[Federal Register Volume 62, Number 60 (Friday, March 28, 1997)]
[Proposed Rules]
[Pages 15077-15082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7953]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[FRL-5803-6]


Transitional and General Opt Out Procedures for Phase II 
Reformulated Gasoline Requirements

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rule making.

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SUMMARY: In this document EPA is proposing to change the regulations 
for states to opt-out of the federal reformulated gasoline (RFG) 
program for areas where a state had previously voluntarily opted into 
the program. Under this proposal, if a state has not submitted an opt-
out petition to EPA by December 31, 1997, it must participate in Phase 
II RFG until December 31, 2003. The Agency believes this proposed 
process is necessary to ensure a smooth transition between the two 
phases of the reformulated gasoline program.
    The Agency is also proposing, that effective January 1, 2004, the 
current opt-out procedures, which provide that EPA-approved opt-out 
petitions become effective 90 days from approval, become effective 
again.
    In addition, this proposed rule would require that states decide 
and submit to EPA a complete opt-out petition by December 31, 1997, if 
they want an opt-in area to continue to participate in Phase I of the 
RFG program up to December 31, 1999, but do not wish to participate in 
Phase II of the program.
    This action does not affect the policies for opting in to the RFG 
program. In a separate action EPA is publishing a notice of proposed 
rulemaking, simultaneous with this proposal, which would permit former 
ozone nonattainment areas to opt into the federal reformulated gasoline 
program. EPA has not made a final determination on the policy for 
attainment area RFG implementation.

DATES: The Agency will hold a public hearing on this proposal if one is 
requested by April 4, 1997. If a public hearing is held, it will take 
place on April 18, 1997.
    If a public hearing is held on this proposal, comments must be 
received by May 19, 1997. If a hearing is not held, comments must be 
receved by April 28, 1997. Please direct all correspondence to the 
address shown below.
    To request a hearing, or to find out if and where a hearing is 
held, please call Christine Hawk at (202) 233-9000.

ADDRESSES: Comments should be submitted (in duplicate, if possible) to 
Air Docket Section, Mail Code 6102, U.S. Environmental Protection 
Agency, 401 M Street, SW, Washington, DC 20460. A copy should also be 
sent to Ms. Christine Hawk at U.S. Environmental Protection Agency, 
Office of Air and Radiation, 401 M Street, SW (6406J), Washington, DC 
20460.
    Materials relevant to this notice have been placed in Docket A-94-
68. The docket is located at the Air Docket Section, Mail Code 6102, 
U.S. Environmental Protection Agency, 401 M Street, SW, Washington, DC 
20460, in room M-1500 Waterside Mall. Documents may be inspected from 
8:00 a.m. to 5:30 p.m. A reasonable fee may be charged for copying 
docket material.
FOR FURTHER INFORMATION CONTACT: Christine Hawk or Diane Turchetta at 
U.S. Environmental Protection Agency Office of Air and Radiation, 401 M 
Street, SW (6406J), Washington, DC 20460, (202) 233-9000.

SUPPLEMENTARY INFORMATION: A copy of this action is available on the 
OAQPS Technology Transfer Network Bulletin Board System (TTNBBS) and on 
the Office of Mobile Sources' World Wide Web cite, <a href="http://www.epa.gov/
OMSWWW">http://www.epa.gov/
OMSWWW</a>. The TTNBBS can be accessed with a dial-in phone line and a 
high-speed modem (PH# 919-541-5742). The parity of your modem should be 
set to none, the data bits to 8, and the stop bits to 1. Either a 1200, 
2400, or 9600 baud modem should be used. When first signing on, the 
user will be required to answer some basic informational questions for 
registration purposes. After completing the registration process, 
proceed through the following series of menus:

(M)  OMS
(K)  Rulemaking and Reporting
(3)  Fuels
(9)  Reformulated gasoline

    A list of ZIP files will be shown, all of which are related to the 
reformulated gasoline rulemaking process. Today's action will be in the 
form of a ZIP file and can be identified by the following title: 
OPTOUT.ZIP. To download this file, type the instructions below and 
transfer according to the appropriate software on your computer:
    <D>ownload, <P>rotocol, <E>xamine, <N>ew, <L>ist, or <H>elp 
Selection or <CR> to exit: D filename.zip
    You will be given a list of transfer protocols from which you must 
choose one that matches with the terminal software on your own 
computer. The software should then be opened and directed to receive 
the file using the same protocol. Programs and instructions for de-
archiving compressed files can be found via <S>ystems Utilities from 
the top menu, under <A>rchivers/de-archivers. Please note that due to 
differences between the software used to develop the document and the 
software into which the document may be downloaded, changes in format, 
page length, etc. may occur.

