Document ID: EPA-HQ-OAR-2003-0079-1038
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2006-12-19T05:00Z

6560-50-P

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[EPA-HQ-OAR-2003-0079, FRL-XXXX-X]

RIN 2060-AJ99

Phase 2 of the Final Rule to Implement the 8-Hour Ozone National Ambient
Air Quality Standard –Notice of Reconsideration

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Notice of reconsideration; request for comment; notice of
opportunity for public hearing.

SUMMARY:  On November 29, 2005, EPA published Phase 2 of the final rule
to implement the 8-hour ozone national ambient air quality standard
(NAAQS).  Subsequently, EPA received a petition to reconsider specific
aspects of this final rule.  In this notice, EPA is announcing its
decision to reconsider and take additional comment on three provisions
in the final Phase 2 8-hour ozone implementation rule:  (1) the
determination that electric generating units (EGUs) that comply with
rules implementing the Clean Air Interstate Rule (CAIR) and that are
located in States where all required CAIR emissions reductions are
achieved from EGUs meet the 8-hour ozone State implementation plan (SIP)
requirement for application of reasonably available control technology
(RACT) for nitrogen oxide (NOx) emissions; (2) a new source review (NSR)
requirement allowing sources to use certain emission reductions as
offsets under certain circumstances; and (3) an NSR provision 
addressing when requirements for the lowest achievable emission rate
(LAER) and emission offsets may be waived.  The EPA is seeking comment
only on the three issues specifically identified in this notice.  We do
not intend to respond to comments addressing other provisions of the
final 8-hour ozone implementation rule that we are not reconsidering.

DATES:  Comments. Comments must be received on or before [INSERT THE
DATE 30 DAYS FOLLOWING PUBLICATION OF THIS NOTICE IN THE FEDERAL
REGISTER].  

	If a anyone contacts us requesting a public hearing by [INSERT 10 DAYS
AFTER PUBLICATION IN THE FEDERAL REGISTER], the hearing will be held on
[XXXINSERT DATE – likely 9/18/06], in [XXXINSERT LOCATION—likely
EPA/RTP].  ].  If a public hearing is requested, the record for this
action will remain open until [XXX INSERT THE DATE 30 DAYS FOLLOWING THE
PUBLIC HEARING] to accommodate submittal of information related to the
public hearing.  For additional information on the public hearing, see
the SUPPLEMENTARY INFORMATION section of this notice of reconsideration.

ADDRESSES:  Submit your comments, identified by Docket ID No.
EPA-HQ-OAR-2003-0079, by one of the following methods:

www.regulations.gov:  Follow the on-line instructions for submitting
comments.  

E-mail: a-and-r-docket@epa.gov.  

Mail:  EPA Docket Center, EPA West (Air Docket), Attention Docket ID No.
EPA-HQ-OAR-2003-0079, Environmental Protection Agency, Mail Code: 6102T,
1200 Pennsylvania Ave., NW, Washington, D.C. 20460.  Please include two
copies if possible.

Hand Delivery:  EPA Docket Center (Air Docket), Attention Docket ID No.
EPA-HQ-OAR-2003-0079, Environmental Protection Agency, 1301 Constitution
Avenue, N.W., Room B102, Washington, D.C.  Such deliveries are only
accepted during the Docket Center’s normal hours of operation, and
special arrangements should be made for deliveries of boxed information.
 NOTE:  The EPA Docket Center suffered damage due to flooding during the
last week of June 2006.  The Docket Center is continuing to operate. 
However, during the cleanup, there will be temporary changes to Docket
Center telephone numbers, addresses, and hours of operation for people
who wish to make hand deliveries or visit the Public Reading Room to
view documents.  Consult EPA's Federal Register notice at 71 FR 38147
(July 5, 2006) or the EPA website at www.epa.gov/epahome/dockets.htm for
current information on docket operations, locations and telephone
numbers.  The Docket Center’s mailing address for U.S. mail and the
procedure for submitting comments to www.regulations.gov are not
affected by the flooding and will remain the same.

Instructions:  Direct your comments to Docket ID No.
EPA-HQ-OAR-2003-0079.  The EPA's policy is that all comments received
will be included in the public docket without change and may be made
available on-line at www.regulations.gov, including any personal
information provided, unless the comment includes information claimed to
be confidential business information (CBI) or other information whose
disclosure is restricted by statute.  Do not submit information that you
consider to be CBI or otherwise protected through www.regulations.gov,
or e-mail.  The www.regulations.gov website is an “anonymous access”
system, which means EPA will not know your identity or contact
information unless you provide it in the body of your comment.  If you
send an e-mail comment directly to EPA without going through
www.regulations.gov, your e-mail 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, 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 EPA cannot read your comment due to technical difficulties
and cannot contact you for clarification, EPA may not be able to
consider your comment.  Electronic files should avoid the use of special
characters, any form of encryption, and be free of any defects or
viruses.  For additional information about EPA’s public docket, visit
the EPA Docket Center homepage at
http://www.epa.gov/epahome/dockets.htm.  For additional instructions on
submitting comments, go to the SUPPLEMENTAL INFORMATION section of this
document.

Docket:  All documents in the docket are listed in www.regulations.gov. 
Although listed in the index, some information is not publicly
available, i.e., CBI or other information whose disclosure is restricted
by statute.  Certain other material, such as copyrighted material, is
not placed on the Internet and will be publicly available only in hard
copy form.  Publicly available docket materials are available either
electronically in www.regulations.gov or in hard copy at the EPA Docket
Center (Air Docket), EPA/DC, EPA West, Room B102, 1301 Constitution
Ave., N.W., 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. For
information on accessing docket materials during the temporary closure
of the EPA docket center see note above.

FOR FURTHER INFORMATION CONTACT: For further information on the issue
relating to NOx RACT for EGU sources in CAIR States, contact Mr. John
Silvasi, Office of Air Quality Planning and Standards, U.S.
Environmental Protection Agency, Mail Code C539-01, Research Triangle
Park, NC 27711, phone number (919) 54l-5666, fax number (919) 54l-0824
or by e-mail at silvasi.john@epa.gov or Ms. Denise Gerth, Office of Air
Quality Planning and Standards, U.S. Environmental Protection Agency,
Mail Code C539-01, Research Triangle Park, NC 27711, phone number (919)
54l-5550, fax number (919) 54l-0824 or by e-mail at   HYPERLINK
"mailto:gerth.denise@epa.gov"  gerth.denise@epa.gov .  For further
information on the new source review issues discussed in this notice,
contact Mr. David Painter, Office of Air Quality Planning and Standards,
(C504-03), U.S. EPA, Research Triangle Park, North Carolina 27711,
telephone number (919) 541-5515, fax number (919) 541-5509, e-mail: 
painter.david@epa.gov.

SUPPLEMENTARY INFORMATION:

I.  General Information 

A. Does This Action Apply to Me?

1.  Issue on Determination of CAIR/RACT Equivalency for NOx EGUs

	Entities potentially affected by the subject rule for today's action
include States (typically State air pollution control agencies), and, in
some cases, local governments that develop air pollution control rules,
in the region affected by the.  Electric generating units (EGUs) are
also potentially affected by virtue of State action in SIPs that
implement provisions resulting from final rulemaking on today’s
action; these sources are in the following groups:  

Industry group	SICa	NAICSb

Electric Services	492	221111, 221112, 221113, 221119, 221121, 221122

a Standard Industrial Classification.

b North American Industry Classification System.

2.  NSR Issues

	Entities potentially affected by the subject rule for today's action
include sources in all industry groups. The majority of sources
potentially affected are expected to be in the following groups.

Industry group	SICa	NAICSb

Electric Services	492	221111, 221112, 221113, 221119, 221121, 221122

Petroleum Refining	291	324110

Industrial Inorganic Chemicals	281	325181, 325120, 325131, 325182,
211112, 325998, 331311, 325188

Industrial Organic Chemicals	286	325110, 325132, 325192, 325188, 325193,
325120,  325199

Miscellaneous Chemical Products	289	325520, 325920, 325910, 325182,
325510

Natural Gas Liquids	132	211112

Natural Gas Transport	492	486210, 221210

Pulp and Paper Mills	261	322110, 322121, 322122, 322130

Paper Mills	262	322121, 322122

Automobile Manufacturing	371	336111, 336112, 336211, 336992, 336322,
336312, 336330, 336340, 336350, 336399, 336212, 336213

Pharmaceuticals	283	325411, 325412, 325413, 325414

a Standard Industrial Classification.

b North American Industry Classification System.

Entities potentially affected by the subject rule for today's action
also include State, local, and Tribal governments that are delegated
authority to implement these regulations.

B. What Should I Consider as I Prepare My Comments for EPA?

	1.  Submitting CBI.  Do not submit this information to EPA through
www.regulations.gov or e-mail.  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 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.

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
today's notice is also available on the World Wide Web.  A copy of
today's notice will be posted at   HYPERLINK
"http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/" 
http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/  .

D. What Information Should I Know About the Public Hearing?

	If requested, EPA will hold a public hearing on today’s notice. The
EPA will hold a hearing only if a party notifies EPA by [INSERT THE DATE
10 DAYS FOLLOWING PUBLICATION OF THIS NOTICE IN THE FEDERAL REGISTER],
expressing its interest in presenting oral testimony on issues addressed
in today’s notice. Any person may request a hearing by calling Ms.
Pamela S. Long at (919) 541–0641 before 5 p.m.  by [INSERT THE DATE 10
DAYS FOLLOWING PUBLICATION OF THIS NOTICE IN THE FEDERAL REGISTER]. Any
person who plans to attend the hearing should visit the EPA’s Web site
at   HYPERLINK "http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/" 
http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/  or contact Ms. Pamela S.
Long at (919) 541–0641 to learn if a hearing will be held.

	If a public hearing is held on today’s notice, it will be held on
[xxx INSERT DATE – likely 9/18/06], 2006 at the EPA, Building C, Room
_____, 109 T.W. Alexander Drive, Research Triangle Park, NC 27709.  
Because the hearing will be held at a U.S. Government facility, everyone
planning to attend should be prepared to show valid picture
identification to the security staff in order to gain access to the
meeting room.  Please check our Web site at
http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/ for information and updates
concerning the public hearing.

	If held, the public hearing will begin at 10 a.m. and end at 2 p.m. 
The hearing will be limited to the subject matter of this document. 
Oral testimony will be limited to 5 minutes.  The EPA encourages
commenters to provide written versions of their oral testimony either
electronically (on computer disk or CD ROM) or in paper copy.  The list
of speakers, will be posted on EPA’s Web site at   HYPERLINK
"http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/" 
http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/  .Verbatim transcripts and
written statements will be included in the rulemaking docket.

	A public hearing would provide interested parties the opportunity to
present data, views, or arguments concerning issues addressed in
today’s notice.  The EPA may ask clarifying questions during the oral
presentations, but would not respond to the presentations or comments at
that time.  Written statements and supporting information submitted
during the comment period will be considered with the same weight as any
oral comments and supporting information presented at a public hearing.

	If a public hearing is held, the record for this action will remain
open until [XXX INSERT THE DATE 30 DAYS FOLLOWING THE PUBLIC HEARING] to
accommodate submittal of information related to the public hearing. 
Otherwise, if a hearing is not held, the record for this action will
remain open until [INSERT THE DATE 30 DAYS FOLLOWING PUBLICATION OF THIS
NOTICE IN THE FEDERAL REGISTER].

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 EPA?

