[Federal Register Volume 59, Number 183 (Thursday, September 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23112]


[[Page Unknown]]

[Federal Register: September 22, 1994]


_______________________________________________________________________

Part II





Environmental Protection Agency





_______________________________________________________________________



40 CFR Part 85



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Clean Air Act: Ozone Transport Commission: Low Emission Vehicle Program 
for Northeast Ozone Transport Region; Proposed Rule
ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 85

[FRL-5074-4]

 

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

AGENCY: Environmental Protection Agency (EPA).

ACTION: Supplemental notice of proposed rulemaking.

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SUMMARY: Pursuant to section 184 of the Clean Air Act, the Northeast 
Ozone Transport Commission recommended that EPA require all state 
members of the OTC to adopt an Ozone Transport Commission Low Emission 
Vehicle (LEV) program.
    In today's supplemental notice of proposed rulemaking (SNPRM), EPA 
is proposing to find that reduction of new motor vehicle emissions 
through OTC LEV or LEV-equivalent program is necessary to mitigate the 
effects of pollution transport and to bring nonattainment areas in the 
OTR into attainment and to avoid interference with maintenance. EPA 
believes an alternative federal low emission vehicle program can be 
developed that would achieve reductions equivalent to or greater than 
the OTC LEV program. EPA also believes there could be significant 
additional benefits from such a program and proposes in today's notice 
a process by which development of such a program could continue. The 
Agency intends to work with stakeholders in this effort.
    Given the absence of such a program, however, EPA is proposing 
under sections 184(c) and 110(k)(5) of the Act that the OTC LEV program 
is necessary throughout the OTR and is consistent with the Act. EPA is 
thus proposing a SIP call under section 110(k)(5) to require each state 
in the OTR to revise its SIP to include the OTC LEV program within one 
year. Today's notice also proposes regulations determining ``model 
year'' for purposes of section 177 and part A of title II of the Act as 
that term is applied to on-highway motor vehicles.

DATES: The comment period for this rulemaking will reopen immediately 
for purposes of taking comment on issues raised in this Supplemental 
Proposal and will remain open until October 24, 1994. Please direct all 
correspondence to the address specified below. EPA will hold a public 
hearing on this Supplemental Notice of Proposed Rulemaking if one is 
requested by September 29, 1994. EPA will hold such a hearing on 
September 29, 1994. The hearing, if requested, would begin at 9 a.m. 
and continue until 4:30 p.m. or until all commenters have the 
opportunity to testify. Members of the public may call the contact 
person indicated below to find out whether a hearing will be held and, 
if so, the exact location.

ADDRESSES: 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, tel. (202) 260-7548, between the 
hours of 8 am to 4 pm, on Monday through Friday.
    The hearings, if requested, will be held in Washington, DC.

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

SUPPLEMENTARY INFORMATION:

I. Outline and Background

    This proposal supplements EPA's April 26 proposal, and EPA does not 
intend to thereby withdraw from consideration any of the various 
elements previously proposed. Rather, EPA intends to focus for purposes 
of public comment on EPA's proposed specific approach to, and basis 
for, approving the OTC LEV recommendation. In addition, EPA is 
proposing today ``model year'' regulations that are relevant to, but 
beyond the specific scope of EPA's April 26 proposal.
    This proposal is organized into the following sections:

I. Outline and Background
    A. Overview of Title I Scheme
    B. Ozone Transport Region Provisions
    C. Background Regarding OTC LEV Program
    D. EPA Actions in Response to the OTC LEV Recommendation
II. Explanation of Proposed Action
III. Statutory Framework for Proposed Action
    A. EPA's Authority under Section 184
    B. State Obligations and EPA's Authority under Section 110
    C. Constitutional Validity of Section 184 Process
    D. Consistency of EPA Action with Limitations on Authority under 
Sections 177, 202 and 209 of the Act
IV. Basis for Approval of OTC LEV Recommendation
    A. Necessity
    1. Legal Interpretation of Necessity
    2. Analysis of Need for OTC LEV (or LEV-Equivalent) Program
    (a) Magnitude of Reductions Needed for Attainment in 2005
    i. General Conclusions
    ii. Analytical Modeling Tools
    (b) Contribution Analysis
    (c) Analysis of Inventory and Options for Control Measures
    i. Inventory Analysis
    ii. Analysis of Options for Control Measures Without More 
Stringent New Motor Vehicle Standards
    iii. Determination Whether Reduction from OTC LEV (or LEV-
Equivalent) Approach to New Motor Vehicles Are Necessary
    (d) Particular Circumstances of OTC LEV Program
    (e) Conclusions Regarding Need for OTC LEV (or LEV Equivalent) 
for Purposes of Attainment by the Dates Provided in Subpart II of 
Part D of title I
    3. Need for OTC LEV (or LEV-Equivalent) Program for Purposes of 
Maintenance
    (a) Legal Relevance of Maintenance
    (b) Technical Analysis of Need for OTC LEV (or LEV-Equivalent) 
Program for Maintenance
    4. Relevance of EPA Transport Policy
    B. Consistency with Section 177 of the Clean Air Act
    1. Introduction
    2. California Fuel Regulations
    (a) Identicality Requirement
    (b) Third Vehicle Prohibition
    3. ZEV Sales Requirement
    4. Incorporation of Minor Provisions of California LEV Program
    5. NMOG Fleet Average
    6. Averaging, Banking and Trading
    7. Applicability of Section 177 in States without Plan 
Provisions Approach under Part D
V. SIP Call
    A. Explanation of Proposed SIP Call
    B. Legal Basis to Provide for Possibility of Alternative 
Standards Program in SIP Call
    C. Sanctions
VI. Determination of Model Year
    A. Introduction
    B. Statutory and Regulatory Requirements
    C. New York and Massachusetts Litigations
    D. Determination of Model Year
VII. Statutory Authority
VIII. Administrative Designation and Regulatory Analysis
IX. Impact on Small Entities
X. Paperwork Reduction Act

I. Outline and 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 2 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 system 
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 timeframe.
    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 
designation of areas as attainment or as ``unclassifiable.'' 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. The inventories are critical inputs 
for models used to determine 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 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.'' The modeling 
information is, of course, important to determining the reductions 
necessary in areas to achieve attainment throughout 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.'' Section 182(b) specifically provides that, by 
November 15, 1993, states were to submit SIP revisions for moderate and 
above areas providing for, with a limited feasibility exception, a 15% 
reduction by 1996 in emissions of volatile organic compounds (VOCs) 
from a 1990 baseline. Further, section 182(c)(2)(B) provides that, by 
November 15, 1994, states are to submit SIP revisions for serious and 
above areas 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 OTC 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--
    (i) 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--
    (I) 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, 
Maryland, Massachusetts, 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 Governors 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 2 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. 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 
2] 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 2] 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.'' EPA 
issued such criteria in 1991.1
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    \1\See U.S. EPA, Doc. EPA-450/4-91-015, Criteria for Assessing 
the Role of Transported Ozone/Precursors in Ozone Nonattainment 
Areas (1991).
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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 focused 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.
    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 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 would be subject to the OTC LEV program 
would have to 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 the following average NMOG fleet emission 
standards:

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 would not preclude earlier state implementation.

D. EPA Actions in Response to the OTC LEV Recommendation

    On March 18, 1994, EPA published a notice announcing receipt of the 
OTC's recommendation, as required by in section 184(c)(1). See 59 FR 
12914. This notice explained EPA's process for responding to the 
recommendation, identified the major elements of the recommendation, 
and briefly explained EPA's intended approach at that time for 
analyzing the issues. On April 8, 1994, EPA announced that the public 
hearing as required by section 184(c)(1) would be held in Hartford, 
Connecticut on May 2-3, 1994. See 59 FR 16811.
    On April 26, 1994, EPA published a notice of proposed rulemaking 
(NPRM) on the OTC recommendation. 59 FR at 21720. This notice described 
the framework for EPA's action on the recommendation and provided 
substantial detail regarding the issues EPA was considering in deciding 
whether to approve, disapprove, or partially approve and partially 
disapprove the recommendation. The NPRM described in detail the 
background and context of the OTC's recommendation, as well as the 
legislative history of section 184. The text of the OTC's 
recommendation was reprinted as an appendix to the NPRM. It also 
addressed the applicability of rulemaking procedures for EPA's action 
on the recommendation. Thereafter, the notice addressed the standards 
applicable to EPA's review of the recommendation, including both the 
``necessary'' and ``consistent with the Act'' criteria. Regarding 
necessity, the NPRM addressed the legal interpretation of this 
standard, the magnitude of emissions reductions needed for attainment 
in the OTR, the focus on contribution of emissions from across the OTR, 
and the timing of the necessary reductions, including the relevance of 
maintenance after attainment. The NPRM also explained the OTC's 
recommended LEV program in detail, EPA modeling of the emissions 
benefits from this program, and the auto manufacturers' FLEV 
alternative. The NPRM then explained EPA's approach to considering 
other alternatives to the OTC LEV program. Regarding consistency of the 
OTC LEV recommendation with the Act, EPA addressed issues common to 
pending litigation in New York and Massachusetts as well as other 
issues regarding consistency of the OTC LEV recommendation with section 
177 of the Act. Overall, EPA proposed, in the alternative, to approve, 
disapprove, or partially approve and partially disapprove the OTC's 
recommendation. The NPRM provided that the public comment period would 
remain open until June 3, 1994, thirty days following the public 
hearing.
    To provide a further opportunity for interactive discussion of the 
issues among the various interested parties, members of the public, and 
EPA, the Agency held an additional series of three public 
``roundtable'' meetings in Philadelphia, Pennsylvania, Durham, New 
Hampshire, and New York City. The agenda for these meetings was 
structured to generally follow the framework for analysis described in 
the NPRM. EPA published a notice on June 2, 1994, providing the time, 
place, and agenda for each meeting. See 59 FR 28520. The primary topics 
discussed at the first meeting in Philadelphia were the proper 
interpretation of the ``necessity'' standard, and the OTC LEV program 
itself. The topics addressed at the second meeting in Durham included 
the magnitude of reductions needed in the OTR, alternatives to the OTC 
LEV program, and a proposal from the Environmental Defense Fund (EDF) 
for emissions trading. At the third meeting in New York City, the 
discussion continued regarding alternative approaches to achieving the 
necessary emissions reductions, including the automakers' FLEV 
proposal, and a proposal from Texaco, Merck, and Public Service 
Electric & Gas Co. to establish a cap on NOX emissions together 
with trading.
    At the New York City roundtable meeting, EPA re-opened the public 
comment period on the NPRM until July 30, 1994, to allow interested 
parties to submit additional information in response to issues raised 
in the roundtable meetings. See 59 FR 35292.
    On August 4, 1994, EPA formally created a subcommittee of the Clean 
Air Act Advisory Committee in accordance with the Federal Advisory 
Committee Act, 5 U.S.C. App. The subcommittee will focus on issues 
related to the OTC petition and provide a public forum to pursue 
discussion of alternative car standards that could apply in 49 states. 
The first substantive meeting of the subcommittee will take place in 
Washington, D.C. on Tuesday, September 13 and Wednesday, September 14, 
1994 at the Ramada Plaza Hotel. EPA published a notice of these 
meetings on August 30, 1994. See 59 FR 44729.

II. Explanation of Proposed Action

    EPA is proposing today to approve the OTC's LEV recommendation 
based on the determination under sections 184(c) and 110(k) of the Act 
that the recommended LEV or a LEV-equivalent program\2\ is necessary 
throughout the OTR and that the recommended LEV program is otherwise 
consistent with the Act. EPA is proposing to find under its SIP call 
authority in section 110(k)(5)\3\ that the SIP for each state in the 
OTR is substantially inadequate to meet the requirements relating to 
pollution transport in section 110(a)(2)(D).\4\ EPA is thus proposing 
to require each state in the OTR to revise its SIP to include the LEV 
program within one year after the section 110(k)(5) finding is finally 
issued. EPA is proposing that the SIP call allow individual OTR states 
to give manufacturers the choice of complying with either the OTC LEV 
requirements or--if such a program is developed--a voluntary new-
vehicle program to which automakers could voluntarily opt-in that 
achieves equivalent or greater emissions reductions that are fully 
enforceable and qualifies for SIP credits.\5\
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    \2\A ``LEV-equivalent program'' is an alternative voluntary 
federal program that would achieve emission reductions from new 
motor vehicles in the OTR equivalent to or greater than would be 
achieved by the OTC LEV program.
    \3\Section 110(k)(5) authorizes the Administrator, whenever she 
finds that a SIP for an area is substantially inadequate to mitigate 
adequately the interstate pollutant transport described in section 
176A or 184, or to otherwise comply with any requirement of the Act, 
to require the State to revise the SIP as ``necessary'' to correct 
the deficiency.
    \4\Section 110(a)(2)(D) requires that SIPs contain adequate 
provisions to prevent emissions within the state that contribute 
significantly to nonattainment in, or interfere with maintenance by, 
any other state.
    \5\EPA does not ordinarily undertake rulemaking to issue a SIP 
call. EPA usually issues SIP calls by letter containing a finding of 
substantial inadequacy. The basis for the SIP call and finding would 
then be the subject of notice-and-comment rulemaking before the 
imposition of any sanctions warranted in response to state failure 
to respond to the SIP call. Here, EPA is choosing instead to 
undertake notice-and-comment rulemaking regarding the basis of the 
SIP call before issuing it.
---------------------------------------------------------------------------

    EPA is also proposing that states in the OTR be allowed, but not 
required, to adopt the Zero Emission Vehicle (ZEV) sales requirement. 
The OTC recommended that EPA require states to adopt the ZEV sales 
requirement only if it is a necessary component of a LEV program under 
section 177. EPA is proposing today that a ZEV sales requirement is not 
a required component of a LEV program adopted under section 177 and 
that states would therefore not be obligated to adopt it. However, 
states have the discretion to include a ZEV sales requirement. States 
may also include economic incentives designed to increase the sales of 
ZEVs as long as such incentives are consistent with sections 177 and 
209 of the Act. EPA is also taking comment on whether to adopt a ``ZEV 
equivalency approach'' to require states either to impose ZEV mandates 
or to impose other requirements on new motor vehicles that achieve the 
evaporative NMOG and NOX benefits associated with ZEVs.
    Finally, EPA is proposing regulations to determine the term ``model 
year'' for purposes of section 177 and part A of title II of the Act, 
as that term applies to motor vehicles. The proposed regulations 
provide that model year will apply on a model-by-model basis. This 
regulatory action codifies long-standing EPA guidance on this 
definition and should clarify the applicability of the two-year lead-
time requirement in section 177.

III. Statutory Framework for Proposed Action

    Today's proposed action is authorized by several Clean Air Act 
provisions. As discussed in the NPRM, EPA has authority to approve the 
OTC's LEV recommendation under section 184(c). EPA also has independent 
authority to require that states submit LEV SIP revisions under 
sections 110(a)(2)(D) and 110(k)(5). EPA disagrees with the comments of 
the automakers that argue that EPA lacks authority to approve the OTC 
LEV recommendation because the section 184 process is unconstitutional 
and because an EPA SIP call requiring state regulation of emissions 
from new motor vehicles violates sections 177, 202, and 209 of the 
Clean Air Act.

A. EPA's Authority To Act Under Section 184

    Section 184 provides a clear statutory basis for EPA's action here. 
EPA described that provision in detail in the background section above, 
and in its April 26 proposal. See 59 FR at 21722-24. In summary, the 
OTC is a body created by operation of law under sections 176A and 184 
of the Act, and is comprised of the Governor (or Governor's designee) 
and an air pollution control official appointed by the Governor for 
each state in the OTR, as well as the EPA Administrator (or her 
designee) and the affected EPA Regional Administrators (or the 
Administrator's designees). Decisions of the OTC are by majority vote 
of all members other than the EPA representatives. Under section 
184(c), the OTC may, after notice-and-comment, develop recommendations 
for additional control measures to be applied within the OTR as 
necessary to bring any area in the region into attainment by the dates 
provided in subpart 2 of part D. The OTC is then to transmit such 
recommendations to EPA to require such measures throughout the OTR.
    Section 184 grants EPA authority to approve the recommendations and 
issue SIP calls requiring that the affected states adopt the 
recommended measures if EPA determines that the measures are 
``necessary to bring any area in [the OTR] into attainment by the dates 
provided by this subpart and are otherwise consistent with the Act.'' 
Upon approval, section 184(c)(5) authorizes the Administrator to issue 
a finding under section 110(k)(5) that the SIP for any state to which a 
requirement of the approved recommendation applies is inadequate to 
meet the requirements of section 110(a)(2)(D) of the Act. The effect of 
the finding is to require that any such state revise its SIP to include 
the approved recommended measures within one year after the finding is 
issued.

B. State Obligations and EPA's Authority To Act Under Section 110

    EPA also is proposing to interpret section 110 of the Act to 
provide that the Agency has independent authority for today's proposed 
action under that section, apart from any authority provided by section 
184. Under section 110(a)(2)(D), each state is obligated to submit SIP 
provisions prohibiting sources in the state from contributing 
significantly to nonattainment or interfering with maintenance in any 
other state. If EPA finds that a SIP is substantially inadequate to 
adequately mitigate interstate pollution transport, section 110(k)(5) 
authorizes EPA to issue a SIP call to correct the inadequacy. Under 
EPA's proposed interpretation, sections 110(a) and (k) allow EPA to 
find at any time that a SIP is inadequate due to pollution transport. 
Thus, EPA is proposing to find that, because of the transport of 
pollution, OTC LEV (or LEV-equivalent) is necessary for areas in the 
OTR to achieve or maintain the ozone NAAQS, and therefore, that EPA has 
authority under sections 110(a)(2)(D) and (k)(5) to make a finding of 
substantial inadequacy and to issue a SIP call requiring adoption of 
OTC LEV. Rather than make a general finding of SIP substantial 
inadequacy, EPA is proposing to find the SIPs substantially inadequate 
only to the extent they do not contain the OTC LEV program. EPA is 
therefore proposing to require these states to adopt the OTC LEV 
program to correct the deficiency.
    The 1990 Clean Air Act Amendments broadened each state's long-
standing obligation to address in its SIP the contribution of emissions 
in its state to air pollution in other states.\6\ The changes expand 
the provision beyond stationary sources that prevent downwind 
attainment or maintenance to other sources and emissions activities 
that contribute significantly\7\ to downwind nonattainment or interfere 
with downwind maintenance. The expanded provision encompasses, among 
other things, mobile source controls in light of the impact of mobile 
sources on downwind attainment and maintenance.
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    \6\Prior to 1990, section 110(a)(2)(E) required that the SIPs:
    Contain adequate provisions * * * prohibiting any stationary 
source within the State from emitting any air pollutant in amounts 
which will * * * prevent attainment or maintenance by any other 
state of any such national primary or secondary ambient air quality 
standard.
    In the 1990 Amendments, this provision was re-codified at 
section 110(a)(2)(D) and broadened to require that a SIP submitted 
under the Act 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 [NAAQS].
    \7\To some extent the reference to contribution merely codified 
an EPA approach taken under the old section 110(a)(2)(E) and that at 
least one court decision had upheld. See Air Pollution Control 
District of Jefferson County, Kentucky v. EPA, 739 F.2d 1071 (6th 
Cir. 1984).
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    The mechanism for EPA to take action to require compliance with 
section 110(a)(2)(D) is the SIP call authority provided in section 
110(k)(5). That provision directs:

    Whenever the Administrator finds that the applicable 
implementation plan for any area is substantially inadequate to 
attain or maintain the relevant [NAAQS], to mitigate adequately the 
interstate pollutant transport described in section [176A] or 
section [184], or to otherwise comply with any requirement of this 
Act, the Administrator shall require the state to revise the plan as 
necessary to correct such inadequacies.

Under section 110(k)(5), the Administrator is to notify the state of 
the inadequacies and may establish reasonable deadlines, not exceeding 
18 months after notice, for submission of the plan revisions.
    Importantly, the Act does not address how states' attainment 
demonstrations are to account for transport of ozone pollution and its 
precursors.\8\ As was the case prior to the 1990 Amendments, neither 
section 110 nor any other provision of the Act specifies when states 
must submit SIP revisions to address the transport issue. Even with the 
advent of the very specific SIP submission schedules in the subpart II 
ozone program under the 1990 Amendments, no deadline is specified for 
compliance with the section 110(a)(2)(D) prohibition. EPA believes it 
may reasonably take action to make a finding of substantial inadequacy 
as soon as EPA has a factual basis to believe that states need to act 
in order to prevent the pollution transport problem from continuing 
past the downwind areas' attainment deadlines. Absent a LEV-equivalent 
program, EPA believes it is necessary that the states take action now 
to adopt the OTC LEV program, and waiting to make this finding may 
compromise their ability to achieve the reductions by the time they are 
needed for timely attainment and maintenance thereafter. This action is 
fully justified by the terms of section 110(k)(5). This provision 
states that ``[w]henever'' EPA makes the requisite finding of 
inadequacy, the state is obliged to submit a SIP revision. By its 
terms, section 110(k)(5) makes clear that the timing of a SIP call 
depends only on EPA's determination of inadequacy, and the section does 
not contain any provision that would tie SIP calls to any particular 
point on the SIP development timeline specified in sections 181 and 
182.
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    \8\EPA's proposed interpretation of sections 110(a)(2)(D) and 
(k) is best understood in the context of the general statutory 
scheme for attainment and maintenance of the ozone NAAQS. EPA's 
April 26 proposal contains a substantial explanation of the 
statutory program to address ozone pollution in subpart II of part D 
of title I added in the 1990 Amendments to the Act. See 59 FR at 
21721-22 (citing General Preamble for the Implementation of Title I 
of the Clean Air Act Amendments of 1990, 57 FR 13498 (April 16, 
1992)). As explained there, section 181 provides for the 
classification of areas according to their degree of ozone 
pollution. The greater the degree of pollution, the longer the area 
has to attain and the more stringent control measures it must adopt. 
The classifications and deadlines by which the areas are to attain 
the ozone NAAQS are: marginal (1993); moderate (1996); serious 
(1999); severe (2005 or 2007, depending on the ozone design value); 
and extreme (2010).
    Section 182 establishes the specific requirements and graduated 
control measures applicable for each type of area. One basic 
requirement is that states were to submit emissions inventories by 
November 1992. A key upcoming requirement is that, by November 15, 
1994, states are to have submitted, for all moderate and above 
areas, demonstrations that the states' SIPs will provide for 
attainment of the ozone NAAQS by the relevant attainment dates. As 
described in detail in the April 26 notice and the General Preamble, 
section 182 specifies a host of control requirements that states 
must adopt for various areas to ensure progress toward attainment.
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    Requiring submission of specific SIP revisions pursuant to section 
110(k)(5) is consistent with past EPA actions. Prior to 1990 and the 
enactment of section 184, EPA required states to submit specific 
reasonably available control technology (RACT) control measures 
applicable to stationary sources as part of a SIP call under section 
110(k)(5). There, EPA's rationale was that:

    Because of the relative imprecision of ozone databases and 
modeling techniques * * * EPA historically has required most areas 
to include in their control strategies certain stationary source 
control measures that EPA believes are reasonably available, and 
necessary to ensure that the SIP ``provides for'' attainment of the 
ozone standard as expeditiously as practicable.\9\
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    \9\For purposes of implementing the Clean Air Act after December 
31, 1987 and prior to the 1990 Amendments, EPA interpreted the 
statute as requiring states to develop corrective plans to attain 
``as expeditiously as practicable.'' See 52 FR at 45044 et seq. 
(Nov. 24, 1987); See also Delaney v. EPA, 898 F.2d 687 (9th Cir. 
1990).

See 52 FR at 45062 (Nov. 24, 1987) (footnote added). EPA took this 
action right away in response to a new list of areas violating the 
ozone standard. See 52 FR at 45055; 53 FR 34500 (Sept. 7, 1988); 55 FR 
30973 (July 30, 1990). EPA did not wait for these areas to develop 
attainment plans before issuing a SIP call requiring them to adopt 
specific controls necessary for attainment. Likewise, here EPA is 
proposing to require submission of the OTC LEV program as necessary for 
compliance with section 110(a)(2)(D).
    EPA believes it has authority under section 110(k)(5) to find that 
the states' SIPs are substantially inadequate for lack of the many 
additional measures needed to fully achieve the emissions reductions 
necessary to adequately mitigate transport, but does not believe it 
should make such a broad finding of substantial inadequacy at this 
time. This is because the states are on track to incorporate many 
additional control measures into their SIPs for purposes of their 
attainment demonstration obligations. In preparing these 
demonstrations, the OTR states are actively working to adopt regional 
strategies to address transport. In the ordinary course, EPA believes 
it should allow states the first opportunity to address transport in 
their forthcoming SIP revisions. There is still this opportunity for 
states to adopt such other control measures to achieve the necessary 
reductions in time for downwind states to meet their attainment 
deadlines and to maintain the NAAQS thereafter.\10\ If those efforts do 
not result in timely adoption of a regional strategy that will provide 
the emission reductions needed for attainment and maintenance, EPA may 
consider making a more comprehensive finding of SIP inadequacy insofar 
as other measures in addition to LEV are lacking.
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    \10\Section 181(a)(1) specified that ozone nonattainment areas 
are to attain the NAAQS ``as expeditiously as practicable but not 
later than'' the dates specified in that section. Based on currently 
available information, EPA does not believe that the serious and 
severe nonattainment areas in the OTR will be able to practicably 
attain the NAAQS earlier than the dates specified in section 
181(a)(1). This is because these areas will need to rely for 
attainment on control measures that depend on equipment turnover 
that will take time to occur. For this reason, EPA's analysis in 
this SNPRM is based on the Agency's belief that the serious and 
severe attainment dates are the dates specified in section 
181(a)(1).
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    EPA does not, however, believe it should wait to find the SIPs 
inadequate insofar as they lack the LEV program. This is because the 
LEV program depends on vehicle fleet turnover that will take an 
unusually long time to generate the needed emissions reductions. If EPA 
waits for the states' attainment demonstrations, the opportunity to 
ensure that necessary emissions reductions from the LEV program are 
achieved beginning in 1999 and growing thereafter may be irrevocably 
lost. Any delay in beginning the fleet turnover to LEV vehicles in 
model year 1999 will diminish the emissions benefits in the years 
following. It is therefore necessary for the states to act now to adopt 
OTC LEV, and appropriate for EPA to make a finding of substantial SIP 
inadequacy now with respect to that program.
    In sum, EPA is proposing to find now that the OTR states' SIPs are 
substantially inadequate insofar as they do not contain the OTC LEV 
program. This is because EPA believes that the states need to adopt 
this program now to mitigate pollution transport adequately by the 
attainment deadlines for areas in downwind states.
    EPA is proposing to set a one-year deadline under section 110(k)(5) 
for OTC LEV SIP submissions. Even though section 110(k)(5) authorizes 
EPA to allow up to 18 months, EPA believes a one-year deadline is 
appropriate here. EPA expects the one-year deadline to fall at the end 
of calendar year 1995. To ensure implementation of the OTC LEV program 
in model year 1999, and given the two-year lead-time requirement of 
section 177, states must adopt the program before January 2, 1996. If 
states were given more than about one year to adopt the LEV program, 
they could not be assured of implementing it for all 1999 model year 
vehicles. Since EPA is proposing to conclude that 1999 model year 
implementation is necessary to achieve the necessary emissions 
reductions, it is important that the SIP submission deadline fall in 
time to meet the two-year lead-time requirement.

