Imposition of Statewide Sanctions on California Under Clean Air Act Section 110(m) for Failure to Submit a Complete SIP Revision for an Enhanced Motor Vehicle Inspection and Maintenance Program

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA-47-2-6094 FRL-4826-4]

Imposition of Statewide Sanctions on California Under Clean Air

Act Section 110(m) for Failure to Submit a Complete SIP Revision for an

Enhanced Motor Vehicle Inspection and Maintenance Program

AGENCY: Environmental Protection Agency.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing this

action to impose sanctions on California under the discretionary

sanction authority provided the Agency under the Clean Air Act, as

amended in 1990, (CAA or Act) for failure by the State to submit a

complete SIP revision for an enhanced motor vehicle inspection and

maintenance (I/M) program as required by the Act for certain ozone and

carbon monoxide (CO) nonattainment areas. On November 13, 1992, the

California Air Resources Board (CARB), acting as the governor's

designee, submitted a commitment (committal SIP) to adopt an I/M

program by November 15, 1993. The committal SIP provides for the

adoption and implementation of an enhanced I/M program meeting all

requirements of EPA's I/M regulations and includes an implementation

schedule. On June 28, 1993, EPA proposed to conditionally approve this

committal SIP or alternatively to disapprove it if certain milestones

contained in the schedule were missed. A full SIP revision including

state legislative authority to implement the program was required by

November 15, 1993. The State Legislature adjourned on September 10,

1993 without having enacted legislation providing authority for

implementing the enhanced I/M program.

On November 15, 1993, the State submitted a document entitled

``Vehicle Inspection and Maintenance Program SIP Revision'' (the

``proposed SIP revision''). The proposed SIP revision was missing

critical elements required for compliance with section 182(c)(3) of the

Act. On December 30, 1993, EPA Region 9 issued a letter finding that

the State had failed to submit a complete SIP revision required under

sections 110 and 182 of the Act. The letter dated December 30, 1993,

notified the State that the proposed SIP revision was incomplete

because it had not been subject to public notice. Due to the failure of

the State to submit a complete SIP revision fulfilling either the

requirements of the Act or its commitment to adopt and implement an

enhanced I/M program as promised in its committal SIP, EPA proposes to

exercise its discretionary authority under the Act to apply a statewide

highway funding limitation sanction and a 2 for 1 offset sanction in

all areas required to have a permit program under the new source review

provisions of the Act.

DATES: Comments must be received on or before March 15, 1994. EPA will

hold a public hearing on this proposed action on Thursday, March 3,

1994.

ADDRESSES: EPA welcomes comments on all aspects of this proposal.

Written comments should be addressed to: U.S. Environmental Protection

Agency, Region 9, Air and Toxics Division (A-2-1), Attention: Docket

No. CA-93-IM-3, 75 Hawthorne Street, San Francisco, CA 94105.

The public hearing will be held in the auditorium of the Los

Angeles Department of Water and Power Building, 111 North Hope, Los

Angeles, California 90012 (telephone: (415) 744-1500) from 1 p.m. to 5

p.m. and from 7 p.m. to 9 p.m.

A docket has been established and contains materials relevant to

this action. A copy of the docket is available for public inspection

during normal business hours at EPA's Region 9 office at the above

address. A reasonable fee may be charged for copying portions of the

docket.

FOR FURTHER INFORMATION CONTACT: David Calkins, Chief, Air Planning

Branch, (A-2), U.S. Environmental Protection Agency, Region 9, 75

Hawthorne Street, San Francisco, California 94105, (415) 744-1500.

SUPPLEMENTARY INFORMATION:

I. Requirements for Inspection and Maintenance Programs

A. Applicability of the Enhanced I/M Program in California

As amended in 1990, the Clean Air Act requires states to make

changes to improve existing I/M programs or to implement new ones for

certain nonattainment areas. Section 182(a)(2)(B) of the Act directed

EPA to publish updated guidance for state I/M programs, taking into

consideration findings of the Administrator's audits and investigations

of these programs. The Act further requires each area required to have

an I/M program to incorporate this guidance into the SIP. Based on

these requirements, EPA promulgated I/M regulations on November 5, 1992

(57 FR 52950).

