[Federal Register Volume 61, Number 218 (Friday, November 8, 1996)]
[Proposed Rules]
[Pages 57834-57837]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28595]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA 181-0021; FRL-5642-9]


Approval and Promulgation of Implementation Plans; California 
State Implementation Plan Revision, South Coast Air Quality Management 
District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve revisions to the California State 
Implementation Plan (SIP) for ozone. The revision concerns the control 
of oxides of nitrogen (NOX) and oxides of sulfur (SOX) 
emissions using an emissions-limiting economic incentive program (EIP), 
the NOX and SOX Regional Clean Air Incentives Market 
(NOX/SOX RECLAIM). This program, which consists of twelve 
rules and associated appendices known as Regulation XX, applies to 
facilities in the South Coast Air Quality Management District (SCAQMD) 
with four or more tons of NOX or SOX emissions per year from 
permitted equipment. The subject facilities, in order to meet annual 
emission reduction requirements, will participate in an EIP in order to 
reduce emissions at a significantly lower cost. The intended effect of 
proposing approval of this rule is to regulate emissions of NOX in 
accordance with the requirements of the Clean Air Act, as amended in 
1990 (CAA or the Act). EPA's final action on this notice of proposed 
rulemaking will incorporate this rule into the federally approved SIP. 
EPA has evaluated this rule and is proposing to approve it under 
provisions of the CAA regarding EPA actions on SIP submittals, SIPs for 
national primary and secondary ambient air quality standards (NAAQS), 
and plan requirements for nonattainment areas. Elsewhere in the Federal 
Register today, EPA is finalizing a limited approval/limited 
disapproval of an earlier version of the RECLAIM program (submitted to 
EPA for approval on March 21, 1994); when EPA publishes its final 
action approving the August 28, 1996 submittal, the possibility of 
sanctions mentioned in the final limited approval/limited disapproval 
of the earlier submittal will be removed.

DATES: Comments on this proposed action must be received in writing on 
or before December 9, 1996.

ADDRESSES: Comments may be mailed to: Daniel A. Meer, Rulemaking 
Section (A-5-3), Air and Toxics Division, U.S. Environmental Protection 
Agency, Region 9, 75 Hawthorne Street, San Francisco, CA 94105-3901.
    Copies of the rule and EPA's evaluation report are available for 
public inspection at EPA's Region 9 office during normal business 
hours. Copies of the submitted rule are also available for inspection 
at the following locations:

California Air Resources Board, Stationary Source Division, Rule 
Evaluation Section, 2020 ``L'' Street, Sacramento, CA 95812.
South Coast Air Quality Management District, 21865 E. Copley Drive, 
Diamond Bar, CA 91765-4182.

FOR FURTHER INFORMATION CONTACT: Kenneth Israels, Rulemaking Section 
(A-5-3), Air and Toxics Division, U.S. Environmental Protection Agency, 
Region IX, 75 Hawthorne Street, San Francisco, CA 94105-3901, 
Telephone: (415) 744-1194.

SUPPLEMENTARY INFORMATION:

Applicability

    The rule being proposed for approval into the California SIP is: 
SCAQMD Regulation XX, NOX/SOX RECLAIM. This rule was 
submitted by the California Air Resources Board (CARB) to EPA on August 
28, 1996 and found complete on September 17, 1996.