Regulated Entities

    Entities potentially regulated by this action are those which 
produce, supply or distribute motor gasoline. Regulated categories and 
entities include:

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                                               Examples of regulated    
                 Category                             entities          
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Industry.................................  Petroleum refiners, motor    
                                            gasoline distributors and   
                                            retailers.                  
State governments........................  State departments of         
                                            environmental protection.   
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    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
could potentially be regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
your business is regulated by this action, you

[[Page 15078]]

should carefully examine the list of areas covered by the reformulated 
gasoline program in Sec. 80.70 of title 40 of the Code of Federal 
Regulations. If you have questions regarding the applicability of this 
action to a particular entity, consult the person listed in the 
preceding FOR FURTHER INFORMATION CONTACT section.

Extended Summary

    Based upon EPA and industry concerns regarding smooth 
implementation of Phase II of the RFG program and public comments that 
were solicited in the Notice of Proposed Rulemaking [60 FR 31269] 
published June 14, 1995, EPA is proposing the following changes to the 
existing opt-out rule, which provides criteria and general procedures 
for states to opt-out of the RFG program through December 31, 1997. 61 
FR 35673 (July 8, 1996).
    This notice applies to areas where the state voluntarily opted into 
the program and subsequently decides to withdraw from the reformulated 
gasoline program, an action referred to as ``opt-out.'' This proposed 
rule provides the Agency's rules concerning criteria and procedures for 
states to opt-out certain areas from the RFG program after December 31, 
1997. This proposal would not change the process a state must follow to 
petition for removal from the program or the criteria used by EPA to 
evaluate a request. This proposal does change the time period before 
the opt-out becomes effective for opt-out petitions received from 
January 1, 1998, through December 31, 2003. This period includes the 
first four years of Phase II (January 1, 2000, to December 31, 2003). 
The proposal also maintains the requirements that the governor, or the 
governor's authorized representative, submit an opt-out petition.
    This proposal specifies that for all opt-out petitions received as 
of December 31, 1997, the existing procedures will apply and that the 
effective date that an area will be removed from the list of covered 
areas defined in 40 CFR Sec. 80.70 will be 90 days (or more at a 
state's request) from the date of EPA's letter of notification to the 
Governor of the requesting state or from the effective date of an 
agency approval of a revision to the State Implementation Plan (SIP) 
where applicable. States which have opted in to the RFG program that do 
not submit a completed opt-out request by December 31, 1997 and 
subsequently submit an opt-out request before January 1, 2004, will be 
required to participate in the federal RFG program, including Phase II 
of the program, until December 31, 2003. The opt-out request will be 
effective January 1, 2004 or 90 days from the Agency written 
notification to the State approving the opt-out petition, whichever 
date is later. Today's proposed requirements will also cover those 
areas opting into the RFG program subsequent to December 31, 1997. 
(i.e. areas opting-in during the transitional period must remain in the 
program at least until December 31, 2003). The opt-out procedures would 
revert back to the existing rule (90 day requirements) as of January 1, 
2004.
    Today's proposal will help provide certainty to the industry as it 
makes decisions that are likely to affect the supply and cost of 
reformulated gasoline, which in turn could affect the cost-
effectiveness of Phase II RFG. Additionally, the proposal maintains the 
flexibility that states have in air quality planning to the degree 
possible and practicable.

