[Federal Register Volume 76, Number 145 (Thursday, July 28, 2011)]
[Proposed Rules]
[Pages 45212-45215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18991]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2011-0571; FRL-9444-6]


Revisions to the California State Implementation Plan, San 
Joaquin Valley Unified Air Pollution Control District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: In this action, we are proposing to approve San Joaquin Valley 
Unified Air Pollution Control District (SJVUAPCD) Rule 3170, 
``Federally Mandated Ozone Nonattainment Fee,'' as a revision to 
SJVUAPCD's portion of the California State Implementation Plan (SIP). 
Rule 3170 is a local fee rule submitted to address section 185 of the 
Clean Air Act (CAA or Act). EPA is also proposing to approve SJVUAPCD's 
fee-equivalent program, which includes Rule 3170 and state law 
authorities that authorize SJVUAPCD to impose supplemental fees on 
motor vehicles, as an alternative to the program required by section 
185 of the Act. We are proposing that SJVUAPCD's alternative fee-
equivalent program is not less stringent than the program required by 
section 185, and, therefore, is approvable, consistent with the 
principles of section 172(e) of the Act. As part of this action, we are 
inviting public comment on whether it is appropriate for EPA to 
consider alternative programs and, if so, what would constitute an 
approvable alternative program. We are taking comments on these 
proposals and plan to follow with a final action.

DATES: Any comments must arrive by August 29, 2011.

ADDRESSES: Submit comments, identified by docket number EPA-R09-OAR-
2011-0571, by one of the following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the on-
line instructions.
    2. E-mail: [email protected].
    3. Mail or deliver: Andrew Steckel (Air-4), U.S. Environmental 
Protection Agency Region IX, 75 Hawthorne Street, San Francisco, CA 
94105-3901.
    Instructions: All comments will be included in the public docket 
without change and may be made available online at http://www.regulations.gov, including any personal information provided, 
unless the comment includes Confidential Business Information (CBI) or 
other information whose disclosure is restricted by statute. 
Information that you consider CBI or otherwise protected should be 
clearly identified as such and should not be submitted through http://www.regulations.gov or e-mail. http://www.regulations.gov is an 
``anonymous access'' system, and EPA will not know your identity or 
contact information unless you provide it in the body of your comment. 
If you send e-mail directly to EPA, your e-mail address will be 
automatically captured and included as part of the public comment. If 
EPA cannot read your comment due to technical difficulties and cannot 
contact you for clarification, EPA may not be able to consider your 
comment.
    Docket: Generally, documents in the docket for this action are 
available electronically at http://www.regulations.gov and in hard copy 
at EPA Region IX, 75 Hawthorne Street, San Francisco, California. While 
all documents in the docket are listed at http://www.regulations.gov, 
some information may be publicly available only at the hard copy 
location (e.g., copyrighted material, large maps), and some may not be 
publicly available in either location (e.g., CBI). To inspect the hard 
copy materials, please schedule an appointment during normal business 
hours with the contact listed in the FOR FURTHER INFORMATION CONTACT 
section.

FOR FURTHER INFORMATION CONTACT: Lily Wong, EPA Region IX, (415) 947-
4114, [email protected].

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

Table of Contents

I. What did the State submit?
II. What action is EPA taking?
III. Background
IV. What is the legal rationale for this action?
V. What is EPA's analysis of SJVUAPCD's alternative program?
VI. Proposed Action
VII. Statutory and Executive Order Reviews

I. What did the State submit?

    On May 19, 2011, SJVUAPCD adopted Rule 3170 as part of SJVUAPCD's 
alternative fee-equivalent program. On June 14, 2011, the California 
Air Resources Board (CARB) submitted SJVUAPCD's alternative fee-
equivalent program, including Rule 3170 and various state law 
authorities, to EPA. On June 23, 2011, EPA determined that the 
submittal met the completeness criteria in 40 CFR Part 51 Appendix V, 
which must be met before formal EPA review.

