[Federal Register Volume 59, Number 80 (Tuesday, April 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10042]


[[Page Unknown]]

[Federal Register: April 26, 1994]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[FRL-4878-3]

 

Proposed Rulemaking on Ozone Transport Commission; Emission 
Vehicle Program for the Northeast Ozone Transport Region

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: On February 10, 1994, the Northeast Ozone Transport Commission 
(OTC) submitted a recommendation to EPA under section 184 of the Clean 
Air Act (the Act), for additional control measures to be applied 
throughout the Northeast Ozone Transport Region (OTR). Specifically, 
the OTC recommended that EPA require all State members of the OTC to 
adopt an Ozone Transport Commission Low Emission Vehicle (OTC LEV or 
LEV) program for the entire OTR. The OTC's recommendation, developed 
after notice-and-comment pursuant to section 184(c)(1), is published 
here as an appendix to this document.
    Under section 184(c)(3), EPA is to review the OTC's recommendation 
to determine whether the additional control measures are necessary to 
bring any area in the OTR into attainment by the dates specified in the 
Act, and are otherwise consistent with the Act. Based on this review, 
EPA is obligated to determine whether to approve, disapprove, or 
partially approve and partially disapprove the OTC's recommendation. If 
EPA disapproves or partially disapproves the OTC recommendation, it is 
to explain why the recommended measures are not necessary or are not 
otherwise consistent with the Act, and to specify additional control 
measures that would be equally effective. Upon EPA approval or partial 
approval of the OTC recommendation, EPA is to make a finding that the 
relevant States' State Implementation Plans (SIPs) are inadequate under 
section 110(a)(2)(D) of the Act (relating to contribution to 
nonattainment in downwind States), and those States are to submit a SIP 
revision within one year of the finding adopting the approved control 
measures. This notice describes the framework for EPA's action on the 
OTC's recommendation and describes the issues EPA is considering in 
deciding whether to approve, disapprove, or partially approve and 
partially disapprove the recommendation.

DATES: EPA will be holding a public hearing on the OTC recommendation 
on Monday, May 2, 1994 from 1 p.m. to 4:30 p.m. (EDT) and on Tuesday, 
May 3, 1994 from 9 a.m. to 4:30 p.m. (EDT). The comment period will 
remain open until June 3, 1994. Please direct all correspondence to the 
addresses shown below.

ADDRESSES: The hearings will be held at the Fifth Floor Auditorium, 
Connecticut Department of Environmental Protection Building, 79 Elm 
Street, Hartford, Connecticut 06106. Written comments should be 
submitted (in duplicate if possible) to the Air Docket (see address 
below). Copies of information relevant to this matter are available for 
inspection in public docket A-94-11 at the Air Docket (LE-131) of the 
EPA, room M-1500, 401 M Street SW., Washington, DC 20460, (202) 260-
7548, between the hours of 8 a.m. to 12 p.m. and 1 p.m. to 5 p.m. on 
Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Mike Shields, Office of Mobile 
Sources, U.S. EPA, 401 M Street, SW., Washington, DC 20460, telephone: 
(202) 260-3450.

SUPPLEMENTARY INFORMATION:

I. Background

A. Overview of Title I Scheme

    The OTC's recommendation under section 184(c) of the Act that EPA 
mandate that States in the OTR adopt the LEV program arises in the 
context of the program designed to address ozone (or ``smog'') 
pollution in subpart II of part D of title I of the Act. This program 
is described in detail in EPA's General Preamble for the Implementation 
of Title I of the Clean Air Act Amendments of 1990, 57 FR 13498 (April 
16, 1992), and the Nitrogen Oxides Supplement to the General Preamble, 
57 FR 55620 (Nov. 25, 1992).
    A number of provisions in subpart 2 and elsewhere in the Act are 
particularly important to emphasize here. Part D establishes a scheme 
for more polluted areas to have more time to attain the National 
Ambient Air Quality Standards (NAAQS), and subjects those more polluted 
areas to a graduated program of additional and more stringent specific 
control requirements to be accomplished over the longer time-frame.
    Section 181(a) provides for classification of ozone nonattainment 
areas based on the degree of the nonattainment problem in the area (as 
measured by the area's ozone design value), and provides that 
attainment ``shall be as expeditiously as practicable but not later 
than'' specified deadlines expressed as years after enactment. The 
areas, and the corresponding attainment deadlines are: Marginal (1993); 
Moderate (1996); Serious (1999); Severe (2005 or 2007, depending on the 
design value); and Extreme (2010). The Act also provides for additional 
``unclassifiable/no data'' nonattainment areas. All classifications 
other than Extreme are represented in the OTR. Section 184(b) also 
specifies additional requirements applicable for attainment areas in 
ozone transport regions, including: (1) Enhanced vehicle inspection and 
maintenance programs in cities meeting specified size thresholds; (2) 
state-wide implementation of reasonably available control measures 
(RACT); (3) ``Stage II'' vehicle refueling vapor controls or 
``comparable measures''; and (4) treatment of major stationary sources 
of ozone precursors as if they were in moderate nonattainment areas.
    Section 182 establishes the graduated control measures applicable 
for each nonattainment classification. These measures are additive in 
that the higher classifications must generally adopt, in addition to 
measures specifically applicable to that higher classification, all 
measures identified for lower classifications as well. A basic 
requirement applicable to Marginal and above classifications is that 
States are to submit inventories of actual emissions from all sources 
in each nonattainment area. See sections 182(a)(1) and 172(c)(3). These 
emissions inventories may be important in determining whether the LEV 
program is necessary in the OTR. For example, the inventories may be 
important to determining the magnitude of emissions reductions that may 
be needed for attainment, and the effectiveness of various measures to 
obtain such reductions.
    Another potentially key requirement is that Moderate and above 
areas must submit attainment demonstrations. Under section 
182(b)(1)(A), for Moderate and above areas States are to specify in 
their plans specific annual reductions in emissions ``as necessary to 
attain the [NAAQS] for ozone by the attainment date applicable under 
this Act.'' Under section 182(c)(2)(A), for Serious and above areas 
States are to submit a demonstration that the State Implementation Plan 
(SIP), ``as revised, will provide for attainment of the ozone [NAAQS] 
by the applicable attainment date.'' Further, this provision continues, 
``[t]his attainment demonstration must be based on photochemical grid 
modeling or any other analytical method determined by the 
Administrator, in the Administrator's discretion, to be at least as 
effective.'' These requirements provide the motivation for the OTC's 
recommendation; as additional measures may be necessary for the States 
to demonstrate that their SIPs will achieve timely attainment. The 
modeling information is, of course, important to determining what 
reductions are necessary in what areas for attainment in the OTR.
    It is also relevant that States are obligated to adopt various 
measures specified for progress toward attainment, and to achieve 
certain percentage reductions in emissions by interim dates. In 
general, section 172(c)(2) requires that SIPs ``require reasonable 
further progress'' (RFP), defined in section 171(1) to mean ``such 
annual incremental reductions in emissions of the relevant air 
pollutant as are required by this part or may reasonably be required by 
the Administrator for the purpose of ensuring attainment of the [NAAQS] 
by the applicable date.'' More specifically, section 182(b) provides 
that for Moderate and above areas States were to submit, by November 
15, 1993, SIP revisions providing for a 15% reduction in emissions of 
volatile organic compounds (VOCs) from a 1990 baseline to be achieved 
by 1996. Further, section 182(c)(2)(B) provides that for Serious and 
above areas States are to submit, by November 15, 1994, SIP revisions 
that will result, subject to a limited feasibility exception, in 
additional reductions in VOC emissions from the 1990 baseline of 3% 
each year averaged over consecutive 3-year periods beginning in 1996 
and until the attainment date. Section 182(c)(2)(C) provides for 
substitution of reductions in emissions of nitrogen oxides (NOX) 
for VOC, in accordance with EPA guidance. These RFP requirements 
establish minimum reductions that certain nonattainment areas in the 
OTR will be required to achieve apart from whether EPA approves or 
disapproves the recommendation.
    Finally, section 110 of the Act establishes general requirements 
for SIPs. Section 110(a)(2) specifies minimum elements of a State's 
SIP, and subparagraph (D) specifies that a State's SIP shall contain 
adequate provisions prohibiting, consistent with the provisions of this 
title, any source or other type of emissions activity within the State 
from emitting any air pollutant in amounts which will contribute 
significantly to nonattainment in, or interfere with maintenance by, 
any other State with respect to any such national primary or secondary 
ambient air quality standard.
    This provision, as discussed in detail below, is the key mechanism 
under the transport provisions of sections 176A and 184, and is central 
to the OTC recommendation and to EPA's action on it.

B. Ozone Transport Region Provisions

    The OTR was established by operation of law under section 184 of 
the Act and is comprised of the States of Connecticut, Delaware, Maine, 
Massachusetts, Maryland, New Hampshire, New Jersey, New York, 
Pennsylvania, Rhode Island, Vermont, the District of Columbia, and the 
portion of Virginia that is within the Consolidated Metropolitan 
Statistical Area that includes the District of Columbia. Congress 
established the OTR in the 1990 Amendments to the Act based on the 
recognition that the transport of ozone and ozone precursors throughout 
the region may render the Northeast States' attainment strategies 
interdependent.
    Under section 184, the Administrator established a Northeast Ozone 
Transport Commission for the OTR consisting of the Governor of each 
State or their designees, the Administrator or her designee, the 
Regional Administrators for the EPA regional offices affected (or the 
Administrator's designees), and an air pollution control official 
representing each State in the region, appointed by the Governor.
    Section 184(c) specifies a procedure for the OTC to develop 
recommendations for additional control measures to be applied within 
all or a part of the OTR if the OTC determines that such measures are 
necessary to bring any area in the OTR into attainment for ozone by the 
applicable dates in the Act. Section 184(c)(1) provides that Upon 
petition of any States within a transport region for ozone, and based 
on a majority vote of the Governors on the Commission (or their 
designees), the Commission may, after notice and opportunity for public 
comment, develop recommendations for additional control measures to be 
applied within all or a part of such transport region if the commission 
determines such measures are necessary to bring any area in such region 
into attainment by the dates provided by [subpart II of part D of title 
I of the Clean Air Act].
    Section 184(c) also lays out procedures the Administrator is to 
follow in responding to recommendations from the OTC. Upon receipt of 
the recommendations, the Administrator is to publish a Federal Register 
notice stating that the recommendations are available and providing an 
opportunity for a public hearing within 90 days. On March 18, 1994, EPA 
published a notice announcing receipt of the OTC recommendation, 59 FR 
12914. EPA further announced on April 8, 1994 that a public hearing 
would be held in Hartford, Connecticut on May 2-3, 1994, 59 FR 16811 
(April 8, 1994). The Administrator is also to ``commence a review of 
the recommendations to determine whether the control measures in the 
recommendations are necessary to bring any area in such region into 
attainment by the dates provided by [subpart II] and are otherwise 
consistent with [the] Act.'' Finally, in undertaking her review, the 
Administrator is to consult with members of the OTC and is to take into 
account the data, views, and comments received pursuant to the public 
hearing.
    Last, sections 184(c) (4) and (5) govern EPA's response to the OTC 
recommendations. The Administrator is to determine whether to approve, 
disapprove, or partially approve and partially disapprove the 
recommendations within nine months of receipt. For any disapproval, the 
Administrator is to specify:
    (i) Why any disapproved additional control measures are not 
necessary to bring any area in such region into attainment by the dates 
provided by [subpart II] or are otherwise not consistent with the Act; 
and
    (ii) Recommendations concerning equal or more effective actions 
that could be taken by the commission to conform the disapproved 
portion of the recommendations to the requirements of [section 184].
    Section 184(c)(5) provides that, upon approval or partial approval 
of any recommendations, the Administrator is to issue to each State in 
the OTR to which an approved requirement applies a finding under 
section 110(k)(5) that the SIP for that State is inadequate to meet the 
requirements of section 110(a)(2)(D), quoted above. Under section 
184(c)(5), the Administrator's finding of inadequacy under section 
110(a)(2)(D) is to require that each affected State revise its SIP to 
include the approved additional control measures within one year after 
the finding is issued.
    Finally, section 184(d) provides that, for purposes of section 184, 
the Administrator is to ``promulgate criteria for purposes of 
determining the contribution of sources in one area to concentrations 
of ozone'' in another nonattainment area. These criteria are to 
``require that the best available air quality monitoring and modeling 
techniques be used for purposes of making such determinations.''

