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Page 1 of 64 **ENVIRONMENTAL PROTECTION AGENCY**

**40 CFR Part 51 [**  **EPA -**  **HQ -**  **OAR -**  **2009 -**  **0897 ; FRL**  **- ]** 

**2060 -** **AQ07 Withdrawal**  **of the Prior Determination**  **or Presumption that Compliance**  **with the CAIR**  **or the**  **NO x**  **SIP Call Constitute s**  **RACT or RACM for the**  **1997 8 -**  **Hour Ozone and**  **1997 Fine Particle NAAQS; and Revision to**  **RACT Guidance and**  **RFP Requirements for the 1997 Fine Particle NAAQS AGENCY:**  Environmental Protection Agency (EPA). **ACTION:** Proposed rule . **SUMMARY:** The EPA is proposing to withdraw any prior determination or pres umption that compliance with the Clean Air Interstate Rule (CAIR) or the NO x SIP Call constitutes reasonabl y available control technology (RACT) or reasonably available control measures (RACM) for oxides of nitrogen ( NO x ) or sulfur dioxide ( SO 2 ) emissions from electric generating unit (EGU) sources participating in these regional cap - and- trade programs . The EPA is proposing revisions to preamble guidance in the final Implementation Rule for the 1997 PM2.5 national ambient air quality standard ( NAAQS ) concer ning the economic feasi bility criteria for determining RACT for sources located within nonattainment area s . The EPA is also proposing not to allow emission reductions from outside of a nonattainment area to be credited toward meeting the Reasonable Further Progress ( RFP ) requirements for the 1997 PM2.5 NAAQS.** * E.O. 12866 Review

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Page 2 of 64 **DATES:** Comments . C omments must be received on or before **[ INSERT DATE**  **30 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER ]**  . Public Hearings . If anyone contacts us requesting a public hearing on or before **[INSERT DATE 15 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]**  , we will hold a public hearing . Please refer to SUPPLEMENTARY INFORMATION for additional information on the comment period and the public hearing . **ADDRESSES:** Submit your comments, i dentified by Docket ID No. EPA- HQ OAR- 2009 - 0897 , by one of the following methods:

 www.regulations.gov **.** Follow the online instructions for submitting comments . Attention Docket ID No. EPA- HQ - OAR- 2009 - 0897.

 Email: a - and- r - docket@epa.gov . Attention Docket ID No. EPA- HQ OAR- 2009 - 0897 .
 Fax: (202) 566 - 9744 . Attention Docket ID No. EPA- HQ - OAR- 2009 - 0897 .
 Mail: EPA Docket Center, EPA West (Air Docket), Attention Docket ID No. EPA- HQ - OAR- 2009 - 0897 , U.S. Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania Avenue, NW, Washington, DC 20460 . Please include a total of two copies .
 Hand Delivery: U.S. Environmental Protection Agency, EPA West (Air Docket), 1301 Constitut ion Avenue, Northwest, Room 3334, Washington, DC 20004, Attention Docket ID No. EPA- HQ - OAR- 2009 -** * E.O. 12866 Review

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Page 3 of 64 0897 . Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed informati on. Instructions . Direct your comments to Docket ID No. EPA- HQ - OAR- 2009 - 0897 . The EPA's policy is that all comments received will be included in the public docket without change and may be made available online at 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 yo u consider to be CBI or otherwise protected through www.regulations.gov or email . The www.regulations.gov website is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment . If you send an email comment directly to EPA without going through www.regulations.gov , your email address will be automa tically 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, the EPA recommends that you include your name and other contact information in the body of you r comment and with any disk or CD - ROM you submit . If the EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, the EPA may not be able to consider your comment . Electronic files should** * E.O. 12866 Review

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Page 4 of 64 avoid the use of special characters, avoid 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 www.epa.gov/epahome/dockets. htm **.** Docket . All documents in the docket are listed in the www.regulations.gov index . Although listed in the index, some information is not publicly available, e.g. , CBI or other information whose disclosure is r estricted by statute . Certain other material, such as copyrighted material, will be publicly available only in hard copy . Publicly available docket materials are available either electronically in www.regulations.gov or in hard copy at the Air and Radiation Docket and Information Center, EPA/DC, EPA West Building, 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, and the telephone number for the Air Docket is (202) 566 - 1742. **FOR FURTHER INFORMATION CONTACT :**  Ms. Kristin Riha , Office of Air Quality Planning and Standards, Air Quality Pol icy Division , Mail code C 539 - 01 , Research Triangle Park, NC 27711, telephone (919) 541 - 2031 ; fax number: 919 - 541 - 0824; email address: riha.kristin @epa.gov. **SUPPLEMENTARY INFORMATION: I.**  **General Information**** * E.O. 12866 Review

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Page 5 of 64 A. Does this a ction apply to me? Entities pote ntially affected by this action include s tates (typically s tate air pollution control agencies) , tribes, and, in some cases, local governments that are responsible for air quality management and planning . In particular, s tates with areas designated nonatta inment for the 1997 8 - hour ozone NAAQS and/ or the 1997 PM2.5 NAAQS and that are located within the geographic areas covered by the NO x SIP Call 1 and/ or the CAIR2 may be affected by this action . EGUs located in such geographic regions may also be affected b y any new RACT or RACM reviews that may result from final rulemaking on this action . T hese sources are in the following groups: Industry group SIC a NAICS b Electric Services 492 221111, 221112, 221113, 221119, 221121, 221122

a Standard Industrial Classi fication. b North American Industry Classification System. B. What should I consider as I prepare my comments for EPA? 1. Submitting CBI . Do not submit this information to EPA through www.regulations.gov or email . Clearly mark the part or all of the
1 See Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reduc ing Regional Transport of Ozone; Final Rule, 63 FR 57356 (October 27, 1998). 2 See Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule); Revisions to Acid Rain Program; Revisions to the NO x SIP Call; Final Rule, 70 FR 25162 (May 12, 2005) .** * E.O. 12866 Review

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Page 6 of 64 info rmation 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 add ition 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 dis closed except in accordance with procedures set forth in 40 CFR P art 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 Registe r 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.** * E.O. 12866 Review

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Page 7 of 64  If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow fo r 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 de adline 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 this notice will be posted at http://www.epa.gov/ttn/oarpg/new.html under “ Recent Actions **.”** D. What information should I know about a possible public hearing? To request a public hearing or information pertaining to a public hearing on this document, contact Ms . Pamela Long at (919) 541 - 0641 before 5 p.m. on **[INSERT DATE 15 DAYS AFTER DATE OF PU** **BLICATION IN THE FEDERAL REGISTER] .**  If requested, further details concerning a public hearing for this proposed rule will be published in a separate Federal Register notice . For updates and additional information on a public hearing, please check EPA’s web site for this** * E.O. 12866 Review

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Page 8 of 64 rulemaking at http://www.epa.gov/ttn/oarpg/new.html under “recent actions **.”** 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 co nsider as I prepare my comments for EPA? 1. Submitting CBI 2. Tips for P reparing Y our C omments C. Where can I get a copy of this document and other related information? D. What information should I know about a pos sible public hearing? E. How is this notice organized? II . Background A. RACT or RACM Requ irements for EGUs Participating in the NO x SIP Call and the CAIR 1. CAA Requirements and the Definition of RACT and RACM 2. The NO x SIP Call 3. The CAIR 4 . The Phase 2 Ozone Implementation Rule 5 . The PM2.5 Implementation Rule 6 . Impact of the NRDC v. EPA Court Decision on Determinations and Presumptions 7 . Impact of the North Carolina v. EPA Court Decis ion o n Determinations and Presumptions B. Analysis of the Economic Feasi bility of Reasonably Available Controls in the PM2.5 Implementation Rule C. RFP Requirements for the 1997 PM2.5 NAAQS 1. Linkage between the RFP Polic y in the Phase 2 Ozone Implementation Rule and the PM2.5 Implementation Rule 2. Rulemaking a nd Litigation Chronology of RF P Requirements for the 1997 Ozon e NAAQS and the 1997 PM2.5 NAAQS III. Proposed Action A. RACT or RACM Requireme nts for EGUs Participating in the NO x SIP Call and the CA I R B. Analysis of the Economic Feasibility of Reasonably Available Controls in the PM2.5 Implementation Rule C. RFP Requirements for the 1997 PM2.5 NAAQS I V. Statutory and Executi ve Order Review** * E.O. 12866 Review

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Page 9 of 64 A. Executive Order 12866: Regulatory Plann ing an d Review and Executive Order 13563: Improving Regulation and Regulatory Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coo rdination with Indian Tribal Governments G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energ y Supply, Distribution, or Use I. National Technology Transfer and Advancement Ac t J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and L ow - Income Populations
**II. Background**  A. RACT or RACM Requirements for EGUs P articipating in the NO x SIP Call and the CAIR 1. CAA Requirements and the Definition of RACT and RACM The Clean Air Act ( CAA ) requires the EPA to designate areas as either attai nment, nonattainment , or unclassifiable for each NAAQS . States have primary responsibility for implementing the NAAQS within their borders, and each state must develop a State Implementation Plan ( SIP ) that contains adequate provisions for attainment and
maintenance of the NAAQS . The SIPs developed by states must meet the applicable statutory requirements . For areas designated nonattainment, Part D of the CAA requires that SIPs must include certain control measures . Subpart 1 of Part D contains generally applicable requirements for all nonattainment areas . Subpart 2 of** * E.O. 12866 Review

