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Page 1 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 6560-50-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 51 [EPA-HQ-OAR-2009-0897; FRL- ] 2060-AQ07 Withdrawal of the Prior Determination or Presumption that Compliance with the CAIR or the NO x SIP Call Constitutes RACT or RACM for the 1997 8-Hour Ozone and 1997 Fine Particle NAAQS AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY: The EPA is proposing to withdraw any prior determination or presumption , for the 1997 8-hour ozone national ambient air quality standard (NAAQS) and the 1997 fine particle (PM 2.5 ) NAAQS, that compliance with the Clean Air Interstate Rule (CAIR) or the NO x SIP Call automatically constitutes reasonably available control technology (RACT) or reasonably available control measures (RACM) for oxides of nitrogen (NO x ) or sulfur dioxide (SO 2 ) emissions from electric generating unit (EGU) sources participating in these regional cap-and-trade programs. DATES: Comments. Comments must be received on or before [INSERT DATE 30 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER ]

. Public Hearings. If anyone contacts us requesting a public hearing on or before [INSERT DATE 15 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER ] , we will hold a public hearing. Please refe r to SUPPLEMENTARY INFORMATION for additional information on the comment period and the public hearing. Deleted: ; and Revision to RACT Guidance and RFP Requirements for the 1997 Fine Particle NAAQS Deleted:

Deleted:

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Deleted: The EPA is proposing revisions to preamble guidance in the final Implementation Rule for the 1997 PM 2.5 national ambient air quality standard (NAAQS) concerning the economic feasibility criteria for determining RACT for sources located within nonattainment areas. The EPA is also proposing not to allow emission reductions from outside of a nonattainment area to be credited toward meeting the Reasonable Further Progress (RFP) requirements for the 1997 PM 2.5 NAAQS. Deleted: ¶*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 2 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-OAR2009-0897, by one of the following methods:

 www.regulations.gov

. Follow the online instructions for submitting comments. Attention Docket ID No. EPA-HQ-OAR-2009-0897.

 Email: a-and-r-docket@epa.gov . Attention Docket ID No. EPA-HQ-OAR-2009- 0897.

 Fax: (202) 566-9744. Attention Docket ID No. EPA-HQ-OAR-2009-0897.

 Mail: EPA Docket Center, EPA West (Air Docket), Attention Docket ID No. EPA-HQ-OAR-2009-0897, U.S. Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania Avenue, NW, Washington, D

. C

. 20460. Please include a total of two copies.

 Hand Delivery: U.S. Environmental Protection Agency, William Jefferson Clinton West Building (Air Docket), 1301 Constitution Avenue, Northwest, Room 3334, Washington, D

. C

. 20004, Attention Docket ID No. EPA-HQ-OAR2009-0897. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information.
Instructions. Direct your comments to Docket ID No. EPA-HQ-OAR-2009-0897. The EPA's policy is that all comments received will be included in the public docket without change and may be made available online at www.regulations.gov , including any personal information provided, unless the comment includes information claimed to be Confidential Business Inform ation (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise Deleted:

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Page 3 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 protected through www.regulations.gov or email. The www.regulations.gov website is an “anonymous access” system, which means the EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an email comment directly to the EPA without going through www.regulations.gov , your email address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, the EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If the EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, the EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, avoid any form of encryption, and be free of any defects or viruses. For additional information about the EPA's public docket, visit the EPA Docket Center homepage at www.epa.gov/epahome/dockets.htm

. Docket . All documents in the docket are listed in the www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g. , CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in www.regulations.gov or in hard copy at the Air and Radiation Docket and Information Center, EPA/DC, EPA William Jefferson Clinton West Building, Room 3334, 1301 Constitution Ave., NW, Washington,
D

. C. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the Air Docket is (202) 566-1742.*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 4 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 FOR FURTHER INFORMATION CONTACT: Ms. Kristin Riha, Office of Air Quality Planning and Standards, Air Quality Policy Division, Mailcode C539-01, Research Triangle Park, NC 27711, telephone (919) 541-2031; fax number: ( 919 ) 541- 5315 ; email address: riha.kristin@epa.gov

. SUPPLEMENTARY INFORMATION: I. General Information A. Does this action apply to me? Entities potentially affected by this action include states (typically state air pollution control agencies) and in some cases, local governments that are responsible for air quality management and planning. In particular, states with areas designated nonattainment for the 1997 8-hour ozone NAAQS and/or the 1997 PM 2.5 NAAQS and that are located within the geographic areas covered by the NO x SIP Call 1 and/or the
CAIR 2 may be affected by this action. EGUs located in such geographic regions may also be affected by any new RACT or RACM reviews that may result from final rulemaking on this action. These sources are in the following groups: Industry group SIC a NAICS b Electric Services 492 221111, 221112, 221113, 221119, 221121,
221122

a Standard Industrial Classification. b North American Industry Classification System.

1 See Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone; Final Rule, 63 FR 57356 (October 27, 1998). 2 See Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule); Revisions to Acid Rain Program; Revisions to the NO x SIP Call; Final Rule, 70 FR 25162 (May 12, 2005). Deleted: Deleted:
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Page 5 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 B. What should I consider as I prepare my comments for the EPA? 1. Submitting CBI. Do not submit this information to the EPA through www.regulations.gov or email. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD

- ROM that you mail to the EPA, mark the outside of the disk or CD

- ROM as CBI and then identify electronically within the disk or CD

- ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed to be CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR Part 2. 2. Tips for Preparing Your Comments. When submitting comments, remember to:

 Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

 Follow directions - The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

 Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

 Describe any assumptions and provide any technical information and/or data that you used.

 If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced. Deleted:

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Page 6 of 37 Deleted: 1 Deleted: 319 Deleted: 1021  Provide specific examples to illustrate your concerns, and suggest alternatives.

 Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

 Make sure to submit your comments by the comment period deadline identified. C. Where can I get a copy of this document and other related information? In addition to being available in the docket, an electronic copy of this notice will be posted at http://www.epa.gov/airquality/ozonepollution/actions.html

. D. What information should I know about a possible public hearing? To request a public hearing or information pertaining to a public hearing on this document, contact Ms. Pamela Long at (919) 541-0641 before 5 p.m. on [INSERT DATE 15 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER ]. If requested, further details concerning a public hearing for this proposed rule will be published in a separate Federal Register notice. For updates and additional information on a public hearing, please check the EPA’s website for this rulemaking at http://www.epa.gov/airquality/ozonepollution/actions.html

. E. How is this notice organized? The information presented in this notice is organized as follows: I. General Information A. Does this action apply to me? B. What should I consider as I prepare my comments for the EPA? C. Where can I get a copy of this document and other related information? D. What information should I know about a possible public hearing? E. How is this notice organized? II. Background A. CAA Requirements and the Definition s of RACT and RACM B. The NO x SIP Call C. The CAIR D. The Phase 2 Ozone Implementation Rule E. The PM 2.5 Implementation Rule Deleted: Deleted: http://www.epa.gov/ttn/oarpg/new.html under “Recent Actions Deleted: ”

Deleted: http://www.epa.gov/ttn/oarpg/new.html Deleted: under “recent actions Deleted: ” Deleted: 1. Submitting CBI¶

2. Tips for Preparing Your Comments¶

Deleted: ¶ Deleted: A. RACT or RACM Requirements for EGUs Participating in the NO x SIP ¶

Call and the CAIR¶ Deleted: 1. Deleted: ¶ Deleted: 2. Deleted: ¶ Deleted: 3. Deleted: ¶ Deleted: 4. Deleted: ¶ Deleted: 5. Deleted: ¶*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 7 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 F. Impact of the NRDC v. EPA Court Decision on Determinations and Presumptions III. Proposed Action IV. Statutory and Executive Order Review A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer and Advancement Act J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations Statutory Authority List of Subjects II. Background
A . CAA Requirements and the Definition s of RACT and RACM The Clean Air Act (CAA) requires the EPA to designate areas as either attainment, nonattainment, or unclassifiable for each NAAQS. States have primary responsibility for implementing the NAAQS wi thin their borders, and each state must develop a SIP that contains adequate provisions for attainment and maintenance of the NAAQS. The SIPs developed by states must me et the applicable statutory requirements. For areas designated nonattainment, Part D of the CAA requires that SIPs must include certain control measures. Subpart 1 of Part D contains generally applicable requirements for all nonattainment areas. Subpart 2 and Subpart 4 of Part D contains additional requirements applicable to certain ozone and particulate matter (PM, including PM 2.5 ) nonattainment areas , respectively. Deleted: 6. Deleted: Deleted: Deleted: 7. Impact of the North Carolina v. EPA Court Decision on ¶ Determinations and Presumptions Deleted: ¶ Deleted: B. Analysis of the Economic Feasibility of Reasonably Available Controls in ¶

the PM 2.5 Implementation Rule¶ C. RFP Requirements for the 1997 PM 2.5 NAAQS¶

1. Linkage between the RFP Policy in the Phase 2 Ozone ¶ Implementation Rule and the PM 2.5 Implementation Rule¶ 2. Rulemaking and Litigation Chronology of RFP Requirements for ¶ the 1997 Ozone NAAQS and the 1997 PM 2.5 NAAQS¶ Deleted: A. RACT or RACM Requirements for EGUs Participating in the NO x SIP ¶

Call and the CAIR¶ B. Analysis of the Economic Feasibility of Reasonably Available Controls in ¶

the PM 2.5 Implementation Rule¶ C. RFP Requirements for the 1997 PM 2.5 NAAQS¶

Deleted: A. RACT or RACM Requirements for EGUs Participating in the NO x SIP Call and the CAIR¶ Deleted: 1

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Page 8 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 Among the general statutory requirements for all nonattainment areas is the requirement in section 172(c)(1) that SIPs: “provide for the implementation of all reasonably available control measures as expeditiously as practicable (including such reductions in emissions from existing sources in the area as may be obtained through the adoption, at a minimum, of reasonably available control technology).” Ozone nonattainment areas that are subject to the requirements of Subpart 2 must meet more specific RACT requirements in accordance with section 182(b)(2)(C). States located within the Ozone Transport Region (OTR) have additional requirements to impose RACT on sources statewide, rather than only in nonattainment areas, in accordance with section 184. The EPA refers to the requirement for “reasonably available control measures” as RACM, and refers to the subset of RACM in the parenthetical for “reasonably available control technology” as RACT. RACM and RACT measures apply broadly to a range of source categories located in designated nonattainment areas, including large stationary sources such as EGUs. The EPA has historically interpreted RACT to mean the lowest emissions limitation that a particular source is capable of meeting by the application of control technology that is reasonably avai lable considering tec hnological and economic feasibility. 3 RACT requirements are specifically intended to impose emission controls for purposes of attainment and maintenance of the NAAQS within a specific nonattainment

