Final Rule on Ozone Transport Commission; Low Emission Vehicle Program for the Northeast Ozone Transport Region

SUMMARY: At the request of the Northeast Ozone Transport Commission

(OTC), EPA is announcing today its final determination that reduction

of new motor vehicle emissions throughout the Northeast Ozone Transport

Region (OTR) is necessary to mitigate the effects of air pollution

transport and to bring nonattainment areas in the OTR into attainment

(including maintenance) of the national ambient air quality standard

for tropospheric ozone (smog). This will assist OTR states in their

efforts to reduce ozone pollution to the level necessary to protect

public health. EPA today approves the recommendation of the OTC and

promulgates a rule under sections 184 and 110 of the Clean Air Act (the

Act) that requires emission reductions from new motor vehicles in the

OTR equivalent to the reductions that would be achieved by the OTC Low

Emission Vehicle (OTC LEV) program.

States would be relieved of their obligations under this

requirement if EPA were to find that all automakers had opted into an

acceptable LEV-equivalent new motor vehicle program. EPA believes that

such a program, which would be far better than OTC LEV, could be agreed

upon and adopted in the near future. States' obligations under this

requirement could also be met by a state's revision of its state

implementation plan to include the OTC LEV program. Today's action

gives states additional flexibility by also allowing a state the option

of adopting a set of measures that would achieve certain emission

reductions needed to prevent the state's adverse pollutant transport

impacts.

EPA is also promulgating a final rule today determining ``model

year'' for purposes of section 177 and part A of title II of the Act,

as that term is applied to on-highway motor vehicles.

DATES: The regulations to be codified in 40 CFR parts 51 and 52 are

effective February 15, 1995. The regulations to be codified in 40 CFR

part 85 are effective February 23, 1995.

ADDRESSES: Materials relevant to this final rule are contained in EPA

Air Docket No. A-94-11, located at the Air Docket (LE-131) of the EPA,

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

7548. Interested parties may inspect the docket between the hours of 8

a.m. to 5:30 p.m., Monday through Friday except on federal holidays.

FOR FURTHER INFORMATION CONTACT: Mike Shields, Office of Mobile

Sources, US EPA, 401 M Street, SW., Washington, DC 20460, tel. (202)

260-7757.

SUPPLEMENTARY INFORMATION:

I. Outline and Introduction

This final rule preamble is organized into the following sections:

I. Outline and Introduction

A. Introduction

B. LEV-Equivalent Program

1. Cleaner Conventional Cars and Light-Duty Trucks

2. Advanced Technology Vehicles

3. Enforcement of a LEV-Equivalent Program

4. Criteria for an Acceptable LEV-Equivalent Program

5. State Obligations if an Acceptable LEV-Equivalent Program is

in Effect

C. Procedural Background

II. Description of Action

III. Statutory Framework for the SIP Call

A. Section 184

B. Section 110

C. Consistency of EPA Action with Sections 177, 202 and 209 of

the Act

IV. Basis for Requiring OTC LEV or a LEV-Equivalent Program

A. Necessity

1. Legal Interpretation of Necessity

2. Emission Reductions from OTC LEV or a LEV-Equivalent Program

are Needed

a. Magnitude of Reductions Needed for Attainment in 2005

b. Contribution Analysis

c. Analysis of Inventory and Options for Control Measures

i. Inventory Analysis

ii. Analysis of Options for Control Measures Without More

Stringent New Motor Vehicle Standards

iii. Determination Whether Reductions from OTC LEV or LEV-

Equivalent Program Are Necessary

iv. ZEV Equivalency

d. The Effect of a Possible LEV-Equivalent Program on the Need

for OTC LEV.

e. Particular Circumstances of OTC LEV Program

f. Conclusions Regarding Need for OTC LEV or a LEV-Equivalent

Program for Purposes of Bringing Downwind States into Attainment by

the Dates Provided in Subpart 2 of Part D of Title I

3. OTC LEV or LEV-Equivalent Program is Also Needed for

Maintenance

a. Legal Analysis

b. Technical Analysis

4. Relevance of EPA Transport Policy

B. Consistency of OTC LEV with Section 177 of the Clean Air Act

1. Introduction

2. California Fuel Regulations

3. ZEV Production Mandate

4. Incorporation of Minor Provisions of the California LEV

Program

5. NMOG Fleet Average

6. Averaging, Trading, and Banking

7. Applicability of Section 177 in States Without Plan

Provisions Approved Under Part D of Title I

V. Action on OTC Petition, Issuance of Findings of SIP Inadequacy,

and Requirements for SIP Revisions

A. Action on OTC Petition and Explanation of SIP Call

B. State Requirements Under EPA SIP Call

C. Sanctions

VI. Determination of Model Year

VII. Effective Date

VIII. Statutory Authority

IX. Administrative Designation and Regulatory Analysis

X. Impact on Small Entities

XI. Paperwork Reduction Act

A. Introduction

In today's action, EPA takes a significant step towards the goal of

reducing smog in the heavily populated northeast region of the country.

The northeast has some of the most severe smog pollution in the

country--pollution reaches levels much higher than are healthy. Ground-

level ozone, the main harmful ingredient in smog, is produced by the

combination of volatile organic compounds (VOCs) and nitrogen oxides

(NOX).1 The chemical reactions that create smog take place

while the pollutants are being blown through the air by the wind, which

means that smog can be more severe miles away from the source of

pollution than it is at the source.

\1\In the upper atmosphere, or stratosphere, ozone occurs

naturally and forms a protective layer, which shields us from the

sun's harmful ultraviolet rays. However, in the lower atmosphere, or

at ``ground level,'' man-made ozone can cause a variety of problems

to human health, crops and trees.

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

Ground-level ozone causes health problems because it damages lung

tissue, reduces lung function, and sensitizes the lungs to other

irritants. Scientific evidence indicates that ambient levels of ozone

not only affect people with impaired respiratory systems, such as

asthmatics, but healthy adults and children as well. Exposure to ozone

for six to seven hours at relatively low concentrations has been found

to reduce lung function significantly in normal, healthy people during

periods of moderate exercise. This decrease in lung function is often

accompanied by such symptoms as chest pain, coughing, nausea, and

pulmonary congestion.

Though these effects are not as well established in humans, animal

studies [[Page 4713]] have demonstrated that repeated exposure to ozone

for many months can produce permanent structural damage in the lungs

and accelerate the rate of lung function loss, as well as the lung

aging period. Each year ground-level ozone is also responsible for

several billion dollars worth of agricultural crop yield loss. It also

causes noticeable foliar damage in many crops and species of trees.

Studies also indicate that current ambient levels of ozone are

responsible for damage to forests and ecosystems.

As part of efforts to reduce harmful levels of smog, today's action

approves the recommendation of an organization of northeastern states

that EPA require all the northeastern states to adopt the California

car program to reduce significantly the pollution emitted by new cars

and light-duty trucks. This requirement could be met either by state

adoption of the California car program or by having a nationwide

alternative car program in effect that would achieve emissions

reductions at least equivalent to what the California car program would

achieve. Motor vehicles are a significant cause of smog because of

their emission of VOCs and NOX. EPA has projected that, without

the California car (or an equivalent) program in the northeastern

states, highway vehicles will account for approximately 38% of NOX

and 22% of VOC anthropogenic (man-made) emissions in 2005. EPA

currently estimates that VOC emissions should be reduced by

approximately 95 tons per day and NOX emissions by approximately

195 tons per day as a result of today's action.2

\2\These emissions estimates are based on the most accurate data

currently available. The Agency continues to analyze emissions data

and modeling assumptions.

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

Since smog travels across county and state lines, it is essential

for state governments and air pollution control agencies to cooperate

to solve the problem. This is particularly true in the densely-

populated northeast--for example, the smog that causes health problems

in New York City is the result, in part, of cars driven in

Pennsylvania, Maryland and elsewhere in the northeast. Through the

Ozone Transport Commission (OTC), the northeastern states have made

major strides in developing region-wide strategies for achieving

healthy air quality. Today's action, a further step in implementing the

OTC's region-wide approach, is necessary for the region to attain and

maintain healthy air quality.

Although EPA believes that the northeastern states cannot achieve

healthy air quality unless their neighbors within the northeast adopt

the California car program or a nationwide program is in effect,

today's action gives the states much flexibility in filling this need.

Today's action sets broad requirements that states must meet, but

otherwise gives states as much flexibility as the Clean Air Act allows

in structuring and implementing their motor vehicle programs. EPA will

continue to work with the states to help develop and establish

California car programs that work well regionally. Furthermore, EPA

continues to support the efforts of parties who are working on a

possible new nationwide approach to decreasing emissions from motor

vehicles and believes such a nationwide program could be superior to

region-wide adoption of the California car program. Such a nationwide

program could relieve states of having to respond to today's SIP call.

Finally, if an individual state achieves sufficient emission reductions

from programs other than a new motor vehicle program (and other than

the broadly practicable measures discussed later in this notice), that

state will be allowed to do so instead of adopting the California car

program.

B. LEV-Equivalent Program

Concurrently with processing the OTC recommendation, EPA has

explored the possibility of a LEV-equivalent program.3 As

explained below, EPA believes the OTC LEV program will provide

significant benefits and is necessary to help the northeast achieve air

quality goals. Nonetheless, as EPA stated in the SNPRM and at numerous

public meetings, EPA believes that a LEV-equivalent program could

provide far greater environmental and public health benefits to the OTR

and the nation, and do so more efficiently than would the OTC LEV

program. Under the Clean Air Act, however, such a program can only be

achieved by agreement of the relevant parties--it cannot be imposed

unilaterally by EPA or the states. In an effort to develop a LEV-

equivalent program, EPA and the parties have been involved in intensive

and open discussions, particularly under the Clean Air Act Advisory

Committee's Subcommittee on Mobile Source Emissions and Air Quality in

the Northeast States that EPA established in August 1994.

\3\In this notice, a ``LEV-equivalent program'' is an

alternative voluntary nationwide program that would achieve emission

reductions from new motor vehicles in the OTR equivalent to or

greater than would be achieved by the OTC LEV program and that would

advance motor vehicle emission control technology. This definition

is based on comments EPA received and discussions at meetings of the

Clean Air Act Advisory Committee's Subcommittee on Mobile Source

Emissions and Air Quality in the Northeast States that indicated

that the alternative voluntary federal program that the interested

parties are discussing would have an advanced technology component.

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

EPA believes that a LEV-equivalent program would have significant

advantages when compared to OTC LEV. First, a LEV-equivalent program

would achieve the same or greater emission reductions for the OTR. Two

factors are primarily responsible for the emissions equivalence. The

LEV-equivalent program would provide for earlier introduction of

Transitional Low Emission Vehicles (``TLEVs'') in the OTR than would be

required under the OTC LEV petition. Also, 2001 and later model year

vehicles that are originally purchased outside the OTR and then move

into the OTR will be approximately 70% cleaner for in-use VOC and

NOX emissions than the incoming vehicles (i.e., Tier I vehicles)

under the OTC LEV program. Second, the LEV-equivalent program would

provide significant environmental and public health benefits for the

rest of the country. Third, by requiring vehicles to meet the same

tailpipe standard in both California and the rest of the country, and

by harmonizing the other California and federal emission standards, the

program could streamline the process for certifying a vehicle for sale,

reduce auto manufacturers' testing and design costs, and provide other

efficiencies in the marketing of automobiles. Fourth, the parties could

use their resources to make the program succeed rather than continuing

the resource-intensive battle that has been waged over the past few

years between the states and the auto industry over the OTC LEV

program.

EPA urges the parties to continue their efforts to reach an agreed-

upon program. The effective date of today's SIP call is February 15,

1995. By giving states a full year to submit their SIP revisions after

the effective date, this action allows the parties, particularly the

states, to focus on the voluntary agreement for the next 45 days

without simultaneously starting whatever legislative and regulatory

action is necessary to adopt OTC LEV in case a LEV-equivalent program

does not materialize. When states do begin legislative efforts, EPA

urges them to structure their authority so that an approved alternative

program can be adopted and implemented nationwide.

The alternative program under discussion contemplates using federal

rulemaking to establish the program. In light of the significant

progress that has already been made in developing an

[[Page 4714]] alternative program, EPA believes it is appropriate to

initiate an expedited rulemaking process on the conventional car

portion of a LEV-equivalent program, as described below. Although EPA

cannot act unilaterally to impose a LEV-equivalent program, EPA

believes that, in light of the parties' continuing efforts to reach

agreement, it is time to start to develop the regulatory structure that

the parties have discussed to implement an agreement. EPA intends to

propose and take comment on the voluntary new motor vehicle emission

program described below. EPA also intends to propose that the entire

alternative program is environmentally superior to OTC LEV because the

alternative is at least environmentally equivalent to OTC LEV in the

OTR and it has additional environmental benefits for the rest of the

nation.

Before issuing such a proposal, EPA will seek the advice and

recommendations of the Clean Air Act Advisory Committee and

Subcommittee that have been addressing these issues. Although many of

these issues, particularly those that would be raised by the

conventional car portion of the program, have already been discussed in

numerous Federal Register notices and public meetings, EPA believes it

is important to allow people and states who have not participated in

this process to date an opportunity to be heard on the specific

provisions of a potential new, nationwide motor vehicle emission

program.

The LEV-equivalent program under discussion has two major

components--a cleaner car to be sold nationwide and advanced motor

vehicle pollution control technology. In the following subsections, EPA

describes the nationwide cleaner car, the advanced technology program

currently under discussion, the possible methods for enforcing a LEV-

equivalent program, the criteria for finding that such a program would

be an acceptable alternative for OTC LEV, and how an acceptable LEV-

equivalent program would affect a state's obligations under today's

action.

1. Cleaner Conventional Cars and Light-Duty Trucks

The first component of a LEV-equivalent program would be

requirements for cleaner conventional cars and light-duty trucks that

ultimately would result in nationwide sales of cleaner new motor

vehicles. Starting with the 2001 model year, all new cars and light-

duty trucks sold outside California would meet the California Low

Emission Vehicle (LEV) standard. These vehicles would have up to 66%

lower in-use VOC and 73% lower in-use NOX tailpipe emissions than

vehicles meeting the federal Tier I Standards. Prior to the nationwide

introduction of this vehicle, auto manufacturers would phase in cleaner

cars and light-duty trucks in the OTR according to a schedule that

would accomplish emission reductions in the OTR equivalent to the

following schedule:

40% TLEVS4 for model years 1997-2000

\4\ TLEV stands for transitional low emissions vehicle, which is

cleaner than cars required by federal law.

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

30% LEVs for model year 1999

60% LEVs for model year 2000

100% LEVs for model years 2001 and later

EPA cannot promulgate regulations requiring manufacturers to meet these

standards prior to model year 2004 (see section 202(b)(1)(C) of the

Act). Nonetheless, EPA can establish a voluntary program that would not

apply to manufacturers until they opted into the program; then, once an

auto manufacturer opted in, the voluntary standards would be

implemented in a way that would be indistinguishable from mandatory

standards.

In establishing such a program, several issues need to be addressed

other than the tailpipe standards and phase-in schedule. EPA will seek

comment on how to establish a banking and trading program, what

exemptions should apply to small volume manufacturers, the extent to

which federal standards (other than tailpipe standards) can be

harmonized with California standards to reduce testing and design

costs, how to incorporate California's on-board diagnostics system

requirements, what process and timing are appropriate for allowing auto

manufacturers to opt in, and other issues that would arise under the

voluntary program.

2. Advanced Technology Vehicles

In the second component, auto manufacturers, utilities, and state

and federal governments would commit to work together to further the

development of advanced technology to control motor vehicle emissions.

Representatives of the states and auto companies have been meeting

independently and as a working group of a Subcommittee of the Clean Air

Act Advisory Committee to develop an advanced technology component of a

LEV-equivalent program. At this point in the discussions, they do not

anticipate that EPA would take regulatory action to adopt the advanced

technology component. Attachment A to this preamble is a current draft

discussion paper of their ideas on the Advanced Technology Vehicle

(ATV) component of a LEV-equivalent program. The parties have not yet

reached agreement on this component.

