Transitional and General Opt Out Procedures for Phase II Reformulated Gasoline Requirements

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[FRL-5803-6]

Transitional and General Opt Out Procedures for Phase II

Reformulated Gasoline Requirements

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rule making.

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SUMMARY: In this document EPA is proposing to change the regulations

for states to opt-out of the federal reformulated gasoline (RFG)

program for areas where a state had previously voluntarily opted into

the program. Under this proposal, if a state has not submitted an opt-

out petition to EPA by December 31, 1997, it must participate in Phase

II RFG until December 31, 2003. The Agency believes this proposed

process is necessary to ensure a smooth transition between the two

phases of the reformulated gasoline program.

The Agency is also proposing, that effective January 1, 2004, the

current opt-out procedures, which provide that EPA-approved opt-out

petitions become effective 90 days from approval, become effective

again.

In addition, this proposed rule would require that states decide

and submit to EPA a complete opt-out petition by December 31, 1997, if

they want an opt-in area to continue to participate in Phase I of the

RFG program up to December 31, 1999, but do not wish to participate in

Phase II of the program.

This action does not affect the policies for opting in to the RFG

program. In a separate action EPA is publishing a notice of proposed

rulemaking, simultaneous with this proposal, which would permit former

ozone nonattainment areas to opt into the federal reformulated gasoline

program. EPA has not made a final determination on the policy for

attainment area RFG implementation.

DATES: The Agency will hold a public hearing on this proposal if one is

requested by April 4, 1997. If a public hearing is held, it will take

place on April 18, 1997.

If a public hearing is held on this proposal, comments must be

received by May 19, 1997. If a hearing is not held, comments must be

receved by April 28, 1997. Please direct all correspondence to the

address shown below.

To request a hearing, or to find out if and where a hearing is

held, please call Christine Hawk at (202) 233-9000.

ADDRESSES: Comments should be submitted (in duplicate, if possible) to

Air Docket Section, Mail Code 6102, U.S. Environmental Protection

Agency, 401 M Street, SW, Washington, DC 20460. A copy should also be

sent to Ms. Christine Hawk at U.S. Environmental Protection Agency,

Office of Air and Radiation, 401 M Street, SW (6406J), Washington, DC

20460.

Materials relevant to this notice have been placed in Docket A-94-

68. The docket is located at the Air Docket Section, Mail Code 6102,

U.S. Environmental Protection Agency, 401 M Street, SW, Washington, DC

20460, in room M-1500 Waterside Mall. Documents may be inspected from

8:00 a.m. to 5:30 p.m. A reasonable fee may be charged for copying

docket material.

FOR FURTHER INFORMATION CONTACT: Christine Hawk or Diane Turchetta at

U.S. Environmental Protection Agency Office of Air and Radiation, 401 M

Street, SW (6406J), Washington, DC 20460, (202) 233-9000.

SUPPLEMENTARY INFORMATION: A copy of this action is available on the

OAQPS Technology Transfer Network Bulletin Board System (TTNBBS) and on

the Office of Mobile Sources' World Wide Web cite, http://www.epa.gov/

OMSWWW. The TTNBBS can be accessed with a dial-in phone line and a

high-speed modem (PH# 919-541-5742). The parity of your modem should be

set to none, the data bits to 8, and the stop bits to 1. Either a 1200,

2400, or 9600 baud modem should be used. When first signing on, the

user will be required to answer some basic informational questions for

registration purposes. After completing the registration process,

proceed through the following series of menus:

(M) OMS

(K) Rulemaking and Reporting

(3) Fuels

(9) Reformulated gasoline

A list of ZIP files will be shown, all of which are related to the

reformulated gasoline rulemaking process. Today's action will be in the

form of a ZIP file and can be identified by the following title:

OPTOUT.ZIP. To download this file, type the instructions below and

transfer according to the appropriate software on your computer:

ownload, rotocol, xamine, ew, ist, or elp

Selection or to exit: D filename.zip

You will be given a list of transfer protocols from which you must

choose one that matches with the terminal software on your own

computer. The software should then be opened and directed to receive

the file using the same protocol. Programs and instructions for de-

archiving compressed files can be found via ystems Utilities from

the top menu, under rchivers/de-archivers. Please note that due to

differences between the software used to develop the document and the

software into which the document may be downloaded, changes in format,

page length, etc. may occur.

