[Federal Register Volume 71, Number 249 (Thursday, December 28, 2006)]
[Notices]
[Pages 78192-78199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-22313]


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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OAR-2006-0340; FRL-8262-6]


Boutique Fuels List under Section 1541(b) of the Energy Policy 
Act

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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SUMMARY: The Energy Policy Act of 2005 (EPAct) includes a number of 
provisions addressing state boutique fuel programs. Section 1541(b) of 
this Act requires EPA, in consultation with the Department of Energy, 
to determine the total number of fuels approved into all state 
implementation plans (SIPs) as of September 1, 2004, under section 
211(c)(4)(C) of the Clean Air Act (CAA). The EPAct also requires us to 
publish a list of such fuels, including the states and Petroleum 
Administration for Defense District (PADD) in which they are used, for 
public review and comment. On June 6, 2006, we published a draft list 
based upon a ``fuel type approach'' along with an explanation of our 
rationale in developing it. We also published an alternative list based 
upon a ``state specific approach.'' In this notice we are finalizing 
the list of total number of fuels approved into all SIPs as of 
September 1, 2004, based upon the fuel type approach. This notice also 
addresses comments that we received on the proposed draft notice and 
list.

FOR FURTHER INFORMATION CONTACT: Anne Pastorkovich, Environmental 
Protection Agency, MC 6406J, 1200 Pennsylvania Ave., NW, Washington, DC 
20460; telephone number: 202-343-9623; fax number: 202-343-2801; email 
address: [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Under the Clean Air Act (CAA), state fuel programs respecting a 
fuel characteristic or component that we have regulated under section 
211(c) (1) are preempted.\1\ EPA may waive preemption through approval 
of the fuel program into a State Implementation Plan (SIP). Approval 
into the SIP

[[Page 78193]]

requires a demonstration that the state fuel program is necessary to 
achieve the National Ambient Air Quality Standards (NAAQS) that the 
plan implements.\2\ ``Necessary'' means that no other measures exist 
that would bring about timely attainment or that other measures exist 
and are technically possible to implement, but are unreasonable or 
impracticable.\3\ These state fuels programs, which are often referred 
to as ``boutique'' fuel programs because they differ from the federal 
fuel required in the area, have been adopted by the state to address a 
specific local air quality issue. One issue presented by boutique fuels 
is that when events (such as hurricanes or pipeline and refinery 
breakdowns) lead to fuel supply shortages, varying fuel standards can 
complicate the process of quickly solving the supply interruption.
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    \1\ See CAA section 211(c)(4)(A), 42 U.S.C. 7545(c)(4)(A).
    \2\ NAAQS are standards for ambient levels of certain air 
pollutants (e.g. ground-level ozone) and are designed to protect 
public health and welfare.
    \3\ See CAA section 211(c)(4)(C)(i), 42 U.S.C. 7545(c)(4)(C)(i).
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    The Energy Policy Act of 2005 (EPAct) amends the CAA by placing 
additional restrictions on our authority to waive preemption by 
approving a state fuel into the SIP. These restrictions are:
     We cannot approve a state fuel if it would cause the total 
number of fuels approved into SIPs to increase above the number 
approved as of September 1, 2004.
     In cases where our approval would not increase the total 
number of such fuels, because the total number of fuels in SIPs at that 
point is below the number of fuels as of September 1, 2004, then our 
approval requires a finding, after consultation with the Department of 
Energy (DOE), that the new fuel will not cause supply or distribution 
interruptions or have a significant adverse impact on fuel 
producibility in the affected or contiguous areas.\4\
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    \4\ See CAA section 211(v)(4)(C)(v)(IV), 42 U.S.C. 
7545(c)(4)(C)(v)(IV).
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     We cannot approve a state fuel into a SIP unless the fuel 
is already in an existing SIP within that PADD, with the exception of a 
7.0 psi RVP fuel.\5\ EPA's approval of a 7.0 psi RVP fuel would, 
however, be subject to the other EPAct restrictions.
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    \5\ See CAA section 211(c)(4)(C)(v)(V), 42 U.S.C. 
7545(c)(4)(C)(v)(V). For a pictorial depiction of the PADD map, 
please refer to ``Petroleum Administration for Defense Districts'' 
at http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/paddmap.htm.
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    As these restrictions make clear, how we determine the total number 
of fuels on the list may greatly affect states' ability to have future 
boutique fuels programs approved into SIPs.
    Section 1541(b) of the EPAct also requires us, in consultation with 
the Department of Energy (DOE), to determine the total number of fuels 
approved into all state implementation plans (SIPs) as of September 1, 
2004, under section 211(c)(4)(C), and publish a list of such fuels, 
including the state and PADD in which they are used for public review 
and comment. On June 6, 2006, we published a draft list of state fuels 
approved into SIPs under section 211(c)(4)(C) as of September 1, 2004 
for public review and comment.\6\ The notice included our draft 
interpretation of the various EPAct boutique fuels provisions described 
above. As we discussed in the notice, the EPAct is ambiguous as to the 
meaning of ``total number of fuels.'' We provided two proposed 
interpretations for developing the list. The first proposed approach 
was the ``fuel type approach.'' As explained in the notice, this 
approach would treat each type or kind of fuel as a separate fuel, 
without respect to the number of different state implementation plans 
that include this fuel type. For example, all state fuels with a Reid 
Vapor Pressure of 7.8 pounds per square inch (psi) would be considered 
as one fuel in determining the total number of fuels approved as of 
September 1, 2004.\7\ While several states had a 7.8 psi RVP program on 
that date, they would not be treated as different fuels in determining 
the ``total number of fuels,'' but as different states using a single 
fuel type. This approach resulted in a draft list with seven different 
fuel types. 71 FR 32533.
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    \6\ See ``Draft Boutique Fuels List Under Section 1541(b) of the 
Energy Policy Act and Request for Public Comment--Notice.'' 71 FR 
32532, 32533 (June 6, 2006).
    \7\ Reid Vapor Pressure is the common measure of fuel 
volatility. Volatility is the tendency of fuel to evaporate.
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    We also provided an alternative interpretation, called the ``state 
specific approach.'' Under this approach, each individual state using a 
type or kind of fuel in a SIP would be considered a separate fuel. For 
example, each state having a 7.8 psi RVP fuel in its SIP could be 
treated as having a separate fuel for purposes of determining the 
``total number of fuels.'' The state specific interpretation would lead 
to as many fuels as there are state fuel programs in the various PADDs 
and, as proposed, would have resulted in 15 different fuels.\8\ 71 FR 
32533-34.
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    \8\ For a more detailed description of the ``fuel type 
approach'' and the ``state specific approach,'' see 71 FR 32532, 
32533-34. Also see the tables corresponding to these approaches on 
pages 32535-36 of that notice.
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A. Our Final Interpretation of the EPAct Boutique Fuel Provisions