I. EPA's Proposal for Opt-out Petitions Received January 1, 1998 
Through December 31, 2003; and After December 31, 2003

A. Background

    The federal reformulated gasoline (RFG) program is designed to 
reduce ozone levels and air toxics in areas of the country that are 
required to or volunteer to adopt the program. Reformulated gasoline 
reduces vehicle emissions of the ozone precursors, specifically 
volatile organic compounds (VOC), through fuel reformulation. 
Reformulated gasoline also achieves a significant reduction in air 
toxics. In Phase II of the program nitrogen oxides (NO<INF>X), another 
precursor of ozone, are also reduced. The 1990 Amendments to the Clean 
Air Act require reformulated gasoline in the nine largest cities with 
the highest levels of ozone.<SUP>1 In section 211(k)(6), Congress 
provided the opportunity for states to opt-in to the RFG program for 
other ozone nonattainment areas.
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    \1\ EPA recognizes that there are currently ten areas required 
to use Federal Reformulated Gasoline and that these areas currently 
do not have an opt-out option. Those areas are: Los Angeles--
Anaheim--Riverside, CA; San Diego County, CA; Hartford--New 
Britain--Middletown--New Haven--Meriden--Waterbury, CT; New York--
Northern New Jersey--Long Island--Connecticut area; Philadelphia--
Wilmington--Trenton--Cecil County, MD; Chicago--Gary--Lake County, 
IL--Indiana--Wisconsin area; Baltimore, MD; Houston--Galveston--
Brazoria, TX; Milwaukee--Racine, WI; Sacramento, CA.
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    EPA issued final rules establishing requirements for reformulated 
gasoline on December 15, 1993. 59 FR 7716 (February 16, 1994). During 
the development of the RFG rule, a number of states inquired as to 
whether they would be permitted to opt-out of the RFG program at a 
future date, or opt-out of certain of the requirements. This was based 
on their concern that the air quality benefits of RFG, given their 
specific needs, might not warrant the cost of the program, specifically 
focusing on the more stringent standards in Phase II of the program 
(starting in the year 2000). States with that concern wished to retain 
the flexibility to opt-out of the program. Other states indicated they 
viewed RFG as an interim strategy to help bring their nonattainment 
areas into attainment sooner than would otherwise be the case.
    The regulation issued on December 15, 1993, did not include 
procedures for opting-out of the RFG program because EPA had not 
proposed and was not ready to adopt such procedures. Since then, the 
Agency has adopted general procedures for future opt-outs. 61 FR 35673 
(July 8, 1996). These procedures apply to opt-out petitions received 
through December 31, 1997. Today's proposal provides new procedures for 
opt-out petitions received between January 1, 1998, through December 
31, 2003. The existing procedures in place today will take effect again 
beginning January 1, 2004.
    In the proposal to the previous opt-out rulemaking, EPA outlined 
its rationale for determining that it is appropriate to interpret 
section 211(k) as authorizing states to opt-out of the program. 60 FR 
31269 (June 14, 1995). EPA concluded that any conditions on opting out 
should be focused on achieving a reasonable transition out of the 
program. There were two primary areas of concern to the Agency. The 
first was coordination of air quality planning. The second involved 
appropriate lead time for industry to transition out of the program.
    Today's proposal addresses this lead time concern by changing the 
conditions for opting out during the period from January 1, 1998, to 
December 31, 2003. Before the effective date for Phase II RFG (January 
1, 2000) approaches, industry must make investments decisions based in 
part on anticipated demand for RFG. Small, unanticipated changes in 
demand, whether due to market forces or changing regulatory 
requirements, can make cost recovery of investment difficult, and cause 
gasoline prices to rise or fall. Higher gasoline costs caused by 
regulatory uncertainty would diminish the benefits and cost-
effectiveness of EPA's RFG program. Thus, EPA believes it must consider 
these special circumstances which affect industry directly and 
consumers indirectly and propose appropriate

[[Page 15079]]

changes to the opt-out procedures. Therefore, EPA today is proposing 
that states must decide by a certain date (December 31, 1997) if they 
intend for opt-in areas to participate in Phase I RFG up to December 
31, 1999, and/or to participate in Phase II RFG, which begins on 
January 1, 2000. If a state has not submitted an opt-out petition by 
December 31, 1997, it must continue to participate in Phase I RFG 
through December 31, 1999, and participate in Phase II RFG until 
December 31, 2003.