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Page 10 of 64 Part D contains additional requirements applicable to certain ozone nonattainment areas . Among the general statutory requireme nts for all nonattainment areas is the requirement i n section 172 (c)(1) that SIPs: “provide for the implementation of all reasonably available control measures as expeditiously as practicable (including such reductions in emissions from existing sources in the area as may be obtained through the adoption, at a minimum, of reasonably available control technology).” Ozone nonattainment areas that are subject to the requirements of S ubpart 2 must meet more specific RACT requirements in accordance with section 182(b)(2)(C) . States located wi thin the Ozone Transport Region (OTR) have additional requirements to impose RACT on sources statewide, rather than only in nonattainment areas, in accordance with section 184. EPA refers to the requirement for “reasonably available control measures” as RACM, and refers to the subset o f RACM in the parenthetical for “reasonably available control technology” as RACT . RACM and RACT measures apply broadly to a range of source categories located in designated nonattainment areas , including large stationa ry sources such as EGUs . The EPA has interpreted RACT to mean the lowest emissions limitation that a particular source is capable of meeting by the application of control technology that is reasonably available considering technological and economic feasibility as well as other** * E.O. 12866 Review

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Page 11 of 64 considerations . 3 Economic feasibility encompasses considerations such as whether the cost of a potential measure is reasonable considering attainment needs of the area and the costs of other measures, and whether the cost of a measure is reasonable for the regulated en tity to bear, in light of the benefits. 4 RACT requirements are specifically intended to impose emission controls for purposes of attainment and maintenance of the NAAQS within a specific local nonattainment area . The EPA has interpreted the terms RACT a nd RACM for purposes of Subpart 1 requirements as being the level of emissions control that is necessary to provide for expeditious at tainment of the NAAQS within a nonattainment area . Courts have upheld this interpretation of the statute with respect to
n onattainment SIPs. 5 In contrast to nonattainment plan requirements, s ection 110(a) (2)(D)(i) requires each state’s SIP to contain provisions that will prevent emissions from sources in the state from having certain prohibited impacts on the air quality of other states , via interstate transport . In particular, section 110(a )(2)(D)(i) (I) requires that a state’s SIP must contain provisions to prevent emissions in amounts that would “contribute significantly to nonattainment in, or interfere with maintenance by , any other state” with respect to a
3 See Clean Air Fine Particle Implementation Rule; Final Rule, 72 FR 20586 (April 25, 2007) . The interpretation of RACT occurs at 20610. 4 See Clean Air Fine Particle Implementation Rule, 72 FR 20619. 5 See NRDC v. EPA , 571 F .3d 1245, at 1252 - 53 (D.C. Cir. 2009).** * E.O. 12866 Review

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Page 12 of 64 NAAQS . The EPA has initiated several programs pursuant to section 110(a)(2)(D)(i) (I) in order to address interstate transport of emissions that have such prohibited impacts on attainment of the ozone and PM2.5 NAAQS on a regional basis . 2. The NO x SIP Call

In October 1998, EPA published a rule under section 110(a)( 2)(D) ( i ) of the CAA , commonly referred to as the “ NO x SIP Call . ” This rule was intended to reduce NO x emissions (a precursor for ozone formation ) from sourc es that significantly contribute to nonattainment or interfere with maintenance of the ozone NAAQS in one or more downwind states . To implement these reductions, the NO x SIP Call required 22 states and the District of Columbia to submit SIP revisions prohi biting those NO x emissions that EPA determined to be adversely impacting downwind air quality problems . T he NO x SIP Call provided a regional cap - and- trade program as one mechanism for states to meet their interstate transport requirements u nder s ection 110 (a)(2)(D)(i) . Through this mechanism, affected sources could meet emissions reductions requirements either by installing NO x emissions controls or by purchasing allowances from other sources located within the geographic region covered by the NO x SIP Call . 3 . The CAIR In May 2005, EPA published another rule under section 110(a)(2)(D) ( i ) of the CAA , referred to a s the “ Clean Air Interstate** * E.O. 12866 Review

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Page 13 of 64 Rule ” ( or the CAIR ) . The CAIR required reductions of NO x and /or SO 2 emissions across 2 8 states and the District of C olumbia needed to eliminate significant contribution to nonattainment , or interference with maintenance of , the 1997 8 - hour ozone NAAQS and /or the 1997 PM2.5 NAAQS in one or more downwind states . 6 Similar to the NO x SIP Call, EPA provided a regional cap - a nd- trade mechanism as one means for upwind states to meet the interstate transport requirements of section 110(a)(2)(D)(i) . By this mechanism, affected sources could meet their emission reduction requirements either by installing controls for NO x and/ or SO 2 emissions, or by purchasing allowances from other sources located in the geographic region covered by the CAIR . On April 28, 2006 (71 FR 25328) , EPA also promulgated Federal Implementation Plans (FIPs) for all jurisdictions covered by the CAIR to address the section 110(a)(2)(D)(i) requirements in the event that states were unable to make a SIP submission containing state measures necessary to alleviate interstate transport. A number of parties filed petitions for review in 2008 to challenge the CAIR on various grounds . As a result of this litigation, the United States Court of Appeals for the District of Columbia Circuit (the Court) remanded the CAIR to EPA, but later

6 NO x is a precursor for ozone formation, while both NO x and SO 2 are precursors for PM2.5 formation.** * E.O. 12866 Review

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Page 14 of 64 decided not to vacate the rule. 7 In the process of remanding the CAIR, however, the Co urt identified serious concerns with EPA’s reading of the statute and analytical approach, including such core issues as the Agency’s method of evaluating significant contribution to nonattainment and interference with maintenance of the NAAQS . In response to the remand of the CAIR, EPA finalized another rule, the “Cross - State Air Pollution Rule” (CSAPR) on July 6, 2011. 8 Both the NO x SIP Call and the CAIR were intended and designed to eliminate interstate transport of pollutants that have impacts on atta inment and maintenance of the ozone and PM2.5 NAAQS in downwind areas . Thus, they provide significant emissions reductions that assist downwind areas with attainment or maint e n ance of the NAAQS , and allow downwind states to develop SIPs in reliance on regi onal emissions reductions . However, EPA did not intend that either the NO x SIP Call or the CAIR would completely obviate the potential need for additional local pollution controls in downwind nonattainment areas, nor did EPA intend either action to override the statutory

7 See North Carolina v. EPA , 531 F.3d 896; modified b y 550 F.3d 1176 (D.C. Cir. 2008). 8 See http://www.epa.gov/airtransport/pdfs/TR_070611_WEB.pdf for the prepublication version of this rule . Once published in the Federal Register , the rule will appear at www.regulations.gov under Docket Number HQ - OAR- 2009 - 0491.** * E.O. 12866 Review

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Page 15 of 64 requirements for SIPs for nonattainment areas. 9 In order to help states address the specific statutory requirement for SIPs for nonattainment areas for the 1997 8 - hour ozone NAAQS and 1997 PM2.5 NAAQS, EPA promulgated both regulation s and guidance applicable to each NAAQS in separate implementation rules . Within those actions, EPA addressed questions concerning the intersection of the requirements for regional control strategies and the requirements for local control strategies to reduce interstate transport in individual nonattainment areas needed for local attainment purposes . In particular, EPA focused on the issue of whether, or to what extent, compliance by EGUs with the requirements of the NO x SIP Call and /or the CAIR could also be construed as compliance with the RACT requirements for local nonattainment SIPs for the 1997 8 - hour ozone and 1997 PM2.5 NAAQS . The EPA’s approach to this issue for each NAAQS is described in more detail later . 4 . T he Phase 2 Ozone Implementation Rule On November 29, 2005 (70 FR 71612) , EPA published an ozone implementation rule to address nonattainment SIP requirements for the 1997 8 - hour ozone NAAQS (the Phase 2 Ozone Implementation Rule) . The Phase 2 Ozone Implementation Rule addressed various statut ory 9 See the CAIR, 70 FR 25184 (discussing the need for both regional and local emission reductions to bring all areas into attainment); See also Clean Air Fine Particle Implemen tation Rule, 72 FR 20587 - 89 (d iscussing the need for regional and national emission reduction programs in conjunction with local controls in SIPs for nonattainment areas to bring all areas into attainment) .** * E.O. 12866 Review

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Page 16 of 64 requirements, including the requirement for RACT level controls for sources located within nonattainment areas generally, and controls for NO x emissions from EGUs in particular . After explaining its analysis of the issue , EPA indicated its determinatio n that the regional NO x emissions reductions that result from either the NO x SIP Call or the CAIR would meet the NO x RACT requirement for EGUs located in states included within the respective NO x SIP Call or the CAIR geographic region s . Thus, EPA concluded that: “[t]he S tate need not perform a NO x RACT analysis for sources subject to the S tate’s emission cap - and- trade program where the cap - and- trade program has been adopted by the S tate and approved by EPA as meeting the NO x SIP Call requirements or, in S t ates achieving the CAIR reductions solely from electric generating units (EGUs), the CAIR NO x requirements.” 10 In January 2006, Earth j ustice , on behalf of the Natural Resources Defense Council ( NRDC) , filed a petition for reconsideration of the Phase 2 Ozo ne Implementation Rule, objecti ng to EPA’s determination that, in certain circumstances, compliance with the requirements of the CAIR would constitute RACT for NO x emissions for EGUs located in states with in the CAIR region. 11 The petition raised objection s to an alleged failure to seek publ ic comment on the determination and to the Agency’s interpretation of
10 See Phase 2 Ozone Implementation Rule , 70 FR 7 1 617. 11 See “Petition for Reconsideration,” filed by David Baron, E arthjustice, on behalf of NRDC (January 30, 2006) . A copy of the petition is located in the docket for this action.** * E.O. 12866 Review