    In today's notice, we are adopting the fuel type interpretation. We 
are determining the total number of state fuels approved into SIPs 
under section 211(c)(4)(C) as of September 1, 2004 based on the fuel 
type interpretation. We will use both the fuel type interpretation and 
the final list of fuels in implementing the three EPAct criteria for 
future decisions on approval of a state fuel into a SIP. Specifically, 
these criteria present the following restrictions on our ability to 
approve future state fuels into SIPs:
     We cannot approve a state fuel into a SIP under section 
211(c)(4)(C) if it would cause the total number of fuel types on the 
list to increase above the number approved on September 1, 2004.\9\ 
Under the fuel type interpretation, our approval of a state 7.8 psi RVP 
program, for example, would not cause an increase in the number of fuel 
types on the list because that type of RVP program is already on the 
list.
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    \9\ See CAA section 211(c)(4)(C)(v)(I), 42 U.S.C. 
7545(c)(4)(C)(v)(I).
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     In cases where our approval of a fuel would increase the 
total number of fuels types on the list but not above the number 
approved as of September 1, 2004, because the total number of fuel 
types in SIPs is below the number of fuels types as of September 1, 
2004, we are required to make a finding after consultation with the DOE 
that the fuel does not cause supply or distribution interruptions or 
have a significant adverse impact on fuel producibility in the affected 
or contiguous areas. Under the fuel type interpretation, where there is 
``room'' on the list, we may approve a state fuel program, after 
consultation with the DOE, and a finding that the state fuel will not 
cause either supply or distribution interruptions or have a significant 
adverse impact on fuel producibility in either the affected or 
contiguous areas.
     We cannot approve a state fuel into a SIP unless that fuel 
type is already in a SIP in the applicable PADD, with the exception of 
the 7.0 psi RVP fuel type.\10\ Under the fuel type interpretation that 
we are adopting today, the PADD restriction would not extend to our 
approval of a 7.0 psi RVP fuel, although our approval of a 7.0 psi RVP 
fuel would remain subject to the other EPAct restrictions, discussed 
above. See also Section I.C. below for a further discussion of our 
interpretation and

[[Page 78194]]

implementation of the PADD restriction provision in PADD 5.
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    \10\ See CAA section 211(c)(4)(C)(v)(V), 42 U.S.C. 
7545(c)(4)(C)(v)(V).
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B. List of Fuel Types