II. What action is EPA taking?

    EPA is proposing to approve SJVUAPCD Rule 3170 as a revision to 
SJVUAPCD's portion of the California SIP. Rule 3170 is a local rule 
that applies to all major stationary sources emitting VOCs and/or 
NOX. Rule 3170 requires certain major stationary sources to 
pay a fee for each ton of VOCs or NOX emitted in excess of 
80% of baseline emissions. Rule 3170 includes an exemption for ``clean 
units'' and a different calculation of baseline emissions than 
specified by CAA section 185. Therefore, Rule 3170 also requires 
SJVUAPCD to track actual NOX and VOC emissions from all 
major stationary sources of NOX and VOCs and demonstrate 
that it received revenues, pursuant to an alternative mechanism 
described below, equivalent

[[Page 45213]]

to those that would be imposed through section 185 of the Act without 
the ``clean unit'' exemption, and with a baseline calculated in a 
manner consistent with CAA 185. Rule 3170 also requires SJVUAPCD to 
impose additional fees on major stationary sources to remedy any 
shortfall in revenue. In this action, EPA is also proposing to approve 
SJVUAPCD's fee-equivalent program as an alternative to the program 
required by section 185 of the Act. SJVUAPCD's alternative fee-
equivalent program includes Rule 3170 and state law authorities that 
authorize the District to impose a $12 supplemental fee on motor 
vehicle registrations. We are proposing that SJVUAPCD's alternative 
fee-equivalent program is not less stringent than the program required 
by section 185, and, therefore, is approvable, consistent with the 
principles of section 172(e) of the Act as explained more fully below. 
We are taking comments on these proposals and plan to follow with a 
final action.
    In a separate interim final action, published in the Rules section 
in today's Federal Register, we are deferring sanctions that would 
otherwise apply to the SJVUAPCD.

III. Background

Section 185 Fees

    Under Sections 182(d)(3), (e), (f) and 185 of the Act, States with 
ozone nonattainment areas classified as severe or extreme are required 
to submit a revision to the SIP which requires major stationary sources 
of VOC or NOX to pay a fee for each ton of VOC or 
NOX emitted in excess of 80% of baseline emissions.\1\ Under 
section 185(a) of the Act, the SIP revision must provide that the fees 
be paid, if the area to which the SIP revision applies has failed to 
attain the 1-hour ozone standard by the applicable attainment date. A 
source's baseline emissions are its actual emissions during the 
required attainment year. The fee rate is $5,000 per ton in 1990 
dollars, which must be adjusted for inflation based on the Consumer 
Price Index (CPI).
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    \1\ VOCs help produce ground-level ozone and smog, which harm 
human health and the environment. NOX helps produce 
ground-level ozone, smog and particulate matter, which harm human 
health and the environment.
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San Joaquin Valley Unified Air Pollution Control District

    SJVUAPCD is an extreme nonattainment area for the 1-hour ozone 
standard, and therefore, California was required under sections 
182(d)(3), (e) and (f) to develop and submit a SIP revision meeting the 
requirements of section 185, which are discussed above. In San Joaquin 
Valley, under California law, the SJVUAPCD is responsible for 
developing rules, such as Rule 3170, that are intended to meet CAA SIP 
requirements. Such rules are then submitted to EPA after adoption by 
CARB, which is the State agency responsible for SIP matters on behalf 
of the State of California.
    CARB previously submitted an earlier version of SJVUAPCD Rule 3170 
to EPA. EPA took final action on this earlier version of Rule 3170 on 
January 13, 2010. (75 FR 1716). This final action was a limited 
approval/limited disapproval because, while EPA found that the rule 
strengthened the SIP, EPA also found that it did not fully comply with 
the requirements of section 185. EPA identified the following 
deficiencies as preventing full approval: (i) An exemption for units 
that began operation after the attainment year; (ii) an exemption for 
``clean units;'' (iii) the definition of the baseline period as two 
consecutive years; (iv) a provision to allow averaging of baseline 
emissions over 2-5 years); and (v) a definition of ``major source'' 
inconsistent with the CAA. Because our action was a limited approval 
and a limited disapproval, our action started sanctions clocks under 
section 179 of the Act and 40 CFR 52.31.
    On June 14, 2011, CARB submitted SJVUAPCD's alternative fee-
equivalent program, including amended Rule 3170 as adopted on May 19, 
2011 and other state law authorities, to address deficiencies 
identified in EPA's limited disapproval, to stop the sanctions clocks, 
and to satisfy SJVUAPCD's obligations under section 185 of the Act.