Regulated Entities

Entities potentially regulated by this action are those which

produce, supply or distribute motor gasoline. Regulated categories and

entities include:

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Examples of regulated

Category entities

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Industry................................. Petroleum refiners, motor

gasoline distributors and

retailers.

State governments........................ State departments of

environmental protection.

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This table is not intended to be exhaustive, but rather provides a

guide for readers regarding entities likely to be regulated by this

action. This table lists the types of entities that EPA is now aware

could potentially be regulated by this action. Other types of entities

not listed in the table could also be regulated. To determine whether

your business is regulated by this action, you

[[Page 15078]]

should carefully examine the list of areas covered by the reformulated

gasoline program in Sec. 80.70 of title 40 of the Code of Federal

Regulations. If you have questions regarding the applicability of this

action to a particular entity, consult the person listed in the

preceding FOR FURTHER INFORMATION CONTACT section.

Extended Summary

Based upon EPA and industry concerns regarding smooth

implementation of Phase II of the RFG program and public comments that

were solicited in the Notice of Proposed Rulemaking [60 FR 31269]

published June 14, 1995, EPA is proposing the following changes to the

existing opt-out rule, which provides criteria and general procedures

for states to opt-out of the RFG program through December 31, 1997. 61

FR 35673 (July 8, 1996).

This notice applies to areas where the state voluntarily opted into

the program and subsequently decides to withdraw from the reformulated

gasoline program, an action referred to as ``opt-out.'' This proposed

rule provides the Agency's rules concerning criteria and procedures for

states to opt-out certain areas from the RFG program after December 31,

1997. This proposal would not change the process a state must follow to

petition for removal from the program or the criteria used by EPA to

evaluate a request. This proposal does change the time period before

the opt-out becomes effective for opt-out petitions received from

January 1, 1998, through December 31, 2003. This period includes the

first four years of Phase II (January 1, 2000, to December 31, 2003).

The proposal also maintains the requirements that the governor, or the

governor's authorized representative, submit an opt-out petition.

This proposal specifies that for all opt-out petitions received as

of December 31, 1997, the existing procedures will apply and that the

effective date that an area will be removed from the list of covered

areas defined in 40 CFR Sec. 80.70 will be 90 days (or more at a

state's request) from the date of EPA's letter of notification to the

Governor of the requesting state or from the effective date of an

agency approval of a revision to the State Implementation Plan (SIP)

where applicable. States which have opted in to the RFG program that do

not submit a completed opt-out request by December 31, 1997 and

subsequently submit an opt-out request before January 1, 2004, will be

required to participate in the federal RFG program, including Phase II

of the program, until December 31, 2003. The opt-out request will be

effective January 1, 2004 or 90 days from the Agency written

notification to the State approving the opt-out petition, whichever

date is later. Today's proposed requirements will also cover those

areas opting into the RFG program subsequent to December 31, 1997.

(i.e. areas opting-in during the transitional period must remain in the

program at least until December 31, 2003). The opt-out procedures would

revert back to the existing rule (90 day requirements) as of January 1,

2004.

Today's proposal will help provide certainty to the industry as it

makes decisions that are likely to affect the supply and cost of

reformulated gasoline, which in turn could affect the cost-

effectiveness of Phase II RFG. Additionally, the proposal maintains the

flexibility that states have in air quality planning to the degree

possible and practicable.

I. EPA's Proposal for Opt-out Petitions Received January 1, 1998

Through December 31, 2003; and After December 31, 2003

A. Background

The federal reformulated gasoline (RFG) program is designed to

reduce ozone levels and air toxics in areas of the country that are

required to or volunteer to adopt the program. Reformulated gasoline

reduces vehicle emissions of the ozone precursors, specifically

volatile organic compounds (VOC), through fuel reformulation.