Under sections 182(c)(3) and 187(b)(1) of the Act, areas designated

as serious and worse ozone nonattainment areas with 1980 populations of

200,000 or more and CO nonattainment areas with design classifications

above 12.7 ppm and populations of 200,000 or more, in addition to

metropolitan statistical areas with populations of 100,000 or more in

the northeast ozone transport region, are required to meet EPA

regulations for ``enhanced'' I/M programs. These areas were required to

submit a SIP revision to incorporate an enhanced I/M program into the

SIP by November 15, 1992. In California, the State must adopt and

implement enhanced I/M programs for the following urbanized areas:

Bakersfield

Fresno

Los Angeles

Oxnard-Ventura

Riverside-San Bernardino

Sacramento

San Diego

The I/M regulation establishes minimum performance standards for

basic and enhanced I/M programs as well as requirements for the

following: Network type and program evaluation; adequate tools and

resources; test frequency and convenience; vehicle coverage; test

procedures and standards; test equipment; quality control; waivers and

compliance via diagnostic inspection; motorist compliance enforcement;

motorist compliance enforcement program oversight; quality assurance;

enforcement against contractors, stations and inspectors; data

collection; data analysis and reporting; inspector training and

licensing or certification; public information and consumer protection;

improving repair effectiveness; compliance with recall notices; on-road

testing; SIP revisions; and implementation deadlines. For enhanced I/M

programs, all requirements must be implemented by January 1, 1995

except that areas switching from an existing test-and-repair network to

a test-only network may phase in that change between January 1995 and

January 1996.

Each State required to implement an I/M program was required to

submit by November 15, 1992, a SIP revision (here and after referred to

as the ``I/M committal SIP'') including two elements: (1) A commitment

from the Governor or his/her designee to the timely adoption and

implementation of an I/M program meeting all requirements of the I/M

regulation; and (2) a schedule for adoption of the program with interim

milestones including passage of enabling statutory or other legal

authority and adoption of final regulations. Acceptance of I/M

committal SIPs in lieu of full SIPs was justified by the fact that

States could not have been expected to begin development of an I/M

program meeting the requirements of the Act and the I/M regulation

until the I/M regulation was adopted as a final rule, which did not

occur until November 5, 1992. A complete SIP revision which contained

all of the elements identified in the adoption schedule, including the

authorizing legislation and implementing regulations, was required to

be submitted no later than November 15, 1993.

B. I/M Program in California

1. California Committal SIP: The State of California submitted an

I/M committal SIP on November 13, 1992. The committal SIP submittal

became complete by operation of law under section 110(k)(1)(B) on May

13, 1993. The submittal includes a letter from the Executive Officer of

the CARB and a copy of Resolution 92-74 which was adopted at a public

hearing held by the CARB on November 13, 1992. The Resolution directs

the Executive Officer to submit the committal letter to EPA as a

revision to the SIP. The submittal included a commitment by the

governor's designee, the CARB Executive Officer, to the timely adoption

and implementation of I/M programs meeting all requirements of the I/M

regulation and the Act in all nonattainment areas in California where

these programs are required. A schedule of adoption was included in a

letter sent by the CARB Executive Officer to EPA on January 15, 1993

clarifying certain details of the November 13, 1992 I/M committal SIP

submittal. In the schedule California committed to passing legislation

authorizing an I/M program by September 10, 1993. The committal SIP

lists October 10, 1993 as the deadline for the legislation to be signed

by the governor.

2. EPA Proposed Approval: On June 28, 1993 (58 FR 34553) EPA

proposed to conditionally approve the committal SIP under section

110(k)(4) of the Act. In the alternative, however, EPA proposed that,

if the State failed to adopt legislative authority or meet certain

other applicable interim milestones in the commitment prior to EPA's

final action on the submittal, EPA would disapprove the committal SIP.

The basis for such disapproval would be a determination that California

could not meet the November 15, 1993 SIP revision submission date if it

failed to meet the interim milestones. Therefore, since the State could

not meet its commitment, final approval under section 110(k)(4) would

not be appropriate.