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Page 17 of 64 the CAA to allow a regional emissions reduction program to constitute RACT for sources located within nonattainment areas , as well as other related is sues . The EPA granted the petition for reconsideration of the Phase 2 Ozone Implementation Rule and subsequently conducted a Supplemental Technical Analysis to assess whether compliance with the CAIR could satisfy the NO x RACT requirement for EGUs in certa in geographic areas . 12 A proposed rule , which presented this analysi s and solicited comments regarding the reconsideration of whether the CAIR would constitute RACT for NO x emissions for EGUs located in states within the CAIR region , was published i n December 2006 . The EPA did not reconsider or request comments on its prior determination that the NO x SIP Call constitutes RACT for those sources covered by the NO x SIP Call. EPA then published a final notice of reconsideration on June 8, 2007 (72 FR 31727) , re flecting the Agency’s additional evaluation of whether compliance with the CAIR could constitute RACT for NO x emissions for certain EGUs . In that action , EPA modified its conclusion regarding when compliance with the CAIR may satisfy NO x RACT requirements for EGUs in areas within the CAIR region . The EPA reaffirmed its determination that, in many ozone nonattainment areas, 12 See “ Technical Support Document for Phase 2 of the Final Rule to Implement the 8 - Hour Ozone National Ambient Air Quality Standard Notice of Reconsideration; NO x RACT for EGUs in CAIR States

– Supplemental Technical Analysis ,” December 2006. (Docket ID no. EPAHQ - OAR- 2003 - 0079, item numb er EPA- HQ - OAR- 2003 - 0079 - 1044.2) (Suppleme ntal Technical Analysis ) .** * E.O. 12866 Review

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Page 18 of 64 compliance with the CAIR would satisf y NO x RACT requirements for EGUs in such areas . 13 However, EPA stated that this determination would only apply to specific areas for which EPA’s Supplemental Technical Analysis showed that the CAIR was projected to achieve equal or greater NO x emissions reductions than application of source - by - source application of RACT to the EGUs within the nonattainment area . Even in those nonattainment areas where EPA did not make a formal determination, however, EPA also establish e d a separate presumption that compliance with the CAIR, in certain circumstances, c ould satisf y NO x RACT requirements for EGUs in any are a within the CAIR region . 14 EPA thus announced that states could rely initially on this presumption , even in areas where the Agency had made no formal determination , assuming certain conditions . Finally, EPA reiterated in the final notice of reconsideratio n that EGU sources complying with the requirements of the NO x SIP C all would also be considere d to have met their ozone NO x RACT obligations , assuming certain conditions . 15

13 Specifically, EPA determined that compliance with the CAIR would meet the NO x RACT requirements for ozone nonattainment areas in sections 172(c)(1) and 182(f), and the statewide NO x RACT requirements for SIPs for states located within the Ozone Transport Region pursuant to se ctions 184(b) and 182(f) . See Phase 2 Ozone Implementation Rule - Notice of Reconsideration, 72 FR 31730. 14 See Phase 2 Ozone Implementation Rule - Notice of Reconsideration, 72 FR 31730 - 31. 15 Id. , 72 FR 31731.** * E.O. 12866 Review

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Page 19 of 64 In addition to the Supplemental Technical Analysis , EPA provided various legal and policy bases for its determinations and presumptions in the final notice of reconsideration of the Phase 2 Ozone Implementation Rule . For example, EPA argued that its interpretation of section 172(c) to allow RACT to include consideration of regionwide emissions reductions, rather than nonattainment area specific reductions only , was permissible because of the use of the term “reasonable” as part of the definition of RACT. 16 As a policy matter , EPA also argued that emissions reductions that result from reg ional scale programs like the CAIR often “will achieve a more effective and economically efficient air quality improvement in nonattainment areas than application of source - by source RACT.” 17 In November 2008, several parties (including NRDC) further challe nged EPA’s Phase 2 Ozone Implementation Rule and the Notice of Reconsideration . In particular , they challenged EPA’s determination that compliance with the NO x SIP Call and /or the CAIR could satisfy NO x RACT requirements for EGUs in nonattainment areas , an d EPA’s specific determinations for some areas and general presumption for other areas, that compliance with the CAIR could satisfy NO x RACT for EGUs in ozone nonattainment areas . In view of its decision in North Carolina v. EPA , in which the C ourt had previously remanded the CAIR , 16 Id. , 72 FR 31730. 17 Id.** * E.O. 12866 Review

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Page 20 of 64 the Court deferred consideration of the litigant’s challenge to the Phase 2 Ozone Implementation Rule and Reconsideration Notice insofar as they relate d to the CAIR program. As a result of this litigation, t he Court decided that the provisions in the Phase 2 O zone Implementation Rule indicating that a s tate need not perform (or submit) a NO x RACT analysis for EGU sources subject to a cap - and- trade program that meets the requirements of the NO x SIP Call are inconsistent with the st atutory requirements of section 172(c) (1) . 18 The Court specifically held that the Phase 2 Ozone Implementation Rule allowing use of the NO x SIP call to constitute RACT without any locally applicable analysis regarding the equivalence of NO x SIP Call and RACT reductions: “is inconsistent with the Clean Air Act . . . in allowing participation in a regional cap and- trade program to satisfy an area - specific statutory mandate.” The C ourt emphasized that : “ the RACT requirement calls for reductions in emissions f rom sources in the area; reductions from sources outside the nonattainment area do not satisfy the requirement . . . Accordingly, participation in the NO x SIP call would constitute RACT only if participation entailed at least RACT - level reductions in emiss ions from sources within the nonattainment area. ” The Court rejected EPA’s arguments that a regional emissions reductions program like the NO x SIP Call would result in greater

18 See NRDC v. EPA , 571 F.3d 1245 (D.C. Cir. 2009).** * E.O. 12866 Review

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Page 21 of 64 emissions reductions in nonattainment areas as unsupported by any adequate techn ical analysis. 19 The Court likewise rejected EPA’s argument that regionwide emissions reductions would collectively achieve better emission s reductions because this argument did not comport with the explicit “in the area” language of section 172(c)(1). 20 W ith respect to EPA’s argument that the statute is ambiguous as to whether each individual source within a nonattainment area must install RACT, the Court concluded that even if that were correct, EPA had failed to evaluate the impact of the NO x SIP Call on the air quality within specific nonattainment areas, and thus EPA

“ ha s failed to establish that NO x SIP Call compliance can be equated to RACT compliance.” 21 The Court disagreed with EPA’s theory that section 172(c) (6) , which authorizes auctions as a permissible form of control measure , could allow reliance on a regional cap - and- trade type program in lieu of the RACT requirement for sources “in the area.” 22 Finally, the Court rejected the argument that EPA’s interpretation should be upheld because a state could still elect to define RACT to require greater emissions reductions from EGUs in a given area for local atta inment needs, concluding that: “[a] state’s decision to require stricter controls cannot eliminate the defect in EPA’s approach

– failing to implement the requirement of at least
19 Id. 571 F.3d at 1257. 20 Id. 21 Id. 22 Id. 571 F.3d at 1258.** * E.O. 12866 Review

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Page 22 of 64 RACT - level reductions in emissions from sources in the nonattainment area.” 23 Based on the foregoing reasoning , t he C ourt remanded th e provision of the Phase 2 Ozone Implementation Rule determining that the NO x SIP Call satisfies NO x RACT for EGUs because EPA had failed to show that compliance with the NO x SIP Call would achieve at least RACT - level reductions in each nonattainment area . In deciding not to vac ate the provision, however , the Court noted that a determinatio n that RACT was satisfied by compliance with the NO x SIP Call might be permissible for an area if accompanied by a technical analysis demonstrating that the program in fact “results in greater emissions reductions in a nonattainment area than would be achi eved if RACT level controls were installed in that area.” 24 In other words, the Court rejected the notion that a regional cap - and- trade program intended to eliminate interstate transport of emissions consistent with section 110(a)(2)(D)(i) coul d automatica lly constitute RACT level control as required by section 172(c)(1), but held open the possibility that such a program might in fact result in the same , or higher, level of emissions reductions in individual nonattainment areas . The Court did not, however, explain how the key feature of such cap - and- trade programs, i.e. , the ability of sources to purchase allowances in lieu of installation of emissions controls, could meet
23 Id. 24 Id.** * E.O. 12866 Review

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Page 23 of 64 the parameters envisioned by the Court . Nor did the Court speak to the issue of source s that might wish to switch their method of compliance in the future, taking advantage of the flexibility to control emissions or purchase allowances as market conditions evolve . Significantly, the Court did not address at all EPA’s comparable determinati ons and presumption that compliance with the CAIR would constitute NO x RACT for EGUs in ozone nonattainment are as under certain circumstances . As mentioned earlier, the Court deferred consideration of the CAIR- related challenges to EPA’s determinations and presumption because at the time of this decision, the Court had already remanded the CAIR . 25 Nevertheless, EPA believes that the concerns expressed by the Court about the Agency’s approach to the NO x RACT requirement for EGUs and the emissions reductions required by the NO x SIP Call raise significant questions about EPA’s approach to the comparable issues related to compliance with the CAIR, for both the Phase 2 Ozone Implementation Rule and the 1997 PM2.5 NAAQ S Implementation Rule described later . The EPA has therefore decided to consider the decision and the reasoning of the Court with respect to both the NO x SIP Call and the CAIR as it responds to the remand of the Phase 2 Ozone Implementation Rule, and to evaluate the implications of the decision for ot her related rulemakings , including the responses to related petitions for reconsideration .