C. 	Where Can I Get a Copy of This Document and Other Related
Information?

D. 	What Information Should I Know About the Public Hearing?

E. 	How Is This Notice Organized?

II. 	Background

A.  	NOx RACT for EGUs in CAIR States

1.  	Proposed and Final Rules and Guidance.  

2.  	Petition for Reconsideration.

B.  	New Source Review 

1. 	 Proposed and Final rules and Guidance.  

2.  	Petition for Reconsideration.

III. 	Today's Action

A.	  NOx RACT for EGUs in CAIR States

1.  	Reconsideration and Request for Comment on NOx RACT for EGUs in
CAIR States

2.  	Supplemental Technical Analysis

3.  	Request for Public Comment Period On Submission Date For RACT SIP
For NOx For EGUs In CAIR Region 

B.   	Provisions of Final Rule Regarding the Criteria for Emission
Reduction Credits from Shutdowns And Curtailments

1.  	Why We Changed Major Source NSR Criteria for Emission Reduction
Credits (ERC) from Shutdowns and Curtailments 

2.  	Legal Basis for Changes to Criteria for Emission Reduction Credits
from Shutdowns and Curtailments 

3.  	Reconsideration of Emission Reduction Credits Final Rule Language
and Request for Public Comments

C.   	Applicability of Appendix S, Section VI

1.  	Final Changes to Applicability of Appendix S, Section VI 

2.  	Legal Basis for Changes to Applicability of Appendix S and the
Transitional NSR Program

3.  	Reconsideration of Appendix S, Section VI Final Rule Language and
Request for Public Comments 

IV. 	Statutory and Executive Order Reviews

A. 	Executive Order 12866--Regulatory Planning and Review

B. 	Paperwork Reduction Act

C. 	Regulatory Flexibility Act (RFA), as Amended by the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et
seq.

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 Risks 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

V. Statutory Authority

II.  Background

On November 29, 2005, EPA published the final Phase 2 rulemaking to
implement the 8-hour ozone NAAQS (the Phase 2 Rule). That rule
established requirements relating to several specific elements of the
State implementation plans (SIPs) for nonattainment areas for the 8-hour
ozone standard including:  the attainment demonstration; the reasonably
available control technology (RACT) requirement; the reasonable further
progress (RFP) requirement; and new source review.  

The Natural Resources Defense Council (NRDC) filed a petition for
reconsideration dated January 30, 2006 under section 307(d) of the CAA
concerning three provisions of the Phase 2 rule. The EPA has granted the
petition and, in this notice, EPA announces its decision to reconsider
the three provisions discussed below and requests public comment on
these issues.

A.  NOx RACT for EGUs in CAIR States

1.  Proposed and Final Rules and Guidance.  In the Phase 2 rulemaking to
implement the 8-hour ozone NAAQS, EPA determined that EGU sources
complying with rules implementing the CAIR requirements meet ozone NOx
RACT requirements in States where all required CAIR emissions reductions
are achieved from EGUs only.  We noted that the CAIR final rulemaking
established a region-wide NOx emissions cap, effective in 2009, at a
level that, assuming the reductions are achieved from EGUs, would result
in EGUs installing emission controls on the maximum total capacity on
which it is feasible to install emission controls by that date.  In
addition, the CAIR’s 2015 NOx cap will eliminate all NOx emissions
from EGUs that are highly cost effective to control, and the 2009 cap
represents an interim step toward that end.   We also noted the
following in the Phase 2 rulemaking:

The EPA’s prior views on the details of the NOx RACT program were set
forth in the “NOx Supplement to the General Preamble,” November 25,
1992 (57 FR 55620).  In that document, EPA determined that in the
majority of cases, RACT will result in an overall level of control
equivalent to specified maximum allowable emission rates (in pounds of
NOx per million Btu) for certain specified electric utility boilers. 
Section 4.6 of this document (57 FR 55625) noted in part, “In general,
EPA considers RACT for utilities to be the most effective level of
combustion modification reasonably available to an individual unit. 
This implies low NOx burners, in some cases with overfire air and in
other instances without overfire air; flue gas recirculation; and
conceivably some situations with no control at all.”  The NOx
Supplement also provided, “. . . the State may allow individual
owners/operators in the nonattainment area (or, alternatively, Statewide
within an ozone transport region) to have emission limits which result
in greater or lesser emission reductions so long as the areawide average
emission rates described above are met on a Btu-weighted average.” (57
FR at 55625).  The NOx Supplement also set forth (in section 4.7)
guidance on RACT for utility boilers other than those specified in
section 4.6 and also for other source categories.  This section noted in
part, “In general, EPA expects that NOx RACT for these other sources
will be set at levels that are comparable to the RACT guidance specified
above [in section 4.6] . . .”  

“The [CAIR] budgets are based on the level of emissions that can be
achieved through highly cost-effective controls that EPA determined are
available from EGUs; however, States have flexibility to choose the
measures they will use to achieve the necessary emissions reductions. 
Due to feasibility constraints, EPA is requiring the CAIR budgets to be
achieved in two phases.  For summertime NOx, the first phase starts in
2009 (covering 2009-2014); the second phase of NOx reductions begins in
2015 (covering 2015 and thereafter).” (70 FR 71621).  We also noted in
the June 2, 2003, proposal that we considered highly-cost effective
controls for NOx for EGUs and non-EGUs that were used to establish the
Statewide NOx emission caps in the NOx SIP call to constitute a greater
level of control than RACT.  (68 FR 32839.)

In general, we expect that the largest-emitting sources will be the
first to install NOx control technology and that such control technology
will gradually be installed on progressively smaller-emitting sources
until the ultimate cap is reached. 

We do not believe that requiring source-specific RACT controls on EGUs
in nonattainment areas will reduce total NOx emissions from sources
covered by the CAIR below the levels that would be achieved under the
CAIR alone.  

We believe that source-specific RACT would result in more costly
emission reductions on a per ton basis.  We noted the following:  “As
discussed more fully in the CAIR final rulemaking, EPA has set the 2009
CAIR NOx cap at a level that, assuming the reductions are achieved from
EGUs, would result in EGUs installing emission controls on the maximum
total capacity on which it is feasible to install emission controls by
those dates.  The 2015 NOx cap is specifically designed to eliminate all
NOx emissions from EGUs that are highly cost effective to control (the
first cap represents an interim step toward that end).  In general, we
expect that the largest-emitting sources will be the first to install
NOx control technology and that such control technology will gradually
be installed on progressively smaller-emitting sources until the
ultimate cap is reached.” (70 FR 71657, col. 3).

The combination of source specific RACT and the CAIR emissions cap would
not reduce the collective total emissions from EGUs covered by the CAIR,
but would likely achieve the same total emissions reductions as the CAIR
alone, in a more costly way.  

As a result, we believe that EGUs subject to the CAIR NOx emissions cap
meet the RACT requirement for NOx (in States that require all CAIR NOx
reductions from EGUs).  

The EPA made the finding for all areas in the CAIR region, such that
States meeting the CAIR emissions reduction requirements with reductions
from EGUs only, need not submit RACT analyses for covered EGU sources
subject to and in compliance with rules implementing CAIR requirements.

2.  Petition for Reconsideration

	EPA received a petition for reconsideration of the final Phase 2 rule
from the Natural Resources Defense Council (NRDC).  This petition raised
several objections to EPA’s determination that, in certain
circumstances, EGUs in CAIR States may satisfy the NOx RACT requirement
for ozone if they comply with rules implementing the CAIR. 
Specifically, they argued that:

The EPA unlawfully and arbitrarily failed to seek public comment on the
final rule's determination that the CAIR satisfies NOx RACT
requirements.

The EPA’s CAIR-RACT determinations are unlawful and arbitrary because
EPA’s action illegally abrogates the Act’s RACT requirements.

	The EPA granted NRDC’s petition by letter of June 21, 2006.  In this
action, EPA is announcing the initiation of the reconsideration process
and requesting additional public comment on this issue.  Also, EPA is
supplementing the record with additional technical analyses that support
the determination that the CAIR satisfies the NOx RACT requirement for
covered EGUs.

B.  NSR Issues

1.  Our previous proposed and final rules

	The major NSR provisions in the November 29, 2005 Phase 2 rulemaking
were proposed as part of two different regulatory packages.  On July 23,
1996 (61 FR 38250), we proposed changes to the major NSR program,
including codification of the requirements of part D of title I of the
1990 CAA Amendments for major stationary sources of volatile organic
compounds (VOC), NOx, particulate matter having a nominal aerodynamic
diameter less than or equal to 10 microns (PM10), and CO.  On June 2,
2003 (68 FR 32802), we proposed a rule to implement the 8-hour ozone
NAAQS.  In the 2003 action, we proposed a rule to identify the statutory
requirements that apply for purposes of developing SIPs under the CAA to
implement the 8-hour ozone NAAQS (68 FR 32802).  We did not propose
specific regulatory language for implementation of NSR under the 8-hour
NAAQS.  However, we indicated that we intended to revise the
nonattainment NSR regulations to be consistent with the rule for
implementing the 8-hour ozone NAAQS (68 FR 32844).  On April 30, 2004
(69 FR 23951), we published a final rule that addressed classifications
for the 8-hour NAAQS.  The April 2004 rule also included the NSR
permitting requirements for the 8-hour ozone standard, which necessarily
follow from the classification scheme chosen under the terms of subpart
1 and subpart 2.

	In 1996, we proposed to revise the regulations limiting offsets from
emissions reductions due to shutting down an existing source or
curtailing production or operating hours below baseline levels
(“shutdowns/curtailments”).  We proposed substantive revisions in
two alternatives that would ease, under certain circumstances, the
existing restrictions on the use of emission reduction credits from
source shutdowns and curtailments as offsets. 

	On July 23, 1996, we proposed to revise 40 CFR 52.24 to incorporate
changes made by the 1990 CAA Amendments related to the applicability of
construction bans (61 FR 38305).  To clarify our intent, our proposed
8-hour ozone NAAQS implementation rule in June 2003 explained that
section 52.24(k) remained in effect and would be retained.  In that
action, we also proposed that we would revise section 52.24(k) to
reflect the changes in the 1990 CAA Amendments (68 FR 32846).  On June
2, 2003 (68 FR 32802), we explained implementation of the major NSR
program under the 8-hour ozone NAAQS during the SIP development period,
and proposed flexible NSR requirements for areas that expected to attain
the 8-hour NAAQS within 3 years after designation. 

	In the final regulations, we included several revisions to the
regulations governing the nonattainment NSR programs mandated by section
110(a)(2)(C) and part D of title I of the CAA.  First, we codified
requirements added to part D of title I of the CAA in the 1990
Amendments related to permitting of major stationary sources in areas
that are nonattainment for the 8-hour ozone, particulate matter (PM),
and carbon monoxide (CO) NAAQS.  Second, we revised the criteria for
crediting emissions reductions credits from shutdowns and curtailments
as offsets.  Third, we revised the regulations for permitting of major
stationary sources in nonattainment areas in interim periods between
designation of new nonattainment areas and EPA’s approval of a revised
SIP.  Also, we changed the regulations that impose a moratorium (ban)
prohibiting construction of new or modified major stationary sources in
nonattainment areas where the State fails to have an implementation plan
meeting all of the requirements of part D. 

	2.  Petition for reconsideration

The NRDC petition for reconsideration raised two objections to the major
NSR aspects of the Phase 2 rulemaking:

Allowing sources to use emission reductions as offsets if they occur
after the last day of the base year for the SIP planning process; and

Changes to Section VI of Appendix S allowing for waiver of nonattainment
major NSR requirements for some source categories.

