[Federal Register Volume 59, Number 15 (Monday, January 24, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1128]


[[Page Unknown]]

[Federal Register: January 24, 1994]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

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

 

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

AGENCY: Environmental Protection Agency.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing this 
action to impose sanctions on California under the discretionary 
sanction authority provided the Agency under the Clean Air Act, as 
amended in 1990, (CAA or Act) for failure by the State to submit a 
complete SIP revision for an enhanced motor vehicle inspection and 
maintenance (I/M) program as required by the Act for certain ozone and 
carbon monoxide (CO) nonattainment areas. On November 13, 1992, the 
California Air Resources Board (CARB), acting as the governor's 
designee, submitted a commitment (committal SIP) to adopt an I/M 
program by November 15, 1993. The committal SIP provides for the 
adoption and implementation of an enhanced I/M program meeting all 
requirements of EPA's I/M regulations and includes an implementation 
schedule. On June 28, 1993, EPA proposed to conditionally approve this 
committal SIP or alternatively to disapprove it if certain milestones 
contained in the schedule were missed. A full SIP revision including 
state legislative authority to implement the program was required by 
November 15, 1993. The State Legislature adjourned on September 10, 
1993 without having enacted legislation providing authority for 
implementing the enhanced I/M program.
    On November 15, 1993, the State submitted a document entitled 
``Vehicle Inspection and Maintenance Program SIP Revision'' (the 
``proposed SIP revision''). The proposed SIP revision was missing 
critical elements required for compliance with section 182(c)(3) of the 
Act. On December 30, 1993, EPA Region 9 issued a letter finding that 
the State had failed to submit a complete SIP revision required under 
sections 110 and 182 of the Act. The letter dated December 30, 1993, 
notified the State that the proposed SIP revision was incomplete 
because it had not been subject to public notice. Due to the failure of 
the State to submit a complete SIP revision fulfilling either the 
requirements of the Act or its commitment to adopt and implement an 
enhanced I/M program as promised in its committal SIP, EPA proposes to 
exercise its discretionary authority under the Act to apply a statewide 
highway funding limitation sanction and a 2 for 1 offset sanction in 
all areas required to have a permit program under the new source review 
provisions of the Act.

DATES: Comments must be received on or before March 15, 1994. EPA will 
hold a public hearing on this proposed action on Thursday, March 3, 
1994.

ADDRESSES: EPA welcomes comments on all aspects of this proposal. 
Written comments should be addressed to: U.S. Environmental Protection 
Agency, Region 9, Air and Toxics Division (A-2-1), Attention: Docket 
No. CA-93-IM-3, 75 Hawthorne Street, San Francisco, CA 94105.
    The public hearing will be held in the auditorium of the Los 
Angeles Department of Water and Power Building, 111 North Hope, Los 
Angeles, California 90012 (telephone: (415) 744-1500) from 1 p.m. to 5 
p.m. and from 7 p.m. to 9 p.m.
    A docket has been established and contains materials relevant to 
this action. A copy of the docket is available for public inspection 
during normal business hours at EPA's Region 9 office at the above 
address. A reasonable fee may be charged for copying portions of the 
docket.

FOR FURTHER INFORMATION CONTACT: David Calkins, Chief, Air Planning 
Branch, (A-2), U.S. Environmental Protection Agency, Region 9, 75 
Hawthorne Street, San Francisco, California 94105, (415) 744-1500.

SUPPLEMENTARY INFORMATION:

I. Requirements for Inspection and Maintenance Programs

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

    As amended in 1990, the Clean Air Act requires states to make 
changes to improve existing I/M programs or to implement new ones for 
certain nonattainment areas. Section 182(a)(2)(B) of the Act directed 
EPA to publish updated guidance for state I/M programs, taking into 
consideration findings of the Administrator's audits and investigations 
of these programs. The Act further requires each area required to have 
an I/M program to incorporate this guidance into the SIP. Based on 
these requirements, EPA promulgated I/M regulations on November 5, 1992 
(57 FR 52950).
    Under sections 182(c)(3) and 187(b)(1) of the Act, areas designated 
as serious and worse ozone nonattainment areas with 1980 populations of 
200,000 or more and CO nonattainment areas with design classifications 
above 12.7 ppm and populations of 200,000 or more, in addition to 
metropolitan statistical areas with populations of 100,000 or more in 
the northeast ozone transport region, are required to meet EPA 
regulations for ``enhanced'' I/M programs. These areas were required to 
submit a SIP revision to incorporate an enhanced I/M program into the 
SIP by November 15, 1992. In California, the State must adopt and 
implement enhanced I/M programs for the following urbanized areas:

Bakersfield
Fresno
Los Angeles
Oxnard-Ventura
Riverside-San Bernardino
Sacramento
San Diego

    The I/M regulation establishes minimum performance standards for 
basic and enhanced I/M programs as well as requirements for the 
following: Network type and program evaluation; adequate tools and 
resources; test frequency and convenience; vehicle coverage; test 
procedures and standards; test equipment; quality control; waivers and 
compliance via diagnostic inspection; motorist compliance enforcement; 
motorist compliance enforcement program oversight; quality assurance; 
enforcement against contractors, stations and inspectors; data 
collection; data analysis and reporting; inspector training and 
licensing or certification; public information and consumer protection; 
improving repair effectiveness; compliance with recall notices; on-road 
testing; SIP revisions; and implementation deadlines. For enhanced I/M 
programs, all requirements must be implemented by January 1, 1995 
except that areas switching from an existing test-and-repair network to 
a test-only network may phase in that change between January 1995 and 
January 1996.
    Each State required to implement an I/M program was required to 
submit by November 15, 1992, a SIP revision (here and after referred to 
as the ``I/M committal SIP'') including two elements: (1) A commitment 
from the Governor or his/her designee to the timely adoption and 
implementation of an I/M program meeting all requirements of the I/M 
regulation; and (2) a schedule for adoption of the program with interim 
milestones including passage of enabling statutory or other legal 
authority and adoption of final regulations. Acceptance of I/M 
committal SIPs in lieu of full SIPs was justified by the fact that 
States could not have been expected to begin development of an I/M 
program meeting the requirements of the Act and the I/M regulation 
until the I/M regulation was adopted as a final rule, which did not 
occur until November 5, 1992. A complete SIP revision which contained 
all of the elements identified in the adoption schedule, including the 
authorizing legislation and implementing regulations, was required to 
be submitted no later than November 15, 1993.

