[Federal Register Volume 89, Number 163 (Thursday, August 22, 2024)]
[Proposed Rules]
[Pages 67919-67922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18570]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2024-0311; FRL-12092-01-R9]


Conditional Approval of Arizona State Implementation Plan 
Revisions; Maricopa County Air Quality Department; Mobile Source 
Emission Reduction Credits

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to 
conditionally approve a revision to the Maricopa County Air Quality 
Department's (MCAQD or ``Department'') portion of the Arizona State 
Implementation Plan (SIP). This rule revision establishes a program 
allowing fleet owners/operators to generate emission reduction credits 
(ERCs) by either retrofitting or replacing existing fleet vehicles with 
lower emitting vehicles and meeting other ongoing requirements. These 
ERCs are intended for use as offsets under the Department's 
nonattainment New Source Review (NNSR) program. We are taking comments 
on this proposal and plan to follow with a final action.

DATES: Comments must be received on or before September 23, 2024.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R09-
OAR-2024-0311 at https://www.regulations.gov. For comments submitted at 
Regulations.gov, follow the online instructions for submitting 
comments. Once submitted, comments cannot be edited or removed from 
Regulations.gov. The EPA may publish any comment received to its public 
docket. Do not submit electronically any information you consider to be 
Confidential Business Information (CBI) or other information the 
disclosure of which is restricted by statute. Multimedia submissions 
(audio, video, etc.) must be accompanied by a written comment. The 
written comment is considered the official comment and should include 
discussion of all points you wish to make. The EPA will generally not 
consider comments or comment contents located outside of the primary 
submission (i.e., on the web, cloud, or other file sharing system). For 
additional submission methods, please contact the person identified in 
the FOR FURTHER INFORMATION CONTACT section. For the full EPA public 
comment policy, information about CBI or multimedia submissions, and 
general guidance on making effective comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets. If you need assistance in a 
language other than English or if you are a person with a disability 
who needs a reasonable accommodation at no cost to you, please contact 
the person identified in the FOR FURTHER INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: Laura Yannayon, EPA Region IX, 75 
Hawthorne St., San Francisco, CA 94105; by phone: (415) 972-3534; or by 
email to [email protected].

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

Table of Contents

I. The State's Submittal
    A. What rule did the State submit?
    B. Are there other versions of this rule?
    C. What is the purpose of the submitted rule?
II. The EPA's Evaluation and Action

[[Page 67920]]

    A. How is the EPA evaluating the rule?
    B. Does the rule meet the evaluation criteria?
    C. Deferred Action
    D. Proposed Action and Public Comment
III. Incorporation by Reference
IV. Statutory and Executive Order Reviews

I. The State's Submittal

A. What rule did the State submit?

    Table 1 lists the rule addressed by this proposal with the date it 
was adopted by the MCAQD and submitted by the Arizonia Department of 
Environmental Quality (ADEQ), which is the governor's designee for 
Arizona SIP submittals.

                                             Table 1--Submitted Rule
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              Rule No.                                  Rule title                       Adopted      Submitted
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Rule 205...........................  Emission Offsets Generated by Voluntary Mobile       4/26/23        5/4/23
                                      Source Emission Reduction Credits.
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    On November 4, 2023, the submittal of Rule 205 was deemed complete 
by operation of law.

B. Are there other versions of this rule?

    There are no previous versions of Rule 205 in the Maricopa County 
portion of the Arizona SIP.

