[Federal Register Volume 66, Number 220 (Wednesday, November 14, 2001)]
[Rules and Regulations]
[Pages 57196-57219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27581]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[TX-134-5-7509; FRL-7091-5]


Approval and Promulgation of Air Quality State Implementation 
Plans (SIP); Texas: Low Emission Diesel Fuel

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The EPA is approving a State Implementation Plan (SIP) 
revision submitted by the State of Texas establishing a Low Emission 
Diesel (LED) fuel program for distribution in 110 counties in the 
eastern and central parts of Texas. Texas developed this fuel 
requirement to reduce ozone as part of the State's strategy to achieve 
the National Ambient Air Quality Standard (NAAQS) in the Houston-
Galveston Area (HGA) nonattainment area. We are approving Texas' fuel 
requirement into the SIP because we found that the fuel requirement is 
in accordance with the requirements of the Clean Air Act (the Act) as 
amended in 1990 and is necessary for the nonattainment area to achieve 
the ozone NAAQS.

DATES: This final rule is effective on December 14, 2001.

ADDRESSES: Copies of the documents relevant to this action are 
available for public inspection during normal business hours at the 
following locations. Persons interested in examining these documents 
should make an appointment with the appropriate office at least 24 
hours before the visiting day.
    Environmental Protection Agency, Region 6, Air Planning Section 
(6PD-L), 1445 Ross Avenue, Suite 700, Dallas, Texas 75202-2733. Texas 
Natural Resource Conservation Commission, 12100 Park 35 Circle, Austin, 
Texas 78753.

FOR FURTHER INFORMATION CONTACT: Ms. Sandra G. Rennie, Air Planning 
Section (6PD-L), EPA Region 6, 1445 Ross Avenue, Dallas, Texas 75202-
2733, telephone (214) 665-7367.

SUPPLEMENTARY INFORMATION: Throughout this document ``we,'' ``us,'' and 
``our'' means EPA.

I. Table of Contents
II. What action is EPA taking today?
III. What are the Clean Air Act Requirements?
IV. Why is EPA taking this action?
V. What does the State's LED Regulation include?
VI. What did the State submit?
VII. What comments did EPA receive in response to the July 12, 2001, 
proposed rules?
A. Issue 1: Cost and Feasibility
    1.1  State LED requirements will lead to significantly higher 
production costs
    1.2  State LED requirements could cause supply disruptions
    1.3  State LED requirements could cause price spikes
    1.4  Retail price increases may not be reasonable
    1.5  State LED requirements will injure small businesses
    1.6  State LED requirements will injure the trucking industry
    1.7  State LED requirements will injure the railroad industry
    1.8  State LED requirements will impair future controls on 
railroads
    1.9  State LED requirements will impair implementation of 
federal low-sulfur diesel
B. Issue 2: Benefits
    2.1  The environmental benefit of the LED rule is uncertain or 
overstated because the analysis of the NOX reduction 
benefit is flawed.
    2.2  The environmental benefit of the LED rule is not properly 
accounted for or is insignificant because its reliance on low sulfur 
levels will not have impact until newer engines enter the fleet 
after 2007, or because low sulfur levels will not have impact on 
locomotives since they do not use engines which benefit from low 
sulfur fuel.
    2.3  The environmental benefit of using LED fuel is overstated 
because Texas has failed to account for consumers who will re-fuel 
outside the covered area.
    2.4  The environmental benefit of the LED rule is uncertain or 
overstated because Texas has failed to determine how alternative 
formulations will be tested to determine if they achieve equivalent 
emission reductions.
    2.5  A process is needed to protect consumer interests during 
the development of alternative emission reduction plans.
C. Issue 3: Federal Preemption
    3.1  General preemption comments
    3.2  Explanation of why other control measures are unreasonable 
or impracticable
    3.3  Explanation of why other control measures are unreasonable 
or impracticable-premature to assess this now when Texas must still 
identify future control measures to fill the emissions shortfall, 
and the LED rule will not be implemented until 2005.
    3.4  Explanation of why other control measures are unreasonable 
or impracticable-measures for which there is no explanation of 
justification
    3.5  Explanation of why other control measures are unreasonable 
or impracticable-measures for which there is inadequate explanation 
of justification
    3.6  Explanation of why other control measures are unreasonable 
or impracticable-measures which Texas and EPA failed to consider at 
all, or which Texas has recently adopted and has failed to account 
for in the SIP
    3.7  Failure to show necessity for the LED fuel measure in 
attainment areas
    3.8  Failure to meet CAA requirement that the state fuel measure 
is reasonable and practicable, due to the LED fuel measure's 
consumer cost volatility
    3.9  Failure to show necessity because the environmental 
benefits of the LED rule are overstated or inaccurately quantified
    3.10  Preemption under the Supremacy Clause of the U.S. 
Constitution
D. Issue 4: Potential Backsliding With Proposed SIP Changes

[[Page 57197]]

E. Issue 5: Potential Changes at Mid-Course Correction Jeopardize 
Need for Certainty
F. Issue 6: Need for Energy Analysis Under E.O. Issued 5/22/01
G. Issue 7: Need for Regulatory Impact Analysis Under Texas Law
H. Issue 8: Need for Regulatory Flexibility Analysis
I. Issue 9: EPA'S Action is Arbitrary and Capricious
VIII. EPA's Rulemaking Action
IX. Administrative Requirements

II. What Action Is EPA Taking Today?

    We are granting final approval into the Texas SIP of Texas' LED 
fuel requirement for distribution in 110 counties in the eastern and 
central parts of Texas. The State's LED program will apply in the 
designated nonattainment counties in the Houston-Galveston (HGA), 
Dallas-Fort Worth (DFW), and Beaumont-Port Arthur (BPA) ozone 
nonattainment areas, and the attainment counties listed in this action.

III. What Are the Clean Air Act Requirements?

    Section 172 of the Act provides the general requirements for 
nonattainment plans. Section 172(c)(6) and section 110 require SIPs to 
include enforceable emission limitations, and such other control 
measures, means or techniques as well as schedules and timetables for 
compliance, as may be necessary to provide for attainment by the 
applicable attainment date. Today's SIP revision involves approval of 
one of a collection of controls adopted by the State to achieve the 
ozone standard in the HGA nonattainment area as required under section 
172. EPA approval of this SIP revision is governed by section 110 of 
the Act.
    In addition to these general requirements, section 211(c)(4)(C) 
provides that a state fuel control, otherwise preempted under section 
211(c)(4)(A), may be approved into a SIP if EPA finds the fuel control 
is ``necessary'' to achieve a NAAQS. Today's approval of the State's 
fuel control also meets the requirements of section 211(c)(4)(C) 
because we have found that the control is ``necessary'' to achieve the 
NAAQS in the HGA ozone nonattainment area.

IV. Why Is EPA Taking This Action?

    We are taking this action because the State submitted an adequate 
demonstration to show the necessity for this fuel requirement to 
achieve the NAAQS in the HGA ozone nonattainment areas.

V. What Does the State's LED Regulation Include?

    The State's LED regulation requires that diesel fuel sold within 
the 110 counties listed in the regulations have a maximum sulfur 
content of 500 ppm, have no more than 10 percent aromatic hydrocarbons 
by volume, and have a cetane number of 48 or greater. The regulations 
apply to diesel fuel sold for highway and nonroad use beginning April 
1, 2005.
    The nonattainment counties affected are Collin, Denton, Dallas, 
Tarrant, Harris, Galveston, Brazoria, Montgomery, Chambers, Liberty, 
Waller, Fort Bend, Jefferson, Hardin, and Orange.
    The 95 central and eastern Texas counties affected by these rules 
are Anderson, Angelina, Aransas, Atascosa, Austin, Bastrop, Bee, Bell, 
Bexar, Bosque, Bowie, Brazos, Burleson, Caldwell, Calhoun, Camp, Cass, 
Cherokee, Colorado, Comal, Cooke, Coryell, De Witt, Delta, Ellis, 
Falls, Fannin, Fayette, Franklin, Freestone, Goliad, Gonzales, Grayson, 
Gregg, Grimes, Guadalupe, Harrison, Hays, Henderson, Hill, Hood, 
Hopkins, Houston, Hunt, Jackson, Jasper, Johnson, Karnes, Kaufman, 
Lamar, Lavaca, Lee, Leon, Limestone, Live Oak, Madison, Marion, 
Matagorda, McLennan, Milam, Morris, Nacogdoches, Navarro, Newton, 
Nueces, Panola, Parker, Polk, Rains, Red River, Refugio, Robertson, 
Rockwall, Rusk, Sabine, San Jacinto, San Patricio, San Augustine, 
Shelby, Smith, Somervell, Titus, Travis, Trinity, Tyler, Upshur, Van 
Zandt, Victoria, Walker, Washington, Wharton, Williamson, Wilson, Wise, 
and Wood Counties.
    Beginning June 1, 2006, the sulfur content requirement will change 
to 15 ppm in all the above-named counties.

VI. What Did the State Submit?

    The State submitted SIP revisions on December 20, 2000 for 30 Texas 
Administrative Code (TAC) 114 on December 6, 2000. The submittal 
contained data and analyses to support a finding under section 
211(c)(4)(C) that the State's LED fuel requirement is necessary for the 
HGA nonattainment area to achieve the ozone NAAQS. For further 
discussion of the submittals, see the proposed approval, 66 FR 36542 
(July 12, 2001) and accompanying Technical Support Document.
    The State also requested parallel processing of 30 TAC 114 rules 
that were proposed on June 15, 2001. The proposed rules were adopted 
without changes on September 26, 2001, and submitted under a letter 
from the Governor dated October 4, 2001.

VII. What Comments Did EPA Receive in Response to the July 12, 
2001, Proposed Rules?

    Relevant comments on the proposed rulemaking to approve the Texas 
Low Emission Diesel (LED) rule into the Houston-Galveston (HGA) Ozone 
Non-Attainment area were received from the Association of American 
Railroads (AAR), the American Trucking Association (ATA), Baker and 
Botts on behalf of the Business Coalition for Clean Air (BCCA), 
Environmental Defense (ED), National Petrochemical & Refiners 
Association (NPRA), and Texas Motor Transport Association (TMTA). 
Reliant Energy (REI) also referenced this rulemaking in a comment 
letter on other related rulemaking actions, but made no substantive 
comments about the LED fuel program except to endorse comments made by 
BCCA; therefore, all comments mentioned below as having been made by 
BCCA are also made by REI. Responses to the comments follow.

Issue 1: Cost and Feasibility of the LED Fuel Rule and Program

    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. 
Federal inquiry into the economic reasonableness of state action is not 
allowed under the Clean Air Act (see, Union Electric Co., v. EPA, 427 
U.S. 246 (1976); 42 U.S.C. 7410(a)(2)) other than for purposes of 
evaluating the reasonableness and availability of alternatives for 
purposes of a waiver of Federal preemption. Even though EPA's role is 
not to second guess the state's choices in this regard, EPA has done 
its own review of specific comments noted below on the potential cost 
and feasibility of the LED fuel rule and program.
1.1  State LED requirements will lead to significantly higher 
production costs
    BCCA asserts that the production cost of LED will be greater than 
Texas has estimated. In particular, the first phase will cost 9 cents 
per gallon to produce, or about twice what Texas estimated. The second 
phase will be comparable to the cost of producing ultra-low sulfur 
diesel (ULSD) fuel for the federal rule, or about 10 cents per gallon. 
Overall the combined cost for producing LED fuel is estimated to be 
over two times higher than the Texas estimate of 8 cents per gallon.
    Response: EPA believes that the State's estimates of increased 
production costs are generally consistent with that which has been 
observed for wholesale prices for diesel fuel in California. (Using 
California as

[[Page 57198]]

an indicator is appropriate because the California diesel requirements 
are very similar to those in the LED rule). According to a California 
Air Resources Board (CARB) publication entitled California Diesel Fuel 
Factsheet (1997), a gallon of California diesel costs one to four cents 
per gallon more to produce than diesel fuel in other states. More 
recently, CARB analyzed wholesale diesel prices in California and 
neighboring States (Arizona, Oregon and Nevada) during the period 1997 
to 2001 and found that California wholesale diesel prices ranged from 
1.3 cents per gallon lower to 6.0 cents per gallon higher (averaged 0.8 
to 4.5 cents/gallon more) than diesel in Arizona, Oregon and Nevada 
(September 13, 2001 letter from CARB to ``World Fuels Today'', a copy 
of which is in the docket for this rulemaking). With respect to the 
second phase of LED fuel, i.e., the 15 ppm sulfur requirement, we note 
that refiners who make highway diesel fuel will be subject to ULSD 
requirements at the same level under the federal rule in the same 
timeframe, so the production cost for phase 2 LED would be comparable 
to ULSD. According to data from Energy Information Administration 
(EIA),\1\ ULSD production cost for PADDIII (which includes Texas, and 
is defined below in response to Issue 1.3) range from 4.5 to 7.0 cents 
per gallon higher than current diesel costs, so the Texas estimate of 
four cents per gallon for phase 2 LED is consistent with this range.
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    \1\ ``The Transition to Ultra-Low Sulfur Diesel Fuel: Effects on 
Prices and Supply,'' May, 2001, EIA, Chapter 7, page 68. It is 
posted at http://www.eia.doe.gov/oiaf/servicerpt/ulsd/pdf/ulsd.pdf.
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1.2  State LED requirements could cause supply disruptions
    BCCA and NPRA argue that there is a higher market risk of the LED 
rules; specifically, it will reduce regional diesel fuel supplies, 
reduce incentives for refineries to invest in low sulfur diesel 
facilities, and limit refiner's ability to build new facilities. NPRA 
argues that any requirement for a unique diesel fuel will affect supply 
balance.
    Response: As discussed in detail in the response to issue 1.6, we 
estimate that approximately 60 percent of diesel supplied to Texas is 
in the 110 county area affected by the LED rule. At a minimum, 
therefore, we expect that LED would make up 60 percent of the diesel 
used in Texas. The Texas comptroller's office reports that 3.1 billion 
gallons of diesel were sold in Texas during the fiscal year ending 
August 30, 2001.\2\ Thus 1.8 billion gallons of LED would be required 
to replace the existing grades being sold. Diesel consumption in Texas 
is approximately 8 percent of the U.S. total consumption (see issue 
1.6).
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    \2\ Personal communication between EPA and Texas comptroller's 
office; October 1, 2001.
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    Approximately 18 to 20 percent of U.S. refineries producing diesel 
are located in Texas. This is comparable to California in which 
approximately 15 percent of U.S. refineries producing diesel are 
located in California. Because California refineries for the most part 
supply the special diesel required in that state, the situation in 
Texas is similar. In addition, considering refineries located in the 
neighboring States of Louisiana, Oklahoma, Arkansas, and New Mexico, 
the number of refineries in or in proximity to Texas rises to 34 to 38 
percent of the U.S. total.
    Based on this information, EPA concludes that refineries in Texas 
and neighboring states currently supplying the covered area with diesel 
now are highly likely to supply the LED fuel. EPA believes because of 
the size of the covered area and its proximity to widespread fuel 
production and distribution systems, the area will be less prone to 
many of the problems associated with small isolated areas that have 
unique fuel requirements.
1.3  State LED requirements could cause price spikes
    ATA asserts that boutique fuels are contrary to sound public policy 
objectives because departures from the national diesel fuel standard 
will disrupt interstate and local trucking industries. The parties 
assert this is mainly because Texas LED requirements would create a 
boutique fuel and lead to unpredictable price spikes.
    Response: The 110 county area in Texas in which the LED fuel will 
be consumed is very large and in close proximity to widespread fuel 
production and distribution systems. Thus, the fuel will be less prone 
to many of the problems associated with unique fuel requirements in 
small isolated areas. (See 1.2 above). We conclude that the frequency 
of price spikes in Texas would not be expected to be greater than the 
frequency of spikes in other areas. Therefore we examined diesel prices 
in Petroleum Administration for Defense Districts (PADD) PADD III and 
PADD IV \3\ and analyzed those prices relative to prices of diesel in 
California--a state which currently has a large diesel program. Retail 
diesel prices were obtained for the period July 1995 through September 
2001 from the Energy Information Administration (http://www.eia.doe.gov/oil_gas/petroleum/info_glance/distillate.html). The 
price of diesel in California was positively correlated to the prices 
of diesel in PADD III and PADD IV (correlation coefficients of 0.93 and 
0.94, respectively), indicating the frequency of spikes was not unique 
to--nor were spikes more frequent in--California.
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    \3\ A PADD is a designation used to delineate regions of 
petroleum production. Texas is in PADD III (Gulf Coast) which also 
comprises New Mexico, Louisiana, Arkansas, Mississippi and Alabama. 
PADD IV comprises the States of Montana, Idaho, Wyoming, Utah, and 
Colorado.
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1.4  Retail price increases may not be reasonable
    NPRA argues that the potential cost volatility of Texas low 
emission diesel does not meet the CAA requirement that the state fuel 
regulation be both reasonable and practicable. The TNRCC has estimated 
the production cost of LED to be four cents per gallon more than 
current specifications. Parties suggest that Energy Information 
Administration (EIA) data indicate the retail price of diesel in 
California is much more than four cents per gallon higher than the 
price of diesel in PADD III (11 to 41 cents per gallon).
    Response: Comparing State of Texas estimates for production cost to 
California retail prices and PADD III retail prices is misleading 
because retail prices do not reflect the production cost alone. Other 
factors in retail pricing include differences in supply and demand, 
dealer mark up, and proximity of supply. The State of Texas has 
determined that 4 cents per gallon (production costs) for Phase I is an 
acceptable difference since LED provides an environmental benefit. As 
discussed in issue 1.1, California recently validated similar 
production cost estimates for their analogous diesel fuel via a 
comparison of wholesale prices in California to prices in neighboring 
states. Based on this, we believe that State of Texas' estimate is 
reasonably accurate. See also our response to issue 3.8 for discussion 
of NPRA's comment about the CAA requirement.
1.5  State LED requirements will injure small businesses
    BCCA asserts that the LED rule will have an adverse effect on small 
businesses and disagrees with Texas' characterization that the impact 
will be small. Commenters argue that retailers located in the covered 
area near the boundary areas will suffer because facilities outside the 
area can sell non-LED fuel which would be lower in price.
    Response: The commenter does not quantify the extent of the impact, 
nor do