B. Statutory Authority

    The statutory authority for the action in this rule is granted to 
EPA by section 211(c) and (k) and section 301(a) of the Clean Air Act 
as amended, 42 U.S.C. 7545 (c) and (k) and 7601(a). For a more complete 
discussion of statutory authority, see the proposal for general rules 
establishing criteria and procedures for states to opt-out of the RFG 
program. 60 FR 31271 (June 14, 1995).
    As discussed there, EPA believes it is appropriate to interpret 
section 211(k) as authorizing states to opt-out of the RFG program, 
provided that a process is established for a reasonable transition out 
of the program. EPA believes allowing states to opt-out is consistent 
with the Act's recognition that states have the primary responsibility 
to develop a mix of appropriate control strategies needed to reach 
attainment with the NAAQS. Given this deference to state decision 
making, it follows that the conditions on opting out should be geared 
towards achieving a reasonable transition out of the RFG program, as 
compared to requiring a state to justify its decision.
    EPA has identified two principal areas of concern in this regard. 
The first involves coordination of air quality planning. The second 
involves appropriate lead time for industry to transition out of the 
program. Today's proposal addresses the latter concern. EPA's authority 
allows it the discretion to authorize opt-outs in a way that balances 
the interests of the parties affected by the regulations. The rule 
establishing opt-out criteria and procedures placed only limited 
conditions on the states, focusing on the information that must be 
submitted before EPA may approve an opt-out request. The rule also 
generally required a 90-day time period to pass before an EPA-approved 
opt-out became effective. Today, EPA is proposing to lengthen this time 
period for certain future opt-outs because it believes the 
circumstances affecting industry have changed enough to warrant an 
appropriate change.
    Today's proposal changes the conditions for opting out during the 
period from January 1, 1998 to December 31, 2003. As the effective date 
for Phase II RFG (January 1, 2000) approaches, industry must make 
investment decisions based in part on anticipated demand for 
reformulated gasoline. These decisions are likely to affect supply and 
ultimately affect the cost of reformulated gasoline. Uncertainty of 
supply and cost fluctuations could cause problems for and possibly 
diminish the benefits and cost-effectiveness of EPA's RFG program. 
Section 211(k) of the Act requires that reformulated gasoline achieve 
the greatest reductions in VOCs and toxics emissions, ``taking into 
consideration the cost of achieving such emission reductions . . .'' 
Thus, EPA believes it must consider these circumstances affecting 
industry that could potentially affect cost. EPA's proposal is designed 
to reduce the potential for adverse cost and supply impacts on the 
reformulated gasoline program.

C. Need for a Required Participation Period Until January 1, 2004

    Under EPA's current opt-out provisions, some states may effectively 
opt-out of the reformulated gasoline program as of 90 days from the 
date EPA approves a state petition for the opt-out. 61 FR 35673 (July 
8, 1996). The U.S. Department of Energy expressed its concerns in 
comments during the previous rulemaking that such a time frame to opt-
out by states who originally intended to participate in Phase II of the 
reformulated gasoline program makes it more difficult for refiners to 
recover their investments in refinery facilities needed to comply with 
the requirements of Phase II reformulated gasoline. (Air Docket A-94-
68) The Department further explained in its comments that the ability 
to price gasoline at a level that recovers investments depends very 
heavily on marginal supply and demand. Small unanticipated changes in 
demand, whether due to market forces or changing regulatory 
requirements, can make cost recovery of investment difficult, and cause 
gasoline prices to rise or fall.
    EPA shares the Department's concerns and, in the interest of 
minimizing the adverse supply and cost impacts for this gasoline 
program, is proposing a required participation period for reformulated 
gasoline opt-in areas intending to participate in Phase II of the 
reformulated gasoline program.
    Refinery investments for Phase II RFG have been estimated by the 
U.S. Department of Energy to be about $1 billion for East Coast 
refiners and $2 billion for Gulf Coast PADD III refiners. Refiners who 
expect to be producing Phase II reformulated gasoline starting January 
1, 2000, and who need additional facilities to meet the requirements of 
that gasoline, are likely to be making commitments to refinery 
investments through 1997, two years in advance of the Phase II start 
date. This decision to invest in the refining equipment needed to 
comply with Phase II is based on each refiner's product capabilities 
and likely anticipated demand for Phase II reformulated gasoline.
    To comply with the Phase II requirements in 2000, each refiner is 
uniquely situated. For those refiners that plan to modify their 
refineries, different levels of investment would be required. The 
largest investments are expected to be made in the areas of 
desulfurization and alkylation to control sulfur and olefins. Some are 
expected to make early refinery changes to come into compliance with 
the complex model requirements in 1998. While the economic burden of 
Phase II compliance will fall disproportionately on some refiners, the 
Agency's main concern in this proposal is to provide a stable 
regulatory environment which will not inhibit cost recovery, given that 
this could lead to supply problems and cost fluctuations that could 
diminish the overall cost-effectiveness of the RFG program.
    The Agency, in its estimates of the Phase II reformulated gasoline 
program costs [as stated in the regulatory impact analysis (RIA) for 
the final RFG rulemaking 59 FR 7716], has assumed a 10 percent real 
rate of return. Based on this assumed rate of return, refiners would 
need a six year investment recovery period. The Agency is soliciting 
comments on the range of investment recovery periods needed by the 
refineries who plan to invest capital in refining equipment for Phase 
II reformulated gasoline, the impact of future opt-outs on this period, 
and the expected impacts on supply and cost from such opt-outs.
    The time required to recover refinery investments is highly 
variable, depending on a number of factors, including the size and type 
of investment, the refiner's financial situation and market conditions. 
The U.S. Department of Energy believes, based on the National Petroleum 
Council 1993 refinery study and on the Department's own examination of 
this issue, that at a minimum, a four-year period is required for the 
industry as a whole to recover its Phase II investments. The Department 
also