3 See Memorandum from Roger Strelow titled “Guidance for Determining Acceptability of SIP Regulations in Non-Attainment Areas.” (December 9, 1976). See also “State Implementation Plans; General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990,” 57 FR 13498 (April 16, 1992). Deleted: as well as other considerations Deleted: Economic feasibility encompasses Deleted: considerations such as whether the cost of a potential measure is reasonable considering attainment needs of the area and the costs of other measures, and wh ether the cost of a measure is reasonable for the regulated entity to bear, in light of the benefits. Deleted: 4 Deleted: Deleted: local Deleted: Clean Air Fine Particle Implementation Rule; Final Rule, 72 FR 20586 (April 25, 2007). The interpretation of RACT occurs at 20610.*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 9 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 area. The EPA has interpreted the terms RACT and RACM for purposes of Subpart 1 requirements as being the level of emissions control that is necessary to provide for expeditious attainment of the NAAQS within a nonattainment area. Courts have upheld this interpretation of the statute with respect to nonattainment SIPs. 5 In contrast to nonattainment plan requirements, section 110(a)(2)(D)(i) requires each state’s SIP to contain provisions that will prevent emissions from sources in the state from having certain prohibited impacts on the air quality of other states, via interstate transport. In particular, section 110(a)(2)(D)(i )(I) requires that a state’s SIP must contain provisions to prevent emissions in amounts that would “contribute significantly to nonattainment in, or interfere with maintenance by, any other state” with respect to a NAAQS. The EPA has initiated several regulatory programs pursuant to section 110(a)(2)(D)(i)(I) to address interstate transpor t of emissions that have such prohibited impacts on attainment of the ozone and PM 2.5 NAAQS on a regional basis.
B . The NO x SIP Call In October 1998, the EPA published a rule under section 110(a)(2)(D)(i) of the CAA, commonly referred to as the “NO x SIP Call.” This rule was intended to reduce NO x emissions (a precursor for ozone formation) from sources that significantly contribute to nonattainment or interfere with maintenance of the ozone NAAQS in one or more downwind states. To implement these reductions, the NO x SIP Call required 22 states and the District of Columbia to submit SIP revisions prohibiting those NO x emissions that the EPA determined to be adversely impacting downwind air quality problems. The NO x SIP Call provided a regional emissions cap-and-trade program as one mechanism for states to

5 See NRDC v. EPA , 571 F.3d 1245, at 1252-53 (D.C. Cir. 2009). Deleted: in order

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Page 10 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 meet their interstate transport requirements under section 110(a)(2)(D)(i). Through this mechanism, affected sources could meet emissions reductions requirements either by installing NO x emissions controls or by purchasing allowances from other sources located within the geographic region covered by the NO x SIP Call.
C . The CAIR In May 2005, the EPA published another rule under section 110(a)(2)(D)(i) of the CAA, referred to as the “Clean Air Inters tate Rule” (or the CAIR). The CAIR required reductions of NO x and/or SO 2 emissions across 28 states and the District of Columbia needed to eliminate significant contribution to nonattainment, or interference with maintenance of, the 1997 8-hour ozone NAAQS and/or the 1997 PM 2.5 NAAQS in one or more downwind states. 6 Similar to the NO x SIP Call, the EPA provided a regional emissions cap-and-trade mechanism as one means for upwind states to meet the interstate transport requirements of section 110(a)(2)(D)(i). By this mechanism, affected sources could meet their emission reduction requirements either by installing controls for NO x and/or SO 2 emissions, or by purchasing allowances from other sources located in the geographic region covered by the CAIR. On April 28, 2006 (71 FR 25328), the EPA also promulgated Federal Implementation Plans (FIPs) for all jurisdictions covered by the CAIR to address the section 110(a)(2)(D)(i) requirements in the event that states were unable to make a SIP submission containing state measures necessary to alleviate interstate transport.

6 NO x is a precursor for ozone formation, while both NO x and SO 2 are precursors for PM 2.5 formation. Deleted:

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Page 11 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 A number of parties filed petitions for review in 2008 to challenge the CAIR on various grounds. As a result of this litigation, the United States Court of Appeals for the District of Columbia Circuit (the Court) remanded the CAIR to the EPA, but later decided not to vacate the rule. 7 In the process of remanding the CAIR, however, the Court identified serious concerns with the EPA’s reading of the statute and analytical approach, including such core issues as the a gency’s method of evaluating significant contribution to nonattainment and interference with maintenance of the NAAQS. In response to the remand of the CAIR, the EPA finalized another rule, the “Cross-State Air Pollution Rule” (CSAPR) on July 6, 2011 (published in the Federal Register on August 8, 2011)

. 8 This rule was then vacated by the U.S. Court of Appeals for the District of Columbia (D.C. Circuit) on August 21, 2012. 9 In its opinion vacating the CSAPR, the D.C. Circuit instructed the EPA to continue administering the CAIR pending promulgation of a valid replacement. The United States Supreme Court subsequently agreed to review the decision of the D.C. Circuit. Oral argument before the Supreme Court was held on December 10, 2013. Both the NO x SIP Call and the CAIR were intended and designed to eliminate interstate transport of pollutants that have impacts on attainment and maintenance of the ozone and /or PM 2.5 NAAQS in downwind areas. Thus, they provide significant emissions reductions that assist downwind areas with attainment or maintenance of the NAAQS, and allow downwind states to develop SIPs in reliance on regional emissions reductions.

7 See North Carolina v. EPA , 531 F.3d 896; modified by 550 F.3d 1176 (D.C. Cir. 2008). 8 See “Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals, Final Rule,” 76 FR 48208 (August 8, 2011). 9 See EME Homer City Generation L.P. v. EPA , 696 F.3d 7 (D.C. Cir. 2012) , cert. granted 133 S. Ct. 2857 (2013)

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Page 12 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 However, the EPA did not intend that either the NO x SIP Call or the CAIR would completely obviate the potential need for additional local pollution controls in downwind nonattainment areas, nor did the EPA intend either action to override the statutory requirements for SIPs for nonattainment areas. 10 In order to help states address the specific statutory requirement for SIPs for nonattainment areas for the 1997 8-hour ozone NAAQS and 1997 PM 2.5 NAAQS, the EPA promulgated both regulations and guidanc e applicable to each NAAQS in separate implementation rules. Within those actions , the EPA addressed questions concerning the intersection of the requirements for regional control strategies and the requirements for local control strategies to reduce interstate transport in individual nonattainment areas needed for local attainment purposes. In particular, the EPA focused on the issue of whether, or to what extent, compliance by EGUs with the requirements of the NO x SIP Call and/or the CAIR could also be construed as compliance with the RACT requirements for local nonattainment SIPs for the 1997 8-hour ozone and 1997 PM 2.5 NAAQS. The EPA’s approach to this issue for each NAAQS is described in more detail later.
D . The Phase 2 Ozone Implementation Rule On November 29, 2005 (70 FR 71612), the EPA published an ozone implementation rule to address nonattainment SIP requirements for the 1997 8-hour ozone NAAQS (the Phase 2 Ozone Implementation Rule). The Phase 2 Ozone

10 See the CAIR, 70 FR 25184 (discussing the need for both regional and local emission reductions to bring all areas into attainment); See also Clean Air Fine Particle Implementation Rule, 72 FR 20587 (discussing the need for regional and national emission reduction programs in conjunction with local controls in SIPs for nonattainment areas to bring all areas into attainment). Deleted: ¶

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Page 13 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 Implementation Rule addressed various statutory requirements, including the requirement for RACT

- level controls for sources located within nonattainment areas generally, and controls for NO x emissions from EGUs in particular. After explaining its analysis of the issue, the EPA indicated its determination that the regional NO x emissions reductions that result from either the NO x SIP Call or the CAIR would meet the NO x RACT requirement for EGUs located in states included within the respective NO x SIP Call or CAIR geographic regions. Thus, the EPA concluded that: “[t]he State need not perform a NO x RACT analysis for sources subject to the State’s emission cap-and-trade program where the cap-and-trade program has been adopted by the State and approved by the EPA as meeting the NO x SIP Call requirements or, in States achieving the CAIR reductions solely from electric generating units (EGUs), the CAIR NO x requirements.” 11 In January 2006, Earthjustice, on behalf of the Natural Resources Defense Council (NRDC), filed a petition for reconsideration of the Phase 2 Ozone Implementation Rule, objecting to the EPA’s determination that, in certain circumstances, compliance with the requirements of the CAIR would constitute RACT for NO x emissions for EGUs located in states within the CAIR region. 12 The petition raised objections to an alleged failure to seek public comment on the determination and to the a gency’s interpretation of the CAA to allow a regional emissions reduction program to constitute RACT for sources located with in nonattainment areas, as well as other related issues. The EPA granted the petition for reconsideration of the Phase 2 Ozone Implementation Rule and subsequently conducted a Supplemental Technical Analysis to

11 See Phase 2 Ozone Implementation Rule, 70 FR 71617. 12 See “Petition for Reconsideration,” filed by David Baron, Earthjustice, on behalf of NRDC (January 30, 2006). A copy of the petition is located in the docket for this action. Deleted:

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Page 14 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 assess whether compliance with the CAIR could satisfy the NO x RACT requirement for EGUs in certain geographic areas. 13 A proposed rule, which presented this analysis and solicited comments regarding the reconsideration of whether the CAIR would constitute RACT for NO x emissions for EGUs located in states within the CAIR region, was published in December 2006. The EPA did not reconsider or request comments on its prior determination that the NO x SIP Call constitutes RACT for those sources covered by the NO x SIP Call. The EPA then published a final notice of reconsideration on June 8, 2007 (72 FR 31727), reflecting the a gency’s additional evaluation of whether compliance with the CAIR could constitute RACT for NO x emissions for certain EGUs. In that action, the EPA modified its conclusion regarding when compliance with the CAIR may satisfy NO x RACT requirements for EGUs in areas within the CAIR region. The EPA reaffirmed its determination that, in many ozone nonattainment areas, compliance with the CAIR would satisfy NO x RACT requirements for EGUs in such areas. 14 However, the EPA stated that this determination would only apply to specific areas for which the EPA’s Supplemental Technical Analysis showed that the CAIR was projected to achieve equal or greater NO x emissions reductions than application of source-by-source application of RACT to the

13 See “Technical Support Document for Phase 2 of the Final Rule to Implement the 8- Hour Ozone National Ambient Air Quality Standard-Notice of Reconsideration; NO x RACT for EGUs in CAIR States – Supplemental Technical Analysis,” December 2006.(Docket ID no. EPA-HQ-OAR-2003-0079, item number EPA-HQ-OAR-2003- 0079-1044.2) (Supplemental Technical Analysis). 14 Specifically, the EPA determined that compliance with the CAIR would meet the NO x RACT requirements for ozone nonattainment areas in sections 172(c)(1) and 182(f), and the statewide NO x RACT requirements for SIPs for states located within the Ozone Transport Region pursuant to sections 184(b) and 182(f). See Phase 2 Ozone Implementation Rule-Notice of Reconsideration, 72 FR 31730. Deleted:

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Page 15 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 EGUs within the nonattainment area. Even in those nonattainment areas where the EPA did not make a formal determination, however, the EPA also established a separate presumption that compliance with the CAIR, in certain circumstances, could satisfy NO x RACT requirements for EGUs in any area within the CAIR region. 15 The EPA thus announced that states could rely initially on this presumption, even in areas where the

a gency had made no formal determination, assuming certain conditions. Finally, the EPA reiterated in the final notice of reconsideration that EGU sources complying with the requirements of the NO x SIP Call would also be considered to have met their ozone NO x RACT obligations, assuming certain conditions. 16 In addition to the Supplemental Technical Analysis, the EPA provided various legal and policy bases for its determinations and presumptions in the final notice of reconsideration of the Phase 2 Ozone Implementation Rule. For example, the EPA argued that its interpretation of section 172(c) to allow RACT to include consideration of regionwide emissions reductions, rather than nonattainment area specific reductions only, was permissible because of the use of the term “reasonable” as part of the definition of
RACT. 17 As a policy matter, the EPA also argued that emissions reductions that result from regional scale programs like the CAIR often “will achieve a more effective and economically efficient air quality improvement in nonattainment areas than application of source-by-source RACT.” 18

15 See Phase 2 Ozone Implementation Rule-Notice of Reconsideration, 72 FR 31730. 16 Id. 72 FR 31731. 17 Id. 72 FR 31730. 18 Id. Deleted:

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Page 16 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 In November 2008, the U.S. Court of Appeals for the D.C. Circuit heard oral argument concerning multiple petitions for judicial review of the EPA’s Phase 2 Ozone Implementation Rule and the Notice of Reconsideration. Among other issues, the petitioners (including NRDC) challenged the EPA’s determination that compliance with the NO x SIP Call and/or the CAIR could satisfy NO x RACT requirements for EGUs in

ozone nonattainment areas, and the EPA’s speci fic determinations for some areas and general presumption for other areas, that compliance with the CAIR could satisfy NO x RACT for EGUs in ozone nonattainment areas. In view of its decision in North Carolina
v. EPA , in which the Court had previously remanded the CAIR and in response to the parties’ joint suggestion to the Court that any further litigation of CAIR-related issues be held in abeyance given the North Carolina decision , the Court deferred consideration of the litigants ’ challenge s to the Phase 2 Ozone Implementation Rule and Reconsideration Notice insofar as they related to the CAIR program. As a result of this litigation, the Court decided that the provisions in the Phase 2 Ozone Implementation Rule indicating that a state need not perform (or submit) a NO x RACT analysis for EGU sources subject to a cap-and-trade program that meets the requirements of the NO x SIP Call are inconsistent with the statutory requirements of section 172(c)(1). 19 The Court specifically held that the Phase 2 Ozone Implementation Rule allowing use of the NO x SIP call to constitute RACT without any locally applicable analysis regarding the equivalence of NO x SIP Call and RACT reductions: “isinconsistent with the Clean Air Act . . . in allowing participation in a regional cap-andtrade program to satisfy an area-specific statutory mandate.” The Court emphasized that:

19 See NRDC v. EPA , 571 F.3d 1245 (D.C. Cir. 2009). Deleted: several parties (including NRDC) further challenged

Deleted: In particular, they

Deleted: ’

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Page 17 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 “the RACT requirement calls for reductions in emissions from sources in the area; reductions from sources outside the nonattainm ent area do not satisfy the requirement . . . Accordingly, participation in the NO x SIP call would constitute RACT only if participation entailed at least RACT-level reductions in emissions from sources within the nonattainment area.” The Court rejected the EPA’s arguments that a regional emissions reductions program like the NO x SIP Call would result in greater emissions reductions in nonattainment areas as unsupported by any adequate technical analysis. 20 The Court likewise rejected the EPA’s argument that regionwide emissions reductions would collectively achieve better emissions reductions because this argument did not comport with the explicit “in the area” language of section 172(c)(1). 21 With respect to the EPA’s argument that the statute is ambiguous as to whether each individual source within a nonattainment area must install RACT, the Court concluded that even if that were correct, the EPA had failed to evaluate the impact of the NO x SIP Call on the air quality within specific nonattainment areas, and thus the EPA “has failed to establish that NO x SIP Call compliance can be equated to RACT compliance.” 22 The Court disagreed with the EPA’s theory that section 172(c)(6), which authorizes auctions as a permissible form of control measure, c ould allow reliance on a regional cap-and-trade type program in lieu of the RACT requirement for sources “in the area.” 23 Finally, the Court rejected the argument that the EPA’s interpretation should be upheld because a state could still elect

20 Id. 571 F.3d at 1257. 21 Id. 22 Id. 23 Id. 571 F.3d at 1258.*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 18 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 to define RACT to require greater emissions reductions from EGUs in a given area for local attainment needs, concluding that: “[a] state’s decision to require stricter controls cannot eliminate the defect in the EPA’s approach – failing to implement the requirement of at least RACT-level reductions in emissions from sources in the nonattainment area.” 24 Based on the foregoing reasoning, the Court remanded the provision of the Phase 2 Ozone Implementation Rule determining that the NO x SIP Call satisfies NO x RACT for EGUs because the EPA had failed to show that compliance with the NO x SIP Call would achieve at least RACT-level reductions in each nonattainment area. In deciding not to vacate the provision, however, the Court noted that a determination that RACT was satisfied by compliance with the NO x SIP Call might be permissible for an area if accompanied by a technical analysis demonstrating that the program in fact “results ingreater emissions reductions in a nonattainment area than would be achieved if RACTlevel controls were installed in that area.” 25 In other words, the C ourt rejected the notion that a regional cap-and-trade program intended to eliminate interstate transport ofemissions consistent with section 110(a)(2)(D)(i) could automatically constitute RACTlevel control as required by section 172(c)(1), but held open the possibility that such a program might in fact result in the same, or higher, level of emissions reductions in individual nonattainment areas. Significantly, the Court did not address at all the EPA’s comparable determinations and presumption that compliance with the CAIR would constitute NO x RACT for EGUs in ozone nonattainment areas under certain circumstances. As

24 Id. 25 Id. Deleted: The Court did not, however, explain how the key feature of such cap-and-trade programs, i.e. , the ability of sources to purchase allowances in lieu of installation of emissions controls, could meet the parameters envisioned by the Court. Nor did the Court speak to the issue of sources that might wish to switch their method of compliance in the future, taking advantage of the flexibility to control emissions or purchase allowances as market conditions evolve.*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 19 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 mentioned earlier, the Court (in response to the joint suggestion of the parties) deferred consideration of the CAIR-related challenges to the EPA’s determinations and presumption because at the time of this decision, the Court had already remanded the
CAIR. 26 However, on August 30, 2013, the U.S. Court of Appeals for the D.C. Circuit granted the EPA’s request for voluntary remand of the CAIR determination and vacatur of the CAIR presumption. In granting the a gency’s request , the Court said that “[v]acatur of the presumption is appropriate in light of the NRDC v. EPA ...” 27
E . The PM 2.5 Implementation Rule On April 25, 2007 (72 FR 20586), the EPA published the “Clean Air Fine Particle Implementation Rule” to address nonattainment SIP requirements for the 1997 PM 2.5 NAAQS (the PM 2.5 Implementation Rule). 28 That action provided regulations and additional guidance in the preamble for state plans required to implement the 1997 PM 2.5 NAAQS. The PM 2.5 Implementation Rule provided a framework for developing SIP submissions for nonattainment areas based on the Subpart 1 requirements for nonattainment areas found in section 172 of the CAA. 29

26 Id. at 1250. 27 NRDC v. EPA , No. 09-1198 (D.C. Cir.) (order of August 30, 2013). 28 The PM 2.5 Implementation Rule is now codified at 40 CFR Section 51.1000 – 1012. Section 51.1010 addresses the RACT and RACM requirement s . 29 The EPA notes that on January 4, 2013, the PM 2.5 Implementation Rule was remanded by the U.S. Court of Appeals for the D.C. Circuit. The Court ruled that the EPA should have issued the implementation rule under the Clean Air Act requirements of Subpart 4. ( See NRDC v. EPA , 706 F.3d 428 (D.C. Cir. 2013 ). This proposal addresses only one aspect of the remanded PM 2.5 Implementation Rule, i.e. , the presumption that CAIR is RACT/RACM for purposes of attainment plans for the 1997 PM 2.5 NAAQS. This issue is not directly related to the court’s decision in NRDC v. EPA . The EPA intends to respond to the court’s remand in that decision in another rulemaking that will address implementation requirements for the PM 2.5 NAAQS more broadly. Deleted: A

Deleted: Nevertheless, the EPA believes that the concerns expressed by the Court about the Agency’s approach to the NO x RACT requirement for EGUs and the emissions reductions required by the NO x SIP Call raise significant questions about the EPA’s approach to the comparable issues related to compliance with the CAIR, for both the Phase 2 Ozone Implementation Rule and the 1997 PM 2.5 NAAQS Implementation Rule Deleted: described later Deleted:

. Deleted: The EPA has therefore decided to consider the decision and the reasoning of the Court with respect to both the NO x SIP Call and the CAIR as it responds to the remand of the Phase 2 Ozone Implementation Rule, and to evaluate the implications of the decision for other related rulemakings, including the responses to related petitions for reconsideration Deleted:

. Deleted: 5

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Page 20 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 With respect to the requirements of section 172 (c)(1), the PM 2.5 Implementation Rule u sed a combined RACT/RACM approach, where a state’s obligation to implement RACT was considered as part of the overall RACM obligation for EGU sources. RACT/RACM was defined in the Rule as the set of emission reduction measures needed to attain the standards as expeditiously as practicable in the nonattainment area at issue. Through guidance in the preamble to the final PM 2.5 Implementation Rule, the EPA also established a presumption that compliance with the CAIR would satisfy RACT/RACM requirements for SO 2 and NO x emissions from EGUs in states participating in the CAIR cap-and-trade program for such emissions. 30
For SO 2 , the EPA’s guidance recommended that states that obtained all SO 2 reductions required by the CAIR from EGUs could presume that such sources located within a designated nonattainment area were meeting SO 2 RACT/RACM requirements because of overall regional SO 2 reductions from EGUs. The guidance indicated that this presumption could be u sed without conducting a technical analysis comparing the CAIR and RACT/RACM reductions for the specific nonattainment area. For NO x , the EPA similarly recommended that so long as the EGU sources in the state were required to operate NO x emissions controls on a year-round basis to comply with the CAIR, then that state could presume that those EGUs were meeting NO x RACT/RACM requirements because of overall regional NO x reductions from EGUs. The EPA made no decision with respect to what might constitute RACT/RACM level controls for direct PM 2.5 emissions from EGUs in relation to the CAIR because the CAIR only addressed the NO x and SO 2 emissions from such sources.