[[Page 57199]]

they provide any evidence that this will happen. Specifically, we do 
not know with certainty what the price differential between LED and 
non-LED fuel will be. The commenter also does not provide the 
relationship between price differential and outside-the-boundary 
purchases. Presumably at lower differences in price, impacts will be 
small to negligible. Finally, the commenter does not provide the 
percentage of retail facilities located near the boundary of the 
covered area that are owned by small businesses as opposed to larger 
companies.
1.6  State LED requirements will injure the trucking industry
    ATA and TMTA argue that the rule represents a departure from the 
national diesel fuel standard and that there will accordingly be a 
sudden price increase or spike in diesel fuel in Texas. They base the 
argument on price behavior of ``boutique fuels'' thus asserting that 
the LED will be a boutique fuel and have similar impacts. They state 
that the price increases will be disruptive and will force many small 
truckers into bankruptcy. They argue that an RIA to assess the economic 
impacts of the rule has not been prepared as required under Texas law.
    Response: While there will be some increase in price due to 
increased production costs, we do not believe that they will be 
excessive as discussed previously in our responses to issues 1.1 
through 1.4. We also believe that characterizing the LED as a fuel that 
will cause problems in distribution and supply because of the nature of 
its specifications is misleading. Unique fuel requirements, 
particularly in isolated or small markets, are those that have caused 
the greatest concern. This would not be the case with LED.
    The LED will be required to be sold in a 110 county area. The total 
lane-miles in the covered area represents approximately 60 percent of 
the lane-miles for the entire state of Texas.\4\ Diesel use is 
generally directly proportional to lane miles; thus, the 60 percent 
figure suggests that there will be a large market for the LED; i.e., 
approximately 60 percent of the diesel sold in Texas will be LED. The 
amount of diesel fuel currently used in Texas makes up approximately 8 
percent of the total national demand.\5\ Given the large market for 
diesel that Texas currently represents--and that the LED fuel will also 
represent--it is highly likely that the refiners that currently make 
and supply diesel for Texas will make the LED. The large market for LED 
provides some degree of assurance that LED will not function as a 
specialty fuel that only a few refiners will make. When that happens, 
there are difficulties if the refinery that supplies the fuel is unable 
to operate which cause prices to increase or spike. Because of the 
large source of supply of LED, the LED rule will not reduce the 
fungibility of diesel supply; thus, we do not envision the same issues 
of supply disruptions that sometimes occur with other types of unique 
fuels.
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    \4\ ``Lane miles'' are the product of miles and the number of 
lanes in a given area. Thus, a one-mile segment of six lane highway 
is equivalent to 6 lane miles. Lacking diesel fuel sales or use on a 
county-wide level, we felt that lane miles would serve as a 
relatively accurate surrogate for diesel use. We had considered 
using vehicle miles traveled (VMT) as a surrogate. VMT in the 110 
county area makes up 95percent of total VMT in Texas, according to 
Texas Department of Transportation (TXDOT) statistics. The TXDOT 
statistics, however, include both diesel and gasoline vehicles on 
given lengths of road. Because ``lane miles'' do not include vehicle 
use, they serve as a better indicator.
    \5\ The figure of 8 percent was derived from EIA: ``Fuel Oil and 
Kerosene Sales 2000'' information compiled by the Federal Highway 
Administration, using the annual VMT for trucks in Texas and 
nationwide.
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    The issue of the RIA is addressed under Issue 7.
1.7  State LED requirements will injure the railroad industry
    AAR states that the costs of LED will be significant to the 
railroad industry even if only 4 cents/gallon as TNRCC estimates. This 
is significant to the railroad industry which purchases more than 4.1 
billion gallons of diesel fuel annually.
    Response: The commenter's argument about cost being a significant 
factor because of the large volume of diesel fuel purchased by the 
railroads is based on national diesel consumption. The LED will be sold 
only in a 110 county area in Texas. Based on year 2000 data from the 
Energy Information Agency's (EIA) ``Fuel Oil and Kerosene Sales 2000'' 
report, the amount of diesel used by railroads on a national basis is 
3,290,507,000 gallons of which Texas railroads consume 504,360,000 
gallons or approximately 15 percent. While there will be an increase in 
cost to the railroads, we estimate such increase to be 15 percent or 
less of their projected cost.
1.8  State LED requirements will impair future controls on railroads
    AAR commented that implementing the LED rule for locomotives would 
significantly increase costs without offsetting environmental benefits. 
They cite a document entitled ``Statement of Principles: Houston/
Galveston Ozone Nonattainment Area Railroad Program'' signed by USEPA, 
TNRCC, Burlington Northern & Santa Fe Railway Company, and Union 
Pacific Railroad Company. They claim they are committed to implementing 
measures to achieve greater emission reductions than those required 
under EPA's locomotive emissions regulations.
    Response: We have addressed cost in our responses to Issues 1.1 
through 1.6. We do not believe that the increase in cost of fuel will 
be prohibitive, nor do we believe that they will adversely affect 
business.
    We agree with the commenter that locomotives are more fuel 
efficient than trucks, and so would have lower emissions on a ton/mile 
basis. Fuel efficiency is only one means to reduce emissions; however, 
having greater fuel efficiency does not mean that there is no room for 
improvement. If emissions are lower using LED, then locomotives would 
stand to have even greater emission reductions.
    We also agree that approving the LED program in Texas does limit 
the measures available for the companies to meet the reduction targets 
agreed upon for the Statement of Principles in that this type of fuel 
will now be required. Sufficient alternatives still exist, however, 
that allow the companies to meet their emission reduction goals
1.9  State LED requirements will impair implementation of Federal low-
sulfur diesel
    ATA and BCCA commented that boutique fuels are contrary to sound 
public policy objectives because boutique fuels will jeopardize EPA's 
efforts to introduce ULSD in 2006. The ULSD requirement, in conjunction 
with tighter emission standards, will result in much greater emission 
reductions than the LED rule, especially when considering the negative 
impact of the LED rule on the refining industry's effort to comply with 
the ULSD rule. The refining industry's need to make substantial capital 
investments to produce ULSD fuel will be diverted to comply with the 
LED rule. BCCA supports efforts to align the Texas rule with EPA's 
national rulemaking.
    BCCA commented that the existing distribution infrastructure for 
diesel fuel is not adequate to supply both LED fuel within Texas and 
EPA-specified fuels throughout the rest of the country. (Focused 
especially on low sulfur phase of LED rule.)
    NPRA commented that the sulfur standard of LED program which takes 
effect in 2006 (15 ppm) is inconsistent with EPA's ultra low sulfur 
diesel (ULSD) program, also taking effect in 2006 but at a different 
date (9/1/06 for

[[Page 57200]]

EPA, compared to 6/1/06 for LED) and with transitional flexibilities 
that permit the sale of some 500 ppm sulfur cap highway diesel fuel 
until the end of May, 2010 (which LED does not have.) Additionally, the 
EPA program includes a credit trading feature which would exclude LED 
fuel, thus resulting in the unintended consequence of creating an 
obstacle to the accomplishment of the transitional objectives of EPA's 
program. This could jeopardize the supplies of ULSD, which could in 
turn cause increased product price volatility, price spikes, and 
product outages. (Cites EIA report, The Transition to Ultra-Low Sulfur 
Diesel Fuel: Effects on Prices and Supply, May, 2001, especially 
chapter 5.)
    Response: The commenter points out that the low sulfur standard of 
the LED program takes effect at a different date than the ULSD rule. 
There is only a three month difference, however. We do not believe this 
poses logistical difficulties. Also, the low sulfur requirement of the 
LED rule was established to harmonize with EPA's ULSD rule so that 
there would not be a significant difference in sulfur requirements.
    The commenter also argues that producing LED will be difficult 
because of the efforts needed to meet EPA's ULSD rule in that this rule 
excludes LED fuel from the credit trading provision. The ULSD rule 
contains a provision that if a state requires more than 80 percent of 
its fuel to meet a sulfur limit of 15 ppm or lower, then it would be 
excluded from the credit transfer area, a region that generally follows 
the boundaries of the Petroleum Administration for Defense Districts 
(PADDs). Since the major concern in the ULSD rule was ensuring 
availability of 15 ppm fuel nationwide, credit transfers were limited 
to these areas.
    Under this provision Texas would in effect become its own PADD, 
separate from PADD III. Because much of the refining capacity in PADD 
III is in Texas, the commenter is correct that the LED rule will limit 
the flexibility offered under the ULSD rule for refiners in Texas. The 
LED rule, however, will also result in more production of 15 ppm fuel 
in PADD III, and thus more availability of 15 ppm fuel. The market for 
LED fuel is certain, allowing refiners a reasonably accurate estimate 
for payback of the investments required to make this fuel. Finally, a 
state that obtains a waiver of preemption for fuels under section 
211(c)(4)(C) of the Clean Air Act, (which we are granting to the State 
of Texas for the LED rule, as it applies to highway diesel fuel,) can 
adopt fuel controls that are non-identical to and that may be more 
stringent than federal requirements.
    As indicated in the response to issue 1.6, because of the large 
area in which LED area would be required, we do not believe that supply 
and fungibility problems that are typical to fuels with unique 
specifications in small isolated areas will affect LED. The LED fuel 
will replace the diesel fuel currently used in the 110 county area. 
Since this area represents an estimated 60 percent of the diesel use in 
Texas, the area represents a dedicated market that refiners are 
currently servicing, and in close proximity to numerous refineries as 
noted in our response to issue 1.2. Those refiners who choose to make 
the LED fuel will have complied with the ULSD sulfur limits which would 
therefore not jeopardize EPA's efforts to introduce ULSD in 2006.

Issue 2: Benefits of the LED Rule and Program

2.1  The environmental benefit of the LED rule is uncertain or 
overstated because the analysis of the NOX reduction benefit 
is flawed
    ATA commented that Texas failed to establish baseline fuel 
parameters representative of local parameters, instead relying on 
national averages. Furthermore, Texas failed to establish whether the 
single prototype engine used by Heavy-Duty Engine Working Group (HDEWG) 
is representative of the 1990 and later model year engines that will be 
operating in the nonattainment area in 2005.
    BCCA commented that Texas has overestimated the NOX 
reduction benefit of LED fuel because EPA stated in the preamble to 
ULSD NPRM that the emission effects of regulating aspects of diesel 
fuel other than sulfur are ``rather small, and points out the limited 
test data on which ERG relied in making its 7/26/00 estimate . ATA 
agrees stating that Texas' estimate for older engines is suspect 
because it relied on CARB data, which is ``thin,'' and Texas mistakenly 
applied the wrong estimate from CARB. ATA further states that CARB 
claims only a 5.6 percent reduction for its diesel fuel rather than 7 
percent as Texas uses for pre-1990 highway engines. (Cites CARB's EMFAC 
2000 TSD, Section 10.9, 5/15/00, and say CARB mistakenly bases its 
estimate on 10 percent aromatic fuel. This is not used in California 
but ``equivalent'' formulas are used if they demonstrate equivalency 
using a 1991 Detroit Diesel engine. ATA says the appropriateness of 
using this engine to demonstrate fuel equivalency is the ``subject of 
great debate.'' They note that in 2005 the pre-1990 trucks will be 15 
years old and will comprise only a very small percentage of the 
trucking fleet.)
    ATA states that the emissions impact of altering gasoline fuel 
components is well understood, with several peer-reviewed studies, but 
the same scientific rigor has not been applied to estimating the 
emissions impact of altering diesel fuel components. (Cites Sierra 
Research, Inc. report, 3/20/98, and MathPro, Inc. and Energy & 
Environmental Analysis, Inc. report, 2/16/98.)
    Furthermore, ATA states EPA has itself questioned the benefits of 
altering diesel fuel components, and has not yet completed its 
analysis. ATA said EPA will host a public workshop (which was held on 
8/28/01) to ``receive comment on its preliminary evaluation of the 
emission reductions from LED fuel.'' ATA's preliminary analysis of 
EPA's model reveals significant statistical errors, rendering its 
predictive capabilities inadequate. It is impossible to make the 
Section 211 necessity determination without first accurately 
quantifying the emissions impact of using this fuel.
    ATA states that there is bipartisan commitment to study the impacts 
of boutique fuels, in the form of a bill recently passed by the U.S. 
House of Representatives to require a joint DOE/EPA report by 12/31/01. 
Making a decision on the LED fuel before this report is produced is 
unwise and unnecessary.
    BCCA encourages Texas to adopt the EPA diesel formulation without 
cetane and aromatics controls. AAR states that although TNRCC says 
there are additional emission reductions when low sulfur fuel is 
coupled with low aromatic content fuel, regardless of engine 
technology, the cost to achieve any such additional reductions, when 
compared to the emissions benefit, would be enormous. The direct effect 
on emissions of LED would be small. (Cites EPA's discussion of effects 
of fuel parameters on emissions, 64 FR 26142, 26147, 5/13/99.)
    Response: In the preamble to our recent proposed rulemaking on the 
emission standards for heavy duty engines and the sulfur level of 
highway diesel fuel, EPA considered whether parameters of highway 
diesel fuel other than sulfur should be regulated. EPA's focus in that 
proposal was to enable diesel engines to meet much more stringent 
emission standards which EPA was also proposing. We believed that 
diesel engines could meet those standards with the use of advanced 
exhaust emission control systems, but the performance of these systems 
is dramatically reduced by sulfur. Other

[[Page 57201]]

fuel properties such as cetane levels and aromatics content did not 
appear to have the same impact as sulfur on the advanced emission 
control systems, although they could achieve immediate emission 
reductions by affecting the combustion process directly rather than by 
enabling the advanced emission control system. We noted, however, that 
those emission reductions effects are ``rather small,'' especially in 
comparison to the emission benefits projected to occur as a result of 
the more stringent emission standards and sulfur levels in highway 
diesel fuel that EPA was then proposing, and subsequently adopted. (See 
preamble to proposed rule, 65 FR 35430, 6/2/00, at 35519-35520. For 
final rule, described in the Issue 1 discussion as the ``ULSD rule'', 
see 66 FR 5002, 1/18/01.)
    Although Texas, just as other states, will see the NOX 
reduction benefits of this federal rule when the engine emission 
standards and the fuel sulfur controls are implemented, beginning in 
2006-2007, it will not see significant NOX reductions by 
2007, the attainment date for the Houston area to achieve the 1-hour 
ozone standard. The full benefit of the federal rule will not be seen 
until significant fleet turnover occurs, when the newer engines meeting 
the more stringent emission standards are a bigger portion of the 
highway diesel fleet. Texas chose to impose restrictions on the cetane 
and aromatics levels of diesel fuel for both highway vehicles and 
nonroad equipment, realizing that the NOX emission 
reductions would be immediate, even if the emission reductions would 
not be as large as those which will result from the Federal rule.
    When we learned that Texas was claiming NOX reductions 
from the cetane and aromatics controls in its low emission diesel rule, 
we were concerned about the size of the estimated benefits and the 
analysis upon which the estimate was based. In November, 2000, we 
initiated a project to analyze existing test data, rather than conduct 
new emissions testing, and developed a regression model approach to 
analyze the results and to develop a quantitative relationship between 
fuel parameters and emissions changes. In July, 2001, we made public a 
Staff Discussion Document \6\ with the preliminary results of this 
analysis.
---------------------------------------------------------------------------

    \6\ ``Strategies and Issues in Correlating Diesel Fuel 
Properties with Emissions,'' Staff Discussion Document, EPA report 
number EPA420-P-01-001, July 2001. This document is in the docket 
for this rulemaking and is posted on EPA website at: 
http://www.epa.gov/otaq/models/analysis.htm
---------------------------------------------------------------------------

