[Federal Register Volume 67, Number 92 (Monday, May 13, 2002)]
[Proposed Rules]
[Pages 31998-32002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11825]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA 249-0349; FRL-7211-2]


Revisions to the California State Implementation Plan, South 
Coast Air Quality Management District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing a conditional approval of revisions to the 
South Coast Air Quality Management District's portion of the California 
State Implementation Plan (SIP). These revisions concern oxides of 
nitrogen (NOX) and oxides of sulfur (SOX) 
emissions from facilities emitting 4 tons or more per year of 
NOX and/or SOX in the year 1990 or any subsequent 
year. We are proposing action on local rules that regulate these 
emission sources under the Clean Air Act as amended in 1990 (CAA or the 
Act). These rules compose the South Coast Air Quality Management 
District's Regional Clean Air Incentives Market (``RECLAIM'') program. 
We are taking comments on this proposal and plan to follow with a final 
action.

DATES: Any comments must arrive by July 12, 2002.

ADDRESSES: Mail comments to Andy Steckel, Rulemaking Office Chief (AIR-
4), U.S. Environmental Protection Agency, Region IX, 75 Hawthorne 
Street, San Francisco, CA 94105-3901.
    You can inspect copies of the submitted SIP revisions and EPA's 
technical support document (TSD) at our Region IX office during normal 
business hours. You may also see copies of the submitted SIP revisions 
at the following locations:


[[Page 31999]]


California Air Resources Board, Stationary Source Division, Rule 
Evaluation Section, 1001 ``I'' Street, Sacramento, CA 95814.
South Coast Air Quality Management District (``SCAQMD''), 21865 E. 
Copley Dr., Diamond Bar, CA 91765-4182.

FOR FURTHER INFORMATION CONTACT: Thomas C. Canaday, Rulemaking Office 
(AIR-4), U.S. Environmental Protection Agency, Region IX, (415) 947-
4121.

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

Table of Contents

I. The State's Submittal
    A. What rules did the State submit?
    B. Are there other versions of these rules?
    C. What is the purpose of the submitted rules?
II. EPA's Evaluation and Action
    A. How is EPA evaluating the rules?
    B. Do the rules meet the evaluation criteria?
    C. What are the rule deficiencies?
    D. Proposed action and public comment.
III. Background information
    A. Why were these rules submitted?
    IV. Administrative Requirements

I. The State's Submittal

A. What Rules Did the State Submit?

    Table 1 lists the rules addressed by this proposal with the dates 
that they were adopted by SCAQMD and submitted by the California Air 
Resources Board (CARB).

                                            Table 1.--Submitted Rules
----------------------------------------------------------------------------------------------------------------
               Local agency                    Rule #              Rule title             Adopted     Submitted
----------------------------------------------------------------------------------------------------------------
SCAQMD....................................         2000  General......................     05/11/01     05/31/01
SCAQMD....................................         2001  Applicability................     05/11/01     05/31/01
SCAQMD....................................         2002  Allocations for Oxides of         05/11/01     05/31/01
                                                          Nitrogen (NOX) and Oxides of
                                                          Sulfur (SOX).
SCAQMD....................................         2004  Requirements.................     05/11/01     05/31/01
SCAQMD....................................         2005  New Source Review for RECLAIM     04/20/01     10/30/01
SCAQMD....................................         2006  Permits......................     05/11/01     05/31/01
SCAQMD....................................         2007  Trading Requirements.........     05/11/01     05/31/01
SCAQMD....................................         2010  Administrative Remedies and       05/11/01     05/31/01
                                                          Sanctions.
SCAQMD....................................         2011  Requirements for Monitoring,      05/11/01     05/31/01
                                                          Reporting, and Recordkeeping
                                                          for Oxides of Sulfur (SOX)
                                                          Emissions.
SCAQMD....................................       2011-2  Protocol for Monitoring,          03/16/01     05/31/01
                                                          Reporting, and Recordkeeping
                                                          for Oxides of Sulfur (SOX)
                                                          Emissions.
SCAQMD....................................         2012  Requirements for Monitoring,      05/11/01     05/31/01
                                                          Reporting, and Recordkeeping
                                                          for Oxides of Nitrogen (NOX)
                                                          Emissions.
SCAQMD....................................       2012-2  Protocol for Monitoring,          03/16/01     05/31/01
                                                          Reporting, and Recordkeeping
                                                          for Oxides of Nitrogen (NOX)
                                                          Emissions.
SCAQMD....................................         2015  Backstop Provisions..........     05/11/01     05/31/01
SCAQMD....................................         2020  RECLAIM Reserve..............     05/11/01     05/31/01
----------------------------------------------------------------------------------------------------------------