    We have also modified the draft list in response to comments that 
we received on the proposed notice, and it now contains a total of 8 
different fuel types. See Section III, below, for the final List of 
State Fuels approved under section 211(c)(4)(C) as of September 1, 
2004.
(i) 9.0 psi RVP Fuel Type
    In proposing the draft list of boutique fuels, we recognized that 
there were a few states that had 9.0 psi RVP fuel programs approved 
into their SIPs as of September 1, 2004. We explained, however, that we 
do not believe that we should include a 9.0 psi RVP fuel type on the 
boutique fuels list required by EPAct. We explained that we were 
obligated to publish a list based on the total number of fuels approved 
into SIPs under section 211(c)(4)(C) as of September 1, 2004, and also 
required to remove a fuel that is ``identical to a Federal fuel 
formulation implemented by the Administrator,'' from the list.\11\ 
Because the current federal RVP requirement in all of these 
northeastern states is 9.0 psi RVP, and was as of September 1, 2004, 
reading the EPAct provisions literally would require EPA to include a 
9.0 psi RVP fuel type on the list but to remove it from the list at the 
same time. We proposed to exclude the 9.0 psi RVP fuel type from the 
list in order to avoid this illogical outcome. As we further explained 
in the notice, we do not believe that the 9.0 psi RVP fuel type would 
be viewed as contributing to the proliferation of ``fuel islands'' that 
Congress was concerned about.\12\ We continue to believe that the 
appropriate way to reconcile these apparently conflicting provisions is 
to exclude the 9.0 psi RVP fuel type from the list. We do not believe 
that adoption of the fuel type interpretation affects our decision not 
to list the 9.0 psi RVP fuel type.
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    \11\ See CAA section 211(c)(4)(C)(v)(III), 42 U.S.C. 
7545(c)(4)(C)(v)(III).
    \12\ See 71 FR 32532, 32534.
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    We received two comments concerning our treatment of the 9.0 psi 
RVP fuel type. Our response to these comments can be found in ``Section 
II. Comment Summary and Response,'' below.
(ii) Arizona Clean Burning Gasoline (CBG)
    Under our proposed fuel type interpretation, we listed the total 
number of fuels based on the kind or type of fuel approved into a SIP 
as of September 1, 2004. 71 FR 32533. We also determined the fuel type 
or kind based on the required specific fuel components, specifications, 
or limits of each fuel type (for example, 7.8 psi RVP, 7.2 psi RVP or 
7.0 psi RVP). At proposal therefore, we listed 7.0 psi RVP as a fuel 
type with Arizona as one of the 5 states that uses this fuel type. We 
also listed Arizona Clean Burning Gasoline (CBG) as a separate fuel 
type. We received two comments on our proposal. Both commenters 
recommended that we list Arizona CBG as two types of fuels, namely 
summertime and wintertime CBG. Both commenters said that specifications 
for CBG were different in winter, which was described as the period 
beginning November 2-March 31, and summer, which was described as the 
remaining portions of the calendar year. Also one commenter stated that 
both summer and winter CBG have different specifications for RVP, 
sulfur, aromatics, olefins, E200 and E300.
    In today's notice, we are listing Arizona CBG as two fuel types--
summer CBG and non-summer CBG. (See section III below for our final 
list of the fuel types). We agree with the commenters that Arizona's 
CBG program has several components, specifications or limits for summer 
CBG, such as the 7.0 psi RVP requirement, that are different from non-
summer CBG. We also believe summer CBG requirements, which have been 
adopted by Arizona to address ozone nonattainment, include the 7.0 psi 
RVP requirement. We are therefore listing summer CBG as one fuel type, 
because it has specifications that are different from non-summer CBG. 
We have removed Arizona from the list as one of the states that uses 
the 7.0 psi fuel type. We believe that our decision to list CBG as two 
fuel types is similar to our listing of the Atlanta 7.0 psi RVP with 
sulfur provisions as a separate fuel type. At proposal we also 
specified the control period for Arizona's 7.0 psi RVP program as June 
1-September 30. In today's notice, we are specifying May 1-September 30 
as the time period for the CBG summer control period, in order to 
correspond with the start date of Arizona's summer CBG control period 
(May 1) and the end date of Arizona's 7.0 psi RVP control period 
(September 30).
    One consequence of our decision to list Arizona CBG as two fuel 
types is that states in PADD 5 seeking to adopt state fuel programs 
would now have a wider choice of fuel types for purposes of addressing 
local air quality problems.
(iii) RVP Fuel Types that Do Not Provide a 1.0 psi Waiver for Ethanol-
Blended Gasoline
    In our draft list published June 6, 2006, we did not list any of 
the RVP programs that do not provide a 1.0 psi waiver for ethanol-
blended gasoline as separate fuel types. More specifically, we proposed 
listing the 7.8 psi RVP program for western Pennsylvania, and the 7.0 
psi RVP program for El Paso, Texas as part of the 7.8 psi and 7.0 psi 
fuel types respectively. Both programs explicitly do not provide a 1.0 
psi waiver for ethanol blends, and we have approved this requirement 
into the respective SIPs.\13\ We received two comments supporting our 
proposed decision not to list these fuel programs as separate fuel 
types, and one comment inquiring as to why EPA made no mention of RVP 
waivers for 10% ethanol-gasoline blends. Our response to these comments 
can be found in ``Section II. Comment Summary and Response,'' below.
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    \13\ Most SIPs explicitly allow the 1.0 psi waiver for ethanol-
blended gasoline. However, some SIPs are silent regarding the 1.0 
psi waiver for ethanol-blended gasoline, and our understanding is 
that these SIPs do not allow for such a waiver.
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    Listing fuel programs as separate fuel types depending on whether 
they allow or do not allow a 1.0 psi waiver for ethanol-blended 
gasoline would have several consequences. First, states in the same 
PADD as either Pennsylvania and Maine (PADD 1), or Texas (PADD 3), that 
want to adopt 7.8 psi RVP programs, would not be able to adopt a 7.8 
psi RVP program in their SIP that allows a 1.0 psi waiver for ethanol-
blended gasoline, because there is no 7.8 psi RVP program approved in 
any SIP in either PADD 1 or 3 that allows a 1.0 psi waiver for ethanol 
blends. Conversely, states in PADD 2 that want to adopt a 7.8 psi RVP 
program would only be able to adopt a 7.8 psi RVP program that allows a 
1.0 psi waiver for ethanol-blended gasoline, because there is no RVP 
program approved in a SIP in PADD 2 that does not allow a 1.0 psi 
waiver for ethanol blends.
    Another consequence of listing separate fuel types for areas that 
do not allow a 1.0 psi ethanol waiver is that we would have to decide 
how to treat the 7.0 psi RVP fuel type under EPAct. The EPAct treats 
the 7.0 psi RVP fuel type differently from other fuel types by allowing 
EPA to approve a state 7.0 psi RVP fuel even if no other states in the 
same PADD already have a 7.0 psi RVP fuel approved in their SIP (see 
Section I.C. below). The EPAct does not specify whether future 
approvals of 7.0 psi RVP SIP fuels should be allowed with a 1.0