    As part of our process in conducting this analysis, we had notified 
stakeholders of our project and asked for relevant data. As we prepared 
our preliminary conclusions, we met with numerous stakeholders to 
review these conclusions, beginning in May, 2001, and in response to 
requests from stakeholders, held a public workshop on August 28, 2001, 
to hear comments on the Staff Discussion Document. Although the comment 
period on the Staff Discussion Document remains open to October 30, 
2001, we have analyzed the comments made at the workshop which have the 
most direct bearing on our NOX benefit estimates for the LED 
rule, and believe it is appropriate to use the estimates from EPA's 
draft NOX model in lieu of the estimates Texas originally 
claimed. More detail on EPA's review of these comments and our use of 
the draft NOX model in estimating the NOX 
benefits of the LED rule are in the memorandum dated September 27, 
2001, from Robert Larson, Acting Director, Transportation and Regional 
Programs Division, EPA Office of Transportation and Air Quality, to 
Carl Edlund, Director, Multimedia Planning and Permitting Division, EPA 
Region VI. (See memo in docket for this rulemaking.)
    As noted in Section I of the Staff Discussion Document, Texas 
claimed that use of LED fuel in the attainment year (2007) reduced 
NOX emissions by 7 percent for older highway diesel engines 
(pre-1990 model year) and for nonroad engines, and by 5.7 percent for 
newer highway diesel engines (1990 and later model years). EPA's 
estimate is similar, but is given with respect to different engine 
categories, i.e., we estimate that the use of LED fuel in 2007 will 
reduce NOX emissions by 6.2 percent for highway or large 
nonroad diesel engines without EGR technology, and by 4.8 percent for 
highway or large nonroad diesel engines with EGR technology.
    For this estimate, we are defining ``large'' nonroad engines as 
those engines with greater than 50 horsepower. ``EGR'' technology is 
``exhaust gas recirculation'' technology, which we expect will play a 
significant role in new engines designed to meet EPA's 2004 heavy duty 
highway engine emission standards. We expect many of the new engines 
with EGR technology will be produced as early as 2002. Many nonroad 
diesel engines may also be produced with EGR technology in order to 
meet EPA's Tier 3 standards beginning with model year 2005. For small 
nonroad engines (less than 50 horsepower) which constitute a very small 
fraction of the nonroad engine emissions inventory, we have determined 
that we cannot assign a NOX benefit on the basis of data 
considered by EPA.
    This estimate is based on comparing the LED-like fuel to a baseline 
fuel with the same diesel fuel properties as those reported by the 
Alliance of Automobile Manufacturers (AAM) for nationwide average 
diesel fuel properties (excluding California). AAM data is based on 
surveys of fuel properties in various cities around the country, 
including San Antonio, but no other cities in Texas; we could not find 
any other source of data for Houston. The average fuel properties for 
San Antonio are very similar to the nationwide average fuel properties, 
but since we could not be certain that the San Antonio average fuel was 
a better representation of Houston fuel than the nationwide average, 
given the small differences between the two, we used the nationwide 
average fuel properties to represent the baseline fuel. (See issue 6 in 
the September 27, 2001 memo from Larson to Edlund.)
    As to the use of estimates for newer engines based on results of 
the Heavy Duty Engine Workgroup (HDEWG), the use of California data for 
older engines, and the concern over a limited database, we refer to the 
discussion in both the Staff Discussion Document and the September 27, 
2001, memo from Larson to Edlund (particularly issues 3, 4, and 5) 
regarding the size of the database, the names and dates of the 35 
studies which EPA used in building its draft NOX model, and 
the appropriateness of making estimates for newer model engines with 
more limited data points. One of EPA's concerns about Texas's original 
estimate was the reliance on California data, most of which was 
collected under the VE-1 program administered by the Coordinating 
Research Council and used by California in preparation for its October, 
1988, report on the projected benefit of its proposed diesel fuel 
regulation, which was eventually adopted and implemented in 1993. We 
knew that many more studies relevant to this subject had been completed 
since 1988, and we have been able to use those studies in our project. 
With respect to the estimate in section 10.9 of California's EMFAC 2000 
Technical Support Document of 5.6 percent for NOX reductions 
for pre-1991 engines (as well as its estimate of 12.4 percent for 
NOX reductions for 1991 and later engines) these are not the 
estimates EPA is using and approving today.
    The discussion of issue 4 in the September 27, 2001, memo addresses 
the appropriateness of using data from the HDEWG program for newer 
engines. Although ATA expressed concern that

[[Page 57202]]

the estimate for 1990 and later model engines was based on the single 
prototype engine used by HDEWG, we note that EPA's estimate is based on 
data from more this single post-1990 engine, although we acknowledge 
that 1997 and newer model engines are not well represented in the 
database. In discussing Issue 4, we explain the reasons we think this 
does not affect the validity of the estimate, and we incorporate that 
discussion by reference here.
    ATA commented that, although the emissions impact of altering 
gasoline fuel components is well understood, with several peer-reviewed 
studies, the same scientific rigor has not been applied to estimating 
the emissions impact of altering diesel fuel components. As we note in 
discussing issue 2 in the September 27, 2001, memo, most of the studies 
in our database have gone through some level of peer review, including 
28 studies (out of 35) for which this was a requirement since they were 
published under the auspices of the Society of Automotive Engineers. We 
note other levels of review applicable to three more of the studies 
conducted through the Coordinating Research Council as well as EPA's 
own review of the quality of the studies before deciding to use the 
emissions data for our database. This level of review ensures there is 
scientific rigor to our process.
    ATA also comments that a bill recently passed by the U.S. House of 
Representatives would require EPA and the U.S. Department of Energy to 
conduct a joint study of the impact of boutique fuels, and that EPA's 
approval of the LED rule in advance of this study is unwise and 
unnecessary. We note that, although ATA did not identify the bill, we 
believe they are referring to Section 603 of HR 4 which is pending 
action in the U.S. Senate but has not yet become law as of today. EPA 
is required to take final action on the SIP submittal for Houston by 
October 15, 2001, under a consent decree, and cannot base any aspect of 
its decision on this or any other Congressional bill which has not yet 
become law. Additionally, we have addressed concerns raised by this 
commenter and others regarding cost and feasibility of the LED rule in 
the responses to several comments related to issue 1 of the LED rule.
    In summary, we believe the NOX reduction benefits of the 
LED rule are estimated with reasonable certainty, and are not 
overstated. EPA carefully reviewed the available test data relevant to 
analyzing emissions impacts of LED fuel, subjected its analysis to 
public scrutiny, evaluated comments at a public workshop, and has 
concluded that its draft model is an appropriate predictor of 
NOX emission impacts of the LED rule, as described above and 
in the September 27, 2001, memo from Larson to Edlund.
2.2  The environmental benefit of the LED rule is not properly 
accounted for or is insignificant because its reliance on low sulfur 
levels will not have impact until newer engines enter the fleet after 
2007, or because low sulfur levels will not have impact on locomotives 
since they do not use engines which benefit from low sulfur fuel.
    BCCA asserts that the emissions benefit for the LED rule is not 
properly accounted for since the program will not be mature in the 
attainment year (2007) and will not get the estimated benefit until the 
fleet turns over and there are more vehicles with exhaust treatment 
systems that can efficiently make use of the low sulfur LED fuel. TX 
should ``work with EPA and all the other areas in this predicament to 
develop a method for crediting these prospective reductions.''
    AAR commented that there has been no showing that LED would have a 
significant impact on emissions, especially lower sulfur. AAR also 
noted in comments to TNRCC in its rulemaking process that EPA has 
refrained from requiring railroads to use low sulfur fuel because there 
would not be any meaningful environmental benefit. Sulfur levels in 
diesel fuel are controlled to enable the use of aftertreatment devices, 
but neither the railroad industry nor EPA expects such devices suitable 
for locomotives to be available in the foreseeable future. (In 1997, 
EPA noted that exhaust gas recirculation (EGR) systems would probably 
not be used by locomotive manufacturers due to technical problems, and 
that catalysts on locomotives are problematic. Cites OMS document, 
``Locomotive Emission Standards: Regulatory Support Document'' p 87, 
12/97.) TNRCC said, in response to AAR's objections, that control of 
non-road diesel fuel is necessary in terms of retrofit technology, but 
neither EPA nor the railroads expect that retrofit technology dependent 
on LED will be used on locomotives in the foreseeable future. (Cites 
TNRCC Rule Log 2000-011D-114-AI, p 44.)
    Response: Texas is not relying on low sulfur levels in calculating 
estimated benefits of the LED rule, but relies only on the changes in 
cetane and aromatics levels, which will have an immediate impact on the 
current fleet. (See page 6-17 of the HGA Attainment Demonstration SIP.) 
As noted in the TSD, sulfur has no direct effect on NOX 
reductions by itself. If low sulfur fuel is used with engines that have 
either been retrofitted or originally designed with aftertreatment 
devices or other methods of taking advantage of the low sulfur fuel, 
the combined effect is reductions in NOX emissions.
2.3  The Environmental Benefit of Using LED Fuel Is Overstated Because 
Texas Has Failed To Account for Consumers Who Will Re-fuel Outside the 
Covered Area
    ATA and TMTA assert that Texas has overestimated the benefit of 
using LED fuel because it did not account for refueling by consumers 
outside the covered area. ATA cites the Arizona report for the 
statistic that six times as many trucks refuel outside California as 
within California. As a result, the LED rule would likely result in 
more vehicle miles traveled with a corresponding increase in vehicle 
emissions. Additionally, long-haul trucks will fuel up before entering 
the covered area and eliminate any benefit assumed to derive from their 
use of LED fuel. Approving the waiver request in the absence of an 
accurate estimate of emissions reductions is arbitrary and capricious.
    TMTA notes two reasons for refueling outside the covered area, as 
follows:
    (1) The use of ``federal fuel'' has not been accounted for. Except 
for diesel vehicles which operate solely within the covered area, all 
other diesel vehicles traveling within the covered area have an 
incentive to purchase cheaper federal fuel outside the covered area. 
TMTA refers to California and Arizona statements (regarding the 
percentage of diesel vehicle miles or activity attributable to out-of-
state vehicles or vehicles purchasing diesel fuel outside a covered 
area) as examples supporting a statement that the LED rule will not be 
able to affect the significant level of federal fuel use, and questions 
Texas' failure to anticipate an environmental difference between 
application of the LED rule statewide (as currently adopted) and 
application in only 110 counties (as currently proposed.) TMTA says the 
failure to account for the use of federal fuel in its estimates of 
potential emission reductions is contrary to law and must be remedied.
    TMTA cites CARB EMFAC 2001 Workshop, 5/29/01, for the statement 
that according to California's emissions inventory model, 33 percent of 
the state's HD diesel vehicle activity is attributed to out-of-state 
vehicles. They also cite Arizona Department of Environmental Quality 
Deputy Director

[[Page 57203]]

Ira Domsky's report to the On-Road Mobile Sources Subcommittee, 11/00, 
CARB diesel evaluation-amount of locally purchased diesel fuel, for the 
statement that in the Phoenix metropolitan area, more than 70 percent 
of diesel vehicle miles are attributed to vehicles operating on diesel 
fuel purchased outside the area. (2) The cheaper ``federal fuel'' will 
be available across county and state lines, within 50 miles of the HGA 
and DFW nonattainment areas and adjacent to the BPA nonattainment area, 
so trucking companies will begin serving the covered area from primary 
or satellite operations based in Arkansas, Oklahoma, Louisiana, western 
Texas, and beyond. The real impact will be an increase in vehicle miles 
traveled, as trucks drive beyond the covered area to purchase cheaper 
fuel but presumably return to serve the covered area.
    AAR argues that because locomotive fuel tanks have a capacity of 
several thousand gallons, locomotives travel for as much as 1,000 miles 
without refueling. Locomotives entering a state are fueled out-of-
state, and much of the fuel they burn is out-of-state fuel. They argue 
that the converse is also true; i.e., that locomotives fueled in-state 
burn a significant amount of that fuel out-of-state, so that the LED 
requirement would mostly benefit states other than Texas since most of 
the LED purchased in Texas would be burned in other states.
    Response: Regarding the commenters' arguments that trucks will seek 
to refuel outside the covered area, we do not believe that this will be 
the case based on the usage pattern of diesel in California. Based on 
annual diesel fuel usage numbers compiled by the Federal Highway 
Administration (FHWA) from 1991 through 1999, we compared the slope of 
increase in diesel fuel use between California and nationwide. The 
diesel usage pattern for California and USA (derived from statistics 
compiled by FHWA\7\) shown in Figure 1 below however, does not indicate 
an abrupt change in refueling patterns in California.\8\ Figure 1 
indicates that in 1993 (the year in which California's diesel rule took 
effect) there is a slight decrease in use from the previous year. In 
all subsequent years, however, the increase follows a similar rate of 
increase as the nationwide rate.
---------------------------------------------------------------------------

    \7\ Available at: http://www.fhwa.dot.gov/ohim/ohimstat.htm
    \8\ National usage has been scaled by multiplying values by 0.1 
for purposes of comparing rate of increase with California usage. 
FHWA usage figures are based on state motor fuel tax records. Motor 
fuel usage was split between gasoline and ``special fuel'' which 
includes diesel, liquid petroleum gas (LPG), and propane. Given that 
LPG and propane usage are relatively small compared to diesel, we 
believe that the special fuel usage numbers are adequate indicators 
of diesel usage.
[GRAPHIC] [TIFF OMITTED] TR14NO01.000

    We also investigated the statement that the commenter attributes to 
the Arizona Department of Environmental Quality (ADEQ) that six times 
as many trucks refuel outside California as within California. On page 
7 of ADEQ's April, 1999 report titled ``Explanation for Choosing not to 
Require CARB Diesel or Other `Cleaner' Diesel Fuels in Maricopa 
County'' ADEQ states: ``ADEQ has been advised that, in California, six 
times as many long-distance trucks refuel outside California before 
entering the state than refuel in California before leaving.'' The 
referenced report, a copy of which is in the docket for this 
rulemaking, does not cite any source or other supporting data for this 
statement. As such, we believe that it may be anecdotal and is not 
supported by the California diesel usage shown in Figure 1. 
Alternatively, if it is true, it may be the case that this pattern 
existed even before California's diesel rule went into effect. The 
commenter has provided no data to support the conjecture that refueling 
patterns will change other than the apparently anecdotal evidence from 
Arizona, and statements that higher costs will cause trucks to refuel 
outside the covered area.
    Taking California as an indicator, therefore, we do not believe 
that the trucking industry will reroute trucks in order to refuel 
outside the covered area. With respect to the statement that long haul 
trucks will seek to refuel out of state or outside the covered area, we 
note that according to the 1997 Vehicle Inventory and Use Survey, 
compiled by the U.S. Census, the majority of truck traffic in Texas 
remains in-state. Specifically, less than 25 percent of the miles 
traveled by the majority of truck traffic in Texas (70 percent) is 
outside of Texas. Also, the average range of operation or length of 
trip for approximately 76 percent of the truck traffic in Texas is less 
than 200 miles. Border-to-border travel distances for the 110 county 
covered area range from 153 to 454 miles. Based on these figures, we 
believe that the majority of environmental effects from use of LED by 
trucks comes from the in-state traffic, not from through traffic. We do 
not believe that the small amount of long-

[[Page 57204]]

haul traffic will change their refueling patterns significantly.
    Regarding the argument that the benefit of the LED rule will be 
realized mostly out of state because of the size of the locomotive fuel 
tanks, the commenter fails to quantify how much of the fuel purchased 
out of state is burned in the Houston non-attainment area, or how much 
of the fuel purchased in the covered area is burned in this area. Even 
though some fuel purchased in Texas will be burned out of State, there 
will still be some amount of LED fuel purchased and burned within the 
Houston nonattainment area which would result in some emission 
reduction there. As we noted in the response to Issue 1.7, 15 percent 
of national railroad purchases of diesel fuel are in Texas. So we 
expect the emission reduction would still be significant.
2.4  The Environmental Benefit of the LED Rule Is Uncertain or 
Overstated Because Texas Has Failed To Determine How Alternative 
Formulations Will Be Tested To Determine if They Achieve Equivalent 
Emission Reductions
    ATA asserts that Texas has failed to determine how alternative 
formulations will be tested to determine they achieve equivalent 
emissions reductions. The proposed rule has no explanation of the 
baseline fuel to be used for comparison with the alternative 
formulation; there is no mention of which engines are tested for 
equivalency; and there is no mention of what operating conditions are 
simulated.
    Response: Both the proposed and final versions of the LED rule for 
the Houston SIP, as submitted to EPA in December, 2000, include 
provisions for determining how alternative formulations will be tested 
to see if they achieve equivalent emission reductions. No changes have 
been made to these sections in the revisions requested for parallel 
processing by the Governor on June 15, 2001, or in the final version of 
the LED rule adopted September 26, 2001, submitted to EPA on October 4, 
2001, and approved by EPA in today's rulemaking. (See rule revisions on 
TNRCC website at http://www.tnrcc.state.tx.us/oprd/sips/houston.html#revisions, and in Rule Log 2001-007d-114-AI.) These 
provisions, as specified in section 114.312(g), are in section 
114.315(c) of the LED rule, and are modeled on the procedures used by 
California in determining equivalent emission reductions of alternative 
formulations of California diesel fuel. (See Title 13, California Code 
of Regulations, 2282(a)(1)(C) and (g).)
    Although the LED rule provisions for this purpose are not identical 
to those of California, they are very similar. The LED rule provides 
for testing the ``candidate'' fuel, i.e., the alternative formulation, 
against a ``reference'' fuel, i.e., the baseline fuel, which must have 
cetane, aromatics and sulfur levels meeting the standards for 
``conventional'' LED fuel. The two fuels must be tested for exhaust 
emissions using a Detroit Diesel Corporation Series-60 engine or an 
engine specified by the applicant and approved by the executive 
director of TNRCC to be equally representative of the post-1990 model 
year heavy duty diesel engine fleet. A minimum of five exhaust emission 
tests must be conducted in accordance with Federal Test Procedures for 
Control of Emissions from New and in-Use Highway Vehicles and Engines: 
Emissions Regulations for New Otto-Cycle and Diesel Heavy Duty 
Engines--Gaseous and Particulate Exhaust Test Procedures, dated 1998. 
(40 CFR part 86, subpart N.) These procedures are for transient cycle 
testing, which is intended to represent actual in-use driving 
conditions.
    Alternative formulations can only be approved by the executive 
director of TNRCC if the director finds that the candidate fuel has 
been properly tested in accordance with these provisions and makes the 
determinations specified in section 114.315(c)(5) regarding the average 
individual emissions of the candidate fuel compared to those of the 
reference fuel.
2.5  A Process Is Needed To Protect Consumer Interests During the 
Development of Alternative Emission Reduction Plans
    TMTA stated that a process is needed to protect consumer interests 
during the development and approval of alternative emission reduction 
(AER) plans under proposed section 114.318, which allows producers to 
submit plans for substitute fuel strategies that are determined to 
achieve an equivalent level of reductions as the LED fuel which is 
regulated specifically. TMTA acknowledges that TNRCC's executive 
director and EPA must approve such AER plans, but notes the lack of 
details and the potential for market manipulation that may result if 
each proposal is not given proper scrutiny by affected entities. TMTA 
requests that a process be instituted to enable diesel fuel users to 
evaluate and comment on any proposed AER plan submitted to TNRCC.
    Response: EPA made comments to TNRCC on July 2, 2001, regarding 
section 114.318 and the ability of producers to submit AER plans. (See 
letter dated July 2, 2001, from Thomas Diggs to Herbert Williams in the 
docket for this rulemaking.) We expressed similar concerns about the 
implementation of this section and the ``market share'' approach it 
seems to allow for estimating equivalency of emission reductions. Since 
EPA's approval of such plans is required, in addition to approval of 
TNRCC's executive director, we will be working with TNRCC on the 
implementation of this section, and will consider the request made by 
this commenter as the procedures are developed, by providing for public 
notice and comment.