25 Id . at 1250.** * E.O. 12866 Review

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Page 24 of 64 5 . T he PM2.5 I mplementation Rule On April 25, 2007 (72 FR 20586) , EPA published the “ Clean Air Fine Particle Implementation Rule ” to address nonattainment SIP requi rements for the 1997 PM2.5 NAAQ S (the PM2.5 Implementation Rule). 26 Th at action provide d r egulations and additional guidance in the preamble for s tate plans required to implement the 1997 PM2.5 NAAQS . Th e PM2.5 Implementation Rule provide d a framework for developing SIP submissions for nonattainment areas based on the S ubpart 1 requirements for nonattainment areas found in section 172 of the CAA . With respect to the requirements of s ection 172 (c)(1), the PM2.5 I mplementation Rule utilized a combined RACT/ RACM approach, where an area’s obligation to implement RACT was considered as part of an area’s overall RACM obligation for EGU sources . RACT/RACM was defined in the Rule as the set of emission reduction measures needed to attain the standards as expeditio usly as practicable in the nonattainment area at issue . T hrough guidance in the preamble to the final PM2.5 I mplementation Rule , EPA also establishe d a presumption that compliance with the CAIR would satisfy RACT /RACM requirement s for SO 2 and NO x emission s from EGUs in states participating in the CAIR cap - and- trade program for such emissions. 27

26 The PM2.5 Implementation Rule is now codified at 40 CFR Section 51.1000

– 1012 . Section 51.1010 addresses the RACT and RACM requirement . 27 See PM2.5 Implementation Rule, 72 FR 20623

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Page 25 of 64 For SO 2 , EPA’s guidance recommended that states that obtained all SO 2 reductions required by the CAIR from EGUs could presume that such sources located within a des ignated nonattainment area were meeting SO 2 RACT /RACM requirements because of overall regional SO 2 reductions from EGUs . The guidance indicated that this presumption could be utilized without conducting a technical analysis comparing the CAIR and RACT /RACM reductions for the specific nonattainment area . For NO x , EPA similarly recommended that so long as the EGU s ources in the state were required to operate NO x emissions controls on a year - round basis to comply with the CAIR , then that state could presume th at those EGUs were meeting NO x RACT /RACM requirements because of overall regional NO x reductions from EGUs . The EPA made no decision with respect to what might constitute RACT /RACM level controls for direct PM2.5 emissions from EGUs in relation to the CAIR because the CAIR only addressed the NO x and SO 2 emissions from such sources . Based on this presumption that compliance with the CAIR would constitute RACT /RACM level controls for SO 2 and NO x emissions from EGUs within the CA IR region, EPA concluded that: “states may define RACT/RACM as the CAIR level of control on the collective group of sources in the region rather than impose a specific level of control on individual sources.” 28 In other words, EPA indicated that states could presume that EGUs located wi thin a given nonattainment area

28 Id. at 72 FR 20624.** * E.O. 12866 Review

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Page 26 of 64 were meeting the RACT /RACM requirement, based solely upon a regional program that imposed controls on sources both within and outside designated nonattainment areas . The EPA acknowledged that reliance on the presumption coul d result in situations where specific EGU s located within nonattainment areas might elect to comply with the CAIR through the acquisition of allowances, rather than the reduction of emissions . Although EPA articulated a series of policy and technical reaso ns for the appropriateness of considering a regional control program like the CAIR to be a preferable approach, the Agency also acknowledged that a state might “conclude that establishing additional ‘beyond CAIR’ emissions control requirements on specific sources in nonattainment areas is warranted to provide for attainment as expeditiously as practicable.” 29 These policy and technical arguments are very similar to those made by EPA in connection with challenges to the Phase 2 Ozone Implementation Rule , and rejected by the C ourt decision discussed in fu rther detail previously in this notice . In June 2007, EPA received a petition for reconsideration filed by Earth j ustice on behalf of several petitioners (including NRDC)

29 Id. at 72 FR 20625.** * E.O. 12866 Review

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Page 27 of 64 that raised several objections to t h e PM2.5 Implementation Rule . 30 One of the principle objections raised by the petition is that under the CAA, compliance with a regional trading program, such as the CAIR , should not be presumed to satisfy RACT /RACM requirements for individual EGU sources located in nonattainment areas . The petitioner argued that the effect of the “CAIR- RACT presumption” was to waive the CAA RACT requirements for individual EGU sources located with in PM2.5 nonattainment areas . The petition also asserts that the presumption and its accompanying rationale were added to the rule after the close of the public comment period, and that EPA therefore failed to seek public comment on the final rule’s determination that the CAIR presumptively satisfies SO 2 and NO x RACT requirements f or EGUs located in nonattainment areas . The petition further maintain s that EPA lacks authority to establish a presumption on what satisfies RACT in this fashion , and that EPA’s conclusion that the CAIR can b e presumed to satisfy RACT is arbitrary and capr icious because it lacked a factual basis . Lastly, t he petition also maintain ed that even if a n initial presumption that compliance with the CAIR constituted compliance with the RACT requirements of section 172(c) (1) were otherwise permissible, the final ru le would be

30 See “ Petition for Reconsideration, ” filed by Paul Cort, Earth j ustice, on behalf of the American Lung Associati on, Medical Advocates for Healthy Air, Natural Resources Defense Council, and the Sierra Club (June 25, 2007) . A copy of the petition is in the docket for this action.** * E.O. 12866 Review

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Page 28 of 64 arbitrary and unlawful because it fail ed to explain if or how the presumption can be rebutted . Sign i ficantly, Earth j ustice filed the petition for reconsideration of the PM2.5 Implementation Rule well before the Court in the NRDC v. EPA case addressed the comparable issue with respect to the NO x SIP Call in the context of the Phase 2 O zone I mplementation Rule . Nevertheless, the petitioner made essentially the same points as the Court in the NRDC v. EPA case that to allow compliance with a region al cap - and- trade program to constitute RACT for sources located within a nonattainment area automatically, or pursuant to an unsupported presumption, would be contrary to the explicit requirements of section 172(c)(1) . Moreover, EPA notes that multiple par ties have indicated that they intend to challenge the PM2.5 Implementation Rule on this same issue through petitions for review currently pending i n the Court. In light of the arguments raised in the petition for reconsideration, and in light of the Court’ s decision in NRDC v. EPA , EPA decided to grant the petition for reconsideration on this issue and initiate this rulemaking . 31 Accordingly, after reconsideration and for the reasons further described later in this notice , EPA is proposing in this action to withdraw our prior presumption in the

31 See letter dated April 25, 2011 , from Lisa Jackson to Paul Cort, Earthjustice . A copy of this letter is located in the docket for this action.** * E.O. 12866 Review

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Page 29 of 64 PM2.5 Implementation Rule that compliance with the CAIR would automatically constitute RACT /RACM level controls for EGUs located in areas designated nonattainment for the 1997 PM2.5 NAAQS. 6 . Impact of the NRDC v. EPA Court Decision on Determinations and Presumptions EPA has reevaluated whether compliance with the NO x SIP Call could constitute NO x RACT for EGUs in light of the Court’s opinion in the NRDC v. EPA case . Given the explicit wording of section 172(c)(1) tha t sources “in the area” must at a minimum adopt RACT controls for that area, EPA believes that it is no longer appropriate to address this requirement merely based upon the participation of the source in a regional cap - and- trade program . Implicit in a regi onal cap - andtrade program is that some sources may elect to utilize allowances in lieu of emissions controls in order to meet the regional emissions reductions requirements, and that those elections could change . In response to the remand of the CAIR, E PA finalized the CSAPR on July 6, 2011, which requires 27 states in the eastern half of the United States to significantly improve air quality by reducing EGU emissions that cross state lines and contribute to ground - level ozone and fine particle pollution in other states . At the same time, the Agency also issued a supplemental proposal that would require six states
— Iowa, Kansas, Michigan, Missouri, Oklahoma, and Wisconsin

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Page 30 of 64 program . F inalizing this supplemental proposal would bring the total number of covered states under the CSAPR to 28. Based on the logic of the NRDC v. EPA Court decision, and the concerns raised in the petition for reconsideration on the PM2.5 Implementation Rule, E PA believes that it would be inappropriate for EPA to pre - judge that other regional cap - and- trade programs, such as the CSAPR , would constitute RACT for covered sources . Therefore, states should not rely merely on the fact that sources are complying with a regional cap - and- trade program as a basis for RACT or RACM level emissions controls for the 1997 8 - hour ozone NAAQS, the 1997 PM2.5 NAAQS, or any other NAAQS . States must comply with the provisions of the CAA, which require an evaluation of EGUs located
w ithin designated nonattainment areas for potential RACT controls, and imposition of such controls as may be necessary for expeditious attainment of the NAAQS within the area . States may, however, elect to conduct a technical analysis for the specific nona ttainment area considering the emissions controls required by the regional cap - and- trade program at issue, and demonstrate that this program results in equal to or greater than actual emission reductions from the EGUs within the nonattainment area than wou ld application of RACT on all subject EGUs within the nonattainment area . States could conduct this analysis for the EGUs in the nonattainment area, either individually or in t he aggregate .** * E.O. 12866 Review

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Page 31 of 64 The EPA anticipates that in many areas, such an evaluation will li kely indicate that EGUs within the nonattainment area at issue are already adequately controlled for NO x and SO 2 emissions, whether by virtue of the NO x SIP Call, the controls required by the CSAPR , or by other means . However, based on the logic of the NRDC v. EPA Court decision, and the concerns raised in the petition for reconsideration on the PM2.5 Implementation Rule, EPA believes that it would be inappropriate for EPA to pre - judge that outcome prior to state development of locally applicable demonstrat ions showing equivalent reductions. 7 . Impact of the North Carolina v. EPA Decision on Determinations and Presumptions As mentioned earlier , the Court remanded the CAIR to EPA and later decided not to vacate the rule . In the process of remanding the CAIR, the Court identified serious concerns with EPA’s reading of the statute and analytical approach, including such core issues as the Agency’s method of evaluating significant contribution to nonattainment and interference with maintenance of the NAAQS . The E PA notes that the Court also reiterated some of its concerns in the NRDC v. EPA decision with the CAIR and EPA’s use of a regional cap - andtrade program to address interstate transport of emissions between states. 32

