[Federal Register Volume 60, Number 15 (Tuesday, January 24, 1995)]
[Rules and Regulations]
[Pages 4712-4739]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1387]



      

[[Page 4711]]

_______________________________________________________________________

Part III





Environmental Protection Agency





_______________________________________________________________________



40 CFR Part 51, et al.



Low Emission Vehicle Program for the Northeast Ozone Transport Region; 
Final Rule

  Federal Register / Vol. 60, No. 15 / Tuesday, January 24, 1995 / 
Rules and Regulations   
[[Page 4712]] 

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52 and 85

[FRL-5141-8]
RIN-2060-AF15


Final Rule on Ozone Transport Commission; Low Emission Vehicle 
Program for the Northeast Ozone Transport Region

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: At the request of the Northeast Ozone Transport Commission 
(OTC), EPA is announcing today its final determination that reduction 
of new motor vehicle emissions throughout the Northeast Ozone Transport 
Region (OTR) is necessary to mitigate the effects of air pollution 
transport and to bring nonattainment areas in the OTR into attainment 
(including maintenance) of the national ambient air quality standard 
for tropospheric ozone (smog). This will assist OTR states in their 
efforts to reduce ozone pollution to the level necessary to protect 
public health. EPA today approves the recommendation of the OTC and 
promulgates a rule under sections 184 and 110 of the Clean Air Act (the 
Act) that requires emission reductions from new motor vehicles in the 
OTR equivalent to the reductions that would be achieved by the OTC Low 
Emission Vehicle (OTC LEV) program.
    States would be relieved of their obligations under this 
requirement if EPA were to find that all automakers had opted into an 
acceptable LEV-equivalent new motor vehicle program. EPA believes that 
such a program, which would be far better than OTC LEV, could be agreed 
upon and adopted in the near future. States' obligations under this 
requirement could also be met by a state's revision of its state 
implementation plan to include the OTC LEV program. Today's action 
gives states additional flexibility by also allowing a state the option 
of adopting a set of measures that would achieve certain emission 
reductions needed to prevent the state's adverse pollutant transport 
impacts.
    EPA is also promulgating a final rule today 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 regulations to be codified in 40 CFR parts 51 and 52 are 
effective February 15, 1995. The regulations to be codified in 40 CFR 
part 85 are effective February 23, 1995.

ADDRESSES: Materials relevant to this final rule are contained in EPA 
Air Docket No. A-94-11, located at the Air Docket (LE-131) of the EPA, 
room M-1500, 401 M Street SW., Washington, DC 20460, tel. (202) 260-
7548. Interested parties may inspect the docket between the hours of 8 
a.m. to 5:30 p.m., Monday through Friday except on federal holidays.

FOR FURTHER INFORMATION CONTACT: Mike Shields, Office of Mobile 
Sources, US EPA, 401 M Street, SW., Washington, DC 20460, tel. (202) 
260-7757.

SUPPLEMENTARY INFORMATION:

I. Outline and Introduction

    This final rule preamble is organized into the following sections:

I. Outline and Introduction
    A. Introduction
    B. LEV-Equivalent Program
    1. Cleaner Conventional Cars and Light-Duty Trucks
    2. Advanced Technology Vehicles
    3. Enforcement of a LEV-Equivalent Program
    4. Criteria for an Acceptable LEV-Equivalent Program
    5. State Obligations if an Acceptable LEV-Equivalent Program is 
in Effect
    C. Procedural Background
II. Description of Action
III. Statutory Framework for the SIP Call
    A. Section 184
    B. Section 110
    C. Consistency of EPA Action with Sections 177, 202 and 209 of 
the Act
IV. Basis for Requiring OTC LEV or a LEV-Equivalent Program
    A. Necessity
    1. Legal Interpretation of Necessity
    2. Emission Reductions from OTC LEV or a LEV-Equivalent Program 
are Needed
    a. Magnitude of Reductions Needed for Attainment in 2005
    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 Reductions from OTC LEV or LEV-
Equivalent Program Are Necessary
    iv. ZEV Equivalency
    d. The Effect of a Possible LEV-Equivalent Program on the Need 
for OTC LEV.
    e. Particular Circumstances of OTC LEV Program
    f. Conclusions Regarding Need for OTC LEV or a LEV-Equivalent 
Program for Purposes of Bringing Downwind States into Attainment by 
the Dates Provided in Subpart 2 of Part D of Title I
    3. OTC LEV or LEV-Equivalent Program is Also Needed for 
Maintenance
    a. Legal Analysis
    b. Technical Analysis
    4. Relevance of EPA Transport Policy
    B. Consistency of OTC LEV with Section 177 of the Clean Air Act
    1. Introduction
    2. California Fuel Regulations
    3. ZEV Production Mandate
    4. Incorporation of Minor Provisions of the California LEV 
Program
    5. NMOG Fleet Average
    6. Averaging, Trading, and Banking
    7. Applicability of Section 177 in States Without Plan 
Provisions Approved Under Part D of Title I
V. Action on OTC Petition, Issuance of Findings of SIP Inadequacy, 
and Requirements for SIP Revisions
    A. Action on OTC Petition and Explanation of SIP Call
    B. State Requirements Under EPA SIP Call
    C. Sanctions
VI. Determination of Model Year
VII. Effective Date
VIII. Statutory Authority
IX. Administrative Designation and Regulatory Analysis
X. Impact on Small Entities
XI. Paperwork Reduction Act

A. Introduction

    In today's action, EPA takes a significant step towards the goal of 
reducing smog in the heavily populated northeast region of the country. 
The northeast has some of the most severe smog pollution in the 
country--pollution reaches levels much higher than are healthy. Ground-
level ozone, the main harmful ingredient in smog, is produced by the 
combination of volatile organic compounds (VOCs) and nitrogen oxides 
(NOX).1 The chemical reactions that create smog take place 
while the pollutants are being blown through the air by the wind, which 
means that smog can be more severe miles away from the source of 
pollution than it is at the source.

    \1\In the upper atmosphere, or stratosphere, ozone occurs 
naturally and forms a protective layer, which shields us from the 
sun's harmful ultraviolet rays. However, in the lower atmosphere, or 
at ``ground level,'' man-made ozone can cause a variety of problems 
to human health, crops and trees.
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    Ground-level ozone causes health problems because it damages lung 
tissue, reduces lung function, and sensitizes the lungs to other 
irritants. Scientific evidence indicates that ambient levels of ozone 
not only affect people with impaired respiratory systems, such as 
asthmatics, but healthy adults and children as well. Exposure to ozone 
for six to seven hours at relatively low concentrations has been found 
to reduce lung function significantly in normal, healthy people during 
periods of moderate exercise. This decrease in lung function is often 
accompanied by such symptoms as chest pain, coughing, nausea, and 
pulmonary congestion.
    Though these effects are not as well established in humans, animal 
studies [[Page 4713]] have demonstrated that repeated exposure to ozone 
for many months can produce permanent structural damage in the lungs 
and accelerate the rate of lung function loss, as well as the lung 
aging period. Each year ground-level ozone is also responsible for 
several billion dollars worth of agricultural crop yield loss. It also 
causes noticeable foliar damage in many crops and species of trees. 
Studies also indicate that current ambient levels of ozone are 
responsible for damage to forests and ecosystems.
    As part of efforts to reduce harmful levels of smog, today's action 
approves the recommendation of an organization of northeastern states 
that EPA require all the northeastern states to adopt the California 
car program to reduce significantly the pollution emitted by new cars 
and light-duty trucks. This requirement could be met either by state 
adoption of the California car program or by having a nationwide 
alternative car program in effect that would achieve emissions 
reductions at least equivalent to what the California car program would 
achieve. Motor vehicles are a significant cause of smog because of 
their emission of VOCs and NOX. EPA has projected that, without 
the California car (or an equivalent) program in the northeastern 
states, highway vehicles will account for approximately 38% of NOX 
and 22% of VOC anthropogenic (man-made) emissions in 2005. EPA 
currently estimates that VOC emissions should be reduced by 
approximately 95 tons per day and NOX emissions by approximately 
195 tons per day as a result of today's action.2

    \2\These emissions estimates are based on the most accurate data 
currently available. The Agency continues to analyze emissions data 
and modeling assumptions.
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    Since smog travels across county and state lines, it is essential 
for state governments and air pollution control agencies to cooperate 
to solve the problem. This is particularly true in the densely-
populated northeast--for example, the smog that causes health problems 
in New York City is the result, in part, of cars driven in 
Pennsylvania, Maryland and elsewhere in the northeast. Through the 
Ozone Transport Commission (OTC), the northeastern states have made 
major strides in developing region-wide strategies for achieving 
healthy air quality. Today's action, a further step in implementing the 
OTC's region-wide approach, is necessary for the region to attain and 
maintain healthy air quality.
    Although EPA believes that the northeastern states cannot achieve 
healthy air quality unless their neighbors within the northeast adopt 
the California car program or a nationwide program is in effect, 
today's action gives the states much flexibility in filling this need. 
Today's action sets broad requirements that states must meet, but 
otherwise gives states as much flexibility as the Clean Air Act allows 
in structuring and implementing their motor vehicle programs. EPA will 
continue to work with the states to help develop and establish 
California car programs that work well regionally. Furthermore, EPA 
continues to support the efforts of parties who are working on a 
possible new nationwide approach to decreasing emissions from motor 
vehicles and believes such a nationwide program could be superior to 
region-wide adoption of the California car program. Such a nationwide 
program could relieve states of having to respond to today's SIP call. 
Finally, if an individual state achieves sufficient emission reductions 
from programs other than a new motor vehicle program (and other than 
the broadly practicable measures discussed later in this notice), that 
state will be allowed to do so instead of adopting the California car 
program.

B. LEV-Equivalent Program

    Concurrently with processing the OTC recommendation, EPA has 
explored the possibility of a LEV-equivalent program.3 As 
explained below, EPA believes the OTC LEV program will provide 
significant benefits and is necessary to help the northeast achieve air 
quality goals. Nonetheless, as EPA stated in the SNPRM and at numerous 
public meetings, EPA believes that a LEV-equivalent program could 
provide far greater environmental and public health benefits to the OTR 
and the nation, and do so more efficiently than would the OTC LEV 
program. Under the Clean Air Act, however, such a program can only be 
achieved by agreement of the relevant parties--it cannot be imposed 
unilaterally by EPA or the states. In an effort to develop a LEV-
equivalent program, EPA and the parties have been involved in intensive 
and open discussions, particularly under the Clean Air Act Advisory 
Committee's Subcommittee on Mobile Source Emissions and Air Quality in 
the Northeast States that EPA established in August 1994.

    \3\In this notice, a ``LEV-equivalent program'' is an 
alternative voluntary nationwide 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 and that would 
advance motor vehicle emission control technology. This definition 
is based on comments EPA received and discussions at meetings of the 
Clean Air Act Advisory Committee's Subcommittee on Mobile Source 
Emissions and Air Quality in the Northeast States that indicated 
that the alternative voluntary federal program that the interested 
parties are discussing would have an advanced technology component.
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    EPA believes that a LEV-equivalent program would have significant 
advantages when compared to OTC LEV. First, a LEV-equivalent program 
would achieve the same or greater emission reductions for the OTR. Two 
factors are primarily responsible for the emissions equivalence. The 
LEV-equivalent program would provide for earlier introduction of 
Transitional Low Emission Vehicles (``TLEVs'') in the OTR than would be 
required under the OTC LEV petition. Also, 2001 and later model year 
vehicles that are originally purchased outside the OTR and then move 
into the OTR will be approximately 70% cleaner for in-use VOC and 
NOX emissions than the incoming vehicles (i.e., Tier I vehicles) 
under the OTC LEV program. Second, the LEV-equivalent program would 
provide significant environmental and public health benefits for the 
rest of the country. Third, by requiring vehicles to meet the same 
tailpipe standard in both California and the rest of the country, and 
by harmonizing the other California and federal emission standards, the 
program could streamline the process for certifying a vehicle for sale, 
reduce auto manufacturers' testing and design costs, and provide other 
efficiencies in the marketing of automobiles. Fourth, the parties could 
use their resources to make the program succeed rather than continuing 
the resource-intensive battle that has been waged over the past few 
years between the states and the auto industry over the OTC LEV 
program.
    EPA urges the parties to continue their efforts to reach an agreed-
upon program. The effective date of today's SIP call is February 15, 
1995. By giving states a full year to submit their SIP revisions after 
the effective date, this action allows the parties, particularly the 
states, to focus on the voluntary agreement for the next 45 days 
without simultaneously starting whatever legislative and regulatory 
action is necessary to adopt OTC LEV in case a LEV-equivalent program 
does not materialize. When states do begin legislative efforts, EPA 
urges them to structure their authority so that an approved alternative 
program can be adopted and implemented nationwide.
    The alternative program under discussion contemplates using federal 
rulemaking to establish the program. In light of the significant 
progress that has already been made in developing an 
[[Page 4714]] alternative program, EPA believes it is appropriate to 
initiate an expedited rulemaking process on the conventional car 
portion of a LEV-equivalent program, as described below. Although EPA 
cannot act unilaterally to impose a LEV-equivalent program, EPA 
believes that, in light of the parties' continuing efforts to reach 
agreement, it is time to start to develop the regulatory structure that 
the parties have discussed to implement an agreement. EPA intends to 
propose and take comment on the voluntary new motor vehicle emission 
program described below. EPA also intends to propose that the entire 
alternative program is environmentally superior to OTC LEV because the 
alternative is at least environmentally equivalent to OTC LEV in the 
OTR and it has additional environmental benefits for the rest of the 
nation.
    Before issuing such a proposal, EPA will seek the advice and 
recommendations of the Clean Air Act Advisory Committee and 
Subcommittee that have been addressing these issues. Although many of 
these issues, particularly those that would be raised by the 
conventional car portion of the program, have already been discussed in 
numerous Federal Register notices and public meetings, EPA believes it 
is important to allow people and states who have not participated in 
this process to date an opportunity to be heard on the specific 
provisions of a potential new, nationwide motor vehicle emission 
program.
    The LEV-equivalent program under discussion has two major 
components--a cleaner car to be sold nationwide and advanced motor 
vehicle pollution control technology. In the following subsections, EPA 
describes the nationwide cleaner car, the advanced technology program 
currently under discussion, the possible methods for enforcing a LEV-
equivalent program, the criteria for finding that such a program would 
be an acceptable alternative for OTC LEV, and how an acceptable LEV-
equivalent program would affect a state's obligations under today's 
action.
1. Cleaner Conventional Cars and Light-Duty Trucks
    The first component of a LEV-equivalent program would be 
requirements for cleaner conventional cars and light-duty trucks that 
ultimately would result in nationwide sales of cleaner new motor 
vehicles. Starting with the 2001 model year, all new cars and light-
duty trucks sold outside California would meet the California Low 
Emission Vehicle (LEV) standard. These vehicles would have up to 66% 
lower in-use VOC and 73% lower in-use NOX tailpipe emissions than 
vehicles meeting the federal Tier I Standards. Prior to the nationwide 
introduction of this vehicle, auto manufacturers would phase in cleaner 
cars and light-duty trucks in the OTR according to a schedule that 
would accomplish emission reductions in the OTR equivalent to the 
following schedule:

40% TLEVS4 for model years 1997-2000

    \4\ TLEV stands for transitional low emissions vehicle, which is 
cleaner than cars required by federal law.
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30% LEVs for model year 1999
60% LEVs for model year 2000
100% LEVs for model years 2001 and later

EPA cannot promulgate regulations requiring manufacturers to meet these 
standards prior to model year 2004 (see section 202(b)(1)(C) of the 
Act). Nonetheless, EPA can establish a voluntary program that would not 
apply to manufacturers until they opted into the program; then, once an 
auto manufacturer opted in, the voluntary standards would be 
implemented in a way that would be indistinguishable from mandatory 
standards.
    In establishing such a program, several issues need to be addressed 
other than the tailpipe standards and phase-in schedule. EPA will seek 
comment on how to establish a banking and trading program, what 
exemptions should apply to small volume manufacturers, the extent to 
which federal standards (other than tailpipe standards) can be 
harmonized with California standards to reduce testing and design 
costs, how to incorporate California's on-board diagnostics system 
requirements, what process and timing are appropriate for allowing auto 
manufacturers to opt in, and other issues that would arise under the 
voluntary program.
2. Advanced Technology Vehicles
    In the second component, auto manufacturers, utilities, and state 
and federal governments would commit to work together to further the 
development of advanced technology to control motor vehicle emissions. 
Representatives of the states and auto companies have been meeting 
independently and as a working group of a Subcommittee of the Clean Air 
Act Advisory Committee to develop an advanced technology component of a 
LEV-equivalent program. At this point in the discussions, they do not 
anticipate that EPA would take regulatory action to adopt the advanced 
technology component. Attachment A to this preamble is a current draft 
discussion paper of their ideas on the Advanced Technology Vehicle 
(ATV) component of a LEV-equivalent program. The parties have not yet 
reached agreement on this component.
3. Enforcement of a LEV-Equivalent Program
    Given constraints imposed by Congress in the Clean Air Act, a LEV-
equivalent program cannot be instituted without the consent of the auto 
manufacturers and the OTC states. The auto manufacturers must agree to 
any tailpipe regulations other than the current federal program or the 
California program. EPA is precluded by section 202(b)(1)(C) from 
modifying the mandatory tailpipe standards prior to model year 2004. 
States are precluded by sections 177 and 209 from adopting any program 
other than the California program. Thus, the only route left to a LEV-
equivalent program is one in which the auto manufacturers voluntarily 
agree to additional regulation. The auto manufacturers have said that, 
in principle, they could agree to a voluntary program if it avoided the 
need to comply with OTC LEV in the OTC states. The OTC states, 
therefore, would have to agree not to require compliance with OTC LEV 
if the auto manufacturers were complying with a voluntary federal 
program.
    EPA has suggested that a combination of EPA regulations, consent 
decree(s), and a memorandum of understanding could be used in 
combination to create an enforceable LEV-equivalent program. EPA 
anticipates that a memorandum of understanding may be necessary or 
appropriate to outline the general structure and some specifics of the 
LEV-equivalent program. EPA intends to propose that the cleaner 
conventional car component would be embodied in EPA regulations that 
would be issued after an expedited notice-and-comment rulemaking was 
completed. EPA suggests that the regulations be supplemented by a 
consent decree addressing obligations not in the regulations and 
providing additional assurance that the regulatory obligations will 
remain in effect. The states and automakers have discussed embodying 
the advanced technology vehicle component in a memorandum of 
understanding and a consent decree.
    EPA intends to propose that it has statutory authority to 
promulgate the voluntary standards under sections 202(a) and 301(a) of 
the Clean Air Act. Section 202(a)(1) directs the Administrator to 
prescribe standards for control of air pollutant emissions from motor 
vehicles. EPA's prescription of [[Page 4715]] voluntary, as well as 
mandatory standards, is consistent with this authority under section 
202(a)(1). Section 202(b)(1)(C) prohibits the Administrator from 
changing the emission standards (Tier I standards) established in 
section 202(g), (h) and (i) prior to model year 2004. However, this 
prohibition against EPA setting new mandatory standards does not negate 
EPA's authority to establish emission standards with which 
manufacturers may voluntarily comply. In addition, section 301(a) 
authorizes the Administrator to promulgate regulations necessary to 
carry out her functions under the Act. The voluntary standards 
discussed above would fall within the Administrator's duty to implement 
the broad air pollution reduction purposes of the Act, and specifically 
to control air pollution from motor vehicles.
4. Criteria for an Acceptable LEV-Equivalent Program
    EPA is not determining in today's action what criteria an 
alternative program would need to meet for EPA to find that the program 
is an acceptable alternative to the OTC LEV program. EPA would 
determine the necessary criteria for equivalence as a part of any 
rulemaking that established or reviewed such an alternative program. 
However, EPA believes that one criterion that a LEV-equivalent program 
must meet is that it must have VOC and NOX emissions reductions in 
the OTR equivalent to those that would be achieved by the OTC LEV 
program.5 Based on EPA's current analysis, a version of which was 
in a notice of data availability published on October 24, 1994 (59 FR 
53395), EPA intends to propose that the alternative program described 
above meets this equivalence requirement.