    On, July 20, 2001, these rule submittals (excepting the submittal 
for Rule 2005) were found to meet the completeness criteria in 40 CFR 
part 51 Appendix V, which must be met before formal EPA review. The 
rule submittal for Rule 2005 was found to be complete on January 1, 
2002.

B. Are There Other Versions of These Rules?

    We approved an amended version of Rule 2000 into the SIP on June 
15, 1998. The SCAQMD adopted revisions to the SIP-approved version of 
Rule 2000 on February 14, 1997, and April 11, 1997, and CARB submitted 
them to us on August 22, 1997. The SCAQMD subsequently adopted 
additional revisions to the SIP-approved version of this rule on 
October 20, 2000, and CARB submitted those revisions to us on March 14, 
2001.
    We approved an amended version of Rule 2001 into the SIP on June 
15, 1998. The SCAQMD adopted revisions to the SIP-approved version of 
Rule 2001 on February 14, 1997, and CARB submitted them to us on August 
22, 1997.
    We approved an amended version of Rule 2002 into the SIP on March 
14, 2000.
    We approved an amended version of Rule 2004 into the SIP on June 
15, 1998. The SCAQMD adopted revisions to the SIP-approved version of 
Rule 2004 on July 12, 1996, and CARB submitted them to us on March 3, 
1997.
    We approved an amended version of Rule 2005 into the SIP on March 
14, 2000.
    We approved amended versions of Rules 2006 and 2007 into the SIP on 
June 15, 1998.
    We approved Rule 2010, adopted by the SCAQMD on October 15, 1993, 
into the SIP on November 8, 1996.
    We approved versions of Rules 2011 and 2011-2 into the SIP on June 
15, 1998. These versions were adopted by the SCAQMD on December 7, 
1995. The SCAQMD adopted revisions to the SIP-approved versions of Rule 
2011 and 2011-2 on July 12, 1996, and CARB submitted them to us on 
March 3, 1997. The SCAQMD adopted additional revisions to the SIP-
approved versions of these rules on February 14, 1997, and CARB 
submitted those revisions to us on August 22, 1997. Finally, the SCAQMD 
adopted further revisions to the SIP-approved versions of Rules 2011 
and 2011-2 on April 11, 1997, and April 9, 1999, and CARB submitted 
those revisions to us on July 23, 1999.
    We approved versions of Rules 2012 and 2012-2 into the SIP on June 
15, 1998. These versions were adopted by the SCAQMD on December 7, 
1995. The SCAQMD adopted revisions to the SIP-approved versions of Rule 
2012 and 2012-2 on July 12, 1996, and CARB submitted them to us on 
March 3, 1997. The SCAQMD adopted additional revisions to the SIP-
approved versions of these rules on February 14, 1997, and April 11, 
1997, and CARB submitted those revisions to us on August 22, 1997. 
Finally, the SCAQMD adopted further revisions to the SIP-approved 
versions of Rules 2012 and 2012-2 on April 9, 1999, and CARB submitted 
those revisions to us on July 23, 1999.
    We approved an amended version of Rule 2015 into the SIP on June 
15, 1998. This version had been adopted by the SCAQMD on December 7, 
1995. The SCAQMD adopted revisions to the SIP-approved version of Rule 
2015 on July 12, 1996, and CARB submitted them to us on March 3, 1997. 
The SCAQMD subsequently adopted additional revisions to the SIP-
approved version of this rule on February 14, 1997, and

[[Page 32000]]

CARB submitted those revisions to us on August 22, 1997.
    There is no previous version of Rule 2020 in the SIP. While we can 
act on only the most recently submitted versions of submitted rules, we 
have reviewed materials provided with previous submittals.