Reformulated gasoline also achieves a significant reduction in air

toxics. In Phase II of the program nitrogen oxides (NOX), another

precursor of ozone, are also reduced. The 1990 Amendments to the Clean

Air Act require reformulated gasoline in the nine largest cities with

the highest levels of ozone.1 In section 211(k)(6), Congress

provided the opportunity for states to opt-in to the RFG program for

other ozone nonattainment areas.

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\1\ EPA recognizes that there are currently ten areas required

to use Federal Reformulated Gasoline and that these areas currently

do not have an opt-out option. Those areas are: Los Angeles--

Anaheim--Riverside, CA; San Diego County, CA; Hartford--New

Britain--Middletown--New Haven--Meriden--Waterbury, CT; New York--

Northern New Jersey--Long Island--Connecticut area; Philadelphia--

Wilmington--Trenton--Cecil County, MD; Chicago--Gary--Lake County,

IL--Indiana--Wisconsin area; Baltimore, MD; Houston--Galveston--

Brazoria, TX; Milwaukee--Racine, WI; Sacramento, CA.

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EPA issued final rules establishing requirements for reformulated

gasoline on December 15, 1993. 59 FR 7716 (February 16, 1994). During

the development of the RFG rule, a number of states inquired as to

whether they would be permitted to opt-out of the RFG program at a

future date, or opt-out of certain of the requirements. This was based

on their concern that the air quality benefits of RFG, given their

specific needs, might not warrant the cost of the program, specifically

focusing on the more stringent standards in Phase II of the program

(starting in the year 2000). States with that concern wished to retain

the flexibility to opt-out of the program. Other states indicated they

viewed RFG as an interim strategy to help bring their nonattainment

areas into attainment sooner than would otherwise be the case.

The regulation issued on December 15, 1993, did not include

procedures for opting-out of the RFG program because EPA had not

proposed and was not ready to adopt such procedures. Since then, the

Agency has adopted general procedures for future opt-outs. 61 FR 35673

(July 8, 1996). These procedures apply to opt-out petitions received

through December 31, 1997. Today's proposal provides new procedures for

opt-out petitions received between January 1, 1998, through December

31, 2003. The existing procedures in place today will take effect again

beginning January 1, 2004.

In the proposal to the previous opt-out rulemaking, EPA outlined

its rationale for determining that it is appropriate to interpret

section 211(k) as authorizing states to opt-out of the program. 60 FR

31269 (June 14, 1995). EPA concluded that any conditions on opting out

should be focused on achieving a reasonable transition out of the

program. There were two primary areas of concern to the Agency. The

first was coordination of air quality planning. The second involved

appropriate lead time for industry to transition out of the program.

Today's proposal addresses this lead time concern by changing the

conditions for opting out during the period from January 1, 1998, to

December 31, 2003. Before the effective date for Phase II RFG (January

1, 2000) approaches, industry must make investments decisions based in

part on anticipated demand for RFG. Small, unanticipated changes in

demand, whether due to market forces or changing regulatory

requirements, can make cost recovery of investment difficult, and cause

gasoline prices to rise or fall. Higher gasoline costs caused by

regulatory uncertainty would diminish the benefits and cost-

effectiveness of EPA's RFG program. Thus, EPA believes it must consider

these special circumstances which affect industry directly and

consumers indirectly and propose appropriate

[[Page 15079]]

changes to the opt-out procedures. Therefore, EPA today is proposing

that states must decide by a certain date (December 31, 1997) if they

intend for opt-in areas to participate in Phase I RFG up to December

31, 1999, and/or to participate in Phase II RFG, which begins on

January 1, 2000. If a state has not submitted an opt-out petition by

December 31, 1997, it must continue to participate in Phase I RFG

through December 31, 1999, and participate in Phase II RFG until

December 31, 2003.

B. Statutory Authority

The statutory authority for the action in this rule is granted to

EPA by section 211(c) and (k) and section 301(a) of the Clean Air Act

as amended, 42 U.S.C. 7545 (c) and (k) and 7601(a). For a more complete

discussion of statutory authority, see the proposal for general rules

establishing criteria and procedures for states to opt-out of the RFG

program. 60 FR 31271 (June 14, 1995).