    \5\The vehicle types subject to a LEV-equivalent program would 
need to be the same vehicle types (or a subset thereof) that would 
be subject to OTC LEV. Thus, emission reductions from heavy-duty 
trucks could not be used to assess the equivalence of a LEV-
equivalent program.
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    In addition, an acceptable alternative program must be enforceable. 
A finding of enforceability would have to include a showing that the 
program, once in effect, would remain in effect. Therefore, today's 
action regarding the LEV-equivalent program is based on the assumption 
that automobile manufacturers would not be allowed to use ``off-
ramps''6 to exit from the program. The OTC has also stated that 
the advancement of motor vehicle emission control technology is one of 
the criteria an alternative program must meet.

    \6\ An ``off-ramp'' is a provision allowing manufacturers to opt 
out of an alternative program if a certain trigger-event occurs, for 
example, if a state implemented a LEV program.
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5. State Obligations if an Acceptable LEV-Equivalent Program is in 
Effect
    Today's action recognizes that, if an acceptable LEV-equivalent 
program were in effect, then states would not be required to adopt OTC 
LEV regulations and submit them as a SIP revision. Under today's rule, 
if EPA were to determine later through rulemaking that a LEV-equivalent 
program was acceptable and were to find that it was in effect, states 
would not be obligated to adopt the OTC LEV program as long as the LEV-
equivalent program stayed in effect. For example, if all the automakers 
opted into a LEV-equivalent program that did not allow them to opt out, 
states would not have to undertake the legislative and regulatory 
process necessary for adoption of the OTC LEV program. If something 
happened to disrupt or void the LEV-equivalent program, states would 
then be required to adopt OTC LEV because today's action would still 
make states responsible for ensuring that there were provisions for 
emission reductions from new motor vehicles.
    In the SNPRM, EPA had raised the issue of whether states would need 
to adopt OTC LEV regulations if a LEV-equivalent program were in 
effect. Under one approach, states would adopt an OTC LEV program that 
allowed auto manufacturers the option of complying with a LEV-
equivalent program instead of the OTC LEV standards; thus, OTC LEV 
would be in place as a ``back stop'' in case something happened to the 
LEV-equivalent program. For example, if a LEV-equivalent program 
allowed manufacturers to opt out if a state adopted the California LEV 
program, then the other states could not be assured that they would 
achieve the necessary reductions from a LEV-equivalent program. 
Therefore, states would need to have OTC LEV in place so that it would 
replace the LEV-equivalent program if that program were no longer in 
effect. EPA believes that, under certain circumstances, the ``back 
stop'' approach wastes state resources by requiring a rulemaking 
process for a program that should never be used. Thus, under today's 
rule, states could be relieved of the obligation to adopt OTC LEV if 
EPA determined in a later rulemaking that a LEV-equivalent program was 
an acceptable alternative to OTC LEV and found that the program was in 
effect.

C. Procedural Background

    The OTC submitted a recommendation to EPA on February 10, 1994, 
that EPA require all states in the OTR to adopt an OTC LEV program. EPA 
extensively reviewed the background for this rulemaking in its 
September 22, 1994, supplemental notice of proposed rulemaking (SNPRM). 
See 59 FR at 48664-48667. This review included a description of the 
statutory scheme in which the rulemaking arises, a description of the 
ozone transport region provisions of the Clean Air Act, background 
regarding the OTC's development of the OTC LEV program, and a summary 
of EPA's actions in response to the OTC's recommendation. This 
background is not repeated in its entirety here, and the reader is 
referred to the SNPRM for further detail.
    EPA has moved quickly to resolve the very complicated issues that 
the OTC's recommendation raises and has provided maximum opportunity 
for public participation. After receiving the OTC's recommendation on 
February 10, 1994, the Agency quickly published a notice announcing 
receipt of the OTC's recommendation, identifying its major elements, 
and briefly presenting EPA's framework for a process to respond and an 
approach for analyzing the issues. See 59 FR at 12914 (March 18, 1994). 
As announced on April 8, 1994, EPA held two days of public hearings on 
May 2-3, 1994, in Hartford, Connecticut. See 59 FR at 16811.
    Before the public hearing and pursuant to section 307(d) of the 
Clean Air Act, EPA published a notice of proposed rulemaking (NPRM) 
that contained extensive information about EPA's approach to addressing 
the recommendation. See 59 FR 21720 (April 26, 1994). This notice 
detailed EPA's analytic framework for a decision and identified the 
central issues EPA was considering. EPA explained in the NPRM that the 
rulemaking procedures of section 307(d) would apply to any approval or 
partial approval of the recommendation, since those procedures are an 
excellent vehicle for ensuring an open, public process. See 59 FR at 
21724. In the NPRM, EPA proposed in the alternative to approve, 
disapprove, or partially approve and partially disapprove the OTC 
recommendation.
    After publication of EPA's proposal and the two days of initial 
public hearings, EPA held an additional series of three public 
``roundtable'' meetings in Pennsylvania, New Hampshire, and New York. 
EPA held these meetings to provide specific analysis of the issues 
through interactive discussion among the various interested parties and 
members of the public. See 59 FR 28520 (June 2, 1994). At the end of 
these [[Page 4716]] meetings, EPA extended the public comme organized 
public discussion of issues raised and resolved in this rulemaking. In 
addition to sharing their views in many public hearings and meetings, 
interested parties provided voluminous written comments on EPA's April 
26 and September 22 proposals. These comments and other documents 
relevant to the development of this final rule are contained in the 
public docket for this rulemaking. The Agency has fully considered all 
of this information in developing today's final rule. EPA's responses 
to significant comments are contained in detailed response-to- comments 
documents that are contained in the public docket. Interested parties 
should consult those documents for EPA's response to the comments it 
received.
    EPA has structured this final rule to follow the analytic framework 
that the Agency used in the NPRM and SNPRM. As explained above, rather 
than repeating the entire discussion in the SNPRM, EPA is adopting much 
of the rationale provided in the SNPRM as the statement of basis and 
purpose supporting today's final action. For this reason, this final 
rule notice summarizes and references much of the discussion in the 
SNPRM, and elaborates where needed to clarify or modify EPA's proposed 
rationale in light of the comments EPA received or to address issues 
left unresolved in the SNPRM. Although this notice and the SNPRM 
contain EPA's responses to some comments, the response-to-comments 
documents provide detailed responses to all other relevant, significant 
comments received. In addition to relying on this notice and the 
response-to-comments documents as the statement of basis and purpose 
for today's action, EPA is also relying for its statement of basis and 
purpose on the detailed explanations in the SNPRM, except where 
indicated otherwise in this final rule notice or the response-to-
comments documents, or where statements in the SNPRM are inconsistent 
with statements in the final rule notice or response-to-comments 
documents.

II. Description of Action

    EPA today is making the factual finding that emissions reductions 
from new motor vehicles equivalent to the reductions that would be 
achieved by the OTC LEV program are needed throughout the OTR to bring 
certain OTR nonattainment areas into attainment (including maintenance) 
by their applicable attainment dates. Based on that finding, EPA today 
is issuing to each of the states in the OTR a finding that its SIP is 
substantially inadequate to meet certain requirements insofar as the 
SIP would not currently achieve those emission reductions. There are 
two possible ways to achieve these emission reductions and thereby cure 
this SIP inadequacy--state adoption of the OTC LEV program or 
establishment of an acceptable LEV-equivalent federal motor vehicle 
program. By virtue of today's findings of SIP inadequacy, unless an 
acceptable LEV-equivalent program is in effect, EPA is today finding 
the OTC LEV program necessary to achieve timely attainment (including 
maintenance) in certain nonattainment areas and therefore is requiring 
each OTC state to cure the inadequacy within one year by adoption of 
the OTC LEV program and submission of it as a SIP revision. However, if 
EPA issues a rule determining that a LEV-equivalent new motor vehicle 
program is acceptable and issues a finding that all the automakers have 
opted into that program nationwide, then the states would be relieved 
of their obligation to adopt OTC LEV.
    As an alternative to achieving emission reductions from new motor 
vehicles, states could submit adopted measures sufficient to fill the 
gap in emission reductions that EPA identifies in today's rule as 
required to prevent adverse transport impacts on downwind attainment. 
By filling the gap in emission reductions between the measures EPA has 
identified in this notice as potentially broadly practicable measures 
and the amount necessary to prevent adverse transport impacts downwind, 
the state would demonstrate that it was unnecessary to adopt new motor 
vehicle controls for transport reasons.
    EPA is approving the OTC's LEV recommendation based on the 
determination under sections 184(c) and 110(a)(2)(D) of the Act that 
the recommended LEV program is necessary throughout the OTR to bring 
certain OTR nonattainment areas into attainment by the applicable 
attainment dates, unless an acceptable LEV-equivalent program is in 
effect, and that the recommended LEV program is otherwise consistent 
with the Act. Approval of the OTC recommendation requires EPA to issue 
the finding of SIP inadequacy described above and to require states to 
respond within one year with SIP revisions requiring the OTC LEV 
program, unless an acceptable LEV-equivalent program is in effect. 
Independent of section 184, but based on the same factual finding of 
necessity, EPA also is requiring the actions described above under its 
SIP call authority in section 110(k)(5)\7\ on the basis 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) 
and to mitigate adequately the interstate pollutant transport described 
in section 184.\8\

    \7\Section 110(k)(5) authorizes the Administrator to require the 
state to revise the SIP as necessary to correct the deficiency 
whenever she finds that a SIP for an area is substantially 
inadequate to mitigate adequately the interstate pollutant transport 
described in sections 176A or 184 or to otherwise comply with any 
requirement of the Act.
    \8\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.
---------------------------------------------------------------------------

    EPA's SIP call does not require states in the OTR to adopt 
California's Zero Emission Vehicle (ZEV) production mandate, but leaves 
this choice to each state's discretion. EPA has determined that section 
177 of the Act allows states to adopt the California LEV program 
without adopting the ZEV mandate.
    Finally, EPA is issuing regulations defining the term ``model 
year'' for purposes of section 177 and part A of title II of the Act, 
as that term applies to on-highway motor vehicles. The regulations 
provide that model year will apply on an engine family-by-engine family 
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 the SIP Call

    As mentioned above, authority for today's SIP call is premised both 
on EPA's approval of the OTC recommendation under section 184(c) and on 
EPA's independent authority under sections 110(a)(2)(D) and 110(k)(5), 
which would support such an action even in the absence of an OTC 
recommendation.9 For reasons described in the response-to-comments 
[[Page 4717]] documents, EPA disagrees with comments claiming that EPA 
lacks such authority because the section 184 process is invalid under 
the United States Constitution, because section 110 does not authorize 
EPA to require states to adopt specific measures, or because an EPA SIP 
call requiring state regulation of emissions from new motor vehicles 
violates sections 177, 202, and 209 of the Act.

    \9\ In addition, EPA believes it has authority to approve the 
OTC's recommendations under section 176A, the general transport 
commission provision of the CAA. For the reasons described in the 
response-to-comments documents accompanying this final action, which 
include the fact that the OTC refers to section 176A in its own by-
laws, EPA believes that the Northeast OTC is a section 176A 
transport commission as well as a section 184 transport commission. 
As a consequence, EPA believes that, notwithstanding the fact that 
the OTC's recommendations themselves do not explicitly refer to 
section 176A, it may treat the OTC's recommendations as section 176A 
requests with recommendations, as well as section 184 
recommendations, and act on them accordingly. References in this 
notice to EPA's analysis of and conclusions on the OTC petition 
under section 184 are intended to reflect also EPA's analysis of and 
conclusions on the petition treated as a request with 
recommendations under section 176A.
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A. Section 184

    EPA described the provisions of section 184 in detail in both the 
NPRM and SNPRM. See 59 FR at 21722-21724 and 59 FR at 48668. Section 
184(c) explicitly provides that the Administrator is to review the 
OTC's recommendations to determine whether the control measures in the 
recommendations are necessary and otherwise consistent with the Act, 
and is to approve, disapprove, or partially disapprove and partially 
approve such recommendations. Upon approval, the Administrator is to 
issue to affected states a finding under section 110(k)(5) that the SIP 
for such state is inadequate to meet the requirements of section 
110(a)(2)(D), and that each such state is required to revise its SIP to 
include the approved measures within one year after the finding is 
issued.
    In the SNPRM, EPA addressed comments from both the auto 
manufacturers and the Natural Resources Defense Council (NRDC) 
regarding the validity of the section 184 scheme under the United 
States Constitution. Various other commenters also submitted comments 
on the constitutional questions. EPA has fully considered the comments 
and believes that section 184 is consistent with the Constitution, as 
discussed in the response-to-comments documents.

B. Section 110

    EPA is interpreting section 110 of the Act to provide that it 
grants the Agency independent authority to issue today's SIP call, 
apart from any authority provided by section 184, for the reasons given 
below and in the SNPRM, 59 FR at 48667-48670 (col. 1), and further 
explained in detail in the response-to-comments document accompanying 
this final action. Section 110(a)(2)(D) requires that SIPs include 
adequate 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 * 
* * mitigate adequately interstate pollutant transport * * * or to 
otherwise comply with any requirement of this Act,'' including section 
110(a)(2)(D), section 110(k)(5) requires EPA to issue a SIP call 
requiring the state to adopt the SIP revisions necessary to correct the 
inadequacy.
    As proposed in the SNPRM, EPA concludes that sections 110(a)(2)(D) 
and (k)(5) authorize it to find at any time that a SIP is inadequate 
due to pollution transport. EPA believes that emissions reductions from 
new motor vehicles equivalent to those achieved by the OTC LEV program 
are necessary throughout the OTR to bring all of the OTR states into 
attainment (including maintenance) of the ozone NAAQS by their 
respective attainment dates; that, unless an acceptable LEV-equivalent 
program is in effect, OTC LEV is necessary because it is the only 
currently available method of achieving these reductions; that the 
states' SIPs are inadequate to the extent they do not provide for the 
emissions reductions from new motor vehicles equivalent to those 
achieved by the OTC LEV program; and that, unless EPA issues a finding 
that all automakers have opted into a LEV-equivalent program that EPA 
has determined by rule to be acceptable, the states must adopt the OTC 
LEV program to correct the deficiency within one year of the effective 
date of the finding of inadequacy, and that waiting to make this 
finding may compromise the states' ability to achieve the reductions by 
the time they are needed for timely attainment and maintenance 
thereafter. As discussed in the SNPRM, EPA concludes that, as it has 
done in the past, it may require submission of specific SIP measures 
pursuant to section 110(k)(5). Finally, as discussed in the SNPRM, EPA 
believes that it should find the states' SIPs inadequate only insofar 
as they do not contain the emissions reductions from new motor vehicles 
equivalent to those achieved by OTC LEV program because those 
reductions depend on vehicle fleet turnover, which will take an 
unusually long time to generate the needed emissions reductions.
    EPA is basing today's final action in part on this independent 
authority under section 110, and it believes certain aspects of its 
explanation in the SNPRM merit elaboration. First, where EPA has found 
a measure to be necessary to prevent states from contributing 
significantly to other states' nonattainment, EPA concludes that 
section 110(k)(5) authorizes the Agency to find SIPs inadequate to the 
extent that they do not contain that measure. In this case, however, 
both EPA's SIP call under section 110(k)(5) and its necessity finding 
under section 184 are qualified by the assumptions EPA made in 
conducting the necessity analysis. Because EPA assumed for purposes of 
its analysis that certain measures were not potentially practicable for 
all areas in the transport region and thus excluded such measures from 
consideration, the states' obligation under the SIP call could be met 
(1) by obtaining the necessary reductions from new motor vehicles 
through adoption of OTC LEV or through an alternative new motor vehicle 
program that achieved equivalent emissions reductions, or (2) by 
adopting alternative measures that will provide sufficient emission 
reductions to fill the gap in emission reductions needed to prevent 
significant transport impacts on downwind attainment, which would 
demonstrate that OTC LEV is not in fact necessary in that state.
    Second, EPA continues to support the conclusions described in the 
SNPRM regarding the scope of this SIP call, 59 FR at 48669. The OTC LEV 
program is distinctive and warrants a finding under section 110(k)(5) 
that these SIPs are deficient insofar as they do not provide for 
emissions reductions from new motor vehicles equivalent to those 
achieved by that program. Model year 1999 and later vehicles will 
remain on the road until well after the attainment deadlines throughout 
the northeast. Failure to require that they meet LEV emissions 
standards will constitute an irrevocable loss in emissions reductions 
until those vehicles are replaced many years later. Therefore, it is 
important that the tighter LEV standards apply to these new vehicles if 
the reduced emissions will be necessary to achieve and maintain the 
NAAQS later.
    A general finding of SIP inadequacy is not yet warranted. EPA 
recognizes the close connection between states' planning to address 
transport and their planning for reductions to ensure timely 
attainment. The November 15, 1994, deadline for states to submit 
modeled attainment demonstrations has now passed. However, of the 
states in the OTR that have submitted SIPs, none purports to provide 
for the emissions reductions needed to bring downwind states into 
attainment and continue maintenance of the ozone standard.\10\ 
Especially in such circumstances, EPA continues to believe that it has 
authority under section 110(k)(5) to find that the states' current SIPs 
are substantially inadequate for lack of a pollution 
[[Page 4718]] control measure that must be adopted and implemented in 
the near term for the state to achieve fully the emissions reductions 
necessary to mitigate transport adequately. However, while the states' 
failure merits even closer EPA oversight of these states' progress in 
SIP development, EPA believes that a general finding of SIP inadequacy 
is not yet warranted. While, for the reasons described above, EPA is 
drawing an exception with respect to a finding of SIP inadequacy based 
on the absence of a LEV program from these SIP, EPA still believes it 
should generally allow states the first opportunity to address 
transport and their attainment demonstrations together in their 
forthcoming SIP revisions before the Agency exercises its SIP-call 
authority more broadly to address non-LEV deficiencies.

    \10\In the SNPRM, EPA incorrectly stated that the Act creates no 
deadline for submission of SIPs demonstrating compliance with 
section 110(a)(2)(D), and inadvertently omitted language it had 
drafted to explain that section 172(b), read in conjunction with 
section 172(c)(7), does establish a deadline for such SIPs for 
nonattainment areas. That date too has now passed.
---------------------------------------------------------------------------

    Even though the attainment demonstrations are now overdue, states 
are in the process of incorporating many additional control measures 
into their SIPs for purposes of meeting their obligations and are 
actively working to adopt regional strategies to address transport. In 
fact, as discussed in greater detail below, after publication of the 
SNPRM the OTC states signed a Memorandum of Understanding to adopt 
stringent controls on NOx emissions from stationary sources that 
will apply region-wide throughout the OTR. EPA will continue to track 
the states' progress in adopting control measures to achieve the 
necessary reductions in time for downwind states to meet their 
attainment deadlines and to maintain the NAAQS thereafter, and if those 
efforts prove insufficient, EPA may consider making a more 
comprehensive finding of SIP inadequacy if other measures are lacking.

C. Consistency of EPA Action With Sections 177, 202 and 209 of the Act

    EPA reaffirms its initial determination and rationale that its 
decision is consistent with sections 177, 202 and 209. See 59 FR 48670-
48671. As discussed in the SNPRM, section 202(b)(1)(C) only precludes 
the Agency from promulgating national standards under section 202 that 
modify certain specified standards prior to model year 2004. This is 
not a general prohibition against all EPA action relating to the 
control of emissions from motor vehicles. In acting under section 184 
and section 110, however, EPA is not imposing mandatory federal 
standards. Rather, EPA is requiring the states to exercise their own 
independent authority under section 177 to promulgate state regulations 
relating to the control of emissions from motor vehicles. That state 
authority is not limited by section 202(b)(1)(C). Thus, this action 
relies not on EPA's authority under section 202 (which would be limited 
by section 202(b)(1)(C)), but on EPA's authority under sections 110 and 
184, to mandate state action that would otherwise be discretionary.
    Some commenters note that EPA is requiring states to act under 
section 177 in a manner that would otherwise be up to the discretion of 
the state.\11\ However, as discussed above, sections 110 and 184 give 
the Administrator authority to impose ``additional control measures'' 
(i.e., measures over and above those required under other provisions of 
the Act) on states. Moreover, section 110(a)(2)(D) requires SIPs to 
contain provisions prohibiting ``any source or other type of emissions 
activity'' from emitting air pollution that interferes with attainment 
or maintenance in other states. This language is sufficiently broad to 
include motor vehicles. There is no indication that section 184 is 
limited in effect to stationary sources or that state standards for 
automobiles were excluded from the ``additional control measures'' that 
EPA could require under section 184.