B. I/M Program in California

    1. California Committal SIP: The State of California submitted an 
I/M committal SIP on November 13, 1992. The committal SIP submittal 
became complete by operation of law under section 110(k)(1)(B) on May 
13, 1993. The submittal includes a letter from the Executive Officer of 
the CARB and a copy of Resolution 92-74 which was adopted at a public 
hearing held by the CARB on November 13, 1992. The Resolution directs 
the Executive Officer to submit the committal letter to EPA as a 
revision to the SIP. The submittal included a commitment by the 
governor's designee, the CARB Executive Officer, to the timely adoption 
and implementation of I/M programs meeting all requirements of the I/M 
regulation and the Act in all nonattainment areas in California where 
these programs are required. A schedule of adoption was included in a 
letter sent by the CARB Executive Officer to EPA on January 15, 1993 
clarifying certain details of the November 13, 1992 I/M committal SIP 
submittal. In the schedule California committed to passing legislation 
authorizing an I/M program by September 10, 1993. The committal SIP 
lists October 10, 1993 as the deadline for the legislation to be signed 
by the governor.
    2. EPA Proposed Approval: On June 28, 1993 (58 FR 34553) EPA 
proposed to conditionally approve the committal SIP under section 
110(k)(4) of the Act. In the alternative, however, EPA proposed that, 
if the State failed to adopt legislative authority or meet certain 
other applicable interim milestones in the commitment prior to EPA's 
final action on the submittal, EPA would disapprove the committal SIP. 
The basis for such disapproval would be a determination that California 
could not meet the November 15, 1993 SIP revision submission date if it 
failed to meet the interim milestones. Therefore, since the State could 
not meet its commitment, final approval under section 110(k)(4) would 
not be appropriate.
    3. State Legislative Action: On November 15, 1993 California failed 
to meet its commitment to EPA. By letter dated December 30, 1993, EPA 
Region 9 notified the State that the proposed SIP revision submitted on 
November 15, 1993, did not contain the critical elements required by 
statute and that the State had failed to submit a complete SIP revision 
as required by the Act. For example, the proposed SIP revision did not 
contain legislative authority for the State to implement the proposed 
SIP revision. In addition, EPA Region 9 notified the State that the 
proposed SIP revision was an incomplete SIP submittal because it was 
not subject to a public hearing.
    Further, the State failed to meet the interim deadlines in its 
committal SIP. California was required to obtain legislative authority 
for the adoption and implementation of an enhanced I/M program during 
the 1993 legislative session under the November 15, 1992 I/M committal 
SIP submittal. Bills to change California's existing I/M program were 
introduced during the 1993 legislative session and hearings were held 
by the Senate and Assembly Transportation Committees. The legislature 
adjourned, however, on September 10, 1993 without having adopted I/M 
legislation. Failure to provide such authority prevented California 
from submitting a complete SIP revision by November 15, 1993.
    Earlier this year, EPA anticipated the possibility that the 
California legislature would fail to adopt necessary legislation during 
the 1993 legislative session. On April 13, 1993, EPA and the U.S. 
Department of Transportation sent a joint letter to Governor Wilson 
advising him that EPA would exercise its discretionary authority under 
section 110(m) of the Act to impose sanctions if the legislature failed 
to adopt adequate legislation. On November 24, 1993, EPA issued a press 
statement indicating that EPA would temporarily halt the process of 
imposing sanctions to permit discussions between the parties to resolve 
the issue.
    4. Importance of Timely Implementation of Appropriate I/M Programs: 
Beyond being a specific mandate of the Act, enhanced I/M programs play 
an important role in the ability of California areas to comply with the 
CAA requirements for achieving the National Ambient Air Quality 
Standards (NAAQS) for ozone and CO, as well as the Act's requirements 
for reasonable further progress (RFP) reductions for ozone. The Act 
provides that each state in which all or part of an ozone and/or CO 
nonattainment area are located is required to provide an attainment 
demonstration showing that its SIP, as revised, will provide for 
attainment of the ozone and/or CO NAAQS by the applicable attainment 
date(s).
    The Act further requires that each state in which all or part of a 
serious, severe, or extreme ozone nonattainment area is located shall 
submit SIP revisions that will reduce VOC emissions by November 15, 
1996 by at least 15% of the 1990 baseline emissions. If the reductions 
identified in the SIP revisions are less than 15% of the baseline 
emissions, the State may obtain a waiver under section 
182(b)(1)(A)(ii); this requires the State to make several 
demonstrations, including one that the plan reflecting the lesser 
amount includes all measures that can feasibly be implemented in the 
area in light of technological achievability. Many areas in California 
will have difficulty meeting the RFP requirements because credit for 
certain pre-1990 CAA programs, such as the federal motor vehicle 
control program and basic I/M, is not allowed. The additional benefits 
of enhanced I/M, however, are fully creditable towards meeting the RFP 
requirement. Enhanced I/M is one of the most powerful tools available 
to areas in terms of providing expeditious reductions in both VOC and 
NOx, both of which are treated in most California plans as precursors 
of ozone.
    Finally, a federally approvable enhanced I/M program represents one 
of the most cost-effective air quality control strategies available. 
Without an effective I/M program, attainment of the ozone and CO air 
quality standard is virtually impossible. Without appropriate enabling 
legislation, an enhanced I/M program cannot be implemented.

