Approval and Promulgation of Implementation Plans; California State Implementation Plan Revision, South Coast Air Quality Management District

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA 181-0021; FRL-5642-9]

Approval and Promulgation of Implementation Plans; California

State Implementation Plan Revision, South Coast Air Quality Management

District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve revisions to the California State

Implementation Plan (SIP) for ozone. The revision concerns the control

of oxides of nitrogen (NOX) and oxides of sulfur (SOX)

emissions using an emissions-limiting economic incentive program (EIP),

the NOX and SOX Regional Clean Air Incentives Market

(NOX/SOX RECLAIM). This program, which consists of twelve

rules and associated appendices known as Regulation XX, applies to

facilities in the South Coast Air Quality Management District (SCAQMD)

with four or more tons of NOX or SOX emissions per year from

permitted equipment. The subject facilities, in order to meet annual

emission reduction requirements, will participate in an EIP in order to

reduce emissions at a significantly lower cost. The intended effect of

proposing approval of this rule is to regulate emissions of NOX in

accordance with the requirements of the Clean Air Act, as amended in

1990 (CAA or the Act). EPA's final action on this notice of proposed

rulemaking will incorporate this rule into the federally approved SIP.

EPA has evaluated this rule and is proposing to approve it under

provisions of the CAA regarding EPA actions on SIP submittals, SIPs for

national primary and secondary ambient air quality standards (NAAQS),

and plan requirements for nonattainment areas. Elsewhere in the Federal

Register today, EPA is finalizing a limited approval/limited

disapproval of an earlier version of the RECLAIM program (submitted to

EPA for approval on March 21, 1994); when EPA publishes its final

action approving the August 28, 1996 submittal, the possibility of

sanctions mentioned in the final limited approval/limited disapproval

of the earlier submittal will be removed.

DATES: Comments on this proposed action must be received in writing on

or before December 9, 1996.

ADDRESSES: Comments may be mailed to: Daniel A. Meer, Rulemaking

Section (A-5-3), Air and Toxics Division, U.S. Environmental Protection

Agency, Region 9, 75 Hawthorne Street, San Francisco, CA 94105-3901.

Copies of the rule and EPA's evaluation report are available for

public inspection at EPA's Region 9 office during normal business

hours. Copies of the submitted rule are also available for inspection

at the following locations:

California Air Resources Board, Stationary Source Division, Rule

Evaluation Section, 2020 ``L'' Street, Sacramento, CA 95812.

South Coast Air Quality Management District, 21865 E. Copley Drive,

Diamond Bar, CA 91765-4182.

FOR FURTHER INFORMATION CONTACT: Kenneth Israels, Rulemaking Section

(A-5-3), Air and Toxics Division, U.S. Environmental Protection Agency,

Region IX, 75 Hawthorne Street, San Francisco, CA 94105-3901,

Telephone: (415) 744-1194.

SUPPLEMENTARY INFORMATION:

Applicability

The rule being proposed for approval into the California SIP is:

SCAQMD Regulation XX, NOX/SOX RECLAIM. This rule was

submitted by the California Air Resources Board (CARB) to EPA on August

28, 1996 and found complete on September 17, 1996.

Background

On November 15, 1990, the Clean Air Act Amendments of 1990 (CAA)

were enacted. Pub. L. 101-549, 104 Stat. 2399, codified at 42 U.S.C.

7401-7671q. The air quality planning requirements for the reduction of

NOX emissions through reasonably available control technology

(RACT) are set out in section 182(f) of the CAA. On November 25, 1992,

EPA published a NPRM entitled ``State Implementation Plans; Nitrogen

Oxides Supplement to the General Preamble; Clean Air Act Amendments of

1990 Implementation of Title I; Proposed Rule,'' (the NOX

Supplement) which describes and provides preliminary guidance on the

requirements of section 182(f). The November 25, 1992, notice should be

referred to for further information on the NOX requirements and is

incorporated into this document by reference.