    \11\This is likely to be true for any actions ordered under 
section 184 or 110. EPA would not need the authority of section 110 
and 184 to require states to promulgate standards already required 
by law.
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IV. Basis for Requiring OTC LEV or a LEV-Equivalent Program

    EPA's explanation of the proposed basis for approval of the OTC LEV 
recommendation comprises the primary subject of the SNPRM. See 59 FR at 
48671-48694. This detailed explanation is not repeated here. Rather, 
the following discussion references many of the portions of the SNPRM 
on which EPA is relying for today's action. In addition to these 
references and a summary, this discussion only addresses changes to and 
elaborations upon EPA's explanation of its basis for action. In 
addition to the rationale set forth in this notice and the response-to-
comments documents, EPA is also relying on the SNPRM as the basis for 
today's SIP call, except as otherwise explained in the response-to-
comments documents or in this preamble, or where the SNPRM is 
inconsistent with those documents. EPA bases its requirement for states 
to adopt the OTC LEV program on its determinations that the emissions 
reductions that the program achieves are necessary to bring certain 
nonattainment areas into attainment (including maintenance) of the 
ozone standard by the dates applicable under Subpart 2 of Part D of 
Title I of the Clean Air Act; that, unless an acceptable LEV-equivalent 
program is in effect, OTC LEV is necessary because there is no other 
currently available method of achieving these reductions from the same 
sources; and that requiring the OTC LEV program is consistent with 
other requirements of the Act. The basis for each of these 
determinations is described in detail in subsections A and B of this 
section of the notice.

A. Necessity

    EPA's conclusion that the emission reductions achieved by the OTC 
LEV program are necessary to bring certain nonattainment areas in the 
OTR into attainment (including maintenance) of the ozone standard by 
their applicable dates is based on a series of statutory 
interpretations and factual determinations. As set forth in detail 
below, EPA is interpreting the ``necessary'' standard in section 
184(c)--as well as the ``significant contribution'' and 
``interference'' tests of section 110(a)(2)(D) read in conjunction with 
section 184(c)(5)--as authorizing the Agency to find ``necessary'' any 
potentially broadly practicable measure that, in light of the 
availability of other potentially broadly practicable measures, is 
needed to bring the downwind areas into timely attainment. EPA next 
analyzes the full magnitude of emission reductions needed for serious 
and severe nonattainment areas in the OTR to attain the standard, and 
the degree to which various sections of the OTR upwind of those 
respective nonattainment areas contribute to their nonattainment. From 
that analysis EPA concludes that 50-75% NOX reductions from every 
portion of the OTR lying to the south, southwest, west and northwest of 
each of the serious and severe OTR nonattainment areas, as well as 50-
75% VOC reductions from the portion of the OTR lying in or near (and 
upwind of) each of those nonattainment areas, are needed to bring each 
of those respective nonattainment areas into attainment by their 
respective attainment dates.
    EPA then analyzes the potentially broadly practicable pollution 
control measures (other than emission standards for new motor vehicles) 
to determine whether they would achieve the necessary emission 
reductions; EPA concludes that they would not and that a significant 
shortfall would remain. Based on that conclusion, EPA finds that new 
motor vehicle tailpipe emission reductions are necessary to help fill 
that shortfall, and that, unless an acceptable LEV-equivalent program 
is in effect, the OTC LEV program is the [[Page 4719]] only program 
currently available to achieve those reductions, and hence that the OTC 
LEV program is necessary. EPA then concludes that the trading and 
migration of vehicles within the OTR provide a basis for requiring that 
the OTC LEV program be adopted even in the few portions of the OTR not 
upwind of a serious or severe nonattainment area in order to ensure 
that the necessary emission reductions from the various upwind portions 
of the OTR contributing significantly to those downwind nonattainment 
problems are actually achieved. Based on those findings, EPA then 
concludes that, unless an acceptable LEV-equivalent program is in 
effect, the OTC LEV program is necessary in every portion of the OTR to 
bring the serious and severe ozone nonattainment areas of the OTR into 
attainment by their respective attainment dates.
    Finally, EPA concludes that it may interpret section l84's 
reference to attainment to incorporate maintenance of the ozone 
standard. EPA relies on that interpretation, on EPA's treatment of the 
OTR petition as resting also on the provisions in section 176A, and on 
EPA's independent authority under sections 110(a)(2)(D) and (k)(5) to 
address the interference of upwind states with maintenance of the 
standard by downwind states. Based on these, EPA concludes that it may 
and should make the same necessity and SIP inadequacy findings 
described above and approve the OTC recommendation, not only to assure 
timely attainment in the OTR's serious and severe nonattainment areas, 
but also because such reductions are necessary for those and certain 
other areas to maintain the ozone standard.
1. Legal Interpretation of Necessity
    EPA discussed its interpretation of the ``necessary'' standard 
under sections 184(c) and 110(k)(5) in the SNPRM. See 59 FR at 48671-
48675. EPA then proposed, under section 110(a)(2)(D), that contributing 
emissions are ``significant,'' at least where EPA finds that 
controlling the emissions is necessary to bring any downwind area into 
attainment. EPA also proposed that contributing emissions ``interfere'' 
with downwind maintenance, at least where controlling the emissions is 
necessary for downwind areas to maintain the NAAQS. In particular, the 
Agency believes that the ``necessary'' standard requires the Agency to 
evaluate the emissions reductions needed and then determine whether 
potentially reasonable and practicable alternative measures could be 
adopted instead of the OTC LEV program to achieve the needed 
reductions. Id. There are two different types of alternative measures 
that could affect a finding that OTC LEV is necessary. First, an 
alternative that achieves the same or greater emissions reductions from 
the same emissions sources (here, new motor vehicles) may render the 
OTC LEV program unnecessary. There are limited opportunities to develop 
an alternative to the OTC LEV program that would achieve the same or 
greater reductions from new motor vehicles. This is because section 202 
bars EPA modification of the Tier I standards prior to model year 2004, 
and the states cannot, under sections 177 and 209, adopt standards 
other than the California standards. As discussed in the introduction 
to this notice and below, EPA has worked to explore the possibility of 
an alternative program to achieve equivalent reductions from new motor 
vehicles that would be consistent with these provisions. Such a program 
is not currently available to the OTC states. However, if EPA were to 
determine through rulemaking that a LEV-equivalent program is 
acceptable and to find that all the automakers had opted into the 
program, then states would not be required to adopt OTC LEV as long as 
the LEV-equivalent program remained in effect.
    Second, certain alternative measures that are sufficient in the 
aggregate to achieve the necessary reductions without further 
reductions from new motor vehicles could likewise render the OTC LEV 
program unnecessary.
    EPA's interpretation is consistent with its approach to 
interpreting the ``necessary'' standard under section 211(c)(4)(C) of 
the Act. See 59 FR at 48672. The interpretation certified by Congress 
under that section provides that measures are necessary if no other 
measures that would bring about timely attainment exist, or ``if other 
measures exist and are technically possible to implement, but are 
unreasonable or impracticable.'' Similarly, EPA is concluding here that 
alternatives are available if they are at least potentially reasonable 
and practicable for application across the OTR, as well as sufficient 
to achieve the necessary reductions. Also, EPA's necessity 
determination and its SIP call are both subject to any state's ability 
to demonstrate, through adoption of alternative measures that EPA 
cannot currently find potentially practicable for all OTR areas, that 
the OTC LEV program is not in fact necessary to bring the downwind 
states into attainment (including maintenance), and thereby to prevent 
a significant contribution from that state to nonattainment in another 
and to prevent interference with maintenance in a downwind state.
    EPA must make any determination of the need for additional control 
measures in the context of factual uncertainty regarding issues such as 
whether measures are potentially broadly practicable, the amount of 
reductions needed, and the amount of reductions that particular 
measures will achieve in fact. EPA is making its determination based on 
the best information currently available. As explained in the SNPRM and 
elaborated upon in the response-to-comments documents, EPA believes 
that it should apply a general policy of resolving these uncertainties 
in favor of the public and the environment.
    EPA noted in the SNPRM that the states' attainment plans were due 
two months later, and that the work the states had accomplished in 
assembling their attainment plans did not indicate that the OTC LEV 
program would be unnecessary to address the transport problem. See 59 
FR at 48673. EPA has now received SIP submissions under section 182 
(b)-(d), concerning attainment and rate-of-progress, that were due by 
November 15, 1994 from only a few of the states in the OTC. Of those 
received, none purports to achieve NOX or VOC reductions 
sufficient to account for contributions to nonattainment problems 
further downwind. This further confirms that EPA should act now based 
on the best available information.
    EPA discussed in its NPRM and SNPRM whether section 184, together 
with the legislative history, support giving ``deference'' to the OTC's 
recommendation regarding the necessity of the OTC LEV program, and EPA 
explicitly requested comment on that issue. See 59 FR at 21726-21727 
and 59 FR at 48672. EPA has now considered the issue of deference to 
the OTC in light of the comments received and does not believe that the 
OTC, per se, deserves any special deference. EPA believes, however, 
that when states submit a request to EPA that EPA take specific action 
to implement section 110(a)(2)(D), whether under section 110(k)(5) 
alone or under sections 176A or 184, EPA should pay close attention to 
that request and consider it and any recommendations it makes 
carefully. EPA believes that this is appropriate in light of the 
fundamental role that states have historically played in implementing 
title I of the CAA and the expertise that states bring to bear on air 
pollution problems. In reviewing any such request from states, EPA 
remains obligated to consider independently all of the factual 
information available in determining whether any program 
[[Page 4720]] recommended by the states is necessary. In any event, in 
this instance, EPA's independent review of all the relevant factual 
information fully supports the conclusion that the OTC LEV program is 
necessary, and EPA has not accorded the OTC's recommendation deference 
in approving it.
2. Emission Reductions from OTC LEV or a LEV-Equivalent Program are 
Needed
    (a) Magnitude of Reductions Needed for Attainment in 2005. The 
SNPRM contains EPA's detailed analysis of available modeling 
information regarding the magnitude of reductions needed for attainment 
in the serious and severe nonattainment areas in the OTR. See 59 FR at 
48673-48675. EPA's conclusion is that NOX emission reductions of 
50% to 75% from a 1990 baseline emissions inventory are needed 
throughout the OTR to reach attainment of the ozone NAAQS in those 
serious and severe areas. EPA further concludes that VOC emissions 
reductions of 50% to 75% from a 1990 baseline emissions inventory are 
needed in and near (and upwind of) the Northeast urban corridor for 
attainment in the serious and severe areas. Some parts of the OTR may 
need reductions closer to the upper end of the range and other parts 
closer to the lower end, based on the emissions level in the particular 
area and the geographic location of the area.
    As explained in the SNPRM, 59 FR at 48674, the 50% to 75% 
reductions are needed from a 1990 baseline emissions inventory, 
assuming that all growth in emissions since 1990 must be neutralized in 
addition to achieving these percentage reductions. The estimated target 
level of emissions implied by this percentage reduction will not vary 
over time, though the growth that must be neutralized will steadily 
increase. EPA derived this conclusion from extensive modeling studies 
that are described in the SNPRM but are not repeated here. See 59 FR at 
48675.
    EPA reviewed in detail the atmospheric modeling tools used to 
analyze the need for and effectiveness of various strategies, and the 
studies that had been completed at the time of the SNPRM. See 59 FR at 
48674. These tools include the Regional Oxidant Model (ROM) and the 
Urban Airshed Model (UAM), which differ principally in the size of the 
modeling domain and the resolution of information about subunits in the 
photochemical grid. EPA also explained that the relationship between 
ROM and UAM modeling involves an iterative process. ROM applications 
provide boundary conditions (i.e., the conditions of the ambient air at 
the upwind boundary of each of the UAM domains) for UAM analysis, and 
UAM analyses provide information about strategies that can be input for 
further ROM modeling to yield more refined boundary conditions for 
further UAM analysis.
    The states' obligation to submit attainment demonstrations (due 
November 15, 1994) involves the use of UAM modeling to demonstrate that 
the adopted control measures will achieve attainment for their own 
nonattainment areas. As indicated above, only a few of the OTR states 
have submitted any of this information, including UAM modeling, and 
none has submitted the complete UAM modeling. As indicated in the 
SNPRM, EPA does not expect the UAM modeling to be completed in the near 
future. EPA does not believe it is appropriate to wait for the UAM 
attainment demonstrations (which have since become overdue) to reach a 
conclusion here. This is because ROM is the more important modeling 
tool for assessing transport and is sufficient to support certain key 
conclusions with respect to transport. Also, the OTC LEV and the LEV-
equivalent programs depend on time for vehicle turnover to achieve 
reductions and delay could cause necessary reductions to be irrevocably 
lost. Current information justifies action now to avoid the very high 
risk of losing necessary reductions while awaiting further technical 
information from the states that is already overdue.
(b) Contribution Analysis
    As described in more detail in the response-to-comments documents, 
EPA continues to rely on the ROM studies described in the SNPRM--the 
ROMNET and Matrix studies--to support its conclusions concerning 
transport and the amount of emissions reductions needed across the 
region for the serious and severe nonattainment areas in the Northeast 
corridor to attain. In the SNPRM, EPA examined the degree to which 
transport contributes to the ozone problem in each of those areas. See 
59 FR at 48675-77. EPA acknowledged that it is enormously complicated 
to determine which reductions are needed for any specific area to avoid 
causing ozone exceedances downwind. The analysis depends on regional, 
urban, and wind trajectory modeling information and monitoring data, as 
well as information on controls assumed in the web of downwind areas 
and other upwind areas. In the SNPRM, EPA noted that the OTC relied on 
ROM studies and trajectory analyses to determine the extent to which 
upwind areas contribute to exceedances downwind throughout the OTR. EPA 
continues to believe that these studies support its conclusions.
    In the SNPRM, EPA also reviewed studies in which EPA examined 
surface winds and aloft winds data during the relevant times. As stated 
in the SNPRM, this information indicates that transport results in a 
large cumulative impact of emissions and ozone transported by surface 
winds from the south and southwest of each of the nonattainment areas 
along the Northeast urban corridor, and that transport also results 
from ozone and emissions transported by winds aloft from far to the 
west and northwest of each of the nonattainment areas along the 
corridor. EPA continues to believe that these studies support its 
conclusions.
    More specifically, wind trajectory data support the conclusion that 
the following areas contribute to nonattainment and maintenance 
problems in the OTR, in the following manner (other areas may 
contribute as well): The Washington, D.C. nonattainment area--
encompassing part of Virginia, the District of Columbia, and part of 
Maryland--is to the south-southwest of the Baltimore, Maryland, 
nonattainment area, and thus, according to wind trajectory data, ozone 
and emissions from those areas travel with the surface winds to 
contribute to the nonattainment problem in Baltimore. The Baltimore 
area itself, as well as the rest of Maryland, is to the south, 
southwest, or west of the Philadelphia, Pennsylvania nonattainment 
area, which includes parts of Pennsylvania, Delaware and New Jersey; 
thus ozone and emissions from Maryland contribute to that nonattainment 
problem. Ozone and emissions from western Pennsylvania, and western and 
northern Maryland, contribute to the Philadelphia problem as well. 
Ozone and emissions from the Philadelphia area contribute to the New 
York City area which lies to the northeast. Ozone and emissions from 
western and northern Pennsylvania and northern New Jersey, and the 
southern and western portions of upstate New York--which are to the 
west and northwest of the New York City area--also contribute to the 
nonattainment problem in that area, which comprises parts of New York, 
northern New Jersey, and southern Connecticut. The New York City area 
is to the southwest of Providence, Hartford, and Boston, and thus ozone 
and emissions from the New York City area contribute to those areas' 
problems. Ozone and emissions from upstate New York and northern 
Pennsylvania, which lie to the west and [[Page 4721]] northwest, also 
contribute to the problems in Hartford, Providence and Boston. 
Connecticut, Rhode Island, western Massachusetts, Vermont, and central 
and southern New Hampshire also contribute to the Boston problem, by 
virtue of lying to the southwest, west or northwest of Boston. By 
virtue of lying to the southwest of Portsmouth, New Hampshire, the 
states of Connecticut, Rhode Island, and Massachusetts contribute to 
Portsmouth's nonattainment problem. Western and northern New York 
State, Vermont, and central and southern New Hampshire lie to the west 
and northwest of the Portsmouth nonattainment area, and thus also 
contribute to the Portsmouth problem. The Boston area, as well as New 
Hampshire, Vermont, and New York State, lie to the southwest or west of 
Maine, and thus contribute to nonattainment and maintenance problems in 
Maine.
    Recently, and too late for inclusion in the rationale of the SNPRM, 
three additional studies have become available, described below. These 
new studies confirm the conclusions indicated by the previous studies.
    EPA has completed a modeling analysis for the OTC to examine the 
potential impacts of region-wide NOX-oriented control strategies 
in portions of the eastern United States.\12\ The pertinent purposes of 
this analysis were (1) to identify whether a set of alternative 
regional controls would reduce ozone transport into and along the 
Northeast ``Urban Corridor'' to below 120 ppb, and (2) to examine the 
incremental benefits, in term of ozone reductions in the Corridor, from 
the application of control strategies within the Corridor only and 
within the entire OTR. For this analysis, the ``Urban Corridor'' is 
defined as the contiguous serious and severe ozone nonattainment areas 
extending from Washington, DC, through Baltimore, Philadelphia, New 
York City, and New England to southern New Hampshire.

    \12\See ``Summary of EPA Regional Oxidant Model Analyses of 
Various Regional Ozone Control Strategies'', November 28, 1994.
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    For the analysis EPA used ROM (see 59 FR at 48674), a photochemical 
grid model covering the eastern half of the United States and 
southeastern Canada. Model simulations were performed for two 
meteorological episodes: July 1-15, 1988 and July 13-21, 1991. The July 
1988 period was a severe and widespread ozone episode in most sections 
of the modeling domain. During the July 1991 period, high ozone 
concentrations were limited to the Midwest and Northeast. 
Meteorological weather patterns were quite favorable for large-scale 
ozone and precursor transport into and along the Urban Corridor during 
both episodes.
    EPA modelled several scenarios simulating very significant emission 
reductions (on the order of 35-40% for NOX and VOC) in the OTR. 
These scenarios included, among others, reductions from combinations of 
measures, including the Clean Air Act-mandated control programs, a 0.15 
lb/MMBtu NOX limit, an additional ``corridor control package,'' 
and LEV. None of these emission reduction combinations was sufficient 
to reduce ozone levels to below 0.12 ppm throughout the region. 
Specifically, even with the most effective combination of measures, 
several areas, including the New York City area and parts of New 
England, were not in attainment by the year 2005. Specifically in New 
England, even the most effective combination of these measures did not 
result in attainment in the Boston area and parts of Connecticut and 
Rhode Island by the year 2005. Because emissions are lower in 2005 than 
in 1999 (the attainment year for serious areas in the OTR), it is a 
reasonable extrapolation from this data that an even greater 
nonattainment problem remained in 1999, and that a maintenance problem 
in these areas is to be expected. This provides additional support to 
EPA's conclusions from the SNPRM that very large emission reductions 
will be required throughout the OTR to bring all areas into attainment.
    EPA also used ROM to examine the impact on air quality of a region-
wide OTC LEV program applied in addition to a Clean Air Act 2005 base 
case scenario and a 0.15 lb/MMBtu NOX program in the OTR. Given 
that, due to fleet turnover, reductions from the OTC LEV program would 
be only partially achieved by 2005, EPA's ROM analysis found the 
incremental improvements in ozone levels due to application of the OTC 
LEV program (reductions of 3-6 ppb in daily maximum ozone levels) to be 
relatively large. EPA found this incremental improvement from OTC LEV 
most evident when the LEV results are compared with the results of 
simulating the impact of a ``corridor control strategy'' that would 
result in similar emission reductions.
    A further discussion of this recent model analysis is included in 
the response-to-comments documents.
    New York State reached conclusions that support the studies 
described above, after applying the Urban Airshed Model (UAMIV) to the 
modeling domain being used in the New York and Connecticut ozone 
attainment demonstrations.\13\ These studies utilized the CALMET 
procedure for generating meteorological inputs to UAM. Consequently, 
resulting wind fields and mixing heights differed from those used in 
the ROM analyses and in earlier UAM studies conducted by the same 
investigators. New York State's most recent UAM study shows that it 
would be impossible to demonstrate attainment unless large reductions 
in regional ozone transported into the domain were realized. In this 
UAM study, it is shown that a local strategy reflecting 75% reduction 
in VOC and 25% reduction in NOX combined with an upwind regional 
strategy reflecting 75% reduction in NOX and 25% reduction in VOC 
would be necessary to attain the NAAQS throughout the New York UAM 
domain. These results add credence to the ROM matrix findings and 
results from ROM simulations performed for the OTC, which came to 
similar conclusions.