C. Constitutional Validity of Section 184 Process

    The automakers' comments on EPA's April 26 proposal have raised a 
number of arguments that the Agency's proceedings under section 184 are 
unconstitutional.\11\ The Natural Resources Defense Council (NRDC) has 
submitted a response to these constitutional arguments.\12\ EPA does 
not believe the arguments that section 184 is unconstitutional have 
merit. And in any case, given EPA's independent authority under section 
110(k)(5), any constitutional question regarding the validity of 
section 184 would not affect the validity of the action proposed today.
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    \1\1See Letter from Kenneth W. Starr on behalf of the American 
Automobile Manufacturers' Association and the Association of 
International Automobile Manufacturers to Assistant Attorney General 
Walter Dellinger (July 20, 1994).
    \1\2See Letter from David Driesen on behalf of the Natural 
Resources Defense Council to Walter E. Dellinger, III (Aug. 22, 
1994).
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    The automakers argue that Congress, through section 184, is 
commandeering the legislative processes of the OTR states by directly 
compelling them to take certain actions. The automakers argue that this 
violates principles of federalism and the Tenth Amendment to the 
Constitution. The Supreme Court has interpreted the Tenth Amendment to 
mean that Congress cannot coerce states in their sovereign political 
capacity to regulate private conduct.\13\ Section 184 is fully within 
the scheme of ``cooperative federalism'' that the courts have confirmed 
is consistent with constitutional requirements.\14\ As with many other 
federal programs, section 184 is simply an unremarkable case under the 
Clean Air Act's SIP program where Congress has provided incentives to 
the states as a method of influencing their policy choices. Congress 
may attach conditions on the receipt of federal funds (as long as the 
conditions bear some relation to the purpose of the federal spending), 
to influence states' legislative choices. And where Congress has the 
authority to regulate private activity under the Commerce Clause, the 
Court has recognized Congress's power to offer states the choice of 
regulating an activity according to federal standards or having state 
law pre-empted by federal regulation.\15\ Here, Congress provided 
incentives to the states by placing conditions on highway funding; by 
allowing states to apply a less stringent ``offset ratio'' for new 
stationary pollution sources; and by allowing states to themselves 
impose regulations rather than having the federal government implement 
the program the state chose not to implement. See sections 179 (highway 
and offset sanctions) and 110(c)(1) (federal implementation plans).
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    \1\3See New York v. United States, 120 L.Ed.2d 123,139-44 (1992) 
(discussing principles of federalism and limitations on federal 
power to compel states to act in their political capacity under the 
Tenth Amendment).
    \1\4See Hodel v. Virginia Surface Mining & Reclamation Ass'n, 
Inc, 452 U.S. 264, 289 (1981).
    \1\5See New York v. United States, 120 L.Ed.2d at 144-45. See 
also Brown v. EPA, 521 F.2d 827, 840 (9th Cir. 1975) (state may not 
interfere with such regulation of air pollution sources as 
Administrator may undertake pursuant to Clean Air Act and Congress 
has power to authorize Administrator to obtain reluctant state's 
consent by conditioning federal expenditures within state on 
consent).
---------------------------------------------------------------------------

    The automakers also argue that section 184 constitutes an 
unconstitutional delegation of federal authority to the OTC and 
violates the Appointments Clause. They argue that through section 184 
Congress delegated legislative authority outside the federal 
government, or authorized state officials composing the OTC to exercise 
significant federal executive authority that the Constitution commands 
only federal officials appointed consistent with the Appointments 
Clause may exercise. EPA does not, however, believe that state 
officials exercise ``significant authority'' pursuant to federal law in 
this context. EPA welcomes comment on the automakers' constitutional 
arguments and the response from NRDC that are in the docket.

D. Consistency of EPA Action With Limitations on Authority Under 
Sections 177, 202 and 209 of the Act

    EPA's proposed action is fully consistent with both the letter and 
spirit of sections 177, 202 and 209 of the Act. These three provisions 
make it clear that Congress wanted auto manufacturers to have to meet 
only two types of standards--federal standards and California 
standards. Section 177 specifically contemplates that California's 
standards may apply outside California. Approving the OTC's 
recommendation is doing no more than requiring states, based on need, 
to exercise authority given to them by Congress. EPA is authorized to 
take this action under sections 184 and 110. EPA disagrees with those 
commenters that claim sections 177 and 202 preclude EPA from approving 
the OTC's recommendation.
    Requiring adoption of the LEV standards in the OTR does not change 
any current federal standard, so it is not prohibited by section 202. 
Section 202(b)(1)(C) explicitly precludes EPA only from exercising its 
authority under section 202 to modify certain specified standards prior 
to model year 2004--it is not a general prohibition of all EPA action 
relating to the control of emissions from motor vehicles. Thus, EPA may 
not modify certain mandatory federal standards applicable nation-wide 
to motor vehicles until model year 2004. However, today's proposal 
requires only that states adopt certain programs applicable to motor 
vehicles in such states, as states are permitted to do under section 
177. EPA is not proposing to rely on section 202 to require the LEV 
standards, so the prohibition in 202(b)(1)(C) is irrelevant.
    The automakers have argued that granting the OTC petition violates 
section 177 because EPA is making a choice (whether states should adopt 
California standards) that section 177 reserves to the states. This 
misconstrues the nature of section 177 and fails to read section 177 
together with section 110(k)(5) or section 184. Section 177 provides an 
exception to the general prohibition in section 209 against states 
(other than California) adopting motor vehicle emission standards. 
Section 177 thus provides states the discretion to adopt controls that 
section 209 would otherwise preclude. Sections 110(k)(5) and 184 allow 
EPA to require states to take actions that would otherwise be left to 
their discretion. The language of section 177, that the states' 
authority applies ``[n]otwithstanding section 209,'' makes clear that 
Congress intended to provide an exception to section 209, not bar EPA 
requirements under sections 110 or 184.

IV. Basis for Approval of OTC LEV Recommendation.

A. Necessity

1. Legal Interpretation of Necessity
    EPA's April 26 proposal contains an extensive discussion of the 
Agency's approach to interpreting the ``necessary'' standard under 
section 184(c), and includes several options. See 59 FR at 21725-27. 
Today, EPA is proposing its interpretation of this standard. Section 
110(k)(5) also includes a ``necessary'' standard providing that, upon 
an EPA finding of SIP inadequacy, the Agency is to require that the 
state submit SIP revisions that are ``necessary'' to correct the 
inadequacy. EPA is proposing that, in this particular case, the 
``necessary'' standard under section 110(k)(5) be interpreted the same 
as the ``necessary'' standard under section 184(c).
    If EPA approves or partially approves the recommendation, section 
184(c)(5) provides that EPA is to issue a finding that the SIPs for the 
states to which an approved requirement applies are inadequate to meet 
the requirements of section 110(a)(2)(D). Section 110(a)(2)(D) provides 
that SIPs are to contain adequate provisions prohibiting emissions 
within the state that will ``contribute significantly to nonattainment 
in, or interfere with maintenance by, any other state.''
    EPA is proposing that contributing emissions are significant under 
section 110(a)(2)(D) at least where controlling such emissions is 
necessary to bring any downwind area into attainment. EPA also is 
proposing that emissions interfere with downwind maintenance under 
110(a)(2)(D) at least where controlling such emissions is necessary for 
downwind areas to maintain the NAAQS.\16\ EPA is further proposing to 
interpret section 184 to mean that the Agency may approve the OTC's 
recommendation if the measures are necessary for any area in the OTR to 
attain or maintain the NAAQS.
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    \16\EPA is not addressing in this rulemaking whether, under 
section 110(a)(2)(D), a state's emissions may ``contribute 
significantly'' to nonattainment or ``interfere with maintenance'' 
in another state when controlling the upwind state's emissions is 
not strictly necessary but nevertheless would be helpful to downwind 
states' efforts to attain and maintain the NAAQS.
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    Section 110(k)(5) provides that EPA may issue a SIP call whenever 
it finds a SIP for an area to be substantially inadequate to attain or 
maintain the NAAQS, to mitigate adequately interstate transport under 
sections 176A or 184, or to otherwise comply with any requirement of 
the Act. EPA is proposing to interpret section 110(k)(5) to mean that 
it may issue a SIP call based on a finding that a SIP does not comply 
with the requirement of the section 110(a)(2)(D) to address adequately 
the effect of pollution transport on downwind attainment and 
maintenance. EPA may require that the states revise their SIPs to 
include any particular measure that is necessary to comply with section 
110(a)(2)(D).
    EPA believes that the ``necessary'' standard requires the Agency to 
evaluate the emissions reductions needed, and then whether reasonable 
and practicable alternative measures could be adopted instead of the 
OTC LEV program to achieve the needed reductions. The role of 
``alternatives'' in EPA's analysis has often been confused in the 
course of EPA's hearings and round-table proceedings. EPA believes two 
distinct kinds of alternatives are relevant to necessity.
    First, an alternative program to achieve the same emissions 
reductions from the same emissions sources may render the OTC LEV 
program unnecessary. An example is useful to illustrate this point. If 
EPA or the states were (hypothetically) to mandate that all new motor 
vehicles be ZEVs, then an OTC LEV program would not be necessary--it 
would not make sense (and would be unnecessary) to mandate OTC LEV 
tailpipe standards for a new vehicle fleet consisting entirely of cars 
without tailpipes. This would be true regardless of what emissions 
reductions are needed overall and what other measures are available to 
achieve the needed reductions. It is in this sense that EPA believes 
that OTC LEV would be unnecessary if there were another program 
available to achieve emissions reductions from new motor vehicles 
comparable to, or greater than, those from OTC LEV. Under this aspect 
of the analysis, the ability of the alternative to achieve reductions 
sufficient to comply with section 110(a)(2)(D) is not relevant.
    EPA is aware of alternative programs that currently are under 
discussion by various interested parties. EPA believes that some 
alternative programs could be preferable to simply approving the 
petition. Such alternatives focus on a 49-state approach, whereby auto 
manufacturers would commit to produce cars with a cleaner internal 
combustion engine (compared to current federal standards) nationwide. 
Incentives for advanced technology and zero emission vehicles are also 
part of the discussion. As these alternatives are developed and 
modeling of associated benefits is undertaken, EPA will add the 
analyses to the docket and publish a notice of data availability in the 
Federal Register.
    EPA believes that a 49-state low emission vehicle approach could be 
better than the OTC LEV program in a number of respects. First, EPA 
believes that a 49-state program could have significant environmental 
benefits as compared to the OTC LEV program. A 49-state approach could 
benefit the OTR by reducing incoming pollution from other states--both 
transported air pollution and pollution from the migration of non-OTR 
vehicles into the state (as a result both of tourism and relocation). A 
49-state approach would also help non-OTR states by providing NOX 
and VOC reductions and other air quality benefits. EPA also believes 
that an alternative could provide equal or greater impetus to 
development of advanced technology. Second, the auto industry would 
benefit from uniform markets. See discussion in Section IV.A.2.(d) for 
a discussion of the benefits of uniform markets. The auto industry 
plays a vital role in our economy. Reducing the economic impacts of 
EPA's actions, without reducing environmental benefits are matters of 
concern to the Agency.
    Once these 49-state alternatives are further developed, EPA intends 
to complete a qualitative and quantitative comparison of their 
environmental benefits relative to the OTC LEV program. The Agency will 
then publish, as soon as possible, a Federal Register notice setting 
forth the alternative and taking comment on issues it raises.
    The options for developing an alternative program are somewhat 
limited. As explained above, section 202 bars EPA modification of the 
Tier I standards prior to model year 2004, and the states cannot, under 
section 177 and 209, adopt standards other than the California 
standards. Thus, the only alternative method for requiring vehicle 
manufacturers to achieve reductions in tailpipe emissions from new 
light-duty cars and trucks is a program in which manufacturers 
voluntarily agree to be bound by more stringent standards. This concept 
and the legal basis for it are discussed in greater detail in section V 
of this notice, below.
    It is this first kind of alternative that underlies the basis for 
EPA providing in its SIP call for the possibility that an alternative 
program may be developed that would achieve emissions reductions from 
new motor vehicles that are comparable to or greater than those from 
OTC LEV. If such a program were developed, it would not be necessary to 
apply the OTC LEV program to vehicles subject to the alternative 
standards. This concept and the legal basis for it are discussed in 
greater detail in section V of this notice, below.
    Second, the availability of alternative measures that are 
sufficient to achieve the necessary reductions without further 
reductions from new motor vehicles or trucks could likewise render the 
OTC LEV program unnecessary. The question here is not whether EPA will 
mandate such other measures in response to the OTC's recommendation. 
The OTC did not recommend such other measures and; for the reasons 
described in section III.B., EPA is not ready to consider mandating 
them under sections 110(k)(5) and 110(a)(2)(D) at this time. Rather, 
the question is whether such other measures are available so that it is 
unnecessary for EPA to require the OTC LEV program. As EPA explained in 
its April 26 proposal:

    To the extent more reductions will be needed even with the LEV 
program [to mitigate significant contribution to nonattainment in 
the OTR], 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.

59 FR at 21734.
    EPA has established a precedent for interpreting the ``necessary'' 
standard that is consistent with this approach. EPA's interpretation is 
guided by its approach to interpreting that term (ultimately codified 
by Congress), under section 211(c)(4)(C) of the Act, as explained in 
the April 26 proposal. See 59 FR at 21734. That interpretation is 
important to evaluating the availability of alternatives sufficient to 
achieve the necessary emissions reductions. Under section 211(c)(4)(C), 
controls are necessary if they would still be needed after adoption of 
all other reasonable and practicable measures. That is, EPA would 
consider alternatives available if they are comparatively reasonable 
and practicable. And the reasonable and practicable alternatives must 
be sufficient to achieve the necessary reductions in order to conclude 
that the proffered control is unnecessary.17
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    \1\7EPA also suggested in its April 26 proposal a different 
possible approach to the ``necessary'' standard. Under that 
approach, EPA might 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. That is, as long as the States 
in the OTR still need more reductions to address the transport 
problem, then EPA would consider the OTC LEV (or LEV-equivalent) 
program necessary. Assessment of alternative control measures would 
not be relevant. See 59 FR at 21725. While EPA is not proposing here 
to adopt that approach, EPA notes that the facts showing that the 
OTC LEV (or LEV-equivalent) program is necessary under the approach 
discussed in the text would, a fortiori, be sufficient to show that 
the OTC LEV (or LEV-equivalent) program is necessary under this 
different approach.
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    Of course, whether potential alternative measures are ``reasonable 
and practicable'' as well as sufficient to achieve the necessary 
reductions may not be self-evident. In its April 26 proposal, EPA 
described approaches to factual uncertainty and other policy 
considerations that could influence these determinations. See 59 FR at 
21726-27. As with its decisions under section 211(c)(4)(C), here EPA 
does not consider drastic measures such as gas rationing, or plant 
shutdowns to constitute reasonable alternatives to the OTC LEV program. 
Congress could not have intended that EPA should consider such drastic 
alternatives, since such alternatives would clearly be adequate to 
achieve any necessary reductions, and hence no proffered measure would 
ever be necessary. This would essentially read section 184 out of the 
Act. Further, EPA believes cost-effectiveness of potential alternatives 
is a criterion in evaluating reasonableness and comparing other 
measures to the measure proffered as necessary. But the comparison of 
the reasonableness and practicability of various measures, including 
what is ``too drastic,'' is a complicated policy determination 
requiring consideration of cost and public acceptance, and need not be 
supported by a highly specific technical record. See 59 FR at 21726.
    While EPA believes that it is important to assess the sufficiency 
of reasonable and practicable alternatives, states have the continuing 
opportunity to come forward to adopt sufficient alternatives and prove 
that the OTC LEV program indeed turns out to be unnecessary. EPA does 
not believe states would seriously entertain unreasonable or 
impracticable measures to adopt in place of OTC LEV in order to achieve 
the necessary emissions reductions. Nonetheless, EPA recognizes that 
states which do in fact adopt such other measures sufficient to comply 
with section 110(a)(2)(D) might thereby render the OTC LEV program 
unnecessary. EPA therefore is proposing that it would retain authority 
under the SIP call to change its necessary determination and withdraw 
its SIP call for those states that adopt controls sufficient to comply 
with section 110(a)(2)(D), including those controls EPA might now 
believe to be unreasonable or impracticable. As states in the northeast 
have not yet adopted sufficient measures proving that the LEV program 
(or LEV-equivalent) is unnecessary, EPA believes that it should 
evaluate whether sufficient reasonable and practicable alternatives 
exist based on the best current information and policy judgment.
    EPA also discussed in its April 26 proposal various approaches to 
factual uncertainty regarding issues such as cost and the amount of 
reductions needed for compliance with section 110(a)(2)(D). There, EPA 
raised the question of whether the statutory structure, together with 
the legislative history, support giving substantial weight or 
``deference'' to the OTC's recommendation that the OTC LEV program is 
necessary for attainment in the OTR. EPA suggested that it could 
reasonably interpret the provisions to mean that EPA is to start with a 
presumption of approving the OTC's recommendations and approve the 
recommendation unless EPA found that the recommended measures were 
unnecessary. EPA pointed to floor statements in the conference debate 
in the Senate regarding section 184 that EPA bears a ``heavy burden'' 
to ``demonstrat[e] that the additional control measure(s) is not 
necessary.'' See 59 FR at 21726 (quoting Baucus-Chafee Statement of 
Managers and Senator Lieberman). EPA's public hearings and round-table 
discussions reflected some confusion about the meaning of ``deference'' 
to the OTC. EPA questions whether there is any basis under any 
provision of the Clean Air Act to relieve the Agency of an obligation 
to consider independently all of the factual information available in 
determining whether the OTC LEV program is necessary.
    In this case, EPA believes the facts affirmatively show that this 
measure is indeed necessary. In addition, EPA believes that its general 
policy of prudence in making decisions regarding highly complex 
scientific issues affecting public health should apply to its analysis 
here. EPA believes this policy is reasonable and permissible in 
addressing what is ``necessary'' to achieve and maintain the health-
based ambient air quality standard for ozone.18
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    \1\8Courts have recognized that scientific evidence is 
cumulative, and that EPA has discretion to take an environmentally 
protective approach to protecting public health and welfare. In 
Ethyl Corp. v. EPA, 541 F.2d 1 (D.C. Cir.), cert. denied, 426 U.S. 
941 (1976), the court of appeals considered EPA's action to regulate 
the lead content of gasoline on grounds that emissions ``will 
endanger'' the public health or welfare under prior section 
211(c)(1)(A). There, the court recognized that EPA's decision may be 
based on ``the inconclusive but suggestive results of numerous 
studies.'' Ethyl, 541 F.2d at 38. Further, the court found that the 
Administrator appropriately acted ``conservatively'' based on 
``suggestive'' evidence to make a ``prudent'' determination. Ethyl, 
541 F.2d at 39. EPA believes such prudence is likewise appropriate 
here, where the public health and welfare is at stake.
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    EPA believes its general policy in favor of protecting public 
health and welfare is particularly appropriate to evaluate whether a 
particular measure is needed to solve an inter-state problem. EPA 
believes that pollution transport and the states' obligations under 
section 110(a)(2)(D) to control emissions that would contribute to 
nonattainment or interfere with maintenance downwind are critical to 
the integrity of the states' attainment plans under title I. Especially 
in a region such as the Northeast, where extensive transport makes 
states inter-dependent on their collective pollution control programs, 
EPA believes that its general policy should apply to make sure that 
states adopt controls necessary for other states' attainment. These 
states depend for their own citizens' health on the actions of upwind 
states that may lack an incentive to bear the costs of protecting 
downwind citizens' health. In such circumstances, EPA's general policy 
of prudence is particularly appropriate in evaluating what is necessary 
in the upwind states to protect health downwind. Moreover, these 
states' independent efforts (and their residents' support for them) to 
address emissions within their own borders may depend significantly on 
the confidence these states have that the other states in the region 
are acting as ``good neighbors.''
    High officials closely involved in the SIP planning process in 
these states have now come to EPA, after extensive public processes of 
their own, believing a particular measure is necessary for them and 
their neighbors to do their part to address a substantially collective 
public health problem. These officials, as the chief state officers 
responsible for ensuring state compliance with the Clean Air Act, are 
the closest to the air quality planning information in the states. 
Whether EPA responds under section 184 or by exercising its authority 
under section 110(k)(5), EPA believes that it makes policy sense to 
apply its general approach of prudence in favor of environmental 
protection to scientific uncertainties. EPA believes sound policy 
dictates that it has a responsibility to do so. The legislative history 
reviewed in EPA's April 26 proposal reflects that at least some in 
Congress intended that EPA follow this approach.
    To the extent EPA's analysis reveals that other measures are 
reasonable and practicable but are not sufficient to achieve the 
necessary reductions, EPA would have authority directly under section 
110(k)(5) to require the states to adopt those measures, too. But, for 
the reasons described above in section III.B., EPA does not believe it 
need exercise its authority in this manner at this time. Of course, 
states will need to adopt many of these measures as part of their 
attainment demonstrations due November 15, 1994, and this may go a long 
way toward these states' contribution to downwind nonattainment or 
their interference with downwind maintenance. But EPA believes that it 
should require this measure now, in light of the states' 
recommendation, the time needed to yield emissions benefits (due to the 
lead-time requirement and time for fleet turnover), and the need for a 
coordinated decision to adopt the program for the entire region 
collectively. Since it is both necessary to address the transport 
problem and very difficult for the states to adopt the OTC LEV program 
without assurance that their neighbors that need to will also do so, 
the Agency believes that there is adequate reason to act now to require 
this measure under sections 184 and 110(k)(5).
    EPA recognizes that, under this approach, certain states would have 
to adopt the OTC LEV program even though they did not vote to make this 
recommendation to EPA. In its April 26 proposal, EPA questioned whether 
the ability of certain states to override the wishes of others by vote 
could militate against an environmentally conservative approach to 
uncertainty. EPA does not view the objection of certain states as 
justifying a different approach. Rather, EPA currently believes that 
the weight of a recommendation from high officials in a majority of the 
states justifies an environmentally conservative decision regarding 
whether the measure in question is necessary. While the minority states 
might understandably wish to reserve their options for compliance, 
their adopted attainment demonstrations are due in a matter of two 
months, and the work that those states have accomplished toward 
assembling their attainment plans has not convinced EPA that the OTC 
LEV (or LEV-equivalent) program will be unnecessary to address the 
transport problem. As noted above, EPA believes that even if these 
officials presented this recommendation without invoking the formal 
section 184 process, EPA would appropriately take an environmentally 
protective approach to deciding whether to issue a SIP call for the 
measure directly under section 110(k)(5). Moreover, as discussed above, 
EPA is proposing to explore the possibility that alternatives will 
become available and adopted so that states would no longer need the 
OTC LEV program, or that the states may demonstrate that they have 
adopted sufficient measures without LEV (potentially including those 
that EPA might otherwise dismiss as unreasonable or impracticable) to 
comply with section 110(a)(2)(D).
2. Analysis of Need for OTC LEV (or LEV-Equivalent) Program
    (a) Magnitude of Reductions Needed for Attainment in 2005.
    i. General Conclusions.
    The first step in EPA's analysis of whether the OTC LEV (or LEV-
equivalent) program is needed is to consider what emissions reductions 
are necessary to bring all areas into attainment. Based on EPA's 
region-wide modeling analyses, it is clear that very large reductions 
in emissions of both NOX and VOC are needed for the serious and 
severe areas of the OTR to come into attainment. Based on the best 
analysis available to EPA to date, NOX emission reductions on the 
order of 50% to 75% are needed throughout the OTR to reach attainment 
with the ozone NAAQS. VOC emissions reductions on the order of 50% to 
75% are needed for attainment particularly in the East Coast urban 
corridor. These estimates are based on modeling analyses that used a 
1985 emissions baseline. Updated inventory information indicates the 
1985 inventory underestimated base case NOX and VOC emissions. 
Therefore, EPA believes that at least a 50% to 75% reduction in 
emissions is necessary from the 1990 baseline.\19\ Given EPA's belief 
that in addressing areas of factual uncertainty here it should err on 
the side of environmental protection, EPA requests comments on whether 
reductions from reasonable and practicable measures should be in the 
middle of these ranges before EPA would determine that the OTC LEV (or 
LEV-equivalent) program is unnecessary.
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    \1\9The Clean Air Act requires states to develop 1990 base year 
emissions inventories of actual emissions on which to base planning 
requirements, including attainment demonstrations. Therefore, the 
remainder of the document will generally refer to emissions 
reductions required or obtained from a 1990 emissions inventory. EPA 
is relying on the above-noted relationship between the 1985 and 1990 
inventory to draw conclusions about necessary emissions reductions 
from the 1990 baseline inventory.
---------------------------------------------------------------------------

