[Federal Register Volume 62, Number 106 (Tuesday, June 3, 1997)]
[Rules and Regulations]
[Pages 30260-30270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14442]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[FRL-5834-4]


Regulations of Fuels and Fuel Additives: Extension of the 
Reformulated Gasoline Program to the Phoenix, Arizona Moderate Ozone 
Nonattainment Area

AGENCY: Environmental Protection Agency (``EPA'').

ACTION: Final rule.

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SUMMARY: Under section 211(k)(6) of the Clean Air Act, as amended 
(``Act'' or ``CAA''), the Administrator of EPA must require the sale of 
reformulated gasoline (``RFG'') in an ozone nonattainment area 
classified as Marginal, Moderate, Serious, or Severe upon the 
application of the governor of the state in which the nonattainment 
area is located. As requested by the Governor of Arizona, today's 
action extends the requirement to sell RFG to the Phoenix, Arizona 
moderate ozone nonattainment area, effective July 3, 1997 for all 
persons other than retailers and wholesale purchaser-consumers (i.e., 
refiners, importers, and distributors), and August 4, 1997 for 
retailers and wholesale purchaser-consumers. As of the implementation 
date for retailers and wholesale purchaser-consumers, the Phoenix ozone 
nonattainment area will be a covered area for all purposes in the 
federal RFG program. The federal Phase I RFG program provides 
reductions in ozone-forming volatile organic compounds (``VOC'') 
emissions and air toxics, and prohibits increase in oxides of nitrogen 
(``NOX'') emissions. Reductions in VOCs are environmentally 
significant because of the associated reductions in ozone formation. 
Exposure to ground-level ozone (or smog) can cause respiratory 
problems, chest pain, and coughing and may worsen bronchitis, 
emphysema, and asthma.

DATES: This final rule is effective July 3, 1997.

ADDRESSES: Materials relevant to the final rule have been placed in 
Docket A-97-02. The docket is located at the Air Docket Section, Mail 
Code 6102, U.S. Environmental Protection Agency, 401 M Street, SW, 
Washington, DC 20460, in room M-1500 Waterside Mall. Documents may be 
inspected on business days from 8:00 a.m. to 5:30 p.m. A reasonable fee 
may be charged for copying docket material. An identical docket is also 
located in EPA's Region IX office in Docket A-AZ-97. The docket is 
located at 75 Hawthorne Street, AIR-2, 17th Floor, San Francisco, 
California 94105. Documents may be inspected from 9:00 a.m. to noon and 
from 1:00--4:00 p.m. A reasonable fee may be charged for copying docket 
material.

FOR FURTHER INFORMATION CONTACT: Janice Raburn at U.S. Environmental 
Protection Agency Office of Air and Radiation, 401 M Street, SW 
(6406J), Washington, DC 20460, (202) 233-9856.

SUPPLEMENTARY INFORMATION:

Availability on the TTNBBS

    The preamble, regulatory language and regulatory support document 
are also available electronically from the EPA Internet Web site and 
via dial-up modem on the Technology Transfer Network (TTN), which is an 
electronic bulletin board system (BBS) operated by EPA's Office of Air 
Quality Planning and Standards. Both services are free of charge, 
except for your existing cost of Internet connectivity or the cost of 
the phone call to TTN. Users are able to access and download files on 
their first call using a personal computer per the following 
information. The official Federal Register version is made available on 
the day of publication on the primary Internet sites listed below. The 
EPA Office of Mobile Sources also publishes these notices on the

[[Page 30261]]

secondary Web site listed below and on the TTN BBS.

Internet (Web)

http://www.epa.gov/docs/fedrgstr/EPA-AIR/
(either select desired date or use Search feature)
http://www.epa.gov/OMSWWW/
(look in What's New or under the specific rulemaking topic)

TTN BBS: 919-541-5742

(1200-14400 bps, no parity, 8 data bits, 1 stop bit)
Voice Help line: 919-541-5384
Off-line: Mondays from 8:00 AM to 12:00 Noon ET

    A user who has not called TTN previously will first be required to 
answer some basic informational questions for registration purposes. 
After completing the registration process, proceed through the 
following menu choices from the Top Menu to access information on this 
rulemaking.

 Gateway to TTN Technical Areas (Bulletin Boards)
 OMS--Mobile Sources Information
(Alerts display a chronological list of recent documents)  
Rulemaking & Reporting

    At this point, choose the topic (e.g., Fuels) and subtopic (e.g., 
Reformulated Gasoline) of the rulemaking, and the system will list all 
available files in the chosen category in date order with brief 
descriptions. To download a file, type the letter ``D'' and hit your 
Enter key. Then select a transfer protocol that is supported by the 
terminal software on your own computer, and pick the appropriate 
command in your own software to receive the file using that same 
protocol. After getting the files you want onto your computer, you can 
quit the TTN BBS with the oodbye command.
    Please note that due to differences between the software used to 
develop the document and the software into which the document may be 
downloaded, changes in format, page length, etc. may occur.

Regulated Entities

    Entities potentially regulated by this action are those which 
produce, supply or distribute motor gasoline. Regulated categories and 
entities include:

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                                                Examples of regulated   
                 Category                             entities          
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Industry..................................  Petroleum refiners, motor   
                                             gasoline distributors and  
                                             retailers.                 
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This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
could potentially be regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
your business would have been regulated by this action, you should 
carefully examine the list of areas covered by the reformulated 
gasoline program in section 80.70 of title 40 of the Code of Federal 
Regulations. If you have questions regarding the applicability of this 
action to a particular entity, consult the person listed in the 
preceding FOR FURTHER INFORMATION CONTACT section.
    The remainder of this preamble is organized into the following 
sections:

I. Background
    A. Clean Air Act Opt-in Provision
    B. EPA Procedures and Arizona Opt-in Request
II. Action
III. Response to Comments
    A. EPA Interpretation of section 211(k)(6) of the Clean Air Act
    B. Phoenix Circumstances
    1. Need for Air Quality Benefits of Federal RFG
    2. Supply
    C. Implementation Issues
    1. Enforcement Relief Provided by EPA
    2. Other Implementation Issues
IV. Environmental Impact
V. Statutory Authority
VI. Regulatory Flexibility
VII. Public Participation
VIII. Executive Order 12866
IX. Paperwork Reduction Act
X. Unfunded Mandates
XI. Judicial Review
XII. Submission to Congress
XIII. List of Subjects in 40 CFR Part 80

I. Background

A. Clean Air Act Opt-in Provision

    As part of the Clean Air Act Amendments of 1990, Congress added a 
new subsection (k) to section 211 of the Act. Subsection (k) requires 
the sale of gasoline that EPA has certified as reformulated in the nine 
worst ozone nonattainment areas beginning January 1, 1995. Section 
211(k)(10)(D) defines the areas required to be covered by the 
reformulated gasoline (``RFG'') program as the nine ozone nonattainment 
areas having a 1980 population in excess of 250,000 and having the 
highest ozone design values during the period 1987 through 1989. 
1 Under section 211(k)(10)(D), any area reclassified as a 
severe ozone nonattainment area under section 181(b) must also be 
included in the RFG program. 2 EPA published final 
regulations for the RFG program on February 16, 1994. See 59 FR 7716.
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    \1\ Applying these criteria, EPA has determined the nine covered 
areas to be the metropolitan areas including Los Angeles, Houston, 
New York City, Baltimore, Chicago, San Diego, Philadelphia, Hartford 
and Milwaukee.
    \2\ Sacramento was reclassified from Serious to Severe effective 
June 1, 1995 and became a mandatory covered RFG area effective June 
1, 1996.
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    Any ozone nonattainment area classified as Marginal, Moderate, 
Serious, or Severe may be included in the program at the request of the 
Governor of the state in which the area is located. Section 
211(k)(6)(A) provides that upon the application of a Governor, EPA 
shall apply the prohibition against selling conventional gasoline 
(``CG'') in any area requested by the Governor which has been 
classified under subpart 2 of Part D of Title I of the Act as a 
Marginal, Moderate, Serious or Severe ozone nonattainment 
area.3 Subparagraph 211(k)(6)(A) further provides that EPA 
is to apply the prohibition as of the date the Administrator ``deems 
appropriate, not later than January 1, 1995, or 1 year after such 
application is received, whichever is later.'' In some cases the 
effective date for a potential opt-in area may be extended beyond the 
one year required by section 211(k)(6)(A). Such an extension, as 
provided in section 211(k)(6)(B), would be based on a determination by 
EPA that there is ``insufficient domestic capacity to produce'' RFG. 
Finally, section 211(k)(6)(A) requires that EPA publish a governor's 
application in the Federal Register.
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    \3\ EPA recently published a proposed rulemaking that would 
allow areas previously classified as Marginal through Severe to opt-
in. 62 FR 15074 (March 28, 1997).
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    Although section 211(k)(6) provides EPA discretion to establish the 
effective date for this prohibition to apply to such areas, EPA does 
not have discretion to deny a Governor's request. Therefore, the scope 
of EPA's Notice of Proposed Rulemaking (``NPRM'') was limited to 
proposing an effective date for Phoenix's opt-in to the RFG program. 
EPA solicited comments addressing the proposed implementation date and 
stated in the NPRM that it was not soliciting comments that supported 
or opposed Phoenix participating in the RFG program.