C. What Is the Purpose of the Submitted Rules?

    The RECLAIM program is intended to allow facilities subject to the 
program to meet their emission reduction requirements in the most cost-
effective manner. The program was designed to provide incentives for 
industry to reduce emissions and develop innovative pollution control 
technologies, as well as give facilities added flexibility in meeting 
emission reduction requirements. Each facility under the program was 
given an allocation of RECLAIM Trading Credits (``RTCs'') based on a 
declining balance equivalent to the emissions levels that would have 
occurred if the facility continued to operate under the then current 
command-and-control regulations. Facilities within the RECLAIM program 
must reconcile their emissions with their RTC holdings and have the 
option of doing so by either installing control equipment, modifying 
their activity, or purchasing RTCs from other facilities.
    Beginning June 2000, RECLAIM program participants experienced a 
sharp and sudden increase in NOX RTC prices for both 1999 
and 2000 compliance years. The program rules were amended with the 
intent of lowering and stabilizing RTC prices. The submitted rule 
revisions isolate existing large power plants (those producing 50 
megawatts or more) from the rest of RECLAIM, require these plants to 
install emissions control equipment, limit their ability to purchase 
RTCs from other program participants, and impose on them a mitigation 
fee for emissions in excess of RTC holdings. The revisions also 
initiate a temporary, limited, pilot RECLAIM Air Quality Investment 
Program; improve registration and timely reporting of RTC trades; and 
modify procedures for late electronic emissions reports. The rule 
revisions also effect additional changes to the RECLAIM program 
predating and unrelated to the sudden increase in RTC prices. Some 
definitions in Rule 2000 were added or modified. Rule 2001 was revised 
to specify that RECLAIM facilities will be exempt from future 
amendments to certain rules listed in Rule 2001. The breakdown 
provisions of Rule 2004 were revised. Numerous revisions were made to 
the monitoring, reporting, and recordkeeping requirements and protocols 
of Rule 2011, Rule 2011-2, Rule 2012, and Rule 2012-2. Rule 2015 was 
revised to consolidate some reporting requirements and to specify the 
presentation date of the annual RECLAIM audit report. The TSD has more 
information about these rules.

II. EPA's Evaluation and Action

A. How Is EPA Evaluating the Rules?

    Generally, SIP rules must be enforceable (see section 110(a) of the 
Act), must require Reasonably Available Control Technology (``RACT'') 
for major sources in nonattainment areas (see section 182(a)(2)(A)), 
and must not relax existing requirements (see sections 110(l) and 193). 
The SCAQMD regulates an ozone nonattainment area (see 40 CFR part 81), 
so the submitted rules must fulfill RACT.
    We have used guidance and policy documents to help evaluate 
enforceability and RACT requirements consistently. Because this 
guidance is non-binding and does not represent final agency action, EPA 
uses this guidance as an initial screen to determine whether 
approvability issues arise. These documents include the following:
    1. ``State Implementation Plans; Nitrogen Oxides Supplement to the 
General Preamble; Clean Air Act Amendments of 1990 Implementation of 
Title I; Proposed Rule,'' (the NOX Supplement), 57 FR 55620, 
November 25, 1992.
    2. ``Issues Relating to VOC Regulation Cutpoints, Deficiencies, and 
Deviations; Clarification to Appendix D of November 24,1987 Federal 
Register Notice,'' (Blue Book), notice of availability published in the 
May 25, 1988 Federal Register.
    3. ``Improving Air Quality with Economic Incentive Programs,'' 
January 2001, Office of Air and Radiation, EPA-452/R-01-001 (``EIP 
Guidance''). This guidance applies to discretionary economic incentive 
programs (``EIPs'') and represents the agency's interpretation of what 
EIPs should contain in order to meet the requirements of the CAA.
    4. ``State Implementation Plans: Policy Regarding Excess Emissions 
During Malfunctions, Startup and Shutdown,'' EPA Office of Air and 
Radiation, and EPA Office of Enforcement and Compliance Assurance, 
September 20, 1999 (``Excess Emissions Policy'').