Background

    On November 15, 1990, the Clean Air Act Amendments of 1990 (CAA) 
were enacted. Pub. L. 101-549, 104 Stat. 2399, codified at 42 U.S.C. 
7401-7671q. The air quality planning requirements for the reduction of 
NOX emissions through reasonably available control technology 
(RACT) are set out in section 182(f) of the CAA. On November 25, 1992, 
EPA published a NPRM entitled ``State Implementation Plans; Nitrogen 
Oxides Supplement to the General Preamble; Clean Air Act Amendments of 
1990 Implementation of Title I; Proposed Rule,'' (the NOX 
Supplement) which describes and provides preliminary guidance on the 
requirements of section 182(f). The November 25, 1992, notice should be 
referred to for further information on the NOX requirements and is 
incorporated into this document by reference.
    Section 182(f) of the Clean Air Act requires States to apply the 
same requirements to major stationary sources of NOX (``major'' as 
defined in section 302 and section 182(c), (d), and (e)) as are applied 
to major stationary sources of volatile organic compounds (VOCs), in 
moderate or above ozone nonattainment areas. The Los Angeles-South 
Coast Air Basin is classified as extreme; 1 therefore this area 
was subject to the RACT requirements of section 182(b)(2) and the 
November 15, 1992 deadline, cited below.
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    \1\ The Los Angeles-South Coast Air Basin retained its 
designation of nonattainment and classified by operation of law 
pursuant to sections 107(d) and 181(a) upon the date of enactment of 
the CAA. See 55 FR 56694 (November 6, 1991).
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    Section 182(b)(2) requires submittal of RACT rules for major 
stationary sources of VOC (and NOX) emissions (not covered by a 
pre-enactment control techniques guidelines (CTG) document or a post-
enactment CTG document) by November 15, 1992. There were no NOX 
CTGs issued before enactment and EPA has not issued a CTG document for 
any NOX sources since enactment of the CAA. The RACT rules 
covering NOX sources and submitted as SIP revisions, are expected 
to require final installation of the actual NOX controls as 
expeditiously as practicable, but no later than May 31, 1995.
    On April 7, 1994, EPA published a Notice of Final Rulemaking (NFRM) 
concerning EIPs entitled ``Economic Incentive Program Rules,'' (EIP 
rules) in order to fulfill the requirements of section 182(g)(4)(A) of 
the Act (see 59 FR 16690). The EIP rules establish several requirements 
which State programs must meet. These requirements are:
     Statement of goals and rationale. This element shall 
include a clear statement as to the environmental problem being 
addressed, the intended environmental and economic goals of the 
program, and the rationale relating the incentive-based strategy to the 
program goals.
     Program scope. This element shall contain a clear 
definition of the sources affected by the program.

[[Page 57835]]