3. Enforcement of a LEV-Equivalent Program

Given constraints imposed by Congress in the Clean Air Act, a LEV-

equivalent program cannot be instituted without the consent of the auto

manufacturers and the OTC states. The auto manufacturers must agree to

any tailpipe regulations other than the current federal program or the

California program. EPA is precluded by section 202(b)(1)(C) from

modifying the mandatory tailpipe standards prior to model year 2004.

States are precluded by sections 177 and 209 from adopting any program

other than the California program. Thus, the only route left to a LEV-

equivalent program is one in which the auto manufacturers voluntarily

agree to additional regulation. The auto manufacturers have said that,

in principle, they could agree to a voluntary program if it avoided the

need to comply with OTC LEV in the OTC states. The OTC states,

therefore, would have to agree not to require compliance with OTC LEV

if the auto manufacturers were complying with a voluntary federal

program.

EPA has suggested that a combination of EPA regulations, consent

decree(s), and a memorandum of understanding could be used in

combination to create an enforceable LEV-equivalent program. EPA

anticipates that a memorandum of understanding may be necessary or

appropriate to outline the general structure and some specifics of the

LEV-equivalent program. EPA intends to propose that the cleaner

conventional car component would be embodied in EPA regulations that

would be issued after an expedited notice-and-comment rulemaking was

completed. EPA suggests that the regulations be supplemented by a

consent decree addressing obligations not in the regulations and

providing additional assurance that the regulatory obligations will

remain in effect. The states and automakers have discussed embodying

the advanced technology vehicle component in a memorandum of

understanding and a consent decree.

EPA intends to propose that it has statutory authority to

promulgate the voluntary standards under sections 202(a) and 301(a) of

the Clean Air Act. Section 202(a)(1) directs the Administrator to

prescribe standards for control of air pollutant emissions from motor

vehicles. EPA's prescription of [[Page 4715]] voluntary, as well as

mandatory standards, is consistent with this authority under section

202(a)(1). Section 202(b)(1)(C) prohibits the Administrator from

changing the emission standards (Tier I standards) established in

section 202(g), (h) and (i) prior to model year 2004. However, this

prohibition against EPA setting new mandatory standards does not negate

EPA's authority to establish emission standards with which

manufacturers may voluntarily comply. In addition, section 301(a)

authorizes the Administrator to promulgate regulations necessary to

carry out her functions under the Act. The voluntary standards

discussed above would fall within the Administrator's duty to implement

the broad air pollution reduction purposes of the Act, and specifically

to control air pollution from motor vehicles.

4. Criteria for an Acceptable LEV-Equivalent Program

EPA is not determining in today's action what criteria an

alternative program would need to meet for EPA to find that the program

is an acceptable alternative to the OTC LEV program. EPA would

determine the necessary criteria for equivalence as a part of any

rulemaking that established or reviewed such an alternative program.

However, EPA believes that one criterion that a LEV-equivalent program

must meet is that it must have VOC and NOX emissions reductions in

the OTR equivalent to those that would be achieved by the OTC LEV

program.5 Based on EPA's current analysis, a version of which was

in a notice of data availability published on October 24, 1994 (59 FR

53395), EPA intends to propose that the alternative program described

above meets this equivalence requirement.

\5\The vehicle types subject to a LEV-equivalent program would

need to be the same vehicle types (or a subset thereof) that would

be subject to OTC LEV. Thus, emission reductions from heavy-duty

trucks could not be used to assess the equivalence of a LEV-

equivalent program.

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

In addition, an acceptable alternative program must be enforceable.

A finding of enforceability would have to include a showing that the

program, once in effect, would remain in effect. Therefore, today's

action regarding the LEV-equivalent program is based on the assumption

that automobile manufacturers would not be allowed to use ``off-

ramps''6 to exit from the program. The OTC has also stated that

the advancement of motor vehicle emission control technology is one of

the criteria an alternative program must meet.

\6\ An ``off-ramp'' is a provision allowing manufacturers to opt

out of an alternative program if a certain trigger-event occurs, for

example, if a state implemented a LEV program.

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

5. State Obligations if an Acceptable LEV-Equivalent Program is in

Effect

Today's action recognizes that, if an acceptable LEV-equivalent

program were in effect, then states would not be required to adopt OTC

LEV regulations and submit them as a SIP revision. Under today's rule,

if EPA were to determine later through rulemaking that a LEV-equivalent

program was acceptable and were to find that it was in effect, states

would not be obligated to adopt the OTC LEV program as long as the LEV-

equivalent program stayed in effect. For example, if all the automakers

opted into a LEV-equivalent program that did not allow them to opt out,

states would not have to undertake the legislative and regulatory

process necessary for adoption of the OTC LEV program. If something

happened to disrupt or void the LEV-equivalent program, states would

then be required to adopt OTC LEV because today's action would still

make states responsible for ensuring that there were provisions for

emission reductions from new motor vehicles.

In the SNPRM, EPA had raised the issue of whether states would need

to adopt OTC LEV regulations if a LEV-equivalent program were in

effect. Under one approach, states would adopt an OTC LEV program that

allowed auto manufacturers the option of complying with a LEV-

equivalent program instead of the OTC LEV standards; thus, OTC LEV

would be in place as a ``back stop'' in case something happened to the

LEV-equivalent program. For example, if a LEV-equivalent program

allowed manufacturers to opt out if a state adopted the California LEV

program, then the other states could not be assured that they would

achieve the necessary reductions from a LEV-equivalent program.

Therefore, states would need to have OTC LEV in place so that it would

replace the LEV-equivalent program if that program were no longer in

effect. EPA believes that, under certain circumstances, the ``back

stop'' approach wastes state resources by requiring a rulemaking

process for a program that should never be used. Thus, under today's

rule, states could be relieved of the obligation to adopt OTC LEV if

EPA determined in a later rulemaking that a LEV-equivalent program was

an acceptable alternative to OTC LEV and found that the program was in

effect.

C. Procedural Background

The OTC submitted a recommendation to EPA on February 10, 1994,

that EPA require all states in the OTR to adopt an OTC LEV program. EPA

extensively reviewed the background for this rulemaking in its

September 22, 1994, supplemental notice of proposed rulemaking (SNPRM).

See 59 FR at 48664-48667. This review included a description of the

statutory scheme in which the rulemaking arises, a description of the

ozone transport region provisions of the Clean Air Act, background

regarding the OTC's development of the OTC LEV program, and a summary

of EPA's actions in response to the OTC's recommendation. This

background is not repeated in its entirety here, and the reader is

referred to the SNPRM for further detail.

EPA has moved quickly to resolve the very complicated issues that

the OTC's recommendation raises and has provided maximum opportunity

for public participation. After receiving the OTC's recommendation on

February 10, 1994, the Agency quickly published a notice announcing

receipt of the OTC's recommendation, identifying its major elements,

and briefly presenting EPA's framework for a process to respond and an

approach for analyzing the issues. See 59 FR at 12914 (March 18, 1994).

As announced on April 8, 1994, EPA held two days of public hearings on

May 2-3, 1994, in Hartford, Connecticut. See 59 FR at 16811.

Before the public hearing and pursuant to section 307(d) of the

Clean Air Act, EPA published a notice of proposed rulemaking (NPRM)

that contained extensive information about EPA's approach to addressing

the recommendation. See 59 FR 21720 (April 26, 1994). This notice

detailed EPA's analytic framework for a decision and identified the

central issues EPA was considering. EPA explained in the NPRM that the

rulemaking procedures of section 307(d) would apply to any approval or

partial approval of the recommendation, since those procedures are an

excellent vehicle for ensuring an open, public process. See 59 FR at

21724. In the NPRM, EPA proposed in the alternative to approve,

disapprove, or partially approve and partially disapprove the OTC

recommendation.

After publication of EPA's proposal and the two days of initial

public hearings, EPA held an additional series of three public

``roundtable'' meetings in Pennsylvania, New Hampshire, and New York.

EPA held these meetings to provide specific analysis of the issues

through interactive discussion among the various interested parties and

members of the public. See 59 FR 28520 (June 2, 1994). At the end of

these [[Page 4716]] meetings, EPA extended the public comme organized

public discussion of issues raised and resolved in this rulemaking. In

addition to sharing their views in many public hearings and meetings,

interested parties provided voluminous written comments on EPA's April

26 and September 22 proposals. These comments and other documents

relevant to the development of this final rule are contained in the

public docket for this rulemaking. The Agency has fully considered all

of this information in developing today's final rule. EPA's responses

to significant comments are contained in detailed response-to- comments

documents that are contained in the public docket. Interested parties

should consult those documents for EPA's response to the comments it

received.

EPA has structured this final rule to follow the analytic framework

that the Agency used in the NPRM and SNPRM. As explained above, rather

than repeating the entire discussion in the SNPRM, EPA is adopting much

of the rationale provided in the SNPRM as the statement of basis and

purpose supporting today's final action. For this reason, this final

rule notice summarizes and references much of the discussion in the

SNPRM, and elaborates where needed to clarify or modify EPA's proposed

rationale in light of the comments EPA received or to address issues

left unresolved in the SNPRM. Although this notice and the SNPRM

contain EPA's responses to some comments, the response-to-comments

documents provide detailed responses to all other relevant, significant

comments received. In addition to relying on this notice and the

response-to-comments documents as the statement of basis and purpose

for today's action, EPA is also relying for its statement of basis and

purpose on the detailed explanations in the SNPRM, except where

indicated otherwise in this final rule notice or the response-to-

comments documents, or where statements in the SNPRM are inconsistent

with statements in the final rule notice or response-to-comments

documents.

II. Description of Action

EPA today is making the factual finding that emissions reductions

from new motor vehicles equivalent to the reductions that would be

achieved by the OTC LEV program are needed throughout the OTR to bring

certain OTR nonattainment areas into attainment (including maintenance)

by their applicable attainment dates. Based on that finding, EPA today

is issuing to each of the states in the OTR a finding that its SIP is

substantially inadequate to meet certain requirements insofar as the

SIP would not currently achieve those emission reductions. There are

two possible ways to achieve these emission reductions and thereby cure

this SIP inadequacy--state adoption of the OTC LEV program or

establishment of an acceptable LEV-equivalent federal motor vehicle

program. By virtue of today's findings of SIP inadequacy, unless an

acceptable LEV-equivalent program is in effect, EPA is today finding

the OTC LEV program necessary to achieve timely attainment (including

maintenance) in certain nonattainment areas and therefore is requiring

each OTC state to cure the inadequacy within one year by adoption of

the OTC LEV program and submission of it as a SIP revision. However, if

EPA issues a rule determining that a LEV-equivalent new motor vehicle

program is acceptable and issues a finding that all the automakers have

opted into that program nationwide, then the states would be relieved

of their obligation to adopt OTC LEV.

As an alternative to achieving emission reductions from new motor

vehicles, states could submit adopted measures sufficient to fill the

gap in emission reductions that EPA identifies in today's rule as

required to prevent adverse transport impacts on downwind attainment.

By filling the gap in emission reductions between the measures EPA has

identified in this notice as potentially broadly practicable measures

and the amount necessary to prevent adverse transport impacts downwind,

the state would demonstrate that it was unnecessary to adopt new motor

vehicle controls for transport reasons.

EPA is approving the OTC's LEV recommendation based on the

determination under sections 184(c) and 110(a)(2)(D) of the Act that

the recommended LEV program is necessary throughout the OTR to bring

certain OTR nonattainment areas into attainment by the applicable

attainment dates, unless an acceptable LEV-equivalent program is in

effect, and that the recommended LEV program is otherwise consistent

with the Act. Approval of the OTC recommendation requires EPA to issue

the finding of SIP inadequacy described above and to require states to

respond within one year with SIP revisions requiring the OTC LEV

program, unless an acceptable LEV-equivalent program is in effect.

Independent of section 184, but based on the same factual finding of

necessity, EPA also is requiring the actions described above under its

SIP call authority in section 110(k)(5)\7\ on the basis that the SIP

for each state in the OTR is substantially inadequate to meet the

requirements relating to pollution transport in section 110(a)(2)(D)

and to mitigate adequately the interstate pollutant transport described

in section 184.\8\

\7\Section 110(k)(5) authorizes the Administrator to require the

state to revise the SIP as necessary to correct the deficiency

whenever she finds that a SIP for an area is substantially

inadequate to mitigate adequately the interstate pollutant transport

described in sections 176A or 184 or to otherwise comply with any

requirement of the Act.

\8\Section 110(a)(2)(D) requires that SIPs contain adequate

provisions to prevent emissions within the state that contribute

significantly to nonattainment in, or interfere with maintenance by,

any other state.

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

EPA's SIP call does not require states in the OTR to adopt

California's Zero Emission Vehicle (ZEV) production mandate, but leaves

this choice to each state's discretion. EPA has determined that section

177 of the Act allows states to adopt the California LEV program

without adopting the ZEV mandate.

Finally, EPA is issuing regulations defining the term ``model

year'' for purposes of section 177 and part A of title II of the Act,

as that term applies to on-highway motor vehicles. The regulations

provide that model year will apply on an engine family-by-engine family

basis. This regulatory action codifies long-standing EPA guidance on

this definition and should clarify the applicability of the two-year

lead-time requirement in section 177.

III. Statutory Framework for the SIP Call

As mentioned above, authority for today's SIP call is premised both

on EPA's approval of the OTC recommendation under section 184(c) and on

EPA's independent authority under sections 110(a)(2)(D) and 110(k)(5),

which would support such an action even in the absence of an OTC

recommendation.9 For reasons described in the response-to-comments

[[Page 4717]] documents, EPA disagrees with comments claiming that EPA

lacks such authority because the section 184 process is invalid under

the United States Constitution, because section 110 does not authorize

EPA to require states to adopt specific measures, or because an EPA SIP

call requiring state regulation of emissions from new motor vehicles

violates sections 177, 202, and 209 of the Act.

\9\ In addition, EPA believes it has authority to approve the

OTC's recommendations under section 176A, the general transport

commission provision of the CAA. For the reasons described in the

response-to-comments documents accompanying this final action, which

include the fact that the OTC refers to section 176A in its own by-

laws, EPA believes that the Northeast OTC is a section 176A

transport commission as well as a section 184 transport commission.

As a consequence, EPA believes that, notwithstanding the fact that

the OTC's recommendations themselves do not explicitly refer to

section 176A, it may treat the OTC's recommendations as section 176A

requests with recommendations, as well as section 184

recommendations, and act on them accordingly. References in this

notice to EPA's analysis of and conclusions on the OTC petition

under section 184 are intended to reflect also EPA's analysis of and

conclusions on the petition treated as a request with

recommendations under section 176A.

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

A. Section 184

EPA described the provisions of section 184 in detail in both the

NPRM and SNPRM. See 59 FR at 21722-21724 and 59 FR at 48668. Section

184(c) explicitly provides that the Administrator is to review the

OTC's recommendations to determine whether the control measures in the

recommendations are necessary and otherwise consistent with the Act,

and is to approve, disapprove, or partially disapprove and partially

approve such recommendations. Upon approval, the Administrator is to

issue to affected states a finding under section 110(k)(5) that the SIP

for such state is inadequate to meet the requirements of section

110(a)(2)(D), and that each such state is required to revise its SIP to

include the approved measures within one year after the finding is

issued.

In the SNPRM, EPA addressed comments from both the auto

manufacturers and the Natural Resources Defense Council (NRDC)

regarding the validity of the section 184 scheme under the United

States Constitution. Various other commenters also submitted comments

on the constitutional questions. EPA has fully considered the comments

and believes that section 184 is consistent with the Constitution, as

discussed in the response-to-comments documents.

B. Section 110

EPA is interpreting section 110 of the Act to provide that it

grants the Agency independent authority to issue today's SIP call,

apart from any authority provided by section 184, for the reasons given

below and in the SNPRM, 59 FR at 48667-48670 (col. 1), and further

explained in detail in the response-to-comments document accompanying

this final action. Section 110(a)(2)(D) requires that SIPs include

adequate provisions prohibiting sources in the state from contributing

significantly to nonattainment or interfering with maintenance in any

other state. If EPA finds that a SIP is ``substantially inadequate to *

* * mitigate adequately interstate pollutant transport * * * or to

otherwise comply with any requirement of this Act,'' including section

110(a)(2)(D), section 110(k)(5) requires EPA to issue a SIP call

requiring the state to adopt the SIP revisions necessary to correct the

inadequacy.

