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

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

[Federal Register: February 7, 2002 (Volume 67, Number 26)]
[Rules and Regulations]
[Page 5729-5735]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07fe02-7]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[CA249-0324; FRL-7134-4]

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

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

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SUMMARY: EPA is finalizing approval of revisions to the South Coast Air
Quality Management District (SCAQMD) portion of the California State
Implementation Plan (SIP). These revisions were proposed in the Federal
Register on

[[Page 5730]]

August 7, 2001 and concern oxides of nitrogen (NO_X)
emissions from mobile sources (Class 7 and 8 heavy duty vehicles,
marine vessels, ocean-going marine vessel hotelling operations, truck
and trailer refrigeration units), and area sources (agricultural
pumps). We are approving local rules that regulate these emission
sources under the Clean Air Act as amended in 1990 (CAA or the Act).

EFFECTIVE DATE: This rule is effective on March 11, 2002.

ADDRESSES: You can inspect copies of the administrative record for this
action at EPA's Region IX office during normal business hours. You can
inspect copies of the submitted SIP revisions at the following
locations:

Environmental Protection Agency, Region IX, 75 Hawthorne Street, San
Francisco, CA 94105-3901.
Environmental Protection Agency, Air Docket (6102), Ariel Rios
Building, 1200 Pennsylvania Avenue, NW., Washington, DC 20460.
California Air Resources Board, Stationary Source Division, Rule
Evaluation Section, 1001 ``I'' Street, Sacramento, CA 95814.
South Coast Air Quality Management District, 21865 E. Copley Dr.,
Diamond Bar, CA 91765-4182.

FOR FURTHER INFORMATION CONTACT: Lily Wong, Rulemaking Office (AIR-4),
U.S. Environmental Protection Agency, Region IX, (415) 947-4114.

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

I. Proposed Action

On August 7, 2001, (66 FR 41174), EPA proposed to approve the
following rules into the California SIP.

----------------------------------------------------------------------------------------------------------------
Local agency Rule No. Rule title Adopted Submitted
----------------------------------------------------------------------------------------------------------------
SCAQMD...................................... 1612.1 Mobile Source Credit 03/16/01 05/08/01
Generation Pilot Program.
SCAQMD...................................... 1631 Pilot Credit Generation 05/11/01 05/31/01
Program for Marine Vessels.
SCAQMD...................................... 1632 Pilot Credit Generation 05/11/01 05/31/01
Program for Hotelling
Operations.
SCAQMD...................................... 1633 Pilot Credit Generation 05/11/01 05/31/01
Program for Truck/Trailer
Refrigeration Units.
SCAQMD...................................... 2507 Pilot Credit Generation 05/11/01 05/31/01
Program for Agricultural
Pumps.
----------------------------------------------------------------------------------------------------------------

We proposed to approve these rules because we determined that they
complied with the relevant CAA requirements. Our proposed action
contains more information on the rules and our evaluation.

