Proposed Rulemaking on Ozone Transport Commission; Emission Vehicle Program for the Northeast Ozone Transport Region

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[FRL-4878-3]

Proposed Rulemaking on Ozone Transport Commission; Emission

Vehicle Program for the Northeast Ozone Transport Region

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: On February 10, 1994, the Northeast Ozone Transport Commission

(OTC) submitted a recommendation to EPA under section 184 of the Clean

Air Act (the Act), for additional control measures to be applied

throughout the Northeast Ozone Transport Region (OTR). Specifically,

the OTC recommended that EPA require all State members of the OTC to

adopt an Ozone Transport Commission Low Emission Vehicle (OTC LEV or

LEV) program for the entire OTR. The OTC's recommendation, developed

after notice-and-comment pursuant to section 184(c)(1), is published

here as an appendix to this document.

Under section 184(c)(3), EPA is to review the OTC's recommendation

to determine whether the additional control measures are necessary to

bring any area in the OTR into attainment by the dates specified in the

Act, and are otherwise consistent with the Act. Based on this review,

EPA is obligated to determine whether to approve, disapprove, or

partially approve and partially disapprove the OTC's recommendation. If

EPA disapproves or partially disapproves the OTC recommendation, it is

to explain why the recommended measures are not necessary or are not

otherwise consistent with the Act, and to specify additional control

measures that would be equally effective. Upon EPA approval or partial

approval of the OTC recommendation, EPA is to make a finding that the

relevant States' State Implementation Plans (SIPs) are inadequate under

section 110(a)(2)(D) of the Act (relating to contribution to

nonattainment in downwind States), and those States are to submit a SIP

revision within one year of the finding adopting the approved control

measures. This notice describes the framework for EPA's action on the

OTC's recommendation and describes the issues EPA is considering in

deciding whether to approve, disapprove, or partially approve and

partially disapprove the recommendation.

DATES: EPA will be holding a public hearing on the OTC recommendation

on Monday, May 2, 1994 from 1 p.m. to 4:30 p.m. (EDT) and on Tuesday,

May 3, 1994 from 9 a.m. to 4:30 p.m. (EDT). The comment period will

remain open until June 3, 1994. Please direct all correspondence to the

addresses shown below.

ADDRESSES: The hearings will be held at the Fifth Floor Auditorium,

Connecticut Department of Environmental Protection Building, 79 Elm

Street, Hartford, Connecticut 06106. Written comments should be

submitted (in duplicate if possible) to the Air Docket (see address

below). Copies of information relevant to this matter are available for

inspection in public docket A-94-11 at the Air Docket (LE-131) of the

EPA, room M-1500, 401 M Street SW., Washington, DC 20460, (202) 260-

7548, between the hours of 8 a.m. to 12 p.m. and 1 p.m. to 5 p.m. on

Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Mike Shields, Office of Mobile

Sources, U.S. EPA, 401 M Street, SW., Washington, DC 20460, telephone:

(202) 260-3450.

SUPPLEMENTARY INFORMATION:

I. Background

A. Overview of Title I Scheme

The OTC's recommendation under section 184(c) of the Act that EPA

mandate that States in the OTR adopt the LEV program arises in the

context of the program designed to address ozone (or ``smog'')

pollution in subpart II of part D of title I of the Act. This program

is described in detail in EPA's General Preamble for the Implementation

of Title I of the Clean Air Act Amendments of 1990, 57 FR 13498 (April

16, 1992), and the Nitrogen Oxides Supplement to the General Preamble,

57 FR 55620 (Nov. 25, 1992).

A number of provisions in subpart 2 and elsewhere in the Act are

particularly important to emphasize here. Part D establishes a scheme

for more polluted areas to have more time to attain the National

Ambient Air Quality Standards (NAAQS), and subjects those more polluted

areas to a graduated program of additional and more stringent specific

control requirements to be accomplished over the longer time-frame.

Section 181(a) provides for classification of ozone nonattainment

areas based on the degree of the nonattainment problem in the area (as

measured by the area's ozone design value), and provides that

attainment ``shall be as expeditiously as practicable but not later

than'' specified deadlines expressed as years after enactment. The

areas, and the corresponding attainment deadlines are: Marginal (1993);

Moderate (1996); Serious (1999); Severe (2005 or 2007, depending on the

design value); and Extreme (2010). The Act also provides for additional

``unclassifiable/no data'' nonattainment areas. All classifications

other than Extreme are represented in the OTR. Section 184(b) also

specifies additional requirements applicable for attainment areas in

ozone transport regions, including: (1) Enhanced vehicle inspection and

maintenance programs in cities meeting specified size thresholds; (2)

state-wide implementation of reasonably available control measures

(RACT); (3) ``Stage II'' vehicle refueling vapor controls or

``comparable measures''; and (4) treatment of major stationary sources

of ozone precursors as if they were in moderate nonattainment areas.

Section 182 establishes the graduated control measures applicable

for each nonattainment classification. These measures are additive in

that the higher classifications must generally adopt, in addition to

measures specifically applicable to that higher classification, all

measures identified for lower classifications as well. A basic

requirement applicable to Marginal and above classifications is that

States are to submit inventories of actual emissions from all sources

in each nonattainment area. See sections 182(a)(1) and 172(c)(3). These

emissions inventories may be important in determining whether the LEV

program is necessary in the OTR. For example, the inventories may be

important to determining the magnitude of emissions reductions that may

be needed for attainment, and the effectiveness of various measures to

obtain such reductions.

Another potentially key requirement is that Moderate and above

areas must submit attainment demonstrations. Under section

182(b)(1)(A), for Moderate and above areas States are to specify in

their plans specific annual reductions in emissions ``as necessary to

attain the [NAAQS] for ozone by the attainment date applicable under

this Act.'' Under section 182(c)(2)(A), for Serious and above areas

States are to submit a demonstration that the State Implementation Plan

(SIP), ``as revised, will provide for attainment of the ozone [NAAQS]

by the applicable attainment date.'' Further, this provision continues,

``[t]his attainment demonstration must be based on photochemical grid

modeling or any other analytical method determined by the

Administrator, in the Administrator's discretion, to be at least as

effective.'' These requirements provide the motivation for the OTC's

recommendation; as additional measures may be necessary for the States

to demonstrate that their SIPs will achieve timely attainment. The

modeling information is, of course, important to determining what

reductions are necessary in what areas for attainment in the OTR.

It is also relevant that States are obligated to adopt various

measures specified for progress toward attainment, and to achieve

certain percentage reductions in emissions by interim dates. In

general, section 172(c)(2) requires that SIPs ``require reasonable

further progress'' (RFP), defined in section 171(1) to mean ``such

annual incremental reductions in emissions of the relevant air

pollutant as are required by this part or may reasonably be required by

the Administrator for the purpose of ensuring attainment of the [NAAQS]

by the applicable date.'' More specifically, section 182(b) provides

that for Moderate and above areas States were to submit, by November

15, 1993, SIP revisions providing for a 15% reduction in emissions of

volatile organic compounds (VOCs) from a 1990 baseline to be achieved

by 1996. Further, section 182(c)(2)(B) provides that for Serious and

above areas States are to submit, by November 15, 1994, SIP revisions

that will result, subject to a limited feasibility exception, in

additional reductions in VOC emissions from the 1990 baseline of 3%

each year averaged over consecutive 3-year periods beginning in 1996

and until the attainment date. Section 182(c)(2)(C) provides for

substitution of reductions in emissions of nitrogen oxides (NOX)

for VOC, in accordance with EPA guidance. These RFP requirements

establish minimum reductions that certain nonattainment areas in the

OTR will be required to achieve apart from whether EPA approves or

disapproves the recommendation.

Finally, section 110 of the Act establishes general requirements

for SIPs. Section 110(a)(2) specifies minimum elements of a State's

SIP, and subparagraph (D) specifies that a State's SIP shall contain

adequate provisions prohibiting, consistent with the provisions of this

title, any source or other type of emissions activity within the State

from emitting any air pollutant in amounts which will contribute

significantly to nonattainment in, or interfere with maintenance by,

any other State with respect to any such national primary or secondary

ambient air quality standard.

This provision, as discussed in detail below, is the key mechanism

under the transport provisions of sections 176A and 184, and is central

to the OTC recommendation and to EPA's action on it.

B. Ozone Transport Region Provisions

The OTR was established by operation of law under section 184 of

the Act and is comprised of the States of Connecticut, Delaware, Maine,

Massachusetts, Maryland, New Hampshire, New Jersey, New York,

Pennsylvania, Rhode Island, Vermont, the District of Columbia, and the

portion of Virginia that is within the Consolidated Metropolitan

Statistical Area that includes the District of Columbia. Congress

established the OTR in the 1990 Amendments to the Act based on the

recognition that the transport of ozone and ozone precursors throughout

the region may render the Northeast States' attainment strategies

interdependent.

Under section 184, the Administrator established a Northeast Ozone

Transport Commission for the OTR consisting of the Governor of each

State or their designees, the Administrator or her designee, the

Regional Administrators for the EPA regional offices affected (or the

Administrator's designees), and an air pollution control official

representing each State in the region, appointed by the Governor.

Section 184(c) specifies a procedure for the OTC to develop

recommendations for additional control measures to be applied within

all or a part of the OTR if the OTC determines that such measures are

necessary to bring any area in the OTR into attainment for ozone by the

applicable dates in the Act. Section 184(c)(1) provides that Upon

petition of any States within a transport region for ozone, and based

on a majority vote of the Governors on the Commission (or their

designees), the Commission may, after notice and opportunity for public

comment, develop recommendations for additional control measures to be

applied within all or a part of such transport region if the commission

determines such measures are necessary to bring any area in such region

into attainment by the dates provided by [subpart II of part D of title

I of the Clean Air Act].

Section 184(c) also lays out procedures the Administrator is to

follow in responding to recommendations from the OTC. Upon receipt of

the recommendations, the Administrator is to publish a Federal Register

notice stating that the recommendations are available and providing an

opportunity for a public hearing within 90 days. On March 18, 1994, EPA

published a notice announcing receipt of the OTC recommendation, 59 FR

12914. EPA further announced on April 8, 1994 that a public hearing

would be held in Hartford, Connecticut on May 2-3, 1994, 59 FR 16811

(April 8, 1994). The Administrator is also to ``commence a review of

the recommendations to determine whether the control measures in the

recommendations are necessary to bring any area in such region into

attainment by the dates provided by [subpart II] and are otherwise

consistent with [the] Act.'' Finally, in undertaking her review, the

Administrator is to consult with members of the OTC and is to take into

account the data, views, and comments received pursuant to the public

hearing.

Last, sections 184(c) (4) and (5) govern EPA's response to the OTC

recommendations. The Administrator is to determine whether to approve,

disapprove, or partially approve and partially disapprove the

recommendations within nine months of receipt. For any disapproval, the

Administrator is to specify:

(i) Why any disapproved additional control measures are not

necessary to bring any area in such region into attainment by the dates

provided by [subpart II] or are otherwise not consistent with the Act;

and

(ii) Recommendations concerning equal or more effective actions

that could be taken by the commission to conform the disapproved

portion of the recommendations to the requirements of [section 184].

Section 184(c)(5) provides that, upon approval or partial approval

of any recommendations, the Administrator is to issue to each State in

the OTR to which an approved requirement applies a finding under

section 110(k)(5) that the SIP for that State is inadequate to meet the

requirements of section 110(a)(2)(D), quoted above. Under section

184(c)(5), the Administrator's finding of inadequacy under section

110(a)(2)(D) is to require that each affected State revise its SIP to

include the approved additional control measures within one year after

the finding is issued.

Finally, section 184(d) provides that, for purposes of section 184,

the Administrator is to ``promulgate criteria for purposes of

determining the contribution of sources in one area to concentrations

of ozone'' in another nonattainment area. These criteria are to

``require that the best available air quality monitoring and modeling

techniques be used for purposes of making such determinations.''

C. Background Regarding OTC LEV Program

The Administrator convened the OTC on May 7, 1991. Thereafter, the

OTC moved to work toward a regional ozone strategy with emphasis on

consensus agreements to adopt regional measures to address the ozone

problem in the Northeast. To address the contribution of motor vehicles

to the Northeast ozone problem, the OTC focussed early on emissions

standards for new motor vehicles and on adoption of federal

reformulated gasoline throughout the OTR as potential additional

control measures. The Act, however, imposes certain limitations on the

States' ability to adopt new motor vehicle emissions standards.

Section 209 of the Act generally preempts States from establishing

new motor vehicle emissions standards, leaving such regulation to EPA

under section 202 of the Act. Section 209 does, however, provide an

exception for California to adopt new motor vehicle emissions standards

where the Administrator grants a preemption waiver based on a finding

that California's standards will be, ``in the aggregate, at least as

protective of public health and welfare as applicable Federal

standards.'' Further, under section 177 of the Act, any State which has

SIP provisions approved under part D of title I may adopt and enforce

new motor vehicle emission standards for any model year if:

(1) Such standards are identical to the California standards for

which a waiver has been granted for such model year, and

(2) California and such State adopt such standards at least two

years before commencement of such model year (as determined by

regulations of the Administrator).

EPA has granted a waiver for California's ``Low Emission Vehicle''

program (See 58 FR 4166 (Jan. 13, 1993)(announcing availability of

Waiver of Federal Preemption; California Low- Emission Vehicle

Standards (Jan. 8, 1993)). This program generally calls for five

categories of vehicles meeting progressively more stringent emissions

standards: California Tier I vehicles; Transitional Low Emission

Vehicles (TLEV); Low Emission Vehicles (LEV); Ultra-Low Emission

Vehicles (ULEV); and Zero Emission Vehicles (ZEV). California has also

established an overall non-methane organic gas (NMOG) standard that

each manufacturer must meet for its fleet of new vehicles in a

particular model year by selling any combination of vehicles certified

by California as meeting standards for one of the five categories. In

addition, under California's program, at least 2% of each

manufacturers' new vehicle fleet sold in California must be ZEV's by

1998, and 10% by 2003.\1\

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\1\In EPA's waiver decision regarding California's LEV program,

the EPA Administrator stated, ``Based on EPA's review of this

record, I find reasonable and so adopt California's finding that

there is adequate leadtime to permit the development of technology

necessary to meet those standards giving appropriate consideration

to the cost of compliance within the required time frame.'' Waiver

of Federal Preemption; California Low-Emission Vehicle Standards at

69 (Jan. 8, 1993).