[[Page 78195]]

psi ethanol waiver, without a 1.0 psi ethanol waiver, or whether states 
should be able to choose whether or not they want to allow a 1.0 psi 
ethanol waiver.\14\
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    \14\ It is important to note that this discussion of approval of 
state fuel programs with or without a 1.0 psi waiver for ethanol 
blends has no impact on EPA's federal RVP program. In the federal 
RVP program there is a 1.0 psi waiver for ethanol blends, subject to 
the provisions for exclusion of the 1.0 psi waiver adopted in EPAct. 
Section 211(h)(4), (5). EPA's interpretation of the section 
211(c)(4)(C) boutique fuels provisions above has no impact on the 
federal RVP program adopted under the provisions of section 211(h).
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    We are not listing RVP programs as separate fuel types according to 
whether or not they allow the 1.0 psi ethanol waiver. We believe that 
listing SIP fuels in this manner would reduce fuel fungibility and 
reduce states' flexibility, which are contrary to Congressional intent. 
As explained above, one consequence of such a listing is that a state 
in PADD 1 that wants to adopt a 7.8 psi RVP program into their SIP 
could not allow the 1.0 psi ethanol waiver because there is no RVP 
program in a SIP in PADD 1 that allows a 1.0 psi waiver for ethanol-
blended gasoline. We believe that if a state in PADD 1 adopts a 7.8 psi 
fuel program that does not allow a 1.0 psi waiver for ethanol-blended 
gasoline, refiners would be required to either not blend ethanol into 
gasoline in the area covered by the new SIP, or supply a special sub-
RVP blendstock which, when blended with ethanol, would meet the 7.8 psi 
RVP standard. If refiners choose to supply a special blendstock, which 
meets the 7.8 psi RVP standard when blended with ethanol, the 
blendstock would have to be produced and transported separately from 
all other fuels. We believe this would run counter to EPAct's intention 
of promoting fuel fungibility.
    Additionally, because the exception allowed for 7.0 psi RVP fuel 
programs makes no mention as to whether new 7.0 psi RVP fuel programs 
should be permitted with or without the 1.0 psi ethanol waiver, we 
believe that Congress was primarily concerned with classifying fuel 
types according to RVP limits, instead of whether or not they allowed 
the 1.0 psi ethanol waiver. We therefore, believe that listing fuel 
types solely according to RVP limits is most consistent with Congress's 
intent to improve fuel fungibility.

 C. Removal of Fuel Types from the List

    We are required to remove a fuel from the published list of fuels 
if the fuel is either identical to a federal fuel or is removed from 
the SIP into which it is approved.\15\ At proposal we explained that 
under the fuel type interpretation, a fuel type would be removed from 
the list only if that fuel type was either identical to a federal fuel 
or removed from all SIPs with that type of fuel program. 71 FR 32534. 
We also proposed how we would implement the provision relating to 
removal of a fuel from the published list.\16\ 71 FR 32535. We received 
two comments on our proposed implementation of this provision to remove 
a fuel from the published list. Our response to these comments can be 
found in ``Section II. Comment Summary and Response,'' below.
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    \15\ See CAA section 211(c)(4)(C)(v)(III), 42 U.S.C. 
7545(c)(4)(C)(v)(III).
    \16\ See 71 FR 32532, 32534.
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    In today's notice we are adopting the fuel type interpretation, and 
as proposed we will be removing a fuel from the list if it is either 
identical to a federal fuel or if it is removed from all SIPs into 
which it is approved. Our removal of a fuel type that either ceases to 
exist in any SIP or that is identical to a federal fuel formulation may 
create ``room'' on the list, and subsequently, subject to the three 
restrictions discussed above, we can approve a ``new fuel'' type into a 
SIP.

D. Approval of a ``New Fuel''

    The EPAct provides that before approving a ``new fuel'' into a SIP, 
where there is room on the list for additional fuels, we must make a 
finding, after consultation with the DOE, on the impact of the ``new 
fuel'' on fuel supply, distribution, and producibility. We also 
addressed the EPAct use of the term ``new fuel'', under the fuel type 
interpretation.\17\ We explained that the term ``new fuel'' may be 
somewhat problematic under the fuel type interpretation. A new fuel 
type would be a fuel type that is not already on the list, however, the 
PADD restriction would preclude the approval of a new fuel type if that 
fuel type is not already approved into a SIP in the applicable 
PADD.\18\ At proposal, we explained that because there is an exception 
to the PADD restriction for a 7.0 psi RVP program, we could under 
limited circumstances give meaning to the term ``new fuel'' under the 
proposed fuel type interpretation.\19\ We received one comment on our 
proposed implementation of this provision for the addition of a ``new 
fuel'' to the published list. Our response to this comment can be found 
in ``Section II. Comment Summary and Response,'' below.
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    \17\ See CAA section 211(c)(4)(C)(v)(IV), 42 U.S.C. 
7545(c)(4)(C)(v)(IV).
    \18\ See CAA section 211(c)(4)(C)(v)(IV), 42 U.S.C. 
7545(c)(4)(C)(v)(V) and 71 FR 32532, 32534.
    \19\ Congress exempted 7.0 psi RVP programs from the PADD 
restriction. While the other EPAct provisions on boutique fuels do 
apply to 7.0 psi RVP programs, the specific limitation on PADD usage 
in section 211(c)(4)(C)(v)(V) does not apply. Also see 71 FR 32532, 
32534.
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    In today's notice, we are adopting the fuel type interpretation, 
and as proposed, we will give meaning to the term ``new fuel'' under 
the limited circumstances where a state seeks to adopt a 7.0 psi RVP 
program. At such a time, we also expect to make a finding on the impact 
of the ``new fuel'' on fuel supply, distribution, and producibility, 
after consultation with the DOE.
    We also believe that we could give meaning to the term ``new fuel'' 
where states within PADD 5 seek our approval to adopt a fuel program 
that has been approved into California's SIP. See our discussion of the 
PADD restriction, California Air Resources Board (CARB) fuels, and 
states in PADD 5 in Section I.D. below. We believe that under this 
additional limited circumstance, where states in PADD 5 are seeking to 
adopt CARB fuels approved into California's SIP, and there is room on 
the list for a new fuel type, we could give meaning to the term ``new 
fuel'' to include a CARB fuel program, under the fuel type 
interpretation that we are adopting today. At such a time, we will also 
make a finding on the impact of the ``new fuel'' on fuel supply, 
distribution, and producibility, after consultation with the DOE.

