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###### Environmental Protection Agency

          - 40 CFR Part 52
          - [EPA-R09-OAR-2009-0024; FRL-8943-7]

# AGENCY:

Environmental Protection Agency (EPA).

# ACTION:

Proposed rule.

# SUMMARY:

EPA is proposing a limited approval and limited disapproval of revisions to the San Joaquin Valley Unified Air Pollution Control District portion of the California State Implementation Plan. These revisions concern a local fee rule that applies to major sources of volatile organic compound and nitrogen oxide emissions within the San Joaquin Valley ozone nonattainment area. We are proposing action on a local rule that regulates these emission sources under the Clean Air Act as amended in 1990. We are taking comments on this proposal and plan to follow with a final action.

# DATES:

                        Any comments must arrive by                         *September 18, 2009*.                    

# ADDRESSES:

Submit comments, identified by docket number EPA-R09-OAR-2009-0024, by one of the following methods:

                        1.                         *Federal eRulemaking Portal: http://www.regulations.gov*. Follow the on-line instructions.                    

                        2. E-mail:                         *steckel.andrew@epa.gov*.                    

                        3.                         *Mail or deliver:*                         Andrew Steckel (Air-4), U.S. Environmental Protection Agency Region IX, 75 Hawthorne Street, San Francisco, CA 94105-3901.                    

*Instructions:*                         All comments will be included in the public docket without change and may be made available online at                         *http://www.regulations.gov*, including any personal information provided, unless the comment includes Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Information that you consider CBI or otherwise protected should be clearly identified as such and should not be submitted through                         *http://www.regulations.gov*                         or e-mail.                         *http://www.regulations.gov*                         is an “anonymous access” system, and EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send e-mail directly to EPA, your e-mail address will be automatically captured and included as part of the public comment. 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.                    

*Docket:*                         The index to the docket for this action is available electronically at                         *http://www.regulations.gov*                         and in hard copy at EPA Region IX, 75 Hawthorne Street, San Francisco, California. While all documents in the docket are listed in the index, some information may be publicly available only at the hard copy location (                        *e.g.*, copyrighted material), and some may not be publicly available in either location (                        *e.g.*, CBI). To inspect the hard copy materials, please schedule an appointment during normal business hours with the contact listed in the                         **FOR FURTHER INFORMATION CONTACT**                         section.                    

# FOR FURTHER INFORMATION CONTACT:

                        Mae Wang, EPA Region IX, (415) 947-4124,                         *wang.mae@epa.gov*.                    

# SUPPLEMENTARY INFORMATION:

Throughout this document, “we,” “us” and “our” refer to EPA.

## Table of Contents

I. The State's Submittal

A. What Rule did the State Submit?

B. What Is the Purpose of the Submitted Rule?

C. Why Was This Rule Submitted?

II. EPA's Evaluation and Action

A. How Is EPA Evaluating the Rule?

B. Does the Rule Meet the Evaluation Criteria?

C. What Are the Rule Deficiencies?

D. Proposed Action and Public Comment

III. Statutory and Executive Order Reviews

## I. The State's Submittal

### A. What Rule Did the State Submit?

The San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD) adopted Rule 3170, Federally Mandated Ozone Nonattainment Fee, on May 16, 2002. This rule was submitted by the California Air Resources Board (CARB) on August 6, 2002, for incorporation into the California State Implementation Plan (SIP). On August 30, 2002, this rule submittal was found to meet the completeness criteria in 40 CFR Part 51, Appendix V.

### B. What Is the Purpose of the Submitted Rule?

                    SJVUAPCD Rule 3170 requires certain major stationary sources of volatile organic compounds (VOCs) and nitrogen oxides (NOX) in the San Joaquin Valley ozone nonattainment area to pay a fee to the SJVUAPCD if the area fails to attain the 1-hour national ambient air quality standard (NAAQS) for ozone by its Federally established attainment date. The fee must be paid for each calendar year after the attainment year until the area is redesignated to attainment of the 1-hour ozone standard.                