[[Page 15080]]

emphasized that an eight-year period was more adequate given the 
current competitive gasoline market.
    If the Agency were to extend the current opt-out provisions, it 
would reduce the ability of refiners to plan for a relatively stable 
level of demand for Phase II reformulated gasoline and refiners would 
have a disincentive to invest in Phase II of the reformulated gasoline 
program. Without greater assurance of the markets for Phase II 
reformulated gasoline for a period sufficient for investment recovery, 
refiners may limit or delay investment and prepare for a smaller than 
currently-predicted reformulated gasoline demand. Refiners could 
minimize their production of and stocks for reformulated gasoline to 
protect refiners and gasoline distributors from the potential loss of 
reformulated gasoline markets. If refiners react to uncertain market 
conditions in these ways, there would be the increased potential for 
reformulated gasoline cost increase and supply shortages.
    These potential actions, taken by refiners reacting to Phase II 
reformulated gasoline market uncertainty, would increase costs to 
refiners, ultimately resulting in higher gasoline prices for consumers. 
Limited or delayed investment in Phase II reformulated gasoline would 
create the potential for spot shortages or some refiners may attempt to 
quickly recoup their investment in Phase II, both situations causing 
gasoline price increases. EPA is concerned that the cost-effectiveness 
of the reformulated gasoline program would be jeopardized by regulatory 
uncertainty, as it pertains to the regulated community's ability to 
plan for providing the manufacturing capacity to produce reformulated 
gasoline to specified control areas. Section 211(k) of the Clean Air 
Act Amendments of 1990 requires that reformulated gasoline achieve the 
greatest reductions in volatile organic compounds (VOCs) and toxics 
emissions, ``taking into consideration the cost of achieving such 
emission reductions . . .'' Today's proposal is designed to reduce the 
potential for the adverse cost and supply impacts on the reformulated 
gasoline program.
    The Agency is not trying to assure that all refiners will recover 
investments made in Phase II reformulated gasoline production in a 
given time period. EPA is instead seeking to structure the federal 
reformulated gasoline program in a way that minimizes the potential 
cost and supply impacts that could occur to refiners, thereby making it 
difficult to recover investments associated with producing this 
product. A refiner's decision to invest in reformulated gasoline is 
based, in part, upon an opt-in state's decision to have EPA require the 
sale of RFG in a particular area. Reformulated gasoline market 
uncertainty is increased when opt-in states are not bound to remain in 
the reformulated gasoline program and by the relatively simple process 
for states to opt out of the reformulated gasoline program provided for 
in the existing rule.
    EPA is committed to ensuring that areas around the country attain 
the National Ambient Air Quality Standards (NAAQS), including the ozone 
standard. EPA recognizes, however, that under the Clean Air Act the 
states play a primary role in attaining the NAAQS, including choosing 
those control measures they prefer to include in their plans to attain 
and maintain the NAAQS. EPA is committed to maintaining, to a degree 
possible and practicable, the flexibility that states have in air 
quality planning by establishing procedures to opt out and substitute 
alternative control measures where the state considers appropriate.
    EPA believes that today's proposal achieves a balance between 
allowing states with voluntary RFG areas the flexibility to opt-out of 
the program and giving industry a certain level of assurance as to a 
predictable demand for Phase II reformulated gasoline during the 
important investment recovery period of the program's early years. 
Today's proposal helps maintain a consistent market, adequate supplies 
and reasonable prices, thus maintaining the reformulated gasoline 
program's cost-effectiveness. EPA's own estimate of Phase II 
reformulated gasoline costs suggests consideration of a required 
participation period of six years, but the Agency believes that 
requiring reformulated gasoline in opt-in states for a period greater 
than four years may create a disincentive for continued participation 
in those areas where this program is currently considered a cost-
effective control measure for the control of ground-level ozone and 
toxics. Although a longer recovery period of six or eight years may be 
needed by some refiners to fully recover all Phase II investments and 
less time for those who already have the capability to produce Phase II 
reformulated gasoline, the ability of states to opt-out again after 
2004 does not mean that such opt-outs will occur. Refiners in general 
will still have significant demand for Phase II RFG for many years 
after 2004. EPA is proposing four years to attempt to strike a balance 
between the potential adverse impacts if refiners have too short of a 
time to recoup their Phase II investments and the need of states for 
some flexibility in using reformulated gasoline. EPA further believes 
that this balance benefits reformulated gasoline consumers by 
attempting to provide market consistency which should encourage 
adequate supplies and reasonable prices.