IV. What is the legal rationale for equivalent alternative programs?

    EPA is proposing that states can meet the 1-hour ozone section 185 
obligation through a SIP revision containing either the fee program 
prescribed in section 185 of the Act, or an equivalent alternative 
program. As further explained below, EPA is proposing that an 
alternative program may be acceptable if EPA determines, through 
notice-and-comment rulemaking, that it is consistent with the 
principles of section 172(e) of the CAA.\2\
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    \2\ EPA has previously set forth this reasoning in a memorandum 
from Stephen D. Page, Director, Office of Air Quality Planning and 
Standards, to Air Division Directors, ``Guidance on Developing Fee 
Programs Required by Clean Air Act Section 185 for the 1-hour Ozone 
NAAQS,'' January 5, 2010. On July 1, 2011, the DC Circuit Court of 
Appeals vacated this guidance, on the ground that it was final 
agency action for which notice-and-comment rulemaking procedures 
were required. NRDC v. EPA, No. 10-1056, 2011 WL 2601560, C.A.D.C. 
2011. In today's notice, we are applying the court's directive to 
follow the rulemaking requirements set forth in the Administrative 
Procedures Act to inform our consideration of section 185 and 
alternative fee programs. We are therefore inviting the public to 
comment on whether it is appropriate for EPA to consider an 
alternative program and, if so, whether SJVUAPCD's program would 
constitute an approvable alternative program under the CAA.
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    Section 172(e) is an anti-backsliding provision of the CAA that 
requires EPA to develop regulations to ensure that controls in a 
nonattainment area are ``not less stringent'' than those that applied 
to the area before EPA revised a national ambient air quality standard 
(NAAQS) to make it less stringent. In the Phase 1 ozone implementation 
rule for the 1997 ozone NAAQS published on April 30, 2004 (69 FR 
23951), EPA determined that although section 172(e) does not directly 
apply where EPA has strengthened the NAAQS, as it did in 1997, it was 
reasonable to apply the same anti-backsliding principle that would 
apply to the relaxation of a standard for the transition from the 1-
hour NAAQS to the more stringent 1997 8-hour NAAQS. As part of applying 
the principles in section 172(e) for purposes of the transition from 
the 1-hour standard to the 1997 8-hour standard, EPA can either require 
states to retain programs that applied for purposes of the 1-hour 
standard, or alternatively can allow states to adopt alternative 
programs, but only if such alternatives are determined through notice-
and-comment rulemaking to be ``not less stringent'' than the mandated 
program.
    EPA has identified three possible types of alternative programs 
that could satisfy the section 185 requirement: (i) Those that achieve 
the same emissions reductions; (ii) those that raise the same amount of 
revenue and establish a process where the revenues would be used to pay 
for emission reductions that will further improve ozone air quality; 
and (iii) those that would be equivalent through a combination of both 
emission reductions and revenues. Accordingly, we are proposing to 
determine through notice-and-comment rulemaking, that States can 
demonstrate an alternative program's equivalency by comparing expected 
fees and/or emissions reductions directly attributable to application 
of section 185 to the expected fees and/or emissions reductions from 
the proposed alternative program. Under an alternative program, states 
might opt to shift the fee burden from a specific set of major 
stationary sources to non-major sources, such as owners of mobile 
sources that also contribute to ozone formation. EPA also believes that 
alternative programs, if approved as ``not less stringent'' than the 
section 185

[[Page 45214]]

fee program, would encourage 1-hour ozone NAAQS nonattainment areas to 
reach attainment as effectively and expeditiously as a section 185 fee 
program, if not more so, and therefore satisfy the CAA's goal of 
attainment and maintenance of the NAAQS.
    In sum, in order for EPA to approve an alternative program as 
satisfying the 1-hour ozone section 185 fee program SIP revision 
requirement, the state must demonstrate that the alternative program is 
not less stringent than the otherwise applicable section 185 fee 
program by collecting fees equal to or exceeding the fees that would 
have been collected under 185.

V. What is EPA's analysis of SJVUAPCD's alternative program?

Summary of SJVUAPCD's Alternative Program

    SJVUAPCD's alternative fee-equivalent program consists of Rule 3170 
and additional state law materials, including California Assembly Bill 
2522 (``AB2522''), now codified at California Health and Safety Code 
40610-40613. Rule 3170 applies to major stationary sources of VOCs and 
NOX, which in the SJVUAPCD are sources that emit 10 tons per 
year or more of either pollutant. Rule 3170 differs from CAA section 
185 because it exempts ``clean units'' from the assessment of fees and 
because it allows baseline emissions to be calculated over a multi-year 
period, rather than a single year as provided in CAA section 185.\3\ 
Because these differences will likely affect the amount of fees 
collected from major stationary sources, SJVUAPCD's alternative fee-
equivalent program provides for the collection of additional fees from 
motor vehicle registrations, specifically, $12 per year per motor 
vehicle, as authorized by California AB2522. (Cal. Health and Safety 
Code Sec. Sec.  40610-40613).
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    \3\ The CAA and EPA's Section 185 baseline guidance (referenced 
below in this section) allow for alternative baseline periods only 
if a source's emissions are irregular, cyclical, or otherwise vary 
significantly from year to year.
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    Rule 3170 requires the Air Pollution Control Officer (APCO) to 
prepare and submit to EPA an ``Annual Fee Equivalency Demonstration 
Report'' to show that the total annual fees collected from stationary 
sources and motor vehicle registrations are at least equal to the 
amount of annual fees that would have been collected from stationary 
sources under a fee program as prescribed in section 185 of the Act. If 
the report shows that the actual collected funds are insufficient to 
demonstrate equivalency, Rule 3170 requires the collection of 
additional fees from stationary sources to make up the shortfall. EPA's 
technical support document (TSD) has more information about SJVUAPCD's 
alternative fee-equivalent program.