     Program baseline. A program baseline shall be defined as a 
basis for projecting program results and, if applicable, for 
initializing the incentive mechanism (e.g., for marketable permits 
programs). The program baseline shall be consistent with, and 
adequately reflected in, the assumptions and inputs used to develop an 
area's reasonable further progress (RFP) plans and attainment and 
maintenance demonstrations, as applicable. The State shall provide 
sufficient supporting information from the areawide emissions inventory 
and other sources to justify the baseline used in the State or local 
EIP.
     Replicable emission quantification methods. This program 
element, for programs other than those which are categorized as 
directionally-sound, shall include credible, workable, and replicable 
methods for projecting program results from affected sources and, where 
necessary, for quantifying emissions from individual sources subject to 
the EIP. Such methods, if used to determine credit taken in attainment, 
RFP, and maintenance demonstrations, as applicable, shall yield results 
which can be shown to have a level of certainty comparable to that for 
source-specific standards and traditional methods of control strategy 
development.
     Source requirements. This program element shall include 
all source-specific requirements that constitute compliance with the 
program. Such requirements shall be appropriate, readily ascertainable, 
and State and federally enforceable.
     Projected results and audit/reconciliation procedures. 
This program element includes a commitment to ensure the timely 
implementation of programmatic revisions or other measures which the 
State, in response to the audit, deems necessary for the successful 
operation of the program in the context of overall RFP and attainment 
requirements. (see 40 CFR 51.493(f)(3)(i))
     Implementation schedule. The program shall contain a 
schedule for the adoption and implementation of all State commitments 
and source requirements included in the program design.
     Administrative procedures. The program shall contain a 
description of State commitments which are integral to the 
implementation of the program, and the administrative system to be used 
to implement the program, addressing the adequacy of the personnel, 
funding, and legislative authority.
     Enforcement mechanisms. The program shall contain a 
compliance instrument(s) for all program requirements, which is legally 
binding and enforceable by both the State and EPA. This program element 
shall also include a State enforcement program which defines 
violations, and specifies auditing and inspections plans and provisions 
for enforcement actions. The program shall contain effective penalties 
for noncompliance which preserve the level of deterrence in traditional 
programs. For all such programs, the manner of collection of penalties 
must be specified.
    The EIP rule should be referred to for further information on the 
EIP requirements and is incorporated into this proposal by reference.
    This document addresses EPA's proposed action for SCAQMD Regulation 
XX--NOX/SOX RECLAIM. The rule was adopted by the SCAQMD on 
December 7, 1995 and May 10, 1996, and submitted by the CARB on August 
28, 1996. Regulation XX was found to be complete on September 17, 1996 
pursuant of EPA's completeness criteria that are set forth in 40 CFR 
Part 51 Appendix V 2 and is being proposed for approval into the 
SIP. Elsewhere in the Federal Register today, EPA is finalizing a 
limited approval/limited disapproval of an earlier version of the 
RECLAIM program (submitted to EPA for approval on March 21, 1994); when 
EPA publishes its final action approving the August 28, 1996 submittal, 
the possibility of sanctions mentioned in the final limited approval/
limited disapproval of the earlier submittal will be removed.
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    \2\  EPA adopted the completeness criteria on February 16, 1990 
(55 FR 5830) and, pursuant to section 110(k)(1)(A) of the CAA, 
revised the criteria on August 26, 1991 (56 FR 42216).
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    NOX emissions contribute to the production of ground level 
ozone and smog. The revision concerns the control of oxides of nitrogen 
(NOX) and oxides of sulfur (SOX) emissions using an 
emissions-limiting EIP, NOX/SOX RECLAIM. This program, which 
consists of twelve rules and associated appendices known as Regulation 
XX, applies to facilities in the SCAQMD with four or more tons of 
NOX or SOX emissions per year from permitted equipment. The 
subject facilities, in order to meet annual emission reduction 
requirements, will participate in an EIP in order to reduce emissions 
at a significantly lower cost. The regulation was adopted as part of 
SCAQMD's efforts to achieve the NAAQS for ozone and in response to the 
CAA requirements cited above. The following is EPA's evaluation and 
proposed action for Regulation XX.

EPA Evaluation and Proposed Action

    In determining the approvability of a NOX rule, EPA must 
evaluate the rule for consistency with the requirements of the CAA and 
EPA regulations, as found in section 110 and part D of the CAA and 40 
CFR part 51 (Requirements for Preparation, Adoption and Submittal of 
Implementation Plans). EPA's interpretation of these requirements, 
which forms the basis for this action, appears in the NOX 
Supplement (57 FR 55620) and various other EPA policy guidance 
documents.3 Among these provisions is the requirement that a 
NOX rule must, at a minimum, provide for the implementation of 
RACT for stationary sources of NOX emissions.
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    \3\ Among other things, the pre-amendment guidance consists of 
those portions of the proposed Post-1987 ozone and carbon monoxide 
policy that concern RACT, 52 FR 45044 (November 24, 1987); ``Issues 
Relating to VOC Regulation Cutpoints, Deficiencies, and Deviations, 
Clarification to Appendix D of November 24, 1987 Federal Register 
Notice'' (Blue Book) (notice of availability was published in the 
Federal Register on May 25, 1988).
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    For the purposes of assisting state and local agencies in 
developing NOX RACT rules, EPA prepared the NOX Supplement to 
the General Preamble. In the NOX supplement, EPA provides 
preliminary guidance on how RACT will be determined for stationary 
sources of NOX emissions. While most of the guidance issued by EPA 
on what constitutes RACT for stationary sources has been directed 
towards application for VOC sources, much of the guidance is also 
applicable to RACT for stationary sources of NOX (see section 4.5 
of the NOX Supplement). In addition, pursuant to section 183(c), 
EPA has issued alternative control technique documents (ACTs) that 
identify alternative controls for all categories of stationary sources 
of NOX. The ACT documents provide information on control 
technology for stationary sources that emit or have the potential to 
emit 25 tons per year or more of NOX. However, the ACTs do not 
establish a presumptive norm for what is considered RACT for stationary 
sources of NOX. In general, the guidance documents cited above, as 
well as other relevant and applicable guidance documents, have been set 
forth to ensure that submitted NOX RACT rules meet Federal RACT 
requirements and are fully enforceable and strengthen or maintain the 
SIP.
    In evaluating the rule, EPA must also determine whether the section 
182(b) requirement for RACT implementation by May 31, 1995 is met. The 
NOX/SOX RECLAIM program meets this requirement by 
establishing baseline emissions in January 1994 and July 1994 in the 
market which are below RACT