B. EPA Procedures and Arizona Opt-in Request

    The Governor of Arizona established in May 1996 an Air Quality 
Strategies Task Force (``Arizona Task Force'') to develop a report 
describing long- and short-term strategies that would contribute to 
attainment of the federal national ambient air quality standards 
(``NAAQS'') for ozone, carbon monoxide and particulates. In July 1996, 
this task

[[Page 30262]]

force recommended establishment of a Fuels Subcommittee to evaluate 
potential short-term and long-term fuels options for the Phoenix ozone 
nonattainment area. The Fuels Subcommittee was composed of 
representatives of a diverse mixture of interests including gasoline-
related industries, public health organizations, and both in-county and 
out-of-county interests. Several members of the refining industry 
supported the opt-in to the federal RFG program for Phoenix for the 
onset of the 1997 VOC control season. The subcommittee submitted its 
final report to the Arizona Task Force on November 26, 
1996.4
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    \4\ See Docket A-97-02, II-A-3.
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    By letter dated January 17, 1997, the Governor of the State of 
Arizona applied to EPA to include the Phoenix moderate ozone 
nonattainment area in the federal RFG program. The Governor requested 
an implementation date of June 1, 1997. EPA published the Governor's 
letter in the Federal Register, as required by section 211(k)(6). The 
Direct Final rule published by EPA on February 18, 1997 (62 FR 7164) 
extended the RFG program to the Phoenix moderate ozone nonattainment 
area by setting two implementation dates. EPA set an effective date of 
June 1, 1997 for refiners, importers, and distributors, and July 1, 
1997 for retailers and wholesale purchaser-consumers. The Agency 
published a Direct Final Rule because it viewed setting the effective 
date for the addition of the Phoenix ozone nonattainment area to the 
federal RFG program as non-controversial and anticipated no adverse or 
critical comments.
    Also on February 18, 1997 EPA published an NPRM (62 FR 7197), in 
which EPA proposed to apply the prohibitions of subsection 211(k)(5) to 
the Phoenix, Arizona nonattainment area. EPA proposed to adopt the same 
two implementation dates for Phoenix specified in the Direct Final 
Rule. EPA published an NPRM so that, in the event that it did receive 
an adverse comment in response to the Direct Final Rule, the Agency 
would proceed with notice-and-comment rulemaking. EPA is today taking 
final action on that NPRM.
    After publication of the Direct Final Rule and the NPRM, EPA 
received several requests for a hearing. A copy of these comments can 
be found in Air Docket A-97-02. (See ADDRESSES) Since EPA received a 
request for a hearing, the Direct Final Rule adding the Phoenix ozone 
nonattainment area to the RFG program was withdrawn by the 
Administrator on March 31, 1997. See 62 FR 16082 (April 4, 1997.) EPA 
published a Notice of public hearing on March 12, 1997 (62 FR 11405) 
and held a public hearing in Phoenix, Arizona on March 18, 1997.

II. Action

    Pursuant to the governor's letter and the provisions of section 
211(k)(6), EPA is today adopting regulations that apply the 
prohibitions of subsection 211(k)(5) to the Phoenix, Arizona moderate 
ozone nonattainment area. EPA believes the implementation dates adopted 
today achieve a reasonable balance between requiring the earliest 
possible start date to achieve air quality benefits in Phoenix and 
providing adequate lead time for industry to prepare for program 
implementation. These dates are consistent with the state's request 
that EPA require that the RFG program begin in the Phoenix area as 
early as possible in the high ozone season, which begins June 1. These 
dates will provide environmental benefits by allowing Phoenix to 
achieve VOC reduction benefits for some of the 1997 VOC-controlled 
season.
    EPA has concluded, based on its analysis of available information, 
including public comments received and discussed below (See III. 
Response to Comments), that the refining and distribution industry's 
capacity to supply federal RFG to Phoenix this summer exceeds the 
estimated demand. EPA has also concluded that the implementation dates 
adopted today provide adequate lead time to industry to set up storage 
and sales agreements to ensure supply of RFG to the Phoenix ozone 
nonattainment area.
    The Governor's request seeks a single implementation date of June 1 
for the RFG program in the Phoenix area. However, pursuant to its 
discretion to set an effective date under section 211(k)(6), EPA is 
establishing two implementation dates. For all persons other than 
retailers and wholesale purchaser-consumers (i.e., refiners, importers, 
and distributors), implementation shall take effect on the effective 
date of this rule, July 3, 1997. This date applies to the refinery 
level and all other points in the distribution system other than the 
retail level. For retailers and wholesale purchaser-consumers, 
implementation shall take effect 30 days after the effective date of 
this rule, August 4, 1997. As of the implementation date for retailers 
and wholesale purchaser-consumers, the Phoenix ozone nonattainment area 
will be treated as a covered area for all purposes of the federal RFG 
program.

III. Response to Comments

A. EPA Interpretation of Section 211(k)(6) of the Clean Air Act

    Several parties noted that EPA would be setting a precedent for 
future opt-ins by the criteria it uses to determine an appropriate 
effective date for the Phoenix opt-in. They noted that the decision 
would have a national impact and asked for assurance from EPA that it 
would apply these criteria uniformly. One commenter stated that the 
compliance date set for the first opt-in requests allowed refiners many 
months to set up the systems and organizations necessary to comply with 
the rules. This timing provided industry with the certainty it needed 
to make informed compliance decisions and the time it needed to 
implement the required changes either in the production of different 
fuels or in the administrative requirements for compliance. The 
commenter said that EPA had never contemplated such a rapid opt-in 
process as the one proposed for Phoenix and recommended that EPA avoid 
setting an undesirable precedent.
    The Arizona opt-in request is the first request EPA has received 
since the federal RFG program began in January 1995.5 
Previous opt-in requests were sent in from two to three and a half 
years before January 1, 1995. Section 211(k)(6)(A) authorizes EPA to 
set an effective date for an area's opt-in that is no later than one 
year from the date of the request, or January 1, 1995, whichever is 
later. In the case of these early opt-in requests, January 1, 1995, was 
later than one year from the date of the requests. Therefore, EPA set 
an effective date of January 1, 1995, for those areas to opt-in. EPA 
received one opt-in request shortly before the federal RFG program 
began. For that request, EPA set an effective date of June 1, 1995, 
less than one year from the Governor's opt-in request.6
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    \5\ Voluntarily covered federal RFG areas (``opt-in'' areas) 
currently exist in twelve States and the District of Columbia. Each 
of these areas submitted opt-in requests (a letter from the State 
Governor to the EPA Administrator) between June 1991 and October 
1992. EPA responded to these requests to set an effective date under 
section 211(k)(6)(A) of the CAA by (1) publishing a ``Notice of 
Application for the Extension of the RFG program'' in which EPA set 
an effective date of January 1, 1995, the date when the federal RFG 
program was required to begin; and (2) including these areas as 
``covered areas'' under 40 CFR section 80.70(j) in the Final Rule 
for Standards for Reformulated and Conventional Gasoline 59 FR 7716, 
7852 (February 16, 1994), as amended at 59 FR 36944, 36964 (July 20, 
1994).
    \6\ The Governor of Wisconsin requested to opt-in some areas in 
April 1994; in August 1994, the Governor requested the effective 
date of June 1995. EPA published a Direct Final Rule on January 11, 
1995 (60 FR 2693) setting June 1, 1995 as the effective date. 
Wisconsin subsequently withdrew its opt-in request by letter dated 
March 31, 1995 and EPA published a Notice to Withdraw Final Rule on 
May 3, 1995 (60 FR 21724).