II. Public Comments and EPA Responses

EPA's proposed action provided a 60-day public comment period.
During this period, we received comments from the following parties.
1. Suma Peesapati, Communities for a Better Environment (CBE);
letter dated October 9, 2001 and received October 9, 2001.
2. Reed L. Royalty, Orange County Taxpayers Association (OCTA);
letter dated August 30, 2001 and received September 6, 2001.
3. William J. Quinn, California Council for Environmental and
Economic Balance (CCEEB); letter dated October 5, 2001 and received
October 5, 2001.
4. Jon K. Owyang, Market-Based Solutions (MBS); letter dated
October 8, 2001 and received October 8, 2001.
5. Jack Brunton, Sempra Energy (SE); letter dated October 8, 2001
and received October 9, 2001.
6. Michael J. Carroll, Latham & Watkins (LW); letter dated October
9, 2001 and received October 9, 2001.
7. Detrich B. Allen, City of Los Angeles (CLA); letter dated
October 9, 2001 and received October 9, 2001.
The comments and our responses are summarized below.
Comment 1: CBE commented that the RECLAIM program is fundamentally
flawed and, as a result, has not achieved the emission reductions
promised during program development eight years ago. Among the problems
that CBE describes with RECLAIM are: (a) Initial over-allocation of
credits resulting from artificially inflated baselines; (b) Inadequate
safeguards against fraud and uncertainty; (c) Emissions have actually
increased from the two largest NO_X source categories.
Response 1: RECLAIM is implemented by SCAQMD's Regulation 20 and
establishes a declining cap on emissions from medium and large
stationary NO_X sources. Regulations 16 and 25 provide
mechanisms to generate emission reduction credits from mobile sources
and area sources that can be purchased by RECLAIM sources. EPA is not
acting on Regulation 20 at this time. We are acting on rules in
Regulations 16 and 25, which can and should be evaluated independently.
Regulation 16 and 25 sources are not also subject to Regulation 20 and
Regulation 20 does not need to function well to achieve emission
reductions from Regulations 16 and 25. Even if Regulation 20 has
achieved no real emission reductions to date, rules in Regulation 16
and 25 should be approved if they comply with the CAA as described in
relevant national policy and guidance. As discussed in today's notice
and the August 7, 2001 proposal, we believe these rules in Regulations
16 and 25 do comply with the CAA. Comments on Regulation 20 are not
relevant to EPA's SIP action on the Regulation 16 and Regulation 25
credit rules.
Comment 2: CBE commented that SCAQMD and EPA should fix RECLAIM's
defects rather than developing and approving the Regulation 16 and 25
rules. Regulations 16 and 25 would increase the supply of cheap credits
which will exacerbate the problem with the RECLAIM program.
Response 2: We agree that SCAQMD should correct any problems with
the existing RECLAIM program. However, as discussed in Response 1,
Regulations 16 and 25 can and should be evaluated independently from
Regulation 20. While we do not believe these reductions will be
inexpensive, as suggested by the comment, there would be nothing
inherently wrong if they were. An important feature of economic
incentive programs like this is to allow industry to achieve the most
economically efficient emission reductions. The commenter may be
alleging that the emission reduction credits will be cheap because they
will not come from real emission reductions. The commenter, however,
provides no evidence or support for this. If used, we believe these
credit rules will generate real emission reductions. As discussed in
the Technical Support Documents (TSDs) to our August 7, 2001 proposal,
the rules are carefully designed to assure that reductions are surplus,
quantifiable, enforceable and permanent. As we have stated numerous
times, the criteria for judging the adequacy of emission reduction
credits, i.e., that the emission reductions are surplus, quantifiable,
enforceable and permanent, are based upon fundamental requirements of
the CAA. See ``Emissions Trading Policy Statement,'' 51 FR 43814,
43831-43832 (December 4,

[[Page 5731]]

