[Federal Register Volume 62, Number 48 (Wednesday, March 12, 1997)]
[Rules and Regulations]
[Pages 11346-11360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6217]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80
[FRL-57-02-2]
RIN 2060-AD27
Regulation of Fuels and Fuel Additives; Standards for
Reformulated Gasoline
AGENCY: Environmental Protection Agency (EPA).
ACTION: Notice of denial of petition for reconsideration.
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SUMMARY: Pursuant to section 553(e) of the Administrative Procedure
Act, the American Petroleum Institute requested that EPA reconsider and
repeal the Phase II reformulated gasoline emission reduction standard
for oxides of nitrogen. For the reasons provided below, EPA is denying
this petition. EPA's review of new data concerning the air quality
benefits and cost-effectiveness of the reformulated gasoline emission
reduction standard for oxides of nitrogen demonstrates the continued
appropriateness of the standard.
EFFECTIVE DATE: March 12, 1997.
ADDRESSES: Information relevant to this action is contained in Docket
No. A-96-27 at the EPA Air and Radiation Docket, room M-1500 (mail code
6102), 401 M St., SW., Washington, DC 20460. The docket may be
inspected at this location from 8:30 a.m. until 5:30 p.m. weekdays. The
docket may also be reached by telephone at (202) 260-7548. As provided
in 40 CFR part 2, a reasonable fee may be charged by EPA for
photocopying.
FOR FURTHER INFORMATION CONTACT: Debbie Wood, Office of Mobile Sources,
Fuels and Energy Division, (202) 233-9000.
SUPPLEMENTARY INFORMATION
I. Introduction and Background
On February 16, 1994, EPA published a final rule establishing
various content and emission reduction standards for reformulated
gasoline (RFG), including provisions for the certification of RFG and
enforcement of RFG standards, and establishing certain requirements
regarding unreformulated or conventional gasoline (59 FR 7716). The
purpose of the RFG program is to improve air quality by requiring that
gasoline sold in certain areas of the U.S. be reformulated to reduce
emissions from motor vehicles of toxics and tropospheric ozone-forming
compounds, as specified by section 211(k) of the Clean Air Act (CAA or
the Act). Section 211(k) mandates that RFG be sold in nine specific
metropolitan areas with the most severe summertime ozone levels; RFG
must also be sold in any ozone nonattainment area reclassified as a
severe area, and in other ozone nonattainment areas that choose to
participate or ``opt in'' to the program. The Act further requires that
conventional gasoline sold in the rest of the country not become any
more polluting than it was in 1990 by requiring that each refiner's and
importer's gasoline be as clean, on average, as it was in 1990. This
has resulted in regulatory requirements referred to as the ``anti-
dumping'' program.
The Act mandates certain requirements for the RFG program. Section
211(k)(1) directs EPA to issue regulations that:
Require the greatest reduction in emissions of ozone forming
volatile organic compounds (during the high ozone season) and
emissions of toxic air pollutants (during the entire year)
achievable through the reformulation of conventional gasoline,
taking into consideration the cost of achieving such emission
reductions, any nonair-quality and other air-quality related health
and environmental impacts and energy requirements.
Section 211(k) specifies the minimum requirement for reduction of
volatile organic compounds (VOCs) and toxics for 1995 through 1999, or
Phase I of the RFG program; the section specifies that EPA must require
the more stringent of a formula fuel or an emission reduction
performance standard, measured on a mass basis, equal to 15 percent of
baseline emissions. Baseline emissions are the emissions of 1990 model
year technology vehicles operated on a specified baseline gasoline.
Section 211(k)(2) compositional specifications for RFG include a 2.0
weight percent oxygen standard and a 1.0 volume percent benzene
standard. Section 211(k)(2) also specifies that emissions of oxides of
nitrogen (NOX) may not increase in RFG over baseline emissions.
For the year 2000 and beyond, or Phase II of the RFG program, the
Act specifies that the VOC and toxic performance standards must be no
less than either a formula fuel or a 25 percent reduction from baseline
emissions, whichever is more stringent. EPA can adjust these standards
upward or downward taking into account such factors as technological
feasibility and cost, but in no case can the standards be less than 20
percent.
Shortly after passage of the CAA Amendments in 1990, EPA entered
into a regulatory negotiation with interested parties to develop
specific proposals for implementing both the RFG and anti-dumping
programs. In August 1991, the negotiating committee reached
[[Page 11347]]
consensus on a program outline that would form the basis for a notice
of proposed rulemaking, addressing emission content standards for Phase
I (1995-1999), emission models, certification, use of averaging and
credits, and other important program elements.
The regulatory negotiation conducted by EPA did not address the
Phase II VOC and toxic standards for RFG, nor did it address a
reduction in NOX emissions beyond the statutory cap imposed under
section 211(k)(2)(A). The final rule promulgated by EPA closely
followed the consensus outline agreed to by various parties in the
negotiated rulemaking process. The final rule also adopted a NOX
emission reduction performance standard for Phase II RFG, relying on
authority under section 211(c)(1)(A).