The EPA granted the petition by letter of June 21, 2006 and in this
action EPA announces its decision to reconsider and to request
additional public comment on these issues.

III.  Today’s Action

A.  NOx RACT for EGUs in CAIR States

1.  Reconsideration and request for comment on NOx RACT for EGUs in CAIR
States

In this notice, EPA announces its decision to reconsider and request
additional comment on the finding that EGU sources complying with rules
implementing CAIR requirements meet ozone NOx RACT requirements in
States where all required CAIR reductions are achieved from EGUs only. 
This finding provided the basis for our determination that, for purposes
of meeting the NOx RACT requirement, States need not perform (or submit)
NOx RACT analyses for sources subject to a NOx trading program meeting
the CAIR NOx requirements (in a State achieving all CAIR reductions from
EGUs only).  According to this provision, States relying on this
conclusion for the affected EGU sources need to document their reliance
on EPA’s determination in their RACT SIPs.  A full discussion of
EPA’s rationale and the conditions under which the above determination
is valid appears in the Phase 2 Rule preamble at FR 71656-71658
(November 29, 2005).  

At this time, EPA is not proposing to make any changes to this
provision.  The petition for reconsideration did not provide information
sufficient to convince EPA that any aspect of the determination in the
final Phase 2 8-hour ozone rule was in error, and EPA’s supplemental
technical analysis further supports this determination.  However, EPA
acknowledges that the agency did not provide sufficient opportunity for
public comment on this determination and recognizes the significant
public interest in this issue and requests additional comment on the
approach described below.

	As explained in the preamble to the final Phase 2 Rule, EPA does not
believe that requiring source-specific RACT controls on EGUs in
nonattainment areas will reduce total NOx emissions from sources covered
by the CAIR below the levels that would be achieved under the CAIR
alone.  As discussed more fully in the CAIR final rulemaking, EPA has
set the 2009 CAIR NOx cap at a level that, assuming the reductions are
achieved from EGUs, would result in EGUs installing emission controls on
the maximum total capacity on which it is feasible to install emission
controls by that date.  Under cap-and-trade programs such as the CAIR
program, there is a direct relationship between the total number of
allowances held by participating sources and the collective emissions
from those sources.  Source-specific control requirements (such as
source-by-source RACT) layered on top of the overall allowance-based
emissions cap may affect the temporal distribution of emissions (by
reducing banking and thus delaying early reductions) or the spatial
distribution of emissions (by moving them around from one place to
another), but such requirements do not affect total allowed emissions in
the CAIR region.

Furthermore, we believe that source-specific RACT could result in more
costly emission reductions on a per ton basis.  The 2015 NOx cap is
specifically designed to eliminate all NOx emissions from EGUs that are
highly cost effective to control (the first cap represents an interim
step toward that end).  In general, we expect that the largest-emitting
sources will be the first to install NOx control technology and that
such control technology will gradually be installed on progressively
smaller-emitting sources until the ultimate cap is reached.  If States
chose to require smaller-emitting sources in nonattainment areas to meet
source-specific RACT requirements by 2009 (the required compliance date
for RACT), they would likely use labor and other resources that would
otherwise be used for emission controls on larger sources.  Because of
economies of scale, more boiler-makers (skilled workers needed to
install control equipment on EGUs) and other resources may be required
per megawatt of power generation for smaller units than for larger
units.  Thus, the cost of achieving such reductions would be greater on
a per ton basis.  If source-specific requirements are strategically
targeted at the units that can be controlled most cost effectively, then
the imposition of source-specific controls would achieve the same
temporal and spatial distribution of controls as the projected CAIR
cap-and-trade program.  If not, however, the imposition of
source-specific requirements would make any given level of emission
reduction more costly than it would be under the cap-and-trade program
alone.  Thus, in States that achieve all CAIR reductions from EGUs,
requiring both source-specific RACT on EGUs and compliance with rules
implementing the CAIR would not reduce the collective total emissions
from EGUs covered by the CAIR, but would likely achieve the same total
emissions reductions as the CAIR alone, in a more costly way.  

	The CAIR is implemented on an annual and (for ozone) a seasonal basis,
but we believe  that the averaging basis on which RACT is being
implemented under the Phase 2 Rule is not in conflict with existing EPA
policy.  In general, the RACT requirement is applied on a short-term
basis up to 24 hours.  However, EPA guidance permits averaging times
longer than 24 hours under certain conditions.  Although these earlier
EPA guidance documents were directed at VOCs, the NOx Supplement to the
General Preamble  provides, “While this guidance has been largely
directed at application within the VOC program, much of the guidance is
also applicable to RACT for stationary sources of NOx.”  Section 4.6
(“RACT for Certain Electric Utility Boilers”) of the NOx Supplement
provides generally applicable NOx RACT emission rates for certain
utility boilers on a pounds of NOx per million Btu basis and indicates,
“Compliance with these limits may be determined on a continuous basis
through the use of a 30 day rolling average emission rate, calculated
each operating day as the average of all hourly data for the
pr[e]ceeding 30 operating days.”

	However, other EPA guidance and policy allow for longer averaging times
in certain circumstances.  The EPA’s “Economic Incentive Policy” 
provides guidance on use of long-term averages with regard to RACT and
generally provides for averaging times of no greater than 30 days. 
However, that guidance also states, “For NOx sources that are required
to comply with the [Ozone Transport Region] NOx MOU regulation or the
NOx SIP call, the averaging time of an emission limit must not exceed a
compliance period of an area’s ozone season.  Sources involved with
EIP trades must meet all requirements applicable to the program.”  The
EPA interprets this policy as applying to all trading programs and
providing that the averaging time may not exceed the period for
determining compliance with the trading program (e.g. for the CAIR
annual trading programs – one year and for the CAIR ozone season
trading program - the ozone season).	The EPA also believes that
emissions reductions from the CAIR will continue to be applied for the
most part on a permanent basis.  The EPA believes that EGUs covered by
the CAIR that install permanent controls will generally reduce their
emissions for an extended period of time and not fluctuate in their
level of control significantly over short periods.  Sources that comply
with the CAIR comply with the overall NOx emission caps on an annual and
(for ozone) a seasonal basis.  We note that sources covered by the CAIR
are expected to reduce emissions to either comply with State emission
limits (or to “overcontrol” beyond mere compliance and create
surplus emission reduction credits that would be used to provide
allowances to under-controlling sources) through permanent installation
of emission controls such as selective catalytic reduction or selective
non-catalytic reduction or combustion modification.  As we noted in the
Phase 2 Rule preamble in relation to the NOx SIP call, “In addition to
operating advanced controls at least in the ozone season, many sources
have installed combustion controls that function all the time; emissions
reductions from these controls will occur year round.” (70 FR 71656). 
Therefore, because of the general level of permanence of the controls on
individual sources, EPA believes that sources that install controls will
generally continue to provide the level of control for an extended
period of time.

For these reasons, we continue to believe that EGUs subject to rules
implementing the CAIR NOx emission reduction requirements satisfy the
RACT requirements for NOx (in States that require all CAIR NOx
reductions from EGUs).  Thus, at this time, EPA is not proposing to make
any changes to the determination concerning NOx RACT for EGUs in CAIR
States in the Phase 2 Rule.  EPA continues to support its determination
that States achieving all CAIR reductions from EGUs need not submit RACT
analyses for EGU sources that are subject to and in compliance with
rules implementing the CAIR requirements.  

	The determination that EGU sources complying with rules implementing
CAIR requirements thereby also meet ozone NOx RACT requirements applies
only to EGUs in States achieving all required CAIR reductions from EGUs.
 As explained in the preamble to the final Phase 2 Rule, under the CAIR,
a State may elect to meet its State budget for NOx emissions solely
through requiring reductions from EGUs or through requiring reductions
from a combination of sources, including non-EGUs.  If the State
requires reductions from sources other than EGUs, it is not eligible to
participate in the EPA-administered CAIR trading programs. 
Additionally, separate provisions of the CAIR rule allow States to
choose to allow large NOx sources that are not EGUs to opt-in to the
trading programs.  States that elect to allow such opt-ins, and States
that require reductions from sources other than EGUs in implementing
CAIR, may not rely on EPA’s determination that EGUs complying with
rules implementing the CAIR satisfy NOx RACT.  If only part of the CAIR
reductions are required from EGUs, and the balance of the reductions
obtained from non-EGU sources, then the stringency of the CAIR EGU
control would be diminished to some extent (an amount that cannot be
determined until a State submits a SIP indicating which sources are
participating in the program).  Therefore, in these cases, the rationale
for our determination that these sources satisfy the RACT requirement
would not apply.

	Nonetheless, a State that elects to bring its NOx SIP Call non-EGU
sources into the CAIR ozone season trading program may continue to rely
on EPA’s determination that RACT is met for EGU sources covered by the
CAIR trading program.  It may rely on this determination if and only if
the State retains a summer season EGU budget under the CAIR that is at
least as restrictive as the EGU budget that was set in the State(s NOx
SIP call SIP. The rationale for this determination is that the sources
covered by the NOx SIP call were shown to meet a level of NOx control
that exceeds EPA’s presumption of control under NOx RACT.  Note that
EPA is not reconsidering or requesting additional comment on its
determination that the NOx SIP Call constitutes RACT for sources covered
by the NOx SIP Call.  Therefore, as explained in the final Phase 2 Rule,
if the summer season EGU budget under CAIR is at least as restrictive as
set out in the NOx SIP call SIP, then those EGUs are meeting a level of
control at least as stringent as RACT.  (See 68 FR 32839, col 1
“Proposed Approach for NOx RACT Determinations in Areas Affected by
the NOx SIP Call;” and 70 FR 71656, col 3, “NOx SIP Call.”)  If
the State does not retain a summer season EGU budget under CAIR that is
at least as restrictive as the EGU budget set under the NOx SIP Call
SIP, the State would need to conduct RACT analyses for EGUs (either on
an individual basis, or using the averaging approach within the
nonattainment area).  

In addition, as we noted in the Phase 2 Rule, a State has discretion to
require beyond-RACT NOx reductions from any source (including sources
covered by the CAIR or NOx SIP Call programs), and has an obligation to
demonstrate attainment of the 8-hour ozone standard as expeditiously as
practicable.  In certain areas, States may require NOx controls based on
more advanced control technologies as necessary to provide for timely
attainment of the ozone standards.

2.  Supplemental Technical Analysis

To provide further support for the determination regarding CAIR and
ozone NOx RACT, EPA conducted additional technical analysis.  For each
geographic area where 8-hour ozone RACT determinations are required, EPA
examined whether the emissions reductions projected from CAIR equal or
exceed the emissions reductions projected to occur from application of
source-by-source RACT.  Specifically, this analysis was conducted for
each ozone transport region (OTR) State and for each nonattainment area
for which a RACT SIP, separate from an attainment demonstration SIP, is
expected to be required.  This analysis illustrates that the CAIR
achieves greater emissions reductions than would be achieved through the
application of source-by-source RACT controls in each of the relevant
areas.

a.  Analysis Data and Method

To conduct this analysis, EPA used the Integrated Planning Model (IPM)
and National Electric Energy Data System (NEEDS)  to project EGU
emissions reductions that will be obtained in the year 2010 under two
scenarios: (1) implementation of the CAIR, assuming all States in the
CAIR ozone region participate in the CAIR seasonal NOx trading program
and all States in the CAIR PM2.5 region (except Delaware and New Jersey)
participate in the CAIR annual NOx trading program and; (2) application,
on a source-by-source basis, of an assumed level of RACT to all EGUs in
areas for which a RACT SIP, separate from an attainment SIP, must be
prepared .