1986), and ``Economic Incentive Program Rules,'' 59 FR 16690, 16691
(April 7, 1994).
We note also that the Regulation 16 and 25 rules are designed to
achieve significant environmental benefit. In particular, the rules
require that all NO_X emission reduction credits be
discounted by 9-10% for the benefit of the environment. The rules will
also significantly reduce particulate matter (PM) emissions, since no
PM emission reduction credits are awarded. For these reasons, the
approval of these credit rules will strengthen the SIP, regardless of
the past performance of the RECLAIM program.
Comment 3: CBE commented that SCAQMD has not complied with Rule
2015 which offers an appropriate ``fix.'' Rule 2015 requires SCAQMD to
conduct a thorough investigation of the high price of credits in the
context of the compliance and enforcement program, and of whether the
program provides appropriate incentives to comply.
Response 3: SCAQMD'S implementation of Rule 2015 is not relevant to
this rulemaking. Rule 2015 does not preclude the SCAQMD from developing
credit rules in Regulations 16 and 25. See also Responses 1 and 2.
Comment 4: CBE commented that mobile to stationary source trading
results in environmental justice (EJ) impacts. While the benefits from
emission reductions from mobile sources occur over a widespread area,
the emissions increases occur at stationary sources, often in low-
income communities of color. Further, even if the emission reductions
occur in low-income communities of color, pollution is merely
transferred from mobile to stationary sources in the same community.
Response 4: EPA agrees that programs which allow volatile organic
compound (VOC) trading should address EJ, because many VOCs are also
hazardous air pollutants (HAPs) that may impact health of people near
the emission sources. This comment is not relevant to the five credit
rules, however, which only allow trading of NO_X emissions
and not VOC or HAPs. NO_X emissions combine with VOCs to form
ozone, which can have significant health impacts. But because ozone
forms fairly slowly and then disperses throughout the South Coast Air
Basin, it is highly unlikely that increased NO_X emissions in
any one South Coast neighborhood will disproportionately increase ozone
levels in the same neighborhood. NO_X emissions also
contributes to PM formation, but the increased health impacts from this
PM in the South Coast is also a regional and not a localized problem
for the same reasons, and thus does not have EJ implications. Lastly,
NO₂, a component of NO_X emissions, can have
health impacts. To considerable extent, the same arguments regarding
regional rather than localized impacts would apply here. In addition,
all areas of South Coast and the country meet the health-based
NO₂ standard, so no health impacts are expected from
NO₂.
Comment 5: CBE commented that monitoring mobile emission reduction
programs is difficult and often leads to ``phantom trades,'' citing
SCAQMD's experience with Rule 1610 regarding car scrappage.
Response 5: EPA believes that emission reductions from these five
credit rules are real, surplus, quantifiable, enforceable, and
permanent. These five credit rules are fundamentally different than the
car scrappage program because they require utilization of a cleaner
technology to generate emission reduction credits. Rule 1610, on the
other hand, assumed that emissions would be reduced by scrapping cars
that would no longer operate. While we agree that Rule 1610 was
significantly flawed, its problems (e.g., some scrapped cars had not
been in use and some cars' parts were used after being scrapped) do not
relate to these credit rules. Oversight, for example, of these credit
rules is more straightforward because they require changes to equipment
which can be easily verified. The credit rules also require extensive
monitoring, recordkeeping and reporting to verify the emission
reduction credits.
Comment 6: CBE commented that proper functioning of the RECLAIM
market necessitates a closed universe of credits. This is why, for
example, excess emissions are deducted from sources' annual credit
allocation--to regulate the total amount of pollution on the market.
Response 6: It is not essential that the total amount of pollution
in the market remain fixed, but that the basin-wide emissions be
reduced. A closed universe of emission reduction credits in RECLAIM is
not necessary if new emission reductions are real and appropriately
addressed in the emissions inventory. As discussed in Response 2, the
five credit rules are carefully designed to assure that reductions are
real by being surplus (which includes being addressed in the emissions
inventory), quantifiable, enforceable and permanent.
We also evaluated the credit rules to determine whether demand
shifting could create ``paper'' reductions by shifting activity to
sources not participating in the program. Demand shifting is not a
problem because emission reduction credits can only be generated to the
extent that generators lower emission rates and actually engage in the
activity. If, for example, a generator completely shifts his activity
level to sources not participating in the program, no emission
reduction credits are generated and the emission rate of the non-
participating sources would not increase. We also evaluated whether the
credit rules could increase activity and emissions from the source
categories they address. We are aware of no basis for this to occur.
Any increase in source category activity would be a function of growth
that would be factored into the attainment plan.
Comment 7: CBE commented that CAA section 110(a) requires SIPs to
include programs for enforcement of control measures, and to assure
adequate personnel, funding and authority. SCAQMD has a minimum
2-year lag in enforcing existing programs, and the five credit rules
impose a new set of monitoring, reporting and calculating criteria that
will substantially increase SCAQMD's enforcement burden. SCAQMD does
not plan to increase its enforcement capacity to properly oversee these
new requirements in violation of section 110(a).
Response 7: EPA originally approved California's compliance with
the section 110(a)(2)(E) personnel, funding and authority requirement
in 1972, and we have had no cause to question SCAQMD's continued
compliance since then. Enforcement cases take time to identify, develop
and negotiate, and while a two-year lag to close them out is not ideal,
in itself it does not justify questioning compliance with section
110(a)(2)(E). We note also that SCAQMD is by far the largest and best
funded local air pollution regulatory agency in the country, with over
750 staff and an annual operating budget of over $85 million. In
addition, we understand that in the last two and a half years, SCAQMD
has added 22 inspectors which may help SCAQMD in determining RECLAIM
compliance. We understand that the emission reduction projects under
these five credit rules are administered by SCAQMD staff in a different
office than staff working on RECLAIM compliance.
Comment 8: CBE commented that approving the credit rules will relax
existing requirements in violation of CAA section 110(l). Section
110(l) directs EPA to not approve SIP revisions that interfere with
attainment, reasonable further progress or any other applicable
requirement. Credit rule approval would delay real emission

