```

[Federal Register Volume 77, Number 241 (Friday, December 14, 2012)]
[Rules and Regulations]
[Pages 74372-74381]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-29385]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2011-0876; FRL-9736-6]

Revisions to the California State Implementation Plan, South 
Coast Air Quality Management District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: In this action, EPA is finalizing approval of South Coast Air 
Quality Management District (SCAQMD) Rule 317, ``Clean Air Act Non-
Attainment Fee,'' as a revision to SCAQMD's portion of the California 
State Implementation Plan (SIP). This action was proposed in the 
Federal Register on January 12, 2012 and concerns volatile organic 
compounds (VOC) and oxides of nitrogen (NOX). Rule 317 is a 
local fee rule submitted to address section 185 of the Clean Air Act 
(CAA or Act) with respect to the 1-hour ozone standard for anti-
backsliding purposes. EPA is finalizing approval of Rule 317 as an 
alternative to the program required by section 185 of the Act. EPA has 
determined that SCAQMD's alternative fee-equivalent program is not less 
stringent than the program required by section 185, and, therefore, is 
approvable as an equivalent alternative program, consistent with the 
principles of section 172(e) of the Act.

DATES: This rule will be effective on January 14, 2013.

ADDRESSES: EPA has established docket number EPA-R09-OAR-2011-0876 for 
this action. Generally, documents in the docket for this action are 
available electronically at http://www.regulations.gov or in hard copy 
at EPA Region IX, 75 Hawthorne Street, San Francisco, California. While 
all documents in the docket are listed at http://www.regulations.gov, 
some information may be publicly available only at the hard copy 
location (e.g., copyrighted material, large maps, multi-volume 
reports), and some may not be available in either location (e.g., 
confidential business information (CBI)). To inspect the hard copy 
materials, please schedule an appointment during normal business hours 
with the contact listed in the FOR FURTHER INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: Lily Wong, EPA Region IX, (415) 947-
4114, wong.lily@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us'' and 
``our'' refer to EPA.

[[Page 74373]]

Table of Contents

I. Proposed Action
II. Public Comments and EPA Responses
III. EPA Action
IV. Statutory and Executive Order Reviews

I. Proposed Action

    EPA proposed to approve the following rule into the California SIP, 
in the Federal Register at 77 FR 1895, January 12, 2012.

----------------------------------------------------------------------------------------------------------------
             Local agency                  Rule No.            Rule title             Adopted        Submitted
----------------------------------------------------------------------------------------------------------------
SCAQMD................................             317  Clean Air Act Non-            02/04/2011      04/22/2011
                                                         Attainment Fee.
----------------------------------------------------------------------------------------------------------------

    We proposed to approve this rule because we determined that it 
complies with the relevant CAA requirements and is approvable as an 
equivalent alternative to the program required by section 185 of the 
Act for the 1-hour ozone standard as an anti-backsliding measure. Our 
proposed action contains more information on the rule and our 
evaluation.

II. Public Comments and EPA Responses

    EPA's proposed action provided a 30-day public comment period. 
During this period, we received comments from several parties. Most 
comments supported our proposed action; Earthjustice submitted comments 
opposing our proposed action. The comments and our responses are 
summarized below.

A. Rule 317 and Section 185

1. Rule 317 and Section 185 Generally
    a. Comment: Earthjustice commented that Rule 317 does not impose 
fees on major stationary sources, but instead collects an equivalent 
amount from other sources including government grants.
    Response: We agree that section 185 requires major stationary 
sources to pay fees; however, today's action is to approve SCAQMD Rule 
317 in the context of the revoked 1-hour ozone NAAQS. We conclude that 
Rule 317 is approvable into the California SIP as the District's 
equivalent alternative program because we have determined that Rule 317 
contains provisions that ensure that the fee equivalency account will 
reflect expenditures that are at least equal to the amount that would 
otherwise be collected under section 185, and they ensure that the 
funds will be used to reduce ozone pollution. Specifically, Rule 317 
contains requirements to calculate the section 185 fee obligation, 
establish a ``section 172(e) fee equivalency account,'' track qualified 
expenditures on pollution control projects, annually demonstrate 
equivalency, and provide for a backstop if equivalency cannot be 
demonstrated. We have therefore determined that Rule 317 satisfies the 
requirements of CAA section 185, consistent with the principles of 
section 172(e).
2. Rule 317 and Baseline Issues
    a. Comment: Earthjustice made several points relating to their 
general argument that the baseline used to determine the equivalent fee 
to be collected (and potentially to impose the fee if there is a 
shortfall) fails to comply with section 185. Another commenter 
supported Rule 317's alternative baseline provisions.
    Response: Section 185(b)(2) authorizes EPA to issue guidance that 
allows the baseline to be the lower of average actuals or average 
allowables determined over more than one calendar year. Section 
185(b)(2) further states that the guidance may provide that the average 
calculation for a specific source may be used if the source's emissions 
are irregular, cyclical or otherwise vary significantly from year to 
year. Pursuant to these provisions, EPA developed and issued a 
memorandum to EPA Regional Air Division Directors, ``Guidance on 
Establishing Emissions Baselines under Section 185 of the Clean Air Act 
(CAA) for Severe and Extreme Ozone Nonattainment Areas that Fail to 
Attain the 1-hour Ozone NAAQS by their Attainment Date,'' William T. 
Harnett, Director, Air Quality Division, March 21, 2008 (EPA's Baseline 
Guidance). EPA's Baseline Guidance suggests as an alternative baseline 
for sources whose annual emissions are ``irregular, cyclical, or 
otherwise vary significantly from year to year,'' the baseline 
calculation in EPA's Prevention of Significant Deterioration (PSD) 
regulations at 40 CFR 52.21(b)(48). As explained in EPA's Baseline 
Guidance, the PSD regulations allow a baseline to be calculated using 
``any 24-consecutive month period within the past 10 years (`2-in-10' 
concept) to calculate an average actual annual emissions rate (tons per 
year).''
    Rule 317 uses an alternative baseline to calculate the fees owed by 
all section 185 sources in the South Coast Air Basin.\1\ Rather than 
calculating an alternative baseline for each source based on EPA's 2-
in-10 PSD concept, Rule 317 sets an alternative baseline for all 
sources in the South Coast Air Basin by defining the term ``baseline 
emissions'' to mean the average of each source's actual emissions 
during a specific time period--fiscal years 2005-2006 and 2006-2007.\2\
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    \1\ Rule 317 specifies that the baseline for existing major 
stationary sources in the Salton Sea Air Basin is the attainment 
year, which is consistent with the express language in CAA section 
185. EPA's Technical Support Document (TSD) dated January 4, 2012 
provides greater detail on the various terms used to refer to the 
geographic area of the Salton Sea Air Basin that is in the SCAQMD.