32 See NRDC v. EPA , 571 F.3d 1245 at 1256 - 57.** * E.O. 12866 Review

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Page 32 of 64 Given that the Court has remanded the CAI R, the Agency believes that any prior determination that compliance with the CAIR would constitute RACT for NO x for EGUs for purposes of the Phase 2 Ozone Implementation Rule can no longer be considered reliable . Those determinations were implicitly based upon the continued existence of the CAIR and its specific requirements . In making the determinations, EPA evaluated the controls that EGUs in those areas would be likely to install given the specific requirements of the CAIR, and the choices that such sour ces would make given the specific cap - and- trade features of the CAIR . Further, in NRDC v. EPA , the Court explicitly rejected the Agency’s conclusion that compliance with the NO x SIP Call would constitute RACT for EGUs in nonattainment areas because there
was inadequate technical basis or justification for such a conclusion. 33 EPA believes that after the remand of the CAIR, the prior EPA determinations that compliance with the CAIR would automatically constitute RACT for EGUs in nonattainment areas suffers f rom a comparable lack of an adequate technical basis or

33 EPA notes that the Court also considered the issue of potentially outdated RACT determinations in the context of “RACT certifications” in the Phase 2 Ozone Implementation Rule . T he Court approved of EPA’s case - by - case approach to evaluate the continued viability of past RACT determinations, in part because “[i]f a state is presented with information indicat ing that a previous RACT determination is inapp ropriate, the state must consider that information and modify its RACT determinations accordingly.” NRDC v. EPA , 571 F.3d 1245 at 1254 - 55 . The EPA concludes that the same logic would extend to prior determinations that the CAIR constituted RACT, in light of subsequent events.** * E.O. 12866 Review

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Page 33 of 64 justification . Moreover, because other rules such as the CSAPR will by necessity differ from the CAIR as a result of the Court’s remand of the CAIR, EPA concludes that any reliance on the prior determinations at this time would be inappropriate . Therefore, in this action EPA is proposing to withdraw the prior area - specific determinations that EPA made in connection with the Phase 2 Ozone Implementation Rule . EPA’s prior conclusion that a state could p resume that the CAIR would constitute NO x RACT for EGUs for purposes of the ozone NAAQS, even in areas where EPA did not make a formal determination, is also no longer reliable for the same reasons . That presumption also assumed continued existence of the CAIR and its specific requirements . Similarly, EPA’s prior conclusion that a state could presume that compliance with the CAIR would constitute both NO x RACT/RACM and SO 2 RACT/RACM for EGUs for purposes of the PM2.5 NAAQS is also no longer reliable . Theref ore, in this action EPA is proposing to withdraw our prior presumption that EPA announced for purposes of the ozone NAAQS in the Phase 2 Ozone Implementation Rule and our prior presumption that EPA announced for purposes of the PM2.5 NAAQS in the PM2.5 Imp lementation Rule . B . Analysis of the Economic Feasibility of Reasonably Available Controls in the PM2.5 Implementation Rule** * E.O. 12866 Review

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Page 34 of 64 Section 172(c)(1) requires that sources located in nonattainment areas meet RACM a nd RACT level control requirements . In the PM2.5 Implementation Rule, EPA promulgate d regulations to implement this requirement , among others, for the 1997 PM2.5 NAAQS. 34 In addition, in the preamble to the final PM2.5 Implementation Rule, EPA provided extensive guidance for states about how to evaluate sources for RACM and RACT level controls. 35 Although section 172(c)(1) does not itself specify how to determine what constitutes RACM or RACT level controls, EPA has a long history of interpreting those terms both in prior guidance and as applied in many SIP actions . The petition for reconsideration of the final PM2.5 Implementation Rule filed by Earth j ustice asserts that EPA unlawfully and arbitrarily revised well - established criteria used to determine the economic feasibility of controls being considere d for RACT , without any explanation of the legal or policy arguments in support of the new interpretation of the statute . 36 The petition further claims that the new approach directly contradicts the approach included in the proposed PM2.5 Implementation Ru le and that these new interpretations were added to the final rule after the close of the public comment

34 See 40 CFR 51.1010 . 35 See PM2.5 Implementation Rule, 72 FR 20609

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Page 35 of 64 period . For this reason, the petition argues that EPA unlawfully failed to present the new criteria for economic feasibility of RACT to the public for comment . The petition maintains that the final PM2.5 Implementation Rule includes the following new policies which were not subject to an opportunity for public comment: (1) consideration of economic feasibility encompasses whether the cost of a measure is reasonable to bear in light of the benefits; (2) there is no presumption that a given source must bear a similar cost to other similar sources; and (3) s tates may evaluate equity considerations in weighing economic feasibility. 37 The petition states tha t these are significant changes in longstanding EPA policy and interpretation of the RACT requirement for nonattainment areas . In particular, the petitioner argues that “[e]conomic feasibility is not a cost - benefit analysis.” Th e petition er also argues th at EPA’s longstanding policy, which was reiterated in the preamble to t he proposal for the PM2.5 Implementation Rule , maintained that absent other indications, it is reasonable for a source to bear similar costs of emission reduction as are borne by simila r sources in the same source category .

37 The new guidance objected to by the petitioner appears in section II.F.5.b of the preamble to the final PM2.5 Implementation Rule . See 72 FR 20 619 - 20.** * E.O. 12866 Review

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Page 36 of 64 In light of the arguments raised in the petition, EPA decided to grant the petition for reconsideration on this issue. 38 Accordingly, after reconsideration and for the reasons explained further, EPA is proposing in th is action to remove the section of guidance in the preamble to the final PM2.5 Implementation Rule that included the new interpretation s of RACT objected to by the petitioner . The EPA is also proposing to replace this section of the guidance with EPA’s lon g - standing policy on economic feasibility for RACT as described in the proposed PM2.5 Implementation Rule. 39 A basic element of this policy is the presumption that a source in a given category should be able to bear a cost of control similar to the cost of control of other sources in that category. 40 The original policy did not include factors such as “equity” and “profit margins” in determining whether a given level of control is appropriate. C. RFP Requirements for the 1997 PM2.5 NAAQS 1. Linkage b etween the RFP Policy in the Phase 2 Ozone Implementation Rule and the PM2.5 Implementation Rule The Phase 2 Ozone Implementation Rule and the PM2.5 Implementation Rule each included a policy allowing emission 38 See letter dated April 25, 2011 from Lisa Jackson to Paul Cort, Earthjustice . A copy of this letter is located in the docket for this action . 39 See Proposed Rule To Implement the Fine Particle National Ambient Air Quality Standards, 7 0 FR 65984 ( November 1, 2005) . The section of the preamble appears at 70 FR 66021 - 22. 40 See Title I General Preamble, 57 FR 13498 (April 16, 1992) for the basis of this policy.** * E.O. 12866 Review

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Page 37 of 64 reductions from certain sources located outside of a nonattainment area to be credited toward meeting the RFP requirement for the 1997 8 - hour ozone NAAQS and the 1997 PM2.5 NAAQS within such a nonattainment area . In these actions , EPA used somewhat different approaches with respect to how states could take credit for emission reductions from outside the nonattainment area . In response to a petition for reconsideration of the Phase 2 Ozone Implementation Rule concerning this policy and other issues, EPA proposed to revise the policy for the 1997 8 - hour ozone NAAQS on December 22, 2010 (75 FR 80420) . This action is being proposed in response to a petition for reconsideration concerning the RFP policy in the PM2.5 Implementation Rule . However, to understand this proposed change in RFP policy with respect to the PM2.5 Implementation Rule, it is important to also understand related actions and court decisions with respect to this issue in th e Phase 2 Ozone Implementation Rule . A chronology of rulemaking and litigation with respect to the RFP policy is described in detail in the next sub section. 2. Rulemaking and Litigation Chronology of RFP Requirements for the 1997 Ozone NAAQS and the 1997 PM2.5 NAAQS Under EPA’s Phase 2 Ozone Implementation Rule, certain emission reductions from sources located outside a nonattainment area could be credited toward meeting the 1997 8 - hour ozone NAAQS RFP requirement . In the preamble to that Rule, EPA stated that credit could be taken** * E.O. 12866 Review

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Page 38 of 64 for volatile organic compounds ( VOC ) and NO x emission reductions within 100 kilometers (km) and 200 km, respectively, from outside the nonattainment area under certain circumstances . In addition, if a regional NO x control strategy was in place in a state, NO x reductions within that state beyond 200 km could be credited toward meeting the RFP target . In a ll cases, however, states had to include a demonstration that the emissions from outside the nonattainment area had an impact on ambient ozone air quality levels within the nonattainment area and emissions from the sources outside the area providing the re ductions would have to be added to the baseline inventory for the nonattainment area . The EPA explained that where data indicated that emission reductions from sources outside a nonattainment area improved ozone air quality within the nonattainment area, i t was appropriate to allow states to take RFP credit for such reductions from outside the nonattainment area . This interpretation was consistent with the policy EPA had established under the l - hour ozone standard "Guidance for Implementing the l - Hour Ozone and Pre - Existing PM 10 NAAQS . ” 41 Earth j ustice filed a petition for reconsideration in January 2006 on behalf of NRDC challenging EPA’s interpretation that formed

41 The memorandum is available on the EPA Technology and Transfer Network (TTN) Policy and Guidance page for Title I at this website: http://www.epa.gov/ttn/oarpg/t1pgm.html . For a more complete discussion of EPA’s rationale for applying this interpretation in the Phase 2 Ozone Imp lementation Rule, see 70 FR 71647 - 49.** * E.O. 12866 Review