[[Page 5732]]

reductions by postponing installation of available control equipment on
RECLAIM sources, and thus interfere with reasonable further progress
and attainment in the South Coast.
Response 8: If used, we believe these credit rules will generate
real emission reductions. We agree that use of these rules may mean
some available controls are not installed on RECLAIM sources. However,
because the new emission reductions are real, and additional
environmental benefit is built into the Regulation 16 and 25 rules, we
expect the rules to result in a net decrease in emissions, and not
interfere with attainment, reasonable further progress or any other
applicable requirement in violation of CAA section 110(l). See also
Responses 2 and 6.
Comment 9: CBE provided information regarding California's alleged
power crisis and commented that the crisis may not have been
responsible for the price spike in RECLAIM credits. If it was, the
energy crisis is over and doesn't justify changes to the RECLAIM
program. If it wasn't, the price reflects the true cost of foregoing
pollution control and represents a healthy market making up for years
of dysfunction. This is not the time to flood the market with more
credits which will artificially drive down credit prices and delay real
emission reductions.
Response 9: As discussed in Response 2 and elsewhere, we believe
the five credit rules comply with the CAA and will benefit the
environment. The justification for developing these rules is not a
criteria in our evaluation.
Comment 10: CBE commented that, at a minimum, SCAQMD should limit
the amount of new emission reduction credits that can enter the RECLAIM
market to prevent: (a) Flooding the market with emission reduction
credits that drive down credit prices and continue a dysfunctional
market that provides no incentives for pollution control; (b)
eviscerating the potential benefits of compliance plans under proposed
RECLAIM Rules 2009 and 2009.1; and (c) violating CAA section 110(l).
Response 10: See Responses 1, 2, 6, 8, and 9. In addition, SCAQMD's
staff reports estimate that the maximum NO_X emission
reduction credits that will be generated from the five credit rules is
approximately 2.75 to 3.96 tons/day. Even if this entire amount of
emission reduction credit is generated, it is unlikely to flood the
RECLAIM credit market, which currently contains approximately 32.45
tons/day.
Comment 11: CBE commented that Rule 1612.1 contains only 9% instead
of the traditional 10% environmental benefit, in violation of CAA
section 110(l). The 10% benefit helps ensure that pollution credit
programs reduce pollution, and helps mitigate the margin of error
associated with emission measurement and emission reduction credits
calculation.
Response 11: EPA evaluates environmental benefit as an issue
separate from uncertainty. EPA however agrees that technical
uncertainty must also be addressed. We believe that uncertainty in
measuring emissions and calculating emission reductions has been
addressed by establishing conservative emission quantification
protocols in these rules. For example, the baseline emission rate in
Rule 1612.1 is the emission rate for a new on-highway diesel engine
that meets both EPA and CARB certified exhaust engine standards.
Applying certified engine standards helps remove the uncertainty
relating to the remaining useful life of the existing diesel engine,
and will result in a conservative estimate of baseline emissions, since
we expect that the actual emission rate of the existing diesel engines
will be higher than the baseline emission rate specified in the
emission quantification protocols. Technical uncertainty is also
mitigated by the use of certified engine standards for the optional