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At its second meeting on July 16, 1991, the OTC adopted a

Memorandum of Understanding (MOU) in which the State and District of

Columbia representatives agreed that, in view of the significant

contribution of motor vehicles to the Northeast ozone problem, they all

support California's Motor Vehicle Control Program, and call on their

jurisdictions to cooperatively evaluate the feasibility, air quality

benefits, and associated costs of this Program in the OTR. At its third

meeting on October 29, 1991, the OTC States agreed to a further MOU

providing that each OTC state would take steps to implement

California's Low Emission Vehicle program as soon as possible. New York

and Massachusetts are the only States that have fully adopted the

California LEV program in legislation and regulations without

contingencies, and both States are set to implement their programs. The

automobile manufacturers' have challenged the legality of both programs

and both lawsuits are ongoing. Other States have adopted or are

adopting the program contingent on regional program adoption, and the

remaining States are at various stages of the legislative or regulatory

process to adopt the program.

In August 1993, Maine, Maryland, and Massachusetts petitioned the

OTC to adopt a recommendation calling for the application of the

California LEV program throughout the OTR. During the fall of 1993, the

OTC held a number of public forums in various locations in the

Northeast, and held a public hearing in Hartford, Connecticut on

December 16-17, 1993. Finally, at its winter meeting on February 1,

1994 in Washington, D.C., the OTC voted by a 9 to 4 majority to

recommend that EPA mandate the California LEV program throughout the

OTR. (The OTC refers to the program they recommend as ``OTC LEV.'') New

Hampshire, Virginia, Delaware, and New Jersey voted against the

recommendation. The OTC's recommendation contains the following

elements:

(1) The OTC LEV program would be applicable to all 1999 and

subsequent model year passenger cars and light duty trucks in the OTR;

(2) Subject to certain very limited exceptions, all vehicles sold,

imported, delivered, purchased, leased, rented, acquired, received, or

registered in the OTR that are subject to the OTC LEV program must be

certified pursuant to a California Air Resources Board (CARB) Executive

Order;

(3) The OTC LEV program would allow the sale of the five categories

of California vehicles: California Tier I, TLEV, LEV, ULEV, and ZEV;

(4) Manufacturers could choose any combination of California

certified vehicles to meet average NMOG fleet emission standards in the

OTR as follows:

1999--0.113 g/mi

2000--0.073 g/mi

2001--0.070 g/mi

2002--0.068 g/mi

2003 and later--0.062 g/mi

Regarding California's ZEV sales mandate, the OTC recommends that,

to the extent it must apply to satisfy section 177, it shall apply. But

if it is not required under section 177, the OTC recommends that the

``individual States within the OTC may at their option include such a

requirement and/or economic incentives designed to increase the sales

of ZEVs in the programs they adopt.''

(5) The effective date for the OTC LEV program would be January 1,

1996, allowing two vehicle model years prior to applicability of the

standards in 1999, but does not preclude earlier State implementation.

D. Legislative History of Section 184

The OTC provisions originated in Congress in the House bill as

introduced. That bill, as introduced, established an ozone transport

region for the Northeast, and incorporated the procedures specified for

general transport regions under what was finally enacted as section

176A of the Act. That provision in the House bill did not involve a

plan for specific additional control measures. See H.R. 3030 at 92-93

and 49 (July 27, 1989), reprinted in 2 1990 Legislative History of the

Clean Air Act Amendments of 1990, 103rd Cong., 1st. sess. (Nov. 1993)

(hereinafter ``1990 Legislative History'') at 3828-29 and 3785. The

House committee then marked-up H.R. 3030 to include the provisions as

finally enacted. See H.R. Rep't No. 101-490, part 1, 101st Cong., 2d

Sess. at 527-28 (May 17, 1989), reprinted in 2 1990 Legislative History

at 3551-52. It described the bill as establishing ``a public procedure

and structure'' for an OTC to transmit recommendations to EPA and

explained that EPA's response ``should be buttressed by supporting

material.'' It further stated, ``The Committee expects that the

Administrator's review of additional control measures recommended by an

ozone transport commission will fully acknowledge and respond to the

dimensions of the transport problems addressed by the commission's

recommendations.'' The report also set out the timetable for EPA's

response within nine months, and for EPA to issue a finding of SIP

inadequacy ``[u]pon full or partial approval'' followed by States' SIP

revisions within one year. H.R. Rep't. No. 101-490 at 256, reprinted in

2 1990 Legislative History at 3280.

The Senate bill, in contrast, as introduced provided that the

commission could, without any independent EPA review or approval,

``after notice and opportunity for comment, require additional control

measures to be applied within such transport region if the commission

determines such measures are necessary to bring all areas in such

region into attainment by the dates provided by this subpart.'' See S.

1630, 101st Cong., 1st Sess. (Sept. 4, 1989), reprinted in 5 1990

Legislative History at 9111.

The Senate bill, as introduced, was amended in committee to provide

for EPA review of an OTC ``plan'' for additional control measures.

Under the Senate committee mark-up, the OTC could, after notice and

comment, develop a plan for additional control measures for the OTR,

and would then transmit the plan to EPA for review. The committee then

included the general framework for EPA review that survives in section

184 as enacted, including EPA's obligation to explain any disapproval

and recommend alternatives. The bill differed from the statute as

enacted, however, in that: (1) EPA was obligated to state in the

Federal Register notice upon receipt of the plan that ``written data,

views, or comments on the plan may be submitted to the Administrator

within ninety days beginning on the receipt date'' but was not

obligated to conduct a public hearing; (2) EPA's period to determine

whether to approve the plan was 120 days, rather than nine months; and

(3) the bill provided that the plan would be deemed approved if the

Administrator failed to act within 120 days. The Senate committee mark-

up also included the mechanism for implementation whereby EPA would

issue a finding that the States' plans were inadequate, and that the

finding would require the States to revise their SIPs to include the

approved additional control measures within one year after the finding

is issued. See S. Rep. No. 101-228, 101st Cong., 1st Sess., at 34 and

610-11 (Dec. 20, 1989), reprinted in 5 1990 Legislative History at

8950-51. This version was reported out of committee to the full Senate.

See S. 1630 (Dec. 20, 1989), reprinted in 5 1990 Legislative History at

7986-7988.

In the Senate debate on the Senate bill, Senator Lieberman

explained these developments. He explained that President Bush's

bill\2\ would have left the final decision about imposing additional

controls to EPA. But Senator Lieberman explained that this was

``unacceptable'' because EPA's lack of support for past regional

efforts to adopt controls was in part responsible for their failure.

Senator Lieberman went on to explain that concerns were raised to the

committee that the commission was being given ``too much authority''

because it would have ``ultimate authority to impose additional

controls on sources of emissions in the separate States.'' Lieberman

emphasized the importance of taking from EPA the responsibility for

recommending baseline regional controls. He went on to explain that,

under the bill.

\2\President Bush's bill was H.R. 3030, as introduced.

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Final authority to disapprove additional measures actually rests

with EPA. However, EPA bears the burden, as clearly stated in the

bill, of demonstrating that the additional control measure is not

necessary to bring any area of the region into attainment by the

dates provided. In making their decision, EPA must not place unfair

burdens on the recipient State.

See Senate Debate on S. 1630 (Jan. 31, 1990), reprinted in 4 1990

Legislative History at 5077 (statement of Sen. Lieberman).

As noted, the conference adopted the House version. The debates on

the conference bill focused primarily on the importance of the

transport provisions to address a significant problem. In the Senate

Debate on the conference bill,

Senator Lieberman again explained EPA's responsibilities in responding

to an OTC recommendation:

The Administrator has the final authority to disapprove

additional measures recommended by the Commission. However, EPA

bears a heavy burden of demonstrating that the additional control

measure(s) is not necessary to bring any area of the region into

attainment by the dates provided and to recommend equal or more

effective actions that could be taken by the Commission to conform

the disapproved portion of the recommendations. Any recommendations

by EPA under this section designed to replace the recommendations of

the Commission shall not place an unfair burden on any state which

is the victim of the transported air pollution. Equal or more

effective actions recommended by the EPA shall mean actions which

achieve equivalent progress towards attainment of the standard,

given full consideration of the impact of transported air pollution.

Senate Debate (Oct. 27, 1990), 1 1990 Legislative History at 1053

(Statement of Senator Lieberman). Also in the Senate Debate on the

Conference bill, Senator Baucus inserted a detailed explanation of the

bill, known as the Baucus-Chafee Statement of Senate Managers. See 1

1990 Legislative History at 1000 and 1045. The Statement of Senate

Managers reiterated Senator Lieberman's points, using his exact

language quoted above to describe EPA's role in responding to an OTC

recommendation, including the emphasis on EPA's ``heavy burden'' to

disapprove. 1 1990 Legislative History at 1004.

II. Applicability of Rulemaking Procedure

Section 184(c) establishes a specific notice-and-comment procedure

both for OTC development of and EPA action to approve or disapprove

recommendations for additional control measures in the OTR. These

procedures are compatible with, but not necessarily identical to, the

procedures the Agency must follow to issue a rule. The statute is

silent as to whether EPA can take final action on the OTC

recommendation without complying with notice-and-comment rulemaking

procedures. EPA does not believe that rulemaking procedures are

necessary if EPA disapproves the OTC recommendation because such an

action would not have a binding future effect on any regulated parties.

It is less clear whether rulemaking procedures are necessary for

approval or partial approval of the OTC recommendation.

Regardless of whether rulemaking procedures are required, EPA

recognizes the importance of public participation in its decision-

making process. The procedures required by section 307(d) of the Clean

Air Act are an excellent vehicle for ensuring an open, public process.

Among other things, they require the establishment and maintenance of a

rulemaking docket that contains the information, data and documents

upon which EPA bases its proposed and final rules; they provide an

opportunity for the public to present written and oral comments to the

Agency, including an opportunity to rebut views presented at a public

hearing; and they require the Agency to respond to the significant

public comments, criticisms and new data submitted during the comment

period.

EPA has decided that the better course in this instance is to

follow section 307(d) rulemaking procedures and ensure that there is an

open public process that allows interested parties to put on the record

their views, comments, arguments and data relevant to the decision

before the Agency.\3\ The Administrator has determined that, pursuant

to section 307(d)(1)(V), if the Agency approves or partially approves

the OTC recommendation, section 307(d) will apply.\4\

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\3\EPA is not finding that it is legally obligated to use

rulemaking procedures to approve the OTC recommendation. EPA

reserves the right to approve future OTC recommendations without

following rulemaking procedures.

\4\The decision to follow rulemaking procedures is intended to

preserve EPA's option of approving or partially approving the OTC

recommendation. The Agency is not legally obligating itself to

follow rulemaking procedures to the extent it disapproves or

partially disapproves the OTC recommendation, although the Agency

currently intends to follow the procedures set forth in 307(d)

regardless of whether it approves or disapproves the OTC

recommendation.

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EPA has established Air Docket No. A-94-11 and placed in it the

data, information and documents upon which the Agency relied in

drafting this proposal, as required by section 307(d) (2), (3) and (4).

Section 307(d)(3)'s requirement that EPA publish a notice of proposed

rulemaking is met by this notice. In view of the limited nine month

timetable for EPA decision, to satisfy rulemaking requirements, EPA is

also relying on the OTC's recommendation itself (developed through the

OTC's statutory notice-and-comment process), the OTC's technical

analysis and response to comments, as well as EPA's discussion of

relevant issues, data, and other Agency information.\5\ This proposal

leaves open EPA's option to approve, disapprove, or partially approve

and partially disapprove the OTC recommendation in its final decision.

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\5\Courts have recognized the possibility of publishing State

submissions to EPA to satisfy rulemaking requirements for a

proposal. Under the 1977 Amendments, EPA argued that time

constraints constituted ``good cause'' to avoid notice-and-comment

rulemaking in designating areas according to their attainment

status. In New Jersey v. EPA, the Court of Appeals for the D.C.

Circuit emphasized that EPA could have published as proposed rules

the State designations shortly after it received them in order to

complete rulemaking under the short statutory timetable. New Jersey

v. EPA, 626 F.2d 1038, 1043 (D.C. Cir. 1980). Accord United States

Steel Corp. v. EPA, 595 F.2d 207 (5th Cir. 1979).

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EPA seeks public views, arguments, data and comments on all aspects

of its analysis in this notice and on the Agency's information placed

in the docket. EPA also seeks comment on the OTC's recommendation

(contained in an Appendix to this proposal), on the OTC's views that

are described in this notice, and on the OTC's technical support

document and response to comments document that may be found in the

docket. Finally, EPA will supplement the record with additional

rationales, discussions, data, and other pertinent information for

public participation and comment as that becomes available.

As indicated in detail below, EPA is considering a number of

complicated issues in determining whether to approve or disapprove the

OTC recommendation, and invites comments on all of these issues. EPA

intends to make every effort to afford the public an opportunity to

participate in the Agency's process to respond to the recommendation.

In addition to the opportunity to file written comments and present

oral views at the May 2-3 public hearing, EPA intends to hold a series

of public meetings in the Northeast to provide further opportunity for

oral presentation of views. EPA also expects to supplement the record

as necessary to allow the public to comment on new information and

considerations that EPA believes it should take into account in making

a decision.