C. Background Regarding OTC LEV Program

    The Administrator convened the OTC on May 7, 1991. Thereafter, the 
OTC moved to work toward a regional ozone strategy with emphasis on 
consensus agreements to adopt regional measures to address the ozone 
problem in the Northeast. To address the contribution of motor vehicles 
to the Northeast ozone problem, the OTC focussed early on emissions 
standards for new motor vehicles and on adoption of federal 
reformulated gasoline throughout the OTR as potential additional 
control measures. The Act, however, imposes certain limitations on the 
States' ability to adopt new motor vehicle emissions standards.
    Section 209 of the Act generally preempts States from establishing 
new motor vehicle emissions standards, leaving such regulation to EPA 
under section 202 of the Act. Section 209 does, however, provide an 
exception for California to adopt new motor vehicle emissions standards 
where the Administrator grants a preemption waiver based on a finding 
that California's standards will be, ``in the aggregate, at least as 
protective of public health and welfare as applicable Federal 
standards.'' Further, under section 177 of the Act, any State which has 
SIP provisions approved under part D of title I may adopt and enforce 
new motor vehicle emission standards for any model year if:
    (1) Such standards are identical to the California standards for 
which a waiver has been granted for such model year, and
    (2) California and such State adopt such standards at least two 
years before commencement of such model year (as determined by 
regulations of the Administrator).
    EPA has granted a waiver for California's ``Low Emission Vehicle'' 
program (See 58 FR 4166 (Jan. 13, 1993)(announcing availability of 
Waiver of Federal Preemption; California Low- Emission Vehicle 
Standards (Jan. 8, 1993)). This program generally calls for five 
categories of vehicles meeting progressively more stringent emissions 
standards: California Tier I vehicles; Transitional Low Emission 
Vehicles (TLEV); Low Emission Vehicles (LEV); Ultra-Low Emission 
Vehicles (ULEV); and Zero Emission Vehicles (ZEV). California has also 
established an overall non-methane organic gas (NMOG) standard that 
each manufacturer must meet for its fleet of new vehicles in a 
particular model year by selling any combination of vehicles certified 
by California as meeting standards for one of the five categories. In 
addition, under California's program, at least 2% of each 
manufacturers' new vehicle fleet sold in California must be ZEV's by 
1998, and 10% by 2003.\1\
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    \1\In EPA's waiver decision regarding California's LEV program, 
the EPA Administrator stated, ``Based on EPA's review of this 
record, I find reasonable and so adopt California's finding that 
there is adequate leadtime to permit the development of technology 
necessary to meet those standards giving appropriate consideration 
to the cost of compliance within the required time frame.'' Waiver 
of Federal Preemption; California Low-Emission Vehicle Standards at 
69 (Jan. 8, 1993).
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    At its second meeting on July 16, 1991, the OTC adopted a 
Memorandum of Understanding (MOU) in which the State and District of 
Columbia representatives agreed that, in view of the significant 
contribution of motor vehicles to the Northeast ozone problem, they all 
support California's Motor Vehicle Control Program, and call on their 
jurisdictions to cooperatively evaluate the feasibility, air quality 
benefits, and associated costs of this Program in the OTR. At its third 
meeting on October 29, 1991, the OTC States agreed to a further MOU 
providing that each OTC state would take steps to implement 
California's Low Emission Vehicle program as soon as possible. New York 
and Massachusetts are the only States that have fully adopted the 
California LEV program in legislation and regulations without 
contingencies, and both States are set to implement their programs. The 
automobile manufacturers' have challenged the legality of both programs 
and both lawsuits are ongoing. Other States have adopted or are 
adopting the program contingent on regional program adoption, and the 
remaining States are at various stages of the legislative or regulatory 
process to adopt the program.
    In August 1993, Maine, Maryland, and Massachusetts petitioned the 
OTC to adopt a recommendation calling for the application of the 
California LEV program throughout the OTR. During the fall of 1993, the 
OTC held a number of public forums in various locations in the 
Northeast, and held a public hearing in Hartford, Connecticut on 
December 16-17, 1993. Finally, at its winter meeting on February 1, 
1994 in Washington, D.C., the OTC voted by a 9 to 4 majority to 
recommend that EPA mandate the California LEV program throughout the 
OTR. (The OTC refers to the program they recommend as ``OTC LEV.'') New 
Hampshire, Virginia, Delaware, and New Jersey voted against the 
recommendation. The OTC's recommendation contains the following 
elements:
    (1) The OTC LEV program would be applicable to all 1999 and 
subsequent model year passenger cars and light duty trucks in the OTR;
    (2) Subject to certain very limited exceptions, all vehicles sold, 
imported, delivered, purchased, leased, rented, acquired, received, or 
registered in the OTR that are subject to the OTC LEV program must be 
certified pursuant to a California Air Resources Board (CARB) Executive 
Order;
    (3) The OTC LEV program would allow the sale of the five categories 
of California vehicles: California Tier I, TLEV, LEV, ULEV, and ZEV;
    (4) Manufacturers could choose any combination of California 
certified vehicles to meet average NMOG fleet emission standards in the 
OTR as follows:

    1999--0.113 g/mi
    2000--0.073 g/mi
    2001--0.070 g/mi
    2002--0.068 g/mi
    2003 and later--0.062 g/mi

    Regarding California's ZEV sales mandate, the OTC recommends that, 
to the extent it must apply to satisfy section 177, it shall apply. But 
if it is not required under section 177, the OTC recommends that the 
``individual States within the OTC may at their option include such a 
requirement and/or economic incentives designed to increase the sales 
of ZEVs in the programs they adopt.''
    (5) The effective date for the OTC LEV program would be January 1, 
1996, allowing two vehicle model years prior to applicability of the 
standards in 1999, but does not preclude earlier State implementation.

D. Legislative History of Section 184

    The OTC provisions originated in Congress in the House bill as 
introduced. That bill, as introduced, established an ozone transport 
region for the Northeast, and incorporated the procedures specified for 
general transport regions under what was finally enacted as section 
176A of the Act. That provision in the House bill did not involve a 
plan for specific additional control measures. See H.R. 3030 at 92-93 
and 49 (July 27, 1989), reprinted in 2 1990 Legislative History of the 
Clean Air Act Amendments of 1990, 103rd Cong., 1st. sess. (Nov. 1993) 
(hereinafter ``1990 Legislative History'') at 3828-29 and 3785. The 
House committee then marked-up H.R. 3030 to include the provisions as 
finally enacted. See H.R. Rep't No. 101-490, part 1, 101st Cong., 2d 
Sess. at 527-28 (May 17, 1989), reprinted in 2 1990 Legislative History 
at 3551-52. It described the bill as establishing ``a public procedure 
and structure'' for an OTC to transmit recommendations to EPA and 
explained that EPA's response ``should be buttressed by supporting 
material.'' It further stated, ``The Committee expects that the 
Administrator's review of additional control measures recommended by an 
ozone transport commission will fully acknowledge and respond to the 
dimensions of the transport problems addressed by the commission's 
recommendations.'' The report also set out the timetable for EPA's 
response within nine months, and for EPA to issue a finding of SIP 
inadequacy ``[u]pon full or partial approval'' followed by States' SIP 
revisions within one year. H.R. Rep't. No. 101-490 at 256, reprinted in 
2 1990 Legislative History at 3280.
    The Senate bill, in contrast, as introduced provided that the 
commission could, without any independent EPA review or approval, 
``after notice and opportunity for comment, require additional control 
measures to be applied within such transport region if the commission 
determines such measures are necessary to bring all areas in such 
region into attainment by the dates provided by this subpart.'' See S. 
1630, 101st Cong., 1st Sess. (Sept. 4, 1989), reprinted in 5 1990 
Legislative History at 9111.
    The Senate bill, as introduced, was amended in committee to provide 
for EPA review of an OTC ``plan'' for additional control measures. 
Under the Senate committee mark-up, the OTC could, after notice and 
comment, develop a plan for additional control measures for the OTR, 
and would then transmit the plan to EPA for review. The committee then 
included the general framework for EPA review that survives in section 
184 as enacted, including EPA's obligation to explain any disapproval 
and recommend alternatives. The bill differed from the statute as 
enacted, however, in that: (1) EPA was obligated to state in the 
Federal Register notice upon receipt of the plan that ``written data, 
views, or comments on the plan may be submitted to the Administrator 
within ninety days beginning on the receipt date'' but was not 
obligated to conduct a public hearing; (2) EPA's period to determine 
whether to approve the plan was 120 days, rather than nine months; and 
(3) the bill provided that the plan would be deemed approved if the 
Administrator failed to act within 120 days. The Senate committee mark-
up also included the mechanism for implementation whereby EPA would 
issue a finding that the States' plans were inadequate, and that the 
finding would require the States to revise their SIPs to include the 
approved additional control measures within one year after the finding 
is issued. See S. Rep. No. 101-228, 101st Cong., 1st Sess., at 34 and 
610-11 (Dec. 20, 1989), reprinted in 5 1990 Legislative History at 
8950-51. This version was reported out of committee to the full Senate. 
See S. 1630 (Dec. 20, 1989), reprinted in 5 1990 Legislative History at 
7986-7988.

    In the Senate debate on the Senate bill, Senator Lieberman 
explained these developments. He explained that President Bush's 
bill\2\ would have left the final decision about imposing additional 
controls to EPA. But Senator Lieberman explained that this was 
``unacceptable'' because EPA's lack of support for past regional 
efforts to adopt controls was in part responsible for their failure. 
Senator Lieberman went on to explain that concerns were raised to the 
committee that the commission was being given ``too much authority'' 
because it would have ``ultimate authority to impose additional 
controls on sources of emissions in the separate States.'' Lieberman 
emphasized the importance of taking from EPA the responsibility for 
recommending baseline regional controls. He went on to explain that, 
under the bill.

    \2\President Bush's bill was H.R. 3030, as introduced.
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    Final authority to disapprove additional measures actually rests 
with EPA. However, EPA bears the burden, as clearly stated in the 
bill, of demonstrating that the additional control measure is not 
necessary to bring any area of the region into attainment by the 
dates provided. In making their decision, EPA must not place unfair 
burdens on the recipient State.

    See Senate Debate on S. 1630 (Jan. 31, 1990), reprinted in 4 1990 
Legislative History at 5077 (statement of Sen. Lieberman).

    As noted, the conference adopted the House version. The debates on 
the conference bill focused primarily on the importance of the 
transport provisions to address a significant problem. In the Senate 
Debate on the conference bill,
Senator Lieberman again explained EPA's responsibilities in responding 
to an OTC recommendation:

    The Administrator has the final authority to disapprove 
additional measures recommended by the Commission. However, EPA 
bears a heavy burden of demonstrating that the additional control 
measure(s) is not necessary to bring any area of the region into 
attainment by the dates provided and to recommend equal or more 
effective actions that could be taken by the Commission to conform 
the disapproved portion of the recommendations. Any recommendations 
by EPA under this section designed to replace the recommendations of 
the Commission shall not place an unfair burden on any state which 
is the victim of the transported air pollution. Equal or more 
effective actions recommended by the EPA shall mean actions which 
achieve equivalent progress towards attainment of the standard, 
given full consideration of the impact of transported air pollution.

    Senate Debate (Oct. 27, 1990), 1 1990 Legislative History at 1053 
(Statement of Senator Lieberman). Also in the Senate Debate on the 
Conference bill, Senator Baucus inserted a detailed explanation of the 
bill, known as the Baucus-Chafee Statement of Senate Managers. See 1 
1990 Legislative History at 1000 and 1045. The Statement of Senate 
Managers reiterated Senator Lieberman's points, using his exact 
language quoted above to describe EPA's role in responding to an OTC 
recommendation, including the emphasis on EPA's ``heavy burden'' to 
disapprove. 1 1990 Legislative History at 1004.

II. Applicability of Rulemaking Procedure

    Section 184(c) establishes a specific notice-and-comment procedure 
both for OTC development of and EPA action to approve or disapprove 
recommendations for additional control measures in the OTR. These 
procedures are compatible with, but not necessarily identical to, the 
procedures the Agency must follow to issue a rule. The statute is 
silent as to whether EPA can take final action on the OTC 
recommendation without complying with notice-and-comment rulemaking 
procedures. EPA does not believe that rulemaking procedures are 
necessary if EPA disapproves the OTC recommendation because such an 
action would not have a binding future effect on any regulated parties. 
It is less clear whether rulemaking procedures are necessary for 
approval or partial approval of the OTC recommendation.
    Regardless of whether rulemaking procedures are required, EPA 
recognizes the importance of public participation in its decision-
making process. The procedures required by section 307(d) of the Clean 
Air Act are an excellent vehicle for ensuring an open, public process. 
Among other things, they require the establishment and maintenance of a 
rulemaking docket that contains the information, data and documents 
upon which EPA bases its proposed and final rules; they provide an 
opportunity for the public to present written and oral comments to the 
Agency, including an opportunity to rebut views presented at a public 
hearing; and they require the Agency to respond to the significant 
public comments, criticisms and new data submitted during the comment 
period.
    EPA has decided that the better course in this instance is to 
follow section 307(d) rulemaking procedures and ensure that there is an 
open public process that allows interested parties to put on the record 
their views, comments, arguments and data relevant to the decision 
before the Agency.\3\ The Administrator has determined that, pursuant 
to section 307(d)(1)(V), if the Agency approves or partially approves 
the OTC recommendation, section 307(d) will apply.\4\
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    \3\EPA is not finding that it is legally obligated to use 
rulemaking procedures to approve the OTC recommendation. EPA 
reserves the right to approve future OTC recommendations without 
following rulemaking procedures.
    \4\The decision to follow rulemaking procedures is intended to 
preserve EPA's option of approving or partially approving the OTC 
recommendation. The Agency is not legally obligating itself to 
follow rulemaking procedures to the extent it disapproves or 
partially disapproves the OTC recommendation, although the Agency 
currently intends to follow the procedures set forth in 307(d) 
regardless of whether it approves or disapproves the OTC 
recommendation.
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    EPA has established Air Docket No. A-94-11 and placed in it the 
data, information and documents upon which the Agency relied in 
drafting this proposal, as required by section 307(d) (2), (3) and (4). 
Section 307(d)(3)'s requirement that EPA publish a notice of proposed 
rulemaking is met by this notice. In view of the limited nine month 
timetable for EPA decision, to satisfy rulemaking requirements, EPA is 
also relying on the OTC's recommendation itself (developed through the 
OTC's statutory notice-and-comment process), the OTC's technical 
analysis and response to comments, as well as EPA's discussion of 
relevant issues, data, and other Agency information.\5\ This proposal 
leaves open EPA's option to approve, disapprove, or partially approve 
and partially disapprove the OTC recommendation in its final decision.
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    \5\Courts have recognized the possibility of publishing State 
submissions to EPA to satisfy rulemaking requirements for a 
proposal. Under the 1977 Amendments, EPA argued that time 
constraints constituted ``good cause'' to avoid notice-and-comment 
rulemaking in designating areas according to their attainment 
status. In New Jersey v. EPA, the Court of Appeals for the D.C. 
Circuit emphasized that EPA could have published as proposed rules 
the State designations shortly after it received them in order to 
complete rulemaking under the short statutory timetable. New Jersey 
v. EPA, 626 F.2d 1038, 1043 (D.C. Cir. 1980). Accord United States 
Steel Corp. v. EPA, 595 F.2d 207 (5th Cir. 1979).
---------------------------------------------------------------------------

    EPA seeks public views, arguments, data and comments on all aspects 
of its analysis in this notice and on the Agency's information placed 
in the docket. EPA also seeks comment on the OTC's recommendation 
(contained in an Appendix to this proposal), on the OTC's views that 
are described in this notice, and on the OTC's technical support 
document and response to comments document that may be found in the 
docket. Finally, EPA will supplement the record with additional 
rationales, discussions, data, and other pertinent information for 
public participation and comment as that becomes available.
    As indicated in detail below, EPA is considering a number of 
complicated issues in determining whether to approve or disapprove the 
OTC recommendation, and invites comments on all of these issues. EPA 
intends to make every effort to afford the public an opportunity to 
participate in the Agency's process to respond to the recommendation. 
In addition to the opportunity to file written comments and present 
oral views at the May 2-3 public hearing, EPA intends to hold a series 
of public meetings in the Northeast to provide further opportunity for 
oral presentation of views. EPA also expects to supplement the record 
as necessary to allow the public to comment on new information and 
considerations that EPA believes it should take into account in making 
a decision.

