Document ID: EPA-HQ-OAR-2003-0079-1023
Agency: epa
Document Type: Proposed Rule
Title: Phase 2 of the Final Rule To Implement the 8-Hour Ozone National Ambient Air Quality Standard--Notice of Reconsideration
Posted Date: 2006-12-19T05:00Z

[Federal Register: December 19, 2006 (Volume 71, Number 243)]
[Proposed Rules]               
[Page 75902-75916]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19de06-24]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[EPA-HQ-OAR-2003-0079, FRL-8256-8]
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: Proposed rule.

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[[Page 75903]]

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 action, EPA is announcing its 
decision to reconsider and take additional comment on three provisions 
in the final Phase 2 8-hour ozone implementation rule: 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; a new 
source review (NSR) requirement allowing sources to use certain 
emission reductions as offsets under certain circumstances; and an NSR 
provision addressing when requirements for the lowest achievable 
emission rate (LAER) and emission offsets may be waived. In addition, 
EPA requests comment on postponing the submission date for the RACT SIP 
for RACT SIPs for EGUs in the CAIR region. The EPA is seeking comment 
only on the three issues specifically identified in this notice and the 
submission date issue. 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 January 18, 
2007.
    If anyone contacts us requesting a public hearing by December 29, 
2006, the hearing will be held on January 3, 2007. If a public hearing 
is requested, the record for this action will remain open until 
February 2, 2007 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:
     http://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, DC 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, NW., Room 3334, Washington, DC. 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.
     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 http://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 
http://www.regulations.gov, or e-mail. The www.regulations.gov Web site 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 http://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 SUPPLEMENTARY INFORMATION section of this document.
    Public Hearing: If a hearing is held it will be held at the U.S. 
Environmental Protection Agency, 109 TW Alexander Drive, Research 
Triangle Park, North Carolina 27709, Building C.
    Docket: All documents in the docket are listed in 
http://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 http://www.regulations.gov or in hard copy 

at the EPA Docket Center (Air Docket), EPA/DC, EPA West, Room 3334, 
1301 Constitution Ave., NW., Washington, DC. 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, (C539-01), Research Triangle Park, NC 
27711, phone number (919) 541-5666, fax number (919) 541-0824 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, (C539-
01), Research Triangle Park, NC 27711, phone number (919) 541-5550, fax 
number (919) 541-0824 or by e-mail at gerth.denise@epa.gov. For further 
information on the NSR 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 CAIR.\1\ The 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:
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    \1\ Federal Register of May 12, 2005 (70 FR 25162).

[[Page 75904]]

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                Industry group                 SIC \a\                          NAICS \b\
----------------------------------------------------------------------------------------------------------------
Electric Services............................      492  221111, 221112, 221113, 221119, 221121, 221122.
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\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.

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                Industry group                 SIC \a\                          NAICS \b\
----------------------------------------------------------------------------------------------------------------
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.
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\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 
http://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 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 December 29, 
2006, 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 December 
29, 2006. Any person who plans to attend the hearing should visit the 
EPA's Web site at http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/ and 

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 
January 3, 2007 at the EPA, Building C, 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 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,

[[Page 75905]]

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 February 2, 2007 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 January 18, 2007.

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. NSR Issues
    1. Our Previous Proposed and Final Rules
    2. Petition for Reconsideration
III. This 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)
    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 
SIPs for nonattainment areas for the 8-hour ozone standard including: 
The attainment demonstration; the 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 
Clean Air Act (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.\2\ 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 
additional arguments in the phase 2 rule, which we are summarizing 
below under Section III. A. 1. below.
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    \2\ However, as noted below, 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 restrictive 
as the EGU budget that was set in the State's NOX SIP 
call SIP.
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2. Petition for Reconsideration
    The EPA received a petition for reconsideration of the final Phase 
2 rule from the 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 
addresses 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

[[Page 75906]]

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. This 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 determination 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.\3\ This determination 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). However, we are 
summarizing that rationale here:
---------------------------------------------------------------------------