Issue 3: Federal Preemption and the Necessity Showing Under CAA Section 
211(c)(4)(C)

3.1  General Preemption Comments
    ATA and BCCA argue that the federal Clean Air Act preempts the LED 
rule under 211(c)(1), and Texas has failed to meet the statutory test 
for a waiver of preemption under CAA 211(c)(4)(C) and object to EPA's 
finding.
    ATA and BCCA support adopting federal diesel rules for Texas. EPA 
should use this opportunity to move the overall national regulatory 
strategy for diesel fuel away from the patchwork quilt of boutique 
fuels towards a single national fuel standard, as Congress originally 
intended. In regulating mobile sources under the Clean Air Act, 
Congress intended to avoid subjecting mobile sources to a patchwork 
quilt of separate state controls, recognizing that allowing each state 
to go its own way could be difficult for manufacturers and users. ATA 
cites Senate report No. 192, 89th Congress, 1st Session. 5-6 (1965).
    Response: The statutory preemption in CAA section 211(c)(4)(A) and 
the corresponding standard in section 211(c)(4)(C) for a ``waiver'' of 
this statutory preemption are central to many of the issues raised by 
commenters. To the extent that a waiver of preemption is required, EPA 
believes that Texas has met the statutory criteria for justifying EPA's 
approval of the LED measure into the HGA SIP, thus waiving federal 
preemption of the state's fuel measure for highway diesel fuel.
    As we explained in the preamble to the Notice of Proposed 
Rulemaking and in the Technical Support Document, section 211(c)(4)(A) 
generally prohibits the state from prescribing or attempting to enforce 
controls respecting motor vehicle fuel characteristics or components 
that EPA has controlled under section 211(c)(1), unless the state 
control is identical to the federal control. This statutory preemption 
does

[[Page 57205]]

not apply to the state's control of fuel content for nonroad engines, 
since this fuel is not used in ``motor vehicles'' as that term is used 
in the CAA. Thus, the Texas LED rule, which applies to diesel fuel for 
both highway and nonroad use, is not preempted under this statutory 
provision to the extent it applies to diesel fuel for nonroad use.
    For a state fuel control which is subject to the section 
211(c)(4)(A) preemption, the CAA does provide an exception in section 
211(c)(4)(C). Under this section, EPA may approve a non-identical state 
fuel control as a SIP provision, if the state demonstrates that the 
measure is necessary to achieve a NAAQS. EPA may approve an otherwise 
preempted state fuel measure as necessary if no other measures would 
bring about timely attainment, or if other measures exist and are 
technically possible to implement but are unreasonable or 
impracticable. EPA may make a finding of necessity even if the plan for 
the area does not contain an approved demonstration of timely 
attainment.
    EPA has reviewed numerous state fuel controls for approval into 
SIPs under section 211(c)(4)(C). In 1997, EPA issued guidance for EPA 
regions and States on the use of fuel options in ozone SIPs. (See 
``Guidance on Use of Opt-in to RFG and Low RVP Requirements in Ozone 
SIPs,'' August, 1997, U.S. Environmental Protection Agency, Office of 
Mobile Sources, at: http://www.epa.gov/otaq/fuels.htm#rvp.) This 
guidance was directed primarily at state requirements for low Reid 
Vapor Pressure (RVP) of gasoline, since that was the principal type of 
fuel control which states had adopted to date. It sets forth guidelines 
for application of the statutory test in section 211(c)(4)(C), 
explaining the following demonstrations which a state should make in 
showing that its fuel measure is ``necessary,'' and justifying its 
request for a waiver of preemption:
    (1) Identification of the quantity of reductions needed to reach 
attainment;
    (2) Identification of other possible control measures and the 
quantity of reductions each would achieve;
    (3) Explanation for rejecting alternative control measures as 
unreasonable or impracticable; and
    (4) Demonstration that reductions are needed even after 
implementation of reasonable and practicable alternatives, and that the 
fuel measure will provide some or all of the needed reductions.
    Texas followed these guidelines in making its request to EPA for 
approval of the LED measure into the Houston SIP. EPA agrees that Texas 
has demonstrated the need for the LED measure pursuant to the statutory 
test in section 211(c)(4)(C), as explained in detail in the TSD. We 
address specific comments on the details of this necessity showing in 
responses to Issues 3.2 through 3.9 below.
    We acknowledge, as ATA notes, that Congressional intent in 
regulating mobile sources of air pollution was to avoid a ``patchwork 
quilt'' of separate state controls in an effort to prevent difficulties 
for manufacturers of vehicles and fuels, and that this is consistent 
with the statutory preemption of state fuel controls in section 
211(c)(4)(A). Congress specifically provided an exception to 
preemption, however, in section 211(c)(4)(C) for state fuel controls 
that are necessary for achievement of a NAAQS. This exception is 
consistent with Congressional intent for state flexibility in choosing 
control measures in meeting federal CAA requirements. This statutory 
scheme balances the need for national uniformity against the state's 
flexibility to choose the most appropriate control measures for each 
state.
    EPA recognizes the concerns associated with the potential 
disruption caused by numerous state (or ``boutique'') fuels. In most 
situations, EPA believes that a uniform national program is the best 
way to protect public health and minimize disruption to the country's 
efficient fuel distribution network. As the number of state fuels 
increases, so do the potential problems associated with a disruption of 
the fuel distribution network. Therefore, EPA's general expectation is 
that states will limit state fuel programs that differ from Federal 
standards to situations where local or unique circumstances warrant 
control. Texas has demonstrated that the Houston area's attainment of 
the 1 hour ozone NAAQS in 2007 can only be achieved with a combination 
of all reasonable control measures, including the LED measure, that are 
being adopted now, together with an enforceable commitment to adopt 
control measures in the future to fill the emissions shortfall which 
remains after adopting the current control measures.
3.2:  Explanation of Why Other Control Measures Are Unreasonable or 
Impracticable
    ATA states that under the statutory test for waiver of preemption, 
Texas has failed to analyze whether other control measures could be 
implemented to achieve the ozone NAAQS.
    ATA further argues that in analyzing whether other control measures 
are ``unreasonable'' or ``impracticable,'' EPA must independently 
determine whether the state has met a very heavy burden in showing that 
all other ozone control measures are either incapable of being 
performed or not reasonable because their implementation might result 
in exorbitant costs or be viewed as an irrational choice for pollution 
abatement. To merely find that a boutique fuel will reduce air 
emissions or is less costly or easier to implement than an alternative 
control measure is an insufficient basis for approving a fuel 
preemption waiver, and would render Section 211 meaningless.
    Response: Section 211(c)(4)(C) currently provides, ``The 
Administrator may find that a State control or prohibition is necessary 
to achieve that standard if no other measures that would bring about 
timely attainment exist, or if other measures exist and are technically 
possible to implement, but are unreasonable or impracticable.'' ATA 
argues that whether an alternative control measure is reasonable or 
practicable must be determined in absolute terms, without comparison to 
the fuel measure being considered. EPA does not agree that this type of 
determination is compelled by the Act. To the contrary, the current 
language of section 211(c)(4)(C) represents Congress' ratification of 
EPA's long held interpretation that States may justify a fuel control 
as necessary when the alternatives by comparison would be more drastic, 
unpopular, costly or slower to implement.
    The ``reasonable and practicable'' language in section 211(c)(4)(C) 
that ATA points to derives from EPA's interpretation of the pre-1990 
language of 211(c)(4)(C). See 53 FR 30224, 30228-29 (Aug. 10, 1988) 
(Maricopa County SIP Approval). Before the 1990 Clean Air Amendments, 
the Act allowed SIP approval of otherwise preempted state fuel controls 
if such controls were ``necessary'' for timely attainment, but the Act 
was silent on the criteria for determining what was ``necessary.'' In 
amending the Clean Air Act in 1990, Congress adopted EPA's 
interpretation of ``necessary'' directly into the statutory language.
    Because Congress effectively ratified EPA's pre-1990 interpretation 
of ``necessary,'' it is valuable to review EPA's approach in making the 
necessity determination in SIP approvals prior to the 1990 Amendments. 
In those rulemakings, EPA repeatedly made clear that the determination 
of whether there were other reasonable or practicable alternatives 
involved some comparison with the proposed State fuel control. See 54 
FR 19173, 19174 (May 4, 1989) (``EPA need look at other measures

[[Page 57206]]

before RVP control, only if it has clear evidence that RVP control 
would have greater adverse impacts than those alternatives. EPA has no 
such evidence here. Therefore, EPA can defer to Massachusetts' apparent 
view that RVP control is the next less costly (or is itself reasonable) 
measure. Thus, EPA concludes that Massachusetts' RVP regulations are 
`necessary' to achieve the NAAQS.''); 54 FR 23650, 23651 (June 2, 1989) 
(finding same in approving Connecticut and Rhode Island RVP programs); 
54 FR 37479, 37481 (Sept. 11, 1989) (stating in approval of Maine RVP, 
``In addition, none of the available control strategies which could 
achieve the same magnitude of reductions as limiting the RVP of 
gasoline can be as quickly implemented'').
    ATA's argument is not new. In comments on both the New York and New 
Jersey RVP SIP approvals, commenters claimed that, ``EPA's method for 
determining what is necessary is too vague because it would allow EPA 
to approve state fuel controls `simply because alternative measures are 
more inconvenient, unpopular, or costly.' '' 54 FR 25572, 25574 (June 
16, 1989); see also 54 FR 26030 (June 21, 1989). In responding to these 
comments, EPA explained:

    This judgment concerning what is too drastic is a complicated 
policy determination requiring the Administrator to weigh precisely 
those factors which the commenter would exclude from [the 
Administrator's] consideration--whether the remaining alternatives 
are costly or unpopular. * * * EPA's and New Jersey's analysis of 
reasonably available controls is based on a factual record supported 
by the best analytical tools the agencies had available to them at 
the time. EPA's judgment that State fuel regulation is a less 
drastic course than gas rationing and other unpopular controls so 
far not implemented in any SIP is clearly a matter on the frontier 
of air pollution control planning, and therefore cannot (and need 
not) be supported by the same technical record as, for example, 
EPA's determination of [the emissions reductions needed] to attain 
the standard.

54 FR at 25574; see also 54 FR at 26033. In both the New Jersey and New 
York approvals, EPA reiterated the comparative nature of the analysis 
of alternatives:

    To be sure, if there were sufficient evidence for EPA to 
conclude that the state's RVP controls would result in significantly 
more severe impacts than other measures that neither EPA nor the 
state has yet identified as ``reasonable'' for the state to 
implement, then it might well be appropriate for the Agency to 
account for the emission reductions that those other measures would 
achieve before determining the shortfall against which to judge the 
RVP controls. The Agency does not believe, however, that the State's 
RVP control would produce significantly more severe effects than 
such alternatives (e.g., than a trip reduction ordinance of the type 
that Arizona found reasonable for application in Phoenix and 
Tucson).

54 FR at 26034-35; see also 54 FR at 25576.

    EPA's current interpretation is consistent with the pre-1990 
interpretation implicitly adopted by Congress. EPA's August 1997 
Guidance on Use of Opt-in to RFG and Low RVP Requirements (``1997 
Guidance'') explains:

    In determining whether other ozone control measures are 
unreasonable or impracticable, reasonableness and practicability 
should be determined in comparison to the [fuel] measure that the 
state is petitioning to adopt. This is not an abstract consideration 
of whether the other measures are reasonable or practicable, but 
rather a consideration of whether it would be reasonable or 
practicable to require such other measures in light of the potential 
availability of the preempted state fuel control. Some measures may 
be reasonable and practicable for certain areas of the country, but 
given the advantages of a [fuel] requirement under the specific 
circumstances of the particular area, the other measures may be 
comparatively unreasonable or impracticable. Finding another measure 
unreasonable or impracticable under this criteria would not 
necessarily imply that the measure would be unreasonable or 
impracticable for other areas, or even the same area, under 
different circumstances.

1997 Guidance at 6.

    The Guidance also reviews factors which may be used in comparing 
control measures, as follows:

    While the basis for finding unreasonableness or impracticability 
is in part comparative, the state still must provide solid reasons 
why the other measures are unreasonable or impracticable and must 
demonstrate these reasons with adequate factual support. Reasons why 
a measure might be unreasonable or impracticable for a particular 
area include, but are not limited to, the following: length of time 
to implement the measure; length of time to achieve ozone reduction 
benefits; degree of disruption entailed by implementation; other 
implementation concerns, such as supply issues; costs to industry, 
consumers and/or the state; cost-effectiveness; or reliance on 
commercially unavailable technology. A strong justification for 
finding a measure unreasonable or impracticable may depend upon the 
combination of several of these reasons. Regions should consider as 
many of these factors as may apply in evaluating each measure that a 
state rejects as unreasonable or impracticable. Also, small 
differences in overall costs or cost-effectiveness are generally not 
sufficient to make a measure unreasonable, and states should not 
attempt to justify fuel requirements on that basis alone. Cost is 
one component of an overall assessment of comparative reasonableness 
and practicability.
    For example, two programs may achieve comparable emission 
reductions, but implementation of the measure other than the state 
fuel measure may involve substantially more disruption by requiring 
development and imposition of a new state regulatory program, 
together with significant capital investment in necessary 
technology. In addition, these hurdles to implementation may mean 
that there would be a substantial comparative delay in emissions 
reductions. Under such circumstances, the other measure may well be 
unreasonable in comparison to a fuel requirement.

1997 Guidance at 6.

    EPA believes this interpretation reasonably preserves a State's 
ability to address its air quality problems in an efficient and timely 
manner. It also reflects the reality that the reasonableness and 
practicability of control measures is dependent on the circumstances 
faced in a particular area and the suite of options available to 
address the particular problems. EPA also believes, contrary to ATA's 
claim, that Texas has analyzed whether other control measures could be 
implemented. EPA reviewed that analysis in the TSD, and responds to 
specific comments on that analysis in responses to Issues 3.4, 3.5, and 
3.6 below.
3.3:  Explanation of Why Other Control Measures Are Unreasonable or 
Impracticable-Premature To Assess This Now When Texas Must Still 
Identify Future Control Measures To Fill the Emissions Shortfall, and 
the LED Rule Will Not Be Implemented Until 2005
    ATA and TMTA commented that because the Texas SIP contains only 
enough control measures to achieve the NAAQS in part, and leaves a 
NOX emissions shortfall for which Texas makes an 
``enforceable commitment'' to fill in the future, it is premature to 
determine whether the State has met the statutory test of necessity 
when it is impossible to analyze other possible control measures. EPA 
must review the additional control measures Texas will adopt in the 
future before making a Section 211(c)(4)(C) determination on the LED 
measure, which will not take effect until 2005.
    ATA further states that by delaying implementation of the LED rule 
until 2005, Texas has made it premature for EPA to grant a fuel waiver 
since Texas must determine by 2004 what other measures will be used to 
meet attainment. One stated purpose of the delay to 2005 is to allow 
for alternative emission reduction plans, but despite this purpose, 
Texas is asking EPA to grant a preemption waiver for a fuel that

[[Page 57207]]

will not be used for four years. It is impossible to predict what mix 
of control measures will be needed in 2005 to reach attainment in 2005 
and beyond. EPA should conduct a public workshop and publish a formal 
request for information to identify all potential NOX 
control measures, obviating the need for boutique fuel formulations.
    Response: EPA disagrees with commenters' claims that necessity 
cannot be determined until all of the control measures necessary for 
demonstrating attainment have been identified. The interpretation 
offered by ATA and TMTA would be in direct conflict with the language 
of 211(c)(4)(C) and has been repeatedly rejected by EPA.
    ATA and TMTA argue that because the SIP identifies a shortfall in 
the needed emissions reductions and commits the State to implement 
control measures in the future, it is premature to find the fuel 
measure necessary because other measures will need to be adopted and 
may be more reasonable. Under this interpretation, no state fuel 
controls could be approved into a SIP unless the SIP provided a final 
demonstration of attainment. For all other SIP revisions, where a 
shortfall of emissions reductions is identified, a fuel control could 
not be found to be necessary because other alternative controls would 
eventually need to be adopted and those other measures may be more 
reasonable than the fuel measure or provide sufficient benefits to 
offset the need for the fuel control.
    This result is expressly rejected by section 211(c)(4)(C), which 
provides ``The Administrator may make a finding of necessity under this 
subparagraph even if the plan for the area does not contain an approved 
demonstration of timely attainment.'' In other words, Congress 
expressly allows approvals of fuel controls into a SIP before a final 
demonstration of attainment is made.
    The language in 211(c)(4)(C), added as part of the 1990 Amendments, 
again represents a ratification of EPA's pre-1990 interpretation that 
necessity under 211(c)(4)(C) can be demonstrated even though the SIP 
approval acknowledges an emissions reduction shortfall and implicitly 
anticipates the need for additional future controls. See, e.g., 54 FR 
at 37481 (proposing approval of a Maine State fuel control); 54 FR at 
19174 (approving a Massachusetts State fuel control); and 54 FR at 
23652 (approving State fuel controls for Connecticut and Rhode Island). 
In the 1989 approvals of the New York and New Jersey low RVP control 
programs, EPA explained that it does not interpret section 211(c)(4)(C) 
to require a complete demonstration of attainment in order to approve a 
fuel control measure:

    Forcing a state to demonstrate attainment before allowing it to 
adopt stricter fuel controls would yield perverse results. Areas 
with the worst ozone nonattainment problems, which have the most 
difficulty assembling a demonstration of attainment, would be 
disabled for perhaps several years from adopting clearly necessary 
controls. * * * Several commenters noted that New Jersey so far has 
not been able to identify any combination of control measures which 
would bring the State into attainment. It is precisely in areas like 
New Jersey, with an especially difficult nonattainment problem, 
where the expeditious implementation of new controls, and hence the 
finding of necessity under section 211(c)(4)(C), is most 
appropriate.