D. Effective Date for Approved Opt-Out Petitions

    Today's proposal changes the date on which EPA-approved opt-out 
petitions become effective for opt-out petitions received January 1, 
1998, through December 31, 2003.
    This proposal modifies the existing requirement for any opt-out 
request received between January 1, 1998, and January 1, 2004. States 
which previously opted in to the RFG program that do not submit an opt-
out request by December 31, 1997, and subsequently submit a completed 
opt-out request before January 1, 2004, will be required to participate 
in Phase II of the program until December 31, 2003. The opt-out request 
will be effective January 1, 2004 or 90 days from the Agency's written 
notification to the State approving the opt-out petition, whichever is 
later.
    If a state submits an opt-out request prior to December 31, 1997, 
the state can designate the opt-out to occur at any future date beyond 
the minimum 90-day period required under current opt-out procedures as 
long as it is not a date beyond December 31, 1999. For example, a state 
could submit an opt-out request before the December 31, 1997, deadline 
which specifies that the opt-out would not be effective until the end 
of the year 1999. Areas opting into the RFG program subsequent to 
December 31, 1997, will be treated the same as areas opting in prior to 
that date and will also be included in Phase II of the program until 
December 31, 2003.
    EPA also proposes that, beginning on January 1, 2004, opt-out 
requests from states again be approved based on the opt-out provisions 
in effect before January 1, 1998.
    EPA requests comments on two specific possible variations to this 
proposal in anticipation of interest in these options by outside 
parties:
    (1) a possible exception to the required participation for areas 
which are redesignated as attainment areas during the period of January 
1, 1998, through December 31, 2003. Such an exception would allow an 
opt-out request to be approved by EPA using the same 90 day opt-out 
effective date applicable before December 31, 1997 [See 61 FR 35673, 
July 8, 1996.]
    (2) a similar participation period for areas first opting into the 
RFG program

[[Page 15081]]

subsequent to December 31, 1999, requiring these area to participate in 
Phase II of the program for at least four years from the date of their 
opt-in. This variation would establish the effective date for the 
removal of an area from the program as January 1, 2004, or 90 days from 
the Agency's written notification approving the opt-out, or four years 
from the effective date of their opt-in, whichever date is later, for 
all opt-out requests received after January 1, 2000.