### C. Why Was This Rule Submitted?

                    Under sections 182(d)(3), (e), and 185 of the Clean Air Act as amended in 1990 (CAA or the Act), States are required to adopt an excess emissions fee regulation for ozone nonattainment areas classified as severe or extreme. The 1-hour ozone NAAQS classification for the San Joaquin Valley area is extreme (                    *see*69 FR 20550, April 16, 2004). Although EPA has revoked the 1-hour ozone NAAQS (69 FR 23951, April 30, 2004), Section 185 requirements still apply for 1-hour ozone non-attainment areas (                    *South Coast Air Quality Management District*                     v.                     *EPA*                    , 472 F.3d 882, DC Cir. 2006). The fee regulation specified by the Act requires major stationary sources of VOCs in the nonattainment area to pay a fee to the State if the area fails to attain the standard by the attainment date set forth in the Act. Section 182(f) of the Act requires States to apply the same requirements to major stationary sources of NOX                     as are applied to major stationary sources of VOCs. Emissions of VOCs and NOX                     play a role in producing ground-level ozone and smog, which harm human health and the environment. SJVUAPCD Rule 3170 applies to major sources of both NOX                     and VOCs.                

## II. EPA's Evaluation and Action

### A. How Is EPA Evaluating the Rule?

                    Generally, SIP rules must be enforceable (                    *see*                     section 110(a) of the Act), and must not relax existing requirements (                    *see*                     sections 110(l) and 193). Rule 3170 was evaluated for compliance with the requirements in CAA section 185. The rule was also                           ( print page 41827)                        evaluated for consistency with the CAA and EPA's general SIP policies, as well as a March 21, 2008, memorandum from William Harnett, Director of the Air Quality Policy Division, to the Regional Air Division Directors, entitled, “Guidance on Establishing Emissions Baselines under Section 185 of the Clean Air Act (CAA) for Severe and Extreme Ozone Nonattainment Areas that Fail to Attain the 1-hour Ozone NAAQS by their Attainment Date.” Guidance and policy documents that we use to help evaluate specific enforceability requirements typically include the following:                

1. “Issues Relating to VOC Regulation Cutpoints, Deficiencies, and Deviations”, EPA, May 25, 1988 (the Bluebook).

2. “Guidance Document for Correcting Common VOC & Other Rule Deficiencies”, EPA Region 9, August 21, 2001 (the Little Bluebook).

                    3. “State Implementation Plans; Nitrogen Oxides Supplement to the General Preamble; Clean Air Act Amendments of 1990 Implementation of Title I; Proposed Rule”, (the NOX                     Supplement), 57 FR 55620, November 25, 1992.                

### B. Does the Rule Meet the Evaluation Criteria?

Rule 3170 improves the SIP by establishing an excess emissions fee regulation. Portions of the rule are consistent with the CAA, as well as relevant policy and guidance regarding enforceability and SIP relaxations. Rule provisions which do not meet the evaluation criteria are summarized below.

### C. What Are the Rule Deficiencies?

The following provisions conflict with section 185 of the Act and prevent full approval of the SIP revision:

                    Section 4.2 of SJVUAPCD Rule 3170 exempts units that begin operation after the attainment year. CAA Section 185 does not provide for an exemption for emission units that begin operation after the attainment year, so this exemption does not fully comply with the CAA. Rather, it requires “each major source” to pay the fee.                     *See*                     CAA section 185(a).                

Section 4.3 exempts any “clean emission unit” from the requirements of the rule. Section 3.6 defines a clean emission unit as a unit that is equipped with an emissions control technology that either has a minimum 95% control efficiency (or 85% for lean-burn internal combustion engines), or meets the requirements for achieved-in-practice Best Achievable Control Technology as accepted by the APCO during the 5 years immediately prior to the end of the attainment year. The District's staff report for Rule 3170 states that the exemption is intended to address “the difficulty of reducing emissions from units with recently installed BACT.” Although EPA understands the District's intended purpose for including the exemption, the exemption does not comply with CAA section 185, for the same reason as noted above for new emission units.

                    The EPA's Clean Air Act Advisory Committee (CAAAC) has recently asked EPA to review and address whether it is “legally permissible under either section 185 or 172(e) of the Clean Air Act for a State to exercise discretion” to develop fee program SIPs employing one or more of a list of CAAAC-identified program options (                    *see  http://www.epa.gov/​air/​caaac/​185wg*). One of the program options the CAAAC identified is an exemption from fees for “well-controlled” sources. In today's action, EPA is proposing to disapprove the “clean emission unit” exemption in SJVUAPCD Rule 3170 because we do not believe such an exemption is authorized by CAA section 185. However, the State has not requested that EPA review the SIP pursuant to section 172(e) and has not made a demonstration that the program it has submitted would ensure controls that are “not less stringent” than those required under section 172(e). Thus, EPA is not at this time addressing whether it is legally permissible under CAA section 172(e) for a State to adopt an alternative program at least as stringent as a section 185 fee program, and for the alternative program to contain a clean unit exemption.                