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[[Page 30263]]

    EPA recognizes that each ozone nonattainment area that submits an 
opt-in request will have a unique set of circumstances that has led the 
State to select federal RFG as a control measure. Section 211(k)(6)(A) 
of the Act gives the Administrator discretion to ``establish an 
effective date * * * as he deems appropriate* * *.'' EPA interprets 
this provision to mean that it has broad discretion to consider any 
factors reasonably relevant to the timing of the effective date. This 
would include factors that affect industry and the potential opt-in 
area. The factors that affect industry could include productive 
capacity and capability, other markets for RFG, oxygenate supply, cost, 
lead time, supply logistics for the area, potential price spikes, and 
potential disruption to business. The circumstances of the potential 
opt-in area could include environmental benefits and the timing of such 
benefits; amount and types of reductions it needs; and effects of 
transport, geography, climate, and weather patterns on air quality. EPA 
will review each opt-in request and the particular facts pertaining to 
the potential opt-in area and the suppliers for that area to determine 
the appropriate implementation date. EPA believes that Phoenix is an 
ozone nonattainment area in extraordinary circumstances. (See 
discussion in III.B.1. below.) Thus, at the request of the Arizona 
Governor, EPA has reviewed this opt-in request as expeditiously as 
possible. EPA has provided the flexibility refiners need to meet the 
effective date by providing enforcement relief for several 
implementation issues. (See discussion in III.C. below.)
    Some commenters were concerned that EPA viewed its scope of review 
for the Phoenix opt-in too narrowly. They suggested that EPA should 
consider all issues relevant to a successful and orderly 
implementation.7 One commenter argued that the Arizona 
Governor made four requests in his January 17, 1997 letter and that EPA 
should consider all these requests together: that EPA set an effective 
date for Phoenix to opt-in to federal RFG; that EPA grant two waivers 
under section 211(c)(4)(C) of the Act from EPA, one for a state Reid 
vapor pressure (``RVP'') standard of 7.0 pounds per square inch 
(``psi'') and one for a state wintertime oxygenated fuel standard; and 
that EPA allow Phoenix to opt-out of federal RFG.8 The 
commenter asked that EPA justify its decision to address opt-in first 
and separated from these other requests.
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    \7\ EPA stated in the Notice of public hearing (62 FR 16082 
(March 12, 1997)) that comments regarding Arizona's decision to opt-
in to federal RFG; EPA opt-out procedures; the Arizona Reid vapor 
pressure (RVP) waiver; and enforcement issues would not be relevant 
to the limited scope of the opt-in rulemaking. EPA has discussed the 
RVP waiver and enforcement issues, to the extent that they are 
relevant to setting the effective date, in the preamble to today's 
final rule.
    \8\ See Docket A-97-02, II-D-1.
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    EPA interprets the Governor's January 17 letter as a request to 
opt-in to federal RFG. The first paragraph of the letter states that 
the purpose of the letter is to request that EPA require federal RFG to 
be supplied to the Phoenix ozone nonattainment area beginning June 1, 
1997. In addition, the fact that the Governor's letter requesting to 
opt-in to RFG raises other issues on which EPA action may be pending 
does not require EPA to resolve those issues in conjunction with the 
Agency's action on the opt-in request.
    The Governor's letter includes references to the pending RVP and 
oxygenated fuels standards waivers, but these references simply seek 
expeditious approval of these previously submitted waiver requests. 
EPA's Region 9 is currently considering these 211(c)(4)(C) waiver 
requests.9
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    \9\ The Arizona Department of Environmental Quality (``ADEQ'') 
re-submitted a formal request, (a SIP Revision with supporting 
documentation) for the RVP waiver by letter dated April 29, 1997 to 
Region 9. A copy of this letter (without attachments) is in Docket 
A-97-02, IV-D. A copy of the letter (with attachments) can be found 
in the Region 9 Docket for this rulemaking (A-AZ-97) and the Region 
9 Docket for the RVP Waiver (AZ-RVP-97).
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    Commenters stated that in determining an appropriate effective date 
EPA should consider the capacity to supply both RFG and low RVP 
gasoline. Commenters argued that EPA should address the RVP waiver 
request and the timing of the waiver decision, and acknowledge the 
impact on refiners. EPA has considered the effect of a state 7.0 psi 
RVP program on timing and supply for federal RFG. While refiners stated 
that they need to know exactly what the fuel specifications are going 
to be, EPA received comments from refiners stating that they could 
supply RFG to Phoenix without having a final 7.0 psi RVP waiver 
preemption in place. EPA acknowledges the importance for refiners to 
know what all the specifications will be for Phoenix gasoline. EPA also 
acknowledges that until EPA waives preemption for a state 7.0 psi RVP 
standard under section 211(c)(4)(C), Arizona is preempted from 
enforcing that standard. Nonetheless, the waiver of preemption is a 
separate action. If EPA waives preemption and refiners need some 
transition time, because the RVP program would be a state program, 
Arizona would have authority to provide the appropriate transition 
time.
    Regarding the wintertime oxygenated fuel waiver request, the state 
has not yet submitted the documentation for this request. When it does, 
Region 9 will address it in a timely manner. Regarding Arizona's 
potential opt-out, EPA does not consider the January 17 letter to be an 
opt-out request. While the Governor asked for clarification of EPA opt-
out procedures, he did not request to opt-out; he did not ask EPA to 
set an opt-out effective date or discuss any of the criteria required 
in the Opt-Out Procedures Rule.10 The Governor simply made a 
statement of current intent to submit an opt-out request if a certain 
condition exists. That is, if Arizona were to decide that a different 
fuel would better meet its needs, the Governor would submit an opt-out 
request by December 31, 1997.11
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    \10\ 61 FR 35673 (July 8, 1996).
    \11\ See 62 FR 15077 (March 28, 1997), EPA Notice of Proposed 
Rulemaking for Transitional and General Opt Out Procedures for Phase 
II Reformulated Gasoline Requirements. EPA proposed, inter alia that 
states decide and submit to EPA a complete opt-out petition by 
December 31, 1997, if they want a current opt-in area to opt-out 
before December 31, 1999.
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    Several commenters believe EPA should consider the Governor's 
statement of intent to opt-out in the future in setting the effective 
opt-in date. Given that EPA has not received from Arizona an opt-out 
request and thus no request for a particular opt-out effective date, 
EPA cannot determine what effect, if any, a potential opt-out would 
have on supply as of the opt-in effective date. While EPA is concerned 
with potential supply disruptions and uncertainty for the regulated 
community that could result with cyclic state opt-in and opt-out, the 
CAA allows states to determine which control measures for meeting 
federal air quality standards are most appropriate and best meet their 
needs.12 In addition, the Opt-out Procedures Rule provides a 
process a state must follow to petition for removal from the program, 
the criteria used by EPA to evaluate a request, and the necessary 
transition period before the opt-out becomes effective.13
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    \12\ There is no indication that Arizona intends to initiate 
another cycle of federal RFG adoption.
    \13\ 61 FR 35673, 35674 (July 8, 1996).