emission factors in Rule 1612.1. Under the CAA and other federal
regulations, manufacturers must submit applications to obtain a
certificate of conformity to EPA on the basis of engine(s) testing that
conforms to the requirements of the EPA Test Procedures, and where
applicable, in accordance with the California Exhaust Emission
Standards and Test Procedures for new model year engines.
As discussed in our August 7, 2001 proposal, EPA published the EIP
guidance, ``Improving Air Quality with Economic Incentive Programs''
(EPA-452/R-01-001) in January 2001 to help ensure consistent
application of the CAA regarding economic incentive programs like
RECLAIM and the five credit rules. The EIP guidance suggests that a 10%
emission reduction credit discount generally demonstrates adequate
environmental benefit consistent with the CAA, but also allows States
to demonstrate environmental benefit other ways. Nine percent of all
NO_X emission reductions generated under Rule 1612.1 will be
retired for benefit of the environment and cannot be used to offset
emissions at RECLAIM sources. Rule 1612.1 activity as well as the
activities in the other credit rules will also significantly reduce PM
emissions; but since no PM emission reduction credits are awarded or
can be used by RECLAIM sources, all the PM emission reductions fully
benefit the environment. These PM emission reductions are important to
the demonstration of overall environmental benefit from Rule 1612.1
and, in combination with the 9% NO_X emission reduction
credit discount, are consistent with the EIP guidance and the CAA.
Comment 12: CBE commented that the CAA prohibits use of mobile
source emission reduction credits from the five rules for NSR offsets.
CAA section 173(a)(1)(A) states that offsets must be obtained ``from
existing sources in the region.'' CAA section 111(a)(6) defines
``existing source'' as ``any stationary source other than a new
source.'' Therefore, NSR offsets must be obtained from stationary, not
mobile sources.
Response 12: CBE misunderstands the purpose and application of
section 111 of the CAA. The title of section 111 is also a description
of its limited application; ``Standards of Performance for New
Stationary Sources.'' The definition cited by CBE in section 111(a)(6)
applies only to the stationary sources covered by section 111. That
definition is not applicable to or relevant for these credit rules,
which are being included into the California SIP pursuant to section
110 of the CAA. Had Congress wished to limit the generation of offsets
to stationary sources, it would have inserted ``stationary'' in front
of ``sources'' in the language quoted by CBE from section 173(a)(1)(A)
of the CAA. Congress was obviously aware of this distinction, having
defined ``stationary source'' for purposes of the CAA in section
302(z). Since section 173(a)(1)(A) uses the broader term ``sources,''
EPA has concluded that this can include mobile sources.
Comment 13: CBE has commented that EPA's reliance on the 2001 EIP
Guidance as the basis for proposing approval of the credit rules is
illegal. The 2001 EIP guidance has no legal authority and calls for a
relaxation of standards proposed in other policy statements and rules.
The 2001 EIP guidance cannot change standards that have gone through
the formal rulemaking process, such as the 1986 Emissions Trading
Policy Statement (ETPS) and the 1994 EIP rule, and surely cannot trump
federal CAA requirements.
Response 13: While the 1986 ETPS was published in the Federal
Register, it was guidance, not regulation and did not, as CBE suggests,
go through formal rulemaking. Similarly, the 1994 EIP explains that it
was guidance for discretionary programs such as these five credit
rules. The 2001 EIP is EPA's most recent guidance for economic