This analysis was conducted for each State in the OTR because all parts
of States in the OTR have an obligation under sections 182(f) and 184(b)
of the CAA to meet the requirements, including RACT, for major sources
of NOx as if the area were a moderate ozone nonattainment area. 42
U.S.C. section 7511a(f), 42 U.S.C. section  7511c(b); also 40 CFR
51.916. 

This analysis under the two scenarios described above also was conducted
for each 8-hour ozone nonattainment area for which a RACT SIP is
required separate from the attainment demonstration.  Under 40 CFR
51.912(a) , States must submit a RACT SIP separate from the attainment
demonstration for all subpart 2 8-hour ozone nonattainment areas
classified moderate or higher.  In addition, 40 CFR 51.912(c)(2)
requires States to submit a RACT SIP separate from the attainment
demonstration for all subpart 1 areas with attainment dates beyond 5
years after their 8-hour designation.  This separate RACT SIP must
address major sources of NOx – including EGUs.  EPA expects that
States may wish to rely on EPA’s NOx RACT determination for EGUs in
CAIR States when submitting these RACT SIPs.  

The EGUs in subpart 1 areas with attainment dates of 5 years or less are
subject to the NOx RACT requirement, but for these areas the RACT
requirement is satisfied by submission of a SIP that ensures attainment
as expeditiously as practicable.  Because States are not required to
submit separate RACT SIPs for these areas, EPA does not expect States to
rely on EPA’s NOx RACT determination in SIP submissions covering these
areas.   In these areas the RACT requirement does not ensure any
emissions reductions beyond those required for attainment purposes.  As
a result, the quantitative emissions reduction comparison below for the
CAIR scenario and the source-by-source RACT scenario does not include
these areas.

For these reasons, EPA’s analysis projected emission reductions for
the following 8-hour ozone nonattainment areas, regardless of whether
they are in an OTR State:

Moderate subpart 2 areas in the CAIR region (there are currently no
areas in the CAIR region classified higher than moderate).

( 	The Buffalo-Niagara Falls subpart 1 area.  (Buffalo-Niagara Falls is
the only subpart 1 area in the CAIR region that is projected to remain
in nonattainment in 2010 without further control programs.  Because
8-hour attainment SIPs are not yet due and we cannot reliably predict
whether the state will submit a SIP demonstrating attainment for the
Buffalo area within five years of designation, EPA is including this
area in the analysis. 

In comparing the projected emissions reductions from EGUs under the CAIR
and source-by-source RACT scenarios, we start from a 2010 EGU emissions
baseline.  This baseline reflects the impact of existing controls and
other controls projected to result from existing rules, (i.e., no CAIR
implementation, no 8-hour ozone RACT implementation).  Then, we estimate
the emissions reductions that CAIR would achieve, and the emissions
reductions that source-by-source RACT would achieve, relative to this
baseline.

The analysis under the CAIR scenario relied on the IPM model using the
NEEDS data base, both described above.  IPM provides forecasts of
least-cost capacity expansion, electricity dispatch, and emission
control strategies for meeting energy demand given certain
environmental, transmission, dispatch, and reliability constraints.  IPM
can be used to evaluate the cost and emissions impacts of proposed
policies to limit emissions of sulfur dioxide (SO2), NOx, carbon dioxide
(CO2), and mercury (Hg) from the electric power sector.  IPM is used by
the EPA to project the impact of emissions policies on the electric
power sector in the 48 contiguous States and the District of Columbia,
and the model is able to capture detailed information regarding the
power sector, including representations of the operating characteristics
of individual electric boilers and generators while also considering a
long-term horizon.  The model is capable of providing detailed regional,
state, and local projections, and EPA feeds emissions projections from
IPM into air quality modeling.  IPM has been used in support of Title IV
of the CAA, the NOx SIP call, the CAIR, The Clean Air Mercury Rule
(CAMR), and the Clean Air Visibility Rule (CAVR).  Documentation for the
model can be found on EPA’s website:   HYPERLINK
"http://www.epa.gov/airmarkets/epa-ipm/index.html" 
http://www.epa.gov/airmarkets/epa-ipm/index.html  .

The emission projections for the source-by-source RACT scenario rely on
IPM modeled projections of EGU electric generation and NEEDS data base
NOx rates with the assumed level of control.

b.  Assumptions Used in Analysis

For purposes of this analysis, EPA developed reasonable assumptions
about the level of control that EPA believes would be RACT for EGUs.  
However, the exact level of controls assumed for any particular unit
does not imply that this is necessarily RACT for that unit.   Further,
the assumed level of control also does not imply that there are no
additional emission reductions from these units that a State might need
to require in order to demonstrate attainment, since the attainment SIP
is separate from the RACT SIP. 

The assumptions regarding RACT for EGUs are outlined below:  

For EGUs that have already installed post-combustion controls (i.e., SCR
or SNCR) or state-of-the-art combustion controls or that are projected
to have such controls by 2010 under existing rules (e.g., NOx SIP Call
and/or State rules), EPA’s analysis assumes that no further controls
or emissions reductions would be required to meet NOx RACT. For purposes
of this analysis, state-of-the-art combustion controls are defined as:
1) low NOx burners with overfire air for wall-fired units and 2) low NOx
coal-and-air nozzles with close-coupled and separated overfire air for
tangentially-fired units. 

 For EGUs that have no emission controls or that are projected to have
no emission controls by 2010, or for EGUs that will have some level of
control less than state-of-the-art combustion controls, EPA assumed
“NOx RACT” to be any additional controls needed to achieve
state-of-the-art combustion control levels (e.g., a wall-fired unit with
low NOx burners would need to install overfire air).

 The analysis used a unit-by-unit technology requirement (rather than an
emission rate criterion) to determine what constitutes
"state-of-the-art” combustion controls for each unit as described
above.  Thus, emission reduction rates vary by unit.  The assumption
that all uncontrolled units will install state-of-the-art combustion
controls likely overstates the number of units that would, in fact,
install such controls because RACT is determined on a source-by-source
basis, and certain units may have unique constraints that could lead a
State to determine that combustion controls are not RACT for that unit. 
Thus, these assumptions lead to a more conservative estimate of
emissions reductions from the application of RACT (i.e. these
assumptions cause the model to predict greater reductions than would
likely occur through individual State RACT programs). 

No IPM projections were available for 2009.  Therefore, EPA projected
emissions reductions for 2010 to approximate the emissions reductions
expected to be achieved by 2009, which is both the last year for RACT
compliance in moderate 8-hour nonattainment areas and the year the first
phase of CAIR NOx reductions starts.  The EPA believes the 2010 data
provides a reasonable estimation of emissions reductions that would be
achieved in 2009 under the two scenarios because we do not expect
significant changes in fuel use patterns, levels of NOx control, or
power generation between 2009 and 2010.

The EPA analysis of projected emissions reductions under the two
scenarios described above also relied on the following assumptions: 

As noted above, EPA interprets the CAA to allow RACT to be met on an
area-wide basis through averaging rather than requiring every unit to
meet a RACT minimum level of control.  The analysis applied a RACT level
of control to all uncontrolled EGUs in covered areas; averaging would
allow some of these units to remain uncontrolled if others applied
controls beyond RACT.  Consistent with EPA guidance, this approach to
averaging ensures that actual emissions with RACT averaging are no
greater than if RACT were applied without averaging.

The EPA’s existing RACT guidance for EGUs indicates that EPA considers
RACT for utilities to be the most effective level of combustion
modification reasonably available to an individual unit.  (See 57 FR at
55626; November 25, 1992.)  However, the EPA analysis in support of this
notice of reconsideration makes the conservative assumption that, for
uncontrolled units, a level of combustion control would be employed now
that is more advanced than was available in 1992.  This conservative
assumption was made for purposes of this analysis only and does not
imply that EPA believes in any particular case that these more advanced
combustion controls are necessarily RACT.

The OTR States and (former) moderate and above 1-hour ozone
nonattainment areas were required to submit SIPs for the 1-hour standard
for NOx RACT on EGUs (or obtain a NOx waiver under section 182(g) of the
CAA).  The EPA has previously approved all these NOx SIPs (or approved
waivers).  The current analysis simulates control on uncontrolled EGUs
that were not required to install controls under the 1-hour SIPs.  This
is a conservative assumption; the lack of 1-hour controls may indicate
site-specific conditions that led to a determination that RACT was no
control for these sources. 

As noted, several of these assumptions are conservative.  As a result,
the projections of emissions reductions under the source-by-source RACT
scenario may exceed the emissions reductions that would actually occur.

c.  Results of Analysis

The EPA used these projections to examine whether the reductions
achieved as a result of the CAIR will equal or exceed those that would
be achieved by application of source-by-source RACT in each OTR State
and each nonattainment area for which a separate RACT SIP is required. 
This comparison illustrates that the CAIR program achieves greater
emissions reductions than would be attributable to the application of
source-by-source RACT controls in each of the specified areas.  The
results of the projections are presented and compared in Tables A and B.
 These initial projections, based on the conservative assumptions
discussed, show greater reductions from the CAIR program than from
application of RACT on a source-by-source basis to EGUs in each State in
the OTR and each nonattainment area required to submit separate RACT
analyses, with the exceptions of the State of Connecticut and the
Poughkeepsie, New York nonattainment area.  As explained below, the
source-by-source RACT projection for Poughkeepsie incorrectly identifies
the reductions attributable to RACT.  Further, the source-by-source RACT
analysis for the State of Connecticut is not relevant to the analysis of
whether the CAIR achieves greater reductions than RACT since RACT must
be met for each nonattainment area in Connecticut, and all of
Connecticut is within a nonattainment area. The analysis shows that in
all nonattainment areas in Connecticut, comprising all of Connecticut,
CAIR gets at least as much reduction as RACT. The specific situations in
these two areas are discussed in greater detail below.

i.  OTR States

The comparison for the OTR States is presented in Table A.  The results
for Connecticut, Massachusetts, Rhode Island, Delaware, and New Jersey
are included in this table since they are in the OTR.  However, the
entirety of each of these States is included in one or more
nonattainment areas.  These five States, therefore, must demonstrate to
EPA that RACT has been applied in each nonattainment area in their
State.  They are not allowed to substitute for this demonstration a
demonstration that RACT has been applied statewide.  Thus for these
States, the statewide projection is not relevant to this analysis. 
Instead, the results in Table B showing the reductions achieved in the
relevant nonattainment areas provide the appropriate basis for the
comparison of reductions under the CAIR versus the reductions from the
application of source-by-source RACT.  