As discussed there, EPA believes it is appropriate to interpret

section 211(k) as authorizing states to opt-out of the RFG program,

provided that a process is established for a reasonable transition out

of the program. EPA believes allowing states to opt-out is consistent

with the Act's recognition that states have the primary responsibility

to develop a mix of appropriate control strategies needed to reach

attainment with the NAAQS. Given this deference to state decision

making, it follows that the conditions on opting out should be geared

towards achieving a reasonable transition out of the RFG program, as

compared to requiring a state to justify its decision.

EPA has identified two principal areas of concern in this regard.

The first involves coordination of air quality planning. The second

involves appropriate lead time for industry to transition out of the

program. Today's proposal addresses the latter concern. EPA's authority

allows it the discretion to authorize opt-outs in a way that balances

the interests of the parties affected by the regulations. The rule

establishing opt-out criteria and procedures placed only limited

conditions on the states, focusing on the information that must be

submitted before EPA may approve an opt-out request. The rule also

generally required a 90-day time period to pass before an EPA-approved

opt-out became effective. Today, EPA is proposing to lengthen this time

period for certain future opt-outs because it believes the

circumstances affecting industry have changed enough to warrant an

appropriate change.

Today's proposal changes the conditions for opting out during the

period from January 1, 1998 to December 31, 2003. As the effective date

for Phase II RFG (January 1, 2000) approaches, industry must make

investment decisions based in part on anticipated demand for

reformulated gasoline. These decisions are likely to affect supply and

ultimately affect the cost of reformulated gasoline. Uncertainty of

supply and cost fluctuations could cause problems for and possibly

diminish the benefits and cost-effectiveness of EPA's RFG program.

Section 211(k) of the Act requires that reformulated gasoline achieve

the greatest reductions in VOCs and toxics emissions, ``taking into

consideration the cost of achieving such emission reductions . . .''

Thus, EPA believes it must consider these circumstances affecting

industry that could potentially affect cost. EPA's proposal is designed

to reduce the potential for adverse cost and supply impacts on the

reformulated gasoline program.

C. Need for a Required Participation Period Until January 1, 2004

Under EPA's current opt-out provisions, some states may effectively

opt-out of the reformulated gasoline program as of 90 days from the

date EPA approves a state petition for the opt-out. 61 FR 35673 (July

8, 1996). The U.S. Department of Energy expressed its concerns in

comments during the previous rulemaking that such a time frame to opt-

out by states who originally intended to participate in Phase II of the

reformulated gasoline program makes it more difficult for refiners to

recover their investments in refinery facilities needed to comply with

the requirements of Phase II reformulated gasoline. (Air Docket A-94-

68) The Department further explained in its comments that the ability

to price gasoline at a level that recovers investments depends very

heavily on marginal supply and demand. Small unanticipated changes in

demand, whether due to market forces or changing regulatory

requirements, can make cost recovery of investment difficult, and cause

gasoline prices to rise or fall.

EPA shares the Department's concerns and, in the interest of

minimizing the adverse supply and cost impacts for this gasoline

program, is proposing a required participation period for reformulated

gasoline opt-in areas intending to participate in Phase II of the

reformulated gasoline program.

Refinery investments for Phase II RFG have been estimated by the

U.S. Department of Energy to be about $1 billion for East Coast

refiners and $2 billion for Gulf Coast PADD III refiners. Refiners who

expect to be producing Phase II reformulated gasoline starting January

1, 2000, and who need additional facilities to meet the requirements of

that gasoline, are likely to be making commitments to refinery

investments through 1997, two years in advance of the Phase II start

date. This decision to invest in the refining equipment needed to

comply with Phase II is based on each refiner's product capabilities

and likely anticipated demand for Phase II reformulated gasoline.

To comply with the Phase II requirements in 2000, each refiner is

uniquely situated. For those refiners that plan to modify their

refineries, different levels of investment would be required. The

largest investments are expected to be made in the areas of

desulfurization and alkylation to control sulfur and olefins. Some are

expected to make early refinery changes to come into compliance with

the complex model requirements in 1998. While the economic burden of

Phase II compliance will fall disproportionately on some refiners, the

Agency's main concern in this proposal is to provide a stable

regulatory environment which will not inhibit cost recovery, given that

this could lead to supply problems and cost fluctuations that could

diminish the overall cost-effectiveness of the RFG program.