[[Page 57836]]

and are annually reduced further below this level.
    In determining the approvability of an EIP, EPA must evaluate the 
regulation for consistency with the requirements of the CAA and EPA 
regulations, as found in section 110 and Part D of the CAA and 40 CFR 
Part 51 (Requirements for Preparation, Adoption, and Submittal of 
Implementation Plans). The EPA interpretation of these requirements, 
which forms the basis for today's action, appears in the various EPA 
policy guidance documents listed in footnote 4 of this notice. Among 
these provisions is the requirement that an EIP rule must, at a 
minimum, be consistent with attainment and RFP requirements found in 
the CAA.
    For the purpose of assisting state and local agencies in developing 
rules which incorporate economic incentive strategies, EPA prepared the 
EIP rules, cited above (59 FR 16690). In the EIP rules, EPA provides 
guidance on how EIPs can be designed to be consistent with the 
attainment and RFP requirements of the CAA. In general, the guidance 
documents cited above, as well as other relevant and applicable 
guidance documents, have been set forth to ensure that submitted EIPs 
meet federal requirements and are fully enforceable and strengthen or 
maintain the SIP.
    A more detailed discussion of the sources controlled, the controls 
required, and justification for why these controls represent RACT can 
be found in the Technical Support Document (TSD), dated August, 1996.
    The revised RECLAIM program rule (Regulation XX) contains 
significant changes which address the deficiencies identified in the 
original NPRM, dated February 28, 1995 4 in the following ways:
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    \4\ For more information on how these deficiencies were 
addressed, please see the TSD which accompanies this rulemaking, 
available from EPA Region 9.
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     The program no longer allows the use of variances to avoid 
compliance with program requirements; the program now meets the 
requirements of Section 110(i) of the Act,
     The SCAQMD revised the program so that it meets certain 
new source review requirements of the Act and Part D, which were listed 
as deficiencies in the February 28, 1995 NPRM,
     The program no longer allows the use of Executive Officer 
discretion in the implementation of certain emissions monitoring 
provision, which were listed as deficiencies in the February 28, 1995 
NPRM,
     The EPA and SCAQMD have agreed upon a permit mechanism to 
address the program's references to other programs, notably those 
involving the use of mobile source emission reduction credits (MERCs) 
to ensure that the program is consistent with Section 110(i) of the 
Act, and
     The SCAQMD, with the August 28, 1996 submittal, provided 
all of the necessary demonstrations to ensure that the requirements of 
the EIP rules are being met.
    A detailed discussion of the rule provisions and evaluations has 
been provided in the TSD available at EPA's Region 9 office (TSD dated 
August, 1996).
    EPA has evaluated the submitted rule and has determined that it is 
consistent with the CAA, EPA regulations and EPA policy. Therefore, 
SCAQMD's Regulation XX--NOX/SOX RECLAIM is being proposed for 
approval under section 110(k)(3) of the CAA as meeting the requirements 
of section 110(a), section 182(b)(2), section 182(f), the NOX 
Supplement to the General Preamble, and the EIP rules.
    EPA is seeking comment in this NPRM on whether the deficiencies 
cited in the final limited approval/limited disapproval of NOX/
SOX RECLAIM found elsewhere in the Federal Register today have 
been addressed. EPA believes that the cited deficiencies have been 
addressed with the August 28, 1996 submittal of revisions to Regulation 
XX.
    Nothing in this action should be construed as permitting or 
allowing or establishing a precedent for any future request for 
revision to any state implementation plan. Each request for revision to 
the state implementation plan shall be considered separately in light 
of specific technical, economic and environmental factors and in 
relation to relevant statutory and regulatory requirements.