    \13\See Kuruvilla, John et. al., ``Modeling Analyses of the 
Ozone Problem in the Northeast'', prepared for U.S. EPA, CA No. 
X819328-01-0, EPA document no. EPA-230-R-94-108, 1994.
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    In the New York UAM analysis, both large VOC and large NOX 
reductions were effective in reducing peak ozone concentrations, with 
the VOC controls being somewhat more so. However, predicted reductions 
in ozone were more extensive over a larger area when NOX was 
reduced by large amounts. This latter finding with the UAM is 
consistent with ROM analyses that suggest that large NOX 
reductions will be needed to reduce regional transport to at or below 
120 ppb of ozone. As noted above, the New York UAM analyses to date are 
consistent in predicting that large reductions to incoming regional 
ozone (through control of ozone precursors) will be needed to 
demonstrate attainment further downwind with the UAM.
    The New York UAM analysis uses more refined, localized 
meteorological estimates (CALMET), instead of coarser ROM meteorology, 
as well as the updated interim regional inventory, rather than 1985 
National Acid Precipitation Assessment Program emissions. This study is 
close to what New York is expected to use for its attainment 
demonstration and rate-of-progress SIPs; thus, the study is 
particularly helpful.
    Finally, EPA performed studies designed to determine the extent to 
which improved air quality in recent years is due to meteorological 
fluctuations compared to reduced VOC [[Page 4722]] emissions.14 
These studies, discussed in more detail in the response-to-comments 
documents, included the development and application of a statistical 
procedure for normalizing apparent ozone air quality trends to account 
for confounding meteorological factors. The studies concluded that 
after meteorology is normalized, there has been a downward trend in 
ozone concentrations of 1-2% per year, from 1981 through 1993 (the end 
date of the studies). EPA then conducted a ROM test that examined the 
impact on ozone levels of the reduction in VOC and NOX emissions 
between 1988 and 1991. ROM predicted a decrease in ozone levels that 
matched the decrease observed in the meteorological studies. EPA views 
these studies as confirmation of the validity of the ROM model's 
estimates.

    \14\See Briefing, ``Urban Ozone Trends Adjusted for 
Meteorology''; See also Cox, William M. and Chu, Shao-Hung, 
``Meteorologically Adjusted Ozone Trends in Urban Areas: A 
Probabilistic Approach'', Atmospheric Environment, Vol. 27B, No. 4, 
pp. 425-434, 1993.
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    For its conclusions, EPA relies on (1) the initial ROM studies 
showing that 50-75% NOX reductions (from 1990 levels) from the OTR 
as a whole are needed to bring the serious and severe nonattainment 
areas into attainment by 2005; (2) the wind trajectory analysis 
supporting the conclusion that locations lying anywhere from the south 
through northwest of each of those nonattainment areas must contribute 
that level of NOX reductions in order for each of those 
nonattainment areas, respectively, to attain; and (3) the subsequent 
ROM, NY UAM and meteorological studies confirming the results of the 
initial ROM and wind-trajectory analysis. Based on these, EPA concludes 
that 50-75% NOX reductions from the 1990 levels in each state (or, 
in the case of Virginia, the portion of the state) in the OTR will be 
needed in order for each of the serious and severe areas from Baltimore 
northeast through Portsmouth, New Hampshire to attain the standard. In 
addition, based on the same analyses, EPA concludes that 50-75% VOC 
reductions from the 1990 levels are needed in and near and (upwind of) 
those nonattainment areas in order for each of those areas--including 
the portions of the Washington, Philadelphia, New York, Providence and 
Portsmouth areas just downwind and across state lines from those nearby 
upwind VOC sources--to attain the standard by their respective 
attainment dates.15 The need for this large level of reductions, 
coupled with the wind trajectory data, form the basis for EPA's 
conclusions that virtually every area within the OTR contributes 
directly to a nonattainment or maintenance problem in a downwind state 
in the OTR.

    \15\For example, VOC sources in the northern Virginia portion of 
the Washington nonattainment area contribute to nonattainment in the 
Maryland portion of that area, and VOC sources in the New Hampshire 
portions of the Boston nonattainment area contribute to 
nonattainment in the Massachusetts portion of that area.
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(c) Analysis of Inventory and Options for Control Measures
    The next step in EPA's analysis is to assess the options available 
for achieving the necessary reductions in NOX across the OTR and 
in VOCs in and near the Northeast Corridor of the OTR, which is 
discussed in more detail in the SNPRM. See 59 FR at 48677-48684. For 
this step, EPA first assessed the best available information about the 
inventory of emissions across the OTR and then considered various 
potential control measures to reduce emissions by the necessary amount. 
In its analysis, EPA considered options that are at least potentially 
reasonable and practicable across the entire OTR (referred to herein as 
``potentially broadly practicable'' measures). In other words, EPA has 
not considered options that, while perhaps potentially practicable to 
some extent in some locations, would be impracticable if applied to 
their full extent throughout the OTR.16

    \16\EPA believes that whether such measures--particularly those 
involving local land-use, highway, or mass transit infrastructure 
changes--are practicable to some extent in individual areas depends 
on a consideration of local factors that can be conducted only by 
state and local citizens and governments. For that reason, EPA 
cannot itself either determine or assume that those measures are 
practicable to some extent in any particular area. As described 
elsewhere in this notice, however, EPA has left states the 
flexibility to demonstrate that such measures are indeed practicable 
and hence might close any emissions reductions shortfall so as to 
render emission reductions from new motor vehicles unnecessary.
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i. Inventory Analysis
    EPA relied on the 1990 interim regional inventory used for ROM and 
UAM analyses and projected emissions growth to estimate NOX and 
VOC emissions in 2005 (the attainment deadline for severe areas, except 
for the New York-New Jersey-Connecticut area with the slightly later 
deadline of 2007). EPA projected that highway vehicles will account for 
approximately 38% of the total NOX inventory and 22% of the total 
VOC inventory in 2005, indicating that substantial motor vehicle 
controls would have to be an important part of a workable compliance 
plan for the OTR. EPA projected the gasoline-powered light-duty vehicle 
component of the inventory (the vehicle types that would be subject to 
the OTC LEV program) to constitute 28% of total NOX emissions and 
19% of total VOC emissions in the 2005 inventory.
ii. Analysis of Options for Control Measures Without More Stringent New 
Motor Vehicle Standards
    To identify and evaluate the full range of potentially broadly 
practicable control options, EPA first analyzed the impact of measures 
explicitly required by the Act, using the same ROM modeling tools used 
to assess the overall magnitude of reductions needed in the OTR. The 
Agency then analyzed other options to fill the shortfall in emissions 
reductions, including a stringent limit on NOX emissions, measures 
EPA included in proposed Federal Implementation Plans (FIPs) for three 
areas in California, and measures listed in compilations of NOX 
and VOC control measures prepared by EPA and the State and Territorial 
Air Pollution Program Administrators/Association of Local Air Pollution 
Control Officials (STAPPA/ALAPCO). Recognizing uncertainties in various 
aspects of its analysis and EPA's authority to resolve those 
uncertainties in favor of health and environmental protection, EPA 
concludes that no combination of such measures would be sufficient to 
achieve the necessary amount of reductions without more stringent 
standards applicable to new motor vehicles.
    EPA identified in the SNPRM the array of measures applicable to 
stationary and mobile sources under the Act, and described its modeling 
of the impacts of these measures on ambient ozone levels in the OTR. 
EPA calculated that application of these controls would achieve 
reductions by 2005 in the OTR of 20% for NOX and 37% for VOCs from 
the 1990 baseline inventory, and concluded from ROM studies modeling 
the impacts of these measures that this level of reductions would be 
insufficient.
    As explained in the SNPRM, EPA must account for problems in 
calculating the impact of control measures, including imperfect 
enforcement, control equipment malfunctions, and operating and 
maintenance problems. Accounting for such problems through a ``Rule 
Effectiveness'' factor diminishes the emissions reductions that one 
could expect if all sources could fully comply with rules at all times. 
See 59 FR at 48682. EPA noted that it had applied Rule Effectiveness 
considerations in calculating the overall impact of the Act-mandated 
controls for the ROM studies and for mobile sources within the MOBILE 
emissions model. See 59 [[Page 4723]] FR at 48679 n.36 and 48682. 
However, EPA did not apply Rule Effectiveness values in calculating the 
impacts of other control measures, thereby making these measures overly 
optimistic.
    In addition to the Act-mandated controls, EPA also examined the 
impact of a 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 calculated that this level of control would achieve a 15% reduction 
in inventory-wide NOX emissions from a 2005 projected baseline, 
after application of other controls mandated in the Act. Together with 
the mandatory measures, this would achieve a total NOX emissions 
reduction in the OTR of 32% from 1990 baseline levels.
    EPA explained in the SNPRM that it evaluated the 0.15 NOX 
standard as representing the maximum emissions reduction from large 
stationary sources that is not clearly unreasonable or impracticable. 
See 59 FR at 48679. By this EPA explained that it did not mean that EPA 
believes that such measures are in fact reasonable and practicable. See 
59 FR at 48678.
    In fact, on September 27, 1994--five days after publication of the 
SNPRM--eleven of the thirteen OTC member States signed a Memorandum of 
Understanding regarding regional NOX controls (NOX MOU) 
somewhat less stringent than the 0.15 NOX standard. Only 
Massachusetts and Virginia have not signed the NOX MOU.
    Designed to build on the existing NOX Reasonably Available 
Control Technology (RACT) program, the agreement represents a phased 
approach to controlling NOX emissions from power plants and other 
large fuel combustion sources. The first component (called ``phase II'' 
because the existing NOX RACT program is ``phase I''), to be 
implemented by May 1999, would include three control zones in the 
region: An inner zone ranging from the Washington, DC, metropolitan 
area northeast to southeastern New Hampshire; an outer zone ranging 
from the inner zone out to western Pennsylvania; and a northern zone 
which includes much of northern New York and northern New England, 
including most of New Hampshire.
    Control requirements under the MOU vary with the zone in which the 
various sources are located, with the most stringent requirements 
occurring in the inner zone. Affected sources (boilers and indirect 
heat exchangers with a maximum gross heat input rate of at least 250 
MMBtu per hour and electric generating units producing at least 15MW of 
electricity) in the Inner Zone will be required to reduce NOX 
emissions by 65 percent from base year levels or emit NOX at a 
rate of no more than 0.2 lbs/MMBtu. In the Outer Zone, NOX 
emissions must be reduced by 55 percent from base year levels by May 1, 
1999, or emissions must be limited to no more than 0.2 lbs/MMBtu. 
Northern Zone controls remain at RACT levels during phase II.
    The next phase (known as ``phase III'') would be implemented by May 
2003. By that date, affected sources in both the Inner and Outer Zones 
must reduce NOX emissions by 75 percent from base year levels or 
limit NOX emissions to no more than 0.15 lb/MMBtu. Affected 
sources in the Northern Zone would be subject to regulations that would 
reduce their rate of NOX emissions by 55 percent from base year 
levels, or would have to emit NOX at a rate of no greater than 0.2 
lbs/MMBtu.
    The NOX MOU provides for modified regulations for the May 1, 
2003, targets if additional modelling and analysis show that these 
modified regulations, in combination with regulations for controlling 
VOCs, will result in attainment of the ozone standard throughout the 
OTR. In such a case, the NOX MOU would have to be revised by 
December 31, 1998.
    Based on EPA's 1990 interim emissions inventory, EPA estimates that 
the NOX MOU will result in about a 70 percent reduction in 
NOX from these sources, or slightly less than the reduction that 
would have occurred with the application of a region-wide 0.15 lbs/
MMBtu standard. EPA estimates that more than three-fourths of the total 
NOX reductions to be obtained under the NOX MOU will be 
achieved by 1999.
    In addition to the Act-mandated measures and region-wide NOX 
controls, EPA also considered a variety of NOX and VOC control 
measures from STAPPA/ALAPCO compilations, transportation control 
measures, California reformulated gasoline, and measures EPA proposed 
for FIPs for California areas. As summarized in the SNPRM, most of the 
NOX source categories in the STAPPA/ALAPCO compilation were 
already encompassed within the 0.15 NOX standard. The remaining 
STAPPA/ALAPCO categories of small stationary and area sources comprise 
an extremely small portion of the stationary source segment of the 
emissions inventory, and a still smaller portion of the overall 
inventory. EPA also calculated that the transportation control measures 
that EPA would consider potentially broadly practicable would yield 
only a combined reduction of 2.5% from 1990 baseline inventory-wide 
NOX reductions. In the SNPRM, EPA identified the option of 
extending the employee trip reduction (or employee commute options 
(``ECO'')) program region-wide as potentially practicable. Upon further 
consideration, EPA believes it is more appropriate to characterize 
region-wide ECO as a measure that, while potentially practicable in 
some urban and suburban settings, cannot be considered broadly 
practicable if applied across the OTR. Deleting the emission-reduction 
benefits of extending ECO region-wide, however, merely buttresses the 
conclusions described above. For California reformulated gasoline, EPA 
calculated a 1.4% reduction in NOX emission from 1990 baseline 
inventory-wide levels. For the proposed California FIP measures, EPA 
also did not find additional options that were not either inappropriate 
or unavailable in the OTR, or already encompassed within the Act-
mandated controls or 0.15 NOX standard. In sum, EPA concludes that 
all other potentially broadly practicable options will be needed in 
addition to more stringent controls for new motor vehicles throughout 
the OTR, in order for the serious and severe ozone nonattainment areas 
in the OTR to attain the ozone standard; those other options will not 
produce emissions reductions sufficient to remove the need for such 
motor vehicle controls. As described in the SNPRM, similar conclusions 
apply with respect to VOC emission controls in and near the urban 
Northeast Corridor nonattainment areas of the OTR.
iii. Determination Whether Reductions from OTC LEV or LEV-Equivalent 
Program Are Necessary
    As discussed in the SNPRM and above, EPA has concluded that there 
are not sufficient broadly practicable options for making up the 
shortfall in emissions reductions necessary for attainment and that all 
of the emissions reductions associated with applying the OTC LEV or 
LEV-equivalent program are necessary. See 59 FR at 48683-48684. EPA 
calculated the impact of the OTC LEV program in 2005 from the 2005 
projected inventory, over the reductions that will take place in New 
York and Massachusetts as a result of their existing LEV programs 
beginning in 1996. EPA did not account in those calculations for the 
emissions associated with migrating and visiting vehicles. EPA 
subsequently analyzed these migration effects and published a notice 
describing them on October 24, 1994, 59 FR 53396. Since that notice, 
EPA has done a more thorough analysis of these effects, which can be 
found in the RIA [[Page 4724]] located in section V of the docket. EPA 
now estimates that those migration effects result in a 16 ton per day 
increase in VOC emissions and a 28 ton per day increase in NOX 
emissions in 2005 over EPA's previous estimates of highway vehicle 
emissions under the OTC LEV program. However, the benefits of the OTC 
LEV are still substantial and EPA continues to believe that the 
information above and in the SNPRM (see conclusion 59 FR at 48682) 
supports the conclusion that all of the emission reductions associated 
with the OTC LEV program are necessary and that no options other than 
that program are currently available to achieve reductions from new 
motor vehicles. The OTC LEV program is necessary unless an acceptable 
LEV-equivalent program is in effect.
    The OTC LEV program would be reasonable and practicable in the OTR, 
as explained in the SNPRM, 59 FR at 48683-48684. EPA granted California 
a waiver for the LEV program based on a finding of technical 
feasibility and adequate lead-time; the California Air Resources Board 
(CARB) has continued to find the program feasible with certification of 
several categories of LEVs; New York and Massachusetts have also found 
that the program is reasonable; and the legislative history of section 
177 reflects the notion that extension of California standards to other 
states would not place an undue burden on auto manufacturers.
iv. ZEV Equivalency
    EPA requested comment in the SNPRM on whether it should use its 
authority under section 184 to include a ``ZEV equivalency'' 
requirement--i.e., to require the OTR states to achieve the additional 
emissions reductions associated with the ZEV production mandate if the 
Agency were not to require the OTR states to adopt the ZEV mandate. See 
59 FR at 48684. EPA noted that in an August 4, 1994, letter, the Chair 
of the OTC stated that, for purposes of discussing different options 
with the auto manufacturers, any alternative should be compared to the 
full LEV program, including the ZEV mandate. In addition, commenters 
suggested that EPA require that states' programs compel the automobile 
manufacturers either to sell ZEVs or to achieve equivalent reductions 
from the new vehicle sector.
    EPA has decided that today's action should not require states to 
achieve those benefits of the ZEV production mandate that are not 
otherwise provided by the OTC LEV program.17 First, EPA does not 
interpret the OTC's recommendation as recommending that EPA issue such 
a requirement. Regarding the ZEV production mandate, the OTC's February 
10, 1994, recommendation states:

    \17\For purposes of today's action, the additional benefits of 
ZEVs are NMOG evaporative and NOx tailpipe emissions. Because the 
LEV program's fleet NMOG average is unaffected by the ZEV mandate, 
the ZEV mandate does not affect fleet NMOG tailpipe emissions, but 
the mandate does result in increased reductions of NMOG evaporative 
and NOx tailpipe emissions. Commenters also suggested that auto 
manufacturers be responsible for CO, toxics and CO2 benefits of 
ZEVs, but consideration of these benefits is beyond the scope of the 
Agency's authority under section 184, which pertains solely to ozone 
pollution and its precursors.
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    To the extent that a Zero Emission Vehicle sales requirement 
must be a component of a LEV program under Section 177, such a 
requirement shall apply. Further, if such a Zero Emission Vehicle 
sales requirement is not a required component of programs adopted 
under Section 177, individual States within the OTC may at their 
option include such a requirement and/or economic incentives 
designed to increase the sales of ZEVs in the programs they adopt.