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[[Page 30264]]

B. Phoenix Circumstances

1. Need for Air Quality Benefits of Federal RFG
    Many commenters addressed Phoenix's air quality situation, the 
conclusion by the Arizona Task Force that federal RFG was the most 
effective short-term control measure for Phoenix, and the consequences 
for Phoenix air quality if it does not receive those 
benefits.14 A representative of the Arizona Department of 
Environmental Quality (``ADEQ'') testified at the hearing, providing 
the following reasons for why the State of Arizona needs EPA to 
expeditiously set an effective date for Phoenix to opt-in to federal 
RFG this summer. First, Arizona has some of the toughest combinations 
of strategies to address ozone pollution in the nation. Arizona 
implemented the Inspection and Maintenance 240 program, including the 
pressure test; has a trip reduction program more stringent than was 
required for Severe ozone nonattainment areas; has a regulatory remote 
sensing program; and has had a state low (7.0 psi) RVP standard since 
1994.15
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    \14\ Some commenters discussed what they considered to be the 
best fuel for Phoenix in the long-term. As stated in the NPRM and 
Notice of public hearing, Arizona's short-or long-term fuel choice 
is not relevant to this opt-in rulemaking.
    \15\ A remote sensor is an instrument that measures emissions in 
a pathway across a road as a vehicle drives by. At the same time the 
vehicle drives by, a photograph is taken of the license plate. 
Remote sensing programs are designed to target the highest emitting 
vehicles in an unobtrusive way. Arizona's program requires owners of 
vehicles that are found to be exceeding emissions standards (with 
remote sensing) to bring their vehicle in for further emissions 
testing and possible repair.
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    Despite these requirements, ozone violations persist in the Phoenix 
nonattainment area. Twenty-nine exceedances were recorded in the summer 
of 1995, and ten exceedences were recorded in 1996. In addition, 
Phoenix has a long ozone season; ADEQ documents violations from mid-May 
to early September. These ozone violations have significant health 
implications because they affect large numbers of people in the Phoenix 
metropolitan area. For example, ADEQ estimates that as many as 496,000 
people could have been exposed to unhealthful levels of air quality due 
to violations on July 23, 1996.
    ADEQ pointed out that Phoenix is currently a Moderate nonattainment 
area, but the State is concerned about potential redesignation to 
Serious because of the new source review (``NSR'') requirements that 
would come with it. ADEQ believes, based on its current emissions 
inventory, that NSR requirements would not produce significant air 
quality benefits and thus would not be an effective ozone attainment 
strategy for Phoenix.16 ADEQ has been working with EPA's 
Region 9 on a Voluntary Early Ozone Plan (``VEOP'') to bring cleaner 
air to Phoenix sooner and obviate the need for reclassification to 
Serious. The tonnage reductions represented by federal RFG for 1997 
through 1999 in Phoenix are a critical portion of the emissions 
reductions that ADEQ needs to show in the VEOP.
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    \16\ ADEQ's current emissions inventory shows that contributions 
to ozone nonattainment from mobile sources are in excess of twenty-
five percent and from stationary sources are approximately six 
percent. ADEQ is currently reevaluating the inventory that it used 
for the Voluntary Early Ozone Plan (``VEOP'') because they have 
reason to believe that mobile emissions may have been underestimated 
and biogenic emissions overestimated.
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    ADEQ also stated that the Arizona Task Force concluded that supply 
of RFG for Phoenix would not be at issue, based on an independent 
contractor study on fuel and refining capabilities.17 The 
report was reviewed by dozens of stakeholders, many of whom were fuel 
suppliers. The consultant determined that there was an adequate supply 
of federal RFG available for Phoenix.
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    \17\ See ``Final Report: Assessment of Fuel Formulations Options 
for Maricopa County for State of Arizona Department of Environmental 
Quality'' performed under Contract 97-0013AA by MathPro Inc. with 
Air Improvement Resource, Inc., November 7, 1996 (``MathPro 
Report''), EPA Air Docket A-97-02, II-A-2.
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    One commenter who served on the Arizona Task Force stated at the 
hearing that, after reviewing the analysis done by a contractor, the 
Task Force concluded that opt-in to federal RFG was the single most 
effective measure that the state could adopt in the short term to 
improve air quality in Phoenix.18 In addition to providing 
the emissions reductions Phoenix needs, supply was available and the 
federal enforcement mechanism was in place. The commenter added that if 
there was a delay in the opt-in effective date for Phoenix, they would 
move into this summer's ozone season when humidity and higher 
temperatures could result in an ozone violation this summer, and this 
was what the Arizona Task Force was seeking to avoid by adopting a 
short-term fuels measure. One commenter, on the other hand, argued that 
the summer emissions benefits of federal RFG for Phoenix would be small 
(2-4 percent) for ground level ozone.
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    \18\ Id.
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2. Supply
    Commenters asked EPA to list the criteria it would use to determine 
that adequate supply of RFG exists in a potential opt-in area. As 
stated earlier, EPA believes section 211(k)(6)(A) provides broad 
discretion to the Administrator to establish an appropriate effective 
date. In setting an effective date for a potential opt-in area, EPA 
believes it should review the many factors that could affect the supply 
of gasoline to that area. These include, but are not limited to, supply 
logistics, cost, potential price spikes, the number of current and 
potential suppliers for that market, whether such suppliers have 
experience producing RFG or the capability to produce RFG, intent of 
suppliers to withdraw from the market, availability of adequate 
gasoline volumes, and the amount of lead time needed by suppliers and 
the distribution industry to set up storage and sales agreements to 
ensure supply. By evaluating these and other factors, EPA can make a 
determination as to whether industry's capacity to supply RFG for an 
opt-in area meets or exceeds the demand.
    EPA has determined that capacity to supply federal RFG to Phoenix 
this summer exceeds the estimated gasoline demand. EPA has concluded 
that refiners will be able to adequately supply federal RFG for Phoenix 
within 30 days of publication of the final rule, the effective date for 
terminal compliance. EPA has concluded that retailers will be able to 
supply RFG within 60 days of publication of the final rule, the 
effective date for retailers and wholesale purchaser-consumers. The 
following is a discussion of the factors EPA considered in reaching 
this conclusion.
a. Logistics
    Many commenters stated that Phoenix is in a unique logistical 
situation. It has no pipeline access to the large production facilities 
on the Gulf Coast. It is relatively isolated from refineries and 
dependent on two common carrier pipelines, one coming from the east and 
one coming from the west.19 Commenters emphasized to EPA the 
importance of Phoenix having a reliable supply of gasoline from both 
the east and west because temporary shutdowns have occurred on each 
side, disrupting supply up to 24 hours or longer. One commenter 
testified at the hearing that these disruptions happen periodically. 
The pipelines are primarily constructed on railroad right-of-ways, so 
train derailments cause the pipeline to

[[Page 30265]]

shutdown. A shutdown occurred recently on the west pipeline due to a 
train derailment, and the downtime was 24 hours. The downtime could be 
longer, depending on the severity of the derailment or other problem, 
such as heavy rains.
---------------------------------------------------------------------------

    \19\ The Santa Fe Pacific Pipeline (``SFPP'') is the common 
carrier that transports gasoline and other products (diesel, jet 
fuel, and heating oil) to Phoenix by one pipeline from the west 
(originating in Los Angeles, California) and one pipeline from the 
east (originating in El Paso, Texas).
---------------------------------------------------------------------------

    The west pipeline now delivers approximately 70 thousand B/D of 
gasoline to Phoenix and about 12 percent (8,000) of that continues on 
to Tucson. The east pipeline now delivers approximately 25 thousand B/D 
of gasoline to Phoenix.20 Both the east and west pipelines 
have significant additional capacity beyond what is currently being 
shipped.21 About 20 percent of the Phoenix total is 
ultimately shipped to markets outside Maricopa County and will not be 
RFG unless market conditions result in a give-away.22
---------------------------------------------------------------------------

    \20\ MathPro Report at pages 20-27.
    \21\ See Docket A-97-02, IV-E-7, Memorandum to EPA Air Docket 
regarding telephone conversations between EPA and industry 
representatives on the issue of supply to Phoenix.
    \22\ MathPro Report at pages 20-27. A give-away occurs when 
higher quality gasoline, that costs more to produce, is sold at a 
lower price, one reflective of conventional gasoline. MathPro Report 
at page 30.
---------------------------------------------------------------------------

