54552 Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Rules and Regulations

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 80

[FRL–5903–3]

Transitional and General Opt Out

Procedures for Phase II Reformulated

Gasoline Requirements

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Final rule.

SUMMARY: This final rule revises the

regulations for states to opt-out of the

federal reformulated gasoline (RFG)

program for areas where a state had

previously voluntarily opted into the

program. The previously published optout provisions provide that EPAapproved opt-out petitions become

effective 90 days from approval. Under

today’s action, if a state has not

submitted an opt-out petition to EPA by

December 31, 1997, it must participate

in the federal RFG program until

December 31, 2003. The Agency

believes this rule is necessary to ensure

a smooth transition between the two

phases of the reformulated gasoline

program. The use of Phase II RFG will

provide greater health benefits than

Phase I by requiring further reductions

from the refiners’ 1990 gasoline baseline

for volatile organic compounds (VOCs)

and toxics by about 25% and 20%

respectively. The requirements also

include a nitrogen oxides (NOX)

reduction of about 6%.

Effective January 1, 2004, the current

opt-out procedures become effective

again. States that want to end their

involvement in the federal RFG program

prior to December 31, 1999, and not

participate in Phase II of the program,

must submit a complete opt-out petition

to EPA by December 31, 1997.

Today’s action does not affect the

regulations for opting in to the RFG

program. In a separate action EPA will

publish a final rule which would permit

former ozone nonattainment areas to opt

into the federal reformulated gasoline

program.

EFFECTIVE DATE: This final rule is

effective November 19, 1997.

FOR FURTHER INFORMATION CONTACT:

Christine Hawk or Diane Turchetta at

U.S. Environmental Protection Agency,

Office of Air and Radiation, 401 M

Street, SW (6406J), Washington, DC

20460, (202) 233–9000.

SUPPLEMENTARY INFORMATION: A copy of

this action is available on the OAQPS

Technology Transfer Network Bulletin

Board System (TTNBBS) and on the

Office of Mobile Sources’ World Wide

Web cite, http://www.epa.gov/

OMSWWW. The TTNBBS can be

accessed with a dial-in phone line and

a high-speed modem (PH# 919–541–

5742). The parity of your modem should

be set to none, the data bits to 8, and

the stop bits to 1. Either a 1200, 2400,

or 9600 baud modem should be used.

When first signing on, the user will be

required to answer some basic

informational questions for registration

purposes. After completing the

registration process, proceed through

the following series of menus:

(M) OMS

(K) Rulemaking and Reporting

(3) Fuels

(9) Reformulated gasoline

A list of ZIP files will be shown, all of

which are related to the reformulated

gasoline rulemaking process. Today’s

action will be in the form of a ZIP file

and can be identified by the following

title: OPTOUT.ZIP. To download this

file, type the instructions below and

transfer according to the appropriate

software on your computer:

<D>ownload, <P>rotocol, <E>xamine,

<N>ew, <L>ist, or <H>elp Selection or

<CR> to exit: D filename.zip

You will be given a list of transfer

protocols from which you must choose

one that matches with the terminal

software on your own computer. The

software should then be opened and

directed to receive the file using the

same protocol. Programs and

instructions for de-archiving

compressed files can be found via

<S>ystems Utilities from the top menu,

under <A>rchivers/de-archivers. Please

note that due to differences between the

software used to develop the document

and the software into which the

document may be downloaded, changes

in format, page length, etc. may occur.

Regulated Entities

Entities potentially regulated by this

action are those which produce, supply

or distribute motor gasoline. Regulated

categories and entities include:

Category Examples of regulated entities

Industry ........................ Petroleum refiners,

motor gasoline

distributors and

retailers.

State governments ...... State departments

of environmental

protection.

This table is not intended to be

exhaustive, but rather provides a guide

for readers regarding entities likely to be

regulated by this action. This table lists

the types of entities that EPA is now

aware could potentially be regulated by

this action. Other types of entities not

listed in the table could also be

regulated. To determine whether your

business is regulated by this action, you

should carefully examine the list of

areas covered by the reformulated

gasoline program in § 80.70 of title 40 of

the Code of Federal Regulations. If you

have questions regarding the

applicability of this action to a

particular entity, consult the person

listed in the preceding FOR FURTHER

INFORMATION CONTACT section.

Extended Summary

EPA published a Notice of Proposed

Rulemaking on March 28, 1997, (62 FR

15077) proposing changes to the

existing opt-out rule which provides

criteria and general procedures for states

to opt-out of the RFG program through

December 31, 1997. This final rule

promulgates the revisions as proposed

by EPA with minor changes. 61 FR

35673 (July 8, 1996).

This final rule applies to areas where

the state voluntarily opted into the

federal RFG program and subsequently

decides to withdraw from it referred to

as ‘‘opt-out.’’ This final rule establishes

the criteria and procedures for states to

opt-out from the RFG program after

December 31, 1997. Today’s rule does

not change the process a state must

follow to petition for removal from the

program or the criteria used by EPA to

evaluate a request. For example, the rule

maintains the requirements that the

governor, or the governor’s authorized

representative, submit an opt-out

petition. This rule changes the time

period before the opt-out becomes

effective for opt-out petitions received

from January 1, 1998, through December

31, 2003. This period includes the

remaining two years of Phase I (January

1, 1998 to December 31, 1999) and the

first four years of Phase II (January 1,

2000, to December 31, 2003).