In addition, for the State of Connecticut, this analysis overestimates
the NOx reductions to be achieved as a result of the application of
RACT.  IPM projects that one EGU in Connecticut, Bridgeport Harbor, will
install SCR by 2010 as a result of Connecticut’s participation in the
NOx SIP Call trading program, but IPM projects that this unit will not
install SCR under CAIR.  The SCR is attributable to the facility’s
plan to comply with the NOx SIP Call, but, due to projected changes in
the price of NOx allowances due to the CAIR, IPM projects that this
facility will not install SCR following 

implementation of CAIR.  Thus, the projections of emissions reductions
associated with the source-by-source RACT scenario in the State of
Connecticut are based on the assumption that the Bridgeport Harbor
facility will install SCR, but the projections associated with CAIR are
based on the assumption that the facility will not install SCR.  The
emissions reductions attributable to the SCR are 930 tons, and,
consequently, the emissions reductions projected in this analysis under
the RACT and CAIR scenarios differ by 930 tons.  Because installation of
the SCR is independent of the RACT requirement, the emissions reductions
associated with this SCR are not attributable to the application of RACT
in the State of Connecticut.  For this reason, EPA believes that the
projections of emissions reductions attributable to RACT overstate the
actual reductions attributable to RACT by 930 tons.  When the 930 ton
reduction resulting from the installation of the SCR is eliminated from
the projected emissions reductions under the RACT scenario, the
projections show that the total new reductions in the State of
Connecticut from the application of RACT are 0.  This is equal to the
emissions reductions projected from implementation of CAIR. 

	ii.  Relevant 8-hour Nonattainment Areas

Table B compares emissions reductions for the specified 8-hour
nonattainment areas.    The data in Table B suggests that all of the
nonattainment areas analyzed, with the exception of the Poughkeepsie, NY
area, would achieve greater reductions with the CAIR program than if
RACT were applied.  The initial RACT projection for the Poughkeepsie, NY
nonattainment area does not take into account the recent installation of
low NOx burners on two coal-fired units and thus incorrectly identifies
the reductions attributable to application of RACT.  These controls were
installed after the control data for these units was finalized in the
IPM.  Because these controls were not accounted for, the projection for
emissions reductions attributable to RACT in the Poughkeepsie, NY area
assumed that these units would install state-of-the-art combustion
controls.  The total reductions attributed to these sources were 1,260
tons.  More recent data shows that these units already have combustion
controls in place.  As stated previously, the analysis assumes that NOx
RACT is assumed to be existing control for sources with controls already
in place.  Thus, when these existing controls are considered, the
analysis does not project any additional emission reductions due to
application of RACT to these sources.  For this reason, the combustion
controls and NOx rates under the CAIR program and under source-by-source
RACT for these units would be the same, and the CAIR and RACT policies
would get nearly identical levels of reductions for the Poughkeepsie
nonattainment area.

TABLE A—OZONE TRANSPORT REGION STATES

State Name	2010 CAIR Reductions* (tons)	2010 RACT Reductions* (tons)
Difference between

CAIR Reductions and RACT Reductions* (tons)

Connecticut**	-930	0	-930

Delaware	1,160	0	1,160

Maine	0	0	0

Maryland	43,410	730	42,680

Massachusetts	10	0	10

New Hampshire	30	0	30

New Jersey	5,550	0	5,550

New York	9,870	5,600	4,270

Pennsylvania	112,010	1,360	110,660

Virginia (Alexandria)	2,220	0	2,220

Grand Total	173,330	7,700	165,660

* The columns “CAIR Reductions” and “RACT Reductions” include
existing advance controls.  “RACT Reductions” include controls
projected to be in place by 2010 under existing rules (e.g., NOx SIP
Call and State rules) (as well as installation of state-of-the art
combustion controls on currently uncontrolled sources to simulate RACT
control on these units).

** See text for discussion.  The entire State of Connecticut is included
in nonattainment areas subject to the RACT (see list in Table B)
requirement and therefore the analysis of its nonattainment areas is the
more appropriate determinant.

TABLE B—MODERATE AND ABOVE 8-HOUR OZONE NONATTAINMENT AREAS AND
BUFFALO-NIAGARA FALLS NONATTAINMENT AREA

Nonattainment Area Name	2010 CAIR Reductions* (tons)	2010 RACT
Reductions* (tons)	Difference between CAIR Reductions and RACT
Reductions* (tons)

Baltimore, MD	19,870	250	19,620

Boston-Lawrence-Worcester (E. MA), MA	10	0	10

Buffalo-Niagara Falls, NY (Subpart 1)	4,310	710	3,600

Charlotte-Gastonia-Rock Hill, NC-SC	160	0	160

Chicago-Gary-Lake County, IL-IN	13,580	540	13,040

Cleveland-Akron-Lorain, OH	7,720	2,160	5,560

Greater Connecticut, CT	0	0	0

Houston-Galveston-Brazoria, TX	730	0	730

Jefferson Co, NY	0	0	0

Milwaukee-Racine, WI	0	0	0

New York-New Jersey-Long Island, NY-NJ-CT	1,550	0	1,550

Philadelphia-Wilmin-Atlantic Ci, PA-NJ-MD-DE	11,980	0	11,980

Poughkeepsie, NY**	0	1,260	-1,260

Sheboygan, WI	5,400	530	4,870

Springfield (Western MA), MA	0	0	0

St. Louis, MO-IL	7,150	50	7,100

Washington, DC-MD-VA	23,980	490	23,500

Grand Total	96,430	5,980	90,460

* “CAIR Reductions” and “RACT Reductions” include existing
advance controls.  “RACT Reductions” include controls projected to
be in place by 2010 under existing rules (e.g., NOx SIP Call and State
rules) (as well as installation of state-of-the art combustion controls
on currently uncontrolled sources to simulate RACT control on these
units).

.** See text for discussion.  There are two EGU sources in the analysis
for the Poughkeepsie area that were assumed to have no existing control,
but in actuality had combustion controls installed after the IPM runs
were completed for the analysis.  Thus this projection overstates
expected reductions as a result of RACT by 1260 tons. 

	3.  Request for  Public Comment Period on Submission Date For RACT SIP
for RACT SIPs for EGUs In CAIR Region

	Because EPA is reconsidering the RACT determination discussed above, we
believe it is appropriate to postpone the submission date for the
portion of the 8-hour ozone SIP that addresses NOx RACT for EGUs in the
CAIR region.  The EPA therefore proposes a new date of June 15, 2007 for
States in the CAIR region to submit RACT SIPs for these sources. 

	Such a postponement would affect only moderate 8-hour ozone
nonattainment areas in the CAIR region and only the portion of the RACT
SIPs that covers EGUs.  For moderate areas in the CAIR region, the
States must still submit RACT SIPs for all other affected sources per 40
CFR 51.912 (a) by September 15, 2006.

  SEQ CHAPTER \h \r 1 B.   Provisions of Final Rule Regarding the
Criteria For Emission Reduction Credits From Shutdowns And Curtailments

1.  Why We Changed Major Source NSR Criteria For Emission Reduction
Credits (ERC) From Shutdowns And Curtailments 

	The final 8-hour ozone implementation rule removed the requirement that
a State must have an approved attainment plan before a source may use
pre-application credits from shutdowns or curtailments as offsets.  It
also revised the availability of creditable offsets, consistent with the
requirements of section 173 of the CAA.  We revised the provisions at
section 51.165(a)(3)(ii)(C) and appendix S concerning emission reduction
credits generated from shutdowns and curtailments as proposed in
Alternative 2 of the 1996 proposal, with one exception.  Alternative 2
of the 1996 proposal provided that, in order to be creditable, the
shutdown of an existing emission unit or curtailing of production or
operating hours must have occurred after the “most recent emissions
inventory.”  We agreed with the commenter who found the regulatory
term “most recent emissions inventory” confusing.  In particular,
the commenter believed this language could be mistaken to mean that the
base year for the purpose of determining emissions that may be used as
creditable offsets would continue to shift.  The commenter noted that it
would be more accurate to state that the base year emissions inventory
is the starting point, and all creditable emissions reductions must
result from the shutdown or curtailment of emissions that have been
reported in the base year inventory or a subsequent emissions inventory.
 (For the 8-hour ozone NAAQS, the base year is   2002. )  We agreed with
the commenter that the terminology “most recent emissions inventory”
could be confusing and revised section 51.165(a)(3)(C)(1) and Appendix S
paragraph IV.C.3. accordingly, specifying the cutoff date after which
the shutdown or curtailment of emissions must occur as “the last day
of the base year for the SIP planning process.  For purposes of this
paragraph, a reviewing authority may choose to consider a prior shutdown
or curtailment to have occurred after the last day of the base year if
the projected emissions inventory used to develop the attainment
demonstration explicitly includes the emissions from such previously
shutdown or curtailed emission units.”  This provision is consistent
with the previous regulation which also allowed the reviewing authority
to treat prior shutdowns or curtailments as occurring after the date of
the most recent emissions inventory, but we have modified the regulatory
language to clarify the appropriate emissions inventory.  Further, this
regulatory language is consistent with our previous guidance on how
emission reduction credits from shutdowns and curtailments are used in
attainment planning.  The base year inventory includes actual emissions
from existing sources and would not normally reflect emissions from
units that were shutdown or curtailed before the base year, as these
emissions are not "in the air."  To the extent that these emission
reduction credits are to be considered available for use as offsets and
are thus “in the air” for purposes of demonstrating attainment, they
must be specifically included in the projected emissions inventory used
in the attainment demonstration along with other growth in emissions
over the base year inventory.  This step assures that emissions from
shutdown and curtailed units are accounted for in attainment planning. 
As with the prior rules, reviewing authorities thus retain the ability
to consider a prior shutdown or curtailment to have occurred after the
last day of the base year if emissions that are eliminated by the
shutdown or curtailment are emissions that were accounted for in the
attainment demonstration.  However, in no event may credit be given for
shutdowns that occurred before August 7, 1977, a provision carried over
from the previous regulation.  See 51.165(a)(3)(C)(1)(ii)  and 40 CFR
Part 51 Appendix S Paragraph IV.C.3.

	Other changes made to the provisions of the final Phase 2 Rule
regarding emissions reduction credits from shutdowns and curtailments
were nonsubstantive and merely clarified the restrictions on credits
from shutdowns or curtailments.  Specifically, the rule proposed on June
2, 2003 retained the requirement that a State have an approved
attainment demonstration before a source may use preapplication credits
from shutdowns or curtailments as offsets, but made that requirement
inapplicable where the credits occurred after the last day of the base
year for the SIP planning process or where they were included in the
most recent emissions inventory.  Our final rule recognized there is no
requirement for an approved attainment demonstration in those
circumstances, and thus deleted the reference to that former requirement
since under the revised rule it would never apply. 

2.  Legal Basis For Changes To Criteria For Emission Reduction Credits
From Shutdowns And Curtailments 

	The revisions made to the rules governing use of emissions reductions
from shutdowns/curtailments as offsets were warranted by the more
detailed attainment planning and sanction provisions of the 1990 CAA
Amendments.  These provisions specifically address air quality concerns
in nonattainment areas lacking EPA-approved attainment demonstrations. 
As a threshold matter, we noted (See 70 FR 71677, November 29, 2005)
that CAA section 173 does not mandate the prior restrictions on shutdown
credits, specifically, the requirement to have an approved attainment
demonstration before shutdown credits may be allowed.  (See 48 FR 38742,
38751; August 25, 1983).  Rather, in promulgating these restrictions in
1989, EPA recognized that it had a large degree of discretion under the
CAA to shape implementing regulations, as well as the need to exercise
that discretion such that offsets are consistent with reasonable further
progress (RFP) as required in CAA section 173.  (See 54 FR 27286, 27292;
June 28, 1989).  Originally, EPA believed that areas without approved
attainment demonstrations lacked adequate safeguards to ensure that
shutdown/curtailment credits would be consistent with RFP.  We thus
subjected those areas to more restrictive requirements to ensure a link
between the new source and the source being shutdown/curtailed (that is,
shutdown/curtailment must occur after the application for a new or
modified major source is filed).