    \2\ Rule 317 specifies that the baseline will be 
programmatically adjusted to account for regulatory effects between 
2006 through 2010 and that actual emissions used to calculate the 
alternative baseline cannot exceed allowable emissions.
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    Therefore, we agree that Rule 317's baseline for sources in the 
South Coast Air Basin differs from the attainment year baseline set 
forth in section 185. We note, however, that we are approving SCAQMD 
Rule 317 in the context of the revoked 1-hour ozone NAAQS and that Rule 
317 satisfies the requirements of CAA section 185, consistent with the 
principles of section 172(e). We respond below to Earthjustice's 
specific points regarding baseline issues.
    b. Comment: Earthjustice stated that the statute allows for an 
alternative baseline ``for a specific source'' if emissions are 
irregular, cyclical or otherwise vary significantly from year to year 
and allows for alternative baselines based on the nature of source-
specific operations. The commenter stated that Rule 317 renders this 
source-specific test meaningless. The commenter contended that choosing 
the baseline should be a source-specific determination that accounts 
for the variability, cycle or irregularity of the emissions. The 
commenter stated that the District's response to variability is a 
``blanket approach'' that has no connection to the source-specific 
findings required by the Act. The commenter stated that the District's 
analysis shows that ``all or nearly all'' sources had emissions that 
varied and so undermines the claim that the variability was 
significant.
    Response: EPA disagrees with the commenter's assertion that Rule 
317 is inconsistent with section 185 because it does not utilize a 
``source-specific

[[Page 74374]]

determination.'' As described in EPA's proposed action, SCAQMD looked 
at available emissions data for all 234 sources subject to section 185 
fees that reported actual emissions of at least 10 tons per year in 
2010 and found that all 234 sources had some variability (see SCAQMD 
letter dated December 21, 2011, Exhibit D). In addition, SCAQMD 
conducted a more detailed analysis for 112 sources for which SCAQMD had 
ten consecutive years of actual emissions data. SCAQMD developed a 
mathematical formula to define and analyze variability.\3\ Applying 
this formula, SCAQMD found that 107 of the 112 sources (or over 95% of 
the data set) had greater than 20 percent variability in emissions 
across a 10-year period.
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    \3\ SCAQMD's formula for ``V'' (Variation in Emissions (or 
Irregularity)) = (Range of Emissions) / (Median Emissions Value). 
SCAQMD calculated ``V'' for each of the 112 sources based on 10 
years of actual emissions data.
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    EPA also disagrees with the commenter's argument that variability 
cannot be significant if it is experienced by all sources. The Act 
itself does not define the phrase ``otherwise vary significantly from 
year to year;'' therefore, EPA may supply a reasonable interpretation. 
SCAQMD separately considered the available information for each of the 
234 sources and found that no source had consistent emissions. To the 
contrary, SCAQMD found that emissions for all sources varied from year 
to year. While some source's emissions varied more than others, all 
evidenced some variation. Moreover, SCAQMD's data shows that even 
sources with the smallest variation in emissions experienced a range of 
approximately 10 percent. As a practical matter, EPA notes that Rule 
317's baseline definition makes little difference with respect to 
sources that have less emissions variability because, as a matter of 
course, less variation in emissions means that those sources owe 
essentially the same amount under either section 185's attainment year 
baseline or under Rule 317's universal alternative baseline using years 
2006-2007.
    c. Comment: Earthjustice stated that the District's justification 
of its approach based on the PSD regulations is arbitrary. The 
commenter further contended that Section 185 does not refer to the new 
source review program, so the baseline provisions in the PSD 
regulations are irrelevant to interpreting section 185.
    Response: EPA disagrees with the comment that the District's 
justification of its approach based on EPA's PSD regulations is 
arbitrary because section 185 does not refer to the new source review 
program. In fact, to establish the default baseline for calculating 
emission fees, section 185 refers to ``the lower of the amount of 
actual VOC emissions (`actuals') or VOC emissions allowed under the 
permit applicable to the source * * * (`allowables') during the 
attainment year.'' SCAQMD's reference to the baseline established by 
EPA's PSD regulations is also valid because EPA's Baseline Guidance 
recommended the PSD 2-in-10 concept as an acceptable approach for 
states seeking to implement an alternative baseline in their section 
185 fee programs. As explained in EPA's Baseline Guidance, EPA's 
rationale for the PSD 2-in-10 concept was that it would allow a source 
``to consider a full business cycle in setting a baseline emissions 
rate that represents normal operation of the source for that time 
period.'' Lastly, we note that the commenter has not recommended, and 
we are not aware of, a superior alternative to basing the approach on 
EPA's PSD regulations.
    d. Comment: Earthjustice commented that the District's analysis is 
not based on an assessment of the source itself and the nature of its 
operations, but on the broader impacts of the recession in the region. 
The commenter stated that the District's approach of raising the 
baseline from the atypical low production year is counter to the 
purpose of section 185's baseline requirement, which is to use the 
lowest level of emissions, whether actual or allowable. The commenter's 
reasoning is that if emissions at these levels are not low enough to 
attain the standard, the fee should be imposed to incentivize an 
additional 20 percent reduction. The commenter contended that Rule 317 
undermines this objective--by raising the baseline level of emissions, 
a 20 percent reduction is less likely to result in attainment.
    Response: EPA disagrees with the comment to the extent that it 
implies that the District inappropriately considered recessionary 
impacts on emissions when considering the appropriate baseline for Rule 
317 or that the District acted inappropriately by not using the 
attainment year, 2010, as the baseline because it was an ``atypical low 
production year.'' Section 185 explicitly acknowledges the possibility 
that a fee program might need to adjust the baseline for emissions that 
are ``irregular, cyclical, or otherwise vary significantly from year to 
year.''
    EPA also disagrees with the comment's implication that Rule 317 
undermines section 185's objectives because it does not establish a 
baseline based on the lowest level of emissions and thus will not 
result in the same level of emissions reductions. Again, the comment 
fails to acknowledge that Congress explicitly authorized use of an 
alternative baseline based on emissions over a period of more than one 
year in cases where there are variations in emissions levels. It is 
reasonable to assume that Congress's objectives in establishing the 
section 185 program were to allow for some discretion on the part of 
the regulatory agencies to account for practical realities that could 
arise during program implementation, even if the result might affect 
fees owed.