As proposed in the SNPRM, EPA concludes that sections 110(a)(2)(D)

and (k)(5) authorize it to find at any time that a SIP is inadequate

due to pollution transport. EPA believes that emissions reductions from

new motor vehicles equivalent to those achieved by the OTC LEV program

are necessary throughout the OTR to bring all of the OTR states into

attainment (including maintenance) of the ozone NAAQS by their

respective attainment dates; that, unless an acceptable LEV-equivalent

program is in effect, OTC LEV is necessary because it is the only

currently available method of achieving these reductions; that the

states' SIPs are inadequate to the extent they do not provide for the

emissions reductions from new motor vehicles equivalent to those

achieved by the OTC LEV program; and that, unless EPA issues a finding

that all automakers have opted into a LEV-equivalent program that EPA

has determined by rule to be acceptable, the states must adopt the OTC

LEV program to correct the deficiency within one year of the effective

date of the finding of inadequacy, and that waiting to make this

finding may compromise the states' ability to achieve the reductions by

the time they are needed for timely attainment and maintenance

thereafter. As discussed in the SNPRM, EPA concludes that, as it has

done in the past, it may require submission of specific SIP measures

pursuant to section 110(k)(5). Finally, as discussed in the SNPRM, EPA

believes that it should find the states' SIPs inadequate only insofar

as they do not contain the emissions reductions from new motor vehicles

equivalent to those achieved by OTC LEV program because those

reductions depend on vehicle fleet turnover, which will take an

unusually long time to generate the needed emissions reductions.

EPA is basing today's final action in part on this independent

authority under section 110, and it believes certain aspects of its

explanation in the SNPRM merit elaboration. First, where EPA has found

a measure to be necessary to prevent states from contributing

significantly to other states' nonattainment, EPA concludes that

section 110(k)(5) authorizes the Agency to find SIPs inadequate to the

extent that they do not contain that measure. In this case, however,

both EPA's SIP call under section 110(k)(5) and its necessity finding

under section 184 are qualified by the assumptions EPA made in

conducting the necessity analysis. Because EPA assumed for purposes of

its analysis that certain measures were not potentially practicable for

all areas in the transport region and thus excluded such measures from

consideration, the states' obligation under the SIP call could be met

(1) by obtaining the necessary reductions from new motor vehicles

through adoption of OTC LEV or through an alternative new motor vehicle

program that achieved equivalent emissions reductions, or (2) by

adopting alternative measures that will provide sufficient emission

reductions to fill the gap in emission reductions needed to prevent

significant transport impacts on downwind attainment, which would

demonstrate that OTC LEV is not in fact necessary in that state.

Second, EPA continues to support the conclusions described in the

SNPRM regarding the scope of this SIP call, 59 FR at 48669. The OTC LEV

program is distinctive and warrants a finding under section 110(k)(5)

that these SIPs are deficient insofar as they do not provide for

emissions reductions from new motor vehicles equivalent to those

achieved by that program. Model year 1999 and later vehicles will

remain on the road until well after the attainment deadlines throughout

the northeast. Failure to require that they meet LEV emissions

standards will constitute an irrevocable loss in emissions reductions

until those vehicles are replaced many years later. Therefore, it is

important that the tighter LEV standards apply to these new vehicles if

the reduced emissions will be necessary to achieve and maintain the

NAAQS later.

A general finding of SIP inadequacy is not yet warranted. EPA

recognizes the close connection between states' planning to address

transport and their planning for reductions to ensure timely

attainment. The November 15, 1994, deadline for states to submit

modeled attainment demonstrations has now passed. However, of the

states in the OTR that have submitted SIPs, none purports to provide

for the emissions reductions needed to bring downwind states into

attainment and continue maintenance of the ozone standard.\10\

Especially in such circumstances, EPA continues to believe that it has

authority under section 110(k)(5) to find that the states' current SIPs

are substantially inadequate for lack of a pollution

[[Page 4718]] control measure that must be adopted and implemented in

the near term for the state to achieve fully the emissions reductions

necessary to mitigate transport adequately. However, while the states'

failure merits even closer EPA oversight of these states' progress in

SIP development, EPA believes that a general finding of SIP inadequacy

is not yet warranted. While, for the reasons described above, EPA is

drawing an exception with respect to a finding of SIP inadequacy based

on the absence of a LEV program from these SIP, EPA still believes it

should generally allow states the first opportunity to address

transport and their attainment demonstrations together in their

forthcoming SIP revisions before the Agency exercises its SIP-call

authority more broadly to address non-LEV deficiencies.

\10\In the SNPRM, EPA incorrectly stated that the Act creates no

deadline for submission of SIPs demonstrating compliance with

section 110(a)(2)(D), and inadvertently omitted language it had

drafted to explain that section 172(b), read in conjunction with

section 172(c)(7), does establish a deadline for such SIPs for

nonattainment areas. That date too has now passed.

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

Even though the attainment demonstrations are now overdue, states

are in the process of incorporating many additional control measures

into their SIPs for purposes of meeting their obligations and are

actively working to adopt regional strategies to address transport. In

fact, as discussed in greater detail below, after publication of the

SNPRM the OTC states signed a Memorandum of Understanding to adopt

stringent controls on NOx emissions from stationary sources that

will apply region-wide throughout the OTR. EPA will continue to track

the states' progress in adopting control measures to achieve the

necessary reductions in time for downwind states to meet their

attainment deadlines and to maintain the NAAQS thereafter, and if those

efforts prove insufficient, EPA may consider making a more

comprehensive finding of SIP inadequacy if other measures are lacking.

C. Consistency of EPA Action With Sections 177, 202 and 209 of the Act

EPA reaffirms its initial determination and rationale that its

decision is consistent with sections 177, 202 and 209. See 59 FR 48670-

48671. As discussed in the SNPRM, section 202(b)(1)(C) only precludes

the Agency from promulgating national standards under section 202 that

modify certain specified standards prior to model year 2004. This is

not a general prohibition against all EPA action relating to the

control of emissions from motor vehicles. In acting under section 184

and section 110, however, EPA is not imposing mandatory federal

standards. Rather, EPA is requiring the states to exercise their own

independent authority under section 177 to promulgate state regulations

relating to the control of emissions from motor vehicles. That state

authority is not limited by section 202(b)(1)(C). Thus, this action

relies not on EPA's authority under section 202 (which would be limited

by section 202(b)(1)(C)), but on EPA's authority under sections 110 and

184, to mandate state action that would otherwise be discretionary.

Some commenters note that EPA is requiring states to act under

section 177 in a manner that would otherwise be up to the discretion of

the state.\11\ However, as discussed above, sections 110 and 184 give

the Administrator authority to impose ``additional control measures''

(i.e., measures over and above those required under other provisions of

the Act) on states. Moreover, section 110(a)(2)(D) requires SIPs to

contain provisions prohibiting ``any source or other type of emissions

activity'' from emitting air pollution that interferes with attainment

or maintenance in other states. This language is sufficiently broad to

include motor vehicles. There is no indication that section 184 is

limited in effect to stationary sources or that state standards for

automobiles were excluded from the ``additional control measures'' that

EPA could require under section 184.

\11\This is likely to be true for any actions ordered under

section 184 or 110. EPA would not need the authority of section 110

and 184 to require states to promulgate standards already required

by law.

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

IV. Basis for Requiring OTC LEV or a LEV-Equivalent Program

EPA's explanation of the proposed basis for approval of the OTC LEV

recommendation comprises the primary subject of the SNPRM. See 59 FR at

48671-48694. This detailed explanation is not repeated here. Rather,

the following discussion references many of the portions of the SNPRM

on which EPA is relying for today's action. In addition to these

references and a summary, this discussion only addresses changes to and

elaborations upon EPA's explanation of its basis for action. In

addition to the rationale set forth in this notice and the response-to-

comments documents, EPA is also relying on the SNPRM as the basis for

today's SIP call, except as otherwise explained in the response-to-

comments documents or in this preamble, or where the SNPRM is

inconsistent with those documents. EPA bases its requirement for states

to adopt the OTC LEV program on its determinations that the emissions

reductions that the program achieves are necessary to bring certain

nonattainment areas into attainment (including maintenance) of the

ozone standard by the dates applicable under Subpart 2 of Part D of

Title I of the Clean Air Act; that, unless an acceptable LEV-equivalent

program is in effect, OTC LEV is necessary because there is no other

currently available method of achieving these reductions from the same

sources; and that requiring the OTC LEV program is consistent with

other requirements of the Act. The basis for each of these

determinations is described in detail in subsections A and B of this

section of the notice.

A. Necessity

EPA's conclusion that the emission reductions achieved by the OTC

LEV program are necessary to bring certain nonattainment areas in the

OTR into attainment (including maintenance) of the ozone standard by

their applicable dates is based on a series of statutory

interpretations and factual determinations. As set forth in detail

below, EPA is interpreting the ``necessary'' standard in section

184(c)--as well as the ``significant contribution'' and

``interference'' tests of section 110(a)(2)(D) read in conjunction with

section 184(c)(5)--as authorizing the Agency to find ``necessary'' any

potentially broadly practicable measure that, in light of the

availability of other potentially broadly practicable measures, is

needed to bring the downwind areas into timely attainment. EPA next

analyzes the full magnitude of emission reductions needed for serious

and severe nonattainment areas in the OTR to attain the standard, and

the degree to which various sections of the OTR upwind of those

respective nonattainment areas contribute to their nonattainment. From

that analysis EPA concludes that 50-75% NOX reductions from every

portion of the OTR lying to the south, southwest, west and northwest of

each of the serious and severe OTR nonattainment areas, as well as 50-

75% VOC reductions from the portion of the OTR lying in or near (and

upwind of) each of those nonattainment areas, are needed to bring each

of those respective nonattainment areas into attainment by their

respective attainment dates.

EPA then analyzes the potentially broadly practicable pollution

control measures (other than emission standards for new motor vehicles)

to determine whether they would achieve the necessary emission

reductions; EPA concludes that they would not and that a significant

shortfall would remain. Based on that conclusion, EPA finds that new

motor vehicle tailpipe emission reductions are necessary to help fill

that shortfall, and that, unless an acceptable LEV-equivalent program

is in effect, the OTC LEV program is the [[Page 4719]] only program

currently available to achieve those reductions, and hence that the OTC

LEV program is necessary. EPA then concludes that the trading and

migration of vehicles within the OTR provide a basis for requiring that

the OTC LEV program be adopted even in the few portions of the OTR not

upwind of a serious or severe nonattainment area in order to ensure

that the necessary emission reductions from the various upwind portions

of the OTR contributing significantly to those downwind nonattainment

problems are actually achieved. Based on those findings, EPA then

concludes that, unless an acceptable LEV-equivalent program is in

effect, the OTC LEV program is necessary in every portion of the OTR to

bring the serious and severe ozone nonattainment areas of the OTR into

attainment by their respective attainment dates.

Finally, EPA concludes that it may interpret section l84's

reference to attainment to incorporate maintenance of the ozone

standard. EPA relies on that interpretation, on EPA's treatment of the

OTR petition as resting also on the provisions in section 176A, and on

EPA's independent authority under sections 110(a)(2)(D) and (k)(5) to

address the interference of upwind states with maintenance of the

standard by downwind states. Based on these, EPA concludes that it may

and should make the same necessity and SIP inadequacy findings

described above and approve the OTC recommendation, not only to assure

timely attainment in the OTR's serious and severe nonattainment areas,

but also because such reductions are necessary for those and certain

other areas to maintain the ozone standard.

1. Legal Interpretation of Necessity

EPA discussed its interpretation of the ``necessary'' standard

under sections 184(c) and 110(k)(5) in the SNPRM. See 59 FR at 48671-

48675. EPA then proposed, under section 110(a)(2)(D), that contributing

emissions are ``significant,'' at least where EPA finds that

controlling the emissions is necessary to bring any downwind area into

attainment. EPA also proposed that contributing emissions ``interfere''

with downwind maintenance, at least where controlling the emissions is

necessary for downwind areas to maintain the NAAQS. In particular, the

Agency believes that the ``necessary'' standard requires the Agency to

evaluate the emissions reductions needed and then determine whether

potentially reasonable and practicable alternative measures could be

adopted instead of the OTC LEV program to achieve the needed

reductions. Id. There are two different types of alternative measures

that could affect a finding that OTC LEV is necessary. First, an

alternative that achieves the same or greater emissions reductions from

the same emissions sources (here, new motor vehicles) may render the

OTC LEV program unnecessary. There are limited opportunities to develop

an alternative to the OTC LEV program that would achieve the same or

greater reductions from new motor vehicles. This is because section 202

bars EPA modification of the Tier I standards prior to model year 2004,

and the states cannot, under sections 177 and 209, adopt standards

other than the California standards. As discussed in the introduction

to this notice and below, EPA has worked to explore the possibility of

an alternative program to achieve equivalent reductions from new motor

vehicles that would be consistent with these provisions. Such a program

is not currently available to the OTC states. However, if EPA were to

determine through rulemaking that a LEV-equivalent program is

acceptable and to find that all the automakers had opted into the

program, then states would not be required to adopt OTC LEV as long as

the LEV-equivalent program remained in effect.

Second, certain alternative measures that are sufficient in the

aggregate to achieve the necessary reductions without further

reductions from new motor vehicles could likewise render the OTC LEV

program unnecessary.

EPA's interpretation is consistent with its approach to

interpreting the ``necessary'' standard under section 211(c)(4)(C) of

the Act. See 59 FR at 48672. The interpretation certified by Congress

under that section provides that measures are necessary if no other

measures that would bring about timely attainment exist, or ``if other

measures exist and are technically possible to implement, but are

unreasonable or impracticable.'' Similarly, EPA is concluding here that

alternatives are available if they are at least potentially reasonable

and practicable for application across the OTR, as well as sufficient

to achieve the necessary reductions. Also, EPA's necessity

determination and its SIP call are both subject to any state's ability

to demonstrate, through adoption of alternative measures that EPA

cannot currently find potentially practicable for all OTR areas, that

the OTC LEV program is not in fact necessary to bring the downwind

states into attainment (including maintenance), and thereby to prevent

a significant contribution from that state to nonattainment in another

and to prevent interference with maintenance in a downwind state.

EPA must make any determination of the need for additional control

measures in the context of factual uncertainty regarding issues such as

whether measures are potentially broadly practicable, the amount of

reductions needed, and the amount of reductions that particular

measures will achieve in fact. EPA is making its determination based on

the best information currently available. As explained in the SNPRM and

elaborated upon in the response-to-comments documents, EPA believes

that it should apply a general policy of resolving these uncertainties

in favor of the public and the environment.

EPA noted in the SNPRM that the states' attainment plans were due

two months later, and that the work the states had accomplished in

assembling their attainment plans did not indicate that the OTC LEV

program would be unnecessary to address the transport problem. See 59

FR at 48673. EPA has now received SIP submissions under section 182

(b)-(d), concerning attainment and rate-of-progress, that were due by

November 15, 1994 from only a few of the states in the OTC. Of those

received, none purports to achieve NOX or VOC reductions

sufficient to account for contributions to nonattainment problems

further downwind. This further confirms that EPA should act now based

on the best available information.

EPA discussed in its NPRM and SNPRM whether section 184, together

with the legislative history, support giving ``deference'' to the OTC's

recommendation regarding the necessity of the OTC LEV program, and EPA

explicitly requested comment on that issue. See 59 FR at 21726-21727

and 59 FR at 48672. EPA has now considered the issue of deference to

the OTC in light of the comments received and does not believe that the

OTC, per se, deserves any special deference. EPA believes, however,

that when states submit a request to EPA that EPA take specific action

to implement section 110(a)(2)(D), whether under section 110(k)(5)

alone or under sections 176A or 184, EPA should pay close attention to

that request and consider it and any recommendations it makes

carefully. EPA believes that this is appropriate in light of the

fundamental role that states have historically played in implementing

title I of the CAA and the expertise that states bring to bear on air

pollution problems. In reviewing any such request from states, EPA

remains obligated to consider independently all of the factual

information available in determining whether any program

[[Page 4720]] recommended by the states is necessary. In any event, in

this instance, EPA's independent review of all the relevant factual

information fully supports the conclusion that the OTC LEV program is

necessary, and EPA has not accorded the OTC's recommendation deference

in approving it.