In December 1995, the American Petroleum Institute (API) submitted
a petition to EPA requesting reconsideration and repeal of the Phase II
RFG NOX standard. API also requested suspension of the effective
date of the standard, pending deliberations on the cost-effectiveness
of NOX control. EPA's initial review of the API petition indicated
that it presented no compelling new evidence or argument that would
warrant revisiting the decision made in promulgating the Phase II RFG
NOX reduction standard. EPA also conducted a review of relevant
and available new information on costs and benefits developed since
promulgation of the final rule to ensure that EPA's conclusions on the
appropriateness of the Phase II RFG NOX reduction standard remain
well-founded. EPA published a Federal Register notice requesting
comment on the issues raised in the API petition.1 In December
1996, EPA reopened the comment period, to allow public comment on a
draft Department of Energy report on RFG costs, and held a meeting with
interested parties to discuss the draft report.
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\1\ 61 FR 35960 (July 9, 1996).
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The arguments presented in the API petition are summarized below,
followed by a summary of the public comments received, and EPA's
response to the petition and comments. A complete copy of the API
petition, public comments, and new information generated by EPA may be
found in the docket for this action.
II. Summary of API Petition
A. Consistency With CAA and Negotiated Rulemaking
In its petition, API argues that the Phase II RFG NOX emission
reduction standard is inconsistent with the 1990 Clean Air Act
Amendments and the 1991 regulatory negotiation.2 API cites
provisions of the statute that specifically require reductions in
various pollutants, and contrasts those explicit NOX reduction
mandates with the ``no NOX increase'' approach toward RFG in
section 211(k).3 API also argues that the 1991 agreement reached
in the regulatory negotiation does not address a Phase II NOX
reduction, and that the focus of debate during the regulatory
negotiation was whether de minimis increases in NOX would satisfy
the no NOX increase standard.4
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\2\ API Petition for Reconsideration and Rulemaking on NOX
Reduction Portion of the Reformulated Gasoline Rule (hereinafter
``Pet.'') at p. 1.
\3\ Pet. at p. 2.
\4\ Pet. at p. 3.
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B. Air Quality Benefits
In its petition, API argues that ozone benefits for the Phase II
NOX standard are overstated. 5 API states that the primary
basis for the NOX standard is ozone attainment, because of the
role NOX emissions play with VOC emissions in the formation of
ozone. 6 API cites EPA's 1994 Trends Report 7 to support its
statement that substantial progress toward ozone attainment has been
made. 8 API argues that progress toward attainment of the National
Ambient Air Quality Standard (NAAQS) for ozone can be expected to
continue because of new federal programs and state obligations
established under the Clean Air Act Amendments of 1990. 9
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\5\ Pet. at p. 5.
\6\ Ibid.
\7\ U.S. EPA, National Air Quality and Emissions Trends Report
1993, EPA 454/R-94-026, October 1994, p. 6.
\8\ Pet. at p. 6.
\9\ Ibid.
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API further argues that EPA's section 182(f) waiver decisions show
that NOX reductions are not always warranted for ozone
attainment.10 API states that, in establishing section 182(f)
waivers, Congress recognized that NOX reductions do not always
contribute to ozone attainment, because of atmospheric meteorology and
the complex relationship of NOX and VOC emissions. 11 API
characterizes section 182(f) as stating that major stationary source
requirements for NOX do not apply where NOX reductions do not
contribute to ozone NAAQS attainment or do not yield net air quality
benefits in the affected nonattainment area. 12 API argues that
the Phase II RFG NOX standard emphasizes those portions of a 1991
National Research Council study 13 and other studies that show
NOX control to be an effective ozone control strategy, while
discounting those parts of the same studies showing that NOX
control may be counterproductive in a particular area. 14 API
cites studies to contradict EPA's discounting of the adverse effects of
NOX reductions on ozone. 15 API points to parts of EPA's 1993
report to Congress (pursuant to section 185B of the CAA) to support its
contention that NOX control may not always be appropriate to
reduce ozone.16
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\10\ Pet. at p. 7.
\11\ Pet. at p. 8.
\12\ Ibid.
\13\ National Research Council, Rethinking the Ozone Problem in
Urban and Regional Air Pollution, National Academy Press,
Washington, DC., 1991.
\14\ Pet. at p. 9.
\15\ Pet. at p. 10.
\16\ Pet. at p. 11.
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API argues that in granting section 182(f) waivers, EPA has
concluded in most cases that additional NOX reductions are not
needed for ozone attainment; however, in a few cases, EPA has found
that NOX reductions would be detrimental to ozone
attainment.17 Moreover, three waivers would suspend major
stationary source NOX control in cities required to use RFG:
Chicago, Milwaukee, and Houston.18 API states that the waivers
have no set period of duration and stay in place so long as the
conditions in section 182(f) are met.19 API concludes that the
Phase II NOX standard is incongruous with the granting of section
182(f) waivers in RFG areas.20 API also argues that the Phase II
RFG NOX standard is incongruous with the two-phased approach EPA
adopted for submittal of ozone SIP attainment demonstrations.21
API concludes that given the substantial progress toward ozone NAAQS
attainment, and the CAA requirement of continued steady progress, EPA's
Phase II RFG NOX standard applicable in all RFG areas is
incongruous with the granting of state
[[Page 11348]]
petitions for waiver from section 182 NOX reduction
requirements.22
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\17\ Pet. at p. 12.