Thus the OTC states clearly recommended that they be obligated to adopt 
the ZEV mandate only if it were legally required for adoption of the 
LEV program under section 177. Since EPA has concluded that states 
adopting the LEV program are not obligated to adopt the ZEV mandate 
under section 177 (see discussion in section IV.B.3. below), the OTC 
states have not recommended that EPA require state adoption of the ZEV 
mandate. The states also clearly expressed their wish to retain 
authority as individual states to adopt ZEV mandates. This in no way 
suggests that the states wanted EPA to require those who choose not to 
adopt a ZEV production mandate to achieve its benefits through other 
requirements applicable to manufacturers of new motor vehicles.
    The February 10 recommendation does not elsewhere reflect any 
desire that EPA require the states to achieve the additional benefits 
associated with a ZEV mandate. The recitation clauses in the OTC's 
recommendation state the OTC's expectation that EPA should evaluate 
alternatives to the OTC LEV program according to specified criteria. 
This does not, however, amount to a request that EPA require that 
states achieve the benefits associated with the ZEV mandate. Rather, 
EPA believes this is best understood as indicating the OTC's desire 
that EPA should consider other options to achieve the same reductions 
from new motor vehicles through a LEV-equivalent program. In so doing, 
EPA believes the OTC's recommendation is best understood to underscore 
that such an option should also advance technology.
    Second, the August 4, 1994 letter from the OTC does not support the 
view that EPA should require that states achieve the additional 
emissions benefits of the ZEV mandate. That letter does not purport to 
interpret the OTC's February 10 recommendation.18 Rather, that 
letter sets forth the OTC's principles in approaching negotiations with 
the automakers regarding a LEV-equivalent program. The August 4 letter 
reflects the OTC's desire that the OTC's agreement to accept a LEV-
alternative would not deprive the OTC states of the ZEV benefits that 
they would otherwise have the option to require. This is entirely 
different from a recommendation that EPA require that the states 
achieve the ZEV benefits.19

    \18\EPA need not resolve whether it is appropriate to rely on 
such a letter to determine the OTC's intent.
    \19\Even if the OTC had intended that EPA require state programs 
requiring from the new motor vehicle sector the additional benefits 
provided by a ZEV production mandate, it is unlikely that EPA could 
issue such a requirement. EPA received no comments explaining how, 
without adopting a ZEV mandate, states could require the additional 
ZEV mandate emission benefits from the new motor vehicle sector and 
not violate sections 209 and 177.
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d. The Effect of a Possible LEV-Equivalent Program on the Need for OTC 
LEV
    As mentioned above, EPA is continuing to work with the interested 
parties to determine whether a LEV-equivalent program could be 
developed. Several commenters have argued that the possibility of a 
LEV-equivalent program precludes EPA from finding that OTC LEV is 
necessary. EPA disagrees with these commenters for the reasons given in 
the SNPRM, 59 FR 48683 (cols. 2-3). There is no currently available 
method (other than adoption of a LEV program under section 177) for a 
state unilaterally to require emission reductions from new motor 
vehicles. The alternative program being developed by interested parties 
is not an option that individual states can adopt now. The alternative 
requires the automakers' consent to tighter standards and the 
automakers have made it clear that their consent will not be given 
without certain conditions being met--including the condition that all 
OTC states agree to the alternative. Not all OTC states have agreed to 
an alternative, and EPA does not have authority to require them to do 
so. In addition, the automakers have indicated that their agreement to 
a LEV-equivalent program is contingent on New York and 
[[Page 4725]] Massachusetts dropping their ZEV programs. EPA cannot 
require those states to take such an action. Furthermore, the 
alternative would likely require either EPA regulations or a consent 
decree or both before it would be valid. EPA cannot now find that the 
OTC LEV program is unnecessary even though a LEV-equivalent program 
might become available in the near future. As discussed elsewhere in 
this notice, however, EPA has qualified its finding that OTC LEV is 
necessary by providing that that program will not be considered 
necessary, and hence will not be required, if and when EPA finds that 
an acceptable LEV-equivalent program is in effect.20

    \20\ On another point raised in the SNPRM, EPA noted that it was 
considering an extension of its cross-border sales policy to Maine 
dealers. EPA has made this extension. See letters from Mary T. Smith 
to Honorable Olympia J. Snowe and Honorable William S. Cohen, dated 
October 12, 1994.
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e. Particular Circumstances of OTC LEV Program.
    Several particular aspects of the OTC LEV program further support 
EPA's conclusion that it is necessary to adopt the program region-wide 
to attain the greatest amount of emissions reductions and to facilitate 
operation of the program, as explained in more detail in the SNPRM. See 
59 FR at 48684-48685. These circumstances include: The interstate 
nature of the business of selling new cars, particularly among the 
smaller Northeast states and especially along their border areas; the 
need for states to adopt the program as soon as possible because the 
fleet turnover on which the emissions reductions depend takes 
substantial time; and the mobility of cars throughout the dense 
transportation infrastructure in the Northeast, so that the sale of 
cars meeting less stringent standards in part of the region could 
compromise environmental benefits across the region. The mobility of 
motor vehicles in the OTR supports the conclusion that the LEV program 
is needed throughout the OTR, to ensure that both the motor-vehicle-
related portion of the overall NOX reduction needed throughout the 
OTR, and the motor-vehicle-related portion of the overall VOC 
reductions needed in and near the urbanized Northeast Corridor, are 
actually achieved.
f. Conclusions Regarding Need for OTC LEV or a LEV-Equivalent Program 
for Purposes of Bringing Downwind States Into Attainment by the Dates 
Provided in Subpart 2 of Part D of Title I
    The next step in EPA's analysis in the SNPRM was to address 
specifically the need for the OTC LEV program by the 1999, 2005, and 
2007 attainment deadlines for the serious and severe areas in the OTR. 
As noted above, EPA's conclusion that 50% to 75% reduction from a 1990 
baseline inventory in NOX emissions throughout the OTR and in VOC 
emissions in and near the urban areas is constant over time. EPA's 
modeling focused primarily on the 2005 inventory, at which time growth 
since 1990 must be offset in addition to achieving the 50% to 75% 
reductions. As EPA explained in the SNPRM, there is no reason to 
believe that the conclusion that emission reductions equivalent to 
those achieved by the OTC LEV program are necessary would be different 
for the New York-New Jersey-Connecticut severe area, which has a 2007 
attainment deadline. This is because the control options EPA considered 
will not achieve such greater reductions in the extra two years so as 
to make up the shortfall needed for attainment. Also, each of these 
three states needs the program in order that the other two may attain 
by 2007, as they share a common airshed and commuters from each of 
these states contribute emissions to the others. For these same 
reasons, these three states may also need the program in order that the 
southern New Jersey-Philadelphia nonattainment area may attain by 2005.
    Based on the ROM and trajectory analyses described in the SNPRM and 
the analysis of alternative control measures, EPA also believes that, 
unless an acceptable LEV-equivalent program is in effect, all of the 
OTR states need the OTC LEV program in order that serious areas with a 
1999 attainment deadline may attain on time. As noted above, because 
emissions will be lower in the OTC nonattainment areas in 2005 than in 
1999, it is a reasonable extrapolation from the modeling data that an 
even greater nonattainment problem will remain in 1999 than in 2005. 
Even the limited reductions from the OTC LEV program in model year 1999 
are actually necessary, given the reductions that need to be achieved 
in upwind states in order for each of these areas to attain on time. 
Further, the attainment date for those serious areas may well extend 
beyond 1999. This provides another reason to resolve in favor of acting 
quickly, any uncertainties with regard to the need for an OTC LEV or 
LEV-equivalent program to bring serious areas into timely attainment. 
Three years of data are needed to actually achieve attainment, and the 
states may legally extend their attainment deadlines for two one-year 
periods if one exceedance of the NAAQS occurs in the deadline year. It 
is quite possible that at least some of the serious areas with 1999 
deadlines will need to rely on these extensions through 2001. Certainly 
current modeling indicates that the best chance for these areas to 
attain by their attainment dates would be through use of these one-year 
extensions. Emission reductions from the OTC LEV program would be 
necessary to offset growth and sustain attainment-level air quality in 
2000 and 2001, when the program will generate increasing reductions due 
to fleet turnover.
    In summary, based on the analysis in the SNPRM and consideration of 
the comments, EPA concludes that (1) emission reductions from the OTC 
LEV or a LEV-equivalent program are a necessary part of the 50-75% 
NOX and VOC reductions needed from upwind states to bring serious 
and severe areas stretching from the Washington, DC nonattainment area 
to the Portsmouth, New Hampshire nonattainment area into attainment by 
the 1999, 2005, and 2007 deadlines applicable to those areas; (2) the 
reductions from OTC LEV or a LEV-equivalent program will be needed in 
areas located in a broad arc extending from the south through the 
northwest of each of those areas; (3) such a program is also needed in 
the remaining parts of the OTR to maintain the program's effectiveness 
in light of dealership trading and migration of vehicles throughout the 
OTR; and (4) the OTC LEV program is the only currently available 
program for reducing emissions from new motor vehicles. Therefore, EPA 
concludes that the OTC LEV program is necessary in each state (or in 
the case of Virginia, portion of the state) in order to bring all of 
those serious and severe nonattainment areas into attainment by those 
dates, unless an acceptable LEV-equivalent program is in effect.
3. OTC LEV or LEV-Equivalent Program is Also Needed for Maintenance
    In the SNPRM, EPA also addressed how maintenance of the ozone NAAQS 
after it is achieved is relevant to EPA's analysis. See 59 FR at 48687-
48690. First, EPA explained its legal authority to consider maintenance 
under both sections 110(k)(5) and 184, and then described why OTC LEV 
or a LEV-equivalent program is necessary for maintenance.
a. Legal Analysis
    EPA concludes that it has authority to act, even under section 
110(k)(5), even prior to submission of attainment demonstrations under 
section 182, to require submission of measures [[Page 4726]] necessary 
for compliance with the maintenance aspects of section 110(a)(2)(D), as 
discussed in more detail in the SNPRM. In the SNPRM and NPRM 
discussions, EPA emphasized the relocation of maintenance in general to 
section 175A in the 1990 Amendments to the Act, together with the 
retention of maintenance as an explicit consideration under section 
110(a)(2)(D) for purposes of addressing pollution transport. 
Particularly in light of the staggered attainment deadlines under 
section 181 for ozone, upwind areas with later deadlines may continue 
to generate emissions interfering with downwind maintenance in downwind 
areas with shorter attainment deadlines. As with the attainment 
analysis, EPA concludes that it is important to act now, because 
reductions from the OTC LEV and LEV-equivalent programs are dependent 
on fleet turnover, and delay would cause the irrevocable loss of 
emissions reductions necessary for downwind maintenance. Also, 
uncertainty in the factual analysis for maintenance should be resolved 
in favor of health and the environment for the same reasons EPA 
described in the attainment discussion.
    EPA also concludes maintenance is a proper consideration under 
section 184(c), as described in more detail in the SNPRM and NPRM. 
While the language of section 184(c) references timely attainment and 
does not explicitly refer to maintenance, EPA concluded that 
``attainment'' should be understood to include ``maintenance'' where 
the issue is whether measures are ``necessary'' to comply with 
pollution transport requirements. This is because it does not make 
sense 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. Also, EPA believes that the OTC is an entity also 
established under section 176A, which encompasses both the attainment 
and maintenance aspects of section 110(a)(2)(D). Section 184 simply 
adds stringency to section 176A in light of the serious problem in the 
northeast. It therefore makes sense to believe Congress did not intend 
in section 184(c) to displace the more general authority of a 
commission under section 176A to make recommendations, and for EPA to 
approve recommendations, concerning both the attainment and maintenance 
aspects of section 110(a)(2)(D). EPA has reviewed the comments 
submitted on this issue and continues to believe that it has the 
authority to consider maintenance when acting pursuant either to 
section 110 or section 184 for the reasons given in the SNPRM and in 
the response-to-comments documents.
    Beyond that, as described earlier, EPA believes that it may treat 
the OTC submittal also as a request with recommendations under section 
176A, which plainly authorizes EPA to approve such a request if its 
recommended measures are necessary to prevent interference with 
maintenance in downwind states under section 110(a)(2)(D).
b. Technical Analysis
    EPA is concluding that, unless an acceptable LEV-equivalent program 
is in effect, the OTC LEV program is necessary for states in the OTR to 
maintain the ozone NAAQS after they achieve the standard, as discussed 
in the SNPRM. See 59 FR at 48688. EPA bases this conclusion on its 
analysis of emissions growth in the OTR which the additional measures 
must neutralize, even after sufficient controls for attainment by the 
attainment deadlines are in place. This growth results especially from 
increasing vehicle miles traveled (VMT), which tends to overcome 
reductions resulting from turnover to the Tier 1 standards and 
implementation of advanced inspection/maintenance programs. Therefore, 
the high level of reductions needed to attain the NAAQS are also needed 
from the same areas to maintain the NAAQS, and OTC LEV or a LEV-
equivalent program is needed from those areas for the same reason.
    The Agency's analysis of available control options shows that they 
are insufficient to produce the emissions reductions needed to bring 
downwind areas into attainment without more stringent standards for new 
motor vehicles. The Agency therefore concludes that such options would 
a fortiori be insufficient to achieve the emissions reductions needed 
to maintain the standard over two consecutive ten-year periods 
following redesignation (as required under section 175A). The 
additional ROM and meteorological studies described above tend to 
confirm that the serious areas in the Northeast Corridor--including the 
New England areas--will not be able to attain and maintain the ozone 
standard without a combination of measures including OTC LEV or a LEV-
equivalent program. (The response-to-comments documents include 
additional support for this conclusion.)
    EPA explained that the OTC LEV or LEV-equivalent program will 
continue to accrue additional benefits through the year 2028. EPA 
calculated that in 2015 (the latest year for which it has projected 
emissions reductions), the program would yield a 39% reduction in 
NOX emissions and a 38% reduction in VOC emissions from highway 
vehicles compared to emissions in that year without the program.
    EPA acknowledges that for the most part, sources in Maine do not 
directly contribute emissions or ozone to an interstate ozone 
nonattainment problem. Maine is included because vehicles purchased in 
Maine may release emissions in parts of the OTR that do contribute to a 
nonattainment or maintenance problem. A vehicle purchased in Maine may 
travel to another state in the OTR because a Maine resident who 
purchased the vehicle in Maine moved to the other state or traveled 
there for purposes of work or recreation. This pattern is more common 
in southeastern Maine, which is close to the New Hampshire city of 
Portsmouth.
    EPA's rationale for finding LEV necessary in New Hampshire is 
several-fold. Parts of southern and central New Hampshire are northwest 
of Boston, and trajectory studies support the hypothesis that emissions 
and ozone from these areas contribute to the Boston nonattainment 
problem. In addition, part of New Hampshire is in the Boston 
nonattainment area; thus, vehicles in this area generate local NOX 
and VOC emissions that are part of the problem on the Massachusetts 
side of the state border. Vehicles in other parts of New Hampshire 
should be subject to the OTC LEV program for the same reason as 
vehicles in Maine, discussed above.
    In addition, New Hampshire lies to the south and southwest of 
Maine, and thus contributes to Portland and other Maine nonattainment 
problems. Although the Maine areas are moderate with an attainment date 
of 1996, it is possible that the LEV reductions, which will not begin 
until 1999, will be necessary for attainment and maintenance in Maine. 
At the least, this possibility provides EPA with another reason to 
resolve any uncertainty over the necessity of OTC LEV in this state in 
favor of requiring OTC LEV.
    Specifically, the OTC ROM and the New York UAM/ROM Study clarify 
the extent to which LEV may be needed for attainment and maintenance in 
the northeastern portions of the OTR. Both studies (i) apply ROM 2.2 to 
analyze what would happen with a recurrence of the July 1988 
meteorological episodes in the year 2005, and (ii) incorporate the 
interim regional emissions inventory as well as emissions reductions 
from [[Page 4727]] controls required under the Clean Air Act 
Amendments. These studies find that, for the episode days modelled, 
ozone levels for the southeast coastal region in Maine hover at the 120 
ppb standard. OTC ROM, figures A-2 and B-2; New York UAM/ROM Study, 
figures 15a-c and 18a-c. It should be noted that the ROM model tends to 
underestimate ozone levels in this seacoast region by failing to fully 
account for the impact of the seabreeze. The ROM model tends to show 
higher levels of ozone just off the coast, but it appears that 
seabreezes keep more of the ozone plume over the shore. Accordingly, it 
is quite possible that by the year 2005, this portion of Maine would 
remain in nonattainment notwithstanding the imposition of all mandated 
Clean Air Act controls.
    The attainment date for this area is 1996. Emissions inventories 
are expected to decrease over time, so that the 2005 inventory is 
expected to be lower than inventories in the last part of the 1990s. 
Accordingly, ozone levels in the last part of the 1990s in Maine may be 
expected to be even higher than in the year 2005. For this reason, it 
is possible that Maine's attainment dates will be extended to or past 
1999 through application of EPA's overwhelming transport policy. Even 
if Maine's attainment date remains 1996, Maine appears likely to have a 
problem maintaining the NAAQS standard in the late 1990s and early 21st 
century. Accordingly, EPA believes it relevant to inquire into how to 
assure attainment and maintenance of the ozone NAAQS in Maine.
    The OTC ROM study shows that the beneficial impact of OTC LEV and 
.15 lb/MMBtu NOX limits throughout the OTR is an ozone reduction 
of some 6-9 ppb, and that the beneficial impact of OTC LEV alone is 
approximately 3 ppb. The spatial impact of these reductions is 
difficult to discern from the ROM model due to, among other things, the 
large grids it employs; thus, it is not possible to isolate the 
benefits from stationary sources compared to mobile sources. Therefore, 
it is possible that reductions from motor vehicles will prove to be a 
necessary component of any control strategy designed to assure 
attainment and maintenance for the Maine coastal areas. It is further 
possible that emissions reductions from other mobile source measures 
will not prove to be sufficient, and therefore that the reductions from 
OTC LEV would be necessary.
    Although the preceding conclusions are based on information that at 
present is uncertain, EPA believes that it is appropriate to resolve 
those uncertainties in favor of concluding that the emission reductions 
that would be achieved by OTC LEV or an acceptable LEV-equivalent 
program throughout Maine and New Hampshire (as well as states to the 
south and west of Maine) are indeed needed to ensure maintenance (if 
not also timely attainment) in Maine.
4. Relevance of EPA Transport Policy
    As described in the SNPRM, the Agency's September 1, 1994 transport 
policy addresses areas where overwhelming transport from upwind areas 
with later attainment dates is a dominant factor accounting for 
nonattainment in downwind areas with an earlier attainment date. Such 
downwind areas may not be able to attain by the deadline due to the 
impact of transport. EPA's policy is that states may seek to have EPA 
interpret the Act so that, if it is impracticable to accelerate 
controls upwind and other facts can be shown, then the downwind areas 
might have additional time to attain beyond the section 181(a)(1) 
dates. EPA anticipates that emissions reductions during any ``extension 
period'' for downwind areas would apply to reaching attainment rather 
than to maintenance. In addition, if EPA concludes that certain serious 
areas in the OTR will not be able to reach attainment by 1999, and do 
not qualify for any extensions, then they would be reclassified to a 
higher classification (i.e., ``bump up'') under section 181(b)(2) of 
the Act and would have additional time to attain. The OTC LEV or a LEV-
equivalent program would ultimately also be necessary to achieve the 
reductions needed by any such area in the period after 1999 to attain 
by such later attainment dates.