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Page 39 of 64 the basis of its policy for allowing credit for emission reductions outside the nonattainment a rea, namely the interpretation that the intent of section 182(c)(2)(C) is to reduce ambient ozone concentrations within an area rather than to reduce emissions within the nonattainment area. 42 The petitioner claimed that EPA’s interpretation and implementa tion of these provisions were both unlawful and arbitrary . The petitioner also argued that the rule was arbitrary because it allowed the state to claim credit for emission reductions from selected outside - the - nonattainment - area sources without also adding emissions from other outside sources to the RFP baseline, even where those other sources impact air quality in the nonattainment area . EPA subsequently published the PM2.5 Implementation Rule, where the Agency adopted a somewhat different approach for cre diting emission reductions from outside nonattainment areas. 43 Section G.5.b of the preamble to t he PM2.5 Implementation Rule allowed states to take credit for reductions of NO x and SO 2 emissions up to 200 km from outside the nonattainment area (and potent ially for reductions of VOC or ammonia as well) only when certain conditions are met, including that when taking RFP credit for emissions reductions achieved outside

42 This same petition also challenged EPA’ s determination within the Phase 2 Ozone Implementation Rule that, under certain circumstances, compliance with the requirements of the CAIR would constitute RACT for NO x emissi ons from EGUs located in states within the CAIR region. 43 See PM2.5 Implementation Rule, 72 FR 20586.** * E.O. 12866 Review

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Page 40 of 64 of a nonattainment area, the baseline emissions inventory for the nonattainment area conta in all, rather than a select few, sources in the outside area. 44 The primary objective of this policy was to reflect the net emission reductions in the area outside of a nonattainment area that could affect the nonattainment area rather than crediting only reductions from selected sources. In June 2007, EPA received a petition for reconsideration filed by Earth j ustice on behalf of several petitioners (including NRDC) that raised objections to the PM2.5 Implementation Rule on several issues, including the RFP policy allowing credit for emission reductions from outside the nonattainment area. 45 Shortly thereafter, EPA requested from the Court in July 2007 , a partial voluntary remand of the Phase 2 Ozone Implementation Rule to reevaluate and re consider whethe r to revise the RFP interpretation for ozone to assure consistency with the provisions in the PM2.5
44 In addition, where state RFP plans rely on emission reductions outside of a nonattainment area to meet the RFP obligations, such plans must include a te chnical demonstration showing that such outside emissions significantly affected the PM2.5 concentrations within the nonattainment area . In addition, the area outside the nonattainment area from which creditable reductions are taken must be within the stat e; areas outside the state but within 200 km would not be eligible for credit for RFP purposes . 45 This same petition raised concerns regarding the criteria used to determine the economic feasibility of controls being considered for RACT for the 1997 PM2.5 NAAQS . See “Petition for Reconsideration,” filed by Paul Cort, Earth j ustice, on behalf of the American Lung Association, Medical Advocates for Healthy Air, Natural Resources Defense Council, and the Sierra Club (June 25, 2007) . A copy of the petition is i n the docket for this action.** * E.O. 12866 Review

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Page 41 of 64 Implementation Rule . In response to EPA's motion for a partial voluntary remand of the ozone RFP policy, NRDC asked the Court to also to vacate this provisi on . In November 2007, the Court issued an order that vacated and remanded the portion of the Phase 2 Ozone Implementation Rule that allowed RFP credit for emission r eductions of VOC and NO x from outside nonattainment areas . On August 11, 2009 ( 74 FR 40074) , EPA issued a final rule to revise the RFP policy in the Phase 2 Ozone Implementation Rule to be consistent with the interpretation in the PM2.5 Implementation rule . In July 2009, the Court issued its decision on the other issues in the Phase 2 Ozone I mplementation Rule case. 46 The Court examined the phrase “in the area” included in separate provisions relating to reductions from the application of RACT . As described previously in this notice , i n the Phase 2 Ozone Implementation Rule, EPA had explained that because an interstate emissions trading program would achieve beyond RACT - level NO x reductions regionally, areas did not have to meet the RACT - level reductions required under CAA section 172 (c)(1) solely from within the nonattainment area . The Court, however, concluded that the phrase “in the area” means that reductions must occur from sources within the area and “reductions from outside the nonattainment area do not satisfy the requirement.” 47

46 See NRDC v. EPA , 571 F.3d 1245 (D.C. Cir. 2009) . 47 Id., 571 F.3d at 1256 .** * E.O. 12866 Review

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Page 42 of 64 In October 2009, Earth j ustice filed a petition on behalf of NRDC for reconsideration of the August 2009 final rule revising EPA’s interpretation in the Phase 2 Ozone Implementation Rule allowing credit toward meeting the RFP requirement using emissions reductions from outside of ozone nonattainment areas . In its petition, the petitioner based its objections to the rule on the following grounds: 1) the Court’s decision on the RACT provisions in the Phase 2 Ozone Implementation Rule and its interpretation of the phrase “sources in the area” requires that RFP emissi on reductions also be achieved only from sources within the nonattainment area; 2) EPA had presented a new rationale in the August 2009 final rule , i.e. , there is some ambiguity in the statutory provisions because they do not prohibit credits for reduction s from outside the nonattainment area, for which it did not provide an opportunity for comment; 3) EPA offered a new and arbitrary rationale for its choice of the 100 and 200 km distances for reductions outside the nonattainment area ; 4) EPA stated a new a nd arbitrary rationale, i.e. , creditable reductions outside a nonattainment area must be reasonably expected to provide ozone air quality benefits comparable to those from reductions in the area, for evaluating emissions reductions outside a nonattainment area ; and 5) EPA relied on a new rationale when it explained that sources that are outside the nonattainment area are not necessarily “nearby” for designations purposes and certain factors would need to** * E.O. 12866 Review

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Page 43 of 64 be considered for judging whether an area is “nearby” for those purposes. In May 2010, based on Earth j ustice’s October 2009 petition for reconsideration, EPA granted reconsideration of the August 2009 final rule to revise the RFP policy in the Phase 2 Ozone Implementation Rule, and stated it would initiate a rulemaking to address the issue . 48 EPA issued this proposed rulemaking on December 22, 2010 ( 75 FR 80420) . In this proposed rulemaking, EPA is addressing the petitioner’s first objection and EPA believes that the proposed action makes the other objection s moot . Therefore, EPA did not address any of those subsequent points in the proposed reconsideration rulemaking. These developments with respect to the RFP issue in the context of the 1997 8 - hour ozone NAAQS necessitate a reexamination of the comparable issue for purposes of the 1997 PM2.5 NAAQS . The petition for reconsideration of the PM2.5 Implementation Rule filed in June 2007 by Earth j ustice raised two main objections to the policy allowing certain emissions reductions from outside the nonattainment a rea to be credited toward meeting the RFP requirements for the 1997 PM2.5 NAAQS . First, Earth j ustice argued that EPA committed a procedural violation by failing to solicit public comments on the policy .

48 See letter dated May 13, 2010 , from Gina McCarthy to David S. Baron and Paul Cort, Earth j ustice . A copy of the letter is located in the docket for this action.** * E.O. 12866 Review

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Page 44 of 64 Second, the petitioner argued that the policy lacks a ny standard for defining the geographic boundary of the area outside the nonattainment area from which emission reductions c ould be credited . The petitioner noted that the policy “limits the surrounding area that can be included to a doughnut around the no nattainment area of up to 200 kilometers. ” 49 However, the petitioner objected to t he approach in the PM2.5 Implementation Rule because it could allow a state to choose any portion of that surrounding area for purposes of the RFP calculation ; i.e. , a state need only show that emissions in the area selected substantially impact ambient concentrations in the nonattainment area. The petitioner argued that t here is no stated requirement that all areas substantially impacting the nonattainment area be included . F or these reasons, the petitioner claimed that the RFP policy was unlawful and arbitrary . In light of the arguments raised by Earth j ustice’s June 2007 petition, EPA decided to grant the petition for reconsideration on this issue. 50 Due to EPA’s proposed a ction to revise the RFP policy for the 1997 8 - hour ozone NAAQS, and upon reconsideration of the policy for the 1997 PM2.5 NAAQS, EPA is proposing in this action to set aside its earlier interpretation of the RFP provisions described in Section II. G.5.b of the preamble to the final PM2.5 Implementation
49 See PM2.5 Implementation Rule, 70 FR 20636. 50 See letter dated May 13, 2010 from Gina McCarthy to David S. Baron and Paul Cort, Earth j ustice . A copy of the letter is located in the docket for this action.** * E.O. 12866 Review

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Page 45 of 64 Rule and to no longer permit states to rely on credit for emission reductions from outside the PM2.5 nonattainment area to meet such an area’s RFP obligations . **III. Proposed Action**  A. RACT or RACM Requirements for EGUs P articipating in the NO x SIP Call and the CAIR In this notice, EPA is proposing to revise the Phase 2 Ozone Implementation Rule in order to: ( 1) withdraw the determination that compliance with the NO x SIP Call satisfies NO x RACT for EGUs located in certain ozone nonattainment areas or in states within the OTR ; and ( 2) withdraw the separate determination that compliance with the CAIR satisfies NO x RACT for EGUs located in certain specific ozone nonattainment areas and the pr esumption that compliance with the CAIR can satisfy NO x RACT for EGUs located in other ozone nonattainment areas or in states within the OTR . The EPA is also proposing to withdraw from th e PM2.5 I mplementation Rule any presumption that compliance with the CAIR automatically satisfies RACT /RACM requirements for SO 2 and NO x emissions from EGUs located in PM2.5 nonattainment areas. EPA has re evaluated whether compliance with the NO x SIP Call could constitute NO x RACT for EGUs in light of the Courts’ opinion i n the NRDC v. EPA case . Given the explicit wording of section 172(c) (1) that sources “in the area” must at a minimum adopt RACT controls** * E.O. 12866 Review