III. Standards Applicable to EPA Review of OTC Recommendation

    Section 184 of the Act specifies two general criteria that EPA is 
to apply in evaluating whether to approve, disapprove, or partially 
approve and partially disapprove the OTC recommendation. These are, 
first, whether the additional control measures that the OTC recommends 
are ``necessary'' and, second, whether the additional control measures 
are ``otherwise consistent with th[e] Act.'' If the recommended measure 
is necessary and consistent with the Act, EPA believes it would be 
obligated to approve the recommendation.

A. Necessity

    EPA believes that it has substantial discretion to interpret the 
``necessary'' test, and is considering a number of approaches, 
discussed below. EPA's evaluation of ``necessity'' could involve two 
fundamental analytic steps: First, EPA believes it should consider the 
magnitude of emissions reductions in ozone precursors needed for the 
nonattainment areas in the OTR to attain. Second, it may be appropriate 
to consider other potential emissions reduction measures that may be 
available to satisfy the needed magnitude of emissions reductions, and 
compare the LEV program to alternative measures. In connection with the 
magnitude of reductions needed for attainment, EPA is considering: (1) 
how it should address the geographic dimension of determining where the 
LEV program is necessary for areas in the OTR to achieve attainment; 
(2) how it should account for the timing of when the LEV program would 
generate reductions that could contribute to attainment; and (3) 
whether EPA can take into account the need for the LEV program for 
maintenance purposes. In connection with alternatives to the LEV 
program, EPA is evaluating relevant aspects of (1) the recommended LEV 
program; (2) the FLEV alternative that the auto manufacturers have 
proposed; and (3) other possible emissions reduction measures 
identified by EPA, the OTC, or other State bodies.
1. Necessity Finding
    EPA believes that more than one approach to defining what is 
``necessary'' is conceivable. One possible approach is to consider as 
necessary any additional control measures that contribute to 
attainment, as long as measures specifically required by the Act or 
that are otherwise in place are insufficient to achieve attainment. 
Under this approach, the relevant question would be whether additional 
reductions are needed for attainment, and the availability of 
alternative control measures would not be relevant.
    A second approach is to first consider what emissions reductions 
are needed for attainment and then to compare the LEV program to 
alternative measures that could be adopted to achieve those reductions. 
Before enactment of the 1990 Amendments, EPA interpreted the term 
``necessary'' generally in this manner under section 211(c)(4)(C) of 
the Act, in the context of preemption of State fuel requirements.\6\ 
The section 211(c) provision specifically addresses how alternative 
measures should be compared for purposes of evaluating necessity.
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    \6\Other provisions of the Act also involve a ``necessary'' 
standard. Under section 110, the Administrator is to approve a 
State's SIP revision if it meets the applicable requirements of the 
Act, including the requirement in section 110(a)(2)(A) that the SIPs 
include measures ``as may be necessary or appropriate to meet the 
applicable requirements of this Act.'' Prior to the 1990 Amendments, 
section 110(a)(2) provided that the Administrator shall approve a 
State's SIP if it includes measures ``as may be necessary to insure 
attainment and maintenance'' of the primary and secondary NAAQS. The 
Supreme Court has interpreted the ``as may be necessary'' language 
to mean that ``the Administrator must assure that the minimal, or 
`necessary,' requirements are met, not that he detect and reject any 
state plan more demanding than federal law requires.'' Union 
Electric Co. v. EPA, 427 U.S. 246 at 263 (1976) (footnote omitted). 
EPA currently does not believe that this test, and the Union 
Electric Co. Court's analysis, are applicable under section 184. The 
Union Electric Co. Court explained that the language, structure, and 
purpose of the Act, are consistent with a State's decision to be 
stricter within its borders than Federal law requires, here, in 
contrast, section 184 appears to indicate that EPA is to disapprove 
the OTC's recommended measures if those measures are not necessary. 
Further, the Union Electric Court's analysis is inapplicable here 
because a majority of OTC States is seeking to impose requirements 
on dissenting OTC States over their objections. EPA requests comment 
on this view.
    Also, in connection with its study and rulemaking under section 
202(i) related to ``Tier 2'' motor vehicle emissions standards, EPA 
is to determine whether ``there is a need for further reductions in 
emissions.'' (Emphasis supplied.) As discussed below, EPA has not 
yet completed the Tier 2 study or the subsequent rulemaking, and 
thus has not yet interpreted this standard in that context.
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    Section 211(c)(4)(A) provides that, subject to specified 
exceptions, States may not regulate characteristics of motor vehicle 
fuels or additives in order to control motor vehicle emissions once EPA 
has regulated that characteristic or has found that such regulation is 
not necessary. Congress apparently sought to preempt States from 
interfering with national uniformity in federal fuel regulations. 
Subparagraph (C) specifies an exception for States to regulate fuels 
and additives in their SIPs, which the Administrator may approve ``only 
if [s]he finds that the State control or prohibition is necessary to 
achieve the national primary or secondary ambient air quality standard 
which the plan implements.''
    Prior to the 1990 Amendments, the term ``necessary'' was not 
further defined. At that time, EPA regulated the volatility of gasoline 
under section 211(c) in order to control evaporative emissions of VOCs. 
Certain States sought approval from EPA for more stringent volatility 
controls on the grounds that such more stringent controls were 
``necessary'' under section 211(c)(4)(C). EPA approved States' more 
stringent volatility controls in New York and New Jersey, among 
others\7\. In addition, EPA earlier approved Arizona's controls on 
oxygenate content of gasoline in order to control carbon monoxide 
emissions as necessary under section 211(c)(4)(C).\8\ In approving 
these State controls, EPA articulated a test for determining 
``necessity.'' There, EPA explained that if, after accounting for the 
possible reductions from all other reasonable control measures, the 
State could demonstrate that further measures are still needed for 
attainment, then the fuel controls are ``necessary'' within the meaning 
of section 211(c)(4)(C). EPA first articulated this test in the Arizona 
case:

    \7\See EPA's Approvals of Revisions for State Implementation 
Plans for New York, 54 FR 26030, 26031 (June 21, 1989) and New 
Jersey, 54 FR 25572, 25573 (June 16, 1989).
    \8\See EPA's Approval of Revisions for State Implementation Plan 
for Arizona, 53 FR 17378, 17413 (May 16, 1988) and 53 FR 30224, 
20228 (Aug. 10, 1988).
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    EPA believes that a fuel control measure may be ``necessary'' 
for timely attainment if no other measures that would bring about 
timely attainment exist, or if such other measures exist and are 
technically possible to implement but are unreasonable or 
impracticable.'' 53 FR at 17413. In short, EPA's approach was that 
the controls were necessary if they would still be needed for 
attainment after adoption of all other reasonable and practicable 
measures. Congress subsequently codified this interpretation when it 
added a definition of ``necessary'' to section 211(c)(4)(C) in the 
1990 Amendments.\9\