III. Standards Applicable to EPA Review of OTC Recommendation

Section 184 of the Act specifies two general criteria that EPA is

to apply in evaluating whether to approve, disapprove, or partially

approve and partially disapprove the OTC recommendation. These are,

first, whether the additional control measures that the OTC recommends

are ``necessary'' and, second, whether the additional control measures

are ``otherwise consistent with th[e] Act.'' If the recommended measure

is necessary and consistent with the Act, EPA believes it would be

obligated to approve the recommendation.

A. Necessity

EPA believes that it has substantial discretion to interpret the

``necessary'' test, and is considering a number of approaches,

discussed below. EPA's evaluation of ``necessity'' could involve two

fundamental analytic steps: First, EPA believes it should consider the

magnitude of emissions reductions in ozone precursors needed for the

nonattainment areas in the OTR to attain. Second, it may be appropriate

to consider other potential emissions reduction measures that may be

available to satisfy the needed magnitude of emissions reductions, and

compare the LEV program to alternative measures. In connection with the

magnitude of reductions needed for attainment, EPA is considering: (1)

how it should address the geographic dimension of determining where the

LEV program is necessary for areas in the OTR to achieve attainment;

(2) how it should account for the timing of when the LEV program would

generate reductions that could contribute to attainment; and (3)

whether EPA can take into account the need for the LEV program for

maintenance purposes. In connection with alternatives to the LEV

program, EPA is evaluating relevant aspects of (1) the recommended LEV

program; (2) the FLEV alternative that the auto manufacturers have

proposed; and (3) other possible emissions reduction measures

identified by EPA, the OTC, or other State bodies.

1. Necessity Finding

EPA believes that more than one approach to defining what is

``necessary'' is conceivable. One possible approach is to consider as

necessary any additional control measures that contribute to

attainment, as long as measures specifically required by the Act or

that are otherwise in place are insufficient to achieve attainment.

Under this approach, the relevant question would be whether additional

reductions are needed for attainment, and the availability of

alternative control measures would not be relevant.

A second approach is to first consider what emissions reductions

are needed for attainment and then to compare the LEV program to

alternative measures that could be adopted to achieve those reductions.

Before enactment of the 1990 Amendments, EPA interpreted the term

``necessary'' generally in this manner under section 211(c)(4)(C) of

the Act, in the context of preemption of State fuel requirements.\6\

The section 211(c) provision specifically addresses how alternative

measures should be compared for purposes of evaluating necessity.

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\6\Other provisions of the Act also involve a ``necessary''

standard. Under section 110, the Administrator is to approve a

State's SIP revision if it meets the applicable requirements of the

Act, including the requirement in section 110(a)(2)(A) that the SIPs

include measures ``as may be necessary or appropriate to meet the

applicable requirements of this Act.'' Prior to the 1990 Amendments,

section 110(a)(2) provided that the Administrator shall approve a

State's SIP if it includes measures ``as may be necessary to insure

attainment and maintenance'' of the primary and secondary NAAQS. The

Supreme Court has interpreted the ``as may be necessary'' language

to mean that ``the Administrator must assure that the minimal, or

`necessary,' requirements are met, not that he detect and reject any

state plan more demanding than federal law requires.'' Union

Electric Co. v. EPA, 427 U.S. 246 at 263 (1976) (footnote omitted).

EPA currently does not believe that this test, and the Union

Electric Co. Court's analysis, are applicable under section 184. The

Union Electric Co. Court explained that the language, structure, and

purpose of the Act, are consistent with a State's decision to be

stricter within its borders than Federal law requires, here, in

contrast, section 184 appears to indicate that EPA is to disapprove

the OTC's recommended measures if those measures are not necessary.

Further, the Union Electric Court's analysis is inapplicable here

because a majority of OTC States is seeking to impose requirements

on dissenting OTC States over their objections. EPA requests comment

on this view.

Also, in connection with its study and rulemaking under section

202(i) related to ``Tier 2'' motor vehicle emissions standards, EPA

is to determine whether ``there is a need for further reductions in

emissions.'' (Emphasis supplied.) As discussed below, EPA has not

yet completed the Tier 2 study or the subsequent rulemaking, and

thus has not yet interpreted this standard in that context.

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Section 211(c)(4)(A) provides that, subject to specified

exceptions, States may not regulate characteristics of motor vehicle

fuels or additives in order to control motor vehicle emissions once EPA

has regulated that characteristic or has found that such regulation is

not necessary. Congress apparently sought to preempt States from

interfering with national uniformity in federal fuel regulations.

Subparagraph (C) specifies an exception for States to regulate fuels

and additives in their SIPs, which the Administrator may approve ``only

if [s]he finds that the State control or prohibition is necessary to

achieve the national primary or secondary ambient air quality standard

which the plan implements.''

Prior to the 1990 Amendments, the term ``necessary'' was not

further defined. At that time, EPA regulated the volatility of gasoline

under section 211(c) in order to control evaporative emissions of VOCs.

Certain States sought approval from EPA for more stringent volatility

controls on the grounds that such more stringent controls were

``necessary'' under section 211(c)(4)(C). EPA approved States' more

stringent volatility controls in New York and New Jersey, among

others\7\. In addition, EPA earlier approved Arizona's controls on

oxygenate content of gasoline in order to control carbon monoxide

emissions as necessary under section 211(c)(4)(C).\8\ In approving

these State controls, EPA articulated a test for determining

``necessity.'' There, EPA explained that if, after accounting for the

possible reductions from all other reasonable control measures, the

State could demonstrate that further measures are still needed for

attainment, then the fuel controls are ``necessary'' within the meaning

of section 211(c)(4)(C). EPA first articulated this test in the Arizona

case:

\7\See EPA's Approvals of Revisions for State Implementation

Plans for New York, 54 FR 26030, 26031 (June 21, 1989) and New

Jersey, 54 FR 25572, 25573 (June 16, 1989).

\8\See EPA's Approval of Revisions for State Implementation Plan

for Arizona, 53 FR 17378, 17413 (May 16, 1988) and 53 FR 30224,

20228 (Aug. 10, 1988).

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EPA believes that a fuel control measure may be ``necessary''

for timely attainment if no other measures that would bring about

timely attainment exist, or if such other measures exist and are

technically possible to implement but are unreasonable or

impracticable.'' 53 FR at 17413. In short, EPA's approach was that

the controls were necessary if they would still be needed for

attainment after adoption of all other reasonable and practicable

measures. Congress subsequently codified this interpretation when it

added a definition of ``necessary'' to section 211(c)(4)(C) in the

1990 Amendments.\9\

\9\Of course, Congress did not codify this or any other

definition of ``necessary'' in section 184. This difference might

arguably support EPA's discretion to adopt a different approach to

the term under section 184.

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In applying this definition of ``necessary'' in the fuel context,

EPA explained that it would not require that a State impose more

drastic measures (such as driving prohibitions, gas rationing, or plant

shutdowns), as alternatives to State fuel controls. See 54 FR at 26031

and 26035. EPA further explained that it would conclude that measures

are ``necessary'' when no other measures that EPA or the State has

found reasonable are available\10\ to achieve this reduction. Beyond

such identified ``reasonable'' measures, EPA need look at other

measures before [the fuel] control only if it has clear evidence that

[the fuel] control would have greater adverse impacts than those

alternatives. Therefore, EPA can defer to [the State's] apparent view

that [the fuel] control is the next less costly (or is itself a

reasonable) measure.

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\10\In context, it appears that EPA intended the word

``available'' to mean ``sufficient.''

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See 54 FR at 26031.

EPA did consider cost-effectiveness of alternative measures as one

criterion, but not the only criterion, for evaluating the

reasonableness of the alternatives. 54 FR at 26035. EPA also explained:

``Arguably, an alternative measure is `reasonable' only if its effects

are less drastic than the effects of the fuel controls.'' Id.

There may be some ambiguity whether EPA's test was whether

(considering cost and other factors), the fuel controls were more

reasonable than alternatives, or that alternatives were so drastic as

to prevent EPA from concluding that they were reasonable. EPA did state

that it determined that reasonable alternatives would not achieve

enough reductions, and that it ``determined that remaining controls

such as gas rationing, driving reductions, and source shutdowns are so

drastic that the State may resort to fuel controls first.'' 54 FR at

26033. But EPA immediately thereafter characterized its judgement as

being that ``State fuel regulation is a less drastic course than gas

rationing and other unpopular controls.'' Id. At the least, it seems

that EPA believed that comparing the reasonableness of fuel controls to

alternatives was a significant factor in determining whether the

alternatives were themselves reasonable. EPA also explained that its

judgment about what is too drastic ``is a complicated policy

determination'' requiring the Administrator to weigh factors such as

cost and popularity, and that such policy judgments need not be

supported by the same technical record as, for example, determinations

of as the magnitude or reductions an area needs for attainment. 54 FR

at 26033. Also, EPA did not insist that the State fuel controls be

sufficient to fill the shortfall to achieve attainment, or that all

measures needed to achieve attainment actually be adopted in order to

qualify for the section 211(c)(4)(C) exception. Most importantly, as

the paragraph quoted above indicates, EPA gave significant deference to

the State's determination regarding whether the fuel control was the

most reasonable and practicable measure to achieve the NAAQS.

Congress's codification of EPA's interpretation of ``necessary'' in

the fuel context confirms the validity of this interpretation in the

fuels context. EPA is considering whether this approach should apply

here, including deference to the OTC's view that no more ``reasonable''

and ``practicable'' alternatives to the recommended measure are

available that would be sufficient for purposes of attainment.

In addition to the fuels precedent, EPA believes that the statutory

structure, together with the legislative history, may further support

giving substantial weight, or deference, to the OTC's recommendation

that implementation of the LEV program throughout the OTR is necessary

for attainment in the region. While EPA is to review the OTC's

recommendations under section 184(c)(2)(B) ``to determine whether the

control measures are necessary,'' under section 184(c)(4) EPA is to

specify ``why any disapproved additional control measures are not

necessary'' if EPA disapproves or partially disapproves the

recommendations. Section 184 nowhere mentions a parallel obligation to

explain why the additional control measures are necessary in the case

of approval or partial approval. EPA believes it could reasonably

interpret these provisions to mean that EPA is to start with a

presumption of approving the OTC's recommendations, unless it finds

that the recommended measures are not necessary.

EPA believes the legislative history could be read to support this

view. As described above, the Baucus-Chafee Statement of Managers, in

discussing EPA's role in reviewing an OTC recommendation, pointed out

EPA's ``heavy burden'' to ``demonstrat[e] that the additional control

measure(s) is not necessary.'' See 1 1990 Legislative History at 1004,

supra (emphasis supplied). As noted above, the Statement of Managers'

discussion used identical language to Senator Lieberman's description

in the Senate debate. Further, Senator Lieberman characterized the

Senate bill as ``clearly stating'' that EPA must demonstrate that the

additional control measure is not necessary. See 1990 Legislative

History at 1053, supra.

To be sure, EPA generally has an obligation to explain the basis

for its decision, and the House Report did indicate that EPA's response

``should be buttressed by supporting material.'' H.R. Rep't. No. 101-

490 at 256, reprinted in 2 1990 Legislative History at 3280, supra. But

EPA's explicit statutory obligation to explain why a measure is ``not

necessary'' together with the Senate's unequivocal interpretations in

the legislative history may reasonably indicate that EPA should give

substantial weight to the OTC's determination of necessity.

EPA is mindful that its factual analysis of the LEV program's

necessity will be subject to substantial uncertainty within the nine

month timetable provided for a decision. EPA expects this to be so both

for the modeling information regarding its analysis of the magnitude or

reductions needed as well as the reasonableness of the LEV program and

alterative measures. Here, EPA is under a statutory obligation to reach

a decision by November 10, 1994. Meeting this deadline may be

particularly important in this case, because the OTC States are

obligated under section 182(b)(1)(A) and section 182(c)(2) of the Act

to submit for their ozone nonattainment areas, by November 15, 1994,

demonstrations that their SIPs, as revised, will provide for attainment

of the ozone NAAQS by the dates applicable to each area. These States

presumably intend to rely on EPA's decision regarding the recommended

LEV program in their attainment demonstrations to show that their SIPs

will provide for timely attainment. Without knowing whether EPA will

approve, disapprove, or partially approve and partially disapprove the

OTC's LEV recommendation, the States would not know what magnitude of

emissions reductions their other SIP measures must achieve.\11\ Under

these circumstances, and in light of the legislative history and

statutory structure, it appears appropriate for EPA to at least resolve

uncertainties in favor of approval, in deference to the OTC's

determination of necessity. In other words, it appears appropriate for

EPA to start with the position that it should approve the OTC's

recommendation unless it has a sufficient factual basis to find that

the LEV program is not necessary. EPA requests comment on whether and

the extent to which it should accord deference to the OTC's

determination that the LEV program is necessary.

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\11\EPA notes that it generally has found SIPs inadequate and

called for plan revisions after complete SIPs have been submitted or

where a new situation arises creating the inadequacy. Here, an

approval of the OTC recommendation within the nine month timetable

would result in a finding under section 110(k)(5) of SIP inadequacy

under section 110(a)(2)(D) prior to submission of attainment

demonstrations due November 15, 1994. EPA believes this is

appropriate. The Act does not specify a deadline for compliance with

section 110(a)(2)(D); section 184 does not limit EPA to finding SIPs

inadequate only after attainment demonstrations are submitted; and

section 110(k)(5) specifically authorizes EPA to require SIP

revisions ``to mitigate adequately the interstate pollutant

transport described in section [184] and or section [176A].''

Indeed, States may need to rely on EPA's decision here in their

attainment demonstrations.