\18\ Pet. at p. 13. API also points out that Dallas, which chose
to implement the RFG program, has been granted a section 182(f)
waiver. The Dallas waiver is based on a showing that Dallas would
attain the ozone NAAQS without implementation of the additional
NOX controls required under section 182. 59 FR 44386 (August
29, 1994).
\19\ Ibid.
\20\ Pet. at p. 14.
\21\ Ibid.
\22\ Id.
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API also argues that non-ozone benefits claimed for the Phase II
RFG NOX standard are wholly speculative; no evidence is offered by
EPA to show that the assumed effects are measurable, let alone
significant.23 Non-ozone benefits claimed include less acid rain,
reduced toxic nitrated compounds, reduced nitrate deposition, improved
visibility, lower levels of nitrogen dioxide, lower levels of PM-10,
and protection against increases in fuel olefin content which could
increase the reactivity of vehicle emissions. 24
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\23\ Pet. at p. 15.
\24\ Ibid.
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C. Cost-Effectiveness
API argues that the impact of the NOX reduction standard on
gasoline refining costs and on refinery flexibility is
understated.25 API cites statements by EPA acknowledging that a
NOX performance standard restricts the flexibility of refiners in
producing qualifying RFG.26 API discounts EPA's assertion that the
performance standard is not a fuel recipe and refiners may produce
gasoline in any way that achieves the desired result.27 According
to API, any NOX reduction ``interferes with refining flexibility
and leaves refiners with unduly costly and narrow choices for producing
RFG.'' 28
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\25\ Pet. at p. 16.
\26\ Ibid.
\27\ Id.
\28\ Pet. at pp. 17-18.
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API argues that the cost-effectiveness of NOX reduction is
overstated because sulfur removal costs are understated and ozone
benefits are overstated. 29 API references detailed information
submitted during the RFG rulemaking that criticizes inadequacies in the
Bonner & Moore refinery model used by EPA.30 API also cites a 1994
DOE study 31 that API characterizes as suggesting that EPA's
desulfurization costs are too low.32 API cites cost estimates
recently prepared by EPA for the Ozone Transport Assessment Group
(OTAG) to illustrate its point that EPA and API are far apart on cost
estimates.33 API states that if EPA used more accurate
desulfurization costs, the cost of Phase II NOX reductions would
increase above the $10,000 per ton benchmark EPA rejected as too high
during the RFG rulemaking.34
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\29\ Pet. at pp. 18-19.
\30\ Pet. at p. 19.
\31\ U.S. DOE, Estimating the Costs and Effects of Reformulated
Gasolines, DOE/PO-0030, December 1994 (hereinafter ``1994 DOE
study'').
\32\ Pet. at p. 20.
\33\ Pet. at pp. 20-21.
\34\ Pet. at p. 21.
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API also argues that EPA's analysis of cost-effectiveness does not
take into account that NOX reductions do not contribute to ozone
attainment in certain areas.35 API states that the Chicago,
Milwaukee, Houston and Dallas areas each have section 182(f) waivers
and comprise 33 percent of the non-California RFG market. 36 API
argues that the benefit of NOX reductions in these areas is at
least zero, if not less than zero, thereby driving EPA's cost-
effectiveness up to about $7,500 per ton, based on this factor
alone.37
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\35\ Pet. at p. 22.
\36\ Pet. at p. 22.
\37\ Pet. at p. 22.
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API further argues that EPA understated the relative cost-
effectiveness of major stationary source NOX control strategies,
by dwelling on motor vehicle and engine controls.38 API argues
that stationary source controls can discriminate between areas where
NOX reductions contribute to ozone attainment and areas where they
do not, unlike motor vehicle, engine, and fuel controls.39 API
cites several studies conducted by or for EPA between July 1991 and
July 1994 that contain more comprehensive information about stationary
source controls, including cost-effectiveness.40 API provides a
table citing data from those studies, and includes its estimate of
incremental cost-effectiveness for several technologies.41 API
concludes that its incremental cost-effectiveness values compare
favorably even to EPA's incremental cost-effectiveness estimate of
$5,000 per ton of NOX removed for a 6.8 percent NOX emission
reduction.42
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\38\ Pet. at p. 23.
\39\ Pet. at p. 23.
\40\ Pet. at pp. 23-24.
\41\ Pet. at p. 25.
\42\ Pet. at p. 26.
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API argues that control of major stationary sources for NOX
offers a far larger potential for overall reduction in air
pollution.43 API cites EPA's 1994 Trends Report that combustion
stationary sources account for about 50 percent of national NOX
emissions with a NOX reduction potential of 75 to 95
percent.44 API further argues that major stationary source
controls can be targeted to avoid the economic waste of NOX
controls where they are not needed and the adverse effect on ozone
because of atmospheric chemistry.45
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\43\ Pet. at p. 27.
