322, 336312, 336330,
336340, 336350, 336399, 336212, 336213.
Pharmaceuticals.............................. 283 325411, 325412, 325413, 325414.
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\a\ Standard Industrial Classification.
\b\ North American Industry Classification System.

Entities potentially affected by the subject rule for today's
action also include State, local, and Tribal governments that are
delegated authority to implement these regulations.

B. What Should I Consider as I Prepare My Comments for EPA?

1. Submitting CBI. Do not submit this information to EPA through
http://www.regulations.gov or e-mail. Clearly mark the part or all of the

information that you claim to be CBI. For CBI information in a disk or
CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as
CBI and then identify electronically within the disk or CD ROM the
specific information that is claimed as CBI. In addition to one
complete version of the comment that includes information claimed as
CBI, a copy of the comment that does not contain the information
claimed to be CBI must be submitted for inclusion in the public docket.
Information so marked will not be disclosed except in accordance with
procedures set forth in 40 CFR part 2.
2. Tips for Preparing Your Comments. When submitting comments,
remember to:
Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
Follow directions--The agency may ask you to respond to
specific questions or organize comments by referencing a Code of
Federal Regulations (CFR) part or section number.
Explain why you agree or disagree; suggest alternatives
and substitute language for your requested changes.
Describe any assumptions and provide any technical
information and/or data that you used.
If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
Provide specific examples to illustrate your concerns, and
suggest alternatives.
Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
Make sure to submit your comments by the comment period
deadline identified.

C. Where Can I Get a Copy of This Document and Other Related
Information?

In addition to being available in the docket, an electronic copy of
today's notice is also available on the World Wide Web. A copy of
today's notice will be posted at http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/
.

D. What Information Should I Know About the Public Hearing?

If requested, EPA will hold a public hearing on today's notice. The
EPA will hold a hearing only if a party notifies EPA by December 29,
2006, expressing its interest in presenting oral testimony on issues
addressed in today's notice. Any person may request a hearing by
calling Ms. Pamela S. Long at (919) 541-0641 before 5 p.m. by December
29, 2006. Any person who plans to attend the hearing should visit the
EPA's Web site at http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/ and

contact Ms. Pamela S. Long at (919) 541-0641 to learn if a hearing will
be held.
If a public hearing is held on today's notice, it will be held on
January 3, 2007 at the EPA, Building C, 109 T.W. Alexander Drive,
Research Triangle Park, NC 27709. Because the hearing will be held at a
U.S. Government facility, everyone planning to attend should be
prepared to show valid picture identification to the security staff in
order to gain access to the meeting room. Please check our Web site at
http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/ for information and

updates concerning the public hearing.
If held, the public hearing will begin at 10 a.m. and end at 2 p.m.
The hearing will be limited to the subject matter of this document.
Oral testimony will be limited to 5 minutes. The EPA encourages
commenters to provide written versions of their oral testimony either
electronically (on computer disk or CD ROM) or in paper copy. The list
of speakers will be posted on EPA's Web site at http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/.
Verbatim transcripts and written statements will

be included in the rulemaking docket.
A public hearing would provide interested parties the opportunity
to present data, views, or arguments concerning issues addressed in
today's notice. The EPA may ask clarifying questions during the oral
presentations,

[[Page 75905]]

but would not respond to the presentations or comments at that time.
Written statements and supporting information submitted during the
comment period will be considered with the same weight as any oral
comments and supporting information presented at a public hearing.
If a public hearing is held, the record for this action will remain
open until February 2, 2007 to accommodate submittal of information
related to the public hearing. Otherwise, if a hearing is not held, the
record for this action will remain open until January 18, 2007.

E. How Is This Notice Organized?

The information presented in this notice is organized as follows:

I. General Information
A. Does This Action Apply to Me?
B. What Should I Consider as I Prepare My Comments for EPA?
C. Where Can I Get a Copy of This Document and Other Related
Information?
D. What Information Should I Know About the Public Hearing?
E. How Is This Notice Organized?
II. Background
A. NOX RACT for EGUs in CAIR States
1. Proposed and Final Rules and Guidance
2. Petition for Reconsideration
B. NSR Issues
1. Our Previous Proposed and Final Rules
2. Petition for Reconsideration
III. This Action
A. NOX RACT for EGUs in CAIR States
1. Reconsideration and Request for Comment on NOX
RACT for EGUs in CAIR States
2. Supplemental Technical Analysis
3. Request for Public Comment Period on Submission Date for RACT
SIP for NOX for EGUs in CAIR Region
B. Provisions of Final Rule Regarding the Criteria for Emission
Reduction Credits From Shutdowns and Curtailments
1. Why We Changed Major Source NSR Criteria for Emission
Reduction Credits (ERC) From Shutdowns and Curtailments
2. Legal Basis for Changes to Criteria for Emission Reduction
Credits From Shutdowns and Curtailments
3. Reconsideration of Emission Reduction Credits Final Rule
Language and Request for Public Comments
C. Applicability of Appendix S, Section VI
1. Final Changes to Applicability of Appendix S, Section VI
2. Legal Basis for Changes to Applicability of Appendix S and
the Transitional NSR Program
3. Reconsideration of Appendix S, Section VI Final Rule Language
and Request for Public Comments
IV. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review
B. Paperwork Reduction Act
C. Regulatory Flexibility Act (RFA)
D. Unfunded Mandates Reform Act
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
G. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
I. National Technology Transfer and Advancement Act
J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
V. Statutory Authority

II. Background

On November 29, 2005, EPA published the final Phase 2 rulemaking to
implement the 8-hour ozone NAAQS (the Phase 2 Rule). That rule
established requirements relating to several specific elements of the
SIPs for nonattainment areas for the 8-hour ozone standard including:
The attainment demonstration; the RACT requirement; the reasonable
further progress (RFP) requirement; and new source review.
The Natural Resources Defense Council (NRDC) filed a petition for
reconsideration dated January 30, 2006 under section 307(d) of the
Clean Air Act (CAA) concerning three provisions of the Phase 2 rule.
The EPA has granted the petition and, in this notice, EPA announces its
decision to reconsider the three provisions discussed below and
requests public comment on these issues.

A. NOX RACT for EGUs in CAIR States

1. Proposed and Final Rules and Guidance
In the Phase 2 rulemaking to implement the 8-hour ozone NAAQS, EPA
determined that EGU sources complying with rules implementing the CAIR
requirements meet ozone NOX RACT requirements in States
where all required CAIR emissions reductions are achieved from EGUs
only.\2\ We noted that the CAIR final rulemaking established a region-
wide NOX emissions cap, effective in 2009, at a level that,
assuming the reductions are achieved from EGUs, would result in EGUs
installing emission controls on the maximum total capacity on which it
is feasible to install emission controls by that date. In addition, the
CAIR's 2015 NOX cap will eliminate all NOX
emissions from EGUs that are highly cost effective to control, and the
2009 cap represents an interim step toward that end. We also noted
additional arguments in the phase 2 rule, which we are summarizing
below under Section III. A. 1. below.
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\2\ However, as noted below, a State that elects to bring its
NOX SIP Call non-EGU sources into the CAIR ozone season
trading program may continue to rely on EPA's determination that
RACT is met for EGU sources covered by the CAIR trading program. It
may rely on this determination if and only if the State retains a
summer season EGU budget under the CAIR that is at least restrictive
as the EGU budget that was set in the State's NOX SIP
call SIP.
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2. Petition for Reconsideration
The EPA received a petition for reconsideration of the final Phase
2 rule from the NRDC. This petition raised several objections to EPA's
determination that, in certain circumstances, EGUs in CAIR States may
satisfy the NOX RACT requirement for ozone if they comply
with rules implementing the CAIR. Specifically, they argued that:
The EPA unlawfully and arbitrarily failed to seek public
comment on the final rule's determination that the CAIR satisfies
NOX RACT requirements.
The EPA's CAIR-RACT determinations are unlawful and
arbitrary because EPA's action illegally abrogates the Act's RACT
requirements.
The EPA granted NRDC's petition by letter of June 21, 2006. In this
action, EPA is announcing the initiation of the reconsideration process
and requesting additional public comment on this issue. Also, EPA is
supplementing the record with additional technical analyses that
addresses the determination that the CAIR satisfies the NOX
RACT requirement for covered EGUs.