3. State Legislative Action: On November 15, 1993 California failed

to meet its commitment to EPA. By letter dated December 30, 1993, EPA

Region 9 notified the State that the proposed SIP revision submitted on

November 15, 1993, did not contain the critical elements required by

statute and that the State had failed to submit a complete SIP revision

as required by the Act. For example, the proposed SIP revision did not

contain legislative authority for the State to implement the proposed

SIP revision. In addition, EPA Region 9 notified the State that the

proposed SIP revision was an incomplete SIP submittal because it was

not subject to a public hearing.

Further, the State failed to meet the interim deadlines in its

committal SIP. California was required to obtain legislative authority

for the adoption and implementation of an enhanced I/M program during

the 1993 legislative session under the November 15, 1992 I/M committal

SIP submittal. Bills to change California's existing I/M program were

introduced during the 1993 legislative session and hearings were held

by the Senate and Assembly Transportation Committees. The legislature

adjourned, however, on September 10, 1993 without having adopted I/M

legislation. Failure to provide such authority prevented California

from submitting a complete SIP revision by November 15, 1993.

Earlier this year, EPA anticipated the possibility that the

California legislature would fail to adopt necessary legislation during

the 1993 legislative session. On April 13, 1993, EPA and the U.S.

Department of Transportation sent a joint letter to Governor Wilson

advising him that EPA would exercise its discretionary authority under

section 110(m) of the Act to impose sanctions if the legislature failed

to adopt adequate legislation. On November 24, 1993, EPA issued a press

statement indicating that EPA would temporarily halt the process of

imposing sanctions to permit discussions between the parties to resolve

the issue.

4. Importance of Timely Implementation of Appropriate I/M Programs:

Beyond being a specific mandate of the Act, enhanced I/M programs play

an important role in the ability of California areas to comply with the

CAA requirements for achieving the National Ambient Air Quality

Standards (NAAQS) for ozone and CO, as well as the Act's requirements

for reasonable further progress (RFP) reductions for ozone. The Act

provides that each state in which all or part of an ozone and/or CO

nonattainment area are located is required to provide an attainment

demonstration showing that its SIP, as revised, will provide for

attainment of the ozone and/or CO NAAQS by the applicable attainment

date(s).

The Act further requires that each state in which all or part of a

serious, severe, or extreme ozone nonattainment area is located shall

submit SIP revisions that will reduce VOC emissions by November 15,

1996 by at least 15% of the 1990 baseline emissions. If the reductions

identified in the SIP revisions are less than 15% of the baseline

emissions, the State may obtain a waiver under section

182(b)(1)(A)(ii); this requires the State to make several

demonstrations, including one that the plan reflecting the lesser

amount includes all measures that can feasibly be implemented in the

area in light of technological achievability. Many areas in California

will have difficulty meeting the RFP requirements because credit for

certain pre-1990 CAA programs, such as the federal motor vehicle

control program and basic I/M, is not allowed. The additional benefits

of enhanced I/M, however, are fully creditable towards meeting the RFP

requirement. Enhanced I/M is one of the most powerful tools available

to areas in terms of providing expeditious reductions in both VOC and

NOx, both of which are treated in most California plans as precursors

of ozone.

Finally, a federally approvable enhanced I/M program represents one

of the most cost-effective air quality control strategies available.

Without an effective I/M program, attainment of the ozone and CO air

quality standard is virtually impossible. Without appropriate enabling

legislation, an enhanced I/M program cannot be implemented.

II. Sanctions Under the Clean Air Act

This sanction action is being proposed under EPA's discretionary

authority contained in section 110(m) of the Act. The predicate

findings and types of sanctions are described in section 179 of the

Act. The two sanctions available to EPA for application under section

110(m), as provided in section 179(b), are: (1) A prohibition on the

funding of certain highway projects; and (2) an increase in the

emission offset requirement for new and modified major stationary

sources. The highway funding sanction prohibits approval by the

Secretary of Transportation of any projects or the awarding by the

Secretary of any grants, under Title 23 of the U.S. Code, other than

projects or grants for safety and certain other categories of projects

listed in section 179(b)(1). The offset sanction requires that, when

States apply the emission offset requirement of section 173 to new or

modified sources, the ratio of emission reductions to increased

emissions must be at least 2 to 1.