The Agency, in its estimates of the Phase II reformulated gasoline

program costs [as stated in the regulatory impact analysis (RIA) for

the final RFG rulemaking 59 FR 7716], has assumed a 10 percent real

rate of return. Based on this assumed rate of return, refiners would

need a six year investment recovery period. The Agency is soliciting

comments on the range of investment recovery periods needed by the

refineries who plan to invest capital in refining equipment for Phase

II reformulated gasoline, the impact of future opt-outs on this period,

and the expected impacts on supply and cost from such opt-outs.

The time required to recover refinery investments is highly

variable, depending on a number of factors, including the size and type

of investment, the refiner's financial situation and market conditions.

The U.S. Department of Energy believes, based on the National Petroleum

Council 1993 refinery study and on the Department's own examination of

this issue, that at a minimum, a four-year period is required for the

industry as a whole to recover its Phase II investments. The Department

also

[[Page 15080]]

emphasized that an eight-year period was more adequate given the

current competitive gasoline market.

If the Agency were to extend the current opt-out provisions, it

would reduce the ability of refiners to plan for a relatively stable

level of demand for Phase II reformulated gasoline and refiners would

have a disincentive to invest in Phase II of the reformulated gasoline

program. Without greater assurance of the markets for Phase II

reformulated gasoline for a period sufficient for investment recovery,

refiners may limit or delay investment and prepare for a smaller than

currently-predicted reformulated gasoline demand. Refiners could

minimize their production of and stocks for reformulated gasoline to

protect refiners and gasoline distributors from the potential loss of

reformulated gasoline markets. If refiners react to uncertain market

conditions in these ways, there would be the increased potential for

reformulated gasoline cost increase and supply shortages.

These potential actions, taken by refiners reacting to Phase II

reformulated gasoline market uncertainty, would increase costs to

refiners, ultimately resulting in higher gasoline prices for consumers.

Limited or delayed investment in Phase II reformulated gasoline would

create the potential for spot shortages or some refiners may attempt to

quickly recoup their investment in Phase II, both situations causing

gasoline price increases. EPA is concerned that the cost-effectiveness

of the reformulated gasoline program would be jeopardized by regulatory

uncertainty, as it pertains to the regulated community's ability to

plan for providing the manufacturing capacity to produce reformulated

gasoline to specified control areas. Section 211(k) of the Clean Air

Act Amendments of 1990 requires that reformulated gasoline achieve the

greatest reductions in volatile organic compounds (VOCs) and toxics

emissions, ``taking into consideration the cost of achieving such

emission reductions . . .'' Today's proposal is designed to reduce the

potential for the adverse cost and supply impacts on the reformulated

gasoline program.

The Agency is not trying to assure that all refiners will recover

investments made in Phase II reformulated gasoline production in a

given time period. EPA is instead seeking to structure the federal

reformulated gasoline program in a way that minimizes the potential

cost and supply impacts that could occur to refiners, thereby making it

difficult to recover investments associated with producing this

product. A refiner's decision to invest in reformulated gasoline is

based, in part, upon an opt-in state's decision to have EPA require the

sale of RFG in a particular area. Reformulated gasoline market

uncertainty is increased when opt-in states are not bound to remain in

the reformulated gasoline program and by the relatively simple process

for states to opt out of the reformulated gasoline program provided for

in the existing rule.

EPA is committed to ensuring that areas around the country attain

the National Ambient Air Quality Standards (NAAQS), including the ozone

standard. EPA recognizes, however, that under the Clean Air Act the

states play a primary role in attaining the NAAQS, including choosing

those control measures they prefer to include in their plans to attain

and maintain the NAAQS. EPA is committed to maintaining, to a degree

possible and practicable, the flexibility that states have in air

quality planning by establishing procedures to opt out and substitute

alternative control measures where the state considers appropriate.

EPA believes that today's proposal achieves a balance between

allowing states with voluntary RFG areas the flexibility to opt-out of

the program and giving industry a certain level of assurance as to a

predictable demand for Phase II reformulated gasoline during the

important investment recovery period of the program's early years.