B. NSR Issues

1. Our Previous Proposed and Final Rules
The major NSR provisions in the November 29, 2005 Phase 2
rulemaking were proposed as part of two different regulatory packages.
On July 23, 1996 (61 FR 38250), we proposed changes to the major NSR
program, including codification of the requirements of part D of title
I of the 1990 CAA Amendments for major stationary sources of volatile
organic compounds (VOC), NOX, particulate matter having a
nominal aerodynamic diameter less than or equal to 10 microns
(PM10), and CO. On June 2, 2003 (68 FR 32802), we proposed a
rule to implement the 8-hour ozone NAAQS. In the 2003 action, we
proposed a rule to identify the statutory requirements that apply for
purposes of developing SIPs under the CAA to implement the 8-hour ozone
NAAQS (68 FR 32802). We did not propose specific regulatory language
for implementation of NSR under the 8-hour NAAQS. However, we indicated

[[Page 75906]]

that we intended to revise the nonattainment NSR regulations to be
consistent with the rule for implementing the 8-hour ozone NAAQS (68 FR
32844). On April 30, 2004 (69 FR 23951), we published a final rule that
addressed classifications for the 8-hour NAAQS. The April 2004 rule
also included the NSR permitting requirements for the 8-hour ozone
standard, which necessarily follow from the classification scheme
chosen under the terms of subpart 1 and subpart 2.
In 1996, we proposed to revise the regulations limiting offsets
from emissions reductions due to shutting down an existing source or
curtailing production or operating hours below baseline levels
(``shutdowns/curtailments''). We proposed substantive revisions in two
alternatives that would ease, under certain circumstances, the existing
restrictions on the use of emission reduction credits from source
shutdowns and curtailments as offsets.
On July 23, 1996, we proposed to revise 40 CFR 52.24 to incorporate
changes made by the 1990 CAA Amendments related to the applicability of
construction bans (61 FR 38305). To clarify our intent, our proposed 8-
hour ozone NAAQS implementation rule in June 2003 explained that
section 52.24(k) remained in effect and would be retained. In that
action, we also proposed that we would revise section 52.24(k) to
reflect the changes in the 1990 CAA Amendments (68 FR 32846). On June
2, 2003 (68 FR 32802), we explained implementation of the major NSR
program under the 8-hour ozone NAAQS during the SIP development period,
and proposed flexible NSR requirements for areas that expected to
attain the 8-hour NAAQS within 3 years after designation.
In the final regulations, we included several revisions to the
regulations governing the nonattainment NSR programs mandated by
section 110(a)(2)(C) and part D of title I of the CAA. First, we
codified requirements added to part D of title I of the CAA in the 1990
Amendments related to permitting of major stationary sources in areas
that are nonattainment for the 8-hour ozone, particulate matter (PM),
and carbon monoxide (CO) NAAQS. Second, we revised the criteria for
crediting emissions reductions credits from shutdowns and curtailments
as offsets. Third, we revised the regulations for permitting of major
stationary sources in nonattainment areas in interim periods between
designation of new nonattainment areas and EPA's approval of a revised
SIP. Also, we changed the regulations that impose a moratorium (ban)
prohibiting construction of new or modified major stationary sources in
nonattainment areas where the State fails to have an implementation
plan meeting all of the requirements of part D.
2. Petition for Reconsideration
The NRDC petition for reconsideration raised two objections to the
major NSR aspects of the Phase 2 rulemaking:
Allowing sources to use emission reductions as offsets if
they occur after the last day of the base year for the SIP planning
process; and
Changes to Section VI of Appendix S allowing for waiver of
nonattainment major NSR requirements for some source categories.
The EPA granted the petition by letter of June 21, 2006 and in this
action EPA announces its decision to reconsider and to request
additional public comment on these issues.

III. This Action

A. NOX RACT for EGUs in CAIR States

1. Reconsideration and Request for Comment on NOX RACT for
EGUs in CAIR States
In this notice, EPA announces its decision to reconsider and
request additional comment on the determination that EGU sources
complying with rules implementing CAIR requirements meet ozone
NOX RACT requirements in States where all required CAIR
reductions are achieved from EGUs only.\3\ This determination provided
the basis for our determination that, for purposes of meeting the
NOX RACT requirement, States need not perform (or submit)
NOX RACT analyses for sources subject to a NOX
trading program meeting the CAIR NOX requirements (in a
State achieving all CAIR reductions from EGUs only). According to this
provision, States relying on this conclusion for the affected EGU
sources need to document their reliance on EPA's determination in their
RACT SIPs. A full discussion of EPA's rationale and the conditions
under which the above determination is valid appears in the Phase 2
Rule preamble at FR 71656-71658 (November 29, 2005). However, we are
summarizing that rationale here:
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\3\ However, see footnote 1 above and exception described below.
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In the Phase 2 rulemaking to implement the 8-hour ozone NAAQS, EPA
determined that EGU sources complying with rules implementing the CAIR
requirements meet ozone NOX RACT requirements in States
where all required CAIR emissions reductions are achieved from EGUs
only.\4\ We noted that the CAIR final rulemaking established a region-
wide NOX emissions cap, effective in 2009, at a level that,
assuming the reductions are achieved from EGUs, would result in EGUs
installing emission controls on the maximum total capacity on which it
is feasible to install emission controls by that date. In addition, the
CAIR's 2015 NOX cap will eliminate all NOX
emissions from EGUs that are highly cost effective to control, and the
2009 cap represents an interim step toward that end. We also noted the
following in the Phase 2 rulemaking:
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\4\ However, as noted below, a State that elects to bring its
NOX SIP Call non-EGU souces into the CAIR ozone season
trading program may continue to rely on EPA's determination that
RACT is met for EGU sources covered by the CAIR trading program. It
may rely on this determination if and only if the State retains a
summer season EGU budget under the CAIR that is at least as
restrictive as the EGU budget that was set in the State's
NOX SIP call SIP.
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The EPA's prior views on the details of the NOX
RACT program were set forth in the ``NOX Supplement to the
General Preamble,'' November 25, 1992 (57 FR 55620). In that document,
EPA determined that in the majority of cases, RACT will result in an
overall level of control equivalent to specified maximum allowable
emission rates (in pounds of NOX per million Btu) for
certain specified electric utility boilers. Section 4.6 of this
document (57 FR 55625) noted in part, ``In general, EPA considers RACT
for utilities to be the most effective level of combustion modification
reasonably available to an individual unit. This implies low
NOX burners, in some cases with overfire air and in other
instances without overfire air; flue gas recirculation; and conceivably
some situations with no control at all.'' The NOX Supplement
also provided, ``* * * the State may allow individual owners/operators
in the nonattainment area (or, alternatively, Statewide within an ozone
transport region) to have emission limits which result in greater or
lesser emission reductions so long as the areawide average emission
rates described above are met on a Btu-weighted average.'' (57 FR at
55625). The NOX Supplement also set forth (in section 4.7)
guidance on RACT for utility boilers other than those specified in
section 4.6 and also for other source categories. This section noted in
part, ``In general, EPA expects that NOX RACT for these
other sources will be set at levels that are comparable to the RACT
guidance specified above [in section 4.6] * * *''

[[Page 75907]]