Section 179(a) of the Act sets forth the findings\1\ which provide

EPA with discretion under section 110(m) to impose one or both of the

sanctions specified under section 179(b). The four findings are: (1) A

state has failed, for a nonattainment area, to submit a SIP or an

element of a SIP, or that the SIP or SIP element submitted fails to

meet the completeness criteria of section 110(k); (2) EPA disapproves a

SIP submission for a nonattainment area based on the submission's

failure to meet one or more plan elements required by the Act; (3) a

State has not made any other submission required by the Act or has made

a submission that does not meet the completeness criteria or has made a

required submission that is disapproved by EPA for not meeting the

Act's requirements; or (4) a requirement of an approved plan is not

being implemented.

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\1\Section 179(a) refers to Agency findings, disapprovals, and

determinations. These will all be referred to by the one term

``findings.''

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Under section 179(a), unless the State corrects the deficiency, one

of the two sanctions listed in section 179(b) must be imposed 18 months

after a finding is made, and the second must be imposed 6 months after

the first sanction is imposed if the deficiency remains uncorrected.\2\

In addition, both sanctions shall apply after 18 months if the

Administrator finds a lack of good faith on the part of the State.

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\2\On October 1, 1993, EPA proposed a rule governing the order

in which the sanctions shall apply under section 179 of the Act. 58

FR 51270. The rule proposes that the offset sanctions apply first

and the highway sanctions apply second. According to the proposed

rule, EPA may change this sequence of sanctions through individual

notice and comment rulemaking. This proposed sequencing applies only

to mandatory sanctions that apply under section 179(a) and does not

govern sanctions imposed under section 110(m).

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Although section 179(a) establishes mandatory deadlines for the

application of sanctions at certain points after a finding of

deficiency, section 110(m) provides EPA with the discretion to impose

section 179(b) sanctions at any time (or at any time after) a section

179(a) finding. Likewise, although mandatory sanctions under section

179 are limited to the area with the deficiency, section 110(m)

authorizes EPA to apply discretionary sanctions to any portion of the

state that EPA deems reasonable and appropriate to ensure that the

requirements of the Act are met. See 57 FR 44534, 44536-44537. However,

the Act requires EPA to establish by rule criteria to ensure that such

sanctions are not applied on a statewide basis where one or more

political subdivisions covered by the applicable implementation plan

are principally responsible for the deficiency.

On September 28, 1992, EPA proposed criteria under section 110(m)

that it would use when proposing statewide sanctions to determine if

one or more political subdivisions is principally responsible for a SIP

deficiency. 57 FR 44534. These proposed criteria are discussed later in

this notice.

With regard to California, EPA is using its discretionary authority

under section 110(m) to propose early sanctions\3\ based on

California's failure to adopt legislation to improve its I/M program.

EPA is taking this action for two reasons: (1) Congress required timely

submittal of enhanced I/M programs as a measure central to allowing the

State's metropolitan areas to meet CAA deadlines, and any legislative

delay threatens the States's ability to meet those deadlines, and (2)

enhanced I/M is the single most effective air pollution control measure

available. Delayed legislative approval of an acceptable I/M program

places a disproportionate burden for cleaning the air on the State's

major industrial sources--additional burdens which are especially

problematic given California's current economic difficulties.

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\3\EPA issued its letter on December 30, 1993, finding that the

state's proposed SIP revision was a failure to submit a SIP revision

as required by the Act and, in addition, was an incomplete SIP

submittal. Mandatory sanctions were triggered under Section 179(a)

by issuance of the letter notifying the state of the finding of

deficiency.