30 See PM 2.5 Implementation Rule, 72 FR 20623. Deleted: tilized Deleted: an area’s Deleted: an area’s

Deleted: tilized

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Page 21 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 Based on this presumption that compliance with the CAIR would constitute RACT/RACM level controls for SO 2 and NO x emissions from EGUs within the CAIR region, the EPA concluded that: “states may define RACT/RACM as the CAIR level of control on the collective group of sources in the region rather than impose a specific level of control on individual sources.” 31 In other words, the EPA indicated that states could presume that EGUs located within a given nonattainment area were meeting the RACT/RACM requirement, based solely upon a regional program that imposed controls on sources both within and outside designated nonattainment areas. The EPA acknowledged that reliance on the presumption could result in situations where specific EGUs located within nonattainment areas might elect to comply with the CAIR through the acquisition of allowances, rather than the reduction of emissions. Although the EPA articulated a series of policy and technical reasons for the appropriateness of considering a regional control program like the CAIR to be a preferable approach, the a gency also acknowledged that a state might “conclude that establishing additional ‘beyond CAIR’ emissions control requirements on specific sources in nonattainment areas is warranted to provide for attainment as expeditiously as practicable.” 32 These policy and technical arguments are very similar to those made by the EPA in connection with challenges to the Phase 2 Ozone Implementation Rule, and rejected by the Court decision discussed in further detail previously in this notice. In June 2007, the EPA received a petition for reconsideration filed by Earthjustice on behalf of several petitioners (including NRDC) that raised several objections to the

31 Id. at 72 FR 20624. 32 Id. at 72 FR 20625. Deleted: A*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 22 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 PM 2.5 Implementation Rule. 33 One of the principle objections raised by the petition is that under the CAA, compliance with a regional trading program, such as the CAIR, should not be presumed to satisfy RACT/RACM requirements for individual EGU sources located in nonattainment areas. The petitioner argued that the effect of the “CAIR-RACT presumption” was to waive the CAA RACT requirements for individual EGU sources located within PM 2.5 nonattainment areas. The petition also asserts that the presumption and its accompanying rationale were added to the rule after the close of the public comment period, and that the EPA therefore failed to seek public comment on the final rule’s determination that the CAIR presumptively satisfies SO 2 and NO x RACT requirements for EGUs located in nonattainment areas. The petition further maintains that the EPA lacks authority to establish a presumption on what satisfies RACT in this fashion, and that the EPA’s conclusion that the CAIR can be presumed to satisfy RACT is arbitrary and capricious because it lacked a factual basis. Lastly, the petition also maintained that even if an initial presumption that compliance with the CAIR constituted compliance with the RACT requirements of section 172(c)(1) were otherwise permissible, the final rule would be arbitrary and unlawful because it failed to explain if or how the presumption can be rebutted. Significantly, Earthjustice filed the petition for reconsideration of the PM 2.5 Implementation Rule well before the Court in the NRDC v. EPA case addressed the comparable issue with respect to the NO x SIP Call in the context of the Phase 2 Ozone

33 See “Petition for Reconsideration,” filed by Paul Cort, Earthjustice, on behalf of the American Lung Association, Medical Advocates for Healthy Air, Natural Resources Defense Council, and the Sierra Club (June 25, 2007). A copy of the petition is in the docket for this action. Deleted:*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 23 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 Implementation Rule. Nevertheless, the petitioner made essentially the same points as the Court in the NRDC v. EPA case that to allow compliance with a regional cap-and-trade program to constitute RACT for sources located within a nonattainment area automatically, or pursuant to an unsupported presumption, would be contrary to the explicit requirements of section 172(c)(1). Moreover, the EPA notes that multiple parties have indicated that they intend to challenge the PM 2.5 Implementation Rule on this same issue through petitions for review currently pending in the Court. In light of the arguments raised in the petition for reconsideration, and in light of the Court’s decision in NRDC v. EPA , the EPA decided to grant the petition for reconsideration on this issue and initiate this rulemaking. 34
F

. Impact of the NRDC v. EPA Court Decision on Determinations and Presumptions The EPA has reevaluated whether compliance with the NO x SIP Call could automatically constitute NO x RACT for EGUs in light of the Court’s opinion in the
NRDC v. EPA case. Given the explicit wording of section 172(c)(1) that sources “in the area” must at a minimum adopt RACT controls for that area, the EPA believes that it is no longer appropriate to presume that this requirement is automatically met through the participation of source s in a regional emissions cap-and-trade program. Implicit in a regional cap-and-trade program is that some sources may elect to u se allowances in lieu of emissions controls to meet the regional emissions reductions requirements, and that those elections could change from year to year

. The EPA believes that it would be inappropriate to pre-judge whether participation in a cap-and-trade program satisf ies NO x

34 See letter dated April 25, 2011, from Lisa P. Jackson to Paul Cort, Earthjustice. A copy of this letter is located in the docket for this action. Deleted:

Deleted: Accordingly, after reconsideration and for the reasons further described later in this notice, the EPA is proposing in this action to withdraw our prior presumption in the PM 2.5 Implementation Rule that compliance with the CAIR would automatically constitute RACT/RACM level controls for EGUs located in areas designated nonattainment for the 1997 PM 2.5 NAAQS. Deleted: 6 Deleted:

. Deleted: ¶

Deleted: address Deleted: merely Deleted: based upon Deleted: the Deleted: source Deleted: tilize Deleted: in order

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Page 24 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 RACT for EGU sources in any given nonattainment area

. The EPA further believes that states could rely on a regional emissions cap-and-trade program for purposes of meeting
NO x RACT requirements if they conduct the appropriate analysis demonstrating that compliance by EGUs participating in this program results in actual emission reductions in the particular nonattainment area that are equal to, or greater than, emission reductions that would result if RACT were applied to each individual EGU source or the EGU source category in the nonattainment area

. Additionally, b ased on the logic of the NRDC v. EPA Court decision, and the concerns raised in the petition for reconsideration on the PM 2.5 Implementation Rule, the EPA believes that it would be inappropriate absent an analysis for the EPA to pre-judge whether regional cap-and-trade programs would constitute RACT or RACM for covered

sources in a particular PM 2.5 nonattainment area

. III. Proposed Action In this notice, the EPA is proposing to: (1) withdraw from the Phase 2 Ozone Implementation Rule the determination that compliance with the NO x SIP Call satisfies
NO x RACT for EGUs located in certain ozone nonattainment areas or in states within the OTR; (2) withdraw from the Phase 2 Ozone Implementation Rule the separate determination that compliance with the CAIR satisfies NO x RACT for EGUs located in certain specific ozone nonattainment areas. ; and (3) withdraw from the PM 2.5 Implementation Rule any presumption that compliance with the CAIR automatically satisfies RACT/RACM requirements for SO 2 and NO x emissions from EGUs located in
PM 2.5 nonattainment areas. Deleted: In response to the remand of the CAIR, EPA finalized the CSAPR on July 6, 2011, which requires 27 states in the eastern half of the United States to significantly improve air quality by reducing EGU emissions that cross state lines and contribute to ground-level ozone and fine particle pollution in other states. At the same time, the Agency also issued a supplemental proposal that would require six states — Iowa, Kansas, Michigan, Missouri, Oklahoma, and Wisconsin — to make summertime NO X reductions under the CSAPR ozone-season control program. Finalizing this supplemental proposal would bring the total number of covered states under the CSAPR to 28. Deleted: B Deleted: that other Deleted: , such as the CSAPR, Deleted: Therefore, states should not rely merely on the fact that sources are complying with a regional cap-and-trade program as a basis for RACT or RACM level emissions controls for the 1997 8- hour ozone NAAQS or, the 1997 PM 2.5 NAAQS, or any other NAAQS. States must comply with the provisions of the CAA, which require an evaluation of EGUs located within designated nonattainment areas for potential RACT controls, and imposition of such controls as may be necessary for expeditious attainment of the NAAQS within the area. States may, however, elect to conduct a technical analysis for the specific nonattainment area considering the emissions controls required by the regional cap-and-trade program at issue, and demonstrate that compliance by EGUs participating in this program results in equal to or greater than actual emission reductions from the EGUs within the particular nonattainment area that are equal to or greater than the emission reductions that would result if application of RACT were applied to an individual on all subject EGU source or the EGU source categorys within the nonattainment area. States could conduct this analysis for the EGUs in the nonattainment area, either individually or in the aggregate. The EPA anticipates that in many areas, such an evaluation will likely indicate that EGUs within the nonattainment area at issue are already adequately controlled for NO x and SO 2 emissions, whether by virtue of the NO x SIP Call, the controls required by the CAIRSAPR, or by other means. However, based on the logic of the NRDC v. EPA Court decision, and the concerns raised in the petition for reconsideration on of the PM 2.5 Implementation Rule, the EPA believes that it would be inappropriate for the EPA to pre-judge that outcome prior to state development of locally applicable demonstrations showing equivalent reductions. Deleted: 7. Impact of the North Carolina v. EPA Decision on Determinations and Presumptions ¶ As mentioned earlier, the Court remanded the CAIR to the EPA and later decided not to vacate the rule. In the process of remanding ... [1] Deleted: A. RACT or RACM Requirements for EGUs Participating in the NO x SIP Call and the CAIR¶ Deleted: revise the Phase 2 Ozone Implementation Rule in order to Deleted: a Deleted: and the presumption that compliance with the CAIR can satisfy NO x RACT for EGUs located in other ozone nonattainment areas or in states within the OTR Deleted: The EPA is also proposing to Deleted:*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 25 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 In general, the EPA supports flexible, common sense approaches that provide the health and environmental protections required under the CAA while maximizingflexibility for states. The EPA also supports maintaining the integrity of regional capand-trade programs. Therefore, as a result of this action, states would retain the option of relying on source participation in a regional cap-and-trade program for purposes of meeting the RACT or RACM requirements for the 1997 ozone NAAQS or the 1997
PM 2.5 NAAQS if they submit a supporting technical analysis to the EPA. More information about this flexibility is included below. The EPA has reevaluated whether compliance with the NO x SIP Call could constitute NO x RACT for EGUs in light of the
Court ’ s opinion in the NRDC v. EPA case. Given the explicit wording of section 172(c)(1) that sources “in the area” must at a minimum adopt RACT controls for that area, the EPA believes that it is no longer appropriate to determine that this requirement is automatically addressed for certain sources based upon the participation of th ose

source s in a regional cap-and-trade program. After reconsideration, the EPA believes that it would be consistent with the statutory provision, with the overall structure of the CAA with respect to nonattainment plans, and with the overarching objective to provide for expeditious attainment of the NAAQS in each nonattainment area, that states should evaluate the EGUs located within designated nonattainment areas for any necessary controls. As noted above , the NRDC v. EPA decision left open the possibility that an area-specific analysis might establish that compliance with a regional cap-and-trade program like the NO x SIP Call could simultaneously result in factual compliance with the RACT requirement for sources located within nonattainment areas, and EPA’s elimination of the prior determination will in no way prevent a state from conducting and Deleted: ¶

Deleted: ’

Deleted: establish a presumption

Deleted: address this requirement merely Deleted: the source Deleted: e Deleted: Implicit in a regional cap-and-trade program is that some sources may elect to usetilize allowances in lieu of emissions controls in order to meet the regional emissions reductions requirements, and that those elections could change. Deleted: more

Deleted: In addition Deleted: to the extent that the Court in

Deleted: the EPA believes that eliminating the Deleted: s Deleted: and presumptions Deleted: result*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 26 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 relying on such an analysis. S tates have the option of conduct ing a technical analysis for the specific nonattainment area considering the emissions controls required by a regional cap-and-trade program, and demonstrating that compliance by EGUs participating in the program results in actual emission reductions in the particular nonattainment area that are equal to or greater than the emission reductions that would result if RACT were applied to each individual EGU s ource or the EGU source category within the nonattainment

area. We note that s ubsequent to the NRDC v. EPA decision , the Court granted the EPA’s request for a remand of a similar determination, previously made in the Phase 2 Ozone Implementation R ule, that compliance with the CAIR could, in some circumstances , automatically satisfy RACT requirements for certain sources. Following the North Carolina v. EPA decision that remanded the CAIR, the Court had deferred consideration of whether compliance with the CAIR could automatically satisfy a source’s obligation to install RACT for the 1997 ozone NAAQS . Following vacatur of the rule that was to replace the CAIR, however, the EPA decided that it would be appropriate to reconsider this determination also in light of the earlier decision in NRDC
v. EPA