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EPA also recognizes counter-arguments that it should apply a more

stringent variant of the section 211(c)(4)(C) approach, without

deference to the OTC's view that no more ``reasonable'' and

``practicable'' alternatives to the recommended measure exist. This

departure from the section 211(c) approach may be justified by a

difference in context between sections 211(c) and 184. In particular,

the purpose of preemption under section 211(c) is to preserve national

uniformity in EPA fuel regulations, which States can override where

``necessary'' for purposes of achieving attainment. In contrast, under

section 184 the OTC is authorized to specify, subject to EPA approval,

measures necessary for compliance with the prohibition in section

110(a)(2)(D) of the Act against significant contribution interfering

with attainment in any other State. States are already obligated to

comply with section 110(a)(2)(D) and are free to choose the control

measures to do so; section 184 adds an element of compulsion whereby

the OTC may override an objecting State to impose specific

``necessary'' measures.

Arguably, EPA deference might be less appropriate for the OTC,

which can specify measures overriding the objection of a minority of

its member States, and depriving them of their choice of measures to

comply with section 110(a)(2)(D). On the other hand, it can be argued

that Congress, in enacting section 184, intended the OTC to be given a

substantial voice for proposing solutions to the ozone transport

problem, even where its solutions override the views of some member

States. Moreover, strict insistence on showing that no reasonable and

practicable alternatives are available would seem to add little to the

States' independent obligation to comply with section 110(a)(2)(D),

since States are likely to choose reasonable and practicable means to

comply. Still, Congress's own emphasis in the 1990 Amendments on

specifying control measures it thought necessary for attainment, in

addition to specifying deadlines, may indicate that allowing the OTC to

specify additional control measures, even under a strict interpretation

of ``necessary,'' is significant.

EPA requests comment on whether, if that test should apply, EPA the

interpretation of ``necessary'' under section 211(c)(4)(C) should apply

here. In addition, EPA requests comment on whether it should defer to

the OTC's evaluation of whether ``reasonable'' and ``practicable''

alternatives to the LEV program are available.

Finally, EPA is considering how comparative cost-effectiveness and

other social and environmental factors should affect its analysis of

reasonable and practicable alternatives. One possible approach is that

the LEV program would be necessary if it is still needed after all more

cost-effective measures are adopted. As noted above, EPA considered

cost-effectiveness as a criterion, but not the only criterion, in

evaluating the reasonableness of controls under section 211(c)(4)(C).

EPA recognizes that other policy reasons may support adoption of

control measures that may not appear to be the most cost- effective for

purposes of attaining the ozone NAAQS. For example, the socio-economic

distribution of the burden of particular measures, employment impacts,

and cross-media environmental impacts may affect the choice of control

measures. EPA requests comment on how these factors should affect an

analysis of alternatives.

2. Magnitude of Reductions

As noted above, EPA believes it should address the amount of

reductions needed for attainment in the OTR as the first step in

evaluating whether the LEV program is necessary. In particular, EPA

believes it is important to evaluate what reductions are needed, where

they are needed, and when they are needed. In addition, EPA is

considering whether it may also consider whether the LEV program is

necessary for maintaining the ozone NAAQS even after it is achieved.

The OTC addressed the magnitude of reductions necessary for OTR

attainment in its response to comments and technical support documents.

There, the OTC expressed the belief that the control strategies

specifically mandated in the Clean Air Act would not be sufficient for

the nonattainment areas in the OTR to achieve and maintain the ozone

NAAQS. The OTC believes that more reductions will be needed than the

LEV program would generate. Also, the OTC notes that, despite an

overall recent decline in the frequency and severity of ozone

exceedances, it believes that short term trends have proven inaccurate

indicators of long term status. Further, the OTC notes that studies

indicate that the trend toward fewer exceedances will reverse without

significant additional NOX and VOC control.

Regarding the scientific basis, the OTC also contends that

emissions inventories, photochemical modeling and ambient monitoring

data constitute the best tools available to evaluate the need for

emissions reductions, despite continuing refinement of this scientific

information. The OTC recognized that most air quality analysis in the

past has focused on domains within a particular State rather than on a

broader region. It asserts that it assessed the need for and

effectiveness of reductions in the OTR using photochemical models,

monitoring data, trajectory analyses, and mobile emission models.

a. Focus on Contribution. At the outset, EPA believes the concern

in section 184 with ozone transport affects its analysis of where

emissions reductions are necessary for areas in the OTR to achieve

attainment. That is, EPA currently believes that the ``need'' for

additional measures in the OTR under section 184 should not focus on a

State's need to adopt the LEV program in its own jurisdiction for the

benefit of in-State nonattainment areas. States, of course, retain full

authority to adopt this program under section 177 without EPA approval.

Rather, EPA believes that the focus should be on the need for upwind

States that contribute to nonattainment downwind to adopt the LEV

program not for their own benefit but for the benefit of the downwind

areas that could not otherwise attain on time. The statutory structure,

including the reliance in section 184(c)(5) on section 110(a)(2)(D), as

well as the legislative history, support this conclusion.

Of course, EPA recognizes that upwind States also have an

independent obligation to adopt measures for purposes of their own

timely attainment. The measures upwind areas adopt for their own

benefit may well be sufficient to prevent contribution to nonattainment

downwind. While upwind areas may still contribute pollutants downwind

after they have reached attainment, their independent obligation to

attain should go a long way to reducing emissions that contribute to

downwind nonattainment.\12\ It nevertheless seems that reductions in

upwind areas may be necessary to prevent significant contribution to

nonattainment downwind, even if the upwind areas would have to achieve

those reductions for their own benefit, anyway. In other words, it does

not seem that upwind areas' own need to reduce emissions for their own

attainment should render those reductions unnecessary. To be sure,

upwind areas' independent implementation of the LEV program in their

SIPs may make it unnecessary for administrative purposes to mandate

those controls. But EPA's obligation to mandate the recommended LEV

measure does not appear to turn on whether the States already have or

would have to implement that program for their own benefit. Rather,

EPA's obligation seems to turn on whether the program is necessary for

purposes of downwind attainment, regardless of whether it is necessary

or has been adopted for upwind attainment purposes. EPA requests

comment on this view.

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\12\One complication, discussed further below, is the timing of

reductions upwind, where the upwind areas may have a later

attainment deadline.

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Finally, EPA notes that it may be possible for downwind areas that

are the recipients of transported pollution to counteract some portion

of the incoming pollutants by adopting more controls downwind than

would otherwise be necessary. Such areas might diminish the reductions

necessary upwind by adopting such more stringent controls downwind. For

downwind areas that are less polluted and have less stringent controls

in place, the downwind areas might even be able to ``over-control'' at

less cost than it would take for upwind areas to prevent some increment

of contribution. On the other hand, it may not be fair to insist that

downwind areas bear the cost of counteracting pollution that is

generated upwind. In any case, however, no area receives air at its

boundaries that is free of ozone or precursors. Thus, in evaluating

what upwind contribution ``needs'' to be reduced for attainment

downwind, it may be important to determine what ``boundary conditions''

downwind areas should be entitled to receive. EPA requests comment on

these issues, and particularly on the extent to which it should view

upwind reductions as necessary for attainment downwind, if the downwind

area could, through extra controls, make those upwind reductions

unnecessary.

b. Timing of Reductions. As noted above, the OTC recommendation

calls for adoption of the LEV program in the OTR in 1996, providing two

years lead-time to auto manufacturers with the LEV standards applicable

to model year 1999 vehicles. The benefits of this program are also

dependent upon turnover in the vehicle fleet. As referenced above, EPA

is thus mindful that this schedule for the LEV program will not

generate reductions in time to assist areas in meeting a moderate area

1996 and will generate only minimal reductions by the serious area 1999

attainment deadline. More benefits would be available for severe areas

with a 2005 or 2007 attainment deadline. The importance of when upwind

reductions are necessary for downwind attainment, and when the LEV

program will generate such reductions raises a number of important

issues.

First, in order for the LEV standards to apply in model year 1999,

EPA may have to reach a decision to approve the OTC recommendation by

the end of 1994. This may be an important factor supporting EPA's

action within the nine month statutory timetable based on the best

available current information. Under section 177 of the Act, States may

adopt motor vehicle emissions standards identical to California's

standards if ``California and the State adopt such standards at least

two years before commencement of such model year (as determined by

regulations of the Administrator).'' Under EPA's current regulations,

model year 1999 may begin as early as January 2, 1998 (See 40 CFR

86.082-2). To provide two years lead-time, States might then have to

adopt California's standards by January 2, 1996 in order for the

standards to apply for model year 1999.\13\ If EPA were to approve the

OTC's LEV recommendation, section 184(c)(5) provides that EPA's finding

of SIP inadequacy is to require that States revise their SIPs to

include the LEV program within one year of the finding.\14\ Therefore,

if EPA is to require that States adopt the LEV program and submit SIP

revisions by January 2, 1996, then EPA must make a finding of SIP

inadequacy no later than January 2, 1995. Delays in an EPA decision

could delay application of an approved program, and would further delay

the benefits and the degree to which such benefits could contribute to

timely attainment.

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\13\An issue in litigation in New York and Massachusetts has

been whether the model year and two-year lead-time requirement under

section 177 may vary for different manufacturers that begin their

model years at different times, or whether the model year begins for

purposes of section 177 for all manufacturers as soon as the model

year may begin for any manufacturer.

\14\It is not entirely clear whether EPA has discretion to give

States less than one full year to submit their SIP revisions. Under

section 110(k)(5), EPA ``may establish reasonable deadlines (not to

exceed 18 months after such notice) for submission of such plan

revisions.'' The more specific provision in section 184 that lacks

the explicit grant of discretion from section 110(k)(5) itself

arguably indicates that EPA does not have such discretion. EPA

requests comment on this view.

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Finally, EPA believes the time when the LEV program would generate

reductions also relates to the locations where reductions are needed

for purposes of relieving contribution of transported pollutants that

interfere with timely attainment. It appears that the LEV program will

generate reductions in time only to help areas to achieve attainment by

the severe classification deadline of 2005 or 2007. States in the most

northeast portion of the OTR, including Rhode Island, Massachusetts,

Maine, Vermont, and New Hampshire, contain no such areas. EPA believes

that its recent considerations in response to ozone transport problems

in a letter to Senator Carl Levin\15\ and in subsequent March 21, 1994

letters to the Massachusetts Department of Environmental Protection and

the Conservation Law Foundation (CLF)\16\ may be relevant to the timing

of LEV reductions. In particular, certain moderate nonattainment areas

have raised a concern that they may not be able to themselves adopt

controls to ensure attainment of the ozone standard by the 1996

deadline for areas classified as moderate because air pollution

transported from upwind may be the dominant factor accounting for their

nonattainment problem. The solution contemplated in the section 184

transport provision is for the responsible upwind areas to relieve

their significant contribution so that the downwind areas may attain on

time. Still, in certain cases this view could be at odds with the

overall title I scheme that establishes later deadlines for attainment

in more polluted areas and also establishes a graduated program of

additional and more stringent requirements to be accomplished in those

areas over the longer time-frame. If accelerating controls in the

upwind areas is impracticable and certain facts related to ozone

transport could be shown, EPA suggested it might consider reasonably

interpreting the Act to grant the downwind areas additional time to

reach attainment beyond the dates specified in section 181(a)(1). EPA

concluded its letters to Senator Levin and the CLF by indicating that

it is continuing to develop policy to address this problem. EPA

requests comment on the relevance of this policy here. In particular,

reductions generated over time through fleet turnover to vehicles

meeting LEV standards could be more important in assisting areas in

reaching attainment by later deadlines. If any moderate or serious

areas in the OTR have until later than 1999 to attain, this could

affect the utility of the LEV program for such areas to reach

attainment.

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\15\See letter from Mary D. Nichols, Assistant Administrator for

Air and Radiation, to the Hon. Carl Levin (March 7, 1994).

\16\See letters from John S. Seitz, Director, Office of Air

Quality Planning and Standards, to Renee J. Robins, Staff Scientist,

Conservation Law Foundation (March 21, 1994) and to Barbara Kweta,

Director, Division of Air Quality Control, Massachusetts Department

of Environmental Protection (March 21, 1994).

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For episodes in which the long-range transport is from the

southwest to the northeast in the OTR, States northeast of New York and

Connecticut would not contribute to nonattainment in any severe

nonattainment area. Under these circumstances, the LEV program in such

States would not assist any downwind areas in reaching attainment by

the deadlines specified in the Act. However, past episodes have shown

that high concentrations in the severe areas do not always occur only

when the wind blows from the southwest. When the wind blows in the

opposite direction from these States into severe areas to the south,

the LEV program in these States could assist the severe areas in

reaching attainment. EPA requests comment on whether it would be

appropriate to geographically limit any approval of the recommended LEV

program.

EPA is also considering whether it has discretion to take into

account whether the LEV program is necessary for areas to maintain the

ozone NAAQS after achieving attainment. Particularly in the case of

motor vehicle standards, whose benefits require time for the fleet to

turn over, taking the OTR's maintenance needs into account could

significantly affect the analysis. The OTC, in its response to

comments, noted that LEV is a significant factor in achieving

maintenance requirements.

Section 184(c)(1) specifies on its face that the OTC may develop

recommendations for additional control measures if the OTC determines

such measures are ``necessary to bring any area in such region into

attainment by the dates provided by this subpart.'' Identical language

appears in section 184(c)(2) to describe EPA's obligation in reviewing

the need for the control measures in the recommendations and a third

time in section 184(c)(4) to describe EPA's obligation to explain why

any control measures in the recommendation are not necessary. This

language, omitting any reference to maintenance, unless unintentional,

might suggest that Congress designed section 184(c) as a tool to reach

attainment alone, and not to ensure maintenance thereafter.

