Criteria for Exercising Discretionary Sanctions Under Title I of the Clean Air Act

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[FRL-4822-4]

RIN 2060-AD10

Criteria for Exercising Discretionary Sanctions Under Title I of

the Clean Air Act

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: This rulemaking sets forth criteria that EPA must consider

when exercising its discretionary authority to impose sanctions on a

statewide basis pursuant to the Clean Air Act as amended in 1990 (Act).

If EPA makes one of the findings of State implementation plan (SIP)

deficiency described in the Act, EPA may impose an emissions offset or

highway funding sanction on any portion of the State that the

Administrator determines is reasonable and appropriate for the purpose

of ensuring that the requirements of the Act relating to plans are met.

This rulemaking establishes the criteria EPA shall use in exercising

its discretionary authority during the 24-month period following a

finding of a plan deficiency to ensure that these sanctions are not

applied on a statewide basis when one or more political subdivisions

are principally responsible for such deficiency. In addition, EPA

describes the discretionary sanctions provision and EPA's anticipated

application of these sanctions ``at any time'' after the Agency makes a

finding.

EFFECTIVE DATE: This rule will be effective February 10, 1994.

ADDRESSES: Materials relevant to this rulemaking are contained in

Docket No. A-91-66. A reasonable fee may be charged for copying docket

materials. The Docket is located at the following address and may be

inspected from 8:30 a.m. until noon and from 1:30 p.m. until 3:30 p.m.,

Monday through Friday: Room M-1500 (LE-131), Waterside Mall, 401 M

Street SW., Washington, DC 20640.

FOR FURTHER INFORMATION CONTACT: Ted Creekmore, U.S. EPA, MD-15,

Research Triangle Park, North Carolina 27711, (919) 541-5699.

SUPPLEMENTARY INFORMATION:

I. Overview

The EPA is promulgating criteria under section 110(m) of the Act to

ensure that, during the 24-month period following a finding,

disapproval, or determination (hereinafter ``finding'') referred to in

section 179(a), sanctions pursuant to section 110(m) are not applied on

a statewide basis where one or more political subdivisions are

principally responsible for such deficiency. Thus, these criteria apply

only in the limited circumstance in which EPA is considering the

imposition of statewide sanctions under section 110(m) within 24 months

after the Agency makes a section 179(a) finding.

On September 28, 1992 (57 FR 44534), EPA proposed criteria that EPA

will use to determine if sanctions imposed pursuant to section 110(m)

of the Act may not be applied statewide. The preamble to the proposed

rule contains a detailed discussion of the background of the Act, of

the proposed criteria, and of the provisions of section 179 and section

110(m) (see 57 FR 44534-44535).

New Sec. 52.30(c) of the rule provides five criteria that EPA will

use to determine if sanctions imposed pursuant to section 110(m) may

not be imposed statewide. If at least one political subdivision meets

all five of the criteria, then that political subdivision will be

considered principally responsible, and EPA will not impose sanctions

on a statewide basis. Rather, EPA will impose sanctions only on the

areas of the State for which EPA determines it is reasonable and

appropriate to impose sanctions. If all of the criteria are not met by

at least one political subdivision, then no political subdivision is

principally responsible, and EPA will use its discretion to determine

whether to apply statewide sanctions. However, if EPA, using its

discretion, initially determines that less-than-statewide sanctions

should be applied, the Agency will not need to consider the criteria;

EPA will impose sanctions on those political subdivisions the Agency

has determined to be reasonable and appropriate. Such decisions will be

made on a case-by-case basis and each action will be subject to the

notice-and-comment rulemaking procedures of the Administrative

Procedure Act.1

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\1\As noted in EPA's proposed rule, the Agency will follow

notice-and-comment rulemaking in every instance that EPA anticipates

imposing section 110(m) sanctions (57 FR 44534, September 28, 1992).

In each rulemaking action, the public will have an opportunity to

comment on the proposed geographic scope of the sanctions, the

timing of the sanctions, and the order in which the two available

sanctions will be imposed. To the extent the public has commented on

these issues as a general matter in this rulemaking action, EPA has

responded by suggesting that the issue is more appropriately raised

in independent rulemaking actions in which section 110(m) sanctions

are proposed.

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In the final rule, EPA has changed four provisions from the

proposal based on comments received regarding specific details of the

regulatory text. They are as follows:

1. In Sec. 52.30(a)(2), the definition of ``required activity'' was

revised in two ways. First, the phrase ``may include, but is not

limited to'' was deleted from the definition. Second, the phrase

``adequate SIP or SIP element'' is replaced by the phrase ``plan or

plan item.'' These two changes were made in order to follow more

clearly the language of section 110(m). Since section 110(m) refers

only to actions required with respect to a ``plan or plan item,'' EPA

agrees that the phrase ``may include, but is not limited to'' is

unnecessary because it appears to imply EPA has authority to impose

sanctions with respect to findings other than those for a plan or plan

item. Furthermore, since section 110(m) uses the phrase ``plan or plan

item,'' EPA believes it would be more consistent to use that phrase in

the regulatory language rather than the phrase ``adequate SIP or SIP

element.''

2. The terms ``plan or plan items'' are added to the definitions

section of the rule, Sec. 52.30(a)(4), and are defined as follows:

``For purposes of Sec. 52.30, the terms `plan' or `plan item' mean an

implementation plan or portion of an implementation plan or action

needed to prepare such plan required by the Act, as amended in 1990, or

in response to a SIP Call under section 110(k)(5) of the amended Act.''

3. In Sec. 52.30(c), ``criteria,'' as defined in the proposal,

provides: ``The EPA will use the following five criteria, all of which

must be met, to determine whether a political subdivision is

principally responsible for the deficiency.'' This section is clarified

by revising it to read as follows: ``For the purposes of this

provision, EPA will consider a political subdivision to be principally

responsible for the deficiency on which a section 179(a) finding is

based, if all five of the following criteria are met.'' Thus, the rule

clarifies that all five criteria are to be met, not merely used by EPA

to determine how sanctions will be imposed.