II. Environmental Impact

    If an area opts out of the reformulated gasoline program, it will 
not receive the reductions in VOCs, oxides of nitrogen (NO<INF>x), and 
air toxics that are expected from this program. Instead, the areas 
would be subject to the federal controls on Reid vapor pressure for 
gasoline in the summertime, and would only receive control of NO<INF>x 
and air toxics through the requirements of the conventional gasoline 
anti-dumping program. These latter requirements are designed to ensure 
that gasoline quality does not degrade from the levels found in 1990. 
These areas would be foregoing the air quality benefits obtained from 
the use of reformulated gasoline.
    In this proposal, EPA continues to recognize that states have the 
primary responsibility to develop the mix of control strategies needed 
to attain and maintain the NAAQS, and should have flexibility in 
determining the mix of control measures needed to meet their air 
pollution goals. However, the proposal also seeks to ensure through the 
required participation period that the potential for a state to decide 
to opt-out of Phase II of the RFG program does not cause adverse 
impacts on the market demand for RFG and thus maintains the cost-
effectiveness of the RFG program. EPA expects that states will in fact 
act prudently in exercising their ability to opt-out under these rules. 
Any environmental impacts of opting out are, therefore, not expected to 
occur in isolation, but in a context of states exercising their 
responsibility and developing appropriate control strategies for their 
areas' air pollution goals.

III. Executive Order 12866

    Under Executive Order 12866,<SUP>2 the Agency must determine 
whether a regulation is ``significant'' and therefore subject to OMB 
review and the requirements of the Executive Order. The Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may:
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    \2\  See 58 FR 51735 (October 4, 1993).
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    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments of 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof, or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive Order.<SUP>3
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    \3\ Id. at section 3(f)(1)-(4).
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    Pursuant to the terms of Executive Order 12866, Office of 
Management and Budget (OMB) has notified EPA that it considers this a 
significant regulatory action within the meaning of the Executive 
Order. EPA submitted this action to OMB for review. Changes made in 
response to OMB suggestions or recommendations will be documented in 
the public record.

IV. Unfunded Mandates

    Under Section 202 of the Unfunded Mandates Reform Act of 1995 
(``UMRA''), Public Law 104-4, EPA must prepare a budgetary impact 
statement to accompany any general notice of proposed rulemaking or 
final rule that includes a Federal mandate which may result in 
estimated costs to State, local, or tribal governments in the 
aggregate, or to the private sector, of $100 million or more. Under 
Section 205, for any rule subject to Section 202 EPA generally must 
select the least costly, most cost-effective, or least burdensome 
alternative that achieves the objectives of the rule and is consistent 
with statutory requirements. Under Section 203, before establishing any 
regulatory requirements that may significantly or uniquely affect small 
governments, EPA must take steps to inform and advise small governments 
of the requirements and enable them to provide input.
    EPA has determined that today's proposed rule does not trigger the 
requirements of UMRA. The rule does not include a Federal mandate that 
may result in estimated annual costs to State, local, or tribal 
governments in the aggregate, or to the private sector, of $100 million 
or more, and it does not establish regulatory requirements that may 
significantly or uniquely affect small governments.

V. Economic Impact and Impact on Small Entities

    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 605(b), the Administrator certifies that this rule will not have 
a significant impact on a substantial number of small entities. This 
proposed rule is not expected to result in any additional compliance 
cost to regulated parties and in fact is expected to decrease 
compliance costs and decrease costs to consumers in the affected areas 
by providing more certainty for regulated parties. This proposed rule 
imposes no new requirements on states.
    With respect to the portion of today's action which proposes to 
require participation until January 1, 2004, of opt-in areas unless 
they request to opt-out prior to January 1, 1998, today's proposal is 
not expected to result in any additional compliance cost to regulated 
parties. It does no more than maintain the status quo for those 
entities who have been supplying reformulated gasoline to the 
reformulated gasoline opt-in areas and imposes no additional 
requirements on parties that must comply with the RFG regulations.
    With respect to the portion of today's proposed rule which would 
apply to opt-out requests applied for on or after January 1, 2004, the 
proposed rule is not expected to result in any additional compliance 
cost to regulated parties and in fact is expected to decrease 
compliance costs to those entities who previously supplied reformulated 
gasoline to the area opting out. This rule also establishes a 
transition period which maximizes affected parties' ability to plan for 
smooth transition from the reformulated gasoline program, minimizing 
disruption to the motor gasoline marketplace. This transition period is 
reasonably expected to allow parties to turn over existing stocks of 
reformulated gasoline to conventional gasoline.