Congress explicitly addressed maintenance in connection with ozone

transport under section 110(a)(2)(D). As discussed above, if EPA

approves the OTC recommendation, under section 184(c)(5) it is to find

SIPs inadequate under section 110(a)(2)(D). That latter provision

specifies that SIPs are to contain adequate provisions to prohibit

emissions that will ``contribute significantly to nonattainment in, or

interfere with maintenance by, any other State'' with respect to any

primary or secondary NAAQS. To be sure, States continue to have an

obligation in any case to comply with the requirement in section

110(a)(2)(D) to prevent emissions that will interfere with maintenance

by any other State. But the omission of any reference to maintenance in

section 184 may indicate that Congress did not intend it to be a proper

basis for OTC recommendations.\17\

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\17\One might argue that the need to bring any area in the OTR

into timely attainment inherently carries with it the need to bring

such areas ``back'' into attainment if they attain and subsequently

relapse into nonattainment again. The difficulty with such a view,

however, is that it seems at odds with the distinction--clearly

delineated elsewhere in the Act--between attainment and maintenance.

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Section 176A(a) governs the establishment of transport regions, and

additions or removals of areas from such regions. Section 176A(b)

governs the establishment of transport commissions for such regions,

the representation on and voting of a commission, and a commission's

obligations to assess transport, strategies for addressing it, and to:

Recommend to the Administrator such measures as the Commission

determines to be necessary to ensure that the plans for the relevant

States meet the requirements of section [110(a)(2)(D)].

A commission under section 176A therefore appears obligated to

consider compliance with section 110(a)(2)(D) in its entirety,

including compliance with the requirement to prohibit interference with

maintenance by other States. Section 176A(c) governs requests from the

commission to EPA, providing simply that the commission ``established

under subsection (b) may request the Administrator to issue a finding

under section [110(k)(5)] that the [SIP] for one or more of the States

in the transport region is substantially inadequate to meet the

requirements of section [110(a)(2)(D)].'' That subsection also governs

EPA's obligation to approve, disapprove, or partially approve and

disapprove a commission's request within 18 months and to issue a

finding of SIP inadequacy under section 110(k)(5) at the time of any

approval. Under section 176A(c), again, the commission's authority to

request a finding of inadequacy appears to extend to all requirements

of section 110(a)(2)(D), including the obligations relating to

maintenance.

Section 184 does incorporate portions of section 176A by reference.

On this basis, one might argue that Congress intended the OTC's power

under section 184 to be broader than a commission's power under section

176A, and would thus reach maintenance issues in some manner. Section

184(a) provides that ``a single transport region for ozone (within the

meaning of section [176A(a)])'' for the Northeast States is established

by operation of law. That subsection further provides that the

Administrator is to convene the OTC ``required (under section

[176A(b)])'' that results from the establishment by operation of law.

These provisions arguably indicate that the OTC under section 184 is

also a creature of section 176A, as a transport region ``within the

meaning of'' section 176A(b) and ``convened'' under section 176A(b).

Indeed, it is section 176A(b), referenced in section 184(a), that

authorizes a commission to make recommendations for measures needed to

comply with section 110(a)(2)(D).

Of course, section 184(c) sets out a process for the OTC to

recommend additional control measures that the States must adopt

``within one year'' after EPA's approval and finding of SIP inadequacy.

Under section 176A, in contrast, EPA's approval results in a finding of

SIP inadequacy but does not result in specific new mandatory control

measures. Even if the OTC here has authority through section 176A to

recommend that EPA find SIPs inadequate in relation to maintenance,

section 176A would not appear to provide for EPA to require specific

new control measures for maintenance purposes. Perhaps Congress

intended to limit this extra power to create new mandatory control

measures to attaining the NAAQS, but not to extend to maintenance

thereafter. It might be reasonable to believe that EPA's difficulty in

ensuring attainment in the Northeast justified this extra invasion into

State discretion, but that Congress trusted EPA would be better able to

enforce States' obligations to prevent interference with maintenance

elsewhere, once contribution preventing attainment is addressed.

In any case, in considering the LEV measure, EPA believes that it

may consider maintenance in the course of its analysis here for

independent purposes of section 110(a)(2)(D). In other words, EPA's

process in responding to the OTC recommendation may provide an

appropriate forum in which to also consider what upwind control

measures may be necessary for purposes of preventing interference with

maintenance downwind. Instead of considering what reductions in current

emissions may be necessary to prevent contribution to nonattainment,

for maintenance the relevant concern would seem to be the need for

additional controls after attainment to counteract growth and prevent

emissions that would cause downwind areas to relapse into

nonattainment.

EPA believes it might reasonably determine in this proceeding that

States' SIPs would need to control an additional increment of emissions

to prevent interfering with maintenance downwind even after it is

achieved. EPA might then notify States that their SIPs are inadequate

to prevent interference with maintenance of the NAAQS. Apart from

mandating particular measures for maintenance under section 184, EPA

believes that it could identify the increment of controls that appear

to be ``necessary'' to prevent interference with maintenance downwind,

and the measures that appear ``necessary'' to achieve adequate

emissions control for this purpose. Under such circumstances, EPA

believes it has independent authority under section 110(k)(5) to insist

that States adopt such controls, or other comparably effective

controls, to address the maintenance concern.

Finally, in connection with maintenance, EPA believes that its

inability to establish more stringent ``Tier 2'' motor vehicle

standards under section 202(i) until model year 2004 is relevant.\18\

As noted above, under section 202(a), Congress explicitly provided that

EPA may not modify the ``Tier 1'' auto emissions standards specified in

subsections 202(a)(3)(B)(ii), (g), (h) and (i) prior to model year

2004. The OTC, in its response to comments, recognized this limitation.

The OTC recommendation calls for the LEV standards to apply beginning

in model year 1999, a full 5 model years earlier than Tier 2 standards

could at the earliest apply under section 202(i). Therefore, EPA should

consider the need for LEV standards during those years when Tier 2

could not be available, whether for purposes of reaching attainment or

for maintenance thereafter. The OTC, in its response to comments,

contends that the earlier implementation of LEV is important for severe

areas to achieve attainment by 2005 or 2007.

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\18\Subsection 202(i) sets out the scheme for EPA to consider

and possibly establish more stringent ``Tier 2'' standards beginning

with model year 2004. Under paragraphs (1) and (2) of subsection

202(i), EPA is to study whether more stringent ``Tier 2'' standards

should be adopted beginning with model year 2004, taking into

account such factors as the need for further reductions, technical

feasibility, cost, and alternatives. EPA is to submit this study to

Congress no later than June 1, 1997. Under paragraph (3), based on

this study EPA is to determine, through rulemaking, whether to

establish more stringent ``Tier 2'' standards to be applicable no

earlier than model year 2004 but not later than model year 2006.

Finally, subparagraph (3)(E) provides a default to ``Tier 2''

emissions standards specified in Table 3 in paragraph (1), unless

EPA affirmatively decides not to promulgate, to postpone or to

promulgate an alternative to such standards.

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EPA is considering whether it may account for the possibility of

Tier 2 standards beginning with model year 2004 in analyzing the need

for the LEV program. EPA's authority to adopt more stringent Tier 2

standards for model year 2004, if necessary, may make less pressing a

determination now that LEV is necessary for model years 2004 and after.

However, the impact of Tier 2 standards for reaching attainment

deadlines in 2005 or 2007 is likely to be small and this consideration

therefore may be more important for purposes of the OTR's maintenance

needs. Moreover, EPA is aware that it cannot prejudge the outcome of

the Tier 2 study that is to be the basis for its Tier 2 rulemaking. EPA

questions whether it is at all appropriate for its decision regarding

the necessity of the OTC-LEV program to be influenced by the mere

possibility of future federal regulations, where such regulations are

not assured and where states have little to no control regarding

whether such regulations will ever be promulgated. EPA also notes that

the issues relevant to the Tier 2 study are not identical to the issues

relevant to the establishment of the OTC-LEV program. For example, Tier

2 standards would apply nation-wide, and EPA's analysis would balance

the relevant factors on a national scale, whereas the analysis of need

for the OTC's LEV program should be more focused on the OTR.

EPA requests comment on all aspects of this analysis. In

particular, EPA requests comment on whether it can or should consider

the OTR's need for controls for purposes of maintenance in addition to

attainment, and on the relevance of Tier 2 standards to its analysis.

c. Technical considerations. Pursuant to section 184(d), EPA has

published criteria for assessing transport of ozone and ozone

precursors.\19\ These criteria recommend use of trajectory models and

timing considerations to provide a qualitative judgment regarding the

relative importance of transport in contributing to an area's

nonattainment problem. The OTC, to support its recommendation, relied

upon such approaches to establish the importance of transport as a

contributing factor to nonattainment in the OTR.

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\19\U.S. EPA, 1991, Criteria for Assessing the Role of

Transported Ozone/Precursors in Ozone Nonattainment Areas, EPA-450/

4-91-015.

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The criteria also identify more quantitative procedures for

considering effects of transport in urban scale modeling applications

applied in SIP attainment demonstrations. The criteria identify use of

regional grid photochemical models as the preferred approach for

providing quantitative estimates of transport. These estimates are used

as inputs to urban scale models, such as the Urban Airshed Model, in

order to estimate reductions in local emissions and/or transport

necessary to demonstrate attainment. Unfortunately, however, urban

modeling analyses using SIP databases are not yet available and are not

due to be submitted to EPA as part of States' attainment demonstrations

until November 15, 1994.

However, several regional modeling studies have been performed to

characterize regional transport of ozone in the OTR. It is not possible

to come up with precise control targets for ozone precursor emissions

from these studies, due to their use of an earlier emission inventory,

the broad spatial resolution available in the model used and the nature

of the control strategies investigated. Nevertheless, the studies are

useful for deriving approximate estimates. Further, their credence is

enhanced by the fact that they all lead to a consistent conclusion that

a substantial reduction in NOX emissions and VOC emissions are

likely to be necessary to reduce ozone to the 0.12 ppm NAAQS or below

throughout the OTR during periods of adverse meteorological conditions.

For example, Possiel, et al. (1991)\20\ conclude that ``stringent

maximum technology VOC and NOX controls'' with emissions

reductions on the order of 70% for VOC and 50% for NOX ``may be

necessary in all areas of the Northeast Corridor'', and additional

reductions of VOC may be needed in some portions of the corridor.

Results presented in another EPA study by Chu, et al. (1994)\21\

suggest that regional reductions in VOC and NOX of 50% or more may

be needed to reduce highest ozone levels to 0.12 ppm or less in the

northeastern United States.

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\20\Possiel, N.C., L.B. Milch and B.R. Goodrich (eds.), 1991,

Regional Modeling for Northeast Transport, EP-450/4-91-002a, U.S.

EPA, Research Triangle Park, NC.

\21\Chu. S.H. and W.M. Cox, 1994, ``Effects of Emissions

Reductions on Ozone Predicitions by the Regional Oxidant Model (ROM)

During the July 1988 Episode'', accepted for publication in J. of

Applied Meteorology.

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3. The OTC's Recommended LEV Program

a. OTC-LEV Provisions. The LEV program recommended by the OTC (OTC-

LEV) would apply to all 1999 and subsequent model year passenger cars

and light-duty trucks (LDTs) (0-5750 pounds loaded vehicle weight

(LVW)) in the OTR. The OTC-LEV program would establish five categories

of vehicles: California ``Tier I'' vehicles; transitional low emission

vehicles (TLEVs); low emission vehicles (LEVs); ultra-low emission

vehicles (ULEVs); and zero emission vehicles (ZEVs). Each vehicle

category has specific exhaust emission certification standards for

hydrocarbons (expressed in terms of ``non-methane organic gases,'' or

``NMOG''), carbon monoxide (CO), oxides of nitrogen (NOX),

particulate matter (PM) and formaldehyde (HCHO).

The OTC-LEV program would also establish a NMOG ``fleet average''

requirement that, for passenger cars and small light-duty trucks

(LDTs), would decline from a value of 0.113 gpm in 1999 to 0.062 gpm in

2003 and later years. Manufacturers would be obliged to produce larger

percentages of the more stringent categories of vehicles (LEVs, ULEVs

and ZEVs) in order to meet the increasingly stringent NMOG standard.

The program also includes a slightly higher NMOG fleet average for

larger LDTs.

Manufacturers would be free to decide the mix of vehicle categories

they would produce, provided the NMOG fleet average requirement is met,

except that if EPA determines that the California LEV program's ZEV

sales requirement must be included in the OTC-LEV program, then

manufacturers would be required to include in their vehicle fleet a

certain percentage of ZEVs per model year. (The OTC recommendation,

barring a determination that section 177 requires the adoption of a ZEV

mandate, leaves the decision to adopt a ZEV mandate to the individual

states. This issue will be discussed in the ``Consistency with the

Act'' section, below.) Under the ZEV sales requirement, when the OTC-

LEV program begins in 1999, two percent of a manufacturer's sales of

light-duty vehicles must be ZEVs. The sales requirement increases to a

maximum of 10 percent of sales for model year 2003 and beyond.

The OTC explicitly excluded California reformulated gasoline

requirements from its recommendation. Also, the OTC-LEV program is

limited to light-duty vehicles and trucks. The OTC-LEV program would be

enforced by the OTC states.

b. EPA Modeling for the OTC-LEV Program. EPA will use the MOBILE5a

emission factor model to quantify the HC, CO, and NOX emission

reductions associated with the OTC-LEV program. MOBILE5a incorporates

the latest technical information available on both the expected

certification and in-use performance of vehicles meeting LEV standards.

MOBILE5a uses emission factor equations for each OTC-LEV exhaust

standard, and the proportion of vehicles meeting each of these

standards necessary to meet the fleet average NMOG standard for each

model year, to calculate the average emissions of each model year of

the LEV program in any calendar year. EPA anticipates emissions

reductions for NOX and CO, as well as NMOG, due to the lower

NOX and CO standards required for vehicles in the OTC-LEV program.