This final rule specifies that for all

opt-out petitions received on or before

December 31, 1997, the previously

published procedures (61 FR 35673)

will apply and that the effective date

that an area will no longer be a covered

area as defined in 40 CFR section 80.70

will be 90 days (or more at a state’s

request) from the date of EPA’s letter of

notification to the Governor of the

requesting state or from the effective

date of an agency approval of a revision

to the State Implementation Plan (SIP)

where applicable. States which have

opted in to the RFG program that do not

submit a completed opt-out request by

December 31, 1997 and subsequently

submit an opt-out request before January

1, 2004, will be required to participate

in the federal RFG program, including
Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Rules and Regulations 54553

1EPA recognizes that there are currently ten areas

required to use Federal RFG and that these areas

currently do not have an opt-out option. Those

areas are: Los Angeles–Anaheim–Riverside, CA;

San Diego County, CA; Hartford–New Haven–

Meriden–Waterbury, CT; New York–Northern New

Jersey–Long Island–Connecticut area; Philadelphia–

Wilmington–Trenton–Cecil County, MD; Chicago–

Gary–Lake County, IL–Indiana–Wisconsin area;

Baltimore, MD; Houston–Galveston–Brazoria, TX;

Milwaukee–Racine, WI; Sacramento, CA.

Phase II of the program, until at least

December 31, 2003. The opt-out request

will be effective January 1, 2004 or 90

days from the Agency’s written

notification to the State approving the

opt-out petition, whichever date is later,

unless the Governor requests a later

date.

The Agency may grant up to a five

month extension to the December 31,

1997 deadline in limited circumstances.

An extension can be granted where the

State’s Legislature has pending

legislation on the use of federal RFG

that was active prior to March 28, 1997,

when this opt-out rule was proposed.

The request for an extension must

demonstrate that the legislation cannot

reasonably be acted upon until after the

December deadline. Such legislation

must be related to either opting out of

or remaining in the RFG program. The

Governor must submit a request for an

extension to EPA containing such

information before December 31, 1997.

The Agency can then grant an extension

up to May 31, 1998.

Today’s requirements will also cover

those areas opting into the RFG program

subsequent to December 31, 1997; areas

opting-in during that time period must

remain in the program at least until

December 31, 2003. The opt-out

procedures would revert back to the

previously published rule (90 day

requirements) as of January 1, 2004.

Today’s action will help provide

certainty to the industry as it makes

decisions that are likely to affect the

supply and cost of RFG, which in turn

could affect the cost-effectiveness of

Phase II RFG. Additionally, the action

maintains the flexibility that states have

in air quality planning to the degree

possible and practicable.

I. Opt-out Petitions Received January 1,

1998 Through December 31, 2003; and

After December 31, 2003

A. Background

The federal reformulated gasoline

(RFG) program is designed to reduce

ozone levels and air toxics in areas of

the country that are required to or

volunteer to adopt the program.

Reformulated gasoline reduces motor

vehicle emissions of the ozone

precursors, specifically volatile organic

compounds (VOC), through fuel

reformulation. RFG also achieves a

significant reduction in air toxics. In

Phase II of the program emissions of

nitrogen oxides (NOX), another

precursor of ozone, are also reduced.

The Clean Air Act requires RFG in ten

metropolitan areas with the highest

levels of ozone.1 In section 211(k)(6),

Congress provided the opportunity for

states to opt-in to the RFG program for

other areas classified under Subpart 2 of

Part D of Title I as ozone nonattainment

areas.

EPA issued final rules establishing

requirements for RFG on December 15,

1993. 59 FR 7716 (February 16, 1994).

During the development of the RFG

rule, a number of states inquired as to

whether they would be permitted to optout of the RFG program at a future date,

or opt-out of certain requirements. This

was based on their concern that the air

quality benefits of RFG, given their

specific needs, might not warrant the

cost of the program, specifically

focusing on the more stringent

standards in Phase II of the program

(starting in the year 2000). States with

that concern wished to retain the

flexibility to opt-out of the program.

Other states indicated they viewed RFG

as an interim strategy to help bring their

nonattainment areas into attainment

sooner than would otherwise be the

case.

The regulation issued on December

15, 1993, did not include procedures for

opting-out of the RFG program because

EPA had not proposed and was not

ready to adopt such procedures at that

time. Since then, the Agency has

adopted general procedures for future

opt-outs. 61 FR 35673 (July 8, 1996).

These procedures apply to opt-out

petitions received through December 31,

1997.

Based upon EPA concerns regarding

smooth implementation of Phase II of

the RFG program and public comments

that were received in response to the

Notice of Proposed Rulemaking (60 FR

31269) published June 14, 1995, EPA is

changing the regulations in this final

rule for opt-out petitions received

between January 1, 1998, through

December 31, 2003. The previously

published procedures in place today (61

FR 35673) will take effect again

beginning January 1, 2004.