54 FR at 25573-74; see also 54 FR at 26032 (finding same for New York).

    ATA also suggests that because additional controls must be 
identified in 2004, before the LED implementation date in 2005, EPA 
cannot determine that reasonable and practicable alternatives will not 
be available. TMTA argues further, that the finding of necessity is 
inconsistent with EPA's presumption that such reasonable or practicable 
controls will be available by 2004.
    At the outset, TMTA's assertion that EPA has presumed reasonable 
and practicable measures will be available in the future is unfounded. 
Texas developed a list of measures that it is able to implement but 
could still not provide enough NOX reductions to meet the 
attainment goal. As a result, the State must look to the future for 
emerging technologies and other newly available measures to fill its 
enforceable commitments. EPA's approval of the SIP with enforceable 
commitments, however, is not dependent on any assumption as to the 
reasonableness or practicability of these future controls. In all 
likelihood, the State will need to explore more and more drastic 
control measures to fulfill the enforceable commitments made in this 
SIP.
    EPA and the State have canvassed an extensive array of control 
measures and adopted or counted the emissions reductions of a number of 
measures that have not been implemented as part of any other SIP. These 
options reflect the combined efforts of multiple agencies and 
stakeholders and represent the set of controls that these groups 
believed were worthy for State consideration. This list will certainly 
change over time, as will the assessment of the reasonableness and 
practicability of these controls. It is not reasonable, however, to 
prevent the State from moving forward with fuel controls based on the 
inherently changing nature of the list of alternatives. Based on the 
information before the State and EPA at this time, it is reasonable to 
conclude that the LED program is necessary under 211(c)(4)(C) because 
the alternatives known to the agencies are not considered reasonable 
and practicable at this time. Whether new controls are identified in 
the future or currently identified controls become more reasonable at a 
later date, does not affect the rational basis supporting EPA's action 
today.
    ATA's claim that necessity cannot be demonstrated until later 
because the State has provided lead time for implementing the LED 
control that extends beyond the 2004 date for identifying additional 
controls, further ignores the reality of the situation being faced by 
the State. The State concluded that significant lead time will be 
required for refineries to implement the LED program. Notwithstanding 
the extended time needed for implementation, the State and EPA have 
still concluded that the control is necessary because no other 
reasonable or practicable alternatives are available that would achieve 
timely attainment. If the State were forced to wait until 2004 to 
finally adopt the LED program into the SIP, it could be 2009 before the 
program could be reasonably implemented. Alternatively, if the State 
maintained the LED program as an adopted program but waited for SIP 
approval around 2004, refiners would be put in the difficult position 
of trying to decide whether to make the necessary investments to comply 
with the State rule should it be approved. Neither outcome is a 
reasonable approach to implementing the Clean Air Act and neither is 
consistent with section 110(a)(2) of the Act which requires attainment 
``as expeditiously as practicable.''
3.4  Explanation of Why Other Control Measures Are Unreasonable or 
Impracticable--Measures for Which There Is No Explanation of 
Justification
    ATA shows there are 21 control measures listed in Appendix L of the 
HGA SIP for which Texas claims it had insufficient information to 
evaluate for possible adoption. This list of measures contains no 
explanation why they meet the statutory standard of being 
``unreasonable or impracticable'' to adopt.
    TMTA also argues that Texas failed to explain why other more cost-
effective measures are unreasonable or impracticable. Some of the 
measures in Appendix L, the ``initial list of brainstorming ideas,'' 
were transformed

[[Page 57208]]

into proposed rules while others were not. For those measures not 
incorporated into the SIP, Texas has not justified why these measures 
were deemed ``unreasonable or impracticable.'' A more thorough review 
is necessary.
    Response: Appendix L consists of the list of more than 200 
brainstorming ideas that was generated by TNRCC (State of Texas), EPA 
Region 6, California contacts, and stakeholders. The process of 
brainstorming involves listing all ideas suggested without making any 
judgment on them, and without necessarily knowing what each idea 
entails. The list was later categorized by the State to reflect its 
evaluation of the merits of each option as known at that time. When the 
list was developed during the SIP development process, not much was 
known about some of the options. Many that fell into that category 
turned up on ATA's list of measures for which it claims a more thorough 
review is necessary. At the time the SIP was adopted, the State 
continued to lack sufficient information for most of these measures to 
make an informed decision about credit values that could be assigned to 
them as well as effective implementation strategies. Other criteria 
that were used to determine if options were reasonable or practicable 
are whether legislative authority would be necessary and the difficulty 
(hence the effectiveness) of enforcement to bring about real 
reductions. Most of these measures have not been adopted into ozone 
SIPs anywhere in the country. A few of these measures may be re-
considered for future attainment plans to fill the emissions shortfall, 
or have been incorporated into HGA's programs for Voluntary Mobile 
Emissions Programs (VMEP) and/or Transportation Control Measures (TCM) 
for very limited, if any, credit in current or future attainment plans, 
but are so small that they could not begin to fill the 56 tpd 
NOX emissions shortfall.

------------------------------------------------------------------------
             Control option              What we know/what we don't know
------------------------------------------------------------------------
Require purchase of emission reduction   The State is uncertain about
 credits to offset upset emissions of     what this idea entails. There
 NOX.                                     is already a provision in the
                                          current Mass Cap and Trade
                                          rules covering exceptional
                                          circumstances.
Expanded I/M Light-duty diesel &         EPA has not certified a
 Expanded I/M Heavy-duty Diesel.          technology for diesel
                                          inspection and maintenance
                                          that addresses NOX reductions;
                                          this is still an emerging
                                          technology. The State has
                                          listed Diesel I/M as a
                                          possible future control
                                          strategy on p. 7-40 and 43 of
                                          the HGA SIP attainment
                                          demonstration.
Remove speed bumps & Traffic calming     These Transportation Control
 (reduce fast starts/stops).              Measures appear to do the same
                                          thing by eliminating starts
                                          and stops. Preliminary studies
                                          have shown the benefit to this
                                          TCM to be in pounds per day
                                          rather than tons per day.
Restrict private traffic control         This measure would prohibit
 officials on Regional Computerized       businesses from placing cops-
 Traffic Signal System streets (RCTSS).   for-hire at exits to employee
                                          parking lots at close of
                                          business. This type of traffic
                                          control activity conflicts
                                          with automated signalization
                                          on the RCTSS streets. The
                                          benefit is dubious based on
                                          the amount of idling that
                                          would result in the employee
                                          parking lot while motorists
                                          waited to dart into moving
                                          traffic. No known studies on
                                          this.
Consider merging all regional mass       Implementing this measure would
 transit into 8-county mass transit       require a legislative change
 authority to better coordinate           as well as local voter
 programs.                                approval. The benefit, if any,
                                          for this measure is unknown,
                                          and would depend on the
                                          success of such a merger in
                                          increasing use of mass transit
                                          and decreasing VMT. This could
                                          take many years to establish.
New technology (Guided bus)............  No one knows enough about this
                                          new technology to know if
                                          implementing this technology
                                          would produce a benefit or be
                                          cost-effective.
TRANSTAR expansion & TRANSTAR: Incident  TRANSTAR expansion appears in
 detection system (covers 20 miles of     the VMEP but is assigned zero
 freeway corridor).                       credit for implementation.
Air conditioner use assumptions in       These are not control measures,
 emissions model plus reduction options.  therefore cannot be considered
Adjustments to Modeling assumptions:      as a reasonable or practicable
 Emissions model deterioration rate.      measure. When MOBILE6 is
                                          released for use, these
                                          factors will be included in
                                          future modeling. They are not
                                          included in MOBILE5 modeling
                                          which is required for use in
                                          this attainment demonstration.
Adjustments to Modeling assumptions:     The State is uncertain which
 Speed controls by type of vehicle.       type of vehicles would be
                                          speed controlled and in what
                                          manner.
2005 Registration fee for diesel         Texas Senate Bill 5, signed by
 engines. To be waived for CNG engines.   the Governor on June 14, 2001,
                                          imposes a surcharge on the
                                          registration of a truck-
                                          tractor or commercial motor
                                          vehicle in an amount equal to
                                          10 percent of the total fees
                                          due for the registration of
                                          the truck-tractor or
                                          commercial motor vehicle. This
                                          was effective September 1,
                                          2001. There would be little if
                                          any NOX benefit to convert to
                                          CNG because CNG is directed
                                          more toward non-methane
                                          hydrocarbon, CO2, mass of
                                          particulate matter, and air
                                          toxic emissions.
Combustion control (Off-road mobile      Senate Bill 5 (TERP) also
 sources).                                addresses this control option.
                                          See response to issue 3.5 for
                                          description of TERP, and issue
                                          3.6 for explanation of how
                                          TERP emission reduction
                                          credits in excess of credits
                                          from repealed rules can help
                                          fill the emissions shortfall.
Fertilizer substitutions...............  Fertilizer is a part of the NOX
                                          emissions inventory under
                                          biogenics (18 tpd). Reducing
                                          the biogenic portion of the
                                          inventory has not been studied
                                          enough to provide any
                                          certainty on effective control
                                          measures.
Airplane ground operations--taxiing;     Although planning of airline
 scheduling.                              operations during rush hours
                                          to reduce idling on runways to
                                          reduce emissions may have
                                          merit, the State does not have
                                          the authority to impose
                                          regulations on airlines to
                                          require this planning. The
                                          Federal Aviation
                                          Administration has
                                          jurisdiction over airline
                                          operations once the aircraft
                                          leaves the gate. The State
                                          executed agreed Orders with
                                          the major airlines and the
                                          City of Houston to achieve
                                          emission reductions from
                                          Ground Support Equipment (GSE)
                                          at airports in the HGA area,
                                          which does not apply to
                                          planes.
Contract incentives (construction        This measure is being
 industry).                               implemented in the HGA VMEP as
                                          one part of the Local
                                          Government Emission Reduction
                                          Program. Credits generated
                                          from the Texas Emission
                                          Reduction Plan (TERP) can be
                                          used in this measure once they
                                          become available.

[[Page 57209]]

 
Regulate speed and course in Texas       The Houston-Galveston Area
 water of Gulf of Mexico.                 Council investigated this
                                          control measure as part of the
                                          VMEP. It was not considered
                                          feasible for the HGA area. Two
                                          reasons were cited. Ships
                                          already operate at reduced
                                          speed during their time in the
                                          Houston Ship Channel so only
                                          small speed reductions are
                                          possible. Second, even small
                                          reductions in speed raise
                                          safety concerns by the Harbor
                                          Pilots because of potential
                                          loss of steerage.
Emission controls (offshore sources) &   EPA, along with the U.S.
 Restriction on use of off-shore          Department of Interior--
 equipment at certain times of day/week/  Minerals Management Service
 season.                                  conducted a modeling
                                          evaluation of the impacts from
                                          emissions of offshore sources
                                          on ozone nonattainment areas
                                          in Texas and Louisiana. A
                                          field study was conducted in
                                          1993, and the final report was
                                          completed in 1995. Based on
                                          the modeling completed, the
                                          overall impact from these
                                          offshore sources was deemed to
                                          be small. Texas has limited
                                          ability to regulate offshore
                                          sources, being confined to
                                          those sources within State
                                          waters (within 10 miles of the
                                          coast). Section 209(e)
                                          prohibits State controls of
                                          non-road engines unless the
                                          measure is identical to one
                                          approved by EPA for
                                          California. See Engine
                                          Manufacturers Ass'n v. EPA, 88
                                          F. 3d 1075 (D.C. Cir. 1996).
------------------------------------------------------------------------

3.5:  Explanation of Why Other Control Measures Are Unreasonable or 
Impracticable-Measures for Which There is Inadequate Explanation of 
Justification
    ATA comments that there are eight categories of control measures 
rejected by Texas which cannot be summarily dismissed as unreasonable 
or impracticable. EPA failed to conduct an independent analysis of 
these rejected measures, and failed to analyze whether each rejected 
measure is, by itself, unreasonable or impracticable but only compared 
each measure to the LED rule. Finally, the list of 200 measures which 
Texas relied on in its planning process is dated 2/99, more than two 
years ago, and is outdated, especially considering the 2005 
implementation date of the LED rule. The eight categories are:
    (A) Expanding control measures beyond the HGA non-attainment area 
(focus is on Major Point Source NOX reduction controls, 
i.e., power plants)
    (B) Expanding vehicle I/M requirements.
    (C) Expanding speed limit reductions.
    (D) Expanding vehicle idling restrictions.
    (E) Three variations of driving restrictions.
    (F) Four control measures identified in App L as ``economically 
infeasible,'' including LED fuel. The others are an emission-based 
registration fee; a clean-fueled shuttle; and a gas tax increase.
    (G) Accelerated purchase of low NOX engines (Tier 2 and 
Tier 3 diesel equipment) and early (pre-2004) introduction of lower 
emission HD trucks and buses through market-based incentives.
    (H) Construction shift.
    Response: ATA claims the list of 200 measures used in the Texas 
planning process is outdated, especially considering the 2005 
implementation date of the LED rule. Although the list is outdated in 
some respects with more than two years of hindsight, we disagree with 
the implication that it was not reasonable for Texas to proceed from 
that list to choose measures such as the LED rule which will be 
implemented several years in the future. As noted above in our response 
to issue 3.4, the Texas planning process for this 2001 attainment 
demonstration deadline involved numerous stakeholders and a time-
consuming review of measures which originated with brainstorming and 
progressed to an evaluation of the then-known advantages and 
disadvantages of the 202 measures listed in Appendix L. The planning 
process led to choices for the State's rulemaking effort, another time-
consuming process which is required in order to provide public notice 
and comment on the State's proposed controls and to meet the CAA 
standards for SIP measures. Following adoption is the time required to 
implement the measures, which in some cases may take several years.
    The process beginning in 1999 or earlier is necessary to meet the 
2001 deadline and the eventual 2007 attainment date. The CAA 
specifically requires interim deadlines or milestones for states with 
attainment dates many years in the future in order to prevent a state 
from waiting until the last minute to find ways to achieve attainment, 
in recognition of the time required to identify, evaluate, propose, 
adopt, and implement controls. Some of the rejected measures in 
Appendix L will be re-considered by the State to fill the emissions 
shortfall from this attainment demonstration, but Texas made reasonable 
decisions in choosing from measures identified in 1999 from which it 
has proceeded to adopt the measures we are approving today.
    The first four measures listed above are measures which ATA claims 
could be adopted in the areas beyond the HGA non-attainment area and 
have not been analyzed sufficiently to reject them as reasonable 
alternatives to the LED rule. We disagree. In addition to considering 
and adopting control measures within the three ozone non-attainment 
areas in Texas (HGA, DFW, and BPA) to meet their respective attainment 
obligations, Texas considered adopting many of the same measures for 
the 95 attainment counties of eastern and central Texas. As discussed 
in the response to issue 3.7, both ozone and its precursor 
NOX and VOC emissions can be transported from the attainment 
areas into the non-attainment areas. The transport influence of ozone 
and NOX emissions into the HGA non-attainment area is 
strongest within the attainment areas that are up to 50 and 200 
kilometers of the HGA area, respectively.
    Texas adopted a regional SIP strategy for the 95 counties after 
considering the expected benefit for the non-attainment areas as well 
as the costs to be imposed on the residents of the 95 attainment 
counties. Some of the 95 counties are more populated than others but 
the population density of the 95 counties is much less than in the HGA 
non-attainment area, as noted below. The strategy included two measures 
for VOC reductions (Stage I vapor recovery control and low RVP gasoline 
control), approved into the Texas SIPs on December 20, 2000, (at 65 FR 
79745), and April 26, 2001 (66 FR 20927), respectively, and one measure 
for stationary source NOX controls, approved into the Texas 
SIPs on March 16, 2001 (at 66 FR 15195). Additionally, Texas adopted 
speed limit reductions and vehicle I/M requirements as part of the DFW 
SIP in five of the 95 attainment counties, those nearest DFW, where 
population size and VMT is large enough to show a significant benefit. 
More detail on the NOX control measures is provided below 
for the first three measures listed, but we believe Texas has made 
reasonable choices in assessing the possible control measures

[[Page 57210]]

to be adopted in the 95 counties after considering their likely benefit 
for the non-attainment areas and the size of the population that would 
bear the cost of the control.
    We also note that for the following alternative measures, even if 
the measures were considered reasonable and practicable, they would 
have to provide enough emission reductions to fill the 56 tpd 
NOX emissions shortfall completely in order to displace the 
need for the LED rule. Many of these measures would yield small 
reductions, as noted in discussion of such measures.