    Phoenix is considered part of the West Coast distribution area that 
supplies 1.3 million B/D of gasoline.23 Industry 
representatives believe that it is inconsequential whether a small 
shortfall in RFG supply for Phoenix occurs in the east or the west 
pipeline. The west pipeline has the capacity, with some disruption, to 
adjust and meet the majority of the Phoenix demand for all types of 
gasoline in the event of loss of the east line supply. The loss of the 
east supply has happened before, when one of the two suppliers was down 
for periodic maintenance and a breakdown occurred at the other. Several 
refiners agreed that the only situation that is likely to cause an RFG 
shortage in Phoenix is a break or stoppage in the west 
pipeline.24 Given that the total Phoenix/Tucson area 
gasoline demand is 110 thousand B/D and the maximum east pipeline flow 
rate is 55 thousand B/D for all products, shortages and price increases 
are inevitable if the west pipeline goes down.25 This would 
occur regardless of the type of gasoline required by Arizona; 
therefore, the state's opt-in to RFG does not affect this situation.
---------------------------------------------------------------------------

    \23\ See Docket A-97-02, IV-E-7.
    \24\ Id.
    \25\ MathPro Report at pages 20-27.
---------------------------------------------------------------------------

b. Estimated Phoenix Gasoline Market and Refiner Capability to Supply
    The total gasoline demand for the state of Arizona is approximately 
130 thousand B/D. The total gasoline now being delivered to Phoenix 
terminals by both pipelines is about 88 thousand B/D. Approximately 80 
percent (70 thousand B/D) of the Phoenix terminal volume is used in 
Maricopa County (the Phoenix ozone nonattainment area). The remaining 
20 percent of the Phoenix terminal volume is shipped to five other 
Arizona counties.26
---------------------------------------------------------------------------

    \26\ Id.
---------------------------------------------------------------------------

    Based on the comments received, EPA believes at least six refiners 
will supply federal RFG from the west and two to three refiners will 
supply RFG from the east. This assures some supply of federal RFG to 
Phoenix from both the west and the east. Most of the refiners that 
commented, with one exception, stated that they intend to supply 
federal RFG for the Phoenix market for the summer of 1997. In addition, 
one company stated that it intends to supply Phoenix by displacement; 
that is, it supplies the Texas and California markets with federal RFG 
and California RFG (``CaRFG''), thus making it possible for Texas and 
California refiners to supply the Phoenix market. Furthermore, one 
commenter submitted a plot of the price difference between RFG and CG 
in the New York, Gulf Coast, and California markets. The commenter 
concluded that the very narrow differential, which was about 2 cents in 
the federal program and about 4 cents for the California gasoline, 
indicates that supplies are more than adequate. And finally, the 
Arizona Task Force contractor stated in its report that its analysis of 
the gasoline distribution system (which includes the refineries, the 
SFPP South Pipeline System, and the local bulk terminals) led to the 
finding that in general ``the existing distribution system has the 
capability to deliver the required volumes of special Maricopa County 
gasolines meeting any of the proposed standards [the Arizona Task Force 
considered several fuels options] .'' 27
---------------------------------------------------------------------------

    \27\ Id. at pages 76-77.
---------------------------------------------------------------------------

    One refiner commented that it currently supplies Phoenix from a 
refinery located in El Paso and will not be able to produce RFG for 
this summer at that refinery. The company stated, however, that they 
are looking at various options to replace those volumes. Another party 
stated that for the few refiners that might not be able to meet the RFG 
specifications this summer, the industry has an often-utilized method 
of arranging exchanges or trades of gasoline in one market for gasoline 
in another. This arrangement is designed to provide relief for refiners 
and marketers during company-specific supply disruptions.
c. Potential for Phoenix RFG Supply Shortage
    Industry has told EPA in written comments and in meetings that the 
continuous buying, selling and trading of gasoline stocks in response 
to the spot prices makes supply shortages of types of gasoline, like 
RFG, very unlikely.28 The short term price increases that 
occurred when CaRFG was introduced in California was caused by an 
unusual and unexpected combination of refinery disruptions not expected 
to occur in Phoenix. Typical spot prices are: (1) CaRFG--$0.70/gallon; 
(2) federal RFG-$0.69/gallon; and (3) CG--$0.66/gallon. Generally, the 
differences in price correspond to difference in refining costs. Thus, 
in order to supply RFG, a trader could opt to buy any of the gasoline 
types, whether barged from Texas, San Francisco, Washington, or other 
more distant locations, and, if necessary, turn CG into RFG, at a cost 
of 3 cents/gallon.29 In effect, the cost of purchasing of 
RFG would be about the same as the cost of purchasing CG and converting 
it to RFG. The Energy Information Administration (EIA) recently 
informed EPA that there was an oversupply of gasoline in California and 
the price of CaRFG dropped 8 cents during the first week in 
May.30 One commenter, however, argued that the Phoenix 
requirement to supply federal RFG with a 7.0 psi RVP makes the gasoline 
unique. This commenter believes that fewer refiners will supply the 
Phoenix gasoline, resulting in recurring shortages, accompanied by 
price spikes. As discussed in this preamble, however, most refiners 
that currently supply gasoline to Phoenix commented that they intend to 
continue to do so.
---------------------------------------------------------------------------

    \28\ ``Spot Market'' is defined as commodity transactions 
whereby participants make buy-and-sell commitments of relatively 
short duration, in contrast to the ``contract'' market in which 
transactions are long term. U.S. Petroleum Refining, Meeting 
Requirements for Cleaner Fuels and Refiners, Volume I--Analyses and 
Results, National Petroleum Council, August 1993 at GL-8. ``Spot 
prices'' are the prices for a single sale of a product, i.e., 
gasoline, on the Spot Market.
    \29\ See Docket A-97-02, IV-E-7.
    \30\ See Docket A-97-02, IV-E-8.
---------------------------------------------------------------------------

d. Oxygenate Supply
    Federal RFG requires the addition of oxygenates (2.0 percent by 
weight). This addition of oxygenate will increase the volume of 
gasoline supply by approximately 10 percent. If Phoenix requires 65 
thousand B/D of RFG and industry continues to provide that amount of 
gasoline, the supply will

[[Page 30266]]