    EPA has reached these conclusions based on modeling analyses of the 
impact of emissions reduction strategies for this region. For purposes 
of its modeling studies, EPA considered the impact of various 
strategies in the year 2005. Focusing first on the impact in 2005 is 
reasonable because by then all control measures explicitly mandated in 
subpart 2 of part D of the Act will be in place. EPA can thereby 
analyze more precisely what reductions beyond those already explicitly 
required will be needed. Since two of the three core severe 
nonattainment areas in the urban corridor along the East Coast from 
Washington D.C. to Boston have an attainment deadline of 2005, it is by 
this date that the Clean Air Act mandates severe area controls to be in 
place. These areas are the Baltimore and Philadelphia areas. The New 
York-New Jersey-Connecticut severe area has the slightly later 
attainment deadline of 2007 due to its higher ozone design value. EPA 
also focused on this year in its studies in part because the OTC's 
modeling committee asked that EPA do so.
    It is important to note, however, that for purposes of this step in 
the analysis, the year that is the subject of the study does not affect 
the magnitude of necessary emissions reductions. This is because the 
precise question in this step is what reductions are needed from a 1990 
baseline emissions inventory in order for each of the nonattainment 
areas in the OTR to come into attainment. For purposes of this 
analysis, EPA assumes that all growth in emissions since 1990 must be 
neutralized in addition to achieving the requisite emissions reductions 
from the 1990 baseline. That is, EPA's conclusion is that emission 
reductions on the order of 50% to 75% in VOC (primarily in the urban 
areas and NOX (regionally) are needed in the OTR to reach 
attainment, and that growth in emissions since 1990 must be neutralized 
in addition to the 50% to 75% reductions. Of course, in later years the 
amount of growth that must be neutralized on top of the 50% to 75% 
reductions will increase. But the conclusion that 50% to 75% reductions 
from the 1990 baseline are needed remains constant over time.
    ii. Analytical Modeling Tools.
    Two basic atmospheric modeling tools are used to analyze the need 
for and effectiveness of various emissions reduction strategies to 
attain the ozone NAAQS. These are both photochemical grid models into 
which information regarding the atmosphere and emissions is input for 
subunits in a grid that encompasses a particular area, or ``domain.'' 
The model is designed to measure the impact of changes in emissions 
input for each subunit on the grid. An important aspect of the models 
is the set of assumptions regarding the air that enters the modeling 
domain at its boundaries, commonly referred to as ``boundary 
conditions.''
    The two basic models used to analyze ozone pollution in the 
northeast United States are the Urban Airshed Model (UAM) and the 
Regional Oxidant Model (ROM). The key differences between these models 
are the size of the modeling domain and the resolution of information 
about subunits in the photochemical grid. The resolution depends on the 
size of the overall domain. As their names indicate, the UAM is an 
urban scale model that yields more precise information about particular 
urban areas, and the ROM is a broader regional model that is more 
useful for assessing regional impacts. The UAM generally involves a 
modeling domain on the order of 200 km on a side, with a horizontal 
resolution of five km or better and five or more vertical layers.\20\ 
EPA is using a ROM to analyze the domain encompassing the United States 
east of 99W longitude, covering approximately the eastern half of the 
country. Horizontal resolution is approximately 18 km, with three 
vertical layers considered.
---------------------------------------------------------------------------

    \2\0Grid models, such as the UAM and the ROM, entail 
superimposing a 3-dimensional box over the area to be modeled. This 
box is subdivided into grid cells. The model predicts average 
concentration within each cell for each hour of a simulation. The 
spatial resolution possible with a model is defined by the size of 
these individual grid cells. The models do not allow one to draw 
conclusions about concentrations averaged over areas which are 
smaller than the size of the individual grid cells.
---------------------------------------------------------------------------

    The UAM is particularly useful to demonstrate with fine resolution 
whether urban areas will achieve attainment using a particular 
emissions reduction strategy, based on assumptions about the boundary 
conditions of the UAM domain. The ROM is useful for assessing the 
relationship between UAM domains and what is happening in the broader 
region to determine appropriate boundary conditions for UAM modeling. 
The function of ROM applications for developing attainment strategies 
is to provide boundary conditions for the UAM analyses. Essentially, 
boundary conditions are estimates of the amount of ozone and ozone 
precursors entering each of the UAM domains from upwind. Boundary 
conditions reflect the cumulative effect of pollutant transport as well 
as control measures and growth applied in upwind areas. Upwind areas 
for purposes of the ROM analysis include upwind UAM domains, portions 
of the OTR outside the UAM domains, and the eastern U.S. outside the 
OTR. The boundary conditions resulting from these ROM simulations serve 
as an important input to the states' UAM analyses.
    Modeling using the UAM and ROM tools is an iterative process. 
First, UAM yield information about the strategies and impacts of 
strategies in smaller areas. The information from these models can then 
be fed into the ROM to yield information about the collective impact of 
the UAM assumptions throughout the region. The strategies in each area 
impact other areas downwind as the air moves from one area to another. 
The ROM then yields information about the appropriate boundary 
conditions to be input into the next round of each area's UAM. Each 
iteration in this process yields more refined information about the 
effect of strategies in the UAM domains and the appropriate boundary 
conditions for each UAM domain. In sum, the UAM is useful to assess the 
precise strategies in isolated nonattainment areas; the ROM is useful 
to assess the relationship between areas in light of their 
interdependence because of a common transported air mass throughout the 
region and to provide boundary conditions for further UAM modeling.
    The Clean Air Act requires that the states submit modeled 
demonstrations of attainment to EPA on or before November 15, 1994. As 
described, states will be using the UAM with input from the ROM 
applications to make these modeled demonstrations, though none have yet 
been completed and submitted to EPA for review. In the OTR, the states 
will model four urban areas using the UAM: (1) New England; (2) New 
York City/Connecticut/northern New Jersey; (3) Philadelphia/New Jersey/
Maryland; and (4) Baltimore/Maryland/Washington D.C. These urban areas 
are so close together and so inter-dependent that each of these four 
UAM modeling domains overlaps portions of at least one of the other 
four. EPA does not expect the states to complete UAM modeling analysis 
for the four urban areas that demonstrates that a particular control 
strategy will achieve attainment (relying on ROM applications through 
the iterative process discussed above), until well after November 1994. 
EPA's analysis of the need for the LEV program relies principally on 
several past and ongoing ROM studies. While EPA could use the complete 
UAM studies to refine the analysis, EPA believes ROM is the more 
important modeling tool for assessing transport. EPA further believes 
that certain conclusions can now be drawn about the outcome of the UAM 
analyses with respect to transport.
    The Agency has used the ROM over the past several years to study 
national policies and strategies for reducing ozone. Because of the 
large domain subject to a ROM analysis, this tool is well-suited for 
assessing effects of regional strategies on regional transport of ozone 
and its precursors. ROM provides vital information for the states to 
consider in choosing sets of individual measures within each 
nonattainment area for purposes of their attainment demonstrations. EPA 
has applied ROM in various studies since 1988 to assess regional 
effects of control strategies. For purposes of assessing the amount of 
reductions needed to attain the ozone NAAQS throughout the OTR, EPA 
reviewed the results of these ROM studies. These studies analyzed 
impacts of various control strategies using data from the actual ozone 
exceedance episode in July 1988. During these particular episodes, the 
ROM model predicted that two sub-regions in the OTR would have hourly 
ozone concentrations over 180 ppb (50% over the ozone NAAQS), even 
after application of the control measures specifically mandated in the 
Act.
    In EPA's ROMNET study,\21\ except for the New York metropolitan 
area, scenarios with predicted ozone levels below the NAAQS involved 
NOX reductions on the order of 60%-70% below 1985 levels. EPA's 
conclusions regarding necessary NOX reductions varied from city to 
city, depending on whether VOC or NOX was the limiting factor in 
ozone production near the city. VOC tends to be the limiting factor in 
urban areas, where there are less biogenic VOC emissions. In rural or 
suburban areas where biogenic emissions of VOC from vegetation are 
greater, NOX tends to be the limiting factor. NOX reductions 
in the rural and suburban areas can be important even where such areas 
are not themselves violating the NAAQS, because the ozone and ozone 
precursors from these areas are transported into the nonattainment 
areas, exacerbating conditions in the nonattainment areas. EPA 
concluded that VOC reductions on the order of 70%-90% from 1985\22\ 
levels would be needed to reduce ozone levels to comply with the level 
specified in the NAAQS in several of the large cities along the East 
Coast urban corridor. Based on this and the other studies discussed 
below, EPA believes that NOX controls are needed regionally, while 
VOC reductions are critical particularly in and near the urban areas in 
the region.
---------------------------------------------------------------------------

    \21\See Regional Ozone Modeling for Northeast Transport 
(ROMNET), EPA Doc. EPA-450/4-91-002a (June 1991).
    \22\Both the ROMNET study and another study (the matrix study), 
discussed later, used the 1985 National Acid Precipitation 
Assessment Program (NAPAP) regional emissions inventory as the 
baseline. The 1985 NAPAP inventory of NOX and VOC was the only 
regional inventory available at the time for use in these studies.
---------------------------------------------------------------------------

    Another ROM study, called ``the matrix study,''\23\ analyzed the 
impact of uniform reductions in NOX and VOC emissions throughout 
the eastern half of the United States. This analysis indicates that, 
for the July 1-15, 1988 episode for the OTR portion of the modeling 
domain, emission reductions for both NOX and VOC on the order of 
50% to 75% from 1985 levels are needed to reduce maximum ozone levels 
in the OTR portion of the modeling domain to the level specified in the 
NAAQS.
---------------------------------------------------------------------------

    \23\See Chu, S.H., E.L. Meyer, W.M. Cox, R.D. Scheffe, 1993, 
``The Response of Regional Ozone to VOC and NOX Emissions 
Reductions: An Analysis for the Eastern United States Based on 
Regional Oxidant Modeling,'' Proceedings of U.S. EPA/AWMA 
International Specialty Conference on Tropospheric Ozone: 
Nonattainment and Design Value Issues, AWMA TR-23, pp.305-311 
(1993).
---------------------------------------------------------------------------

    While these studies used a regional 1985 emission inventory as the 
baseline, it is the 1990 emissions baseline that is of particular 
concern in determining whether LEV is necessary for attainment. Under 
the Act, states are required to submit comprehensive 1990 inventories 
of NOX and VOC emissions upon which to base their air quality 
planning, including their attainment demonstrations. EPA believes that, 
based on current, recently updated information, both the matrix and 
ROMNET studies relied on assumptions about the emissions inventory that 
underestimated base case VOC and NOX emissions.\24\ This is 
because inventories used in both the matrix and ROMNET studies were 
based on older estimates compiled for the National Acid Precipitation 
Assessment Program (NAPAP).\25\ For example, EPA believes that 
inventory assumptions in the matrix study underestimated 1990 baseline 
emissions in the OTR for NOX by 16% and VOC by about 38%. 
Correcting the inventory assumptions in the matrix study should 
therefore result in modeling results that reductions in NOX and 
VOC emissions needed for attainment throughout the OTR are even greater 
than described above. EPA does not have a precise comparison between 
the current inventory information and the assumptions relied on in the 
ROMNET study, but a comparable difference is likely based on the 
difference between the current recently updated inventory and the older 
NAPAP-based inventory used in ROMNET. Based on these ROM modeling 
studies and analysis of 1985 and 1990 emission inventory assumptions, 
EPA concludes that, at a minimum, 50% to 75% reductions in NOX 
throughout the OTR and VOC in and near the urban areas emissions will 
be necessary for regional attainment from the 1990 baseline.
---------------------------------------------------------------------------

    \24\See E.H. Pechan & Associates, Regional Interim Emission 
inventories (1987-1991), Volume I: Development Methodologies, 
Prepared under EPA contract 68-D2-159, Work Assignment No. 13, (May 
1993).
    \25\Saeger, M., J.Langstaff, R.Walters, L.Modica, D.Zimmerman, 
D.Fratt, D.Dulleba, R.Ryan, J.Demmy, W.Tax, D.Sprague, D.Mudgett, 
A.Werner. The NAPAP Emissions Inventory (Version 2): Development of 
the Annual Data and Modeler's Tapes, EPA Doc. No.600/7-89-012a., 
U.S. EPA, Research Triangle Park, NC (1989).
---------------------------------------------------------------------------

    (b) Contribution Analysis.
    The second step in EPA's analysis is to assess the degree to which 
transport contributes to the ozone problem in the OTR. As explained in 
the April 26 notice, EPA believes that the ``need'' for additional 
measures in the OTR in order to comply with section 110(a)(2)(D) 
focuses primarily on the states' need to adopt the program in question 
for the benefit of areas downwind. See 59 FR at 21728. Of course, the 
states retain full authority to adopt the LEV program under section 177 
for their own benefit without EPA approval. As explained below, 
analysis of what reductions are needed for any specific area to avoid 
causing ozone exceedances downwind is an enormously complicated task 
that depends on regional, urban, and wind trajectory modeling 
information and monitoring data. Further, the analysis of the controls 
necessary in an upwind area depends on the controls assumed in the web 
of downwind areas and other upwind areas. In dealing with these 
complications and uncertainties, EPA emphasizes that the lead-time 
together with the lengthy time needed for fleet turnover in order to 
obtain the benefits from the OTC LEV program support reaching a 
decision now based on the best data currently available. Based on this 
data, EPA's conclusion is that very large reductions in NOX 
emissions on the order of 50% to 75% throughout the OTR are necessary 
for the serious and severe nonattainment areas in the OTR to attain the 
ozone standard by their respective attainment dates. EPA also believes 
that a similar magnitude of reductions in VOC emissions is necessary 
primarily in and near the urban areas of the OTR.
    Because ROM is useful to assess regional strategies in light of the 
transport of ozone and ozone precursors across a region, and is 
therefore critical to establishing boundary conditions for UAM models, 
it is also useful to assess the degree of transport across a region. 
The ROM studies discussed above therefore are a critical component of 
the best current information regarding the extent to which upwind areas 
contribute to exceedances of the ozone standard in downwind areas 
throughout the OTR. Use of these studies, together with regional 
trajectory analyses, to assess contribution between areas, is 
consistent with EPA's published guidance for conducting contribution 
analyses.\26\ The OTC, too, relied on these approaches consistent with 
EPA's published guidance to establish the importance of addressing 
pollution that is transported throughout the OTR and to thereby support 
its recommendation that the LEV program is necessary region-wide.
---------------------------------------------------------------------------

    \26\See U.S. EPA, Doc. EPA-450/4-91-015, Criteria for Assessing 
the Role of Transported Ozone/Precursors in Ozone Nonattainment 
Areas (1991).
---------------------------------------------------------------------------

    EPA believes that the ROM studies, together with regional 
trajectory analyses, show that the large percentage reductions in 
NOX and VOC discussed above (on the order of 50% to 75% 
reductions, with somewhat less emphasis on VOC reductions outside the 
urban areas) are needed throughout the OTR for purposes of the downwind 
nonattainment areas to attain the NAAQS. EPA recognizes that these 
conclusions are based on ROM and trajectory analyses for the OTR as a 
whole, and that factual uncertainty remains regarding the precise 
degree of contribution for individual small subunits of the modeled 
domain to ozone violations in other areas, and the amount of emissions 
reductions needed to prevent such contribution.
    To assess such contribution for each subunit in the grid would 
require a myriad of sensitivity tests that are extremely complicated. 
This is because contribution from one area to another can be enormously 
difficult to isolate. The significance of any particular area's 
contribution depends on the controls that have been implemented in 
other areas that share the same airshed. The interrelationship between 
the ROM and UAM models illustrates this point. The strategies needed in 
the urban areas depend on what is being done in other areas that 
affects UAM boundary conditions, and the strategies applied in all of 
the areas determines the boundary conditions. In short, upwind areas 
may need to do somewhat less to avoid causing downwind exceedances if 
the downwind areas themselves do more, but the upwind areas may need to 
do more if the downwind areas do less. And this relationship must 
account for such variables in the many areas that share air throughout 
the northeast.
    While recognizing these complications and the associated factual 
uncertainties, modeling and wind trajectory analyses show that 
emissions transport from OTR areas in an arc extending from the south 
and southwest to the northwest substantially affect nonattainment areas 
along the East Coast urban corridor. The OTC's technical support 
document for its recommendation\27\ contains several analyses that 
support this conclusion. These analyses relate wind trajectory data to 
monitored ozone data during three multi-day ozone exceedance episodes 
in 1992 and 1993, as well as the July 1988 episode that was the subject 
of the ROMNET study discussed above. These analyses also relate 
monitoring data at mountaintop sites during these episodes that 
indicate a broad region-wide buildup of ozone as the episodes progress. 
For the 1992 and 1993 episodes, the wind trajectory data together with 
the timing of high ozone readings at relatively rural sites in the 
northern part of the OTR support the conclusion that transport from the 
East Coast urban corridor toward the northeast portions of the OTR 
leads to high regional ozone over a prolonged period.
---------------------------------------------------------------------------

    \27\See ``The Long Range Transport of Ozone in the Ozone 
Transport Region'' (January 1994).
---------------------------------------------------------------------------

    The analysis of the July 1988 episode relies heavily on EPA's 
ROMNET study. The ROMNET results indicate that emissions within the 
East Coast urban corridor have a dominant impact on predicted ozone 
levels within the corridor when emissions levels are very high. The 
conclusion that corridor-wide emissions play a dominant role in 
affecting predicted high ozone concentrations is consistent with 
findings in a subsequent study EPA has performed for the OTC.\28\ The 
ROMNET study separately modeled the impact of similar large percentage 
reductions (60%) in NOX emissions first in OTR nonattainment 
areas, second in OTR attainment areas and third in the four states 
bordering the OTR. The modeling showed that ozone levels in the urban 
corridor were more sensitive to reductions in the nonattainment areas 
(which are mostly in the urban corridor). This was because the actual 
quantity of emissions and hence the amount eliminated through a 60% 
reduction was greater in the urban corridor, and because these 
reductions were closer to the problem. However, as shown in the ROMNET 
study, emissions from outside the urban corridor have an increasingly 
important impact as the emissions within the corridor are reduced. 
Since modeling indicates that very large reductions inside the urban 
corridor are needed to approach the NAAQS, EPA expects that large 
reductions outside the urban corridor will also become increasingly 
important and in fact necessary for the nonattainment areas in the 
urban corridor to reach the NAAQS.
---------------------------------------------------------------------------

    \28\See Report of OTC Modeling Committee, ``Sensitivity of 
Regional Ozone to Reductions in NOX and VOC Emissions: Results 
of Phase III ROM Analyses'' (Section 9)(Winter 1993 Meeting).
---------------------------------------------------------------------------

    In addition to the study of these three episodes on which the OTC 
relied, EPA has reviewed additional surface and aloft wind trajectory 
information. This information was generated from ROM wind fields for 
each of the days analyzed in the four UAM modeling studies for purposes 
of attainment demonstrations currently underway for the four UAM 
modeling domains in the OTR. In all, EPA analyzed twenty-five days 
during 1987, 1988 and 1991. EPA has found that on more than 80% of 
these days surface winds\29\ are from the south to southwesterly 
direction. This surface wind orientation is consistent with a large 
cumulative impact of emissions along the northeast urban corridor. EPA 
also found that, on about 70% of the days, winds aloft\30\ originate 
from directions ranging from west-southwest through northwest. This 
wind aloft orientation is consistent with a longer range impact on the 
northeast urban corridor from sources located anywhere from the west-
southwest through the northwest of each of the OTR nonattainment areas 
in the urban corridor. This would include sources in the western and 
northwestern portions of the OTR and beyond.
---------------------------------------------------------------------------

    \29\Surface winds in a ROM analysis represent wind flow in the 
lowest 100-300 meters of the atmosphere.
    \30\Winds aloft in a ROM analysis represent an average over a 
layer from 300 meters to about 1500 meters above ground.
---------------------------------------------------------------------------

    Even though the UAM analyses for purposes of the attainment 
demonstrations are not yet complete, EPA believes certain conclusions 
can now be drawn about the outcome with respect to transport. The 
episodes selected for these UAM analyses were chosen on the basis of 
high observed ozone concentrations. In other words, the prevailing 
meteorological conditions on these days were right for ozone formation. 
These episodes correspond with wind trajectory information that 
indicates a large impact from emissions transported across the region. 
These wind trajectories will therefore also be used in the ROM analyses 
to generate the boundary conditions for feedback into the UAM analyses. 
These UAM analyses are the basis for the attainment demonstrations for 
the OTR, and they are therefore likely to indicate that regional 
controls are critical to demonstrating attainment for the four UAM 
domains.
    An additional source of specific information about transport along 
the urban corridor is the calculation of boundary conditions for 
Washington/Baltimore, Philadelphia, New York and New England for July 
7, 1988.\31\ This is the only day subject to modeling in all four UAM 
domains in the OTR. Estimates of the surface winds for this day are 
consistently from the south-southwest for all four domains. Both 
predicted and observed values for the boundary conditions for the UAM 
domains are above or approaching the level of the NAAQS (120 ppm). And 
the modeled values show a clear tendency to increase moving northeast 
along the corridor, thus supporting the conclusion that the emissions 
accumulate as they are transported up the corridor.
---------------------------------------------------------------------------

    \3\1Washington D.C. and Baltimore are combined in a single 
modeling domain.
---------------------------------------------------------------------------

    In addition, EPA has analyzed days selected for UAM modeling in any 
of the four domains for which calculated ROM surface wind trajectories 
were from the west or northwest. For most of these days, predicted and 
observed boundary conditions are on the order of 50-90 ppb with one 
exception on June 22, 1988 for New York. The data for the day with 
higher boundary conditions are presented in the following table. The 
mean values in the table represent the concentrations averaged for 
several monitors near the boundary of the modeling domain. The maximum 
(max.) values are the highest observations made in the vicinity of the 
boundary. 

 Table 1.--Observed Upwind Boundary Conditions for New York on June 22, 
                                1988.\1\                                
------------------------------------------------------------------------
                                                                Observed
                                                                 ozone, 
                         Time of day                             (ppb)  
                                                                ``Mean/ 
                                                                Max.''  
------------------------------------------------------------------------
1000-1200....................................................      79/94
1600-1800....................................................    111/142
1000-1800 average............................................   101/124 
------------------------------------------------------------------------
\1\The table is derived from information presented in Possiel, N. and R.
  Wayland, Preliminary Evaluation of ROM for Estimating UAM Boundary    
  Concentrations, (SRAB, TSD, OAQPS Internal Report)(April 1994).       

    Predicted ozone values at the western boundary of the domain for 
this day are also on the order of 100 ppb. On this day, the ROM 
trajectories indicate light surface winds prevailed. The data in the 
table support the conclusion that these high boundary conditions result 
at least in part from long range transport from the western and 
northwestern OTR. This, together with all the other information 
available, further supports the conclusion that controls in the western 
and northwestern portions of the OTR are necessary for attainment 
throughout the region.
    Finally, EPA has compiled back-trajectories calculated from ROM for 
each of the four UAM domains for all days selected for modeling. The 
results generally support the conclusion that surface winds from the 
south through west-southwest and winds aloft from the northwest to 
south-southwest transport pollutants across the OTR. This, together 
with all of the other available information, supports EPA's conclusion 
that large emission reductions in NOX in both the northeast urban 
corridor and upwind areas located to the far south-through-northwest of 
the nonattainment areas in the urban corridor are necessary, and that 
large emissions reductions in VOC at least in and near the urban 
corridor are necessary.
    In sum, EPA analyzed ozone monitoring data, wind trajectory data, 
and information derived from several analytical techniques and modeling 
studies. All of these analyses in combination lead EPA to conclude that 
large scale regional transport is a critical component of the ozone 
nonattainment problem in the OTR. It is clear that to reach attainment 
in the northeast urban corridor, the nonattainment areas themselves 
will have to implement very extensive emission control programs for 
NOX and VOC to counteract their contribution to ozone violations 
in their immediate areas and further downwind toward the northeast. 
Also, EPA believes, based on best current information, that large 
reductions in NOX emissions are necessary throughout areas located 
from the south through the west and northwest, and that large VOC 
reductions are necessary for at least the urban portions of the OTR.
    (c) Analysis of Inventory and Options for Control Measures
    Having assessed the magnitude of reductions needed throughout the 
OTR, the next step in EPA's analysis is to assess the options available 
for achieving the necessary 50% to 75% reductions in NOX across 
the OTR and in VOC for the urban parts of the OTR. In doing so, EPA 
first assessed the best available information about the inventory of 
emissions across the OTR. Then EPA proceeded to consider various 
potential control measures to reduce these emissions by the necessary 
amount. As discussed above in section IV.A.1. and in the April 26 
notice, EPA considered options that are at least potentially reasonable 
and practicable in light of the OTC LEV program. Based on this 
analysis, EPA believes that no combination of potentially reasonable 
and practicable controls on large and small stationary point sources, 
area sources, highway vehicles, offroad mobile sources, and fuels will 
be sufficient to achieve the necessary reductions without more 
stringent standards for new motor vehicles. And the only option legally 
available to the states for achieving the necessary further reductions 
from new motor vehicles is the OTC LEV program.
i. Inventory Analysis
    The table below presents OTR-wide NOX and VOC emission 
estimates for 2005. This information was derived from the 1990 interim 
regional inventory EPA is currently using in the ROM analyses discussed 
above to support UAM modeling for SIP attainment 
demonstrations.32,33 These figures reflect the net effect of 
growth and control programs projected from 1990. As discussed above in 
section IV.A.2., EPA's conclusions regarding the percent reductions in 
NOX and VOC emissions are based on modeling which used the 1985 
NAPAP emissions inventory. However, as stated above, EPA believes that 
the amount of reductions necessary from the 1990 baseline are 
comparable to, or perhaps greater than the reductions from the 1985 
inventory. This means that controls must counteract growth in emissions 
to produce a reduction from the emissions levels in 1990 of at least 
50-75%. Inventories reflecting growth and controls need to be compared 
to the approximate reduction targets to fully evaluate the need for a 
LEV program. The table below indicated that light-duty vehicles (and 
mobile sources in general) represent a substantial portion of the OTR 
inventory for both NOX and VOCs, even after accounting for 
implementation of all controls in the year 2005 explicitly required in 
the Act.
---------------------------------------------------------------------------

    \3\2,33See E.H. Pechan & Associates, Regional Interim Emission 
Inventories (1987-1991), Volume I: Development Methodologies, 
Prepared under EPA contract 68-D2-159, Work Assignment No. 13 (May 
1993).
---------------------------------------------------------------------------

    (a) NOX. 

     Table 2.--OTR-Wide Inventory Anthropogenic Estimates for 20051     
------------------------------------------------------------------------
                                                                Percent 
                  Source category                    Tons per   of total
                                                       day     inventory
------------------------------------------------------------------------
Light-Duty Mobile..................................      2034         28
Heavy-Duty Mobile (gas + diesel)...................       727         10
Offroad Emissions..................................      1430         19
Stationary Point Sources...........................      2567         35
Stationary Area Sources............................       555          8
Total Emissions....................................      7314       100 
------------------------------------------------------------------------

    (b) VOC. 

------------------------------------------------------------------------
                                                                Percent 
                  Source category                    Tons per   of total
                                                       day     inventory
------------------------------------------------------------------------
Light-Duty Mobile..................................      1481         19
Heavy-Duty Mobile (gas + diesel)...................       210          3
Offroad Emissions..................................      1266         16
Point Sources......................................      1103         14
Area Sources.......................................      3767         48
Total Emissions....................................      7827       100 
------------------------------------------------------------------------
1EPA recognizes that the precision implied by these numbers is greater  
  than justified, given the uncertainty associated with projected       
  emission estimates. However, the figures are provided in this and     
  subsequent tables displaying emissions data in order for the reader to
  understand the full derivation of percentages reflecting the relative 
  importance of various components of the inventory.                    