In the proposal to the previous optout rulemaking, EPA outlined its

rationale for determining that it is

appropriate to interpret section 211(k)

as authorizing states to opt-out of the

program. 60 FR 31269 (June 14, 1995).

EPA concluded that any conditions on

opting out should be focused on

achieving a reasonable transition out of

the program. There were two primary

areas of concern to the Agency. The first

was coordination of air quality

planning. The second involved

appropriate lead time for industry to

transition out of the program.

Today’s final rule addresses this lead

time concern by changing the

conditions for opting out during the

period from January 1, 1998, to

December 31, 2003. As the effective date

for Phase II RFG (January 1, 2000)

approaches, industry must make

investment decisions based in part on

anticipated demand for RFG.

Unanticipated changes in demand, due

to opt-outs, could make cost recovery of

investment difficult. To avoid this,

refiners would tend to minimize capital

investments and rely on costly

operational changes which may be more

to meet the Phase II requirements. This

approach to compliance requirements

could lead to higher gasoline prices

which would diminish the costeffectiveness of EPA’s RFG program.

Thus, EPA believes it must consider

these special circumstances which affect

industry directly and consumers

indirectly and make appropriate

changes to the opt-out procedures.

Therefore, EPA is requiring states to

decide by December 31, 1997 if they

intend for opt-in areas to participate in

Phase I RFG up to December 31, 1999,

and/or to participate in Phase II RFG,

which begins on January 1, 2000. If a

state has not submitted an opt-out

petition by December 31, 1997, it must

continue to participate in Phase I RFG

through December 31, 1999, and

participate in Phase II RFG until

December 31, 2003. The Agency

however may grant up to a five month

extension to the December 31, 1997

deadline if the state meets specific

criteria.

B. Statutory Authority

The statutory authority for the action

in this rule is granted to EPA by section

211(c) and (k) and section 301(a) of the

Clean Air Act as amended, 42 U.S.C.

7545 (c) and (k) and 7601(a). For a more

complete discussion of statutory

authority, see the proposal for general

rules establishing criteria and

procedures for states to opt-out of the

RFG program. 60 FR 31271 (June 14,

1995).

As discussed there, EPA believes it is

appropriate to interpret section 211(k)

as authorizing states to opt-out of the

RFG program, provided that a process is

established for a reasonable transition

out of the program. EPA believes

allowing states to opt out is consistent
54554 Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Rules and Regulations

with the Act’s recognition that states

have the primary responsibility to

develop a mix of appropriate control

strategies needed to reach attainment

with the NAAQS. Given this deference

to state decision making, it follows that

the conditions on opting out should be

geared towards achieving a reasonable

transition out of the RFG program, as

compared to requiring a state to justify

its decision.

EPA has identified two principal

areas of concern in this regard. The first

involves coordination of air quality

planning. The second involves

appropriate lead time for industry to

transition out of the program. Today’s

rule addresses the latter concern. EPA’s

authority allows it the discretion to

authorize opt-outs in a way that

appropriately balances the interests of

the parties affected by the regulations.

The previous rule establishing opt-out

criteria and procedures placed only

limited conditions on the states,

focusing on the information that must

be submitted before EPA may approve

an opt-out request. The previous rule

also generally required a 90-day time

period to pass before an EPA-approved

opt-out became effective. Today, EPA is

proposing to lengthen this time period

for certain future opt-outs because it

believes the circumstances affecting

industry have changed enough to

warrant an appropriate change.

C. Need for a Required Participation

Period

In the NPRM, EPA proposed a four

year required participation period in

Phase II for RFG opt-in areas. EPA

solicited comments on the impact of

future opt-outs during this time period,

and the expected impacts on supply and

cost from such opt-outs if they were

allowed to occur. Two petroleum

associations commented that they

support the establishment of a

minimum participation period for the

Phase II RFG program which would

provide market certainty and

stabilization. One association

specifically remarked that industry

needs market certainty to not only

ensure adequate planning and

investments to satisfy RFG demand at

the lowest cost, but to continue

investments in RFG facilities by

providing assurance that the program

would be in effect for a reasonable time

to allow a return on investment. It

further commented that EPA must make

every effort to guarantee a stable

regulatory climate for the highly capital

intensive RFG program. The other

association remarked that it agreed with

the U.S. Department of Energy’s (DOE’s)

comments to the Agency’s June 1995

NPRM, specifically the cost recovery

issue. Several refiners/suppliers

commented that they agree with the

associations’ comments. One company

added that the Agency must take into

account the long term impact on all

parties, including small refiners and

marketers when deciding RFG opt-ins or

opt-outs. A state commented that

consumers would benefit from a stable

price market which would be

encouraged by a long-term commitment

to the program. The Agency did not

receive any comments arguing against

the need for a required participation

period.

Based on these comments, EPA

maintains its belief in the need for a

required Phase II participation period as

proposed. The proposed requirement

was prompted by the concerns

expressed by DOE in its comments

during the previous opt-out rulemaking.

Specifically, DOE commented that a

short time frame to opt-out by states

who originally intended to participate

in Phase II of the RFG program makes

it difficult for refiners to recover their

investments in refinery facilities needed

to comply with the requirements of

Phase II RFG. (Air Docket A–94–68) The

Department further explained in its

comments that the ability to price

gasoline at a level that recovers

investments depends very heavily on

marginal supply and demand. Small

unanticipated changes in demand,

whether due to market forces or

changing regulatory requirements, can

make cost recovery of investment

difficult, and cause gasoline prices to

rise or fall.