4. In its proposed rule, Sec. 52.30(d)(1), EPA provides: ``If all

of the criteria in paragraph (c) of this section have been met through

the action or inaction of the `same' political subdivision, EPA will

not impose sanctions on a statewide basis.'' Although no comments were

received from the public on this language, a review by the Agency

suggested that the phrase ``same political subdivision'' may be

confusing. By including that language in the rule, EPA was attempting

to indicate that one political subdivision must meet all five of the

criteria before EPA's authority to impose sanctions on a statewide

basis would be constrained (see 57 FR 44536). For example, if a State

has two nonattainment areas and a rule, which was past due under the

Act, was not yet adopted and submitted to EPA for either area, EPA

would look at each nonattainment area independently to determine

whether the five criteria were met. If the first three criteria were

met by one nonattainment area and the last two by the second

nonattainment area, then EPA's authority to impose statewide sanctions

would not be constrained. However, if one nonattainment area met all

five of the criteria, EPA could not impose statewide sanctions based on

the finding for that area. The EPA is replacing the word same with the

word one in the rule in order to alleviate any confusion. This

provision will be implemented in accordance with the interpretation

above.

II. Background

In general, the preamble to the proposed rule notes that the Act

contains two sanctions provisions:

1. Section 110(m),2 provides the Administrator with discretion

to impose sanctions at any time on any portion of the State that she

determines is reasonable and appropriate;

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\2\42 U.S.C. section 7410(m).

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2. Section 179(a)3 requires the Administrator to impose

sanctions after specific timeframes if the deficiencies on which the

sanctions are based are not corrected.4

\3\42 U.S.C. section 7509(a).

\4\It is necessary, for clarity's sake, to understand that

section 179(a) performs two very distinct functions: it defines

several types of findings, and requires EPA to impose sanctions if

one of these findings has been made. Section 179(a) (1) through (4)

sets forth the four types of findings which may lead to the

imposition of a sanction. The introduction and latter part of

section 179(a) mandate that at least one sanction must be imposed 18

months after a finding has been made with respect to certain types

of plans if the deficiency is not corrected.

This rulemaking considers the application of sanctions under section

110(m). However, because section 110(m) and section 179 are

interrelated, the preamble to the proposed rulemaking discussed

sanctions under section 179 (a) and (b) in order to clarify what is

required by section 110(m).

The specific types of sanctions which may be imposed under section

110(m), or must be imposed under section 179(a), are listed in section

179(b). The two sanctions provided are a highway funding sanction and a

2:1 offset sanction. These two sanctions are described in more detail

in the preamble to the proposed rule (see 57 FR 44535).

Section 179(b) sanctions may be applied pursuant to section 110(m)

when the Administrator makes a finding under section 179(a) (1) through

(4), provided that the Agency has followed all procedural requirements

for imposing a sanction. The Administrator has no authority under

section 110(m), nor any mandatory duty under section 179(a), to impose

sanctions until she has made a finding. The types of findings provided

under section 179(a) are discussed in more detail in the preamble to

the proposed rule (see 57 FR 44535).

Section 110(m) may be divided into two distinct parts (see 57 FR

44535). The first part of section 110(m) contains four distinct

elements:

1. The timing of the imposition of section 110(m) sanctions;

2. The availability under section 110(m) of the sanctions listed in

section 179(b);

3. The reference to a finding, disapproval, or determination under

section 179(a) (1) through (4); and

4. The geographic scope of application of sanctions under section

110(m).

The second part requires the Administrator to propose criteria to be

used when considering the application of sanctions on a statewide basis

under section 110(m) within 24 months of a section 179(a) finding.

Although not central to the purpose of this rulemaking, EPA presented a

detailed discussion of the four elements referred to in the first part

of section 110(m) in the proposed rule. The purpose was to explain how

sections 110(m) and 179 provisions are interrelated. As shall be

evident in the ``Response to Comments'' section, the preamble language

discussing these four elements was the basis for numerous comments. The

criteria, which are the basis of this action, seemed to generate

significantly fewer comments.

III. Development of Criteria

The second sentence of section 110(m) requires the Agency to

establish criteria that EPA must apply if the Agency considers applying

sanctions under section 110(m) on a statewide basis within 24 months of

a section 179(a) finding. These criteria should enable EPA to determine

when a political subdivision,5 rather than the entire State, is

principally responsible for a section 179(a) deficiency. Where the

political subdivision is principally responsible, EPA may not impose

sanctions on a statewide basis.

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\5\In Sec. 52.30(a)(1), EPA defines the term political

subdivision as ``* * * the representative body that is responsible

for adopting and/or implementing air pollution controls for one, or

any combination of one or more of the following: city, town,

borough, county, parish, district, or any other geographical

subdivision created by, or pursuant to, Federal or State law. This

will include any agency designated under section 174, 42 U.S.C.,

section 7504, by the State to carry out the air planning

responsibilities under part D.''

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The EPA recognizes that an understanding of the term ``principal

responsibility'' was integral to the development of the criteria. The

preamble to the proposed rule contains a detailed discussion on how a

political subdivision may be held ``principally responsible'' for a

section 179(a) failure when the EPA recognizes that the States have

primary responsibility for meeting the requirements of the Act (see 57

FR 44535-36). The EPA believes that the criteria promulgated today will

clearly indicate when the political subdivision carries the principal

burden of carrying out an activity.

The EPA is promulgating five criteria (summarized below) that it

believes will enable a determination of when a State has relinquished

its primary control over an activity to a political subdivision and the

political subdivision has failed to perform that required activity. The

EPA believes that the political subdivision is principally responsible

when the political subdivision:

1. Has the legal authority to perform the required activity;

2. Has traditionally performed, or has been delegated the

responsibility to perform, the required activity;

3. Has received, where appropriate, adequate funding or authority

to obtain funding from the State to perform the required activity;

4. Has agreed to perform (and has not revoked that agreement) or is

required to accept responsibility for performing the required activity;

and

5. Has failed to perform the required activity.

If one or more political subdivisions each meet all five of the

criteria, EPA will consider those subdivisions principally responsible,

and EPA may impose sanctions only on those political subdivisions and

on other areas (short of the entire State) for which the Agency

determines reasonable and appropriate. The EPA would not impose

sanctions statewide. However, if all of the criteria have not been met

by at least one political subdivision, EPA will use its discretion to

determine whether to apply sanctions on a statewide basis.