``The [CAIR] budgets are based on the level of emissions
that can be achieved through highly cost-effective controls that EPA
determined are available from EGUs; however, States have flexibility to
choose the measures they will use to achieve the necessary emissions
reductions. Due to feasibility constraints, EPA is requiring the CAIR
budgets to be achieved in two phases. For summertime NOX,
the first phase starts in 2009 (covering 2009-2014); \5\ the second
phase of NOX reductions begins in 2015 (covering 2015 and
thereafter).'' (70 FR 71621). We also noted in the June 2, 2003,
proposal that we considered highly-cost effective controls for
NOX for EGUs and non-EGUs that were used to establish the
Statewide NOX emission caps in the NOX SIP call
to constitute a greater level of control than RACT. (68 FR 32839.)
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\5\ The CAIR first phase also provides an annual NOX
budget, which also starts in 2009.
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In general, we expect that the largest-emitting EGU
sources will be the first to install NOX control technology
and that such control technology will gradually be installed on
progressively smaller-emitting EGU sources until the ultimate cap is
reached.
We do not believe that requiring source-specific RACT
controls on EGUs in nonattainment areas will reduce total
NOX emissions from EGU sources covered by the CAIR below the
levels that would be achieved under the CAIR alone.
We believe that EGU source-specific RACT would result in
more costly emission reductions on a per ton basis. We noted the
following: ``As discussed more fully in the CAIR final rulemaking, EPA
has set the 2009 CAIR NOX cap at a level that, assuming the
reductions are achieved from EGUs, would result in EGUs installing
emission controls on the maximum total capacity on which it is feasible
to install emission controls by those dates. The 2015 NOX
cap is specifically designed to eliminate all NOX emissions
from EGUs that are highly cost effective to control (the first cap
represents an interim step toward that end) * * * In general, we expect
that the largest-emitting sources will be the first to install
NOX control technology and that such control technology will
gradually be installed on progressively smaller-emitting sources until
the ultimate cap is reached.'' (70 FR 71657, col. 3).
The combination of EGU source specific RACT and the CAIR
emissions cap would not reduce the collective total emissions from EGUs
covered by the CAIR, but would likely achieve the same total emissions
reductions as the CAIR alone, in a more costly way.
As a result, we believe that EGUs subject to the CAIR
NOX emissions cap meet the RACT requirement for
NOX (in States that require all CAIR NOX
reductions from EGUs).
The EPA made the finding for all areas in the CAIR region, such
that States meeting the CAIR emissions reduction requirements with
reductions from EGUs only, need not submit RACT analyses for covered
EGU sources subject to and in compliance with rules implementing CAIR
requirements. At this time, EPA is not proposing to make any changes to
this provision. The petition for reconsideration did not provide
information sufficient to convince EPA that any aspect of the
determination in the final Phase 2 8-hour ozone rule was in error, and
EPA's supplemental technical analysis lends support to this
determination. However, EPA acknowledges that the agency did not
provide sufficient opportunity for public comment on this
determination. We recognize the significant public interest in this
issue and request additional comment on this determination.
As explained in the preamble to the final Phase 2 Rule, EPA does
not believe that requiring source-specific RACT controls on EGUs in
nonattainment areas will reduce total NOX emissions from
sources covered by the CAIR below the levels that would be achieved
under the CAIR alone. As discussed more fully in the CAIR final
rulemaking, EPA has set the 2009 CAIR NOX cap at a level
that, assuming the reductions are achieved from EGUs, would result in
EGUs installing emission controls on the maximum total capacity on
which it is feasible to install emission controls by that date. Under
cap-and-trade programs such as the CAIR program, there is a direct
relationship between the total number of allowances held by
participating sources and the collective emissions from those sources.
EGU source-specific control requirements (such as EGU source-by-source
RACT) layered on top of the overall allowance-based emissions cap may
affect the temporal distribution of emissions (by reducing banking and
thus delaying early reductions) or the spatial distribution of
emissions (by moving them around from one place to another), but such
requirements do not affect total allowed emissions in the CAIR region.
Furthermore, we believe that EGU source-specific RACT could result
in more costly emission reductions on a per ton basis. The 2015
NOX cap is specifically designed to eliminate all
NOX emissions from EGUs that are highly cost effective to
control (the 2009 cap represents an interim step toward that end). In
general, we expect that the largest-emitting EGU sources will be the
first to install NOX control technology and that such
control technology will gradually be installed on progressively
smaller-emitting EGU sources until the ultimate cap is reached. If
States choose to require smaller-emitting EGU sources in nonattainment
areas to meet source-specific RACT requirements by 2009 (the required
compliance date for RACT), they would likely use labor and other
resources that would otherwise be used for emission controls on larger
EGU sources. Because of economies of scale, more boiler-makers (skilled
workers needed to install control equipment on EGUs) and other
resources may be required per megawatt of power generation for smaller
units than for larger units. Thus, the cost of achieving such
reductions would be greater on a per ton basis. If it were possible to
strategically target source-specific requirements at the EGUs that can
be controlled most cost effectively, then the imposition of source-
specific controls would achieve the same temporal and spatial
distribution of controls as the projected CAIR cap-and-trade program.
But this would require accurate forehand knowledge of each EGU's
control costs, which would be practically difficult for regulators to
obtain. Without this accurate source-specific control cost information,
the imposition of EGU source-specific requirements would make any given
level of emission reduction more costly than it would be under the cap-
and-trade program alone. Thus, in States that achieve all CAIR
reductions from EGUs, requiring both source-specific RACT on EGUs and
compliance with rules implementing the CAIR would not achieve greater
collective total emissions reductions from EGUs covered by the CAIR,
and the collective reductions would likely be achieved at higher
overall cost.
The CAIR is implemented on an annual and (for ozone) a seasonal
basis. We believe that these averaging periods on which RACT is being
implemented under the Phase 2 Rule are not in conflict with existing
EPA policy. In general, the RACT requirement is applied on a short-term
basis up to 24 hours.\6\ However, EPA guidance permits

[[Page 75908]]

averaging times longer than 24 hours under certain conditions.\7\
Although these earlier EPA guidance documents were directed at VOC, the
NOX Supplement to the General Preamble \8\ provides, ``While
this guidance has been largely directed at application within the VOC
program, much of the guidance is also applicable to RACT for stationary
sources of NOX.'' Section 4.6 (``RACT for Certain Electric
Utility Boilers'') of the NOX Supplement provides generally
applicable NOX RACT emission rates for certain utility
boilers on a pounds of NOX per million Btu basis and
indicates, ``Compliance with these limits may be determined on a
continuous basis through the use of a 30 day rolling average emission
rate, calculated each operating day as the average of all hourly data
for the pr[e]ceeding 30 operating days.''
---------------------------------------------------------------------------

\6\ 6 See, e.g., 52 FR at 45108 col. 2, ``Compliance Periods''
(November 24, 1987). ``VOC rules should describe explicitly the
compliance timeframe associated with each emission limit (e.g.,
instantaneous or daily). However, where the rules are silent on
compliance time, EPA will interpret it as instantaneous.
\7\ Memorandum from John O'Connor, Acting Director of the Office
of Air Quality Planning and Standards, January 20, 1984, ``Averaging
Times for Compliance with VOC Emission Limits--SIP Revision
Policy.''
\8\ 57 FR at 55625, col. 1 sec. 4.5 ``Relation to VOC RACT
Policies'' (November 25, 1992).
---------------------------------------------------------------------------

Other EPA guidance and policy allow for longer averaging times in
certain circumstances. The EPA's ``Economic Incentive Policy'' \9\
(EIP) provides guidance on use of long-term averages for RACT and
generally provides for averaging times of no greater than 30 days.
However, that guidance also states, ``For NOX sources that
are required to comply with the [Ozone Transport Region] NOX
MOU regulation or the NOX SIP call, the averaging time of an
emission limit must not exceed a compliance period of an area's ozone
season. Sources involved with EIP trades must meet all requirements
applicable to the program.'' The EPA interprets this policy as applying
to all trading programs and providing that the averaging time may not
exceed the period for determining compliance with the trading program
(e.g., one year for the CAIR annual trading programs--and the ozone
season for the CAIR ozone season trading program).
---------------------------------------------------------------------------

\9\ Improving Air Quality with Economic Incentive Programs,
January 2001, available at http://www.epa.gov/region07/programs/artd/air/policy/search.htm
.

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

In addition, the RACT emission reductions need to be permanent,
i.e., once implemented, they also need to be continuously implemented.
The EPA believes that emissions reductions from the CAIR will continue
to be applied on a permanent basis. The EPA believes that EGUs covered
by the CAIR that make the economic decision to install permanent
controls will generally reduce their emissions for an extended period
of time and not fluctuate in their level of control significantly over
short periods, since it will generally be in their economic interest to
control in order to generate emission allowances for sale to EGUs that
opt not to install controls. Sources that comply with the CAIR comply
with the overall NOX emission caps on an annual and (for
ozone) a seasonal basis. We note that sources covered by the CAIR are
expected to reduce emissions to either comply with State emission
limits (or to ``overcontrol'' beyond mere compliance and create surplus
emission reduction credits that would be used to provide allowances to
under-controlling sources) through permanent installation of emission
controls such as selective catalytic reduction or selective non-
catalytic reduction or combustion modification. As we noted in the
Phase 2 Rule preamble in relation to the NOX SIP call, ``In
addition to operating advanced controls at least in the ozone season,
many sources have installed combustion controls that function all the
time; emissions reductions from these controls will occur year round.''
(70 FR 71656). Therefore, because of the expected general level of
permanence of the controls on individual sources, EPA believes that
sources that install controls will generally continue to provide the
level of control for an extended period of time.
For these reasons, we continue to believe that EGUs subject to
rules implementing the CAIR NOX emission reduction
requirements satisfy the RACT requirements for NOX (in
States that require all CAIR NOX reductions from EGUs).
Thus, at this time, EPA is not proposing to make any changes to the
determination concerning NOX RACT for EGUs in CAIR States in
the Phase 2 Rule. The EPA continues to support its determination that
States achieving all CAIR reductions from EGUs need not submit RACT
analyses for EGU sources that are subject to and in compliance with
rules implementing the CAIR requirements.
The determination that EGU sources complying with rules
implementing CAIR requirements thereby also meet ozone NOX
RACT requirements applies only to EGUs in States achieving all required
CAIR reductions from EGUs, except as noted below. As explained in the
preamble to the final Phase 2 Rule, under the CAIR, a State may elect
to meet its State budget for NOX emissions solely through
requiring reductions from EGUs or through requiring reductions from a
combination of sources, including non-EGUs. If the State requires
reductions from sources other than EGUs, it is not eligible to
participate in the EPA-administered CAIR trading programs.
Additionally, separate provisions of the CAIR rule allow States to
choose to allow large NOX sources that are not EGUs to opt-
in to the trading programs. States that elect to allow such opt-ins,
and States that require reductions from sources other than EGUs in
implementing CAIR, may not rely on EPA's determination that EGUs
complying with rules implementing the CAIR satisfy NOX RACT.
If only part of the CAIR reductions are required from EGUs, and the
balance of the reductions obtained from non-EGU sources, then the
stringency of the CAIR EGU control would be diminished to some extent
(an amount that cannot be determined until a State submits a SIP
indicating which sources are participating in the program). Therefore,
in these cases, the rationale for our determination that these sources
satisfy the RACT requirement would not necessarily apply.
Nonetheless, a State that elects to bring its NOX SIP
Call non-EGU sources into the CAIR ozone season trading program may
continue to rely on EPA's determination that RACT is met for EGU
sources covered by the CAIR trading program. It may rely on this
determination if and only if the State retains a summer season EGU
budget under the CAIR that is at least as restrictive as the EGU budget
that was set in the State's NOX SIP call SIP. The rationale
for this determination is that the sources covered by the
NOX SIP call were shown to meet a level of NOX
control that exceeds EPA's presumption of control under NOX
RACT. Note that EPA is not reconsidering or requesting additional
comment on its determination that the NOX SIP Call
constitutes RACT for sources covered by the NOX SIP Call.
Therefore, as explained in the final Phase 2 Rule, if the summer season
EGU budget under CAIR is at least as restrictive as set out in the
NOX SIP call SIP, and if non-EGU sources after 2008 continue
to be subject to a SIP that regulates those non-EGU sources equally or
more stringently than the State's current rules meeting the
NOX SIP call, then those EGUs are meeting a level of control
at least as stringent as RACT. (See 68 FR 32839, col. 1 ``Proposed
Approach for NOX RACT Determinations in Areas Affected by
the NOX SIP Call;'' and 70 FR 71656, col. 2, ``Response,''
and col. 3, ``NOX SIP Call.'') If the State does not meet
these conditions, the State would need to conduct RACT analyses for
those EGUs (either on an individual basis, or using the averaging
approach within the nonattainment area). The published