    EPA believes it is instructive to highlight the significance of 
emissions from highway vehicles in the inventory. As shown in Table 2, 
above, EPA expects that highway vehicles will account for approximately 
38% of the total NOX inventory and 22% of the total VOC inventory 
in 2005. Highway mobile source NOX and VOC emissions, therefore, 
constitute a major portion of the emissions in the OTR, and it is 
reasonable to conclude that a workable compliance plan for the OTR must 
include substantial controls on motor vehicles.
    Further, because the LEV program would achieve emissions reductions 
primarily from gasoline-powered vehicles, it may be useful to separate 
the projected mobile source emissions into gasoline and diesel 
components. EPA estimates that gasoline-powered light-duty vehicles 
constitutes 28% of the total NOX emissions and 19% of the total 
VOC emissions in the 2005 projected inventory.
ii. Analysis of Options for Control Measures Without More Stringent New 
Motor Vehicle Standards
    This section reviews options for control measures that could 
potentially render the OTC LEV (or LEV-equivalent) unnecessary in the 
OTR. As will be discussed, EPA has determined that such measures do not 
provide sufficient emissions reductions without LEV and that therefore 
LEV is necessary.
    In evaluating control options, EPA considered measures that it 
believes are not clearly unreasonable or impracticable (and are thus 
potentially reasonable and practicable). This does not mean that EPA 
believes that such measures are in fact reasonable and practicable. 
Rather, EPA believes that for purposes of assessing whether states 
might adopt other reasonable and practicable measures to achieve the 
needed reductions without OTC LEV, it should consider all measures that 
are not clearly unreasonable or impracticable.34-35 EPA did not 
consider measures such as mandatory plant shutdowns, gas rationing, and 
bans on ownership of high-emitting vehicles because the Agency believes 
these are clearly unreasonable or impracticable to impose in comparison 
to the OTC LEV program.
---------------------------------------------------------------------------

    \3\4-35EPA does not intend its consideration of particular 
measures here to suggest that the Agency believes such measures 
constitute reasonably available control technology (RACT) or 
reasonably available control measures (RACM) as those terms of art 
are used in the Clean Air Act.
---------------------------------------------------------------------------

    As EPA explained in its April 26 notice and in section III.A.1. 
above, the Agency believes that cost-effectiveness of control options 
is one criterion in evaluating whether they are clearly unreasonable 
and impracticable. EPA believes that it should consider additional 
factors, such as extreme economic and societal costs, disruptions, 
distributional impacts, and public acceptance, that would warrant the 
conclusion that Congress would not have had the Agency consider 
particular measures to be viable options for finding other measures 
unnecessary. See 59 FR at 21726.
    In assessing options for control measures, EPA relied, in part, on 
the same ROM modeling studies EPA used to assess the overall magnitude 
of reductions needed in the OTR. These studies are useful to check 
whether the impact of specific control strategies corresponds with 
predictions about the overall magnitude of reductions. See sections 
IV.A.2.(a) and (b), above. The first ROM study analyzed the impact of 
the control measures explicitly mandated in the Act for OTR areas. The 
second study is the 1991 ROMNET ``matrix'' study of the impact of a 
series of uniform reductions in emissions of NOX, VOC or both. As 
discussed above, EPA reached conclusions about necessary emissions 
reduction targets from these studies.
    In the analysis, EPA first quantified the impact of the measures 
required by the Act. Next, EPA evaluated an array of additional control 
options that are not clearly unreasonable or impracticable that could 
be implemented in addition to the mandatory measures. EPA then surveyed 
other potentially reasonable and practicable control measures to 
determine whether those options are sufficient to make up the shortfall 
which exists after application of the mandatory measures without the 
OTC LEV program. These other control options include the maximum 
region-wide limit on NOX emissions that is not clearly 
unreasonable or impracticable, measures EPA included in proposed 
Federal Implementation Plans for three areas in California, and 
measures listed in compilations of NOX and VOC controls prepared 
by EPA and the State and Territorial Air Pollution Program 
Administrators/Association of Local Air Pollution Control Officials 
(STAPPA/ALAPCO).
    The EPA considered both NOX and VOC control measures, but 
focused primarily on NOX controls. As discussed previously, EPA 
believes that very large reductions in NOX emissions on the order 
of 50%-75% are needed region-wide, while a similar magnitude of VOC 
reductions are necessary primarily in or near the East Coast urban 
corridor. EPA believes that there are insufficient potentially 
reasonable and practicable measures to achieve the necessary NOX 
reductions region-wide without the LEV program. This is a sufficient 
basis for approval of the OTC's recommendation and for issuing a 
finding that the SIPs are substantially inadequate to meet section 
110(a)(2)(A) without the LEV program for the entire region. EPA also 
believes that there are insufficient potentially reasonable and 
practicable measures to achieve the necessary VOC reductions in and 
near the urban areas, which constitutes an additional basis for 
approving the OTC's recommendation and for making a finding of 
substantial inadequacy with regard to interstate transport for those 
areas.

 Control Measures Explicitly Mandated Under the Act

    The Act includes a broad array of measures applicable to stationary 
as well as mobile sources. As discussed above, EPA calculated emission 
reduction estimates from these controls and input them into ROM to 
study the impacts for particular meteorological episodes.36 The 
modeling incorporated the following measures that, for technical 
reasons, may differ slightly from those mandated in the Act.
---------------------------------------------------------------------------

    \3\6EPA used an 80% Rule Effectiveness value in calculating the 
overall effectiveness of control measures. Rule effectiveness was 
applied to all controls that were not an irreversible process change 
(for which 100% effectiveness was assumed). Thus, for the controls 
that consider Rule Effectiveness the emission reduction due to a 
particular control device was calculated as the product of the 
control efficiency and the Rule Effectiveness value. For example, a 
device that controls at a level of 75% would produce an emissions 
reduction of only 60% (i.e. 0.75  x  0.80). Rule effectiveness is 
explained in detail in this section, below.
---------------------------------------------------------------------------

    1. Reasonably available control technology (RACT) on ``major'' 
point sources of NOX and VOC;
    2. Federal emissions standards in place for off-highway vehicles;
    3. Federal reformulated gasoline requirements in all OTR 
nonattainment areas (including Phase II standards);
    4. Enhanced Inspection/Maintenance (I/M) programs for all 
metropolitan areas with populations above 100,000;
    5. Emissions cap on large point sources (above 100 tons per 
year37) after 1996 to reflect offset requirements for new and 
modified major sources (i.e., equivalent to new source review 
requirements and 1:1 offsets);
---------------------------------------------------------------------------

    \3\7The model assumed the 100 tons per year cutoff for reasons 
related to the construction of the air quality model. EPA recognizes 
that smaller sources are also subject to new source review 
requirements. These are treated in the model as stationary area 
sources. The model cannot readily separate those individual smaller 
sources subject to new source review from other smaller sources.
---------------------------------------------------------------------------

    6. Emissions cap on area sources in each nonattainment area 
beginning on the attainment deadlines for those areas to reflect 
maintenance requirements;
    7. ``Stage II'' vapor recovery controls on gasoline pumps in all 
metropolitan areas with populations above 100,000;
    8. Application of RACT controls specified in EPA's Control 
Technique Guidelines (CTG's) for eleven source categories;38
---------------------------------------------------------------------------

    \3\8These CTG's include reductions from area sources as well as 
point sources, and therefore go beyond the RACT controls identified 
in 1.
---------------------------------------------------------------------------

    9. Federal controls on emissions from commercial solvents, marine 
vessel loading, municipal landfills and hazardous waste treatment, 
storage, and disposal facilities (TSDF's);39
---------------------------------------------------------------------------

    \3\9One commenter asked that EPA, in assessing the need for the 
OTC LEV program, consider the potential for emissions reductions 
from landfills. EPA has proposed a new source performance standard 
(NSPS) for landfills and proposed guidelines for existing landfill 
sources. See 56 FR 24468 (May 30, 1991). EPA expects to take final 
action on the NSPS and the guidance by December 1994. EPA has taken 
the resulting emissions reductions into account among the Clean Air 
Act mandatory measures.
---------------------------------------------------------------------------

    10. Federal ``Tier I'' tailpipe emission standards for new 
vehicles;
    11. Federal evaporative emissions controls for new vehicles;
    12. Federal ``Phase 2'' controls on gasoline volatility;
    13. Federal Maximum Available Control Technology (MACT) controls 
for hazardous air pollutants (which include VOCs) for approximately 
forty source categories;
    14. Federal controls on NOX emissions from coal-fired utility 
boilers under the Acid Rain program.
    EPA calculated that application of these controls mandated in the 
Act would achieve emissions reductions by 2005 in the OTR of 20% for 
NOX and 37% for VOC from the 1990 baseline. As discussed above in 
sections IV.A.2.(a) and (b), EPA believes this level of reductions will 
not be sufficient to attain the ozone NAAQS throughout the OTR. 
Confirming this conclusion, ROM studies of four episodes applying these 
measures in 2005 for all days being modeled in the four UAM domains in 
the OTR yield predictions of ozone levels above the 120 ppb NAAQS in 
five OTR subregions. These subregions include the UAM domains for 
Baltimore/Washington, Philadelphia, New York City and New England, and 
west/central Pennsylvania. Further, the model predicts ozone levels 
would exceed 160 ppb in at least one subregion for each of the 
episodes.

 Region-wide 0.15 NOX Standard

    Beyond the measures explicitly mandated in the Act, the OTC also 
asked EPA to analyze the impact of an additional region-wide limit on 
NOX emissions of 0.15 lbs/MMBtu (the ``0.15 NOX standard'') 
for boilers, gas turbines, and internal combustion engines with a 
capacity of at least 250 MMBtu/hr. EPA evaluated the 0.15 NOX 
standard to represent the maximum emissions reduction from large 
stationary sources from measures that are not clearly unreasonable or 
impracticable. EPA developed emissions estimates associated with this 
additional control and modeled the impact on regional NOX 
emissions. EPA's modeling conclusion is that a 0.15 NOX standard 
would achieve a 15% reduction in inventory-wide NOX emissions from 
a 2005 projected baseline, after application of other controls mandated 
in the Act.40 Together with the mandatory measures, this 
additional measure would therefore achieve a total NOX emissions 
reduction in the OTR of 32% from 1990 baseline levels. Thus, even a 
strategy including the additional 0.15 NOX standard region-wide in 
addition to all mandated Clean Air Act measures would achieve only 32% 
reductions in NOX and 37% reductions in VOC from 1990 baseline 
levels.
---------------------------------------------------------------------------

    \4\0EPA notes that these percentage reductions are from a 2005 
projected baseline. EPA's conclusion that a 50%-75% reduction in 
emissions is from a 1990 inventory baseline. It is important to bear 
in mind throughout this analysis that the 1990 baseline inventory is 
substantially larger than the projected 2005 baseline, which 
presumes application of mandatory Clean Air Act controls. Therefore, 
percentage reductions that particular measures achieve from the 2005 
are larger than the percentage reductions those same measures would 
achieve if calculated from the 1990 baseline.
---------------------------------------------------------------------------

    After application of the mandated Clean Air Act measures together 
with the O.15 NOX standard, highway vehicle emissions still 
represent a substantial component of the emissions inventory. Table 3, 
below, reflects these calculations. 

  Table 3.--Total and Mobile 2005 Emissions in the OTR Corresponding to 
    Mandatory Measures Plus Additional Controls on Large NOX Sources    
------------------------------------------------------------------------
                                                        NOX,      VOC,  
                      Emissions                       tons per  tons per
                                                         day       day  
------------------------------------------------------------------------
Total Emissions in the OTR..........................      6181      7827
Highway Vehicle Emissions in the OTR................      2759      1858
Percent of Total Emissions Attributable to Highway                      
 Vehicles...........................................       45%       24%
------------------------------------------------------------------------

 STAPPA/ALAPCO Compilations of VOC and NOX Control 
Measures

    EPA, together with STAPPA/ALAPCO, prepared two important 
compilations of potential measures available to states in the OTR to 
address ozone air quality problems.41 The STAPPA/ALAPCO 
compilations provide fairly comprehensive lists of VOC and NOX 
control measures that augment traditional controls. The VOC document 
includes programs to obtain reductions from degreasers, vehicle 
refueling (Stage II vapor recovery), aerospace manufacturing and 
rework, bakeries, offset lithography, wood furniture coatings, and 
automobile assembly, among others. EPA has, however, already included 
most of the VOC measures from the STAPPA/ALAPCO compilation in the 
analysis of Clean Air Act mandated measures, described above, while 
others affect only a small portion of the VOC inventory.
---------------------------------------------------------------------------

    \4\1See Meeting the 15-Percent Rate-of-Progress Requirement 
Under the Clean Air Act: A Menu of Options, STAPPA/ALAPCO (Sept. 
1993); Controlling Nitrogen Oxides Under the Clean Air Act: A Menu 
of Options, STAPPA/ALAPCO (July 1994).
---------------------------------------------------------------------------

    The STAPPA/ALAPCO compilation of NOX control measures 
identifies seventeen NOX source categories. Most of the source 
categories listed are included in the 0.15 lbs/MMBtu NOX standard 
that EPA considered. The only source categories included in the 
compilation, but not in the 0.15 standard, are NOX emissions from 
open burning and residential space and water heaters. However, 
emissions from these source categories identified in the document are 
extremely small compared to other source categories.
    With the exception of coal-fired boilers, the STAPPA/ALAPCO 
document recommends emission levels more stringent than the 0.15 
NOX standard that EPA modeled through application of beyond-RACT 
measures. Emissions from coal-fired boilers dominate the stationary 
source emission inventory. That is, the additional NOX reductions 
from those other source categories are a relatively small portion of 
the emission inventory compared to the contribution from coal-fired 
boilers (and an even smaller portion of the overall 35% stationary 
source contribution to the total inventory).

 Transportation Control Measures

    EPA also considered transportation control measures (TCMs) as 
potentially reasonable and practicable measures available for the OTR. 
There are a wide range of TCMs that have been proposed, but EPA 
believes that many of them, such as gasoline rationing, are 
unreasonable and impracticable here. Two options that EPA considers 
potentially reasonable and practicable are the extension of the 
Employee Commute Option (ECO) program region-wide and implementation of 
a comprehensive system of congestion pricing, employee parking pricing, 
and emissions-based registration fees.
    Section 182(d)(1)(B) of the Act mandates that the severe areas in 
the OTR adopt employee trip reduction programs (also known as ECO 
programs). Under these programs, each employer with more than one 
hundred employees must offer incentives and encouragement for employees 
to travel to work by means other than single-occupant vehicles. The 
eventual goal of the program is to achieve a 25% increase in vehicle 
occupancy for morning commuting trips. This is equivalent to one out of 
five employees using a mode of commuting, other than driving. EPA's 
best case estimate of the benefits of extending the ECO program region-
wide is a three percent reduction in vehicle miles travelled (VMT) in 
the OTR. This reduction in VMT would correspond to approximately a two 
percent reduction in NOX and VOC emissions from light-duty 
vehicles in the OTR, and to a 0.6% reduction in overall NOX 
emissions and a 0.4% reduction in overall VOC emissions from the 2005 
baseline. The incremental amount of reductions is limited because the 
program would only affect the limited number of large employers outside 
the severe areas and because commuting trips are only a fraction of 
overall trips and VMT.
    A second TCM option is a comprehensive system of fees and 
incentives designed to affect driving habits and vehicle usage. These 
controls, including congestion pricing, employee parking pricing, and 
emissions-based registration fees, are described in the Cameron 
Report.42 These measures could possibly achieve a 12% reduction in 
car and light-truck VMT in the OTR. This would correspond to a 12% 
reduction in NOX and VOC emissions from light-duty vehicles, a 2% 
reduction in overall VOC emissions and a 3% reduction in overall 
NOX emissions from the 2005 baseline.
---------------------------------------------------------------------------

    \4\2See ``Transportation Efficiency: Tackling Southern 
California's Air Pollution and Congestion'', Michael Cameron, EDF 
and Regional Institute of Southern California (March 1991).
---------------------------------------------------------------------------

 California Reformulated Gasoline

    The use of California reformulated gasoline in the OTR is another 
option that has been mentioned. This program would generate limited 
additional emissions reductions in the OTR. California reformulated 
gasoline achieves greater emissions reductions than Federal 
reformulated gasoline, due to the different specifications for the 
California fuel, such as a lower Reid Vapor Pressure (RVP). EPA 
estimates that the implementation of California reformulated gasoline 
in the OTR could provide an approximate six to seven percent reduction 
in NOX and VOC emissions from gasoline vehicles. This corresponds 
to reductions from the overall 2005 baseline of 1.7% for NOX and 
1.5% for VOC. This issue was addressed in a study done for the State of 
Maryland43 and a study prepared for the group of northeast 
states.44 Both of these studies corroborate EPA's conclusion that 
California reformulated gasoline would achieve limited reductions in 
the OTR.
---------------------------------------------------------------------------

    \4\3See Ellis, H., ``An Analysis of Ozone Control Strategies for 
Maryland,'' Johns Hopkins University (Jan. 17, 1994).
    \4\4See Screening Study of Mobile-Source Strategies for the 
Northeast,'' Acurex Environmental Corporation (Oct. 1992).
---------------------------------------------------------------------------

 California Federal Implementation Plans Measures

    EPA also considered additional emission reduction measures that the 
Agency has included in a proposed Federal Implementation Plan (FIP) for 
the Ventura, Sacramento, and South Coast areas of California. See 59 FR 
23263 (May 5, 1994). As the following discussion indicates, the 
measures proposed for consideration in these FIPs which are not 
unreasonable or impracticable and which could be implemented by the 
states in the OTR, have largely been considered as part of other 
strategies discussed above. Those that remain would not generate a 
substantial reduction in emissions from the overall inventory.45
---------------------------------------------------------------------------

    \4\5As the FIP proposal contains too many provisions to list 
exhaustively, the following discussion focuses on examples to 
illustrate EPA's approach.
---------------------------------------------------------------------------

Context Surrounding FIP Measures

    The court-ordered obligation that EPA produce FIPs for three 
regions of California has placed EPA in an unusual position. The Clean 
Air Act places primary responsibility for clean air planning at the 
regional, state and local levels. This is appropriate because state and 
local officials have the specific knowledge, flexibility, and 
sensitivity to tailor clean air plans to the particular needs of their 
communities. Throughout the FIP development process, EPA has 
acknowledged that the measures at its disposal include blunt 
instruments that have the potential for significant social and economic 
impact. Also, the time constraints imposed by the court order and the 
functional limits on EPA's ability to fashion measures which meet the 
specific needs of localities have forced the Agency to propose a number 
of measures that would not be appropriate for implementation in the 
OTR.
    The pollution problems experienced in California are of a magnitude 
far greater than those experienced anywhere else in the nation. 
Moreover, the OTC, with its recommendation here, seeks to benefit from 
the leadership California has demonstrated in setting strict pollution 
standards for new vehicles. The measures proposed in the FIP generally 
supplement measures California has already adopted. The LEV program is 
a critical aspect of California's attainment strategy and the FIP. When 
considering whether FIP measures may constitute part of a set of 
measures sufficient to achieve the necessary reductions in the OTR 
without the LEV (or LEV-equivalent) program, it is essential to stress 
that EPA proposed these measures for California in addition to the LEV 
program that California had already adopted in 1990. If the LEV program 
had not already been adopted, EPA would have had to propose a measure 
very much like it for the FIP, due to the substantial and relatively 
cost-effective benefits that the program will provide in California.

Description of FIP Measures

    For the purposes of this discussion, EPA has grouped proposed FIP 
measures into four broad categories: (1) FIP measures that are not 
practicable in the OTR because they depend on federal authority to be 
implemented or are predicated on special regulatory authority Congress 
has conferred only upon California; (2) FIP measures that are clearly 
unreasonable and impracticable in the OTR because they are predicated 
upon industrial or geographic circumstances that are particular to 
California; (3) FIP measures that are unreasonable and impracticable in 
the OTR relative to LEV implementation because they are too costly or 
speculative; and (4) FIP measures which are not clearly unreasonable or 
impracticable for implementation in the OTR.
    (1) Measures excluded because they depend on unique authority.
    a. Federal Authority--EPA proposed two different types of FIP 
measures relying on EPA's unique federal authority. Most were measures 
that would apply nationally, such as recreational marine vessel 
controls, and thus would apply in the OTR, as well. Additionally, EPA 
proposed some parts of the FIP solely under authority accorded to the 
Agency under the FIP provisions in section 110(c). These parts of the 
FIP regulated source categories including new locomotives and farm and 
construction equipment under 175 hp. See section 209(e)(1). These 
proposed FIPs would rely on section 110(c) to impose requirements for 
these sources that are more stringent than EPA has proposed for the 
nation as a whole. All states, including California, are preempted from 
regulating this category of sources. Therefore, no state in the OTR has 
the option of adopting these controls.
    b. State Authority--California has authority under section 209 of 
the Act to address pollution from on-highway and nonroad engines 
(except certain categories of nonroad engines noted above), which other 
states do not have. In the FIP proposal, EPA stepped into the shoes of 
California and proposed several measures under California's section 209 
authority for California only. Generally, these measures are tight new 
emission standards for new on-highway and nonroad equipment. EPA also 
proposed certain measures to improve durability of on-highway and 
nonroad equipment to better control emissions in-use. EPA again 
proposed these programs under California's special authority that other 
states do not have. Because states are preempted from adopting such 
regulations in the absence of California regulations actually adopted 
under California's Clean Air Act authority, states in the OTR do not 
now have the option of adopting any of these controls.
    (2) FIP measures that are impracticable in the OTR because they are 
predicated upon industrial or geographic circumstances that are 
particular to California.
    EPA proposed several programs for the FIP that deal with 
circumstances unique to California's industrial and geographic 
circumstances and are therefore inappropriate for the OTR. For example, 
due to the fire hazards inherent in an arid region, California fire 
departments burn vegetation periodically to lower the risk of a wild 
fire. EPA proposed that these burns only occur on certain days so that 
the pollution from the fire does not add to ozone exceedances. Since 
such burns do not occur in the OTR, such requirements would not make 
sense there. The rules regarding outer continental shelf oil 
exploration are another example of rules which may make sense in 
California but not in the OTR.
    (3) FIP measures that are unreasonable or impracticable in the OTR 
because they are too costly or disruptive.
    The FIP contains ``cap'' rules for stationary sources which impose 
an annual rate of reduction on affected sources for as many 
controllable VOC and NOX categories as possible. The emission 
reduction targets are derived from the overall shortfall in the FIP 
area rather than any consideration of available emission control 
technologies. EPA's proposal anticipates that the state and local 
agencies can over time develop carefully tailored economic incentive 
programs or traditional rules based upon the most recent technologies 
and regulatory approaches. But the cap rules themselves are not 
examples of specific regulatory approaches to be adopted at the state 
or local level. These are therefore blunt instruments without specific 
and identifiable emissions control mechanisms in mind. As such, they 
may be costly to achieve and EPA cannot now conclude that they are 
based on technologies that are potentially practicable.
    Beginning in 2004, the FIP also proposes to discourage the use of 
older high polluting recreational boat engines through the imposition 
of a user fee and permit system. EPA believes that measures which 
restrict individual behavior or prevent citizens from benefitting from 
investments made in property are particularly difficult to implement. 
EPA does not believe it is reasonable to adopt such measures before 
implementation of the LEV standards.
    (4) Proposed FIP measures which are not clearly unreasonable and 
impracticable.
    Many of the proposed FIP measures are based on national, state and 
local initiatives that EPA does not believe it should dismiss as 
clearly unreasonable or impracticable. Nationally, there are a variety 
of standards for stationary and mobile sources. California initiatives 
include the LEV program itself, as well as other measures applicable to 
consumer products. The FIP proposal also takes into account local 
efforts in the affected California areas to reduce NOX from 
stationary and mobile sources.
    EPA is in the process of developing many national rules that it 
took into account in the FIP proposal and that it therefore expects to 
apply in the OTR. For example, apart from the FIP proposal, EPA is 
developing by November 1995, nation-wide emission standards for new 
marine engines. EPA is also developing standards for locomotives and 
small nonroad engines under 25 hp. California has also developed rules 
to reduce VOC emissions from paints and other consumer products and EPA 
is developing similar controls on the VOC content of consumer and 
commercial solvents and architectural coatings. EPA has already 
accounted for the benefits of all of these measures for the OTR above, 
in its modeling of the impact of the mandatory Clean Air Act measures.
    Local areas in California, especially the South Coast Air Quality 
Management District (South Coast), have been especially innovative in 
developing emissions reduction programs. There are two programs that 
EPA took into account in its FIP proposal which merit special comment 
here. First, the South Coast developed an ECO program to reduce the 
number of vehicle miles travelled to and from major employers. As 
discussed above, the Clean Air Act now requires many nonattainment 
areas to implement ECO programs. EPA proposed in the FIP to expand 
coverage to Sacramento. As discussed above, the ECO programs already 
required for certain areas in the OTR could be expanded region-wide, or 
applied to smaller employers than currently mandated. However, as noted 
above, the incremental benefits from these programs appear to be 
relatively small.
    The South Coast has also developed a new program that EPA took into 
account in its FIP proposal, known as the Regional Clean Air Incentives 
Market (RECLAIM), to establish a declining cap on NOX emissions 
from stationary sources. Unlike the South Coast, however, large 
stationary NOX sources in the OTR are dominated by coal-fired 
utilities. In place of a declining NOX cap program, the OTR states 
are developing a plan to impose a stringent NOX standard for 
utilities. This is part of the 0.15 lbs/MMBtu NOX standard , 
discussed above. This standard is substantially more stringent than 
many in the OTR believe to be reasonable, but EPA has nonetheless 
modeled the impacts of such a strategy in its analysis here.

 Consideration of Rule Effectiveness

    In evaluating the emissions reductions attributable to particular 
control measures, it is important to consider the effectiveness of the 
rules. If all sources fully comply with the rules at all times, and if 
there were never problems with control equipment, then the emission 
reductions associated with control measures could be calculated and 
summed to reflect the anticipated reductions as a result of applying 
specific regulations. However, past history has shown that rules are 
not consistently applied or enforced, control equipment malfunctions, 
and operating and maintenance problems occur, all contributing to air 
emissions. These emissions are accounted for through the application of 
rule effectiveness (RE) guidelines. This is a means of identifying and 
estimating the increased emissions failures and uncertainties in 
emission control programs.
    Rule effectiveness is a measure of the extent to which a rule 
actually achieves its desired emission reductions. It accounts for a 
variety of factors that influence the efficacy of emission control 
programs, including: the nature of the regulation or control (e.g., 
complexity of record-keeping or test methods); nature of control 
techniques (e.g., potential for fugitive emissions); performance of 
sources in complying with the regulation (e.g., schedule of maintenance 
and inspection of control equipment); and performance of those 
enforcing the regulation (e.g., inspector training).
    EPA accounts for RE for mobile source controls that affect the 
mobile emissions factors internally in the MOBILE model. For stationary 
sources, however, the emissions inventory must account for RE to yield 
more reliable estimates of the actual emissions reductions that SIP 
rules will achieve. In general, EPA specifies an 80 percent default RE 
value in the absence of a local category-specific RE value. In essence, 
this assumes that the ability to use control devices or regulations to 
achieve emission reductions is only 80 percent effective. Without 
application of RE to the emissions inventory, the emissions reductions 
estimated to occur as a result of control measures would be overly 
optimistic. Although EPA's analysis of measures mandated in the Act 
accounts for RE, the emissions reductions assumed for the other 
measures may not have accounted for REs and must therefore be 
considered overly optimistic.