2. Emission Reductions from OTC LEV or a LEV-Equivalent Program are

Needed

(a) Magnitude of Reductions Needed for Attainment in 2005. The

SNPRM contains EPA's detailed analysis of available modeling

information regarding the magnitude of reductions needed for attainment

in the serious and severe nonattainment areas in the OTR. See 59 FR at

48673-48675. EPA's conclusion is that NOX emission reductions of

50% to 75% from a 1990 baseline emissions inventory are needed

throughout the OTR to reach attainment of the ozone NAAQS in those

serious and severe areas. EPA further concludes that VOC emissions

reductions of 50% to 75% from a 1990 baseline emissions inventory are

needed in and near (and upwind of) the Northeast urban corridor for

attainment in the serious and severe areas. Some parts of the OTR may

need reductions closer to the upper end of the range and other parts

closer to the lower end, based on the emissions level in the particular

area and the geographic location of the area.

As explained in the SNPRM, 59 FR at 48674, the 50% to 75%

reductions are needed from a 1990 baseline emissions inventory,

assuming that all growth in emissions since 1990 must be neutralized in

addition to achieving these percentage reductions. The estimated target

level of emissions implied by this percentage reduction will not vary

over time, though the growth that must be neutralized will steadily

increase. EPA derived this conclusion from extensive modeling studies

that are described in the SNPRM but are not repeated here. See 59 FR at

48675.

EPA reviewed in detail the atmospheric modeling tools used to

analyze the need for and effectiveness of various strategies, and the

studies that had been completed at the time of the SNPRM. See 59 FR at

48674. These tools include the Regional Oxidant Model (ROM) and the

Urban Airshed Model (UAM), which differ principally in the size of the

modeling domain and the resolution of information about subunits in the

photochemical grid. EPA also explained that the relationship between

ROM and UAM modeling involves an iterative process. ROM applications

provide boundary conditions (i.e., the conditions of the ambient air at

the upwind boundary of each of the UAM domains) for UAM analysis, and

UAM analyses provide information about strategies that can be input for

further ROM modeling to yield more refined boundary conditions for

further UAM analysis.

The states' obligation to submit attainment demonstrations (due

November 15, 1994) involves the use of UAM modeling to demonstrate that

the adopted control measures will achieve attainment for their own

nonattainment areas. As indicated above, only a few of the OTR states

have submitted any of this information, including UAM modeling, and

none has submitted the complete UAM modeling. As indicated in the

SNPRM, EPA does not expect the UAM modeling to be completed in the near

future. EPA does not believe it is appropriate to wait for the UAM

attainment demonstrations (which have since become overdue) to reach a

conclusion here. This is because ROM is the more important modeling

tool for assessing transport and is sufficient to support certain key

conclusions with respect to transport. Also, the OTC LEV and the LEV-

equivalent programs depend on time for vehicle turnover to achieve

reductions and delay could cause necessary reductions to be irrevocably

lost. Current information justifies action now to avoid the very high

risk of losing necessary reductions while awaiting further technical

information from the states that is already overdue.

(b) Contribution Analysis

As described in more detail in the response-to-comments documents,

EPA continues to rely on the ROM studies described in the SNPRM--the

ROMNET and Matrix studies--to support its conclusions concerning

transport and the amount of emissions reductions needed across the

region for the serious and severe nonattainment areas in the Northeast

corridor to attain. In the SNPRM, EPA examined the degree to which

transport contributes to the ozone problem in each of those areas. See

59 FR at 48675-77. EPA acknowledged that it is enormously complicated

to determine which reductions are needed for any specific area to avoid

causing ozone exceedances downwind. The analysis depends on regional,

urban, and wind trajectory modeling information and monitoring data, as

well as information on controls assumed in the web of downwind areas

and other upwind areas. In the SNPRM, EPA noted that the OTC relied on

ROM studies and trajectory analyses to determine the extent to which

upwind areas contribute to exceedances downwind throughout the OTR. EPA

continues to believe that these studies support its conclusions.

In the SNPRM, EPA also reviewed studies in which EPA examined

surface winds and aloft winds data during the relevant times. As stated

in the SNPRM, this information indicates that transport results in a

large cumulative impact of emissions and ozone transported by surface

winds from the south and southwest of each of the nonattainment areas

along the Northeast urban corridor, and that transport also results

from ozone and emissions transported by winds aloft from far to the

west and northwest of each of the nonattainment areas along the

corridor. EPA continues to believe that these studies support its

conclusions.

More specifically, wind trajectory data support the conclusion that

the following areas contribute to nonattainment and maintenance

problems in the OTR, in the following manner (other areas may

contribute as well): The Washington, D.C. nonattainment area--

encompassing part of Virginia, the District of Columbia, and part of

Maryland--is to the south-southwest of the Baltimore, Maryland,

nonattainment area, and thus, according to wind trajectory data, ozone

and emissions from those areas travel with the surface winds to

contribute to the nonattainment problem in Baltimore. The Baltimore

area itself, as well as the rest of Maryland, is to the south,

southwest, or west of the Philadelphia, Pennsylvania nonattainment

area, which includes parts of Pennsylvania, Delaware and New Jersey;

thus ozone and emissions from Maryland contribute to that nonattainment

problem. Ozone and emissions from western Pennsylvania, and western and

northern Maryland, contribute to the Philadelphia problem as well.

Ozone and emissions from the Philadelphia area contribute to the New

York City area which lies to the northeast. Ozone and emissions from

western and northern Pennsylvania and northern New Jersey, and the

southern and western portions of upstate New York--which are to the

west and northwest of the New York City area--also contribute to the

nonattainment problem in that area, which comprises parts of New York,

northern New Jersey, and southern Connecticut. The New York City area

is to the southwest of Providence, Hartford, and Boston, and thus ozone

and emissions from the New York City area contribute to those areas'

problems. Ozone and emissions from upstate New York and northern

Pennsylvania, which lie to the west and [[Page 4721]] northwest, also

contribute to the problems in Hartford, Providence and Boston.

Connecticut, Rhode Island, western Massachusetts, Vermont, and central

and southern New Hampshire also contribute to the Boston problem, by

virtue of lying to the southwest, west or northwest of Boston. By

virtue of lying to the southwest of Portsmouth, New Hampshire, the

states of Connecticut, Rhode Island, and Massachusetts contribute to

Portsmouth's nonattainment problem. Western and northern New York

State, Vermont, and central and southern New Hampshire lie to the west

and northwest of the Portsmouth nonattainment area, and thus also

contribute to the Portsmouth problem. The Boston area, as well as New

Hampshire, Vermont, and New York State, lie to the southwest or west of

Maine, and thus contribute to nonattainment and maintenance problems in

Maine.

Recently, and too late for inclusion in the rationale of the SNPRM,

three additional studies have become available, described below. These

new studies confirm the conclusions indicated by the previous studies.

EPA has completed a modeling analysis for the OTC to examine the

potential impacts of region-wide NOX-oriented control strategies

in portions of the eastern United States.\12\ The pertinent purposes of

this analysis were (1) to identify whether a set of alternative

regional controls would reduce ozone transport into and along the

Northeast ``Urban Corridor'' to below 120 ppb, and (2) to examine the

incremental benefits, in term of ozone reductions in the Corridor, from

the application of control strategies within the Corridor only and

within the entire OTR. For this analysis, the ``Urban Corridor'' is

defined as the contiguous serious and severe ozone nonattainment areas

extending from Washington, DC, through Baltimore, Philadelphia, New

York City, and New England to southern New Hampshire.

\12\See ``Summary of EPA Regional Oxidant Model Analyses of

Various Regional Ozone Control Strategies'', November 28, 1994.

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

For the analysis EPA used ROM (see 59 FR at 48674), a photochemical

grid model covering the eastern half of the United States and

southeastern Canada. Model simulations were performed for two

meteorological episodes: July 1-15, 1988 and July 13-21, 1991. The July

1988 period was a severe and widespread ozone episode in most sections

of the modeling domain. During the July 1991 period, high ozone

concentrations were limited to the Midwest and Northeast.

Meteorological weather patterns were quite favorable for large-scale

ozone and precursor transport into and along the Urban Corridor during

both episodes.

EPA modelled several scenarios simulating very significant emission

reductions (on the order of 35-40% for NOX and VOC) in the OTR.

These scenarios included, among others, reductions from combinations of

measures, including the Clean Air Act-mandated control programs, a 0.15

lb/MMBtu NOX limit, an additional ``corridor control package,''

and LEV. None of these emission reduction combinations was sufficient

to reduce ozone levels to below 0.12 ppm throughout the region.

Specifically, even with the most effective combination of measures,

several areas, including the New York City area and parts of New

England, were not in attainment by the year 2005. Specifically in New

England, even the most effective combination of these measures did not

result in attainment in the Boston area and parts of Connecticut and

Rhode Island by the year 2005. Because emissions are lower in 2005 than

in 1999 (the attainment year for serious areas in the OTR), it is a

reasonable extrapolation from this data that an even greater

nonattainment problem remained in 1999, and that a maintenance problem

in these areas is to be expected. This provides additional support to

EPA's conclusions from the SNPRM that very large emission reductions

will be required throughout the OTR to bring all areas into attainment.

EPA also used ROM to examine the impact on air quality of a region-

wide OTC LEV program applied in addition to a Clean Air Act 2005 base

case scenario and a 0.15 lb/MMBtu NOX program in the OTR. Given

that, due to fleet turnover, reductions from the OTC LEV program would

be only partially achieved by 2005, EPA's ROM analysis found the

incremental improvements in ozone levels due to application of the OTC

LEV program (reductions of 3-6 ppb in daily maximum ozone levels) to be

relatively large. EPA found this incremental improvement from OTC LEV

most evident when the LEV results are compared with the results of

simulating the impact of a ``corridor control strategy'' that would

result in similar emission reductions.

A further discussion of this recent model analysis is included in

the response-to-comments documents.

New York State reached conclusions that support the studies

described above, after applying the Urban Airshed Model (UAMIV) to the

modeling domain being used in the New York and Connecticut ozone

attainment demonstrations.\13\ These studies utilized the CALMET

procedure for generating meteorological inputs to UAM. Consequently,

resulting wind fields and mixing heights differed from those used in

the ROM analyses and in earlier UAM studies conducted by the same

investigators. New York State's most recent UAM study shows that it

would be impossible to demonstrate attainment unless large reductions

in regional ozone transported into the domain were realized. In this

UAM study, it is shown that a local strategy reflecting 75% reduction

in VOC and 25% reduction in NOX combined with an upwind regional

strategy reflecting 75% reduction in NOX and 25% reduction in VOC

would be necessary to attain the NAAQS throughout the New York UAM

domain. These results add credence to the ROM matrix findings and

results from ROM simulations performed for the OTC, which came to

similar conclusions.

\13\See Kuruvilla, John et. al., ``Modeling Analyses of the

Ozone Problem in the Northeast'', prepared for U.S. EPA, CA No.

X819328-01-0, EPA document no. EPA-230-R-94-108, 1994.

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

In the New York UAM analysis, both large VOC and large NOX

reductions were effective in reducing peak ozone concentrations, with

the VOC controls being somewhat more so. However, predicted reductions

in ozone were more extensive over a larger area when NOX was

reduced by large amounts. This latter finding with the UAM is

consistent with ROM analyses that suggest that large NOX

reductions will be needed to reduce regional transport to at or below

120 ppb of ozone. As noted above, the New York UAM analyses to date are

consistent in predicting that large reductions to incoming regional

ozone (through control of ozone precursors) will be needed to

demonstrate attainment further downwind with the UAM.

The New York UAM analysis uses more refined, localized

meteorological estimates (CALMET), instead of coarser ROM meteorology,

as well as the updated interim regional inventory, rather than 1985

National Acid Precipitation Assessment Program emissions. This study is

close to what New York is expected to use for its attainment

demonstration and rate-of-progress SIPs; thus, the study is

particularly helpful.

Finally, EPA performed studies designed to determine the extent to

which improved air quality in recent years is due to meteorological

fluctuations compared to reduced VOC [[Page 4722]] emissions.14

These studies, discussed in more detail in the response-to-comments

documents, included the development and application of a statistical

procedure for normalizing apparent ozone air quality trends to account

for confounding meteorological factors. The studies concluded that

after meteorology is normalized, there has been a downward trend in

ozone concentrations of 1-2% per year, from 1981 through 1993 (the end

date of the studies). EPA then conducted a ROM test that examined the

impact on ozone levels of the reduction in VOC and NOX emissions

between 1988 and 1991. ROM predicted a decrease in ozone levels that

matched the decrease observed in the meteorological studies. EPA views

these studies as confirmation of the validity of the ROM model's

estimates.

\14\See Briefing, ``Urban Ozone Trends Adjusted for

Meteorology''; See also Cox, William M. and Chu, Shao-Hung,

``Meteorologically Adjusted Ozone Trends in Urban Areas: A

Probabilistic Approach'', Atmospheric Environment, Vol. 27B, No. 4,

pp. 425-434, 1993.

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

For its conclusions, EPA relies on (1) the initial ROM studies

showing that 50-75% NOX reductions (from 1990 levels) from the OTR

as a whole are needed to bring the serious and severe nonattainment

areas into attainment by 2005; (2) the wind trajectory analysis

supporting the conclusion that locations lying anywhere from the south

through northwest of each of those nonattainment areas must contribute

that level of NOX reductions in order for each of those

nonattainment areas, respectively, to attain; and (3) the subsequent

ROM, NY UAM and meteorological studies confirming the results of the

initial ROM and wind-trajectory analysis. Based on these, EPA concludes

that 50-75% NOX reductions from the 1990 levels in each state (or,

in the case of Virginia, the portion of the state) in the OTR will be

needed in order for each of the serious and severe areas from Baltimore

northeast through Portsmouth, New Hampshire to attain the standard. In

addition, based on the same analyses, EPA concludes that 50-75% VOC

reductions from the 1990 levels are needed in and near and (upwind of)

those nonattainment areas in order for each of those areas--including

the portions of the Washington, Philadelphia, New York, Providence and

Portsmouth areas just downwind and across state lines from those nearby

upwind VOC sources--to attain the standard by their respective

attainment dates.15 The need for this large level of reductions,

coupled with the wind trajectory data, form the basis for EPA's

conclusions that virtually every area within the OTR contributes

directly to a nonattainment or maintenance problem in a downwind state

in the OTR.

\15\For example, VOC sources in the northern Virginia portion of

the Washington nonattainment area contribute to nonattainment in the

Maryland portion of that area, and VOC sources in the New Hampshire

portions of the Boston nonattainment area contribute to

nonattainment in the Massachusetts portion of that area.

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

(c) Analysis of Inventory and Options for Control Measures

The next step in EPA's analysis is to assess the options available

for achieving the necessary reductions in NOX across the OTR and

in VOCs in and near the Northeast Corridor of the OTR, which is

discussed in more detail in the SNPRM. See 59 FR at 48677-48684. For

this step, EPA first assessed the best available information about the

inventory of emissions across the OTR and then considered various

potential control measures to reduce emissions by the necessary amount.

In its analysis, EPA considered options that are at least potentially

reasonable and practicable across the entire OTR (referred to herein as

``potentially broadly practicable'' measures). In other words, EPA has

not considered options that, while perhaps potentially practicable to

some extent in some locations, would be impracticable if applied to

their full extent throughout the OTR.16

\16\EPA believes that whether such measures--particularly those

involving local land-use, highway, or mass transit infrastructure

changes--are practicable to some extent in individual areas depends

on a consideration of local factors that can be conducted only by

state and local citizens and governments. For that reason, EPA

cannot itself either determine or assume that those measures are

practicable to some extent in any particular area. As described

elsewhere in this notice, however, EPA has left states the

flexibility to demonstrate that such measures are indeed practicable

and hence might close any emissions reductions shortfall so as to

render emission reductions from new motor vehicles unnecessary.