Expanding Control Measures Beyond the HGA Non-Attainment Area--(Focus 
Is on Stationary Source NOX Controls)

    Texas rules for stationary sources in attainment areas are already 
more stringent than Federal rules for attainment areas. For stationary 
source NOX controls in the attainment area, the State rules 
require all grandfathered sources to reduce their emissions by 30 
percent, all grandfathered utilities to reduce emissions by 50 percent, 
and cement kilns to reduce by 30 percent. New sources in the attainment 
areas must meet Federal Prevention of Significant Deterioration 
requirements which may require controls be put in place depending on 
emission levels.
    The 30 percent control for cement kilns is consistent with EPA's 
Alternative Control Techniques (ACT) for Cement Plants. See EPA-453/R-
94-004. There are no requirements for cement kilns in HGA, DFW, and BPA 
because there are no cement kilns there. Technology to reduce 
NOX emissions beyond 30 percent for cement kilns is not 
cost-effective, although some cement kilns in the attainment area near 
DFW were able to reduce emissions by as much as 50 percent. All kilns 
cannot be controlled in the same way or to the same degree due to 
technology differences in the kiln type, design, and operation. The 50 
percent reduction requirement for utilities was determined by examining 
the most cost-effective controls. Because most of these facilities are 
grandfathered they had few controls, if any, to start with. Combustion 
control was determined to be the most cost-effective control for these 
facilities. The annualized cost to install and operate combustion 
controls on utilities is estimated at $4,000 per ton of emissions 
reduced. Thirteen of the utilities affected by this rule are municipal 
or electric cooperatives. The coal-fired utility in San Miguel will 
spend more ($5,288/ton) for 4,768 tons of reductions, while the 
municipality-owned stationary gas turbines will be less than $4,000/
ton. Small business emission reduction controls are also expected to 
average about $4,000/ton. Small increments of additional NOX 
reductions for utilities were expected to run $10,000/ton. For this 
reason, the cost/benefit ratio goes up dramatically past 50 percent for 
utilities.
    In the nonattainment areas of HGA, DFW, and BPA, Selective 
Catalytic Reduction was determined to be the most cost-effective means 
of control because combustion controls had already been applied to 
sources in those areas and further NOX reductions were still 
needed in these more populated areas. In response to a comment from TXU 
(Texas Utilities) on the State's NOX point source 
rulemaking, the State responded that regarding cost for increasing 
reductions from 70 percent to 88 percent, it was determined that an 
average cost to do so could be as high as $7,500/ton depending on the 
type of unit being retrofitted. For grandfathered utilities this cost 
would be on top of the initial costs for combustion controls plus other 
measures, which we have not discussed, to increase reductions from 50 
to 70 percent. Therefore, not even accounting for all costs, the 
estimated cost per ton for these small sources is well over $10,000/
ton. For this reason, the cost/benefit ratio goes up dramatically past 
50 percent for utilities. We agree this is unreasonable in attainment 
areas where a smaller population would bear the larger cost.
Expanding Speed Limit Reductions Beyond the HGA Non-Attainment Area
    Speed limit reductions have been implemented in five attainment 
counties that adjoin the DFW nonattainment area. These counties have a 
significant amount of vehicle miles traveled (VMT) and ample fleet size 
to justify expanding this measure beyond the 4-county area, and the 
resulting emission reduction is reflected in the DFW SIP for its 
attainment of the 1 hour ozone NAAQS.
    Population density in the remaining attainment counties is about 83 
persons per square mile.\9\ In the HGA nonattainment area (including 3 
mostly rural counties whose total population is 116,000,) the 
population density is 502 persons per square mile. This measure would 
have a very small benefit due to the low VMT in the counties nearest to 
HGA. Considering the high degree of cost and disruption involved in 
implementing and enforcing speed limit reductions in areas with such 
low population density and VMT, the measure would be unreasonable and 
impracticable.
---------------------------------------------------------------------------

    \9\ Data from the Texas Almanac, 2000-2001 edition, 1999. Dallas 
Morning News, Dallas, TX. pp. 131-284.
---------------------------------------------------------------------------

    For example, Montgomery County is part of the HGA nonattainment 
area, not considered rural, but much less urbanized than Harris County, 
which is the core county in the HGA. Montgomery County has a daily VMT 
of slightly over 5.8 million miles. Lowering speed limits in Montgomery 
County contributes only 1.44 tpd or 0.14 percent of needed 
NOX emissions reductions. Of eight attainment counties 
adjoining the nonattainment counties, the average population is under 
38,000 per county, and the average daily VMT is about 1.1 million miles 
(or less than 1/5 that of Montgomery County). This data regarding 
relatively low population, as well as Texas Department of 
Transportation (TXDOT) data,\10\ support our statement that there is 
not a significant amount of vehicles miles traveled or ample fleet size 
to justify expanding this measure. The TXDOT Districts are made up of a 
number of counties each.
---------------------------------------------------------------------------

    \10\ Data from the Texas Department of Transportation website, 
at: http://www.dot.state.tx.us.txdot.htm.

------------------------------------------------------------------------
                                     Vehicles
          TxDOT district            registered    VMT/day     Sq. miles
------------------------------------------------------------------------
Houston District--Brazoria, Fort     3,675,485   67,549,266        6,732
 Bend, Galveston, Harris,
 Montgomery, Waller..............
Lufkin District--north of              264,061    8,087,867        7,538
 Houston--Angelina, Houston,
 Nacogdoches, Polk, Sabine, San
 Augustine, San Jacinto, Shelby,
 Trinity.........................

[[Page 57211]]

 
Beaumont District--northeast of        484,998   14,286,703        2,846
 Houston--Chambers+, Hardin*,                                     2,045+
 Jasper, Jefferson*, Liberty+,                                    2,388*
 Newton, Orange*, Tyler..........
                                                            ------------
                                                             7,279 total
+Part of HGA nonattainment.......                                   +HGA
*Nonattainment counties in the                                      *BPA
 Beaumont-Port Arthur
 nonattainment area..............
Bryan District--west of Houston--      294,645   11,114,870        8,845
 Brazos, Burleson, Freestone,
 Grimes, Leon, Madison, Milam,
 Robertson, Walker, Washington...
Yoakum District--south of              310,694   10,719,104       11,025
 Houston--Austin, Calhoun,
 Colorado, DeWitt, Fayette,
 Gonzales, Jackson, Lavaca,
 Matagorda, Victoria, Wharton....
East of Houston--There are no
 counties, just the Gulf of
 Mexico
------------------------------------------------------------------------

Expanding I/M Beyond the HGA Non-Attainment Area

    Vehicle I/M is being expanded into five attainment counties in the 
DFW area which have opted to establish this program. These counties 
have sufficient population, percent of commuters, and potential growth 
rates to warrant implementing I/M to obtain meaningful reductions in 
NOX emissions which would benefit the DFW non-attainment 
area, and the resulting emission reduction is reflected in the DFW SIP 
for attainment of the 1 hour ozone NAAQS.
    With respect to the remaining attainment counties, none has opted 
to establish such a program, and cannot be required to do so under 
current state law or Federal I/M rules. Although we agree with the 
commenter that the fact that a legislative change is required to 
implement a program is not a sufficient reason to reject a control 
measure, we reiterate that it is the length of time that would be 
required to seek such changes and implement them that make the success 
of such a measure unpredictable and impracticable. Opposition to 
vehicle I/M programs in Texas historically has been strong, resulting 
in the legislative decision in 1997 to allow such programs in 
attainment counties only if those counties voluntarily decide to adopt 
them. It is very unpredictable whether such opposition could be 
overcome, even with the delay in implementation of the LED rule from 
2002 to 2005.
    We also consider the amount of emission reductions expected versus 
the cost to implement an I/M program. In the three mostly rural 
counties of the HGA nonattainment area, the average NOX 
emission reductions from I/M is about one ton per day. The cost for one 
I/M testing station equipped with ASM-2 (the type of testing equipment 
required in the non-attainment area) is about $40,000, which means the 
cost per ton of NOX reduction is at least $40,000 per ton. 
More than one station in a county might be required, increasing the 
cost per ton of NOX reductions even more. Although this cost 
can be recovered when the number of vehicles is large, it is not 
reasonable or practicable in less populated areas with fewer vehicles, 
such as the 36 counties nearest HGA (as indicated in the chart above) 
where emissions would have the strongest influence on HGA.

Expanding Vehicle Idling Restrictions Beyond the HGA Non-Attainment 
Area

    Idling restrictions in the nonattainment area which is congested 
and includes eight counties yields less than 0.5 tpd of NOX 
emission reductions. Emission reductions from idling restrictions in 
less populated areas, especially the 36 counties closest to HGA where 
emissions would have the strongest influence on HGA (as noted in the 
chart above) would be considerably less. The cost to implement and 
enforce such restrictions in less populated areas where the benefit 
would be very small makes this an impracticable measure.

Measures Rejected Due to Technical Infeasibility

    The three types of driving restrictions mentioned by the commenter 
are (1) restrictions on use of ``drive-through'' services, such as fast 
food restaurants and banks; (2) restrictions on driving by time of day 
or by alternate days; and (3) restrictions on driving by geographic 
area. No jurisdiction in the country has adopted such restrictions for 
ozone SIPs, with the exception of use of ``drive-through'' restrictions 
on a voluntary basis on ozone action days. Such voluntary measures 
would be subject to EPA's limit on their use in SIPs, which Texas has 
already met.
    The impact of such driving restrictions on consumers as well as 
businesses, big and small, would be substantial, forcing a major 
examination of alternate transportation methods and drivers' access to 
such methods. Such restrictions would have to be examined in light of 
the equity of forcing drivers who have limited economic means or 
limited access to alternate transportation methods to find other ways 
to get to their places of work. Enforcement of driving restrictions is 
difficult, and such restrictions would likely be very unpopular. EPA 
agrees with the State that these measures are unreasonable and 
impracticable.

Measures Rejected Due to Economic Infeasibility

    The State originally adopted a statewide LED program for on-highway 
diesel fuel, considering wider coverage to be more economically 
feasible than the half-state program for 110 counties, and submitted 
this rule for the HGA SIP. More recently, the State reconsidered the 
half-state program, consistent with the Texas Clean Air Strategy,\11\ 
and asked EPA to parallel process a change to the rules for geographic 
coverage as well as implementation date. The State concluded that the 
reduction in coverage area would reduce the cost burden upon areas of 
the State that would not benefit as much from the use of LED as the 
currently covered counties, but would also continue to ensure that 
there was sufficient supply to the areas that need it the most. See 
also our response to issues 1.2 and 1.6 regarding supply and coverage 
in the 110 county covered area, and our response to issue 3.7 regarding 
the necessity showing for LED fuel in the attainment areas.
---------------------------------------------------------------------------

    \11\ The Texas Clean Air Strategy is a group of measures adopted 
by the State on April 19, 2000, to reduce background ozone 
concentrations in 95 attainment counties in east and central Texas. 
These include Stage I vapor recovery, Low RVP gasoline, and 
permitting of grandfathered stationary sources. EPA approved these 
measures into the SIP as cited above in this response.
---------------------------------------------------------------------------

    Emission-based registration fees and a gas tax increase would 
require legislative action. Legislative action not

[[Page 57212]]

only takes time (because the Texas Legislature is in session only in 
odd-numbered years for a few months each time), but the success of such 
action is unpredictable and opposition to such measures is strong. The 
impact of such economic requirements has the most severe impact on the 
poorest people who tend to own older, dirtier cars and would therefore 
pay the highest emission based fees, and for gas taxes would be paying 
a higher percentage of their income, since gas taxes are not 
progressive, for what is a virtual necessity in terms of access to 
places of work. It is not clear what the identifiable benefit of these 
programs would be, and we agree with Texas that they would be 
unreasonable or impracticable at this time.
    Mandates to purchase new clean fuel airport shuttles or convert 
existing airport shuttles to clean-fuels were rejected as unreasonable 
because this would be a clear economic hardship on a very small group 
of vehicles typically owned by small businesses. Should this measure be 
considered in the future, some financial incentives may be available 
under the TERP (as described below) or through the Department of 
Energy's Clean Cities program.

Accelerated Purchase of Low-NOX Engines and Early (pre-2004) 
Introduction of Lower Emission HD Trucks and Buses Through Market-Based 
Incentives

    Senate Bill 5, adopted by the 77th Legislature in June of this 
year, required repeal of State rules requiring the accelerated purchase 
of low-NOX engines but, in their place, adopted a plan to 
achieve equivalent reductions through the use of economic incentives. 
Senate Bill 5, which includes the Texas Emission Reduction Program 
(TERP), is an economic incentive program to accomplish exactly what the 
rule mandated--to accelerate the purchase of new engines or rebuilt or 
retrofitted existing engines to achieve the same low-NOX 
emission levels. Although most of the funds will be directed toward the 
nonattainment areas, funds are not restricted to the nonattainment 
areas. Therefore, this measure is being implemented, and has been 
submitted as part of the SIP which is being approved today.
    The TERP is similar to California's Carl Moyer Program that 
provides grants to cover the incremental cost of cleaner on-road, off-
road, marine, locomotive and stationary agricultural pump engines, as 
well as forklifts and airport ground support equipment. The TERP is 
also a state-funded program to provide grants, rebates, and other 
incentives for improving air quality throughout the State. The grant 
program will pay the incremental costs of repowering, rebuilding, or 
retrofitting on-highway vehicles and non-road equipment. A rebate 
program offers incentives for the purchase or lease of cleaner new on-
road, heavy-duty diesel vehicles.

The Construction Shift

    Pursuant to Senate Bill 5, referenced above, the Legislature 
revoked TNRCC's authority to implement the construction shift rule with 
the understanding that the incentives provided by the TERP will achieve 
equivalent reductions. The construction shift rule allowed operation 
during the morning hours only if a company presented a plan that showed 
how they would achieve reduced NOX emissions. A plan using 
low-NOX engines, whether new, rebuilt, or retrofitted, would 
have been acceptable to meet that requirement. Therefore, the TERP 
achieves the same goal, and the measure is being implemented. The 
equivalent emission reductions from the TERP were substituted for the 
reductions that would have resulted from the construction shift rule in 
the SIP we are approving today.
3.6  Explanation of why other control measures are unreasonable or 
impracticable-measures which Texas and EPA failed to consider at all, 
or which Texas has recently adopted and has failed to account for in 
the SIP
    ATA commented that there are at least six measures which Texas did 
not adopt which Texas should have considered and EPA should have 
independently analyzed as to whether they are unreasonable or 
impracticable.
    (A) Emissions banking and trading program (mentions new SCAQMD 
program)
    (B) Accelerated retirement of HD vehicles
    (C) Natural gas buses
    (D) Phoenix voluntary early ozone plan
    (E) Energy efficiencies (Building codes)
    (F) Federal clean fuel fleet program
    Texas failed to consider existing programs with demonstrated cost-
effective emission reductions. TMTA argues that Texas is obligated to 
look beyond its borders to investigate control measures used in other 
jurisdictions before obtaining a fuel preemption waiver. A non-
exhaustive list includes the following seven measures. The last two of 
these measures which were recently adopted in Texas need to be 
accounted for in the SIP analysis; since attainment was demonstrated 
without them, it is likely attainment can now be demonstrated by 
substituting these programs for the LED rule.
    (A) Emissions banking and trading program
    (B) Phoenix voluntary early ozone plan
    (C) Accelerated retirement of HD vehicles
    (D) Early introduction of low-NOX engines
    (E) Carl Moyer Memorial air quality standards attainment program
    (F) Texas emissions reduction program (Senate Bill 5)
    (G) Texas House Bill 2912
    TMTA also commented that two non-fuel measures have been adopted by 
Texas since TNRCC submitted its attainment demonstration SIP to EPA, 
and these non-fuel measures will provide emission reductions that will 
make the LED rule emissions benefits unnecessary: (1) is the Texas 
Emissions Reductions Plan Fund, modeled on California's Carl Moyer 
program. If it is as successful as its prototype, the 52 [sic] tpd 
additional NOX reductions required in the Houston SIP can be 
achieved in less than three years; (2) is a requirement that 
unregulated facilities in eastern Texas be permitted by 2007 and that 
oil and gas pipeline facilities in eastern Texas reduce emissions from 
internal combustion engines by as much as 50 percent.
    Response: Most of the measures discussed below have already been 
adopted by Texas for inclusion in the SIP, whether previously approved 
(such as the Clean Fuel Fleet program) and therefore reflected in the 
baseline emissions inventory or as part of today's attainment 
demonstration or as plans for future attainment demonstrations to fill 
the 56 tpd NOX emissions shortfall. Unless they would 
provide enough emission reductions to fill the 56 tpd NOX 
emissions shortfall completely, they do not displace the need for the 
LED rule. Many of these measures would yield small reductions, as noted 
in discussion of such measures.

Emissions Banking and Trading Program

    The comment pertained to South Coast Air Quality Management 
District expanding the emissions trading program by permitting 
stationary sources of air pollution to purchase NOX credits 
from mobile sources. ATA commented that programs like these rely on the 
free market to produce NOX reductions in the most cost 
effective manner. The TNRCC Mass Emissions Cap and Trade (MECT) EIP 
program for the HGA nonattainment area provides for this free market 
trading approach.

[[Page 57213]]

EPA proposed approval into the Houston SIP of the TNRCC MECT program on 
July 23, 2001 (66 FR 38231), to provide flexibility in achieving the 
595 tpd NOX reductions from stationary sources. EPA is 
finalizing that approval today in a separate action. For more 
information on the emissions banking and trading program, see our 
action published elsewhere in the Federal Register.

Accelerated Retirement of Heavy Duty Vehicles

    The Texas Emission Reduction Program (TERP), described above in the 
response to issue 3.5, offers incentives to replace engines in older 
vehicles with the cleanest engines available. This program did not 
exist when the SIP was developed and adopted but was recently adopted 
by the Legislature. Emission reductions from the TERP replace the 
reductions that would have resulted from two rules for which the 
Legislature required repeal, i.e., the accelerated purchase of low 
NOX engines and the construction shift. Any emission 
reductions from this voluntary program which exceed the reductions that 
would have resulted from the repealed rules will go toward filling the 
emissions shortfall in the attainment demonstration we are approving 
today.