These five criteria are intended to be applicable to SIP failures

relating to stationary, area, and mobile sources. The EPA believes that

the criteria developed here will enable it to successfully determine

when a political subdivision is principally responsible for a

deficiency.

IV. Limits of This Rulemaking

Nothing in the Act precludes EPA from applying sanctions pursuant

to section 110(m), without examining the criteria, if the Agency elects

to impose a sanction on a less-than-statewide basis or where EPA

imposes statewide sanctions more than 24 months after a finding.

Furthermore, this rulemaking does not affect the situation where each

of a group of political subdivisions, whose combined area comprises the

entire State, suffer a deficiency. The EPA could impose a sanction on

each of those political subdivisions as an independent area without

applying the criteria, even though this may appear to be a statewide

sanction. All decisions to impose section 110(m) sanctions will be made

on a case-by-case basis, and will be subject to notice-and-comment

rulemaking.

This rule is not intended to identify which sanction EPA will apply

in a particular circumstance, nor the type of deficiency for which EPA

might use its discretion to apply sanctions. Furthermore, it is not

intended to describe the notice and comment procedures EPA will

ultimately use to impose a sanction pursuant to section 110(m).

V. Response to Comments

The EPA received comments from 15 sources including business

associations, and Federal, State and local government entities. The

following section provides a summary of the responses to major

comments.

A. The EPA's Interpretation of the Statutory Requirements of Section

110(m)

Under this category, the commenters expressed concern with respect

to the timing of sanctions and the application of sanctions beyond a

nonattainment area. Although, as stated before, these issues are not

central to the criteria being promulgated, EPA has responded to these

comments below.

1. Imposition of Sanctions Earlier Than 18 Months

Comment. The Illinois EPA (IEPA) and the Virginia Department of

Transportation (DOT) believe section 110(m) does not give EPA the

authority to impose sanctions earlier than 18 months after a finding

under section 179. These commenters believe it is incorrect to impose

any sanctions during the 18-month period immediately following a

finding because section 179 clearly states that EPA may not impose

sanctions if the deficiency is corrected within 18 months. The IEPA

believes Congress included this 18-month period in recognition of the

magnitude of the State's responsibilities under the Act as well as the

time involved in the legislative and rulemaking processes. Also, the

Illinois DOT states that because section 179 is the more detailed

sanctions provision, under established principles of statutory

construction and interpretation, it must prevail over section 110(m).

The IEPA suggests that if EPA determined to impose sanctions

earlier than the 18-month period specified in section 179, EPA should

develop specific criteria for when these early sanctions will be

imposed, and provide notice and opportunity for potentially affected

parties to comment prior to imposing sanctions. The IEPA also indicates

that these criteria are necessary to avoid placing industries that are

located in States that meet deadlines in a timely manner at a

competitive disadvantage.

Response. Section 110(m) provides that the Administrator ``* * *

may apply any of the sanctions listed in section 179(b) (at any time or

at any time after) the Administrator makes a finding. * * *'' under

section 179(a). This language plainly authorizes sanctions without

regard to a waiting period after a finding is made.

The EPA believes that section 179 is phrased to require sanctions

after 18 months not, as the commenters say, to prohibit sanctions

before 18 months. Section 179 states ``for any implementation plan or

plan revision required under this part (or required in response to a

finding of substantial inadequacy as described in section 110(k)(5)),

if the Administrator [makes a finding], unless such deficiency has been

corrected within 18 months after the finding * * * one of the sanctions

referred to in subparagraph (b) shall apply. * * *'' This provision

mandatorily imposes sanctions at 18 months if the deficiency has not

been corrected, but does not prohibit sanctions earlier. Because

section 179 does not prohibit the earlier application of sanctions, it

does not conflict with section 110(m), which provides that sanctions

may be imposed earlier than 18 months. Therefore, there is not a

statutory construction issue of whether section 179 needs to prevail

over section 110(m).

Regarding the request by the IEPA that EPA develop specific

criteria for when an early sanction will be imposed, the EPA does not

believe such criteria are statutorily required; however, since EPA will

provide the public with an opportunity to comment on any sanction

action under section 110(m) through notice-and-comment rulemaking prior

to imposition of the sanctions, the public will have the opportunity to

comment on EPA's rationale for the application of sanctions earlier

than 18-months following the finding. Although EPA does not intend to

develop specific criteria, Section A(4) of this preamble provides

further discussion on application of sanctions earlier than 18-months

following a finding.

As to IEPA's concern about competitive disadvantage, imposition of

sanctions under section 110(m) should benefit sources located in those

areas that make timely submittal of plans and plan revisions. Rather

than delaying sanctions until 18 months after a finding, under section

110(m) sanctions may be applied much earlier than 18 months. Therefore,

delinquent areas may be burdened much sooner than the 18-month period

under section 179. Imposition of section 110(m) sanctions should

inhibit any advantage achieved through delayed submittal of required

plans and revisions.

2. Application of Sanctions Beyond Nonattainment Areas Comment

Five commenters believe highway sanctions should not be imposed

outside of a nonattainment area. The Texas DOT, New York DOT, Illinois

DOT and IEPA are concerned that EPA has not extended the nonattainment

limitations of section 179 (a) and (b) to the imposition of sanctions

under section 110(m). These commenters indicate that sanctions should

apply only to nonattainment areas. The Virginia DOT believes that

section 110(m) sanctions should not extend beyond a nonattainment area,

except in extreme cases (such as where lack of good faith exists) and

after a 24-month correction period has passed.

The New York DOT and IEPA believe that EPA's position regarding the

geographic applicability of offset and highway sanctions is

inconsistent, and that the reasoning that is applied to make the offset

sanction applicable to a specific area should benefit the highway

sanction as well. The IEPA feels that section 110(m) refers to the

section 179(b) sanctions without exempting the Administrator from

complying with the geographic limitations specified in section 179(b).

The Illinois DOT comments that section 110(m) allows EPA to

sanction an area less than a whole nonattainment area if a unit of

local government is really to blame.