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

i. Inventory Analysis

EPA relied on the 1990 interim regional inventory used for ROM and

UAM analyses and projected emissions growth to estimate NOX and

VOC emissions in 2005 (the attainment deadline for severe areas, except

for the New York-New Jersey-Connecticut area with the slightly later

deadline of 2007). EPA projected that highway vehicles will account for

approximately 38% of the total NOX inventory and 22% of the total

VOC inventory in 2005, indicating that substantial motor vehicle

controls would have to be an important part of a workable compliance

plan for the OTR. EPA projected the gasoline-powered light-duty vehicle

component of the inventory (the vehicle types that would be subject to

the OTC LEV program) to constitute 28% of total NOX emissions and

19% of total VOC emissions in the 2005 inventory.

ii. Analysis of Options for Control Measures Without More Stringent New

Motor Vehicle Standards

To identify and evaluate the full range of potentially broadly

practicable control options, EPA first analyzed the impact of measures

explicitly required by the Act, using the same ROM modeling tools used

to assess the overall magnitude of reductions needed in the OTR. The

Agency then analyzed other options to fill the shortfall in emissions

reductions, including a stringent limit on NOX emissions, measures

EPA included in proposed Federal Implementation Plans (FIPs) for three

areas in California, and measures listed in compilations of NOX

and VOC control measures prepared by EPA and the State and Territorial

Air Pollution Program Administrators/Association of Local Air Pollution

Control Officials (STAPPA/ALAPCO). Recognizing uncertainties in various

aspects of its analysis and EPA's authority to resolve those

uncertainties in favor of health and environmental protection, EPA

concludes that no combination of such measures would be sufficient to

achieve the necessary amount of reductions without more stringent

standards applicable to new motor vehicles.

EPA identified in the SNPRM the array of measures applicable to

stationary and mobile sources under the Act, and described its modeling

of the impacts of these measures on ambient ozone levels in the OTR.

EPA calculated that application of these controls would achieve

reductions by 2005 in the OTR of 20% for NOX and 37% for VOCs from

the 1990 baseline inventory, and concluded from ROM studies modeling

the impacts of these measures that this level of reductions would be

insufficient.

As explained in the SNPRM, EPA must account for problems in

calculating the impact of control measures, including imperfect

enforcement, control equipment malfunctions, and operating and

maintenance problems. Accounting for such problems through a ``Rule

Effectiveness'' factor diminishes the emissions reductions that one

could expect if all sources could fully comply with rules at all times.

See 59 FR at 48682. EPA noted that it had applied Rule Effectiveness

considerations in calculating the overall impact of the Act-mandated

controls for the ROM studies and for mobile sources within the MOBILE

emissions model. See 59 [[Page 4723]] FR at 48679 n.36 and 48682.

However, EPA did not apply Rule Effectiveness values in calculating the

impacts of other control measures, thereby making these measures overly

optimistic.

In addition to the Act-mandated controls, EPA also examined the

impact of a region-wide limit on NOX emissions of 0.15 lbs/MMBtu

(the ``0.15 NOX standard'') for boilers, gas turbines, and

internal combustion engines with a capacity of at least 250 MMBtu/hr.

EPA calculated that this level of control would achieve a 15% reduction

in inventory-wide NOX emissions from a 2005 projected baseline,

after application of other controls mandated in the Act. Together with

the mandatory measures, this would achieve a total NOX emissions

reduction in the OTR of 32% from 1990 baseline levels.

EPA explained in the SNPRM that it evaluated the 0.15 NOX

standard as representing the maximum emissions reduction from large

stationary sources that is not clearly unreasonable or impracticable.

See 59 FR at 48679. By this EPA explained that it did not mean that EPA

believes that such measures are in fact reasonable and practicable. See

59 FR at 48678.

In fact, on September 27, 1994--five days after publication of the

SNPRM--eleven of the thirteen OTC member States signed a Memorandum of

Understanding regarding regional NOX controls (NOX MOU)

somewhat less stringent than the 0.15 NOX standard. Only

Massachusetts and Virginia have not signed the NOX MOU.

Designed to build on the existing NOX Reasonably Available

Control Technology (RACT) program, the agreement represents a phased

approach to controlling NOX emissions from power plants and other

large fuel combustion sources. The first component (called ``phase II''

because the existing NOX RACT program is ``phase I''), to be

implemented by May 1999, would include three control zones in the

region: An inner zone ranging from the Washington, DC, metropolitan

area northeast to southeastern New Hampshire; an outer zone ranging

from the inner zone out to western Pennsylvania; and a northern zone

which includes much of northern New York and northern New England,

including most of New Hampshire.

Control requirements under the MOU vary with the zone in which the

various sources are located, with the most stringent requirements

occurring in the inner zone. Affected sources (boilers and indirect

heat exchangers with a maximum gross heat input rate of at least 250

MMBtu per hour and electric generating units producing at least 15MW of

electricity) in the Inner Zone will be required to reduce NOX

emissions by 65 percent from base year levels or emit NOX at a

rate of no more than 0.2 lbs/MMBtu. In the Outer Zone, NOX

emissions must be reduced by 55 percent from base year levels by May 1,

1999, or emissions must be limited to no more than 0.2 lbs/MMBtu.

Northern Zone controls remain at RACT levels during phase II.

The next phase (known as ``phase III'') would be implemented by May

2003. By that date, affected sources in both the Inner and Outer Zones

must reduce NOX emissions by 75 percent from base year levels or

limit NOX emissions to no more than 0.15 lb/MMBtu. Affected

sources in the Northern Zone would be subject to regulations that would

reduce their rate of NOX emissions by 55 percent from base year

levels, or would have to emit NOX at a rate of no greater than 0.2

lbs/MMBtu.

The NOX MOU provides for modified regulations for the May 1,

2003, targets if additional modelling and analysis show that these

modified regulations, in combination with regulations for controlling

VOCs, will result in attainment of the ozone standard throughout the

OTR. In such a case, the NOX MOU would have to be revised by

December 31, 1998.

Based on EPA's 1990 interim emissions inventory, EPA estimates that

the NOX MOU will result in about a 70 percent reduction in

NOX from these sources, or slightly less than the reduction that

would have occurred with the application of a region-wide 0.15 lbs/

MMBtu standard. EPA estimates that more than three-fourths of the total

NOX reductions to be obtained under the NOX MOU will be

achieved by 1999.

In addition to the Act-mandated measures and region-wide NOX

controls, EPA also considered a variety of NOX and VOC control

measures from STAPPA/ALAPCO compilations, transportation control

measures, California reformulated gasoline, and measures EPA proposed

for FIPs for California areas. As summarized in the SNPRM, most of the

NOX source categories in the STAPPA/ALAPCO compilation were

already encompassed within the 0.15 NOX standard. The remaining

STAPPA/ALAPCO categories of small stationary and area sources comprise

an extremely small portion of the stationary source segment of the

emissions inventory, and a still smaller portion of the overall

inventory. EPA also calculated that the transportation control measures

that EPA would consider potentially broadly practicable would yield

only a combined reduction of 2.5% from 1990 baseline inventory-wide

NOX reductions. In the SNPRM, EPA identified the option of

extending the employee trip reduction (or employee commute options

(``ECO'')) program region-wide as potentially practicable. Upon further

consideration, EPA believes it is more appropriate to characterize

region-wide ECO as a measure that, while potentially practicable in

some urban and suburban settings, cannot be considered broadly

practicable if applied across the OTR. Deleting the emission-reduction

benefits of extending ECO region-wide, however, merely buttresses the

conclusions described above. For California reformulated gasoline, EPA

calculated a 1.4% reduction in NOX emission from 1990 baseline

inventory-wide levels. For the proposed California FIP measures, EPA

also did not find additional options that were not either inappropriate

or unavailable in the OTR, or already encompassed within the Act-

mandated controls or 0.15 NOX standard. In sum, EPA concludes that

all other potentially broadly practicable options will be needed in

addition to more stringent controls for new motor vehicles throughout

the OTR, in order for the serious and severe ozone nonattainment areas

in the OTR to attain the ozone standard; those other options will not

produce emissions reductions sufficient to remove the need for such

motor vehicle controls. As described in the SNPRM, similar conclusions

apply with respect to VOC emission controls in and near the urban

Northeast Corridor nonattainment areas of the OTR.

iii. Determination Whether Reductions from OTC LEV or LEV-Equivalent

Program Are Necessary

As discussed in the SNPRM and above, EPA has concluded that there

are not sufficient broadly practicable options for making up the

shortfall in emissions reductions necessary for attainment and that all

of the emissions reductions associated with applying the OTC LEV or

LEV-equivalent program are necessary. See 59 FR at 48683-48684. EPA

calculated the impact of the OTC LEV program in 2005 from the 2005

projected inventory, over the reductions that will take place in New

York and Massachusetts as a result of their existing LEV programs

beginning in 1996. EPA did not account in those calculations for the

emissions associated with migrating and visiting vehicles. EPA

subsequently analyzed these migration effects and published a notice

describing them on October 24, 1994, 59 FR 53396. Since that notice,

EPA has done a more thorough analysis of these effects, which can be

found in the RIA [[Page 4724]] located in section V of the docket. EPA

now estimates that those migration effects result in a 16 ton per day

increase in VOC emissions and a 28 ton per day increase in NOX

emissions in 2005 over EPA's previous estimates of highway vehicle

emissions under the OTC LEV program. However, the benefits of the OTC

LEV are still substantial and EPA continues to believe that the

information above and in the SNPRM (see conclusion 59 FR at 48682)

supports the conclusion that all of the emission reductions associated

with the OTC LEV program are necessary and that no options other than

that program are currently available to achieve reductions from new

motor vehicles. The OTC LEV program is necessary unless an acceptable

LEV-equivalent program is in effect.

The OTC LEV program would be reasonable and practicable in the OTR,

as explained in the SNPRM, 59 FR at 48683-48684. EPA granted California

a waiver for the LEV program based on a finding of technical

feasibility and adequate lead-time; the California Air Resources Board

(CARB) has continued to find the program feasible with certification of

several categories of LEVs; New York and Massachusetts have also found

that the program is reasonable; and the legislative history of section

177 reflects the notion that extension of California standards to other

states would not place an undue burden on auto manufacturers.

iv. ZEV Equivalency

EPA requested comment in the SNPRM on whether it should use its

authority under section 184 to include a ``ZEV equivalency''

requirement--i.e., to require the OTR states to achieve the additional

emissions reductions associated with the ZEV production mandate if the

Agency were not to require the OTR states to adopt the ZEV mandate. See

59 FR at 48684. EPA noted that in an August 4, 1994, letter, the Chair

of the OTC stated that, for purposes of discussing different options

with the auto manufacturers, any alternative should be compared to the

full LEV program, including the ZEV mandate. In addition, commenters

suggested that EPA require that states' programs compel the automobile

manufacturers either to sell ZEVs or to achieve equivalent reductions

from the new vehicle sector.

EPA has decided that today's action should not require states to

achieve those benefits of the ZEV production mandate that are not

otherwise provided by the OTC LEV program.17 First, EPA does not

interpret the OTC's recommendation as recommending that EPA issue such

a requirement. Regarding the ZEV production mandate, the OTC's February

10, 1994, recommendation states:

\17\For purposes of today's action, the additional benefits of

ZEVs are NMOG evaporative and NOx tailpipe emissions. Because the

LEV program's fleet NMOG average is unaffected by the ZEV mandate,

the ZEV mandate does not affect fleet NMOG tailpipe emissions, but

the mandate does result in increased reductions of NMOG evaporative

and NOx tailpipe emissions. Commenters also suggested that auto

manufacturers be responsible for CO, toxics and CO2 benefits of

ZEVs, but consideration of these benefits is beyond the scope of the

Agency's authority under section 184, which pertains solely to ozone

pollution and its precursors.

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

To the extent that a Zero Emission Vehicle sales requirement

must be a component of a LEV program under Section 177, such a

requirement shall apply. Further, if such a Zero Emission Vehicle

sales requirement is not a required component of programs adopted

under Section 177, individual States within the OTC may at their

option include such a requirement and/or economic incentives

designed to increase the sales of ZEVs in the programs they adopt.

Thus the OTC states clearly recommended that they be obligated to adopt

the ZEV mandate only if it were legally required for adoption of the

LEV program under section 177. Since EPA has concluded that states

adopting the LEV program are not obligated to adopt the ZEV mandate

under section 177 (see discussion in section IV.B.3. below), the OTC

states have not recommended that EPA require state adoption of the ZEV

mandate. The states also clearly expressed their wish to retain

authority as individual states to adopt ZEV mandates. This in no way

suggests that the states wanted EPA to require those who choose not to

adopt a ZEV production mandate to achieve its benefits through other

requirements applicable to manufacturers of new motor vehicles.

The February 10 recommendation does not elsewhere reflect any

desire that EPA require the states to achieve the additional benefits

associated with a ZEV mandate. The recitation clauses in the OTC's

recommendation state the OTC's expectation that EPA should evaluate

alternatives to the OTC LEV program according to specified criteria.

This does not, however, amount to a request that EPA require that

states achieve the benefits associated with the ZEV mandate. Rather,

EPA believes this is best understood as indicating the OTC's desire

that EPA should consider other options to achieve the same reductions

from new motor vehicles through a LEV-equivalent program. In so doing,

EPA believes the OTC's recommendation is best understood to underscore

that such an option should also advance technology.

Second, the August 4, 1994 letter from the OTC does not support the

view that EPA should require that states achieve the additional

emissions benefits of the ZEV mandate. That letter does not purport to

interpret the OTC's February 10 recommendation.18 Rather, that

letter sets forth the OTC's principles in approaching negotiations with

the automakers regarding a LEV-equivalent program. The August 4 letter

reflects the OTC's desire that the OTC's agreement to accept a LEV-

alternative would not deprive the OTC states of the ZEV benefits that

they would otherwise have the option to require. This is entirely

different from a recommendation that EPA require that the states

achieve the ZEV benefits.19

\18\EPA need not resolve whether it is appropriate to rely on

such a letter to determine the OTC's intent.

\19\Even if the OTC had intended that EPA require state programs

requiring from the new motor vehicle sector the additional benefits

provided by a ZEV production mandate, it is unlikely that EPA could

issue such a requirement. EPA received no comments explaining how,

without adopting a ZEV mandate, states could require the additional

ZEV mandate emission benefits from the new motor vehicle sector and

not violate sections 209 and 177.

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

d. The Effect of a Possible LEV-Equivalent Program on the Need for OTC

LEV

As mentioned above, EPA is continuing to work with the interested

parties to determine whether a LEV-equivalent program could be

developed. Several commenters have argued that the possibility of a

LEV-equivalent program precludes EPA from finding that OTC LEV is

necessary. EPA disagrees with these commenters for the reasons given in

the SNPRM, 59 FR 48683 (cols. 2-3). There is no currently available

method (other than adoption of a LEV program under section 177) for a

state unilaterally to require emission reductions from new motor

vehicles. The alternative program being developed by interested parties

is not an option that individual states can adopt now. The alternative

requires the automakers' consent to tighter standards and the

automakers have made it clear that their consent will not be given

without certain conditions being met--including the condition that all

OTC states agree to the alternative. Not all OTC states have agreed to

an alternative, and EPA does not have authority to require them to do

so. In addition, the automakers have indicated that their agreement to

a LEV-equivalent program is contingent on New York and

[[Page 4725]] Massachusetts dropping their ZEV programs. EPA cannot

require those states to take such an action. Furthermore, the

alternative would likely require either EPA regulations or a consent

decree or both before it would be valid. EPA cannot now find that the

OTC LEV program is unnecessary even though a LEV-equivalent program

might become available in the near future. As discussed elsewhere in

this notice, however, EPA has qualified its finding that OTC LEV is

necessary by providing that that program will not be considered

necessary, and hence will not be required, if and when EPA finds that

an acceptable LEV-equivalent program is in effect.20

\20\ On another point raised in the SNPRM, EPA noted that it was

considering an extension of its cross-border sales policy to Maine

dealers. EPA has made this extension. See letters from Mary T. Smith

to Honorable Olympia J. Snowe and Honorable William S. Cohen, dated

October 12, 1994.