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III. Proposed Sanctions

A. Finding Under Section 179(a)

As stated previously, on December 30, 1993, EPA Region 9 issued a

letter notifying the state of its failure to submit a complete SIP

revision on November 15, 1993, as required by the Act. EPA's letter

constitutes a finding under section 179(a) that triggers EPA's

discretionary authority to impose the sanctions proposed in this notice

under section 110(m). Further, on June 28, 1993, EPA proposed to

conditionally approve California's I/M committal SIP for both basic and

enhanced I/M programs. EPA also proposed, in the alternative, to

disapprove this commitment if the state failed to adopt authorizing

legislation and to submit the required I/M programs by the November 15,

1993 date. California has also now failed to adopt and submit such

programs.

If sufficient progress has not been made by California toward the

implementation of an approvable I/M program to be operational on or

before January 1, 1995, EPA hereby announces its intention to impose

sanctions on May 15, 1994.

B. Rationale and Approach for Section 110(m) Sanctions

Section 110(m) of the Act allows EPA to apply the highway and

offset sanctions at any time (or at any time after) it makes a finding

under section 179(a). Based on its finding dated December 30, 1993, EPA

is proposing to impose both the highway and offset sanctions. EPA

believes that the imposition of highway sanctions is appropriate

because of California's failure to adopt legislation to enhance its

existing smog check program. In the absence of improved smog check, the

ability of the State's metropolitan areas to meet the Clean Air Act

deadlines for attaining healthy air quality is severely compromised. As

previously noted, enhanced smog check is the single most effective air

pollution control measures available and delayed legislative approval

of an acceptable program further burdens major industrial sources of

air pollution with responsibility for cleaning the air.

Under section 110(m), EPA may apply sanctions to any portion of the

state it determines is reasonable and appropriate. During the 24 months

following the finding, EPA may not impose the sanctions statewide if

one or more political subdivisions within the state is principally

responsible for the deficiency that is the basis for sanctions. EPA has

proposed criteria for determining when a political subdivision is

principally responsible (57 FR 44534, September 28, 1992). The criteria

provide that a political subdivision is principally responsible if: (1)

It has the legal authority to perform the required activity; (2) it has

traditionally performed, or has been delegated the responsibility to

perform, the required activity; (3) it has received, where appropriate,

adequate funding, or authority to obtain funding, from the state to

perform the required activity; (4) it has agreed to perform (and has

not revoked that agreement), or is required by state law to accept

responsibility for performing, the required activity; and (5) it has

failed to perform the required activity. A ``political subdivision'' is

defined as the representative body that is responsible for adopting

and/or implementing air pollution controls for any combination of

political subdivisions created by, or pursuant to, Federal or State

law. If no political subdivision meets all 5 criteria, EPA may use its

discretion to determine whether it is reasonable and appropriate to

apply sanctions on a statewide basis.

In this notice, EPA is proposing to use the above proposed criteria

to determine if it may impose the highway sanction statewide for

California because of the State's failure to submit a complete SIP

revision complying with the I/M committal SIP revision.

EPA believes that the first criterion has not been met by any

political subdivision. Only the California legislature has the

authority to revise the state statute to provide for an enhanced I/M

program meeting the CAA and EPA requirements. Once the legislature has

acted, only state government agencies can adopt any implementing

regulations. While individual air pollution control district or air

quality management districts may request implementation of the state I/

M program once adopted, this authority is meaningless unless the State

has first established an appropriate program through legislation and

regulations. Since the state legislature has not enacted the

legislation required to provide the legal authority for an enhanced I/M

program meeting the CAA and EPA requirements, an enhanced I/M program

is not available to areas within the state that require the program.

Since no political subdivision within the state has met the first

criterion, EPA believes that no political subdivision is principally

responsible for the failure to have an enhanced I/M program. Therefore,

EPA is not prohibited from imposing highway sanctions statewide. As

noted above, the state legislature bears the ultimate responsibility to

adopt the requisite legislative authority and CARB, not the individual

air quality districts, must subsequently adopt adequate regulations.

Since the state bears ultimate responsibility, EPA believes that it is

reasonable and appropriate to impose sanctions on the entire State.

