Federal Register / Vol. 69, No. 95 / Monday, May 17, 2004 / Rules and Regulations 27837

Unfunded Mandates Reform Act 

The Unfunded Mandates Reform Act 

of 1995 (2 U.S.C. 1531–1538) requires 

Federal agencies to assess the effects of 

their discretionary regulatory actions. In 

particular, the Act addresses actions 

that may result in the expenditure by a 

State, local, or tribal government, in the 

aggregate, or by the private sector of 

$100,000,000 or more in any one year. 

Though this proposed rule would not 

result in such expenditure, we do 

discuss the effects of this rule elsewhere 

in this preamble. 

Taking of Private Property 

This rule will not affect a taking of 

private property or otherwise have 

taking implications under Executive 

Order 12630, Governmental Actions and 

Interference with Constitutionally 

Protected Property Rights. 

Civil Justice Reform 

This rule meets applicable standards 

in sections 3(a) and 3(b)(2) of Executive 

Order 12988, Civil Justice Reform, to 

minimize litigation, eliminate 

ambiguity, and reduce burden. 

Protection of Children 

The Coast Guard has analyzed this 

rule under Executive Order 13045, 

Protection of Children from 

Environmental Health Risks and Safety 

Risks. This rule is not an economically 

significant rule and does not create an 

environmental risk to health or risk to 

safety that may disproportionately affect 

children.

Energy Effects 

We have analyzed this rule under 

Executive Order 13211, Actions 

Concerning Regulation That 

Significantly Affect Energy Supply, 

Distribution, or Use. We have 

determined that it is not a ‘‘significant 

energy action’’ under that order because 

it is not a ‘‘significant regulatory action’’

under Executive Order 12866 and is not 

likely to have a significant adverse effect 

on the supply, distribution, or use of 

energy. It has not been designated by the 

Administrator of the Office of 

Information and Regulatory Affairs as a 

significant energy action. Therefore, it 

does not require a Statement of Energy 

Effects under Executive Order 13211. 

Indian Tribal Governments 

This rule does not have tribal 

implications under Executive Order 

13175, Consultation and Coordination 

with Indian Tribal Governments, 

because it does not have a substantial 

direct effect on one or more Indian 

tribes, on the relationship between the 

Federal Government and Indian tribes, 

or on the distribution of power and 

responsibilities between the Federal 

Government and Indian tribes. 

Environment 

We have considered the 

environmental impact of this rule and 

concluded that under figure 2–1, 

paragraph (34)(g), of Commandant 

Instruction M16475.1C, this rule is 

categorically excluded from further 

environmental documentation. A 

written categorical exclusion 

determination is available in the docket 

for inspection or copying where 

indicated under ADDRESSES.

List of Subjects in 33 CFR Part 165 

Harbors, Marine Safety, Navigation 

(water), Reporting and record keeping 

requirements, Security measures, 

Waterways.

■ For the reasons set out in the preamble, 

the Coast Guard amends 33 CFR part 165 

as follows:

PART 165—REGULATED NAVIGATION 

AREAS AND LIMITED ACCESS AREAS

■ 1. The authority citation for part 165 

continues to read as follows:

Authority: 33 U.S.C. 1226, 1231; 46 U.S.C. 

Chapter 701; 50 U.S.C. 191, 195; 33 CFR 

1.05–1(g), 6.04–1, 6.04–6, and 160.5; Pub. L. 

107–295, 116 Stat. 2064; Department of 

Homeland Security Delegation No. 0170.1.

■ 2. A new temporary § 165.T09–009 is 

added to read as follows:

§ 165.T09–009 Security Zone; Cleveland 

Harbor, Cleveland, Ohio. 

(a) Location. The following area is a 

security zone: All waters of Cleveland 

Harbor south of a line drawn from the 

northeast corner of Voinovich Park 

(41°30′40.5′′ N, 081°41′47.5′′ W) to the 

northwest corner of Burke Lakefront 

Airport (41°30′48.5′′ N, 081°41′37′′ W) 

(NAD 83). 

(b) Effective time and date. This 

regulation is effective from noon (local) 

until 3 p.m. (local), on May 21, 2004. 

(c) Regulations. Entry into, transit 

through, or anchoring within the 

security zone is prohibited unless 

authorized by the Captain of the Port 

Cleveland or the Coast Guard Patrol 

Commander.

Dated: April 20, 2004. 

L.W. Thomas, 

Commander, U.S. Coast Guard, Captain of 

the Port Cleveland.

[FR Doc. 04–11148 Filed 5–14–04; 8:45 am] 

BILLING CODE 4910–15–P

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[CA 280–0444; FRL–7657–3] 

Revisions to the California State 

Implementation Plan; San Joaquin 

Valley Unified Air Pollution Control 

District

AGENCY: Environmental Protection 

Agency (EPA).

ACTION: Final rule.

SUMMARY: EPA is finalizing approval of 

revisions to the San Joaquin Valley 

Unified Air Pollution Control District 

(SJVUAPCD or District) portion of the 

California State Implementation Plan 

(SIP). In the Federal Register on 

February 13, 2003, EPA proposed 

approval of revised SJVUAPCD Rules 

2020 (permit exemptions) and 2201 

(New Source Review or NSR for 

stationary sources). The rule revisions 

we are approving into the SIP address 

deficiencies identified in our July 19, 

2001 limited approval and limited 

disapproval of the previous versions of 

these rules.

EFFECTIVE DATE: June 16, 2004.

ADDRESSES: You can inspect copies of 

the administrative record for this action 

at EPA’s Region IX office during normal 

business hours by appointment. You 

can inspect copies of the submitted SIP 

revisions by appointment at the 

following locations: 

Environmental Protection Agency, 

Region IX, 75 Hawthorne Street, San 

Francisco, CA 94105–3901. 

Copies of the submitted Rules are also 

available for inspection at the following 

locations: 

California Air Resources Board, 

Stationary Source Division, Rule 

Evaluation Section, 1001 ‘‘I’’ Street, 

Sacramento, CA 95814. 

San Joaquin Valley Unified APCD, 

1990 E. Gettysburg Avenue, Fresno, CA 

93726. 