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

e. Particular Circumstances of OTC LEV Program.

Several particular aspects of the OTC LEV program further support

EPA's conclusion that it is necessary to adopt the program region-wide

to attain the greatest amount of emissions reductions and to facilitate

operation of the program, as explained in more detail in the SNPRM. See

59 FR at 48684-48685. These circumstances include: The interstate

nature of the business of selling new cars, particularly among the

smaller Northeast states and especially along their border areas; the

need for states to adopt the program as soon as possible because the

fleet turnover on which the emissions reductions depend takes

substantial time; and the mobility of cars throughout the dense

transportation infrastructure in the Northeast, so that the sale of

cars meeting less stringent standards in part of the region could

compromise environmental benefits across the region. The mobility of

motor vehicles in the OTR supports the conclusion that the LEV program

is needed throughout the OTR, to ensure that both the motor-vehicle-

related portion of the overall NOX reduction needed throughout the

OTR, and the motor-vehicle-related portion of the overall VOC

reductions needed in and near the urbanized Northeast Corridor, are

actually achieved.

f. Conclusions Regarding Need for OTC LEV or a LEV-Equivalent Program

for Purposes of Bringing Downwind States Into Attainment by the Dates

Provided in Subpart 2 of Part D of Title I

The next step in EPA's analysis in the SNPRM was to address

specifically the need for the OTC LEV program by the 1999, 2005, and

2007 attainment deadlines for the serious and severe areas in the OTR.

As noted above, EPA's conclusion that 50% to 75% reduction from a 1990

baseline inventory in NOX emissions throughout the OTR and in VOC

emissions in and near the urban areas is constant over time. EPA's

modeling focused primarily on the 2005 inventory, at which time growth

since 1990 must be offset in addition to achieving the 50% to 75%

reductions. As EPA explained in the SNPRM, there is no reason to

believe that the conclusion that emission reductions equivalent to

those achieved by the OTC LEV program are necessary would be different

for the New York-New Jersey-Connecticut severe area, which has a 2007

attainment deadline. This is because the control options EPA considered

will not achieve such greater reductions in the extra two years so as

to make up the shortfall needed for attainment. Also, each of these

three states needs the program in order that the other two may attain

by 2007, as they share a common airshed and commuters from each of

these states contribute emissions to the others. For these same

reasons, these three states may also need the program in order that the

southern New Jersey-Philadelphia nonattainment area may attain by 2005.

Based on the ROM and trajectory analyses described in the SNPRM and

the analysis of alternative control measures, EPA also believes that,

unless an acceptable LEV-equivalent program is in effect, all of the

OTR states need the OTC LEV program in order that serious areas with a

1999 attainment deadline may attain on time. As noted above, because

emissions will be lower in the OTC nonattainment areas in 2005 than in

1999, it is a reasonable extrapolation from the modeling data that an

even greater nonattainment problem will remain in 1999 than in 2005.

Even the limited reductions from the OTC LEV program in model year 1999

are actually necessary, given the reductions that need to be achieved

in upwind states in order for each of these areas to attain on time.

Further, the attainment date for those serious areas may well extend

beyond 1999. This provides another reason to resolve in favor of acting

quickly, any uncertainties with regard to the need for an OTC LEV or

LEV-equivalent program to bring serious areas into timely attainment.

Three years of data are needed to actually achieve attainment, and the

states may legally extend their attainment deadlines for two one-year

periods if one exceedance of the NAAQS occurs in the deadline year. It

is quite possible that at least some of the serious areas with 1999

deadlines will need to rely on these extensions through 2001. Certainly

current modeling indicates that the best chance for these areas to

attain by their attainment dates would be through use of these one-year

extensions. Emission reductions from the OTC LEV program would be

necessary to offset growth and sustain attainment-level air quality in

2000 and 2001, when the program will generate increasing reductions due

to fleet turnover.

In summary, based on the analysis in the SNPRM and consideration of

the comments, EPA concludes that (1) emission reductions from the OTC

LEV or a LEV-equivalent program are a necessary part of the 50-75%

NOX and VOC reductions needed from upwind states to bring serious

and severe areas stretching from the Washington, DC nonattainment area

to the Portsmouth, New Hampshire nonattainment area into attainment by

the 1999, 2005, and 2007 deadlines applicable to those areas; (2) the

reductions from OTC LEV or a LEV-equivalent program will be needed in

areas located in a broad arc extending from the south through the

northwest of each of those areas; (3) such a program is also needed in

the remaining parts of the OTR to maintain the program's effectiveness

in light of dealership trading and migration of vehicles throughout the

OTR; and (4) the OTC LEV program is the only currently available

program for reducing emissions from new motor vehicles. Therefore, EPA

concludes that the OTC LEV program is necessary in each state (or in

the case of Virginia, portion of the state) in order to bring all of

those serious and severe nonattainment areas into attainment by those

dates, unless an acceptable LEV-equivalent program is in effect.

3. OTC LEV or LEV-Equivalent Program is Also Needed for Maintenance

In the SNPRM, EPA also addressed how maintenance of the ozone NAAQS

after it is achieved is relevant to EPA's analysis. See 59 FR at 48687-

48690. First, EPA explained its legal authority to consider maintenance

under both sections 110(k)(5) and 184, and then described why OTC LEV

or a LEV-equivalent program is necessary for maintenance.

a. Legal Analysis

EPA concludes that it has authority to act, even under section

110(k)(5), even prior to submission of attainment demonstrations under

section 182, to require submission of measures [[Page 4726]] necessary

for compliance with the maintenance aspects of section 110(a)(2)(D), as

discussed in more detail in the SNPRM. In the SNPRM and NPRM

discussions, EPA emphasized the relocation of maintenance in general to

section 175A in the 1990 Amendments to the Act, together with the

retention of maintenance as an explicit consideration under section

110(a)(2)(D) for purposes of addressing pollution transport.

Particularly in light of the staggered attainment deadlines under

section 181 for ozone, upwind areas with later deadlines may continue

to generate emissions interfering with downwind maintenance in downwind

areas with shorter attainment deadlines. As with the attainment

analysis, EPA concludes that it is important to act now, because

reductions from the OTC LEV and LEV-equivalent programs are dependent

on fleet turnover, and delay would cause the irrevocable loss of

emissions reductions necessary for downwind maintenance. Also,

uncertainty in the factual analysis for maintenance should be resolved

in favor of health and the environment for the same reasons EPA

described in the attainment discussion.

EPA also concludes maintenance is a proper consideration under

section 184(c), as described in more detail in the SNPRM and NPRM.

While the language of section 184(c) references timely attainment and

does not explicitly refer to maintenance, EPA concluded that

``attainment'' should be understood to include ``maintenance'' where

the issue is whether measures are ``necessary'' to comply with

pollution transport requirements. This is because it does not make

sense to believe Congress intended that section 184 would not reach a

measure in fact necessary for maintenance, when the result of a failure

to implement the measure would therefore be downwind areas' relapse

into nonattainment. Also, EPA believes that the OTC is an entity also

established under section 176A, which encompasses both the attainment

and maintenance aspects of section 110(a)(2)(D). Section 184 simply

adds stringency to section 176A in light of the serious problem in the

northeast. It therefore makes sense to believe Congress did not intend

in section 184(c) to displace the more general authority of a

commission under section 176A to make recommendations, and for EPA to

approve recommendations, concerning both the attainment and maintenance

aspects of section 110(a)(2)(D). EPA has reviewed the comments

submitted on this issue and continues to believe that it has the

authority to consider maintenance when acting pursuant either to

section 110 or section 184 for the reasons given in the SNPRM and in

the response-to-comments documents.

Beyond that, as described earlier, EPA believes that it may treat

the OTC submittal also as a request with recommendations under section

176A, which plainly authorizes EPA to approve such a request if its

recommended measures are necessary to prevent interference with

maintenance in downwind states under section 110(a)(2)(D).

b. Technical Analysis

EPA is concluding that, unless an acceptable LEV-equivalent program

is in effect, the OTC LEV program is necessary for states in the OTR to

maintain the ozone NAAQS after they achieve the standard, as discussed

in the SNPRM. See 59 FR at 48688. EPA bases this conclusion on its

analysis of emissions growth in the OTR which the additional measures

must neutralize, even after sufficient controls for attainment by the

attainment deadlines are in place. This growth results especially from

increasing vehicle miles traveled (VMT), which tends to overcome

reductions resulting from turnover to the Tier 1 standards and

implementation of advanced inspection/maintenance programs. Therefore,

the high level of reductions needed to attain the NAAQS are also needed

from the same areas to maintain the NAAQS, and OTC LEV or a LEV-

equivalent program is needed from those areas for the same reason.

The Agency's analysis of available control options shows that they

are insufficient to produce the emissions reductions needed to bring

downwind areas into attainment without more stringent standards for new

motor vehicles. The Agency therefore concludes that such options would

a fortiori be insufficient to achieve the emissions reductions needed

to maintain the standard over two consecutive ten-year periods

following redesignation (as required under section 175A). The

additional ROM and meteorological studies described above tend to

confirm that the serious areas in the Northeast Corridor--including the

New England areas--will not be able to attain and maintain the ozone

standard without a combination of measures including OTC LEV or a LEV-

equivalent program. (The response-to-comments documents include

additional support for this conclusion.)

EPA explained that the OTC LEV or LEV-equivalent program will

continue to accrue additional benefits through the year 2028. EPA

calculated that in 2015 (the latest year for which it has projected

emissions reductions), the program would yield a 39% reduction in

NOX emissions and a 38% reduction in VOC emissions from highway

vehicles compared to emissions in that year without the program.

EPA acknowledges that for the most part, sources in Maine do not

directly contribute emissions or ozone to an interstate ozone

nonattainment problem. Maine is included because vehicles purchased in

Maine may release emissions in parts of the OTR that do contribute to a

nonattainment or maintenance problem. A vehicle purchased in Maine may

travel to another state in the OTR because a Maine resident who

purchased the vehicle in Maine moved to the other state or traveled

there for purposes of work or recreation. This pattern is more common

in southeastern Maine, which is close to the New Hampshire city of

Portsmouth.

EPA's rationale for finding LEV necessary in New Hampshire is

several-fold. Parts of southern and central New Hampshire are northwest

of Boston, and trajectory studies support the hypothesis that emissions

and ozone from these areas contribute to the Boston nonattainment

problem. In addition, part of New Hampshire is in the Boston

nonattainment area; thus, vehicles in this area generate local NOX

and VOC emissions that are part of the problem on the Massachusetts

side of the state border. Vehicles in other parts of New Hampshire

should be subject to the OTC LEV program for the same reason as

vehicles in Maine, discussed above.

In addition, New Hampshire lies to the south and southwest of

Maine, and thus contributes to Portland and other Maine nonattainment

problems. Although the Maine areas are moderate with an attainment date

of 1996, it is possible that the LEV reductions, which will not begin

until 1999, will be necessary for attainment and maintenance in Maine.

At the least, this possibility provides EPA with another reason to

resolve any uncertainty over the necessity of OTC LEV in this state in

favor of requiring OTC LEV.

Specifically, the OTC ROM and the New York UAM/ROM Study clarify

the extent to which LEV may be needed for attainment and maintenance in

the northeastern portions of the OTR. Both studies (i) apply ROM 2.2 to

analyze what would happen with a recurrence of the July 1988

meteorological episodes in the year 2005, and (ii) incorporate the

interim regional emissions inventory as well as emissions reductions

from [[Page 4727]] controls required under the Clean Air Act

Amendments. These studies find that, for the episode days modelled,

ozone levels for the southeast coastal region in Maine hover at the 120

ppb standard. OTC ROM, figures A-2 and B-2; New York UAM/ROM Study,

figures 15a-c and 18a-c. It should be noted that the ROM model tends to

underestimate ozone levels in this seacoast region by failing to fully

account for the impact of the seabreeze. The ROM model tends to show

higher levels of ozone just off the coast, but it appears that

seabreezes keep more of the ozone plume over the shore. Accordingly, it

is quite possible that by the year 2005, this portion of Maine would

remain in nonattainment notwithstanding the imposition of all mandated

Clean Air Act controls.

The attainment date for this area is 1996. Emissions inventories

are expected to decrease over time, so that the 2005 inventory is

expected to be lower than inventories in the last part of the 1990s.

Accordingly, ozone levels in the last part of the 1990s in Maine may be

expected to be even higher than in the year 2005. For this reason, it

is possible that Maine's attainment dates will be extended to or past

1999 through application of EPA's overwhelming transport policy. Even

if Maine's attainment date remains 1996, Maine appears likely to have a

problem maintaining the NAAQS standard in the late 1990s and early 21st

century. Accordingly, EPA believes it relevant to inquire into how to

assure attainment and maintenance of the ozone NAAQS in Maine.

The OTC ROM study shows that the beneficial impact of OTC LEV and

.15 lb/MMBtu NOX limits throughout the OTR is an ozone reduction

of some 6-9 ppb, and that the beneficial impact of OTC LEV alone is

approximately 3 ppb. The spatial impact of these reductions is

difficult to discern from the ROM model due to, among other things, the

large grids it employs; thus, it is not possible to isolate the

benefits from stationary sources compared to mobile sources. Therefore,

it is possible that reductions from motor vehicles will prove to be a

necessary component of any control strategy designed to assure

attainment and maintenance for the Maine coastal areas. It is further

possible that emissions reductions from other mobile source measures

will not prove to be sufficient, and therefore that the reductions from

OTC LEV would be necessary.

Although the preceding conclusions are based on information that at

present is uncertain, EPA believes that it is appropriate to resolve

those uncertainties in favor of concluding that the emission reductions

that would be achieved by OTC LEV or an acceptable LEV-equivalent

program throughout Maine and New Hampshire (as well as states to the

south and west of Maine) are indeed needed to ensure maintenance (if

not also timely attainment) in Maine.

4. Relevance of EPA Transport Policy

As described in the SNPRM, the Agency's September 1, 1994 transport

policy addresses areas where overwhelming transport from upwind areas

with later attainment dates is a dominant factor accounting for

nonattainment in downwind areas with an earlier attainment date. Such

downwind areas may not be able to attain by the deadline due to the

impact of transport. EPA's policy is that states may seek to have EPA

interpret the Act so that, if it is impracticable to accelerate

controls upwind and other facts can be shown, then the downwind areas

might have additional time to attain beyond the section 181(a)(1)

dates. EPA anticipates that emissions reductions during any ``extension

period'' for downwind areas would apply to reaching attainment rather

than to maintenance. In addition, if EPA concludes that certain serious

areas in the OTR will not be able to reach attainment by 1999, and do

not qualify for any extensions, then they would be reclassified to a

higher classification (i.e., ``bump up'') under section 181(b)(2) of

the Act and would have additional time to attain. The OTC LEV or a LEV-

equivalent program would ultimately also be necessary to achieve the

reductions needed by any such area in the period after 1999 to attain

by such later attainment dates.

B. Consistency of OTC LEV With Section 177 of the Clean Air Act

1. Introduction

EPA concludes that the OTC's recommendation is consistent with

section 177 of the Act, and that implementation of the ZEV production

mandate is unnecessary for the recommendation to be consistent with

section 177, for the reasons given in greater detail in the response-

to-comments document and in the SNPRM, 59 FR at 48690-48694. The

aspects of the OTC recommendation identified as potentially implicating

section 177 include: the statement in the OTC recommendation that

adoption of California reformulated gasoline is not a part of the

recommendation; the recommendation that EPA not require the ZEV

production mandate except to the extent required under section 177; and

the recommendation's failure to explicitly incorporate California's

regulations. Commenters raised other concerns about consistency of the

OTC's recommendation with section 177, including: whether incorporation

of the NMOG fleet average requirement would violate section 177;

whether a state's incorporation of the California LEV program after the

program is initiated in California would create a ``third vehicle'' due

to California's credit banking provisions; and whether a state without

a current nonattainment area or approved SIP can adopt the California

LEV requirements.

EPA has reviewed the comments provided since the publication of the

SNPRM and has concluded that the determination of consistency proposed

in the SNPRM should be made final. Therefore, EPA finds that the OTC

LEV recommendation is consistent with section 177 of the Act.