E. The PADD Restriction

    The EPAct constrains our approval of ``any fuel unless that fuel'' 
was already approved into at least one SIP in the applicable PADD as of 
the date of our consideration of a state's request.\20\ At proposal we 
explained that for a state fuel program to be approved into a SIP in 
the future, the effect of the PADD restriction is that the fuel type 
must have been approved into a SIP in that PADD as of the date of our 
consideration of a state's request (with the exception of 7.0 psi RVP 
programs).\21\ We explained in the notice that the PADD restriction 
places a strong constraint on our future approval of ``boutique fuels'' 
because it effectively limits state fuels to both the types of fuels 
currently in existence, and to the PADDs in which they are currently 
found.\22\ We also received several comments on our treatment of CARB 
fuels. Our response to these comments can be found below in section 
II.B.
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    \20\ See CAA section 211(c)(4)(C)(v)(V), 42 U.S.C. 
7545(c)(4)(C)(v)(V).
    \21\ See 71 FR 32532, 32534.
    \22\ See 71 FR 32532, 32534-32535.
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    In today's notice we are adopting the fuel type interpretation and 
finalizing a

[[Page 78196]]

list of fuel types under this interpretation. Moreover, as proposed, we 
can approve a state fuel program if the fuel type (except for 7.0 psi 
RVP programs) has been approved into a SIP in the applicable PADD as of 
the date of our consideration of a state's request. Additionally, 
because we are allowed to approve a fuel if it is ``approved in at 
least one [SIP] in the applicable [PADD],'' we believe that there is a 
limited circumstance in PADD 5 where we could approve a fuel type that 
is in a SIP in that PADD although such a fuel type is not on the list 
that we have published today.\23\ Our approval would however, be 
subject to the three restrictions we have listed and discussed earlier. 
If our approval will not cause an increase in the number of fuel types 
above those approved as of September 1, 2004, i.e., if there is ``room 
on the list,'' we could approve for states within PADD 5 a fuel program 
that is in California's SIP, without violating the PADD restriction. 
CARB fuels are approved into California's SIP, but because the approval 
is not under CAA section 211(c)(4)(C) we have not placed CARB fuels on 
the list of fuels we are publishing today. Under the PADD restriction 
provision, however, we are only required to approve a fuel if it is 
``approved in at least one [SIP] in the applicable [PADD].'' We would, 
therefore, not be prohibited from approving CARB fuels for states 
within PADD 5, because CARB fuels are approved into a SIP in the 
applicable PADD. As earlier explained, adoption and approval of CARB 
fuels, however, remains subject to our meeting the three restrictions 
we have listed and discussed, above.
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    \23\ CAA section 211(c)(4)(C)(v)(V), 42 U.S.C. 
7545(c)(4)(C)(v)(V)
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    We continue to believe that under the fuel type interpretation, 
states would generally adopt fuels programs but only in those limited 
cases where that fuel type is already found in their PADD. We also 
continue to believe that this interpretation addresses the ``fuel 
islands'' concerns, while continuing to preserve an important degree of 
flexibility and choice of states in developing air pollution control 
programs.

II. Comment Summary and Response

    We received thirteen sets of comments on the boutique fuels notice. 
These comments were submitted to the public docket. Our responses to 
comments are as follows:

A. Comments on the Fuel Type Approach versus the State Specific 
Approach.

    Comment: The Fuel Type Approach is Preferred. All commenters 
supported the fuel type approach except one who expressed no opinion. 
No commenter supported a state-specific approach.
    Response: We agree that the fuel type approach is preferable for 
several reasons. The fuel type approach will implement the intent of 
the EPAct, while preserving some choice for states in meeting the 
NAAQS.