[[Page 75909]]

CAIR summer season NOX budgets for each State are at least
as stringent as the NOX budgets for the NOX SIP
call. Also, the CAIR rule permits a State to bring its NOX
SIP Call non-EGU sources into the CAIR ozone season trading program
only if they continue to be regulated at the same level of stringency
as under the NOX SIP call. 40 CFR 96.340 (published at 70 FR
25392, May 12, 2005)).
In addition, as we noted in the Phase 2 Rule, a State has
discretion to require beyond-RACT NOX reductions from any
source (including sources covered by the CAIR or NOX SIP
Call programs), and has an obligation to demonstrate attainment of the
8-hour ozone standard as expeditiously as practicable. In certain
areas, States may require NOX controls based on more
advanced control technologies as necessary to provide for attainment of
the ozone standards.
2. Supplemental Technical Analysis
To provide further support for the determination regarding CAIR and
ozone NOX RACT, EPA conducted an additional technical
analysis. For each geographic area within the CAIR region where 8-hour
ozone RACT determinations are required, EPA examined whether the
emissions reductions projected from the CAIR equal or exceed the
emissions reductions projected to occur from application of source-by-
source RACT.\10\ Specifically, this analysis was conducted for
operating coal-, oil-, and gas-fired EGUs for each ozone transport
region (OTR) State within the CAIR region and for each nonattainment
area in the CAIR region for which a RACT SIP, separate from an
attainment demonstration SIP, is expected to be required.\11\ The
analysis was conducted on the basis of annual emissions and also summer
season emissions. This analysis illustrates that the CAIR achieves
greater overall emissions reductions across the CAIR region and across
the OTR than would be achieved through the application of EGU source-
by-source RACT controls. The docket contains a Technical Support
Document \12\ describing the analysis.
---------------------------------------------------------------------------

\10\ Since RACT is a technology requirement prescribing year-
round controls, it is appropriate to consider how participation in
both CAIR trading programs (annual and seasonal) will affect annual
emissions of NOX and to compare that to how RACT will
affect annual emissions of NOX.
\11\ 40 CFR 51.912(c)(1) (promulgated in the Phase 2 Rule)
provides that for a subpart 1 area ``* * * that submits an
attainment demonstration that requests an attainment date 5 or less
years after designation for the 8-hour NAAQS, the State shall meet
the RACT requirement by submitting an attainment demonstration SIP
demonstrating that the area has adopted all control measures
necessary to demonstrate attainment as expeditiously as
practicable.'' Thus, these areas are not required to submit RACT
SIPs separate from their attainment demonstrations. However, a State
must submit a RACT SIP separate from an attainment demonstration SIP
for the following areas: Under 40 CFR 51.912(a), subpart 2 moderate
and above areas; and under 40 CFR 51.912(c)(2), subpart 1 areas with
attainment dates beyond 5 years after designation.
\12\ Technical Support Document for Phase 2 of the Final Rule To
Implement the 8-Hour Ozone National Ambient Air Quality Standard--
Notice of Reconsideration; NOX RACT for EGUs in CAIR
States--Supplemental Technical Analysis.
---------------------------------------------------------------------------

This emissions analysis, though not quantitatively definitive, is
suggestive of the appropriateness of the determination that areas meet
the 8-hour ozone SIP requirement for application of RACT for
NOX emissions where all EGUs comply with rules implementing
the CAIR and those areas are located in States where all required CAIR
emissions reductions are achieved exclusively from EGUs. There is
uncertainty in the assumptions made in the analysis, although, as noted
in the Technical Support Document, the assumptions tended to be
conservative, i.e., erring on the side of projecting more emission
reductions under the RACT scenario. The analysis does not project that
CAIR emission reductions are equivalent to or exceed the reductions
from source-by-source RACT for EGUs for every relevant nonattainment
area and every State within the OTR. However, CAIR emission reductions
are overall significantly greater regionwide than reductions obtained
from source-by-source RACT for EGUs in both the CAIR region and the
OTR. It is our belief that, due to the nature of regional emissions
transport, local nonattainment area emissions reductions alone will not
achieve the most effective or economically efficient impact on ozone
air quality in nonattainment areas. We believe a combination of local
and broader regional reductions, such as those driven by the CAIR
requirements for EGUs, will achieve a more effective and economically
efficient air quality improvement in nonattainment areas than
application of source-by-source RACT.
Further, EPA believes that the term ``reasonable'' in RACT may be
construed to allow consideration of the air quality impact of required
emissions reductions from a region-wide cap and trade program such as
the CAIR. As stated earlier, the region-wide CAIR NOX
emissions cap for 2009 was established based on the maximum total
capacity on which it was possible to install controls by that date. So
by design, the 2009 CAIR region-wide NOX emissions cap for
EGUs represents the most reductions that are reasonable to achieve.
Because the CAIR achieves more NOX emission reductions
overall across the CAIR region and the OTR than EGU-by-EGU application
of RACT, we believe this will result in more region-wide air quality
improvements than application of RACT in the absence of the CAIR. The
CAIR is projected to improve ozone air quality across much of the
eastern half of the country, including many current and projected
future nonattainment areas. A list of the counties projected to be in
nonattainment in 2010 and 2015 (in the absence of the CAIR and 8-hour
ozone SIPs), and the air quality improvement provided by the CAIR in
each county, is provided in the preamble to the final CAIR (70 FR 91,
May 12, 2005, pp. 25254-25255, Tables VI-12 and VI-13) and in the final
Air Quality Modeling Technical Support Document in the CAIR final rule
docket (docket document EPA-OAR-2003-0053-2123). The CAIR improves air
quality in all of the 40 projected 2010 nonattainment counties, and in
all 22 of the projected 2015 nonattainment counties, that were
identified in the CAIR rule modeling. The modeling also showed air
quality improvement in numerous counties projected to be in attainment.
3. Request for Public Comment Period on Submission Date for RACT SIP
for RACT SIPs for EGUs in CAIR Region
Because EPA is reconsidering the RACT determination discussed
above, we believe it is appropriate to postpone the submission date for
the portion of the 8-hour ozone SIP that addresses NOX RACT
for EGUs in the CAIR region. The EPA therefore proposes a new date of
June 15, 2007 for States in the CAIR region to submit RACT SIPs for
these sources.
Such a postponement would affect only moderate 8-hour ozone
nonattainment areas in the CAIR region and only the portion of the RACT
SIPs that covers EGUs. For moderate areas in the CAIR region, the
States must still submit RACT SIPs for all other affected sources per
40 CFR 51.912(a) by September 15, 2006.