A copy of the rules may also be 

available via the Internet at http://

www.arb.ca.gov/drdb/drdbltxt.htm.

Please be advised that this is not an EPA 

Web site and may not contain the same 

version of the rules that were submitted 

to EPA.

FOR FURTHER INFORMATION CONTACT: Ed 

Pike, Permits Office [AIR–3], Air 

Division, EPA Region IX, (415) 972–

3970, pike.ed@epa.gov.

SUPPLEMENTARY INFORMATION:

Throughout this document, ‘‘we,’’ ‘‘us’’

and ‘‘our’’ refer to EPA. 

27838 Federal Register / Vol. 69, No. 95 / Monday, May 17, 2004 / Rules and Regulations 

1Many California Districts use the term ‘‘Best 

Available Control Technology’’ (BACT) with a 

definition equivalent to LAER. Please see the 1999 

TSD for additional information on the District’s 

definition of BACT.

2On September 22, 2003, the Governor signed 

SB700 into law. The legislation includes an 

amendment to California Health & Safety Code 

section 42310 to delete the previous permit 

exemption for agricultural sources.

3We also received an e-mail on March 14, 2003 

from Cathy Reheis-Boyd, Acting President of 

WSPA, asking EPA to consider incorporating 

language into the final notice that indicates a 

willingness to work with the District to develop a 

flexible tracking system that accounts for all 

differences between the local and federal permitting 

systems. We do not understand this to be a 

comment on the decision to approve the District’s 

rule or a suggestion that the tracking system fails 

to accurately account for the various differences 

between the local and federal programs. We agree, 

however, that, should the District choose to revise 

its tracking system provisions, it will be important 

for EPA to continue to work with the District to 

ensure the system accurately accounts for these 

differences.

4These are emissions reductions banked as 

credits before the 1990 Clean Air Act Amendments. 

This notice uses the term ‘‘pre-baseline’’ emission 

reduction credits to clarify that the issue is tied not 

solely to the 1990 date, but the date that an area 

uses as its emissions inventory baseline date.

I. Background 

On February 13, 2003 (68 FR 7330), 

EPA proposed to approve the following 

rules into the California SIP.

Local agency Rule No. Rule title Adopted Submitted 

SJVUAPCD ................................. 2020 Exemptions ..................................................................................... 12/19/02 12/23/02 

SJVUAPCD ................................. 2201 New and Modified Stationary Source Review Rule ....................... 12/19/02 12/23/02 

We proposed to approve these rules 

because we determined that they 

addressed the deficiencies noted in our 

July 19, 2001 limited approval and 

limited disapproval of the previous 

versions of these rules (66 FR 37587) 

and otherwise complied with relevant 

Clean Air Act (CAA or Act) 

requirements. Our February 13, 2003, 

Federal Register notice of proposed 

rulemaking (NPRM) contains more 

information on the rules and our 

evaluation. 

EPA’s limited disapproval cited three 

deficiencies in the previous versions of 

Rules 2020 and 2201. First, EPA 

determined that the previous version of 

Rule 2201 was not approvable because 

its offset tracking equivalency system 

failed to contain a mandatory remedy. 

We also found the previous version of 

Rule 2201 deficient because section 4.5 

of the rule exempted agricultural 

sources from permitting. Finally, we 

concluded the previous version of Rule 

2020 was not approvable because it did 

not require all sources making 

modifications that result in a significant 

increase in emissions to meet the 

Lowest Achievable Emission Rate 

(LAER). For a more detailed discussion 

of these three rule deficiencies please 

see our July 19, 2001 final limited 

approval and limited disapproval at 66 

FR 37587 and the accompanying 

Technical Support Document dated 

August 30, 1999 (‘‘1999 TSD’’). 

EPA’s July 2001 limited disapproval 

informed the District that the following 

actions were required to correct the rule 

deficiencies: 

1. The District must revise Rule 2201 

to provide a mandatory, enforceable and 

automatic remedy to cure any annual 

shortfall and, in the future, prevent 

shortfalls in the District’s New Source 

Review Offset Equivalency Tracking 

System. 

2. The District must remove the 

agricultural exemption from Rule 2020. 

3. The District must revise Rule 2201 

to ensure that all sources meet LAER1

if they are allowed to make a significant 

increase in their actual emissions rate.

See 66 FR 37590. The District has 

addressed each of these deficiencies.

The District revised Rule 2201 to 

clarify and expand the requirements for 

tracking the equivalency of the District’s 

NSR offset requirements to the federal 

NSR program offset requirements. The 

revised District rule includes specific 

and automatic remedies to address any 

shortfall found by the tracking system or 

any failure to implement the tracking 

system. The revisions to section 7.0 of 

Rule 2201 reasonably satisfy EPA’s 

requirement for mandatory, enforceable 

and automatic remedies to address any 

shortfalls and prevent future ones. 

To address the deficiency in Rule 

2020, the District deleted the previous 

permit exemption for agricultural 

sources. We note that the State has also 

removed a similar blanket exemption, 

thereby providing the District with 

authority to require air permits for 

agricultural sources, including federally 

required NSR permits.2

Finally, the District revised Rule 2201 

to require LAER for all modifications 

considered major under federal 

regulations. Sections 3.24 and 4.1.3 

provide that any major modification, as 

defined in the federal regulations in 40 

CFR 51.165, must meet LAER. We 

conclude this revision reasonably 

addresses the noted deficiency. 

II. Public Comments and EPA 

Responses 

EPA’s proposed action provided a 30-

day public comment period. During this 

period, we received comments from the 

following parties. 

1. Seyed Sadredin, SJVUAPCD; letter 

dated March 13, 2003. 

2. Caroline Farrell, Center on Race, 

Poverty & the Environment, on behalf of 

the Association of Irritated Residents 

(AIR); letter dated March 17, 2003. 

3. David Farabee, Pillsbury Winthrop, 

LLP, on behalf of the Western States 

Petroleum Association (WSPA); letter 

dated March 17, 2003.3

4. Ann Harper, Earthjustice; letter 

dated March 17, 2003. 