2. California Fuel Regulations

EPA finds that the OTC's choice not to include California's clean

fuel requirements in its recommendation does not violate section 177

because it neither contravenes the ``identical standards'' requirement

nor the ``third car'' prohibition of section 177. EPA addressed this

issue in detail in the SNPRM and continues to rely on that discussion.

See 59 FR at 48690-91. California's fuel provisions were not part of

California's waiver application under section 209 and are not governed

by section 209(a). Rather, they are addressed separately in section 211

of the Act. Section 211 allows states to regulate fuels differently

than EPA if they can demonstrate that such regulation is necessary to

meet air quality standards, except that California may regulate fuel

without such a showing. California's fuel standards are thus not

``standards * * * for which a waiver has been granted'' under section

177. If states were obligated to adopt California's fuel standards to

comply with section 177, then such states would also have to meet the

necessary showing under section 211 with respect to the fuel

requirements. This would contradict the structural separation in the

Act between vehicle and fuel requirements. It would also erect a

``necessary'' hurdle to adopting vehicle standards identical to

California's vehicle standards in a way not contemplated in section

177.

Moreover, given the specific language of section 177 (its

references to section 209, its reference to waivers, and its use of the

term ``standards relating to control of emissions from new motor

vehicles,'' which mirrors section 209's [[Page 4728]] language), it is

clear that the ``standards'' that must be identical under section 177

are vehicle-based standards, not fuel standards. Finally, the

legislative history indicates that Congress specifically decided not to

include fuel requirements under section 177 when it reviewed section

177 in 1990.

Both federal courts that have reviewed the issue have found that

failure of a state to promulgate California's fuel regulations does not

violate section 177's requirement that an adopting state's standards be

identical to California's standards. Motor Vehicle Manufacturers

Association v. NYDEC, 17 F.3d 521 (2nd Cir. 1994) and American

Automobile Manufacturers Association v. Greenbaum, No. 93-10799-MA (D.

Mass. October 27, 1993) (the ``New York case'' and the ``Massachusetts

case'', respectively). These decisions are in accord with EPA's

position on this matter. For a more detailed discussion of this issue,

review the response-to-comments documents and the SNPRM at 59 FR at

48690 (col. 3).

Likewise, EPA finds that the OTC's choice not to include the

California fuel requirements does not violate section 177's ``third

vehicle'' prohibition. The auto manufacturers claim higher sulfur

levels in fuel found in the OTR would cause problems with California

LEV emissions control systems, necessitating changes in design that

would create a ``third vehicle.'' EPA rejects this argument.

The voluminous data provided by manufacturers do not contradict the

basic premises outlined by EPA in the SNPRM. This data refers to three

issues related to increased sulfur in fuel in the northeast that

manufacturers claim will cause the manufacture of ``third vehicles.''

These are: The effects sulfur will have on California's on-board

emissions diagnostics system (OBD II); the effects of sulfur on in-use

recall testing; and the effects of sulfur on ``maximum I/M cutpoints''

(i.e., cutpoints of 1.5 times the applicable standard).

As the Agency made clear in the SNPRM, nothing in the OTC LEV

recommendation requires manufacturers to build a third car. In fact,

the OTC LEV petition requires that cars sold in the OTC be California-

certified vehicles. Manufacturers can build the same car to meet both

California's and the OTC's requirements. Any design change that a

manufacturer makes is based on the manufacturer's choice to do so. As

the Second Circuit made clear in its decision denying manufacturers'

``third vehicle'' claim in the context of the ZEV production mandate,

whatever design change ``manufacturers choose to install on cars sold

in New York is a marketing choice of theirs and not a requirement

imposed by the (state).'' MVMA, 17 F.3d 521, 538 (2nd Cir. 1994).

Manufacturers' claims regarding sulfur's effects on California OBD

II systems center around the contention that manufacturers will use

flange-mounted catalyst assemblies instead of welded ones in their

vehicles sold in the northeast. This is not a significant change in the

design of the vehicles, and it would be done to save consumer time and

cost if the catalysts need to be replaced. This would be a marketing

choice by manufacturers and does not provide the basis for a third

vehicle claim.

This issue was addressed by the District Court in the New York case

recently. In dismissing a virtually identical claim by manufacturers in

the New York case, the District Court (Judge McAvoy) found that ``the

changes of which (manufacturers) complain are simply not required by

New York's adoption of California's LEV program. Certainly New York has

not expressly required that manufacturers change their emissions

systems mounting. Likewise, (manufacturers) have failed to show that

New York's adoption will de facto inevitably cause the switch from

flanged to bolted assemblies.'' MVMA, Docket No. 92-CV-869, slip op. at

16 (N.D.N.Y. Oct. 24, 1994). In the Massachusetts case, the trial judge

in AAMA has also denied manufacturers' request for a preliminary

injunction on this issue, determining that manufacturers were unlikely

to succeed on the merits of their claim. AAMA, Docket No. 93-10799-MA

(D. Mass. Oct. 27, 1993.)

In addition, manufacturers' claims regarding ``maximum I/M

cutpoints'' (i.e., cutpoints 1.5 times above the applicable standards)

and state in-use recall testing are inapposite. The OTC recommendation

did not include requests for either maximum I/M or in-use recall

testing. It is uncertain whether state programs will include these

provisions. Therefore, as such provisions are not required or otherwise

implicated by this action, manufacturers' arguments that such programs

will cause ``third vehicles'' are not ripe.

Another important issue noted by several commenters and Judge

McAvoy is that a significant number of vehicles sold in California

(those that permanently or, to a lesser extent, temporarily relocate)

are likely to be subjected to fuels with the same sulfur levels as

those in the northeast. In fact, AAMA admits that permanently relocated

California vehicles will likely need to have their converters replaced.

However, according to AAMA, auto manufacturers apparently will choose

not to equip California vehicles with the flange mounted converter

assemblies, though manufacturers do not claim that such assemblies are

forbidden by California regulations or that the way in which vehicle

catalysts are mounted is relevant in California certification testing.

Once again, any difference in vehicles is a manufacturer choice and is

certainly not mandated by the provisions of the OTC LEV recommendation;

nor is it an undue burden.

Moreover, as discussed more thoroughly in the response-to- comments

documents, the legislative history shows that Congress intended to

provide separate requirements for state regulation of vehicles and

state regulation of fuels. As Judge McAvoy determined, Congress did not

intend that differences in fuel requirements be used as criteria to

invalidate state vehicle regulations under section 177. See MVMA,

Docket No. 92-CV-869, slip op. at 19 (N.D.N.Y. Oct. 24, 1994).

Finally, as discussed in detail in the response-to-comments

documents, EPA is not convinced that the factual data provided by

manufacturers show that manufacturers will need to build a different

car for the OTR than for California in model year 1999 and thereafter.

First, manufacturers admit that the data they provide are generally

applicable to vehicles built prior to the current model year or to

model years 1996-1998. EPA notes that significant progress in

developing catalyst formulations that are more tolerant of sulfur than

current formulations may eliminate much of the concerns of

manufacturers by the 1999 model year. Also, EPA believes that

manufacturers have not shown that sulfur in fuel will, in and of

itself, cause OBD II catalyst monitors to illuminate malfunction

indicator lights by mistaking otherwise good catalysts as

malfunctioning.

3. ZEV Production Mandate

EPA finds that the ZEV production mandate is not required to ensure

consistency with section 177 for the reasons given in the SNPRM. See 59

FR at 48691-48692. EPA is leaving to each individual OTC state the

decision as to whether to adopt the ZEV mandate.21 EPA is not

resolving whether the ZEV mandate is an ``emission standard.''

[[Page 4729]] Rather, the Agency concludes that the ZEV production

mandate is not required to meet the identical standards provision under

section 177, whether or not the mandate is a standard relating to

control of emissions. Section 177 does not require adoption of all

California standards for a particular model year, but only requires

that if a state adopts motor vehicle standards, those standards that

are adopted must be identical to California's standards.22 The ZEV

production mandate and the remainder of the LEV program can be

segregated from each other, and the ZEV mandate is not essential for

implementation and enforcement of the remainder of the LEV program,

which is a fully functional and enforceable motor vehicle emissions

program. States adopting the LEV program therefore need not adopt the

ZEV mandate to comply with the requirement for identical standards

under section 177.

\21\EPA believes that the incorporation of the ZEV production

mandate into a state's LEV program is consistent with the

requirements of section 177.

\22\In the SNPRM, 59 FR 48692, n. 72, EPA stated its belief that

all standards applicable to a segregable program must be implemented

to assure that specific vehicles are subject to the same emissions

requirements. Upon further review, EPA believes that individual

emission standards may be implemented as long as the ``third car''

and ``sales limitation'' requirements of section 177 are not

violated by the omission of any standard.

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

4. Incorporation of Minor Provisions of the California LEV Program

The OTC's recommendation does not spell out every detail of the

California LEV program that it intended to incorporate into the

recommended program. As discussed in more detail in the SNPRM and the

response-to-comments documents, EPA interprets the OTC's recommendation

to incorporate the requirement that standards be identical to the

California LEV program, and to include any secondary requirements of

the California program necessary to ensure consistency with section 177

for 1999 and later model year passenger cars and light-duty trucks. See

59 FR at 48693. Determinations regarding which portions of the

California LEV program are required for consistency with section 177

will be made in the review of each state plan.

5. NMOG Fleet Average

State adoption of the NMOG fleet average does not violate section

177, as explained in the SNPRM. See 59 FR at 48693. The fleet average

requirement is a primary component of the California program that is

necessary to ensure specified emission reductions. Adoption of it by

other states is consistent with the identical standards requirement of

section 177. The NMOG average requires that a certain number of lower-

emitting vehicles must be sold in order to assure compliance, but does

not prohibit the sale of any California-certified car. State

incorporation of the NMOG average is therefore consistent with section

177's provision that states cannot restrict the sales of California-

certified vehicles.

6. Averaging, Trading, and Banking

Manufacturers claim that states must allow manufacturers to carry

over to OTR states any banked credits manufacturers have received in

California in model years leading up to 1999. Since California's LEV

program begins before model year 1999, each manufacturer is allowed to

generate and bank credits under California's program prior to 1999. The

manufacturer may use these credits to reduce the stringency of the NMOG

standards it must meet in California in model year 1999 and, to some

extent, later years. For OTC states that begin the program in model

year 1999, manufacturers would not be able to generate and bank credits

in that state before that year. Forcing manufacturers to meet the NMOG

fleet average in 1999 without the ability to use banked credits would,

according to manufacturers, violate section 177 by requiring a

different vehicle mix and, in effect, more stringent standards, in

1999. Therefore, auto manufacturers arguably could have to meet a more

stringent NMOG fleet average requirement in model year 1999 than they

would have to meet in California in that year.

EPA concludes that the availability of credit banking in California

prior to model year 1999 does not cause the OTC's recommended program

to violate the identical standards requirement of section 177. In

addition, states do not have to accept credits manufacturers have

banked in California in model years prior to 1999.

The specific language of section 177 indicates that the existence

of banked credits from a previous model year should not prevent states

from enacting the same NMOG fleet average requirements as California

has for 1999 and later years. Section 177 states that ``any State * * *

may adopt and enforce for any model year standards * * * and take other

actions * * * if * * * such standards are identical to the California

standards for which a waiver has been granted for such model year.''

(Emphasis added.) Section 177 explicitly refers to standards (and other

actions) taken with regard to a specific model year. Thus, as the OTC

LEV program's NMOG fleet average for the 1999 and later model years is

identical to the California NMOG fleet average that California has in

effect for those model years, there is no conflict with section 177.

Moreover, the ``limitation on California vehicles'' language is

concerned with ensuring that ``types'' of California vehicles are not

prohibited in section 177 states. It is not designed to ensure that

manufacturers' vehicle mixes in all states are identical.

However, as discussed in part V below, EPA believes that a state,

if it so chose, could implement the NMOG fleet average to account for

manufacturers' inability to bank credits in that state prior to the

start of the OTC LEV program in that state. EPA believes that there may

be advantages to states and manufacturers if states did account for the

manufacturers' inability to bank credits in OTC LEV programs prior to

model year 1999. For further explanation, see EPA's discussion in the

SNPRM (59 FR at 48694) and the response-to-comments documents.

7. Applicability of Section 177 in States Without Plan Provisions

Approved Under Part D of Title I

All states in the OTR have plan provisions approved under part D of

title I of the Act, and therefore satisfy this prerequisite for

eligibility under section 177. All states other than Vermont have ozone

nonattainment areas with associated SIPs approved under part D. Vermont

has plan provisions approved under part D related to earlier

nonattainment problems. See 40 CFR 52.2370(c)(10). In addition, EPA has

very recently approved Vermont's plan provisions related to emissions

statements in order to fulfill obligations under part D as revised by

the 1990 Amendments to the Act.

V. Action on OTC Petition, Issuance of Findings of SIP Inadequacy, and

Requirements for SIP Revisions

A. Action on OTC Petition and Explanation of SIP Call23

\23\EPA is not relying on the discussion in section V. A. of the

SNPRM (59 FR at 48694-48695) for the statement of basis and purpose

for today's action, but is relying on the discussion in section V.

B. (59 FR at 48695).

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

Based on the factual conclusions and legal interpretations

presented in section IV.A. above, EPA determines through today's action

that, until such time as EPA finds that an acceptable LEV-equivalent

program is in effect, adopting OTC LEV throughout the OTR is necessary

to bring certain areas into attainment (including maintenance) by the

dates provided in subpart 2 of part D of title I of the Clean Air Act.

Based on the conclusions presented in section [[Page 4730]] IV.B.

above, EPA determines through today's action that OTC LEV is otherwise

consistent with the Act. Based on those conclusions, EPA today approves

the OTC's recommendation that OTC LEV be adopted throughout the OTR. As

described elsewhere, however, EPA's approval of the OTC recommendation

and the requirements that flow from it leave open the option for an

acceptable LEV-equivalent program that would remove the need for the

OTC LEV program.

In section IV.A., EPA discussed its factual finding that emission

reductions from new motor vehicles equivalent to the reductions that

would be achieved by the OTC LEV program are needed throughout the OTR

to bring certain OTR nonattainment areas into attainment (including

maintenance) by their applicable attainment dates. Based on this

finding, EPA today finds under section 110(a)(2)(D) that each of those

states (and in the case of Virginia, the portion of the state lying

within the OTR) contributes significantly to nonattainment in, and

interferes with maintenance by, another state with respect to the ozone

standard. Because the SIPs for those states currently lack provisions

requiring those emission reductions, EPA today finds under its

independent section 110(k)(5) authority that each of those SIPs is

substantially inadequate (1) to comply with section 110(a)(2)(D)'s

requirement that each SIP contain adequate provisions prohibiting any

emissions activity that will contribute significantly to nonattainment

in, or interfere with maintenance by, another state with respect to the

ozone standard; and (2) to mitigate adequately the interstate pollutant

transport described in section 184. EPA is making the first of these

findings also pursuant to the requirement of section 184(c)(5) that,

upon approval of an OTC recommendation, EPA make ``a finding under

section 110(k)(5) that the implementation plan for such state is

inadequate to meet the requirements of section 110(a)(2)(D).''

Section 184(c)(5) states that EPA's finding under section 110(k)(5)

shall require the affected state to revise its SIP to include the

approved control measure within one year after the finding is issued.

Section 110(k)(5) itself provides that EPA must require the state

receiving a finding of SIP inadequacy to revise its SIP ``as

necessary'' to correct the inadequacies that are the subject of the

finding. As described above, EPA is qualifying its finding that OTC LEV

is necessary under sections 184 and 110(a)(2)(D), and hence is

qualifying its approval of the OTC LEV recommendation, by making each

finding subject to the contingency that EPA will find that an

acceptable LEV-equivalent program has come into effect. Thus, the SIP

inadequacy would be cured for each such SIP if an acceptable LEV-

equivalent program were in effect, and states would not have to submit

a SIP revision to comply with today's action. Therefore, EPA has

structured today's rule to require that each state in the OTR submit a

SIP revision within one year from the effective date of the SIP call

unless EPA finds that an acceptable, LEV-equivalent program is in

effect.