The emissions factor equations are derived from an engineering analysis

of the performance of vehicles meeting existing exhaust standards and

of the effect of new emission controls needed to meet the OTC-LEV

standards. The emission factor equations for LEVs also take into

account differences between certification fuel in California and the

federal fuel which will be used in the OTR. Also, to evaluate the need

for the LEV program to maintain the NAAQS, EPA would have to model

emissions well past the attainment deadlines.

Emission factors from MOBILE5a are multiplied by vehicle miles

traveled (VMT) in order to create emissions inventories.

For this analysis, EPA will be comparing projected mobile source

inventories in future years with and without the OTC-LEV program. EPA

will follow the same guidance EPA has given the States when projecting

future VMT.

MOBILE5a has the ability to model a LEV program which includes a

ZEV sales mandate or a LEV program without a ZEV sales mandate, both

meeting the same NMOG fleet average requirement. To properly quantify

the emissions impact of the OTC recommendation, EPA will require

information on the extent to which ZEVs will be required, as well as

information on ZEV usage patterns and on their effect on power plant

emissions.

There are a number of other programs designed to reduce emissions

from highway vehicles, including federal reformulated fuel, control of

refueling emissions, and transportation control measures (TCMs), that

are either mandated by the Clean Air Act in all or parts of the OTR or

are programs that the States may opt into as part of a SIP. EPA intends

to quantify the emission reductions of the OTC-LEV program, taking into

account all mandatory measures and other regional measures that the OTC

has identified. The timing of reductions could be accelerated if States

were to adopt schemes to accelerate fleet turnover. But these schemes

would likely have to be drastic to significantly increase the

reductions that the LEV program would generate by 2005.

At this time, EPA believes that evaporative emissions from

California and federal vehicles will be the same, under a given fuel

and inspection regime. This assumption is reflected in MOBILE5a.

One current development that may affect EPA's modeling of the OTC-

LEV program is California's decision as to whether to require onboard

refueling vapor recovery systems (ORVR) as part of its motor vehicle

emission program. See CARB Mail-out #94-08, Workshop Notice (Feb. 9,

1994). Should California receive a waiver from EPA which would permit

them not to require ORVR, it would seem inappropriate to include any

emissions benefits from ORVR in modeling the benefits of the California

LEV program. Given that the OTC-LEVs would have to meet identical

standards as the California vehicles and that the OTC could not require

a ``third vehicle,'' the OTC-LEVs could also have no requirements for

onboard systems. The lack of an onboard refueling requirement for the

OTC-LEV program could affect the emission benefits of the LEV program.

The issue is related to section 184(b)(2)'s requirement that Stage II

vehicle refueling provisions, or provisions capable of achieving

comparable emissions reductions, shall be implemented in the OTR. EPA

requests comment on the effect that a California's decision not to

require ORVR would have on EPA's action on the OTC recommendation

implications which this would have for Stage II exemption levels and

enforcement provisions in the OTR.

EPA requests comment and technical data regarding the effect of the

OTC-LEV program on emissions in the OTR.

EPA will also review the cost effectiveness of the OTC-LEV program.

Cost estimates of California's LEV program have varied greatly. Much of

the variation is attributable to different assumptions regarding the

necessary technology, economies of scale, and how development costs

should be calculated. During EPA's consideration of California's waiver

for its LEV program, California estimated additional costs to be $170

per car, while the automobile industry estimated this figure to be over

$1000 per car. While both California and the industry have subsequently

refined and reduced their estimates based on new hardware assumptions,

the large difference remains an issue. Cost-effectiveness estimates for

the OTC-LEV program will be somewhat distinct from the California LEV

cost-effectiveness estimates because some or much of the costs that

were included in the California LEV estimates, particularly research

and development costs, may be reduced or eliminated in the OTC-LEV

context because the costs have already been expended in developing the

California LEV program. EPA requests comment on cost-effectiveness of

the OTC-LEV program, given the continuing existence of the California

LEV program.

4. Alternatives to the OTC's Recommended LEV Program

The recitation clauses to the OTC recommendation specifically

state:

Whereas the OTC expects the U.S. Environmental Protection

Agency, through the consultation process provided in Section 184(c)

of the Clean Air Act, to evaluate alternatives (including the

program presented by the automobile manufacturers with enhancements)

which are comparable in terms of enforceability, timeliness, and

quantity of emission reductions to those achieved by the OTC LEV

program, are consistent with the Clean Air Act, and advances

technology.

This indicates that the OTC intends that EPA consider alternatives,

and in particular that EPA should consider the auto manufacturers'

alternative.

a. Automobile Manufacturers' Alternative to the OTC's Recommended

LEV Program. The American Automobile Manufacturers Association's (AAMA)

alternative program to the California LEV program is known as the

Federal LEV or FLEV program. As proposed by the auto manufacturers,

manufacturers would provide FLEVs to all States in the OTC. The FLEV

automobiles would meet the following emission standards: 0.125 gpm

NMOG; 2.5 gpm CO; 0.3 gpm NOX at 100,000 miles; and 0.2 gpm

NOX at 50,000 miles. Light-duty trucks would also have FLEV

standards. The FLEV standards would be phased-in, with the standards

applicable to 30% of all new cars in model year 2001, 60% in model year

2002, and 100% in model year 2003. These standards represent a

substantial improvement from the federal Tier I standards (0.25 gpm

NMHC, 3.4 gpm CO, 0.4 NOX) with which manufacturers must now

comply. The standards are, however, less stringent than the federal

Tier II ``default'' standards specified in Table 1 in section 202(i)(1)

(0.125 gpm NMHC, 1.7 gpm CO, 0.2 gpm NOX), which cannot apply

before model year 2004. They are also less stringent than California's

LEV category standards for NMOG (0.075 gpm at 50,000, 0.090 gpm at

100,000) but more stringent than California's LEV category standards

for CO (3.4 gpm at 50,000, 4.2 gpm at 100,000).

The AAMA proposed that FLEV vehicles would be available nationwide.

A sales mandate for ZEVs was not included in the FLEV proposal. Under

the FLEV proposal, manufacturers would certify their vehicles to the

FLEV standards, but in-use standards would remain at the current

federal Tier 1 levels through at least model year 2003.

As proposed, the FLEV program would be implemented through a

consent decree settling litigation regarding implementation of the LEV

program in New York and Massachusetts. The consent decree mechanism was

proposed based on the contention that section 202(b)(1)(C) and 202(i)

prohibit EPA from imposing the FLEV standards prior to model year 2004

and that section 209 prohibits States from adopting the FLEV standards.

Under the proposal, in addition to the manufacturers' obligation to

provide cars meeting FLEV standards, the consent decree would reflect

the States' agreement not to adopt the LEV program; Massachusetts's and

New York's agreement to withdraw their programs; and an agreement that

the manufacturers' obligations to provide FLEV cars would terminate if

any State adopted a California LEV program. While States would have the

right to enforce the FLEV program through the court supervising the

consent decree, EPA might provide the information regarding whether

particular cars in fact meet the FLEV standards.

The auto manufacturers proffered their FLEV proposal to the OTC,

which determined that it would not achieve the same level of emission

control as the California LEV program. In reaching this conclusion, the

OTC emphasized a number of points in its response to comments document.

First, under the proposal the FLEV standards would apply two model

years later than the OTC-LEV standards, and would not be fully

implemented until two years thereafter. Second, the level of NMOG

emissions under the FLEV proposal would be considerably higher than

under the OTC-LEV program. Third, according to the OTC, projections

using EPA's MOBILE5 emissions model indicate that in the year 2020,

emissions of hydrocarbons under the OTC-LEV program will be about 30

percent lower than they would be under the FLEV program, due largely to

the portion of the fleet under the OTC-LEV program consisting of cars

meeting ULEV and ZEV standards. In sum, the OTC calculates that its LEV

program would provide 21 tons per day of VOC reductions and 38 tons per

day of NOX reductions in the OTR beyond the FLEV proposal.\22\

Fourth, the OTC notes that under the FLEV proposal, the FLEV standards

would apply for new car certification, but, until model year 2004, in-

use standards would be the same as the federal Tier I standards. This,

according to the OTC, may reduce the emissions reductions that would

otherwise be predicted from the FLEV program. Fifth, the OTC notes

that, since the FLEV proposal is premised on the withdrawal of the now-

adopted LEV programs in New York and Massachusetts, as many as eight or

nine years of emissions reductions from those programs would be lost

under the FLEV proposal.

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\22\This calculation assumed: (1) ``Maximum'' I/M for under both

programs; (2) Federal reformulated gasoline; (3) earlier

introduction of the LEV program. It is unclear whether the

calculation assumed the ZEV sales mandate under the OTC-LEV program.

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In addition, the OTC points out additional benefits of the OTC-LEV

program over the FLEV proposal. These include the expected increase in

use of alternative fuels under the OTC-LEV program, which will reduce

dependence on foreign oil and reduce emissions of greenhouse gases, as

well as the benefits of forcing advanced technology, particularly

associated with cars meeting ULEV and ZEV standards. Certain

technologies, such as electrically heated catalysts and hydrocarbon

traps would apparently not be needed to meet FLEV standards, nor would

electric car technology. Also, the OTC believes that technologies such

as adoptive transient learning controls, dual oxygen sensors, improved

fuel atomization and auxiliary air would not be used commonly for FLEV

vehicles. Further, the OTC believes its LEV program would force

advances in battery technologies, and potential initiatives such as

hydrogen fuel cells and fly wheels. (Of course, to the extent a ZEV

sales mandate is not part of the OTC LEV program, ZEV technologies may

not be advanced.) EPA seeks comment on the emission control and other

benefits of the FLEV program, particularly in comparison to the OTC-LEV

program.

In addition, the OTC expressed concerns regarding the

enforceability of the FLEV proposal. EPA is likewise concerned about

whether such a program could be adopted and enforced. As noted above,

it is likely that EPA could not alter Tier 1 standards prior to model

year 2004, and therefore could not impose the FLEV standards before

that time. Even beginning in model year 2004, EPA adoption of standards

comparable to the FLEV standards would have to be supported under the

criteria set out in section 202(i) of the Act. As the OTC pointed out,

States also cannot adopt or enforce the FLEV standards, because they

cannot adopt any new motor vehicle standards (other than the California

standards) under the preemption provisions of section 209 of the Act.

Section 209(a) prohibits States from adopting or attempting to enforce

``any standard relating to the control of emissions'' from new motor

vehicles and also prohibits States from requiring any approval relating

to emissions as a condition precedent to initial retail sale, titling,

or registration of new vehicles.''

To establish the legal framework for implementing the FLEV program,

the manufacturers have relied on the section 302(k) definition of

``emission standard'' (i.e. ``a requirement established by the State or

the Administrator''). They argue that the consent decree arrangement

does not involve an ``emission standard'' since the standards would not

be ``established'' by the State or the Administrator. The applicability

of the section 302(k) definition to section 209(a), however, is not

clear, since section 209(a) does not use the term ``emission standard''

but rather uses the perhaps broader language ``any standard relating to

the control of emissions from new motor vehicles.'' EPA requests

comment on whether using the consent decree mechanism to establish the

FLEV proposal would adequately avoid a conflict with section 209 and

allow States to enforce the FLEV program.

The consent decree mechanism raises a set of legal concerns. One

such concern is whether all the OTC States could become parties to the

consent decree. The auto manufacturers suggest that the OTC States

could intervene in the New York or Massachusetts litigation under Rule

24 of the Federal Rules of Civil Procedure. They contend that the OTC

States' October 29, 1991 Memorandum of Understanding (MOU) that each

State in the OTC would take steps to implement California's LEV program

as soon as possible constitutes adequate grounds for permissive

intervention under Rule 24(b). Other concerns are raised regarding the

role of the court in a consent decree. The consent decree mechanism

would require that the court determine that a decree is an appropriate

commitment of the court's limited resources. Under the FLEV proposal,

the district court overseeing the consent decree would presumably

directly enforce the FLEV standards sua sponte or at the behest of

parties to the decree. (The penalties for noncompliance are not clear.)

EPA is concerned that supervision of the FLEV program could require

substantial resources from the court. Finally, it is not clear how

enforcement would work if any auto manufacturers refused to sign the

consent decree. EPA requests comment on each of these issues,

particularly whether the consent decree mechanism is sufficient for

enforcement and on whether the OTC States could intervene in the

litigation under section 24(b) to be able to enforce the decree.

EPA is also concerned about its ability to grant SIP credits for

emissions reductions under the FLEV proposal. First, credits are

ordinarily limited to emissions reduction measures that are adopted in

a State's SIP, after reasonable notice and public hearing (as provided

in section 110(a)(2) of the Act). One issue is whether under the FLEV

proposal, the emissions controls could be part of the SIP, since to

make them part of the SIP could conflict with the preemption provisions

of section 209(a) of the Act. Further, once controls are adopted in the

SIP, they are ordinarily federally enforceable under section 113 of the

Act. Under the FLEV proposal, EPA would not be in a position to enforce

the controls, both because the controls would not be in the SIP, and

because the auto manufacturers have proposed that EPA not sign the

consent decree. And it is not clear what jurisdiction the court would

have to allow EPA to intervene in the New York or Massachusetts

litigation to sign the consent decree, or to otherwise seek judicial

enforcement of such a decree. For OTC States that would not sign the

consent decree, it is unclear how such States could seek enforcement of

the FLEV standards, or how EPA could grant SIP credits to them.

Finally, the existence of clauses allowing the auto manufacturers to

escape from their obligations to provide cars meeting the FLEV

standards under particular circumstances reduces the certainty of the

emissions controls. EPA is concerned that this lack of certainty

conflicts with the ordinary certainty of SIP creditable measures. EPA

requests comment on its ability to grant SIP credits for reductions

generated under the FLEV proposal.

b. Other Measures. The OTC in its recommendation stated that it

expects EPA to evaluate alternatives comparable to the OTC-LEV program

in terms of enforceability, timeliness, quantity of emissions

reductions, consistency with the Act, and advancement in technology.