Refinery investments for Phase II RFG

were originally estimated by the U.S.

Department of Energy (DOE) to be about

$1 billion for East Coast refiners and

about $2 billion for Gulf Coast PADD III

refiners. These estimates were included

in DOE’s December 1994 report,

Estimating the Costs and Effects of RFG.

Using improved modeling and realworld RFG production volume data,

EPA worked closely with API and DOE

to improve the DOE refinery model.

This work was conducted in concert

with EPA’s review of the NOx waiver

petition submitted by the American

Petroleum Institute (API). Based on the

over 200 improvements and changes to

the refinery model, DOE released an

updated report in 1997 entitled ReEstimation of the Refining Cost of RFG

NOx Control. The updated investment

estimates in this report for 6.8% NOx

reduction range from about $0.2 to $0.8

billion for PADD I and about $0.0 to

$0.6 billion for PADD III.

The investment estimates decreased

for several reasons but predominantly

because refiners are producing a lower

volume of RFG than was originally

anticipated in 1994 due to subsequent

opt-outs, due to a smaller quantity of

spillover than anticipated, and because

the refinery models used have been

revised to more accurately project

capital investments by the refining

industry. Although the investment

estimates are lower, EPA agrees with

DOE’s assessment that the estimated

investments remain significant and that

a required participation period is still

appropriate. Such a requirement will

encourage refiners to make the

appropriate investments which in turn

will help keep RFG prices low.

Refiners who expect to be producing

Phase II RFG starting January 1, 2000,

and who need additional facilities to

meet the requirements of that gasoline,

are likely to begin making commitments

to refinery investments in 1997, two

years in advance of the Phase II start

date. The decision to invest in the

capital needed to comply with Phase II

RFG is based on each refiner’s product

capabilities, desire to participate in the

program, and likely anticipated

demand.

Those refiners who chose to supply

Phase II RFG are each uniquely situated

to comply with the year 2000 Phase II

requirements. Different levels of

investment will be pursued by each

refiner when investment is chosen or is

necessary. The largest investments are

expected to be made in the areas of

desulfurization and alkylation to control

sulfur and olefins. Some are expected to

make early refinery changes to come

into compliance with the complex

model requirements in 1998. While the

economic burden of Phase II compliance

will fall disproportionately on some

refiners, the Agency’s main concern in

this final rule is to provide a stable

regulatory environment which will not

unreasonably inhibit cost recovery,

given that this could lead to supply

problems and cost fluctuations that

could diminish the appeal and costeffectiveness of the RFG program.

D. Four Year Required Participation

Period From January 1, 2000 to

December 31, 2003

In the NPRM, EPA proposed a four

year required participation period to

attempt to strike a balance between the

potential adverse impacts if refiners

have too little time to recoup their Phase

II investments and the need of states for

some flexibility in using RFG. The

Agency solicited comments on the range

of investment recovery periods needed

by the refineries who plan to invest

capital in refining equipment for Phase

II RFG.
Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Rules and Regulations 54555

Several refiners and petroleum

associations commented that a four year

commitment period is not necessarily

sufficient or is the minimum amount of

time refiners would need to recover

investments made to produce Phase II

RFG. These commenters referenced

DOE’s comments that an eight year

period is more adequate given the

current competitive gasoline market, as

well as EPA’s statement that refiners

would need a six year investment

recovery period assuming a 10% real

rate of return (62 FR 15077). Two

refiners encouraged EPA to adopt a six

year participation period while one

suggested at least ten years based on the

argument that manufacturing Phase II

RFG is a long range project with

expected pay outs of 10–20 years.

Conversely, two states and two refiners/

suppliers of RFG commented that a

four-year period is adequate for several

reasons including that it strikes a

balance between sufficient certainty for

RFG producers and flexibility for states

to chose air quality control measures,

markets tend to become more efficient

over time, and that an extended

required period may not provide

additional cost recovery but instead

create a disincentive to continue

participation in the program.

The above comments do not represent

any new information or compelling

arguments to change the proposed fouryear participation period beyond four

years. Thus the EPA continues to

believe that a four year period is the

most appropriate. The Agency is not

trying to assure that all refiners will

recover investments made in Phase II

RFG production in a given time period.

EPA is instead seeking to structure the

federal RFG program in a way that

minimizes the potential abrupt decrease

in demand that could occur to refiners,

thereby making it difficult to recover

investments associated with producing

this product. The potential for such

decreases in demand soon after the

implementation of Phase II RFG could

be a disincentive to refiners to invest in

the kind of capital that would tend to

reduce future supply problems and to

sustain the cost-effectiveness of the

program. This is because a refiner’s

decision to invest in Phase II RFG is

based, in part, upon an opt-in state’s

decision to have EPA require the sale of

Phase II RFG in a particular area. RFG

market uncertainty is increased when

opt-in states are not bound to remain in

the RFG program and by the relatively

simple process for states to opt out of

the RFG program provided for in the

previously published rule. Without

greater assurance of the markets for

Phase II reformulated gasoline over a

sufficient period of time, refiners may

limit or delay investments and prepare

for a smaller than currently-predicted

RFG demand.