These comments and our responses 

are summarized below. 

The District and WSPA support 

approval of the revised rules into the 

SIP, but argue that EPA should revise or 

clarify various preamble statements, in 

particular those regarding the 

creditability of certain ‘‘pre-1990’’

Emission Reductions Credits.4

Earthjustice and AIR oppose approval of 

Rule 2201 for the reasons described 

below.

In addition to these comments, EPA 

received four other letters related to the 

proposed action after the close of the 

comment period: 

1. Paul Fanelli, Manufacturers 

Council of the Central Valley (MCCV); 

letter dated March 21, 2003. This letter 

is addressed to the Regional 

Administrator and does not specifically 

comment on the proposed approval 

notice. The letter instead notes that 

‘‘The MCCV has been advised that the 

EPA Region IX staff has formulated 

policy regarding pre-1990 Emission 

Reduction Credits (ERC’s)’’ and raises 

concerns with such policy formulation. 

2. Joe Neves, Kings County Board of 

Supervisors; letter dated April 2, 2003. 

The letter echoes concerns raised by the 

District regarding the treatment of pre1990 Emission Reduction Credits. 

Federal Register / Vol. 69, No. 95 / Monday, May 17, 2004 / Rules and Regulations 27839

5The District’s rule provides for EPA review of 

the District’s creditability determinations not for 

purposes of reviewing whether individual 

permitting decision rely on ERCs that are not 

surplus at the time-of-use, but to ensure the 

District’s program satisfies the offset requirements 

of the Act. Accordingly, section 7.1.5 of District 

Rule 2201 provides that EPA may review the 

District’s creditability determination to ensure that 

the emission reductions are ‘‘real, surplus, 

quantifiable, enforceable, and permanent.’’

6We explained our understanding of the District’s 

rule in our testimony before the California Energy 

Commission regarding the offsets relied upon in the 

NSR permit for Calpine’s San Joaquin Valley Energy 

Center. We noted that the District rule allowed 

Calpine to rely on credits considered acceptable 

under the District rules but that would be nonsurplus under the federal rules. We added that the 

District would need to address any shortfall that 

resulted in the creditable emission reductions 

needed to satisfy the Clean Air Act offset 

requirements. A copy of this testimony has been 

added to the administrative record for today’s 

action.

3. L.W. Clark, Independent Oil 

Producers’ Agency (IOPA), letter dated 

April 22, 2003. IOPA argues pre-1990 

emission reduction credits should not 

be discounted in any equivalency 

demonstration. 

4. Harley Pinson, Occidental of Elk 

Hills (Oxy); letter dated July 1, 2003. 

Oxy notes in its letter that it previously 

submitted comments regarding the 

proposed rule in its capacity as a 

member of WSPA, but adds that it 

would like to reiterate some of the 

concerns raised by WSPA, the District 

and others. 

We have not prepared separate 

responses to these late comments. Our 

responses to the timely comments 

sufficiently address their concerns. 

A. General Equivalency Tracking 

System Issues 

Comment 1: WSPA expresses concern 

that sources in compliance with District 

Rules 2020 and 2201 may not comply 

with federal offset requirements because 

EPA noted that sources should ‘‘ensure 

that the emission reductions used to 

satisfy offset requirements meet federal 

creditability criteria.’’ WSPA writes that 

this statement suggests sources that 

comply with Rule 2201 may still not 

meet pertinent federal offset 

requirements. WSPA urges EPA to 

clarify that compliance with the 

District’s SIP-approved NSR rule 

satisfies federal offset requirements and 

that a separate federal emission 

reduction creditability analysis is not 

necessary. 

Response: EPA agrees that a source 

that complies with the applicable 

District SIP-approved NSR rule would 

be in compliance with the provisions of 

the Clean Air Act that the District SIP 

rule implements. As EPA explained in 

the NPRM, with the exception of the 

requirement to determine the surplus 

value of emission reduction credits at 

the time of use, the District rule applies 

the same criteria for determining the 

creditability of such emission reduction 

credits as the CAA. See 68 FR 7333. As 

a result, sources must continue to meet 

CAA creditability requirements as 

incorporated in sections 4.5 and 3.2.1 of 

Rule 2201. The equivalency 

demonstration in Rule 2201 provides 

some flexibility regarding surplus 

adjusting but the rule does not 

otherwise exempt sources from 

obtaining creditable emission reduction 

credits to meet offset requirements. 

Once these other requirements are met, 

nothing in section 7.1.5 requires the 

District to withdraw a permit issued in 

reliance on an emission reduction credit 

that is of lesser surplus value at the time 

of use under federal criteria.5 Rule 2201 

allows such credits to be used as long 

as equivalency is demonstrated 

annually.6 Should the District allow too 

many non-surplus emission reductions 

to be used as offsets, the remedy is 

outlined in section 7.4. The District will 

retire additional creditable reductions 

that have not been used as offsets and 

have been banked or generated as a 

result of enforceable permitting actions. 

If a deficit remains, the District must 

implement the requirements specified 

in the federal rules.

Comment 2: WSPA disagrees with 

EPA’s determination that the offset 

equivalency tracking system only covers 

permits for sources with authority to 

construct (ATC) applications deemed 

complete on or after August 20, 2001. 

WSPA argues that because EPA granted 

limited approval to a prior version of 

the tracking system in its July 19, 2001 

final action, EPA cannot rely on the fact 

that it subsequently required additional 

changes to the tracking system to 

exclude sources covered by ATC 

applications deemed complete before 

August 20, 2001. EPA should clarify 

that even sources that have permit 

applications deemed complete before 

August 20, 2001 should be treated as 

covered by the District’s tracking 

system. 

Response: Section 7.3.1 of District 

Rule 2201 limits the scope of the 

tracking system to ‘‘new and modified 

sources for which a complete 

application for Authority to Construct 

was submitted after August 20, 2001.’’