II. Sanctions Under the Clean Air Act

    This sanction action is being proposed under EPA's discretionary 
authority contained in section 110(m) of the Act. The predicate 
findings and types of sanctions are described in section 179 of the 
Act. The two sanctions available to EPA for application under section 
110(m), as provided in section 179(b), are: (1) A prohibition on the 
funding of certain highway projects; and (2) an increase in the 
emission offset requirement for new and modified major stationary 
sources. The highway funding sanction prohibits approval by the 
Secretary of Transportation of any projects or the awarding by the 
Secretary of any grants, under Title 23 of the U.S. Code, other than 
projects or grants for safety and certain other categories of projects 
listed in section 179(b)(1). The offset sanction requires that, when 
States apply the emission offset requirement of section 173 to new or 
modified sources, the ratio of emission reductions to increased 
emissions must be at least 2 to 1.
    Section 179(a) of the Act sets forth the findings\1\ which provide 
EPA with discretion under section 110(m) to impose one or both of the 
sanctions specified under section 179(b). The four findings are: (1) A 
state has failed, for a nonattainment area, to submit a SIP or an 
element of a SIP, or that the SIP or SIP element submitted fails to 
meet the completeness criteria of section 110(k); (2) EPA disapproves a 
SIP submission for a nonattainment area based on the submission's 
failure to meet one or more plan elements required by the Act; (3) a 
State has not made any other submission required by the Act or has made 
a submission that does not meet the completeness criteria or has made a 
required submission that is disapproved by EPA for not meeting the 
Act's requirements; or (4) a requirement of an approved plan is not 
being implemented.
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    \1\Section 179(a) refers to Agency findings, disapprovals, and 
determinations. These will all be referred to by the one term 
``findings.''
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    Under section 179(a), unless the State corrects the deficiency, one 
of the two sanctions listed in section 179(b) must be imposed 18 months 
after a finding is made, and the second must be imposed 6 months after 
the first sanction is imposed if the deficiency remains uncorrected.\2\ 
In addition, both sanctions shall apply after 18 months if the 
Administrator finds a lack of good faith on the part of the State.
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    \2\On October 1, 1993, EPA proposed a rule governing the order 
in which the sanctions shall apply under section 179 of the Act. 58 
FR 51270. The rule proposes that the offset sanctions apply first 
and the highway sanctions apply second. According to the proposed 
rule, EPA may change this sequence of sanctions through individual 
notice and comment rulemaking. This proposed sequencing applies only 
to mandatory sanctions that apply under section 179(a) and does not 
govern sanctions imposed under section 110(m).
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    Although section 179(a) establishes mandatory deadlines for the 
application of sanctions at certain points after a finding of 
deficiency, section 110(m) provides EPA with the discretion to impose 
section 179(b) sanctions at any time (or at any time after) a section 
179(a) finding. Likewise, although mandatory sanctions under section 
179 are limited to the area with the deficiency, section 110(m) 
authorizes EPA to apply discretionary sanctions to any portion of the 
state that EPA deems reasonable and appropriate to ensure that the 
requirements of the Act are met. See 57 FR 44534, 44536-44537. However, 
the Act requires EPA to establish by rule criteria to ensure that such 
sanctions are not applied on a statewide basis where one or more 
political subdivisions covered by the applicable implementation plan 
are principally responsible for the deficiency.
    On September 28, 1992, EPA proposed criteria under section 110(m) 
that it would use when proposing statewide sanctions to determine if 
one or more political subdivisions is principally responsible for a SIP 
deficiency. 57 FR 44534. These proposed criteria are discussed later in 
this notice.
    With regard to California, EPA is using its discretionary authority 
under section 110(m) to propose early sanctions\3\ based on 
California's failure to adopt legislation to improve its I/M program. 
EPA is taking this action for two reasons: (1) Congress required timely 
submittal of enhanced I/M programs as a measure central to allowing the 
State's metropolitan areas to meet CAA deadlines, and any legislative 
delay threatens the States's ability to meet those deadlines, and (2) 
enhanced I/M is the single most effective air pollution control measure 
available. Delayed legislative approval of an acceptable I/M program 
places a disproportionate burden for cleaning the air on the State's 
major industrial sources--additional burdens which are especially 
problematic given California's current economic difficulties.
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    \3\EPA issued its letter on December 30, 1993, finding that the 
state's proposed SIP revision was a failure to submit a SIP revision 
as required by the Act and, in addition, was an incomplete SIP 
submittal. Mandatory sanctions were triggered under Section 179(a) 
by issuance of the letter notifying the state of the finding of 
deficiency.
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III. Proposed Sanctions

A. Finding Under Section 179(a)

    As stated previously, on December 30, 1993, EPA Region 9 issued a 
letter notifying the state of its failure to submit a complete SIP 
revision on November 15, 1993, as required by the Act. EPA's letter 
constitutes a finding under section 179(a) that triggers EPA's 
discretionary authority to impose the sanctions proposed in this notice 
under section 110(m). Further, on June 28, 1993, EPA proposed to 
conditionally approve California's I/M committal SIP for both basic and 
enhanced I/M programs. EPA also proposed, in the alternative, to 
disapprove this commitment if the state failed to adopt authorizing 
legislation and to submit the required I/M programs by the November 15, 
1993 date. California has also now failed to adopt and submit such 
programs.
    If sufficient progress has not been made by California toward the 
implementation of an approvable I/M program to be operational on or 
before January 1, 1995, EPA hereby announces its intention to impose 
sanctions on May 15, 1994.