C. What is the purpose of the submitted rule?

    Portions of Maricopa County are currently designated as 
``Moderate'' nonattainment for the 2008 and 2015 ozone National Ambient 
Air Quality Standards (NAAQS) and as ``Serious'' nonattainment for the 
1987 particulate matter equal to or less than 10 micrometers 
(PM10) NAAQS.\1\ Therefore, the MCAQD is required to 
implement a NNSR program, which requires sources emitting ozone 
precursors in large quantities to provide surplus emission reductions 
to offset a proposed project's projected emission increases. In 
Maricopa County, the quantity of surplus emission reductions available 
for use as offsets does not appear sufficient to support current and 
projected economic growth.
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    \1\ 40 CFR 81.303.
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    Rule 205, ``Emission Offsets Generated by Voluntary Mobile Source 
Emission Reduction Credits,'' is intended to provide a regulatory 
structure for the generation and use of nontraditional emission 
reduction credits (ERCs) from mobile sources to be used as offsets for 
new and modified major sources. When ERCs are generated from mobile 
sources, they are referred to as mobile ERCs or ``MERCs.'' The rule 
allows mobile source fleet owners that reduce emissions from their 
fleets to sell those reductions to stationary sources, who can then use 
them to offset their proposed emission increases. Rule 205 outlines the 
requirements a ``permitted generator'' of emission reductions must meet 
before the Department can certify these emission reductions as meeting 
the offset integrity criteria specified for NNSR programs.\2\ Generally 
speaking, the rule requires the permitted generator to submit certain 
information in its application; procedures for processing an 
application; use of specific methodologies to calculate emission 
reductions; issuance of MERC certificates; and ongoing monitoring, 
recordkeeping, and reporting requirements. The rule also contains 
certain requirements for the MERC user and the Control Officer. More 
information on the contents of Rule 205 can be found in the Technical 
Support Document (TSD) included in the docket for this action.
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    \2\ See, e.g., 40 CFR 51.165(a)(3)(ii)(C)(1)(i) and CAA sections 
172(a) and (c)(1).
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II. The EPA's Evaluation and Action

A. How is the EPA evaluating the rule?

    In evaluating Rule 205 we reviewed it for compliance with the 
requirements for offsets found in 40 CFR 51.165(a)(3)(ii)(C)(1)(i) and 
CAA section 173 and the substantive CAA requirements for SIPs and SIP 
revisions as set forth in CAA sections 110(a)(2), 110(l), and 193. 
Throughout our evaluation we also referred to our 2001 Economic 
Incentive Programs (EIP) guidance document.
    The requirements for emission reductions used as NNSR offsets are 
found in 40 CFR 51.165(a)(3)(ii)(C). Specifically, paragraph 
(a)(3)(ii)(C)(1)(i) requires emission reductions to be surplus, 
permanent, quantifiable, and federally enforceable. We refer to this 
group of requirements as the ``offset integrity criteria.'' In 
addition, CAA section 173(a) requires increased emissions to be offset 
by reductions in ``actual'' emissions, meaning that the pollutant was 
actually emitted during the baseline period and is not a paper 
reduction in a source's potential to emit; in other words, it requires 
that each offset represents emissions that have been taken out of the 
air. CAA section 173(c)(1) also provides a timing requirement for the 
offsets, in that the emission reductions must be, ``by the time a new 
or modified source commences operation, in effect and enforceable.''
    CAA section 110(a)(2) requires that regulations submitted to the 
EPA for SIP approval be clear and legally enforceable. CAA section 
110(l) requires that states provide public notice and an opportunity 
for public hearing of SIP revisions prior to their submittal and 
prohibits the EPA from approving any SIP revisions that would interfere 
with attainment or maintenance of a NAAQS, reasonable further progress 
(RFP), or other applicable requirements of the CAA. CAA section 193 
prohibits the modification of any SIP-approved control requirement in 
effect before November 15, 1990, in a nonattainment area, unless the 
modification ensures equivalent or greater emission reductions of the 
relevant pollutants.
    In 2001, the EPA issued a guidance document entitled ``Improving 
Air Quality with Economic Incentive Programs'' (``2001 EIP 
guidance''),\3\ which sets out the EPA's non-binding guidelines on 
discretionary EIPs.\4\ An EIP is a regulatory program that implements 
market-based strategies to achieve an air quality objective. Rule 205 
is classified as an EIP because it provides a framework for generating 
ERCs from mobile sources. The ERCs generated under the EIP may be 
traded with stationary sources to provide the offsets required under a 
NNSR program.\5\ Our 2001 EIP guidance document does not represent 
final EPA action on the requirements for EIPs, but rather it identifies 
several different types of EIPs and proposed elements for each type 
that, if met, would assure that the program would meet the applicable 
CAA requirements.
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    \3\ U.S. EPA, Improving Air Quality with Economic Incentive 
Programs, EPA-452/R-01-001 (January 2001), available at https://www.epa.gov/sites/default/files/2015-07/documents/eipfin.pdf.
    \4\ A discretionary EIP is not subject to the requirements for 
mandatory EIPs found in 40 CFR part 51, subpart U.
    \5\ See id.