How is EPA evaluating SJVUAPCD's alternative program?

    Generally, SIP rules must be enforceable (see section 110(a) of the 
Act). Guidance and policy documents that we use to evaluate 
enforceability requirements consistently include the following:
    1. ``Issues Relating to VOC Regulation Cutpoints, Deficiencies, and 
Deviations,'' EPA, May 25, 1988 (the Bluebook).
    2. ``Guidance Document for Correcting Common VOC & Other Rule 
Deficiencies,'' EPA Region 9, August 21, 2001 (the Little Bluebook).
    3. ``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.
    Also, SIP revisions must not interfere with any applicable 
requirement concerning attainment and reasonable further progress (RFP) 
or any other applicable requirement of the Act (CAA 110(l))).
    SJVUAPCD's alternative fee-equivalent program must also be 
evaluated against section 185 of the Act, as described above under 
section III of this document. EPA also developed the following guidance 
on establishing baselines under section 185:
    4. Memorandum from William Harnett, Director of the Air Quality 
Policy Division to the Regional Air Division Directors, entitled, 
``Guidance on Establishing Emissions Baselines under Section 185 of the 
Clean Air Act (CAA) for Severe and Extreme Ozone Nonattainment Areas 
that Fail to Attain the 1-hour Ozone NAAQS by their Attainment Date,'' 
March 21, 2008.\4\
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    \4\ This guidance can be found at: http://www.epa.gov/ttn/oarpg/t1/memoranda/20080321_harnett_emissions_basline.pdf.
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Does SJVUAPCD's alternative program meet the evaluation criteria?

    We believe SJVUAPCD's alternative fee-equivalent program is 
consistent with the relevant policy and guidance regarding 
enforceability, SIP relaxations, and sections 172(e) and 185 of the 
Act.
    First, we propose to determine that our approval of Rule 3170 as 
revised would comply with CAA sections 110(l) because the proposed SIP 
revision would not interfere with the on-going process for ensuring 
that requirements for RFP and attainment of the NAAQS are met, and is 
more stringent than the version previously approved into the SIP 
because it corrects the previously-identified deficiencies.
    Second, EPA is proposing to find that SJVUAPCD has met its 1-hour 
ozone NAAQS section 185 obligation through its alternative fee-
equivalent program, which includes Rule 3170 and additional state law 
authorities. Specifically, EPA is proposing to find that SJVUAPCD's 
alternative fee-equivalent program is acceptable because, consistent 
with the principles of section 172(e), it is not less stringent than 
the requirements of section 185.
    The version of Rule 3170 we are proposing to approve today contains 
two provisions that are not directly consistent with section 185: (1) 
An exemption for ``clean units;'' and (2) an allowance for an alternate 
baseline period of two consecutive years (2006-2010) if the APCO 
determines it would be more representative of normal operations. As 
described below, EPA has determined that SJVUAPCD's alternative fee-
equivalent program will make up for any shortfall in collected funds 
that might result from these two provisions and provides adequate 
enforcement and oversight mechanisms, as well as a remedy to address 
any shortfalls, to assure equivalency.
    SJVUAPCD's alternative fee-equivalent program provides for the 
collection of additional fees from motor vehicle registrations, 
specifically, $12 per year per motor vehicle. This collection of motor 
vehicle registration fees is authorized by California AB2522 (now 
codified at Health and Safety Code 40610-40613). AB2522 also requires 
SJVUAPCD to use these revenues to fund incentive-based programs 
resulting in NOX and VOC emissions reductions in the San 
Joaquin Valley. Rule 3170 requires the APCO to implement a system to 
track all information with respect to emissions data, the calculation, 
assessment, and collection of fees from stationary sources, as well as 
tracking of the amount of collected motor vehicle registration fees. 
The APCO is required to prepare and submit to EPA an ``Annual Fee 
Equivalency Demonstration Report'' that shows that the sum of the total 
fees collected from stationary sources and motor vehicle registrations 
are equal to or greater than the fees that would have been collected 
under a direct implementation of section 185. In the event that the 
annual equivalency report shows insufficient funds collected (i.e., a 
shortfall), Rule 3170 requires the collection of