Administrative Requirements

A. Executive Order 12866

    This action has been classified as a Table 3 action for signature 
by the Regional Administrator under the procedures published in the 
Federal Register on January 19, 1989 (54 FR 2214-2225), as revised by a 
July 10, 1995 memorandum from Mary Nichols, Assistant Administrator for 
Air and Radiation. The Office of Management and Budget (OMB) has 
exempted this regulatory action from E.O. 12866 review.

B. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., EPA 
must prepare a regulatory flexibility analysis assessing the impact of 
any proposed or final rule on small entities. 5 U.S.C. 603 and 604. 
Alternatively, EPA may certify that the rule will not have a 
significant impact on a substantial number of small entities. Small 
entities include small businesses, small not-for-profit enterprises, 
and government entities with jurisdiction over populations of less than 
50,000.
    SIP approvals under sections 110 and 301, and subchapter I, part D 
of the CAA do not create any new requirements but simply approve 
requirements that the State is already imposing. Therefore, because the 
Federal SIP approval does not impose any new requirements, I certify 
that it does not have a significant impact on any small entities 
affected. Moreover, due to the nature of the Federal-State relationship 
under the CAA, preparation of a flexibility analysis would constitute 
Federal inquiry into the economic reasonableness of State action. The 
Clean Air Act forbids EPA to base its actions concerning SIPs on such 
grounds. Union Electric Co. v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 
42 U.S.C. 7410(a)(2).

C. Unfunded Mandates

    Under Section 202 of the Unfunded Mandates Reform Act of 1995 
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA 
must prepare a budgetary impact statement to accompany any proposed or 
final rule that includes a Federal mandate that may result in estimated 
costs to State, local, or tribal governments in the aggregate; or to 
private sector, of $100 million or more. Under Section 205, EPA must 
select the most cost-effective and least burdensome alternative that 
achieves the objectives of the rule and is consistent with statutory 
requirements. Section 203 requires EPA to establish a plan for 
informing and advising any small governments that may be significantly 
or uniquely impacted by the rule.
    EPA has determined that the approval action promulgated does not 
include a Federal mandate that may result in estimated costs of $100 
million or more to either State, local, or tribal governments in the 
aggregate, or to the private sector. This Federal action approves pre-
existing requirements under State or local law, and imposes no new 
Federal requirements. Accordingly, no additional costs to State, local, 
or tribal governments, or to the private sector, will result from this 
action.

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D. Submission to Congress and the General Accounting Office

    Under section 801(a)(1)(A) of the Administrative Procedures Act 
(APA) as amended by the Small Business Regulatory Enforcement Fairness 
Act of 1996, EPA submitted a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives and the Comptroller General of the General Accounting 
Office prior to publication of the rule in today's Federal Register. 
This rule is not a ``major rule'' as defined by section 804(2) of the 
APA as amended.

E. Petitions for Judicial Review

    Under section 307(b)(1) of the Act, petitions for judicial review 
of this action must be filed in the United States Court of Appeals for 
the appropriate circuit by January 7, 1997. Filing a petition for 
reconsideration by the Administrator of this final rule does not affect 
the finality of this rule for the purposes of judicial review, nor does 
it extend the time within which a petition for judicial review may be 
filed and shall not postpone the effectiveness of such rule or action. 
This action may not be challenged later in proceedings to enforce its 
requirements (see section 307(b)(2)).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Hydrocarbons, 
Incorporation by reference, Intergovernmental relations, Nitrogen 
oxides, Ozone, Reporting and recordkeeping requirements, Volatile 
organic compound.

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

    Dated: October 6, 1996.
Felicia Marcus,
Regional Administrator.
[FR Doc. 96-28595 Filed 11-7-96; 8:45 am]
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