    Moreover, we believe that SCAQMD's alternative baseline will result 
in emission reductions that are at least as significant as those that 
could be achieved under a source-by-source approach using EPA's 
Baseline Guidance. As explained in our proposed action, SCAQMD had the 
reasonable expectation that since virtually all sources had significant 
variability, most if not all sources would request a different baseline 
than the attainment year. Instead of allowing each source to select its 
own alternative two-year baseline period (as would be allowed under 
EPA's Baseline Guidance), Rule 317 calculates the fee obligation based 
on each source's emissions during Fiscal years 2005-2006 and Fiscal 
years 2006-2007. SCAQMD's analysis showed that its alternative baseline 
should be expected to result in more emission reductions than a fee 
program that used EPA's Baseline Guidance because under the approach 
allowed by the Guidance, each individual source would likely choose the 
two-year period in which it had its highest emissions, thereby 
resulting in a higher threshold for triggering the assessment of 
section 185 fees. Given the assumption that a source would pick the two 
consecutive years with the highest emissions, SCAQMD calculated such 
baselines from the historic data. SCAQMD's analysis showed that the 
SCAQMD method resulted in aggregate baseline emissions that were 7,081 
tons lower than that allowed under the EPA's Baseline Guidance. (See 
SCAQMD letter dated December 21, 2011, Exhibit D). SCAQMD's decision to 
establish an alternative baseline period for all sources is reasonable 
given that SCAQMD's approach is more stringent than that allowed under 
EPA's Baseline Guidance. Finally, we note that the commenter did not 
challenge EPA's Baseline Guidance.

[[Page 74375]]

B. EPA's Authority To Approve Alternative Fee Rules That Differ From 
CAA Section 185

1. Authority Under CAA and Case Law
    a. Comment: Earthjustice commented that nothing in the plain 
language of the Act, the ``principles'' behind that language, or South 
Coast Air Quality Management District v. EPA, 472 F.3d 882 (D.C. Cir. 
2006) gives EPA the power to rewrite the terms of section 185. The 
commenter stated that EPA's argument that it can invent alternatives 
that fail to comply with the plain language of section 185 has no 
statutory basis. Other commenters stated that section 172(e) provides 
authority for EPA to approve Rule 317 and alternative fee programs 
generally.
    Response: In a 2004 rulemaking governing implementation of the 1997 
8-hour ozone standard, EPA revoked the 1-hour ozone standard effective 
June 15, 2005. See Federal Register at 69 FR 23858, April 30, 2004 and 
69 FR 23951, April 30, 2004 (``2004 Rule''); see also, 40 CFR 50.9(b). 
EPA's revocation of the 1-hour standard was upheld by the Court of 
Appeals for the District of Columbia Circuit. South Coast Air Quality 
Management District v. EPA, 472 F.3d 882 (D.C. Cir. 2006) reh'g denied, 
489 F.3d. 1245 (D.C. Cir.) 2007) (clarifying that the vacatur was 
limited to the issues on which the court granted the petitions for 
review)(``South Coast''). Thus, the 1-hour ozone standard that the 
District failed to attain by its attainment date no longer exists and a 
different standard now applies.
    Section 172(e) provides that, in the event of a relaxation of a 
primary NAAQS, EPA must promulgate regulations to require ``controls'' 
that are ``not less stringent'' than the controls that applied to the 
area before the relaxation. EPA's 8-hour ozone standard is recognized 
as a strengthening of the NAAQS, rather than a relaxation; however, EPA 
is applying the ``principles'' of section 172(e) to prevent backsliding 
of air quality in the transition from regulation of ozone pollution 
using a 1-hour metric to an 8-hour metric. Our application of the 
principles of section 172(e) in this context was upheld by the D.C. 
Circuit in the South Coast decision: ``EPA retains the authority to 
revoke the one-hour standard so long as adequate anti-backsliding 
provisions are introduced.'' South Coast, 472 F.3d at 899. Further, the 
court stated, that in light of the revocation, ``[t]he only remaining 
requirements as to the one-hour NAAQS are the anti-backsliding 
limitations.'' Id.
    As stated above, section 172(e) requires State Implementation Plans 
to contain ``controls'' that are ``not less stringent'' than the 
controls that applied to the area before the NAAQS revision. EPA's 2004 
Rule defined the term ``controls'' in section 172(e) to exclude section 
185. See 2004 Rule, 69 FR at 24000. The D.C. Circuit ruled that EPA's 
exclusion of section 185 from the list of ``controls'' for Severe and 
Extreme non-attainment areas was improper and remanded that part of the 
rule back to EPA. See South Coast, 472 F.3d at 902-03. The court did 
not, however, address the specific issue of whether the principles of 
section 172(e) required section 185 itself or any other controls not 
less stringent, and section 172(e) clearly on its face allows such 
equivalent programs. Further, the court in NRDC v. EPA, 643 F.3d 311 
(D.C. Cir. 2011), specifically noted with respect to equivalent 
alternative programs that, ``neither the statute nor our case law 
obviously precludes [the equivalent program alternative.]'' 643 F.3d at 
321. In this rulemaking approving SCAQMD Rule 317, EPA is fully 
recognizing section 185 as a ``control'' that must be implemented 
through the application of the principles of section 172(e). As 
explained above, the D.C. Circuit stated that EPA must apply the 
principles of section 172(e) to non-attainment requirements such as 
section 185. Thus, we are following the D.C. Circuit's holding that the 
principles of section 172(e) apply in full to implement 185 
obligations.
2. Applicability of Section 172(e)
    a. Comment: Earthjustice commented that CAA section 172(e) does not 
apply to this situation because EPA has adopted a more health 
protective ozone standard. According to the commenter, EPA acknowledges 
that section 172(e) by its terms does not authorize EPA's action 
because the newer 8-hour ozone standard is not a relaxation of the 
prior 1-hour ozone standard. The commenter asserted that EPA claims 
that its authority to permit States to avoid the express requirements 
of section 185 derives from the ``principles'' of section 172(e), but 
the commenter contended that there is no principle in the CAA that 
Congress intended to give EPA authority to rewrite the specific 
requirements of section 185 when EPA finds that the health impacts 
related to ozone exposure are even more dangerous than Congress 
believed when it adopted the detailed requirements in the 1990 Clean 
Air Act Amendments. Other commenters stated that section 172(e) 
provides authority for EPA to approve Rule 317 and alternative fee 
programs generally.
    Response: The South Coast court agreed with the application of the 
principles of section 172(e) despite the fact that section 172(e) 
expressly refers to a ``relaxation'' of a NAAQS, whereas the transition 
from 1-hour to 8-hour is generally understood as increasing the 
stringency of the NAAQS. As the court stated, ``Congress contemplated * 
* * the possibility that scientific advances would require amending the 
NAAQS. Section 109(d)(1) establishes as much and section 172(e) 
regulates what EPA must do with revoked restrictions * * * The only 
remaining requirements as to the one-hour NAAQS are the anti-
backsliding limitations.'' South Coast, 472 F.3d at 899 (citation 
omitted).