B. Comments Regarding State Fuel Programs Not Included on the Draft 
State Boutique Fuels List

    Comment: Arizona Clean Burning Gasoline (CBG) should be listed as 
two separate fuel types. Two commenters suggested that we list Arizona 
CBG as two fuel types on the list--summer CBG and winter CBG. According 
to one commenter, this is because the Arizona CBG has specifications 
for RVP, sulfur, aromatics, olefins, E200 and E300 during summer that 
are different from the specifications for winter. The commenter also 
stated that the summer specifications address the ozone NAAQS, while 
the winter specifications address the CO NAAQS, and that the differing 
fuel specifications results in ``unique supply and distribution 
issues.'' Another commenter stated that we had failed to ``adequately 
characterize Arizona CBG which is actually two different fuels 
depending on the time of year involved.''
    Response: We agree that Arizona CBG should be listed as two 
separate fuel types. Arizona requires winter CBG to meet a set of 
specific standards for RVP, sulfur, aromatics, olefins, T50, T90 and 
oxygen. Arizona, however, allows summer CBG to either meet the same set 
of specific standards (for sulfur, aromatics, olefins, T50, T90 and 
oxygen), or alternatively meet performance standards for emissions 
reductions in VOC and NOX. As explained in Section 1.A, 
above, summer CBG includes specification for 7.0 psi RVP. Thus, because 
CBG has components, specifications or limits for summertime that are 
different from non-summertime specifications, we are listing CBG as two 
fuel types. In today's notice, therefore, we are listing summertime 
CBG, which includes the 7.0 psi RVP requirement and non-summertime CBG. 
(See Section III, below, for our list of the fuels approved into all 
SIPs as of September 1, 2004). We have also changed the dates in the 
table to reflect compliance dates for these two fuel types. We believe 
that the practical effect of adding a second fuel type for Arizona CBG 
is small, although we note that for states in PADD 5 this changes one 
fuel type (CBG) into two fuel types (summer and non-summer CBG) for 
consideration of approval to their SIPs for purposes of addressing 
local air quality issues.
    Comment: State RVP programs that do not provide a 1.0 psi RVP 
waiver for ethanol-blended gasoline should be listed as separate 
programs. Two state fuels programs (western Pennsylvania and El Paso, 
Texas) do not provide a 1.0 psi RVP waiver for ethanol-blended gasoline 
in their RVP fuel programs. Two commenters stated that these fuel 
programs should not be listed as separate fuel types. Also, one 
commenter stated that EPA made no mention of RVP waivers for 10% 
ethanol-gasoline blends and the impact these may have on the list of 
fuel types.
    Response: As explained above, we are not listing the 7.8 psi RVP 
western Pennsylvania program and 7.0 psi RVP El Paso, Texas programs 
that do not allow the 1.0 psi waiver for ethanol blended gasoline as 
two separate fuel types. As also explained in the preamble, we believe 
that listing fuel types according to whether they do or do not allow a 
1.0 psi ethanol waiver would run contrary to Congress's intention to 
improve fuel fungibility through the boutique fuel list. As further 
explained in the preamble, because the PADD restriction exception 
allowed for 7.0 psi RVP fuel programs makes no mention as to whether 
new 7.0 psi RVP fuel programs should be permitted with or without the 
1.0 psi ethanol waiver, we do not believe that Congress intended use of 
this criteria for listing fuel types.
    Comment: ``Historical'' 9.0 psi RVP programs should be on the list. 
In 1989 we set nationwide RVP standards for gasoline sold during the 
summer, in two phases. Phase I applied to 1990 and 1991, and Phase II 
applied to 1992 and later years. Generally, we set the RVP level at 
10.5 psi and 9.0 psi in the northern states, under Phase I and II, 
respectively.\24\ Between 1989 and 1992, some northeastern states also 
adopted 9.0 psi RVP programs, which we approved into their SIPs under 
section 211(c)(4)(C). These 9.0 psi RVP programs remain in the SIPs of 
several northeastern states. Two commenters supported our decision to 
not include these 9.0 psi RVP fuel programs on the list. However, one 
commenter suggested that we should include these programs on the 
boutique fuels list and that failure to include them would not fulfill

[[Page 78197]]

Congressional intent. This commenter also stated that listing the 9.0 
psi RVP fuel type and then subsequently removing the 9.0 psi RVP fuel 
type would provide ``room'' on the list for the adoption of another 
state fuel program for the northeastern states, or more specifically 
states in PADD 1.
---------------------------------------------------------------------------

    \24\ See 40 CFR 80.27(a)(1) and (2).
---------------------------------------------------------------------------

    Response: We do not believe that the 9.0 psi RVP fuel type should 
be included on the list. We proposed not to list the 9.0 psi RVP 
programs as a way of reconciling the somewhat conflicting provisions 
requiring us to list fuels and to remove fuels that were identical to 
federal fuel programs. At proposal, we explained that we were obligated 
to publish a list based on the total number of fuels approved into SIPs 
under section 211(c)(4)(C) as of September 1, 2004, and also required 
to remove a fuel that is ``identical to a Federal fuel formulation 
implemented by the Administrator'' from the list. We further explained 
that reading these provisions literally would require us to 
simultaneously include 9.0 psi RVP on the list we are publishing today 
and at the same time to remove it from the list. We concluded that 
although several of these 9.0 psi RVP programs remain in the SIPs of 
some northeastern states, Congress would not have intended such an 
illogical approach, primarily because the 9.0 psi RVP program could not 
be viewed as contributing to the proliferation of 'fuel islands.'' \25\ 
We continue to believe that we should not list 9.0 psi RVP as a fuel 
type on the list, and in today's notice we are not including 9.0 psi 
RVP as a fuel type on the list.
---------------------------------------------------------------------------

    \25\ See 71 FR 32534 for a more detailed discussion of our 
treatment of 9.0 RVP fuel programs.
---------------------------------------------------------------------------