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

    Section 110(m) of the Act allows EPA to apply the highway and 
offset sanctions at any time (or at any time after) it makes a finding 
under section 179(a). Based on its finding dated December 30, 1993, EPA 
is proposing to impose both the highway and offset sanctions. EPA 
believes that the imposition of highway sanctions is appropriate 
because of California's failure to adopt legislation to enhance its 
existing smog check program. In the absence of improved smog check, the 
ability of the State's metropolitan areas to meet the Clean Air Act 
deadlines for attaining healthy air quality is severely compromised. As 
previously noted, enhanced smog check is the single most effective air 
pollution control measures available and delayed legislative approval 
of an acceptable program further burdens major industrial sources of 
air pollution with responsibility for cleaning the air.
    Under section 110(m), EPA may apply sanctions to any portion of the 
state it determines is reasonable and appropriate. During the 24 months 
following the finding, EPA may not impose the sanctions statewide if 
one or more political subdivisions within the state is principally 
responsible for the deficiency that is the basis for sanctions. EPA has 
proposed criteria for determining when a political subdivision is 
principally responsible (57 FR 44534, September 28, 1992). The criteria 
provide that a political subdivision is principally responsible if: (1) 
It has the legal authority to perform the required activity; (2) it has 
traditionally performed, or has been delegated the responsibility to 
perform, the required activity; (3) it has received, where appropriate, 
adequate funding, or authority to obtain funding, from the state to 
perform the required activity; (4) it has agreed to perform (and has 
not revoked that agreement), or is required by state law to accept 
responsibility for performing, the required activity; and (5) it has 
failed to perform the required activity. A ``political subdivision'' is 
defined as the representative body that is responsible for adopting 
and/or implementing air pollution controls for any combination of 
political subdivisions created by, or pursuant to, Federal or State 
law. If no political subdivision meets all 5 criteria, EPA may use its 
discretion to determine whether it is reasonable and appropriate to 
apply sanctions on a statewide basis.
    In this notice, EPA is proposing to use the above proposed criteria 
to determine if it may impose the highway sanction statewide for 
California because of the State's failure to submit a complete SIP 
revision complying with the I/M committal SIP revision.
    EPA believes that the first criterion has not been met by any 
political subdivision. Only the California legislature has the 
authority to revise the state statute to provide for an enhanced I/M 
program meeting the CAA and EPA requirements. Once the legislature has 
acted, only state government agencies can adopt any implementing 
regulations. While individual air pollution control district or air 
quality management districts may request implementation of the state I/
M program once adopted, this authority is meaningless unless the State 
has first established an appropriate program through legislation and 
regulations. Since the state legislature has not enacted the 
legislation required to provide the legal authority for an enhanced I/M 
program meeting the CAA and EPA requirements, an enhanced I/M program 
is not available to areas within the state that require the program.
    Since no political subdivision within the state has met the first 
criterion, EPA believes that no political subdivision is principally 
responsible for the failure to have an enhanced I/M program. Therefore, 
EPA is not prohibited from imposing highway sanctions statewide. As 
noted above, the state legislature bears the ultimate responsibility to 
adopt the requisite legislative authority and CARB, not the individual 
air quality districts, must subsequently adopt adequate regulations. 
Since the state bears ultimate responsibility, EPA believes that it is 
reasonable and appropriate to impose sanctions on the entire State.
    The offset requirements apply only to new or modified major 
stationary sources located in or to be located in areas that are 
required to have a permit program pursuant to section 173. Thus, the 
offset sanctions are limited to those areas which are required to have 
a permit program, i.e., the ozone and CO nonattainment areas. For 
ozone, those areas are: Monterey, Santa Barbara, San Diego, San 
Francisco Bay Area, South Coast, Ventura, Sacramento, San Joaquin 
Valley, and the South East Desert. The offset sanction would apply to 
all new or modified major stationary sources for VOCs and NOx that are 
locating to or located in each of these areas and for such sources of 
CO that are located in or locating to the following CO nonattainment 
areas: Chico, Sacramento, San Diego, San Francisco, San Joaquin, and 
South Coast. EPA proposes to impose the offset sanctions in the manner 
described in the proposed action on the sequencing of sanctions (58 FR 
51270, 51275-51277 (October 1, 1993)).