    \9\Of course, Congress did not codify this or any other 
definition of ``necessary'' in section 184. This difference might 
arguably support EPA's discretion to adopt a different approach to 
the term under section 184.
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    In applying this definition of ``necessary'' in the fuel context, 
EPA explained that it would not require that a State impose more 
drastic measures (such as driving prohibitions, gas rationing, or plant 
shutdowns), as alternatives to State fuel controls. See 54 FR at 26031 
and 26035. EPA further explained that it would conclude that measures 
are ``necessary'' when no other measures that EPA or the State has 
found reasonable are available\10\ to achieve this reduction. Beyond 
such identified ``reasonable'' measures, EPA need look at other 
measures before [the fuel] control only if it has clear evidence that 
[the fuel] control would have greater adverse impacts than those 
alternatives. Therefore, EPA can defer to [the State's] apparent view 
that [the fuel] control is the next less costly (or is itself a 
reasonable) measure.
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    \10\In context, it appears that EPA intended the word 
``available'' to mean ``sufficient.''
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    See 54 FR at 26031.
    EPA did consider cost-effectiveness of alternative measures as one 
criterion, but not the only criterion, for evaluating the 
reasonableness of the alternatives. 54 FR at 26035. EPA also explained: 
``Arguably, an alternative measure is `reasonable' only if its effects 
are less drastic than the effects of the fuel controls.'' Id.
    There may be some ambiguity whether EPA's test was whether 
(considering cost and other factors), the fuel controls were more 
reasonable than alternatives, or that alternatives were so drastic as 
to prevent EPA from concluding that they were reasonable. EPA did state 
that it determined that reasonable alternatives would not achieve 
enough reductions, and that it ``determined that remaining controls 
such as gas rationing, driving reductions, and source shutdowns are so 
drastic that the State may resort to fuel controls first.'' 54 FR at 
26033. But EPA immediately thereafter characterized its judgement as 
being that ``State fuel regulation is a less drastic course than gas 
rationing and other unpopular controls.'' Id. At the least, it seems 
that EPA believed that comparing the reasonableness of fuel controls to 
alternatives was a significant factor in determining whether the 
alternatives were themselves reasonable. EPA also explained that its 
judgment about what is too drastic ``is a complicated policy 
determination'' requiring the Administrator to weigh factors such as 
cost and popularity, and that such policy judgments need not be 
supported by the same technical record as, for example, determinations 
of as the magnitude or reductions an area needs for attainment. 54 FR 
at 26033. Also, EPA did not insist that the State fuel controls be 
sufficient to fill the shortfall to achieve attainment, or that all 
measures needed to achieve attainment actually be adopted in order to 
qualify for the section 211(c)(4)(C) exception. Most importantly, as 
the paragraph quoted above indicates, EPA gave significant deference to 
the State's determination regarding whether the fuel control was the 
most reasonable and practicable measure to achieve the NAAQS.
    Congress's codification of EPA's interpretation of ``necessary'' in 
the fuel context confirms the validity of this interpretation in the 
fuels context. EPA is considering whether this approach should apply 
here, including deference to the OTC's view that no more ``reasonable'' 
and ``practicable'' alternatives to the recommended measure are 
available that would be sufficient for purposes of attainment.
    In addition to the fuels precedent, EPA believes that the statutory 
structure, together with the legislative history, may further support 
giving substantial weight, or deference, to the OTC's recommendation 
that implementation of the LEV program throughout the OTR is necessary 
for attainment in the region. While EPA is to review the OTC's 
recommendations under section 184(c)(2)(B) ``to determine whether the 
control measures are necessary,'' under section 184(c)(4) EPA is to 
specify ``why any disapproved additional control measures are not 
necessary'' if EPA disapproves or partially disapproves the 
recommendations. Section 184 nowhere mentions a parallel obligation to 
explain why the additional control measures are necessary in the case 
of approval or partial approval. EPA believes it could reasonably 
interpret these provisions to mean that EPA is to start with a 
presumption of approving the OTC's recommendations, unless it finds 
that the recommended measures are not necessary.
    EPA believes the legislative history could be read to support this 
view. As described above, the Baucus-Chafee Statement of Managers, in 
discussing EPA's role in reviewing an OTC recommendation, pointed out 
EPA's ``heavy burden'' to ``demonstrat[e] that the additional control 
measure(s) is not necessary.'' See 1 1990 Legislative History at 1004, 
supra (emphasis supplied). As noted above, the Statement of Managers' 
discussion used identical language to Senator Lieberman's description 
in the Senate debate. Further, Senator Lieberman characterized the 
Senate bill as ``clearly stating'' that EPA must demonstrate that the 
additional control measure is not necessary. See 1990 Legislative 
History at 1053, supra.
    To be sure, EPA generally has an obligation to explain the basis 
for its decision, and the House Report did indicate that EPA's response 
``should be buttressed by supporting material.'' H.R. Rep't. No. 101-
490 at 256, reprinted in 2 1990 Legislative History at 3280, supra. But 
EPA's explicit statutory obligation to explain why a measure is ``not 
necessary'' together with the Senate's unequivocal interpretations in 
the legislative history may reasonably indicate that EPA should give 
substantial weight to the OTC's determination of necessity.
    EPA is mindful that its factual analysis of the LEV program's 
necessity will be subject to substantial uncertainty within the nine 
month timetable provided for a decision. EPA expects this to be so both 
for the modeling information regarding its analysis of the magnitude or 
reductions needed as well as the reasonableness of the LEV program and 
alterative measures. Here, EPA is under a statutory obligation to reach 
a decision by November 10, 1994. Meeting this deadline may be 
particularly important in this case, because the OTC States are 
obligated under section 182(b)(1)(A) and section 182(c)(2) of the Act 
to submit for their ozone nonattainment areas, by November 15, 1994, 
demonstrations that their SIPs, as revised, will provide for attainment 
of the ozone NAAQS by the dates applicable to each area. These States 
presumably intend to rely on EPA's decision regarding the recommended 
LEV program in their attainment demonstrations to show that their SIPs 
will provide for timely attainment. Without knowing whether EPA will 
approve, disapprove, or partially approve and partially disapprove the 
OTC's LEV recommendation, the States would not know what magnitude of 
emissions reductions their other SIP measures must achieve.\11\ Under 
these circumstances, and in light of the legislative history and 
statutory structure, it appears appropriate for EPA to at least resolve 
uncertainties in favor of approval, in deference to the OTC's 
determination of necessity. In other words, it appears appropriate for 
EPA to start with the position that it should approve the OTC's 
recommendation unless it has a sufficient factual basis to find that 
the LEV program is not necessary. EPA requests comment on whether and 
the extent to which it should accord deference to the OTC's 
determination that the LEV program is necessary.
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    \11\EPA notes that it generally has found SIPs inadequate and 
called for plan revisions after complete SIPs have been submitted or 
where a new situation arises creating the inadequacy. Here, an 
approval of the OTC recommendation within the nine month timetable 
would result in a finding under section 110(k)(5) of SIP inadequacy 
under section 110(a)(2)(D) prior to submission of attainment 
demonstrations due November 15, 1994. EPA believes this is 
appropriate. The Act does not specify a deadline for compliance with 
section 110(a)(2)(D); section 184 does not limit EPA to finding SIPs 
inadequate only after attainment demonstrations are submitted; and 
section 110(k)(5) specifically authorizes EPA to require SIP 
revisions ``to mitigate adequately the interstate pollutant 
transport described in section [184] and or section [176A].'' 
Indeed, States may need to rely on EPA's decision here in their 
attainment demonstrations.
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    EPA also recognizes counter-arguments that it should apply a more 
stringent variant of the section 211(c)(4)(C) approach, without 
deference to the OTC's view that no more ``reasonable'' and 
``practicable'' alternatives to the recommended measure exist. This 
departure from the section 211(c) approach may be justified by a 
difference in context between sections 211(c) and 184. In particular, 
the purpose of preemption under section 211(c) is to preserve national 
uniformity in EPA fuel regulations, which States can override where 
``necessary'' for purposes of achieving attainment. In contrast, under 
section 184 the OTC is authorized to specify, subject to EPA approval, 
measures necessary for compliance with the prohibition in section 
110(a)(2)(D) of the Act against significant contribution interfering 
with attainment in any other State. States are already obligated to 
comply with section 110(a)(2)(D) and are free to choose the control 
measures to do so; section 184 adds an element of compulsion whereby 
the OTC may override an objecting State to impose specific 
``necessary'' measures.
    Arguably, EPA deference might be less appropriate for the OTC, 
which can specify measures overriding the objection of a minority of 
its member States, and depriving them of their choice of measures to 
comply with section 110(a)(2)(D). On the other hand, it can be argued 
that Congress, in enacting section 184, intended the OTC to be given a 
substantial voice for proposing solutions to the ozone transport 
problem, even where its solutions override the views of some member 
States. Moreover, strict insistence on showing that no reasonable and 
practicable alternatives are available would seem to add little to the 
States' independent obligation to comply with section 110(a)(2)(D), 
since States are likely to choose reasonable and practicable means to 
comply. Still, Congress's own emphasis in the 1990 Amendments on 
specifying control measures it thought necessary for attainment, in 
addition to specifying deadlines, may indicate that allowing the OTC to 
specify additional control measures, even under a strict interpretation 
of ``necessary,'' is significant.
    EPA requests comment on whether, if that test should apply, EPA the 
interpretation of ``necessary'' under section 211(c)(4)(C) should apply 
here. In addition, EPA requests comment on whether it should defer to 
the OTC's evaluation of whether ``reasonable'' and ``practicable'' 
alternatives to the LEV program are available.
    Finally, EPA is considering how comparative cost-effectiveness and 
other social and environmental factors should affect its analysis of 
reasonable and practicable alternatives. One possible approach is that 
the LEV program would be necessary if it is still needed after all more 
cost-effective measures are adopted. As noted above, EPA considered 
cost-effectiveness as a criterion, but not the only criterion, in 
evaluating the reasonableness of controls under section 211(c)(4)(C). 
EPA recognizes that other policy reasons may support adoption of 
control measures that may not appear to be the most cost- effective for 
purposes of attaining the ozone NAAQS. For example, the socio-economic 
distribution of the burden of particular measures, employment impacts, 
and cross-media environmental impacts may affect the choice of control 
measures. EPA requests comment on how these factors should affect an 
analysis of alternatives.
2. Magnitude of Reductions
    As noted above, EPA believes it should address the amount of 
reductions needed for attainment in the OTR as the first step in 
evaluating whether the LEV program is necessary. In particular, EPA 
believes it is important to evaluate what reductions are needed, where 
they are needed, and when they are needed. In addition, EPA is 
considering whether it may also consider whether the LEV program is 
necessary for maintaining the ozone NAAQS even after it is achieved.
    The OTC addressed the magnitude of reductions necessary for OTR 
attainment in its response to comments and technical support documents. 
There, the OTC expressed the belief that the control strategies 
specifically mandated in the Clean Air Act would not be sufficient for 
the nonattainment areas in the OTR to achieve and maintain the ozone 
NAAQS. The OTC believes that more reductions will be needed than the 
LEV program would generate. Also, the OTC notes that, despite an 
overall recent decline in the frequency and severity of ozone 
exceedances, it believes that short term trends have proven inaccurate 
indicators of long term status. Further, the OTC notes that studies 
indicate that the trend toward fewer exceedances will reverse without 
significant additional NOX and VOC control.
    Regarding the scientific basis, the OTC also contends that 
emissions inventories, photochemical modeling and ambient monitoring 
data constitute the best tools available to evaluate the need for 
emissions reductions, despite continuing refinement of this scientific 
information. The OTC recognized that most air quality analysis in the 
past has focused on domains within a particular State rather than on a 
broader region. It asserts that it assessed the need for and 
effectiveness of reductions in the OTR using photochemical models, 
monitoring data, trajectory analyses, and mobile emission models.
    a. Focus on Contribution. At the outset, EPA believes the concern 
in section 184 with ozone transport affects its analysis of where 
emissions reductions are necessary for areas in the OTR to achieve 
attainment. That is, EPA currently believes that the ``need'' for 
additional measures in the OTR under section 184 should not focus on a 
State's need to adopt the LEV program in its own jurisdiction for the 
benefit of in-State nonattainment areas. States, of course, retain full 
authority to adopt this program under section 177 without EPA approval. 
Rather, EPA believes that the focus should be on the need for upwind 
States that contribute to nonattainment downwind to adopt the LEV 
program not for their own benefit but for the benefit of the downwind 
areas that could not otherwise attain on time. The statutory structure, 
including the reliance in section 184(c)(5) on section 110(a)(2)(D), as 
well as the legislative history, support this conclusion.
    Of course, EPA recognizes that upwind States also have an 
independent obligation to adopt measures for purposes of their own 
timely attainment. The measures upwind areas adopt for their own 
benefit may well be sufficient to prevent contribution to nonattainment 
downwind. While upwind areas may still contribute pollutants downwind 
after they have reached attainment, their independent obligation to 
attain should go a long way to reducing emissions that contribute to 
downwind nonattainment.\12\ It nevertheless seems that reductions in 
upwind areas may be necessary to prevent significant contribution to 
nonattainment downwind, even if the upwind areas would have to achieve 
those reductions for their own benefit, anyway. In other words, it does 
not seem that upwind areas' own need to reduce emissions for their own 
attainment should render those reductions unnecessary. To be sure, 
upwind areas' independent implementation of the LEV program in their 
SIPs may make it unnecessary for administrative purposes to mandate 
those controls. But EPA's obligation to mandate the recommended LEV 
measure does not appear to turn on whether the States already have or 
would have to implement that program for their own benefit. Rather, 
EPA's obligation seems to turn on whether the program is necessary for 
purposes of downwind attainment, regardless of whether it is necessary 
or has been adopted for upwind attainment purposes. EPA requests 
comment on this view.
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    \12\One complication, discussed further below, is the timing of 
reductions upwind, where the upwind areas may have a later 
attainment deadline.
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    Finally, EPA notes that it may be possible for downwind areas that 
are the recipients of transported pollution to counteract some portion 
of the incoming pollutants by adopting more controls downwind than 
would otherwise be necessary. Such areas might diminish the reductions 
necessary upwind by adopting such more stringent controls downwind. For 
downwind areas that are less polluted and have less stringent controls 
in place, the downwind areas might even be able to ``over-control'' at 
less cost than it would take for upwind areas to prevent some increment 
of contribution. On the other hand, it may not be fair to insist that 
downwind areas bear the cost of counteracting pollution that is 
generated upwind. In any case, however, no area receives air at its 
boundaries that is free of ozone or precursors. Thus, in evaluating 
what upwind contribution ``needs'' to be reduced for attainment 
downwind, it may be important to determine what ``boundary conditions'' 
downwind areas should be entitled to receive. EPA requests comment on 
these issues, and particularly on the extent to which it should view 
upwind reductions as necessary for attainment downwind, if the downwind 
area could, through extra controls, make those upwind reductions 
unnecessary.
    b. Timing of Reductions. As noted above, the OTC recommendation 
calls for adoption of the LEV program in the OTR in 1996, providing two 
years lead-time to auto manufacturers with the LEV standards applicable 
to model year 1999 vehicles. The benefits of this program are also 
dependent upon turnover in the vehicle fleet. As referenced above, EPA 
is thus mindful that this schedule for the LEV program will not 
generate reductions in time to assist areas in meeting a moderate area 
1996 and will generate only minimal reductions by the serious area 1999 
attainment deadline. More benefits would be available for severe areas 
with a 2005 or 2007 attainment deadline. The importance of when upwind 
reductions are necessary for downwind attainment, and when the LEV 
program will generate such reductions raises a number of important 
issues.
    First, in order for the LEV standards to apply in model year 1999, 
EPA may have to reach a decision to approve the OTC recommendation by 
the end of 1994. This may be an important factor supporting EPA's 
action within the nine month statutory timetable based on the best 
available current information. Under section 177 of the Act, States may 
adopt motor vehicle emissions standards identical to California's 
standards if ``California and the State adopt such standards at least 
two years before commencement of such model year (as determined by 
regulations of the Administrator).'' Under EPA's current regulations, 
model year 1999 may begin as early as January 2, 1998 (See 40 CFR 
86.082-2). To provide two years lead-time, States might then have to 
adopt California's standards by January 2, 1996 in order for the 
standards to apply for model year 1999.\13\ If EPA were to approve the 
OTC's LEV recommendation, section 184(c)(5) provides that EPA's finding 
of SIP inadequacy is to require that States revise their SIPs to 
include the LEV program within one year of the finding.\14\ Therefore, 
if EPA is to require that States adopt the LEV program and submit SIP 
revisions by January 2, 1996, then EPA must make a finding of SIP 
inadequacy no later than January 2, 1995. Delays in an EPA decision 
could delay application of an approved program, and would further delay 
the benefits and the degree to which such benefits could contribute to 
timely attainment.
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    \13\An issue in litigation in New York and Massachusetts has 
been whether the model year and two-year lead-time requirement under 
section 177 may vary for different manufacturers that begin their 
model years at different times, or whether the model year begins for 
purposes of section 177 for all manufacturers as soon as the model 
year may begin for any manufacturer.
    \14\It is not entirely clear whether EPA has discretion to give 
States less than one full year to submit their SIP revisions. Under 
section 110(k)(5), EPA ``may establish reasonable deadlines (not to 
exceed 18 months after such notice) for submission of such plan 
revisions.'' The more specific provision in section 184 that lacks 
the explicit grant of discretion from section 110(k)(5) itself 
arguably indicates that EPA does not have such discretion. EPA 
requests comment on this view.
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    Finally, EPA believes the time when the LEV program would generate 
reductions also relates to the locations where reductions are needed 
for purposes of relieving contribution of transported pollutants that 
interfere with timely attainment. It appears that the LEV program will 
generate reductions in time only to help areas to achieve attainment by 
the severe classification deadline of 2005 or 2007. States in the most 
northeast portion of the OTR, including Rhode Island, Massachusetts, 
Maine, Vermont, and New Hampshire, contain no such areas. EPA believes 
that its recent considerations in response to ozone transport problems 
in a letter to Senator Carl Levin\15\ and in subsequent March 21, 1994 
letters to the Massachusetts Department of Environmental Protection and 
the Conservation Law Foundation (CLF)\16\ may be relevant to the timing 
of LEV reductions. In particular, certain moderate nonattainment areas 
have raised a concern that they may not be able to themselves adopt 
controls to ensure attainment of the ozone standard by the 1996 
deadline for areas classified as moderate because air pollution 
transported from upwind may be the dominant factor accounting for their 
nonattainment problem. The solution contemplated in the section 184 
transport provision is for the responsible upwind areas to relieve 
their significant contribution so that the downwind areas may attain on 
time. Still, in certain cases this view could be at odds with the 
overall title I scheme that establishes later deadlines for attainment 
in more polluted areas and also establishes a graduated program of 
additional and more stringent requirements to be accomplished in those 
areas over the longer time-frame. If accelerating controls in the 
upwind areas is impracticable and certain facts related to ozone 
transport could be shown, EPA suggested it might consider reasonably 
interpreting the Act to grant the downwind areas additional time to 
reach attainment beyond the dates specified in section 181(a)(1). EPA 
concluded its letters to Senator Levin and the CLF by indicating that 
it is continuing to develop policy to address this problem. EPA 
requests comment on the relevance of this policy here. In particular, 
reductions generated over time through fleet turnover to vehicles 
meeting LEV standards could be more important in assisting areas in 
reaching attainment by later deadlines. If any moderate or serious 
areas in the OTR have until later than 1999 to attain, this could 
affect the utility of the LEV program for such areas to reach 
attainment.
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    \15\See letter from Mary D. Nichols, Assistant Administrator for 
Air and Radiation, to the Hon. Carl Levin (March 7, 1994).
    \16\See letters from John S. Seitz, Director, Office of Air 
Quality Planning and Standards, to Renee J. Robins, Staff Scientist, 
Conservation Law Foundation (March 21, 1994) and to Barbara Kweta, 
Director, Division of Air Quality Control, Massachusetts Department 
of Environmental Protection (March 21, 1994).
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    For episodes in which the long-range transport is from the 
southwest to the northeast in the OTR, States northeast of New York and 
Connecticut would not contribute to nonattainment in any severe 
nonattainment area. Under these circumstances, the LEV program in such 
States would not assist any downwind areas in reaching attainment by 
the deadlines specified in the Act. However, past episodes have shown 
that high concentrations in the severe areas do not always occur only 
when the wind blows from the southwest. When the wind blows in the 
opposite direction from these States into severe areas to the south, 
the LEV program in these States could assist the severe areas in 
reaching attainment. EPA requests comment on whether it would be 
appropriate to geographically limit any approval of the recommended LEV 
program.
    EPA is also considering whether it has discretion to take into 
account whether the LEV program is necessary for areas to maintain the 
ozone NAAQS after achieving attainment. Particularly in the case of 
motor vehicle standards, whose benefits require time for the fleet to 
turn over, taking the OTR's maintenance needs into account could 
significantly affect the analysis. The OTC, in its response to 
comments, noted that LEV is a significant factor in achieving 
maintenance requirements.
    Section 184(c)(1) specifies on its face that the OTC may develop 
recommendations for additional control measures if the OTC determines 
such measures are ``necessary to bring any area in such region into 
attainment by the dates provided by this subpart.'' Identical language 
appears in section 184(c)(2) to describe EPA's obligation in reviewing 
the need for the control measures in the recommendations and a third 
time in section 184(c)(4) to describe EPA's obligation to explain why 
any control measures in the recommendation are not necessary. This 
language, omitting any reference to maintenance, unless unintentional, 
might suggest that Congress designed section 184(c) as a tool to reach 
attainment alone, and not to ensure maintenance thereafter.
    Congress explicitly addressed maintenance in connection with ozone 
transport under section 110(a)(2)(D). As discussed above, if EPA 
approves the OTC recommendation, under section 184(c)(5) it is to find 
SIPs inadequate under section 110(a)(2)(D). That latter provision 
specifies that SIPs are to contain adequate provisions to prohibit 
emissions that will ``contribute significantly to nonattainment in, or 
interfere with maintenance by, any other State'' with respect to any 
primary or secondary NAAQS. To be sure, States continue to have an 
obligation in any case to comply with the requirement in section 
110(a)(2)(D) to prevent emissions that will interfere with maintenance 
by any other State. But the omission of any reference to maintenance in 
section 184 may indicate that Congress did not intend it to be a proper 
basis for OTC recommendations.\17\
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    \17\One might argue that the need to bring any area in the OTR 
into timely attainment inherently carries with it the need to bring 
such areas ``back'' into attainment if they attain and subsequently 
relapse into nonattainment again. The difficulty with such a view, 
however, is that it seems at odds with the distinction--clearly 
delineated elsewhere in the Act--between attainment and maintenance.
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    Section 176A(a) governs the establishment of transport regions, and 
additions or removals of areas from such regions. Section 176A(b) 
governs the establishment of transport commissions for such regions, 
the representation on and voting of a commission, and a commission's 
obligations to assess transport, strategies for addressing it, and to:

    Recommend to the Administrator such measures as the Commission 
determines to be necessary to ensure that the plans for the relevant 
States meet the requirements of section [110(a)(2)(D)].