3. Discretion in Title I, Part D, Subparts 1 and 2
    a. Comment: Earthjustice commented that the Supreme Court in 
Whitman v. Am. Trucking Assns, interpreted the CAA as showing 
Congressional intent to limit EPA's discretion. The commenter claimed 
that the D.C. Circuit in SCAQMD also held that EPA's statutory 
interpretation maximizing agency discretion was contrary to the clear 
intent of Congress in enacting the 1990 amendments. The commenter 
stated that EPA's purported approach [with respect to 185] would allow 
EPA to immediately void the specific statutory scheme Congress intended 
to govern for decades. The commenter argued that where EPA has found 
that elevated 1-hour ozone exposures remain a serious concern, EPA 
cannot reasonably claim that Congress meant to give EPA the discretion 
to revise the carefully prescribed statutory requirements like section 
185 that Congress intended to address such exposures. The commenter 
stated that EPA proposed to accept a program other than that provided 
by Congress in section 185. The commenter concluded that given that 
Congress provided a specific program, EPA has no discretion to approve 
an alternative. Other commenters stated that the Act provides EPA with 
discretion to approve Rule 317 and alternative fee programs generally.
    Response: While one holding in Whitman v. Am. Trucking Assns, 531 
U.S. 457 (2001) stands for the general proposition that Congress 
intended to set forth prescriptive requirements for EPA and states, 
particularly the requirements contained in Subpart 2, the D.C. Circuit 
has noted that the Court did not consider the issue of how to implement 
Subpart 2 for the 1-hour standard after revocation. See, South Coast, 
472 F.3d at 893 (``when the Supreme Court assessed the 1997 Rule, it 
thought that the one- and eight-hour

[[Page 74376]]

standards were to coexist.''). Thus, the Court did not consider how 
section 172(e)'s anti-backsliding requirements might be applied in the 
current context of a revoked NAAQS.
    We also believe that the commenter's reliance on South Coast to 
argue that it precludes EPA's use of section 172(e) principles to 
implement section 185 is similarly misplaced. The holding cited by the 
commenter relates to an entirely different issue than EPA's discretion 
and authority under section 172(e)--whether EPA had properly allowed 
certain eight-hour ozone non-attainment areas to comply with Subpart 1 
in lieu of Subpart 2. In fact, the South Coast court not only upheld 
EPA's authority under section 109(d) to revise the NAAQS by revoking 
the 1-hour standard, it recognized its discretion and authority to then 
implement section 172(e):

    Although Subpart 2 of the Act and its table 1 rely upon the 
then-existing NAAQS of 0.12 ppm, measured over a one-hour period, 
elsewhere the Act contemplates that EPA could change the NAAQS based 
upon its periodic review of `the latest scientific knowledge useful 
in indicating the kind and extent of all identifiable effects on 
public health' that the pollutant may cause. CAA sections 108(a), 
109(d), 42 U.S.C. 7408(a), 7409(d). The Act provides that EPA may 
relax a NAAQS but in so doing, EPA must `provide for controls which 
are not less stringent than the controls applicable to areas 
designated nonattainment before such relaxation.' CAA 172(e), 42 
U.S.C. 7502(e).

South Coast, 472 F.3d at 888.
    Further, as noted above, EPA believes that South Coast supports our 
reliance on section 172(e) principles to approve Rule 317 as fulfilling 
section 185 requirements for the revoked 1-hour standard. As the court 
stated, ``EPA was not, as the Environmental petitioners contend, 
arbitrary and capricious in withdrawing the one-hour requirements, 
having found in 1997 that the eight-hour standard was `generally even 
more effective in limiting 1-hour exposures of concern than is the 
current 1-hour standard.' * * * The only remaining requirements as to 
the one-hour NAAQS are the anti-backsliding limitations.'' Id. 
(citation omitted).

C. EPA's Proposed Action and Consistency With Section 172(e)

1. Statutory Analysis for Alternatives to a Section 185 Program
    a. Comment: Earthjustice commented that EPA's different and 
inconsistent tests for determining ``not less stringent'' undermine the 
reasonableness of these options as valid interpretations of the Act. 
The commenter stated that EPA's interpretation means that a program 
that achieves the same emission reductions as section 185 and a program 
that achieves fewer emission reductions than section 185 can both be 
considered ``not less stringent.'' However, stringency is either a 
measure of the emission reductions achieved or it is not. The commenter 
concluded that if it is, then a program that does not achieve 
equivalent reductions cannot pass the test. The commenter contended 
that EPA did not actually interpret the term ``stringent'' and that it 
offers no basis for claiming that Congress intended this term to have 
different meanings and allow for different metrics for guarding against 
backsliding. Other commenters stated that EPA's criteria for 
equivalency were reasonable and supported EPA's proposal with respect 
to the concept of alternative section 185 fee programs.
    Response: We believe that the three alternatives we identified in 
our proposed action (i.e., same emission reductions; same amount of 
revenue to be used to pay for emission reductions to further improve 
ozone air quality; a combination of the two) are reasonable and 
consistent with Congress' intent. First, we note that Congress did not 
define the phrase ``not less stringent'' or the term ``stringent'' in 
the Act. EPA, therefore, may use its discretion and expertise to 
reasonably interpret section 172(e). Furthermore, we note that the D.C. 
Circuit, in NRDC v. EPA, 643 F.3d 311 (D.C. Cir. 2011), while finding 
that EPA's guidance document providing our initial presentation of 
various alternatives to section 185 \4\ should have been promulgated 
through notice-and-comment rulemaking, declined to rule on whether the 
types of alternative programs we considered in connection with our 
proposed action on Rule 317 were illegal, stating, ``neither the 
statute nor our case law obviously precludes [the program 
alternative].'' Id. at 321.
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    \4\ ``Guidance on Developing Fee Programs Required by Clean Air 
Act Section 185 for the 1-hour Ozone NAAQS, Stephen D. Page, 
Director, Office of Air Quality Planning and Standards, to Regional 
Air Division Directors, Regions I-X, Jan. 5, 2010,'' vacated, NRDC 
v. EPA, 643 F.3d 311 (D.C. Cir. 2011).
---------------------------------------------------------------------------

    We do not agree that evaluating a variety of metrics (e.g., fees, 
emissions reductions, or both) to determine whether a state's 
alternative program meets section 172(e)'s ``not less stringent'' 
criterion undermines our interpretation. On its face, section 185 
results in assessing and collecting emissions fees, but the fact that 
section 185 is also part of the ozone nonattainment requirements of 
Part D, Subpart 2, suggests that Congress also anticipated that section 
185 might lead to emissions reductions that would improve air quality, 
and ultimately facilitate attainment of the 1-hour ozone standard.\5\ 
Thus, EPA believes it is reasonable to assess stringency of alternative 
programs on the basis of either the monetary or emissions-reduction 
aspects of section 185 or on the combination of both.
---------------------------------------------------------------------------

    \5\ EPA previously articulated the dual nature of section 185 in 
its now-vacated section 185 guidance. See id. at 4. Although the 
section 185 guidance policy has been vacated, we agree with, and 
here in this notice and comment rulemaking adopt, its reasoning on 
this point.