The offset requirements apply only to new or modified major

stationary sources located in or to be located in areas that are

required to have a permit program pursuant to section 173. Thus, the

offset sanctions are limited to those areas which are required to have

a permit program, i.e., the ozone and CO nonattainment areas. For

ozone, those areas are: Monterey, Santa Barbara, San Diego, San

Francisco Bay Area, South Coast, Ventura, Sacramento, San Joaquin

Valley, and the South East Desert. The offset sanction would apply to

all new or modified major stationary sources for VOCs and NOx that are

locating to or located in each of these areas and for such sources of

CO that are located in or locating to the following CO nonattainment

areas: Chico, Sacramento, San Diego, San Francisco, San Joaquin, and

South Coast. EPA proposes to impose the offset sanctions in the manner

described in the proposed action on the sequencing of sanctions (58 FR

51270, 51275-51277 (October 1, 1993)).

C. Removal of Discretionary Sanctions

EPA is proposing to temporarily lift (i.e., toll)4 the highway

and offset sanctions imposed under section 110(m) upon passage by the

California legislature and signature by the Governor of legislation

which EPA preliminarily determines provides legal authority for an

enhanced I/M program meeting the requirements of the CAA and the I/M

regulation. EPA proposes to notify the state of this tolling by a

letter to the Governor and the public by a notice published in the

notice section of the Federal Register. The section 110(m) sanctions

would not be completely lifted until the State makes a complete

submittal of its enhanced I/M program for the State of California. EPA

will take action to completely lift section 110(m) sanctions at the

time it determines the State's submittal to be complete or it is deemed

complete. A complete submittal is one that contains all the critical

elements listed in the I/M regulation as determined through the

completeness criteria in section 110(k)(1).

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\4\As a general rule, an Agency must go through rulemaking to

remove or alter a requirement imposed through rulemaking. While U.S.

EPA intends to issue a notice tolling the 110(m) sanction upon the

occurrence of the events described, U.S. EPA will use the good cause

exception to the otherwise applicable requirement for proposed

rulemaking. EPA believes there is good cause to toll the sanctions

once the state takes the action which cures the defficiency that

resulted in the imposition of sanctions. See 5 U.S.C.Sec. 553(b)(B).

Therefore, no proposed action for removal will be issued. Consistent

with U.S. EPA's intent to impose discretionary sanctions only on

those areas that lack legislative authority, EPA believes that it is

in the public interest to remove, at least temporarily, these

discretionary sanctions as expeditiously as possible once the State

of California has enacted legislative authority.

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As an alternative, if EPA takes final action disapproving

California's committal SIP prior to taking final action imposing

sanctions, EPA proposes that such disapproval be the basis for imposing

the discretionary sanctions. In such case, the sanctions would be

tolled in the same manner; however, if the disapproval is the final

basis for imposing the sanctions, such sanctions would not be

completely lifted until EPA formally approves an enhanced I/M program

for the State of California. In such a case, EPA would take action to

lift the sanctions at the same time as EPA took final action approving

the State's I/M program.

EPA's action imposing or tolling the section 110(m) sanctions will

in no manner affect EPA's obligation to impose mandatory sanctions

under section 179(a) where one mandatory sanction shall apply 18 months

after EPA's finding of incompleteness and the second mandatory sanction

shall apply 6 months later. Sanctions under section 179(a) apply to the

area for which the deficiency exists. If the State does not adopt and

submit to EPA a complete submittal providing for an I/M program within

the 18-month and additional 6-month periods, the sanctions will

automatically apply to those areas of the state that were required to

have but do not have such a complete I/M program under the amended Act.

See 58 FR 51270 (October 1, 1993). Moreover, if EPA takes final action

disapproving California's I/M committal SIP, a second sanctions clock

will be triggered and California must not only submit an I/M program,

but EPA must also approve that program within the relevant time frames

to stop the mandatory sanctions clock and avoid sanctions on the final

disapproval.

IV. Regulatory Requirements

A. 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 Office of Management and Budget (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 right and obligations of recipients

thereof; or

(4) Raise novel legal or policy issues arising out of legal

mandates, the President's priorities, or the principles set forth in

the Executive Order.