    A commission under section 176A therefore appears obligated to 
consider compliance with section 110(a)(2)(D) in its entirety, 
including compliance with the requirement to prohibit interference with 
maintenance by other States. Section 176A(c) governs requests from the 
commission to EPA, providing simply that the commission ``established 
under subsection (b) may request the Administrator to issue a finding 
under section [110(k)(5)] that the [SIP] for one or more of the States 
in the transport region is substantially inadequate to meet the 
requirements of section [110(a)(2)(D)].'' That subsection also governs 
EPA's obligation to approve, disapprove, or partially approve and 
disapprove a commission's request within 18 months and to issue a 
finding of SIP inadequacy under section 110(k)(5) at the time of any 
approval. Under section 176A(c), again, the commission's authority to 
request a finding of inadequacy appears to extend to all requirements 
of section 110(a)(2)(D), including the obligations relating to 
maintenance.
    Section 184 does incorporate portions of section 176A by reference. 
On this basis, one might argue that Congress intended the OTC's power 
under section 184 to be broader than a commission's power under section 
176A, and would thus reach maintenance issues in some manner. Section 
184(a) provides that ``a single transport region for ozone (within the 
meaning of section [176A(a)])'' for the Northeast States is established 
by operation of law. That subsection further provides that the 
Administrator is to convene the OTC ``required (under section 
[176A(b)])'' that results from the establishment by operation of law. 
These provisions arguably indicate that the OTC under section 184 is 
also a creature of section 176A, as a transport region ``within the 
meaning of'' section 176A(b) and ``convened'' under section 176A(b). 
Indeed, it is section 176A(b), referenced in section 184(a), that 
authorizes a commission to make recommendations for measures needed to 
comply with section 110(a)(2)(D).
    Of course, section 184(c) sets out a process for the OTC to 
recommend additional control measures that the States must adopt 
``within one year'' after EPA's approval and finding of SIP inadequacy. 
Under section 176A, in contrast, EPA's approval results in a finding of 
SIP inadequacy but does not result in specific new mandatory control 
measures. Even if the OTC here has authority through section 176A to 
recommend that EPA find SIPs inadequate in relation to maintenance, 
section 176A would not appear to provide for EPA to require specific 
new control measures for maintenance purposes. Perhaps Congress 
intended to limit this extra power to create new mandatory control 
measures to attaining the NAAQS, but not to extend to maintenance 
thereafter. It might be reasonable to believe that EPA's difficulty in 
ensuring attainment in the Northeast justified this extra invasion into 
State discretion, but that Congress trusted EPA would be better able to 
enforce States' obligations to prevent interference with maintenance 
elsewhere, once contribution preventing attainment is addressed.
    In any case, in considering the LEV measure, EPA believes that it 
may consider maintenance in the course of its analysis here for 
independent purposes of section 110(a)(2)(D). In other words, EPA's 
process in responding to the OTC recommendation may provide an 
appropriate forum in which to also consider what upwind control 
measures may be necessary for purposes of preventing interference with 
maintenance downwind. Instead of considering what reductions in current 
emissions may be necessary to prevent contribution to nonattainment, 
for maintenance the relevant concern would seem to be the need for 
additional controls after attainment to counteract growth and prevent 
emissions that would cause downwind areas to relapse into 
nonattainment.
    EPA believes it might reasonably determine in this proceeding that 
States' SIPs would need to control an additional increment of emissions 
to prevent interfering with maintenance downwind even after it is 
achieved. EPA might then notify States that their SIPs are inadequate 
to prevent interference with maintenance of the NAAQS. Apart from 
mandating particular measures for maintenance under section 184, EPA 
believes that it could identify the increment of controls that appear 
to be ``necessary'' to prevent interference with maintenance downwind, 
and the measures that appear ``necessary'' to achieve adequate 
emissions control for this purpose. Under such circumstances, EPA 
believes it has independent authority under section 110(k)(5) to insist 
that States adopt such controls, or other comparably effective 
controls, to address the maintenance concern.
    Finally, in connection with maintenance, EPA believes that its 
inability to establish more stringent ``Tier 2'' motor vehicle 
standards under section 202(i) until model year 2004 is relevant.\18\ 
As noted above, under section 202(a), Congress explicitly provided that 
EPA may not modify the ``Tier 1'' auto emissions standards specified in 
subsections 202(a)(3)(B)(ii), (g), (h) and (i) prior to model year 
2004. The OTC, in its response to comments, recognized this limitation. 
The OTC recommendation calls for the LEV standards to apply beginning 
in model year 1999, a full 5 model years earlier than Tier 2 standards 
could at the earliest apply under section 202(i). Therefore, EPA should 
consider the need for LEV standards during those years when Tier 2 
could not be available, whether for purposes of reaching attainment or 
for maintenance thereafter. The OTC, in its response to comments, 
contends that the earlier implementation of LEV is important for severe 
areas to achieve attainment by 2005 or 2007.
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    \18\Subsection 202(i) sets out the scheme for EPA to consider 
and possibly establish more stringent ``Tier 2'' standards beginning 
with model year 2004. Under paragraphs (1) and (2) of subsection 
202(i), EPA is to study whether more stringent ``Tier 2'' standards 
should be adopted beginning with model year 2004, taking into 
account such factors as the need for further reductions, technical 
feasibility, cost, and alternatives. EPA is to submit this study to 
Congress no later than June 1, 1997. Under paragraph (3), based on 
this study EPA is to determine, through rulemaking, whether to 
establish more stringent ``Tier 2'' standards to be applicable no 
earlier than model year 2004 but not later than model year 2006. 
Finally, subparagraph (3)(E) provides a default to ``Tier 2'' 
emissions standards specified in Table 3 in paragraph (1), unless 
EPA affirmatively decides not to promulgate, to postpone or to 
promulgate an alternative to such standards.
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    EPA is considering whether it may account for the possibility of 
Tier 2 standards beginning with model year 2004 in analyzing the need 
for the LEV program. EPA's authority to adopt more stringent Tier 2 
standards for model year 2004, if necessary, may make less pressing a 
determination now that LEV is necessary for model years 2004 and after. 
However, the impact of Tier 2 standards for reaching attainment 
deadlines in 2005 or 2007 is likely to be small and this consideration 
therefore may be more important for purposes of the OTR's maintenance 
needs. Moreover, EPA is aware that it cannot prejudge the outcome of 
the Tier 2 study that is to be the basis for its Tier 2 rulemaking. EPA 
questions whether it is at all appropriate for its decision regarding 
the necessity of the OTC-LEV program to be influenced by the mere 
possibility of future federal regulations, where such regulations are 
not assured and where states have little to no control regarding 
whether such regulations will ever be promulgated. EPA also notes that 
the issues relevant to the Tier 2 study are not identical to the issues 
relevant to the establishment of the OTC-LEV program. For example, Tier 
2 standards would apply nation-wide, and EPA's analysis would balance 
the relevant factors on a national scale, whereas the analysis of need 
for the OTC's LEV program should be more focused on the OTR.
    EPA requests comment on all aspects of this analysis. In 
particular, EPA requests comment on whether it can or should consider 
the OTR's need for controls for purposes of maintenance in addition to 
attainment, and on the relevance of Tier 2 standards to its analysis.
    c. Technical considerations. Pursuant to section 184(d), EPA has 
published criteria for assessing transport of ozone and ozone 
precursors.\19\ These criteria recommend use of trajectory models and 
timing considerations to provide a qualitative judgment regarding the 
relative importance of transport in contributing to an area's 
nonattainment problem. The OTC, to support its recommendation, relied 
upon such approaches to establish the importance of transport as a 
contributing factor to nonattainment in the OTR.
---------------------------------------------------------------------------

    \19\U.S. EPA, 1991, Criteria for Assessing the Role of 
Transported Ozone/Precursors in Ozone Nonattainment Areas, EPA-450/
4-91-015.
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    The criteria also identify more quantitative procedures for 
considering effects of transport in urban scale modeling applications 
applied in SIP attainment demonstrations. The criteria identify use of 
regional grid photochemical models as the preferred approach for 
providing quantitative estimates of transport. These estimates are used 
as inputs to urban scale models, such as the Urban Airshed Model, in 
order to estimate reductions in local emissions and/or transport 
necessary to demonstrate attainment. Unfortunately, however, urban 
modeling analyses using SIP databases are not yet available and are not 
due to be submitted to EPA as part of States' attainment demonstrations 
until November 15, 1994.
    However, several regional modeling studies have been performed to 
characterize regional transport of ozone in the OTR. It is not possible 
to come up with precise control targets for ozone precursor emissions 
from these studies, due to their use of an earlier emission inventory, 
the broad spatial resolution available in the model used and the nature 
of the control strategies investigated. Nevertheless, the studies are 
useful for deriving approximate estimates. Further, their credence is 
enhanced by the fact that they all lead to a consistent conclusion that 
a substantial reduction in NOX emissions and VOC emissions are 
likely to be necessary to reduce ozone to the 0.12 ppm NAAQS or below 
throughout the OTR during periods of adverse meteorological conditions. 
For example, Possiel, et al. (1991)\20\ conclude that ``stringent 
maximum technology VOC and NOX controls'' with emissions 
reductions on the order of 70% for VOC and 50% for NOX ``may be 
necessary in all areas of the Northeast Corridor'', and additional 
reductions of VOC may be needed in some portions of the corridor. 
Results presented in another EPA study by Chu, et al. (1994)\21\ 
suggest that regional reductions in VOC and NOX of 50% or more may 
be needed to reduce highest ozone levels to 0.12 ppm or less in the 
northeastern United States.
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    \20\Possiel, N.C., L.B. Milch and B.R. Goodrich (eds.), 1991, 
Regional Modeling for Northeast Transport, EP-450/4-91-002a, U.S. 
EPA, Research Triangle Park, NC.
    \21\Chu. S.H. and W.M. Cox, 1994, ``Effects of Emissions 
Reductions on Ozone Predicitions by the Regional Oxidant Model (ROM) 
During the July 1988 Episode'', accepted for publication in J. of 
Applied Meteorology.
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3. The OTC's Recommended LEV Program
    a. OTC-LEV Provisions. The LEV program recommended by the OTC (OTC-
LEV) would apply to all 1999 and subsequent model year passenger cars 
and light-duty trucks (LDTs) (0-5750 pounds loaded vehicle weight 
(LVW)) in the OTR. The OTC-LEV program would establish five categories 
of vehicles: California ``Tier I'' vehicles; transitional low emission 
vehicles (TLEVs); low emission vehicles (LEVs); ultra-low emission 
vehicles (ULEVs); and zero emission vehicles (ZEVs). Each vehicle 
category has specific exhaust emission certification standards for 
hydrocarbons (expressed in terms of ``non-methane organic gases,'' or 
``NMOG''), carbon monoxide (CO), oxides of nitrogen (NOX), 
particulate matter (PM) and formaldehyde (HCHO).
    The OTC-LEV program would also establish a NMOG ``fleet average'' 
requirement that, for passenger cars and small light-duty trucks 
(LDTs), would decline from a value of 0.113 gpm in 1999 to 0.062 gpm in 
2003 and later years. Manufacturers would be obliged to produce larger 
percentages of the more stringent categories of vehicles (LEVs, ULEVs 
and ZEVs) in order to meet the increasingly stringent NMOG standard. 
The program also includes a slightly higher NMOG fleet average for 
larger LDTs.
    Manufacturers would be free to decide the mix of vehicle categories 
they would produce, provided the NMOG fleet average requirement is met, 
except that if EPA determines that the California LEV program's ZEV 
sales requirement must be included in the OTC-LEV program, then 
manufacturers would be required to include in their vehicle fleet a 
certain percentage of ZEVs per model year. (The OTC recommendation, 
barring a determination that section 177 requires the adoption of a ZEV 
mandate, leaves the decision to adopt a ZEV mandate to the individual 
states. This issue will be discussed in the ``Consistency with the 
Act'' section, below.) Under the ZEV sales requirement, when the OTC-
LEV program begins in 1999, two percent of a manufacturer's sales of 
light-duty vehicles must be ZEVs. The sales requirement increases to a 
maximum of 10 percent of sales for model year 2003 and beyond.
    The OTC explicitly excluded California reformulated gasoline 
requirements from its recommendation. Also, the OTC-LEV program is 
limited to light-duty vehicles and trucks. The OTC-LEV program would be 
enforced by the OTC states.
    b. EPA Modeling for the OTC-LEV Program. EPA will use the MOBILE5a 
emission factor model to quantify the HC, CO, and NOX emission 
reductions associated with the OTC-LEV program. MOBILE5a incorporates 
the latest technical information available on both the expected 
certification and in-use performance of vehicles meeting LEV standards. 
MOBILE5a uses emission factor equations for each OTC-LEV exhaust 
standard, and the proportion of vehicles meeting each of these 
standards necessary to meet the fleet average NMOG standard for each 
model year, to calculate the average emissions of each model year of 
the LEV program in any calendar year. EPA anticipates emissions 
reductions for NOX and CO, as well as NMOG, due to the lower 
NOX and CO standards required for vehicles in the OTC-LEV program. 
The emissions factor equations are derived from an engineering analysis 
of the performance of vehicles meeting existing exhaust standards and 
of the effect of new emission controls needed to meet the OTC-LEV 
standards. The emission factor equations for LEVs also take into 
account differences between certification fuel in California and the 
federal fuel which will be used in the OTR. Also, to evaluate the need 
for the LEV program to maintain the NAAQS, EPA would have to model 
emissions well past the attainment deadlines.
    Emission factors from MOBILE5a are multiplied by vehicle miles 
traveled (VMT) in order to create emissions inventories.
    For this analysis, EPA will be comparing projected mobile source 
inventories in future years with and without the OTC-LEV program. EPA 
will follow the same guidance EPA has given the States when projecting 
future VMT.
    MOBILE5a has the ability to model a LEV program which includes a 
ZEV sales mandate or a LEV program without a ZEV sales mandate, both 
meeting the same NMOG fleet average requirement. To properly quantify 
the emissions impact of the OTC recommendation, EPA will require 
information on the extent to which ZEVs will be required, as well as 
information on ZEV usage patterns and on their effect on power plant 
emissions.
    There are a number of other programs designed to reduce emissions 
from highway vehicles, including federal reformulated fuel, control of 
refueling emissions, and transportation control measures (TCMs), that 
are either mandated by the Clean Air Act in all or parts of the OTR or 
are programs that the States may opt into as part of a SIP. EPA intends 
to quantify the emission reductions of the OTC-LEV program, taking into 
account all mandatory measures and other regional measures that the OTC 
has identified. The timing of reductions could be accelerated if States 
were to adopt schemes to accelerate fleet turnover. But these schemes 
would likely have to be drastic to significantly increase the 
reductions that the LEV program would generate by 2005.
    At this time, EPA believes that evaporative emissions from 
California and federal vehicles will be the same, under a given fuel 
and inspection regime. This assumption is reflected in MOBILE5a.
    One current development that may affect EPA's modeling of the OTC-
LEV program is California's decision as to whether to require onboard 
refueling vapor recovery systems (ORVR) as part of its motor vehicle 
emission program. See CARB Mail-out #94-08, Workshop Notice (Feb. 9, 
1994). Should California receive a waiver from EPA which would permit 
them not to require ORVR, it would seem inappropriate to include any 
emissions benefits from ORVR in modeling the benefits of the California 
LEV program. Given that the OTC-LEVs would have to meet identical 
standards as the California vehicles and that the OTC could not require 
a ``third vehicle,'' the OTC-LEVs could also have no requirements for 
onboard systems. The lack of an onboard refueling requirement for the 
OTC-LEV program could affect the emission benefits of the LEV program. 
The issue is related to section 184(b)(2)'s requirement that Stage II 
vehicle refueling provisions, or provisions capable of achieving 
comparable emissions reductions, shall be implemented in the OTR. EPA 
requests comment on the effect that a California's decision not to 
require ORVR would have on EPA's action on the OTC recommendation 
implications which this would have for Stage II exemption levels and 
enforcement provisions in the OTR.
    EPA requests comment and technical data regarding the effect of the 
OTC-LEV program on emissions in the OTR.
    EPA will also review the cost effectiveness of the OTC-LEV program. 
Cost estimates of California's LEV program have varied greatly. Much of 
the variation is attributable to different assumptions regarding the 
necessary technology, economies of scale, and how development costs 
should be calculated. During EPA's consideration of California's waiver 
for its LEV program, California estimated additional costs to be $170 
per car, while the automobile industry estimated this figure to be over 
$1000 per car. While both California and the industry have subsequently 
refined and reduced their estimates based on new hardware assumptions, 
the large difference remains an issue. Cost-effectiveness estimates for 
the OTC-LEV program will be somewhat distinct from the California LEV 
cost-effectiveness estimates because some or much of the costs that 
were included in the California LEV estimates, particularly research 
and development costs, may be reduced or eliminated in the OTC-LEV 
context because the costs have already been expended in developing the 
California LEV program. EPA requests comment on cost-effectiveness of 
the OTC-LEV program, given the continuing existence of the California 
LEV program.
4. Alternatives to the OTC's Recommended LEV Program
    The recitation clauses to the OTC recommendation specifically 
state:

    Whereas the OTC expects the U.S. Environmental Protection 
Agency, through the consultation process provided in Section 184(c) 
of the Clean Air Act, to evaluate alternatives (including the 
program presented by the automobile manufacturers with enhancements) 
which are comparable in terms of enforceability, timeliness, and 
quantity of emission reductions to those achieved by the OTC LEV 
program, are consistent with the Clean Air Act, and advances 
technology.

    This indicates that the OTC intends that EPA consider alternatives, 
and in particular that EPA should consider the auto manufacturers' 
alternative.
    a. Automobile Manufacturers' Alternative to the OTC's Recommended 
LEV Program. The American Automobile Manufacturers Association's (AAMA) 
alternative program to the California LEV program is known as the 
Federal LEV or FLEV program. As proposed by the auto manufacturers, 
manufacturers would provide FLEVs to all States in the OTC. The FLEV 
automobiles would meet the following emission standards: 0.125 gpm 
NMOG; 2.5 gpm CO; 0.3 gpm NOX at 100,000 miles; and 0.2 gpm 
NOX at 50,000 miles. Light-duty trucks would also have FLEV 
standards. The FLEV standards would be phased-in, with the standards 
applicable to 30% of all new cars in model year 2001, 60% in model year 
2002, and 100% in model year 2003. These standards represent a 
substantial improvement from the federal Tier I standards (0.25 gpm 
NMHC, 3.4 gpm CO, 0.4 NOX) with which manufacturers must now 
comply. The standards are, however, less stringent than the federal 
Tier II ``default'' standards specified in Table 1 in section 202(i)(1) 
(0.125 gpm NMHC, 1.7 gpm CO, 0.2 gpm NOX), which cannot apply 
before model year 2004. They are also less stringent than California's 
LEV category standards for NMOG (0.075 gpm at 50,000, 0.090 gpm at 
100,000) but more stringent than California's LEV category standards 
for CO (3.4 gpm at 50,000, 4.2 gpm at 100,000).
    The AAMA proposed that FLEV vehicles would be available nationwide. 
A sales mandate for ZEVs was not included in the FLEV proposal. Under 
the FLEV proposal, manufacturers would certify their vehicles to the 
FLEV standards, but in-use standards would remain at the current 
federal Tier 1 levels through at least model year 2003.
    As proposed, the FLEV program would be implemented through a 
consent decree settling litigation regarding implementation of the LEV 
program in New York and Massachusetts. The consent decree mechanism was 
proposed based on the contention that section 202(b)(1)(C) and 202(i) 
prohibit EPA from imposing the FLEV standards prior to model year 2004 
and that section 209 prohibits States from adopting the FLEV standards. 
Under the proposal, in addition to the manufacturers' obligation to 
provide cars meeting FLEV standards, the consent decree would reflect 
the States' agreement not to adopt the LEV program; Massachusetts's and 
New York's agreement to withdraw their programs; and an agreement that 
the manufacturers' obligations to provide FLEV cars would terminate if 
any State adopted a California LEV program. While States would have the 
right to enforce the FLEV program through the court supervising the 
consent decree, EPA might provide the information regarding whether 
particular cars in fact meet the FLEV standards.
    The auto manufacturers proffered their FLEV proposal to the OTC, 
which determined that it would not achieve the same level of emission 
control as the California LEV program. In reaching this conclusion, the 
OTC emphasized a number of points in its response to comments document. 
First, under the proposal the FLEV standards would apply two model 
years later than the OTC-LEV standards, and would not be fully 
implemented until two years thereafter. Second, the level of NMOG 
emissions under the FLEV proposal would be considerably higher than 
under the OTC-LEV program. Third, according to the OTC, projections 
using EPA's MOBILE5 emissions model indicate that in the year 2020, 
emissions of hydrocarbons under the OTC-LEV program will be about 30 
percent lower than they would be under the FLEV program, due largely to 
the portion of the fleet under the OTC-LEV program consisting of cars 
meeting ULEV and ZEV standards. In sum, the OTC calculates that its LEV 
program would provide 21 tons per day of VOC reductions and 38 tons per 
day of NOX reductions in the OTR beyond the FLEV proposal.\22\ 
Fourth, the OTC notes that under the FLEV proposal, the FLEV standards 
would apply for new car certification, but, until model year 2004, in-
use standards would be the same as the federal Tier I standards. This, 
according to the OTC, may reduce the emissions reductions that would 
otherwise be predicted from the FLEV program. Fifth, the OTC notes 
that, since the FLEV proposal is premised on the withdrawal of the now-
adopted LEV programs in New York and Massachusetts, as many as eight or 
nine years of emissions reductions from those programs would be lost 
under the FLEV proposal.
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    \22\This calculation assumed: (1) ``Maximum'' I/M for under both 
programs; (2) Federal reformulated gasoline; (3) earlier 
introduction of the LEV program. It is unclear whether the 
calculation assumed the ZEV sales mandate under the OTC-LEV program.
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    In addition, the OTC points out additional benefits of the OTC-LEV 
program over the FLEV proposal. These include the expected increase in 
use of alternative fuels under the OTC-LEV program, which will reduce 
dependence on foreign oil and reduce emissions of greenhouse gases, as 
well as the benefits of forcing advanced technology, particularly 
associated with cars meeting ULEV and ZEV standards. Certain 
technologies, such as electrically heated catalysts and hydrocarbon 
traps would apparently not be needed to meet FLEV standards, nor would 
electric car technology. Also, the OTC believes that technologies such 
as adoptive transient learning controls, dual oxygen sensors, improved 
fuel atomization and auxiliary air would not be used commonly for FLEV 
vehicles. Further, the OTC believes its LEV program would force 
advances in battery technologies, and potential initiatives such as 
hydrogen fuel cells and fly wheels. (Of course, to the extent a ZEV 
sales mandate is not part of the OTC LEV program, ZEV technologies may 
not be advanced.) EPA seeks comment on the emission control and other 
benefits of the FLEV program, particularly in comparison to the OTC-LEV 
program.
    In addition, the OTC expressed concerns regarding the 
enforceability of the FLEV proposal. EPA is likewise concerned about 
whether such a program could be adopted and enforced. As noted above, 
it is likely that EPA could not alter Tier 1 standards prior to model 
year 2004, and therefore could not impose the FLEV standards before 
that time. Even beginning in model year 2004, EPA adoption of standards 
comparable to the FLEV standards would have to be supported under the 
criteria set out in section 202(i) of the Act. As the OTC pointed out, 
States also cannot adopt or enforce the FLEV standards, because they 
cannot adopt any new motor vehicle standards (other than the California 
standards) under the preemption provisions of section 209 of the Act. 
Section 209(a) prohibits States from adopting or attempting to enforce 
``any standard relating to the control of emissions'' from new motor 
vehicles and also prohibits States from requiring any approval relating 
to emissions as a condition precedent to initial retail sale, titling, 
or registration of new vehicles.''
    To establish the legal framework for implementing the FLEV program, 
the manufacturers have relied on the section 302(k) definition of 
``emission standard'' (i.e. ``a requirement established by the State or 
the Administrator''). They argue that the consent decree arrangement 
does not involve an ``emission standard'' since the standards would not 
be ``established'' by the State or the Administrator. The applicability 
of the section 302(k) definition to section 209(a), however, is not 
clear, since section 209(a) does not use the term ``emission standard'' 
but rather uses the perhaps broader language ``any standard relating to 
the control of emissions from new motor vehicles.'' EPA requests 
comment on whether using the consent decree mechanism to establish the 
FLEV proposal would adequately avoid a conflict with section 209 and 
allow States to enforce the FLEV program.
    The consent decree mechanism raises a set of legal concerns. One 
such concern is whether all the OTC States could become parties to the 
consent decree. The auto manufacturers suggest that the OTC States 
could intervene in the New York or Massachusetts litigation under Rule 
24 of the Federal Rules of Civil Procedure. They contend that the OTC 
States' October 29, 1991 Memorandum of Understanding (MOU) that each 
State in the OTC would take steps to implement California's LEV program 
as soon as possible constitutes adequate grounds for permissive 
intervention under Rule 24(b). Other concerns are raised regarding the 
role of the court in a consent decree. The consent decree mechanism 
would require that the court determine that a decree is an appropriate 
commitment of the court's limited resources. Under the FLEV proposal, 
the district court overseeing the consent decree would presumably 
directly enforce the FLEV standards sua sponte or at the behest of 
parties to the decree. (The penalties for noncompliance are not clear.) 
EPA is concerned that supervision of the FLEV program could require 
substantial resources from the court. Finally, it is not clear how 
enforcement would work if any auto manufacturers refused to sign the 
consent decree. EPA requests comment on each of these issues, 
particularly whether the consent decree mechanism is sufficient for 
enforcement and on whether the OTC States could intervene in the 
litigation under section 24(b) to be able to enforce the decree.
    EPA is also concerned about its ability to grant SIP credits for 
emissions reductions under the FLEV proposal. First, credits are 
ordinarily limited to emissions reduction measures that are adopted in 
a State's SIP, after reasonable notice and public hearing (as provided 
in section 110(a)(2) of the Act). One issue is whether under the FLEV 
proposal, the emissions controls could be part of the SIP, since to 
make them part of the SIP could conflict with the preemption provisions 
of section 209(a) of the Act. Further, once controls are adopted in the 
SIP, they are ordinarily federally enforceable under section 113 of the 
Act. Under the FLEV proposal, EPA would not be in a position to enforce 
the controls, both because the controls would not be in the SIP, and 
because the auto manufacturers have proposed that EPA not sign the 
consent decree. And it is not clear what jurisdiction the court would 
have to allow EPA to intervene in the New York or Massachusetts 
litigation to sign the consent decree, or to otherwise seek judicial 
enforcement of such a decree. For OTC States that would not sign the 
consent decree, it is unclear how such States could seek enforcement of 
the FLEV standards, or how EPA could grant SIP credits to them. 
Finally, the existence of clauses allowing the auto manufacturers to 
escape from their obligations to provide cars meeting the FLEV 
standards under particular circumstances reduces the certainty of the 
emissions controls. EPA is concerned that this lack of certainty 
conflicts with the ordinary certainty of SIP creditable measures. EPA 
requests comment on its ability to grant SIP credits for reductions 
generated under the FLEV proposal.
    b. Other Measures. The OTC in its recommendation stated that it 
expects EPA to evaluate alternatives comparable to the OTC-LEV program 
in terms of enforceability, timeliness, quantity of emissions 
reductions, consistency with the Act, and advancement in technology. 
EPA recognizes that the magnitude of emissions reductions needed to 
mitigate significant contribution to nonattainment in the OTR is likely 
to exceed the reductions that the measures specified in the Act plus 
the LEV program will generate. To the extent more reductions will be 
needed even with the LEV program, other measures that address that 
shortfall would not, for that reason alone, qualify as ``alternatives'' 
to LEV. Rather, other measures might qualify as ``alternatives'' only 
if such other measures, singly or in combination, generate enough 
reductions to fill the entire shortfall needed without LEV. Any 
conclusions about what may qualify as ``alternatives,'' therefore, 
would depend on a prior evaluation of the magnitude of reductions 
needed. Once the amount of reductions needed is ascertained, then the 
emissions reductions and costs associated with measures other than LEV 
that could fill the shortfall without LEV might be evaluated.
    First, EPA believes it may be useful to consider the emissions 
reductions associated with other emission control measures that the Act 
specifically mandates for areas in the OTR, for example, reformulated 
gasoline, enhanced inspection and maintenance programs, and Stage II 
refueling vapor recovery controls. While these measures are not 
``alternatives'' because they are mandatory, EPA believes that the 
amount of reductions they will generate is important in evaluating the 
magnitude of the shortfall for attainment.
    Next, EPA believes it may evaluate the emissions reductions 
associated with other measures that the OTC itself is considering and 
has agreed to adopt (in addition to the LEV program) or further explore 
through memoranda of understanding (MOU), including federal 
reformulated gasoline in areas where it is not mandatory under the Act, 
a ``second phase'' of NOX emission reductions from stationary 
sources and an intrastate NOX emission offset trading program. 
(See OTC MOUs signed October 29, 1991, March 10, 1992, and May 18, 
1993.) Another source of measures is the menu of options identified by 
STAPPA/ALAPCO in a document entitled ``Meeting the 15-Percent Rate-of-
Progress Requirement Under the Clean Air Act: A Menu of Options'' 
(September 1993). Finally, measures identified in the recent FIP 
proposal for certain areas in California (EPA Air Docket No. A-94-09) 
could be evaluated. EPA requests comment on measures from these sources 
and other potential measures for evaluation that could be alternatives 
to the recommended OTC-LEV program. EPA might evaluate the cost, 
reasonableness, and other factors associated with these other measures 
if they are shown, in fact, to be ``alternatives'' to the LEV program.