---------------------------------------------------------------------------

    Lastly, as discussed in our proposal, SCAQMD has demonstrated that 
Rule 317 will result in a federally enforceable requirement to obtain 
funding for and make expenditures on air pollution reduction projects 
in amounts at least equal to the amounts that would otherwise be 
collected under section 185. In addition, it is reasonable to expect 
that in one respect SCAQMD's alternative program will achieve more 
emission reductions than direct implementation of section 185 because 
the funding that results from the District's alternative program must 
be used on programs intended to reduce emissions, while section 185 has 
no such direct requirement. The comment suggests that EPA's logic, if 
unreasonably extended, might theoretically lead it to approve a program 
that achieves fewer emission reductions than a program directly 
implemented under section 185. We are not doing that in this action, 
deciding whether to approve Rule 317 as it has been submitted to us. We 
also have no intention of doing so in the future.
2. ``Not Less Stringent'' and Target of Fees
    a. Comment: Earthjustice commented that to be ``not less 
stringent,'' a control must be no less rigorous, strict, or severe and 
claimed that none of EPA's alternatives meets this definition. The 
commenter stated that EPA's description of the alternatives does not 
focus on ``stringency'' but on ``equivalency.'' The commenter contended 
that Section 172(e) does not allow for ``equivalent'' controls; it 
requires controls to be ``not less stringent.''
    Response: EPA interprets the criterion set forth in section 172(e), 
``not less stringent,'' to mean that, in the context of the revoked 1-
hour ozone NAAQS, an alternative control that is as stringent as a 
previously applicable control should be considered approvable. An 
alternative control that is equivalent to the applicable control still 
meets section

[[Page 74377]]

172(e)'s criterion, ``not less stringent'' because it is as stringent, 
and therefore not less stringent, than the applicable control.
    b. Comment: Earthjustice commented that Congress made deliberate 
choices as to which sources would be subject to penalties, the 
magnitude of those penalties and the duration of those penalties. The 
commenter stated that the purpose of Rule 317 is to avoid the stringent 
requirements of section 185 and dilute the severity of the 185 penalty 
on major industrial sources. The commenter averred that it is not 
possible to claim that Rule 317 is ``not less stringent'' than section 
185 when that is the very purpose of the rule. Other commenters stated 
that Rule 317's focus on mobile sources rather than stationary sources 
is appropriate and more likely to lead to emission reductions and 
attainment with the one-hour ozone standard.
    Response: We agree that section 185 requires major stationary 
sources to pay fees whereas Rule 317 does not; however, today's action 
is to approve SCAQMD Rule 317 in the context of the revoked 1-hour 
ozone NAAQS, consistent with the principles of section 172(e). By their 
very nature, the environmental outcomes that will be achieved by 
incentive-based programs (such as the fee programs envisioned by 
section 185) are difficult to predict with any precision, making the 
relative stringency of incentive-based programs difficult to evaluate. 
Thus, EPA's review focuses on whether the District provided a 
reasonable comparison of relative stringency. In particular, it is 
difficult to assess the relative stringency of section 185 and Rule 317 
based on a comparison of where or how the funds associated with the 185 
and the alternative program come from. We acknowledge as reasonable the 
District's decision, in developing an alternative fee program, to focus 
on mobile sources rather than stationary sources because emissions from 
mobile sources constitute approximately 90 percent of NOX 
emissions in SCAQMD.\6\
---------------------------------------------------------------------------

    \6\ California Air Resources Board's California Emissions 
Projection Analysis Model (CEPAM): 2009 Almanac found at: http://www.arb.ca.gov/app/emsinv/fcemssumcat2009.php.
---------------------------------------------------------------------------

    Moreover, it is clear that Rule 317, through the creation of a fee 
equivalency account that will be used to offset fees required under 
section 185, and a requirement to annually demonstrate and report 
equivalency, will result in a federally enforceable requirement to 
obtain funding for and make expenditures on air pollution reduction 
projects. Rule 317 contains provisions that ensure that the fee 
equivalency account will reflect expenditures that are at least equal 
to the amount that would otherwise be collected under section 185 and 
that ensure that the funds will be used to reduce ozone pollution. By 
one measure, Rule 317, which requires the expenditure of funds on 
projects that reduce ozone nonattainment, will be more effective than a 
section 185 fee program, which is not required to contain an 
enforceable requirement to spend funds to reduce air pollution, in 
producing actual air quality benefits.
3. ``Not Less Stringent'' and Equivalent Funding
    a. Comment: Earthjustice commented that a program that raises an 
equivalent amount of money is not supported by section 185's structure 
and legislative history. The commenter stated that section 185 was not 
intended as a revenue generating provision. The commenter concluded 
that nothing in the legislative history indicates that Congress' intent 
was to collect a certain amount of money.
    Response: Section 185 explicitly mandates a specific fee, requires 
that the fee be indexed for inflation, establishes a baseline for 
measuring such fees, and authorizes an alternative baseline for use in 
calculating that fee. For those reasons, and the additional reasons 
discussed above, we believe that section 185 has both monetary and 
emissions-related aspects and that it is reasonable for EPA to assess 
the stringency of alternative programs on the basis of either aspect of 
section 185 or on the combination of both.
    Rule 317 will result in a federally enforceable requirement to 
obtain funding and to spend those funds on ozone pollution reduction 
projects. In addition, we note that the District's focus on alternative 
funding from programs that relate to mobile sources is reasonable in 
light of the fact that approximately 90 percent of NOX 
emissions in the District are attributable to mobile sources.\7\ Thus, 
only 10 percent of NOX emissions are caused by stationary 
sources, most of which are already subject to either best available 
retrofit control technology or best available control technology or 
lowest achievable emission rate requirements.\8\ Thus, Rule 317 by 
ensuring the expenditure of these funds on the primary causes of ozone 
nonattainment is likely to be more effective in producing real 
reductions in ozone pollution than a 185 fee program.
---------------------------------------------------------------------------

    \7\ Ibid.
    \8\ SCAQMD Rule 317 Final Staff Report; page 317-1.
---------------------------------------------------------------------------

4. ``Not Less Stringent'' and Equivalent Emission Reductions
    a. Comment: Earthjustice commented that the measure of equivalency 
should be section 185's emission reduction incentive. The commenter 
contended that penalties end if an area is redesignated to attainment 
or a source reduces its emissions by 20 percent. The commenter pointed 
out that the D.C. Circuit noted, ``[T]hese penalties are designed to 
constrain ozone pollution.'' The commenter stated EPA should assess how 
Rule 317 will create incentives for major stationary sources to reduce 
emissions. Many commenters stated that most stationary sources have 
already installed air pollution controls such as best available control 
technology or best available retrofit technology. As a result, 
installation of additional controls would not be feasible. According to 
these commenters, to avoid fees, sources would curtail production, 
which would be harmful to the economy. In addition, curtailing 
production is not a realistic option for sources such as hospitals and 
providers of essential services.