\44\ Pet. at p. 27.
\45\ Pet. at p. 29.
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API concludes that EPA should repeal the Phase II RFG NOX
emission reduction standard or, at least, suspend the effective date
until a comprehensive consideration of NOX control cost-
effectiveness is performed.46 API claims EPA should sequence
NOX controls where NOX reductions are appropriate, targeting
major stationary source NOX controls first as they are claimed to
be more cost-effective and can be targeted where needed geographically.
Other controls should not be considered until major stationary source
controls are employed and evaluated, according to API.47 Finally,
API concludes that Phase II RFG NOX emission reductions are not
compelled by the statute, are not necessary, and are not the most cost-
effective controls for NOX reduction and, thus, satisfy none of
the criteria for regulatory action set out in Executive Order
12866.48
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\46\ Pet. at p. 31.
\47\ Pet. at p. 30.
\48\ Pet. at pp. 30-31.
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III. Summary of Public Comment
EPA received public comment on the API petition from 26 commenters,
including the oil, automotive, and utility industries, and from states
and state organizations. This section summarizes those comments.
A. Consistency With CAA and Regulatory Negotiation Agreement in
Principle
Whether the Phase II RFG NOX reduction standard is consistent
with the CAA and the regulatory negotiation is addressed in comments by
several oil companies, and by oil, automotive, utility, and state
associations. Most comments from the oil industry restate the points
made by API in its petition to EPA, described in the previous section.
One oil company also argued that EPA did not give proper consideration
to the statutory factors required under section 211(c)(1)(A) of the
Act, given that EPA is still trying to define the complex relationships
involving NOX, atmospheric chemistry, and ozone formation.
The automotive, utility, and state association comments argue that
although the Phase II RFG NOX reduction standard is not mandated
by section 211(k) of the CAA, it is not inconsistent with the CAA, and
that the Phase II program was not addressed by the regulatory
negotiation's Agreement in Principle, so the NOX reduction
standard does not contradict or supersede any specific term of the
agreement.
[[Page 11349]]
B. Air Quality Benefits
Most comments address the issue of whether EPA overstated the air
quality benefits of the Phase II RFG NOX emission reduction
standard. Several oil industry comments cite air quality modeling data
generated by OTAG to support the API argument that NOX reductions
may cause urban ozone increases, also referred to as NOX
disbenefits. One oil company argues that the OTAG modeling results
present compelling new evidence against the Phase II RFG NOX
emission reduction standard, citing one day each of two modeling runs
as evidence that aggressive NOX controls significantly increase
ozone concentrations in the urban areas where ozone levels are highest.
Those runs include a 60 percent reduction in elevated NOX
emissions, and a 60 percent reduction in elevated NOX emissions
plus a 30 percent reduction in low-level NOX emissions.
Another oil company argues that the OTAG modeling results are
significant new evidence to support the API petition, and show that the
NOX disbenefit phenomenon is consistently present and most
pronounced in the Chicago metropolitan area. That company further
argues that OTAG modeling results show that urban VOC reductions do not
eliminate the disbenefit from NOX reductions, although the company
notes that VOC reductions do mitigate the disbenefit. That company
argues that the scale of significant ozone transport tends to be
substantially localized rather than OTAG domain-wide, undercutting the
transport rationale for widespread imposition of NOX controls. The
commenter bases its arguments on modeling results for three days for
each of three ozone episodes; one with 60 percent elevated point source
NOX reductions, the second with 60 percent elevated point source
NOX reductions plus 30 percent low-level NOX reductions, and
the third with 30 percent VOC reductions plus 60 percent elevated
NOX reductions and 30 percent low-level NOX reductions. Also
included was one day of a run of 30 percent low-level NOX
reductions only.
In its comments on the petition, API argues that OTAG air quality
modeling sensitivity runs as of August 1996 show that downwind air
quality benefits of NOX control are far less than expected,
undercutting the core transport rationale for widespread imposition of
RFG NOX controls. API argues that OTAG modeling confirms its
central thesis that NOX emissions reductions increase ozone levels
immediately downwind of several urban nonattainment areas, notably
Chicago and New York. Finally, API argues that the OTAG modeling shows
that the ozone increases were not fully ameliorated by larger NOX
reductions or VOC reductions; even if VOC controls were effective, this
would put affected states in the position of imposing extra VOC
controls to offset the adverse air quality impact of RFG NOX
controls.
Several states, and state and utility associations also addressed
the air quality benefits issue. States and state associations stress
the importance of the Phase II RFG NOX standard in state ozone
attainment and maintenance planning. State associations argue that OTAG
has projected that, in 2007, mobile sources will still contribute 43
percent of all NOX after implementation of CAA controls; given the
challenges facing so many areas in identifying and implementing
programs that will lead to attainment of the ozone standard, the air
quality benefits associated with the NOX reduction potential of
Phase II RFG cannot be overstated. One state points out that with the
anticipated lowering of the federal ozone standard, the Phase II RFG
NOX emission reduction standard will become even more critical for
states. A state association argues that although there has been
progress toward attainment, loss of a tool as significant as Phase II
RFG in reducing VOC and NOX would only exacerbate state emission
reduction shortfalls.