B. Consistency of OTC LEV With Section 177 of the Clean Air Act

1. Introduction
    EPA concludes that the OTC's recommendation is consistent with 
section 177 of the Act, and that implementation of the ZEV production 
mandate is unnecessary for the recommendation to be consistent with 
section 177, for the reasons given in greater detail in the response-
to-comments document and in the SNPRM, 59 FR at 48690-48694. The 
aspects of the OTC recommendation identified as potentially implicating 
section 177 include: the statement in the OTC recommendation that 
adoption of California reformulated gasoline is not a part of the 
recommendation; the recommendation that EPA not require the ZEV 
production mandate except to the extent required under section 177; and 
the recommendation's failure to explicitly incorporate California's 
regulations. Commenters raised other concerns about consistency of the 
OTC's recommendation with section 177, including: whether incorporation 
of the NMOG fleet average requirement would violate section 177; 
whether a state's incorporation of the California LEV program after the 
program is initiated in California would create a ``third vehicle'' due 
to California's credit banking provisions; and whether a state without 
a current nonattainment area or approved SIP can adopt the California 
LEV requirements.
    EPA has reviewed the comments provided since the publication of the 
SNPRM and has concluded that the determination of consistency proposed 
in the SNPRM should be made final. Therefore, EPA finds that the OTC 
LEV recommendation is consistent with section 177 of the Act.
2. California Fuel Regulations
    EPA finds that the OTC's choice not to include California's clean 
fuel requirements in its recommendation does not violate section 177 
because it neither contravenes the ``identical standards'' requirement 
nor the ``third car'' prohibition of section 177. EPA addressed this 
issue in detail in the SNPRM and continues to rely on that discussion. 
See 59 FR at 48690-91. California's fuel provisions were not part of 
California's waiver application under section 209 and are not governed 
by section 209(a). Rather, they are addressed separately in section 211 
of the Act. Section 211 allows states to regulate fuels differently 
than EPA if they can demonstrate that such regulation is necessary to 
meet air quality standards, except that California may regulate fuel 
without such a showing. California's fuel standards are thus not 
``standards * * * for which a waiver has been granted'' under section 
177. If states were obligated to adopt California's fuel standards to 
comply with section 177, then such states would also have to meet the 
necessary showing under section 211 with respect to the fuel 
requirements. This would contradict the structural separation in the 
Act between vehicle and fuel requirements. It would also erect a 
``necessary'' hurdle to adopting vehicle standards identical to 
California's vehicle standards in a way not contemplated in section 
177.
    Moreover, given the specific language of section 177 (its 
references to section 209, its reference to waivers, and its use of the 
term ``standards relating to control of emissions from new motor 
vehicles,'' which mirrors section 209's [[Page 4728]] language), it is 
clear that the ``standards'' that must be identical under section 177 
are vehicle-based standards, not fuel standards. Finally, the 
legislative history indicates that Congress specifically decided not to 
include fuel requirements under section 177 when it reviewed section 
177 in 1990.
    Both federal courts that have reviewed the issue have found that 
failure of a state to promulgate California's fuel regulations does not 
violate section 177's requirement that an adopting state's standards be 
identical to California's standards. Motor Vehicle Manufacturers 
Association v. NYDEC, 17 F.3d 521 (2nd 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. For a more detailed discussion of this issue, 
review the response-to-comments documents and the SNPRM at 59 FR at 
48690 (col. 3).
    Likewise, EPA finds that the OTC's choice not to include the 
California fuel requirements does not violate section 177's ``third 
vehicle'' prohibition. The auto manufacturers claim higher sulfur 
levels in fuel found in the OTR would cause problems with California 
LEV emissions control systems, necessitating changes in design that 
would create a ``third vehicle.'' EPA rejects this argument.
    The voluminous data provided by manufacturers do not contradict the 
basic premises outlined by EPA in the SNPRM. This data refers to three 
issues related to increased sulfur in fuel in the northeast that 
manufacturers claim will cause the manufacture of ``third vehicles.'' 
These are: The effects sulfur will have on California's on-board 
emissions diagnostics system (OBD II); the effects of sulfur on in-use 
recall testing; and the effects of sulfur on ``maximum I/M cutpoints'' 
(i.e., cutpoints of 1.5 times the applicable standard).
    As the Agency made clear in the SNPRM, nothing in the OTC LEV 
recommendation requires manufacturers to build a third car. In fact, 
the OTC LEV petition requires that cars sold in the OTC be California-
certified vehicles. Manufacturers can build the same car to meet both 
California's and the OTC's requirements. Any design change that a 
manufacturer makes is based on the manufacturer's choice to do so. As 
the Second Circuit made clear in its decision denying manufacturers' 
``third vehicle'' claim in the context of the ZEV production mandate, 
whatever design change ``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 521, 538 (2nd Cir. 1994).
    Manufacturers' claims regarding sulfur's effects on California OBD 
II systems center around the contention that manufacturers will use 
flange-mounted catalyst assemblies instead of welded ones in their 
vehicles sold in the northeast. This is not a significant change in the 
design of the vehicles, and it would be done to save consumer time and 
cost if the catalysts need to be replaced. This would be a marketing 
choice by manufacturers and does not provide the basis for a third 
vehicle claim.
    This issue was addressed by the District Court in the New York case 
recently. In dismissing a virtually identical claim by manufacturers in 
the New York case, the District Court (Judge McAvoy) found that ``the 
changes of which (manufacturers) complain are simply not required by 
New York's adoption of California's LEV program. Certainly New York has 
not expressly required that manufacturers change their emissions 
systems mounting. Likewise, (manufacturers) have failed to show that 
New York's adoption will de facto inevitably cause the switch from 
flanged to bolted assemblies.'' MVMA, Docket No. 92-CV-869, slip op. at 
16 (N.D.N.Y. Oct. 24, 1994). In the Massachusetts case, the trial judge 
in AAMA has also denied manufacturers' request for a preliminary 
injunction on this issue, determining that manufacturers were unlikely 
to succeed on the merits of their claim. AAMA, Docket No. 93-10799-MA 
(D. Mass. Oct. 27, 1993.)
    In addition, manufacturers' claims regarding ``maximum I/M 
cutpoints'' (i.e., cutpoints 1.5 times above the applicable standards) 
and state in-use recall testing are inapposite. The OTC recommendation 
did not include requests for either maximum I/M or in-use recall 
testing. It is uncertain whether state programs will include these 
provisions. Therefore, as such provisions are not required or otherwise 
implicated by this action, manufacturers' arguments that such programs 
will cause ``third vehicles'' are not ripe.
    Another important issue noted by several commenters and Judge 
McAvoy is that a significant number of vehicles sold in California 
(those that permanently or, to a lesser extent, temporarily relocate) 
are likely to be subjected to fuels with the same sulfur levels as 
those in the northeast. In fact, AAMA admits that permanently relocated 
California vehicles will likely need to have their converters replaced. 
However, according to AAMA, auto manufacturers apparently will choose 
not to equip California vehicles with the flange mounted converter 
assemblies, though manufacturers do not claim that such assemblies are 
forbidden by California regulations or that the way in which vehicle 
catalysts are mounted is relevant in California certification testing. 
Once again, any difference in vehicles is a manufacturer choice and is 
certainly not mandated by the provisions of the OTC LEV recommendation; 
nor is it an undue burden.
    Moreover, as discussed more thoroughly in the response-to- comments 
documents, the legislative history shows that Congress intended to 
provide separate requirements for state regulation of vehicles and 
state regulation of fuels. As Judge McAvoy determined, Congress did not 
intend that differences in fuel requirements be used as criteria to 
invalidate state vehicle regulations under section 177. See MVMA, 
Docket No. 92-CV-869, slip op. at 19 (N.D.N.Y. Oct. 24, 1994).
    Finally, as discussed in detail in the response-to-comments 
documents, EPA is not convinced that the factual data provided by 
manufacturers show that manufacturers will need to build a different 
car for the OTR than for California in model year 1999 and thereafter. 
First, manufacturers admit that the data they provide are generally 
applicable to vehicles built prior to the current model year or to 
model years 1996-1998. EPA notes that significant progress in 
developing catalyst formulations that are more tolerant of sulfur than 
current formulations may eliminate much of the concerns of 
manufacturers by the 1999 model year. Also, EPA believes that 
manufacturers have not shown that sulfur in fuel will, in and of 
itself, cause OBD II catalyst monitors to illuminate malfunction 
indicator lights by mistaking otherwise good catalysts as 
malfunctioning.
3. ZEV Production Mandate
    EPA finds that the ZEV production mandate is not required to ensure 
consistency with section 177 for the reasons given in the SNPRM. See 59 
FR at 48691-48692. EPA is leaving to each individual OTC state the 
decision as to whether to adopt the ZEV mandate.21 EPA is not 
resolving whether the ZEV mandate is an ``emission standard.'' 
[[Page 4729]] Rather, the Agency concludes that the ZEV production 
mandate is not required to meet the identical standards provision under 
section 177, whether or not the mandate is a standard relating to 
control of emissions. Section 177 does not require adoption of all 
California standards for a particular model year, but only requires 
that if a state adopts motor vehicle standards, those standards that 
are adopted must be identical to California's standards.22 The ZEV 
production mandate and the remainder of the LEV program can be 
segregated from each other, and the ZEV mandate is not essential for 
implementation and enforcement of the remainder of the LEV program, 
which is a fully functional and enforceable motor vehicle emissions 
program. States adopting the LEV program therefore need not adopt the 
ZEV mandate to comply with the requirement for identical standards 
under section 177.

    \21\EPA believes that the incorporation of the ZEV production 
mandate into a state's LEV program is consistent with the 
requirements of section 177.
    \22\In the SNPRM, 59 FR 48692, n. 72, EPA stated its belief that 
all standards applicable to a segregable program must be implemented 
to assure that specific vehicles are subject to the same emissions 
requirements. Upon further review, EPA believes that individual 
emission standards may be implemented as long as the ``third car'' 
and ``sales limitation'' requirements of section 177 are not 
violated by the omission of any standard.
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4. Incorporation of Minor Provisions of the California LEV Program
    The OTC's recommendation does not spell out every detail of the 
California LEV program that it intended to incorporate into the 
recommended program. As discussed in more detail in the SNPRM and the 
response-to-comments documents, EPA interprets the OTC's recommendation 
to incorporate the requirement that standards be identical to the 
California LEV program, and to include any secondary requirements of 
the California program necessary to ensure consistency with section 177 
for 1999 and later model year passenger cars and light-duty trucks. See 
59 FR at 48693. Determinations regarding which portions of the 
California LEV program are required for consistency with section 177 
will be made in the review of each state plan.
5. NMOG Fleet Average
    State adoption of the NMOG fleet average does not violate section 
177, as explained in the SNPRM. See 59 FR at 48693. The fleet average 
requirement is a primary component of the California program that is 
necessary to ensure specified emission reductions. Adoption of it by 
other states is consistent with the identical standards requirement of 
section 177. The NMOG average requires that a certain number of lower-
emitting vehicles must be sold in order to assure compliance, but does 
not prohibit the sale of any California-certified car. State 
incorporation of the NMOG average is therefore consistent with section 
177's provision that states cannot restrict the sales of California-
certified vehicles.
6. Averaging, Trading, and Banking
    Manufacturers claim that states must allow manufacturers to carry 
over to OTR states any banked credits manufacturers have received in 
California in model years leading up to 1999. Since California's LEV 
program begins before model year 1999, each manufacturer is allowed to 
generate and bank credits under California's program prior to 1999. The 
manufacturer may use these credits to reduce the stringency of the NMOG 
standards it must meet in California in model year 1999 and, to some 
extent, later years. For OTC states that begin the program in model 
year 1999, manufacturers would not be able to generate and bank credits 
in that state before that year. Forcing manufacturers to meet the NMOG 
fleet average in 1999 without the ability to use banked credits would, 
according to manufacturers, violate section 177 by requiring a 
different vehicle mix and, in effect, more stringent standards, in 
1999. Therefore, auto manufacturers arguably could have to meet a more 
stringent NMOG fleet average requirement in model year 1999 than they 
would have to meet in California in that year.
    EPA concludes that the availability of credit banking in California 
prior to model year 1999 does not cause the OTC's recommended program 
to violate the identical standards requirement of section 177. In 
addition, states do not have to accept credits manufacturers have 
banked in California in model years prior to 1999.
    The specific language of section 177 indicates that the existence 
of banked credits from a previous model year should not prevent states 
from enacting the same NMOG fleet average requirements as California 
has for 1999 and later years. Section 177 states that ``any State * * * 
may adopt and enforce for any model year standards * * * and take other 
actions * * * if * * * such standards are identical to the California 
standards for which a waiver has been granted for such model year.'' 
(Emphasis added.) Section 177 explicitly refers to standards (and other 
actions) taken with regard to a specific model year. Thus, as the OTC 
LEV program's NMOG fleet average for the 1999 and later model years is 
identical to the California NMOG fleet average that California has in 
effect for those model years, there is no conflict with section 177. 
Moreover, the ``limitation on California vehicles'' language is 
concerned with ensuring that ``types'' of California vehicles are not 
prohibited in section 177 states. It is not designed to ensure that 
manufacturers' vehicle mixes in all states are identical.
    However, as discussed in part V below, EPA believes that a state, 
if it so chose, could implement the NMOG fleet average to account for 
manufacturers' inability to bank credits in that state prior to the 
start of the OTC LEV program in that state. EPA believes that there may 
be advantages to states and manufacturers if states did account for the 
manufacturers' inability to bank credits in OTC LEV programs prior to 
model year 1999. For further explanation, see EPA's discussion in the 
SNPRM (59 FR at 48694) and the response-to-comments documents.
7. Applicability of Section 177 in States Without Plan Provisions 
Approved Under Part D of Title I
    All states in the OTR have plan provisions approved under part D of 
title I of the Act, and therefore satisfy this prerequisite for 
eligibility under section 177. All states other than Vermont have ozone 
nonattainment areas with associated SIPs approved under part D. Vermont 
has plan provisions approved under part D related to earlier 
nonattainment problems. See 40 CFR 52.2370(c)(10). In addition, EPA has 
very recently approved Vermont's plan provisions related to emissions 
statements in order to fulfill obligations under part D as revised by 
the 1990 Amendments to the Act.

V. Action on OTC Petition, Issuance of Findings of SIP Inadequacy, and 
Requirements for SIP Revisions

A. Action on OTC Petition and Explanation of SIP Call23

    \23\EPA is not relying on the discussion in section V. A. of the 
SNPRM (59 FR at 48694-48695) for the statement of basis and purpose 
for today's action, but is relying on the discussion in section V. 
B. (59 FR at 48695).
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    Based on the factual conclusions and legal interpretations 
presented in section IV.A. above, EPA determines through today's action 
that, until such time as EPA finds that an acceptable LEV-equivalent 
program is in effect, adopting OTC LEV throughout the OTR is necessary 
to bring certain areas into attainment (including maintenance) by the 
dates provided in subpart 2 of part D of title I of the Clean Air Act. 
Based on the conclusions presented in section [[Page 4730]] IV.B. 
above, EPA determines through today's action that OTC LEV is otherwise 
consistent with the Act. Based on those conclusions, EPA today approves 
the OTC's recommendation that OTC LEV be adopted throughout the OTR. As 
described elsewhere, however, EPA's approval of the OTC recommendation 
and the requirements that flow from it leave open the option for an 
acceptable LEV-equivalent program that would remove the need for the 
OTC LEV program.
    In section IV.A., EPA discussed its factual finding that emission 
reductions from new motor vehicles equivalent to the reductions that 
would be achieved by the OTC LEV program are needed throughout the OTR 
to bring certain OTR nonattainment areas into attainment (including 
maintenance) by their applicable attainment dates. Based on this 
finding, EPA today finds under section 110(a)(2)(D) that each of those 
states (and in the case of Virginia, the portion of the state lying 
within the OTR) contributes significantly to nonattainment in, and 
interferes with maintenance by, another state with respect to the ozone 
standard. Because the SIPs for those states currently lack provisions 
requiring those emission reductions, EPA today finds under its 
independent section 110(k)(5) authority that each of those SIPs is 
substantially inadequate (1) to comply with section 110(a)(2)(D)'s 
requirement that each SIP contain adequate provisions prohibiting any 
emissions activity that will contribute significantly to nonattainment 
in, or interfere with maintenance by, another state with respect to the 
ozone standard; and (2) to mitigate adequately the interstate pollutant 
transport described in section 184. EPA is making the first of these 
findings also pursuant to the requirement of section 184(c)(5) that, 
upon approval of an OTC recommendation, EPA make ``a finding under 
section 110(k)(5) that the implementation plan for such state is 
inadequate to meet the requirements of section 110(a)(2)(D).''
    Section 184(c)(5) states that EPA's finding under section 110(k)(5) 
shall require the affected state to revise its SIP to include the 
approved control measure within one year after the finding is issued. 
Section 110(k)(5) itself provides that EPA must require the state 
receiving a finding of SIP inadequacy to revise its SIP ``as 
necessary'' to correct the inadequacies that are the subject of the 
finding. As described above, EPA is qualifying its finding that OTC LEV 
is necessary under sections 184 and 110(a)(2)(D), and hence is 
qualifying its approval of the OTC LEV recommendation, by making each 
finding subject to the contingency that EPA will find that an 
acceptable LEV-equivalent program has come into effect. Thus, the SIP 
inadequacy would be cured for each such SIP if an acceptable LEV-
equivalent program were in effect, and states would not have to submit 
a SIP revision to comply with today's action. Therefore, EPA has 
structured today's rule to require that each state in the OTR submit a 
SIP revision within one year from the effective date of the SIP call 
unless EPA finds that an acceptable, LEV-equivalent program is in 
effect.
    As described earlier, EPA has based its necessity findings on the 
conclusions that there are insufficient potentially broadly practicable 
measures to achieve the necessary emission reductions without also 
applying OTC LEV or a LEV-equivalent program. A state would always have 
the option under section 110 to adopt whatever measures it may believe 
practicable for application within its borders. Thus, EPA is qualifying 
its finding of necessity, and hence is qualifying its approval of the 
OTC recommendation, by making each subject to the contingency that a 
state will actually adopt sufficient (non-LEV) measures beyond those 
EPA has identified as potentially broadly practicable so as to 
demonstrate that the OTC LEV program is not necessary for that state to 
cure the SIP inadequacy. EPA has structured its rule to provide that, 
unless an acceptable LEV-equivalent program is in effect, the SIP 
revisions required in response to the findings of SIP inadequacy must 
contain either the OTC LEV program or sufficient adopted alternative 
measures. These measures would be sufficient if, when combined with the 
emission reductions that would result in that state from the measures 
mandated by the Clean Air Act and all measures EPA has currently 
concluded are potentially broadly practicable, they would achieve 50 to 
75% NOX reductions from a 1990 baseline throughout that state and 
50 to 75% VOC reductions from a 1990 baseline in the portions of the 
state in or near the line of serious and severe nonattainment areas 
along the Northeast Corridor.
    As described above, today's SIP call keeps open the option of an 
acceptable24 LEV-equivalent program, while ensuring that necessary 
emission reductions are not delayed. The finding of inadequacy would be 
cured and states would not have to adopt OTC LEV if an acceptable LEV-
equivalent program were in effect (which EPA assumes for today's action 
would include a requirement that auto manufacturers could not opt out 
once they had opted in). If states take action to adopt or enact OTC 
LEV before discussions on the alternative program are concluded, EPA 
encourages states to structure their OTC LEV programs to provide for a 
future LEV-equivalent program that EPA finds is acceptable in a future 
rulemaking. Such a provision could give auto manufacturers the choice 
of complying with either the state's OTC LEV standards or the 
acceptable LEV-equivalent program.

    \24\The criteria for determining whether a LEV-equivalent 
program is acceptable will be established as part of the rulemaking 
on the acceptability of that program. However, to relieve states of 
their obligation to submit an OTC LEV program, EPA has assumed that 
a LEV-equivalent program would not allow manufacturers to opt out of 
the program after they had opted in. EPA is not addressing today 
whether states would need to adopt OTC LEV as a ``back stop'' if 
manufacturers could opt out of the program.
---------------------------------------------------------------------------

    To meet the requirements of this SIP call using an OTC LEV program, 
a state must exercise its authority under section 177 to adopt the NMOG 
fleet averages that are part of California's LEV program. The 
requirements for these are set forth in the following section. States 
are not required to adopt the ZEV mandate, but retain their authority 
to do so under section 177.
    As described above, rather than submit an OTC LEV SIP revision, 
states may submit a ``shortfall'' program to meet today's SIP call. A 
``shortfall'' SIP revision must contain adopted measures that make up 
the shortfall between (1) the emission reductions necessary to prevent 
adverse consequences on downwind nonattainment (i.e., 50-75% NOX 
reductions throughout the state and 50-75% VOC reductions in the 
portions of the state in, or near and upwind of the Northeast urban 
corridor), and (2) the emission reductions that would be achieved by 
the measures mandated by the Act and the potentially broadly applicable 
measures EPA identifies in this notice and the SNPRM. Such SIPs will 
include measures that EPA cannot now conclude are potentially 
practicable for the region as a whole. Therefore, states submitting a 
shortfall SIP in lieu of the OTC LEV program must submit fully adopted 
measures sufficient to fill completely the emission reduction 
shortfall, not just the emission reduction equivalent to the OTC LEV 
program, in order to make a convincing demonstration that OTC LEV is 
not necessary to prevent adverse impacts in downwind states. The 
submittal of (non-LEV) measures that would achieve only emissions 
reductions equivalent to what [[Page 4731]] the OTC LEV or LEV-
equivalent program would achieve might still leave a substantial 
shortfall. Thus, there would be no showing that a LEV program would be 
unnecessary to fill that remaining shortfall. The ``shortfall'' SIP 
measures cannot be measures that are mandated by the Clean Air Act or 
are among the potentially broadly applicable measures identified by EPA 
in this notice or the SNPRM. For purposes of determining whether such a 
shortfall SIP revision is complete within the meaning of section 
110(k)(1) (and hence is eligible at least for consideration to be 
approved as satisfying today's SIP call), such a SIP revision must 
contain other adopted emission-reduction measures that, together with 
the identified potentially broadly applicable measures, achieve at 
least the minimum 50% reduction in NOX emissions throughout those 
portions of the state within the transport region, and at least the 
minimum 50% reduction in VOC emissions within those portions of the 
state in or near (and upwind of) the urbanized portions of the 
Northeast Corridor.