. The EPA believes that the logic of the NRDC v. EPA decision extends to any determination that sources subject to a regional trading program such as the CAIR automatically comply with RACT requirements for NO x . In other words, the decision establishes that any such determination is permissible if supported by an adequate technical demonstration showing that the trading program would result in equal or greater emission reductions tha n would be achieved by application of RACT to the relevant sources or source categories. Deleted: should states elect to consider it Deleted: Only where Deleted: s Deleted: the Deleted: at issue Deleted: Deleted: such a Deleted: equal to or greater than Deleted: s Deleted: from the EGUs with Deleted: application of Deleted: on all subject Deleted: Deleted: , could the EPA approve a SIP adopting such an approach Deleted: The EPA believes that although

Deleted:

Deleted: explicitly

Deleted: for NO x or SO 2

Deleted: , it is both consistent with the decision and appropriate for the Agency to reconsider this issue in the same manner that the Court addressed whether compliance with the NO x SIP Call could satisfy a EGU’s obligation to meet RACT within a nonattainment area. We believe that the Court deferred action with respect to the CAIR, not because the issue could be decided differently, but rather because the Court had already remanded the CAIR to the EPA for other reasons. Deleted: presumption Deleted: or SO 2 Deleted: gets

Deleted: Moreover, the EPA believes th at the remanded status of the CAIR, and the fact that it will be replaced with a different regional program, renders the prior determinations and presumptions unreliable.*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 27 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 The EPA does not believe the analysis to support the CAI R determination in the Phase 2 Ozone I mplementation R ule provides an adequate technical demonstration . For this reason, the EPA is also proposing to withdraw its conclusion, made in the Phase 2 Ozone Implementation Rule final notice of reconsideration, that the EPA’s Supplemental Technical Analysis gives an adequate demonstration that participation in the CAIR is projected to achieve equal or greater annual emissions reductions from EGUs than source-by-source RACT for certain specific areas. The EPA is proposing this action because it no longer believes that the assumptions held within the Supplemental Technical Analysis are adequate to make such a showing. After reconsideration, the EPA now concludes that the analysis’s across-theboard assumptions regarding what constitutes RACT for all sources in all nonattainment areas were inadequate, and did not consider whether more advanced control technologies, such as post-combustion controls ( e.g. , selective catalytic reduction or selective noncatalytic reduction), might at some time be technically and economically feasible for specific sources in some areas. The EPA is consequently proposing to amend Section 51.912 to state explicitly that for each individual major source, or major source category, in a nonattainment area , states must conduct a RACT analysis for purposes of 1997 8-hour ozone NAAQS SIPs. As part of the PM 2.5 Implementation Rule, the EPA included a presumption that EGU participation in the CAIR constituted RACT or RACM for SO 2 for EGU sources in a particular nonattainment area. The EPA did not include a supporting analysis for this presumption as part of the Rule. The EPA believes that the logic of the NRDC v. EPA decision extends to any presumption that sources subject to a regional emissions cap-andDeleted: the determination

Deleted: ,

Deleted:

Deleted: First, the analysis was pr emised upon the continued existence of the CAIR, and implicitly upon the predicted action of sources subject to the CAIR. Second, after Deleted:

Deleted: Therefore, states with nonattainment areas for which the EPA previously made this determination must now individually comply with the provisions of the CAA, which require an evaluation of EGUs located within designated nonattainment areas for RACT controls, and imposition of such controls as may be necessary for expeditious attainment of the NAAQS within the area. In addition, should they elect to do so, they must conduct a technical analysis for the specific nonattainment area considering the emissions controls required by the regional cap-and-trade program at issue, and demonstrating that this program results in equal to or greater than actual emissions reductions from the EGUs within the nonattainment area than would application of RACT on all subject sources within the nonattainment area before they include such a determination in a SIP. Deleted: undergo*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 28 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 trade program such as the CAIR automatically comply with RACT or RACM requirements for NO x or SO 2 . As a result of this action , states should not rely merely on the fact that sources are complying with a regional cap-and-trade program as a basis for RACT or RACM-level emissions controls for the 1997 8-hour ozone NAAQS or the 1997 PM 2.5 NAAQS. States must comply with the provisions of the CAA, which require an evaluation of emissions sources, such as EGUs , located within designated nonattainment areas for potential RACT or RACM controls, and imposition of such controls as may be necessary for expeditious attainment of the NAAQS within the area. However, states retain the option of conducting a technical analysis for the specific nonattainment area considering the emissions controls required by a regional cap-and-trade program, and demonstrating that compliance by EGUs participating in the cap-and-trade program results in actual emission reductions in the particular nonattainment area that are equal to or greater than the emission reductions that would result if RACT or RACM were applied to an individual EGU source or the EGU source category within the nonattainment area. States could conduct this analysis for the EGUs in the nonattainment area, either individually or in the aggregate. The EPA anticipates that in many areas, such an evaluation will likely indicate that EGUs within the nonattainment area at issue are already adequately controlled for
NO x and SO 2 emissions, whether by virtue of the NO x SIP Call, the controls required by the CAIR, or by other means. However, based on the logic of the NRDC v. EPA Court decision, and the concerns raised in the petition for reconsideration of the PM 2.5 Implementation Rule, the EPA believes that it would be inappropriate to pre-judge that*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 29 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 outcome prior to state development of locally applicable demonstrations showing equivalent reductions. The EPA is soliciting comments on the withdrawal of the determinations and presumption as explained previously in this notice. Additionally, the EPA does not believe that the withdrawal of the determinations and presumption has a practical impact

on state planning and emissions control efforts , either currently or prospectively , for the 1997 ozone and PM 2.5 NAAQS . The EPA has worked closely with those states who previously relied on the determinations or presumption , and in those instances either the states or EPA (through SIP approval notices) have conducted, or are currently conducting, the appropriate analysis to demonstrate that EGUs in each nonattainment area have met the RACT or RACM requirements

. The EPA is not aware of any states that have raised concerns about the need to conduct a new RACT or RACM analysis as a result of the policy changes proposed in this rulemaking

. The EPA is soliciting comments

on our assessment that the withdrawal of the determinations and presumption does not have a practical impact on states. IV. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is a "significant regulatory action” because it raise s novel policy issues. Accordingly, the EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any changes made in response to OMB recommendations have been documented in the Deleted: states should not merely presume that for EGUs located in a nonattainment area that compliance with a cap-and-trade program, including the NO x SIP Call, the CAIR, or other programs, such as the CSAPR, could satisfy their obligation to implement NO x or SO 2 RACT. As required by the CAA, states are required to analyze what constitutes RACT for EGUs in each nonattainment area. However, a state may be able to show through appropriate technical analysis that EGU participation in a regional cap-and-trade program, such as the CSAPR, in a particular nonattainment area would meet NO x and/or SO 2 RACT requirements for the area. Such an analysis must show that compliance by EGUs participating in the program results in actual emissions reductions in the particular nonattainment area that are equal to or greater than the emissions reductions that would result if RACT were applied to each individual EGU source or the EGU source category in the area. Deleted: s Deleted: s Deleted: , Deleted: Deleted: B. Analysis of the Economic Feasibility of Reasonably Available Controls in the PM 2.5 Implementation Rule¶ The EPA has granted the petitioner’s request for reconsideration of the guidance in the preamble for the final PM 2.5 Implementation Rule regarding criteria for determining economic feasibility of RACT controls. Upon reconsideration, the EPA agrees that the specific objections raised by the petition do reflect departures from prior EPA guidance on how to evaluate RACT. Given the specific statutory language of section 172(c)(1), and the EPA’s long-standing interpretation of what factors are appropriate for consideration of economic feasibility in a RACT analysis, the EPA concludes that the final guidance that the Agency provided for the PM 2.5 Implementation Rule was inappropriate in certain respects. The EPA also concludes that there was inad equate notice and opportunity for public comment for all of the departures from past guidance, and the departures from the guidance as presented in the preamble for the proposed PM 2.5 Implementation Rule. ¶ Accordingly, the EPA proposes to remove the guidance in question from the preamble to the final PM 2.5 Implementation Rule, and to replace it with guidance very similar to what was included in the preamble to the proposed PM 2.5 Implementation Rule concerning the economic feasibility analysis component for determining what constitutes RACT. The EPA believes that reverting to the guidance as proposed will be the most effective and efficient means to address the concerns related to inappropri ate considerations that were set forth in the preamble to the final PM 2.5 Implementation Rule. ¶ In particular, this appr oach will remove what the EPA now concludes was incorrect guidance language in the final rule that suggested that the “economic feasibility” element of a RACT determination should include consider ation of “whether the cost of a [control] measure is reasonable for the regulated entity to bear, in light of the benefits,” as the costs of control relative to the health benefits of a particular control tec hnology should not be relevant to the technical determination of RACT. This language suggested that the economic feasibility analysis should be a “cost/benefit” analysis, ... [2] Deleted: is likely to Deleted: legal or Deleted: arising out of legal mandates, the President’s priorities, or the principles set forth in the Executive Order*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 30 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 docket for this action. B. Paperwork Reduction Act This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act , 44 U.S.C. 3501 et seq. Burden is defined at 5 CFR 1320.3(b). This action merely interprets the statutory requirements that apply to states in preparing their SIPs. C. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of this proposed rule on small entities, small entity is defined as: (1) A small business that is a small industrial entity as defined in the U.S. Small Business Administration (SBA) size standards. ( See 13 CFR 121.); (2) A governmental jurisdiction that is a government of a city, county, town, school district, or special district with a population of less than 50,000; and (3) A small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field. After considering the economic impacts of this proposed rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This rule will not directly impose any requirements on small*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 31 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 entities. Rather, this rule interprets the obligations of the CAA for states to submit implementation plans in order to attain the 1997 8-hour ozone and 1997 PM 2.5 NAAQS. We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts. D. Unfunded Mandates Reform Act This action contains no federal mandates under the provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, 2 U.S.C. 1531 – 1538) for state, local, or tribal governments or the private sector

. The action imposes no enforceable duty on any state, local, or tribal governments or the private sector. Therefore, this action is not subject to the requirements of sections 202 or 205 of the UMRA. This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. This action merely interprets the statutory requirements that apply to states in preparing their SIPs. E. Executive Order 13132: Federalism This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This action does not impose any new mandates on state or local governments. Thus, Executive Order 13132 does not apply to this rule.*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 32 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 In the spirit of Executive Order 13132, and consistent with EPA policy to promote communications between the EPA and state and local governments, the EPA is specifically soliciting comments on this proposed rule from state and local officials. F. Executive Order 13175: Consultation and Coordination with Indian Tribal
Governments This rule does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). The rule does not have a substantial direct effect on one or more Indian tribes, since no tribe has to develop a Tribal Implementation Plan under this regulation. Furthermore, this rule does not affect the relationship or distribution of power and responsibilities between the federal government and Indian tribes. The CAA and the Tribal Air Rule establish the relationship of the federal government and tribes in developing plans to attain the NAAQS, and this rule does nothing to modify that relationship. This rule does not have tribal implications. Thus, Executive Order 13175 does not apply to this action. However, the EPA did conduct outreach to tribes on a regularly scheduled conference call with the National Tribal Air Association on March 27, 2014, where we provided the tribes with a brief overview of the proposed rule. The EPA specifically solicits additional comment on this proposed action from tribal officials. G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks The EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the EO has the potential to influence the regulation. This action is Deleted: SIP