Today's proposal helps maintain a consistent market, adequate supplies

and reasonable prices, thus maintaining the reformulated gasoline

program's cost-effectiveness. EPA's own estimate of Phase II

reformulated gasoline costs suggests consideration of a required

participation period of six years, but the Agency believes that

requiring reformulated gasoline in opt-in states for a period greater

than four years may create a disincentive for continued participation

in those areas where this program is currently considered a cost-

effective control measure for the control of ground-level ozone and

toxics. Although a longer recovery period of six or eight years may be

needed by some refiners to fully recover all Phase II investments and

less time for those who already have the capability to produce Phase II

reformulated gasoline, the ability of states to opt-out again after

2004 does not mean that such opt-outs will occur. Refiners in general

will still have significant demand for Phase II RFG for many years

after 2004. EPA is proposing four years to attempt to strike a balance

between the potential adverse impacts if refiners have too short of a

time to recoup their Phase II investments and the need of states for

some flexibility in using reformulated gasoline. EPA further believes

that this balance benefits reformulated gasoline consumers by

attempting to provide market consistency which should encourage

adequate supplies and reasonable prices.

D. Effective Date for Approved Opt-Out Petitions

Today's proposal changes the date on which EPA-approved opt-out

petitions become effective for opt-out petitions received January 1,

1998, through December 31, 2003.

This proposal modifies the existing requirement for any opt-out

request received between January 1, 1998, and January 1, 2004. States

which previously opted in to the RFG program that do not submit an opt-

out request by December 31, 1997, and subsequently submit a completed

opt-out request before January 1, 2004, will be required to participate

in Phase II of the program until December 31, 2003. The opt-out request

will be effective January 1, 2004 or 90 days from the Agency's written

notification to the State approving the opt-out petition, whichever is

later.

If a state submits an opt-out request prior to December 31, 1997,

the state can designate the opt-out to occur at any future date beyond

the minimum 90-day period required under current opt-out procedures as

long as it is not a date beyond December 31, 1999. For example, a state

could submit an opt-out request before the December 31, 1997, deadline

which specifies that the opt-out would not be effective until the end

of the year 1999. Areas opting into the RFG program subsequent to

December 31, 1997, will be treated the same as areas opting in prior to

that date and will also be included in Phase II of the program until

December 31, 2003.

EPA also proposes that, beginning on January 1, 2004, opt-out

requests from states again be approved based on the opt-out provisions

in effect before January 1, 1998.

EPA requests comments on two specific possible variations to this

proposal in anticipation of interest in these options by outside

parties:

(1) a possible exception to the required participation for areas

which are redesignated as attainment areas during the period of January

1, 1998, through December 31, 2003. Such an exception would allow an

opt-out request to be approved by EPA using the same 90 day opt-out

effective date applicable before December 31, 1997 [See 61 FR 35673,

July 8, 1996.]

(2) a similar participation period for areas first opting into the

RFG program

[[Page 15081]]

subsequent to December 31, 1999, requiring these area to participate in

Phase II of the program for at least four years from the date of their

opt-in. This variation would establish the effective date for the

removal of an area from the program as January 1, 2004, or 90 days from

the Agency's written notification approving the opt-out, or four years

from the effective date of their opt-in, whichever date is later, for

all opt-out requests received after January 1, 2000.

II. Environmental Impact

If an area opts out of the reformulated gasoline program, it will

not receive the reductions in VOCs, oxides of nitrogen (NOx), and

air toxics that are expected from this program. Instead, the areas

would be subject to the federal controls on Reid vapor pressure for

gasoline in the summertime, and would only receive control of NOx

and air toxics through the requirements of the conventional gasoline

anti-dumping program. These latter requirements are designed to ensure

that gasoline quality does not degrade from the levels found in 1990.

These areas would be foregoing the air quality benefits obtained from

the use of reformulated gasoline.

In this proposal, EPA continues to recognize that states have the

primary responsibility to develop the mix of control strategies needed

to attain and maintain the NAAQS, and should have flexibility in

determining the mix of control measures needed to meet their air

pollution goals. However, the proposal also seeks to ensure through the

required participation period that the potential for a state to decide

to opt-out of Phase II of the RFG program does not cause adverse

impacts on the market demand for RFG and thus maintains the cost-

effectiveness of the RFG program. EPA expects that states will in fact

act prudently in exercising their ability to opt-out under these rules.