C. Removal of Discretionary Sanctions

    EPA is proposing to temporarily lift (i.e., toll)4 the highway 
and offset sanctions imposed under section 110(m) upon passage by the 
California legislature and signature by the Governor of legislation 
which EPA preliminarily determines provides legal authority for an 
enhanced I/M program meeting the requirements of the CAA and the I/M 
regulation. EPA proposes to notify the state of this tolling by a 
letter to the Governor and the public by a notice published in the 
notice section of the Federal Register. The section 110(m) sanctions 
would not be completely lifted until the State makes a complete 
submittal of its enhanced I/M program for the State of California. EPA 
will take action to completely lift section 110(m) sanctions at the 
time it determines the State's submittal to be complete or it is deemed 
complete. A complete submittal is one that contains all the critical 
elements listed in the I/M regulation as determined through the 
completeness criteria in section 110(k)(1).
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    \4\As a general rule, an Agency must go through rulemaking to 
remove or alter a requirement imposed through rulemaking. While U.S. 
EPA intends to issue a notice tolling the 110(m) sanction upon the 
occurrence of the events described, U.S. EPA will use the good cause 
exception to the otherwise applicable requirement for proposed 
rulemaking. EPA believes there is good cause to toll the sanctions 
once the state takes the action which cures the defficiency that 
resulted in the imposition of sanctions. See 5 U.S.C.Sec. 553(b)(B). 
Therefore, no proposed action for removal will be issued. Consistent 
with U.S. EPA's intent to impose discretionary sanctions only on 
those areas that lack legislative authority, EPA believes that it is 
in the public interest to remove, at least temporarily, these 
discretionary sanctions as expeditiously as possible once the State 
of California has enacted legislative authority.
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    As an alternative, if EPA takes final action disapproving 
California's committal SIP prior to taking final action imposing 
sanctions, EPA proposes that such disapproval be the basis for imposing 
the discretionary sanctions. In such case, the sanctions would be 
tolled in the same manner; however, if the disapproval is the final 
basis for imposing the sanctions, such sanctions would not be 
completely lifted until EPA formally approves an enhanced I/M program 
for the State of California. In such a case, EPA would take action to 
lift the sanctions at the same time as EPA took final action approving 
the State's I/M program.
    EPA's action imposing or tolling the section 110(m) sanctions will 
in no manner affect EPA's obligation to impose mandatory sanctions 
under section 179(a) where one mandatory sanction shall apply 18 months 
after EPA's finding of incompleteness and the second mandatory sanction 
shall apply 6 months later. Sanctions under section 179(a) apply to the 
area for which the deficiency exists. If the State does not adopt and 
submit to EPA a complete submittal providing for an I/M program within 
the 18-month and additional 6-month periods, the sanctions will 
automatically apply to those areas of the state that were required to 
have but do not have such a complete I/M program under the amended Act. 
See 58 FR 51270 (October 1, 1993). Moreover, if EPA takes final action 
disapproving California's I/M committal SIP, a second sanctions clock 
will be triggered and California must not only submit an I/M program, 
but EPA must also approve that program within the relevant time frames 
to stop the mandatory sanctions clock and avoid sanctions on the final 
disapproval.

IV. Regulatory Requirements

A. Executive Order 12866

    Under Executive Order 12866, (58 FR 51735 (October 4, 1993)) the 
Agency must determine whether the regulatory action is ``significant'' 
and, therefore, subject to Office of Management and Budget (OMB) review 
and the requirements of the Executive Order. The Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the right and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, it has been 
determined that this rule is a ``significant regulatory action''. 
Nevertheless after reviewing information regarding this action, OMB has 
waived review.

B. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., EPA 
must prepare a regulatory flexibility analysis assessing the impact of 
any proposed or final rule on small entities. Alternatively, EPA may 
certify that the rule will not have a significant impact on a 
substantial number of small entities. Small entities include small 
businesses, small not-for-profit enterprises, and government entities 
with jurisdiction over populations of less than 50,000.
    EPA cannot reliably predict the impact of these restrictions 
because of the exemptions authorized for certain highway projects 
related to mass transit, public safety, and those that have beneficial 
air quality impacts. Careful review and evaluation of each project is 
necessary to determine whether or not a project is exempt.
    If EPA takes final action on this proposal, the 2 to 1 emissions 
offset requirement will apply to major new sources and major 
modifications to the existing sources of volatile organic compounds 
(VOC), oxides of nitrogen (NOx), and carbon monoxide (CO) in the 
California ozone and carbon monoxide areas subject to section 173(c) 
offset requirement.
    Major stationary sources of VOC, NOX, and CO are generally not 
small entities. Also, the 2 to 1 emission offset requirement does not 
prevent growth and modification but sets a higher offset standard than 
the current offset required. It is not expected that a large number of 
small entities will be affected by the emission offset requirement. In 
the past, when EPA has made efforts to quantify the impact of the Act's 
rules on the construction and modification of sources, EPA has been 
unable to do so due, in part, to the need to obtain information on 
future plans for business growth. This information is difficult to 
obtain, as business are understandably reluctant to make their plans 
public.
    EPA is proposing to impose Federal highway funding assistance 
limitations statewide. This limitation could affect a number of 
government entities with populations of less than 50,000 since 
government entities often apply for and receive federal funding under 
Title 23, United States Code, for road improvement projects. Although a 
great many projects are exempted under section 179(b)(1)(B), a number 
of projects are expected to be affected if EPA takes final action.
    For the reasons stated above, EPA cannot further analyze the 
economic impacts of this action on small entities. The statements in 
this package constitute EPA's full regulatory flexibility analysis.

C. Reporting and Recordkeeping Requirements

    This rule does not contain any information collection requirements 
which require OMB approval under the Paperwork Reduction Act (44 U.S.C. 
3501 et seq.). Should the highway sanctions become effective, the 
Secretary of the U.S. Department of Transportation (USDOT) is required 
to determine which projects or grants should not be affected by the 
sanction and which, therefore, are exempt. This determination will be 
based on information readily available in existing documentation 
gathered for the purpose of evaluating the environmental, social, and 
economic impacts of different alternatives for transportation projects. 
These analyses are already required for the preparation of 
environmental assessments and impact statements under the National 
Environmental Policy Act (NEPA). Historically, exemption determinations 
by USDOT for sanctions have been based on such NEPA documentation and 
have not necessitated additional information gathering and analysis by 
the States. In addition, since under NEPA final environmental documents 
must be approved by USDOT, in most cases the NEPA documentation will 
already be in USDOT's possession. Therefore, EPA does not believe that 
the highway sanction, when applied, will impose an additional 
information collection burden on the states.
    When the offset sanction applies, sources subject to it will not 
incur an additional information collection burden because sources are 
already required under the section 173 offset requirements to obtain an 
emission offset from between 1 to 1 and 1.5 to 1 (depending on the 
classification of the nonattainment area in which they are located). 
Should the offset sanction apply, it would not impose an additional 
information collection burden because sources will not have to provide 
additional information in the application beyond that which they would 
already have to provide in the absence of the sanction. (For the 
information collection burden of new requirements of the amended Act 
for nonattainment new source review (NSR) and prevention of significant 
deterioration, an information collection request is being prepared to 
support rulemaking changes to parts 51 and 52.)

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide, 
Hydrocarbons, Intergovernmental relations, Nitrogen oxide, Ozone, 
Volatile organic compounds.

    Dated: January 7, 1994.
Carol M. Browner,
Administrator.