[[Page 5733]]

incentive programs. EPA'S publication of the 1986 ETPS, 1994 EIP, and
2001 EIP did not constitute a final determination for discretionary
programs and none of them were intended to trump CAA requirements. They
have all been used, however, to help assure consistent interpretation
of the CAA where its application to detailed EIP requirements is
unclear. As stated earlier, the criteria for judging the adequacy of
emission reduction credits, i.e., that the emission reductions are
surplus, quantifiable, enforceable and permanent, are based upon
fundamental requirements of the CAA. See ``Emissions Trading Policy
Statement,'' 51 FR 43814, 43831-43832 (December 4, 1986), and
``Economic Incentive Program Rules,'' 59 FR 16690, 16691 (April 7,
1994).
The next set of comments are summarized from letters CBE wrote to
SCAQMD during development of the five credit rules and were attached to
CBE's August 9, 2001 comment letter to EPA. Since CBE's August 9, 2001
letter is quite extensive and raises many of the same issues as the
attachments, we believe the attachments were included only as
background information and not intended as comments to our August 7,
2001 proposal. We also note that many of the issues in the attachments
are not relevant to our August 7, 2001 proposal because they were
raised in context of SCAQMD's local rulemaking. As a result, we do not
believe we need to respond to the issues raised in the attachments. As
a courtesy to the commenter, however, we have summarized and responded
to these comments below.
Comment 14: CBE has commented that because of the EJ concerns, Rule
1612.1 must have a better public participation process and evaluation.
CBE believed it appropriate to offer community members notice and
opportunity to comment on individual trades. The rule does not provide
for an evaluation of the program until 2006 and should be evaluated on
an annual basis.
Response 14: The rules require a biannual program review beginning
in 2002 for Rule 1612.1. See also Response 4 regarding EJ concerns. The
SIP-approved RECLAIM program does not provide for public notice and
comment on individual trades, and we see no basis for requiring such
notice and comment for Rule 1612.1 trades.
Comment 15: CBE commented that SCAQMD must incorporate technical
uncertainty in the calculation of emission reduction credits. Rule
1612.1 does not incorporate technical uncertainty in its calculation
protocols and allows use of notoriously inaccurate emission factors.
Response 15: Technical uncertainty is accounted for in Rule
1612.1's emissions quantification protocol even though it does not
appear as a separate factor in the calculations. See also Response 11.
Comment 16: CBE commented that SCAQMD violated the California
Environmental Quality Act (CEQA) in its rulemaking process for this
program, citing numerous deficiencies.
Response 16: SCAQMD has certified that development of the five
credit rules fully complies with CEQA. Specifically, SCAQMD made the
following findings: A draft Environmental Assessment (EA) was
circulated for a 30-day public review, all comments received were
responded to in the Final EA, and the Final EA is adequate. SCAQMD has
included the Final EA for the five credit rules in its SIP submittal.
In submitting these rules to EPA, the California Air Resources Board
(CARB) has concurred with this certification. SCAQMD and CARB have much
greater expertise in implementing and interpreting this state law than
does EPA, and we concur with their analysis.
Comment 17: The RECLAIM program has already violated California
