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

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Note: EPA no longer updates this information, but it may be useful as a reference or resource.

[Federal Register: November 14, 2001 (Volume 66, Number 220)]
[Rules and Regulations]
[Page 57196-57219]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14no01-10]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[TX-134-5-7509; FRL-7091-5]

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

AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.

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

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

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

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

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

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

[[Page 57197]]

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

II. What Action Is EPA Taking Today?

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

III. What Are the Clean Air Act Requirements?

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

IV. Why Is EPA Taking This Action?

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

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

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

VI. What Did the State Submit?

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

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

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

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

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

[[Page 57198]]

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

[[Page 57199]]

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

[[Page 57200]]

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

Issue 2: Benefits of the LED Rule and Program

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

[[Page 57201]]

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

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

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

[[Page 57202]]

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

[[Page 57203]]

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

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

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

[[Page 57204]]

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

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

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

[[Page 57205]]

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

[[Page 57206]]

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

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

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

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

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

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

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

1997 Guidance at 6.

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

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

1997 Guidance at 6.

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

[[Page 57207]]

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

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

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

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

[[Page 57208]]

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

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

[[Page 57209]]

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

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

[[Page 57210]]

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

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

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

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

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

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

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

[[Page 57211]]

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

Expanding I/M Beyond the HGA Non-Attainment Area

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

Expanding Vehicle Idling Restrictions Beyond the HGA Non-Attainment
Area

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

Measures Rejected Due to Technical Infeasibility

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

Measures Rejected Due to Economic Infeasibility

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

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

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

[[Page 57212]]

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

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

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

The Construction Shift

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

Emissions Banking and Trading Program

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

[[Page 57213]]

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

Accelerated Retirement of Heavy Duty Vehicles

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

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

Natural Gas Buses

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

Phoenix Voluntary Ozone Plan

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

Energy Efficiency (Building Codes)

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

Federal Clean Fuel Fleet Program

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

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

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

[[Page 57214]]

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

Early Introduction of Low-NO_X Engines

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

Carl Moyer Memorial Air Quality Standards Attainment Program

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

Texas Emissions Reduction Program (Senate Bill 5)

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

Texas House Bill 2912

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

[[Page 57215]]

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

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

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

[[Page 57216]]

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

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

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

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

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

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

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

Issue 7 Need for Regulatory Impact Analysis Under Texas Law

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

Issue 8 Need for Regulatory Flexibility Act Analysis

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

Issue 9 EPA's Action Is Arbitrary and Capricious

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

[[Page 57217]]

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

VIII. EPA's Rulemaking Action

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

IX. Administrative Requirements

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

[[Page 57218]]

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

List of Subjects in 40 CFR Part 52

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

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

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

PART 52--[AMENDED]

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

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

Subpart SS--Texas

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

Sec. 52.2270 Identification of plan.

* * * * *
(c) * * *

EPA Approved Regulations in the Texas SIP
----------------------------------------------------------------------------------------------------------------
State
approval EPA
State citation Title/Subject Submittal approval Explanation
date date
----------------------------------------------------------------------------------------------------------------

* * * * * *
*
----------------------------------------------------------------------------------------------------------------
Chapter 114 (Reg 4)--Control of Air Pollution from Motor Vehicles
----------------------------------------------------------------------------------------------------------------
Subchapter A--Definitions
----------------------------------------------------------------------------------------------------------------

* * * * * *
*
Section 114.6.......................... Low Emission Fuel 12/06/2000 [Insert 11/
Definitions. 14/01
Federal
Register
Cite.]

* * * * * *
*
----------------------------------------------------------------------------------------------------------------
Subchapter H--Low Emission Fuels
----------------------------------------------------------------------------------------------------------------
Division 1: Gasoline Volatility
----------------------------------------------------------------------------------------------------------------

* * * * * *
*
----------------------------------------------------------------------------------------------------------------
Division 2: Low Emission Diesel
----------------------------------------------------------------------------------------------------------------
Section 114.312........................ Low Emission Diesel 12/06/2000 [Insert 11/
Standards. 14/01
Federal
Register
Cite.]
Section 114.313........................ Designated Alternate 12/06/2001 Insert 11/
Limits. 14/01
Federal
Register
Cite.]

[[Page 57219]]

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

* * * * * *
*
----------------------------------------------------------------------------------------------------------------

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

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

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