    We also do not believe that listing and then removing the 9.0 psi 
RVP fuel type would provide for the adoption of a new state fuel type 
for states in PADD 1. As mentioned previously, the PADD restriction 
strongly constrains our future approval of ``boutique fuels'' because 
states are limited to the types of fuels already approved into SIPs in 
their PADDs, with the exception of the 7.0 psi RVP fuel type. Adding a 
9.0 psi RVP fuel type to the list and then removing it would not change 
this. States in PADD 1 would still be limited to adopting a fuel 
already in a SIP in their PADD or a 7.0 psi RVP fuel. Therefore, we 
have not included 9.0 psi RVP programs in the boutique fuels list 
published today.
    Comment: CARB fuels should be included on the Boutique Fuels list. 
Some commenters indicated that the CARB reformulated gasoline (RFG), 
and diesel programs should be included on the list. One commenter 
believed that the list should include CARB RFG and diesel programs, and 
questioned our decision not to list these programs. Other commenters 
stated that although CARB RFG and diesel programs have not been 
approved into a SIP under section 211(c)(4)(C), they should be included 
on the list because they present the same logistical issues as boutique 
fuel programs. Another commenter urged us to inform Congress of our 
lack of authority to address CARB RFG and diesel programs under section 
211(c)(4)(C) if we believed we lacked such authority.
    Response: CAA section 211(c)(4)(C)(v)(II) requires us to determine 
and publish the ``total number of fuels'' approved into all SIPs, under 
section 211(c)(4) as of September 1, 2004. We believe this provision 
specifically refers to state fuels programs ``approved'' into SIPs 
under section 211(c)(4)(C). With such specific language, we do not 
believe that Congress intended us to include CARB fuel programs that 
are approved into a SIP under section110, based upon the ``allowance'' 
from preemption provided under section 211(c)(4)(B), instead of 
``approved'' under section 211(c)(4)(C). We also note that under 
limited circumstances, such as when there is room on the list, adoption 
by a state in PADD 5 of CARB RFG or diesel fuels programs would not 
violate the PADD restriction. See our discussion in Section 1.D, above. 
Such adoption and approval, however, would remain subject to the other 
restrictions on our authority to approve state fuels.
    Comment: State Oxygenated fuels should be included on the Boutique 
Fuels list Some commenters indicated that Congress intended that EPA 
should include state oxygenated fuels programs on the boutique fuels 
list, even though they acknowledged that these programs are not 
approved into SIPs under section 211(c)(4)(C). Similarly, a commenter 
noted that Nevada's oxygenated fuels program contains an ethanol 
mandate that should be included on the list. This commenter also noted 
that the Nevada program includes a 9.0 psi RVP cap in winter.
    Response: Section 211(c)(4)(C)(v)(II) requires us to determine the 
total number of fuels we have approved into all SIPs, under section 
211(c)(4)(C), as of September 1, 2004 and publish a list of such fuels. 
We believe this provision specifically refers to state fuels programs 
``approved'' into SIPs under section 211(c)(4)(C). With such specific 
language, we do not believe that Congress intended us to include 
oxygenated fuels programs that were not approved into SIPs under 
section 211(c)(4)(C), but, rather, were approved under sections 110 and 
211(m). Since the Nevada ethanol requirement is part of an oxygenated 
fuels program that we approved under sections 110 and 211(m), we do not 
believe it should be included on the boutique fuels list we are 
adopting today. Also, since there are no federal wintertime RVP 
controls, the Nevada wintertime RVP cap is not preempted and is not 
approved into the SIP under section 211(c)(4)(C), and we do not believe 
it should be included on the boutique fuels list we are adopting today.
    Comment: State biofuel mandates should be included on the Boutique 
Fuels list. Some commenters stated that the list should include fuels 
required by state biofuel mandates.
    Response: Section 211(c)(4)(C)(v)(II) requires us to determine the 
total number of fuels we have approved into all SIPs, under section 
211(c)(4)(C), as of September 1, 2004. We believe this provision is 
very specific in referring to state fuels programs ``approved'' into 
SIPs under section 211(c)(4)(C). Since the ethanol and biofuel mandates 
(including biodiesel) that the commenters reference were not approved 
into a SIP under section 211(c)(4)(C) as of September 1, 2004, they 
should not be placed on the list.

C. Addition and Removal of a Fuel Type From the List

    Comment: Two commenters noted that beginning in 2007 there should 
be an opportunity to consolidate the boutique fuel list by eliminating 
the unique gasoline sulfur requirements for Atlanta, Georgia. According 
to the commenters, beginning in 2007 early sulfur credits under the 
Tier 2 gasoline sulfur program will have been exhausted and Atlanta and 
other parts of the country would be receiving the same gasoline with 
regard to sulfur content. The Atlanta program would simply be listed as 
one of the states using the 7.0 psi RVP fuel type.
    Response: As discussed above, we must remove a fuel from the list 
when the fuel type is ``identical to a Federal fuel formulation 
implemented by the Administrator.''\26\ Considering removal of the 
Atlanta program from the list, at this stage, however, would be 
premature.
---------------------------------------------------------------------------

    \26\ See CAA section 211(c)(4)(C)(v)(III), 42 U.S.C. 
7545(c)(4)(C)(v)(III)
---------------------------------------------------------------------------

    Comment: One commenter recommended that EPA clarify the procedure 
for adding a fuel to the list. The commenter inquired as to whether EPA 
would approve either a new fuel

[[Page 78198]]

only for use in PADD 1 or one that could be used in any other PADD 
subsequent to removal of a fuel type such as the ``summer 7.0 psi RVP 
gasoline with sulfur provisions,'' which the commenter noted is 
currently in use only in PADD 1. The commenter also inquired as to 
whether a state in PADD 3 could substitute ``summer 7.0 psi RVP 
gasoline with sulfur provisions'' fuel type with another new fuel type. 
The commenter further inquired as to whether such a substitution would 
violate the PADD restriction in section 211(c)(4)(C)(v)(V).
    Response: In sections I.B. and C. of the preamble, we discussed how 
we may remove a fuel type from the list, and approve a ``new fuel'' 
into a SIP under EPAct. In section I.D. of the preamble we also 
discussed how the PADD restriction in section 211(c)(4)(C)(v)(V) places 
a strong constraint on our future approval of ``boutique fuels'' by 
effectively limiting state fuels to both the types of fuels currently 
in existence, and to the PADDs in which they are currently found, with 
the exception of 7.0 psi RVP fuel type. We expect that if the ``summer 
7.0 psi RVP gasoline with sulfur provisions'' fuel type in PADD 1 is 
removed from the list, the only fuels types we may approve into a SIP 
in PADD 3 would be fuel types that are approved into SIPs in PADD 3 as 
of the date of our consideration of a state's request to approve a fuel 
type.

D. Consultation with DOE

    Comment: One commenter stated that EPA's consultations with DOE 
should be part of the public record.
    Response: We agree with this comment. We did consult with DOE Staff 
as part of the development of the June 6, 2006 notice and the draft 
boutique fuels list it announced. We have docketed DOE's concurrence 
with the approach proposed. We have also consulted with DOE staff on 
developing today's notice and the list it adopts and we have docketed 
DOE's concurrence with this final notice.