Pursuant to the terms of Executive Order 12866, it has been

determined that this rule is a ``significant regulatory action''.

Nevertheless after reviewing information regarding this action, OMB has

waived review.

B. Regulatory Flexibility Act

Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., EPA

must prepare a regulatory flexibility analysis assessing the impact of

any proposed or final rule on small entities. Alternatively, EPA may

certify that the rule will not have a significant impact on a

substantial number of small entities. Small entities include small

businesses, small not-for-profit enterprises, and government entities

with jurisdiction over populations of less than 50,000.

EPA cannot reliably predict the impact of these restrictions

because of the exemptions authorized for certain highway projects

related to mass transit, public safety, and those that have beneficial

air quality impacts. Careful review and evaluation of each project is

necessary to determine whether or not a project is exempt.

If EPA takes final action on this proposal, the 2 to 1 emissions

offset requirement will apply to major new sources and major

modifications to the existing sources of volatile organic compounds

(VOC), oxides of nitrogen (NOx), and carbon monoxide (CO) in the

California ozone and carbon monoxide areas subject to section 173(c)

offset requirement.

Major stationary sources of VOC, NOX, and CO are generally not

small entities. Also, the 2 to 1 emission offset requirement does not

prevent growth and modification but sets a higher offset standard than

the current offset required. It is not expected that a large number of

small entities will be affected by the emission offset requirement. In

the past, when EPA has made efforts to quantify the impact of the Act's

rules on the construction and modification of sources, EPA has been

unable to do so due, in part, to the need to obtain information on

future plans for business growth. This information is difficult to

obtain, as business are understandably reluctant to make their plans

public.

EPA is proposing to impose Federal highway funding assistance

limitations statewide. This limitation could affect a number of

government entities with populations of less than 50,000 since

government entities often apply for and receive federal funding under

Title 23, United States Code, for road improvement projects. Although a

great many projects are exempted under section 179(b)(1)(B), a number

of projects are expected to be affected if EPA takes final action.

For the reasons stated above, EPA cannot further analyze the

economic impacts of this action on small entities. The statements in

this package constitute EPA's full regulatory flexibility analysis.

C. Reporting and Recordkeeping Requirements

This rule does not contain any information collection requirements

which require OMB approval under the Paperwork Reduction Act (44 U.S.C.

3501 et seq.). Should the highway sanctions become effective, the

Secretary of the U.S. Department of Transportation (USDOT) is required

to determine which projects or grants should not be affected by the

sanction and which, therefore, are exempt. This determination will be

based on information readily available in existing documentation

gathered for the purpose of evaluating the environmental, social, and

economic impacts of different alternatives for transportation projects.

These analyses are already required for the preparation of

environmental assessments and impact statements under the National

Environmental Policy Act (NEPA). Historically, exemption determinations

by USDOT for sanctions have been based on such NEPA documentation and

have not necessitated additional information gathering and analysis by

the States. In addition, since under NEPA final environmental documents

must be approved by USDOT, in most cases the NEPA documentation will

already be in USDOT's possession. Therefore, EPA does not believe that

the highway sanction, when applied, will impose an additional

information collection burden on the states.

When the offset sanction applies, sources subject to it will not

incur an additional information collection burden because sources are

already required under the section 173 offset requirements to obtain an

emission offset from between 1 to 1 and 1.5 to 1 (depending on the

classification of the nonattainment area in which they are located).

Should the offset sanction apply, it would not impose an additional

information collection burden because sources will not have to provide

additional information in the application beyond that which they would

already have to provide in the absence of the sanction. (For the

information collection burden of new requirements of the amended Act

for nonattainment new source review (NSR) and prevention of significant

deterioration, an information collection request is being prepared to

support rulemaking changes to parts 51 and 52.)

List of Subjects in 40 CFR Part 52

Environmental protection, Air pollution control, Carbon monoxide,

Hydrocarbons, Intergovernmental relations, Nitrogen oxide, Ozone,

Volatile organic compounds.

Dated: January 7, 1994.

Carol M. Browner,

Administrator.