The New York and Illinois DOT also state that since the statute is

clear and understandable on its face, no reference to legislative

history is required or allowed. The Illinois DOT believes that section

110(m) should be viewed in conjunction with section 179(b)(1), and if

Congress had not meant to limit the use of highway funding sanctions to

nonattainment areas, it would not have placed that limitation in

section 179(b). The Illinois DOT comments that Congressman Anderson had

prefaced his remarks as expressing the intent of only four members of

the House Public Works and Transportation Committee. The commenter

noted that in May 1990 the House Energy and Commerce Committee sent out

a version of the Amendments with no limit in section 179(b) on the area

for sanctions (see H. Rep. No. 140, 101st Cong., 2d Sess., Part 1). The

House Public Works Committee responded with a report of its own at that

time amending section 110(m) and repeating almost the same words quoted

by EPA in the proposed rulemaking. Congressman Anderson's words may

have been on the point then, but they did not agree with the language

of section 179(b) the way it was finally passed by Congress.

Also, the Illinois DOT cites the House Conference Committee Report

which accompanied the final version of the Act as evidence that

sanctions are to be limited to nonattainment areas [H. Rep. No. 952,

101st Cong., 2d Sess. 335-6; Cong. Rec. H13101, 13197; Oct. 26, 1990;

1990 U.S. Code Cong. & Adm. News 3385, 3867-8 (Discussing imposition of

sanctions ``* * * in an area that fails to prepare or implement a plan

to attain air quality Pstandards. * * *'')].

Response. To address the concerns of all five commenters, EPA

believes that section 110(m) and section 179, although interrelated, do

set up two distinct sanctions processes. In general, section 179

provides for mandatory sanctions with respect to failures under part D

(in general, the nonattainment area provisions). As provided in the

proposed rule, section 179 focuses on nonattainment areas in several

respects (see 57 FR 44536-37). First, the general introductory language

of section 179(a) provides that sanctions must be imposed for a failure

with respect to ``* * * any implementation plan or plan revision

required under this Ppart. * * *'' The provision is referring to part D

of title I, the portion of the Act dealing with nonattainment area

requirements. While some part D requirements may also apply to

attainment areas in limited circumstances, the primary focus of part D

is nonattainment areas. Second, the highway sanction language expressly

limits the application of sanctions under section 179(a) to

nonattainment areas. Finally, the offset sanction requires new or

modified sources in complying with the requirements of section 173 to

increase their offsets to 2:1. Typically, only sources in nonattainment

areas need to comply with section 173 and, therefore, in most instances

the offset sanction will only affect sources in nonattainment areas.

For the above reasons, EPA believes that section 179(a) does not

require statewide imposition of sanctions.

On the other hand, section 110(m) clearly provides for the

imposition of sanctions beyond nonattainment areas. The express

language of section 110(m) provides that the Administrator may impose

sanctions on ``* * * any portion of the State the Administrator

determines reasonable and Pappropriate. * * *'' Beyond that, section

110(m) provides for the discretionary imposition of sanctions for a

finding that an area has failed to meet any requirement with respect to

any ``plan or plan item'' under the Act. Such requirements could apply

to nonattainment, attainment, or unclassified areas. Although section

110(m) refers to the sanctions established in section 179(b), there is

no language stating that the geographical limitations in section 179

override section 110(m)'s express authorization for sanctions on any

part of the State that EPA determines reasonable and appropriate.

Section 110(m) refers only to the sanctions themselves, not the

accompanying limitations. For the above reasons, EPA believes that

section 110(m) does establish its own geographic scope.

The Virginia DOT suggests that EPA should limit application of

section 110(m) sanctions beyond the nonattainment area to circumstances

where there is a lack of good faith. While EPA may take good faith into

consideration in determining the geographic scope of section 110(m)

sanctions, EPA does not agree that it should establish lack of good

faith as a prerequisite for imposition of section 110(m) sanctions

beyond the nonattainment area.

With respect to the comment of Illinois DOT that EPA can sanction

less than an entire nonattainment area, the Agency agrees that under

section 110(m)'s broad grant of authority for the imposition of

discretionary sanctions, EPA may select an area smaller than the

nonattainment area.

The IEPA comments that EPA is treating the geographic limitations

of the highway and offset sanctions differently and that EPA should say

that highway sanctions are also limited in scope. The EPA disagrees.

First, we believe that both sanctions may be imposed on any portion of

the State. However, by its method of application, the offset sanction

will only have effect in those areas that must apply the emission

offset requirements of section 173. Therefore, the offset sanction

would have no effect in certain areas. The highway sanction is not

self-limiting; therefore, it will have a broader effect.

Second, the EPA did not rely on legislative history to override

statutory language, but rather to support statutory language that

grants EPA discretion to apply sanctions to other than nonattainment

areas. The Illinois DOT bases its argument that the legislative history

does not support the imposition of sanctions beyond the nonattainment

area on an assumption that section 110(m) does not provide an

independent grant of authority to impose sanctions. However, the Act

does provide two separate grants of sanction authority with different

geographic scopes; this is supported by the language of the Act, as

described above, and by the legislative authority. The language from H.

Conf. Rep. No. 101-952 that references the imposition of sanctions on

an area that fails to attain the air quality standard appears to refer

to the imposition of sanctions under section 179 because it discusses

the required imposition of sanctions. The language cited by EPA in the

preamble to the proposed rule addresses a different grant of statutory

authority to impose sanctions, namely, that authority under section

110(m). In addition, Illinois DOT cites H. Rep. No. 101-490, which

clearly provides that EPA may impose sanctions beyond nonattainment

areas by stating that EPA ``* * * is empowered to apply sanctions to

any portion of a State.'' The committee goes on to clarify how it

believes EPA should use this broad grant of authority, indicating that

EPA should impose sanctions on the governmental entity that is

``primarily responsible,'' and noting that a State legislature's

failure to adopt an inspection/maintenance program is a circumstance

where statewide sanctions are appropriate.

3. Section 110(m) Does Not Establish Independent Authority to Sanction

Comment. The Virginia DOT believes section 179 is the basis for

imposing sanctions and is not superseded by section 110(m).

Furthermore, the Virginia DOT comments that section 110(m) expands on

section 179 by requiring that an additional minimum 6-month grace

period must be observed after the initial 18-month period (i.e., 24

months) before sanctions may be imposed on a statewide basis where a

political subdivision is principally responsible for the deficiency.