increase by approximately 6500 B/D just by the addition of oxygenate. 
Several commenters provided information that there is a plentiful 
supply of oxygenates. A commenter stated that given that oxygenate 
producers are presently operating at approximately 90 percent of 
manufacturing capacity, an RFG program for Phoenix is not expected to 
cause any disruptions in oxygenate supply or drastic impacts on the 
oxygenate marketplace.
e. Infrastructure and Reformulation
    EPA received comments that the needed infrastructure, blending, and 
segregation capability are in place for Phoenix. Phoenix has had a 
winter oxygenated gasoline program since 1989, so the infrastructure 
associated with oxygenate blending and product segregation is already 
present. This will help ensure a smooth transition to RFG. A commenter 
stated that based on its study of Arizona's distribution system, it 
believed that the time required to get RFG to the marketplace will be a 
month or less after it is produced.
    EPA received comment that relatively small quality changes will be 
required by refiners to produce RFG. Most refiners providing 
conventional gasoline to Phoenix currently meet the RFG specifications 
except for benzene. The most significant change in the formulation will 
be the reduction of benzene to one volume percent. The addition of two 
weight percent oxygen to the gasoline will contribute to the reduction 
of benzene.
f. Effective Dates
    In the NPRM, EPA proposed that 30 days be allowed between the 
terminal and retail compliance dates and requested comment on whether a 
shorter time period would be appropriate. The Agency received two 
comments on this issue. One refiner stated that under the best 
conditions, thirty days was feasible but not guaranteed. The refiner 
explained that thirty days at a minimum was needed due to potential 
difficulties in blending gasoline and in order to assure compliance at 
low-volume stations. Another refiner stated it supported the 30 days 
but thought 15 sufficient. Two commenters did not speak directly to 
this issue but included in their comments potential schedules for opt-
in compliance. One allowed 21 days and one allowed 15 days between the 
two dates. EPA has decided that 30 days is an appropriate time period 
to allow between terminal and retail compliance dates. While it appears 
that 15 days would be sufficient for high-volume stations, the 
additional 15 days could be important for low-volume stations.
    EPA proposed that the terminal effective date be 30 days following 
the publication of the final opt-in rule. One commenter argued that 45 
days would be more appropriate because a longer transition time would 
allow terminals to gradually convert to RFG by slowly replacing their 
normal inventory levels of conventional gasoline. A shorter time period 
would mean that the terminal must draw down their conventional gasoline 
to lower levels in order to accelerate the conversion. If a refinery 
outage were to occur while inventories are artificially low, the 
possibility of a physical shortage would increase and higher prices 
could result. This situation could be exacerbated by the timing of the 
conversion, well into the high demand summer driving season. One 
commenter concerned with the precedent set by an effective date 30 days 
after publication questioned whether this would provide adequate lead 
time regardless of ability to supply.
    EPA has decided that a terminal effective date of 30 days after 
publication of the final rule provides refiners sufficient lead time. 
Refiner ability to supply RFG is one of the factors EPA considers in 
setting the effective date for an opt-in request, and several refiners 
who supply Phoenix have stated that they have the ability to supply 
federal RFG to Phoenix within 30 days of publication of the final rule. 
One commenter stated that if EPA resolved issues regarding enforcement 
of the RFG requirements in Phoenix by May 1, service stations could 
supply federal RFG in Phoenix by mid-July. Moreover, as several 
commenters stated, industry has been on notice that Phoenix would opt-
in since the date of the Arizona Governor's letter, January 17, 1997. 
EPA proposed that the terminal compliance date be 30 days after 
publication of the final rule or June 1, whichever was later. Based on 
this proposed date, SFPP stated in its comments that it would have to 
begin shipments by April 22. Refiners testified at the hearing that 
they could supply RFG to Phoenix by the proposed date of June 1 if EPA 
worked with them to resolve certain implementation issues. EPA has 
agreed to provide enforcement relief on several implementation issues 
(See discussion in III.C.1. below) and expects that refiners will be 
ready to supply RFG by the terminal compliance date, which will be 
later than the proposed date. The fact that EPA has set an effective 
date of 30 days from publication of the final rule does not mean, 
however, that EPA will decide that is the appropriate amount of lead 
time for future opt-in requests. As discussed above, pursuant to 
section 211(k)(6)(A), EPA will review all relevant factors for each 
opt-in request to determine the appropriate effective date for a 
particular area.
    EPA received one comment requesting that in setting a Phoenix opt-
in effective date, EPA consider any effect that could have on the 
supply of CaRFG in California. The commenter stated that a reduction in 
production of CaRFG could have an adverse effect on gasoline price and 
availability in California. Several California refiners commented that 
they intend to supply federal RFG to Phoenix. None of these refiners 
indicated that producing federal RFG would limit their production of 
CaRFG. EPA has not received any information that would indicate that 
the Phoenix opt-in effective date will affect the supply of CaRFG in 
California.
    EPA asked parties at the hearing to comment on whether supplying 
RFG to Phoenix would affect the supply of CG to Arizona. EPA received 
one comment on this issue from a refiner who stated that it could meet 
its CG contracts for Arizona.

C. Implementation Issues

    Several refiners and one trade association representing the 
refiners identified implementation and enforcement issues they faced in 
preparing to provide RFG to Phoenix in the summer of 1997. These issues 
resulted from the lead time available for the Phoenix opt-in resulting 
from the date of the Arizona Governor's opt-in request and his 
requested implementation date; and the fact that much of the gasoline 
supplied to Phoenix (approximately two-thirds) is produced at 
refineries located in California. These California refineries are 
covered by the California Enforcement Exemption in the federal RFG 
rules (40 CFR 80.81). The association stated, however, that it did not 
support delay of the proposed effective date. Its members could supply 
RFG to Phoenix if EPA could provide some enforcement relief for the 
identified implementation issues. In addition, one refiner commented 
that while it encouraged EPA to grant enforcement relief, it did not 
believe the issues were any reason to delay the implementation date 
because refiners had actually been on notice that they would need to 
prepare to supply Phoenix with RFG since January 17, 1997, the date of 
the Governor's letter to EPA.

[[Page 30267]]

1. Enforcement Relief Provided by EPA
    EPA provided enforcement relief from certain RFG requirements 
related to compliance in an April 18, 1997 letter from Steven A. 
Herman, EPA Assistant Administrator for Enforcement and Compliance 
Assurance, to Urvan Sternfels, President of the National Petroleum 
Refiner's Association. 31 The enforcement relief is provided 
only until January 1, 1998, and consists of the following:
---------------------------------------------------------------------------

    \31\ See Docket A-97-02, IV-C-6.
---------------------------------------------------------------------------

a. Registration of Parties
    40 CFR 80.76 requires that refiners, importers and oxygenate 
blenders register with EPA no later than three months prior to the date 
they intend to produce or import RFG in order to provide EPA with 
information about the companies and their facilities. In light of the 
timing associated with the Phoenix opt-in, EPA will not enforce the 
requirement to register three months in advance, provided a party 
registers before producing any RFG for Phoenix, including the 
requirement to notify EPA of which independent laboratory a party will 
use.
b. Submittal of RFG Survey Plan
    Section 80.68 requires certain refiners to submit to EPA a plan for 
conducting gasoline quality surveys in each RFG covered area. This plan 
must be submitted no later than September 1 of the year preceding the 
year the surveys are to be conducted. However, given the date of 
Governor Symington's opt-in letter, EPA will not enforce the 
requirement to submit a Phoenix survey plan by September 1, 1996, 
provided that within 30 days of EPA's final Phoenix opt-in rule a 
Phoenix survey plan that meets all the requirements of section 80.68 is 
submitted.
c. Use of California Test Methods
    Both the federal RFG and the California Air Resources Board 
(``CARB'') Phase 2 programs require refiners to use certain test 
methods to demonstrate compliance with the standards applicable under 
these programs. In the case of the tests for certain parameters the 
methods specified under the two programs are different.
    Section 80.81 allows California refiners to use CARB test methods 
as an acceptable federal test method when producing CARB gasoline. This 
exemption is limited to gasoline used in California, and refiners are 
required to use federal test methods for gasoline exported from 
California.
    A letter of February 29, 1996 from Steve Herman to the Western 
States Petroleum Association allows California refiners to use CARB 
test methods for CG exported from California, subject to certain 
conditions, but does not allow non-federal test methods for RFG 
exported from California because of the stringent requirements 
associated with federal RFG. However, the Phoenix opt-in presents a 
situation where limited use of CARB test methods for certain federal 
RFG requirements is appropriate in the case of RFG used in Phoenix.
    Section 80.65(e) requires RFG refiners to use federal test methods 
to analyze each RFG batch in order to certify compliance with the 
federal RFG standards, and under section 80.75(a) to report results to 
EPA on a quarterly basis. In addition, section 80.65(e) provides that 
before a refiner can ship RFG the refiner must have received the 
results of federal tests for parameters that are subject to downstream 
standards, i.e., the federal test results for oxygen and benzene, and 
RVP for VOC-controlled RFG, in order to prevent the introduction into 
commerce of RFG that violates a downstream standard.
    EPA believes that refiners in California can meet the requirement 
to use federal test methods for purposes of determining batch 
properties that are reported to EPA, either by using the federal test 
methods at the refinery or by using an independent laboratory to 
conduct federal tests. However, a refiner using an independent 
laboratory may not have received the test results before the RFG 
normally would be shipped. As a result, such a refiner would be 
required to purchase the equipment necessary to conduct the federal 
tests on site, which EPA estimates would cost about $150,000 for both 
the oxygen and the benzene tests. The federal RVP test equipment costs 
much less, and is already owned by most or all refiners.
    Given the fact that Governor Symington's letter states that he may 
request to opt-out of the RFG program by December 31, 1997, and the 
cost of the equipment necessary to conduct the federal oxygen and 
benzene tests, EPA believes it is appropriate to allow use of CARB test 
methods to meet the RFG pre-shipping testing requirement. However, 
refiners and importers using the CARB test methods also must test each 
RFG batch using federal test methods, and the results of the federal 
tests must be used to satisfy the batch reporting requirements of 
section 80.75(a).
    Therefore, EPA will not enforce the requirement at section 
80.65(e)(1) that refiners and importers must have received the results 
of federal oxygen and benzene tests before shipping RFG, provided the 
following conditions are met.
    (1) The refiner or importer does not have the equipment necessary 
to conduct the federal benzene and/or oxygen tests at its refinery or 
import facility.
    (2) The refiner or importer has received the results of CARB 
benzene and/or oxygen tests before shipping any RFG batch, these test 
results have been correlated with the federal test method, and these 
test results must demonstrate compliance with the federal downstream 
standards. If the results of federal benzene and/or oxygen tests show 
the RFG violated the federal downstream standards the refiner or 
importer will have violated these standards regardless of the results 
of the CARB tests. This would be true whether the federal tests are 
conducted by the refiner's independent laboratory, by another regulated 
party or by EPA.
    (3) The refiner or importer must retain the results of any tests 
conducted using CARB methods, and records demonstrating correlation 
between the CARB and federal test methods, and must supply these 
records to EPA on request. Enforcement of the RFG requirements in this 
manner will expire on January 1, 1998.
d. Adjustment of the Reid Vapor Pressure Lower Limit
    The federal RFG program includes standards for the RVP of gasoline. 
The maximum RVP of RFG is controlled primarily because of the increased 
VOC emissions that result from gasoline with higher RVP levels. A 
minimum RVP is included because of limited availability of RVP data at 
the time the simple model standards were developed. In addition, the 
minimum RVP standard addresses vehicle driveability problems, such as 
poor starting and running, that can occur when low volatility gasoline 
does not vaporize in the vehicle engine. As a result, under section 
80.42(c)(1) the minimum RVP allowed for RFG is 6.6 pounds per square 
inch (``psi''), although under section 80.45(f)(1) this minimum RVP 
standard changes to 6.4 psi beginning in 1998.
    Arizona has regulations that require that Phoenix be subject to a 
maximum summertime volatility standard of 7.0 psi. As a result, 
refiners supplying RFG for Phoenix for use during the summer will have 
to meet an RVP standard of 6.6 psi minimum (the federal RFG standard) 
and 7.0 psi maximum (the state-imposed standard). Some refiners have 
said this narrow RVP range would create gasoline production problems 
because of testing variability, but that this problem would be resolved 
if the