    \3\ However, see footnote 1 above and exception described below.
---------------------------------------------------------------------------

    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.\4\ 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:
---------------------------------------------------------------------------

    \4\ However, as noted below, a State that elects to bring its 
NOX SIP Call non-EGU souces 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.
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     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] * * *''

[[Page 75907]]

     ``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); \5\ 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.)
---------------------------------------------------------------------------

    \5\ The CAIR first phase also provides an annual NOX 
budget, which also starts in 2009.
---------------------------------------------------------------------------

     In general, we expect that the largest-emitting EGU 
sources will be the first to install NOX control technology 
and that such control technology will gradually be installed on 
progressively smaller-emitting EGU 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 EGU sources covered by the CAIR below the 
levels that would be achieved under the CAIR alone.
     We believe that EGU 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 EGU 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. 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 lends support to this 
determination. However, EPA acknowledges that the agency did not 
provide sufficient opportunity for public comment on this 
determination. We recognize the significant public interest in this 
issue and request additional comment on this determination.
    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. 
EGU source-specific control requirements (such as EGU 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 EGU 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 2009 cap represents an interim step toward that end). In 
general, we expect that the largest-emitting EGU sources will be the 
first to install NOX control technology and that such 
control technology will gradually be installed on progressively 
smaller-emitting EGU sources until the ultimate cap is reached. If 
States choose to require smaller-emitting EGU 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 
EGU 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 it were possible to 
strategically target source-specific requirements at the EGUs 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. 
But this would require accurate forehand knowledge of each EGU's 
control costs, which would be practically difficult for regulators to 
obtain. Without this accurate source-specific control cost information, 
the imposition of EGU 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 achieve greater 
collective total emissions reductions from EGUs covered by the CAIR, 
and the collective reductions would likely be achieved at higher 
overall cost.
    The CAIR is implemented on an annual and (for ozone) a seasonal 
basis. We believe that these averaging periods on which RACT is being 
implemented under the Phase 2 Rule are not in conflict with existing 
EPA policy. In general, the RACT requirement is applied on a short-term 
basis up to 24 hours.\6\ However, EPA guidance permits

[[Page 75908]]

averaging times longer than 24 hours under certain conditions.\7\ 
Although these earlier EPA guidance documents were directed at VOC, the 
NOX Supplement to the General Preamble \8\ 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.''
---------------------------------------------------------------------------

    \6\ 6 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.
    \7\ 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.''
    \8\ 57 FR at 55625, col. 1 sec. 4.5 ``Relation to VOC RACT 
Policies'' (November 25, 1992).
---------------------------------------------------------------------------

    Other EPA guidance and policy allow for longer averaging times in 
certain circumstances. The EPA's ``Economic Incentive Policy'' \9\ 
(EIP) provides guidance on use of long-term averages for 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., one year for the CAIR annual trading programs--and the ozone 
season for the CAIR ozone season trading program).
---------------------------------------------------------------------------

    \9\ Improving Air Quality with Economic Incentive Programs, 
January 2001, available at http://www.epa.gov/region07/programs/artd/air/policy/search.htm
.

---------------------------------------------------------------------------

    In addition, the RACT emission reductions need to be permanent, 
i.e., once implemented, they also need to be continuously implemented. 
The EPA believes that emissions reductions from the CAIR will continue 
to be applied on a permanent basis. The EPA believes that EGUs covered 
by the CAIR that make the economic decision to 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, since it will generally be in their economic interest to 
control in order to generate emission allowances for sale to EGUs that 
opt not to install controls. 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 expected 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. The 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, except as noted below. 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 necessarily 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, and if non-EGU sources after 2008 continue 
to be subject to a SIP that regulates those non-EGU sources equally or 
more stringently than the State's current rules meeting the 
NOX SIP call, 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. 2, ``Response,'' 
and col. 3, ``NOX SIP Call.'') If the State does not meet 
these conditions, the State would need to conduct RACT analyses for 
those EGUs (either on an individual basis, or using the averaging 
approach within the nonattainment area). The published