(See a description of the TERP and how it compares to the Carl Moyer 
program under the discussion in our response to issue 3.5 for 
accelerated purchase of Tier II/Tier III (low-NOX) engines.)

Natural Gas Buses

    Natural gas buses, as one type of Low Emission Vehicle, are already 
mandated by the State for purchase by mass transit authorities in 30 
TAC 114.150. The low emission vehicle fleet rules meet Federal Clean 
Fuel Fleet requirements for this program. EPA approved this program 
into the HGA SIP on February 7, 2001, (66 FR 9203) so the 
NOX emission reductions achieved through this measure are 
already accounted for in the baseline emissions inventory for this 
attainment demonstration and SIP revision.

Phoenix Voluntary Ozone Plan

    Houston has adopted most of the measures included in the Phoenix 
Voluntary Ozone Plan, as described below, but such measures are limited 
in terms of NOX benefits and would not fill the 56 tpd 
NOX emissions shortfall in the attainment demonstration. 
Some of these measures are already in the attainment demonstration 
being approved today, and some will be adopted for inclusion in future 
attainment plans to help fill the emissions shortfall.
    Tax incentives similar to those in the Phoenix Voluntary Ozone Plan 
are included in future attainment plans as part of the State's 
enforceable commitments to adopt measures to fill the emissions 
shortfall in the attainment demonstration being approved today. 
Fireplaces are not used regularly in HGA, and definitely not during the 
ozone season. So, this measure is more likely to address carbon 
monoxide or particulate matter pollution that may be issues in Phoenix 
but not in HGA.
    Traffic light synchronization is also being implemented in HGA, 
partially under Transportation Control Measures(TCMs) and partially 
under the VMEP. The Computerized Traffic Management System, the 
Arterial Traffic Management System and Intersection Improvements are 
TCMs that include some signalization projects.
    Trip reduction programs are part of the HGA Voluntary Mobile 
Emission Reduction Program (VMEP) in the Commute Solutions program. 
Texas has addressed the use of alternate energy sources at construction 
sites by providing incentives through the TERP (described above). The 
Regional Computerized Traffic Signal System is part of the VMEP that 
includes signalization timing projects for roadways designated as local 
streets, either intrazonal or central connectors. The VMEP credits are 
limited to 3 percent of the total emission reductions needed for the 
SIP. Therefore additional credits for traffic signalization cannot be 
taken under the VMEP.
    Signalization under the VMEP is estimated to generate an estimated 
0.0-0.5 tpd NOX reductions in the 8-county area. The three 
TCM projects are projected to generate 0.36 tpd. This includes other 
activities within these categories besides the signalization projects. 
Details of the VMEP are found in Appendix K, while details of the TCMs 
are found in Appendix I of the HGA SIP.

Energy Efficiency (Building Codes)

    This is included as a measure to fulfill an enforceable commitment 
in future attainment plans which will address the emissions shortfall 
in the attainment demonstration being approved today. (See pages 7-44 
through 7-52 of the HGA attainment demonstration SIP.) Senate Bill 5, 
enacted in June 2001, includes incentives for purchase of energy 
efficient appliances and sets building energy performance standards. 
Rules on the energy efficiency program will be submitted as part of the 
future attainment plans.

Federal Clean Fuel Fleet Program

    ATA points to the following EPA statement in its approval of the 
Texas Clean Fuel Fleet substitute plan as support for its claim that 
the Texas substitute program would not produce the same NOX 
reductions when compared to the Federal Clean Fuel Fleet program:

    It is similar to the Federal CFF program, but with a number of 
significant differences that, but for the supplemental controls, 
result in an emissions reduction shortfall as compared to the 
Federal CFF program. (Emphasis added.)

66 FR 9203 (2/7/01), at 9203. The italicized phrase is the important 
qualification to the sentence which ATA ignored in making its claim. 
EPA's statement refers to only one component of the Texas substitute 
plan, a State fleet program--the Texas Clean Fleet (TCF) program. Texas 
has supplemented this state fleet program with additional controls, as 
allowed under the CAA.
    The Federal CFF program requirements are contained in part C, 
entitled, ``Clean Fuel Vehicles,'' of Title II of the CAA, as amended 
in 1990. Part C was added to the CAA to establish two programs: a 
clean-fuel vehicle pilot program in the State of California (the 
California Pilot Test Program) and the Federal CFF program in certain 
ozone and carbon monoxide (CO) non-attainment areas. Section 182(c)(4) 
of the CAA, 42 U.S.C. 7511a, allows States to opt-out of the Federal 
CFF program by submitting, for EPA approval, a SIP revision consisting 
of a substitute program resulting in as much or greater long term 
emissions reductions in ozone producing and toxic air emissions as the 
Federal CFF program.
    Texas submitted a SIP revision to Chapter 114 and the State's plan 
for implementing a substitute program to opt out of the Federal CFF 
program on August 27, 1998. The revision was adopted after public 
notice and hearing as required by sections 110(a)(2) and 110(l) of the 
CAA and 40 CFR 51.102(f). Texas' CFF substitute plan relies on a State 
fleet program--the Texas Clean Fleet (TCF) program--supplemented with 
additional VOC and NOX emission controls.
    The State has met the requirements of the CAA and has successfully 
demonstrated that its CFF substitute plan will achieve long term 
reductions in emissions of ozone producing and toxic air pollutants in 
excess of those that would have been achieved by the Federal CFF 
program. EPA published its direct final rule on the State's substitute 
program on February 7, 2001, (66 FR 9203) and no adverse comments were

[[Page 57214]]

received. Credit for the NOX reductions attributable to 
Texas' CFF substitute plan are reflected in the Texas SIP baselines for 
ozone.

Early Introduction of Low-NOX Engines

    See our response to issue 3.5 regarding Accelerated Purchase of low 
NOX engines.

Carl Moyer Memorial Air Quality Standards Attainment Program

    See our previous responses that discuss the Texas Emission 
Reduction Program (TERP) in issue 3.5 regarding Accelerated Purchase of 
low NOX engines and in this issue 3.6 regarding Accelerated 
Retirement of HD vehicles.

Texas Emissions Reduction Program (Senate Bill 5)

    When the HGA SIP was developed and adopted, the 77th Texas 
Legislature had not yet come into session. Senate Bill (SB) 5, which 
created the Texas Emission Reduction Program (TERP), was introduced 
during that session that ran from January to June 2001. Therefore, 
emission reductions from the TERP could not be included in the adopted 
SIP submitted in December 2000. At the same time, SB5 also directed the 
State to repeal the rules for the construction shift and the 
accelerated purchase of Tier II/Tier III (low NOX) engines. 
The Governor requested parallel processing of SB5 on June 15, 2001. We 
are parallel processing SB5 with the HGA attainment demonstration. 
Credits generated by the TERP are intended to replace the credits lost 
by repeal of the rules. It is expected that excess credits from the 
TERP will contribute to closing the 56 tpd NOX emissions 
shortfall, but it is not expected to fill the shortfall. In addition, 
EPA believes the three year timeframe referenced in the comment is 
extremely optimistic.
    See also our previous responses that discuss the Texas Emission 
Reduction Program (TERP) in issue 3.5 regarding Accelerated Purchase of 
low NOX engines and in this issue 3.6 regarding Accelerated 
Retirement of HD vehicles.

Texas House Bill 2912

    EPA acknowledges the comment that this Bill requires grandfathered 
facilities to obtain permits by 2007. It is anticipated that Texas will 
submit the reductions from these measures in future SIP revisions to 
help fill the remaining NOX shortfall of 56 tpd. The 50 
percent NOX reduction expected from the newly permitted oil 
and gas pipeline facilities in eastern Texas partially offsets the 
increase in NOX emission reduction levels mandated for 
utilities resulting from the State lowering utility emission reduction 
requirements from 93 percent to 90 percent. The State believed the 
higher levels to be unreasonable due to extraordinary costs to obtain 
the additional 3 percent reductions. Therefore, this legislative action 
does not provide additional credits to be used in place of the LED fuel 
program.
3.7  Failure To Show Necessity for the LED Fuel Measure in Attainment 
Areas
    BCCA asserts that LED fuel is not needed in attainment areas of 
Texas outside the HGA area. These areas are already meeting national 
air quality standards and do not need the LED fuel for air quality 
reasons.
    TMTA commented that Texas does not have the authority to require 
LED fuel in the attainment areas, because it has not shown the LED fuel 
is necessary in those areas, and is acting arbitrarily to require LED 
fuel in those areas. Attainment areas do not need to submit control 
measures to meet CAA standards because they already attain the 
standards. Further, scientific studies have not shown a nexus between 
NOX emissions in the state's eastern and central attainment 
areas and ozone violations in the state's nonattainment areas.
    Response: In both the TSD (at pp 11-12) and the proposed rule (66 
FR 36542, at 36545), EPA explained the reasons Texas has shown as to 
why requiring LED fuel in the covered area benefits the Houston non-
attainment area. There are three reasons. First, requiring LED fuel in 
the covered area will reduce emissions of NOX in the non-
attainment area by helping to ensure that the fuel used by intrastate 
and long-haul trucks that transit the non-attainment area but purchase 
fuel in Texas outside the nonattainment area but within the covered 
area meets the required fuel characteristics for lowering 
NOX emissions. (See also our discussion in response to Issue 
2.3 as to why this requirement for a covered area as large as 110 
counties is important in maintaining the benefit of the LED program.)
    Second, the LED fuel program will reduce possible transport of 
ozone from the surrounding covered areas to the non-attainment area. 
EPA described the meteorological on-shore/ off-shore phenomenon called 
``flow reversal'' which, according to the Coastal Oxidant Assessment 
for Southeast Texas (COAST) study, exacerbates the Houston ozone 
problem. Ozone formed over land moves out over the Gulf in the early 
morning, and then blows back over the land in the early afternoon of 
the same day. This flow reversal influences ozone concentrations inland 
at least 50 kilometers, easily reaching into the attainment area 
immediately surrounding the HGA non-attainment area. Another study 
(Nielsen-Gammon) claims this phenomenon may reach as far inland as 400 
kilometers.
    Third, the LED fuel program will reduce the transport of 
NOX from the surrounding covered areas to the nonattainment 
area. EPA policy recognizes that ozone precursors such as 
NOX emitted in attainment areas may be transported to non-
attainment areas and contribute to ozone problems therein. 
Specifically, EPA's 1997 guidance for implementing the 1 hour ozone 
NAAQS, cited in the TSD and the proposed rule, recognizes that 
NOX emissions outside non-attainment areas at 200 kilometers 
could influence the non-attainment areas.
    We disagree with TMTA's statement that scientific studies have not 
shown a nexus between NOX emissions in the eastern and 
central attainment areas of Texas and ozone violations in the non-
attainment areas. TMTA has not disputed any of EPA's statements 
regarding the COAST study or the Nielsen-Gammon study, nor has it 
provided any other data to contradict the conclusions from these 
studies. We reiterate the three reasons mentioned above which show that 
requiring LED fuel in the covered area benefits the Houston non-
attainment area, thus contributing to the necessity demonstration Texas 
has made.
3.8  Failure To Meet CAA Requirement That the State Fuel Measure Is 
Reasonable and Practicable, Due to the LED Fuel Measure's Consumer Cost 
Volatility
    NPRA stated it is not clear that the potential consumer cost 
volatility of Texas LED meets the CAA requirement that the state fuel 
regulation be both reasonable and practicable. TNRCC has estimated the 
production cost of LED to be four cents per gallon more than current 
specifications. Parties suggest that EIA data indicate the retail price 
of diesel in California is much more than four cents per gallon higher 
than the price of diesel in PADD III (eleven cents to forty-one cents 
per gallon).
    Response: NPRA's comment mis-states the applicable CAA requirement. 
The CAA does not require that the state fuel regulation must be 
reasonable and practicable, but it does require that the state fuel 
program be shown to be more reasonable and practicable than the 
existing alternatives. Texas has made a comparative analysis of many 
possible alternatives to the LED fuel requirement,

[[Page 57215]]

and as demonstrated in the TSD and in the responses to comments in this 
final rule, considered the costs, benefits, implementation time, public 
acceptance and other factors for evaluating reasonableness and 
practicability. EPA has reviewed these findings and made its own 
assessment of these controls as well as the additional alternatives 
identified by commenters. In particular, as discussed in issue 1.4, 
comparing Texas estimates for production cost to California retail 
prices and PADD III retail prices is misleading because retail prices 
do not reflect the production cost alone. Other factors in retail 
pricing include differences in supply and demand, dealer mark up, and 
proximity of supply. The State of Texas has determined that four cents 
per gallon (production costs) for Phase I is an acceptable difference 
since LED provides an environmental benefit. California recently 
validated similar production cost estimates for their analogous diesel 
fuel via a comparison of wholesale prices in California to prices in 
neighboring states. Based on this, we believe that State of Texas' 
estimate is reasonably accurate.
3.9  Failure To Show Necessity Because the Environmental Benefits of 
the LED Rule Are Overstated or Inaccurately Quantified
    ATA and TMTA commented that it is impossible to make the section 
211 necessity determination without first accurately quantifying the 
emissions impact of using the LED fuel. The necessity of LED, as 
required under section 211(c)(4)(C) of the CAA, has not been 
demonstrated, because (among other reasons) the environmental benefits 
are overstated, due to the assumed 100 percent effectiveness in the 
nonattainment area and the failure to account for significant use of 
the cheaper ``federal fuel'' as described above.
    Response: EPA has made its own analysis of the NOX 
reduction benefit expected from use of LED fuel, confirming the 
emission reduction at levels slightly different from those estimated by 
Texas but still significant in helping achieve ozone attainment. (See 
discussion in our response to issue 2.1.) We have also analyzed the 
potential overstatement of the benefit due to re-fueling outside the 
non-attainment area, and have concluded there is a reasonable basis to 
agree with the State of Texas that re-fueling outside the non-
attainment area will not significantly affect the benefit of the LED 
rule. (See discussion in our response to issue 2.3.) Thus, we have 
demonstrated that the LED rule will provide some or all of the emission 
reductions needed to achieve the ozone NAAQS.
3.10  Preemption Under the Supremacy Clause of the U.S. Constitution
    ATA commented that in addition to the explicit statutory preemption 
under CAA 211(c)(4), the Supremacy Clause of the U.S. Constitution 
implicitly preempts the LED rule since it stands as an obstacle to 
accomplishing the Congressional objective of a single national fuel 
standard.
    Response: Aside from the explicit preemption in Section 
211(c)(4)(A), a court could also consider whether a state sulfur 
control is implicitly preempted under the Supremacy Clause of the U.S. 
Constitution. Courts have determined that a state law is preempted by 
federal law where the state requirement actually conflicts with federal 
law by preventing compliance with both federal and state requirements, 
or by standing as an obstacle to accomplishment of Congressional 
objectives. A court could thus consider whether a given state fuel 
control is preempted, notwithstanding waiver of preemption under 
211(c)(4)(C), if it places such significant cost and investment burdens 
on refiners that refiners cannot meet both state and federal 
requirements in time, or if the state control would be preempted on 
some other legal basis.
    Commenters have not raised specific problems that could reasonably 
give rise to a claim of conflict preemption. The State of Texas' 
program appears consistent with Congress' overall goal of achieving air 
quality standards as expeditiously as possible as expressed in section 
110(a)(2), and is consistent with Congress' allowance of State fuel 
controls when necessary to achieve such standards. Nor does there 
appear to be any conflict between the State and federal standards that 
would prevent compliance with both provisions. It is practically and 
legally possible to produce diesel fuel that meets both the federal and 
State sulfur standards, as noted in our response to issue 1.9. The 
State of Texas has provided significant lead time for refiners to come 
into compliance and the State and federal standards are similar for on-
highway diesel fuel. While refiners have raised concerns about the 
impact of the LED rule on the Federal ULSD rule, as we discussed in 
response to Issue 1.9, they did not say it would be impossible to 
comply with both rules, or that compliance with the LED rule prevents 
compliance with the Federal ULSD rule. Furthermore, ATA does not 
provide any support for the claim that compliance with the two 
standards is not possible. For these reasons, EPA does not believe 
there is a clear Constitutional problem that should lead EPA to deny 
approval of the State LED program.