Deleted: Tribal*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 33 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 not subject to EO 13045 because it does not es tablish an environmental standard intended to mitigate health or safety risks. This proposal is designed to help implement the already-established ozone and PM 2.5 NAAQS, which were both promulgated in 1997 to protect the health and welfare of individuals, including children, who are susceptible to the adverse effects of exposure to unhealthy levels of ozone and PM 2.5 . H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use This action is not a “significant energy action” as defined in Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy because it does not establish requirements that directly affect the general public and the public and private sectors, but, rather interprets the statutory requirements that apply to states in preparing their SIPs. The SIPs themselves will likely establish requirements that directly affect the general public, and the public and private sectors. Deleted: Deleted: This action is not subject to EO 13045 (62 FR 19885, April 23, 1997) because it is not economically significant as defined in Executive Order 12866. However, EPA has reason to believe that ozone has a disproportiona te effect on children who play outdoors (62 FR 38856; 38859, July 18, 1997). Likewise, EPA believes that PM 2.5 has a disproportionate effect on children. (See 62 FR 38652- 38760, National Ambient Air Quality Standards for Particulate Matter, Final Rule; also 40 CFR Part 50.) The EPA invites the public to submit or identify peer-reviewed studies and data, of which EPA may not be aware, that assess how changes in RACT may affect ozone or PM 2.5 formation. This rule may lead to lower levels of ozone and PM 2.5 in particular geographical areas, which will be beneficial to the health of children who live in those particular areas.*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 34 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 I. National Technology Transfer and Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 ("NTTAA"), Public Law 104-113, section 12(d), (15 U.S.C. 272 note) directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs the EPA to provide Congress, through OMB, explanations when the a gency decides not to use available and applicable voluntary consensus standards. This rulemaking does not involve technical standards. Therefore, the EPA is not considering the use of any voluntary consensus standards. J. Executive Order 12898: Federal Action s to Address Environmental Justice in Minority Populations and Low-Income Populations Executive Order 12898 (59 FR 7629, Feb. 16, 1994) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States. The EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environm ental effects on minority or low-income populations because if it has any effect on the level of protection provided to human Deleted: A

Deleted:*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 35 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 health or the environment, the effect will be to increase the level of protection by resulting in more stringent emission controls on EGUs in affected nonattainment areas. Statutory Authority The statutory authority for this action is provided by 42 U.S.C. 7501, 7502, 7511a, 7513a, 7513b and 7601. Deleted: ,*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 36 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 Page 35 of 36 Withdrawal of the Prior Determination or Presumption that Compliance with the CAIR or the NO x SIP Call Constitutes RACT or RACM for the 1997 8-Hour Ozone and 1997 Fine Particle NAAQS
List of Subjects in 40 CFR Part 51 Environmental protection, Administrative practice and procedure, Air pollution control, Ozone, Reporting and recordkeeping requirements, Particulate matter, Volatile organic compounds.

___________________________________ Dated:

___________________________________ Gina McCarthy, Administrator. Deleted: 6 Deleted: 3 Deleted: Deleted: 64 Deleted: ; and Revision to RFP Requirements and RACT Guidance for the 1997 Fine Particle NAAQS Deleted:

Deleted: Lisa P. Jackson*** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** EO12866_ RACTRACM_2060-AQ07_Proposal_NPRM_201 40 401

Page 37 of 37 Deleted: 1 Deleted: 319 Deleted: 1021 For reasons set forth in the preamble, part 51 of chapter I of title 40 of the Code of Federal Regulations is proposed to be amended as follows: Part 51-REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL
OF IMPLEMENTATION PLANS. 1. The authority citation for part 51 continues to read as follows: Authority: 23 U.S.C. 101; 42 U.S.C. 7401-7671q 2. Section 51.912 is amended by adding paragraph (a)(4) to read as follows: § 51.912 What requirements apply fo r reasonably available control technology (RACT) and reasonably available control measures (RACM) under the 8-hour NAAQS? (a) * * * (4) An individual RACT determination must be made for each major source or major source category meeting the applicable major source size within a nonattainment area.
* * * * *Page 24: [1] Deleted Riha, Kristin 3/17/2014 10:43:00 AM 

## 7. Impact of the Nort h Carolina v. EPA Decision on De terminations and Presumptions As mentioned earlier, the Court remanded the CAIR to the EPA and later decided not to vacate the rule. In the process of remanding the CAIR, the Court iden tified serious concerns with the EPA’s reading of the statute and analytical approach, including such core issues as the Agency’s method of evaluating significant contributio n to nonattainment an d interference with maintenance of the NAAQS. Th e EPA notes that the Co urt also reitera ted some of its concerns in the NRDC v. EPA decision with the CAIR and the EPA’s use of a regional cap-and-trade program to address interstate tran sport of emissions between states. 1


## Given that the Cour t has remanded the CA IR, the Agency believ es that any prior determination that compliance with th e CAIR would const itute RACT for NO x 

## for EGUs for purposes of the Phase 2 Oz one Implementation Rule can no longer be considered reliable. Those determinations were implicitly based upon the continued existence of the CAIR an d its specific requirements. In making the dete rminations, the EPA evaluated the controls that EGUs in those areas would be likely to install given the specific requirements of the CAIR, and th e choices that such sources would make given the specific cap-and-trade featur es of the CAIR . Further, in
NRDC v. EPA , the Court explicitly rejected the Agency ’s conclusion that compliance with the
NO x 

## SIP Call would constitute RACT for EGUs in nonattainment areas because there was inadequate technical basis or justification for such a conclusion. 2 

## The EPA believes that after the

1 

## See NRDC v. EPA , 571 F.3d 1245 at 1256-57. 2 

## The EPA notes that the Cour t also considered the issue of potentially outdated RACT determinations in the context of “RACT certifi cations” in the Phase 2 Ozone Implementation Rule. The Court approved of EPA’ s case-by-case approach to evaluate the continued viability of past RACT determinations, in part because “[i]f a state is presented with information indicating that a previous RACT de termination is inappropriate, the stat e must consider that information and modify its RACT dete rminations accordingly.” NRDC v. EPA , 571 F.3d 1245 at 1254-55.

## remand of the CA IR, the prior EPA determinations th at compliance with the CAIR would automatically constitute RACT fo r EGUs in nonattainment areas su ffers from a comparable lack of an adequate technical basis or justification. Moreov er, because other rule s such as the CSAPR will by necessity differ from the CAIR as a re sult of the Court’s remand of the CAIR, the EPA concludes that any reliance on th e prior determinations at this time would be inappropriate. Therefore, in this action the EPA is proposing to withdraw the prior ar ea-specific determinations that the EPA made in conn ection with the Phase 2 Ozon e Implementation Rule. The EPA’s prior conclusi on that a state could presume that the CAIR would constitute NO x 

## RACT for EGUs for purposes of the ozone NAAQS, even in areas where th e EPA did not make a formal determination, is also no longer reliable for the same reasons. That presumption also assumed continued existence of the CAIR and it s specific requirements. Similarly, EPA’s prior conclusion that a state could pr esume that compliance with the CAIR would constitute both NO x 

## RACT/RACM and SO 2 

## RACT/RACM for EGUs for purposes of the PM 2.5 

## NAAQS is also no longer reliable. Therefor e, in this act ion the EPA is propos ing to withdraw our prior presumption that EPA announced for purposes of the ozone NAAQS in the Phase 2 Oz one Implementation Rule and our prior presump tion that the EPA announced for purposes of the PM 2.5 

## NAAQS in the PM 2.5 

## Implementation Rule. B. Analysis of the Economic Feasibility of Reasonably Av ailable Contro ls in the PM 2.5 

## Implementation Rule Section 172(c)(1) requir es that sources locat ed in nonattainment areas meet RACM and RACT level control re quirements. In the PM 2.5 

## Implementation Rule, the EPA promulgated

The EPA concludes that the same logic would extend to prior determinations that the CAIR constituted RACT, in light of subsequent events.

## regulations to implemen t this requirement, amon g others, for the 1997 PM 2.5 

## NAAQS. 3 

## In addition, in the prea mble to the final PM 2.5 

## Implementation Rule, the EPA provided extensive guidance for states about how to evaluate sources for RACM and RACT level controls. 4 

## Although section 172(c)(1) does not itself sp ecify how to determine wh at constitutes RACM or RACT level controls, the EPA has a long history of interpre ting those terms both in prior guidance and as applied in many SIP actions. The petiti on for reconsideration of the final PM 2.5 

## Implementation Rule filed by Earthjustice asserts that the EPA unlawfully an d arbitrarily revised well-established criteria used to determine the economic feasibility of contro ls being considered for RACT, without any expl anation of the legal or policy arguments in support of the new interpretation of the statute. 5 

## The petition further claims that the new approach directly contradicts the approa ch included in the proposed PM 2.5 

## Implementation Rule and that thes e new interpretations were adde d to the final rule after the close of the public comment peri od. For this reason, th e petition argues that the EPA unlawfully failed to present the new criteri a for economic feasibility of RA CT to the public for comment. The petition main tains that the final PM 2.5 

## Implementation Rule in cludes the following new policies which were not subject to an opportunity for public comment: (1) consideration of economic feasibility encompasses whether the cost of a measure is reasonable to bear in light of the benefits; (2) there is no pres umption that a given source must bear a similar cost to other similar sources; and (3) states may evaluate equity consid erations in we ighing economic

3 

## See 40 CFR 51.1010. 4 

## See PM 2.5 

## Implementation Ru le, 72 FR 20609– 33. 5 

## See “Petition for Reconsideration,” f iled by Paul Cort, Earthjustice, on behalf of the American Lung Association, Medical Advo cates for Healthy Air, Natural Resources Defense Council, and the Sierra Club (June 25, 2007). A copy of the petition is in the docket for this action.