Any environmental impacts of opting out are, therefore, not expected to

occur in isolation, but in a context of states exercising their

responsibility and developing appropriate control strategies for their

areas' air pollution goals.

III. Executive Order 12866

Under Executive Order 12866,2 the Agency must determine

whether a regulation is ``significant'' and therefore subject to OMB

review and the requirements of the Executive Order. The Order defines

``significant regulatory action'' as one that is likely to result in a

rule that may:

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\2\ See 58 FR 51735 (October 4, 1993).

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(1) Have an annual effect on the economy of $100 million or more,

or adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments of

communities;

(2) Create a serious inconsistency or otherwise interfere with an

action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants,

user fees, or loan programs or the rights and obligations of recipients

thereof, or

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

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

this Executive Order.3

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\3\ Id. at section 3(f)(1)-(4).

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Pursuant to the terms of Executive Order 12866, Office of

Management and Budget (OMB) has notified EPA that it considers this a

significant regulatory action within the meaning of the Executive

Order. EPA submitted this action to OMB for review. Changes made in

response to OMB suggestions or recommendations will be documented in

the public record.

IV. Unfunded Mandates

Under Section 202 of the Unfunded Mandates Reform Act of 1995

(``UMRA''), Public Law 104-4, EPA must prepare a budgetary impact

statement to accompany any general notice of proposed rulemaking or

final rule that includes a Federal mandate which may result in

estimated costs to State, local, or tribal governments in the

aggregate, or to the private sector, of $100 million or more. Under

Section 205, for any rule subject to Section 202 EPA generally must

select the least costly, most cost-effective, or least burdensome

alternative that achieves the objectives of the rule and is consistent

with statutory requirements. Under Section 203, before establishing any

regulatory requirements that may significantly or uniquely affect small

governments, EPA must take steps to inform and advise small governments

of the requirements and enable them to provide input.

EPA has determined that today's proposed rule does not trigger the

requirements of UMRA. The rule does not include a Federal mandate that

may result in estimated annual costs to State, local, or tribal

governments in the aggregate, or to the private sector, of $100 million

or more, and it does not establish regulatory requirements that may

significantly or uniquely affect small governments.

V. Economic Impact and Impact on Small Entities

Pursuant to section 605(b) of the Regulatory Flexibility Act, 5

U.S.C. 605(b), the Administrator certifies that this rule will not have

a significant impact on a substantial number of small entities. This

proposed rule is not expected to result in any additional compliance

cost to regulated parties and in fact is expected to decrease

compliance costs and decrease costs to consumers in the affected areas

by providing more certainty for regulated parties. This proposed rule

imposes no new requirements on states.

With respect to the portion of today's action which proposes to

require participation until January 1, 2004, of opt-in areas unless

they request to opt-out prior to January 1, 1998, today's proposal is

not expected to result in any additional compliance cost to regulated

parties. It does no more than maintain the status quo for those

entities who have been supplying reformulated gasoline to the

reformulated gasoline opt-in areas and imposes no additional

requirements on parties that must comply with the RFG regulations.

With respect to the portion of today's proposed rule which would

apply to opt-out requests applied for on or after January 1, 2004, the

proposed rule is not expected to result in any additional compliance

cost to regulated parties and in fact is expected to decrease

compliance costs to those entities who previously supplied reformulated

gasoline to the area opting out. This rule also establishes a

transition period which maximizes affected parties' ability to plan for

smooth transition from the reformulated gasoline program, minimizing

disruption to the motor gasoline marketplace. This transition period is

reasonably expected to allow parties to turn over existing stocks of

reformulated gasoline to conventional gasoline.

VI. Paperwork Reduction Act

This action does not add any new requirements under the provisions

of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The Office of

Management and Budget (OMB) has approved the information collection

requirements contained in the final FRG/anti-dumping rule and has

assigned OMB control number 2060-0277 (EPA ICR No. 1591.03).

