Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone

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Other Related Documents

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

[Federal Register: November 7, 1997 (Volume 62, Number 216)]
[Proposed Rules]
[Page 60317-60367]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07no97-28]
[[Page 60318]]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[FRL-5911-7]

Finding of Significant Contribution and Rulemaking for Certain
States in the Ozone Transport Assessment Group Region for Purposes of
Reducing Regional Transport of Ozone

AGENCY: Environmental Protection Agency (EPA).
ACTION: Notice of proposed rulemaking (NPR).

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SUMMARY: In accordance with the Clean Air Act (CAA), today's action is
a proposed rulemaking to require certain States to submit State
implementation plan (SIP) measures to ensure that emission reductions
are achieved as needed to mitigate transport of ozone (smog) pollution
and one of its main precursors--emissions of oxides of nitrogen
(NO_X)-- across State boundaries in the eastern half of the
United States. The States affected by today's action are in the Ozone
Transport Assessment Group (OTAG) Region.
Today's action proposes to find that the transport of ozone from
certain States in the OTAG region (the 37 eastern most States and the
District of Columbia) significantly contributes to nonattainment of the
ozone national ambient air quality standards (NAAQS), or interferes
with maintenance of the NAAQS, in downwind States. This proposal
explains the basis for determining significant contribution or
interference with maintenance for the affected States. Further, by
today's action, EPA is proposing the appropriate levels of
NO_X emissions that each of the affected States will be
required to achieve.
The EPA is committed to promulgate final action on the proposed
rule within 12 months from the date of publication of today's action.

DATES: The EPA is establishing a 120-day comment period, ending on
March 9, 1998. For additional information on the comment period, please
refer to SUPPLEMENTARY INFORMATION. A public hearing will be held
during the comment period, if requested. If a public hearing is
requested, EPA will make an announcement in the Federal Register.

ADDRESSES: Documents relevant to this matter are available for
inspection at the Air and Radiation Docket and Information Center
(6101), Attention: Docket No. A-96-56, U.S. Environmental Protection
Agency, 401 M Street SW, room M-1500, Washington, DC 20460, telephone
(202) 260-7548, between 8:00 a.m. and 4:00 p.m., Monday through Friday,
excluding legal holidays. A reasonable fee may be charged for copying.
Comments and data may also be submitted electronically by following the
instructions under SUPPLEMENTARY INFORMATION of this document. No
Confidential Business Information (CBI) should be submitted through e-mail.

FOR FURTHER INFORMATION CONTACT: General questions concerning today's
action should be addressed to Kimber Smith Scavo, Office of Air Quality
Planning and Standards, Air Quality Strategies and Standards Division,
MD-15, Research Triangle Park, NC 27711, telephone (919) 541-3354.
Please refer to SUPPLEMENTARY INFORMATION below for a list of contacts
for specific subjects described in today's action.

SUPPLEMENTARY INFORMATION:

Comment Period

Because commenters may wish to submit technical information that
may require additional time to develop, EPA will accept additional
pertinent information beyond the 120-day time frame and will do what is
possible to take the information into account for the final rulemaking.
The EPA will make every effort to consider this information. However,
due to the time frames associated with this action, EPA cannot
guarantee that information submitted after the close of the comment
period will be considered. The EPA is committed to publish the final
rulemaking within 12 months of the date of today's action.

Electronic Availability

The official record for this rulemaking, as well as the public
version, has been established under docket number A-96-56 (including
comments and data submitted electronically as described below). A
public version of this record, including printed, paper versions of
electronic comments, which does not include any information claimed as
CBI, is available for inspection from 8 a.m. to 4 p.m., Monday through
Friday, excluding legal holidays. The official rulemaking record is
located at the address in ADDRESSES at the beginning of this document.
Electronic comments can be sent directly to EPA at: A-and-R-
Docket@epamail.epa.gov. Electronic comments must be submitted as an
ASCII file avoiding the use of special characters and any form of
encryption. Comments and data will also be accepted on disks in
WordPerfect in 5.1 file format or ASCII file format. All comments and
data in electronic form must be identified by the docket number A-96-
56. Electronic comments on this proposed rule may be filed online at
many Federal Depository Libraries.