B. Consistency With the Clean Air Act

1. Introduction
    As noted above, section 184 requires that in reviewing the 
recommendation of the OTC, EPA must evaluate whether the additional 
control measures are ``otherwise consistent with this Act.'' In 
particular, the additional control measures must be consistent with 
section 177 of the Act, which provides States with the authority to 
adopt and enforce emission standards for new motor vehicles and engines 
if such standards are identical to California standards and if the 
State adopts the standards at least two years before the commencement 
of the model year to which such standards apply. Also, the State 
standards must not prohibit the manufacture or sale of California-
certified motor vehicles, nor may they create a ``third car.''
    In two separate federal court cases, automobile manufacturers have 
challenged the adoption of the LEV program in two OTC States, New York 
and Massachusetts (Motor Vehicle Manufacturers Association v. NYDEC, 
No. 92-CV-869 (N.D.N.Y.) and American Automobile Manufacturers 
Association v. Greenbaum, No. 93-10799-MA (D. Mass.)). In these cases, 
manufacturers are contending that the States have violated portions of 
section 177 by their adoption, or their failure to adopt, certain 
aspects of California's LEV and clean fuel programs. Many of the issues 
that have been raised, and to some extent answered, in those cases are 
likely to be relevant to EPA's decision in this proceeding. Moreover, 
certain issues related to section 177 that were not raised in those 
proceedings are likely to be relevant to this proceeding.
2. Clean Air Act Provisions Regarding State Motor Vehicle Emission 
Standards
    Section 209(a) of the Clean Air Act generally preempts States from 
promulgating or attempting to enforce standards relating to the control 
of emissions from new motor vehicles. However, section 209(b) allows 
EPA to waive federal preemption for California under certain 
circumstances. Section 177 allows other States to promulgate standards 
relating to the control of emissions from new motor vehicles for any 
model year, and to take other actions otherwise preempted under section 
209(a), if--
    (1) Such standards are identical to the California standards for 
which a waiver has been granted for such model year, and (2) California 
and such State adopt such standards at least two years before 
commencement of such model year (as determined by regulations of the 
Administrator). Nothing in this section or in Title II of this Act 
shall be construed as authorizing any such State to prohibit or limit, 
directly or indirectly, the manufacture or sale of a new motor vehicle 
or motor vehicle engine that is certified in California as meeting 
California standards, or to take any action of any kind to create, or 
have the effect of creating, a motor vehicle or engine different than a 
motor vehicle or engine certified in California under California 
standards (a ``third vehicle'') or otherwise create such a ``third 
vehicle''.

42 U.S.C. Sec. 7507
3. New York and Massachusetts Litigations
    New York and Massachusetts have both promulgated regulations 
incorporating aspects of California's LEV program into their State 
regulations. Manufacturers have made several challenges under section 
177 to the State regulations.
    In particular, neither New York nor Massachusetts promulgated 
regulations incorporating California's ``clean fuel'' provisions. 
However, both New York and Massachusetts incorporated California's ZEV 
sales mandate into their State regulations. Manufacturers challenged 
the decisions not to incorporate California's fuel requirements and to 
incorporate California's ZEV sales mandate, arguing that (1) the clean 
fuel requirements are an inherent part of California's automobile 
emission program and thus are subject to the identicality requirement 
of section 177; (2) the failure to incorporate the clean fuel 
requirements will require the manufacture of a ``third vehicle'' 
because the higher sulfur levels in federal fuels may cause problems 
with certain catalysts and may cause other vehicle problems; (3) the 
ZEV sales mandate violates section 177's prohibition on indirect State 
limitations on the sale of California vehicles; and 4) the ZEV sales 
mandate will require manufacture of a ``third vehicle'' in violation of 
section 177.\23\
---------------------------------------------------------------------------

    \23\Manufacturers also make other challenges related to leadtime 
that are not likely to be relevant to this proceeding. The OTC 
recommendation states that the LEV program will be effective on 
January 1, 1996. This provides States and manufacturers with two 
years of leadtime required under section 177. However, if the OTC-
LEV program does not become effective for any State until after 
January 2, 1996, then certain leadtime-related issues raised by 
manufacturers in the above court cases may be relevant in subsequent 
proceeding.
---------------------------------------------------------------------------

    In a recent opinion, the U.S. Court of Appeals for the Second 
Circuit ruled on these issues in the context of the New York 
regulations, except issue two, which the District Court is still 
considering. MVMA v. NYDEC, No. 93-7938 (2d Cir., Feb. 9, 1994). In 
addition, U.S. District Judge Mazzone (D. Mass.) provided a preliminary 
ruling on issues one and two. AAMA v. Greenbaum, No. 93-10799-MA 
(October 27, 1993). Manufacturers initially appealed Judge Mazzone's 
decision to the First Circuit, but have since requested that the appeal 
be withdrawn with regard to these issues. EPA submitted amicus curiae 
briefs to the Second Circuit and the First Circuit. (These briefs and 
the court opinions are in the docket.)
    On issue one, both courts ruled that State failure to incorporate 
California's clean fuel provisions did not violate the identicality 
provision of section 177. The courts ruled that since California's 
clean fuel provisions were part of California's waiver application 
under section 209, they are not ``standards * * * for which a waiver 
has been granted'' and thus are not subject to the identicality 
provisions of section 177. State fuel provisions are addressed in a 
separate section of the Act, section 211. EPA's amicus curiae briefs 
also took this position.
    Regarding issue two, neither trial court has issued a final 
determination, both deferring this issue to trial. However, in his 
decision on manufacturers' motion for preliminary injunction on this 
count, Judge Mazzone concluded that manufacturers had not shown a 
likelihood of prevailing. In its amicus curiae brief to the First 
Circuit, EPA argued that Massachusetts' failure to adopt the clean 
fuels program did not violate the ``third car'' prohibition because (1) 
manufacturers could not show that Massachusetts' LEV program compels 
any design change--manufacturers are free to sell cars in Massachusetts 
that are identical to California cars; (2) manufacturers' testing-based 
concerns were not ripe for review; and (3) the term ``third vehicle'' 
is applied only to design changes necessary to meet certification 
requirements, not minor changes unrelated to meeting applicable 
emission standards.
    On issue three, the Second Circuit found that New York's 
promulgation of California's ZEV sales mandate did not violate section 
177's requirement that States not limit, either directly or indirectly, 
the sale of California cars. The court found that the ZEV mandate did 
not prevent manufacturers from selling any California-certified 
vehicles as long as they also sold the specified percentage of ZEVs. 
``Like the third vehicle rule, the sales-limitation rule is designed to 
reinforce the identicality requirement. It would be incongruous for us 
to hold that the [State] wrongly mandated a ZEV sales percentage 
identical to California's mandate.'' EPA had taken this position in its 
amicus brief.
    On issue four, the Second Circuit ruled that New York's adoption of 
the ZEV mandate does not violate the ``third car'' prohibition because 
New York is administering the mandate in the same manner as California 
and any changes manufacturers make in their cars to sell them in New 
York are based on marketing decisions by manufacturers, not a 
requirement of the State. EPA's amicus brief was consistent with this 
result.

4. Issues Implicated by the OTC Petition

    Some of the section 177-related issues briefed in the New York and 
Massachusetts cases are also implicated by the OTC petition. The OTC 
recommendation, like the New York and Massachusetts regulations, does 
not include California's clean fuel provisions. Moreover, the 
recommendation states:

    To the extent that a Zero Emission Vehicle sales requirement 
must be a component of a LEV program adopted under Section 177, such 
a requirement shall apply. Further, if such a Zero Emission Vehicle 
sales requirement is not a required component of programs adopted 
under Section 177, individual States within the OTC may at their 
option include such a requirement and/or economic incentives 
designed to increase the sales of ZEVs in the programs they adopt.

    This provision relates to the same ZEV-related issues argued in the 
court cases and also produces several section 177-related issues not 
determined in the court cases. The issue of whether the ZEV sales 
mandate is a required component in any State LEV program was not 
addressed by the courts. Section 177 allows a State to adopt and 
enforce ``for any model year standards relating to control of emissions 
from new motor vehicles and * * * engines * * * if such standards are 
identical to the California standards for which a waiver has been 
granted for such model year.''
    The first question presented by this issue is whether the ZEV sales 
mandate is a ``standard relating to control of emissions.'' In letters 
sent to New York and Virginia State officials on January 7, 1993, EPA 
stated that it believed the ZEV sales mandate ``in light of the 
existence of the NMOG [non-methane organic gases] fleet average 
requirement (which is a motor vehicle emission standard), the 
California ZEV sales requirement is not a motor vehicle emission 
standard. Thus, a State which adopts California motor vehicle emission 
standards is not required to, but may, adopt this particular provision 
of California's program. The ZEV sales mandate simply limits the 
flexibility otherwise accorded manufacturers to choose the mix of 
vehicles produced to meet the NMOG fleet average requirement.''
    The Administrator made this statement based on EPA's belief that 
the ZEV sales mandate does not, given the existence of the NMOG 
standard, create any additional requirements that will have any effect 
on NMOG emissions from light-duty vehicles in California. The ZEV sales 
mandate does not require that the overall NMOG emissions from 
California vehicles be any lower than they would have been in the 
absence of the sales mandate. The amount of emissions produced by such 
vehicles is controlled by the NMOG fleet average requirement, not the 
sales mandate. The ZEV mandate merely restricts the manufacturers' 
choices with regard to the type of vehicle they must produce to meet 
the NMOG requirement. Therefore, as the ZEV sales mandate does not 
limit the quantity, rate or concentration of NMOG emissions, EPA stated 
that the mandate was not an emission standard, but instead was an 
accompanying enforcement procedure. In its recommendation, the OTC 
States that the ZEV sales mandate is an accompanying enforcement 
procedure and is not required by section 177.
    EPA requests comment on whether the ZEV sales mandate should be 
considered an emission standards. EPA is also requesting comments 
regarding whether the ZEV sales mandate will have or is likely to have 
a clear effect on emissions of NOx and CO, whether such effect is 
substantial, and whether such a potential effect is relevant to the 
question of whether the sales mandate is an emission standard.
    The second question presented by this issue is whether States are 
required under section 177's identicality provision to promulgate all 
of California's motor vehicle emission standards for a given model 
year, or whether only a certain subset of these regulations must be 
promulgated. Section 177 provides that a State ``may adopt and enforce 
* * * standards * * * if such standards are identical to the California 
standards for which a waiver has been granted.'' The statute does not 
necessarily indicate that if a State adopts one California standard for 
a year it must adopt all of them. EPA believes that adoption of the 
California LEV program does not require adoption of the California 
heavy-duty engine program, which deals with different types of 
vehicles. However, EPA has not finally determined whether section 177 
requires a State to promulgate all California emission standards 
related to a type of vehicle once a State has determined that it 
intends to promulgate any California standards related to that type of 
vehicle. Certainly, where a State intends to incorporate some portion 
of California's emission standards, the State must promulgate all 
regulations that are necessary to ensure that California cars are not 
prohibited from sale in the State and all regulations necessary to 
prevent the requirement of a third car. Must a State promulgate all 
California vehicle-based emission standards relevant to a particular 
type of vehicle? May a State promulgate only those provisions necessary 
to ensure that the State program receives the emission reductions 
California receives from its program, or only those provisions that are 
central parts of the program? May a State promulgate merely those 
regulations that ensure that its program is as protective of the public 
health and welfare, in the aggregate, as the federal program? Under 
this approach, a State would have considerable flexibility to determine 
which parts of a particular program the State would promulgate, but the 
State would not be assured of receiving the same SIP credits as 
California for such a program. In addition, this approach may be 
inconsistent with section 177's goal of preventing myriad different 
motor vehicle programs in the several States and also may be 
inconsistent with the statutory language and the legislative history of 
section 177. EPA requests comment on this issue.
    The identicality issue is also implicated by the form of the OTC's 
initial recommendation to EPA. The OTC recommendation states that it 
intends the OTC-LEV program to be consistent with section 177 and 184 
of the Act. The recommendation also states that the program contains 
standards identical to the California LEV program. However, rather than 
directly incorporating California's regulations into its 
recommendation, or citing to California's regulations, OTC gave a brief 
overview of the parts of California's LEV program it intended to 
incorporate and the time frame for the regulations. EPA initially had 
questions regarding whether the OTC intended to incorporate certain 
secondary provisions in California's LEV program into the OTC-LEV 
program (in particular, the hybrid electric vehicle provisions, banking 
and trading of NMOG credits, the small and intermediate volume 
manufacturer provisions and reactivity adjustment factors). EPA also 
had questions regarding whether California's NMOG fleet average 
requirements were intended to apply to heavier light-duty trucks (3751-
5750 lbs) and whether the OTC intended medium-duty vehicles to be 
included in the LEV program. EPA requested that the OTC clarify these 
issues, becuase failure to incorporate certain secondary provisions 
into the OTC program could conceivably have raised identicality 
problems. On April 15, 1994 Bruce Carhart of the OTC sent a letter to 
EPA stating, in part, the following:

    [The OTC has] recommended regulation of passenger cars and 
light-duty trucks up to 5750 lbs. loaded vehicle weight, not medium 
duty vehicles. Our intention is to maintain identicality with 
California as required by the Clean Air Act. Our recommendation 
includes a fleet average for both classes of light-duty vehicles (0-
3750 and 3751-5750 lbs.); hybrid electric vehicles, in as far as 
California has classified and certified such vehicles; banking and 
trading provisions for purpose of the fleet average; the same 
extensions and exemptions for intermediate and small manufacturers; 
and RAFs as necessary for certification by California. Many of the 
details of the above and any other issues can be worked out through 
the consultation process as required by section 184 of the Clean Air 
Act.