[[Page 30268]]

RVP minimum standard were 6.4 psi. In addition, the American Automobile 
Manufacturers Association commented, stating that it did not believe a 
summertime 6.4 RVP minimum in Phoenix would pose significant risk of 
vehicle performance problems.
    For these reasons, EPA believes it is appropriate to allow a 
minimum RVP of 6.4 psi for VOC-controlled RFG in Phoenix. As a result, 
EPA will not enforce the 6.6 psi minimum RVP standard under section 
80.42(c)(1) for VOC-controlled RFG used in Phoenix, including RFG 
produced for the Phoenix market that is used in non-RFG areas around 
Phoenix, provided the following conditions are met.
    (1) RFG must meet a minimum RVP standard of 6.4 psi during the 
period May 1 through October 31.
    (2) All other RFG must meet a minimum RVP standard of 6.6 psi.
    (3) The refiner or importer must specify in the product transfer 
documents, required in section 80.77, the VOC-controlled RFG is for use 
only in the Phoenix covered area.
2. Other Implementation Issues
    One refiner stated its support of EPA extension of the CARB 
certified laboratory tests for gasoline properties as an alternative 
for all refineries. This would include recognition of the GC-FTIR (ASTM 
5986) for Aromatics, Benzene and Oxygen content. EPA intends to issue 
proposed regulations establishing a performance based analytical test 
method approach for the measurement of the RFG parameters specified in 
section 80.46. Under this approach, quality assurance specifications 
would be developed under which the performance of alternate analytical 
test methods would be deemed acceptable for compliance. The Agency 
envisions that this approach, if adopted, would provide additional 
flexibility to the regulated industry in their choice of analytical 
test methods to be utilized for compliance under the RFG and 
conventional gasoline programs for analytical test methods that differ 
from the designated analytical test method.
    Refiners raised the issue that due to modeling effects, winter 
gasoline via simple (and complex) model gives a lower toxics reduction 
than summer gasoline. Since it is difficult to meet the toxics 
reduction on a per gallon basis with winter gasoline, supply 
flexibility is enhanced by averaging. With only part of the year being 
available for averaging, it is important to implement the rule early 
enough so that the partial year does not have more winter than summer 
months than a full calendar year would have.
    EPA proposed that if refiners produce RFG prior to June 15, 1997, 
it would not be necessary to change anything because there is a balance 
of summer and winter days. EPA proposed to refiners (that have 
registered) that any gasoline produced and federally certified as 
Federal RFG, even if produced before the effective date for Phoenix, 
will count for refiner averaging. Various refiners indicated to EPA 
that this approach satisfactorily addressed their concerns on this 
issue.32
---------------------------------------------------------------------------

    \32\ See Docket A-97-02, IV-E-6.
---------------------------------------------------------------------------

    Another implementation issue raised by refiners arose from the 
independent laboratory sampling program required in the RFG 
regulations. While this should not pose a problem in areas such as Los 
Angeles, Houston or Dallas where many such labs are located, there 
could be a lead time problem in West Texas and New Mexico where the 
refineries are more isolated and there are no labs. EPA proposed to 
refiners that enforcement discretion was not needed because isolated 
refiners could meet the independent lab requirements by mail. Various 
refiners indicated to EPA that this approach satisfactorily addressed 
their concerns on this issue.33
---------------------------------------------------------------------------

    \33\ Id.
---------------------------------------------------------------------------

    One refiner commented that a minor implementation problem results 
from the fact that in-line blender certification by EPA could require 
six months to a year. The refiner suggested that a solution would be 
for EPA to certify promptly new in-line blenders within thirty days. 
EPA believes the appropriate way to address this issue is contained in 
the RFG regulations (40 CFR 80.65(f)(4)). In addition, EPA has 
expeditiously reviewed any in-line blending petitions received to 
address any supply issues.
    Refiners commented that transitions from conventional gasoline to 
RFG always pose unique problems. One refiner stated it was willing to 
work with industry, EPA, and Arizona to ensure a successful transition. 
Another refiner commented that Phoenix may be facing two fuel 
transitions in rapid succession--a transition from conventional 
gasoline to federal RFG and a transition from federal RFG to federal 
RFG plus 7.0 RVP. The refiner urged EPA to work with Arizona to educate 
the public about these changes because public acceptance of the fuels 
changes coming to Phoenix is critical to acceptance of longer-term 
presumably more stringent, fuels solutions now being devised for the 
Phoenix area.
    EPA agrees that a public education strategy is important for fuel 
changes. EPA's Office of Mobile Sources and Region 9 have been working 
with Arizona, which has prepared a public outreach and education plan 
that includes meetings with stakeholders, television advertisements, 
hotlines, informational brochures provided directly to motorists, and 
training for technicians and service station employees. EPA has also 
provided some funding for the Phoenix federal RFG public education 
program.

IV. Environmental Impact

    Gasoline vapors and vehicle exhaust contain VOCs and NOX 
that react in the atmosphere in the presence of sunlight and heat to 
produce ozone, a major component of smog. Vehicles also release toxic 
emissions, one of which (benzene) is a known human carcinogen. Federal 
RFG contains less of the ingredients that contribute to these harmful 
forms of air pollution. Consequently, RFG reduces the exposure of the 
U.S. public overall to ozone and certain air toxics.
    The federal Phase I RFG program provides reductions in ozone-
forming VOC emissions and air toxics, and prohibits any increase in 
NOX emissions. Reductions in VOCs are environmentally 
significant because of the associated reductions in ozone formation and 
in secondary formation of particulate matter, with the associated 
improvements in human health and welfare. Exposure to ground-level 
ozone (or smog) can damage sensitive lung tissue, reduce lung function, 
cause lung inflammation, increase susceptibility to respiratory 
infection, and increase sensitivity of asthmatics to allergens (e.g., 
pollen) and other bronchoconstrictors. Symptoms from short-term 
exposure to ozone include coughing, eye and throat irritation, and 
chest pain. Animal studies suggest that long-term exposure (months to 
years) to ozone can damage lung tissue and may lead to chronic 
respiratory illness.
    Toxic emissions from motor vehicles have been estimated to account 
for roughly half of the total exposure of the urban U.S. population to 
toxic air emissions. Reductions in emissions of toxic air pollutants 
are environmentally important because they carry significant benefits 
for human health and welfare primarily by reducing the number of cancer 
cases each year. The reduction of benzene provides the majority of air 
toxics emission reductions from RFG. New monitoring data from the 1995 
EPA Air Quality Trends Report shows that in RFG areas, benzene was 
reduced by 43 percent. A number of adverse non-

[[Page 30269]]

cancer health effects, such as eye, nose, and throat irritation, have 
also been associated with exposure to elevated levels of these air 
toxics.
    The Arizona Task Force estimates that if federal RFG is required to 
be sold in Phoenix, VOC emissions will be cut by more than nine tons 
per day. In addition, all vehicles would have improved emissions and 
the area would also get reductions in toxic emissions.