B. Do the Rules Meet the Evaluation Criteria?

    These rules improve the SIP by requiring the installation of 
pollution control equipment and by strengthening reporting provisions. 
These rules are largely consistent with the relevant policy and 
guidance regarding enforceability, RACT, and SIP relaxations. Rule 
provisions which do not meet the evaluation criteria are summarized 
below and discussed further in the TSD.

C. What Are the Rule Deficiencies?

    The rules conflict with section 110 and part D of the Act and 
prevent full approval of the SIP revision due to their treatment of 
excess emissions which occur due to equipment breakdown. Rules 2000 and 
2004 contain provisions which exempt, under certain circumstances, 
excess emissions that occur during breakdowns from being counted when a 
RECLAIM facility reconciles its emissions with its RTC holdings. In our 
EIP Guidance and our Excess Emissions Policy, EPA interprets the CAA as 
requiring that such emissions not be exempted.

D. Proposed Action and Public Comment

    On April 2, 2002, SCAQMD Executive Officer Barry R. Wallerstein 
submitted a commitment on behalf of the SCAQMD staff to adopt and 
submit revisions to the RECLAIM program rules within one year after the 
date of publication of EPA's final action on today's proposed 
conditional approval. These revisions will establish a mechanism within 
the RECLAIM program to mitigate all excess emissions resulting from 
breakdowns. RECLAIM will be revised to require monitoring and tracking 
of excess emissions from breakdowns and comparison of the total amount 
of exempted emissions to the amount of unused RTCs for that year. If 
total exempted breakdown emissions from all RECLAIM sources exceeds the 
total amount of unused RTCs program-wide in any year, RECLAIM 
allocations in the following year will be reduced by an amount equal to 
that exceedence.
    As authorized in section 110(k)(4) of the Act, EPA is proposing a 
conditional approval of the submitted rule to improve the SIP. If 
finalized, this action would incorporate into the SIP both the 
submitted rule and the commitment to correct the identified deficiency 
within one year.
    This conditional approval shall be treated as a disapproval if the 
SCAQMD fails to adopt rule revisions to correct the deficiencies within 
the time

[[Page 32001]]

allowed. If this rule is disapproved, sanctions will be imposed under 
section 179 of the Act unless EPA approves subsequent SIP revisions 
that correct the rule deficiencies within 18 months. These sanctions 
would be imposed according to 40 CFR 52.31. A final disapproval would 
also trigger the federal implementation plan (FIP) requirement under 
section 110(c). Note that the submitted rules have been adopted by the 
SCAQMD, and EPA's final conditional approval would not prevent the 
local agency from enforcing it.
    We will accept comments from the public on the proposed conditional 
approval for the next 60 days.

III. Background Information

A. Why Were These Rules Submitted?

    NOX helps produce ground-level ozone, smog and 
particulate matter which harm human health and the environment. Section 
110(a) of the CAA requires states to submit regulations that control 
NOX emissions. Table 2 lists some of the national milestones 
leading to the submittal of these local agency NOX rules.

                Table 2.--Ozone Nonattainment Milestones
------------------------------------------------------------------------
                  Date                                Event
------------------------------------------------------------------------
March 3, 1978..........................  EPA promulgated a list of ozone
                                          nonattainment areas under the
                                          Clean Air Act as amended in
                                          1977. 43 FR 8964; 40 CFR
                                          81.305.
May 26, 1988...........................  EPA notified Governors that
                                          parts of their SIPs were
                                          inadequate to attain and
                                          maintain the ozone standard
                                          and requested that they
                                          correct the deficiencies
                                          (EPA's SIP-Call). See section
                                          110(a)(2)(H) of the pre-
                                          amended Act.
November 15, 1990......................  Clean Air Act Amendments of
                                          1990 were enacted. Pub. L. 101-
                                          549, 104 Stat. 2399, codified
                                          at 42 U.S.C. 7401-7671q.
May 15, 1991...........................  Section 182(a)(2)(A) requires
                                          that ozone nonattainment areas
                                          correct deficient RACT rules
                                          by this date.
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IV. Administrative Requirements

A. Executive Order 12866

    The Office of Management and Budget has exempted this regulatory 
action from Executive Order 12866, Regulatory Planning and Review.