[[Page 75909]]

CAIR summer season NOX budgets for each State are at least 
as stringent as the NOX budgets for the NOX SIP 
call. Also, the CAIR rule permits a State to bring its NOX 
SIP Call non-EGU sources into the CAIR ozone season trading program 
only if they continue to be regulated at the same level of stringency 
as under the NOX SIP call. 40 CFR 96.340 (published at 70 FR 
25392, May 12, 2005)).
    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 attainment of 
the ozone standards.
2. Supplemental Technical Analysis
    To provide further support for the determination regarding CAIR and 
ozone NOX RACT, EPA conducted an additional technical 
analysis. For each geographic area within the CAIR region where 8-hour 
ozone RACT determinations are required, EPA examined whether the 
emissions reductions projected from the CAIR equal or exceed the 
emissions reductions projected to occur from application of source-by-
source RACT.\10\ Specifically, this analysis was conducted for 
operating coal-, oil-, and gas-fired EGUs for each ozone transport 
region (OTR) State within the CAIR region and for each nonattainment 
area in the CAIR region for which a RACT SIP, separate from an 
attainment demonstration SIP, is expected to be required.\11\ The 
analysis was conducted on the basis of annual emissions and also summer 
season emissions. This analysis illustrates that the CAIR achieves 
greater overall emissions reductions across the CAIR region and across 
the OTR than would be achieved through the application of EGU source-
by-source RACT controls. The docket contains a Technical Support 
Document \12\ describing the analysis.
---------------------------------------------------------------------------

    \10\ Since RACT is a technology requirement prescribing year-
round controls, it is appropriate to consider how participation in 
both CAIR trading programs (annual and seasonal) will affect annual 
emissions of NOX and to compare that to how RACT will 
affect annual emissions of NOX.
    \11\ 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.
    \12\ Technical Support Document for Phase 2 of the Final Rule To 
Implement the 8-Hour Ozone National Ambient Air Quality Standard--
Notice of Reconsideration; NOX RACT for EGUs in CAIR 
States--Supplemental Technical Analysis.
---------------------------------------------------------------------------

    This emissions analysis, though not quantitatively definitive, is 
suggestive of the appropriateness of the determination that areas meet 
the 8-hour ozone SIP requirement for application of RACT for 
NOX emissions where all EGUs comply with rules implementing 
the CAIR and those areas are located in States where all required CAIR 
emissions reductions are achieved exclusively from EGUs. There is 
uncertainty in the assumptions made in the analysis, although, as noted 
in the Technical Support Document, the assumptions tended to be 
conservative, i.e., erring on the side of projecting more emission 
reductions under the RACT scenario. The analysis does not project that 
CAIR emission reductions are equivalent to or exceed the reductions 
from source-by-source RACT for EGUs for every relevant nonattainment 
area and every State within the OTR. However, CAIR emission reductions 
are overall significantly greater regionwide than reductions obtained 
from source-by-source RACT for EGUs in both the CAIR region and the 
OTR. It is our belief that, due to the nature of regional emissions 
transport, local nonattainment area emissions reductions alone will not 
achieve the most effective or economically efficient impact on ozone 
air quality in nonattainment areas. We believe a combination of local 
and broader regional reductions, such as those driven by the CAIR 
requirements for EGUs, will achieve a more effective and economically 
efficient air quality improvement in nonattainment areas than 
application of source-by-source RACT.
    Further, EPA believes that the term ``reasonable'' in RACT may be 
construed to allow consideration of the air quality impact of required 
emissions reductions from a region-wide cap and trade program such as 
the CAIR. As stated earlier, the region-wide CAIR NOX 
emissions cap for 2009 was established based on the maximum total 
capacity on which it was possible to install controls by that date. So 
by design, the 2009 CAIR region-wide NOX emissions cap for 
EGUs represents the most reductions that are reasonable to achieve. 
Because the CAIR achieves more NOX emission reductions 
overall across the CAIR region and the OTR than EGU-by-EGU application 
of RACT, we believe this will result in more region-wide air quality 
improvements than application of RACT in the absence of the CAIR. The 
CAIR is projected to improve ozone air quality across much of the 
eastern half of the country, including many current and projected 
future nonattainment areas. A list of the counties projected to be in 
nonattainment in 2010 and 2015 (in the absence of the CAIR and 8-hour 
ozone SIPs), and the air quality improvement provided by the CAIR in 
each county, is provided in the preamble to the final CAIR (70 FR 91, 
May 12, 2005, pp. 25254-25255, Tables VI-12 and VI-13) and in the final 
Air Quality Modeling Technical Support Document in the CAIR final rule 
docket (docket document EPA-OAR-2003-0053-2123). The CAIR improves air 
quality in all of the 40 projected 2010 nonattainment counties, and in 
all 22 of the projected 2015 nonattainment counties, that were 
identified in the CAIR rule modeling. The modeling also showed air 
quality improvement in numerous counties projected to be in attainment.
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.