B. State Requirements Under EPA SIP Call

    To satisfy the requirement for an OTC LEV SIP revision under 
today's SIP call, unless EPA finds that an acceptable LEV-equivalent 
program is in effect, every state in the OTR is required to promulgate 
regulations that will mandate the OTC LEV program for new light-duty 
vehicles and trucks beginning in model year 1999. The regulations must 
be adopted no later than one year following the effective date of the 
SIP call and apply to 1999 and later model years. This will provide 
manufacturers with the two-year lead-time required under section 
177.25 The OTC LEV program applies to all passenger cars and 
light-duty trucks (0-5750 pounds loaded vehicle weight (LVW)) in the 
OTR.26

    \25\ Given today's model year regulations, the effective date of 
this rule, and the information in the docket on auto manufacturers' 
production schedules, EPA realizes that a few 1999 model year engine 
families might not be subject to OTC LEV. EPA does not anticipate 
that this will reduce emission benefits significantly.
    \26\ These requirements therefore apply to all 1999 and later 
model year vehicles in each state, except that these requirements 
only apply in the northern portion of Virginia that is a part of the 
OTR.
---------------------------------------------------------------------------

    The OTC LEV program generally requires that no 1999 or later model 
year vehicle may be sold, imported, delivered, purchased, leased, 
rented, acquired, received, or registered in the OTR unless such 
vehicle has received a certification from the California Air Resources 
Board.27 Each state must allow for the sale of California's Tier 
I, TLEV, LEV, ULEV and ZEV vehicles in that state. The emission 
standards for such vehicle classes must be identical to those in 
California. In addition, all states must promulgate California's NMOG 
fleet average requirements. The fleet averages for passenger cars and 
light-duty trucks 0-3750 lbs. LVW shall be identical to California's 
NMOG fleet averages for such classes of vehicles, as stated in the OTC 
recommendation. The NMOG fleet averages for larger light-duty trucks 
(3751-5750 lbs. LVW) shall be identical to California's NMOG fleet 
averages for such class of vehicles for the applicable model 
years.28 As discussed below, states have considerable flexibility 
in implementing these NMOG fleet averages during the appropriate model 
years.

    \27\ The OTC recommendation contained several exceptions to this 
requirement. For example, vehicles sold directly from one dealer to 
another dealer are not subject to this requirement. EPA expects that 
these exemptions will be included in state programs. EPA is not 
today ruling whether these exemptions are required, permitted or 
prohibited under the Act, although EPA notes that it received no 
comments providing any substantive arguments that these exceptions 
violate section 177.
    \28\ The NMOG fleet averages for passenger cars and light-duty 
trucks (0-3750 lbs. LVW) for the applicable model years, in grams 
per mile, are: 1999-0.113; 2000-0.073, 2001-0.070, 2002-0.068; 2003 
and later years-0.062. The NMOG averages for light-duty trucks 
(3751-5750 lbs. LVW) are: 1999-0.150; 2000-0.099; 2001-0.098; 2002-
0.095; 2003 and later-0.093.
---------------------------------------------------------------------------

    States must adopt California's provisions pertaining to averaging, 
banking and trading, hybrid electric vehicles, extensions and 
exemptions for intermediate and small volume manufacturers (as defined 
by California), and Reactivity Adjustment Factors (RAFs) as necessary 
for certification in California. States also must adopt any other 
provisions of California's new motor vehicle regulations that are 
necessary to ensure compliance with section 177 of the Clean Air Act. 
EPA has not examined which other provisions are necessary to ensure 
compliance with section 177. The need for other provisions shall be 
addressed when individual states adopt or seek approval of the OTC LEV 
program.
    States are not required to adopt California's ZEV production 
mandate. As discussed earlier in section IV.B.3., EPA does not believe 
that adoption of the production mandate is necessary to ensure 
compliance with section 177. The OTC did not recommend that EPA require 
states to incorporate the ZEV production mandate unless it was required 
by section 177, and EPA declines to use its discretion to require 
states to incorporate the mandate. However, states are free, at their 
own discretion, to incorporate the mandate into their motor vehicle 
emission programs.
    States also have significant discretion in the manner in which they 
implement the OTC LEV program. Though states must adhere to the 
requirements of section 177, EPA is not mandating specific methods that 
states must use to implement the program. In particular, EPA believes 
that states have significant discretion in the manner in which they 
implement the NMOG fleet average.
    Given the regional nature of the OTC LEV program and the possible 
hardships to state governments and manufacturers in having to 
administer and comply with separate programs in thirteen different 
jurisdictions, states should attempt to coordinate their programs as 
much as possible. In particular, EPA believes that states could choose 
to give manufacturers the option of meeting the NMOG average on a 
region-wide basis, rather than having to meet the requirement on a 
state-by-state basis.29 This will allow for more flexibility in 
enforcement and compliance, but will require more coordination among 
jurisdictions.

    \29\ For example, a state program could deem a manufacturer to 
be in compliance with a state's NMOG average if the manufacturer's 
sales in OTR states with identical requirements meet the NMOG 
average. There might be only small variations in vehicle mix from 
one state to another if the states have identical standards and are 
in the same region. If such variations have insignificant effects on 
a state's air quality, state-by-state compliance with NMOG averages 
might not be worth the administrative burden.
---------------------------------------------------------------------------

    EPA also believes that states have the discretion to account for 
automakers' inability to bank credits in those states prior to 1999. 
This might be accomplished by accounting for banked credits that 
manufacturers have amassed in California (or perhaps in New York or 
Massachusetts) in model years prior to 1999 under the averaging, 
banking and trading provisions of the LEV program. As discussed above 
in part IV.B.3, EPA does not believe that states have an obligation to 
account for credits that manufacturers have received in California for 
early banking. A state program that includes California's NMOG average 
and California's averaging, banking and trading provisions is 
consistent with section 177, whether or not the state accounts for 
credits that are banked in California prior to the state's 
implementation of the LEV program. However, EPA believes that, in 
implementing the program, states can, consistent with section 177, 
account for banked credits. Given that the averaging, banking and 
[[Page 4732]] trading program was included by California to provide 
flexibility in meeting the program, EPA does not believe it is a breach 
of the identicality requirement to allow states to account for banked 
credits in implementing the OTC LEV program. Also, if any states fail 
to implement the program in model year 1999, desire for regional 
consistency would also dictate that such states allow for any banked 
credits from other state programs in the implementation of their 
programs. In any case, states should coordinate with each other to 
ensure that the goals of regional consistency are not frustrated by 
differences in implementation of the NMOG fleet average.
    Finally, as discussed in section VI.B.5, states may decide not to 
include the NMOG average in their implementation of the OTC LEV program 
in the initial model year if the state can only begin implementation of 
the program in the middle-to-end of the year. Manufacturers have 
objected that beginning implementation of the OTC LEV program in the 
middle of a calendar year would create significant problems for 
manufacturers in meeting the NMOG fleet average requirements for the 
first model year. This is because manufacturers meet the NMOG fleet 
average by coordinating their entire fleets to achieve the desired 
average. This process is susceptible to disruption when manufacturers 
must meet the NMOG average in the initial model year if the initial 
model year begins in the middle-to-end of a calendar year. This is 
because, under the model year regulations finalized today, only a 
portion of a manufacturer's fleet may be subject to the NMOG 
requirements for the initial model year if it is a ``split'' model 
year. EPA believes that manufacturers are well equipped to deal with 
this disruption by moving production start dates, especially given the 
two years of lead-time that manufacturers will have to coordinate their 
production schedules. However, given the fleet-wide nature of the NMOG 
fleet average and the desire for coordinated regional strategy, it may 
be appropriate for states that begin the OTC LEV program in the middle-
to-end of a calendar year to refrain from implementing the NMOG fleet 
average for the initial model year. However, once the second model year 
begins, the NMOG fleet average must be a part of the state program. 
Also, states that initiate the OTC LEV program close to the beginning 
of the year (when disruption of the NMOG program should be minimal) 
should include the NMOG fleet average as part of the OTC LEV program in 
the initial model year.

C. Sanctions

    In the SNPRM, EPA addressed the imposition of sanctions in the case 
of state non-compliance with EPA's SIP call under section 110(k)(5) of 
the Act. EPA's rule to implement section 179 of the Act regarding 
sanctions specifies the order in which the statutory highway funding 
and offset ratio sanctions will apply, but does not 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. See 59 FR 38932 (Aug. 4, 
1994)(sanctions rule). EPA therefore proposed in the SNPRM to extend 
the general scheme promulgated for sanctions under section 179 to the 
SIP call at issue here, with the 2:1 offset sanction applied first and 
the highway funding sanction applied second. EPA takes final action 
today to apply that general scheme to this SIP call.
    EPA also requested 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 (or a complete shortfall SIP revision) by the one-
year deadline for that submission. EPA questioned whether the 
particular circumstances presented here by the two-year lead-time 
requirement may warrant such action. EPA is deferring final action on 
whether to exercise its discretion under section 110(m) to accelerate 
the imposition of sanctions if states fail to submit the OTC LEV 
program by the applicable deadline. The Agency will consider this issue 
further.

VI. Determination of Model Year

    In the SNPRM, EPA proposed to promulgate regulations determining 
for purposes of Section 177 and Title II, Part A of the Act the 
definition of the term ``model year'' and certain related terms. See 59 
FR at 48696-48698. EPA believed that this was a necessary step to 
remove any confusion regarding the commencement of a model year which 
may have resulted from conflicting views on this point in the New York 
and Massachusetts litigations regarding the adoption of the California 
LEV standards.
    After review of the comments received on the proposed model year 
regulations published in the SNPRM, EPA has determined, for the reasons 
given below, in the SNPRM (59 FR 48697-48698), and in the response-to-
comments documents, that it is appropriate at this time to promulgate 
these proposed regulations as final rules. At the request of AAMA, EPA 
is adding language clarifying the term ``date on which a vehicle or 
engine is first produced.''
    EPA's proposed model year regulations, which apply to section 177 
and Title II, retained the definition of ``model year'' found in both 
the Act and in existing EPA regulations (promulgated under section 202) 
as essentially ``the manufacturer's annual production period.''30 
EPA's proposed model year regulations also codified the definition of 
``annual production period,'' which has appeared in various versions of 
EPA Advisory Circulars on this issue since 1972.

    \30\See 42 U.S.C. sec. 7521 (b)(3)(A)(i) (1993) and 40 CFR 
86.082-2 (1994).
---------------------------------------------------------------------------

    Under the proposed regulations, model year would be determined on 
an engine family basis for specific models within engine families, 
depending upon the date the first model in the engine family commences 
production. Therefore, the date upon which the model year begins may be 
different for each engine family that a manufacturer produces. EPA 
believes this approach is more appropriate than beginning model years 
industry-wide on a certain date (an alternative favored by the industry 
and discussed below) because it is more suited to the central purpose 
of section 177, which is to allow states to receive emission benefits 
from the California motor vehicle program while giving manufacturers 
two years of lead-time to prepare to meet the state standards. In 
addition, as discussed in the SNPRM (59 FR 48697), this approach 
provides manufacturers with substantial flexibility to continue to 
produce automobiles for one model year while initiating production of 
other models for a later model year.
    EPA received critical comments on the proposed rule only from AAMA, 
which raised several objections. The main thrust of the AAMA argument 
is that the EPA model year regulations will cause more harm than good 
because they will compel manufacturers to provide both California and 
Federal vehicles to a single state in a single model year depending on 
that state's date of adoption of the California standards. For this 
reason, AAMA supported an industry-wide approach in which model years 
would begin on January 2 of the calendar year preceding the model year 
for which the model year is designated. However, as emphasized in the 
SNPRM, EPA believes that the model year regulations provide vehicle 
manufacturers the maximum flexibility in terms of adjusting the model 
year [[Page 4733]] designations of their product line to meet marketing 
needs and product changes.
    EPA's approach allows manufacturers to control the beginning of the 
model year for each of its engine families, since manufacturers control 
the date upon which its models begin production. Manufacturers are in 
the best position to determine the date that any model in an engine 
family commences production and manufacturers decide production start 
dates on a model-by-model basis. Therefore, the engine family approach 
allows manufacturers to avail themselves of the two year lead-time 
without allowing the state program to lag unnecessarily. By contrast, 
AAMA's approach (allowing the model year to begin on January 2 of the 
year previous to the calendar year for all models) would in fact turn 
the two year lead-time into, in the worst case, a three year lead-time 
(minus one day).
    AAMA also commented that the EPA model year regulations could 
``obviate'' the NMOG fleet average in a situation where manufacturers 
needed to provide California vehicles to a state for only part of a 
model year, and thus may have difficulties meeting the fleet average 
for that model year. EPA recognizes this possibility but notes that one 
way to solve the problem is to revise production and supply schedules 
to make sure the state fleet average is met. Given that manufacturers 
have two years to prepare to meet these requirements, this solution is 
within the capability of manufacturers. In any event, EPA notes that it 
is not today ordering that states must include the NMOG fleet average 
provisions in their state programs in a split model year. Though EPA 
believes that the NMOG average is important to ensure emission 
reductions in states with OTC LEV programs, EPA recognizes that states 
may wish to avoid some of the confusion manufacturers allege is 
possible in the introductory year of the program. If the application of 
NMOG fleet average creates a substantial hardship for manufacturers in 
the first year due to the adoption of OTC LEV by a state late in the 
year, the state may wish not to require manufacturers to comply with 
the NMOG fleet average for the first applicable model year.
    In addition, AAMA asks for clarification regarding two points. 
First, AAMA asks EPA to declare whether the model year rules apply on a 
model-by-model basis or an engine family-by-engine family basis. 
Second, AAMA seeks clarification on how to determine the point of first 
production of a particular model. The model year rules are applied on 
an engine family basis. Where an engine family contains more than one 
model, the model year for that engine family begins upon the first 
production of any model in that engine family. The date of first 
production of any model is the ``Job 1 date,'' which is the date on 
which a manufacturer produces the first saleable unit of a specific 
model.
    EPA received a request from AAMA to extend the comment period for 
the proposed model year regulations to allow more time to consider the 
issues. EPA rejects this request for the following reasons. EPA 
recognizes that because of its approval of the OTC recommendation, the 
OTC member states must now proceed to adopt the OTC LEV program one 
year from the effective date of the SIP call to ensure the minimum 
adequate lead-time for the standards to be effective in model year 
1999. EPA believes that it is important to promulgate these final 
regulations now to eliminate any confusion regarding when a model year 
commences before these states begin the adoption process. EPA has 
provided the public with a full thirty-day comment period with an 
opportunity for hearing. In addition, as the model year issue has been 
the subject of litigation for the last two years, manufacturers have 
been aware of the central questions surrounding this issue.
    For a more detailed discussion of the issues raised by EPA's model 
year regulations, including AAMA's comments and EPA's responses, please 
review the SNPRM, 59 FR 48697-48698, and the response-to-comments 
documents. The text of the final regulations, with minor changes from 
the proposal, appears below.

VII. Effective Date

    The regulations to be codified in 40 CFR parts 51 and 52 (the ``SIP 
call'' regulations) are effective February 15, 1995. This is consistent 
with the requirement of the Administrative Procedure Act, codified at 5 
U.S.C. 553(d), that publication or service of a substantive rule be 
made not less than 30 days before it becomes effective.31 EPA will 
assure that, by January 16, 1995, either notice of today's action will 
be published in the Federal Register or EPA will have provided actual 
notice of this action to the states that have regulatory obligations as 
a result of this action. EPA will also make this notice available to 
other interested persons upon request prior to publication.

    \31\EPA generally acts consistently with this provision and 
provides that a rule does not become effective until 30 days after 
the date of publication, but technically today's action is not 
subject to this provision. The EPA Administrator has determined 
that, pursuant to section 307(d)(1)(V) of the Act, the rulemaking 
procedures of section 307(d) apply. See 59 FR at 21724. Section 
307(d)(1) specifically provides that ``[t]he provisions of section 
553 through 557 and section 706 of title 5 shall not, except as 
expressly provided in this subsection, apply to actions to which 
this subsection applies.'' Nowhere does subsection 307(d) expressly 
provide that section 553(d) of title 5 applies.
---------------------------------------------------------------------------

    As EPA explained in its proposal, it is very important that states 
begin implementation of the OTC LEV program in model year 1999 to 
achieve the necessary emissions reductions. EPA had expressed concern 
in the SNPRM that, to ensure implementation for all models in model 
year 1999, states must adopt the program before January 2, 1996. See 59 
FR at 48669-48670. Based on information in the docket on the production 
schedules for new models, EPA now believes that adoption of the OTC LEV 
program by mid-February, 1995, will not significantly reduce the 
emission benefits of the program for model year 1999.
    The regulations to be codified in 40 CFR part 85 are effective 
February 23, 1995.
    EPA believes that today's actions, including the finding of 
inadequacy, the SIP call and the promulgation of the model year 
regulations, are nationally applicable regulations under section 
307(b)(1) of the Act. Alternatively, the Administrator determines that 
today's actions are nationwide in scope and effect and bases today's 
action on that determination. Today's action interprets sections 110, 
184 and 177 in ways that are applicable nationwide. In addition, the 
SIP call affects 13 different jurisdictions in five different federal 
appellate circuits. Thus, under section 307(b), any petitions for 
review must be filed in the Court of Appeals for the D.C. Circuit 
within 60 days from the date that notice of this action appears in the 
Federal Register.

VIII. Statutory Authority

    The statutory authority for this final rule may be found at 
sections 110, 176A, 177, 184, 202, 206, 209, 301 and 307 of the Clean 
Air Act, 42 U.S.C. 7410, 7506a, 7507, 7511c, 7521, 7525, 7543, 7601, 
and 7607.

IX. 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 
[[Page 4734]] 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 Executive Order 12866, since this action 
could result in a rule that would have substantial impact, this notice 
is a ``significant regulatory action'' because the estimated range of 
annual costs of the OTC LEV program is between $xx and $xx. As such, 
this action submitted to the Office of Management and Budget (OMB) for 
review. Changes made in response to OMB suggestions or recommendations 
will be documented in the public docket for this rulemaking.
    EPA has prepared an economic analysis for this rule under E.O. 
12866. A copy of this analysis has been placed in the docket. A draft 
version of the Regulatory Impact Analysis was submitted to OMB for 
review as required by E.O. 12866. Any written comments from OMB and EPA 
responses to those comments will be placed in the public docket for 
this rulemaking. A final version of the analysis is available in the 
docket.

X. 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 has followed 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 an RFA. But even if EPA is required to publish a general notice 
of rulemaking here, an RFA is required only for small entities that 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 LEV program will 
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 an 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.

XI. 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.

Attachment A to the Preamble

Revised Draft Discussion Paper on ATV Component of 49-State Alternative

December 7, 1994.

I. Principles and Definition

    The Advanced Technology Vehicle (ATV) component of a 49-State 
alternative to the OTC petition will be based on the following 
principles:
     Parties publicly commit to work in cooperation with 
each other to establish and maintain a sustainable, viable market for 
ATV's at the retail level.
     ATV program will be designed to achieve shared 
responsibility among states, EPA, DOE, fuel providers, fleet operators 
and auto manufacturers for achieving increases in ATV's.
     Phased program from infrastructure and vehicle 
development to fleet sales to retail sales will be pursued. Timeframes 
will be assigned to components of any alternative that will involve 
incremental steps toward accomplishing increases in ATV's.
     Vehicle yield from federal and State programs, 
municipal and private fleets, as well as approaches to provide vehicles 
to private consumers will be included.
     Parties will, at the initiation of the MOU and 
throughout the program, jointly develop sales estimates of fleet and 
consumer vehicles that all parties anticipate should be on the road at 
specific milestones.
     All parties commit that specific actions will be 
identified and undertaken as necessary if estimates are not realized.
     Parties will develop a fuel neutral strategy based on 
achieving market longevity and environmental benefits. Infrastructure 
must be constructed under a joint strategy, but it is understood that 
states will make infrastructure choices according to regional needs.
     The definition of ATV for the purposes of this 
agreement will be (PARTIES WILL INSERT DEFINITION LATER).