This date aligns with the effective date 

of EPA’s July 19, 2001 limited approval 

and limited disapproval of the previous 

version of Rule 2201. Prior to August 20, 

2001, the SIP required offsets but did 

not include a requirement to track and 

demonstrate offset equivalency. The 

rule being approved into the SIP today 

clearly specifies the period covered by 

Rule 2201. Whether we use the effective 

date of the prior approval or the terms 

of the current rule, we would still limit 

allowances for non-surplus credits 

under the equivalency tracking system 

to sources submitting ATCs after August 

20, 2001 unless the District changes the 

rule to include these sources in the 

tracking system.

Comment 3: WSPA notes that EPA 

has concluded that the District may not 

rely on the application of LAER 

requirements to newly constructed 

federal minor sources for purposes of 

demonstrating equivalency with federal 

NSR requirements because the District’s 

LAER rules do not require these minor 

sources to make actual emission 

reductions. WSPA observes that despite 

this finding, the District’s rules result in 

emissions from new minor sources that 

are substantially lower than would be 

the case under federal NSR 

requirements. WSPA also observes that 

in certain cases, the District’s NSR 

program does reduce actual emissions 

from sources that are not major under 

federal NSR. WSPA encourages EPA to 

work with the District to assess further 

approaches for evaluating the overall 

effectiveness of the District’s NSR rules 

as compared to federal NSR 

requirements. 

Response: EPA will continue to work 

with the District to assess where more 

stringent District requirements result in 

actual emission reductions that may be 

used to compensate for any less 

stringent offset requirements. It is 

important to reiterate, however, that the 

exercise is to demonstrate that the 

District achieves real reductions in the 

inventory of emissions through 

requirements more stringent than the 

Act’s. For this reason, construction of a 

new source, even if it adds fewer new 

emissions than might occur in other 

areas, does not reduce real emissions 

from the air and the baseline inventory. 

The purpose of the tracking system is 

not to make creditable certain actions 

that do not otherwise qualify as offsets, 

such as avoided possible emission 

increases. CAA section 173(c)(2) 

requires that offsets be reductions in 

‘‘actual emissions.’’ As commenter 

notes, there may be examples where 

actual reductions of emissions in the air 

and in the inventory do occur and we 

will assess these examples with the 

District. 

Comment 4: WSPA notes that the 

equivalency tracking program requires 

the District to demonstrate equivalency 

with the federal NSR rules in effect on 

November 14, 2002. See Rule 2201, 

section 7.1.1. WSPA observes that 

27840 Federal Register / Vol. 69, No. 95 / Monday, May 17, 2004 / Rules and Regulations 

newly promulgated federal NSR Reform 

rules took effect on March 3, 2003 and 

urges EPA to work promptly with the 

District to incorporate the new federal 

NSR rules into the equivalency 

demonstration requirement. 

Response: On December 31, 2002, 

EPA finalized revisions to the federal 

NSR rules (‘‘NSR Reform’’). 67 FR 

80186. Pursuant to the revised rules in 

40 CFR 51.165, permitting agencies 

revising their rules to meet NSR Reform 

must adopt and submit such revisions to 

EPA by January 2, 2006. As suggested by 

the comment, EPA is working with the 

District to determine how the District 

will implement NSR Reform, although 

the rule does not provide for 

establishing a different deadline for the 

District. 

Comment 5: WSPA encourages EPA to 

continue to work with the District to 

develop alternative NSR rules that 

demonstrate equivalency with federal 

offset requirements, while accounting 

for the unique characteristics of the 

District’s permitting system. WSPA also 

suggests that more flexible approaches 

to satisfying federal offset requirements 

may be appropriate in other 

jurisdictions and encourages EPA to 

consider alternative approaches in other 

states and air districts. 

Response: EPA acknowledges WSPA’s 

support for alternative approaches to 

satisfying federal emissions offset 

requirements and will consider 

submissions from other jurisdictions on 

a case-by-case basis. 

B. Determination of Surplus Value of 

Credits 

Comment 6: WSPA agrees that 

creditable emission reductions must be 

surplus when created and either used 

immediately to offset emissions or 

banked for later use. However, WSPA 

argues that nothing in the Clean Air Act 

or EPA regulations requires banked 

emission reduction credits to be surplus 

at the time of use. WSPA suggests that 

EPA revisit its position on the treatment 

of credits banked for later use in order 

to assure that the District’s banking 

program remains effective. 

Response: We disagree with WSPA’s 

assertion that the Clean Air Act does not 

require emission reduction credits to be 

surplus at time of use. The surplus 

requirement derives from CAA section 

173(c)(2), which provides, ‘‘Emission 

reductions otherwise required by this 

Act shall not be creditable as emissions 

reductions for purposes of any such 

offset requirement.’’ We believe the 

provision, by focusing on emission 

reductions ‘‘for purposes’’ of the offset 

requirement, is clear that the 

creditability of an emission reduction is 

to be determined at the time it is used 

as an offset. See also CAA § 173(a)(1)(A) 

(requiring ‘‘actual’’ emission reductions 

equal to the total tonnage of increase at 

the time construction is commenced). 

Even if we found this language 

ambiguous, however, the most 

reasonable interpretation is to reconcile 

creditability, including the surplus 

value, no earlier than at the time of use 

when the permitting agency formally 

determines that an applicant meets 

Clean Air Act requirements for an 

authority to construct permit. WSPA’s 

interpretation that emission reduction 

credits retain their value for all time is 

inconsistent with the purposes of 

section 173(c)(2) and related 

requirements of Part D of Title I of the 

Act that require continuing air pollution 

reductions in nonattainment areas. 

For example, one of the purposes of 

this requirement is to ensure that offsets 

are real reductions in the area’s 

emissions inventory. Without ‘‘surplus 

adjusting’’ at time of use, there is no 

assurance that emissions reductions 

have not already been counted in the 

area’s plan as a decrease in the 

inventory. If a reduction is otherwise 

required by a subsequently adopted 

rule, the reduction is typically included 

in the emissions reduction benefits of 

the rule incorporated into the SIP. This 

inconsistency with the requirement for 

reasonable further progress is one 

reason why EPA believes the ‘‘surplusat-time-of-use’’ requirement is 

consistent with the goals of the Act.