EPA recognizes that the magnitude of emissions reductions needed to

mitigate significant contribution to nonattainment in the OTR is likely

to exceed the reductions that the measures specified in the Act plus

the LEV program will generate. To the extent more reductions will be

needed even with the LEV program, other measures that address that

shortfall would not, for that reason alone, qualify as ``alternatives''

to LEV. Rather, other measures might qualify as ``alternatives'' only

if such other measures, singly or in combination, generate enough

reductions to fill the entire shortfall needed without LEV. Any

conclusions about what may qualify as ``alternatives,'' therefore,

would depend on a prior evaluation of the magnitude of reductions

needed. Once the amount of reductions needed is ascertained, then the

emissions reductions and costs associated with measures other than LEV

that could fill the shortfall without LEV might be evaluated.

First, EPA believes it may be useful to consider the emissions

reductions associated with other emission control measures that the Act

specifically mandates for areas in the OTR, for example, reformulated

gasoline, enhanced inspection and maintenance programs, and Stage II

refueling vapor recovery controls. While these measures are not

``alternatives'' because they are mandatory, EPA believes that the

amount of reductions they will generate is important in evaluating the

magnitude of the shortfall for attainment.

Next, EPA believes it may evaluate the emissions reductions

associated with other measures that the OTC itself is considering and

has agreed to adopt (in addition to the LEV program) or further explore

through memoranda of understanding (MOU), including federal

reformulated gasoline in areas where it is not mandatory under the Act,

a ``second phase'' of NOX emission reductions from stationary

sources and an intrastate NOX emission offset trading program.

(See OTC MOUs signed October 29, 1991, March 10, 1992, and May 18,

1993.) Another source of measures is the menu of options identified by

STAPPA/ALAPCO in a document entitled ``Meeting the 15-Percent Rate-of-

Progress Requirement Under the Clean Air Act: A Menu of Options''

(September 1993). Finally, measures identified in the recent FIP

proposal for certain areas in California (EPA Air Docket No. A-94-09)

could be evaluated. EPA requests comment on measures from these sources

and other potential measures for evaluation that could be alternatives

to the recommended OTC-LEV program. EPA might evaluate the cost,

reasonableness, and other factors associated with these other measures

if they are shown, in fact, to be ``alternatives'' to the LEV program.

B. Consistency With the Clean Air Act

1. Introduction

As noted above, section 184 requires that in reviewing the

recommendation of the OTC, EPA must evaluate whether the additional

control measures are ``otherwise consistent with this Act.'' In

particular, the additional control measures must be consistent with

section 177 of the Act, which provides States with the authority to

adopt and enforce emission standards for new motor vehicles and engines

if such standards are identical to California standards and if the

State adopts the standards at least two years before the commencement

of the model year to which such standards apply. Also, the State

standards must not prohibit the manufacture or sale of California-

certified motor vehicles, nor may they create a ``third car.''

In two separate federal court cases, automobile manufacturers have

challenged the adoption of the LEV program in two OTC States, New York

and Massachusetts (Motor Vehicle Manufacturers Association v. NYDEC,

No. 92-CV-869 (N.D.N.Y.) and American Automobile Manufacturers

Association v. Greenbaum, No. 93-10799-MA (D. Mass.)). In these cases,

manufacturers are contending that the States have violated portions of

section 177 by their adoption, or their failure to adopt, certain

aspects of California's LEV and clean fuel programs. Many of the issues

that have been raised, and to some extent answered, in those cases are

likely to be relevant to EPA's decision in this proceeding. Moreover,

certain issues related to section 177 that were not raised in those

proceedings are likely to be relevant to this proceeding.

2. Clean Air Act Provisions Regarding State Motor Vehicle Emission

Standards

Section 209(a) of the Clean Air Act generally preempts States from

promulgating or attempting to enforce standards relating to the control

of emissions from new motor vehicles. However, section 209(b) allows

EPA to waive federal preemption for California under certain

circumstances. Section 177 allows other States to promulgate standards

relating to the control of emissions from new motor vehicles for any

model year, and to take other actions otherwise preempted under section

209(a), if--

(1) Such standards are identical to the California standards for

which a waiver has been granted for such model year, and (2) California

and such State adopt such standards at least two years before

commencement of such model year (as determined by regulations of the

Administrator). Nothing in this section or in Title II of this Act

shall be construed as authorizing any such State to prohibit or limit,

directly or indirectly, the manufacture or sale of a new motor vehicle

or motor vehicle engine that is certified in California as meeting

California standards, or to take any action of any kind to create, or

have the effect of creating, a motor vehicle or engine different than a

motor vehicle or engine certified in California under California

standards (a ``third vehicle'') or otherwise create such a ``third

vehicle''.

42 U.S.C. Sec. 7507

3. New York and Massachusetts Litigations

New York and Massachusetts have both promulgated regulations

incorporating aspects of California's LEV program into their State

regulations. Manufacturers have made several challenges under section

177 to the State regulations.

In particular, neither New York nor Massachusetts promulgated

regulations incorporating California's ``clean fuel'' provisions.

However, both New York and Massachusetts incorporated California's ZEV

sales mandate into their State regulations. Manufacturers challenged

the decisions not to incorporate California's fuel requirements and to

incorporate California's ZEV sales mandate, arguing that (1) the clean

fuel requirements are an inherent part of California's automobile

emission program and thus are subject to the identicality requirement

of section 177; (2) the failure to incorporate the clean fuel

requirements will require the manufacture of a ``third vehicle''

because the higher sulfur levels in federal fuels may cause problems

with certain catalysts and may cause other vehicle problems; (3) the

ZEV sales mandate violates section 177's prohibition on indirect State

limitations on the sale of California vehicles; and 4) the ZEV sales

mandate will require manufacture of a ``third vehicle'' in violation of

section 177.\23\

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\23\Manufacturers also make other challenges related to leadtime

that are not likely to be relevant to this proceeding. The OTC

recommendation states that the LEV program will be effective on

January 1, 1996. This provides States and manufacturers with two

years of leadtime required under section 177. However, if the OTC-

LEV program does not become effective for any State until after

January 2, 1996, then certain leadtime-related issues raised by

manufacturers in the above court cases may be relevant in subsequent

proceeding.

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

In a recent opinion, the U.S. Court of Appeals for the Second

Circuit ruled on these issues in the context of the New York

regulations, except issue two, which the District Court is still

considering. MVMA v. NYDEC, No. 93-7938 (2d Cir., Feb. 9, 1994). In

addition, U.S. District Judge Mazzone (D. Mass.) provided a preliminary

ruling on issues one and two. AAMA v. Greenbaum, No. 93-10799-MA

(October 27, 1993). Manufacturers initially appealed Judge Mazzone's

decision to the First Circuit, but have since requested that the appeal

be withdrawn with regard to these issues. EPA submitted amicus curiae

briefs to the Second Circuit and the First Circuit. (These briefs and

the court opinions are in the docket.)

On issue one, both courts ruled that State failure to incorporate

California's clean fuel provisions did not violate the identicality

provision of section 177. The courts ruled that since California's

clean fuel provisions were part of California's waiver application

under section 209, they are not ``standards * * * for which a waiver

has been granted'' and thus are not subject to the identicality

provisions of section 177. State fuel provisions are addressed in a

separate section of the Act, section 211. EPA's amicus curiae briefs

also took this position.

Regarding issue two, neither trial court has issued a final

determination, both deferring this issue to trial. However, in his

decision on manufacturers' motion for preliminary injunction on this

count, Judge Mazzone concluded that manufacturers had not shown a

likelihood of prevailing. In its amicus curiae brief to the First

Circuit, EPA argued that Massachusetts' failure to adopt the clean

fuels program did not violate the ``third car'' prohibition because (1)

manufacturers could not show that Massachusetts' LEV program compels

any design change--manufacturers are free to sell cars in Massachusetts

that are identical to California cars; (2) manufacturers' testing-based

concerns were not ripe for review; and (3) the term ``third vehicle''

is applied only to design changes necessary to meet certification

requirements, not minor changes unrelated to meeting applicable

emission standards.

On issue three, the Second Circuit found that New York's

promulgation of California's ZEV sales mandate did not violate section

177's requirement that States not limit, either directly or indirectly,

the sale of California cars. The court found that the ZEV mandate did

not prevent manufacturers from selling any California-certified

vehicles as long as they also sold the specified percentage of ZEVs.

``Like the third vehicle rule, the sales-limitation rule is designed to

reinforce the identicality requirement. It would be incongruous for us

to hold that the [State] wrongly mandated a ZEV sales percentage

identical to California's mandate.'' EPA had taken this position in its

amicus brief.

On issue four, the Second Circuit ruled that New York's adoption of

the ZEV mandate does not violate the ``third car'' prohibition because

New York is administering the mandate in the same manner as California

and any changes manufacturers make in their cars to sell them in New

York are based on marketing decisions by manufacturers, not a

requirement of the State. EPA's amicus brief was consistent with this

result.

4. Issues Implicated by the OTC Petition

Some of the section 177-related issues briefed in the New York and

Massachusetts cases are also implicated by the OTC petition. The OTC

recommendation, like the New York and Massachusetts regulations, does

not include California's clean fuel provisions. Moreover, the

recommendation states:

To the extent that a Zero Emission Vehicle sales requirement

must be a component of a LEV program adopted under Section 177, such

a requirement shall apply. Further, if such a Zero Emission Vehicle

sales requirement is not a required component of programs adopted

under Section 177, individual States within the OTC may at their

option include such a requirement and/or economic incentives

designed to increase the sales of ZEVs in the programs they adopt.

This provision relates to the same ZEV-related issues argued in the

court cases and also produces several section 177-related issues not

determined in the court cases. The issue of whether the ZEV sales

mandate is a required component in any State LEV program was not

addressed by the courts. Section 177 allows a State to adopt and

enforce ``for any model year standards relating to control of emissions

from new motor vehicles and * * * engines * * * if such standards are

identical to the California standards for which a waiver has been

granted for such model year.''

The first question presented by this issue is whether the ZEV sales

mandate is a ``standard relating to control of emissions.'' In letters

sent to New York and Virginia State officials on January 7, 1993, EPA

stated that it believed the ZEV sales mandate ``in light of the

existence of the NMOG [non-methane organic gases] fleet average

requirement (which is a motor vehicle emission standard), the

California ZEV sales requirement is not a motor vehicle emission

standard. Thus, a State which adopts California motor vehicle emission

standards is not required to, but may, adopt this particular provision

of California's program. The ZEV sales mandate simply limits the

flexibility otherwise accorded manufacturers to choose the mix of

vehicles produced to meet the NMOG fleet average requirement.''

The Administrator made this statement based on EPA's belief that

the ZEV sales mandate does not, given the existence of the NMOG

standard, create any additional requirements that will have any effect

on NMOG emissions from light-duty vehicles in California. The ZEV sales

mandate does not require that the overall NMOG emissions from

California vehicles be any lower than they would have been in the

absence of the sales mandate. The amount of emissions produced by such

vehicles is controlled by the NMOG fleet average requirement, not the

sales mandate. The ZEV mandate merely restricts the manufacturers'

choices with regard to the type of vehicle they must produce to meet

the NMOG requirement. Therefore, as the ZEV sales mandate does not

limit the quantity, rate or concentration of NMOG emissions, EPA stated

that the mandate was not an emission standard, but instead was an

accompanying enforcement procedure. In its recommendation, the OTC

States that the ZEV sales mandate is an accompanying enforcement

procedure and is not required by section 177.

EPA requests comment on whether the ZEV sales mandate should be

considered an emission standards. EPA is also requesting comments

regarding whether the ZEV sales mandate will have or is likely to have

a clear effect on emissions of NOx and CO, whether such effect is

substantial, and whether such a potential effect is relevant to the

question of whether the sales mandate is an emission standard.

The second question presented by this issue is whether States are

required under section 177's identicality provision to promulgate all

of California's motor vehicle emission standards for a given model

year, or whether only a certain subset of these regulations must be

promulgated. Section 177 provides that a State ``may adopt and enforce

* * * standards * * * if such standards are identical to the California

standards for which a waiver has been granted.'' The statute does not

necessarily indicate that if a State adopts one California standard for

a year it must adopt all of them. EPA believes that adoption of the

California LEV program does not require adoption of the California

heavy-duty engine program, which deals with different types of

vehicles. However, EPA has not finally determined whether section 177

requires a State to promulgate all California emission standards

related to a type of vehicle once a State has determined that it

intends to promulgate any California standards related to that type of

vehicle. Certainly, where a State intends to incorporate some portion

of California's emission standards, the State must promulgate all

regulations that are necessary to ensure that California cars are not

prohibited from sale in the State and all regulations necessary to

prevent the requirement of a third car. Must a State promulgate all

California vehicle-based emission standards relevant to a particular

type of vehicle? May a State promulgate only those provisions necessary

to ensure that the State program receives the emission reductions

California receives from its program, or only those provisions that are

central parts of the program? May a State promulgate merely those

regulations that ensure that its program is as protective of the public

health and welfare, in the aggregate, as the federal program? Under

this approach, a State would have considerable flexibility to determine

which parts of a particular program the State would promulgate, but the

State would not be assured of receiving the same SIP credits as

California for such a program. In addition, this approach may be

inconsistent with section 177's goal of preventing myriad different

motor vehicle programs in the several States and also may be

inconsistent with the statutory language and the legislative history of

section 177. EPA requests comment on this issue.