As described earlier, EPA has based its necessity findings on the

conclusions that there are insufficient potentially broadly practicable

measures to achieve the necessary emission reductions without also

applying OTC LEV or a LEV-equivalent program. A state would always have

the option under section 110 to adopt whatever measures it may believe

practicable for application within its borders. Thus, EPA is qualifying

its finding of necessity, and hence is qualifying its approval of the

OTC recommendation, by making each subject to the contingency that a

state will actually adopt sufficient (non-LEV) measures beyond those

EPA has identified as potentially broadly practicable so as to

demonstrate that the OTC LEV program is not necessary for that state to

cure the SIP inadequacy. EPA has structured its rule to provide that,

unless an acceptable LEV-equivalent program is in effect, the SIP

revisions required in response to the findings of SIP inadequacy must

contain either the OTC LEV program or sufficient adopted alternative

measures. These measures would be sufficient if, when combined with the

emission reductions that would result in that state from the measures

mandated by the Clean Air Act and all measures EPA has currently

concluded are potentially broadly practicable, they would achieve 50 to

75% NOX reductions from a 1990 baseline throughout that state and

50 to 75% VOC reductions from a 1990 baseline in the portions of the

state in or near the line of serious and severe nonattainment areas

along the Northeast Corridor.

As described above, today's SIP call keeps open the option of an

acceptable24 LEV-equivalent program, while ensuring that necessary

emission reductions are not delayed. The finding of inadequacy would be

cured and states would not have to adopt OTC LEV if an acceptable LEV-

equivalent program were in effect (which EPA assumes for today's action

would include a requirement that auto manufacturers could not opt out

once they had opted in). If states take action to adopt or enact OTC

LEV before discussions on the alternative program are concluded, EPA

encourages states to structure their OTC LEV programs to provide for a

future LEV-equivalent program that EPA finds is acceptable in a future

rulemaking. Such a provision could give auto manufacturers the choice

of complying with either the state's OTC LEV standards or the

acceptable LEV-equivalent program.

\24\The criteria for determining whether a LEV-equivalent

program is acceptable will be established as part of the rulemaking

on the acceptability of that program. However, to relieve states of

their obligation to submit an OTC LEV program, EPA has assumed that

a LEV-equivalent program would not allow manufacturers to opt out of

the program after they had opted in. EPA is not addressing today

whether states would need to adopt OTC LEV as a ``back stop'' if

manufacturers could opt out of the program.

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

To meet the requirements of this SIP call using an OTC LEV program,

a state must exercise its authority under section 177 to adopt the NMOG

fleet averages that are part of California's LEV program. The

requirements for these are set forth in the following section. States

are not required to adopt the ZEV mandate, but retain their authority

to do so under section 177.

As described above, rather than submit an OTC LEV SIP revision,

states may submit a ``shortfall'' program to meet today's SIP call. A

``shortfall'' SIP revision must contain adopted measures that make up

the shortfall between (1) the emission reductions necessary to prevent

adverse consequences on downwind nonattainment (i.e., 50-75% NOX

reductions throughout the state and 50-75% VOC reductions in the

portions of the state in, or near and upwind of the Northeast urban

corridor), and (2) the emission reductions that would be achieved by

the measures mandated by the Act and the potentially broadly applicable

measures EPA identifies in this notice and the SNPRM. Such SIPs will

include measures that EPA cannot now conclude are potentially

practicable for the region as a whole. Therefore, states submitting a

shortfall SIP in lieu of the OTC LEV program must submit fully adopted

measures sufficient to fill completely the emission reduction

shortfall, not just the emission reduction equivalent to the OTC LEV

program, in order to make a convincing demonstration that OTC LEV is

not necessary to prevent adverse impacts in downwind states. The

submittal of (non-LEV) measures that would achieve only emissions

reductions equivalent to what [[Page 4731]] the OTC LEV or LEV-

equivalent program would achieve might still leave a substantial

shortfall. Thus, there would be no showing that a LEV program would be

unnecessary to fill that remaining shortfall. The ``shortfall'' SIP

measures cannot be measures that are mandated by the Clean Air Act or

are among the potentially broadly applicable measures identified by EPA

in this notice or the SNPRM. For purposes of determining whether such a

shortfall SIP revision is complete within the meaning of section

110(k)(1) (and hence is eligible at least for consideration to be

approved as satisfying today's SIP call), such a SIP revision must

contain other adopted emission-reduction measures that, together with

the identified potentially broadly applicable measures, achieve at

least the minimum 50% reduction in NOX emissions throughout those

portions of the state within the transport region, and at least the

minimum 50% reduction in VOC emissions within those portions of the

state in or near (and upwind of) the urbanized portions of the

Northeast Corridor.

B. State Requirements Under EPA SIP Call

To satisfy the requirement for an OTC LEV SIP revision under

today's SIP call, unless EPA finds that an acceptable LEV-equivalent

program is in effect, every state in the OTR is required to promulgate

regulations that will mandate the OTC LEV program for new light-duty

vehicles and trucks beginning in model year 1999. The regulations must

be adopted no later than one year following the effective date of the

SIP call and apply to 1999 and later model years. This will provide

manufacturers with the two-year lead-time required under section

177.25 The OTC LEV program applies to all passenger cars and

light-duty trucks (0-5750 pounds loaded vehicle weight (LVW)) in the

OTR.26

\25\ Given today's model year regulations, the effective date of

this rule, and the information in the docket on auto manufacturers'

production schedules, EPA realizes that a few 1999 model year engine

families might not be subject to OTC LEV. EPA does not anticipate

that this will reduce emission benefits significantly.

\26\ These requirements therefore apply to all 1999 and later

model year vehicles in each state, except that these requirements

only apply in the northern portion of Virginia that is a part of the

OTR.

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

The OTC LEV program generally requires that no 1999 or later model

year vehicle may be sold, imported, delivered, purchased, leased,

rented, acquired, received, or registered in the OTR unless such

vehicle has received a certification from the California Air Resources

Board.27 Each state must allow for the sale of California's Tier

I, TLEV, LEV, ULEV and ZEV vehicles in that state. The emission

standards for such vehicle classes must be identical to those in

California. In addition, all states must promulgate California's NMOG

fleet average requirements. The fleet averages for passenger cars and

light-duty trucks 0-3750 lbs. LVW shall be identical to California's

NMOG fleet averages for such classes of vehicles, as stated in the OTC

recommendation. The NMOG fleet averages for larger light-duty trucks

(3751-5750 lbs. LVW) shall be identical to California's NMOG fleet

averages for such class of vehicles for the applicable model

years.28 As discussed below, states have considerable flexibility

in implementing these NMOG fleet averages during the appropriate model

years.

\27\ The OTC recommendation contained several exceptions to this

requirement. For example, vehicles sold directly from one dealer to

another dealer are not subject to this requirement. EPA expects that

these exemptions will be included in state programs. EPA is not

today ruling whether these exemptions are required, permitted or

prohibited under the Act, although EPA notes that it received no

comments providing any substantive arguments that these exceptions

violate section 177.

\28\ The NMOG fleet averages for passenger cars and light-duty

trucks (0-3750 lbs. LVW) for the applicable model years, in grams

per mile, are: 1999-0.113; 2000-0.073, 2001-0.070, 2002-0.068; 2003

and later years-0.062. The NMOG averages for light-duty trucks

(3751-5750 lbs. LVW) are: 1999-0.150; 2000-0.099; 2001-0.098; 2002-

0.095; 2003 and later-0.093.

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

States must adopt California's provisions pertaining to averaging,

banking and trading, hybrid electric vehicles, extensions and

exemptions for intermediate and small volume manufacturers (as defined

by California), and Reactivity Adjustment Factors (RAFs) as necessary

for certification in California. States also must adopt any other

provisions of California's new motor vehicle regulations that are

necessary to ensure compliance with section 177 of the Clean Air Act.

EPA has not examined which other provisions are necessary to ensure

compliance with section 177. The need for other provisions shall be

addressed when individual states adopt or seek approval of the OTC LEV

program.

States are not required to adopt California's ZEV production

mandate. As discussed earlier in section IV.B.3., EPA does not believe

that adoption of the production mandate is necessary to ensure

compliance with section 177. The OTC did not recommend that EPA require

states to incorporate the ZEV production mandate unless it was required

by section 177, and EPA declines to use its discretion to require

states to incorporate the mandate. However, states are free, at their

own discretion, to incorporate the mandate into their motor vehicle

emission programs.

States also have significant discretion in the manner in which they

implement the OTC LEV program. Though states must adhere to the

requirements of section 177, EPA is not mandating specific methods that

states must use to implement the program. In particular, EPA believes

that states have significant discretion in the manner in which they

implement the NMOG fleet average.

Given the regional nature of the OTC LEV program and the possible

hardships to state governments and manufacturers in having to

administer and comply with separate programs in thirteen different

jurisdictions, states should attempt to coordinate their programs as

much as possible. In particular, EPA believes that states could choose

to give manufacturers the option of meeting the NMOG average on a

region-wide basis, rather than having to meet the requirement on a

state-by-state basis.29 This will allow for more flexibility in

enforcement and compliance, but will require more coordination among

jurisdictions.

\29\ For example, a state program could deem a manufacturer to

be in compliance with a state's NMOG average if the manufacturer's

sales in OTR states with identical requirements meet the NMOG

average. There might be only small variations in vehicle mix from

one state to another if the states have identical standards and are

in the same region. If such variations have insignificant effects on

a state's air quality, state-by-state compliance with NMOG averages

might not be worth the administrative burden.

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

EPA also believes that states have the discretion to account for

automakers' inability to bank credits in those states prior to 1999.

This might be accomplished by accounting for banked credits that

manufacturers have amassed in California (or perhaps in New York or

Massachusetts) in model years prior to 1999 under the averaging,

banking and trading provisions of the LEV program. As discussed above

in part IV.B.3, EPA does not believe that states have an obligation to

account for credits that manufacturers have received in California for

early banking. A state program that includes California's NMOG average

and California's averaging, banking and trading provisions is

consistent with section 177, whether or not the state accounts for

credits that are banked in California prior to the state's

implementation of the LEV program. However, EPA believes that, in

implementing the program, states can, consistent with section 177,

account for banked credits. Given that the averaging, banking and

[[Page 4732]] trading program was included by California to provide

flexibility in meeting the program, EPA does not believe it is a breach

of the identicality requirement to allow states to account for banked

credits in implementing the OTC LEV program. Also, if any states fail

to implement the program in model year 1999, desire for regional

consistency would also dictate that such states allow for any banked

credits from other state programs in the implementation of their

programs. In any case, states should coordinate with each other to

ensure that the goals of regional consistency are not frustrated by

differences in implementation of the NMOG fleet average.

Finally, as discussed in section VI.B.5, states may decide not to

include the NMOG average in their implementation of the OTC LEV program

in the initial model year if the state can only begin implementation of

the program in the middle-to-end of the year. Manufacturers have

objected that beginning implementation of the OTC LEV program in the

middle of a calendar year would create significant problems for

manufacturers in meeting the NMOG fleet average requirements for the

first model year. This is because manufacturers meet the NMOG fleet

average by coordinating their entire fleets to achieve the desired

average. This process is susceptible to disruption when manufacturers

must meet the NMOG average in the initial model year if the initial

model year begins in the middle-to-end of a calendar year. This is

because, under the model year regulations finalized today, only a

portion of a manufacturer's fleet may be subject to the NMOG

requirements for the initial model year if it is a ``split'' model

year. EPA believes that manufacturers are well equipped to deal with

this disruption by moving production start dates, especially given the

two years of lead-time that manufacturers will have to coordinate their

production schedules. However, given the fleet-wide nature of the NMOG

fleet average and the desire for coordinated regional strategy, it may

be appropriate for states that begin the OTC LEV program in the middle-

to-end of a calendar year to refrain from implementing the NMOG fleet

average for the initial model year. However, once the second model year

begins, the NMOG fleet average must be a part of the state program.

Also, states that initiate the OTC LEV program close to the beginning

of the year (when disruption of the NMOG program should be minimal)

should include the NMOG fleet average as part of the OTC LEV program in

the initial model year.

C. Sanctions

In the SNPRM, EPA addressed the imposition of sanctions in the case

of state non-compliance with EPA's SIP call under section 110(k)(5) of

the Act. EPA's rule to implement section 179 of the Act regarding

sanctions specifies the order in which the statutory highway funding

and offset ratio sanctions will apply, but does not address the

imposition of sanctions in the case of state failure to comply with a

SIP call under section 110(k)(5) of the Act. See 59 FR 38932 (Aug. 4,

1994)(sanctions rule). EPA therefore proposed in the SNPRM to extend

the general scheme promulgated for sanctions under section 179 to the

SIP call at issue here, with the 2:1 offset sanction applied first and

the highway funding sanction applied second. EPA takes final action

today to apply that general scheme to this SIP call.

EPA also requested comment on whether it should provide in the

final rule that discretionary sanctions under section 110(m) of the Act

would apply beginning immediately upon a finding of failure to submit

the OTC LEV program (or a complete shortfall SIP revision) by the one-

year deadline for that submission. EPA questioned whether the

particular circumstances presented here by the two-year lead-time

requirement may warrant such action. EPA is deferring final action on

whether to exercise its discretion under section 110(m) to accelerate

the imposition of sanctions if states fail to submit the OTC LEV

program by the applicable deadline. The Agency will consider this issue

further.

VI. Determination of Model Year

In the SNPRM, EPA proposed to promulgate regulations determining

for purposes of Section 177 and Title II, Part A of the Act the

definition of the term ``model year'' and certain related terms. See 59

FR at 48696-48698. EPA believed that this was a necessary step to

remove any confusion regarding the commencement of a model year which

may have resulted from conflicting views on this point in the New York

and Massachusetts litigations regarding the adoption of the California

LEV standards.

After review of the comments received on the proposed model year

regulations published in the SNPRM, EPA has determined, for the reasons

given below, in the SNPRM (59 FR 48697-48698), and in the response-to-

comments documents, that it is appropriate at this time to promulgate

these proposed regulations as final rules. At the request of AAMA, EPA

is adding language clarifying the term ``date on which a vehicle or

engine is first produced.''

EPA's proposed model year regulations, which apply to section 177

and Title II, retained the definition of ``model year'' found in both

the Act and in existing EPA regulations (promulgated under section 202)

as essentially ``the manufacturer's annual production period.''30

EPA's proposed model year regulations also codified the definition of

``annual production period,'' which has appeared in various versions of

EPA Advisory Circulars on this issue since 1972.

\30\See 42 U.S.C. sec. 7521 (b)(3)(A)(i) (1993) and 40 CFR

86.082-2 (1994).

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

Under the proposed regulations, model year would be determined on

an engine family basis for specific models within engine families,

depending upon the date the first model in the engine family commences

production. Therefore, the date upon which the model year begins may be

different for each engine family that a manufacturer produces. EPA

believes this approach is more appropriate than beginning model years

industry-wide on a certain date (an alternative favored by the industry

and discussed below) because it is more suited to the central purpose

of section 177, which is to allow states to receive emission benefits

from the California motor vehicle program while giving manufacturers

two years of lead-time to prepare to meet the state standards. In

addition, as discussed in the SNPRM (59 FR 48697), this approach

provides manufacturers with substantial flexibility to continue to

produce automobiles for one model year while initiating production of

other models for a later model year.

EPA received critical comments on the proposed rule only from AAMA,

which raised several objections. The main thrust of the AAMA argument

is that the EPA model year regulations will cause more harm than good

because they will compel manufacturers to provide both California and

Federal vehicles to a single state in a single model year depending on

that state's date of adoption of the California standards. For this

reason, AAMA supported an industry-wide approach in which model years

would begin on January 2 of the calendar year preceding the model year

for which the model year is designated. However, as emphasized in the

SNPRM, EPA believes that the model year regulations provide vehicle

manufacturers the maximum flexibility in terms of adjusting the model

year [[Page 4733]] designations of their product line to meet marketing

needs and product changes.

EPA's approach allows manufacturers to control the beginning of the

model year for each of its engine families, since manufacturers control

the date upon which its models begin production. Manufacturers are in

the best position to determine the date that any model in an engine

family commences production and

This text is long and has been trimmed here. Open the source document for the complete record.