WSPA’s reading of the surplus 

requirement of section 173(c)(2) would 

diminish it to a mere timing provision 

with no broader air quality protection 

function. WSPA’s interpretation would 

mean that sources making emission 

reductions that they know will be 

required would be able to use these 

emission reduction credits for all time 

as long as they are made before officially 

required. Sources would be motivated to 

make these ‘‘early’’ reductions in order 

to preserve these emissions for future 

use. If such a ‘‘loophole’’ in section 

173(c)(2) did exist, the result would be 

that the emission reduction benefits of 

many CAA requirements such as 

Reasonably Available Control 

Technology (RACT) for existing sources 

would be lost because the reductions 

could be used to allow increases in 

emissions at the same source or other 

sources. This is not a reasonable 

interpretation of section 173(c)(2). A 

more reasonable interpretation is that 

Congress established section 173(c)(2) at 

least in part to preserve the benefits of 

other CAA requirements and that 

creditability must instead be determined 

when a stationary source uses a credit 

to meet offset requirements. 

C. Enforceability of Equivalency 

Tracking System 

Comment 7: AIR contends that EPA 

should not approve Rules 2020 and 

2201 because the District’s revised rules 

remain unenforceable. AIR urges EPA to 

consider the District’s past failure to 

meet statutory or regulatory reporting 

deadlines before relying on the District’s 

commitment to submit annual offset 

equivalency demonstration reports. 

Accordingly, AIR recommends that EPA 

reject any remedy hinging on the 

District’s compliance with reporting 

requirements. Likewise, Earthjustice 

contends that EPA’s reliance on the 

District’s promise of compliance is 

unjustified and unreasonable in light of 

the District’s history of noncompliance 

with the CAA. 

Response: EPA agrees that the 

District’s NSR program must generate 

real, enforceable reductions in 

emissions that meet all EPA 

creditability requirements. Accordingly, 

EPA’s July 19, 2001 limited approval of 

Rules 2020 and 2201 directed the 

District to include in the Rule 2201 

offset equivalency tracking system ‘‘a 

mandatory and enforceable remedy to 

cure any annual shortfall and prevent 

future shortfalls.’’ 66 FR 37587. EPA 

believes the District’s revised Rule 2201 

addresses this concern. Section 7.4.1 of 

Rule 2201 establishes two remedies that 

would take effect if the District fails to 

demonstrate equivalency with federal 

NSR offset requirements. First, the 

District will retire any unused emission 

reduction credits that meet federal 

creditability criteria to make up for any 

shortfall in the amount of federal 

creditable emission reductions required. 

Rule 2201, section 7.4.1.1. If the 

shortfall persists after the District retires 

unused federally creditable emission 

reduction credits, the District must also 

apply federal offset requirements to all 

permits issued after the annual 

demonstration deadline. Rule 2201, 

section 7.4.1.2. As we stated in our 

NPRM, EPA has determined that these 

remedies satisfy the concerns raised in 

our July 19, 2001 limited approval of 

Rule 2201. 

While EPA acknowledges AIR’s 

concern regarding the possible failure to 

meet reporting deadlines, we believe the 

current rules provide adequate remedies 

for any possible noncompliance. For 

example, section 7.4.1.1 of Rule 2201 

specifies that if EPA determines that the 

District’s demonstration is erroneous, 

the mandatory and enforceable remedies 

discussed in the preceding paragraph 

will automatically be imposed. In 

Federal Register / Vol. 69, No. 95 / Monday, May 17, 2004 / Rules and Regulations 27841

7For further discussion on the ability of States to 

make up for sources’ use of non-surplus emission 

reduction credits, see the August 26 1994 memo 

from John Seitz, Director, Office of Air Quality 

Planning and Standards, to David Howekamp, 

Director, Region IX, Air and Toxics Division (‘‘Seitz 

Memo’’). The memo explains, ‘‘States may provide 

other reductions to cover all or some portion of the 

emission reductions required for ensuring ERC’s 

reflect current RACT levels.’’ The memo cites the 

1994 Economic Incentive Program rule and 

guidance, which provided, ‘‘[T]he Act does not 

require that offsets be secured by the new source. 

Rather, any portion of the necessary offsets may be 

generated by the local air quality district or by the 

State.’’ 59 FR 16690, 16696 (April 7, 1994).

8 Given the likely need for stringent controls and 

significant emissions reductions, it may be more 

difficult for the area to demonstrate attainment and 

reasonable further progress if pre-baseline credits 

are carried forward in the inventory.

addition, section 7.4.2.3 specifically 

addresses the consequences should the 

District fail to submit the required 

report to EPA and the public. These 

provisions include specific, automatic 

remedies that provide safeguards should 

the District be unable to meet the 

equivalency demonstration 

requirements. These remedies will 

become federally enforceable upon the 

effective date of today’s action. 

Comment 8: Earthjustice argues that 

the District’s offset equivalency tracking 

system fails to comply with ‘‘some of 

the most basic elements’’ of the Clean 

Air Act. Specifically, Earthjustice 

believes the District’s annual 

equivalency demonstration ‘‘does little 

more than ‘‘track and report’’ annual 

shortfalls in the District’s system.’’

Earthjustice expresses concern that a 

year or more may pass before any 

remedy to cure annual shortfalls takes 

effect. Earthjustice claims that such a 

delay is unreasonable and violates the 

Act. 

Response: As noted above, EPA has 

concluded that the provisions of District 

Rule 2201, section 7.4.1 provide 

automatic and mandatory enforceable 

remedies in the event that an annual 

shortfall in the District’s offset 

equivalency tracking system occurs. 

While it is true the remedies set forth in 

section 7.4.1 take effect only after the 

District fails to demonstrate equivalency 

with federal NSR offset requirements, 

CAA section 173(a)(1)(A) allows for this 

type of aggregate demonstration (please 

see response to Comment 9 for further 

discussion). The reporting schedule is 

unlikely to cause a significant delay 

compared to permit-by-permit review of 

annual aggregate equivalency. 

Accordingly, EPA has concluded that 

the District’s program reasonably 

implements section 173(a)(1) and (c) of 

the Act. 

D. Use of Pre-1990 Emission Reduction 

Credits (ERCs) 

Comment 9: AIR argues the District’s 

NSR program improperly relies on pre1990 emission reduction credits without 

adequately accounting for these credits. 