    Response: Earthjustice correctly states that section 185 requires 
that fees must be paid until an area is redesignated to attainment for 
ozone and that section 185 does not require fees from sources that 
reduce emissions by 20 percent (compared to emissions during the 
baseline period). Thus, one consequence of a section 185 fee program 
may be a reduction in VOC and/or NOX emissions. However, EPA 
does not agree with Earthjustice's comment to the extent it is saying 
that emission reductions are inevitable or must be the sole basis for 
determining whether an alternative program is ``not less stringent'' 
than a section 185 program. As we stated above, we believe the 
prospective stringency of an alternative program may be evaluated by 
comparing either the assessed fees (which are in turn used here to pay 
for emissions reductions) or emission reductions projected to be 
achieved from the proposed alternative program to the fees or emissions 
reductions directly attributable to application of section 185 (or by 
comparing a combination of fees and reductions).
    In addition, Earthjustice's comment does not acknowledge that 
section 185 allows major sources to pay fees and not reduce emissions; 
consequently, the actual impact of the ``incentive'' underlying section 
185 is uncertain, and must be acknowledged in any comparison to the 
effect of Rule 317.

[[Page 74378]]

Nevertheless, we note that Rule 317 creates an incentive for the 
District to ensure that it obtains funding in an amount at least equal 
to the amount of fees that would be collected under section 185 and to 
use those funds to reduce ozone pollution, in order to annually 
demonstrate equivalency of the program.
    In response to the comments in support of our approval of Rule 317, 
we acknowledge that Rule 317 avoids possibly substantial burdens on 
major stationary sources within the District, some of which may be 
small businesses because of the 10 tons/year threshold for major 
stationary sources in the South Coast Air Basin.
    b. Comment: Section 185 is a market-based policy device to 
internalize the external costs of pollution and thereby incentivize 
emission reductions at major stationary sources. The commenter argued 
that EPA must assess how the incentives in Rule 317 compare to the 
incentives in section 185. The commenter stated that this analysis 
would look at how a pollution tax might drive sources to improve 
controls.
    Response: We do not agree that the comparison of ``incentives'' or 
a pollution tax proposed by the commenter is the only approach to 
evaluating the relative stringency of an alternative program, as 
explained above. In addition, we note SCAQMD's observation that many of 
the sources subject to the section 185 fee are not necessarily able to 
internalize the costs of the fees. These sources, which the District 
identified as refineries, utilities and sewage treatment plants, ``are 
likely to have an inelastic response to fees * * * [and] are more 
likely to pass through any increased fee dollars to the consumer rather 
than curtail emissions.'' \9\ Moreover, we anticipate that Rule 317 
will reduce ozone pollution in the District because it creates a 
federally enforceable requirement to demonstrate on an annual basis 
that it has obtained funding and made expenditures on projects related 
to improving ozone air quality.
---------------------------------------------------------------------------

    \9\ Ibid. pp. 5-6.
---------------------------------------------------------------------------

    c. Comment: Earthjustice commented that Rule 317 severs the link 
between the fee and pollution levels by, for example, pre-funding the 
District's fee equivalency account with government subsidies. The 
commenter stated that using taxpayer dollars creates no incentive to 
reduce pollution. Other commenters stated that Rule 317 appropriately 
focuses on programs that will reduce emissions from mobile sources 
because they are primarily responsible for ozone pollution in the 
District.
    Response: As stated above, it is difficult to quantitatively 
compare any incentives created by section 185 or Rule 317. Section 185 
explicitly requires fees from major stationary sources in Severe and 
Extreme ozone nonattainment areas as a penalty for failure to reach 
attainment by their attainment deadlines, but does not directly mandate 
emissions reductions. Rule 317 replaces the uncertain effect of the fee 
incentive with a direct obligation for the District to annually invest 
fee-equivalent funding in projects designed to improve ozone levels. In 
the event the District fails to make this investment, Rule 317 includes 
a backstop provision requiring the District to adopt a rule to address 
any shortfall. In this context, we have determined that Rule 317 
provides a ``not less stringent'' program structure.
5. ``Not Less Stringent'' and Process for Revenues To Be Spent on Air 
Quality Programs''
    a. Comment: Earthjustice commented that EPA does not demonstrate 
that Rule 317 establishes a process for revenues to be used to improve 
ozone air quality. The commenter concluded that Rule 317 on its face 
includes no such process, and provides no detail or mechanism for 
assuring that the fees will result in actual emission reductions that 
will improve ozone air quality. The commenter stated that EPA has 
previously refused to give emission reduction credit for vague 
incentive programs and it is arbitrary for EPA to assume that Rule 317 
will improve air quality without providing a basis for reaching a 
different conclusion.
    Response: EPA disagrees with the comment based on our determination 
that Rule 317 contains adequate provisions to ensure that the 
alternative funding will be used on programs that will improve ozone 
air quality. Rule 317(c)(3) and (5) require the District to make an 
annual demonstration of equivalency and file an annual report with CARB 
and EPA that includes, among other things, a list of all facilities 
subject to section 185 and their fee obligations, and a listing of all 
programs and associated expenditures that were credited into the 
section 172(e) equivalency account. The listing of expenditures that 
were credited to the equivalency account must show the programs and 
program descriptions, a description of the funding, a certification of 
eligibility for each program and the expenditures themselves. In 
addition, Rule 317 contains provisions to ensure the integrity of the 
demonstration process. For example, Rule 317(c)(1)(A) specifies various 
criteria for the types of programs that are eligible for credit, 
including requirements that the projects be ``surplus to the SIP,'' 
designed to reduce VOC or NOX emissions, as well as a 
requirement that ``only monies actually expended from qualified 
programs during a calendar year shall be credited.''
    In addition, the District's Staff Report for Rule 317, at 
Attachment A, contains a listing of programs that the District has 
already identified as appropriate for use as credits in the section 
172(e) equivalency account. These programs include school bus retrofits 
and replacements, liquefied natural gas truck replacements, and funding 
under AB2766, a state law that authorizes the collection of an 
additional $4 per motor vehicle registration to be used for programs to 
reduce motor vehicle pollution.
    Our basis for approving Rule 317 is that it is not less stringent 
than the requirements of section 185 because it will result in funds 
equal to the fees that would be collected under section 185. 
Additionally, we believe that SCAQMD's alternative program will result 
in improvements in air quality since the funds will be used on projects 
that will reduce NOX and VOC emissions in the District. This 
finding is consistent with our actions referenced in the comment 
regarding other incentive programs. In those cases, we acknowledged 
that incentive programs would result in some emission reductions but 
noted that the air district had not adequately demonstrated a specific 
amount of reductions. Similarly, SCAQMD has not demonstrated a specific 
amount of emission reductions from the use of funds identified in Rule 
317, but there is no reason to expect that it would be less than the 
reductions that might result from direct implementation of section 185, 
which does not require sources to reduce emissions and does not require 
that collected fees be directed towards emission reductions.