 Conclusions

    As described above, EPA believes reductions in the range of 50% to 
75% from 1990 baseline NOX and VOC emissions levels will be needed 
to enable all of the serious and severe nonattainment areas in the OTR 
to attain the ozone standard. The NOX reductions are needed 
throughout the OTR and the VOC reductions are needed at least in and 
near the urban portions of the OTR. EPA recognizes that there are 
uncertainties in its modeling analysis used to reach this conclusion. 
For the reasons described earlier in this notice, EPA believes it would 
be appropriate generally to resolve uncertainties in its factual 
analysis in favor of the most environmentally conservative course. EPA 
requests comment on whether, for purposes of its analysis of 
alternative control measures, EPA should conclude that the middle of 
this range, or at least a 65% reduction from baseline NOX 
emissions, will be necessary throughout the OTR. Here, as described 
below, EPA believes that focus on the low end of the range would not 
change its conclusion. In addition to uncertainties in the atmospheric 
models, uncertainties also exist in the base year emissions 
inventories, the projected emissions that account for growth in the 
future, the amount of emission reductions estimated to result from 
implementation of the control measures (including consideration of rule 
effectiveness), and the modeled ozone concentrations resulting from the 
emissions. Additionally, EPA believes that it should err on the side of 
environmental protection in addressing these uncertainties.
    As described above, a strategy consisting of all of the mandatory 
Clean Air Act measures and the 0.15 NOX standard for large 
boilers, gas turbines, and internal combustion engines would achieve 
approximately a 32% reduction in NOX from 1990 baseline levels. 
Most of the source categories listed in the STAPPA/ALAPCO compilation 
of NOX control measures are already included in the 0.15 NOX 
standard, and the NOX emissions from the few remaining categories 
of small stationary and area sources comprise an extremely small 
portion of the stationary source segment of the emissions inventory, 
and a proportionally smaller portion of the overall inventory. Hence, 
it is likely that those additional measures would achieve no more than 
a small percentage reduction in the overall NOX inventory.
    In addition, the transportation control measures that EPA would not 
consider clearly impracticable or unreasonable (including expanded 
geographic coverage of ECO programs and implementation of a 
comprehensive system of congestion pricing, employee parking pricing, 
and emissions-based registration fees, and the versions of those 
measures included in EPA's FIP proposal), would yield a combined 
reduction of 2.5% from 1990 baseline inventory-wide NOX 
reductions. Beyond that, implementation of California reformulated 
gasoline requirements in the OTR would achieve approximately a 1.4% 
reduction in NOX emissions from 1990 baseline inventory-wide 
levels.
    It is apparent that the combined NOX reduction of the entire 
set of these measures would be significantly short of the 65% NOX 
reduction EPA believes is needed throughout the OTR for attainment in 
the serious and severe nonattainment areas of the region. As a result, 
those areas will not be able to attain the standard through application 
of all of the potentially practicable measures, without NOX 
reductions from more stringent emissions standards for new vehicles 
region-wide.
    After evaluating the control measures discussed above, EPA 
concludes that the emissions reductions resulting from application of 
potentially reasonable and practicable control measures will not be 
sufficient to achieve attainment throughout the OTR without more 
stringent new vehicle emission standards.
    Mobile source emissions comprise a significant part of the 2005 
NOX and VOC emissions inventories. Indeed, EPA believes that, 
apart from its analysis of each potentially reasonable control option 
independently, the reasonableness and practicability of adopting all 
these controls measures without adopting more stringent standards for 
new motor vehicles is questionable. And for NOx, while additional 
emissions reductions from other source categories will be important to 
meet the attainment goal, EPA believes the measures will be needed in 
addition to, rather than in place of, more stringent controls for new 
motor vehicles throughout the OTR. Although EPA has not quantified all 
of the VOC reduction measures described above, EPA believes the 
conclusion also applies for VOC, at least in and near the urban 
portions of the OTR.
    iii. Determination Whether Reductions from OTC LEV (or LEV-
Equivalent) Approach to New Motor Vehicles Are Necessary.
    EPA believes that the foregoing information supports the conclusion 
that sufficient options to make up the shortfall in emissions 
reductions necessary for attainment in the OTR are not available from 
sources other than new motor vehicles, and that additional reductions 
in NOX and VOC emissions from new motor vehicles are therefore 
necessary. EPA believes that the OTC LEV program would achieve 
reductions beyond the mandated Clean Air Act measures by 2005 of 4% for 
NOX and 2% for VOC from the 2005 baseline. This information is 
presented in Table 4, below.46
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    \4\6EPA's analysis presumes that the only difference in 
emissions between OTC LEV vehicles and federal vehicles is tailpipe 
emissions. 

 Table 4.--Reduction in 2005 Baseline VOC and NOX Emissions Attributable
                            To a LEV Program                            
------------------------------------------------------------------------
                                                       NOX        VOC   
                                                     changes    changes 
               Emissions component                  (percent)  (percent)
                                                                        
------------------------------------------------------------------------
Total highway emissions...........................        -10         -9
Total OTR emissions...............................         -4        -2 
------------------------------------------------------------------------

    These calculations are based on the incremental effect of the LEV 
program beginning in 1999 throughout the OTR over the reductions that 
will take place in New York and Massachusetts as a result of their 
existing LEV programs beginning in 1996. Due to the phase-in schedule 
for the LEV program and the time required for fleet turnover, the 
maximum benefit for LEV would not be realized until 2028. Therefore, 
EPA expects that emissions reductions attributable to an OTC LEV 
program would continue to grow after 2005.
    Under the OTC LEV program, some increases in emissions would be 
associated with the permanent migration of non-LEVs into the OTR, and 
with temporary visits by non-LEV vehicles from other states. The amount 
of excess emissions associated with migrating and visiting vehicles is 
dependent on two factors: (1) the difference in emissions per car 
between the cars entering the OTR and the ``native'' fleet within the 
OTR; and (2) the number and age-mix of the cars entering the OTR from 
outside. Both questions are difficult to answer and will have different 
answers for permanent migration and temporary visitation. The numbers 
in this Table 4 do not include these effects because EPA is still 
analyzing this issue and has not yet quantified these effects.When this 
analysis is ready, EPA will put it in the docket and publish a notice 
of data availability in the Federal Register.
    As described above, EPA does not believe other practicable options 
are available to make up the shortfall to achieve the reductions 
necessary in the OTR for attainment. Therefore, EPA believes that a 
program available to achieve more reductions from new motor vehicles is 
necessary.
    Legal limitations make the LEV program the only option available to 
the states to achieve what are necessary additional reductions from new 
motor vehicles. Section 209 of the Act prohibits states from adopting 
or attempting to enforce any standard relating to the control of 
emissions from new motor vehicles or engines, except for California if 
a waiver is granted. This is subject to a limited exception provided in 
section 177 for states that have SIP provisions approved under part D 
of the Act to adopt and enforce emissions standards for new motor 
vehicles and engines if: (1) Such standards are identical to the 
California standards for which a waiver has been granted; and (2) 
California and the state adopt the standards at least two years before 
the beginning of the model year in which the standards are to apply. 
EPA has granted a waiver for the California LEV standards, and the 
states can therefore adopt them.47,48 At the same time, section 
202(b)(1)(C) explicitly prohibits EPA from changing the current ``Tier 
1'' emissions standards for new motor vehicles in sections 
202(a)(3)(B)(ii), (g), (h), and (i) before model year 2004.
---------------------------------------------------------------------------

    \4\7,48See Waiver of Federal Preemption: California Low Emission 
Vehicle Standards (Jan. 8, 1993).
---------------------------------------------------------------------------

    Therefore, no options other than the LEV program are currently 
available to achieve the necessary additional reductions from new motor 
vehicles and engines. As explained in section V of this notice, EPA is 
proposing to allow for the possibility that an alternative federal 
program achieving comparable emissions reductions to the OTC LEV 
program may be developed. But the possibility that such an alternative 
program can be developed in the future does not contradict the 
conclusion that the only option currently available to the states to 
achieve the required reductions in new motor vehicle emissions (the LEV 
program) is necessary.
    EPA believes that the OTC LEV program would be reasonable and 
practicable in the OTR. EPA granted California a waiver for its LEV 
program on January 8, 1993 based on the finding required under section 
209(b) of the Act.\49\ In addition, when the California Air Resources 
Board (CARB or the Board) initially approved its LEV regulations in 
1990, it directed CARB to report biennially to the Board on the status 
of implementation of the regulations. The staff provided the Board with 
the first such report at a June 11, 1992 public meeting. At the time 
the Board found that the low-emission vehicle standards continued to be 
technologically feasible within the required time frames, and 
accordingly no changes to the standards or phase-in schedule were 
needed.\50\
---------------------------------------------------------------------------

    \49\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).
    \50\See letter from Executive Officer James Boyd to EPA 
Administrator Carol Browner (July 21, 1994). The Board and staff did 
recognize that a variety of amendments would be appropriate to 
augment the LEV regulations, make them clearer, and facilitate their 
implementation. This recognition led to the adoption of several LEV 
``follow-up'' amendments, which were formally adopted by the Board. 
On September 22, 1993, CARB sent a letter requesting that EPA 
confirm the Board's determination that these amendments fall within 
the scope of the January 8, 1993 waiver for the California LEV 
Program. EPA has not yet acted on this request.
---------------------------------------------------------------------------

    CARB held its second LEV ``status'' hearing May 12 and 13, 1994, at 
which the Chairwoman stated in her closing statement that CARB had 
``had a successful launch of the Low Emission Vehicle program.''\51\ 
The CARB Staff Report that preceded the May meeting stated that many of 
the technologies that will be required for LEV ``are already in 
production in some vehicle models, and the remaining technologies are 
now developed to near commercial levels of readiness.''\52\ In fact, 
CARB has to date certified several categories of LEVs, including TLEVs 
(produced and sold), light-duty and medium-duty ULEVs (natural gas), 
and ZEVs.
---------------------------------------------------------------------------

    \51\See Closing Statement by CARB Chairwoman Jacqueline Schafer 
at Public Meeting to Review Low-Emission Vehicle Standards at 1 (May 
13, 1994).
    \52\See CARB Staff Report: 1994 Low-Emission Vehicle and Zero-
Emission Vehicle Program Review, at 17 (April 1994).
---------------------------------------------------------------------------

    Furthermore, two states, New York and Massachusetts, believed the 
California LEV program to be reasonable and practicable enough to adopt 
the LEV program in legislation and regulations without contingencies. 
Both states are set to implement their programs. 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.
    Finally, the legislative history of section 177 reinforces the idea 
that states which adopt California standards do not create any undue 
burden for the auto manufacturers. The House Report noted:

    This new state authority [to promulgate standards under section 
177] should not place an undue burden on vehicle manufacturers who 
will be required in any event, to produce vehicles meeting the 
California standards for sale in California.

H.R. Rep. No. 294, 95th Cong., 1st Sess. at 31.

    EPA requests comment on whether it should require the OTR states to 
achieve the additional emissions reductions associated with the ZEV 
sales requirement from new motor vehicles if the Agency does not 
require that the OTR states adopt the ZEV sales requirement. In an 
August 4, 1994 letter, Arthur A. Davis, Chair of the OTC,\53\ stated 
that, in the OTC's February 10 recommendation it indicated that one of 
the criteria for OTC LEV alternatives that EPA might consider was 
emission reduction equivalency. The letter went on to explain the 
principle of equivalency for purposes of discussing different options 
with the auto manufacturers:
---------------------------------------------------------------------------

    \53\See letter from Author A. Davis, OTC Chair, to Mary D. 
Nichols, Assistant Administrator, Office of Air and Radiation, U.S. 
EPA (Aug. 4, 1994).
---------------------------------------------------------------------------

    To determine emission reduction equivalency, alternatives must be 
compared to the emission reduction potential of the OTC LEV 
recommendation with respect to the primary ozone precursors. This means 
that the OTC will assess non-methane organic gases (NMOG) exhaust 
emissions, NMOG evaporative emissions, and exhaust emissions of 
nitrogen oxides (NOX) of significant alternatives with the 
emissions of the same pollutants under the OTC LEV recommendation with 
the full benefits available from the ZEV component.
    This statement might be understood to indicate that the OTC expects 
its recommended program to achieve the full benefits of the ZEV sales 
requirement even if EPA does not mandate the ZEV sales requirement.\54\
---------------------------------------------------------------------------

    \54\As indicated, the OTC plainly recommended that vehicle 
manufacturers comply with the NMOG tailpipe limit regardless of 
EPA's determination regarding the ZEV sales mandate. The issue 
raised here pertains solely to the additional evaporative NMOG and 
NOX benefits provided by ZEV's.
---------------------------------------------------------------------------

    In addition, several commenters believe that the OTC's petition 
included a recommendation that EPA require states to adopt programs 
requiring that the automobile manufacturers obtain the full emissions 
benefits of the ZEV sales requirement. One commenter suggested that EPA 
require that states' programs compel the automobile manufacturers 
either to sell ZEV's or achieve equivalent reductions from the new 
vehicle sector, including tailpipe and evaporative NMOG, NOX, CO, 
toxics, and carbon dioxide. EPA believes that consideration of CO, 
toxics and carbon dioxide benefits are beyond the scope of the Agency's 
authority under Section 184 which pertains solely to ozone pollution 
and its precursors.
    In order for auto manufacturers to achieve the additional 
evaporative NMOG and NOX emissions benefits of the ZEV sales 
requirement without selling ZEV's, they would have to provide a mix of 
vehicles subject to requirements in addition to the NMOG fleet average 
achievement. Under the ZEV equivalency approach, states could provide 
the auto manufacturers the option of either complying with the ZEV 
sales requirement or selling a mix of other vehicles, which could 
include some ZEVs, that satisfies both the NMOG requirements and also 
achieves the additional benefits equivalent to those that would result 
from meeting the full ZEV sales requirement. This approach raises a 
number of questions on which EPA is soliciting comment: (1) What 
emission reductions are attributable to the ZEV sales mandate that 
would not be realized if only the NMOG fleet average part of the 
program were adopted? (2) How would auto manufacturers demonstrate that 
their mix of vehicles achieved the same total emissions reductions as 
the NMOG average plus the ZEV sales mandate? (3) Would such a 
demonstration require EPA or the states to set a new emission standard 
or a sales mandate for non-ZEV vehicles?
    EPA requests comment on a number of other issues pertaining to such 
a ``ZEV equivalency'' requirement, and whether the Agency should 
include such a requirement in the final rule. First, EPA requests 
comment on whether the OTC's recommendation can be interpreted to 
include a requirement that the states' programs achieve the benefits of 
the ZEV sales requirement in addition to the remainder of the 
recommended LEV program from the new vehicle sector. EPA also requests 
comment on whether the August 4 letter from the Chair of the OTC 
supports this interpretation, and the extent to which EPA may rely on 
such a letter to determine the intent of the OTC's February 10 
recommendation.
    Finally, EPA notes that commenters suggesting this approach have 
not provided a specific explanation of how the states may adopt it 
consistent with sections 209 and 177 of the Act. EPA welcomes comments 
from the public on these legal issues.
    (d) Particular circumstances of OTC LEV program.
    EPA believes that its analysis of the contribution from one area to 
another in the OTR should be understood in the specific context of the 
OTC LEV program in question here. EPA believes that several aspects of 
this particular program further support EPA's conclusion that it is 
necessary to adopt this program region-wide to counteract ozone 
transport. Many parties have commented that the OTC LEV program should 
apply on a region-wide basis in order to attain the greatest amount of 
emissions reductions and facilitate operation of the LEV program.\55\
---------------------------------------------------------------------------

    \55\See, e.g., letter from Albert Hendricksen, Vice President, 
United Illuminating, to Mike Shields, U.S. EPA (June 3, 1994); 
comments to the OTC LEV docket from Gerald Esper, Director, Vehicle 
Environment Department, American Automobile Manufacturers 
Association (June 3, 1994); and comments to the OTC LEV docket from 
Barbara A. Kwetz, Director, Division of Air Quality Control, 
Massachusetts Department of Environmental Protection (June 3, 1994).
---------------------------------------------------------------------------

    First, new car sales are very much an interstate business, 
particularly in the northeast where many smaller states are located 
together. Consumers frequently travel throughout a particular state and 
to different states to buy cars. To the extent consumers in the more 
polluted nonattainment areas can continue to buy cars elsewhere in the 
same state or in other states, then it is especially important that the 
cars they buy elsewhere meet the strictest emissions standards needed 
for emissions reductions in the more polluted areas.
    The interstate business aspect is especially true in border areas 
of larger states, and can pervade smaller states, such as those in the 
OTR. For example, according to auto dealers in Greenwich, Connecticut, 
fifty percent of their sales are to New York residents. Dealers in 
different states regularly trade vehicles among themselves. Dealers 
also engage in ``drop shipments,'' where a dealer accepts an order from 
an out-of-state customer and the vehicle is shipped directly to the 
customer without ever physically entering the dealer's inventory. To 
accommodate such practices, EPA has adopted a ``cross-border sales'' 
policy that in effect permits the sale of cars certified to California 
standards in states that are contiguous to those that have adopted 
California standards.\56\ Indeed, members of Congress from Maine have 
urged EPA to extend this cross-border sales policy to dealers in Maine 
because they claim that 125 out of 170 Maine dealers rely on vehicle 
trades with Massachusetts dealers. While they explained that those in 
southern Maine are most affected, even dealers as far north as Bangor 
trade with Massachusetts dealers.\57\
---------------------------------------------------------------------------

    \56\See letter from Charles N. Freed, Director, Manufacturers 
Operations Division, U.S. EPA, to interested automobile 
manufacturers (Nov. 16, 1993).
    \57\See letter from Rep. Olympia J. Snowe, U.S. House of 
Representatives, to Carol Browner, Administrator, U.S. EPA (July 18, 
1994); letter from Thomas T. Brown, Jr., Executive Vice President, 
Maine Automobile Dealers Association, to Sen. William Cohen, U.S. 
Senate (June 10, 1994).
---------------------------------------------------------------------------

    It is important that the states adopt OTC LEV as soon as possible 
because the air quality benefits from the program will not be realized 
immediately. This delay in air quality benefits is due to the leadtime 
requirement in section 177 and the time required for fleet turnover. 
For the California standards to apply in another state, section 177 of 
the Act requires that California and the adopting state adopt the 
standards at least two years before commencement of the model year in 
which the LEV standards are to apply. Due to the phase-in schedule for 
the LEV program and the time required for fleet turnover, the maximum 
benefit for LEV would not be realized until 2028.
    It is also very important that the emissions sources in question 
here are mobile. Residents of particular states drive their cars into 
other states, and may even relocate to such other states. This may be 
particularly true in the northeast, where there is a high concentration 
of large metropolitan areas and a very dense transportation 
infrastructure that allows people to drive into and between these big 
cities. For this reason, it makes particular sense to ensure to the 
maximum extent possible that the fleet of cars throughout the region 
meet the strictest emissions standards needed for emission reductions 
in the more polluted areas.
    For these business and environmental reasons, industry and 
government organizations, including auto dealers and states, have urged 
that if the program is to be adopted, all states in the region should 
do so.\58\ Requiring that different cars meeting LEV standards be sold 
in different parts of the same state, in a potential patchwork across 
the region, could create business difficulties and could also 
compromise the intended environmental benefits of the program. Indeed, 
congressional debate over the adoption of section 177 reflected this 
concern.\59\ Presumably due to these concerns, a number of states in 
the OTR have actually adopted legislative authority or actual 
regulations to implement the LEV program under section 177 that would 
go into effect on the condition that some number of other neighboring 
states in the region likewise implement the program.
---------------------------------------------------------------------------

    \58\See, e.g., letter from Robert A. Beck, Vice President, 
Environmental Affairs, Edison Electric Institute, to U.S. EPA (June 
3, 1994); letter from Helene G. Goldberger and Joan Leary Matthews, 
Assistant Attorneys General, State of New York Department of Law, to 
U.S. EPA (June 2, 1994).
    \59\See H.R. Rep. No. 294, 95th Cong., 2nd Sess., 309-311 
(1977), reprinted in Legislative History of the Clean Air Act 
Amendments of 1977 at 2776-78.
---------------------------------------------------------------------------

    Finally, EPA believes that its action in approving state volatility 
controls as necessary under section 211(c)(4)(C) constitutes a 
precedent for considering business practices to conclude that the 
program should apply state-wide, even if it may not have been 
environmentally necessary in that case across the entire state. In that 
case, EPA approved New York's adoption of volatility controls as 
necessary throughout New York, even in areas that were in attainment 
for ozone, in part based on the fact that the pipeline distribution 
network for gasoline made the supply of different gasoline to different 
parts of the state difficult for business and for program 
administration. Therefore, EPA concluded that the need for the program 
in part of the state justified allowing New York to adopt it state-wide 
under section 211(c)(4)(C).\60\
---------------------------------------------------------------------------

    \60\See 54 FR 26030, 26033 (June 21, 1989); 58 FR 12656, 12659 
(March 28, 1989).
---------------------------------------------------------------------------

    EPA is not now proposing that Virginia adopt the OTC LEV program 
state-wide, but requests comment on this issue. Congress designated 
only the northern portion of Virginia that is part of the Washington, 
D.C. metropolitan area as part of the OTR. Therefore, Congress clearly 
intended that Northern Virginia can be treated separately from the 
remainder of Virginia for the purposes of ozone transport, and that 
pollution control in northern Virginia is particularly important for 
attainment of the ozone NAAQS in the northeast. Also, there has been no 
motion under section 176A to extend the OTR to the rest of Virginia on 
grounds that the rest of the state contributes significantly to 
nonattainment in the region.
    However, certain commenters questioned a state's authority to adopt 
California standards in part of a state. Though EPA disagrees with such 
comments, as discussed below, EPA requests comment on whether its final 
action should require Virginia to adopt the OTC LEV program state-wide. 
While EPA believes that there is good reason generally for the program 
to apply state-wide and region-wide in the OTR, EPA does not believe 
that state-wide application is legally required under section 177. 
Section 177 was clearly designed to deal with nonattainment of 
standards. This is consistent with the heading for section 177: ``New 
Motor Vehicle Standards in Nonattainment Areas.''61 Section 177 
does not require statewide implementation of California standards; nor 
do any of the explicit requirements of section 177 imply a requirement 
for statewide implementation. Section 177 merely requires that the 
state adopt standards that are identical to the California standards. 
EPA believes it is most reasonable to interpret the geographical area 
in which the standards apply to be a part of the California program 
that is not an aspect of the term ``standards'' in section 177(l). Of 
course, other states applying the California standards will necessarily 
apply them in a variety of places different from California. And the 
underlying rationale for the identicality requirement that other states 
not adopt standards creating a ``third vehicle'' is not implicated by 
limitation of the program to part of a state.
---------------------------------------------------------------------------

    \6\1See letter from EPA Administrator William Reilly to 
Elizabeth Haskell, Virginia Secretary of Natural Resources (January 
7, 1993).
---------------------------------------------------------------------------