## feasibility. 6 

## The petition states that these are significant changes in longstanding EPA policy and interpretation of the RACT requ irement for nonattainment areas. In particular, the petitioner argues that “[e]conomic feasibilit y is not a cost-benefit analysis.” The petitioner also argues that the EPA’s longstanding policy, wh ich was reiterated in the preamble to the proposal for the
PM 2.5 

## Implementation Rule, maintained that absent other indications, it is reasonable for a source to bear similar costs of emissi on reduction as are borne by s imilar sources in the same source category. In light of the arguments raised in the petition, the EPA decided to grant the petition for reconsideration on this issue. 7 

## Accordingly, after reconsidera tion and for the reasons explained further, the EPA is proposing in this action to re move the section of guidance in the preamble to the final PM 2.5 

## Implementation Rule that in cluded the new interpretati ons of RACT objected to by the petitioner. The EPA is also proposing to replace this section of the guidance with the EPA’s long-standing polic y on economic feasibility for RACT as described in the proposed
PM 2.5 

## Implementation Rule. 8 

## A basic element of th is policy is the presumption that a source in a given category should be ab le to bear a cost of control simila r to the cost of control of other sources in that category. 9 

## The original po licy did not includ e factors such as “equity” and “profit margins” in determining whether a gi ven level of contro l is appropriate. C. RFP Requirements for the 1997 PM 2.5 

## NAAQS

6 

## The new guidance objected to by the petitioner appears in sectio n II.F.5.b of th e preamble to the final PM 2.5 

## Implementation Rule . See 72 FR 20619-20. 7 

## See letter dated April 25, 2011 from Lisa Jackson to Pa ul Cort, Earthjustice. A copy of this letter is located in the docket for this action. 8 

## See Proposed Rule To Implement th e Fine Particle National Ambi ent Air Quality Standards, 70 FR 65984 (November 1, 2005). The section of th e preamble appear s at 70 FR 66021-22. 9 

## See Title I General Preamble, 57 FR 13498 (April 16, 1992) for the ba sis of this policy.

## 1. Linkage between the RFP Policy in the Phas e 2 Ozone Implementa tion Rule and the PM 2.5 

## Implementation Rule The Phase 2 Ozone Implementation Rule and the PM 2.5 

## Implementation Rule each included a policy allowing emission reductions from certain source s located outside of a nonattainment area to be credited toward mee ting the RFP requirement for th e 1997 8-hour ozone NAAQS and the 1997 PM 2.5 

## NAAQS within such a nonatt ainment area. In these acti ons, the EPA used somewhat different approaches with respect to how states could take credit for em ission reductions from outside the nonattainment area. In response to a petition for reconsiderat ion of the Ph ase 2 Ozone Implementation Rule concerning this policy and other issues, the EPA proposed to revise the policy for the 1997 8-hour ozone NAAQS on December 22, 2010 (75 FR 80420). This action is being propos ed in response to a pe tition for reconsidera tion concerning the RFP policy in the PM 2.5 

## Implementation Rule. Howe ver, to understand this proposed change in RFP policy with respect to the PM 2.5 

## Implementation Rule, it is importa nt to also understand related actions and court decisions with respect to this issue in the Ph ase 2 Ozone Implementation Rule. A chronology of rulemaking and litigation with resp ect to the RFP policy is described in detail in the next subsection. 2. Rulemaking and Litiga tion Chronology of RFP Requireme nts for the 1997 Oz one NAAQS and the 1997 PM 2.5 

## NAAQS Under the EPA’s Phase 2 Ozone Implemen tation Rule, certain emis sion reductions from sources located outside a nonatta inment area could be credited toward m eeting the 1997 8-hour ozone NAAQS RFP requirement. In th e preamble to that Rule, the EPA stated that credit could be taken for volatile orga nic compounds (VOC) and NO x 

## emission reduc tions within 100 kilometers (km) and 200 km, re spectively, from outsi de the nonattainment area under certain

## circumstances. In addi tion, if a regional NO x 

## control strategy was in place in a state, NO x 

## reductions within th at state beyond 200 km coul d be credited toward m eeting the RFP target. In all cases, however, states had to include a demonstration that the emissions from outside the nonattainment area had an impact on ambient ozon e air quality levels w ithin the nonattainment area and emissions from th e sources outside the ar ea providing the reductions would have to be added to the baseline inventory for the nonattain ment area. The EPA expl ained that where data indicated that emis sion reductions from s ources outside a nonattainm ent area improved ozone air quality within the nonattainment ar ea, it was appropriate to allow states to take RFP credit for such reductions from outs ide the nonattainment area. This inte rpretation was cons istent with the policy the EPA had established und er the l-hour ozone standard "Guidance for Implementing the l- Hour Ozone and Pre-Existing PM 10 

## NAAQS.” 10 

## Earthjustice filed a pe tition for reconsiderat ion in Januar y 2006 on behalf of NRDC challenging the EPA’s interpretation that formed the basis of its policy fo r allowing credit for emission reductions outside the nonattainment area, namely the in terpretation that the intent of section 182(c)(2)(C) is to reduce ambient ozone con centrations within an area rather than to reduce emissions within the nonattainment area. 11 

## The petitioner clai med that the EPA’s interpretation and implementation of these provis ions were both unlawf ul and arbitrary. The petitioner also argued th at the rule was arbitrar y because it allowed the state to claim credit for emission reductions from select ed outside-the-nonattainment-ar ea sources without also adding

10 

## The memorandum is available on the EPA Technolog y and Transfer Network (TTN) Policy and Guidance page for Title I at this website: http://www.ep a.gov/ttn/oarpg/t1pgm.html. For a more complete discussion of EPA’s rationale for applying this interpretati on in the Phase 2 Ozone Implementation Rule, see 70 FR 71647-49. 11 

## This same petition also challenged EPA’ s determination within the Phase 2 Ozone Implementation Rule that, under certain circumstances, compliance with the requirements of the CAIR would consti tute RACT for NO x 

## emissions from EGUs located in states with in the CAIR region.

## emissions from other outside sources to the RFP baseline, even where those other sources impact air quality in the non attainment area. The EPA subseq uently published the PM 2.5 

## Implementation Rule, wh ere the Agency adopted a somewhat different approach for crediting e mission reductions from outside nonattainment

areas. 12 

## Section G.5.b of the preamble to the PM 2.5 

## Implementation Rule al lowed states to take credit for reductions of NO x 

## and SO 2 

## emissions up to 200 km from outside the nonattainment area (and potentially for reductions of VOC or ammonia as well) only when certain conditions are met, including that wh en taking RFP credit for emissions reductions achieved outside of a nonattainment area, the baseline emissions inventory for the nonattainment area contain all, rather than a select few, sources in the outside area. 13 

## The primary objective of this policy was to reflect the net emission reductio ns in the area outside of a nonattainment ar ea that could affect the nonattainment area rather than creditin g only reductions from selected sources. In June 2007, the EPA r eceived a petition for reconsiderati on filed by Earthjustice on behalf of several petitioners (including NR DC) that raised obj ections to the PM 2.5 

## Implementation Rule on several issues, includi ng the RFP policy allowing credit for emission re ductions from outside the nonattainment area. 14

12 

## See PM 2.5 

## Implementation Ru le, 72 FR 20586. 13 

## In addition, where stat e RFP plans rely on emission reductio ns outside of a nonattainment area to meet the RFP obligations, su ch plans must include a techni cal demonstration showing that such outside emissions si gnificantly affected the PM 2.5 

## concentrations with in the nonattainment area. In addition, the area outsid e the nonattainment area from wh ich creditable reductions are taken must be within the state; areas outside the state but within 200 km would not be eligible for credit for RFP purposes. 14 

## This same petition raised concerns regardin g the criteria used to determine the economic feasibility of controls being considered fo r RACT for the 1997 PM 2.5 

## NAAQS. See “Petition for Reconsideration,” filed by Paul Co rt, Earthjustice, on behalf of the American Lung Association, Medical Advocates for He althy Air, Natural Resources Defens e Council, and the Sierra Club (June 25, 2007). A copy of the petition is in the docket for this action.

## Shortly thereafter, the EPA requested from the Court in July 2007, a partial voluntary remand of the Phase 2 Ozone Implementati on Rule to reevaluate and reconsider whether to revise the RFP interpretation for ozon e to assure consistency wi th the provisi ons in the PM 2.5 

## Implementation Rule. In response to the EPA's motion for a par tial voluntary remand of the ozone RFP policy, NRDC asked the Court to also to vacate this provisi on. In November 2007, the Court issued an order th at vacated and remanded the portion of the Phase 2 Ozone Implementation Rule that allowed RFP cred it for emission reduc tions of VOC and NO x 

## from outside nonattainment areas. On August 11, 2009 (74 FR 40074), the EP A issued a fi nal rule to revise the RFP policy in the Phase 2 Ozone Implementation Ru le to be consistent with the interpretation in the PM 2.5 

## Implementation rule. In July 2009, th e Court issued its decisi on on the other issues in the Phase 2 Ozone Implementation Rule case. 15 

## The Court examined the phrase “i n the area” included in separate provisions relating to re ductions from the applicatio n of RACT. As described previously in this notice, in the Phase 2 Ozone Implementation Rule, the EPA had explained that because an interstate emissions trading program would achieve beyo nd RACT-level NO x 

## reductions regionally, areas did not have to meet the RACT-level reduc tions required under CAA section 172(c)(1) solely from wi thin the nonattainment area. The Court, however , concluded that the phrase “in the area” means that reductions must occur from sources within the area and “reductions from outside th e nonattainment area do not satisfy the requirement.” 16 

## In October 2009, Earthjus tice filed a petition on behalf of NRDC for reconsideration of the August 2009 final rule revising the EPA’s interpretation in th e Phase 2 Ozone Implementation Rule allowing credit toward meeting the RFP requirement using emissions reductions from

15 

## See NRDC v. EPA , 571 F.3d 1245 (D .C. Cir. 2009). 16 

## Id. 571 F.3d at 1256.

## outside of ozone nonattainment areas . In its petition, the petitioner based its ob jections to the rule on the following gr ounds: 1) the Court’s decision on the RACT provisions in the Phase 2 Ozone Implementation Rule and its inte rpretation of the phrase “sources in the area” requires that RFP emission reductions also be ach ieved only from source s within the nonattain ment area; 2) the EPA had presented a new rationale in the August 2009 final rule, i.e. , there is some ambiguity in the statutory provisions because they do not prohibit credits for reductions from outside the nonattainment area, for which it did not provide an oppo rtunity for comment; 3) the EPA offered a new and arbitrary rationale fo r its choice of the 100 and 200 km distan ces for reductions outside the nonattainment ar ea; 4) the EPA st ated a new and arbitrary rationale, i.e. , creditable reductions outside a nonattainment area must be reasonably expect ed to provide ozone air quality benefits comparable to those fr om reductions in the area, for evaluating emissions reductions outside a nonattainment area; and 5) the EPA relied on a new rationale when it explained that sources that are outside the non attainment area are not necessari ly “nearby” for designations purposes and certain factor s would need to be considered for judging whether an area is “nearby” for those purposes. In May 2010, based on Earthjustice’s October 2009 petitio n for reconsideration, the EPA granted reconsideration of the A ugust 2009 final rule to revise the RFP po licy in the Phase 2 Ozone Implementation Rule, and st ated it would initiate a rule making to address the issue. 17 

## The EPA issued this propose d rulemaking on December 22, 2010 (75 FR 80420). In this proposed rulemaking, the EPA is a ddressing the petitioner’ s first objection and the EPA believes that the proposed action makes the other ob jections moot. Ther efore, the EPA did not address any of those subsequent points in the pr oposed reconsideration rulemaking.

17 

## See letter dated May 13, 2010, fr om Gina McCarthy to Davi d S. Baron and Paul Cort, Earthjustice. A copy of the letter is lo cated in the docket for this action.