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[[Page 67921]]

B. Does the rule meet the evaluation criteria?

    In general, we find that Rule 205 complies with most applicable 
requirements but does not satisfy the requirements pertaining to offset 
trading programs and requirements for SIPs to be clear and enforceable, 
including provisions found in 40 CFR 51.165(a)(3)(ii)(C)(1)(i), and CAA 
Sections 110(a)(2) and 173. Our technical support document (TSD), which 
is included in the docket for this action, contains a detailed and 
complete discussion of the applicable CAA requirements and our 
evaluation of whether Rule 205 satisfies these requirements. Section 6 
of the TSD identifies the deficiencies that must be addressed to ensure 
full approval of a future revision of Rule 205. Please see the TSD 
included in the docket for this proposed rulemaking for additional 
information.

C. Deferred Action

    At this time, the EPA is not taking action on Rule 205, Appendix A, 
paragraph D, titled ``High Pollution Area Incentive,'' which contains a 
provision allowing a permitted generator with a vehicle fleet located 
in an ``area of high pollution'' to calculate its baseline emissions 
using the original fleet vehicle emission rates rather than a current 
model year vehicle type emission rate. The EPA will act on this portion 
of the rule in a separate rulemaking unless the provision is withdrawn 
by the MCAQD.

D. Proposed Action and Public Comment

    The EPA has reviewed Rule 205, ``Emission Offsets Generated by 
Voluntary Mobile Source Emission Reduction Credits,'' in accordance 
with the evaluation criteria described earlier in this preamble. CAA 
section 110(k)(4) authorizes the EPA to conditionally approve a plan 
revision based on a commitment by the state to adopt specific 
enforceable measures by a date certain but not later than one year 
after the date of the plan approval. In letters dated May 1, 2024, and 
May 6, 2024, the MCAQD and the ADEQ committed to adopt and submit 
specific enforceable measures to address the identified deficiencies in 
Rule 205 within one year after the date of final approval.\6\ 
Accordingly, pursuant to section 110(k)(4) of the Act, we are proposing 
a conditional approval of Rule 205. We are proposing to conditionally 
approve Rule 205 based on our determination that, apart from the 
deficiencies listed in Section II.B of this preamble and Section 6 of 
our TSD, the rules satisfy the applicable statutory and regulatory 
requirements for offset trading programs and the general requirements 
for SIPs to be clear and enforceable, including provisions found in 40 
CFR 51.165(a)(3)(ii)(C) and CAA Sections 110(a)(2) and 173. Moreover, 
we conclude that if the MCAQD and the ADEQ submit the changes listed in 
their commitment letters, the identified deficiencies will be cured.
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    \6\ See the May 1, 2024 and May 6, 2024 commitment letters from 
the MCAQD and the ADEQ for additional information about how the 
MCAQD will correct the identified deficiencies. These letters are 
contained in the docket for this rulemaking.
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    The intended effect of our proposed conditional approval action is 
to update the applicable SIP while providing the Department the 
opportunity to correct the identified deficiencies. If we finalize this 
action as proposed, our action will be codified through revisions to 40 
CFR 52.120 (Identification of plan) and 40 CFR 52.119 (Identification 
of plan--conditional approval).
    If the State meets its commitment to submit the required revisions 
and the EPA approves the submission, then the deficiencies listed above 
will be cured. However, if the Department fails to submit these 
revisions within the required timeframe, explained in section II.C, the 
conditional approval will automatically convert to a disapproval, and 
the EPA will issue a finding of disapproval. The EPA is not required to 
propose the finding of disapproval.
    In support of this proposed action, we have also concluded that our 
conditional approval of Rule 205 would comply with sections 110(l) and 
193 of the Act because the submitted rule as a whole would not 
interfere with continued attainment of the NAAQS in Maricopa County and 
would not relax control technology and offset requirements.
    We will accept comments from the public on this proposal until 
September 23, 2024.

III. Incorporation by Reference

    In this rulemaking, the EPA is proposing to include in a final EPA 
rule regulatory text that includes incorporation by reference. In 
accordance with requirements of 1 CFR 51.5, the EPA is proposing to 
incorporate by reference Rule 205, ``Emission Offsets Generated by 
Voluntary Mobile Source Emission Reduction Credits,'' which establishes 
a program allowing fleet owners/operators to generate emission 
reduction credits (ERCs) by either retrofitting existing fleet vehicles 
or replacing existing fleet vehicles with lower emitting vehicles and 
meeting other ongoing requirements. The EPA has made, and will continue 
to make, these materials available through https://www.regulations.gov 
and in hard copy at the EPA Region IX Office (please contact the person 
identified in the FOR FURTHER INFORMATION CONTACT section of this 
preamble for more information).