While state and state association comments acknowledge that in
certain urban areas, NOX reductions can increase ozone, state
associations argue that API's advocacy of repeal of the NOX
standard is both premature and shortsighted; premature because OTAG is
still seeking to define the extent and impact of NOX disbenefits
and how disbenefits should be accommodated, and shortsighted because
for many areas of the country it has been conclusively ascertained that
NOX reductions will be imperative if the ozone standard is to be
attained and maintained.
Several states and state associations argue that modeling
demonstrates that NOX reductions are beneficial, and for many
areas imperative, notwithstanding potential disbenefits in some limited
geographic areas. One state and a state association argue that all
major regional modeling efforts performed or underway through such
organizations as OTAG and the Ozone Transport Commission have
demonstrated that NOX reductions are beneficial in reducing ozone
levels and will be needed to achieve attainment of the ozone standard
in many areas, and particularly in the eastern U.S. They argue that the
importance of NOX reductions in reducing ozone levels is becoming
even more pronounced as modeling efforts utilize the newer and more
accurate methodology for estimating biogenic VOC emissions.
A state association argues that the regional photochemical modeling
results prepared for OTAG are confirmatory of previous modeling that
both elevated and low-level control of NOX are beneficial at
reducing the regional extent of ozone, and that the combination of
NOX and VOC control, especially in urban areas, can be very
effective in reducing regional ozone levels. Another state association
also argues that modeling studies have shown that urban VOC reductions,
such as those provided by RFG, are effective at addressing any limited
NOX disbenefits, while leaving in place the very extensive
regional benefits of NOX emission reductions. One state argues
that there is no definitive data that Phase II RFG could be a
significant disbenefit to ground level ozone attainment and, in the
absence of evidence to the contrary, the state will operate under the
assumption that all reductions of ground level ozone precursors are
both important and beneficial.
A state association argues that granting contingent waivers on a
local nonattainment area basis does not negate EPA recognition and
support for regional efforts to use NOX reductions to address
ozone transport and attainment issues. It argues that NOX waivers
do not take into account that when controls are removed or absent in
one area, particularly a control of regional significance, this would
generally cause or exacerbate problems for any area downwind of that
area. It argues that while the understanding and development of
mechanisms for regional ozone reductions over large areas is still
evolving, mechanisms that have the greatest potential continue to rely
on a balance of both VOC and NOX control.
A utility industry group argues that the API petition fails to
buttress its argument that EPA overstated the air quality benefits of
the Phase II RFG NOX standard with new evidence; instead, API
relies upon arguments already rejected by EPA. API's section 182(f)
waiver argument fails because the grant of a waiver says nothing about
the value of the Phase II RFG NOX standard; the utility group
argues that the section 182(f) waiver provisions do not apply to the
RFG program and that, although temporary waivers have been granted in
some places based on highly specific localized facts, the Agency has
made it clear waivers would be reevaluated in
[[Page 11350]]
light of additional data. The utility group also argues that progress
by the states toward attainment as indicated in the 1994 Trends Report
does not establish that the Phase II RFG NOX standard is
unnecessary or unwise; although progress has been made toward
attainment, more still needs to be done.
C. Cost-Effectiveness
Most commenters addressed whether EPA understated the cost-
effectiveness of the Phase II RFG NOX standard. Several oil
companies cite data from OTAG both on the comparative cost of
stationary source reduction measures and the cost of implementing Phase
II RFG throughout the OTAG region. Several companies submitted or cite
a ranking developed by the New Hampshire Department of Environmental
Services for OTAG of cost per ton ranges for NOX reduction
measures. The ranking places Phase II RFG as the second most expensive
NOX control measure at $25,000 to $45,000 per ton. The cost ranges
are comprised of the lowest and highest marginal cost estimates
provided by EPA, the states, industry, and other OTAG participants, and
represents the extent of disagreement over the ``true'' costs of each
measure, according to one oil company comment. One company argues that
these data may be interpreted to show that a NOX reduction
strategy that includes the Phase II RFG NOX reduction standard is
purchasing a much smaller reduction at a much higher price than is
available from alternative measures. That commenter also claims that
DOE's analysis indicates a significantly higher cost per ton of
NOX removed than estimated by EPA in its Regulatory Impact
Analysis (RIA) for the final RFG rule.
In its comments, API also cites the OTAG region-wide cost-
effectiveness estimate for the Phase II RFG NOX standard. API
argues that even if that figure is adjusted for comparison with only
those areas that will use Phase II RFG, the adjusted figure would still
``dwarf'' EPA's $5,000 per ton estimate; however, API did not include
such an adjusted figure in its comments. API also cites the New
Hampshire list as evidence that the NOX standard is not cost-
effective.
Two state associations argue that it would be more accurate to
characterize the cost of Phase II RFG from combined VOC and NOX
reductions; the combined OTAG range for the OTAG region is $3,500 to
$6,200. One state argues that the cost of the NOX standard is
within a reasonable range of cost-effectiveness. That state also argues
that the cost of the NOX standard is highly favorable compared to
the cost of typical transportation control measures.