E. General Comments

    Comment: EPA should explain how the list will be affected by a 
request from a state governor not to allow the 1.0 psi ethanol waiver 
as permitted by section 211(h)(5) of EPAct.
    Response: As mentioned earlier in the preamble, our approval of 
state fuel programs with or without a 1.0 psi waiver for ethanol 
blended gasoline does not have any impact on federal RVP programs, 
which are authorized by section 211(h). For areas covered by federal 
RVP programs, section 211(h)(4) of the Clean Air Act allows a 1.0 psi 
RVP waiver for gasoline blends containing 10% ethanol. Section 
211(h)(5) also permits the governor of a state to petition EPA to 
remove the 1.0 psi RVP waiver if the state provides documentation that 
the 1.0 psi ethanol waiver increases emissions. The EPA's 
interpretation of section 211(c)(4)(C) above, has no impact on such 
federal RVP programs.
    Comment: EPA should provide a more nuanced analysis of fuel 
categories that considers how fuel properties fall into a hierarchy of 
substitutability that affects supply flexibility, both from a 
perspective of vehicle impacts as well as legal constraints. For 
example, a state requiring gasoline with a 7.8 RVP limit also can 
legally allow gasoline with a 7.2 or 7.0 RVP limit.
    Response: Fuels that meet more stringent standards than those 
required by a SIP may be supplied as compliant fuel in any SIP covered 
area. Evaluating SIP fuels from a perspective of vehicle impacts is 
outside the scope of today's Notice.
    Comment: EPA approval of state fuels should include supply impacts 
of all unique fuels, such as California fuels, state winter oxygenate 
fuels, state-mandated biofuels, federal RFG, and federal RVP-controlled 
fuels. Several commenters recommended that, when reviewing the supply 
impacts of a proposed SIP fuel, EPA consider all unique fuels, such as 
California fuels, state winter oxygenate fuels, state-mandated 
biofuels, federal RFG, and federal RVP-controlled fuels, even if these 
fuels are not on the boutique fuel list that we are publishing in 
today's notice. Commenters also urged EPA to include these unique fuel 
requirements in the Sec.  1509 Fuel Harmonization Study that EPA and 
DOE are currently preparing for Congress.
    Response: As explained above, before approving a ``new fuel'' into 
a SIP, where there is ``room'' on the list, EPA is required to make a 
finding, after consultation with the DOE, on the impact of the ``new 
fuel'' on fuel supply, distribution, and producibility. In reviewing 
the supply implications of a ``new fuel,'' EPA agrees that it is 
reasonable to consider all fuels in the area although such fuels are 
not on the boutique fuels list. The supply implications of a ``new 
fuel'' can best be understood by evaluating them in the context of the 
other fuel requirements applicable to fuel distributed in that area. 
Therefore, we believe it is appropriate to consider ``unlisted'' fuels 
such as biofuels or oxygenated gasoline when determining whether or not 
a ``new fuel'' will present supply or distribution interruptions or 
will have a significant adverse impact on fuel producibility in the 
affected or contiguous areas. We also recognize that including these 
``unlisted'' fuels in the EPAct section1509 fuel harmonization study is 
appropriate.
    Comment: One commenter said that EPA should allow more time for 
states to demonstrate attainment with the 8 hour ozone NAAQS and the 
PM2.5 NAAQS. Allowing states more time will enable them to realize the 
benefits of federal fuels programs that have not yet been fully 
implemented (low sulfur gasoline and ultra-low sulfur diesel), and 
lessen the pressure on individual states to add motor fuel controls to 
their SIPs to demonstrate attainment.
    Response: Determining timelines for states to demonstrate 
attainment with the various NAAQS is outside the scope of today's 
Notice.

III. Publication of the Boutique Fuel List

    A list of the eight (8) fuel types approved into SIPs under section 
211(c)(4)(C) as of September 1, 2004, the states, and the PADD they are 
used in is set forth in the following Table. Please note that this 
table varies from the draft table for the fuel type interpretation 
published in the June 6, 2006 notice, which contained seven fuel types. 
Specifically, we have divided the Arizona CBG program into summer and 
non-summer. The Arizona summer CBG program includes the 7.0 psi RVP 
requirement that appeared on the draft table, but covers all the CBG 
requirements applicable between May 1 and September 30.

   Total Number of Fuels Approved in State Implementation Plans (SIPs)
         Under CAA Section 211(c)(4)(C) as of September 1, 2004
------------------------------------------------------------------------
        Type of fuel control             PADD          Region-state
------------------------------------------------------------------------
RVP of 7.8 psi 1....................          1  1-ME (May 1-Sept.15)*
                                              1  3-PA

[[Page 78199]]

 
                                              2  5-IN
                                              2  5-MI
                                              3  6-TX (May 1-Oct. 1)*
RVP of 7.2 psi......................          2  5-IL
RVP of 7.0 psi......................          2  7-KS
                                              2  7-MO
                                              3  4-AL
                                              3  6-TX
RVP of 7.0 with gasoline sulfur               1  4-GA
 provisions.
Low Emission Diesel.................          3  6-TX
Cleaner Burning Gasoline (Summer)...          5  9-AZ (May 1-Sept 30)
Cleaner Burning Gasoline (non-                5  9-AZ (Oct 1-Apr 30)
 Summer).
Winter Gasoline (aromatics & sulfur)          5  9-NV
------------------------------------------------------------------------
* Dates listed in parentheses refer to summer gasoline programs with
  different RVP control periods from the federal RVP control period,
  which runs from June 1 through September 15.


    Dated: December 21, 2006.
Stephen L. Johnson,
Administrator.
 [FR Doc. E6-22313 Filed 12-27-06; 8:45 am]
BILLING CODE 6560-50-P