## These developmen ts with respect to the RFP issue in the context of th e 1997 8-hour ozone NAAQS necessitate a reexamina tion of the comparable issu e for purposes of the 1997 PM 2.5 

## NAAQS. The petition for reconsideration of the PM 2.5 

## Implementation Rule filed in June 2007 by Earthjustice raised two main objections to the policy allowing certain emissions reductions from outside the nonattainme nt area to be credited toward meeting the RFP requirements for the 1997 PM 2.5 

## NAAQS. First, Earthjustice ar gued that the EPA committed a procedural violation by failing to solicit public comments on the policy. Second , the petitioner argue d that the policy lacks any standard for defining the geographic boundary of the area outside the non attainment area from which emission reductions could be credited. The petitioner noted that the policy “limits the surrounding area that can be included to a doughnut around the non attainment area of up to 200 kilometers.” 18 

## However, the petitioner object ed to the approach in the PM 2.5 

## Implementation Rule because it could allow a st ate to choose any port ion of that surrounding area for purposes of the RFP calculation; i.e. , a state need only show that emissi ons in the area selected substantially im pact ambient conc entrations in the nonattai nment area. The petitioner argued that there is no stated requirement that all areas substantially im pacting the nonattainment area be included. For these reason s, the petitioner claimed that th e RFP policy was unlawful and arbitrary. In light of the arguments raised by Earthj ustice’s June 2007 petition, the EPA decided to grant the petition for reconsideration on this issue. 19 

## Due to EPA’s proposed action to revise the RFP policy for the 1997 8-hour ozon e NAAQS, and upon reconsideratio n of the polic y for the 1997
PM 2.5 

## NAAQS, the EPA is proposi ng in this action to set aside its earlier interpretation of the

18 

## See PM 2.5 

## Implementation Ru le, 70 FR 20636. 19 

## See letter dated May 13, 2010 fr om Gina McCarthy to Davi d S. Baron and Paul Cort, Earthjustice. A copy of the letter is lo cated in the docket for this action.

## RFP provisions described in Section II.G.5.b of the preamble to the final PM 2.5 

## Implementation Rule and to no longer pe rmit states to rely on credit for emission reductions from outside the
PM 2.5 

## nonattainment area to meet such an ar ea’s RFP obligations.

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## B. Analysis of the Economic Feasibility of Reasonably Av ailable Contro ls in the PM 2.5 

## Implementation Rule The EPA has granted the petitioner’s re quest for reconsideration of the guidance in the preamble for the final PM 2.5 

## Implementation Rule regarding criteria for determining economic feasibility of RACT cont rols. Upon reconsiderati on, the EPA agrees that th e specific objections raised by the petition do reflect departures fro m prior EPA guidance on how to evaluate RACT. Given the specific statutory language of section 172(c)(1), and the EPA’s long-standing interpretation of what factors are appropriate for consideratio n of economic fe asibility in a RACT analysis, the EPA conclude s that the final guidance that the Agency provided for the
PM 2.5 

## Implementation Rule was inappr opriate in certain respects. The EPA also concludes that there was inadequate notice and opportunity for public comment for all of the departures from past guidance, and the departur es from the guidance as presen ted in the prea mble for the proposed PM 2.5 

## Implementation Rule

. Accordingly, th e EPA proposes to remove the guidance in qu estion from the preamble to the final PM 2.5 

## Implementation Rule, and to replace it with guidance very similar to what was included in the preamble to the proposed PM 2.5 

## Implementation Rule co ncerning the economic feasibility analysis component for determining what constitute s RACT. The EPA believes that reverting to the guidance as propos ed will be the most effective and efficient means to address the concerns related to inappropria te considerations that were set forth in the preamble to the final PM 2.5 

## Implementation Rule.

## In particular, this appr oach will remove what the EPA now concludes was incorrect guidance language in the final rule that suggested that the “economic feasibilit y” element of a RACT determination should include c onsideration of “wheth er the cost of a [c ontrol] measure is reasonable for the regulated entity to bear, in light of the benefits,” as the costs of control relative to the health benefits of a particular control te chnology should not be re levant to the technical determination of RACT. This language suggested that the economic feasib ility analysis should be a “cost/benefit” analysis, inst ead of the “cost effectiveness” type of analysis that it has historically been. Similarly, this ch ange will remove the prior statement in the final rule that there is “no presumption that a given source mu st bear costs similar to any other source,” because of source specific considerations such as “m arginal costs, profit ma rgin, and abilities to pass costs through to the consumer.” Upon recons ideration, the EP A does not believe that such considerations should override the longsta nding presumption that si milar sources should be able to bear similar costs, unless adequately and appropriately demons trated otherwise. A sour ce’s ability to “afford” a control can be a consideration. However, the inte nt of the policy is not to reward less efficient sources by allowing them to bear lower emission control costs than more efficient sources. Finally, re-establishment of the prior guidance referenced in the preamble to the proposed rule will remove the ambiguous refere nces to “equity considerations” as part of the RACT analysis, which in addition to deviating fro m prior guidance merely introduced uncertainty as to what this factor might mean, e.g. , equity between regulated entities or equity between sources and the health concerns of the public in the nonattainment area, or how such competin g equities might be balanced.

## In order to accomplish this revision to the guidance, we propos e in this action to remove the language in section II .F.5.b of the preamb le to the final PM 2.5 

## Implementation Rule (the section heading is: “What factors should states consider in determinin g whether an available control technology or measure is economically feasible?”), 20 

## and to replace it with the following language: What factors shou ld states consid er in determining wh ether an available co ntrol technology is economically feasible? Economic feasibility consid ers the cost of reducing emissi ons and the difference between the cost of the emissi ons reductions approach at the particular source an d the costs of emissions reductions approaches that ha ve been implemented at other similar sources. Absent other indications, the EPA presum es that it is reasonab le for similar sources to bear similar costs of emission reduction. Economic fe asibility for RACT purposes is largely determined by evidence that other sources in a source category have in fact applied the contro l technology or process change in question. The capital costs, annualized costs, and cost effectiveness of an emission reduction technology should be considered in de termining its economic feasibility. The EPA Air Pollu tion Control Cost Manual 21 

## describes procedures for determining these costs for stationary sources. A number of othe r sources of informatio n are available which provide updated informatio n on control technologies and associated costs of installation and operation. 22 

## The above costs should be determined for all technologically feasible emission reduction options. States may give substantia l weight to cost effectiveness in evaluating the reduction feasibility of an emission reduction technology. The cost effectivenes s of a technology is its annualized cost ($/year) divided by th e emissions reduced ( i.e. , tons/year) which yields a cost per amount of emission reduction ($/ton). Cost effectivenes s provides a value for each emission reduction option that is comparable with ot her options and other facilities. In considering what level of control is reasonab le, the EPA is not propo sing a fixed dollar per ton cost threshold for RACT. We be lieve that what is c onsidered to be a reas onable control level should vary based on the severi ty of the nonattainme nt problem in the area. In addition, we believe that in determin ing what appropriate emi ssion control levels are, the state should also consider the collective health benefits that can be realized in the area due to projected

20 

## This section of the preamble to the final PM 2.5 

## Implementation Rule appears at 72 FR 20619- 20. 21 

## See “EPA Air Pollution Control Cost Manual-Sixth Edition,” EPA Office of Air Quality Planning and Standards, Research Triangl e Park, NC, January 2002 . (EPA/452/B-02-001). 22 

## See STAPPA/ALAPCO, “Controlling Fine Particulate Matter Unde r the Clean Air Act: A Menu of Options,” March 2006; EPA’s RACT/BACT/LAER Clearingh ouse; regional air quality planning organizations; stat e air agencies; add others.

## improvements in air qualit y. The health benefits a ssociated with reducing PM 2.5 

## levels are significant. Using estimation techniques reviewed and deemed reasonable by the National Academy of Sciences, national monetized health benefits resulting from reductions in PM concentrations are es timated to exceed emission co ntrol costs by a factor of three to thirty times, depending on the particular controls on sources of PM precursor emissions. 23 

## This approach is consistent with the EPA’s view th at RACT may be related to what is needed for attainment. That is, for areas with more severe air quality problems th at typically will ne ed to adopt more stringent controls, RACT level co ntrols in such areas may requ ire controls at higher cost effectiveness levels ($/ton) than areas with less severe ai r quality problems. Areas with more serious air quality problems ty pically will need to obt ain greater levels of emissions reductions from lo cal sources than areas with less serious prob lems, and it would be expected that their residents coul d realize greater health benefits. For this reason, we believe that it will be reasonable and appropria te for areas with more serious air quality proble ms and higher design values to impose emission reduction re quirements with generally higher costs per ton of reduced emissions that th e cost of emissions re ductions in areas with lower design values. If a source contends that it cannot afford to implement the control technology that is considered to be RACT for certain other sources in its sour ce category, the source should support its claim with information describing the impact of impos ing RACT on its: Fixed and variable prod uction costs ($/unit), Product supply and de mand elasticity, Product prices (cost absorptio n vs. cost pa ss–through), Expected costs incurred by competitors, Company profits, and Employment costs. The EPA is soliciting co mments on replacing the previous section of the gu idance for RACT determinations with this language. To our knowledge, stat es did not utilize the specifi c guidance in the preamble to the PM 2.5 

## Implementation Rule that we are proposing to remove to alter any RACT determinations in nonattainment SIPs de veloped for the 1997 PM 2.5 

## NAAQS, so we anticipate that this change in the guidance will have no practical impact on SIPs already submitted to the EPA for approval. C. RFP Requirements for the 1997 PM 2.5 

## NAAQS

23 

## See “The Clear Skies Act: Technical S upport Package,” U.S. EPA, July 2003. See also: “Draft Regulatory Impact Analysis: C ontrol of Emissions from Non-ro ad Diesel Engines,” United States Environmental Protection Agency Of fice of Air and Radiat ion EPA420-R-03-008, April 2003.

## After reconsideration of the RFP policy raised by th e petitioner in the petition for reconsideration, and in light of the Cour t’s decision in the NRDC v. EPA case, the EPA is proposing in this action to set aside the Agency’s earlier inte rpretation of its RFP policy described in Section II.G.5.b of the preamble to the final PM 2.5 

## Implementation Rule and to interpret the CAA as not allowing states to rely on credit for emission reductions from outside the nonattainment area to me et such an area’s RFP re quirements fo r the 1997 PM 2.5 

## NAAQS. Specifically, the EPA is proposing that states may not take credit for em ission reductions from outside the nonattainm ent area to meet the area’s section 172(c )(3) RFP requirements for reductions within the n onattainment area. This revised policy would ap ply to implementation plans for the 1997 PM 2.5 

## NAAQS, and would apply to all areas wi th an approved attainment date beyond 5 years from the effective date of design ations that are required to submit an RFP plan per section 51.1009(c) of the PM 2.5 

## Implementation Rule. There may, however, remain valid policy reas ons for giving states incentive to focus on obtaining emission reduc tions that are the most beneficial and cost effective for attaining the
PM 2.5 

## NAAQS. Also, there may be case s where the most beneficial and cost-effective reductions are from sources located outside the designated nonattainment area boundaries. In these cases, there may be good policy reason to credit the emission reduc tions toward meeting RFP requirements. To this en d, the EPA is also taki ng comment on whether it would be appropriate for states to rely on emission reductions credit from outside the nonattainment area for RFP obligations, and under what lega l rationale consistent with the CAA would allow the EPA to adopt such an approach.