EPA is committed to ensuring that

non-attainment areas around the

country attain the National Ambient Air

Quality Standards (NAAQS), including

the ozone standard. EPA recognizes,

however, that under the Clean Air Act

the states play a primary role in

attaining the NAAQS, including

choosing those control measures they

prefer to include in their plans to attain

and maintain the NAAQS. EPA is

committed to maintaining, if possible

and practical, the flexibility that states

have in air quality planning by

establishing procedures to opt out and

substitute alternative control measures

where the state considers appropriate.

The Agency believes that requiring RFG

in opt-in states for a period greater than

four years may create a disincentive for

continued participation in those areas

where this program is currently

considered a cost-effective control

measure for the control of ground-level

ozone and toxics.

EPA believes that today’s action

achieves a balance between allowing

states with voluntary RFG areas the

flexibility to opt-out of the program and

giving industry a certain level of

assurance as to a predictable demand for

Phase II RFG during the important

investment recovery period of the

program’s early years. Today’s action

helps maintain a consistent market,

adequate supplies and reasonable

prices, thus maintaining the RFG

program’s cost-effectiveness.

E. Effective Date for Approved Opt-Out

Petitions

In the NPRM, EPA proposed to

change the date on which EPAapproved opt-out petitions become

effective for opt-out petitions received

January 1, 1998, through December 31,

2003. The EPA proposed that States

which previously opted in to the RFG

program that do not submit an opt-out

request by December 31, 1997, and

subsequently submit a completed optout request before January 1, 2004, will

be required to participate in Phase II of

the program until December 31, 2003.

The opt-out request will be effective

January 1, 2004 or 90 days from the

Agency’s written notification to the

State approving the opt-out petition,

whichever is later.

The Agency also proposed that if a

state submits an opt-out request prior to

December 31, 1997, the state can

designate the opt-out to occur at any

future date beyond the minimum 90-day

period required under current opt-out

procedures as long as it is not a date

beyond December 31, 1999. Areas

opting into the RFG program subsequent

to December 31, 1997, will be treated

the same as areas opting in prior to that

date and will also be included in Phase

II of the program until December 31,

2003.

A state commented that the December

31, 1997 deadline should be extended if

the Agency revises the National

Ambient Air Quality Standards

(NAAQS) in the summer of 1997. It

stated that a change in the NAAQS

would require analysis to verify the

appropriateness of RFG as a control

strategy and that the proposed opt-out

deadline would not be sufficient for the

state to make such a decision. The

Agency understands this air quality

planning concern for a revision to the

NAAQS, but extending the opt-out

deadline a few months would not be of

any significant value to the states for

purposes of making decisions on control

strategies to meet the new ozone

standard. Extending the deadline much

beyond December 31, 1997 could

jeopardize the intent of the rulemaking

by not providing industry with

sufficient lead time to make necessary

investment decisions.

A representative of the state of Maine

commented that the opt-out deadline

should be extended at least until end of

May 1998. The state discussed the

controversy within that state

surrounding the decision of whether or

not to stay in the RFG program and

expressed the importance of providing

its legislature the opportunity to

approve such decisions. The state’s

legislative session ended June 1997 and

is not scheduled to reconvene until

January 1998. In January 1997, a bill

was introduced in Maine’s Legislature

to opt the state out of the RFG program.

The Legislature did not act on this

legislation and carried it over to the next

legislative session beginning January

1998 for consideration. The EPA

believes that a limited extension is

justified under these circumstances and

that a limited extension would not

negate the intent of the rulemaking

since only a small refining market

would be affected. Thus in this final

rule EPA is allowing a Governor, that

requests an extension so the legislature

can consider a decision, to submit a

letter to EPA before December 31, 1997

to request an extension up to May 31,

1998. To be eligible for an extension, the

State’s Legislature must have pending

RFG legislation that cannot reasonably

be acted upon until after the December

deadline. Such legislation must be

related to either opting out of or
54556 Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Rules and Regulations

remaining in the RFG program and it

must have been introduced prior to

March 28, 1997, the date of the opt-out

proposal. The Governor must submit a

request for an extension to EPA

containing such information before

December 31, 1997. The Agency then

may grant an extension up to May 31,

1998.

F. Return to Existing Procedures

EPA further proposed that, beginning

on January 1, 2004, opt-out requests

from states again be approved based on

the opt-out provisions in effect before

January 1, 1998. A petroleum

association commented that opt-outs

must follow formal rulemaking process

as provided for under the CAA, and that

approved opt-outs published by July 1

in a given year should be effective

January 1 of the following year to

provide adequate time for refiners to

meet averaging requirement planning

and survey programs.

EPA does not agree that a separate

rulemaking must be conducted for each

future opt-out request. The petition

based process established in the

previous opt-out rulemaking (61 FR

35673) addresses, on a case by case

basis, future individual state requests to

opt out of the federal RFG program. The

regulations establish clear and objective

criteria for EPA to apply in these future

non-rulemaking actions. These criteria

address when a state’s petition is

complete and the appropriate transition

time under the regulations. This

application of regulatory criteria on a

case by case basis to future individual

situations does not require notice and

comment rulemaking, either under

section 307(d) of the Clean Air Act or

the Administrative Procedure Act.