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

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

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

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

Subpart A --[Amended]

    2. Subpart A is proposed to be amended by adding a new Sec. 52.32 
to read as follows:


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

    (a) Purpose. The purpose of this section is to implement 42 U.S.C. 
7410 (m), with respect to the application of discretionary sanctions 
following a finding that has been made pursuant to 42 U.S.C. 7509 (a) 
(1), (2), (3), and (4).
    (b) Definitions. All terms used in this section, but not 
specifically defined in this section shall have the meaning given them 
in Sec. 52.01.
    (1) 1990 Amendments means the 1990 Amendments to the Clean Air Act 
(Pub. Law 101-549, 104 Stat. 2399).
    (2) Act means Clean Air Act, as amended in 1990 (42 U.S.C. 7401 et 
seq.).
    (3) Criteria pollutant means pollutant for which the Administrator 
has promulgated a national ambient air quality standard pursuant to 42 
U.S.C. 7409 (e.g., ozone, lead, sulfur dioxide, particulate matter, 
carbon monoxide, nitrogen dioxide).
    (4) Findings or Finding refer(s) to one or more of the findings, 
disapprovals, and determinations described in 42 U.S.C. 7509 (a) (1), 
(2), (3), and (4).
    (5) Part D means part D of title I of the Act.
    (6) Part D SIP or SIP revision or Plan means a state implementation 
plan or plan revision that states are required to submit or revise 
pursuant to part D.
    (c) Available sanctions and method for implementation. (1) Offset 
sanction. (i) As further set forth in paragraphs (c)(1)(ii) through 
(iii) of this section, for the following areas, on the following dates, 
the State shall apply the emissions offset requirements, in accordance 
with 42 U.S.C. 7503 and 7509(b)(2), at a ratio of at least 2-to-1 for 
emission reductions to increased emissions of the following pollutants 
and their precursors for which the findings under 42 U.S.C. 7409 are 
made:

------------------------------------------------------------------------
                                            Date                        
              Affected area               sanction      Pollutant(s)    
                                           applies        affected      
------------------------------------------------------------------------
State of                                                                
California:                                                             
  Chico.................................  ........  CO                  
  Monterey..............................  ........  VOC, NOx            
  Sacramento............................  ........  VOC, NOx, CO        
  San Diego.............................  ........  VOC, NOx, CO        
  San Francisco Bay Area................  ........  VOC, NOx, CO        
  San Joaquin Valley....................  ........  VOC, NOx, CO        
  Santa Barbara.........................  ........  VOC, NOx, CO        
  South Coast...........................  ........  VOC, NOx, CO        
  South East Desert.....................  ........  VOC, NOx            
  Ventura...............................  ........  VOC, NOx            
------------------------------------------------------------------------


    (ii) For purposes of applying the emissions offset requirement set 
forth in 42 U.S.C. 7503, at the 2-to-1 ratio required under paragraph 
(c)(1) of this section, the State shall comply with the provisions of a 
State-adopted new source review program that the EPA has approved under 
42 U.S.C. 7410(k)(3) as meeting the nonattainment area new source 
review requirements of 42 U.S.C. 7501-7515, as amended by the 1990 
Amendments, or, if no such plan has been approved, the State shall 
comply directly with the nonattainment area new source review 
requirements specified in 42 U.S.C. 7501-7515, as amended by the 1990 
Amendments, or cease issuing permits to construct and operate major new 
or modified sources. For purposes of applying the offset requirement 
under 42 U.S.C. 7503 where the EPA has not fully approved a State's new 
source review program as meeting the requirements of part D, the 
specifications of those provisions shall supersede any State 
requirement that is less stringent or inconsistent.
    (iii) For purposes of applying the emission offset requirement set 
forth in 42 U.S.C. 7503, any permit required pursuant to 42 U.S.C. 7503 
issued on or after the date the offset sanction applies shall be 
subject to the enhanced 2 to 1 ratio under paragraph (c)(1) of this 
section.
    (2) Highway funding sanction. For the following areas, on the 
following dates, the highway sanction shall apply as provided in 
42.U.S.C. 7509(b)(1): 

------------------------------------------------------------------------
                                                                  Date  
                         Affected area                          sanction
                                                                 applies
------------------------------------------------------------------------
State of California...........................................  ........
------------------------------------------------------------------------


[FR Doc. 94-1128 Filed 1-21-94; 10:00 am]
BILLING CODE 6560-50-P