An automobile industry association argues that the API focus on
sulfur reduction overlooks the fact that sulfur reductions also
decrease hydrocarbon (HC) and carbon monoxide (CO) emissions. That
association argues that recent industry data show that when advanced
technology vehicles are operated on high sulfur fuels, their emissions
will be no better than Tier 0 level vehicles; comparing those new data
with expected costs of compliance compiled by Turner, Mason & Company
in April 1992 yields a cost-effectiveness estimate of about $200 per
ton of pollutant removed when the benefits of sulfur removal on HC, CO,
and NOX are considered.
A clean fuel industry association evaluated capital investment
options for reducing the sulfur level in gasoline to meet the Phase II
RFG NOX emission reduction standard. That association argues that
average costs from the investment options evaluated were generally
equal to or less than EPA's original cost estimates for reducing sulfur
levels in RFG; therefore, that association argues, the cost of the
Phase II RFG NOX emission reduction standard has not fundamentally
changed and it is still a cost-effective standard.
The utility industry argues that API presented no compelling new
evidence that desulfurization costs are understated. One utility
industry group argues that API's claim that EPA underestimated
desulfurization costs does not address the fact that desulfurization is
not required; nor did API address the ability of industry to meet the
standard without desulfurization. That group also argues that the fact
that it might be cheaper to reduce emissions from stationary sources
than to reduce NOX in fuels does not mean the same ozone reduction
benefits would be produced. Another utility industry association argues
that, even if API's claim that regulating stationary sources is more
cost-effective is true, that does not justify forcing stationary
sources to subsidize the petroleum industry by paying for that
industry's share of clean air compliance costs.
IV. EPA Response
A. Consistency With CAA and Negotiated Rulemaking
As EPA pointed out in the RFG final rule, the regulatory
negotiation conducted by EPA did not address Phase II RFG VOC and toxic
standards; neither did it address a reduction in NOX emissions
beyond the statutory cap imposed under section 211(k)(2)(A).49
Because the regulatory negotiation did not address Phase II RFG
standards, including the NOX reduction standard, Phase II RFG
standards are consistent with the Agreement in Principle that resulted
from the regulatory negotiation. A reduction in NOX emissions does
not interfere with or reduce the benefits gained by the parties from
the elements of the Agreement in Principle that were finally adopted in
the RFG rule. While it adds costs and gains benefits, these are in
addition to, and not at the expense of, the elements addressed in the
regulatory negotiation. The costs and air quality benefits of the Phase
II RFG NOX emission reduction standard are discussed in more
detail in later sections of this notice.
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\49\ 59 FR 7744 (February 16, 1994).
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The Phase II RFG NOX standard is also fully consistent with
the Act. EPA proposed and finalized the NOX emission reduction
performance standard for Phase II RFG relying on EPA's authority under
section 211(c)(1)(A) of the Act, based on EPA's view that NOX
reductions from summertime RFG are important to achieve attainment of
the ozone NAAQS in many nonattainment areas.50 Section
211(c)(1)(A) of the Act allows the Administrator to regulate fuels or
fuel additives if ``any emission product of such fuel or fuel additive
causes, or contributes to, air pollution which may reasonably be
anticipated to endanger the public health or welfare.'' Section
211(c)(2)(A) further provides that EPA may control those fuels and fuel
additives ``after consideration of all relevant medical and scientific
evidence available * * * including consideration of other
technologically or economically feasible means of achieving emissions
standards under [section 202 of the Act].''
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\50\ Ibid.
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EPA used this authority to require reformulated fuels to also
achieve NOX reductions in order to reduce ozone formation, based
on scientific evidence regarding the benefits of NOX control and
on the cost-effectiveness of NOX reductions. A detailed discussion
of the determination of the need for and scientific justification for
NOX control is presented in the RIA for the final rule.51 The
fact that scientific understanding of atmospheric chemistry and ozone
formation continues to evolve does not
[[Page 11351]]
negate that determination. In addition, as discussed below, EPA's
review of the air quality benefits and cost-effectiveness of the
NOX reduction standard does not show that the rulemaking
determinations supporting this standard were inappropriate.
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\51\ U.S. EPA, Final Regulatory Impact Analysis for Reformulated
Gasoline, December 13, 1993, pp. 313-326.
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B. Air Quality Benefits
1. The Need for Regional NOX Reduction
At present, there are 74 areas in the United States, with a
population exceeding one hundred million, that do not meet the ozone
NAAQS of 120 parts per billion (ppb) for a one-hour daily maximum. The
following section describes ozone formation, the regional scale of the
ozone problem, and the reductions needed to meet the ozone standard.