The EPA believes the petition

approach is the most appropriate as it

will allow for expeditious and

consistent Agency action on the

individual opt-out requests presented by

states. It also provides greater certainty

in the market than individual

rulemakings could provide. Lastly, it

provides quick approval for opt-out

requests while maintaining a sufficient

transition period to minimize costly

market disruptions. In certain cases, the

affected parties will be able to comment

on the state action. In those states where

the RFG program is included as a part

of an approved state implementation

plan (SIP), affected parties that are

concerned with the impacts of an optout would have the opportunity to

comment on a state’s revised plan that

removes RFG as an air control measure.

At a state’s request, the opt-out could

be effective later than 90 days after

approval of the petition or revised SIP.

In such a case, a state must indicate in

its petition to the Agency the desired

effective date for the opt-out. EPA

recommends that a state consider an

opt-out date which becomes effective on

one of the RFG program’s natural

transition points. These natural

transition points are identified as

January 1, the start of the averaging

season, and May 1 and September 15,

the beginning and end, respectively, of

the VOC control season. The Agency

supports state efforts to accommodate

these natural transition points.

G. Variations to Proposal

In the NPRM, EPA requested

comments on two specific possible

variations to the proposal in

anticipation of interest in these options

by outside parties:

(1) An area that reaches attainment of

the ozone standard and is redesignated

during the period of January 1, 1998,

through December 31, 2003, would be

allowed to submit an opt-out request to

be approved by EPA using the same 90

day opt-out effective date applicable

before December 31, 1997 (See 61 FR

35673, July 8, 1996). A petroleum

association commented that it opposed

this variation of allowing areas to opt

out of the program if they redesignate to

attainment. It specified that this

variation would undercut, possibly

negate, the opportunity for cost

recovery, create investment

uncertainties and instability that EPA is

trying to avoid through this rulemaking,

and is inconsistent with the rationale

underlying the rest of the proposal.

Most comments from industry agreed

with the association’s argument against

the variation. One RFG supplier,

however, commented that such a

variation is important to state, local, and

consumer involvement to have every

incentive to reach attainment

classification as soon as possible.

The EPA believes that this variation

could jeopardize the intent of the rule

and thus is not including it in the final

rule. While the Agency agrees that states

should have every incentive to reach

attainment, EPA does not believe this

variation provides an incentive great

enough to outweigh the risk of

undercutting the purpose of the rule. If

some states have areas that are

redesignated to attainment during the

required participation period, their state

implementation plans (SIP), if

applicable, would need to be revised.

Even if these processes were completed

within the required period, it is likely

that the state would need to retain RFG

in its maintenance plan to remain in

attainment. Thus this variation would

not necessarily provide an additional

incentive to reach attainment of the

ozone standard but instead would retain

an element of market uncertainty which

contradicts the purpose of the

requirement.

(2) A similar participation period for

areas first opting into the RFG program

subsequent to December 31, 1999,

requiring these areas to participate in

Phase II of the program for at least four

years from the date of their opt-in. This

variation, referred to as a ‘‘rolling

required period’’, would establish the

effective date for the removal of an area

from the program as January 1, 2004, or

90 days from the Agency’s written

notification approving the opt-out, or

four years from the effective date of

their opt-in, whichever date is later, for

all opt-out requests received after

January 1, 2000.

Several commenters supported a

rolling period to avoid stranded

investments. However, one supplier

remarked that it may not be necessary

to continue with a four year period

beyond 2003. The EPA believes that

with the information available today

and with the uncertainty of the future,

the Agency cannot conclude that there

is a need for a rolling period to assure

a continued cost-effective RFG program.

The Agency did not receive a

compelling argument or information to

continue with a required period for new

opt-in areas. The program which began

in 1995 has remained very stable with

only one new opt-in. If a few areas were

to opt-in the future, they may well be

located near a pipeline or appropriate

infrastructure to meet the new demand

without additional refinery investments.

However, if new areas opt in remote

locations or if there are numerous new

areas, industry may need to make

unanticipated investments which could

impact the price of RFG. In this latter

instance a rolling period may be

necessary.

EPA believes that based on

information available today there is not

sufficient justification to include a

rolling period in this final rule.

However, since the Agency is

committed to ensuring a cost-effective

RFG program to achieve air quality

goals, EPA will take any necessary

action in the future if new information

indicates a rolling period is warranted.

II. Environmental Impact

If an area opts out of the RFG

program, it will not receive the

reductions in VOCs, oxides of nitrogen

(NOX), and air toxics that are expected

from this program. Instead, the areas

would be subject to the federal controls

on Reid vapor pressure for gasoline in

the summertime, and would only
Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Rules and Regulations 54557

2See 58 FR 51735 (October 4, 1993).

3 Id. at section 3(f)(1)–(4).

receive control of NOx and air toxics

through the requirements of the

conventional gasoline anti-dumping

program. These latter requirements are

designed to ensure that gasoline quality

does not degrade from the levels found

in 1990. These areas would be foregoing

the air quality benefits obtained from

the use of RFG.