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

[[Page 75910]]

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 40 CFR 
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.\13\) We 
agreed with the commenter that the terminology ``most recent emissions 
inventory'' could be confusing and revised 40 CFR 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.\14\ 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.\15\ 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 40 CFR 51.165(a)(3)(C)(1)(ii) and 40 CFR part 
51 Appendix S paragraph IV.C.3.
---------------------------------------------------------------------------

    \13\ 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).
    \14\ 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.
    \15\ 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 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/.

---------------------------------------------------------------------------

    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

[[Page 75911]]

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 40 CFR 51.165(a)(3)(ii)(C)(1) and (2), and Appendix S 
paragraph IV.C.3.

C. 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

[[Page 75912]]

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.

[[Page 75913]]

IV. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), 
this action is a ``significant regulatory action.'' This action is 
significant because it raises novel legal or policy issues. 
Accordingly, EPA submitted this action to the Office of Management and 
Budget (OMB) for review under EO 12866 and any changes made in response 
to OMB recommendations have been documented in the docket for this 
action.

B. Paperwork Reduction Act

    The information collection requirements in this reconsideration 
notice are 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 was submitted for approval to OMB under the Paperwork 
Reduction Act, 44 U.S.C. 3501 et seq. [EPA ICR  2236.01.] 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 selected 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 projected cost and hour burden for the statutory SIP 
development obligation for the Phase 2 Rule, and prepared an 
Information Collection Request (ICR). 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 as defined by the Small Business Administration's (SBA) 
regulations at 13 CFR 121.201; (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.
    After considering the economic impacts of 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.

[[Page 75914]]

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).

[[Page 75915]]

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.\16\
---------------------------------------------------------------------------

    \16\ Technical Appendix: Potential Impacts of Implementation of 
the 8-Hour Ozone NAAQS; Technical Support Document. July 21, 2005. 
Docket Document EPA-HQ-OAR-2003-0079-0860.
---------------------------------------------------------------------------

I. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer Advancement Act 
of 1995 (NTTAA), Public Law 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 
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 in 40 CFR Part 51

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

    Dated: December 11, 2006.
Stephen L. Johnson,
Administrator.
    For the reasons stated in the preamble, title 40, chapter I of the 
Code of Federal Regulations is proposed to be amended as follows:

PART 51--REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF 
IMPLEMENTATION PLANS

    1. The authority citation for part 51 continues to read as follows:

    Authority: 23 U.S.C. 101; 42 U.S.C. 7401-7671q.

Subpart I--[Amended]

    2. Section 51.165 is amended by revising paragraph (a)(3)(ii)(C) to 
read as follows:

Sec.  51.165  Permit requirements.

    (a) * * *
    (3) * * *
    (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]

    3. Appendix S to part 51 is amended by revising paragraphs IV.C.3 
and VI 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

[[Page 75916]]

    (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.
[FR Doc. E6-21379 Filed 12-18-06; 8:45 am]

BILLING CODE 6560-50-P