40 CFR part 52 is proposed to be amended as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

1. The authority citation for part 52 continues to read as follows:

Authority: 42 U.S.C. 7401-7671q.

Subpart A --[Amended]

2. Subpart A is proposed to be amended by adding a new Sec. 52.32

to read as follows:

Sec. 52.32 Discretionary sanction under section 110(m) of the Clean

Air Act.

(a) Purpose. The purpose of this section is to implement 42 U.S.C.

7410 (m), with respect to the application of discretionary sanctions

following a finding that has been made pursuant to 42 U.S.C. 7509 (a)

(1), (2), (3), and (4).

(b) Definitions. All terms used in this section, but not

specifically defined in this section shall have the meaning given them

in Sec. 52.01.

(1) 1990 Amendments means the 1990 Amendments to the Clean Air Act

(Pub. Law 101-549, 104 Stat. 2399).

(2) Act means Clean Air Act, as amended in 1990 (42 U.S.C. 7401 et

seq.).

(3) Criteria pollutant means pollutant for which the Administrator

has promulgated a national ambient air quality standard pursuant to 42

U.S.C. 7409 (e.g., ozone, lead, sulfur dioxide, particulate matter,

carbon monoxide, nitrogen dioxide).

(4) Findings or Finding refer(s) to one or more of the findings,

disapprovals, and determinations described in 42 U.S.C. 7509 (a) (1),

(2), (3), and (4).

(5) Part D means part D of title I of the Act.

(6) Part D SIP or SIP revision or Plan means a state implementation

plan or plan revision that states are required to submit or revise

pursuant to part D.

(c) Available sanctions and method for implementation. (1) Offset

sanction. (i) As further set forth in paragraphs (c)(1)(ii) through

(iii) of this section, for the following areas, on the following dates,

the State shall apply the emissions offset requirements, in accordance

with 42 U.S.C. 7503 and 7509(b)(2), at a ratio of at least 2-to-1 for

emission reductions to increased emissions of the following pollutants

and their precursors for which the findings under 42 U.S.C. 7409 are

made:

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

Date

Affected area sanction Pollutant(s)

applies affected

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

State of

California:

Chico................................. ........ CO

Monterey.............................. ........ VOC, NOx

Sacramento............................ ........ VOC, NOx, CO

San Diego............................. ........ VOC, NOx, CO

San Francisco Bay Area................ ........ VOC, NOx, CO

San Joaquin Valley.................... ........ VOC, NOx, CO

Santa Barbara......................... ........ VOC, NOx, CO

South Coast........................... ........ VOC, NOx, CO

South East Desert..................... ........ VOC, NOx

Ventura............................... ........ VOC, NOx

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

(ii) For purposes of applying the emissions offset requirement set

forth in 42 U.S.C. 7503, at the 2-to-1 ratio required under paragraph

(c)(1) of this section, the State shall comply with the provisions of a

State-adopted new source review program that the EPA has approved under

42 U.S.C. 7410(k)(3) as meeting the nonattainment area new source

review requirements of 42 U.S.C. 7501-7515, as amended by the 1990

Amendments, or, if no such plan has been approved, the State shall

comply directly with the nonattainment area new source review

requirements specified in 42 U.S.C. 7501-7515, as amended by the 1990

Amendments, or cease issuing permits to construct and operate major new

or modified sources. For purposes of applying the offset requirement

under 42 U.S.C. 7503 where the EPA has not fully approved a State's new

source review program as meeting the requirements of part D, the

specifications of those provisions shall supersede any State

requirement that is less stringent or inconsistent.

(iii) For purposes of applying the emission offset requirement set

forth in 42 U.S.C. 7503, any permit required pursuant to 42 U.S.C. 7503

issued on or after the date the offset sanction applies shall be

subject to the enhanced 2 to 1 ratio under paragraph (c)(1) of this

section.

(2) Highway funding sanction. For the following areas, on the

following dates, the highway sanction shall apply as provided in

42.U.S.C. 7509(b)(1):

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

Date

Affected area sanction

applies

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

State of California........................................... ........

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

[FR Doc. 94-1128 Filed 1-21-94; 10:00 am]

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