In this final rule, EPA continues to

recognize that states have the primary

responsibility to develop the mix of

control strategies needed to attain and

maintain the NAAQS, and should have

flexibility in determining the mix of

control measures needed to meet their

air pollution goals. However, the final

rule also seeks to ensure through the

required participation period that the

potential for a state to decide to opt-out

of Phase II of the RFG program does not

cause adverse impacts on the market

demand for Phase II RFG during the

initial years of the program and thus

maintains the cost-effectiveness of the

RFG program. EPA expects that states

will in fact act prudently in exercising

their ability to opt-out under these rules.

Any environmental impacts of opting

out are, therefore, not expected to occur

in isolation, but in a context of states

exercising their responsibility and

developing appropriate control

strategies for their areas’ air pollution

goals.

III. Executive Order 12866

Under Executive Order 12866,2 the

Agency must determine whether a

regulation is ‘‘significant’’ and therefore

subject to OMB review and the

requirements of the Executive Order.

The Order defines ‘‘significant

regulatory action’’ as one that is likely

to result in a rule that may:

(1) Have an annual effect on the

economy of $100 million or more, or

adversely affect in a material way the

economy, a sector of the economy,

productivity, competition, jobs, the

environment, public health or safety, or

State, local or tribal governments of

communities;

(2) Create a serious inconsistency or

otherwise interfere with an action taken

or planned by another agency;

(3) Materially alter the budgetary

impact of entitlements, grants, user fees,

or loan programs or the rights and

obligations of recipients thereof, or

(4) Raise novel legal or policy issues

arising out of legal mandates, the

President’s priorities, or the principles

set forth in this Executive Order.3

It has been determined that this rule

is not a ‘‘significant regulatory action’’

under the terms of Executive Order

12866 and is therefore not subject to

OMB review.

IV. Unfunded Mandates

Under Section 202 of the Unfunded

Mandates Reform Act of 1995

(‘‘UMRA’’), P.L. 104–4, EPA must

prepare a budgetary impact statement to

accompany any general notice of final

rulemaking or final rule that includes a

Federal mandate which may result in

estimated costs to State, local, or tribal

governments in the aggregate, or to the

private sector, of $100 million or more.

Under Section 205, for any rule subject

to Section 202 EPA generally must

select the least costly, most costeffective, or least burdensome

alternative that achieves the objectives

of the rule and is consistent with

statutory requirements. Under Section

203, before establishing any regulatory

requirements that may significantly or

uniquely affect small governments, EPA

must take steps to inform and advise

small governments of the requirements

and enable them to provide input.

EPA has determined that today’s final

rule does not trigger the requirements of

UMRA. The rule does not include a

Federal mandate that may result in

estimated annual costs to State, local or

tribal governments in the aggregate, or

to the private sector, of $100 million or

more, and it does not establish

regulatory requirements that may

significantly or uniquely affect small

governments.

V. Economic Impact and Impact on

Small Entities

The Administrator has determined

that this rule will not have a significant

impact on a substantial number of small

entities. A regulatory flexibility analysis

has therefore not been prepared. This

final rule is not expected to result in any

additional compliance cost to regulated

parties and in fact is expected to

decrease compliance costs and decrease

costs to consumers in the affected areas

by providing more certainty for

regulated parties. This final rule

imposes no new requirements on states.

With respect to the portion of today’s

action which requires participation

until January 1, 2004, of opt-in areas

unless they request to opt-out prior to

January 1, 1998, today’s final rule is not

expected to result in any additional

compliance cost to regulated parties. It

does no more than maintain the status

quo for those entities who have been

supplying RFG to the RFG opt-in areas

and imposes no additional requirements

on parties that must comply with the

RFG regulations.

With respect to the portion of today’s

final rule which would apply to opt-out

requests applied for on or after January

1, 2004, the final rule is not expected to

result in any additional compliance cost

to regulated parties and in fact is

expected to decrease compliance costs

to those entities who previously

supplied RFG to the area opting out.

This rule also establishes a transition

period which maximizes affected

parties’ ability to plan for smooth

transition from the RFG program,

minimizing disruption to the motor

gasoline marketplace. This transition

period is reasonably expected to allow

parties to turn over existing stocks of

RFG to conventional gasoline.

VI. Paperwork Reduction Act

This action does not add any new

requirements under the provisions of

the Paperwork Reduction Act, 44 U.S.C.

3501 et seq. The Office of Management

and Budget (OMB) has approved the

information collection requirements

contained in the final FRG/antidumping rule and has assigned OMB

control number 2060–0277 (EPA ICR

No. 1591.03).

Burden means the total time, effort, or

financial resources expended by persons

to generate, maintain, retain, or disclose

or provide information to or for a

Federal agency. This includes the time

needed to review instructions; develop,

acquire, install, and utilize technology

and systems for the purposes of

collecting, validating, and verifying

information, processing and

maintaining information, and disclosing

and providing information; adjust the

existing ways to comply with any

previously applicable instructions and

requirements; train personnel to be able

to respond to a collection of

information; search data sources;

complete and review the collection of

information; and transmit or otherwise

disclose the information.