    Section 185 creates an incentive to reduce emissions but in some 
cases it may not work and may be punitive. In addition, section 185 
does not require that the state use the funds collected for any 
particular purpose, making it unlikely that the funds will be used 
directly to reduce ozone formation. Rule 317 will result in a federally 
enforceable requirement to obtain funding for and make expenditures on 
air pollution reduction projects in amounts at least equal to the 
amounts that would otherwise be collected under section 185. In 
addition, it is reasonable to

[[Page 74379]]

expect that in one respect SCAQMD's alternative program will achieve 
more emission reductions than direct implementation of section 185 
because the funding that results from the District's alternative 
program must be used on programs intended to reduce emissions, while 
section 185 has no such direct requirement.
6. Surplus Reductions
    a. Comment: Earthjustice commented that EPA's analysis that Rule 
317 will improve air quality because the fees are ``surplus'' does not 
make sense. The commenter claimed that the District's 1-hour ozone SIP 
failed to result in attainment of the standard and the 9th Circuit 
Court of Appeals has held that EPA should have disapproved the plan. 
Further, the commenter claimed the District does not have a meaningful 
plan for attaining the 1-hour ozone standard and all existing sources 
of funding have failed to provide ``surplus'' reductions that are not 
required for attainment. The commenter stated that the District has 
collected those fees and yet sources continue to emit at levels that 
have not provided for attainment. The commenter concluded that 
``Equivalent fees'' credited to the District's accounts do not improve 
air quality. One commenter stated that the programs that are surplus to 
the SIP are an appropriate part of an alternative fee program.
    Response: As explained in our proposal, Rule 317 specifies that 
expenditures used to offset section 185 fee obligations via the Section 
172(e) Fee Equivalency Account must be ``surplus'' to the 1-hour ozone 
SIP and must be used on programs intended to reduce ozone formation. We 
explained that ``surplus'' reductions are those that are not relied 
upon nor assumed by the SIP to provide for reasonable further progress 
(RFP) or attainment.\10\ Our proposal also explained that we had 
reviewed the various funding sources identified by the District as 
``surplus'' and confirmed that they were in fact surplus to the 
approved 1-hour ozone SIPs for the South Coast Air Basin (the 1997/1999 
Air Quality Management Plan) and the Southeast Desert Air Quality 
Management Area (1994 Air Quality Management Plan).
---------------------------------------------------------------------------

    \10\ See, ``Improving Air Quality with Economic Incentive 
Programs,'' January 2001 (EPA-452/R-01-001), available at: http://www.epa.gov/ttn/oarpg/t1/memoranda/eipfin.pdf.
---------------------------------------------------------------------------

    We do not agree with the commenter's characterization of the 
court's holding in Assoc'n of Irritated Residents v. EPA. In 
particular, we disagree with the commenter's statement that, ``the 
Ninth Circuit Court of Appeals has held that EPA should have 
disapproved the plan's flawed attainment demonstration.'' In fact, the 
court's ruling concerned EPA's disapproval in 2009 of an attainment 
demonstration adopted by the District in 2003 as an update to the 
approved 1997/1999 SIP for the South Coast Air Basin. Because the 
District's 2003 attainment demonstration indicated that the 1997/1999 
SIP was inadequate, the court held that EPA should take additional 
action to evaluate the adequacy of the 1997/1999 SIP. The court also 
stated that EPA's authority to evaluate the adequacy of the plan could 
arise either under CAA provisions for a Federal Implementation Plan or 
for a SIP call.\11\ The court, however, did not state that EPA should 
have disapproved the 1997/1999 SIP or any part of it, nor did the 
court's ruling invalidate or affect the legal status of the 1997/1999 
SIP. Therefore, the 1997/1999 SIP remains in place as the approved 1-
hour SIP for the South Coast Air Basin.
---------------------------------------------------------------------------

    \11\ As the court held, ``Specifically, EPA has an affirmative 
duty to ensure that California demonstrate attainment with the 
NAAQS, see 42 U.S.C. 7410(a)(2)(A), 7502(c)(6), either by 
promulgating a FIP or evaluating the necessity of a SIP call.'' 
Assoc'n of Irritated Residents v. EPA, 686 F.3d 668, 677 (9th Cir. 
2012).
---------------------------------------------------------------------------

    We also disagree with the commenter's conclusion that the 1997/1999 
SIP cannot be a basis to determine ``surplus'' reductions because the 
1997/1999 SIP failed to result in attainment of the 1-hour standard. By 
extension, this argument would mean that a nonattainment area that 
fails to reach attainment by the applicable deadline would have no 
emissions that could ever be considered ``surplus.'' The loss of 
``surplus'' emissions would result in potentially drastic consequences, 
such as the inability to issue or obtain offset credits and thus a 
virtual cessation of permitting activity for large industrial sources 
in nonattainment areas with missed attainment deadlines.\12\ If 
Congress had intended such a significant consequence for failure to 
reach attainment by an applicable deadline, Congress could have 
explicitly provided for such a result.13 14 Because Congress 
did not provide for the loss of all surplus emissions upon a state's 
failure to attain a standard by an applicable attainment deadline, we 
believe that the 1997/1999 SIP, as the currently approved SIP, is a 
valid basis for determinations of ``surplus'' for purposes of the 1-
hour ozone standard in the South Coast Air Basin.
---------------------------------------------------------------------------

    \12\ Offsets are required by section 173(c) for the permitting 
of new and modified major stationary sources in nonattainment areas.
    \13\ We note that Congress did include specific provisions to 
address a state's failure to reach attainment by the applicable 
deadline, such as sections 172(c) (requiring contingency measures) 
and 179(d) (requiring plan revisions that include ``additional 
measures as the Administrator may reasonably prescribe, including 
all measures that that can be feasibly implemented in the area in 
light of technological achievability, costs, and any nonair quality 
and other air quality-related health and environmental impacts.'')
    \14\ EPA has explained that the failure to attain the revoked 
one-hour ozone standard does not trigger a requirement for a new 
attainment demonstration for the one-hour ozone standard under 
section 179(c) and (d). See e.g., note 15 infra, and 76 FR 82138-
82139.
---------------------------------------------------------------------------

    Nevertheless, EPA recognizes that the 1997/1999 SIP did not result 
in attainment of the 1-hour ozone standard in the South Coast Air 
Basin.\15\ Following the holding in Assoc'n of Irritated Residents v. 
EPA that EPA must review the adequacy of the 1997/1999 SIP, EPA 
initiated the SIP call process with a proposed finding of substantial 
inadequacy, as published at 77 FR 58072, September 19, 2012.\16\ If 
finalized as proposed, the SIP call will require the District to 
submit, within 12 months, a plan providing for attainment of the 1-hour 
ozone standard (``1-hour ozone attainment plan''). Upon approval by 
EPA, the new 1-hour ozone attainment plan will become the new basis for 
determining what reductions are ``surplus.''