AIR contends that the District may not 

use pre-1990 emission reduction credits 

without verifying that the credits are 

surplus (i.e., in excess of emission 

reductions expressly required by the 

Clean Air Act). AIR also notes that there 

are ‘‘very real concerns’’ that the pre1990 emission reduction credits are not 

‘‘actual or quantifiable.’’

Response: Section 7.1.3 of Rule 2201 

requires the Air Pollution Control 

Officer to track the surplus value of 

‘‘creditable’’ emission reductions used 

as offsets. Section 7.1.5 defines 

‘‘creditable’’ for purposes of this 

tracking as emission reductions that are 

real, surplus, quantifiable, enforceable 

and permanent. EPA agrees that prebaseline emission reduction credits 

create special challenges in meeting 

these requirements. Thus, EPA agrees 

with AIR’s comment insofar as it 

suggests the need to carefully scrutinize 

the creditable value of pre-baseline 

emission reduction credits in the 

equivalency tracking system. 

However, to the extent AIR challenges 

EPA’s authority to allow individual 

sources to rely on pre-baseline credits 

for offsetting purposes, EPA believes 

AIR’s arguments are addressed by our 

July 19, 2001 limited approval of the 

District’s NSR rules. In that notice, EPA 

concluded that the District can rely on 

pre-baseline credits in issuing 

individual construction permits 

provided it demonstrates sufficient 

creditable offsets are available on an 

aggregate basis. 66 FR 37588–89. EPA 

believes this conclusion is reasonable in 

light of the requirements of CAA 

§ 173(a)(1)(A), which provides that 

offset requirements are satisfied if ‘‘total 

allowable emissions from existing 

sources in the region, from new or 

modified facilities which are not major 

emitting facilities and from the 

proposed sources, will be sufficiently 

less than total emissions from existing 

sources.’’ The language of section 

173(a)(1)(A) supports the District’s 

reliance on aggregate emissions to 

demonstrate equivalency. See also 57 

FR 13498, 13508 (Apr. 16, 1992) (noting, 

‘‘[f]or purposes of equity, EPA 

encourages States to allow the use of 

pre-enactment [i.e., pre-baseline] 

emission reduction credits for offsetting 

purposes’ and establishing the 

requirements for States to meet if they 

wish to allow these credits).7

Comment 10: AIR believes the offset 

equivalency tracking system will have 

an adverse effect on air quality in the 

San Joaquin Valley if the system fails to 

generate enough surplus emission 

reduction credits to offset pre-1990 

credits. According to AIR, EPA is 

currently unable to predict whether the 

District Rules 2020 and 2201 will 

generate sufficient emission reduction 

credits to demonstrate equivalency with 

federal NSR rules. 

Response: EPA acknowledges AIR’s 

concerns regarding the inclusion of pre1990 emission reduction credits. 

However, EPA believes the 

nonattainment planning process and the 

equivalency tracking system are the 

proper mechanisms for addressing these 

concerns. For example, in the District’s 

2003 PM–10 Plan recently proposed for 

approval (69 FR 5412 (Feb. 4, 2004)), the 

District evaluated the number of prebaseline ERCs that could be used in the 

future without jeopardizing attainment 

or reasonable further progress. See 2003 

PM–10 Plan at 3–17 to 3–20 (Amended 

Dec. 2003). The analysis in the 2003 

PM–10 Plan follows that outlined in the 

August 26, 1994 Seitz Memo. The 

District uses economic forecast data to 

project growth in the various industry 

sectors in the area. Some of this growth 

will trigger NSR and the offset 

requirements. This growth would 

normally not impact the area’s 

inventory because reductions from other 

sources would be required to 

compensate for this growth. Using prebaseline ERCs has the effect of allowing 

growth in emissions without obtaining 

actual inventory reductions. The Seitz 

memo explains that in order to ensure 

that the use of these pre-baseline ERCs 

is consistent with the area’s attainment 

plan and reasonable further progress, 

the District is required to either show 

that their use is reflected in the growth 

estimates in an identifiable way or add 

these ERCs on top of the growth 

estimates. The District has shown that 

by capping the number of pre-baseline 

ERCs that may be used at the projected 

level of growth, the area can still 

achieve sufficient emission reductions 

elsewhere to achieve attainment and 

reasonable further progress ‘‘net’’ of this 

allowed growth in emissions. This 

demonstration supports the limited use 

of pre-baseline ERCs as consistent with 

attainment of the national ambient air 

quality standards (NAAQS) for PM–10. 

EPA agrees that a similar demonstration 

must be included in the area’s ozone 

plan to account for pre-baseline 

emission reduction credits and ensure 

that the plan generates sufficient 

creditable emission reductions to satisfy 

reasonable further progress and 

compliance demonstration requirements 

for extreme ozone nonattainment areas.8

27842 Federal Register / Vol. 69, No. 95 / Monday, May 17, 2004 / Rules and Regulations 

We encourage AIR to participate in the 

public process regarding this plan and 

to raise any concerns with how prebaseline emission reduction credits are 

included.

Comment 11: AIR also notes that there 

is uncertainty surrounding the District’s 

ability to manage the tracking system if 

the San Joaquin Valley is redesignated 

as an extreme ozone nonattainment 

area. AIR therefore concludes that EPA 

should not approve Rule 2201 until 

these uncertainties are resolved. 

Response: On April 8, 2004, EPA took 

final action to reclassify the San Joaquin 

Valley ozone nonattainment area from a 

severe to an extreme 1-hour ozone 

nonattainment area. 69 FR 8126. EPA 

agrees that redesignation of the ozone 

nonattainment area will affect the 

implementation of the offset 

equivalency tracking system. See 68 FR 

8127. The District will need to update 

its NSR program to meet the new federal 

requirements triggered by redesignation. 

The offset tracking system and 

equivalency demonstration was 

approved for limited purposes and EPA 

would like to avoid any possible 

misunderstanding that it was intended 

to address additional rule deficiencies 

that would occur if the District failed to 

update its rules to comply with federal 

NSR requirements for extreme ozone 

nonattainment areas. 