Ozone Formation. Ozone is a naturally occurring trace constituent
of the atmosphere. Background ozone concentrations vary by geographic
location, altitude, and season. Part of this background ozone
concentration is due to natural sources and part is due to long-range
transport of anthropogenic or man-made precursor emissions. The natural
component of background ozone originates from three sources: (1)
Stratospheric ozone (which occurs at about ten to 50 kilometers
altitude) that is transported down to the troposphere (i.e., from the
ground level through about ten kilometers), (2) ozone formed from the
photochemically-initiated oxidation of biogenic (i.e., produced by
living organisms) and geogenic (i.e., produced by the earth) methane
and carbon monoxide with nitric oxide, and (3) ozone formed from the
photochemically-initiated oxidation of biogenic VOCs with NOX.
NOX plays an important role in the oxidation of methane, carbon
monoxide, and biogenic VOC, though the magnitude of this natural
component cannot be precisely determined.52 The background ozone
concentration near sea level in the U.S. for a one-hour daily maximum
during the summer is usually in the range of 30-50 ppb.53
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\52\ U.S. EPA, Office of Air Quality Planning and Standards,
``Review of National Ambient Air Quality Standards for Ozone,
Assessment of Scientific and Technical Information,'' OAQPS Staff
Paper, EPA-452/R-96-007, June 1996.
\53\ Ibid.
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While ozone formation in the atmosphere involves complex non-linear
processes, a simplified description is offered here. For more
information on ozone chemistry, see, for example, the 1991 National
Research Council study. In short, nitric oxide (NO) is formed during
combustion or any high temperature process involving air (air being
largely N2 and O2). NO is formed, for example, when fuel is
burned to generate power for stationary or mobile sources. The NO is
converted to NO2 by reacting with certain compounds formed from
oxidized VOCs, called radicals. It is also converted to NO2 by
reacting with ozone (O3). Sunlight then causes the NO2 to
decompose, leading to the formation of ozone and NO. The NO that
results is then able to start this cycle anew. A reaction path that
converts NO to NO2 without consuming a molecule of ozone allows
ozone to accumulate; this can occur by the presence of oxidized
VOCs.54 That is:
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\54\ Seinfeld, John H., ``Urban Air Pollution: State of the
Science,'' February 10, 1989 vol., Science.
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1. NO is formed from combustion involving air:
N2+O2==>NO molecules.
2. NO2 (nitrogen dioxide) is formed when NO reacts with
radicals from oxidized VOCs.
3. NO2 is also formed when NO reacts with ozone; this removes
ozone:
NO+O3==>NO2+O2.
4. Sunlight causes NO2 to decompose, or photolyze, into NO and
O. Ozone is formed when an oxygen molecule (O2) reacts with the
oxygen element (O), formed from the decomposition of NO2:
NO2==>NO+O; and
O+O2==>Ozone.
A general explanation for the formation of ozone in or near urban
areas follows.55 NOX is produced when combustion temperatures
are above 2500 deg.K, and air is used as an oxidizer in the combustion
process. Incomplete combustion of the fuel also results in the emission
of raw fuel components and oxygenated organic components or VOCs from
the fuels. In sunlight, these components form free radicals (e.g., OH,
HO2, RO, RO2) that oxidize NO to NO2 (reaction 2 above).
The free radical is recreated in the process. Each free radical is
cycled up to five times. The NO2 then reacts with sunlight to
recreate NO and to produce ozone (reaction 4 above). After the first
oxidation of NO to NO2, every subsequent operation of the cycle
produces ozone with an efficiency greater than 90 percent. In current
chemical reaction mechanisms, a typical nitrogen is cycled three to
five times. Some of the ozone produced reacts with organics and with
sunlight to produce more free radicals to maintain the cyclic oxidation
process.
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\55\ Jeffries, H.E., communication to Clinton Burklin, ERG,
October 27, 1996.
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Ozone itself is a major source of the free radicals that oxidize NO
into NO2. This represents a powerful positive feedback process on
the formation of more ozone, given available NOX. The oxidation of
the VOCs also leads to the production of more free radicals. As the
cycle operates, NO2 reacts with free radicals and is converted
into nitrates. This form of nitrogen cannot cycle. This also removes
free radicals. A system that converts all NOX to nitrogen products
cannot create any more ozone.
NO2 reacts rapidly with free radicals. In situations that have
a limited supply of radicals, NO2 effectively competes with VOCs
for the limited free radicals, and is converted into nitrates. This
results in virtually no production of ozone. Where there are large
amounts of NO relative to the sources of radicals (such as VOCs), then
the reaction between NO and existing ozone removes ozone (a radical
source), and the large amount of NO2 formed competes effectively
with VOCs for the other available radicals, thus leading to an overall
suppression of ozone.
In general, areas with high VOC to NOX concentration ratios
(greater than eight to ten) can effectively reduce local ozone
concentrations with local NOX emission reductions.56 In areas
where VOCs are abundant relative to NOX, ozone formation is
controlled primarily by the amount of NOX available to react with
the oxidized VOCs (reaction 2 above).57 These ``NOX limited''
areas generally include rural, suburban, and downwind areas.58 In
contrast, in areas with low VOC to NOX ratios, ozone formation is
controlled primarily by the amount of VOC available. Ozone scavenging
by the NO-O3 reaction (reaction 3 above) is more effective than
the reaction of oxidized VOC with NO producing NO2 (reaction 2
above).59 Such areas are ``VOC limited'' and generally include the
central core areas of large urban areas with significant vehicle
emissions.