The identicality issue is also implicated by the form of the OTC's

initial recommendation to EPA. The OTC recommendation states that it

intends the OTC-LEV program to be consistent with section 177 and 184

of the Act. The recommendation also states that the program contains

standards identical to the California LEV program. However, rather than

directly incorporating California's regulations into its

recommendation, or citing to California's regulations, OTC gave a brief

overview of the parts of California's LEV program it intended to

incorporate and the time frame for the regulations. EPA initially had

questions regarding whether the OTC intended to incorporate certain

secondary provisions in California's LEV program into the OTC-LEV

program (in particular, the hybrid electric vehicle provisions, banking

and trading of NMOG credits, the small and intermediate volume

manufacturer provisions and reactivity adjustment factors). EPA also

had questions regarding whether California's NMOG fleet average

requirements were intended to apply to heavier light-duty trucks (3751-

5750 lbs) and whether the OTC intended medium-duty vehicles to be

included in the LEV program. EPA requested that the OTC clarify these

issues, becuase failure to incorporate certain secondary provisions

into the OTC program could conceivably have raised identicality

problems. On April 15, 1994 Bruce Carhart of the OTC sent a letter to

EPA stating, in part, the following:

[The OTC has] recommended regulation of passenger cars and

light-duty trucks up to 5750 lbs. loaded vehicle weight, not medium

duty vehicles. Our intention is to maintain identicality with

California as required by the Clean Air Act. Our recommendation

includes a fleet average for both classes of light-duty vehicles (0-

3750 and 3751-5750 lbs.); hybrid electric vehicles, in as far as

California has classified and certified such vehicles; banking and

trading provisions for purpose of the fleet average; the same

extensions and exemptions for intermediate and small manufacturers;

and RAFs as necessary for certification by California. Many of the

details of the above and any other issues can be worked out through

the consultation process as required by section 184 of the Clean Air

Act.

EPA requests comment on whether there are other concerns regarding

the identicality of the OTC-LEV program with the California LEV

program. EPA also requests comment on whether EPA can assume that, on

provisions on which OTC is silent, OTC means to require all provisions

that are necessary to ensure identicality and that such provisions must

be adopted.

Another issue in this rulemaking is whether the OTC's incorporation

of California's NMOG fleet average provisions violates any portion of

section 177. In their response to OTC's stated intention to include the

NMOG fleet average program in the OTC-LEV program, some manufacturers

claimed that the incorporation of the NMOG standard would violate

section 177. The OTC found that the NMOG fleet average did not violate

section 177 and that States may enforce these standards, consistent

with California protocols and testing requirements. EPA believes, for

the reasons given by the Second Circuit in the MVMA case in the context

of the ZEV sales mandate, that the fleet average requirement does not

violate the requirement of section 177 that States shall not prohibit

the sale of California cars. In addition, EPA has no evidence contrary

to the OTC's determination that the fleet average requirement does not

violate the ``third vehicle'' prohibition of section 177. EPA also

agrees that States are permitted to enforce this requirement,

consistent with California protocols and requirements. EPA believes

that the NMOG fleet average requirement is the heart of the California

LEV program and is the central mechanism for ensuring reductions from

the program, and that any State program implementing the LEV program

should, and is probably compelled to, include enforceable NMOG fleet

average requirements. EPA requests comment on these issues. EPA also

requests comment regarding whether the NMOG fleet average requirement

must be met statewide or whether it can be met regionwide.

Finally, EPA requests comment on the OTC statement that section 177

does not require a State to adopt the California LEV program in all

areas of a State. OTC's statement is consistent with EPA's

interpretation of section 177, as illustrated in Administrator Reilly's

response to Elizabeth Haskell, Virginia's Secretary of Natural

Resources, in which the Administrator noted that adoption of California

emission standards in part of a State is consistent with section 177's

title, ``New Motor Vehicle Standards in Nonattainment Areas.''

EPA does not at this time have any questions regarding the OTC

recommendation's consistency with any other sections of the Clean Air

Act. EPA requests comment on whether the recommendation may be

inconsistent with any other section of the Act.

IV. Statutory Authority

Authority for the action described in this notice is in sections

184, 176(a), 110, 307(d) and 301 of the Clean Air Act, as amended, 42

U.S.C. 7511a, 7506a, 7410, 7607(d) and 7601.

V. Administrative Designation and Regulatory Analysis

Executive Order 12866

Under Executive Order 12866, 58 FR 51735 (October 4, 1993) the

Agency must determine whether the regulatory action is ``significant''

and therefore subject to OMB review and the requirements of the

Executive Order. The Order defines ``significant regulatory action'' as

one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or

adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments or

communities;

(2) Create a serious inconsistency or otherwise interfere with an

action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants,

user fees, or loan programs or the rights and obligations of recipients

thereof; or

(4) Raise novel or policy issues arising out of legal mandates, the

President's priorities, or the principles set forth in the Executive

Order.

Pursuant to the terms of the Executive Order, since this action

could result in a rule that could have a substantial economic impact,

this notice was submitted to OMB for review. EPA intends to prepare an

economic analysis under E.O. 12866 for any final rule that is a

significant regulatory action. Any written comments to EPA and any

written EPA responses to those comments will be included in the docket

for this proceeding.

VI. Impact on Small Entities

The Regulatory Flexibility Act, 5 U.S.C. 601(a), provides that,

whenever an agency is required to publish a general notice of

rulemaking, it must prepare and make available a regulatory flexibility

analysis (RFA). While EPA intends to follow rulemaking procedures under

section 307(d) of the Clean Air Act, EPA believes it is not legally

required to publish a general notice of rulemaking here, and hence that

it need not prepare a RFA. But even if EPA is required to publish a

general notice of rulemaking here, a RFA is required only for small

entities which are directly regulated by the rule. See Mid-Tex Electric

Cooperative, Inc. v. FERC, 773 F.2d 327 (D.C. Cir. 1985)(agency's

certification need only consider the rule's impact on regulated

entities and not indirect impact on small entities not regulated). The

OTC's recommended LEV program would directly regulate auto

manufacturers. Since these auto manufacturers generally do not qualify

as small businesses within the meaning of the Regulatory Flexibility

Act, EPA does not believe a RFA is needed for either the proposed or

final rules, even if rulemaking is required. Accordingly, pursuant to 5

U.S.C. 605(b), the Administrator certifies that this rule will not have

a significant economic impact on a substantial number of small

entities.

VII. Paperwork Reduction Act

The Paperwork Reduction Act of 1980, 44 U.S.C. 3501 et seq., and

implementing regulations, 5 CFR part 1320, do not apply to this action

as it does not involve the collection of information as defined

therein.

Dated: April 19, 1994.

Carol M. Browner,

Administrator.

Appendix--Recommendation of the States of the Ozone Transport

Commission of an OTC Low Emission Vehicle Program Under Section 184(c)

of the Clean Air Act

Whereas, the States composing the Ozone Transport Region (OTR)*

are faced with a pervasive ozone nonattainment problem; and

Whereas regional ozone modeling to date has shown the need for

emission reductions beyond those which will be realized through the

strategies specifically included in the Clean Air Act; and

Whereas the Clean Air Act, provides the Ozone Transport

Commission (OTC) with a mechanism under Section 184(c) to review and

recommend additional control measures in all or part of the OTR to

control regional ozone; and

Whereas motor vehicles, in the aggregate, are the single largest

source of ozone precursors within the OTR, and introduction of Low

Emission and Zero Emission Vehicles are essential; and

Whereas the Clean Air Act also grants States under Section 177

the option of adopting more stringent Low Emission Vehicle (LEV)

standards for new motor vehicles; and

Whereas based on the technical analysis done by the States of

the OTC to date LEVs provide substantial and cost effective emission

reductions; and

Whereas the OTC under Section 184(c) proposed on November 17,

1993, a regional LEV program, hereafter known as the Ozone Transport

Commission Low Emission Vehicle (OTC LEV) program, after having been

petitioned by three OTC States to consider developing such a

recommendation; and

Whereas the OTC provided at that time notice and opportunity for

public comment as required by Section 184(c) of the Clean Air Act,

including a public hearing in Hartford, Connecticut, on December 16-

17, 1993, and has analyzed and responded to the comments received in

the attached Response to Comments: and

Whereas the OTC has analyzed the impact and need for LEV in the

OTR as documented in the attached Technical Support Document; and

*The States of Connecticut, Delaware, Maine, Maryland,

Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania,

Rhode Island, and Vermont, the District of Columbia, and the part of

Virginia within the Consolidated Metropolitan Statistical Area which

includes the District of Columbia.

Whereas the OTC received and analyzed an alternative proposal

from the automobile manufacturers which, while an improvement over

Tier I Federal vehicles, would require programmatic and timing

enhancements and the addition of an electric vehicle component to

ensure that enforceable vehicle emission reductions comparable to

those achieved by the OTC LEV program could be achieved in a more

timely manner; and

Whereas the OTC expects the U.S. Environmental Protection

Agency, through the consultation process provided in Section 184(c)

of the Clean Air Act, to evaluate alternatives (including the

program presented by the automobile manufacturers with enhancements)

which are comparable in terms of enforceability, timeliness, and

quantity of emission reduction to those achieved by the OTC LEV

program, are consistent with the Clean Air Act, and advances

technology;

Therefore, the Ozone Transport Commission determines that a

regional LEV program, the OTC LEV program, is necessary to bring the

Ozone Transport Region into attainment by the dates provided in the

Clean Air Act; and

Furthermore, that by majority vote of the States of the Ozone

Transport Commission, as indicated by the attached signature sheet,

the Ozone Transport Commission transmits the attached strategy

recommendation regarding the OTC LEV program to the Administrator of

the U.S. Environmental Protection Agency; and

Furthermore that adoption of this recommendation by the Ozone

Transport Commission or approval of this recommendation by the U.S.

Environmental Protection Agency will not require the adoption of

California reformulated gasoline standards by any X within the OTR;

and

Furthermore that as a part of this submittal, the Ozone

Transport Commission includes the attached Response to Comments

received during the public's opportunity to comment on this matter,

and the attached Technical Support Document which addresses the

requirements of Section 184(d) of the Clean Air Act; and

Furthermore that the Ozone Transport Commission will participate

fully in the consultation process on this recommendation with the

U.S. Environmental Protection Agency as provided in Section

1184(c)(3) of the Clean Air Act.

Text of February 1, 1994, Recommendation of the Ozone Transport

Commission to the U.S. Environmental Protection Agency

The Ozone Transport Commission (OTC) has developed the following

recommendation for an Ozone Transport Commission Low Emission

Vehicle (OTC LEV) program which is to be submitted to the U.S.

Environmental Protection Agency under Section 184(c) of the Clean

Air Act (CAA). The legal authority for the OTC recommendation is

described under Section 184(c)(1) of the Clean Air Act and could

result in a Federal requirement for regionwide adoption and

enforcement of motor vehicle emission standards available under

Section 177 of the Clean Air Act. The recommendation is as follows:

Under Section 184(c) of the Clean Air Act as amended in 1990,

the Ozone Transport Commission hereby recommends adoption of an

Ozone Transport Commission Low Emission Vehicle program including

the elements described below for the geographic region designated as

the Ozone Transport Region, defined as the States of Connecticut,

Delaware, Maine, Massachusetts, Maryland, New Hampshire, New Jersey,

New York, Pennsylvania, Rhode Island, and Vermont, the District of

Columbia and that part of Virginia within the Consolidated

Metropolitan Statistical Area which includes the District of

Columbia.

Adoption of this recommendation by the Ozone Transport

Commission or the United States Environmental Protection Agency will

not require the adoption of the California Reformulated Gasoline

Standards by any State, Commonwealth, or jurisdiction with the Ozone

Transport Region.

Elements of the Proposed OTC LEV Program Recommendation

Pursuant to the requirements of Section 177 of the Clean Air

Act, the Ozone Transport Commission Low Emission Vehicle (OTC LEV)

program is applicable to all 1999 and subsequent model year

passenger cars and light duty trucks (0-557550 pounds loaded vehicle

weight) in the Ozone Transport Region (OTR).

Emissions Requirements and Prohibition: No corporation, person

or other entity shall sell, import, deliver, purchase, lease, rent,

acquire, receive, or register a new vehicle subject to the OTC LEV

program in the OTR that has not received a California ARB Executive

Order, unless the vehicle is sold directly from one dealer to

another dealer, sold for purposes of being wrecked or dismantled,

sold exclusively for off-highway use or sold for registration out of

the OTR, as well as a vehicle purchased by a nonresident prior to

establishing residency or a vehicle transfer by inheritance, decree

of divorce, dissolution, or legal separation. Other exceptions would

include motor vehicles held for daily lease or rental to the general

public or engaged in interstate commerce that are registered and

principally operated outside the OTR and motor vehicles defined as

test vehicles, emergency vehicles, or qualifying for exemption under

Section 43656 of the California Health and Safety Code.

The OTC LEV program will allow five categories of vehicles:

California Tier I Vehicles, Transitional Low Emission Vehicles

(TLEV), Low Emission Vehicles (LEV), Ultra-Low Emission Vehicles

(ULEV) and Zero Emission Vehicles (ZEV). Manufacturers may choose

any combination of vehicles certified to the above standards, to

meet a prescribed fleet emission average standard in the OTR.

The effective date for the OTC/state implementation of the OTC

LEV program is January 1, 1996. This schedule allows for notice to

manufacturers of two vehicle model years and requires sales of

cleaner vehicles for the 1999 model year. The OTC LEV program does

not affect or preclude States from earlier implementation.

This program includes a fleet non-methane organic gases emission

average as follows:

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

Fleet

average

Model year standard

(g/mi)

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

1999.......................................................... 0.113

2000.......................................................... .073

2001.......................................................... .070

2002.......................................................... .068

2003 and later................................................ .062

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

To the extent that a Zero Emission Vehicle sales requirement must

be a component of a LEV program adopted under section 177, such a

requirement shall apply. Further, if such a Zero Emission Vehicle sales

requirement is not a required component of programs adopted under

section 177, individual States within the OTC may at their option

include such a requirement and/or economic incentives designed to

increase the sales of ZEVs in the programs they adopt.

[FR Doc. 94-10042 Filed 4-25-94; 8:45 am]

BILLING CODE 6560-50-P