[[Page 45215]]

additional funds from stationary sources.
    SJVUAPCD has demonstrated that its alternative fee-equivalent 
program will be at least as stringent as a CAA section 185 fee program. 
Rule 3170 provides SJVUAPCD the authority to collect fees from certain 
major sources. To the extent that Rule 3170 differs from CAA section 
185 by exempting certain major stationary sources and allowing a 
different baseline calculation, AB2522 allows SJVUACPD to assess 
supplemental motor vehicle registration fees equivalent to those that 
would be collected through a straight section 185 fee program, and 
requires SJVUAPCD to use those revenues to fund incentive-based 
programs resulting in NOX and VOC emissions reductions in 
the San Joaquin Valley. Although we are not approving AB2522 into the 
SIP, Rule 3170 provides adequate oversight and enforcement mechanisms 
through the Annual Fee Equivalency Demonstration Report and the 
shortfall remedy to assure that SJVUAPCD's fee-equivalent alternative 
program will be at least as stringent as a section 185 fee program. We 
therefore conclude that SJVUAPCD's alternative fee-equivalent program 
is consistent with the principles of CAA section 172(e) and not less 
stringent than the requirements of CAA section 185 because it will 
result in collection of fees equal to the fees that would be collected 
under section 185. Based upon SJVUAPCD's demonstration that its 
alternative fee-equivalent program is not less stringent than a section 
185 program, EPA proposes to approve Rule 3170 into the California SIP 
on the basis that SJVUAPCD's alternative fee-equivalent program meets 
the requirements of sections 172(e) and 185 of the Act.
    The TSD has more information on our evaluation.

VI. Proposed Action

    Because EPA believes SJVUAPCD Rule 3170 fulfills all relevant 
requirements, we are proposing to approve Rule 3170 as a SIP revision 
under section 110(k)(3) of the Act. EPA believes that SJVUAPCD's 
alternative fee-equivalent program is not less stringent than the 
requirements set forth in section 185 of the Act, therefore we are 
proposing to approve SJVUAPCD's alternative fee-equivalent program 
consisting of Rule 3170 and state law authorities as fulfilling the 
requirements of sections 185 and 172(e) of the Act.
    We will accept comments from the public on these proposals for the 
next 30 days. Unless we receive convincing new information during the 
comment period, we intend to publish a final approval action that will 
incorporate Rule 3170 into the federally enforceable SIP. Our final 
action would address the CAA section 185 requirements for the 1-hour 
ozone standard and therefore would permanently terminate the sanctions 
clocks associated with our January 13, 2010 action on the effective 
date of the final approval.

VII. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a 
SIP submission that complies with the provisions of the Act and 
applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). 
Thus, in reviewing SIP submissions, EPA's role is to approve State 
choices, provided that they meet the criteria of the Clean Air Act. 
Accordingly, this proposed action merely proposes to approve State law 
as meeting Federal requirements and does not impose additional 
requirements beyond those imposed by State law. For that reason, this 
proposed action:
     Is not a ``significant regulatory action'' subject to 
review by the Office of Management and Budget under Executive Order 
12866 (58 FR 51735, October 4, 1993);
     Does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact 
on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.);
     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);
     Does not have Federalism implications as specified in 
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based 
on health or safety risks subject to Executive Order 13045 (62 FR 
19885, April 23, 1997);
     Is not a significant regulatory action subject to 
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of Section 12(d) of the 
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) because application of those requirements would be inconsistent 
with the Clean Air Act; and
     Does not provide EPA with the discretionary authority to 
address disproportionate human health or environmental effects with 
practical, appropriate, and legally permissible methods under Executive 
Order 12898 (59 FR 7629, February 16, 1994).

In addition, this proposed action does not have tribal implications as 
specified by Executive Order 13175 (65 FR 67249, November 9, 2000), 
because the SIP is not approved to apply in Indian country located in 
the State, and EPA notes that it will not impose substantial direct 
costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52

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

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

    Dated: July 19, 2011.
Jared Blumenfeld,
Regional Administrator, Region IX.
[FR Doc. 2011-18991 Filed 7-27-11; 8:45 am]
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