VI. Paperwork Reduction Act

    This action does not add any new requirements under the provisions 
of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The Office of 
Management and Budget (OMB) has approved the information collection 
requirements contained in the final FRG/anti-dumping rule and has 
assigned OMB control number 2060-0277 (EPA ICR No. 1591.03).
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop,

[[Page 15082]]

acquire, install, and utilize technology and systems for the purposes 
of collecting, validating, and verifying information, processing and 
maintaining information, and disclosing and providing information; 
adjust the existing ways to comply with any previously applicable 
instructions and requirements; train personnel to be able to respond to 
a collection of information; search data sources; complete and review 
the collection of information; and transmit or otherwise disclose the 
information.
    An Agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15.

List of Subjects in 40 CFR Part 80

    Environmental protection, Air pollution control, Fuel additives, 
Gasoline, Motor vehicle pollution.

    Dated: March 21, 1997.
Carol M. Browner,
Administrator.

    40 CFR Part 80 is proposed to be amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

    1. The authority citation for part 80 continues to read as follows:

    Authority: Section 114, 211 and 301(a) of the Clean Air Act as 
amended (42 U.S.C. 7414, 7545, and 7601(a)).

    2. Section 80.72 is amended by revising paragraphs (a), (c)(1) and 
(c)(2) and by adding paragraphs (c)(3) through (c)(7) to read as 
follows:


Sec. 80.72  Procedures for opting out of the covered areas.

    (a) In accordance with paragraph (b) of this section, the 
Administrator may approve a petition from a state asking for removal of 
any opt-in area, or portion of an opt-in area, from inclusion as a 
covered area under Sec. 80.70. If the Administrator approves a 
petition, he or she shall set an effective date as provided in 
paragraph (c) of this section. The Administrator shall notify the state 
in writing of the Agency's action on the petition and the effective 
date of the removal when the petition is approved.
* * * * *
    (c)(1) For opt-out petitions received prior to and including 
December 31, 1997, except as provided in paragraph (c)(2) of this 
section, the Administrator shall set an effective date for removal of 
an area under paragraph (a) of this section as requested by the 
Governor, but no less than 90 days from the Agency's written 
notification to the state approving the opt-out petition, and no later 
than December 31, 1999.
    (2) For opt-out petitions received prior to and including December 
31, 1997, where reformulated gasoline is contained as an element of any 
plan or plan revision that has been approved by the Agency, other than 
as a contingency measure consisting of a future opt-in, then the 
effective date under paragraph (a) of this section shall be 90 days 
from the effective date for Agency approval of a revision to the plan 
that removes reformulated gasoline as a control measure.
    (3) For opt-out petitions received January 1, 1998 through December 
31, 2003, except as provided in paragraph (c)(4) of this section, the 
Administrator shall set January 1, 2004 or 90 days from the Agency's 
written notification to the state approving the opt-out petition, 
whichever date is later, as the effective date for removal of an area 
under paragraph (a) of this section.
    (4) For opt-out petitions received January 1, 1998 through December 
31, 2003, where reformulated gasoline is contained as an element of any 
plan or plan revision that has been approved by the Agency, other than 
as a contingency measure consisting of a future opt-in, then the 
effective date for removal of an area under paragraph (a) this section 
shall be January 1, 2004, or 90 days from the effective date for Agency 
approval of a revision to the plan that removes reformulated gasoline 
as a control measure, whichever date is later.
    (5) For opt-out petitions received on or after January 1, 2004, 
except as provided in paragraph (c)(6) of this section, the 
Administrator shall set an effective date for removal of an area as 
requested by the Governor, but no less than 90 days from the Agency's 
written notification to the state approving the opt-out petition.
    (6) For opt-out petitions received on or after January 1, 2004, 
where reformulated gasoline is contained as an element of any plan or 
plan revision that has been approved by the Agency, other than as a 
contingency measure consisting of a future opt-in, then the effective 
date for removal of an area under paragraph (a) of this section shall 
be 90 days from the effective date for Agency approval of a revision to 
the plan that removes reformulated gasoline as a control measure.
    (7) An area opting into the RFG program after December 31, 1997, 
will be subject to all requirements of this section.
* * * * *
[FR Doc. 97-7953 Filed 3-27-97; 8:45 am]
BILLING CODE 6560-50-P