    (e) Conclusions regarding need for OTC LEV (or LEV-equivalent) for 
purposes of attainment by the dates provided in subpart 2 of part D of 
title I.
    EPA's approach has been to analyze the reductions needed in the OTR 
for purposes of attainment, and then the options available to achieve 
those needed reductions. As discussed above, EPA believes that a 50% to 
75% reduction in NOX emissions throughout the OTR and VOC 
emissions in and near the urban areas will be necessary for attainment 
throughout the OTR. This range is based on studies that used a 1985 
emissions baseline. Updated inventory information indicates that the 
1985 inventory underestimated actual emissions. Therefore, EPA believes 
at least 50% to 75% emissions reductions, and possibly more, are needed 
from the 1990 emissions baseline. EPA's modeling analysis has focused 
generally on the inventory in the year 2005. As discussed in section 
IV.A.2.(a), the percentage reductions necessary from the 1990 baseline 
for purposes of attainment do not change over time and do not depend on 
EPA's choice of 2005 for purposes of modeling. Still, control options 
for achieving those reductions by a particular time can vary, if it 
takes time for certain measures to be developed or to be implemented 
and to achieve reductions. Also, the growth that states must counteract 
in order to achieve the percentage reductions from the 1990 baseline 
will continue to rise over time. EPA's conclusion that the OTC LEV 
program is necessary for attainment in the OTR applies for all of the 
serious and severe areas with attainment deadlines of 1999, 2005 and 
2007.
    Based on the analysis focusing on the 2005 inventory, EPA believes 
that the OTC LEV (or LEV-equivalent) program is necessary for the 
severe nonattainment areas in the OTR to attain by the 2005 deadline. 
EPA believes there is no basis to find that its conclusion that the OTC 
LEV (or LEV-equivalent) program is necessary would be different for 
emissions that contribute to nonattainment in the New York-New Jersey-
Connecticut severe area, which has a 2007 attainment deadline. The 
control options EPA assessed will not achieve such greater reductions 
in the extra two years so as to make up the shortfall in reductions 
needed for attainment without the LEV program.
    Also, it is important to note that each of the states in the New 
York-New Jersey-Connecticut nonattainment area needs the OTC LEV (or 
LEV-equivalent) program in order for the other two to reach attainment 
by 2007. These three states are part of a common airshed and represent 
a single area in which pollutants from VOC and NOX emissions mix 
to form a plume of high ozone concentrations. In addition, there is 
considerable interstate travel by commuters between these states within 
this nonattainment area such that non-LEV vehicles from one state would 
reduce the effectiveness of a LEV program in the adjacent states. For 
similar reasons, these states may also need the LEV (or LEV-equivalent) 
program in order that the southern New Jersey-Philadelphia 
nonattainment area (that abuts the New York-New Jersey-Connecticut 
area) may attain by 2005.
    EPA further believes that the OTC LEV (or LEV-equivalent) program 
is needed in the OTR in order for serious areas with a 1999 attainment 
deadline to attain on time. Such areas, including the northern serious 
areas downwind of the New York-New Jersey-Connecticut area and western/
northwestern New England, face a need for tremendous reductions on a 
very fast track in order to attain by 1999. Since EPA believes that 
other reasonable and practicable options are not available to achieve 
the entire shortfall in emissions reductions necessary for timely 
attainment, even the limited reductions that the OTC LEV program would 
achieve in model year 1999 are actually necessary. And the program is 
not impracticable or unreasonable for this purpose, since the costs in 
1999 will be limited in proportion to the limited vehicles that will 
meet the standards during that first model year.
    Further, EPA believes the manner in which areas actually 
demonstrate that they ultimately achieve attainment further supports 
the conclusion that the OTC LEV (or LEV-equivalent) program is 
necessary for the serious areas to attain by 1999. According to EPA 
guidance, attainment is reached when an area experiences no more than 
three exceedances of the ozone NAAQS over a three-year period.62 
In other words, air quality that results in no more than one exceedance 
of the NAAQS per year averaged over three years will be sufficient for 
attainment, and three years of such data are necessary to demonstrate 
that the state has achieved such air quality.
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    \6\2This is assuming the area has complete ozone monitoring 
data. An adjustment is specified in the ozone NAAQS to account for 
missing data. Where data are incomplete, the number of exceedances 
that would be expected had the data been complete is calculated to 
determine the attainment status of the area; See 40 CFR 50.9 as 
interpreted by Appendix H; ``State Implementation Plans; General 
Preamble for the Implementation of Title I of the Clean Air Act 
Amendments of 1990.'' 57 FR at 13506 (April 16, 1992); Memorandum 
from John Calcagni, former Director of EPA Air Quality Management 
Division to Regional Air Division Directors, ``Procedures for 
Processing Requests to Redesignate Areas to Attainment.'' (Sept. 4, 
1992.)
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    The Clean Air Act attainment requirements take into account that 
states may not be able to achieve air quality improvements two years 
prior to the attainment year deadline in order to be able to show 
attainment over a three-year period ending by that deadline year. Under 
section 181(a)(5) of the Act, a state may apply to EPA for a one-year 
extension of the attainment deadline specified in section 181 if the 
state has complied with all SIP requirements and the area in question 
has experienced no more than one exceedance of the ozone NAAQS during 
the deadline year, containing the attainment date. EPA may grant up to 
two one-year extensions under this provision. Of course, in order to 
achieve the NAAQS and be eligible for redesignation to attainment, the 
states must sustain the air quality improvements achieved in order to 
have not more than one exceedance for each of the two extension years, 
and are likely to have to control growth in emissions in order to do 
so.
    Serious areas in the OTR may need to rely on extensions of the 
attainment deadline under section 181(a)(5) in order to avoid a finding 
of failure to attain (and the consequent ``bump-up'' to a severe 
classification with a 2005 attainment date).63 EPA believes it is 
highly likely, in such a case, that OTC LEV (or LEV-equivalent) will be 
necessary to achieve reductions in order to offset growth and sustain 
attainment-level air quality through the 2000 and 2001 extension years. 
OTC LEV would generate increasing reductions in those years, due to 
fleet turnover.
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    \6\3The available evidence described in this notice indicates 
strongly that these areas will not be able to avoid a bump-up 
without relying on the one-year extensions available under section 
181(a)(5).
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    In sum, since OTC LEV (or LEV-equivalent) is necessary to bring 
serious and severe areas stretching from Washington, DC to Portsmouth, 
New Hampshire into attainment by the 1999, 2005, and 2007 deadlines 
applicable to those areas, and because the reductions from OTC LEV (or 
LEV-equivalent) will be needed in areas located in a broad area 
extending from the south through the northwest of each of those areas 
and nearby locations from which vehicles may travel and be traded, EPA 
proposes to conclude that OTC LEV is necessary throughout the OTR to 
bring those areas into attainment by those dates.
    3. Need for OTC LEV (or LEV-Equivalent) Program for Purposes of 
Maintenance.
    (a) Legal Relevance of Maintenance.
    EPA discussed the timing of reductions from the OTC LEV program and 
the relevance of maintenance to its inquiry at length in the April 26 
proposal. See 59 FR 21728-21730. The program would not achieve 
substantial reductions until after its first implementation in model 
year 1999. There is much evidence that the nonattainment problem in the 
severe areas is a regional problem in origin, and that the OTC LEV 
program is therefore needed throughout much of the region to prevent 
contribution to nonattainment in the severe areas. In addition, 
however, EPA believes that the states in the OTR need the program to 
avoid interference with downwind maintenance of the NAAQS even after it 
is achieved.
    While EPA believes it should consider this maintenance need here, 
it must have legal authority to do so. In the April 26 notice, EPA 
raised this issue because the language in section 184(c) describing the 
basis for an OTC recommendation, EPA's obligation in reviewing it, and 
EPA's obligation to explain why any control measure is not necessary 
all reference necessity ``to bring an area in such region into 
attainment by the dates provided by this subpart'' and omit any 
reference to maintenance. Nevertheless, EPA currently believes that it 
has legal authority to consider maintenance under section 184, and in 
any case has independent authority for the action proposed here on 
maintenance grounds directly under sections 110(k)(5) and 110(a)(2)(D). 
EPA believes that these sections of the Act, together with the overall 
structure of title I, support this conclusion.
    To be sure, other provisions of the Act explicitly distinguish 
between ``attainment'' and ``maintenance.'' Beginning with the overall 
goal of healthful ambient air quality, section 109(b) requires EPA to 
issue ambient air quality standards ``the attainment and maintenance of 
which'' are necessary to protect the public health or welfare. The 
current statutory structure as revised in the 1990 Amendments, however, 
reflects a difference between the manner in which Congress addressed 
states' attainment and maintenance obligations with respect to their 
own independent air quality and the manner in which Congress addressed 
states' obligations to prevent contribution to downwind nonattainment 
and interference with downwind maintenance. In sum, EPA believes that 
this new structure establishes particular time-frames for states to 
address attainment separately from maintenance to protect their own air 
quality, but left much greater discretion for EPA to insist that states 
address these concerns at all times when states' emissions cause harm 
in other states.
    Prior to 1990, initial SIPs due nine months after EPA promulgation 
of a NAAQS were to include programs designed both to attain and 
thereafter maintain the standards. See prior section 110(a)(2) (B) and 
(D) and section 172(a). In 1990, for areas designated as nonattainment 
areas, Congress specified requirements for attainment and maintenance 
in discrete provisions that provide for discrete SIP submissions to 
address these two separable concerns. Section 172 continues to require 
submission of a SIP providing for the attainment of the NAAQS in 
nonattainment areas. The subpart 2 ozone program specifies deadlines 
for submission of a variety of SIP revisions, including attainment 
demonstrations for moderate and above areas. Maintenance considerations 
for nonattainment areas were specifically relocated to a new section 
175A, which provides that states are to submit plans, including 
additional control measures, as necessary to ensure maintenance for at 
least 10 years following redesignation to attainment. See section 
175A(a). Significantly, section 175A includes no requirement that a 
state adopt measures to address transport of pollutants that may 
interfere with maintenance downwind.64
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    \6\4One might assume that an area that is in attainment and 
maintains that status could not interfere with attainment or 
maintenance downwind. Intuitively, one might not expect a ``clean 
air'' area to cause other areas to have ``dirty air.'' But this is 
not the case. Areas that meet the standard may nonetheless have 
emissions that interfere with attainment or maintenance downwind. 
Indeed, Congress's decision to require control measures such as RACT 
and nonattainment new source review even in attainment areas 
throughout the OTR under section 184(b) indicates Congress 
understood that ``clean air'' areas could contribute to ``dirty 
air'' downwind.
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    Consistent with this new structure, Congress changed the 
requirement formerly codified at section 110(a)(2)(D) that required 
SIPs to include a permit program for stationary sources as necessary to 
assure that NAAQS ``are achieved and maintained.'' The new section 
110(a)(2)(C) simply requires regulation of stationary sources as 
necessary to assure that NAAQS ``are achieved.'' Thus, it appears that 
Congress specifically deleted references to maintenance in section 
110(a)(2) where it believed that to be appropriate in light of the new 
structure and new section 175A.65
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    \6\5Congress did leave a reference in section 110(a)(2)(C) to 
``a permit program as required in parts C and D.'' The part C permit 
program codified at section 165 of the Act is designed to prevent 
significant deterioration of air quality in attainment areas, and 
hence would only be relevant to maintenance, not achieving 
attainment. One might argue from this that Congress intended the 
reference to attainment in section 110(a)(2)(C) to include 
maintenance, as well. But, the better view may be that Congress 
simply overlooked the need to delete the reference to part C in 
light of its specific deletion of the reference to maintenance.
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    However, Congress made no such change to the pollution transport 
provisions of section 110(a)(2). The transport provision was 
significantly broadened from the former section 110(a)(2)(E) to new 
section 110(a)(2)(D), as discussed above. Nonetheless, in changing the 
language of the transport provision, Congress saw fit to retain the 
reference to maintenance. Indeed, Congress had to specifically focus on 
this issue when it changed the standard from ``prevent[s] attainment or 
maintenance'' in the former provision to ``contributes significantly'' 
to nonattainment and ``interfere[s] with maintenance'' in the new 
provision. This indicates Congress specifically sought to retain 
maintenance as a criterion for pollution transport under section 
110(a)(2) at the same time it was deleting maintenance as a criterion 
for the permit provisions in light of section 175A.
    EPA believes this structure is consistent with the absence of any 
requirement that maintenance plans under section 175A address pollution 
transport. Thus, the only provision in the Act that requires states to 
prevent emissions within their borders that interfere with maintenance 
in another state downwind is section 110(a)(2)(D). This may be 
particularly important due to the staggered attainment deadlines under 
section 181 for ozone. As is the case in the northeast, severe areas 
with longer attainment deadlines may be located upwind of less polluted 
nonattainment areas with shorter attainment deadlines. Even if the 
downwind areas can attain on time, the upwind areas may continue to 
generate substantial emissions interfering with downwind maintenance 
until or even beyond the upwind area's longer attainment deadline.
    As discussed generally above, EPA believes it has authority to act 
under section 110(k)(5) at any time, even prior to submission of 
attainment demonstrations under section 182, to require submission of 
measures EPA believes are necessary for compliance with section 
110(a)(2)(D). See 59 FR at 21730 (explaining EPA's independent basis to 
issue SIP call under section 110(k)(5) to adopt measures necessary for 
compliance with maintenance aspect of section 110(a)(2)(D)). It is 
especially important that EPA act now, because the LEV program depends 
on vehicle fleet turnover that will take an unusually long time to 
generate the needed emissions reductions. If EPA waits for the states 
to develop their attainment plans, and where applicable, their 
maintenance plans, the opportunity to ensure that necessary emissions 
reductions from the LEV program are achieved beginning in 1999 and 
growing thereafter may be irrevocably lost. Any delay in beginning the 
fleet turnover to LEV vehicles in model year 1999 will diminish the 
emissions benefits in the years following. It is therefore necessary 
for the states to act now to adopt OTC LEV and appropriate for EPA to 
make a finding of substantial inadequacy now with respect to that 
program for the purposes of maintenance. For the same reasons discussed 
generally above, EPA believes an environmentally conservative approach 
to evaluating the need for the LEV program to avoid interference with 
maintenance is warranted here.
    EPA believes that maintenance is a proper consideration under 
section 184(c), too. To be sure, that provision references timely 
attainment and omits maintenance. However, section 184(c)(5) provides 
for an EPA finding of substantial inadequacy under section 110(k)(5) 
that states' SIPs do not meet the requirements of section 110(a)(2)(D), 
which specifically prohibits emissions in states from interfering with 
maintenance in downwind states. Moreover, EPA believes there is an 
adequate basis to reasonably interpret section 184(c) to include 
maintenance. Specifically, EPA believes that it should understand 
``attainment'' to include ``maintenance'' where the issue is whether 
measures are ``necessary'' to comply with pollution transport 
requirements.
    The very emphasis on the ``necessary'' standard under section 184 
supports this conclusion. In contrast, EPA's recent determination that 
``attainment'' under section 182(f) does not include maintenance 
involved a different standard. There, EPA's Conformity General Preamble 
explained that the NOX exemption test in section 182(f)(1)(A) 
where additional NOX reductions ``would not contribute to 
attainment'' does not involve maintenance considerations. See 59 FR 
31238. EPA stated that Congress could reasonably have believed it 
appropriate to require states to impose specified requirements on 
NOX sources for areas in nonattainment, but that states might 
decide for themselves whether to impose such controls for maintenance 
purposes, even if such controls would ``contribute'' to maintenance. 
Id. EPA noted, however, that this distinction might not apply where the 
test is whether control measures are ``necessary'' for attainment and 
maintenance is not referenced, as here. Id.
    Where measures are ``necessary'' for maintenance, EPA does not 
believe it makes sense to let states decide for themselves whether to 
adopt the measures. Inherent in the ``necessary'' determination under 
section 184 is the conclusion that the states really have no choice: 
They need to adopt the measure in order to avoid interfering with 
downwind maintenance. Unlike the section 182(f) ``contributes'' 
context, as long as EPA determines that it is necessary, there really 
is no choice. It seems less reasonable to believe Congress intended 
that section 184 would not reach a measure in fact necessary for 
maintenance, when the result of a failure to implement the measure 
would therefore be downwind areas' relapse into nonattainment, perhaps 
shortly after the attainment dates in subpart 2. Where the necessary 
standard applies in the interstate pollution context, EPA believes it 
is sensible to understand ``attainment'' to include ``maintenance.''
    Finally, EPA believes its discussion of section 176A in its April 
26 proposal identifies an additional statutory basis to support this 
sensible conclusion. That is, the OTR in section 184 is established 
under section 184(a) ``within the meaning of section 176A(a).'' Section 
176A authorizes a transport commission under that provision to 
``[r]ecommend 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)].'' This 
presumably includes both the attainment and maintenance aspects of 
section 110(a)(2)(D). In all other respects, EPA's obligations in 
response to a transport commission under section 176A are less strict 
than under section 184. It would therefore be odd if section 176A 
required EPA to consider maintenance in response to a commission's 
recommendations, but that EPA would not be required to do so under 
section 184. This is particularly so since it seems foolhardy to 
consider measures necessary for attainment at the exclusion of those 
necessary for maintenance.
    Therefore, it seems reasonable to interpret the OTC under section 
184 as a creature of both sections 184 and 176A. Section 184 simply 
adds stringency to EPA's obligations in responding to recommendations 
from the OTC, since Congress specifically identified the serious 
transport problem between the many northeast states as surely deserving 
the attention of such a regional commission. Thus, it makes sense to 
believe that Congress intended the particular dates in section 184 to 
highlight the specific deadlines in the subpart 2 ozone program that 
the OTC is specifically charged with addressing. But in so doing it 
does not seem as reasonable to believe that Congress intended to 
displace the more general authority of a commission under section 176A 
to make recommendations concerning the maintenance aspects of section 
110(a)(2)(D). Thus, EPA believes it is most reasonable to understand 
the references in section 184(c) to attainment to include maintenance 
through section 176A, as well. Even if operating under sections 176A, 
110(k)(5), and 110(a)(2)(D) directly, EPA believes it may issue a SIP 
call at this time under section 110(k)(5) requiring states to adopt the 
OTC LEV program as necessary to avoid interfering with maintenance in 
other states.
    (b) Technical Analysis of Need for OTC LEV (or LEV-Equivalent) 
Program for Maintenance.
    EPA believes that the OTC LEV program is necessary for all of the 
nonattainment areas to maintain the ozone NAAQS, even after they 
attain. This is because EPA's modeling analysis projects very high 
rates of growth in emissions in the OTR that must continue to be 
neutralized even after controls sufficient for attainment by the 
attainment deadlines are in place. Based on EPA's analysis discussed in 
sections II.A.(a), (b) and (c), the Agency does not believe that other 
available control options are sufficient to attain without OTC LEV (or 
LEV-equivalent). Since EPA is not aware of sufficient additional 
control options to counteract growth following attainment, EPA 
believes, a fortiori, that OTC LEV will be necessary for these areas to 
demonstrate maintenance of the NAAQS over two consecutive ten-year 
periods following redesignation (as required by section 175A of the 
Act).
    Not only does EPA believe that the OTC LEV (or LEV-equivalent) 
program is necessary for the nonattainment areas in the OTR to maintain 
the ozone NAAQS, but EPA believes that this program will play an 
increasingly important role in counteracting growth over the 
maintenance periods. Of course, implementation of the program in model 
year 1999 will not begin to play a role until well into the maintenance 
periods for the marginal and moderate areas that attain the standard by 
1993 and 1996, respectively. Assuming areas could achieve redesignation 
in their attainment years, for the serious and severe areas that have 
attainment deadlines under section 181 of 1999, 2005, or 2007, the OTC 
LEV program will contribute to both attainment and maintenance of the 
NAAQS. Due to the phase-in schedule for the LEV program and the time it 
takes for the fleet to completely turnover, the LEV program will 
continue to accrue additional benefits through the year 2028. In 2015 
(the last year for which EPA has done a projection analysis), emissions 
reductions due to the OTC LEV program will be 1200 tons of NOX per 
day and 670 tons of VOC per day. This is a 39% reduction in NOX 
highway vehicle emissions and a 38% reduction in VOC highway vehicle 
emissions compared to emissions in 2015 without the OTC LEV program.
    The following table presents VMT growth rate information averaged 
between 1990 and 2005 for mobile source emissions within the OTR. The 
table focuses on growth estimates for mobile sources as the most 
relevant for assessing the impact of LEV in the OTR, since LEV affects 
emissions from this source category. These growth rates are derived 
from the EPA's MOBILE5 Fuel Consumption model, and are taken from a 
study prepared under EPA contract.66
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    \6\6See E.H. Pechan and Associates, Regional Oxidant Modeling of 
the Clean Air Act Amendments: Default Projection and Control Data 
(Draft), Prepared under EPA Contract No. 68-D0-0120, Work Assignment 
II-60 (April 1993).
---------------------------------------------------------------------------

    Emissions rates for mobile sources are calculated by multiplying 
emissions factors developed for the fleet by projected activity levels, 
characterized as projected vehicle miles travelled (VMT). Growth in VMT 
tends to neutralize the downward trend in emissions factors resulting 
from turnover in the fleet to vehicles meeting federal tier 1 
standards, and implementation of advanced inspection/maintenance 
programs. As the vehicle fleet turns over, fewer old cars with less 
advanced technology will remain on the road, and the downward trend in 
emissions factors will slow over time. Therefore, EPA expects that 
growth in VMT will overtake current programs to increase growth rates 
more and more over time beyond the 1990-2005 time frame in the table. 
Of course, the OTC LEV program would be helpful in increasing and 
extending the downward trend in emissions factors to offset growth in 
VMT and counteract overall emissions growth.

 Table 5.--Growth Rates and Projected Changes in Mobile Source Emissions
                       for OTR States, 1990-2005                        
------------------------------------------------------------------------
                                                               1990-2005
                                                                  VMT   
                          OTR State                              growth 
                                                                rate, %/
                                                                 year   
------------------------------------------------------------------------
ME...........................................................        2.2
NH...........................................................        2.6
VT...........................................................        2.1
MA...........................................................        2.2
RI...........................................................        2.2
CT...........................................................        2.2
NY...........................................................        1.9
NJ...........................................................        2.3
PA...........................................................        2.0
DE...........................................................        2.7
MD...........................................................        2.4
Wash., DC....................................................        1.8
VA...........................................................       2.6 
------------------------------------------------------------------------

    4. Relevance of EPA Transport Policy.
    As EPA discussed in its April 26 proposal, EPA is developing a 
policy to address the particular problem where overwhelming transport 
from upwind areas with later attainment dates is such a dominant factor 
accounting for nonattainment in a downwind area with an earlier 
attainment date that the downwind areas will not be able to attain by 
the deadline. See 59 FR at 21728-29. This problem was specifically 
raised in the OTR for areas in Massachusetts in letters from the 
Massachusetts Department of Environmental Protection and the 
Conservation Law Foundation.\67\ Of course, one solution is for the 
responsible upwind areas to relieve their overwhelming contribution so 
that the downwind areas may attain by the specified year. But, as EPA 
described in its April 26 proposal, in certain cases this 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 over the longer time-frame. It might be appropriate for 
EPA to interpret the Act so that, if it is impracticable to accelerate 
controls in the upwind areas and other facts are shown, then the 
downwind areas might have additional time to reach attainment beyond 
the section 181(a)(1) dates.
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    \67\See letters from Renee Robins, Conservation Law Foundation 
to John Seitz, Director, EPA Office of Air Quality Planning and 
Standards (Jan. 25, 1994); from Barbara Kwetz, Director, 
Massachusetts Division of Air Quality Control to John Seitz, 
Director, EPA Office of Air Quality Planning and Standards (Jan. 14, 
1994); from John Seitz, Director, EPA Office of Air Quality Planning 
and Standards to Barbara Kwetz, Director, Massachusetts Division of 
Air Quality Control (March 21, 1994); from John Seitz, Director, EPA 
Office of Air Quality Planning and Standards to Renee Robbins, 
Conservation Law Foundation (March 21, 1994).
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    Since EPA's April 26 proposal, EPA staff has continued to work with 
a group of officials from states across the country that are likely to 
be affected, including officials from Massachusetts, Maine, and other 
states to develop a policy to address this problem. This policy, 
described in a September 1, 1994 memorandum from Mary D. Nichols, 
Assistant Administrator, to EPA regional offices, provides that states 
seeking to have the Clean Air Act interpreted so as to allow them a 
later attainment deadline would have to make certain showings including 
a showing of overwhelming transport.68
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    \6\8See Memorandum form Mary D. Nichols, Assistant Administrator 
for Air and Radiation, to Air Directors of EPA Regional Offices, 
entitled, ``Ozone Attainment Dates for Areas Affected by 
overwhelming Transport'' (Sept. 1, 1994).
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    EPA does not expect that the states will be able to complete such 
analyses and have EPA make a determination by the time EPA takes final 
action on the OTC recommendation. Nevertheless, EPA recognizes that 
pervasive transport in the OTR underlies the creation of the OTC and 
the basis for EPA's proposed approval of the OTC LEV recommendation. 
EPA expects that, on this basis, a few areas in the OTR are likely 
candidates to make valid demonstrations that the Act should be 
interpreted to allow them more time to attain because overwhelming 
transport from upwind areas with later attainment deadlines will 
unavoidably prevent earlier attainment.
    While this has not yet occurred, EPA can anticipate the 
implications here if it does. If downwind areas ultimately are subject 
to later attainment deadlines than are currently believed to pertain, 
then emissions reductions during the ``extension period'' would apply 
to reaching attainment rather than to maintenance of the NAAQS after 
attainment. To the extent EPA currently believes that the OTC LEV (or 
LEV-equivalent) program is necessary for maintenance in such areas 
after the section 181(a)(1) attainment year (and through any 
``extension period''), then such reductions likewise would be necessary 
for attainment if EPA grants that such areas have the ``extension 
period'' to attain. EPA does now believe that areas in the OTR will 
need the OTC LEV (or LEV-equivalent) program to maintain the NAAQS in 
the years after the section 181(a)(1) deadlines. EPA therefore expects 
that the OTC LEV (or LEV-equivalent) program will ultimately be 
necessary in those years for such areas that may have longer under the 
forthcoming transport policy to actually attain the NAAQS.
    In addition, even if attainment dates are not extended pursuant to 
a transport policy, EPA believes that it may conclude that certain 
serious areas in the OTR will not be able to reach attainment by 1999, 
nor to qualify for the one-year extensions described earlier. Such 
areas would then be subject to ``bump up'' under section 181(b)(2) of 
the Act and would have until 2005 (or, if sooner, as expeditiously as 
practicable) to attain. EPA believes that the OTC LEV (or LEV-
equivalent) program will ultimately be necessary to achieve reductions 
in the period after 1999 for any such areas to attain.