As AIR acknowledges, it is not certain 

when or if the area will be unable to 

demonstrate equivalency in the future. 

In the meanwhile, we believe it is 

reasonable to approve the proposed 

revisions to Rule 2201 because the Rule 

provides automatic remedies in the 

event equivalency cannot be 

demonstrated. Thus, if the District 

cannot demonstrate equivalency, the 

District will meet all federal offset 

requirements on a case-by-case basis. 

Comment 12: AIR argues that the 

District’s use of pre-1990 emission 

reduction credits violates CAA section 

193. AIR observes that section 193 

prohibits the modification of any pre1990 implementation plan in effect in a 

nonattainment area unless the 

modification ensures equivalent or 

greater emission reductions. AIR 

contends that allowing the District to 

use pre-1990 emission reduction credits 

without determining whether or not 

they are surplus would not have been 

allowed prior to the 1990 Clean Air Act 

Amendments and would violate section 

193. 

Response: Section 193 of the Clean 

Air Act prohibits the modification of 

any control requirement in effect in a 

nonattainment area prior to November 

15, 1990 ‘‘unless the modification 

insures equivalent or greater emission 

reductions of such pollutant.’’ AIR does 

not identify which pre-1990 control 

requirement is being relaxed in this 

action. In fact, the revisions being 

approved today are to District rules 

approved into the SIP in 2001. It is 

unclear how section 193 applies to these 

changes given that they do not revise 

any pre-1990 control requirements. 

Moreover, there is no basis for claiming 

these revisions relax the previously 

approved SIP measures; to the contrary, 

these changes strengthen rules 2020 and 

2201 by addressing deficiencies noted 

in the 2001 limited approval/limited 

disapproval. 

Comment 13: Comments from WSPA, 

along with the District, disagreed with 

EPA’s conclusion that pre-1990 

emissions reduction credits are not 

surplus creditable reductions available 

to meet federal offset requirements. 

These commenters argue that the 

District had properly accounted for pre1990 credits in previous submittals to 

EPA. In support of this claim, the 

commenters cite the District’s 1994 

Ozone Attainment Demonstration Plan, 

Revised 1993 Rate of Progress Plan, and 

Revised Post-1996 Rate of Progress Plan. 

Several of the comments note that EPA 

approved these documents without 

questioning the methodology used to 

account for pre-1990 emissions 

reduction credits. WSPA encourages 

EPA to work with the District to resolve 

this issue in a manner that maintains 

the viability of the District’s emissions 

banking program and protects the ability 

of permittees to obtain offsets for future 

projects. 

Response: EPA has worked with the 

District in preparing its new 2003 PM–

10 Plan to demonstrate more clearly that 

limited use of pre-baseline ERCs is 

consistent with attainment of the PM–10 

NAAQS and reasonable further progress 

toward these standards. EPA proposed 

approval of this plan on February 4, 

2004. 69 FR 5412. EPA believes that the 

plan shows that even assuming a 

limited amount of growth in emissions 

is not offset by reductions in the current 

inventory because pre-baseline ERCs are 

used, the area will still be able to attain 

the NAAQS and demonstrate reasonable 

further progress. The District will need 

to support a similar demonstration as 

part of the area’s ozone plan.

The plans referenced by commenters 

did not reasonably support a conclusion 

that the area can attain the ozone 

NAAQS while foregoing meaningful 

offsets from the emissions inventory. 

EPA approval of an attainment 

demonstration does not automatically 

allow the use of pre-baseline ERCs. 

There is no requirement that an area 

carry forward pre-baseline ERCs. The 

decision of whether to allow their 

continued use is up to the State and 

local District. Should a State or local 

District choose to protect these credits 

for future use, the amount of such ERCs 

must be correctly included in the plan. 

A state or local agency could choose to 

include all pre-baseline ERCs and 

require compensating reductions 

elsewhere, or could choose to not allow 

any pre-baseline ERCs to be carried 

forward. The plans referenced by 

commenters included no specific, 

identifiable quantity of pre-baseline 

ERCs and did not in any way limit or 

account for their use. More 

fundamentally, these demonstration 

have not proven out. Reliance on such 

demonstrations while simultaneously 

redesignating the ozone area from severe 

to extreme nonattainment would not be 

reasonable. Until revised 

demonstrations are provided with 

respect to ozone attainment, EPA’s 

position remains that the District has 

not shown that use of these ERCs as 

offsets can be allowed while preserving 

the area’s ability to attain and make 

reasonable further progress toward 

attainment of the ozone NAAQS. 

III. EPA Action 

No comments were submitted that 

changed our assessment that the 

submitted rules address the deficiencies 

noted in our July 19, 2001 limited 

disapproval and comply with the 

relevant CAA requirements. Therefore, 

as authorized in section 110(k)(3) of the 

Act, EPA is fully approving SJVUAPCD 

Rules 2020 and 2201 into the California 

SIP. This action terminates all sanction 

and FIP obligations associated with our 

July 19, 2001 action on a previous 

version of the rule. 

IV. Statutory and Executive Order 

Reviews 

Under Executive Order 12866 (58 FR 

51735, October 4, 1993), this action is 

not a ‘‘significant regulatory action’’ and 

therefore is not subject to review by the 

Office of Management and Budget. For 

this reason, this action is also not 

subject to Executive Order 13211, 

‘‘Actions Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use’’ (66 FR 28355, May 

22, 2001). This action merely approves 

state law as meeting Federal 

requirements and imposes no additional 

requirements beyond those imposed by 

state law. Accordingly, the 

Administrator certifies that this rule 

will not have a significant economic 

impact on a substantial number of small 

entities under the Regulatory Flexibility 

Act (5 U.S.C. 601 et seq.). Because this 

rule approves pre-existing requirements 

Federal Register / Vol. 69, No. 95 / Monday, May 17, 2004 / Rules and Regulations 27843

under state law and does not impose 

any additional enforceable duty beyond 

that required by state law, it does not 

contain any unfunded mandate or 

significantly or uniquely affect small 

governments, as described in the 

Unfunded Mandates Reform Act of 1995 

(Pub. L. 104–4). 