B. Provisions of Final Rule Regarding the Criteria for Emission
Reduction Credits from Shutdowns and Curtailments

1. Why We Changed Major Source NSR Criteria for Emission Reduction
Credits (ERC) from Shutdowns and Curtailments
The final 8-hour ozone implementation rule removed the requirement
that a State must have an

[[Page 75910]]

approved attainment plan before a source may use pre-application
credits from shutdowns or curtailments as offsets. It also revised the
availability of creditable offsets, consistent with the requirements of
section 173 of the CAA. We revised the provisions at 40 CFR
51.165(a)(3)(ii)(C) and appendix S concerning emission reduction
credits generated from shutdowns and curtailments as proposed in
Alternative 2 of the 1996 proposal, with one exception. Alternative 2
of the 1996 proposal provided that, in order to be creditable, the
shutdown of an existing emission unit or curtailing of production or
operating hours must have occurred after the ``most recent emissions
inventory.'' We agreed with the commenter who found the regulatory term
``most recent emissions inventory'' confusing. In particular, the
commenter believed this language could be mistaken to mean that the
base year for the purpose of determining emissions that may be used as
creditable offsets would continue to shift. The commenter noted that it
would be more accurate to state that the base year emissions inventory
is the starting point, and all creditable emissions reductions must
result from the shutdown or curtailment of emissions that have been
reported in the base year inventory or a subsequent emissions
inventory. (For the 8-hour ozone NAAQS, the base year is 2002.\13\) We
agreed with the commenter that the terminology ``most recent emissions
inventory'' could be confusing and revised 40 CFR 51.165(a)(3)(C)(1)
and Appendix S paragraph IV.C.3. accordingly, specifying the cutoff
date after which the shutdown or curtailment of emissions must occur as
``the last day of the base year for the SIP planning process. For
purposes of this paragraph, a reviewing authority may choose to
consider a prior shutdown or curtailment to have occurred after the
last day of the base year if the projected emissions inventory used to
develop the attainment demonstration explicitly includes the emissions
from such previously shutdown or curtailed emission units.'' This
provision is consistent with the previous regulation which also allowed
the reviewing authority to treat prior shutdowns or curtailments as
occurring after the date of the most recent emissions inventory, but we
have modified the regulatory language to clarify the appropriate
emissions inventory. Further, this regulatory language is consistent
with our previous guidance on how emission reduction credits from
shutdowns and curtailments are used in attainment planning.\14\ The
base year inventory includes actual emissions from existing sources and
would not normally reflect emissions from units that were shutdown or
curtailed before the base year, as these emissions are not ``in the
air.'' To the extent that these emission reduction credits are to be
considered available for use as offsets and are thus ``in the air'' for
purposes of demonstrating attainment, they must be specifically
included in the projected emissions inventory used in the attainment
demonstration along with other growth in emissions over the base year
inventory. This step assures that emissions from shutdown and curtailed
units are accounted for in attainment planning.\15\ As with the prior
rules, reviewing authorities thus retain the ability to consider a
prior shutdown or curtailment to have occurred after the last day of
the base year if emissions that are eliminated by the shutdown or
curtailment are emissions that were accounted for in the attainment
demonstration. However, in no event may credit be given for shutdowns
that occurred before August 7, 1977, a provision carried over from the
previous regulation. See 40 CFR 51.165(a)(3)(C)(1)(ii) and 40 CFR part
51 Appendix S paragraph IV.C.3.
---------------------------------------------------------------------------

\13\ 68 FR 32833. See also ``2002 Base Year Emission Inventory
SIP Planning: 8-hr. Ozone, PM2.5 and Regional Haze Programs,'' U.S.
EPA, pg. 1 (November 18, 2002).
\14\ See 57 FR 13553. After the 1990 CAA Amendments were
enacted, 1990 was the base year for 1-hour ozone NAAQS attainment
planning purposes. See 57 FR 13502. The EPA encouraged States to
allow sources to use pre-enactment banked emissions reductions
credits for offsetting purposes. States have been allowed to do so
if the restored credits meet all other offset creditability
criteria, and States consider such credits as part of the attainment
emissions inventory when developing their post-enactment attainment
demonstration.
\15\ For a discussion of emission inventories for the 8-hour
ozone standard, see our emission inventory guidance, ``Emissions
Inventory Guidance for Implementation of Ozone and Particulate
Matter National Ambient Air Quality Standards (NAAQS) and Regional
Haze Regulations--Final,'' at http://www.epa.gov/ttn/chief/eidocs/eiguid/index.html.
For a discussion of emission projections used in

attainment demonstrations, see Emission Inventory Improvement
Program, Volume X, Emission Projections, December 1999, available at
http://www.epa.gov/ttn/chief/eiip/techreport/.

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

Other changes made to the provisions of the final Phase 2 Rule
regarding emissions reduction credits from shutdowns and curtailments
were nonsubstantive and merely clarified the restrictions on credits
from shutdowns or curtailments. Specifically, the rule proposed on June
2, 2003 retained the requirement that a State have an approved
attainment demonstration before a source may use preapplication credits
from shutdowns or curtailments as offsets, but made that requirement
inapplicable where the credits occurred after the last day of the base
year for the SIP planning process or where they were included in the
most recent emissions inventory. Our final rule recognized there is no
requirement for an approved attainment demonstration in those
circumstances, and thus deleted the reference to that former
requirement since under the revised rule it would never apply.
2. Legal Basis for Changes to Criteria for Emission Reduction Credits
From Shutdowns and Curtailments
The revisions made to the rules governing use of emissions
reductions from shutdowns/curtailments as offsets were warranted by the
more detailed attainment planning and sanction provisions of the 1990
CAA Amendments. These provisions specifically address air quality
concerns in nonattainment areas lacking EPA-approved attainment
demonstrations. As a threshold matter, we noted (see 70 FR 71677,
November 29, 2005) that CAA section 173 does not mandate the prior
restrictions on shutdown credits, specifically, the requirement to have
an approved attainment demonstration before shutdown credits may be
allowed. (See 48 FR 38742, 38751; August 25, 1983.) Rather, in
promulgating these restrictions in 1989, EPA recognized that it had a
large degree of discretion under the CAA to shape implementing
regulations, as well as the need to exercise that discretion such that
offsets are consistent with reasonable further progress (RFP) as
required in CAA section 173. (See 54 FR 27286, 27292; June 28, 1989.)
Originally, EPA believed that areas without approved attainment
demonstrations lacked adequate safeguards to ensure that shutdown/
curtailment credits would be consistent with RFP. We thus subjected
those areas to more restrictive requirements to ensure a link between
the new source and the source being shutdown/curtailed (that is,
shutdown/curtailment must occur after the application for a new or
modified major source is filed).
The 1990 CAA Amendments changed the considerations involved. For
areas subject to subpart 2 of CAA part D, Congress emphasized the
emission inventory requirement in section 172(c)(3) as a fundamental
tool in air quality planning (see section 182(a)(1)). Congress also
added new provisions keyed to the inventory requirement, including
specific reduction strategies (e.g., section 182(b)(3) and (4)
(regarding gasoline vapor recovery and motor vehicle inspection and
maintenance

[[Page 75911]]