    EPA requests comment on whether there are other concerns regarding 
the identicality of the OTC-LEV program with the California LEV 
program. EPA also requests comment on whether EPA can assume that, on 
provisions on which OTC is silent, OTC means to require all provisions 
that are necessary to ensure identicality and that such provisions must 
be adopted.
    Another issue in this rulemaking is whether the OTC's incorporation 
of California's NMOG fleet average provisions violates any portion of 
section 177. In their response to OTC's stated intention to include the 
NMOG fleet average program in the OTC-LEV program, some manufacturers 
claimed that the incorporation of the NMOG standard would violate 
section 177. The OTC found that the NMOG fleet average did not violate 
section 177 and that States may enforce these standards, consistent 
with California protocols and testing requirements. EPA believes, for 
the reasons given by the Second Circuit in the MVMA case in the context 
of the ZEV sales mandate, that the fleet average requirement does not 
violate the requirement of section 177 that States shall not prohibit 
the sale of California cars. In addition, EPA has no evidence contrary 
to the OTC's determination that the fleet average requirement does not 
violate the ``third vehicle'' prohibition of section 177. EPA also 
agrees that States are permitted to enforce this requirement, 
consistent with California protocols and requirements. EPA believes 
that the NMOG fleet average requirement is the heart of the California 
LEV program and is the central mechanism for ensuring reductions from 
the program, and that any State program implementing the LEV program 
should, and is probably compelled to, include enforceable NMOG fleet 
average requirements. EPA requests comment on these issues. EPA also 
requests comment regarding whether the NMOG fleet average requirement 
must be met statewide or whether it can be met regionwide.
    Finally, EPA requests comment on the OTC statement that section 177 
does not require a State to adopt the California LEV program in all 
areas of a State. OTC's statement is consistent with EPA's 
interpretation of section 177, as illustrated in Administrator Reilly's 
response to Elizabeth Haskell, Virginia's Secretary of Natural 
Resources, in which the Administrator noted that adoption of California 
emission standards in part of a State is consistent with section 177's 
title, ``New Motor Vehicle Standards in Nonattainment Areas.''
    EPA does not at this time have any questions regarding the OTC 
recommendation's consistency with any other sections of the Clean Air 
Act. EPA requests comment on whether the recommendation may be 
inconsistent with any other section of the Act.

IV. Statutory Authority

    Authority for the action described in this notice is in sections 
184, 176(a), 110, 307(d) and 301 of the Clean Air Act, as amended, 42 
U.S.C. 7511a, 7506a, 7410, 7607(d) and 7601.

V. Administrative Designation and Regulatory Analysis

Executive Order 12866

    Under Executive Order 12866, 58 FR 51735 (October 4, 1993) the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to OMB review and the requirements of the 
Executive Order. The Order defines ``significant regulatory action'' as 
one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, 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 rights and obligations of recipients 
thereof; or
    (4) Raise novel 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 the Executive Order, since this action 
could result in a rule that could have a substantial economic impact, 
this notice was submitted to OMB for review. EPA intends to prepare an 
economic analysis under E.O. 12866 for any final rule that is a 
significant regulatory action. Any written comments to EPA and any 
written EPA responses to those comments will be included in the docket 
for this proceeding.

VI. Impact on Small Entities

    The Regulatory Flexibility Act, 5 U.S.C. 601(a), provides that, 
whenever an agency is required to publish a general notice of 
rulemaking, it must prepare and make available a regulatory flexibility 
analysis (RFA). While EPA intends to follow rulemaking procedures under 
section 307(d) of the Clean Air Act, EPA believes it is not legally 
required to publish a general notice of rulemaking here, and hence that 
it need not prepare a RFA. But even if EPA is required to publish a 
general notice of rulemaking here, a RFA is required only for small 
entities which are directly regulated by the rule. See Mid-Tex Electric 
Cooperative, Inc. v. FERC, 773 F.2d 327 (D.C. Cir. 1985)(agency's 
certification need only consider the rule's impact on regulated 
entities and not indirect impact on small entities not regulated). The 
OTC's recommended LEV program would directly regulate auto 
manufacturers. Since these auto manufacturers generally do not qualify 
as small businesses within the meaning of the Regulatory Flexibility 
Act, EPA does not believe a RFA is needed for either the proposed or 
final rules, even if rulemaking is required. Accordingly, pursuant to 5 
U.S.C. 605(b), the Administrator certifies that this rule will not have 
a significant economic impact on a substantial number of small 
entities.

VII. Paperwork Reduction Act

    The Paperwork Reduction Act of 1980, 44 U.S.C. 3501 et seq., and 
implementing regulations, 5 CFR part 1320, do not apply to this action 
as it does not involve the collection of information as defined 
therein.

    Dated: April 19, 1994.
Carol M. Browner,
Administrator.

Appendix--Recommendation of the States of the Ozone Transport 
Commission of an OTC Low Emission Vehicle Program Under Section 184(c) 
of the Clean Air Act

    Whereas, the States composing the Ozone Transport Region (OTR)* 
are faced with a pervasive ozone nonattainment problem; and
    Whereas regional ozone modeling to date has shown the need for 
emission reductions beyond those which will be realized through the 
strategies specifically included in the Clean Air Act; and
    Whereas the Clean Air Act, provides the Ozone Transport 
Commission (OTC) with a mechanism under Section 184(c) to review and 
recommend additional control measures in all or part of the OTR to 
control regional ozone; and
    Whereas motor vehicles, in the aggregate, are the single largest 
source of ozone precursors within the OTR, and introduction of Low 
Emission and Zero Emission Vehicles are essential; and
    Whereas the Clean Air Act also grants States under Section 177 
the option of adopting more stringent Low Emission Vehicle (LEV) 
standards for new motor vehicles; and
    Whereas based on the technical analysis done by the States of 
the OTC to date LEVs provide substantial and cost effective emission 
reductions; and
    Whereas the OTC under Section 184(c) proposed on November 17, 
1993, a regional LEV program, hereafter known as the Ozone Transport 
Commission Low Emission Vehicle (OTC LEV) program, after having been 
petitioned by three OTC States to consider developing such a 
recommendation; and
    Whereas the OTC provided at that time notice and opportunity for 
public comment as required by Section 184(c) of the Clean Air Act, 
including a public hearing in Hartford, Connecticut, on December 16-
17, 1993, and has analyzed and responded to the comments received in 
the attached Response to Comments: and
    Whereas the OTC has analyzed the impact and need for LEV in the 
OTR as documented in the attached Technical Support Document; and
    *The States of Connecticut, Delaware, Maine, Maryland, 
Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, 
Rhode Island, and Vermont, the District of Columbia, and the part of 
Virginia within the Consolidated Metropolitan Statistical Area which 
includes the District of Columbia.
    Whereas the OTC received and analyzed an alternative proposal 
from the automobile manufacturers which, while an improvement over 
Tier I Federal vehicles, would require programmatic and timing 
enhancements and the addition of an electric vehicle component to 
ensure that enforceable vehicle emission reductions comparable to 
those achieved by the OTC LEV program could be achieved in a more 
timely manner; and
    Whereas the OTC expects the U.S. Environmental Protection 
Agency, through the consultation process provided in Section 184(c) 
of the Clean Air Act, to evaluate alternatives (including the 
program presented by the automobile manufacturers with enhancements) 
which are comparable in terms of enforceability, timeliness, and 
quantity of emission reduction to those achieved by the OTC LEV 
program, are consistent with the Clean Air Act, and advances 
technology;
    Therefore, the Ozone Transport Commission determines that a 
regional LEV program, the OTC LEV program, is necessary to bring the 
Ozone Transport Region into attainment by the dates provided in the 
Clean Air Act; and
    Furthermore, that by majority vote of the States of the Ozone 
Transport Commission, as indicated by the attached signature sheet, 
the Ozone Transport Commission transmits the attached strategy 
recommendation regarding the OTC LEV program to the Administrator of 
the U.S. Environmental Protection Agency; and
    Furthermore that adoption of this recommendation by the Ozone 
Transport Commission or approval of this recommendation by the U.S. 
Environmental Protection Agency will not require the adoption of 
California reformulated gasoline standards by any X within the OTR; 
and
    Furthermore that as a part of this submittal, the Ozone 
Transport Commission includes the attached Response to Comments 
received during the public's opportunity to comment on this matter, 
and the attached Technical Support Document which addresses the 
requirements of Section 184(d) of the Clean Air Act; and
    Furthermore that the Ozone Transport Commission will participate 
fully in the consultation process on this recommendation with the 
U.S. Environmental Protection Agency as provided in Section 
1184(c)(3) of the Clean Air Act.

Text of February 1, 1994, Recommendation of the Ozone Transport 
Commission to the U.S. Environmental Protection Agency

    The Ozone Transport Commission (OTC) has developed the following 
recommendation for an Ozone Transport Commission Low Emission 
Vehicle (OTC LEV) program which is to be submitted to the U.S. 
Environmental Protection Agency under Section 184(c) of the Clean 
Air Act (CAA). The legal authority for the OTC recommendation is 
described under Section 184(c)(1) of the Clean Air Act and could 
result in a Federal requirement for regionwide adoption and 
enforcement of motor vehicle emission standards available under 
Section 177 of the Clean Air Act. The recommendation is as follows:
    Under Section 184(c) of the Clean Air Act as amended in 1990, 
the Ozone Transport Commission hereby recommends adoption of an 
Ozone Transport Commission Low Emission Vehicle program including 
the elements described below for the geographic region designated as 
the Ozone Transport Region, defined as the States of Connecticut, 
Delaware, Maine, Massachusetts, Maryland, New Hampshire, New Jersey, 
New York, Pennsylvania, Rhode Island, and Vermont, the District of 
Columbia and that part of Virginia within the Consolidated 
Metropolitan Statistical Area which includes the District of 
Columbia.
    Adoption of this recommendation by the Ozone Transport 
Commission or the United States Environmental Protection Agency will 
not require the adoption of the California Reformulated Gasoline 
Standards by any State, Commonwealth, or jurisdiction with the Ozone 
Transport Region.

Elements of the Proposed OTC LEV Program Recommendation

    Pursuant to the requirements of Section 177 of the Clean Air 
Act, the Ozone Transport Commission Low Emission Vehicle (OTC LEV) 
program is applicable to all 1999 and subsequent model year 
passenger cars and light duty trucks (0-557550 pounds loaded vehicle 
weight) in the Ozone Transport Region (OTR).
    Emissions Requirements and Prohibition: No corporation, person 
or other entity shall sell, import, deliver, purchase, lease, rent, 
acquire, receive, or register a new vehicle subject to the OTC LEV 
program in the OTR that has not received a California ARB Executive 
Order, unless the vehicle is sold directly from one dealer to 
another dealer, sold for purposes of being wrecked or dismantled, 
sold exclusively for off-highway use or sold for registration out of 
the OTR, as well as a vehicle purchased by a nonresident prior to 
establishing residency or a vehicle transfer by inheritance, decree 
of divorce, dissolution, or legal separation. Other exceptions would 
include motor vehicles held for daily lease or rental to the general 
public or engaged in interstate commerce that are registered and 
principally operated outside the OTR and motor vehicles defined as 
test vehicles, emergency vehicles, or qualifying for exemption under 
Section 43656 of the California Health and Safety Code.
    The OTC LEV program will allow five categories of vehicles: 
California Tier I Vehicles, Transitional Low Emission Vehicles 
(TLEV), Low Emission Vehicles (LEV), Ultra-Low Emission Vehicles 
(ULEV) and Zero Emission Vehicles (ZEV). Manufacturers may choose 
any combination of vehicles certified to the above standards, to 
meet a prescribed fleet emission average standard in the OTR.
    The effective date for the OTC/state implementation of the OTC 
LEV program is January 1, 1996. This schedule allows for notice to 
manufacturers of two vehicle model years and requires sales of 
cleaner vehicles for the 1999 model year. The OTC LEV program does 
not affect or preclude States from earlier implementation.
    This program includes a fleet non-methane organic gases emission 
average as follows:

------------------------------------------------------------------------
                                                                  Fleet 
                                                                 average
                          Model year                            standard
                                                                 (g/mi) 
------------------------------------------------------------------------
1999..........................................................     0.113
2000..........................................................      .073
2001..........................................................      .070
2002..........................................................      .068
2003 and later................................................      .062
------------------------------------------------------------------------

    To the extent that a Zero Emission Vehicle sales requirement must 
be a component of a LEV program adopted under section 177, such a 
requirement shall apply. Further, if such a Zero Emission Vehicle sales 
requirement is not a required component of programs adopted under 
section 177, individual States within the OTC may at their option 
include such a requirement and/or economic incentives designed to 
increase the sales of ZEVs in the programs they adopt.

[FR Doc. 94-10042 Filed 4-25-94; 8:45 am]
BILLING CODE 6560-50-P