Burden means the total time, effort, or financial resources

expended by persons to generate, maintain, retain, or disclose or

provide information to or for a Federal agency. This includes the time

needed to review instructions; develop,

[[Page 15082]]

acquire, install, and utilize technology and systems for the purposes

of collecting, validating, and verifying information, processing and

maintaining information, and disclosing and providing information;

adjust the existing ways to comply with any previously applicable

instructions and requirements; train personnel to be able to respond to

a collection of information; search data sources; complete and review

the collection of information; and transmit or otherwise disclose the

information.

An Agency may not conduct or sponsor, and a person is not required

to respond to a collection of information unless it displays a

currently valid OMB control number. The OMB control numbers for EPA's

regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15.

List of Subjects in 40 CFR Part 80

Environmental protection, Air pollution control, Fuel additives,

Gasoline, Motor vehicle pollution.

Dated: March 21, 1997.

Carol M. Browner,

Administrator.

40 CFR Part 80 is proposed to be amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

1. The authority citation for part 80 continues to read as follows:

Authority: Section 114, 211 and 301(a) of the Clean Air Act as

amended (42 U.S.C. 7414, 7545, and 7601(a)).

2. Section 80.72 is amended by revising paragraphs (a), (c)(1) and

(c)(2) and by adding paragraphs (c)(3) through (c)(7) to read as

follows:

Sec. 80.72 Procedures for opting out of the covered areas.

(a) In accordance with paragraph (b) of this section, the

Administrator may approve a petition from a state asking for removal of

any opt-in area, or portion of an opt-in area, from inclusion as a

covered area under Sec. 80.70. If the Administrator approves a

petition, he or she shall set an effective date as provided in

paragraph (c) of this section. The Administrator shall notify the state

in writing of the Agency's action on the petition and the effective

date of the removal when the petition is approved.

* * * * *

(c)(1) For opt-out petitions received prior to and including

December 31, 1997, except as provided in paragraph (c)(2) of this

section, the Administrator shall set an effective date for removal of

an area under paragraph (a) of this section as requested by the

Governor, but no less than 90 days from the Agency's written

notification to the state approving the opt-out petition, and no later

than December 31, 1999.

(2) For opt-out petitions received prior to and including December

31, 1997, where reformulated gasoline is contained as an element of any

plan or plan revision that has been approved by the Agency, other than

as a contingency measure consisting of a future opt-in, then the

effective date under paragraph (a) of this section shall be 90 days

from the effective date for Agency approval of a revision to the plan

that removes reformulated gasoline as a control measure.

(3) For opt-out petitions received January 1, 1998 through December

31, 2003, except as provided in paragraph (c)(4) of this section, the

Administrator shall set January 1, 2004 or 90 days from the Agency's

written notification to the state approving the opt-out petition,

whichever date is later, as the effective date for removal of an area

under paragraph (a) of this section.

(4) For opt-out petitions received January 1, 1998 through December

31, 2003, where reformulated gasoline is contained as an element of any

plan or plan revision that has been approved by the Agency, other than

as a contingency measure consisting of a future opt-in, then the

effective date for removal of an area under paragraph (a) this section

shall be January 1, 2004, or 90 days from the effective date for Agency

approval of a revision to the plan that removes reformulated gasoline

as a control measure, whichever date is later.

(5) For opt-out petitions received on or after January 1, 2004,

except as provided in paragraph (c)(6) of this section, the

Administrator shall set an effective date for removal of an area as

requested by the Governor, but no less than 90 days from the Agency's

written notification to the state approving the opt-out petition.

(6) For opt-out petitions received on or after January 1, 2004,

where reformulated gasoline is contained as an element of any plan or

plan revision that has been approved by the Agency, other than as a

contingency measure consisting of a future opt-in, then the effective

date for removal of an area under paragraph (a) of this section shall

be 90 days from the effective date for Agency approval of a revision to

the plan that removes reformulated gasoline as a control measure.

(7) An area opting into the RFG program after December 31, 1997,

will be subject to all requirements of this section.

* * * * *

[FR Doc. 97-7953 Filed 3-27-97; 8:45 am]

BILLING CODE 6560-50-P