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Page 46 of 64 for that area, EPA believes that it is no longer appropriate to address this requirement merely based upon the partici pation of the source in a regional cap - and - trade program . Implicit in a regional cap - and- trade program is that some sources may elect to utilize allowances in lieu of emissions controls in order to meet the regional emissions reductions requirements, and t hat those elections could change . After reconsideration, EPA believes that it would be more consistent with the statutory provision, with the overall structure of the CAA with respect to nonattainment plans, and with the overarching objective to provide fo r expeditious attainment of the NAAQS in each nonattainment area, that states should evaluate the EGUs located within designated nonattainment areas for any necessary controls . In addition, to the extent that the Court in the NRDC v. EPA decision left ope n the possibility that an area - specific analysis might establish that compliance with a regional cap - and- trade program like the NO x SIP Call could simultaneously result in factual compliance with the RACT requirement for sources located within nonattainmen t areas, EPA believes that eliminating the prior determinations and presumptions will result in such an analysis should states elect to consider it . Only where states conduct a technical analysis for the specific nonattainment area considering the emission s controls required by the regional cap - and- trade program** * E.O. 12866 Review

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Page 47 of 64 at issue, and demonstrating such a program results in equal to or greater than actual emissions reductions from the EGUs within the nonattainment area than would application of RACT on all subject E GUs within the nonattainment area, could EPA approve a SIP adopting such an approach . EPA believes that although the NRDC v. EPA decision explicitly deferred consideration of whether compliance with the CAIR could automatically satisfy a source’s obligati on to install RACT for NO x or SO 2 , it is both consistent with the decision and appropriate for the Agency to reconsider this issue in the same manner that the Court addressed whether compliance with the NO x SIP Call could satisfy a EGU’s obligation to meet RACT within a nonattainment area . We believe that the Court deferred action with respect to the CAIR, not because the issue could be decided differently, but rather because the Court had already remanded the CAIR to EPA for other reasons . The EPA believes that the logic of the NRDC v. EPA decision extends to any presumption that sources subject to a regional trading program such as the CAIR automatically comply with RACT requirements for NO x or SO 2 . Moreover, EPA believes that the remanded status of the CA IR, and the fact that it will be replaced with a different regional program, renders the prior determinations and presumptions unreliable. EPA is also proposing to withdraw the determination made in the Phase 2 Ozone Implementation Rule, final notice of r econsideration ,** * E.O. 12866 Review

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Page 48 of 64 that EPA’s Supplemental Technical Analysis g i ve s an adequate demonstration that participation in the CAIR is projected to achieve equal or greater annual emissions reduc t ions from EGUs th an source by - source RACT for certain specific areas . EPA is proposing this action because it no longer believes that the assumptions held within th e Supplemental Technical Analysis are adequate to make such a showing . First, the analysis was premised upon the continued existence of the CAIR, and implic itly upon the predicted action of sources subject to the CAIR . Second, after reconsideration, EPA now concludes that t he analys i s’ s across - the board assumptions regarding what constitutes RACT for all sources in all nonattainment areas were inadequate, and did not consider whether more advance d control technologies, such as post - combustion controls ( e.g. , selective catalytic reduction or selective non - catalytic reduction) , might at some time be technically and economically feasible for specific s ources in s ome areas . Therefore, states with nonattainment areas for which EPA previously made this determination must now individually comply with the provisions of the CAA, which require an evaluation of EGUs located within designated nonattainment areas for RACT c ontrols, and imposition of such controls as may be necessary for expeditious attainment of the NAAQS within the area . In addition, should they elect to do so, they must conduct a technical analysis for the specific nonattainment area considering the** * E.O. 12866 Review

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Page 49 of 64 emissi ons controls required by the regional cap - and- trade program at issue, and demonstrating that th is program results in equal to or greater than actual emissions reductions from the EGUs within the nonattainment area than would application of RACT on all subj ect EGUs within the nonattainment area before they include such a determination in a SIP. EPA is consequently proposing to amend Section 51.912 to state explicitly that each individual major source , or major source category, in a nonattainment area must undergo a RACT analysis for purposes of 1997 8 - hour ozone NAAQS SIPs . As a result of this action, states should not merely presume that for EGUs located in a nonattainment area that compliance with a cap - and- trade program, including the NO x SIP Call, the CAIR, or other programs, such as the CSAPR , could satisfy their obligation to implement NO x or SO 2 RACT . As required by the CAA , states are required to analyze what constitutes RACT for EGUs in each nonattainment area . However, a state may be able to show through appropriate technical anal ysis that EGU participation in a regional cap - and- trade program, such as the CSAPR , in a particular nonattainment area would meet NO x and/or SO 2 RACT requirements for the area . Such an analysis must show that compliance by EGUs participating in the program results in actual emissions reductions in the particular nonattainment area that are equal to or greater than the emissions reductions that would** * E.O. 12866 Review

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Page 50 of 64 result if RACT were applied to each individual EGU source or the EGU source category in the area . In addition, the state would have to establish that these emissions levels are required by the SIP by some means independent of the regional program so that they would not change based upon a source’s subsequent decision to comply vi a the purchase of allowances rather than by the installation and operation of emissions controls . The EPA is soliciting comments on the withdrawal of the determinations and presumptions as explained previously in this notice. B. Analysis of the Economic Fe asibility of Reasonably Available Controls in the PM2.5 Implementation Rule EPA has granted the petitioner’s request for reconsideration of the guidance in the preamble for the final PM2.5 Implementation Rule regarding criteria for determining economic fea sibility of RACT controls . Upon reconsideration, EPA agrees that the specific objections raised by the petition do reflect departures from prior EPA guidance on how to evaluate RACT . Given the specific statutory language of section 172(c)(1), and EPA’s lon g - standing interpretation of what factors are appropriate for consideration of economic feasibility in a RACT analysis, EPA concludes that the final guidance that the Agency provided for the PM2.5 Implementation Rule was inappropriate in certain respects . The EPA also concludes that there was inadequate notice and opportunity for public comment for all of** * E.O. 12866 Review

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Page 51 of 64 the departures from past guidance, and the departure s from the guidance as presented in the preamble for the proposed PM2.5 Implementation Rule. Accordin gly, EPA proposes to remove the guidance in question from the preamble to the final PM2.5 Implementation Rule, and to replace it with guidance very similar to what was included in the preamble to the proposed PM2.5 Implementation Rule concerning the economic feasibility analysis component for determining what constitutes RACT . The EPA believes that reverting to the guidance as proposed will be the most effective and efficient means to address the concerns related to inappropriate considerations that were se t forth in the preamble to the final PM2.5 Implementation Rule . In particular, this approach will remove what EPA now concludes was incorrect guidance language in the final rule that suggested that the “economic feasibility” element of a RACT determinatio n should include consideration of “ whether the cost of a [ control ] measure is reasonable for the regulated entity to bear, in light of the benefits,” as the costs of control relative to the health benefits of a particular control technology should not be r elevant to the technical determination of RACT . This language suggested that the economic feasibility analysis should be a “cost/benefit” analysis, instead of the “cost effectiveness” type of analysis that it has historically been .** * E.O. 12866 Review

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Page 52 of 64 Similarly, this change will remove the prior statement in the final rule that there is “no presumption that a given source must bear costs similar to any other source,” because of source specif i c considerations such as “marginal costs, profit margin, and abilities to pass costs through to the consumer.” Upon reconsideration, EPA does not believe that such considerations should override the longstanding presumption that similar sources should be able to bear similar costs , unless adequately and appropriately demonstrated otherwis e . A source’s ability to “afford ” a control can be a cons ideration . However, the intent of the policy is not to reward less efficient sources by allowing them to bear lower emission control costs than more efficient sources . Finally, re - establishment of t he prior guidance referenced in the preamble to the proposed rule will remove the ambiguous references to “equity considerations” as part of the RACT analysis, which in addition to deviating from prior guidance merely introduce d uncertainty as to wh at this factor might mean, e.g. , equity between regulated entities or equity between sources and the health concerns of the public in the nonattainment area, or how such competing equities might be balanced. In order to accomplish this revision to the guidance, we propose in this action to remove the language in section II.F. 5 . b of the preamble to the final PM2.5 Implementation Rule (the section heading** * E.O. 12866 Review

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Page 53 of 64 is: “What factors should states consider in determining whether an available control technology or measure is economically feasible?”) , 51 and to replace it with the following language : What factors should s tates consider in determining whether an available control technology is economically feasible? Economic feasibility considers the cost of reducing emissions and the difference between the cost of the emissions reductions approach at the particular source and the costs of emissions reductions approaches that have been implemented at other similar sources . Absent other indications, EPA presumes that it is reasonabl e for similar sources to bear similar costs of emission reduction . Economic feasibility for RACT purposes is largely determined by evidence that other sources in a source category have in fact applied the control technology or process change in question. T he capital costs, annualized costs, and cost effectiveness of an emission reduction technology should be considered in determining its economic feasibility . The EPA Air Pollution Control Cost Manual 52 describes procedures for determining these costs for st ationary sources . A number of other sources of information are available which provide updated information on control technologies and associated costs of installation and operation. 53 The above costs should be determined for all technologically feasible emission reduction options. States may give substantial weight to cost effectiveness in evaluating the reduction feasibility of an emission reduction technology . The cost effectiveness of a technology is its annualized cost ($/year) divided by the emissions reduced ( i.e . , tons/year) which yields a cost per amount of emission reduction ($/ton) . Cost effectiveness provides a value for each emission reduction option that is comparable with other options and other facilities. In considering what level of control is reasonable, EPA is not proposing a fixed dollar per ton cost threshold for RACT . We believe that what is considered to be a reasonable control level should vary
51 This section of the preamble to t he final PM2.5 Implementation Rule appears at 72 FR 20619 - 20 . 52 See “ EPA Air Pollution Control Cost Manual - Sixth Edition ,” EPA Office of Air Quality Planning and Standards, Research Triangle Park, NC, January 2002 . (EPA/452/B
- 02 - 001). 53 See STAPPA/ALAPCO, “ Controlling Fine Particulate Matter Under the Clean Air Act: A Menu of Options, ” March 2006; EPA’s RACT/BACT/LAER Clearinghouse; regional air quality planning organizations; state air agencies; add others.** * E.O. 12866 Review