---------------------------------------------------------------------------

    \15\ On December 30, 2011, EPA published in the Federal Register 
its ``Determinations of Failure to Attain the One-Hour Standard,'' 
for both the Los Angeles--South Coast Air Basin and the Southeast 
Desert Modified Air Quality Maintenance Area. 76 FR 82133. In this 
action, which also pertains to the San Joaquin Valley Area, we 
explained that our determination of failure to attain the revoked 
one-hour ozone standard does not trigger a requirement for a new 
attainment demonstration for the one-hour ozone standard under 
section 179(c) and (d). Rather, we explained that we made these 
determinations under our authority in sections 301(a) and 181(b)(2) 
to ensure implementation of measures we had previously identified as 
one-hour ozone anti-backsliding requirements, including contingency 
measures and section 185 fees. See e.g., 76 FR 82138-82139.
    \16\ EPA's proposed SIP call explains in greater detail the 
legal basis for requiring the District to submit a new 1-hour ozone 
attainment plan.
---------------------------------------------------------------------------

    EPA believes that Rule 317 is drafted with sufficient flexibility 
that the District will be able to continue to implement the rule by 
making determinations of surplus based on the new 1-hour ozone 
attainment plan. Specifically, Rule 317(c)(1)(i) specifies that the 
Section 172(e) Fee Equivalency Account can offset section 185 fee 
obligations with expenditures from qualified programs that are 
``surplus to the State Implementation Program for the federal 1-hour 
ozone standard. * * *'' Thus, Rule 317's requirements for crediting 
expenditures from qualified programs in the Section 172(e) Fee 
Equivalency Account, as well as the requirements for the annual 
demonstration and reporting of

[[Page 74380]]

equivalency, would accommodate a future 1-hour ozone attainment plan 
and the District will be able to continue to implement the equivalency 
program.

D. Miscellaneous Comments

    a. Comment: One commenter recommended that EPA allow sources to 
apply the calculated section 185 fees to a number of projects at the 
major stationary source or at other sources in either the nonattainment 
area or upwind areas. The commenter suggested ten examples of eligible 
projects including installing emissions control technology, enhancing 
existing pollution control equipment, energy efficiency and renewable 
energy measures, lower emitting fuels, retirement or repowering of a 
higher emitting facility, mobile source retrofit program, clean vehicle 
fleets, and increasing mass transit ridership.
    Response: EPA is acting on SCAQMD's Rule 317, which does not 
include these program features. If these program features are included 
in a specific SIP submittal for another alternative program, EPA would 
evaluate them at that time.
    b. Comment: Numerous commenters expressed concerns that if fees 
were assessed in a direct application of section 185, the fees would 
have a devastating effect on small businesses, jobs, and the economy in 
Southern California. Consequently, they supported SCAQMD's approach in 
Rule 317 and urged EPA to approve the rule.
    Response: We acknowledge the comments and the public's interest in 
this issue. No response needed to these comments that support our 
proposed action.

III. EPA Action

    EPA is finalizing approval of Rule 317, ``Clean Air Act Non-
Attainment Fee,'' as a revision to SCAQMD's portion of the California 
SIP, and as a ``not less stringent'' alternative to the program 
required by section 185 of the Act for anti-backsliding purposes with 
respect to the revoked 1-hour ozone standard.
    The comments submitted do not fundamentally change our assessment 
that Rule 317 complies with the relevant CAA requirements and 
associated EPA rules. Therefore, as authorized in section 110(k)(3) of 
the Act, EPA is fully approving Rule 317 into the California SIP as an 
equivalent alternative program, consistent with the principles of 
section 172(e) of the Act. Final approval of Rule 317 satisfies 
California's obligation under sections 182(d)(3), (e) and (f) to 
develop and submit a SIP revision for the South Coast Air Basin and the 
Riverside County portion of the Salton Sea Air Basin \17\ 1-hour ozone 
nonattainment areas to meet the requirements for a program not less 
stringent than that of section 185. Final approval of Rule 317 also 
permanently terminates all sanctions and Federal Implementation Plan 
(FIP) implications associated with section 185 for the 1-hour ozone 
NAAQS and previous action (75 FR 232, January 5, 2010) regarding the 
South Coast Air Basin and the Riverside County portion of the Salton 
Sea Air Basin.
---------------------------------------------------------------------------

    \17\ See EPA's TSD dated January 4, 2012, which clarifies that 
the Riverside County portion of Salton Sea is the same geographic 
area as the Coachella Valley portion of the Southeast Desert 
Modified Air Quality Maintenance Area.
---------------------------------------------------------------------------

IV. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a 
SIP submission that complies with the provisions of the Act and 
applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). 
Thus, in reviewing SIP submissions, EPA's role is to approve State 
choices, provided that they meet the criteria of the Clean Air Act. 
Accordingly, this action merely approves State law as meeting Federal 
requirements and does not impose additional requirements beyond those 
imposed by State law. For that reason, this action:
     Is not a ``significant regulatory action'' subject to 
review by the Office of Management and Budget under Executive Order 
12866 (58 FR 51735, October 4, 1993);
     Does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact 
on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.);
     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);
     Does not have Federalism implications as specified in 
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based 
on health or safety risks subject to Executive Order 13045 (62 FR 
19885, April 23, 1997);
     Is not a significant regulatory action subject to 
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of Section 12(d) of the 
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) because application of those requirements would be inconsistent 
with the Clean Air Act; and
     Does not provide EPA with the discretionary authority to 
address disproportionate human health or environmental effects with 
practical, appropriate, and legally permissible methods under Executive 
Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this rule does not have tribal implications as 
specified by Executive Order 13175 (65 FR 67249, November 9, 2000), 
because the SIP is not approved to apply in Indian country located in 
the State, and EPA notes that it will not impose substantial direct 
costs on tribal governments or preempt tribal law.
    The Congressional Review Act, 5 U.S.C. 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 action 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. 
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 February 12, 2013. Filing a 
petition for reconsideration by the Administrator of this final rule 
does not affect the finality of this action 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, 
Reporting and recordkeeping requirements, Volatile organic compounds.

[[Page 74381]]

    Dated: September 20, 2012.
Jared Blumenfeld,
Regional Administrator, Region IX.

    Therefore, 40 CFR chapter I is amended as follows:

PART 52--[AMENDED]

0
1. The authority citation for part 52 continues to read as follows:

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

Subpart F--California

0
2. Section 52.220 is amended by adding and reserving paragraph (c)(417) 
and adding paragraph (c)(418) to read as follows:

Sec.  52.220  Identification of plan.

* * * * *
    (c) * * *
    (417) [Reserved]
    (418) New and amended regulation for the following APCD was 
submitted on April 22, 2011, by the Governor's Designee.
    (i) Incorporation by Reference
    (A) South Coast Air Quality Management District
    (1) Rule 317, ``Clean Air Act Non-Attainment Fees,'' amended on 
February 4, 2011.

[FR Doc. 2012-29385 Filed 12-13-12; 8:45 am]
BILLING CODE 6560-50-P
```