V. Statutory Authority

    The Statutory authority for the action proposed today is granted to 
EPA by sections 211(c) and (k) and 301 of the Clean Air Act, as 
amended; 42 U.S.C. 7545 (c) and (k) and 7601.

VI. Regulatory Flexibility

    For the following reasons, EPA has determined that it is not 
necessary to prepare a regulatory flexibility analysis in connection 
with this rule. EPA has also determined that this rule will not have a 
significant economic impact on a substantial number of small entities. 
In promulgating the RFG and anti-dumping regulations, the Agency 
analyzed the impact of the regulations on small businesses. The Agency 
concluded that the regulations may possibly have some economic effect 
on a substantial number of small refiners, but that the regulations may 
not significantly affect other small entities, such as gasoline 
blenders, terminal operators, service stations and ethanol blenders. 
See 59 FR 7810-7811 (February 16, 1994). As stated in the preamble to 
the final RFG/anti-dumping rule, exempting small refiners from the RFG 
regulations would result in the failure of meeting CAA standards. 59 FR 
7810. However, since most small refiners are located in the mountain 
states or in California, which has its own RFG program, the vast 
majority of small refiners are unaffected by the federal RFG 
requirements (although all refiners of conventional gasoline are 
subject to the anti-dumping requirements). Moreover, all businesses, 
large and small, maintain the option to produce conventional gasoline 
to be sold in areas not obligated by the Act to receive RFG or those 
areas which have not chosen to opt into the RFG program. A complete 
analysis of the effect of the RFG/anti-dumping regulations on small 
businesses is contained in the Regulatory Flexibility Analysis which 
was prepared for the RFG and anti-dumping rulemaking, and can be found 
in the docket for that rulemaking. The docket number is: EPA Air Docket 
A-92-12.
    Today's rule will affect only those refiners, importers or blenders 
of gasoline that choose to produce or import RFG for sale in the 
Phoenix ozone nonattainment area, and gasoline distributors and retail 
stations in those areas. As discussed above, EPA determined that, 
because of their location, the vast majority of small refiners would be 
unaffected by the RFG requirements. For the same reason, most small 
refiners will be unaffected by today's action. Other small entities, 
such as gasoline distributors and retail stations located in Phoenix, 
which will become a covered area as a result of today's action, will be 
subject to the same requirements as those small entities which are 
located in current RFG covered areas. The Agency did not find the RFG 
regulations to significantly affect these entities.

VII. Public Participation

    The Agency held a public hearing on March 18, 1997 to hear comments 
on the Notice of Proposed Rulemaking (62 FR 7197) published February 
18, 1997. Comments were provided at the hearing by the Arizona 
Department of Environmental Quality, fuel oxygenate producers, and 
representatives of the oil industry, environmental organizations, and 
other businesses that participated on the Arizona Air Quality 
Strategies Task Force. In addition, EPA reviewed and considered written 
comments on the proposal submitted by the same groups. These comments 
have been presented and addressed in the preamble above (See III. 
Response to Comments). All comments received by the Agency are located 
in the EPA Air Docket A-97-02 (See ADDRESSES).

VIII. Executive Order 12866

    Under Executive Order 12866,34 the Agency must determine 
whether a regulation 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:
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    \34\ See 58 FR 51735 (October 4, 1993).
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    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments of 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 legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive Order.35
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    \35\ Id. At section 3(f) (1)--(4).
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    It has been determined that this rule is not a ``significant 
regulatory action'' under the terms of Executive Order 12866 and is 
therefore not subject to OMB review.

IX. Paperwork Reduction Act

    Today's action does not impose any new information collection 
burden. Refiners are currently subject to the information collection 
requirements for federal reformulated gasoline and conventional 
gasoline. Today's rule adds an additional ozone nonattainment area as a 
federal RFG covered area; the rule does not change the information 
collection requirements already associated with federal RFG. The Office 
of Management and Budget (OMB) has previously approved the information 
collection requirements contained in the final RFG/antidumping rule 
under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et 
seq. and has assigned OMB control number 2060-0277 (EPA ICR No. 1951).
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information.
    Copies of the ICR document(s) may be obtained from Sandy Farmer, 
Information Policy Branch; EPA; 401 M St., SW. (mail code 2136); 
Washington, DC 20460 or by calling (202) 260-2740. Include the ICR and/
or OMB number in any correspondence.

X. Unfunded Mandates

    Under section 202 of the Unfunded Mandates Reform Act of 1995 
(``UMRA''), P.L. 104-4, EPA must prepare a budgetary impact statement 
to accompany any general notice of proposed rulemaking or final rule 
that includes a Federal mandate which may result in estimated costs to 
State, local,

[[Page 30270]]

or tribal governments in the aggregate, or to the private sector, of 
$100 million or more in any one year. Under section 205, for any rule 
subject to section 202 EPA generally must select the least costly, most 
cost-effective, or least burdensome alternative that achieves the 
objectives of the rule and is consistent with statutory requirements. 
Under section 203, before establishing any regulatory requirements that 
may significantly or uniquely affect small governments, EPA must take 
steps to inform and advise small governments of the requirements and 
enable them to provide input.
    EPA has determined that today's rule does not trigger the 
requirements of UMRA. The rule does not include a Federal mandate that 
may result in estimated annual costs to State, local or tribal 
governments in the aggregate, or to the private sector, of $100 million 
or more, and it does not establish regulatory requirements that may 
significantly or uniquely affect small governments.

XI. Judicial Review

    Under section 307(b)(1) of the Clean Air Act, petitions for 
judicial review of this action to extend the federal RFG program to the 
Phoenix ozone nonattainment area must be filed in the United States 
Court of Appeals for the appropriate circuit by August 4, 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)).

XII. Submission to Congress

    Under 5 U.S.C. 801(a)(1)(A) as added 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 5 
U.S.C. 804(2).
    Environmental protection, Air pollution control, Fuel additives, 
Gasoline, and Motor vehicle pollution.

    Dated: May 28, 1997.
Carol M. Browner,
Administrator.

    40 CFR part 80 is amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

    1. The authority citation for part 80 is revised to read as 
follows:

    Authority: Secs. 114, 211, and 301(a) of the Clean Air Act, as 
amended (42 U.S.C. 7414, 7545 and 7601(a)).

    2. Section 80.70 is amended by adding paragraph (m) as follows:


Sec. 80.70  Covered areas.

* * * * *
    (m) The prohibitions of section 211(k)(5) will apply to all persons 
other than retailers and wholesale purchaser-consumers July 3, 1997. 
The prohibitions of section 211(k)(5) will apply to retailers and 
wholesale purchaser-consumers August 4, 1997. As of the effective date 
for retailers and wholesale purchaser-consumers, the Phoenix, Arizona 
ozone nonattainment area is a covered area. The geographical extent of 
the covered area listed in this paragraph shall be the nonattainment 
boundaries for the Phoenix ozone nonattainment area as specified in 40 
CFR 81.303.

[FR Doc. 97-14442 Filed 6-2-97; 8:45 am]
BILLING CODE 6560-50-P