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Page 54 of 64 based on the severity of the nonattainment problem in the area . In addition, we believe tha t in determining what appropriate emission control levels are , the state should also consider the collective health benefits that can be realized in the area due to projected improvements in air quality . The health benefits associated with reducing PM2.5 l evels are significant . Using estimation techniques reviewed and deemed reasonable by the National Academy of Sciences, n a tional monetized health benefits resulting from reductions in PM concentrations are estimated to exceed emission control costs by a fac tor o f three to thirty times, depending on the pa rticular controls on sources of PM precursor emissions. 54 This approach is consistent with EPA’s view that RACT may be related to what is needed for attainment . That is, for areas with more severe air qualit y problems that typically will need to adopt more stringent controls, RACT level controls in such areas may require controls at higher cost effectiveness levels ($/ton) than areas with less severe air quality problems. Areas with more serious air quality problems typically will need to obtain greater levels of emissions reductions from local sources than areas with less serious problems, and it would be expected that their residents could realize greater health benefits . For this reason, we believe that it will b e reasonable and appropriate for areas with more serious air quality problems and higher design values to impose emission reduction requirements with generally higher costs per ton of reduced emissions that the cost of emissions reductions in areas with lower design values. If a source con t ends that it cannot afford t o implement the control technology that is considered to be RACT for certain other sources in its source category, the source should support its claim with information describing the imp act of imposing RACT on its : 1. Fixed and va riable production costs ($/unit) , 2. Product supply and demand elasticity, 3. Product prices (cost absorption vs. cost pass

– through), 4. Expected costs incurred by competitors, 5. Company profits, and 6. Employment costs. EPA is soliciting comments on replacing the previous section of the guidance for RACT determinations with this language . To our
54 See “ The Clear Skies Act: Technical Support Pa ckage ,” U.S. EPA, July 2003 . See also: “ Draft Regulatory Impact Analysis: Control of Emissions from Non - road Diesel Engines, ” United States Environmental Protection Agency Office of Air and Radiation EPA420 - R- 03 - 008, April 2003.** * E.O. 12866 Review

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Page 55 of 64 knowledge, states did not utilize the specific guidance in the preamble to the PM2.5 Implementation Rule that we are proposing to remove to alter any RACT determinations in nonattainment SIPs developed for the 1997 PM2.5 NAAQS, so we anticipate that this change in the guidance will have no practical impact on SIPs already submitted to EPA for approval . C . RFP Requirements for the 199 7 PM2.5 NAAQS After reconsideration of the RFP policy raised by the petitioner in the petition for reconsideration, and in light of the Court’s decision in the NRDC v. EPA case, EPA is proposing in this action to set aside the Agency’s earlier interpretat ion of its RFP policy described in Section II. G.5.b of the preamble to the final PM2.5 Implementation Rule and to interpret the CAA as not allowing states to rely on credit for emission reductions from outside the nonattainment area to meet such an area’s RFP requirements for the 1997 PM2.5 NAAQS . Specifically, EPA is proposing that states may not take credit for emission reductions from outside the nonattainment area to meet the area’s section 172(c)(3) RFP requirements for reductions within the nonattainment area . This revised policy would apply to implementation plans for the 1997 PM2.5 NAAQS , and would apply to all areas with an approved attainment date beyond 5 years from the effective date of designations that are required to submit an RFP plan per sec tion 51.1009(c) of the PM2.5 Implementation Rule .** * E.O. 12866 Review

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Page 56 of 64 There may, however, remain valid policy reasons for giving states incentive to focus on obtaining emission reductions that are the most beneficial and cost effective for attaining the PM2.5 NAAQS . Also, there may be cases where the most beneficial and cost - effective reductions are from sources located outside the designated nonattainment area boundaries . In these cases, there may be good policy reason to credit the emission reductions toward meeting RFP
r equirements . To this end, EPA is also taking comment on whether it would be appropriate for states to rely on emission reductions credit from outside the nonattainmen t area for RFP obligations, and under what legal rationale consistent with the CAA would a llow EPA to adopt such an approach . **I V.**  **Statutory and Executive Order Reviews** A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review Under Executive Order 1286 6 (58 FR 51735, October 4, 1993), this action is a "significant regulatory action” because it is likely to raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the prin ciples set forth in the Executive Order . Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any changes made in response to OMB recommenda tions have been documented in the docket** * E.O. 12866 Review

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Page 57 of 64 for this action. 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) . This action merely interprets the statutory requirements that apply to states in preparing their SIPs. C. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities . Small en tities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of this proposed rule on small entities, small entity is defined as: (1) A small business that is a small industrial entity a s defined in the U.S. Small Business Administration (SBA) size standards . (See 13 CFR 121.); (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** * E.O. 12866 Review

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Page 58 of 64 enterprise which is independently owned and operated and is not dominant in its field. After considering the economic impacts of this proposed rule on small entities, I certify that this action will not have a significant economic impact on a substan tial number of small entities . This rule will not directly impose any requirements on small entities . Rather, this rule interprets the obligations of the CAA for states to submit implementation plans in order to at tain the 1997 8 - hour ozone and 1997 PM2.5 NAAQS . We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts. D. Unfunded Mandates Reform Act This action contains no f ederal mandates under the provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, 2 U.S.C. 1531

– 1538) for state, local, or tribal governments or the private sector . The action imposes no enforceable duty on any state, local, or tribal g overnments or the private sector . Therefore, this action is not subject to the requirements of sections 202 or 205 of the UMRA
. This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments . This action merely interprets the statutory requirements that apply to states in preparing their SIPs.** * E.O. 12866 Review

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Page 59 of 64 E . Executive Order 13132: Federalism 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 action does not impose any new mandates on state or local governments . Thus, Executive Order 13132 does not apply to this rule. In the spirit of Executive Order 13132, and consistent with EPA policy to promote communications between EPA and state and lo cal governments, EPA is specifically soliciting comments on this proposed rule from state and local officials. F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments This rule does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000) . The rule does not have a substantial direct effect on one or more Indian tribes, since no tribe has to develop a SIP under this regulation . Furthermore, this rule does not affect the relationship o r distribution of power and responsibilities between the federal government and Indian tribes . The CAA and the Tribal Air Rule establish the relationship of the federal government and tribes in developing plans to attain the NAAQS, and this rule does nothi ng to** * E.O. 12866 Review

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Page 60 of 64 modify that relationship . This rule does not have Tribal implications . Thus, Executive Order 13175 does not apply to this action . The EPA specifically solicits additional comment on this proposed action from tribal officials. G. Executive Order 13045 : Protection of Children from Environmental Health and Safety Risks This action is not subject to EO 13045 (62 FR 19885, April 23, 1997) because it is not economically significant as defined in Executive Order 12866 . However, EPA has reason to believe th at ozone has a disproportionate effect on children who play outdoors (62 FR 38856; 38859, July 18, 1997) . Likewise, EPA believes that PM2.5 has a disproportionate effect on children . (See 62 FR 38652 - 38760, National Ambient Air Quality Standards for Partic ulate Matter, Final Rule; also 40 CFR Part 50.) The EPA invites the public to submit or identify peer - reviewed studies and data, of which EPA may not be aware, that assess how changes in RACT may affect ozone or PM2.5 formation . This rule may lead to lowe r levels of ozone and PM2.5 in particular geographical areas , which will be beneficial to the health of children who live in those particular areas. H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribut ion, or Use This action is not a “significant energy action” as defined in Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not** * E.O. 12866 Review

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Page 61 of 64 likely to have a significant adverse effect on the supply, distribution, or use of energy because it does not establish requirements that directly affect the general public and the public and private sectors, but, rather interprets the statutory requirements that apply to states in preparing their SIPs . The SIPs themselves will likely establish requirements that directly affect the general public, and the public and private sectors. I. National Technology Transfer and Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 ("NTTAA"), Public Law 104 - 113, section 12(d), (15 U .S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical . Voluntary consensus standards are technical standards ( e.g. , materials specifi cations, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies . The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards . This rulemaking does not involve technical standards . Therefore, EPA is not considering the use of any voluntary consensus standards. J . Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low - Income Populations** * E.O. 12866 Review

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Page 62 of 64 Executive Order 12898 (59 FR 7629, Feb. 16, 1994) establishes federal executive policy on environmental justice . Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low - income populations in the United States . EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low - income populations because if it has any effect on the level of protection provided to human health or the environment, the effect will be to increase the level of protection by resulting in more stringent emission controls on EGUs in affected nonattainment areas.** * E.O. 12866 Review

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Page 63 of 64 **Page 63 of**  **64 -**  **Withdrawal of the Prior Determinat ion or Presumption**  **that Compliance with the CAIR or the NO x**  **SIP Call Constitutes RACT or RACM for the 1997 8**  **- Hour Ozone and 1997 Fine Particle NAAQS; and**  **Revision to RFP Requirements and RACT Guidance for the 1997 Fine Particle NAAQS**  **List of Subjects in 4 0 CFR Part 51**  Environmental protection, Administrative practice and procedure, Air pollution control, Ozone, Reporting and recordkeeping requirements, Particulate matter, Volatile organic compounds.

___________________________________ Dated:

___________________________________ Lisa P. Jackson, Administrator.** * E.O. 12866 Review

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Page 64 of 64 For reasons set forth in the preamble, part 51 of chapter I of title 40 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 2**  **. Section 51.912 is amended by adding paragraph (a)(4) to read a** **s follows:**  § **51.912 Wha t**  **requirements apply for reasonably available control technology (RACT) and reasonably available control measures**  **(RACM) under the 8 -** **hour NAAQS?** **(a) * * *** **(4)** An individual RACT determination must be made for each major source or major source category meeting the applicable major source size within a nonattainment area.

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