The City of Chicago comments that EPA's proposed imposition of

statewide sanctions under section 110(m) as an alternative to section

179 would vitiate section 179. Once EPA determines none of the

political subdivisions meet the criteria, and thus the entire State is

principally responsible for a section 179(a) deficiency, EPA is bound

by the requirements of section 179.

Response. The EPA agrees that sanctions cannot be imposed statewide

within the first 24 months following a finding where a political

subdivision is found principally responsible for the deficiency.

However, EPA disagrees that section 179 provides the sole authority for

imposing sanctions and, in doing so, allows for the imposition of

statewide sanctions. As discussed in the response to Comment 2 above,

section 179 does not refer to the imposition of statewide sanctions

and, in fact, focuses on the imposition of sanctions in nonattainment

areas. In fact, the EPA believes the reference to statewide sanctions

under section 110(m) makes it clear that section 110(m) establishes a

different authority to sanction States and that statewide sanctions are

not required under section 179. Section 110(m) provides that statewide

sanctions shall not be applied within 24 months of the time a finding

is made if a political subdivision is principally responsible for the

deficiency; this provision means that statewide sanctions may be

imposed earlier than 24 months if no political subdivision is found

principally responsible. If section 179 required statewide sanctions

after 18 months, it would be contrary to the section 110(m) provision

that sanctions shall not apply within the 24 months following the

finding if a political subdivision is principally responsible for the

deficiency. Therefore, EPA believes that its ability to impose

statewide sanctions during the 24-month period following a finding is

based on a determination under section 110(m) that a political

subdivision is not principally responsible for the deficiency.

Section 110(m) does not vitiate section 179 because section 179

sanctions are not statewide but are imposed on the specific area for

which the deficiency arises, in most instances nonattainment areas. As

stated previously, section 179 mandates that sanctions be imposed 18

months after a finding is made. While the imposition of sanctions

earlier under section 110(m) could remove the need to impose sanctions

under section 179 sanctions in that area, section 179 has continued

force and effect in areas where section 110(m) sanctions are not

imposed. The EPA does not believe that imposition of sanctions under

section 110(m) conflicts with section 179 sanctions. Application of

sanctions earlier than 18 months is not inconsistent because EPA

believes the purpose of section 179 was to ensure that EPA did not

delay sanctions beyond the periods prescribed in that action.

4. Regulatory Limitation on Early Imposition of Sanctions

Comment. The United States Department of Transportation (U.S. DOT)

recommends adding a statement to the rule that EPA expects to impose

sanctions on a statewide basis earlier than 18 months only in limited

circumstances, after notice-and-comment rulemaking.

Response. This statement was not in the proposed rule and EPA

believes it should not be included in the final rule. The EPA stated in

the preamble to the proposed rule that it would only apply sanctions

early in ``unusual circumstances where the State has indicated explicit

resistance to working to resolve a plan deficiency'' (see 57 FR 44534).

The final rule revises this preamble language because EPA believes the

term ``unusual circumstances'' provides little guidance as to when EPA

intended to use its discretionary sanction authority.

While EPA does not intend to use the section 110(m) authority in

all situations where a finding is made, the Agency needs to ascertain

that it has the flexibility to use this option when necessary. In order

to develop some plans or plan items, States must perform certain steps

that EPA can track to determine whether the State will meet deadlines

in the Act. When a State believes that EPA can impose sanctions only

after a deadline is missed and 18 months have gone by, then there is

little incentive for the State to take the necessary actions to

complete authorization and implementation of politically-difficult

rules and regulations. The EPA needs to maintain its flexibility to

respond rapidly to situations where it appears a State will not meet a

deadline, and to assure the State that it does not, in fact, have an

extended grace period for noncompliance. The certainty and swiftness of

imposition of the Act's penalties are critical to timely completion of

the SIP's. Consequently, the revised language, clarifies EPA's position

concerning when discretionary sanctions may be appropriate while

retaining EPA's flexibility to use such sanctions to ensure compliance

with the Act. Thus, EPA will exercise section 110(m) sanctions earlier

than 18 months only in cases where:

1. The State has indicated an explicit resistance to resolving a

plan or program deficiency or to making a required plan or program

submittal; or

2. Where special circumstances, particular program needs, or time

constraints dictate the need for use of such sanctions.

Thus, the rule retains the Administrator's discretion to apply

sanctions at any time after a finding is made; however, EPA will

provide notice and opportunity for comment on the basis for all section

110(m) actions.

B. EPA Discretion to Determine the ``Reasonable and Appropriate'' Area

for Imposition of Sanctions

1. Comment. The City of Chicago believes the discretion in

Sec. 52.30(d)--that if the criteria are met EPA may impose sanctions on

a less than statewide basis to the area it determines is reasonable and

appropriate--was not Congress' intent in enacting section 110(m). The

City of Chicago believes EPA's only discretion is whether to apply

sanctions to political subdivisions that meet the criteria. Thus, the

City of Chicago believes EPA has no basis to apply sanctions when the

criteria are not met (i.e., to apply sanctions to political

subdivisions that were thought to be principally responsible, but did

not meet the criteria, and to any other surrounding political

subdivisions EPA determines is reasonable and appropriate) and that to

apply sanctions to these areas is arbitrary and capricious.

Response. Section 110(m) states that sanctions may be applied to

any portion of the State the Administrator determines reasonable and

appropriate, with one exception. If one or more political subdivisions

are principally responsible for the deficiency, sanctions may not be

applied statewide. Therefore, if the criteria are met, i.e., a

political subdivision is principally responsible, then EPA may not

impose sanctions on a statewide basis. However, if no political

subdivision is principally responsible, the text of section 110(m)

expressly authorizes EPA to move forward and impose sanctions on a

statewide basis. The EPA would make a determination, however,

concerning what area of the State for which sanctions would be

reasonable and appropriate. Furthermore, EPA is not required to

establish criteria to determine the area of the State for which it is

reasonable and appropriate to apply sanctions under section 110(m).