programs)) and ``milestones'' that measure progress toward attainment
from the base year emissions inventory or subsequent revised
inventories (see section 182(b)(1)). Where the emission reduction
credits pre-date the base year, State and local agencies must include
the credits from the shutdown/curtailment in the projected emissions
inventory used to develop the attainment demonstration. Subpart 4 sets
forth specific reduction strategies and milestones for attainment of
the PM10 standards. Additionally, there are now several
adverse consequences where States fail to meet the planning or
emissions reductions requirements of the CAA. For example, the CAA
contains mandatory increased new source offset sanctions at a 2:1 ratio
where the Administrator finds that a State failed to submit a required
attainment demonstration (see section 179). In areas that are subject
to subpart 2 and subpart 4, failure to attain the air quality standard
by the attainment deadline results in the area being bumped up to a
higher classification (see sections 181(b)(2) and 188(b)(2)).
Additional regulatory requirements are imposed as a result of the
higher classification (see, e.g., section 182(c), (d), and (e), and
section 189(b)). These statutory changes justify shifting the focus of
the prior regulations from individual offset transactions between a
specific new source and shutdown source and towards a systemic
approach. Considering the changes to the 1990 CAA Amendments, we now
believe that continuing the prohibition on the use of shutdown/
curtailment credits generated in a nonattainment area that is without
an approved attainment demonstration is not warranted. We believe that
use of emission reduction credits from shutdowns/curtailments will be
consistent with RFP towards attainment under CAA section 173, even in
the absence of an approved attainment demonstration, if the shutdown or
curtailment occurs after the last day of the base year for the SIP
planning process or is included in the projected emissions inventory
used to develop the attainment demonstration. From an air quality
planning perspective, emissions from the shutdown source actually
impacted the measurements of air quality used in determining the
nonattainment status of an area. Therefore, emissions reductions from
such source shutdowns/curtailments are actual emissions reductions, and
their use as emission offsets at a ratio of 1:1 or greater is
consistent with RFP towards improved air quality as set forth in CAA
section 173(a)(1)(A) provided they are included in the baseline
emissions inventory.
3. Reconsideration of Emission Reduction Credits Final Rule Language
and Request for Public Comments
In its January 30, 2006, petition for reconsideration, NRDC
requested that EPA reconsider provisions in the final Phase 2 Rule that
pertain to ERC. NRDC argued that EPA failed to present portions of the
rule's ``shutdown-curtailment offset provisions'' and accompanying
rationales to the public for comment. As noted above, the EPA is of the
opinion that the basis for the ERC provisions of the final rule were
fully explained in the November 29, 2005 rulemaking and in earlier
actions leading to that rulemaking. The November 29, 2005 preamble
included a lengthy description of preceding actions in which our
rationale was developed. Furthermore, the November 29, 2005 preamble
detailed our response to comments pertaining to the proposal. The
particular comments that triggered the change in wording from usage of
the term ``most recent emissions inventory'' to the term ``projected
emissions inventory used to develop the attainment demonstration''
directly resulted from public comments we received in response to the
July 23, 1996 proposal. The commenters voiced concerns that emission
inventory updates would periodically eliminate emissions that could be
used as emission reduction credits even though those emissions had been
included in the projected inventory to be used for establishing
attainment progress. Such was not our intent and we changed the
language specific to the inventory in question in the interest of
making a clarification. Petitioners assert in their request for
reconsideration that our clarifying amendments to the ERC provisions of
the final rule were not a logical outgrowth of the ERC provisions we
proposed. In contrast, we saw our language change in the final rule as
a technical clarification and not as a change to the nature or scope of
our proposal.
Nonetheless, we do see value in presenting the final rule language
for public comment as requested by the petitioners. It was and is our
position that the changes reflected in the final rule were made in a
procedurally correct manner and that the public comments reflected in
the final rule were factually and logically compelling. Nevertheless,
we encourage and welcome additional input. At proposal, we presented
two options, one of which was adopted following our consideration of
the public comments. We thus propose for reconsideration and seek
public comment on the ERC provisions in the final Phase 2 Rule set
forth at 40 CFR 51.165(a)(3)(ii)(C)(1) and (2), and Appendix S
paragraph IV.C.3.

C. Applicability of Appendix S, Section VI

1. Final Changes to Applicability of Appendix S, Section VI
Section VI allows new sources locating in an area designated as
nonattainment to be exempt from the requirements of Section IV.A. of
Appendix S if the date for attainment has not yet passed. Section VI
provides a management tool to provide a limited degree of flexibility
in situations where a new source would not interfere with an area's
ability to meet an attainment deadline. The final Phase 2 Rule made a
procedural change to limit the applicability of appendix S, section VI
to only those instances in which the Administrator has specifically
approved doing so. Although we did not include the regulatory language
to accomplish this goal in the June 2, 2003 proposal, we did clearly
state our intention of doing so. As we noted at 68 FR 32848, section VI
as worded without any amendment could apply in any nonattainment area
where the dates for attainment have not passed even if the source meets
all applicable SIP emission limitations and would not interfere with
the area's ability to meet its attainment date. As codified prior to
the amendment in the Final Phase 2 Rule, section VI contained no
provision conditioning its applicability on approval by the
Administrator. We noted at proposal, however, that States generally
would not be able to show that a nonattainment area would continue to
meet its attainment date if it does not apply LAER or offsets to major
new sources and major modifications in the absence of safeguards (68 FR
32848).
Further, we stated in the preamble to the Phase 2 Rule that we
continued to believe, as we stated in the proposal, that States should
not interpret section VI as allowing a blanket exemption from LAER and
offsets for all major new sources and major modifications in a given
area before attainment dates have passed for that area. At proposal, we
also offered for comment two broad programmatic proposals to modify the
then-existing section VI for the purpose of providing greater
flexibility. Overall, commenters considered the programmatic options to
be impracticable. However most commenters did express support for the
flexibility provided by section VI. For

[[Page 75912]]

this reason, we retained the original eligibility conditions for
determining when section VI applies, but added the procedural
requirement that the Administrator determine that the two previously
existing conditions of Section VI are satisfied, and that the
Administrator provide public notice of that determination. Thus, in the
final rule we retained the previously existing requirements of Section
VI, and added a further requirement that the Administrator
independently determine and provide public notice that those
requirements have been met. This requirement will achieve the
proposal's purpose of assuring that States do not interpret section VI
to provide a broad exemption to all major new sources and major
modifications in any nonattainment area for which the attainment date
has not passed.
2. Legal Basis for Changes to Applicability of Appendix S and the
Transitional NSR Program
For the purposes of today's reconsideration, we will not expand our
prior expressions of the legal basis for section VI of Appendix S. The
legal basis for Appendix S, including section VI, was discussed in
detail in section V.B.3.b. of the preamble to the final Phase 2 Rule.
We have historically recognized that the SIP development period
provided for in section 172(b) leaves a gap in part D major NSR
permitting and have determined that this gap is to be filled with an
interim major NSR program that is substantially similar to the
requirements of part D, including the LAER and offset requirements from
part D, subject to a limited exemption where the attainment deadline
will be met (57 FR 18070, 18076). This interim NSR program has been
implemented to date through Appendix S.
The section VI exemption, as limited by the final Phase 2 Rule, is
consistent with the section 110(a)(2)(C) requirement that
preconstruction permitting is implemented ``as necessary to assure that
the [NAAQS] are achieved.'' While the Phase 2 Rule did not adopt the
eligibility criteria that were proposed to ensure satisfaction of the
original section VI conditions, we did add the proposed requirement
that the Administrator determine that sources exempted from LAER and
offsets under section VI will meet those conditions, in particular,
noninterference with the attainment deadline. Section VI also is
consistent with the exercise of our gap filling authority under section
301, as informed by the legislative history. That is, Appendix S
reflects Congressional intent that standards equivalent to part D
govern the issuance of NSR permits, subject to a limited degree of
flexibility under conditions where attainment of the NAAQS by the
attainment deadline is assured.
3. Reconsideration of Appendix S, Section VI Final Rule Language and
Request for Public Comments
In its January 30, 2006, petition, NRDC requested that EPA
reconsider provisions in the final Phase 2 Rule that pertain to
Appendix S, section VI. NRDC argued that EPA failed to provide the
public with an opportunity to comment on the language of Appendix S,
Section VI that was included in the final rule. As is the case with
respect to the ERC provisions, EPA believes that our rationale was
fully explained in the November 29, 2005 rulemaking and in earlier
actions leading to that rulemaking. The preamble to the final rule
included a lengthy description of preceding actions in which our
rationale was developed. Further, the preamble to the final rule
detailed our response to comments pertaining to the proposal. In our
June 2, 2003 notice we proposed two possible programs for the
implementation of the provisions contained in Section VI. Commenters
recommended against the proposed approaches and we responded by
dropping both proposed programs at promulgation. As noted above, what
we did in the final rule was add one provision to the already existing
language of Appendix S, section VI to limit use of Section VI to only
those instances publicly approved of by the Administrator. Although we
did not include in the June 2, 2003 proposal the regulatory language
added to the final rule at Appendix S, Section VI.C., we did clearly
state our intention as to the change to be made. From our perspective,
we made the smallest change possible and achieved closure of a gap in
section VI. Thus, we disagree with the petitioner's assertion that the
final rule language is not a logical outgrowth of the proposal. As
well, we disagree with the petitioner's assertion that the final rule
constitutes an open-ended scheme to evade the strictures of Part D. If
anything, the prior rule language could have been construed as open-
ended. The sole intention of our language change was to close what we
perceived to be a loophole allowing just the type of outcome to which
the petitioners object. Congress required just such closure through the
provisions of the original section 129 as included in the August 7,
1977 amendments to the Act. At that time, Congress made clear its
opinion that it would be the role of the Administrator to determine
whether waiver of the appendix S provisions in question might be
appropriate.
The change made to Section VI in the final rule providing that the
Administrator must determine whether the conditions of Section VI have
been satisfied provides a positive safeguard to prevent just the kinds
of unchecked application of its provisions as envisioned by the
petitioners. We continue to see section VI as a gap-filler that goes
away as of the attainment date. It was and is our position that the
changes reflected in the final rule were made in a procedurally correct
manner and that the public comments reflected in the final rule were
factually and logically compelling. Nonetheless, we see value in
presenting for public comment the changes made to Section VI of
Appendix S in the final Phase 2 Rule. Therefore, we seek comment on
subsection C. of Section VI of Appendix S as added in the final Phase 2
rule as requested by the petitioners.
Following today's action, we anticipate two possible outcomes.
First, should we not receive compelling arguments to the contrary, the
provision promulgated on November 29, 2005, and proposed today in
section VI.C. would remain as promulgated. That is, the language
proposed herein is actually already codified in the Code of Federal
Regulations and we would make no further changes. The second possible
outcome of our reconsideration of this provision could be that
commenters might make compelling arguments that it was inappropriate
for us to add to the final Phase 2 Rule the requirement of Section
VI.C. that the Administrator determine that requirements A and B of
Section VI have been satisfied and to provide notice of such
determination. Should that occur, our final rule would consist of
amendatory language to revert the text of section VI to that which
existed prior to November 29, 2005. That is, we would retract section
VI.C. and remove the specification for the Administrator to be the
determinant of when section VI might be applied. We invite comment on
these two options. We currently believe that the correct approach is
the approach we took in the final Phase 2 Rule. While section 129 has
been amended to address matters largely unrelated to those addressed in
1977, Congress did previously legislate a course parallel to that which
we have thus far chosen to pursue.