Section 182(f) of the Clean Air Act requires States to apply the

same requirements to major stationary sources of NOX (``major'' as

defined in section 302 and section 182(c), (d), and (e)) as are applied

to major stationary sources of volatile organic compounds (VOCs), in

moderate or above ozone nonattainment areas. The Los Angeles-South

Coast Air Basin is classified as extreme; 1 therefore this area

was subject to the RACT requirements of section 182(b)(2) and the

November 15, 1992 deadline, cited below.

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\1\ The Los Angeles-South Coast Air Basin retained its

designation of nonattainment and classified by operation of law

pursuant to sections 107(d) and 181(a) upon the date of enactment of

the CAA. See 55 FR 56694 (November 6, 1991).

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Section 182(b)(2) requires submittal of RACT rules for major

stationary sources of VOC (and NOX) emissions (not covered by a

pre-enactment control techniques guidelines (CTG) document or a post-

enactment CTG document) by November 15, 1992. There were no NOX

CTGs issued before enactment and EPA has not issued a CTG document for

any NOX sources since enactment of the CAA. The RACT rules

covering NOX sources and submitted as SIP revisions, are expected

to require final installation of the actual NOX controls as

expeditiously as practicable, but no later than May 31, 1995.

On April 7, 1994, EPA published a Notice of Final Rulemaking (NFRM)

concerning EIPs entitled ``Economic Incentive Program Rules,'' (EIP

rules) in order to fulfill the requirements of section 182(g)(4)(A) of

the Act (see 59 FR 16690). The EIP rules establish several requirements

which State programs must meet. These requirements are:

Statement of goals and rationale. This element shall

include a clear statement as to the environmental problem being

addressed, the intended environmental and economic goals of the

program, and the rationale relating the incentive-based strategy to the

program goals.

Program scope. This element shall contain a clear

definition of the sources affected by the program.

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Program baseline. A program baseline shall be defined as a

basis for projecting program results and, if applicable, for

initializing the incentive mechanism (e.g., for marketable permits

programs). The program baseline shall be consistent with, and

adequately reflected in, the assumptions and inputs used to develop an

area's reasonable further progress (RFP) plans and attainment and

maintenance demonstrations, as applicable. The State shall provide

sufficient supporting information from the areawide emissions inventory

and other sources to justify the baseline used in the State or local

EIP.

Replicable emission quantification methods. This program

element, for programs other than those which are categorized as

directionally-sound, shall include credible, workable, and replicable

methods for projecting program results from affected sources and, where

necessary, for quantifying emissions from individual sources subject to

the EIP. Such methods, if used to determine credit taken in attainment,

RFP, and maintenance demonstrations, as applicable, shall yield results

which can be shown to have a level of certainty comparable to that for

source-specific standards and traditional methods of control strategy

development.

Source requirements. This program element shall include

all source-specific requirements that constitute compliance with the

program. Such requirements shall be appropriate, readily ascertainable,

and State and federally enforceable.

Projected results and audit/reconciliation procedures.

This program element includes a commitment to ensure the timely

implementation of programmatic revisions or other measures which the

State, in response to the audit, deems necessary for the successful

operation of the program in the context of overall RFP and attainment

requirements. (see 40 CFR 51.493(f)(3)(i))

Implementation schedule. The program shall contain a

schedule for the adoption and implementation of all State commitments

and source requirements included in the program design.

Administrative procedures. The program shall contain a

description of State commitments which are integral to the

implementation of the program, and the administrative system to be used

to implement the program, addressing the adequacy of the personnel,

funding, and legislative authority.

Enforcement mechanisms. The program shall contain a

compliance instrument(s) for all program requirements, which is legally

binding and enforceable by both the State and EPA. This program element

shall also include a State enforcement program which defines

violations, and specifies auditing and inspections plans and provisions

for enforcement actions. The program shall contain effective penalties

for noncompliance which preserve the level of deterrence in traditional

programs. For all such programs, the manner of collection of penalties

must be specified.