Health and Safety Code section 39616(c), which require EIPs to reduce
emissions as much or more than the programs they replace. A generous
estimate of actual overall reductions resulting from RECLAIM is 16%
since 1993. Approving the RECLAIM amendments and associated credit
rules will only exacerbate the problem.
Response 17: See Responses 1 and 2.
Comment 18: The Mitigation Fee Program and the RECLAIM AQIP violate
the equivalency requirement under State Law.
Response 18: These comments relate specifically to recent
amendments to Regulation 20 and are not relevant to the five credit
rules. See also, Responses 1 and 2.
Comment 19: While CBE supports SCAQMD's efforts to mandate
pollution control at certain power plants through submittal of
compliance plans to achieve BARCT, it is unclear what the BARCT
standards are for power producing facilities.
Response 19: See Response 18.
Comment 20: It is unclear what is meant by ``best available
information'' which is the basis for environmental dispatch under Rule
2009.
Response 20: See Response 18.
Comment 21: CBE provided a copy of extensive comments that they
made in 1994 to CARB during CARB's hearing on RECLAIM.
Response 21: These comments are not relevant to the five credit
rules. See Response 1 and 2.
The next comments are summarized from a June 1, 2001 letter CBE
wrote to CARB and EPA, and were attached to CBE's October 9, 2001
comment letter to EPA Region 9 regarding the five credit rules. Since
CBE's August 9, 2001 letter is quite extensive and raises many of the
same issues as the attachment, we believe the attachment was included
only as background information and not intended as comments to our
August 7, 2001 proposal. As a result, we do not believe we need to
respond to the issues raised in the June 1, 2001 letter. As a courtesy
to the commenter, however, we have summarized and responded to these
comments below.
Comment 22: CBE commented that CARB has not determined, in
accordance with California Health and Safety Code section 39616(d)(2),
that Rule 1612.1 meets certain requirements of the California Clean Air
Act. CBE believes that the new rules violate several provisions of
state law, including equivalency under subdivision (c) of section
39616.
Response 22: We have discussed this issue with CARB. CARB provided
us with the following legal analysis. CARB has much greater expertise
in implementing and interpreting this state law than does EPA, and we
concur with their analysis.
When an air district first adopts or revises its attainment plan to
establish a market-based incentive program, such as RECLAIM in the
South Coast, the district is required to meet the conditions specified
in Health and Safety Code section 39616(d)(1) or (2) as applicable and
to make certain findings, and CARB is required to make a determination
that the conditions are met. Further, CARB must determine that the
district met the conditions specified in section 39616(d) when adopting
regulations to implement a market-based incentive program. SCAQMD and
ARB met these obligations when the RECLAIM program was established.
These requirements do not apply to the 5 credit rules, however,
because they are not establishing a new market-based incentive program
or significantly altering an existing program. CBE's reading of the
statute as applying to the credit rules, which do not undermine the
findings and determinations made when the overarching RECLAIM program
was established, is incorrect.
This does not mean that a market-based program goes without further
review for compliance with the requirements of section 39616. Under
section 39616(e), a district is required to