[[Page 75913]]

IV. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993),
this action is a ``significant regulatory action.'' This action is
significant because it raises novel legal or policy issues.
Accordingly, EPA submitted this action to the Office of Management and
Budget (OMB) for review under EO 12866 and any changes made in response
to OMB recommendations have been documented in the docket for this
action.

B. Paperwork Reduction Act

The information collection requirements in this reconsideration
notice are addressed along with those covering the Phase 1 Rule (April
30, 2004; 69 FR 23951) and the Phase 2 Rule (November 29, 2005; 70 FR
71612) which was submitted for approval to OMB under the Paperwork
Reduction Act, 44 U.S.C. 3501 et seq. [EPA ICR 2236.01.] The
information collection requirements are not enforceable until OMB
approves them other than to the extent required by statute.
This action announces EPA's decision to reconsider and take
additional comment on several provisions of the Phase 2 Rule, namely
the RACT provisions and selected NSR provisions. This action does not
establish any new information collection burden on States beyond what
was required in the Phase 2 Rule.
The EPA has projected cost and hour burden for the statutory SIP
development obligation for the Phase 2 Rule, and prepared an
Information Collection Request (ICR). Assessments of some of the
administrative cost categories identified as a part of the SIP for an
8-hour standard are already conducted as a result of other provisions
of the CAA and associated ICRs (e.g. emission inventory preparation,
air quality monitoring program, conformity assessments, NSR, inspection
and maintenance program).
The burden estimates in the ICR for the Phase 2 rule are
incremental to what is required under other provisions of the CAA and
what would be required under a 1-hour standard. Burden means the total
time, effort, or financial resources expended by persons to generate,
maintain, retain, or disclose or provide information to or for a
Federal agency. This includes the time needed to review instructions;
develop, acquire, install, and utilize technology and systems for the
purposes of collecting, validating, and verifying information,
processing and maintaining information, and disclosing and providing
information; adjust the existing ways to comply with any previously
applicable instructions and requirements; train personnel to be able to
respond to a collection of information; search data sources; complete
and review the collection of information; and transmit or otherwise
disclose the information.
An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9. When the ICR for the
Phase 2 rule is approved by OMB, the Agency will publish a technical
amendment to 40 CFR part 9 in the Federal Register to display the OMB
control number for the approved information collection requirements
contained in this final rule. However, the failure to have an approved
ICR for this rule does not affect the statutory obligation for the
States to submit SIPs as required under part D of the CAA.
The information collection requirements associated with NSR
permitting for ozone are covered by EPA's request to renew the approval
of the ICR for the NSR program, ICR 1230.17, which was approved by OMB
on January 25, 2005. The information collection requirements associated
with NSR permitting were previously covered by ICR 1230.10 and 1230.11.
The OMB previously approved the information collection requirements
contained in the existing NSR regulations at 40 CFR parts 51 and 52
under the provisions of the Paperwork Reduction Act, and assigned OMB
control number 2060-0003. A copy of the approved ICR may be obtained
from Susan Auby, Collection Strategies Division; U.S. Environmental
Protection Agency (2822T); 1200 Pennsylvania Ave., NW., Washington, DC
20460 or by calling (202) 566-1672.

C. Regulatory Flexibility Act

The Regulatory Flexibility Act generally requires an Agency to
prepare a regulatory flexibility analysis of any rule subject to
notice-and-comment rulemaking requirements under the Administrative
Procedures Act or any other statute unless the Agency certifies the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of today's notice of
reconsideration on small entities, small entity is defined as: (1) A
small business as defined by the Small Business Administration's (SBA)
regulations at 13 CFR 121.201; (2) a governmental jurisdiction that is
a government of a city, county, town, school district or special
district with a population of less than 50,000; and (3) a small
organization that is any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.
After considering the economic impacts of the Phase 1 and Phase 2
Rules, we concluded that those actions did not have a significant
economic impact on a substantial number of small entities. For those
same reasons, I certify that this action will not have a significant
economic impact on a substantial number of small entities. This notice
of reconsideration will not impose any requirements on small entities.
We continue to be interested in the potential impacts of our proposed
rules on small entities and welcome comments on issues related to such
impacts.
Concerning the NSR portion of this notice of reconsideration, a
Regulatory Flexibility Act Screening Analysis (RFASA) was developed as
part of a 1994 draft Regulatory Impact Analysis (RIA) and incorporated
into the September 1995 ICR renewal. This analysis showed that the
changes to the NSR program due to the 1990 CAA Amendments would not
have an adverse impact on small entities. This analysis encompassed the
entire universe of applicable major sources that were likely to also be
small businesses (approximately 50 ``small business'' major sources).
Because the administrative burden of the NSR program is the primary
source of the NSR program's regulatory costs, the analysis estimated a
negligible ``cost to sales'' (regulatory cost divided by the business
category mean revenue) ratio for this source group. The incorporation
of the major source thresholds and offset ratios from the 1990 CAA
Amendments in section 51.165 and appendix S for the purpose of
implementing NSR for the 8-hour standard does not change this
conclusion. Under section 110(a)(2)(C), all States must implement a
preconstruction permitting program ``as necessary to assure that the
[NAAQS] are achieved,'' regardless of changes to today's regulations.
Thus, small businesses continue to be subject to regulations for
construction and modification of stationary sources, whether under
State and local agency minor NSR programs, SIPs to implement section
51.165, or appendix S, to ensure that the 8-hour standard is achieved.

[[Page 75914]]

D. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and Tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, and Tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
1 year. Before promulgating an EPA rule for which a written statement
is needed, section 205 of the UMRA generally requires EPA to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective or least burdensome alternative
that achieves the objectives of the rule. The provisions of section 205
do not apply when they are inconsistent with applicable law. Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative was not adopted. Before EPA establishes any regulatory
requirements that may significantly or uniquely affect small
governments, including Tribal governments, it must have developed under
section 203 of the UMRA a small government agency plan. The plan must
provide for notifying potentially affected small governments, enabling
officials of affected small governments to have meaningful and timely
input in the development of EPA regulatory proposals with significant
Federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory
requirements.
The EPA has determined that this notice of reconsideration does not
contain a Federal mandate that may result in expenditures of $100
million or more for State, local, and Tribal governments, in the
aggregate, or the private sector in any 1 year. In promulgating the
Phase 1 and Phase 2 Rules, we concluded that they were not subject to
the requirements of sections 202 and 205 of the UMRA. For those same
reasons, this notice of reconsideration and request for comment is not
subject to the UMRA.
The EPA has determined that this notice of reconsideration contains
no regulatory requirements that may significantly or uniquely affect
small governments, including Tribal governments.

E. Executive Order 13132: Federalism

Executive Order 13132 (64 FR 43255, August 10, 1999), requires EPA
to develop an accountable process to ensure ``meaningful and timely
input by State and local officials in the development of regulatory
policies that have federalism implications.'' ``Policies that have
federalism implications'' is defined in the Executive Order to include
regulations that have ``substantial direct effects on the States, on
the relationship between the national government and the States, or on
the distribution of power and responsibilities among the various levels
of government.''
This action does not have federalism implications. It will not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132. This notice of reconsideration
requests comment on three aspects of the Phase 2 Rule. For the same
reasons stated in the Phase 1 and Phase 2 Rules, Executive Order 13132
does not apply to this action.
In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicits comment on this action from
State and local officials.