The EIP rule should be referred to for further information on the

EIP requirements and is incorporated into this proposal by reference.

This document addresses EPA's proposed action for SCAQMD Regulation

XX--NOX/SOX RECLAIM. The rule was adopted by the SCAQMD on

December 7, 1995 and May 10, 1996, and submitted by the CARB on August

28, 1996. Regulation XX was found to be complete on September 17, 1996

pursuant of EPA's completeness criteria that are set forth in 40 CFR

Part 51 Appendix V 2 and is being proposed for approval into the

SIP. Elsewhere in the Federal Register today, EPA is finalizing a

limited approval/limited disapproval of an earlier version of the

RECLAIM program (submitted to EPA for approval on March 21, 1994); when

EPA publishes its final action approving the August 28, 1996 submittal,

the possibility of sanctions mentioned in the final limited approval/

limited disapproval of the earlier submittal will be removed.

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\2\ EPA adopted the completeness criteria on February 16, 1990

(55 FR 5830) and, pursuant to section 110(k)(1)(A) of the CAA,

revised the criteria on August 26, 1991 (56 FR 42216).

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NOX emissions contribute to the production of ground level

ozone and smog. The revision concerns the control of oxides of nitrogen

(NOX) and oxides of sulfur (SOX) emissions using an

emissions-limiting EIP, NOX/SOX RECLAIM. This program, which

consists of twelve rules and associated appendices known as Regulation

XX, applies to facilities in the SCAQMD with four or more tons of

NOX or SOX emissions per year from permitted equipment. The

subject facilities, in order to meet annual emission reduction

requirements, will participate in an EIP in order to reduce emissions

at a significantly lower cost. The regulation was adopted as part of

SCAQMD's efforts to achieve the NAAQS for ozone and in response to the

CAA requirements cited above. The following is EPA's evaluation and

proposed action for Regulation XX.

EPA Evaluation and Proposed Action

In determining the approvability of a NOX rule, EPA must

evaluate the rule for consistency with the requirements of the CAA and

EPA regulations, as found in section 110 and part D of the CAA and 40

CFR part 51 (Requirements for Preparation, Adoption and Submittal of

Implementation Plans). EPA's interpretation of these requirements,

which forms the basis for this action, appears in the NOX

Supplement (57 FR 55620) and various other EPA policy guidance

documents.3 Among these provisions is the requirement that a

NOX rule must, at a minimum, provide for the implementation of

RACT for stationary sources of NOX emissions.

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\3\ Among other things, the pre-amendment guidance consists of

those portions of the proposed Post-1987 ozone and carbon monoxide

policy that concern RACT, 52 FR 45044 (November 24, 1987); ``Issues

Relating to VOC Regulation Cutpoints, Deficiencies, and Deviations,

Clarification to Appendix D of November 24, 1987 Federal Register

Notice'' (Blue Book) (notice of availability was published in the

Federal Register on May 25, 1988).

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For the purposes of assisting state and local agencies in

developing NOX RACT rules, EPA prepared the NOX Supplement to

the General Preamble. In the NOX supplement, EPA provides

preliminary guidance on how RACT will be determined for stationary

sources of NOX emissions. While most of the guidance issued by EPA

on what constitutes RACT for stationary sources has been directed

towards application for VOC sources, much of the guidance is also

applicable to RACT for stationary sources of NOX (see section 4.5

of the NOX Supplement). In addition, pursuant to section 183(c),

EPA has issued alternative control technique documents (ACTs) that

identify alternative controls for all categories of stationary sources

of NOX. The ACT documents provide information on control

technology for stationary sources that emit or have the potential to

emit 25 tons per year or more of NOX. However, the ACTs do not

establish a presumptive norm for what is considered RACT for stationary

sources of NOX. In general, the guidance documents cited above, as

well as other relevant and applicable guidance documents, have been set

forth to ensure that submitted NOX RACT rules meet Federal RACT

requirements and are fully enforceable and strengthen or maintain the

SIP.