[[Page 5734]]

reassess its program established in accordance with section 39616
within 5 years of adoption and ratify certain of the findings made at
the time of adoption within 7 years, with CARB concurrence. This
process is currently underway but has not yet been completed.
Comment 23: CBE commented that the credit rules violate State law
because they do not comply with CARB's methodology which requires that
calculation methods for determining the amount of reductions generated
take technical uncertainty into account.
Response 23: SCAQMD has determined that the credit rules are
consistent with State law. In submitting these rules to EPA, CARB has
concurred with this determination. SCAQMD and CARB have much greater
expertise in implementing and interpreting this state law than does
EPA, and we concur with their analysis. We also believe that technical
uncertainty has been addressed in these rules. See Response 11.
The next set of comments are summarized from an October 10, 1999
letter CBE wrote to EPA Headquarters during the comment period for the
2001 EIP guidance, and were attached to CBE's October 9, 2001 comment
letter to EPA Region 9 regarding the five credit rules. Since CBE's
October 9, 2001 letter is quite extensive and raises many of the same
issues, we believe the October 10, 1999 letter was included only as
background information and not intended as a comment to our August 7,
2001 proposal. We also note that many of the issues in the October 10,
1999 letter are either not relevant to our August 7, 2001 proposal
because they were raised in context of EPA's generic national guidance,
or EPA has already responded above to the issue. As a result, we do not
believe we need to respond to the issues raised in the October 10, 1999
letter. As a courtesy to the commenter, however, we have summarized the
remaining relevant issues and responded to these comments below.
Comment 24: CBE comments that the EIP guidance undermines many
existing technology-based rules and regulations, existing EIP policy
and rules, as well as the CAA itself.
Response 24: As discussed in Response 13, the draft EIP guidance
was developed to help assure consistent interpretation of the CAA where
its application to detailed EIP requirements is unclear. We do not
believe it is inconsistent with pre-existing federal requirements or
the CAA. Ultimately, however, specific EIP rules like the five SCAQMD
credit rules must comply with the CAA and implementing regulations
regardless of the EIP guidance.
Comment 25: CBE commented that the public must have access to the
results of the program evaluation and the public must be able to
participate in the development of the reconciliation procedures.
Response 25: The five credit rules include provisions for a
biannual review. The SCAQMD Board also adopted a Resolution which
directed staff to include in the annual RECLAIM report, the
applications and credits issued pursuant to the credit rules.
Consequently, information will be available to the public on an annual
basis. The five credit rules and the RECLAIM program rules and
amendments include reconciliation procedures which have been subject to
public notice and comment.
Comment 26: CLA commented that while they support compliance
flexibility measures, they urged EPA and SCAQMD to carefully examine
potential adverse localized impacts to surrounding communities since
credit programs can have potential socio-economic and environmental
impacts.
Response 26: The SCAQMD Governing Board adopted a Resolution on May
11, 2001 which directed SCAQMD staff to evaluate the potential for
localized impacts from the use of emission reduction credits from these
credit rules, and to recommend to the Governing Board mechanisms to
address such localized impacts, if any. See also Response 4.
Comment 27: CLA commented that EPA and SCAQMD should provide
assurance that the proposed credit rules will not preclude SIP emission
reduction requirements for the maritime industry.
Response 27: The five credit rules do not preclude SCAQMD from
submitting additional SIP emission reduction requirements for the
maritime industry.
Comment 28: CLA commented that they supported the sunset of the
credit rules prior to 2010, the year for ozone attainment, and they
believe that any surplus emission reductions that remain from Rules
1631 or 1632 should be applied to the Marine Vessel SIP Control Measure
or other equivalent measure for the maritime industry in the most
recent EPA-approved SIP.
Response 28: Rule 1631 will end June 30, 2005. We agree that any
emission reductions achieved subsequent to that time should be applied
to the SIP. Rule 1632 includes a provision to evaluate, in 2010,
whether the emission reductions remain surplus in the context of the
most recently EPA-approved SIP. If the emission reductions are
determined not to be surplus, Rule 1632 ends in 2010. If the evaluation
shows that some or all of the emission reductions are surplus, Rule
1632 could continue.
Comment 29: The other commenters all supported our proposed action
to fully approve the five credit rules.
Response 29: No response needed.

III. EPA Action

No comments were submitted that change our assessment that the
submitted rules comply with the relevant CAA requirements. Therefore,
as authorized in section 110(k)(3) of the Act, EPA is fully approving
these rules into the California SIP.

IV. 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 32111,
``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

[[Page 5735]]

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 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. 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.
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 April 8, 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, Incorporation by
reference, Intergovernmental relations, Nitrogen dioxide, Ozone,
Reporting and recordkeeping requirements.

Dated: January 16, 2002.
Wayne Nastri,
Regional Administrator, Region IX.

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 F--California

2. Section 52.220 is amended by adding paragraphs (c)(282) and
(c)(284)(i)(B) to read as follows:

Sec. 52.220 Identification of plan.

* * * * *
(c) * * *
(282) New and amended regulations for the following APCDs were
submitted on May 31, 2001, by the Governor's designee.
(i) Incorporation by reference.
(A) South Coast Air Quality Management District.
(1) Rules 1631, 1632, 1633, and 2507 adopted on May 11, 2001.
* * * * *
(284) * * *
(i) * * *
(B) South Coast Air Quality Management District.
(1) Rule 1612.1 adopted on March 16, 2001.
* * * * *
[FR Doc. 02-2841 Filed 2-6-02; 8:45 am]
BILLING CODE 6560-50-P

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