	The 1990 CAA Amendments changed the considerations involved.  For areas
subject to subpart 2 of CAA Part D, Congress emphasized the emission
inventory requirement in section 172(c)(3) as a fundamental tool in air
quality planning (See Section 182(a)(1).  Congress also added new
provisions keyed to the inventory requirement, including specific
reduction strategies (e.g., section 182(b)(3) and (4) (regarding
gasoline vapor recovery and motor vehicle inspection and maintenance
programs))  and “milestones” that measure progress toward attainment
from the base year emissions inventory or subsequent revised inventories
(See section 182(b)(1)).  Where the emission reduction credits pre-date
the base year, State and local agencies must include the credits from
the shutdown/curtailment in the projected emissions inventory used to
develop the attainment demonstration.  Subpart 4 sets forth specific
reduction strategies and milestones for attainment of the PM10
standards.  Additionally, there are now several adverse consequences
where States fail to meet the planning or emissions reductions
requirements of the CAA.  For example, the CAA contains mandatory
increased new source offset sanctions at a 2:1 ratio where the
Administrator finds that a State failed to submit a required attainment
demonstration (See section 179).  In areas that are subject to subpart 2
and subpart 4, failure to attain the air quality standard by the
attainment deadline results in the area being bumped up to a higher
classification (see sections 181(b)(2) and 188(b)(2)).  Additional
regulatory requirements are imposed as a result of the higher
classification (see, e.g., section 182(c), (d), and (e), and section
189(b)).  These statutory changes justify shifting the focus of the
prior regulations from individual offset transactions between a specific
new source and shutdown source and towards a systemic approach. 
Considering the changes to the 1990 CAA Amendments, we now believe that
continuing the prohibition on the use of shutdown/curtailment credits
generated in a nonattainment area that is without an approved attainment
demonstration is not warranted.  We believe that use of emission
reduction credits from shutdowns/curtailments will be consistent with
RFP towards attainment under CAA section 173, even in the absence of an
approved attainment demonstration, if the shutdown or curtailment occurs
after the last day of the base year for the SIP planning process or is
included in the projected emissions inventory used to develop the
attainment demonstration.  From an air quality planning perspective,
emissions from the shutdown source actually impacted the measurements of
air quality used in determining the nonattainment status of an area. 
Therefore, emissions reductions from such source shutdowns/curtailments
are actual emissions reductions, and their use as emission offsets at a
ratio of 1:1 or greater is consistent with RFP towards improved air
quality as set forth in CAA section 173(a)(1)(A) provided they are
included in the baseline emissions inventory.

3.  Reconsideration of Emission Reduction Credits Final Rule Language
and Request for Public Comments

In its January 30, 2006, petition for reconsideration, NRDC requested
that EPA reconsider provisions in the final Phase 2 Rule that pertain to
ERC.  NRDC argued that EPA failed to present portions of the rule’s
“shutdown-curtailment offset provisions” and accompanying rationales
to the public for comment.  As noted above, the EPA is of the opinion
that the basis for the ERC provisions of the final rule were fully
explained in the November 29, 2005 rulemaking and in earlier actions
leading to that rulemaking.  The November 29, 2005 preamble included a
lengthy description of preceding actions in which our rationale was
developed.  Furthermore, the November 29, 2005 preamble detailed our
response to comments pertaining to the proposal.  The particular
comments that triggered the change in wording from usage of the term
“most recent emissions inventory” to the term “projected emissions
inventory used to develop the attainment demonstration” directly
resulted from public comments we received in response to the July 23,
1996 proposal.  The commenters voiced concerns that emission inventory
updates would periodically eliminate emissions that could be used as
emission reduction credits even though those emissions had been included
in the projected inventory to be used for establishing attainment
progress.  Such was not our intent and we changed the language specific
to the inventory in question in the interest of making a clarification. 
Petitioners assert in their request for reconsideration that our
clarifying amendments to the ERC provisions of the final rule were not a
logical outgrowth of the ERC provisions we proposed.  In contrast, we
saw our language change in the final rule as a technical clarification
and not as a change to the nature or scope of our proposal.

Nonetheless, we do see value in presenting the final rule language for
public comment as requested by the petitioners.  It was and is our
position that the changes reflected in the final rule were made in a
procedurally correct manner and that the public comments reflected in
the final rule were factually and logically compelling.  Nevertheless,
we encourage and welcome additional input.  At proposal, we presented
two options, one of which was adopted following our consideration of the
public comments.  We thus propose for reconsideration and seek public
comment on the ERC provisions in the final Phase 2 Rule set forth at
51.165  SEQ CHAPTER \h \r 1 (a)  SEQ CHAPTER \h \r 1 (3)(ii)(C)(1) and
(2), and Appendix S paragraph IV.C.3.

C  SEQ CHAPTER \h \r 1 .   Applicability of Appendix S, Section VI

1.  Final Changes to Applicability of Appendix S, Section VI 

Section VI allows new sources locating in an area designated as
nonattainment to be exempt from the requirements of Section IV.A. of
Appendix S if the date for attainment has not yet passed.  Section VI
provides a management tool to provide a limited degree of flexibility in
situations where a new source would not interfere with an area’s
ability to meet an attainment deadline.  The final Phase 2 Rule made a
procedural change to limit the applicability of appendix S, section VI
to only those instances in which the Administrator has specifically
approved doing so.  Although we did not include the regulatory language
to accomplish this goal in the June 2, 2003 proposal, we did clearly
state our intention of doing so.  As we noted at 68 FR 32848, section VI
as worded without any amendment could apply in any nonattainment area
where the dates for attainment have not passed even if the source meets
all applicable SIP emission limitations and would not interfere with the
area’s ability to meet its attainment date.  As codified prior to the
amendment in the Final Phase 2 Rule, section VI contained no provision
conditioning its applicability on approval by the Administrator.  We
noted at proposal, however, that States generally would not be able to
show that a nonattainment area would continue to meet its attainment
date if it does not apply LAER or offsets to major new sources and major
modifications in the absence of safeguards (68 FR 32848).

	Further, we stated in the preamble to the Phase 2 Rule that we
continued to believe, as we stated in the proposal, that States should
not interpret section VI as allowing a blanket exemption from LAER and
offsets for all major new sources and major modifications in a given
area before attainment dates have passed for that area.  At proposal, we
also offered for comment two broad programmatic proposals to modify the
then-existing section VI for the purpose of providing greater
flexibility. Overall, commenters considered the programmatic options to
be impracticable.  However most commenters did express support for the
flexibility provided by section VI.  For this reason, we retained the
original eligibility conditions for determining when section VI applies,
but added the  procedural requirement that the Administrator determine
that the two previously existing conditions of Section VI are satisfied,
and that  the Administrator provide public notice of that determination.
 Thus, in the final rule we retained the previously existing
requirements of Section VI, and added a further requirement that the
Administrator independently determine and provide public notice that
those requirements have been met.  This requirement will achieve the
proposal’s purpose of assuring that States do not interpret section VI
to provide a broad exemption to all major new sources and major
modifications in any nonattainment area for which the attainment date
has not passed.

2.  Legal Basis for Changes to Applicability of Appendix S and the
Transitional NSR Program

	For the purposes of today’s reconsideration, we will not expand our
prior expressions of the legal basis for section VI of Appendix S.  The
legal basis for Appendix S, including section VI, was discussed in
detail in section V.B.3.b. of the preamble to the final Phase 2 Rule. 
We have historically recognized that the SIP development period provided
for in section 172(b) leaves a gap in part D major NSR permitting and
have determined that this gap is to be filled with an interim major NSR
program that is substantially similar to the requirements of part D,
including the LAER and offset requirements from part D, subject to a
limited exemption where the attainment deadline will be met (57 FR
18070, 18076).  This interim NSR program has been implemented to date
through Appendix S. 

	The section VI exemption, as limited by the final Phase 2 Rule, is
consistent with the section 110(a)(2)(C) requirement that
preconstruction permitting is implemented “as necessary to assure that
the [NAAQS] are achieved.”  While the Phase 2 Rule did not adopt the
eligibility criteria that were proposed to ensure satisfaction of the
original section VI conditions, we did add the proposed requirement that
the Administrator determine that sources exempted from LAER and offsets
under section VI will meet those conditions, in particular,
noninterference with the attainment deadline.  Section VI also is
consistent with the exercise of our gap filling authority under section
301, as informed by the legislative history.  That is, Appendix S
reflects Congressional intent that standards equivalent to part D govern
the issuance of NSR permits, subject to a limited degree of flexibility
under conditions where attainment of the NAAQS by the attainment
deadline is assured.

3.  Reconsideration of Appendix S, Section VI Final Rule Language and
Request for Public Comments

In its January 30, 2006, petition, NRDC requested that EPA reconsider
provisions in the final Phase 2 Rule that pertain to Appendix S, section
VI.  NRDC argued that EPA failed to provide the public with an
opportunity to comment on the language of Appendix S, Section VI that
was included in the final rule. As is the case with respect to the ERC
provisions, EPA believes that our rationale was fully explained in the
November 29, 2005 rulemaking and in earlier actions leading to that
rulemaking.  The preamble to the final rule included a lengthy
description of preceding actions in which our rationale was developed. 
Further, the preamble to the final rule detailed our response to
comments pertaining to the proposal.  In our June 2, 2003 notice we
proposed two possible programs for the implementation of the provisions
contained in Section VI.  Commenters recommended against the proposed
approaches and we responded by dropping both proposed programs at
promulgation.  As noted above, what we did in the final rule was add one
provision to the already existing language of Appendix S, section VI to
limit use of Section VI to only those instances publicly approved of by
the Administrator.  Although we did not include in the June 2, 2003
proposal the regulatory language added to the final rule at Appendix S,
Section VI.C., we did clearly state our intention as to the change to be
made.  From our perspective, we made the smallest change possible and
achieved closure of a gap in section VI.  Thus, we disagree with the
petitioner’s assertion that the final rule language is not a logical
outgrowth of the proposal.  As well, we disagree with the petitioner’s
assertion that the final rule constitutes an open-ended scheme to evade
the strictures of Part D.  If anything, the prior rule language could
have been construed as open-ended.  The sole intention of our language
change was to close what we perceived to be a loophole allowing just the
type of outcome to which the petitioners object.  Congress required just
such closure through the provisions of the original section 129 as
included in the August 7, 1977 amendments to the Act.  At that time,
Congress made clear its opinion that it would be the role of the
Administrator to determine whether waiver of the appendix S provisions
in question might be appropriate.

The change made to Section VI in the final rule providing that the
Administrator must determine whether the conditions of Section VI have
been satisfied provides a positive safeguard to prevent just the kinds
of unchecked application of its provisions as envisioned by the
petitioners.  We continue to see section VI as a gap-filler that goes
away as of the attainment date.  It was and is our position that the
changes reflected in the final rule were made in a procedurally correct
manner and that the public comments reflected in the final rule were
factually and logically compelling.  Nonetheless, we see value in
presenting for public comment the changes made to Section VI of Appendix
S in the final Phase 2 Rule.  Therefore, we seek comment on subsection
C. of Section VI of Appendix S as added in the final Phase 2 rule as
requested by the petitioners.