II. Memorandum of Understanding

    The Memorandum of Understanding is based on the agreement that all 
parties will contribute to a joint effort to create a sustainable, 
viable ATV market. All parties agree that the best strategy for 
achieving this market is to first utilize the federal fleet markets in 
order to establish a full range of viable vehicle technology, maximize 
the number of vehicles purchased through municipal and state fleet 
programs, create incentives to encourage private fleet purchases, 
establish infrastructure requirements, assess customer preference, and 
to systematically evaluate progress for the purposes of introducing 
vehicles to the private consumer as soon as possible.
    Components of a joint strategy will include the following areas:
    (1) Fleet Estimates--The foundation for introduction of ATV's will 
be the federal requirements under EPAct. Parties will develop 
projections or estimates for anticipated number of vehicles resulting 
from the programs that will be used as objectives for gaining a number 
and types of vehicles on the road on a specific timeline. Parties will 
develop agreements for joining in the programs, including harmonizing 
EPAct and the CAA of 1990, and maximizing federal fleet purchases. 
Parties will work jointly to develop programs and maximize municipal 
and private fleet purchases in the Northeast states. Parties will 
assume expanded municipal and private fleet vehicle sales for the 
purposes of estimation.
    (2) Development of Objectives Based on Fleet and Consumer Sales 
Estimates--At the initiation of the MOU, parties will agree on 
assumptions for and will establish initial overall fleet and consumer 
vehicle sales estimates that can be reasonably expected in the OTR by 
2004. Parties will jointly state that this estimated number of vehicles 
should be sold if initial assumptions prove to be correct and if all 
aspects of the strategy are successfully implemented. Annual sales 
estimates [[Page 4735]] will be revised as part of the annual meeting 
process.
    (3) Problem Identification and Action Commitment--Parties will 
identify possible problems that might occur in the development of a 
viable market and examples of specific actions that might be 
contemplated in a joint evaluation process (specific actions are 
detailed in Section III below).
    (4) Benchmark Criteria and Components of a Viable Market--Benchmark 
criteria will be developed for a long-term, sustainable market. Some 
criteria might include, but will not be limited to:
     Infrastructure development (fuel quality and price, 
station density, user friendly refueling, service support, incentives, 
quasi-public service and fuel sales).
     Vehicle development (range, life-cycle costs, safety 
and user convenience).
     Removal of regulatory impediments to ATV vehicle sales.
     Reliability and durability profile of fleets.
     Consumer needs surveyed from Federal, state and 
municipal fleets and then further defined.
     Fuel savings documented and demonstrated.
     Vehicle resale value documented and retained.
     Consumer-directed incentives in place.
    (5) Joint ATV Program Implementation Process--Parties agree to 
oversee the implementation of this ATV agreement. This joint 
implementation process will include annual meetings to be held between 
principal representatives of the Northeast States and Auto 
manufacturers. Staff level meetings will occur during the course of a 
year to chart progress in the areas listed below and provide a basis 
for evaluation of progress. Possible areas for evaluation include, but 
are not limited to:
     Assumptions for Annual Sales Estimates.
     Funding for Federal Fleet Purchases.
     Technology and Vehicle Type Availability.
     State Procurement Requirements and Practices.
     Joint Marketing Efforts.
     Infrastructure Construction and Capabilities.
     Research and Data Needs.
     Other Information and Expertise Needs.
     Consumer Satisfaction Assessed and Consumer Confidence 
Built.
     Plans to Remove Roadblocks and Other Program 
Adjustments.
    (6) Group Structure and Disagreement Settlement Process--A 
structure for the evaluation will be established by a working group at 
the initiation of the ATV program. This working group will design the 
structure of the annual meetings; designate the purpose, number, type 
and level of meetings to evaluate program progress; and, outline the 
issues of concern to be addressed. Specifically, responsibilities for 
discussion of the evaluation areas listed above will be delineated, 
possible scenarios for action should problems occur or milestones not 
be met by any party will be developed, and a process for resolving 
disagreements that arise will be defined.
    It is agreed by all parties that primarily the auto manufacturers 
and states will be involved in the group structure discussions and the 
overall evaluation process, but that all key parties will be consulted 
for their advice throughout the process.
    (7) Suggested Timeline for Introduction of ATV's--The ATV program 
will consist of three phases. If significant progress could be made 
early for any of these phases, parties could agree through annual 
meeting decisions to advance the timeline of for delivery of vehicles. 
The parties recognize the legitimacy of existing incentive programs and 
that new incentive programs may be instituted earlier than this 
timeframe. The conceptual and planning work for all phases of this 
process will proceed simultaneously, and lessons from existing programs 
will be applied in initiating these steps.

1996-98--EPAct for Federal, State and Fuel Provider Fleets

    Manufacturers market ATV's to fleets. Infrastructure development 
begins. Incentive programs are established. Surveys are conducted to 
estimate potential demand for 1999-2001, including municipal and 
private fleets.

1999-2001--Add Municipal and Private Fleets

    Manufacturers expand product offerings. Infrastructure expands. 
Incentive programs expand to municipal and private fleets. Surveys 
conducted to estimate 2002-2004 retail consumer demand. Criteria 
decided for maintaining sustainable retail sales.

2002-2004--Add Retail Consumer Offerings

    According to establishment of adequate infrastructure, offer ATV's 
for retail consumer sales in all Northeast States. Incentive programs 
expand to retail consumers.

III. Summary of Commitments by All Parties

    In this strategy, each party commits to provide certain results 
within an agreed upon timeframe. A summary of each parties' commitments 
follows.

Auto Manufacturers

     Auto manufacturers will supply private consumer ATVs in 
a timely manner in 2002, if commitments and criteria put forth in the 
MOU are met by all parties. Auto manufacturers will introduce ATV's 
sooner than 2002 if both parties agree that the criteria defining a 
viable market described in this agreement are met earlier.
    The responsibility for supply ATVs includes modifying vehicles to 
the extent necessary for use in the Northeast, establishing adequate 
sales and support structure, technician training and service parts 
inventories in addition to vehicle design, development and manufacture.
     The Auto manufacturers agree to participate in the 
annual review process to assess the progress of the program and to 
determine how to develop a viable market for ATVs in the OTR. This 
includes participating in the projection of annual sales estimates and 
evaluating progress toward meeting those estimates.
     Auto Manufacturers agree to work with the states to 
determine what actions may be needed to adjust the program if sales 
estimates are not being met. This will include consideration of 
voluntary actions such as increasing public education and marketing, 
addressing weaknesses in infrastructure development, and discussing and 
addressing technological barriers or hardware problems. Auto 
manufacturers agree to implement the actions identified and agreed 
upon.
     Auto manufacturers agree to discuss pricing issues with 
states individually as requested to address vehicle pricing concerns.

State Representatives

     States will establish incentive programs to encourage 
the purchase of ATVs and direct state procurement policies in a manner 
consistent with Federal Practices. States will maximize purchases of 
ATVs in state fleets to the greatest extent possible.
     States agree to work to assist municipalities to 
conform with EPAct requirements as soon as feasible. States will also 
work to assist in the development of incentive programs for private 
fleet purchases of ATVs.
     States will participate in the annual review process to 
assess the [[Page 4736]] progress of the program and to determine how 
to develop a viable market for ATVs in the OTR. This includes 
participating in the projection of annual sales estimates and 
evaluating progress toward meetings estimates.
     States agree to work with auto manufacturers to 
determine what actions may be needed to adjust the program if sales 
estimates are not met. This will include consideration of actions such 
as participating in public education efforts and joint marketing; 
addressing problems in fleet purchases, vehicle procurement processes 
or program funding in specific states; and providing information on 
fleet vehicle customer satisfaction and issues. States agree to 
implement the actions identified and agreed upon.
     States agree to seek support of public service 
commissions in becoming involved in the ATV program, and emphasizing 
the importance of fueling infrastructure construction. States agree to 
initiate and support legislation to the greatest extent possible.

Others

     Administration will direct Federal procurement 
practices favoring purchase of ATV's.
     EPA will work with DOE to assure harmonization and 
consistency between CAA of 1990 and EPAct.
     Fuel and energy providers will purchase vehicles 
according to EPAct requirements, establish refueling infrastructure, 
and contribute to the development of state incentive programs.

List of Subjects

40 CFR Part 51

    Environmental protection, Air pollution control.

40 CFR Part 52

    Environmental protection, Air pollution control, Intergovernmental 
relations, Ozone, Volatile organic compounds.

40 CFR Part 82

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

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

    For the reasons set out in the preamble, title 40, chapter 1, is 
amended as follows:

PART 51--[AMENDED]

    1. The authority citation for part 51 shall continue to read as 
follows:

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

    2. Subpart G is amended by adding a new Sec. 51.120, to read as 
follows:


Sec. 51.120  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    (a) The EPA Administrator finds that the State Implementation Plans 
(SIPs) for the States of Connecticut, Delaware, Maine, Maryland, 
Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode 
Island, and Vermont, the portion of Virginia included (as of November 
15, 1990) within the Consolidated Metropolitan Statistical Area that 
includes the District of Columbia, are substantially inadequate to 
comply with the requirements of section 110(a)(2)(D) of the Clean Air 
Act, 42 U.S.C. 7410(a)(2)(D), and to mitigate adequately the interstate 
pollutant transport described in section 184 of the Clean Air Act, 42 
U.S.C. 7511C, to the extent that they do not provide for emission 
reductions from new motor vehicles in the amount that would be achieved 
by the Ozone Transport Commission low emission vehicle (OTC LEV) 
program described in paragraph (c) of this section. This inadequacy 
will be deemed cured for each of the aforementioned states (including 
the District of Columbia) in the event that EPA determines through 
rulemaking that a national LEV-equivalent new motor vehicle emission 
control program is an acceptable alternative for OTC LEV and finds that 
such program is in effect. In the event no such finding is made, each 
of those states must adopt and submit to EPA by February 15, 1996 a SIP 
revision meeting the requirements of paragraph (b) of this section in 
order to cure the SIP inadequacy.
    (b) If a SIP revision is required under paragraph (a) of this 
section, it must contain the OTC LEV program described in paragraph (c) 
of this section unless the State adopts and submits to EPA, as a SIP 
revision, other emission-reduction measures sufficient to meet the 
requirements of paragraph (d) of this section. If a State adopts and 
submits to EPA, as a SIP revision, other emission-reduction measures 
pursuant to paragraph (d) of this section, then for purposes of 
determining whether such a SIP revision is complete within the meaning 
of section 110(k)(1) (and hence is eligible at least for consideration 
to be approved as satisfying paragraph (d) of this section), such a SIP 
revision must contain other adopted emission-reduction measures that, 
together with the identified potentially broadly practicable measures, 
achieve at least the minimum level of emission reductions that could 
potentially satisfy the requirements of paragraph (d) of this section. 
All such measures must be fully adopted and enforceable.
    (c) The OTC LEV program is a program adopted pursuant to section 
177 of the Clean Air Act.
    (1) The OTC LEV program shall contain the following elements:
    (i) It shall apply to all new 1999 and later model year passenger 
cars and light-duty trucks (0-5750 pounds loaded vehicle weight), as 
defined in Title 13, California Code of Regulations, section 
1900(b)(11) and (b)(8), respectively, that are sold, imported, 
delivered, purchased, leased, rented, acquired, received, or registered 
in any area of the state that is in the Northeast Ozone Transport 
Region as of December 19, 1994.
    (ii) All vehicles to which the OTC LEV program is applicable shall 
be required to have a certificate from the California Air Resources 
Board (CARB) affirming compliance with California standards.
    (iii) All vehicles to which this LEV program is applicable shall be 
required to meet the mass emission standards for Non-Methane Organic 
Gases (NMOG), Carbon Monoxide (CO), Oxides of Nitrogen (NOX), 
Formaldehyde (HCHO), and particulate matter (PM) as specified in Title 
13, California Code of Regulations, section 1960.1(f)(2) (and 
formaldehyde standards under section 1960.1(e)(2), as applicable) or as 
specified by California for certification as a TLEV (Transitional Low-
Emission Vehicle), LEV (Low-Emission Vehicle), ULEV (Ultra-Low-Emission 
Vehicle), or ZEV (Zero-Emission Vehicle) under section 1960.1(g)(1) 
(and section 1960.1(e)(3), for formaldehyde standards, as applicable).
    (iv) All manufacturers of vehicles subject to the OTC LEV program 
shall be required to meet the fleet average NMOG exhaust emission 
values for production and delivery for sale of their passenger cars, 
light-duty trucks 0-3750 pounds loaded vehicle weight, and light-duty 
trucks 3751-5750 pounds loaded vehicle weight specified in Title 13, 
California Code of Regulations, section 1960.1(g)(2) for each model 
year beginning in 1999. A state may determine not to implement the NMOG 
fleet average in the first model year of the program if the state 
begins implementation of the program late in a calendar year. However, 
all states must implement the NMOG fleet average in any full model 
years of the LEV program.
    (v) All manufacturers shall be allowed to average, bank and trade 
credits in the same manner as allowed under the [[Page 4737]] program 
specified in Title 13, California Code of Regulations, section 
1960.1(g)(2) footnote 7 for each model year beginning in 1999. States 
may account for credits banked by manufacturers in California or New 
York in years immediately preceding model year 1999, in a manner 
consistent with California banking and discounting procedures.
    (vi) The provisions for small volume manufacturers and intermediate 
volume manufacturers, as applied by Title 13, California Code of 
Regulations to California's LEV program, shall apply. Those 
manufacturers defined as small volume manufacturers and intermediate 
volume manufacturers in California under California's regulations shall 
be considered small volume manufacturers and intermediate volume 
manufacturers under this program.
    (vii) The provisions for hybrid electric vehicles (HEVs), as 
defined in Title 13 California Code of Regulations, section 1960.1, 
shall apply for purposes of calculating fleet average NMOG values.
    (viii) The provisions for fuel-flexible vehicles and dual-fuel 
vehicles specified in Title 13, California Code of Regulations, section 
1960.1(g)(1) footnote 4 shall apply.
    (ix) The provisions for reactivity adjustment factors, as defined 
by Title 13, California Code of Regulations, shall apply.
    (x) The aforementioned state OTC LEV standards shall be identical 
to the aforementioned California standards as such standards exist on 
December 19, 1994.
    (xi) All states' OTC LEV programs must contain any other provisions 
of California's LEV program specified in Title 13, California Code of 
Regulations necessary to comply with section 177 of the Clean Air Act.
    (2) States are not required to include the mandate for production 
of ZEVs specified in Title 13, California Code of Regulations, section 
1960.1(g)(2) footnote 9.
    (3) Except as specified elsewhere in this section, states may 
implement the OTC LEV program in any manner consistent with the Act 
that does not decrease the emissions reductions or jeopardize the 
effectiveness of the program.
    (d) The SIP revision that paragraph (b) of this section describes 
as an alternative to the OTC LEV program described in paragraph (c) of 
this section must contain a set of state-adopted measures that provides 
at least the following amount of emission reductions in time to bring 
serious ozone nonattainment areas into attainment by their 1999 
attainment date:
    (1) Reductions at least equal to the difference between:
    (i) The nitrogen oxides (NOX) emission reductions from the 
1990 statewide emissions inventory achievable through implementation of 
all of the Clean Air Act-mandated and potentially broadly practicable 
control measures throughout all portions of the state that are within 
the Northeast Ozone Transport Region created under section 184(a) of 
the Clean Air Act as of December 19, 1994; and
    (ii) A reduction in NOX emissions from the 1990 statewide 
inventory in such portions of the state of 50% or whatever greater 
reduction is necessary to prevent significant contribution to 
nonattainment in, or interference with maintenance by, any downwind 
state.
    (2) Reductions at least equal to the difference between:
    (i) The VOC emission reductions from the 1990 statewide emissions 
inventory achievable through implementation of all of the Clean Air 
Act-mandated and potentially broadly practicable control measures in 
all portions of the State in, or near and upwind of, any of the serious 
or severe ozone nonattainment areas lying in the series of such areas 
running northeast from the Washington, DC, ozone nonattainment area to 
and including the Portsmouth, New Hampshire ozone nonattainment area; 
and
    (ii) A reduction in VOC emissions from the 1990 emissions inventory 
in all such areas of 50% or whatever greater reduction is necessary to 
prevent significant contribution to nonattainment in, or interference 
with maintenance by, any downwind state.

PART 52--[AMENDED]

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

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

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


Sec. 52.32  Sanctions following findings of SIP inadequacy.

    For purposes of the SIP revisions required by Sec. 51.120, EPA may 
make a finding under section 179(a) (1)-(4) of the Clean Air Act, 42 
U.S.C. 7509(a) (1)-(4), starting the sanctions process set forth in 
section 179(a) of the Clean Air Act. Any such finding will be deemed a 
finding under Sec. 52.31(c) and sanctions will be imposed in accordance 
with the order of sanctions and the terms for such sanctions 
established in Sec. 52.31.
    3. Subpart H is amended by adding a new Sec. 52.381, to read as 
follows:


Sec. 52.381  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    Connecticut must comply with the requirements of Sec. 51.120.
    4. Subpart I is amended by adding a new Sec. 52.433, to read as 
follows:


Sec. 52.433  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    Delaware must comply with the requirements of Sec. 51.120.
    5. Subpart J is amended by adding a new Sec. 52.498, to read as 
follows:


Sec. 52.498  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    The District of Columbia must comply with the requirements of 
Sec. 51.120.
    6. Subpart U is amended by adding a new Sec. 52.1035, to read as 
follows:


Sec. 52.1035  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    Maine must comply with the requirements of Sec. 51.120.
    7. Subpart V is amended by adding a new Sec. 52.1079, to read as 
follows:


Sec. 52.1079  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    Maryland must comply with the requirements of Sec. 51.120.
    8. Subpart W is amended by adding a new Sec. 52.1160, to read as 
follows:


Sec. 52.1160  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    Massachusetts' adopted LEV program must be revised to the extent 
necessary for the state to comply with all aspects of the requirements 
of Sec. 51.120.
    9. Subpart EE is amended by adding a new Sec. 52.1530, to read as 
follows:


Sec. 52.1530  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    New Hampshire must comply with the requirements of Sec. 51.120.
    10. Subpart FF is amended by adding a new Sec. 52.1583, to read as 
follows:


Sec. 52.1583  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    New Jersey must comply with the requirements of Sec. 51.120.
    11. Subpart HH is amended by adding a new Sec. 52.1674, to read as 
follows:


Sec. 52.1674  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    New York's adopted LEV program must be revised to the extent 
necessary for the state to comply with all aspects of the requirements 
of Sec. 51.120. [[Page 4738]] 
    12. Subpart NN is amended by adding a new Sec. 52.2057, to read as 
follows:


Sec. 52.2057  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    Pennsylvania must comply with the requirements of Sec. 51.120.
    13. Subpart OO is amended by adding a new Sec. 52.2079, to read as 
follows:


Sec. 52.2079  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    Rhode Island must comply with the requirements of Sec. 51.120.
    14. Subpart UU is amended by adding a new Sec. 52.2385, to read as 
follows:


Sec. 52.2385  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    Vermont must comply with the requirements of Sec. 51.120.
    15. Subpart VV is amended by adding a new Sec. 52.2453, to read as 
follows:


Sec. 52.2453  Requirements for state implementation plan revisions 
relating to new motor vehicles.

    Virginia must comply with the requirements of Sec. 51.120 with 
respect to the portion of Virginia that in 1990 was located in the 
Consolidated Metropolitan Statistical Area containing the District of 
Columbia.

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 February 23, 
1995 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.

    (a) The ``annual production period'' for all models within an 
engine family of light-duty motor vehicles, heavy-duty motor vehicles 
and engines, and on-highway motorcycles begins either: when any vehicle 
or engine within the engine family 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.
    (b) The date when a vehicle or engine is first produced is the 
``Job 1 date,'' which is defined as that calendar date on which a 
manufacturer completes all manufacturing and assembling processes 
necessary to produce the first saleable unit of the designated model 
which is in all material respects the same as the vehicle or engine 
described in the manufacturer's application for certification. The 
``Job 1 date'' may be a date earlier in time than the date on which the 
certificate of conformity is issued.


Sec. 85.2305  Duration and applicability of certificates of conformity.

    (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 material respects to the 
vehicles 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) New vehicles or engines imported by an original equipment 
manufacturer after December 31 of the calendar year for which the model 
year was 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. [[Page 4739]] 
    (e) 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.

[FR Doc. 95-1387 Filed 1-23-95; 8:45 am]
BILLING CODE 6560-50-P