Issue 4  Potential ``Backsliding'' With Proposed SIP Changes

    ED commented that EPA must reject any effort to relax effective 
control measures on the books before the identified shortfall in 
emissions reductions is eliminated. In particular, the proposed change 
Texas will make to the LED rule is backsliding from the 12/00 SIP since 
it limits applicability for on-road use of LED fuel to East and Central 
Texas instead of statewide, and delays implementation of the LED rule 
until 2005. ED notes that no net loss is calculated.
    Response: The proposed changes to the Texas regulations do not 
constitute ``backsliding'' as that term has come to be used in the 
context of the CAA. The Clean Water Act term ``backsliding'' (33 U.S.C. 
1342(o)) is used in regard to the CAA to refer to weakening federally 
approved regulations in a manner which would interfere with the 
attainment or maintenance of one of the National Ambient Air Quality 
Standards (NAAQS). See, sections 101(b), 110(a)(2)(D), and 161 of the 
CAA. Section 110(1) prohibits EPA from approving a SIP revision if it 
would interfere with attainment, reasonable further progress, or any 
other applicable requirement of the Clean Air Act. The statute leaves 
with the State, however, the ability to formulate and revise the SIP in 
whole or in part so long as the plan provides for timely attainment of 
the NAAQS and meets other applicable CAA requirements. See, CAA section 
110(k)(3) and Train v. NRDC, 421 U.S. 60, 79 (1975).
    The revisions were proposed and submitted to EPA (along with a 
request for parallel processing) prior to approval so they do not 
represent changes to an approved SIP from which a state could be seen 
as ``backsliding''. These are changes to the State's choice as to how 
the ozone NAAQS will be achieved in the HG area. It is not EPA's role 
to disapprove the State's choice of control strategies if that strategy 
will result in attainment of the one-hour standard and meets all other 
applicable statutory requirements. See Union Electric v. EPA, 427 U.S. 
246 (1976); Train v. NRDC, 421 U.S. 60 (1975).
    Even if these changes represented changes in an approved SIP, we do 
not agree that it would be appropriate to reject this rule because it 
is unlikely the changes made to the LED rule since its original 
adoption by the State of Texas

[[Page 57216]]

in December, 2000, would significantly impair the emission reductions 
attributable to this measure. The change in implementation date from 
2002 to 2005 does not affect the benefit of the LED rule, since the 
yearly emission reductions are not cumulative. It is the emission 
reductions in 2007, the attainment date, which is critical. The change 
in geographic scope of the LED rule (from statewide to 110 counties for 
highway diesel fuel) should not significantly affect the benefit of the 
LED rule since the 110 county covered area includes 95 percent of all 
vehicle miles traveled (VMT) in Texas and the most populated cities in 
the state.
    A principal purpose of extending the coverage of the LED rule to 
the 102 counties outside the 8 county Houston non-attainment area is to 
ensure that intrastate and long-haul trucks traveling through the 
Houston area but re-fueling outside the Houston area are re-fueling 
with LED fuel. Because most of the VMT and most of the diesel fuel 
purchased for on-road travel in Texas is within the 110 county area (as 
noted in our response to issue 1.6), this change should not 
significantly affect the resulting benefits of the LED rule. Because 
this rule would not interfere with attainment of the NAAQS, we believe 
approval is proper. See, United States Steel v. EPA, 633 F.2d 671, 674 
(3d cir. 1980). See response to issue 2.3 for discussion of the impact 
of re-fueling outside the covered area on the benefit of the LED rule.

Issue 5  Potential Changes at Mid-Course Correction Jeopardize Need for 
Certainty

    BCCA needs to know that the LED rule, as finalized in 12/00, will 
not change at the mid-course correction in 2004, because its members 
need certainty in order to make plans for investment and construction 
to meet the fuel requirements. These plans carry long lead times.
    Response: We agree this would be a problem but we assume Texas has 
made its final changes to the LED rule after significant negotiations 
between Texas and relevant stakeholders earlier this year led to the 
passage of legislation (HB 2912) delaying the implementation date and 
limiting the geographic scope of the LED rule. This legislation was 
signed by the Governor on May 29, 2001, and led to the most recent 
revisions to the LED rule, implementing the change in date and 
geographic scope, which EPA is approving today.
    If Texas wants to make changes to the LED rule at the mid-course 
correction in 2004, Texas would have to go through its state rulemaking 
process, with public notice and comment, so that stakeholders such as 
the commenter would have an opportunity to explain the implications of 
such changes. Additionally, EPA would have to go through a rulemaking 
process with public notice and comment if Texas wanted to request that 
such changes be approved into the SIP.
    In addition, EPA is approving the enforceable commitment to conduct 
this mid-course correction in the attainment demonstration approval 
being published elsewhere in today's Federal Register. Further 
discussion regarding the appropriateness of the mid-course correction 
can be found in the Response to Comments for that action.

Issue 6  Need for Energy Analysis Under E.O. Issued 5/22/01

    ATA commented that EPA should perform an energy analysis in 
accordance with EO issued 5/22/01 concerning regulations that 
significantly affect energy supply, distribution, or use.
    Response: On May 18, 2001, President George W. Bush signed 
Executive Order 13211, entitled ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (See, 66 FR 
28355, May 22, 2001). This Executive Order (EO) requires Federal 
agencies to prepare, and submit to the Office of Management and Budget 
(OMB), a Statement of Energy Effects for matters identified as 
significant energy actions. ``Significant energy action'' is defined by 
the EO as:

any action by an agency (normally published in the Federal Register) 
that promulgates or is expected to lead to the promulgation * * * 
(1)(i) that is a significant regulatory action under Executive Order 
12866 or any successor order, and (ii) is likely to have a 
significant adverse impact on the supply, distribution or use of 
energy; or (2) that is designated by the Administrator of the Office 
of Information and Regulatory Affairs as a significant regulatory 
action.

SIP approvals are not ``significant regulatory actions'' subject to OMB 
review and are consequently excluded from the requirements of EO 13211.

Issue 7  Need for Regulatory Impact Analysis Under Texas Law

    BCCA argues that the LED rule is not legally defensible because it 
is a ``major environmental rule'' requiring a RIA under Texas law 
because it (1) Exceeds standards set by Federal law, and (2) exceeds an 
express requirement of state law.
    TMTA commented that the cost of purchasing LED and its impact on 
the Texas trucking industry has been understated. A Regulatory Impact 
Analysis to adequately assess the economic impacts of the rule has not 
been prepared, as required under Texas law. TMTA makes three main 
arguments: (1) The cost of purchasing cleaner diesel fuel has not been 
considered; (2) higher fuel costs cannot be passed on due to outside 
competition; and (3) a Regulatory Impact Analysis must be performed 
under Texas law when proposing certain ``major environmental rules'', 
and Texas has mistakenly failed to do so.
    Response: As stated previously, EPA's role in reviewing SIP 
submittals is to approve state choices, provided that they meet the 
criteria of the Clean Air Act. Federal inquiry into the economic 
reasonableness of state action is not allowed under the Clean Air Act 
(see, Union Electric Co., v. EPA, 427 U.S. 246, 255-66 (1976); 42 
U.S.C. 7410(a)(2)) other than for purposes of evaluating the 
reasonableness and availability of alternatives for purposes of a 
waiver of Federal preemption.
    The State has submitted information indicating that the 
administrative requirements of Texas law have been met. We defer to the 
State analysis until such time as a State Court has determined 
otherwise.

Issue 8  Need for Regulatory Flexibility Act Analysis

    ATA commented that EPA has mistakenly concluded that the Regulatory 
Flexibility Act does not apply to this rulemaking.
    Response: This action merely approves state law as meeting Federal 
requirements and imposes no additional requirements beyond those 
imposed by state law. Because this rule approves pre-existing 
requirements under state law and does not impose any additional 
enforceable duty beyond that required by state law and hence does not 
have a significant economic impact on a substantial number of small 
entities, an analysis under the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.) is not required.

Issue 9  EPA's Action Is Arbitrary and Capricious

    ATA states that approval of the LED fuel rule is arbitrary and 
capricious.
    Response: ATA provides no independent support for its claim that 
EPA acted arbitrarily or capriciously. Thus, to the extent ATA relies 
on its previous comments to support this final conclusion, EPA has 
responded to this claim in responding to the specific issues raised by 
ATA and others.
    EPA actions may be overturned if such action is found to be 
arbitrary,

[[Page 57217]]

capricious, an abuse of discretion or otherwise not in accordance with 
law; contrary to Constitutional right, power, privilege or immunity; in 
excess of statutory jurisdiction, authority, or limitations or without 
observance of procudure required by law. CAA Section 307(d)(9). See 
also, Virginia v. Browner, 80 F.3d 869, 876 (4th Cir. 1996) (applying 
the APA standard to the EPA's disapproval of a state implementation 
plan); see also Sierra Club v. EPA, 252 F.3d 943, 946-47 (8th Cir. 
2001) (applying the APA standard to approval of a state implementation 
plan); Ober v. Whitman, 243 F.3d 1190, 1193 (9th Cir. 2001) (applying 
the APA standard to the EPA's exemption in a Federal implementation 
plan of certain de minimis sources of pollution).
    The commenter has suggested that this action is arbitrary and 
capricious. That is not the case. When a Court reviews an agency action 
to see if it was arbitrary and capricious, the Court looks to see if 
the agency ``relied on factors that Congress has not intended it to 
consider, entirely failed to consider an important aspect of the 
problem, offered an explanation for its decision that runs counter to 
the evidence before the agency, or is so implausible that it could not 
be ascribed to a difference in view or the product of agency 
expertise.'' Hughes River Watershed Conservancy v. Johnson, 165 F.3d 
283, 288 (4th Cir. 1999)(citing Motor Vehicle Mfrs. Ass'n v. State Farm 
Mut., 463 U.S. 29, 43 (1983)). The discussion in this Response to 
Comments Preamble and the Technical Support Document supporting the 
proposal for this action provide a reasonable basis for the decision 
reached, demonstrating that this approval is not arbitrary and 
capricious. See, Natural Res. Def. Council, Inc. v. EPA, 16 F.3d 1395, 
1401 (4th Cir. 1993).
    Section 211(c)(4)(C) provides for SIP approval of otherwise 
preempted state fuel controls if EPA finds the control is ``necessary'' 
to achieve a NAAQS because no other reasonable or practicable 
alternatives exist that would bring about timely attainment. We have 
demonstrated that the LED fuel measure is necessary to achieve 
attainment of the 1-hour ozone standard. First we quantified the 
emissions reductions needed to achieve the NAAQS and showed that even 
with implementation of the extraordinary controls being adopted by the 
State, additional reductions are needed. In order to address the 
difficult nonattainment problem in the Houston area, the State has 
adopted a long list of control measures, many of which have never been 
implemented by other states. Notwithstanding these aggressive controls, 
the State has identified a shortfall in the required emission 
reductions and has committed to pursue other necessary controls.
    After demonstrating the air quality need, we showed that, at this 
time, there are no reasonable and practicable alternatives sufficient 
to achieve the NAAQS. In coming to adopt the LED control, the State 
reviewed an unprecedented list of alternatives, reviewing the costs, 
benefits, implementation time, public acceptance and other factors for 
evaluating reasonableness and practicability. EPA has reviewed these 
findings and has made its own assessment of these controls as well as 
the additional alternatives identified by commenters.
    Finally, we demonstrated that the LED program will provide some of 
the needed NOX reductions. While commenters dispute the 
quantity of reductions the LED program will provide, no commenter 
disputes that LED will provide some NOX benefits. EPA has 
nonetheless addressed the specific arguments on the costs and benefits 
of the program and believes that given the costs and benefits of the 
program, the LED program remains a more desirable control option than 
the alternatives rejected by the State.
    EPA, therefore, concludes the record provides a reasonable basis 
for approving the LED SIP revision in accordance with sections 110, 
211(c)(4), and 307(d)(9) of the Clean Air Act.

VIII. EPA's Rulemaking Action

    We are granting final approval pursuant to sections 110 and 
211(c)(4)(C) because we find that the State has (1) identified the 
reduction in NOX needed to achieve attainment of the ozone 
NAAQS; (2) identified all other reasonable and practicable control 
measures; (3) shown that even with the implementation of all reasonable 
and practicable control measures, the State would need additional 
emissions reductions for the HGA nonattainment area to meet the ozone 
NAAQS (124 ppb) on a timely basis; and (4) demonstrated that the LED 
fuel requirement would provide some of those additional reductions.

IX. Administrative Requirements

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
action is not a ``significant regulatory action'' and therefore is not 
subject to review by the Office of Management and Budget. For this 
reason, this action is also not subject to Executive Order 13211, 
``Actions Concerning Regulations That Significantly Affect Energy 
Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001). This action 
merely approves state law as meeting Federal requirements and imposes 
no additional requirements beyond those imposed by state law. 
Accordingly, the Administrator certifies that this rule will not have a 
significant economic impact on a substantial number of small entities 
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because 
this rule approves pre-existing requirements under state law and does 
not impose any additional enforceable duty beyond that required by 
state law, it does not contain any unfunded mandate or significantly or 
uniquely affect small governments, as described in the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4).
    This rule also does not have tribal implications because it will 
not have a substantial direct effect on one or more Indian tribes, on 
the relationship between the Federal Government and Indian tribes, or 
on the distribution of power and responsibilities between the Federal 
Government and Indian tribes, as specified by Executive Order 13175 (65 
FR 67249, November 9, 2000). This action also does not have Federalism 
implications because it does not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, as specified in Executive Order 13132 (64 
FR 43255, August 10, 1999). This action merely approves a state rule 
implementing a Federal standard, and does not alter the relationship or 
the distribution of power and responsibilities established in the Clean 
Air Act. This rule also is not subject to Executive Order 13045 
``Protection of Children from Environmental Health Risks and Safety 
Risks'' (62 FR 19885, April 23, 1997), because it is not economically 
significant.
    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. In 
this context, in the absence of a prior existing requirement for the 
State to use voluntary consensus standards (VCS), EPA has no authority 
to disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the Clean Air Act. Thus, the requirements 
of section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does

[[Page 57218]]

not impose an information collection burden under the provisions of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).
    The Congressional Review Act, 5 U.S.C. section 801 et seq., as 
added by the Small Business Regulatory Enforcement Fairness Act of 
1996, generally provides that before a rule may take effect, the agency 
promulgating the rule must submit a rule report, which includes a copy 
of the rule, to each House of the Congress and to the Comptroller 
General of the United States. EPA will submit 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 United States 
prior to publication of the rule in the Federal Register. A major rule 
cannot take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
section 804(2).
    Under section 307(b)(1) of the Clean Air Act, petitions for 
judicial review of this action must be filed in the United States Court 
of Appeals for the appropriate circuit by January 14, 2002. Filing a 
petition for reconsideration by the Administrator of this final rule 
does not affect the finality of this rule for the purposes of judicial 
review nor does it extend the time within which a petition for judicial 
review may be filed, and shall not postpone the effectiveness of such 
rule or action. This action may not be challenged later in proceedings 
to enforce its requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide, 
Hydrocarbons, Incorporation by reference, Intergovernmental relations, 
Nitrogen dioxide, Ozone, Particulate matter, Reporting and 
recordkeeping requirements, Sulfur oxides, Volatile organic compounds.

    Dated: October 15, 2001.
Gregg A. Cooke,
Regional Administrator, Region 6.

    Part 52, chapter I, title 40 of the Code of Federal Regulations is 
amended as follows:

PART 52--[AMENDED]

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

    Authority: 42 U.S.C. 7401 et seq.

Subpart SS--Texas

    2. In Sec. 52.2270 the table in paragraph (c) is amended under 
Chapter 114 (Reg 4):
    a. Under Subchapter A, by adding a new entry for Section 114.6 in 
numerical order;
    b. Revising the heading ``Subchapter H--Low Emission Fuels; 
Division I: Gasoline Volatility'' to read ``Subchapter H--Low Emission 
Fuels';
    c. Under the heading ``Subchapter H--Low Emission Fuels'' and 
before Section 114.301 by adding the heading ``Division 1: Gasoline 
Volatility';
    d. Under Subchapter H immediately after Section 114.309 by adding a 
new heading ``Division 2: Low Emission Diesel'' followed by new 
individual entries for Sections 114.312, 114.313, 114.314, 114.315, 
114.316, 114.317, 114.318, and 114.319.
    The revisions and additions read as follows:


Sec. 52.2270  Identification of plan.

* * * * *
    (c) * * *

                                    EPA Approved Regulations in the Texas SIP
----------------------------------------------------------------------------------------------------------------
                                                                   State
                                                                  approval       EPA
             State citation                  Title/Subject       Submittal     approval         Explanation
                                                                    date         date
----------------------------------------------------------------------------------------------------------------
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------
                        Chapter 114 (Reg 4)--Control of Air Pollution from Motor Vehicles
----------------------------------------------------------------------------------------------------------------
                                            Subchapter A--Definitions
----------------------------------------------------------------------------------------------------------------
 
*                  *                  *                  *                  *                  *
                                                        *
Section 114.6..........................  Low Emission Fuel       12/06/2000  [Insert 11/
                                          Definitions.                             14/01
                                                                                 Federal
                                                                                Register
                                                                                  Cite.]
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------
                                        Subchapter H--Low Emission Fuels
----------------------------------------------------------------------------------------------------------------
                                         Division 1: Gasoline Volatility
----------------------------------------------------------------------------------------------------------------
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------
                                         Division 2: Low Emission Diesel
----------------------------------------------------------------------------------------------------------------
Section 114.312........................  Low Emission Diesel     12/06/2000  [Insert 11/
                                          Standards.                               14/01
                                                                                 Federal
                                                                                Register
                                                                                  Cite.]
Section 114.313........................  Designated Alternate    12/06/2001   Insert 11/
                                          Limits.                                  14/01
                                                                                 Federal
                                                                                Register
                                                                                  Cite.]

[[Page 57219]]

 
Section 114.314........................  Registration of         09/26/2001  [Insert 11/
                                          Diesel Producers and                     14/01
                                          Importers.                             Federal
                                                                                Register
                                                                                  Cite.]
Section 114.315........................  Approved Test Methods   12/06/2000  [Insert 11/
                                                                                   14/01
                                                                                 Federal
                                                                                Register
                                                                                  Cite.]
Section 114.316........................  Monitoring,             12/06/2000  [Insert 11/
                                          Recordkeeping,                           14/01
                                          Reporting and                          Federal
                                          Requirements.                         Register
                                                                                  Cite.]
Section 114.317........................  Exemptions to Low       12/06/2000  [Insert 11/
                                          Emission Diesel                          14/01
                                          Requirements.                          Federal
                                                                                Register
                                                                                  Cite.]
Section 114.318........................  Alternative Emission    09/26/2001  [Insert 11/
                                          Reduction Plan.                          14/01
                                                                                 Federal
                                                                                Register
                                                                                  Cite.]
Section 114.319........................  Affected Counties and   09/26/2001  [Insert 11/
                                          Compliance Dates.                        14/01
                                                                                 Federal
                                                                                Register
                                                                                  Cite.]
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------

[FR Doc. 01-27581 Filed 11-13-01; 8:45 am]
BILLING CODE 6560-50-P