Following today’s action, we anticipate two possible outcomes.  First,
should we not receive compelling arguments to the contrary, the
provision promulgated on November 29, 2005, and proposed today in
section VI.C. would remain as promulgated.  That is, the language
proposed herein is actually already codified in the Code of Federal
Regulations and we would make no further changes.  The second possible
outcome of our reconsideration of this provision could be that
commenters might make compelling arguments that it was inappropriate for
us to add to the final Phase 2 Rule the requirement of Section VI.C.
that the Administrator determine that requirements A and B of Section VI
have been satisfied and to provide notice of such determination.  Should
that occur, our final rule would consist of amendatory language to
revert the text of section VI to that which existed prior to November
29, 2005.  That is, we would retract section VI.C. and remove the
specification for the Administrator to be the determinant of when
section VI might be applied.  We invite comment on these two options. 
We currently believe that the correct approach is the approach we took
in the final Phase 2 Rule.  While section 129 has been amended to
address matters largely unrelated to those addressed in 1977, Congress
did previously legislate a course parallel to that which we have thus
far chosen to pursue.

IV.  STATUTORY AND EXECUTIVE ORDER REVIEWS

A.  Executive Order 12866: Regulatory Planning and Review 

This action is not a “significant regulatory action(  under the terms
of Executive Order (EO) 12866 (58 FR 51735, October 4, 1993) and is
therefore not subject to review under the EO. 

B.  Paperwork Reduction Act  

The information collection requirements in this reconsideration notice
will be addressed along with those covering the Phase 1 Rule (April 30,
2004; 69 FR 23951) and the Phase 2 Rule (November 29, 2005; 70 FR 71612)
which will be submitted for approval to OMB under the Paperwork
Reduction Act, 44 U.S.C. 3501 et seq.  The information collection
requirements are not enforceable until OMB approves them other than to
the extent required by statute.

This action announces EPA’s decision to reconsider and take additional
comment on several provisions of the Phase 2 Rule, namely the RACT
provisions and NSR provisions.  This action does not establish any new
information collection burden on States beyond what was required in the
Phase 2 Rule.

The EPA has not yet projected cost and hour burden for the statutory SIP
development obligation for the Phase 2 Rule but has started that effort
and will shortly prepare an Information Collection Request (ICR). 
However, EPA did estimate administrative costs at the time of
promulgation of the 8-hour ozone standard in 1997.  See Chapter 10 of
U.S. EPA 1997, Regulatory Impact Analyses for the Particulate Matter and
Ozone National Ambient Air Quality Standards, Innovative Strategies and
Economics Group, Office of Air Quality Planning and Standards, Research
Triangle Park, N.C., July 16, 1997.  Assessments of some of the
administrative cost categories identified as a part of the SIP for an
8-hour standard are already conducted as a result of other provisions of
the CAA and associated ICRs (e.g. emission inventory preparation, air
quality monitoring program, conformity assessments, NSR, inspection and
maintenance program).

The burden estimates in the ICR for the Phase 2 rule are incremental to
what is required under other provisions of the CAA and what would be
required under a 1-hour standard.  Burden means the total time, effort,
or financial resources expended by persons to generate, maintain,
retain, or disclose or provide information to or for a Federal agency. 
This includes the time needed to review instructions; develop, acquire,
install, and utilize technology and systems for the purposes of
collecting, validating, and verifying information, processing and
maintaining information, and disclosing and providing information;
adjust the existing ways to comply with any previously applicable
instructions and requirements; train personnel to be able to respond to
a collection of information; search data sources; complete and review
the collection of information; and transmit or otherwise disclose the
information.  

An agency may not conduct or sponsor, and a person is not required to
respond to a collection of information unless it displays a currently
valid OMB control number.  The OMB control numbers for EPA's regulations
in 40 CFR are listed in 40 CFR part 9.  When the ICR for the Phase 2
rule is approved by OMB, the Agency will publish a technical amendment
to 40 CFR part 9 in the Federal Register to display the OMB control
number for the approved information collection requirements contained in
this final rule.  However, the failure to have an approved ICR for this
rule does not affect the statutory obligation for the States to submit
SIPs as required under part D of the CAA.

The information collection requirements associated with NSR permitting
for ozone are covered by EPA(s request to renew the approval of the ICR
for the NSR program, ICR 1230.17, which was approved by OMB on January
25, 2005.  The information collection requirements associated with NSR
permitting were previously covered by ICR 1230.10 and 1230.11.  The OMB
previously approved the information collection requirements contained in
the existing NSR regulations at 40 CFR parts 51 and 52 under the
provisions of the Paperwork Reduction Act, and assigned OMB control
number 2060-0003.  A copy of the approved ICR may be obtained from Susan
Auby, Collection Strategies Division; U.S. Environmental Protection
Agency (2822T); 1200 Pennsylvania Ave., NW, Washington, DC 20460 or by
calling (202) 566-1672. 

C.     Regulatory Flexibility Act

The Regulatory Flexibility Act generally requires an Agency to prepare a
regulatory flexibility analysis of any rule subject to
notice-and-comment rulemaking requirements under the Administrative
Procedures Act or any other statute unless the Agency certifies 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 today(s notice of
reconsideration 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 12.201);
(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.

In promulgating the Phase 1 and Phase 2 Rules, we concluded that those
actions did not have a significant economic impact on a substantial
number of small entities. For those same reasons, I certify that this
action will not have a significant economic impact on a substantial
number of small entities.  This notice of reconsideration will not
impose any requirements on small entities.  We continue to be interested
in the potential impacts of our proposed rules on small entities and
welcome comments on issues related to such impacts.

	Concerning the NSR portion of this notice of reconsideration, a
Regulatory Flexibility Act Screening Analysis (RFASA) was developed as
part of a 1994 draft Regulatory Impact Analysis (RIA) and incorporated
into the September 1995 ICR renewal.  This analysis showed that the
changes to the NSR program due to the 1990 CAA Amendments would not have
an adverse impact on small entities.  This analysis encompassed the
entire universe of applicable major sources that were likely to also be
small businesses (approximately 50 “small business” major sources). 
Because the administrative burden of the NSR program is the primary
source of the NSR program’s regulatory costs, the analysis estimated a
negligible “cost to sales” (regulatory cost divided by the business
category mean revenue) ratio for this source group.  The incorporation
of the major source thresholds and offset ratios from the 1990 CAA
Amendments in section 51.165 and appendix S for the purpose of
implementing NSR for the 8-hour standard does not change this
conclusion.  Under section 110(a)(2)(C), all States must implement a
preconstruction permitting program “as necessary to assure that the
[NAAQS] are achieved,” regardless of changes to today’s regulations.
 Thus, small businesses continue to be subject to regulations for
construction and modification of stationary sources, whether under State
and local agency minor NSR programs, SIPs to implement section 51.165,
or appendix S, to ensure that the 8-hour standard is achieved.

D.  Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and Tribal
governments and the private sector.  Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with (Federal mandates( that may
result in expenditures to State, local, and Tribal governments, in the
aggregate, or to the private sector, of $100 million or more in any 1
year.  Before promulgating an EPA rule for which a written statement is
needed, section 205 of the UMRA generally requires EPA to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, most cost-effective or least burdensome alternative that
achieves the objectives of the rule.  The provisions of section 205 do
not apply when they are inconsistent with applicable law.  Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative was not adopted.  Before EPA establishes any regulatory
requirements that may significantly or uniquely affect small
governments, including Tribal governments, it must have developed under
section 203 of the UMRA a small government agency plan.  The plan must
provide for notifying potentially affected small governments, enabling
officials of affected small governments to have meaningful and timely
input in the development of EPA regulatory proposals with significant
Federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory
requirements.

The EPA has determined that this notice of reconsideration does not
contain a Federal mandate that may result in expenditures of $100
million or more for State, local, and Tribal governments, in the
aggregate, or the private sector in any 1 year.  In promulgating the
Phase 1 and Phase 2 Rules, we concluded that they were not subject to
the requirements of sections 202 and 205 of the UMRA.  For those same
reasons, this notice of reconsideration and request for comment is not
subject to the UMRA.

The EPA has determined that this notice of reconsideration contains no
regulatory requirements that may significantly or uniquely affect small
governments, including Tribal governments.

E.  Executive Order 13132: Federalism

Executive Order 13132 (64 FR 43255, August 10, 1999), requires EPA to
develop an accountable process to ensure (meaningful and timely input by
State and local officials in the development of regulatory policies that
have federalism implications.(  (Policies that have federalism
implications( is defined in the Executive Order to include regulations
that 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.(

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 notice of reconsideration
requests comment on three aspects of the Phase 2 Rule.  For the same
reasons stated in the Phase 1 and Phase 2 Rules, Executive Order 13132
does not apply to this action.

In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and State and local governments,
EPA specifically solicits comment on this action from State and local
officials.

F.  Executive Order 13175: Consultation and Coordination with Indian
Tribal Governments

Executive Order 13175 (65 FR 67249, November 9, 2000), requires EPA to
develop an accountable process to ensure (meaningful and timely input by
Tribal officials in the development of regulatory policies that have
Tribal implications.(  This notice of reconsideration does not have
(Tribal implications( as specified in Executive Order 13175. 

The purpose of this notice of reconsideration is to announce our
decision to reconsider and request comment on specific aspects of the
Phase 2 Rule.  The CAA provides for States and Tribes to develop plans
to regulate emissions of air pollutants within their jurisdictions.  The
Tribal Authority Rule (TAR) gives Tribes the opportunity to develop and
implement CAA programs such as the 8-hour ozone NAAQS, but it leaves to
the discretion of the Tribes whether to develop these programs and which
programs, or appropriate elements of a program, they will adopt.

For the same reasons stated in the Phase 1 and Phase 2 Rules, this
action does not have Tribal implications as defined by Executive Order
13175.  It does not have a substantial direct effect on one or more
Indian Tribes, since no Tribe has implemented a CAA program to attain
the 8-hour ozone NAAQS at this time.  If a Tribe does implement such a
plan, it would not impose substantial direct costs upon it. 
Furthermore, this action does not affect the relationship or
distribution of power and responsibilities between the Federal
government and Indian Tribes.  The CAA and the TAR establish the
relationship of the Federal government and Tribes in developing plans to
attain the NAAQS, and this action does nothing to modify that
relationship.  Because this action does not have Tribal implications,
Executive Order 13175 does not apply.

G.	Executive Order 13045: Protection of Children from Environmental
Health and Safety Risks

Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any rule
that (1) is determined to be (economically significant( as defined under
Executive Order 12866, and (2) concerns an environmental health or
safety risk that EPA has reason to believe may have disproportionate
effect on children.  If the regulatory action meets both criteria, the
Agency must evaluate the environmental health or safety effects of the
planned rule on children, and explain why the planned regulation is
preferable to other potentially effective and reasonably feasible
alternatives considered by the Agency.

	This notice of reconsideration addresses several provisions in the
Phase 2 Rule that the Agency was requested to reconsider and requests
comment on those provisions.  The action is not subject to Executive
Order 13045 because the Agency does not have reason to believe the
environmental health risks or safety risks addressed by this action
present a disproportionate risk to children.  Nonetheless, we have
evaluated the environmental health or safety effects of the 8-hour ozone
NAAQS on children.  The results of this evaluation are contained in 40
CFR part 50, National Ambient Air Quality Standards for Ozone, Final
Rule (July 18, 1997; 62 FR 38855-38896, specifically, 62 FR 38860 and 62
FR 38865).

H.	Executive Order 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use

This action is not a (significant energy action( as defined in Executive
Order 13211, (Actions That Significantly Affect Energy Supply,
Distribution, or Use,( (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.  The notice of reconsideration announces our decision
to reconsider and requests comment on several aspects of the Phase 2
Rule, for which EPA did perform an analysis of the energy impacts under
Executive Order 13211.