                    Section 3.2.1 defines the baseline period as two consecutive years consisting of the attainment year and the year immediately prior to the attainment year. CAA Section 185(b)(2) establishes the attainment year as the baseline period. While this provision also provides the option for calculating baseline emissions over a period of more than one calendar year, that option is limited to sources with emissions that are irregular, cyclical, or otherwise vary significantly from year to year. Thus section 3.2.1 is inconsistent with the CAA because it provides a different baseline than that required by the CAA (two years instead of one) regardless of whether the emissions are irregular,                     *etc.*

Section 3.2.2 allows averaging over 2-5 years to establish baseline emissions. CAA Section 185(b)(2) states that EPA may issue guidance authorizing such an alternative method of calculating baseline emissions if a source's emissions are irregular, cyclical, or otherwise vary significantly from year to year. EPA issued guidance on alternative methods for calculating baseline emissions in the form of the memorandum from William Harnett, mentioned above. The averaging period allowed in Section 3.2.2 of Rule 3170 appears consistent with the March 21, 2008, guidance. However, the language in Section 3.2.2 allows such averaging “if those years are determined by the APCO as more representative of normal source operation.” This language is considered less stringent than the CAA criteria. The rule should be amended to specify use of the expanded averaging period only if a source's emissions are irregular, cyclical, or otherwise vary significantly from year to year.

Section 3.4 defines the term “Major Source” by referring to the definition in SJVUAPCD Rule 2201 (New and Modified Stationary Source Review Rule). The current SIP-approved version of Rule 2201 was adopted by the SJVUAPCD on December 19, 2002, and approved by EPA on May 17, 2004 (69 FR 27837). This version of Rule 2201 defines “Major Source” as a stationary source with VOC or NOx emissions of over 50,000 pounds per year (25 tons per year). The CAA defines the major source threshold as 10 tons per year for ozone nonattainment areas classified as extreme. The SJVUAPCD amended Rule 2201 on December 18, 2008, and submitted it for inclusion in the SIP on March 17, 2009. This amended version includes the 10 tons per year threshold, but has not been approved into the SIP. Therefore, Rule 3170's reliance on Rule 2201 to define major sources is not approvable at this time. If a version of Rule 2201 that contains the appropriate major source threshold is approved into the SIP prior to finalizing this proposed action, then we will no longer cite Section 3.4 as a deficiency in Rule 3170.

### D. Proposed Action and Public Comment

                    As authorized in sections 110(k)(3) and 301(a) of the Act, EPA is proposing a limited approval of the submitted rule to improve the SIP. If finalized, this action would incorporate the submitted rule into the SIP, including those provisions identified as deficient. This approval is limited because EPA is simultaneously proposing a limited disapproval of the rule under section 110(k)(3) because the rule does not fully meet the statutory section 185 requirement. If this disapproval is finalized, sanctions will be imposed under section 179 of the Act unless EPA approves subsequent SIP revisions that correct the rule deficiencies within 18 months. These sanctions would be imposed according to 40 CFR 52.31. A                           ( print page 41828)                        final disapproval would also trigger the Federal implementation plan (FIP) requirement under section 110(c). Note that the submitted rule has been adopted by the SJVUAPCD, and EPA's final limited disapproval would not prevent the local agency from enforcing it. Moreover, because the rule would be approved into the SIP, it would also be Federally enforceable.                

However, the limited approval of Rule 3170 does not override specific CAA mandates. If the area fails to attain by its 2010 attainment date, fees will accrue beginning in 2011 for emissions above 80% of source baselines for clean units, new units and major sources which are exempted from fee collection under the State rule. The State must adopt and submit a rule to collect fees for 2011 and future years from those units or, consistent with the Administrator's obligation under section 185(d), EPA will collect those fees. In addition, all sources are liable for fees calculated in accordance with the baseline definition in section 185(b)(2) as further interpreted in EPA guidance issued pursuant to that provision. The State must adopt and submit a rule that ensures fees are collected for 2011 and all future applicable years based on the statutory baseline requirement. If the State fails to do so, EPA will collect any additional fees owed pursuant to a Federal program under section 185(d).