2. Comment. Four commenters, New York DOT, the Orange County

Transportation Authority (OCTA), the City of Chicago, and the U.S. DOT,

requested clarification of how EPA will determine the ``reasonable and

appropriate'' area to apply sanctions. The City of Chicago and the U.S.

DOT assert that the statute requires such clarification. The New York

DOT believes that the lack of adequate guidance on what area is

``reasonable and appropriate'' will create confusion and continual

uncertainty on the part of States as well as Federal agencies. The New

York DOT suggests that the prime consideration should be whether a good

faith effort has been made to bring the nonattainment area into

compliance. The New York DOT believes that if this issue is not

addressed in this rulemaking, it should be the subject of another

rulemaking.

The OCTA cites the example of California, which consists of several

regional authorities, which, in turn, each consist of several local

jurisdictions. The OCTA is concerned about how EPA would impose

sanctions in the case where a regional authority contains several local

jurisdictions and where a local authority failed to do everything

mandated by a regional plan. The commenter believes it would be more

reasonable and appropriate to apply sanctions to the single local

jurisdiction, not the regional authority. In addition to assuring that

the State does not suffer sanctions if one political subdivision is

principally responsible for the deficiency, the commenter suggests that

EPA assure that regions within a State would not be subject to

sanctions if one or more local jurisdictions is/are principally

responsible for the deficiency.

The U.S. DOT comments that in situations where a nonattainment area

contains multiple political subdivisions, none of which are principally

responsible according to the five criteria, the rule must clarify how

EPA will determine whether to apply sanctions to the specific

responsible political subdivision(s) rather than the entire

nonattainment area.

The City of Chicago and U.S. DOT assert that the statutory mandate

to promulgate criteria is not limited to the determination of principal

responsibility. These commenters argue that EPA must also develop

criteria to determine when the imposition of sanctions would be

reasonable and appropriate, and the criteria should be sufficient to

put potentially affected political subdivisions on notice of the

activities or agreements which may put them at risk of sanctions.

Response. Section 110(m) specifically provides that EPA may impose

sanctions on any part of the State that EPA deems is reasonable and

appropriate. Section 110(m) then requires that EPA ``* * * establish

criteria for exercising (this) authority * * * 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 such deficiency.'' The EPA believes

this language strictly limits the required development of criteria to

those necessary to determine if a political subdivision is principally

responsible for the deficiency. There is no requirement that the

criteria must guide EPA's further decision of which area is

``reasonable and appropriate'' for the imposition of sanctions. At this

time, EPA does not have experience with imposing these sanctions and,

therefore, does not want to constrain the Agency in the exercise of

this discretion. The variety of circumstances would make it difficult

to develop criteria that would be applicable in every instance. As to

the comments of the City of Chicago and the U.S. DOT that EPA needs to

establish criteria for when it will impose sanctions under section

110(m), EPA does not believe that such criteria are mandated. The

public will have an opportunity to comment on EPA's determination of

the area on which it will impose sanctions and the timing of sanctions

during each specific section 110(m) rulemaking action.

C. Selection and Design of Criteria

Under this category, the commenters focused their particular

concerns on the sanction criteria.

1. Comment. The OCTA suggests that the rule clarify that all five

criteria are to be met, not merely used, by EPA to determine if a

subdivision is principally responsible for the deficiency. The OCTA

suggests the following language: ``Criteria. The EPA will use the

following five criteria, all of which must be met, to determine whether

a political subdivision is principally responsible for the

deficiency.''

Response. The EPA agrees with this comment but determined that

language other than that suggested would be clearer. Therefore, EPA has

revised Sec. 52.30(d)(1) to read as follows: ``For the purposes of this

action, EPA will consider a political subdivision to be principally

responsible for the deficiency on which a section 179(a) finding is

based, if all five of the following criteria are met.''

2. Comment. The New York DOT comments that the necessity for all

five criteria to be met is overly strict and biased toward imposition

of sanctions statewide, and it may be difficult to establish that all

five have been met. Therefore, the New York DOT suggests that only a

majority (three out of five) be met.

Response. The EPA believes all five criteria are needed to

determine whether a political subdivision is principally responsible.

The EPA sees no compelling reason to weaken this requirement. In

addition, the failure to determine that one or more areas are

principally responsible does not presuppose the imposition of statewide

sanctions; the EPA must determine that the area sanctioned is the

reasonable and appropriate area.

3. Comment. The U.S. DOT requests clarification of what State

actions are necessary to provide adequate legal authority under the

proposed Criterion 1. Criterion 1 states that the State must provide

adequate legal authority to a political subdivision to perform the

required activity.

Response. The EPA does not believe that there is a single distinct

definition of the term ``legal authority.'' What constitutes adequate

legal authority may vary from State to State. This should be handled on

a case-by-case basis.

4. Comment. The New York DOT comments that under the proposed

Criterion 2 [Sec. 52.30(c)(2)], there must be a very clear agreement in

the SIP or some other document as to which functions are to be

performed by which agencies. For example, functions traditionally

performed by local agencies may not be performed that way under the

Intermodal Surface Transportation Efficiency Act (ISTEA).

Response. The EPA agrees with the commenter and encourages States

to develop clear agreements as to which functions are being performed

by which agencies. Note in particular that section 174 of the Act

requires States to jointly review and update, as necessary, their

planning procedures that were in effect before the Act was amended in

1990 or to develop new procedures as appropriate. In preparing such

procedures, State and local elected officials must determine which

elements of a revised SIP will be developed, adopted, and implemented

by the State, and which elements will be carried out by local or

regional entities. The EPA has provided guidance on this and other

section 174 requirements in a document entitled ``1992 Transportation

and Air Quality Planning Guidelines'' (July 1992, EPA 420/R-92-001).

The EPA will work with the State and the political subdivision to

ascertain if this criterion has been met. In addition, any comments

raised as to this issue during the rulemaking process on a specific

section 110(m) action will be properly considered by EPA.

5. Comment. Concerning Criterion 4 [Sec. 52.30(c)(4)], the U.S. DOT

also comments there should be a provision included to provide against

``State failure.'' If a local agency cancels an agreement to perform a

certain function, it might leave the State without the time or

resources to perform the function. Thus, the State, instead of the

local agency, would become principally responsible. The U.S. DOT

believes it would be inappropriate to apply statewide sanctions in such

a case.