B. Executive Order 13211

    This proposed rule is not subject to Executive Order 13211, 
``Actions Concerning Regulations That Significantly Affect Energy 
Supply, Distribution, or Use'' (66 FR 28355 (May 22, 2001)) because it 
is not a significant regulatory action under Executive Order 12866.

C. Executive Order 13045

    Executive Order 13045, entitled Protection of Children from 
Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 
1997), applies to any rule that: (1) is determined to be ``economically 
significant'' as defined under Executive Order 12866, and (2) concerns 
an environmental health or safety risk that EPA has reason to believe 
may have a disproportionate effect on children. If the regulatory 
action meets both criteria, the Agency must evaluate the environmental 
health or safety effects of the planned rule on children, and explain 
why the planned regulation is preferable to other potentially effective 
and reasonably feasible alternatives considered by the Agency.
    This rule is not subject to Executive Order 13045 because it does 
not involve decisions intended to mitigate environmental health or 
safety risks.

D. Executive Order 13132

    Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 
1999) revokes and replaces Executive Orders 12612, Federalism and 
12875, Enhancing the Intergovernmental Partnership. Executive Order 
13132 requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that 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.'' Under 
Executive Order 13132, EPA may not issue a regulation that has 
federalism implications, that imposes substantial direct compliance 
costs, and that is not required by statute, unless the Federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by State and local governments, or EPA consults with 
State and local officials early in the process of developing the 
proposed regulation. EPA also may not issue a regulation that has 
federalism implications and that preempts State law unless the Agency 
consults with State and local officials early in the process of 
developing the proposed regulation.
    This proposed rule will 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, 
because it merely acts on 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. Thus, the 
requirements of section 6 of the Executive Order do not apply to this 
proposed rule.

E. Executive Order 13175

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 6, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' ``Policies that have tribal 
implications'' is defined in the Executive Order to include regulations 
that have ``substantial direct effects on one or more Indian tribes, on 
the relationship between the Federal government and the Indian tribes, 
or on the distribution of power and responsibilities between the 
Federal government and Indian tribes.''
    This proposed rule does not have tribal implications. It will not 
have substantial direct effects on tribal governments, 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,

[[Page 32002]]

as specified in Executive Order 13175. Thus, Executive Order 13175 does 
not apply to this rule. In the spirit of Executive Order 13175, and 
consistent with EPA policy to promote communications between EPA and 
tribal governments, EPA specifically solicits additional comment on 
this proposed rule from tribal officials.

F. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, small not-for-profit enterprises, and small governmental 
jurisdictions.
    This proposed rule will not have a significant impact on a 
substantial number of small entities because SIP approvals under 
section 110 and subchapter I, part D of the Clean Air Act do not create 
any new requirements but simply act on requirements that the State is 
already imposing. Therefore, because the Federal SIP approval does not 
create any new requirements, I certify that this action will not have a 
significant economic impact on a substantial number of small entities.
    Moreover, due to the nature of the Federal-State relationship under 
the Clean Air Act, preparation of flexibility analysis would constitute 
Federal inquiry into the economic reasonableness of state action. The 
Clean Air Act forbids EPA to base its actions concerning SIPs on such 
grounds. Union Electric Co. v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 
42 U.S.C. 7410(a)(2).

G. Unfunded Mandates

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

H. National Technology Transfer and Advancement Act

    Section 12 of the National Technology Transfer and Advancement Act 
(NTTAA) of 1995 requires Federal agencies to evaluate existing 
technical standards when developing a new regulation. To comply with 
NTTAA, EPA must consider and use ``voluntary consensus standards'' 
(VCS) if available and applicable when developing programs and policies 
unless doing so would be inconsistent with applicable law or otherwise 
impractical.
    EPA believes that VCS are inapplicable to today's proposed action 
because it does not require the public to perform activities conducive 
to the use of VCS.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Intergovernmental 
relations, Nitrogen dioxide, Ozone, Reporting and recordkeeping 
requirements.

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

    Dated: April 26, 2002.
Wayne Nastri,
Regional Administrator, Region IX.
[FR Doc. 02-11825 Filed 5-10-02; 8:45 am]
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