We will accept comments from the public on the proposed limited approval and limited disapproval for the next 30 days.

## III. Statutory and Executive Order Reviews

### A. Executive Order 12866, Regulatory Planning and Review

The Office of Management and Budget (OMB) has exempted this regulatory action from Executive Order 12866, entitled “Regulatory Planning and Review.”

### B. Paperwork Reduction Act

                    This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501*et seq.*                     Burden is defined at 5 CFR 1320.3(b).                

### C. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not-for-profit enterprises, and small governmental jurisdictions.

This rule will not have a significant impact on a substantial number of small entities because SIP approvals or disapprovals under section 110 and subchapter I, part D of the Clean Air Act do not create any new requirements but simply approve or disapprove requirements that the State is already imposing. Therefore, because the proposed Federal SIP limited approval/limited disapproval does not create any new requirements, I certify that this action will not have a significant economic impact on a substantial number of small entities.

                    Moreover, due to the nature of the Federal-State relationship under the Clean Air Act, preparation of flexibility analysis would constitute Federal inquiry into the economic reasonableness of State action. The Clean Air Act forbids EPA to base its actions concerning SIPs on such grounds.                     *Union Electric Co.*, v.                     *U.S. EPA*, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)(2).                

### D. Unfunded Mandates Reform Act

Under sections 202 of the Unfunded Mandates Reform Act of 1995 (“Unfunded Mandates Act”), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a Federal mandate that may result in estimated costs to State, local, or Tribal governments in the aggregate; or to the private sector, of $100 million or more. Under section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objectives of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly or uniquely impacted by the rule.

EPA has determined that the limited approval/limited disapproval action proposed does not include a Federal mandate that may result in estimated costs of $100 million or more to either State, local, or Tribal governments in the aggregate, or to the private sector. This Federal action proposes to approve and disapprove pre-existing requirements under State or local law, and imposes no new requirements. Accordingly, no additional costs to State, local, or Tribal governments, or to the private sector, result from this action.

### E. Executive Order 13132, Federalism

*Federalism*                     (64 FR 43255, August 10, 1999) revokes and replaces Executive Orders 12612 (Federalism) and 12875 (Enhancing the Intergovernmental Partnership). Executive Order 13132 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.” Under Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or EPA consults with State and local officials early in the process of developing the proposed regulation. EPA also may not issue a regulation that has federalism implications and that preempts State law unless the Agency consults with State and local officials early in the process of developing the proposed regulation.                

This rule 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, because it merely proposes to approve or disapprove a State rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. Thus, the requirements of section 6 of the Executive Order do not apply to this rule.

### F. Executive Order 13175, Coordination With Indian Tribal Governments

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (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 proposed rule does not have Tribal implications, as specified in Executive Order 13175. It will not have substantial direct effects on Tribal governments, on the relationship between the Federal government and Indian Tribes, or on the                           ( print page 41829)                        distribution of power and responsibilities between the Federal government and Indian Tribes. Thus, Executive Order 13175 does not apply to this rule.                

EPA specifically solicits additional comment on this proposed rule from Tribal officials.

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

EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the Executive Order has the potential to influence the regulation. This rule is not subject to Executive Order 13045, because it approves a State rule implementing a Federal standard.

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

This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) because it is not a significant regulatory action under Executive Order 12866.

### I. National Technology Transfer and Advancement Act

Section 12 of the National Technology Transfer and Advancement Act (NTTAA) of 1995 requires Federal agencies to evaluate existing technical standards when developing a new regulation. To comply with NTTAA, EPA must consider and use “voluntary consensus standards” (VCS) if available and applicable when developing programs and policies unless doing so would be inconsistent with applicable law or otherwise impractical.

The EPA believes that VCS are inapplicable to this action. Today's action does not require the public to perform activities conducive to the use of VCS.

# List of Subjects in 40 CFR Part 52

      - Environmental protection
      - Air pollution control
      - Intergovernmental relations
      - Nitrogen dioxide
      - Ozone
      - Reporting and recordkeeping requirements
      - Volatile organic compounds

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

Dated: August 6, 2009.

Jane Diamond,

Acting Regional Administrator, Region IX.

[FR Doc. E9-19856 Filed 8-18-09; 8:45 am]

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