B. Consistency With Section 177 of the Clean Air Act

1. Introduction
    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 general, states, with the 
exception of California, are prohibited under section 209(a) of the Act 
from regulating emissions from new motor vehicles. However, section 177 
of the Act provides an exception from this prohibition that allows a 
state which has plan provisions approved under part D of title I of the 
Act to adopt California's standards relating to control of emissions 
from new motor vehicles and to take other actions otherwise prohibited 
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.
    Section 177 of the Act provides the only exception in the Act from 
preemption of state standards for control of emissions from new motor 
vehicles under section 209(a). The control measures recommended by the 
OTC must therefore be consistent with section 177. EPA noted in the 
NPRM that four aspects of the OTC recommendation may implicate section 
177 of the Act. See 59 FR 21735. First, the OTC recommends that EPA 
require use of California LEVs but specifically states that adoption of 
California reformulated gasoline is not a part of the recommendation. 
Second, the recommendation does not require inclusion of the ZEV sales 
requirement in any state regulations except to the extent the sales 
requirement is required under section 177. Third, EPA noted that the 
recommendation did not explicitly incorporate California's regulations. 
Instead, the recommendation merely stated that the OTC recommended 
adoption of a low emission vehicle program that includes certain 
elements detailed in the recommendation, pursuant to the requirements 
of section 177. EPA also noted that the OTC recommended incorporation 
of California's fleet NMOG standards and that some commenters believed 
incorporation of the NMOG standards was inconsistent with section 177. 
Finally, EPA requested comments regarding whether section 177 allows a 
state to adopt a California vehicle program in a portion of the state, 
rather than the entire state. This final point is not addressed in this 
section of the preamble, but is addressed in section IV.A.2.(c)iii., 
above.
    Since the publication of the first NPRM, EPA has received comments 
indicating that other aspects of the OTC's recommendation may violate 
section 177. One commenter asserted that a state's incorporation of the 
California LEV program after the program is initiated in California may 
create a ``third vehicle'' because of the operation of California's 
emissions credit banking regulations. Also, a commenter questioned 
whether a state without a current nonattainment area or an approved 
state implementation plan can impose the California LEV requirement.
    EPA today proposes to find that the OTC's recommendation for EPA to 
require implementation of the OTC LEV program throughout the OTR is 
consistent with section 177. Moreover, EPA proposes to find that 
implementation of the ZEV sales requirement is not necessary in order 
for the recommendation to be consistent with section 177. Therefore, 
EPA proposes not to require that states in the OTR adopt the ZEV sales 
requirement. Individual states may, at their discretion, incorporate 
the ZEV sales requirements into their programs.
2. California Fuel Regulations
    EPA proposes to find that the OTC's failure to include California's 
clean fuel requirements in its recommendation does not violate section 
177. EPA believes that the failure to include the California fuels 
requirements does not violate the requirement of section 177 that 
standards must be ``identical to the California standards for which a 
waiver has been granted for such model year.'' EPA also believes that 
the lack of California fuel requirements does not violate the ``third 
car prohibition'' of section 177.
    (a) Identicality Requirement.
    Both federal courts that have reviewed the issue have found that 
failure of a state to promulgate California's fuel regulations does not 
violate the section 177 requirement that an adopting state's standards 
be identical to California's standards. Motor Vehicle Manufacturers 
Association v. NYDEC, 17 F.3d 521 (2d Cir. 1994) and American 
Automobile Manufacturers Association v. Greenbaum, No. 93-10799-MA (D. 
Mass. October 27, 1993), (the ``New York case'' and the ``Massachusetts 
case'', respectively). These decisions are in accord with EPA's 
position on this matter. The Agency filed a brief as amicus curiae with 
the Second Circuit in the New York case, and also filed a later brief 
as amicus curiae in the First Circuit on the manufacturers' appeal in 
the Massachusetts case.69 Both briefs have been placed in the 
docket for this rulemaking.
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    \6\9The manufacturers later requested that the appeal be 
withdrawn with regard to all issues except one relating to lead-
time, which is not at issue for EPA's decision whether to approve 
OTC recommendation but is discussed below in connection with the 
model year proposal. On August 3, 1994, the First Circuit granted 
the manufacturers' request to withdraw their appeal on these issues. 
(AAMA v. Greenbaum, No. 93-2276 (1st Cir., August 3, 1994.)
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    California's clean fuel provisions were not part of California's 
waiver application under section 209. In fact, state standards that are 
related to fuel as opposed to emissions of motor vehicles, are not even 
governed by section 209(a). State fuel provisions are addressed 
separately in section 211 of the Act, which provides a substantially 
different regime for state fuel standards. Under section 211, states 
may regulate fuels if they can demonstrate to EPA that such regulation 
is necessary to meet federal air quality standards, except that 
California may regulate fuel without such a demonstration. Therefore, 
as California has not asked for a waiver for its fuel regulations, nor 
is it required to do so under the Act, such standards are not 
``standards * * * for which a waiver has been granted'' and thus are 
not subject to the identicality provisions of section 177. Were the 
Agency to find that states must also adopt California's fuel standards 
to meet the section 177 identicality requirements, then every state 
wishing to adopt California's motor vehicle standards would be required 
to meet not only the requirements of section 177 but also the 
requirements of section 211, so that it could simultaneously adopt 
associated fuel controls. EPA believes that this would be an incorrect 
interpretation of the Act, given the structure of the Act and its 
explicit differentiation between vehicle and fuel requirements. For the 
reasons provided in this notice and outlined by EPA in its amicus 
curiae briefs and by the courts in the New York and Massachusetts 
cases, EPA proposes to find that no conflict with section 177 exists on 
this point.
    (b) Third Vehicle Prohibition.
    EPA also proposes to find that the lack of a clean fuel requirement 
does not violate the ``third vehicle'' prohibition of section 177. 
Manufacturers claim that the difference in sulfur levels between the 
fuels sold in California and the northeast would cause deleterious 
effects on emission control systems on California LEV vehicles, which 
would require certain design changes to manage these effects. This, 
they claim, would require them to manufacture vehicles for the OTR that 
would differ from the vehicles they expect to sell for California, and 
would thus violate section 177's ``third vehicle'' prohibition.
    The manufacturers' arguments fail on several grounds. First, 
nothing in the OTC recommendation requires any manufacturer to produce 
any vehicle different from a California certified vehicle. In fact, the 
OTC recommendation would require that any new car sold in the OTR be a 
California-certified vehicle. Manufacturers are free to sell cars in 
the OTC that are identical to those sold in California. Any design 
changes made by manufacturers would result from a manufacturer's 
voluntary decision to effect such a change. There is no third vehicle 
violation where a manufacturer voluntarily decides to sell a third 
vehicle in a state other than California. The court of appeals in the 
New York case, responding to a similar ``third car'' challenge by 
manufacturers regarding ZEVs, found that whatever design change ``the 
manufacturers choose to install on cars sold in New York is a marketing 
choice of theirs and not a requirement imposed by the [state].'' MVMA, 
17 F.3d at 538.
    Second, the ``third vehicle prohibition'' should not be read to 
apply to every design change, regardless of its nature or scope. 
Section 177 uses the phrase ``third vehicle'' to refer to ``a motor 
vehicle or motor vehicle engine different than a motor vehicle or 
engine certified in California under California standards.'' This 
statutory language indicates that its meaning is tied to the concept of 
emission certification, i.e. that ``third vehicle'' should be read to 
refer to design changes needed to meet certification requirements. This 
reading is consistent with the purpose of the third vehicle 
prohibition, which is to reinforce the identicality requirement by 
prohibiting a state from administering standards identical to 
California's in a way that actually requires conformance to more 
stringent standards.
    The term ``third vehicle'' itself suggests it should be so limited. 
It presumes the existence of ``first vehicles'' and ``second vehicles'' 
(vehicles that meet federal and California standards, respectively). 
Congress was plainly aware that ``first vehicles'' include vehicles 
with widely differing physical characteristics. For example, ``first 
vehicles'' include cars both with and without rear-window defrosters. 
This makes it clear that vehicles may contain minor differences in 
design that are unnecessary to meet emission standards without creating 
``third vehicles.'' The legislative history of section 177 confirms 
that the ``third vehicle prohibition'' does not require physical 
identicality of vehicles and that design changes would not create a 
``third car violation'' unless they create an ``undue burden'' on 
manufacturers.70 Though one manufacturer has stated in other 
proceedings that it may need to use a different converter assembly (one 
that is bolted, not welded) on vehicles sold in the OTR, the 
manufacturers have not provided evidence indicating that significant 
design changes creating an ``undue burden'' are required to implement 
the OTC LEV program without California fuels.
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    \7\0See 136 Cong. Rec. at S16976 (Oct. 27, 1990) (report 
appended to the remarks of Senator Baucus; 136 Cong. Rec. at S16903 
(Oct. 27, 1990) (Exhibit 1 to remarks of Senator Mitchell); 136 
Cong. Rec. at S16954 (Oct. 27, 1990) (statement of Senator Chafee).
---------------------------------------------------------------------------

3. ZEV Sales Requirement
    EPA proposes to find today that the ZEV sales requirement is not 
required to ensure consistency with section 177. Therefore, as the OTC 
requested inclusion of the ZEV sales requirement only ``to the extent 
that a Zero Emission Vehicle sales requirement must be a component of a 
LEV program adopted under Section 177,'' EPA proposes to approve the 
OTC recommendation without the ZEV sales requirement. Individual states 
within the OTC may at their option include such a requirement in the 
programs they adopt.71
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    \7\1The OTC recommendation explicitly recommended that 
individual states within the OTR be allowed to implement the ZEV 
sales mandate if they so choose. EPA believes that incorporation of 
the ZEV sales mandate into a state's LEV program is not inconsistent 
with the requirements of section 177. The court of appeals in the 
New York case similarly found that New York's incorporation of the 
ZEV sales mandate did not violate section 177's prohibition on sales 
limitations on California-certified vehicles or section 177's 
``third vehicle prohibition.''
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    As EPA discussed in the NPRM, the first question presented by this 
issue is whether the ZEV sales requirement is a ``standard relating to 
control of emissions.'' See 59 FR at 21735. EPA initially determined, 
in letters sent to New York and Virginia state officials on January 7, 
1993, that the ZEV sales requirement is not a standard, based on the 
belief that it had no direct effect on emissions associated with the 
LEV program, given the existence of the NMOG fleet average requirement. 
EPA stated: ``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.'' Id. Therefore, as EPA 
found that the ZEV sales mandate did 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 fact, the OTC stated in documents accompanying its 
recommendation that the ZEV sales mandate is an accompanying 
enforcement procedure and is not required by section 177.
    Indeed, the ZEV sales requirement does not require that overall 
tailpipe emissions of NMOG from California vehicles be any lower than 
they would have been in the absence of the sales requirement. The 
amount of NMOG tailpipe emissions produced by such vehicles is 
controlled by the NMOG fleet average requirement, not the sales 
mandate. However, current EPA data indicates that the ZEV sales 
requirement clearly will have a beneficial effect on emissions of 
evaporative hydrocarbons and tailpipe emissions of NOX from 
vehicles in the LEV program.
    Therefore, it appears that the determination of whether the ZEV 
mandate is a ``standard'' must be based on other factors. An argument 
that the ZEV sales requirement is not an emission standard would be 
based on the presumption that ``standards'' are only the numerical 
limits placed on sources restricting emissions of particular 
pollutants. This argument is similar to certain language found in Motor 
and Equipment Manufacturers Association v. EPA (MEMA), 627 F.2d 1095 
(D.C. Cir. 1979) the only significant court case to directly deal with 
the term ``standard'' in the context of the Act's motor vehicle 
emission program. EPA argued in that case that the term ``standard'' 
referred to ``a numerical value setting the quantitative level of 
permitted emissions of pollutants by a new motor vehicle.'' Id. at 
1111. The court neither adopted this definition nor did it take issue 
with EPA's definition. The court did state that the legislative history 
``indicates that Congress intended the word `standards' to mean 
quantitative levels of emissions rather than regulations involving 
certification or in-use maintenance restrictions'' (emphasis added). 
Id. at 1112. The court also cited Adamo Wrecking Co. v. United States, 
434 U.S. 275,286, 98 S.Ct. 566, 573 (1978), in which the Supreme Court 
took a very narrow view of the term ``emission standards,'' stating 
that it only applied to ``a quantitative level,'' not to work practice 
standards. (Adamo was later overruled legislatively twice by Congress. 
Congress first revised section 112 in 1978 and Congress then revised 
section 302 in 1990 to ensure that EPA used a more expansive definition 
of ``emission standard.'')
    However, this approach has some disadvantages. First, it divorces 
the term ``emission standard'' from actual emission reductions. Without 
a mandate to sell cleaner cars, there is no enforceable benefit to 
having numerical emission ``standards'' for those cars. In addition, it 
can be argued that sales requirements do ``relate to the control of 
emissions from new motor vehicles.'' Moreover, such a determination may 
have implications for other requirements in the LEV program and other 
programs, particularly requirements that include averaging, banking and 
trading, requirements that include fleet averaging, and requirements 
where a phase-in is used. (If a phase-in is not a standard, could a 
state require 0% (or 100%) compliance, instead of partial compliance, 
with a standard being phased in over time?) Moreover, the court in MEMA 
stated that the ``only species of emissions control regulation which 
directly addresses air quality is a standard.'' Id. at 1113. This 
language seems consistent with a determination that the term 
``standards'' includes sales requirements because without a sales 
requirement, a numerical limitation on emissions from a type of vehicle 
by itself has no effect on air quality.
    As discussed below, EPA believes that it need not reach a decision 
on this issue at this time. However, EPA requests comment on whether it 
is appropriate in the context of this proceeding to decide this issue.
    Regardless of whether EPA were to find that the ZEV sales 
requirement is a standard, EPA believes that incorporation of the sales 
requirement is not required for the OTC-LEV program to meet the 
requirements for identicality under section 177. 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 
other such standards are identical to the California standards for 
which a waiver has been granted for such model year.''
    EPA believes that section 177 should not be read to require that 
once a state has promulgated one California standard for a particular 
model, the state must adopt all of California's standards relating to 
the control of emissions from all types of motor vehicles for that 
model year. The language of section 177 does not require adoption of 
all California standards for a given model year. Section 177 requires 
only that if a state adopts motor vehicle standards, such standards 
must be identical to California standards. Therefore, the identicality 
requirement only necessitates that the specific standards adopted by 
the state be identical to the comparable California standards. As long 
as the state adopts all standards that are necessary to implement a 
particular California vehicle program,\72\ and as long as the state 
adopts all standards necessitated by the other requirements of section 
177 (e.g., the state must not prevent a California-certified car from 
being sold in the state and must not create a ``third car''), the state 
need not adopt other standards that are not integral to the particular 
program being adopted.
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    \72\EPA believes that all standards applicable to a segregatable 
program must be implemented in order to assure that specific 
vehicles required by a particular program are subject to the same 
emissions requirements (e.g. a state could not adopt only 
California's NMOG standards for a LEV without adopting the NOX 
and CO standards.)
---------------------------------------------------------------------------

    Thus, as discussed in the NPRM, EPA believes that adoption of the 
California LEV program does not require adoption of the California 
heavy-duty engine program. Similarly, EPA believes that section 177 
does not require a state to promulgate standards that are clearly 
segregable from one another.
    EPA believes that the ZEV sales requirement is clearly segregable 
from the rest of the LEV program. The LEV program is essentially 
comprised of several requirements limiting the quantity of emissions 
that may be emitted from particular types of vehicles (e.g. TLEVs, 
LEVs) and two requirements mandating sales of such vehicles. The first 
is the NMOG fleet average. The second is the ZEV sales requirement. 
Without implementation of either of these mandates, the requirements 
defining emission levels for types of vehicles are basically 
unenforceable because, unlike more traditional motor vehicle emission 
programs, the LEV program separates emission levels from mandates to 
buy vehicles meeting such emission levels. In other words, a statute 
defining the levels one must meet for a vehicle to be called a low 
emission vehicle may have little enforceable emissions value, unless 
there is an enforceable requirement to manufacture such a vehicle. The 
NMOG fleet average is the central provision of the LEV program to 
require manufacture of the low emission vehicles in the program and to 
obtain enforceable emission reductions from such vehicles. The ZEV 
sales requirement, on the other hand, is a technology requirement 
essentially designed to ensure the manufacture of technology-forcing 
vehicles. It is designed to create a new generation of vehicles. As 
noted previously, however, the ZEV sales mandate also provides NMOG 
evaporative and tailpipe NOX emissions reduction benefits separate 
and distinct from the NMOG fleet average requirement.
    Though the two mandates are complementary, they are not essential 
for one another. The designs of the vehicles in the LEV program will be 
based on the emission levels that manufacturers must meet. The mandates 
merely tell the manufacturers how many vehicles of each type must be 
built. Each mandate creates a fully functional and enforceable motor 
vehicle emissions program. Therefore, EPA believes that a LEV program 
designed to reduce emissions in the northeast that includes the NMOG 
fleet average may, but need not, include the ZEV sales requirement.
    EPA continues to request comment on whether state incorporation of 
the ZEV sales requirement is necessary to satisfy the identicality 
requirement of section 177.
4. Incorporation of Minor Provisions of the California LEV Program
    The OTC's initial recommendation to EPA does not specifically 
identify every component of the California LEV program that it intends 
to incorporate into the OTC LEV program; nor does the recommendation 
include proposed regulations. Instead the recommendation identifies the 
main elements of the OTC LEV program and the timeframe for the 
regulations.
    EPA believes that the implicit intent of the recommendation was 
incorporation of emission standards that were identical to the 
California LEV program and incorporation of all provisions of 
California's LEV program necessary to ensure consistency with section 
177 for 1999 and later model year passenger cars and light-duty trucks 
(0-5750 pounds loaded vehicle weight). This intent is evidenced by the 
implicit language of the recommendation. The recommendation 
specifically notes that the OTC LEV program is to be applied 
``[p]ursuant to the requirements of section 177.'' EPA believes that 
the listing of the most important provisions of the California LEV 
program to be incorporated was not meant to imply the exclusion of 
other provisions necessary to ensure consistency with section 177. The 
recommendation adopted the OTC LEV program ``including'' the listed 
provisions, implying that other provisions would also be included.
    EPA's interpretation of the petition is further supported by the 
Response to Comments document submitted with the recommendation (and in 
the docket), which clearly states, at page 27, that the recommendation 
has been made consistent with section 177 and 184 of the Act. The 
Response to Comments document also notes, at pages 6 and 33, that the 
provisions of the recommended program were constrained by section 177's 
identicality requirement. Another indication that the OTC clearly 
intended the program to be consistent with section 177 is the fact that 
the recommendation requests incorporation of the ZEV sales requirement 
only to the extent it is required for consistency. Thus, the OTC was 
willing to include this controversial provision if consistency depended 
on its inclusion.
    Moreover, the Executive Director of the OTC, Bruce Carhart, stated 
explicitly, in an April 15, 1994 letter responding to an EPA inquiry, 
that the OTC's ``intention is to maintain identicality with California 
as required by the Clean Air Act.'' Mr. Carhart also indicated that the 
OTC intended to incorporate secondary provisions in California's LEV 
program into the OTC LEV program. EPA believes that it is appropriate 
to use this letter as further evidence of the intent of the Commission. 
Where there is ambiguity in the OTC petition, EPA does not believe that 
its ability to review the OTC recommendation is limited to examining 
the explicit language of the recommendation. Certainly, EPA approval of 
the recommendation cannot include provisions that were not contemplated 
by the recommendation and do not naturally arise from the face of the 
recommendation. However, where the recommendation is ambiguous 
regarding a certain point, EPA believes that, consistent with its 
requirement to consult with the Commission, it may request 
clarification of the OTC petition.
    Further, under Sec. 184(c)(3), if EPA must interpret a 
recommendation in a certain way in order to ensure consistency with the 
Act, and such an interpretation is not inconsistent with the language 
of the recommendation, then EPA is constrained to use that 
interpretation.
    For these reasons, EPA interprets the recommendation to require 
emission standards identical to California's LEV standards and to 
require promulgation of provisions that ensure consistency with section 
177.
    A commenter notes that the OTC recommendation for the NMOG standard 
is not consistent with California's NMOG standard for light-duty trucks 
3751-5750 lbs. This appears to have been an oversight on the part of 
the OTC. As the letter from Mr. Carhart shows, the OTC intended 
separate fleet averages for both classes of light-duty vehicles. 
Consistent with the discussion above, EPA interprets the recommendation 
to recommend NMOG fleet averages identical to California's NMOG 
averages for light-duty vehicles 0-3750 lbs. and for light-duty 
vehicles 3751-5750 lbs.
    EPA does not intend at this time to delineate each portion of the 
California LEV program that is required for satisfaction of the 
requirements of section 177. Such determinations will be made in the 
review of each state plan or in guidance to be issued by EPA later. 
However, EPA notes that the April 15 letter from Bruce Carhart stated 
that the following specific portions of the program have been included 
in the OTC recommendation: The NMOG banking and trading provisions, the 
relevant exemptions for small and intermediate manufacturers, 
provisions for hybrid electric vehicles,\73\ and reactivity adjustment 
factors as necessary for California certification.
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    \73\CARB's LEV program provides for the development and use of 
hybrid electric vehicles (HEVs) as part of the LEV fleet in 
California. HEVs are expected to incorporate an electric motor and 
an auxiliary power unit, such as a combustion engine, to allow for 
the efficient operation of the vehicle's propulsion system as well 
as its other systems, like lighting. CARB provides for three 
different classifications of HEVs in its statutory formula used to 
calculate a manufacturer's fleet average NMOG value. Additionally, 
HEVs are tested differently from LEVs. See Title 13, California Code 
of Regulations, section 1960.1 et. seq.
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5. The NMOG Fleet Average
    As discussed in the April 26, 1994 NPRM, EPA believes that the 
OTC's incorporation of the NMOG fleet average does not violate section 
177. Even if the identicality provision of section 177 does not require 
inclusion of the NMOG fleet average, manufacturers have provided no 
clear argument regarding why inclusion of the NMOG average, which is 
identical to the NMOG average promulgated by California, violates 
section 177. Given that identicality with California standards is a 
primary goal of section 177, any argument that such an identical 
provision is forbidden by section 177 is dubious on its face. Section 
177 was designed to provide manufacturers with assurance that they 
would not be forced to produce several different types of vehicles to 
comply with different state emission standards. Manufacturers have 
provided no evidence that incorporation of the NMOG fleet average will 
in any way cause manufacturers to produce different vehicles than those 
certified for use in California.
    Moreover, as the Second Circuit articulated in the New York case in 
the context of the ZEV sales requirement, the fleet average requirement 
does not violate the requirement of section 177 that states shall not 
prohibit the sale of California cars. While the NMOG average requires 
that a certain number of lower-emitting vehicles must be sold in a 
state to assure compliance, it does not prevent any California-
certified car from being sold. Moreover, as the Second Circuit 
realized, a finding that the fleet average violated section 177 would 
in effect nullify section 177 for all practical purposes with regard to 
the LEV program and any other program that uses any sort of averaging 
or other flexible approach.
    EPA believes that it may be appropriate for the states in the OTC 
to enforce the NMOG fleet average provisions through a regionwide 
averaging system. EPA has received comments supporting such an 
enforcement program. EPA intends to issue guidance after this 
recommendation is approved (if it is finally approved) addressing the 
legal and policy issues implicated by such a program.
6. Averaging, Banking, and Trading
    One commenter noted that as California's LEV program includes a 
banking program and, as California's LEV program will start prior to 
model year 1999, when the state programs under the OTC recommendation 
would begin, a manufacturer may have banked credits under the 
California program by the time the 1999 model year begins.
    EPA does not believe this raises any question regarding consistency 
with section 177. Once again, the state regulations do not require the 
manufacture of a ``third vehicle''; nor do they prevent the sale of 
California certified vehicles in the state, though a slightly different 
mix of vehicles might be required in the first model year for a 
manufacturer who takes advantage of California's banking program. This 
amounts to a business decision by the manufacturer, and it does not 
create any inconsistency. Moreover, a determination that such a 
situation would be inconsistent with section 177 would render section 
177 a nullity for any program that includes banking, because section 
177's lead time requirements make it very difficult for states to begin 
their programs at the same time California begins its program.
7. Applicability of Section 177 in States Without Plan Provisions 
Approved Under Part D
    A comment notes that section 177 applies only to states with plan 
provisions approved under part D. All states in the OTR have such 
approved plan provisions. All states except for Vermont currently 
contain nonattainment areas with associated plans. Vermont has approved 
plan provisions approved under part D related to earlier nonattainment 
problems. See 40 CFR 52.2370(c)(10).

V. SIP Call

A. Explanation of Proposed SIP Call

    EPA recognizes that the timing of its action is critical for the 
states' SIP planning purposes. EPA intends to take final action on the 
OTC's LEV recommendation in November 1994. Under section 184(c)(5), EPA 
is to issue a SIP call under section 110(k)(5) upon approval. EPA 
intends that final action approving the OTC recommendation would also 
entail the SIP call under section 110(k)(5), thus triggering the 
states' obligation to submit SIP revisions to include the OTC LEV (or 
LEV-equivalent) program within one year, or in November 1995. Under any 
circumstances, and regardless of EPA's final action on the OTC LEV 
recommendation, the states are not precluded from adopting and 
submitting a LEV SIP revision at any time consistent with sections 177 
and 209 of the Act, as they have always had the independent authority 
to do.
    EPA recognizes, however, that it is possible an alternative program 
could be promulgated in the future that would achieve equivalent 
emissions reductions from new motor vehicles. Logically, such an 
alternative program that achieves the emission reductions the OTC LEV 
program would achieve, could render the OTC LEV program no longer 
necessary. States could then decide whether to give auto manufacturers 
the choice of meeting either OTC LEV standards or the alternative 
federal program standards. The alternative program would create 
emissions standards applicable to new motor vehicles that automobile 
manufacturers could, at their option, opt for EPA to apply to their new 
motor vehicles. EPA expects that, as long as issues pertaining to the 
enforceability of such standards can be resolved, such alternative 
federal standards could result in emissions benefits in the OTR 
equivalent to those that would result from the OTC LEV program.
    EPA is currently working with the federally chartered Clean Air Act 
Advisory Committee (and a subcommittee created to consider this topic) 
to allow for the possibility of such an alternative program that is in 
the interest of stakeholders and the public at large. EPA expects to 
obtain the advice of the Clean Air Act Advisory Committee considering 
issues related to such a program during the fall of 1994. Thereafter, 
if there is reason to proceed, EPA would undertake a notice-and-comment 
rulemaking to establish the alternative federal standards program, and 
to promulgate such standards early in 1995. EPA expects that it will 
provide a period of time following promulgation for the automakers to 
decide whether to opt into the alternative federal standards program. 
Under a scheme EPA might consider, once automobile manufacturers opt 
into this voluntary program, they would be subject to all provisions of 
the Act and its implementing regulations (particularly provisions 
relating to EPA enforcement of standards) that apply to other mandatory 
standards currently applicable to such vehicles. EPA believes that, in 
this manner, it can establish an alternative mechanism to achieve 
emissions reductions from new motor vehicles equivalent to those that 
the OTC LEV program would achieve in the OTR. The alternative 
rulemaking would need to address a number of questions, including 
whether auto companies should be able to opt out of the program once 
they have opted in, whether states should give up their opportunity to 
adopt or enforce the California LEV program under section 177, and 
whether a consent decree addressing certain discrete issues would be 
useful.
    EPA's proposed SIP call requiring the OTR states to submit SIP 
revisions keeps open the option of an alternative federal program while 
ensuring that necessary emission reductions are not delayed. Under 
EPA's proposed SIP call, each state would be required to submit the OTC 
LEV program as a SIP revision, but the program could allow auto 
manufacturers either to comply with the OTC LEV standards or to opt 
into and comply with EPA promulgated alternative standards, if such 
standards are developed. The states' regulations could provide that the 
LEV program would not apply to auto manufacturers who are subject to an 
equivalent federal program. The states' SIP revisions would have to 
limit this exception to automakers subject to an alternative federal 
program that EPA has promulgated as equivalent to the OTC LEV program. 
EPA would address the criteria for its determination of equivalence in 
any alternative federal standards rulemaking. Under this approach, the 
automakers would not necessarily have to forfeit their ability to opt 
out when they opt into the alternative standards program. Since the 
states would all have to adopt and submit an OTC LEV SIP revision, 
automakers that either do not opt into or later opt out of the 
alternative standards program would be required to comply with the 
states' OTC LEV program.
    If EPA approves the OTC petition within the time specified by the 
Act, states' SIP revisions would be due in November 1995. If states 
delayed only slightly in meeting this deadline, it could result in an 
inability to apply the standards to all vehicles in model year 1999.
    Another benefit of EPA's proposed approach is that the automakers 
need not all make the same choice. Rather, automakers could 
independently choose whether to achieve the necessary emissions 
reductions by opting into and complying with an equivalent federal 
program or by complying with the OTC LEV program. Further, if the 
automakers were to attach any conditions to their opt in to a federal 
program allowing them to escape its obligations and were to trigger 
such an escape provision, they would then fall back to mandatory 
compliance with the states' adopted OTC LEV programs.
    EPA is taking comment on whether, if all automakers opted into an 
alternative federal standards program and did not have a right to opt 
out, the states should have to adopt the OTC LEV program. The only 
benefit EPA sees to such an approach is that the states' LEV program 
would then be necessary as a ``back-stop'' mechanism used solely to 
ensure that the automakers would not opt out of the alternative 
standards program.
    EPA is also considering another approach that would eliminate the 
burden of state adoption of the OTC LEV program if all the automakers 
opt into an alternative federal program. Under this second option, if 
the Agency promulgates alternative emissions standards and auto 
manufacturers opt into that program and commit not to opt out, the OTC 
states' obligation to submit OTC LEV SIP revisions would automatically 
terminate as no longer necessary. EPA urges states to respond under 
either approach to a final approval with immediate action to prepare to 
submit an OTC LEV SIP revision to EPA by November 1995.
    EPA recognizes that the states have authority to adopt whatever 
measures they choose beyond those mandated in the Act in order to 
achieve the necessary emissions reductions. EPA is therefore also 
proposing that it would retain authority in issuing the SIP call to 
change its necessary determination and withdraw its SIP call for those 
states that adopt controls, including those applicable to stationary 
and mobile sources, sufficient to comply with section 110(a)(2)(D).