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

Executive Order 13175 (65 FR 67249, November 9, 2000), requires EPA
to develop an accountable process to ensure ``meaningful and timely
input by Tribal officials in the development of regulatory policies
that have Tribal implications.'' This notice of reconsideration does
not have ``Tribal implications'' as specified in Executive Order 13175.
The purpose of this notice of reconsideration is to announce our
decision to reconsider and request comment on specific aspects of the
Phase 2 Rule. The CAA provides for States and Tribes to develop plans
to regulate emissions of air pollutants within their jurisdictions. The
Tribal Authority Rule (TAR) gives Tribes the opportunity to develop and
implement CAA programs such as the 8-hour ozone NAAQS, but it leaves to
the discretion of the Tribes whether to develop these programs and
which programs, or appropriate elements of a program, they will adopt.
For the same reasons stated in the Phase 1 and Phase 2 Rules, this
action does not have Tribal implications as defined by Executive Order
13175. It does not have a substantial direct effect on one or more
Indian Tribes, since no Tribe has implemented a CAA program to attain
the 8-hour ozone NAAQS at this time. If a Tribe does implement such a
plan, it would not impose substantial direct costs upon it.
Furthermore, this action does not affect the relationship or
distribution of power and responsibilities between the Federal
government and Indian Tribes. The CAA and the TAR establish the
relationship of the Federal government and Tribes in developing plans
to attain the NAAQS, and this action does nothing to modify that
relationship. Because this action does not have Tribal implications,
Executive Order 13175 does not apply.

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

Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any
rule that (1) is determined to be ``economically significant'' as
defined under Executive Order 12866, and (2) concerns an environmental
health or safety risk that EPA has reason to believe may have
disproportionate effect on children. If the regulatory action meets
both criteria, the Agency must evaluate the environmental health or
safety effects of the planned rule on children, and explain why the
planned regulation is preferable to other potentially effective and
reasonably feasible alternatives considered by the Agency.
This notice of reconsideration addresses several provisions in the
Phase 2 Rule that the Agency was requested to reconsider and requests
comment on those provisions. The action is not subject to Executive
Order 13045 because the Agency does not have reason to believe the
environmental health risks or safety risks addressed by this action
present a disproportionate risk to children. Nonetheless, we have
evaluated the environmental health or safety effects of the 8-hour
ozone NAAQS on children. The results of this evaluation are contained
in 40 CFR part 50, National Ambient Air Quality Standards for Ozone,
Final Rule (July 18, 1997; 62 FR 38855-38896, specifically, 62 FR 38860
and 62 FR 38865).

[[Page 75915]]

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

This action is not a ``significant energy action'' as defined in
Executive Order 13211, ``Actions That Significantly Affect Energy
Supply, Distribution, or Use,'' (66 FR 28355, May 22, 2001) because it
is not likely to have a significant adverse effect on the supply,
distribution, or use of energy. The notice of reconsideration announces
our decision to reconsider and requests comment on several aspects of
the Phase 2 Rule, for which EPA did perform an analysis of the energy
impacts under Executive Order 13211.\16\
---------------------------------------------------------------------------

\16\ Technical Appendix: Potential Impacts of Implementation of
the 8-Hour Ozone NAAQS; Technical Support Document. July 21, 2005.
Docket Document EPA-HQ-OAR-2003-0079-0860.
---------------------------------------------------------------------------

I. National Technology Transfer Advancement Act

Section 12(d) of the National Technology Transfer Advancement Act
of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards (VCS) in its
regulatory activities unless to do so would be inconsistent with
applicable law or otherwise impractical. Voluntary consensus standards
are technical standards (e.g., materials specifications, test methods,
sampling procedures, and business practices) that are developed or
adopted by VCS bodies. The NTTAA directs EPA to provide Congress,
through OMB, explanations when the Agency decides not to use available
and applicable VCS.
This action does not involve technical standards. Therefore, EPA is
not considering the use of any VCS.
The EPA will encourage the States and Tribes to consider the use of
such standards, where appropriate, in the development of the
implementation plans.

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

Executive Order 12898 requires that each Federal agency make
achieving environmental justice part of its mission by identifying and
addressing, as appropriate, disproportionate high and adverse human
health or environmental effects of its programs, policies, and
activities on minorities and low-income populations.
The EPA concluded that the Phase 2 Rule does not raise any
environmental justice issues (See 70 FR at 71695, col. 2; (November 29,
2005)); for the same reasons, since this action announces our decision
to reconsider and requests comment on several aspects of the Phase 2
rule, this reconsideration notice does not raise any environmental
justice issues. The health and environmental risks associated with
ozone were considered in the establishment of the 8-hour, 0.08 ppm
ozone NAAQS (62 FR 38856 (July 18, 1997)). The level is designed to be
protective with an adequate margin of safety. The Phase 2 Rule provides
a framework for improving environmental quality and reducing health
risks for areas that may be designated nonattainment.

List of Subjects in 40 CFR Part 51

Environmental protection, Air pollution control, Carbon monoxide,
Lead, Nitrogen dioxide, Ozone, Particulate matter, Sulfur oxides.

Dated: December 11, 2006.
Stephen L. Johnson,
Administrator.
For the reasons stated in the preamble, title 40, chapter I of the
Code of Federal Regulations is proposed to be amended as follows:

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

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

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

Subpart I--[Amended]

2. Section 51.165 is amended by revising paragraph (a)(3)(ii)(C) to
read as follows:

Sec. 51.165 Permit requirements.

(a) * * *
(3) * * *
(ii) * * *
(C) Emission reduction credits from shutdowns and curtailments. (1)
Emissions reductions achieved by shutting down an existing emission
unit or curtailing production or operating hours may be generally
credited for offsets if they meet the requirements in paragraphs
(a)(3)(ii)(C)(1)(i) through (ii) of this section.
(i) Such reductions are surplus, permanent, quantifiable, and
federally enforceable.
(ii) The shutdown or curtailment occurred after the last day of the
base year for the SIP planning process. For purposes of this paragraph,
a reviewing authority may choose to consider a prior shutdown or
curtailment to have occurred after the last day of the base year if the
projected emissions inventory used to develop the attainment
demonstration explicitly includes the emissions from such previously
shutdown or curtailed emission units. However, in no event may credit
be given for shutdowns that occurred before August 7, 1977.
(2) Emissions reductions achieved by shutting down an existing
emissions unit or curtailing production or operating hours and that do
not meet the requirements in paragraph (a)(3)(ii)(C)(1)(ii) of this
section may be generally credited only if:
(i) The shutdown or curtailment occurred on or after the date the
construction permit application is filed; or
(ii) The applicant can establish that the proposed new emissions
unit is a replacement for the shutdown or curtailed emissions unit, and
the emissions reductions achieved by the shutdown or curtailment met
the requirements of paragraph (a)(3)(ii)(C)(1)(i) of this section.
* * * * *

Appendix S to Part 51--[Amended]

3. Appendix S to part 51 is amended by revising paragraphs IV.C.3
and VI to read as follows:

Appendix S to Part 51--Emission Offset Interpretative Ruling

* * * * *
IV. * * *
C. * * *
3. Emission Reduction Credits from Shutdowns and Curtailments.
(i) Emissions reductions achieved by shutting down an existing
source or curtailing production or operating hours may be generally
credited for offsets if they meet the requirements in paragraphs
IV.C.3.i.1. through 2 of this section.
(1) Such reductions are surplus, permanent, quantifiable, and
federally enforceable.
(2) The shutdown or curtailment occurred after the last day of
the base year for the SIP planning process. For purposes of this
paragraph, a reviewing authority may choose to consider a prior
shutdown or curtailment to have occurred after the last day of the
base year if the projected emissions inventory used to develop the
attainment demonstration explicitly includes the emissions from such
previously shutdown or curtailed emission units. However, in no
event may credit be given for shutdowns that occurred before August
7, 1977.
(ii) Emissions reductions achieved by shutting down an existing
source or curtailing production or operating hours and that do not
meet the requirements in paragraphs IV.C.3.i.1. through 2 of this
section may be generally credited only if:
(1) The shutdown or curtailment occurred on or after the date
the new source permit application is filed; or

[[Page 75916]]

(2) The applicant can establish that the proposed new source is
a replacement for the shutdown or curtailed source, and the
emissions reductions achieved by the shutdown or curtailment met the
requirements of paragraphs IV.C.3.i.1. through 2 of this section.
* * * * *
VI. Policy Where Attainment Dates Have Not Passed
In some cases, the dates for attainment of primary standards
specified in the SIP under section 110 have not yet passed due to a
delay in the promulgation of a plan under this section of the Act.
In addition the Act provides more flexibility with respect to the
dates for attainment of secondary NAAQS than for primary standards.
Rather than setting specific deadlines, section 110 requires
secondary NAAQS to be achieved within a ``reasonable time''.
Therefore, in some cases, the date for attainment of secondary
standards specified in the SIP under section 110 may also not yet
have passed. In such cases, a new source locating in an area
designated in 40 CFR 81.300 et seq. as nonattainment (or, where
section III of this Ruling is applicable, a new source that would
cause or contribute to a NAAQS violation) may be exempt from the
Conditions of section IV.A if the conditions in paragraphs VI.A
through C are met.
A. The new source meets the applicable SIP emission limitations.
B. The new source will not interfere with the attainment date
specified in the SIP under section 110 of the Act.
C. The Administrator has determined that conditions A and B of
this section are satisfied and such determination is published in
the Federal Register.
[FR Doc. E6-21379 Filed 12-18-06; 8:45 am]

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