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\56\ National Research Council, Rethinking the Ozone Problem in
Urban and Regional Air Pollution, National Academy Press,
Washington, D.C., 1991.
\57\ Seinfeld, John H., ``Urban Air Pollution: State of the
Science,'' February 10, 1989 vol., Science.
\58\ Finlayson-Pitts, B.J. and J.N. Pitts, Jr., ``Atmospheric
Chemistry of Tropospheric Ozone Formation: Scientific and Regulatory
Implications,'' Air and Waste Management Association, Vol. 43,
August 1993.
\59\ Seinfeld, John H., ``Urban Air Pollution: State of the
Science,'' February 10, 1989 vol., Science.
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The rate of ozone formation varies with the VOC to NOX ratio.
By reducing local emissions of VOC, the formation rate generally slows
down, leading to lower ozone levels locally, but with eventual
production of approximately the same total amount of ozone. Reduction
of NOx emissions can lead to
[[Page 11352]]
a more rapid formation of ozone, though with less total amount of ozone
formed.60
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\60\ Ibid.
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Different mixtures of VOC and NOX, therefore, can result in
different ozone levels such that the total system is non-linear. That
is, large amounts of VOC and small amounts of NOX make ozone
rapidly but are quickly limited by removal of the NOX. VOC
reductions under these circumstances show little effect on ozone. Large
amounts of NO and small amounts of VOC (which usually implies smaller
radical source strengths) result in the formation of inorganic
nitrates, but little ozone. In these cases, reduction of NOX
results in an increase in ozone.
The preceding is a static description. In the atmosphere, physical
processes compete with chemical processes and change the outcomes in
complex ways. The existence of feedback and non-linearity in the
transformation system confound the description. Competing processes
determine the ambient concentration and there are an infinite set of
process magnitudes that can give rise to the same ambient
concentrations and changes in concentrations. Lack of any direct
measurement of process magnitudes results in the need to use
inferential methods to confirm any explanation of a particular ozone
concentration.
The formation of ozone is further complicated by biogenic
emissions, meteorology, and transport of ozone and ozone precursors.
The contribution of ozone precursor emissions from biogenic sources to
local ambient ozone concentrations can be significant, especially
emissions of biogenic VOCs. Important meteorological factors include
temperature, and wind direction and speed. Long-range transport results
in interactions between distant sources in urban or rural areas and
local ambient ozone. Peroxyacetyl nitrate (PAN), formed from the
reaction of radicals with NO2, can transport NOX over
relatively large distances through the atmosphere. Its rate of
decomposition significantly increases with temperature, so that it can
be formed in colder regions, transported, and then decomposed to
deliver NO2 to downwind areas.61
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\61\ National Research Council, Rethinking the Ozone Problem in
Urban and Regional Air Pollution, National Academy Press,
Washington, D.C., 1991.
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Regional Scale of the Ozone Problem. Peak ozone concentrations
typically occur during hot, dry, stagnant summertime conditions. Year-
to-year meteorological fluctuations and long-term trends in the
frequency and magnitude of peak ozone concentrations can have a
significant influence on an area's compliance status.
Typically, ozone episodes last from three to four days on average,
occur as many as seven to ten times per year, and are of large spatial
scale. In the eastern United States, high concentrations of ozone in
urban, suburban, and rural areas tend to occur concurrently on scales
of over 1,000 kilometers.62 Maximum values of non-urban ozone
commonly exceed 90 ppb during these episodes, compared with average
daily maximum values of 60 ppb in summer. Thus, an urban area need
contribute an increment of only 30 ppb over the regional background
during a high ozone episode to cause a violation of the ozone NAAQS of
120 ppb.63
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\62\ Ibid.
\63\ Id.
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The precursors to ozone and ozone itself are transported long
distances under some commonly occurring meteorological conditions. The
transport of ozone and precursor pollutants over hundreds of kilometers
is a significant factor in the accumulation of ozone in any given area.
Few urban areas in the U.S. can be treated as isolated cities
unaffected by regional sources of ozone.64
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\64\ Id.
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NOX Reductions Needed to Meet the Ozone Standard. Over the
past two decades, great progress has been made at the local, state and
national levels in controlling emissions from many sources of air
pollution. Substantial emission reductions are currently being achieved
through implementation of the 1990 CAAA measures for mobile and
stationary sources. These measures include the retrofit of reasonably
available control technology on existing major stationary sources of
NOX and implementation of enhanced vehicle inspection and
maintenance programs under Title I; new emission standards for new
motor vehicles and nonroad engines, and the RFG program under Title II;
and controls on certain coal-fired electric power plants under Title
IV. The effects of these programs on total NOX emissions over time
indicate a decline in emissions from 1990 levels of about 12 percent
until the year 2007. However, continued industrial growth and expansion
of motor vehicle usage threaten to reverse these past achievements;
NOX emissions will gradually increase for the foreseeable future,
unless new initiatives are implemented to reduce NO