In evaluating the rule, EPA must also determine whether the section

182(b) requirement for RACT implementation by May 31, 1995 is met. The

NOX/SOX RECLAIM program meets this requirement by

establishing baseline emissions in January 1994 and July 1994 in the

market which are below RACT

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and are annually reduced further below this level.

In determining the approvability of an EIP, EPA must evaluate the

regulation for consistency with the requirements of the CAA and EPA

regulations, as found in section 110 and Part D of the CAA and 40 CFR

Part 51 (Requirements for Preparation, Adoption, and Submittal of

Implementation Plans). The EPA interpretation of these requirements,

which forms the basis for today's action, appears in the various EPA

policy guidance documents listed in footnote 4 of this notice. Among

these provisions is the requirement that an EIP rule must, at a

minimum, be consistent with attainment and RFP requirements found in

the CAA.

For the purpose of assisting state and local agencies in developing

rules which incorporate economic incentive strategies, EPA prepared the

EIP rules, cited above (59 FR 16690). In the EIP rules, EPA provides

guidance on how EIPs can be designed to be consistent with the

attainment and RFP requirements of the CAA. In general, the guidance

documents cited above, as well as other relevant and applicable

guidance documents, have been set forth to ensure that submitted EIPs

meet federal requirements and are fully enforceable and strengthen or

maintain the SIP.

A more detailed discussion of the sources controlled, the controls

required, and justification for why these controls represent RACT can

be found in the Technical Support Document (TSD), dated August, 1996.

The revised RECLAIM program rule (Regulation XX) contains

significant changes which address the deficiencies identified in the

original NPRM, dated February 28, 1995 4 in the following ways:

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\4\ For more information on how these deficiencies were

addressed, please see the TSD which accompanies this rulemaking,

available from EPA Region 9.

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The program no longer allows the use of variances to avoid

compliance with program requirements; the program now meets the

requirements of Section 110(i) of the Act,

The SCAQMD revised the program so that it meets certain

new source review requirements of the Act and Part D, which were listed

as deficiencies in the February 28, 1995 NPRM,

The program no longer allows the use of Executive Officer

discretion in the implementation of certain emissions monitoring

provision, which were listed as deficiencies in the February 28, 1995

NPRM,

The EPA and SCAQMD have agreed upon a permit mechanism to

address the program's references to other programs, notably those

involving the use of mobile source emission reduction credits (MERCs)

to ensure that the program is consistent with Section 110(i) of the

Act, and

The SCAQMD, with the August 28, 1996 submittal, provided

all of the necessary demonstrations to ensure that the requirements of

the EIP rules are being met.

A detailed discussion of the rule provisions and evaluations has

been provided in the TSD available at EPA's Region 9 office (TSD dated

August, 1996).

EPA has evaluated the submitted rule and has determined that it is

consistent with the CAA, EPA regulations and EPA policy. Therefore,

SCAQMD's Regulation XX--NOX/SOX RECLAIM is being proposed for

approval under section 110(k)(3) of the CAA as meeting the requirements

of section 110(a), section 182(b)(2), section 182(f), the NOX

Supplement to the General Preamble, and the EIP rules.

EPA is seeking comment in this NPRM on whether the deficiencies

cited in the final limited approval/limited disapproval of NOX/

SOX RECLAIM found elsewhere in the Federal Register today have

been addressed. EPA believes that the cited deficiencies have been

addressed with the August 28, 1996 submittal of revisions to Regulation

XX.

Nothing in this action should be construed as permitting or

allowing or establishing a precedent for any future request for

revision to any state implementation plan. Each request for revision to

the state implementation plan shall be considered separately in light

of specific technical, economic and environmental factors and in

relation to relevant statutory and regulatory requirements.