B. Legal Basis To Provide for Possibility of Alternative Standards 
Program in SIP Call

    While EPA believes that the emissions reductions that the OTC LEV 
program would achieve are necessary, the Agency recognizes that another 
program to achieve equivalent reductions from the same emissions 
sources could render the OTC LEV program unnecessary. But at this 
juncture the Clean Air Act precludes EPA from mandating another program 
modifying the Tier 1 controls on new light-duty vehicles to achieve 
further emission reductions.74 The OTC's recommendation 
specifically included in its recitation clauses the OTC's expectation 
that EPA would evaluate alternatives comparable to the OTC LEV program, 
``including the program presented by the automobile manufacturers with 
enhancements.'' Especially in light of this statement, EPA believes it 
is appropriate to leave open the possibility that an environmentally 
equivalent alternative to OTC LEV that is mutually acceptable to the 
states and automakers could be developed that would eliminate any need 
for the states to apply the OTC LEV standard.
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    \7\4Section 209 of the Act preempts states (other than 
California) from establishing new motor vehicle emissions standards, 
leaving such regulation to EPA under title II of the Act. See EPA's 
earlier notices regarding OTC LEV, 59 FR at 21734 (April 26, 1994); 
59 FR at 12915 (March 18, 1994). Of course, section 177 of the Act 
provides an exception whereby the OTC states could adopt standards 
that are identical to California's standards if certain conditions 
are satisfied. It is this exception that the OTC has relied upon in 
recommending that EPA require the states to adopt LEV standards 
identical to those California adopted in its LEV program. But the 
states in the OTR cannot establish alternative new motor vehicle 
emissions standards different from but equivalent to California's 
standards. Likewise, 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, and thus cannot mandate an alternative that would achieve 
equivalent reductions. See 59 FR at 21730 (April 26, 1994).
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    EPA believes that it is legally appropriate for it to specify in 
its SIP call that the consummation of an alternative federal program 
that achieves equivalent environmental benefits could alter the 
Agency's conclusion regarding necessity. Thus, the Agency believes it 
may specify criteria in this regard that, if satisfied, will terminate 
the states' obligations under the SIP call to apply the LEV standards 
to manufacturers subject to an equivalent alternative program. At the 
same time, EPA does not believe there is any reason to wait to 
determine whether the alternative federal program will be consummated 
before issuing the SIP call based on the finding that the OTC LEV 
program is necessary. EPA believes that additional new-vehicle tailpipe 
emission reductions achievable by the OTC LEV program are necessary. 
EPA cannot now assume, based on merely the prospect of an alternative 
federal program and permanent opt-in by all auto manufacturers, that 
OTC LEV will become unnecessary. Moreover, as explained earlier, EPA 
believes it is important to act now for several reasons, including the 
statutory deadline under section 184, the statutory requirement that 
the states provide two years of lead-time before they can apply 
standards under section 177 and the length of time it takes for the 
fleet to turn over.
    EPA believes it may issue a SIP call that would require that states 
submit SIP revisions to include the OTC LEV program, but that would 
allow the states to accept compliance with an equivalent alternative 
program instead. Under this option, as discussed above, the states' 
obligation to submit the OTC LEV program SIP revision would not 
terminate upon the automakers' opt-in to an alternative standards 
program. This would be necessary, for example, if EPA structured the 
alternative program such that the automakers could opt out of it. 
Indeed, the automakers might insist that they retain such an ``escape'' 
in case any state exercised its continuing authority under section 177 
to adopt California standards not consistent with the alternative 
federal program. Under this structure, the promulgation of the 
alternative program would not guarantee that the OTC LEV program would 
not be necessary, even if all automakers were to opt in initially.
    Rather, EPA believes it might appropriately conclude that, as to 
any particular automaker that opts in and complies with the alternative 
program for any period of time, the OTC LEV program would not be 
necessary for that automaker for that time. Thus, EPA believes it might 
find the OTC LEV program necessary but allow states to withhold 
implementation of the OTC LEV standards for automakers that opt into 
the alternative program for as long as they remain in that program. EPA 
believes this approach, too, fits squarely within its authority under 
sections 184(c) and 110(k)(5). That is, just as EPA believes it may 
take account of the possibility that an equivalent alternative program 
could render OTC LEV no longer necessary, an equivalent alternative 
program could render OTC LEV unnecessary for particular manufacturers 
only for as long as they are bound by that program. EPA believes it may 
fashion its approach to take account of this, so that the states must 
revise their SIPs to include the necessary OTC LEV program, but need 
only apply it to those parties for whom and when it is ``necessary'' in 
light of those parties' choices. In sum, under section 110(k)(5), EPA 
believes it may require that states revise their SIPs as necessary to 
comply with section 110(a)(2)(D), but may allow states to account in 
such SIP revisions for circumstances where application of the standards 
may not be necessary.

C. Sanctions

    Under section 179(a), if EPA finds that a state fails to make a 
submission required under the Act, one of the sanctions specified in 
section 179(b) is to apply unless the deficiency has been corrected 
within 18 months after EPA's finding of failure to submit or 
incompleteness under section 110(k). Section 179(b) specifies two 
sanctions available to the Administrator: Withholding of certain 
highway funding under section 179(b)(1); and application of a 2:1 
offset ratio to new or modified stationary sources of emissions for 
which a new source review permit is required under part D of title I.
    EPA recently promulgated final regulations to implement section 179 
of the Act, which specifies sanctions that are to apply where states 
fail to make a submission required under the Act. See 59 FR 39832 (Aug. 
4, 1994). These regulations specify the order in which these sanctions 
will apply in the case of state non-compliance with provisions of the 
Act. These regulations do not, however, address the imposition of 
sanctions in the case of state failure to comply with a SIP call under 
section 110(k)(5) of the Act. Since EPA is proposing a SIP call in this 
rulemaking, EPA believes it is appropriate to propose the order of 
sanctions for purposes of failure to comply if the SIP call is 
promulgated as a final regulation. EPA believes that the general scheme 
promulgated for sanctions generally should also apply here. Under that 
scheme, EPA will generally apply the 2:1 offset sanction first and the 
highway finding sanction second. EPA believes the rationale for this 
approach in the sanctions rule applies with equal force here. In 
addition, EPA is considering whether the particular circumstances here 
that states must adopt the OTC LEV program by January 2, 1996 in order 
to comply with the two-year lead-time requirement prior to model year 
1999 may merit acceleration of sanctions. That is, EPA requests comment 
on whether it should provide in the final rule that discretionary 
sanctions under section 110(m) of the Act would apply beginning 
immediately upon a finding of failure to submit the OTC LEV program.

VI. Determination of Model Year

A. Introduction

    EPA is proposing today to promulgate regulations determining, for 
the purposes of section 177 and Part A of Title II of the Clean Air 
Act, the definition of the term ``model year'' as it applies to motor 
vehicles and motor vehicle engines. This determination should remove 
any confusion regarding when a model year commences under section 177. 
EPA is proposing this determination in this SNPRM because, if EPA 
approves the OTC's LEV recommendation, the OTR states will be required 
to adopt the LEV program under the provisions of section 177 of the 
Act. The definition of the term ``model year,'' in particular, the 
issue of when a model year begins, has been a major issue in the 
litigations that have resulted from New York and Massachusetts's 
attempts to adopt California LEV standards under section 177. These 
litigations have led to considerable confusion regarding when a model 
year commences under section 177. EPA intends to remove this confusion 
by providing nationally consistent regulations providing detailed 
information regarding the term ``model year,'' including when such 
model years commence.

B. Statutory and Regulatory Requirements

    Section 177 of the Act provides that any state which has plan 
provisions approved under part D may adopt and enforce California 
standards for any model year if such standards are identical to the 
California standards for which a waiver has been granted for such model 
year and 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).'' Section 202(b)(3)(A)(i) of the Act 
defines model year as ``the manufacturer's annual production period (as 
determined by the Administrator) which includes January 1 of such 
calendar year. If the manufacturer has no annual production period, the 
term `model year' shall mean the calendar year.'' This definition of 
model year is repeated in regulations at 40 CFR Sec. 86.082-2 (1992).
    EPA has not promulgated regulations providing more specific EPA 
rules regarding determination of model year. Instead, EPA has 
historically relied on Advisory Circulars to clarify agency policy on 
the determination of model year and has used these policies and 
definitions in the enforcement of Federal programs such as vehicle 
certification. The first guidance regarding model year was issued on 
March 27, 1972 (Mobile Source Pollution Control Program (MSPC) Advisory 
Circular 6). This guidance was revised by MSPC Advisory Circular 6A 
(September 1, 1972). The most recent iteration of this guidance was 
issued on December 31, 1987 (EPA Office of Mobile Sources Advisory 
Circular 6B).

C. New York and Massachusetts Litigations

    While Advisory Circulars have been an adequate mechanism for the 
purposes of establishing Agency policies and using such policies for 
enforcement matters, the fact that EPA relies on Advisory Circulars in 
addition to its regulations has been an issue in litigation challenging 
the adoption of the California LEV program by New York and 
Massachusetts. Section 177 states that the term ``model year'' shall be 
``as determined by regulations of the Administrator.'' In the New York 
litigation (Motor Vehicle Manufacturers Association v. NYDEC, 17 F. 3d 
521 (2d Cir. 1994), the U.S. Court of Appeals for the Second Circuit 
determined that the Advisory Circulars were not entitled to the 
deference normally provided to Agency decisions under Chevron U.S.A. 
Inc. v. Natural Resources Defense Counsel, 467 U.S. 837, 843 (1984). 
The Second Circuit found that the circulars were not ``regulations'' 
required under section 177 and were, in any case, not prepared 
specifically to implement section 177.75 The court also found that 
application of Advisory Circular 6B to section 177 was ``newly minted'' 
for the New York litigation,76 and thus was entitled to little 
deference. The court then provided its own opinion regarding the most 
appropriate interpretation of the term ``model year'' in the section 
177 context, and found that ``absent promulgated EPA regulations, 
`model year' is best read as applying on an industry-wide basis.'' Id., 
at 535. As discussed below, the Second Circuit based its opinion on the 
perceived practical problems that would occur if ``model year'' were 
defined by engine family, rather than industry-wide, given the 
existence of the NMOG fleet averaging program, as well as questions 
regarding Congressional intent, industry confusion and enforceability.
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    \7\5The Agency had filed an amicus curiae brief in this case, as 
well as in the Massachusetts case, that argued that the Agency's 
decision, as delineated in the Advisory Circulars, was entitled to 
Chevron deference.
    \7\6As shown in the Massachusetts case, discussed below, this 
determination was factually incorrect.
---------------------------------------------------------------------------

    In the Massachusetts litigation, AAMA v. Greenbaum, No. 93-2276 
(1st Cir., Aug. 3, 1994), the First Circuit decided not to follow the 
lead of the Second Circuit, and instead upheld the EPA's implementation 
of ``model year,'' as delineated in Advisory Circular 6B. Id., slip op. 
at 11-24.77 However, the First Circuit noted that an argument 
could be raised that the EPA Advisory Circular is owed no deference 
because section 177 specifically requires EPA to define ``model year'' 
by regulation, not policy statements. The First Circuit found that 
since plaintiffs had not raised the argument in earlier proceedings, it 
was precluded from raising the issue in its appeal.
---------------------------------------------------------------------------

    \7\7In so doing, the First Circuit noted that the EPA's policy 
had not been newly minted for these litigations, but had been issued 
in 1987 and had been applied to section 177 in a letter to 
Congressman John Dingell (D. Mich.) on March 7, 1991, prior to 
litigation.
---------------------------------------------------------------------------

    Judicial review of this issue has thus resulted in contrary results 
from the two courts of Appeals that have ruled on the matter. However, 
while there was division in the circuit courts as to the final result, 
both courts commented on the lack of EPA regulations that define model 
year for the purpose of determining compliance with section 177. Though 
EPA continues to believe that the existing regulations and Advisory 
Circulars are entitled to Chevron deference, EPA is proposing new 
regulations specifying its definition of model year as that term is 
used in section 177 of the Act in an effort to remove further confusion 
regarding this issue and to provide national consistency. EPA is also 
proposing to apply these regulations to ``model year'' as that term is 
used for regulation of motor vehicles under Part A of Title II of the 
Act. EPA is not proposing to extend this determination at this time to 
regulation of nonroad engines and vehicles, which may require somewhat 
different provisions for ``model year.''

D. Determination of Model Year

    The determination EPA is proposing today for implementation of 
section 177 shall include the regulatory definition of model year as 
that term has been defined under section 202 of the Act. It shall also 
include the more specific determinations regarding model year, 
including the definition of ``production period,'' delineated in 
Advisory Circular 6B (Dec. 31, 1987). This Advisory Circular addresses 
the duration of model year, defines production period and provides 
information on EPA policy concerning the duration and applicability of 
certificates of conformity. It notes that a specific model year must 
include January 1 of the calendar year for which it is designated and 
may not include a January 1 of any other calendar year, thus limiting 
the duration of a model year to a calendar year plus 364 days. In 
addition, Advisory Circular 6B defines ``annual production period'' for 
any specific model within an engine family of light-duty vehicles or 
heavy-duty engines as beginning either:

    ``(1) When such vehicle or engine is first produced, or (2) on 
January 2 of the calendar year preceding the year for which the 
model year is designated, whichever date is later.
    The annual production period ends either: (1) when the last such 
vehicle or engine is produced, or (2) on December 31 of the calendar 
year for which the model year is named, whichever date is sooner.''

    EPA believes that the definitions of ``duration of model year'' and 
``production period for specific models within an engine family'' which 
are contained in Advisory Circular 6B are the appropriate definitions 
to be used to determine compliance with section 177 as well as to 
determine compliance with the programs for which the Advisory Circular 
has been used in the past. EPA believes these definitions, and the fact 
that the production period is based on specific models within engine 
families, provide vehicle manufacturers the maximum flexibility in 
terms of adjusting the model year designation of their product line to 
marketing needs and product changes. By permitting the designation of 
specific engine families, or models within families, as ``pull ahead'' 
model year families without affecting the remainder of the vehicles in 
the model year they are presently building, a manufacturer will be 
able, for example, to launch a new vehicle as a 1995 model year vehicle 
while the remainder of their models are being produced as 1994 models.
    EPA also believes that a determination that model year should be 
determined on a ``model-by-model'' basis is more appropriate than an 
interpretation that ``model year'' should begin at the same time 
industry-wide because the two-year lead-time of section 177 is better 
fulfilled through a ``model-by-model'' approach. Manufacturers 
determine the start date for manufacture of vehicle models on a model-
by-model basis. Therefore, individual manufacturers are in the best 
position to determine when each model they produce in a model year will 
begin production. The lead-time provisions of section 177 were designed 
to give manufacturers sufficient lead-time to produce California 
vehicles necessary to meet the supply needs of any state that 
promulgates standards under section 177 (``177 state''). There is no 
indication that Congress intended that states be unable to regulate 
vehicle models that do not begin production before the two-year 
deadline. Nor is there any practical reason why a particular vehicle 
model should not be covered. Manufacturers are well aware of their own 
production schedules and can assure that any vehicle models that begin 
production after the two-year lead-time ends meet the California 
requirements in a particular state.78
---------------------------------------------------------------------------

    \7\8Automobile dealerships in an affected state would be able to 
contact their manufacturers to find out which vehicle models must be 
sold to California standards in a particular state.
---------------------------------------------------------------------------

    EPA does not agree with the Second Circuit that an ``industry-
wide'' approach to model year would be more appropriate in the context 
of California's NMOG fleet averaging program.79 In fact, though a 
``model-by-model'' approach might be more complicated, it actually 
provides to manufacturers more control over the particular engine 
models that will be subject to an averaging program for a particular 
model year, especially compared to an ``industry-wide'' approach. Under 
the ``industry-wide'' approach, a manufacturer commencing production of 
its vehicles after the lead-time expires cannot determine for itself 
what models would be subject to the California requirements, but must 
instead find out whether any of its competitor manufacturers have begun 
production of a model for that model year prior to the deadline.
---------------------------------------------------------------------------

    \7\9EPA notes that this model year determination must be geared 
toward application to all programs that may be promulgated by 
California, not merely the programs promulgated as part of the LEV 
program. Therefore, application of the model year determination to a 
particular program should not be given overwhelming weight in our 
determination. As the First Circuit noted, ``[f]leet averaging for 
emissions programs is a concept devised by California, not 
Congress.''
---------------------------------------------------------------------------

    Moreover, the increased complexity that may be caused by different 
emission requirements for different vehicles in a single model year is 
not unique to the Agency's approach to the term ``model year'' under 
section 177. In fact, any program that includes a phase-in of standards 
(e.g. the ``Tier I'' requirements of section 202(g)) results in 
different standards for different cars within a model year. Moreover, 
the California LEV program itself contemplates that different cars will 
be certified to different standards during a single model year.
    Also, any increased complexity must be balanced against the 
emissions benefits of such a decision. The best example of the severe 
emissions detriment that will occur if the ``industry-wide'' approach 
is used is the example of Massachusetts' implementation of the 
California vehicle program for model year 1995. Massachusetts' 
promulgation of rules requiring model year 1995 cars to meet California 
standards was completed by January 31, 1992. This gave manufacturers a 
full two years of lead-time for any vehicle model that began production 
after January 31, 1994. However, model year 1995 could begin, under EPA 
rules, by January 2, 1994, and a few vehicle models had begun 
production by that time. If the ``industry-wide'' approach had been 
used for the Massachusetts situation, then, conceivably, all 
manufacturers could continue to provide all of their model year 1995 
vehicles to Massachusetts until December 31, 1995 without meeting the 
California standards for any of the vehicles. Thus, there would be 
close to four years between promulgation of the Massachusetts rule and 
full compliance with such rule by manufacturers. Moreover, the 
``industry-wide'' rule would require that California standards not be 
enforced for any vehicles manufactured in the 1995 model year. Since 
the 1996 model year does not begin for any vehicle until, at the 
earliest, January 2, 1995, the ``industry-wide'' rule would provide 
almost three full years between promulgation and any enforcement of 
California standards. The emissions increases that would result from 
the loss of a full model year from the California program could have a 
significant impact on air pollution in ``177 states'' and on the 
ability of such states to meet the attainment deadlines provided in the 
Clean Air Act.
    The ``model-by-model'' approach is also preferable to the 
``manufacturer-by-manufacturer'' approach80 because it 
substantially lessens the competitiveness concerns that could otherwise 
result. Given that under the ``model-by-model'' approach, the 
determination of model year would be based on when each individual 
model begins production, there would be less of an opportunity for a 
manufacturer to exempt its entire vehicle fleet for a full model year 
by beginning production of one vehicle model before the two year 
deadline. Thus, there is considerably less likelihood that two 
manufacturers will have to meet different emission standards for all of 
their vehicles for a particular year based only on when one model for a 
particular manufacturer began production. Instead, the ``model-by-
model'' approach is likely to result in similar percentages of vehicles 
for each manufacturer being covered by California rules for the 
``split'' model year.
---------------------------------------------------------------------------

    \8\0The ``manufacturer-by-manufacturer'' approach would allow 
any manufacturer that had begun production of any model before the 
two year deadline to escape enforcement of the state regulations for 
every model produced by that manufacturer during that model year. 
This approach had been mandated by the trial court in the New York 
LEV case before the Second Circuit opinion was delivered, see MVMA 
v. NYDEC, 831 F. Supp. 57 (1993).
---------------------------------------------------------------------------

    Finally, EPA disagrees with the Second Circuit's belief that 
Congress did not contemplate a ``split'' model year approach, 
differentiating manufacturers based on when each commences production. 
In fact, EPA's initial Advisory Circulars explaining EPA's ``model-by-
model'' approach were announced in 1972, five years before section 177 
was added to the Clean Air Act. Congress must have at least 
``contemplated,'' if not in fact expected, that EPA would interpret 
``model year'' for section 177 as it had for section 202.

VII. Statutory Authority

    Authority for the action in this notice is in sections 177, 184, 
176(A), 110, 202, 206, 209, 307(d), and 301 of the Clean Air Act, as 
amended, 42 U.S.C. 7511c, 7506a, 7525, 7410, 7607(d), and 7601.

VIII. Administrative Designation and Regulatory Analysis

    Under Executive Order 12866, 58 FR 51735 (Oct. 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 12866, since this 
action could result in a rule that would have a substantial impact, 
this notice is a ``significant regulatory action'' because the 
estimated range of annual costs of the California LEV program in the 
OTC states is between $300 million and $1.6 billion. As such, this 
action was submitted to OMB for review. Changes made in response to OMB 
suggestions or recommendations will be documented in the public record. 
EPA has prepared an economic analysis for this rule under E.O. 12866. A 
copy of this analysis has been placed in the docket. Any written 
comments to EPA and any written EPA responses to those comments 
regarding this analysis will be included in the docket for this 
proceeding.

IX. 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 
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 a 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.
    Nevertheless, the Agency has considered the effect of an OTC LEV 
program on new and used car dealerships as part of its regulatory 
impact analysis, even though such analysis is not required because 
these businesses would not be directly regulated under the rule. The 
results of this analysis, set forth in the RIA, indicate that the OTC 
LEV would not have a significant economic impact on automobile 
dealerships.

X. 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.

List of Subjects in 40 CFR Part 85

    Environmental protection, Air pollution control, Motor vehicle 
pollution, Penalties.

    Dated: September 13, 1994.
Carol M. Browner,
Administrator.

    For the reasons set out in the preamble, part 85 of title 40 of the 
Code of Federal Regulations is proposed to be amended as follows:

PART 85--CONTROL OF AIR POLLUTION FROM MOTOR VEHICLES AND MOTOR 
VEHICLE ENGINES

    1. The authority citation for part 85 is revised to read as 
follows:

    Authority: 42 U.S.C. 7507, 7521, 7522, 7524, 7525, 7541, 7542, 
7543, 7547, 7601(a), unless otherwise noted.

    2. Part 85 is amended by adding subpart X to read as follows:
Subpart X--Determination of Model Year for Motor Vehicles and Engines 
Used in Motor Vehicles Under Section 177 and Part A of Title II of the 
Clean Air Act
Sec.
85.2301  Applicability.
85.2302  Definition of model year.
85.2303  Duration of model year.
85.2304  Definition of production period.
85.2305  Duration and applicability of certificates of conformity.

Subpart X--Determination of Model Year for Motor Vehicles and 
Engines Used in Motor Vehicles Under Section 177 and Part A of 
Title II of the Clean Air Act


Sec. 85.2301  Applicability.

    The definitions provided by this subpart are effective [EFFECTIVE 
DATE OF FINAL RULE] and apply to all light-duty motor vehicles and 
trucks, heavy-duty motor vehicles and heavy-duty engines used in motor 
vehicles, and on-highway motorcycles as such vehicles and engines are 
regulated under section 177 and Title II part A of the Clean Air Act.


Sec. 85.2302  Definition of model year.

    Model year means the manufacturer's annual production period (as 
determined under Sec. 85.2304) which includes January 1 of such 
calendar year, provided, that if the manufacturer has no annual 
production period, the term ``model year'' shall mean the calendar 
year.


Sec. 85.2303  Duration of model year.

    A specific model year must always include January 1 of the calendar 
year for which it is designated and may not include a January 1 of any 
other calendar year. Thus, the maximum duration of a model year is one 
calendar year plus 364 days.


Sec. 85.2304  Definition of production period.

    The ``annual production period'' for any specific model within an 
engine family of light-duty motor vehicle or heavy-duty motor vehicles 
and engines begins either: When such vehicle or engine is first 
produced; or on January 2 of the calendar year preceding the year for 
which the model year is designated, whichever date is later. The annual 
production period ends either: When the last such vehicle or engine is 
produced; or on December 31 of the calendar year for which the model 
year is named, whichever date is sooner.


Sec. 85.2305  Duration and applicability of certificates of 
conformity.1
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    \\\1\The extended coverage period described here for a 
certificate of conformity (i.e., up to one year plus 364 days) is 
primarily intended to allow flexibility in the introduction of new 
models. Under no circumstances should it be interpreted that 
existing models may ``skip'' yearly certification by pulling ahead 
the production of every other model year. While this situation, to 
the Agency's knowledge, has not occurred in the past, a practice of 
producing vehicles for a two year period would violate Congress's 
intent of annual certification based upon an annual production 
period. The Agency is not currently setting forth rules for how to 
determine when abuse has occurred, since this has not been a problem 
to date. However, the Agency is requiring that manufacturers shall 
continue to use normal yearly production periods for existing 
models.
---------------------------------------------------------------------------

    (a) Except as provided in paragraph (b) of this section, a 
certificate of conformity is deemed to be effective and cover the 
vehicles or engines named in such certificate and produced during the 
annual production period, as defined in Sec. 85.2304.
    (b) Section 203 of the Clean Air Act prohibits the sale, offering 
for sale, delivery for introduction into commerce, and introduction 
into commerce of any new vehicle or engine not covered by a certificate 
of conformity unless it is an imported vehicle exempted by the 
Administrator or otherwise authorized jointly by EPA and U.S. Customs 
service regulations. However, the Act does not prohibit the production 
of vehicles or engines without a certificate of conformity. Vehicles or 
engines produced prior to the effective date of a certificate of 
conformity, as defined in paragraph (a) of this section, may also be 
covered by the certificate if the following conditions are met:
    (1) The vehicles or engines conform in all respects to the vehicle 
or engines described in the application for the certificate of 
conformity;
    (2) The vehicles or engines are not sold, offered for sale, 
introduced into commerce, or delivered for introduction into commerce 
prior to the effective date of the certificate of conformity;
    (3) The Agency is notified prior to the beginning of production 
when such production will start, and the Agency is provided full 
opportunity to inspect and/or test the vehicles during and after their 
production; for example, the Agency must have the opportunity to 
conduct selective enforcement auditing production line testing as if 
the vehicles had been produced after the effective date of the 
certificate.
    (c) Vehicles or engines imported by an original equipment 
manufacturer after December 31 of the calendar year for which the model 
year is named are still covered by the certificate of conformity as 
long as the production of the vehicle or engine was completed before 
December 31 of that year. This paragraph does not apply to vehicles 
that may be covered by certificates held by independent commercial 
importers unless specifically approved by EPA.
    (d) Vehicles or engines produced after December 31 of the calendar 
year for which the model year is named are not covered by the 
certificate of conformity for that model year. A new certificate of 
conformity demonstrating compliance with currently applicable standards 
must be obtained for these vehicles or engines, even if they are 
identical to vehicles or engines built before December 31.

[FR Doc. 94-23112 Filed 9-21-94; 8:45 am]
BILLING CODE 6560-50-P