Response. If the local agency cancels its agreement to perform a

function, EPA would take this into consideration when determining

whether the political subdivision is principally responsible in causing

the deficiency. Moreover, this factor may be considered in determining

the area to which it is reasonable and appropriate to apply sanctions.

The EPA can consider all factors in determining what area is reasonable

and appropriate.

6. Comment. The Massachusetts DOT believes the rule should contain

a specific provision for State consultation in determining principal

responsibility because many factors such as regional demographic

trends, changing local traffic patterns, and land-use decisions in

adjoining areas have a larger impact on emissions than institutional

arrangements for air quality planning. The proposed criteria may be the

best way to evaluate whether the State or the political subdivision is

solely responsible for the emissions requirements, but it may not be

relevant in targeting the actual source of the problem or in defining

solutions.

Response. To the extent it determines appropriate, EPA will consult

with the State when evaluating the criteria under section 110(m). In

any event, the State will have adequate opportunity to raise any such

concerns in the comment period following the notice of proposed

rulemaking for imposition of section 110(m) sanctions.

D. Other Relevant Comments

1. Comment. The State of Vermont comments that it is the only State

in attainment with the ozone national ambient air quality standards and

also located within the Northeast Ozone Transport Region. Vermont

requests clarification in the rule of whether attainment status or

inclusion in the ozone transport region (OTR) is the deciding factor

with respect to applicability of these rules.

Response. Neither attainment status nor inclusion in the OTR is the

deciding factor. Under section 110(m), EPA may impose sanctions on a

statewide basis or on any area of the State deemed reasonable and

appropriate based on the failure of the State or a political

subdivision of the State to meet a requirement of the Act with respect

to a plan or plan element. If a requirement is applicable to a

political subdivision of the State, EPA will determine whether that

political subdivision was principally responsible for the failure,

using the criteria established in this rulemaking. The EPA's ability to

use the section 110(m) sanctions is not limited to nonattainment areas

or areas that must meet the title I, part D nonattainment requirements.

2. Comment. The City of Chicago comments that the term ``required

activity'' contravenes the definition of required activity in section

179 and permits EPA to sanction entities without providing any prior

notice that EPA considers a particular action to be sanctionable. The

City of Chicago also comments that since section 110(m) incorporates

section 179(a), EPA is not permitted to create a second, conflicting

definition. Furthermore, the proposed definition does not identify

covered activities, and it does not give entities prior notice of

sanctionable activities. Finally, the City of Chicago is concerned

about the ambiguity of the definition and that it may mean EPA is

expanding the definition from section 179(a).

Response. Section 179(a) does not define required activity. Rather,

EPA believes this introductory phrase under section 179(a) refers to

submittals required under part D of the Act. The four general

categories of activities listed in section 179(a) are the four possible

types of State failure with respect to the required activities under

part D. The types of failure are not synonymous with required

activities under the introductory language of section 179(a). Finally,

the City of Chicago contends that the definition of ``required

activity'' is too open-ended because of the language ``may include, but

is not limited to.''

The EPA interprets the term ``required activity'' for purposes of

section 110(m) in a manner similar to that for section 179(a); however,

EPA recognizes that for section 110(m), ``required activity'' refers to

any plan or plan item requirement under the Act, not just those

required under part D. Finally, EPA agrees that the language ``may

include, but is not limited to'' may provide broader authority than

that granted under section 110(m). Therefore, EPA has changed the

definition in the final rule to provide: ``The term `required activity'

refers to the submission of a plan or plan item or the implementation

of a plan or plan item under the Clean Air Act.''

3. Comment. The OCTA and the U.S. DOT request clarification of the

term ``political subdivision.'' Both commenters appear concerned about

whether EPA in making a determination of ``principal responsibility''

may consider less than the entire nonattainment area. The OCTA notes

that California has several regional authorities that each are composed

of numerous local jurisdictions. These local jurisdictions often have

the responsibility for ``adopting and implementing air pollution

controls.''

Response. The definition of ``political subdivision'' set forth in

Sec. 52.30(a)(1) includes all types of governmental entities, including

local jurisdictions. The EPA could sanction less than an entire

nonattainment area based on a determination that a local jurisdiction

was principally responsible for the deficiency on which the sanction is

based.

4. Comment. The OCTA comments that the proposed rule should include

a definition of ``plan item.'' The OCTA notes that section 110(m) reads

in part ``* * * in relation to any plan or plan item (as that term is

defined by the Administrator). * * *'' The OCTA cites the example of

the California SIP, which is partially composed of regional plans. Some

regional plans require local jurisdictions to take certain actions,

which to the commenter appear to be plan items.

Response. As discussed earlier, to make this clearer, EPA replaces

the phrase ``adequate SIP or SIP element'' under Sec. 52.30(a)(2) with

the phrase ``plan or plan item.'' Although EPA interpreted the phrase

``adequate SIP or SIP element'' to essentially mean the same as the

phrase ``plan or plan item,'' this replacement is more consistent with

the language of section 110(m) which refers to ``plan or plan item.''

``Plan and plan item'' are also defined under Sec. 52.30(a)(4).

E. Comments on Policy Stated In Preamble to Proposed Rule

1. Choice of Sanctions

Comment. The Texas DOT, the Chemical Manufacturers Association

(CMA), and the Northwest Indiana Regional Planning Commission (NIRPC)

asked EPA to identify which sanction will be applied for various types

of SIP deficiencies. These commenters all state that the sanction

should be tied to the underlying deficiency. For example, the

commenters state that highway sanctions should only be applied when

there is a SIP deficiency relative to mobile sources and the offset

sanction where the deficiency is relative to stationary sources. The

CMA recommends adding extra language to the rule as follows: ``The EPA

will assess the nature of the deficiencies and take this into account

when determining which sanction to apply.''

The NIRPC further asserts that only those projects which have the

potential for increasing emissions should be targeted; withholding

highway funds which may correct a problem is inappropriate.

Response. The type of sanction to be applied and the selection

procedure are not part of this rulemaking. Sanction determinations will

be made on a case-by-case basis. The EPA will go through notice-and-

comment rulemaking on selection and imposition of sanctions under

section 110(m). The notice will propose for comment which sanctions or

sanction will be applied. In addition, the Act sets forth those

projects exempted from the highway funding restrictions. The EPA will

act consistently with the requirements of the Act in imposing the

highway funding restrictions.