This rule also does not have tribal 

implications because it will not have a 

substantial direct effect on one or more 

Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes, 

as specified by Executive Order 13175 

(65 FR 67249, November 9, 2000). This 

action also does not have Federalism 

implications because it does not have 

substantial direct effects on the States, 

on the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government, as specified in 

Executive Order 13132 (64 FR 43255, 

August 10, 1999). This action merely 

approves a state rule implementing a 

Federal standard, and does not alter the 

relationship or the distribution of power 

and responsibilities established in the 

Clean Air Act. This rule also is not 

subject to Executive Order 13045 

‘‘Protection of Children from 

Environmental Health Risks and Safety 

Risks’’ (62 FR 19885, April 23, 1997), 

because it is not economically 

significant. 

In reviewing SIP submissions, EPA’s 

role is to approve state choices, 

provided that they meet the criteria of 

the Clean Air Act. In this context, in the 

absence of a prior existing requirement 

for the State to use voluntary consensus 

standards (VCS), EPA has no authority 

to disapprove a SIP submission for 

failure to use VCS. It would thus be 

inconsistent with applicable law for 

EPA, when it reviews a SIP submission, 

to use VCS in place of a SIP submission 

that otherwise satisfies the provisions of 

the Clean Air Act. Thus, the 

requirements of section 12(d) of the 

National Technology Transfer and 

Advancement Act of 1995 (15 U.S.C. 

272 note) do not apply. This rule does 

not impose an information collection 

burden under the provisions of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). 

The Congressional Review Act, 5 

U.S.C. section 801 et seq., as added by 

the Small Business Regulatory 

Enforcement Fairness Act of 1996, 

generally provides that before a rule 

may take effect, the agency 

promulgating the rule must submit a 

rule report, which includes a copy of 

the rule, to each House of the Congress 

and to the Comptroller General of the 

United States. EPA will submit 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 United 

States prior to publication of the rule in 

the Federal Register. A major rule 

cannot take effect until 60 days after it 

is published in the Federal Register. 

This action is not a ‘‘major rule’’ as 

defined by 5 U.S.C. section 804(2). 

Under section 307(b)(1) of the Clean 

Air Act, petitions for judicial review of 

this action must be filed in the United 

States Court of Appeals for the 

appropriate circuit by July 16, 2004. 

Filing a petition for reconsideration by 

the Administrator of this final rule does 

not affect the finality of this rule for the 

purposes of judicial review nor does it 

extend the time within which a petition 

for judicial review may be filed, and 

shall not postpone the effectiveness of 

such rule or action. This action may not 

be challenged later in proceedings to 

enforce its requirements. (See section 

307(b)(2).)

List of Subjects in 40 CFR Part 52 

Environmental protection, Air 

pollution control, Incorporation by 

reference, Intergovernmental relations, 

Nitrogen dioxide, Ozone, Particulate 

matter, Reporting and recordkeeping 

requirements, Volatile organic 

compounds.

Dated: April 19, 2004. 

Wayne Nastri, 

Regional Administrator, Region IX.

■ Part 52, Chapter I, Title 40 of the Code 

of Federal Regulations is amended as 

follows:

PART 52—[AMENDED]

■ 1. The authority citation for Part 52 

continues to read as follows:

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

Subpart F—California

■ 2. Section 52.220 is amended by 

adding paragraph (c)(311) (i)(B) to read 

as follows:

§ 52.220 Identification of plan.

* * * * *

(c) * * * 

(311) * * * 

(i) * * * 

(B) San Joaquin Valley Unified Air 

Pollution Control District. 

(1) Rules 2020 and 2201 adopted on 

December 19, 2002.

* * * * *

[FR Doc. 04–10981 Filed 5–14–04; 8:45 am] 

BILLING CODE 6560–50–P

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Parts 0 and 1 

[OMD Docket No. 02–339; FCC 04–72] 

Implementation of the Debt Collection 

Improvement Act of 1996 and Adoption 

of Rules Governing Applications or 

Requests for Benefits by Delinquent 

Debtors

AGENCY: Federal Communications 

Commission.

ACTION: Final rule.

SUMMARY: The Commission amends its 

rules to implement the Debt Collection 

Improvement Act of 1996 (DCIA). The 

amendments largely follow the 

implementing rules promulgated by the 

Department of Treasury. The 

Commission also adopts a rule whereby 

applications or other requests for 

benefits would be dismissed upon 

discovery that the entity applying for or 

seeking the benefit is delinquent in any 

debt to the Commission, and that entity 

fails to resolve the delinquency.

DATES: Effective June 16, 2004, except 

§§ 1.1112, 1.1116, 1.1161 and 1.1164 

and 1.1910 which will become effective 

on October 1, 2004.

FOR FURTHER INFORMATION CONTACT:

Regina W. Dorsey, Special Assistant to 

the Chief Financial Officer, at 1–202–

418–1993, or by e-mail at 

Regina.Dorsey@fcc.gov, or Laurence H. 

Schecker, Office of General Counsel, 

Administrative Law Division, at 1–202–

418–1720, or by e-mail at 

Laurence.Schecker@fcc.gov.

SUPPLEMENTARY INFORMATION: By this 

document, FCC 04–72, adopted March 

25, and released on April 13, 2004, we 

amend our rules governing the 

collection of claims owed the United 

States, 47 CFR part 1 subpart O, to 

implement the Debt Collection 

Improvement Act of 1996, Public Law 

104–134, 110 Stat. 1321, 1358 (1996) 

(DCIA). The term ‘‘claim’’ or ‘‘debt’’ has 

the meaning used in 31 U.S.C. 3701(b), 

which is any amount of funds or 

property that has been determined by an 

appropriate official of the Federal 

Government to be owed to the United 

States by a person, organization or 

entity other than a Federal Agency. We 

also adopt a rule providing that we will 

withhold action on applications and 

other requests for benefits upon 

discovery that the entity applying for or 

seeking benefits is delinquent in its nontax debts owed to the Commission, and 

dismiss such applications or requests if 

the delinquent debt is not resolved.