I.  National Technology Transfer Advancement Act

Section 12(d) of the National Technology Transfer Advancement Act of
1995 (NTTAA), Public Law No. 104-113, section 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards (VCS) 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 VCS
bodies.  The NTTAA directs EPA to provide Congress, through OMB,
explanations when the Agency decides not to use available and applicable
VCS.

This action does not involve technical standards.  Therefore, EPA is not
considering the use of any VCS.

The EPA will encourage the States and Tribes to consider the use of such
standards, where appropriate, in the development of the implementation
plans.

J.   Executive Order 12898: Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations

Executive Order 12898 requires that each Federal agency make achieving
environmental justice part of its mission by identifying and addressing,
as appropriate, disproportionate high and adverse human health or
environmental effects of its programs, policies, and activities on
minorities and low-income populations.

The EPA concluded that the Phase 2 Rule does not raise any environmental
justice issues (See 70 FR at 71695, col. 2; (November 29, 2005)); for
the same reasons, since this action announces our decision to reconsider
and requests comment on several aspects of the Phase 2 rule, this
reconsideration notice does not raise any environmental 

Page 60 of

justice issues.  The health and environmental risks associated with
ozone were considered in the establishment of the 8-hour, 0.08 ppm ozone
NAAQS (62 FR 38856 (July 18, 1997)).  The level is designed to be
protective with an adequate margin of safety.  The Phase 2 Rule provides
a framework for improving environmental quality and reducing health
risks for areas that may be designated nonattainment.

List of Subjects

40 CFR Part 51

Environmental protection, Air pollution control, Carbon monoxide, Lead,
Nitrogen dioxide, Ozone, Particulate matter, Sulfur oxides.

_______________________________

Dated:

________________________________

William L. Wehrum,

Acting Assistant Administrator for Air and Radiation

For the reasons stated in the preamble, title 40, chapter I of the Code
of Federal Regulations are 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.  

Subpart I - [Amended]

	2.  Section 51.165 is amended as follows:

	a.  By revising paragraph (a)(3)(ii)(C).

§51.165  Permit requirements. 

	(a) * * *

	(3) * * *

	(i) * * *

	(ii) * * * 

	(C)  Emission reduction credits from shutdowns and curtailments.  (1) 
Emissions reductions achieved by shutting down an existing emission unit
or curtailing production or operating hours may be generally credited
for offsets if they meet the requirements in paragraphs
(a)(3)(ii)(C)(1)(i) through (ii) of this section. 

	(i)  Such reductions are surplus, permanent, quantifiable, and
federally enforceable. 

	(ii)  The shutdown or curtailment occurred after the last day of the
base year for the SIP planning process.  For purposes of this paragraph,
a reviewing authority may choose to consider a prior shutdown or
curtailment to have occurred after the last day of the base year if the
projected emissions inventory used to develop the attainment
demonstration explicitly includes the emissions from such previously
shutdown or curtailed emission units.  However, in no event may credit
be given for shutdowns that occurred before August 7, 1977. 

	(2)  Emissions reductions achieved by shutting down an existing
emissions unit or curtailing production or operating hours and that do
not meet the requirements in paragraph (a)(3)(ii)(C)(1)(ii) of this
section may be generally credited only if:

	(i)  The shutdown or curtailment occurred on or after the date the
construction permit application is filed; or 

	(ii)  The applicant can establish that the proposed new emissions unit
is a replacement for the shutdown or curtailed emissions unit, and the
emissions reductions achieved by the shutdown or curtailment met the
requirements of paragraph (a)(3)(ii)(C)(1)(i)of this section.

* * * * *

Appendix S to part 51 - [Amended]

Appendix S to part 51 is amended as follows:

1.  By revising paragraph IV.C.3.

2.  By revising paragraph VI.

	The revisions and additions are proposed to read as follows:

Appendix S to part 51–Emission Offset Interpretative Ruling

	IV. * * *

	C. * * *

	3.  Emission Reduction Credits from Shutdowns and Curtailments.

	(i)  Emissions reductions achieved by shutting down an existing source
or curtailing production or operating hours may be generally credited
for offsets if they meet the requirements in paragraphs IV.C.3.i.1.
through 2 of this section. 

	(1) Such reductions are surplus, permanent, quantifiable, and federally
enforceable. 

	(2)  The shutdown or curtailment occurred after the last day of the
base year for the SIP planning process.  For purposes of this paragraph,
a reviewing authority may choose to consider a prior shutdown or
curtailment to have occurred after the last day of the base year if the
projected emissions inventory used to develop the attainment
demonstration explicitly includes the emissions from such previously
shutdown or curtailed emission units.  However, in no event may credit
be given for shutdowns that occurred before August 7, 1977. 

	(ii)  Emissions reductions achieved by shutting down an existing source
or curtailing production or operating hours and that do not meet the
requirements in paragraphs IV.C.3.i.1. through 2 of this section may be
generally credited only if:

	(1)  The shutdown or curtailment occurred on or after the date the new
source permit application is filed; or 

	(2)  The applicant can establish that the proposed new source is a
replacement for the shutdown or curtailed source, and the emissions
reductions achieved by the shutdown or curtailment met the requirements
of paragraphs IV.C.3.i.1. through 2 of this section.

* * * * *

	VI.  POLICY WHERE ATTAINMENT DATES HAVE NOT PASSED

In some cases, the dates for attainment of primary standards specified
in the SIP under section 110 have not yet passed due to a delay in the
promulgation of a plan under this section of the Act. In addition the
Act provides more flexibility with respect to the dates for attainment
of secondary NAAQS than for primary standards. Rather than setting
specific deadlines, section 110 requires secondary NAAQS to be achieved
within a “reasonable time”. Therefore, in some cases, the date for
attainment of secondary standards specified in the SIP under section 110
may also not yet have passed. In such cases, a new source locating in an
area designated in 40 CFR 81.300 et seq. as nonattainment (or, where
section III of this Ruling is applicable, a new source that would cause
or contribute to a NAAQS violation) may be exempt from the Conditions of
section IV.A if the conditions in paragraphs VI.A through C are met.

A. The new source meets the applicable SIP emission limitations.

B. The new source will not interfere with the attainment date specified
in the SIP under section 110 of the Act.

C. The Administrator has determined that conditions A and B of this
section are satisfied and such determination is published in the Federal
Register.

The CAIR first phase also provides an annual NOx budget, which also
starts in 2009. [footnote 7 in original.]

 CAIR achieves about 80% of its NOx emission reductions in 2009
(remainder in 2015). [footnote 67 in original.]

 The CAIR program achieves about 80 percent of its NOx emission
reductions by the end of 2009 with the remainder by 2015.

 See, e.g., 52 FR at 45108  col. 2, “Compliance Periods” (November
24, 1987).  “VOC rules should describe explicitly the compliance
timeframe associated with each emission limit (e.g., instantaneous or
daily).  However, where the rules are silent on compliance time, EPA
will interpret it as instantaneous.

 Memorandum from John O’Connor, Acting Director of the Office of Air
Quality Planning and Standards, January 20, 1984, “Averaging Times for
Compliance with VOC Emission Limits—SIP Revision Policy.”

 57 FR at 55625, col. 1 sec. 4.5 “Relation to VOC RACT Policies”
(November 25, 1992).

 Improving Air Quality with Economic Incentive Programs, January 2001,
available at 
http://www.epa.gov/region07/programs/artd/air/policy/search.htm.

  40 CFR 51.912 (c)(1) (promulgated in the Phase 2 Rule) provides that
for a subpart 1 area “. . . that submits an attainment demonstration 
that requests an attainment date 5 or less years after designation for
the 8-hour NAAQS,  the State shall meet the RACT requirement by
submitting an attainment demonstration SIP demonstrating that the area
has adopted all control measures necessary to demonstrate attainment as
expeditiously as practicable.”  Thus, these areas are not required to
submit RACT SIPs separate from their attainment demonstrations.  
However, a State must submit a RACT SIP separate from an attainment
demonstration SIP for the following areas:  under 40 CFR 51.912 (a),
subpart 2 moderate and above areas; and under 40 CFR 51.912 (c)(2),
subpart 1 areas with attainment dates beyond 5 years after designation.

 http://www.epa.gov/airmarkets/epa-ipm/ and
http://www.epa.gov/airmarkets/mp/ipmparsed.html.

 http://www.epa.gov/airmarkets/epa-ipm/#needs.

 The analysis, which was based on modeling conducted before March 2006,
assumed that DE and NJ would participate in the seasonal NOx trading
program but not in the annual NOx trading program.  EPA added Delaware
and New Jersey to the CAIR region for PM2.5 in March 2006 and,
therefore, anticipates that they will also join the annual NOx trading
program.  For this reason, the modeling may underestimate the reductions
to be achieved from the implementation of CAIR.

 This difference in projected NOx control is due to the expected
decrease in value of ozone season NOx allowances resulting from the
implementation of the CAIR program.  Connecticut is in the CAIR ozone
region and is, therefore, expected to participate only in the CAIR ozone
season NOx trading program.  When both the CAIR annual and ozone season
NOx trading programs are implemented, ozone season NOx allowances are
projected to become relatively inexpensive.  Thus, the economic benefit
of installing certain controls in states participating only in the CAIR
ozone season trading program may be lower than the economic benefit of
installing those same controls under the NOx SIP Call.  

 If this unit chooses not to install the SCR, it would still have in
place its existing NOx controls (low NOx burners and overfire air),
which are the level of control assumed to be RACT for this analysis. 
Thus, the corrected total emissions reductions attributable to the
unit's compliance with the RACT requirement are 0.

 While changing the assumed level of controls on these two relatively
small units to slightly more advanced controls may have minor impacts on
dispatch and generation patterns, such changes would be negligible in
calculating emission patterns for the areas under consideration. 

 68 FR 32833.  See also “2002 Base Year Emission Inventory SIP
Planning: 8-hr Ozone, PM2.5 and Regional Haze Programs,” U.S. EPA, pg.
1 (November 18, 2002).

 See 57 FR 13553.  After the 1990 CAA Amendments were enacted, 1990 was
the base year for 1-hour ozone NAAQS attainment planning purposes.  See
57 FR 13502.  The EPA encouraged States to allow sources to use
pre-enactment banked emissions reductions credits for offsetting
purposes.  States have been allowed to do so if the restored credits
meet all other offset creditability criteria, and States consider such
credits as part of the attainment emissions inventory when developing
their post-enactment attainment demonstration.

 For a discussion of emission inventories for the 8-hour ozone standard,
see our emission inventory guidance, "Emissions Inventory Guidance for
Implementation of Ozone and Particulate Matter National Ambient Air
Quality Standards (NAAQS) and Regional Haze Regulations - Final," at    
HYPERLINK "http://www.epa.gov/ttn/chief/eidocs/eiguid/index.html." 
http://www.epa.gov/ttn/chief/eidocs/eiguid/index.html.   For a
discussion of emission projections used in attainment demonstrations,
see Emission Inventory Improvement Program, Volume X, Emission
Projections, December 1999, available at 
http://www.epa.gov/ttn/chief/eiip/techreport/.

 Technical Appendix:  Potential Impacts of Implementation of the 8-Hour
Ozone NAAQS; Technical Support Document.  July 21, 2005.  Docket
Document OAR-2003-0079-0860.

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