2. Impact of Rule on Title 23 Funds

Comment. The American Public Transit Association is concerned about

how EPA's sanction determination process could affect the process and

procedures of transferring flexible funds (i.e., certain title 23

program funds) from highway to transit purposes. The Southeastern

Pennsylvania Transportation Authority requests clarification of how any

imposed restrictions on highway funds would affect funds previously

flexed to transit as provided for in the ISTEA.

Response. This rulemaking is not intended to address how the

highway sanctions will be implemented. The EPA is in the process of

developing procedures with the U.S. DOT to provide for the coordinated

implementation of the highway sanction. The EPA and the U.S. DOT will

develop procedures consistent with the specifications in section

179(b).

3. Authority to Sanction For Failure to Implement

Comment. The Massachusetts DOT comments that EPA's authority to

sanction a State if ``* * * a requirement of an approved plan is not

being implemented is too broad, given the large number of agencies,

regulatory authorities, and group interests which can prevent a planned

project from being implemented.'' Instead, a State's good faith effort

to implement an approved project should be identified as an exception

to this policy.

Response. The types of findings that may lead to the imposition of

sanctions are specified in the Act; they are not being developed by

this rulemaking. Therefore, once a finding of failure to implement a

plan has been made, section 179(a) requires that the 18-month mandatory

sanctions clock begins. Furthermore, any finding made under section

179(a) provides EPA with discretion to impose sanctions under section

110(m).

4. Clarification of Offset Sanction

Comment. The Massachusetts DOT requests clarification of the

requirement for a 2:1 emissions reduction from existing sources to

offset emissions from major new facilities. The Massachusetts DOT

believes it is not reasonable to require reductions from existing,

older or congested facilities before major new improvements are made.

Response. The procedure by which facilities offset emissions is not

the subject of this rulemaking. Those issues must be resolved in

regulations adopted by the State pursuant to the requirements of

section 173.

VI. Miscellaneous

A. Relationship to Permit Program

The Act includes specific sanctions provisions for permitting

requirements in section 502(d) and (i), 42 U.S.C., 7661a(d) and (i).

The section 110(m) sanctions procedure does not apply with respect to

findings regarding permit program failures.

B. 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, 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 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, OMB has notified

EPA that this action is a ``significant regulatory action'' within the

meaning of the Executive Order. For this reason, this action was

submitted to OMB for review. Changes made in response to OMB

suggestions or recommendations will be documented in the public record.

C. Regulatory Flexibility Act

Pursuant to the provisions of 5 U.S.C 605(b), the Administrator

hereby certifies that the attached rule will not have a significant

economic impact on a substantial number of small entities. Since the

rule requires EPA to consider criteria before applying sanctions on a

statewide basis, it potentially could result in a reduced burden on

small entities.

D. Paperwork Reduction Act

This proposed rule does not contain any information collection

requirements subject to review by OMB under the Paperwork Reduction Act

of 1980, 44 U.S.C. 3501, et seq.

List of Subjects in 40 CFR Part 52

Environmental protection, Air pollution control, Ozone, Carbon

monoxide, Nitrogen oxides, Sulfur dioxide, PM-10, Sanctions.

Dated: December 29, 1993.

Carol M. Browner,

Administrator.

40 CFR part 52 is amended as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATIONS PLANS

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

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

2. Part 52 is amended by adding a new Sec. 52.30 to subpart A to

read as follows:

Sec. 52.30 Criteria for limiting application of sanctions under

section 110(m) of the Clean Air Act on a statewide basis.

(a) Definitions. For the purpose of this section:

(1) The term ``political subdivision'' refers to the representative

body that is responsible for adopting and/or implementing air pollution

controls for one, or any combination of one or more of the following:

city, town, borough, county, parish, district, or any other

geographical subdivision created by, or pursuant to, Federal or State

law. This will include any agency designated under section 174, 42

U.S.C. 7504, by the State to carry out the air planning

responsibilities under part D.

(2) The term ``required activity'' means the submission of a plan

or plan item, or the implementation of a plan or plan item.

(3) The term ``deficiency'' means the failure to perform a required

activity as defined in paragraph (a)(2) of this section.

(4) For purposes of Sec. 52.30, the terms ``plan'' or ``plan item''

mean an implementation plan or portion of an implementation plan or

action needed to prepare such plan required by the Clean Air Act, as

amended in 1990, or in response to a SIP call issued pursuant to

section 110(k)(5) of the Act.

(b) Sanctions. During the 24 months after a finding, determination,

or disapproval under section 179(a) of the Clean Air Act is made, EPA

will not impose sanctions under section 110(m) of the Act on a

statewide basis if the Administrator finds that one or more political

subdivisions of the State are principally responsible for the

deficiency on which the finding, disapproval, or determination as

provided under section 179(a)(1) through (4) is based.

(c) Criteria. For the purposes of this provision, EPA will consider

a political subdivision to be principally responsible for the

deficiency on which a section 179(a) finding is based, if all five of

the following criteria are met.

(1) The State has provided adequate legal authority to a political

subdivision to perform the required activity.

(2) The required activity is one which has traditionally been

performed by the local political subdivision, or the responsibility for

performing the required activity has been delegated to the political

subdivision.

(3) The State has provided adequate funding or authority to obtain

funding (when funding is necessary to carry out the required activity)

to the political subdivision to perform the required activity.

(4) The political subdivision has agreed to perform (and has not

revoked that agreement), or is required by State law to accept

responsibility for performing, the required activity.

(5) The political subdivision has failed to perform the required

activity.

(d) Imposition of sanctions. (1) If all of the criteria in

paragraph (c) of this section have been met through the action or

inaction of one political subdivision, EPA will not impose sanctions on

a statewide basis.

(2) If not all of the criteria in paragraph (c) of this section

have been met through the action or inaction of one political

subdivision, EPA will determine the area for which it is reasonable and

appropriate to apply sanctions.

[FR Doc. 94-551 Filed 1-10-94; 8:45 am]

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