An Agency may not conduct or

sponsor, and a person is not required to

respond to a collection of information

unless it displays a currently valid OMB

control number. The OMB control

numbers for EPA’s regulations are listed

in 40 CFR Part 9 and 48 CFR Chapter

15.

VII. Submission to Congress and the

General Accounting Office

Under 5 U.S.C. 801(a)(1)(A) as added

by the Small Business Regulatory

Enforcement Fairness Act of 1996, EPA

submitted a report containing this rule

and other required information to the

U.S. Senate, the U.S. House of

Representatives and the Comptroller

General of the General Accounting
54558 Federal Register / Vol. 62, No. 202 / Monday, October 20, 1997 / Rules and Regulations

Office prior to publication of the rule in

today’s Federal Register. This rule is

not a ‘‘major rule’’ as defined by 5

U.S.C. 804(2).

List of Subjects in 40 CFR Part 80

Environmental protection, Fuel

additives, Gasoline, Imports, Motor

vehicle pollution, Penalties, Reporting

and recordkeeping requirements.

Dated: October 9, 1997.

Carol M. Browner,

Administrator.

Final Rulemaking

Accordingly, 40 CFR part 80 is

amended as follows:

PART 80—REGULATION OF FUELS

AND FUEL ADDITIVES

1. The authority citation for part 80

continues to read as follows:

Authority: Secs. 114, 211, and 301(a) of the

Clean Air Act, as amended (42 U.S.C. 7414,

7545 and 7601(a)).

2. Section 80.72 is amended by

revising paragraphs (a) and (c) to read as

follows:

§ 80.72 Procedures for opting out of the

covered areas.

(a) In accordance with paragraph (b)

of this section, the Administrator may

approve a petition from a state asking

for removal of any opt-in area, or

portion of an opt-in area, from inclusion

as a covered area under § 80.70. If the

Administrator approves a petition, he or

she shall set an effective date as

provided in paragraph (c) of this

section. The Administrator shall notify

the state in writing of the Agency’s

action on the petition and the effective

date of the removal when the petition is

approved.

* * * * *

(c)(1) For opt-out petitions received

on or before December 31, 1997, except

as provided in paragraphs (c)(2) and

(c)(3) of this section, the Administrator

shall set an effective date for removal of

an area under paragraph (a) of this

section as requested by the Governor,

but no less than 90 days from the

Agency’s written notification to the state

approving the opt-out petition, and no

later than December 31, 1999.

(2) For opt-out petitions received on

or before December 31, 1997, except as

provided in paragraph (c)(3) of this

section, where RFG is contained as an

element of any plan or plan revision

that has been approved by the Agency,

other than as a contingency measure

consisting of a future opt-in, then the

effective date under paragraph (a) of this

section shall be the date requested by

the Governor, but no less than 90 days

from the effective date of Agency

approval of a revision to the plan that

removes RFG as a control measure.

(3)(i) The Administrator may extend

the deadline for submitting opt-out

petitions in paragraphs (c)(1) and (2) of

this section for a state if:

(A) The Governor or his authorized

representative requests an extension

prior to December 31, 1997;

(B) The request indicates that there is

active or pending legislation before the

state legislature that was introduced

prior to March 28, 1997;

(C) The legislation is concerning

opting out of or remaining in the

reformulated gasoline program; and

(D) The request demonstrates that the

legislation cannot reasonably be acted

upon prior to December 31, 1997.

(ii) The Administrator may extend the

deadline until no later than May 31,

1998. If the deadline is extended, then

opt-out requests from that state received

during the extension shall be considered

under the provisions of paragraphs

(c)(1) and (2) of this section.

(4) For opt-out petitions received

January 1, 1998 through December 31,

2003, except as provided in paragraph

(c)(5) of this section, the Administrator

shall set an effective date for removal of

an area under paragraph (a) of this

section as requested by the Governor but

no earlier than January 1, 2004 or 90

days from the Agency’s written

notification to the state approving the

opt-out petition, whichever date is later.

(5) For opt-out petitions received

January 1, 1998 through December 31,

2003, where RFG is contained as an

element of any plan or plan revision

that has been approved by the Agency,

other than as a contingency measure

consisting of a future opt-in, then the

effective date for removal of an area

under paragraph (a) of this section shall

be the date requested by the Governor,

but no earlier than January 1, 2004, or

90 days from the effective date of

Agency approval of a revision to the

plan that removes RFG as a control

measure, whichever date is later.

(6) For opt-out petitions received on

or after January 1, 2004, except as

provided in paragraph (c)(7) of this

section, the Administrator shall set an

effective date for removal of an area as

requested by the Governor, but no less

than 90 days from the Agency’s written

notification to the state approving the

opt-out petition.

(7) For opt-out petitions received on

or after January 1, 2004, where RFG is

contained as an element of any plan or

plan revision that has been approved by

the Agency, other than as a contingency

measure consisting of a future opt-in,

then the effective date for removal of an

area under paragraph (a) of this section

shall be the date requested by the

Governor, but no less than 90 days from

the effective date of Agency approval of

a revision to the plan that removes RFG

as a control measure.

* * * * *

[FR Doc. 97–27725 Filed 10–17–97; 8:45 am]

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