IV. Statutory and Executive Order Reviews

    Under the CAA, 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, the EPA's role is to review state choices 
and approve those choices if they meet the minimum criteria of the Act. 
Accordingly, this proposed action proposes conditionally approve state 
law as meeting federal requirements and does not impose additional 
requirements beyond those imposed by state law.
    Additional information about these statutes and Executive Orders 
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is not a significant regulatory action and was 
therefore not submitted to the Office of Management and Budget (OMB) 
for review.

B. Paperwork Reduction Act (PRA)

    This action does not impose an information collection burden under 
the PRA because this action does not impose additional requirements 
beyond those imposed by state law.

C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. This 
action will not impose any requirements on small entities beyond those 
imposed by state law.

D. Unfunded Mandates Reform Act (UMRA)

    This action does not contain any unfunded mandate as described in 
UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect 
small governments. This action does not impose additional requirements 
beyond those imposed by state law. Accordingly, no additional costs to 
state, local, or tribal governments, or to

[[Page 67922]]

the private sector, result from this action.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It 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.

F. Executive Order 13175: Coordination With Indian Tribal Governments

    This action does not have tribal implications, as specified in 
Executive Order 13175, because the SIP is not approved to apply on any 
Indian reservation land or in any other area where the EPA or an Indian 
tribe has demonstrated that a tribe has jurisdiction, and will not 
impose substantial direct costs on tribal governments or preempt tribal 
law. Thus, Executive Order 13175 does not apply to this action.

G. Executive Order 13045: Protection of Children From Environmental 
Health Risks and Safety Risks

    The EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that concern environmental health or safety risks 
that the EPA has reason to believe may disproportionately affect 
children, per the definition of ``covered regulatory action'' in 
section 2-202 of the Executive Order. Therefore, this action is not 
subject to Executive Order 13045 because it merely proposes to 
conditionally approve state law as meeting federal requirements. 
Furthermore, the EPA's Policy on Children's Health does not apply to 
this action.

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This action is not subject to Executive Order 13211, because it is 
not a significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act (NTTAA)

    Section 12(d) of the NTTAA directs the EPA to use voluntary 
consensus standards in its regulatory activities unless to do so would 
be inconsistent with applicable law or otherwise impractical. The EPA 
believes that this action is not subject to the requirements of section 
12(d) of the NTTAA because application of those requirements would be 
inconsistent with the CAA.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Population

    Executive Order 12898 (Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations, 59 FR 7629, 
February 16, 1994) directs Federal agencies to identify and address 
``disproportionately high and adverse human health or environmental 
effects'' of their actions on minority populations and low-income 
populations to the greatest extent practicable and permitted by law. 
The EPA defines environmental justice (EJ) as ``the fair treatment and 
meaningful involvement of all people regardless of race, color, 
national origin, or income with respect to the development, 
implementation, and enforcement of environmental laws, regulations, and 
policies.'' The EPA further defines the term fair treatment to mean 
that ``no group of people should bear a disproportionate burden of 
environmental harms and risks, including those resulting from the 
negative environmental consequences of industrial, governmental, and 
commercial operations or programs and policies.''
    The State did not evaluate EJ considerations as part of its SIP 
submittal; the CAA and applicable implementing regulations neither 
prohibit nor require such an evaluation. The EPA did not perform an EJ 
analysis and did not consider EJ in this action. Consideration of EJ is 
not required as part of this action, and there is no information in the 
record inconsistent with the stated goal of Executive Order 12898 of 
achieving EJ for people of color, low-income populations, and 
Indigenous peoples.

List of Subjects in 40 CFR Part 52

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Incorporation by reference, Intergovernmental 
relations, Nitrogen dioxide, Ozone, Reporting and recordkeeping 
requirements, Volatile organic compounds.

    Dated: August 14, 2024.
Martha Guzman Aceves,
Regional Administrator, Region IX.
[FR Doc. 2024-18570 Filed 8-21-24; 8:45 am]
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