Administrative Requirements

A. Executive Order 12866

This action has been classified as a Table 3 action for signature

by the Regional Administrator under the procedures published in the

Federal Register on January 19, 1989 (54 FR 2214-2225), as revised by a

July 10, 1995 memorandum from Mary Nichols, Assistant Administrator for

Air and Radiation. The Office of Management and Budget (OMB) has

exempted this regulatory action from E.O. 12866 review.

B. Regulatory Flexibility Act

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

must prepare a regulatory flexibility analysis assessing the impact of

any proposed or final rule on small entities. 5 U.S.C. 603 and 604.

Alternatively, EPA may certify that the rule will not have a

significant impact on a substantial number of small entities. Small

entities include small businesses, small not-for-profit enterprises,

and government entities with jurisdiction over populations of less than

50,000.

SIP approvals under sections 110 and 301, and subchapter I, part D

of the CAA do not create any new requirements but simply approve

requirements that the State is already imposing. Therefore, because the

Federal SIP approval does not impose any new requirements, I certify

that it does not have a significant impact on any small entities

affected. Moreover, due to the nature of the Federal-State relationship

under the CAA, preparation of a flexibility analysis would constitute

Federal inquiry into the economic reasonableness of State action. The

Clean Air Act forbids EPA to base its actions concerning SIPs on such

grounds. Union Electric Co. v. U.S. EPA, 427 U.S. 246, 255-66 (1976);

42 U.S.C. 7410(a)(2).

C. Unfunded Mandates

Under Section 202 of the Unfunded Mandates Reform Act of 1995

(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA

must prepare a budgetary impact statement to accompany any proposed or

final rule that includes a Federal mandate that may result in estimated

costs to State, local, or tribal governments in the aggregate; or to

private sector, of $100 million or more. Under Section 205, EPA must

select the most cost-effective and least burdensome alternative that

achieves the objectives of the rule and is consistent with statutory

requirements. Section 203 requires EPA to establish a plan for

informing and advising any small governments that may be significantly

or uniquely impacted by the rule.

EPA has determined that the approval action promulgated does not

include a Federal mandate that may result in estimated costs of $100

million or more to either State, local, or tribal governments in the

aggregate, or to the private sector. This Federal action approves pre-

existing requirements under State or local law, and imposes no new

Federal requirements. Accordingly, no additional costs to State, local,

or tribal governments, or to the private sector, will result from this

action.

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D. Submission to Congress and the General Accounting Office

Under section 801(a)(1)(A) of the Administrative Procedures Act

(APA) as amended by the Small Business Regulatory Enforcement Fairness

Act of 1996, EPA submitted a report containing this rule and other

required information to the U.S. Senate, the U.S. House of

Representatives and the Comptroller General of the General Accounting

Office prior to publication of the rule in today's Federal Register.

This rule is not a ``major rule'' as defined by section 804(2) of the

APA as amended.

E. Petitions for Judicial Review

Under section 307(b)(1) of the Act, petitions for judicial review

of this action must be filed in the United States Court of Appeals for

the appropriate circuit by January 7, 1997. Filing a petition for

reconsideration by the Administrator of this final rule does not affect

the finality of this rule for the purposes of judicial review, nor does

it extend the time within which a petition for judicial review may be

filed and shall not postpone the effectiveness of such rule or action.

This action may not be challenged later in proceedings to enforce its

requirements (see section 307(b)(2)).

List of Subjects in 40 CFR Part 52

Environmental protection, Air pollution control, Hydrocarbons,

Incorporation by reference, Intergovernmental relations, Nitrogen

oxides, Ozone, Reporting and recordkeeping requirements, Volatile

organic compound.

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

Dated: October 6, 1996.

Felicia Marcus,

Regional Administrator.

[FR Doc. 96-28595 Filed 11-7-96; 8:45 am]

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