Availability of Related Information

Documents related to OTAG are available on the Agency's Office of
Air Quality Planning and Standards' (OAQPS) Technology Transfer Network
(TTN) Bulletin Board System (BBS). The telephone number for the TTN BBS
is (919) 541-5742. To access the bulletin board a modem and
communications software are necessary. The following parameters on the
communications software are required: Data Bits-8; Parity-N; and Stop
Bits-1. The documents are located on the OTAG BBS. The TTN can also be
accessed via the web at http://www.epa.gov/ttn. If assistance is needed
in accessing the system, call the help desk at (919) 541-5384 in
Research Triangle Park, NC. Other documents related to OTAG can be
downloaded from OTAG's webpage at http://www.epa.gov/ttn/otag. The
OTAG's technical data are located at http://www.iceis.mcnc.org/OTAGDC.

For Additional Information

For technical questions related to the determination of significant
contribution, please contact Norm Possiel, Office of Air Quality
Planning and Standards, Emissions, Monitoring, and Analysis Division,
MD-13, Research Triangle Park, NC 27711, telephone (919) 541-5692. For
legal questions, please contact Howard Hoffman, Office of General
Counsel, 401 M Street SW, MC-2344, Washington, DC, 20460, telephone
(202) 260-5892. For questions concerning the statewide emission
budgets, please contact Doug Grano, Office of Air Quality Planning and
Standards, Air Quality Strategies and Standards Division, MD-15,
Research Triangle Park, NC 27711, telephone (919) 541-3292. For
questions concerning SIP approvability, please contact Carla Oldham,
Office of Air Quality Planning and Standards, Air Quality Strategies
and Standards Division, MD-15, Research Triangle Park, NC 27711,
telephone (919) 541-3347. For questions concerning the cost analysis,
please contact Sam Napolitano, Office of Atmospheric Programs, MC-
6201J, 401 M Street SW, Washington, DC 20460, telephone (202) 233-9751.

Outline

I. Preamble

[[Page 60319]]

A. Summary of Rulemaking and Affected States
B. General Factual Background
C. Statutory and Regulatory Background
1. Clean Air Act Provisions
a. 1970 and 1977 Clean Air Act Amendments
b. 1990 Clean Air Act Amendments
i. 1-hour Ozone NAAQS
ii. Revised Ozone NAAQS
iii. Provisions Concerning Transport of Ozone and Its Precursors
2. Regulatory Structure
a. March 2, 1995 Policy
b. OTAG
c. EPA's Transport SIP Call Regulatory Efforts
d. Revision of the Ozone NAAQS
e. Impacts of NO_X Emissions
D. EPA's Proposed Analytical Approach
1. Process for Requiring Submission of Section 110(a)(2)(D) SIP
Revisions
2. Overview of Elements of Section 110(a)(2)(D)
a. Summary of Section 110(a)(2)(D)
b. Significant Contribution to Nonattainment
c. Interfere with Maintenance
d. Remedying the Significant Contribution
i. Adequate Mitigation
ii. Elimination of Contribution
iii. Comparison of the Two Legal Interpretations of Section 110(a)(2)(D)
iv. Other Issues
e. Control Implementation and Budget Attainment Dates
E. Section 126 Petitions
F. OTAG Process
II. Weight of Evidence Determination of Significant Contribution
A. Introduction
B. Background Technical Information
1. OTAG Modeling Process
2. OTAG Strategy Modeling
3. OTAG Geographic Modeling
4. Other Relevant Analyses
C. Technical Analyses of Significant Contribution
1. Criteria for Determining Significant Contribution
2. Overview of Technical Approach
3. Identification of Ozone ``Problem Areas'
4. Analysis of Air Quality, Trajectory, and Non-OTAG Modeling
Information
5. Approaches for Analyzing Subregional Modeling Data
a. Approaches for 1-Hour Nonattainment
b. Approaches for 8-Hour Nonattainment
c. Methods for Presenting 1-Hour and 8-Hour Assessments
6. Contributions to 1-Hour Nonattainment
7. Contributions to 8-Hour Nonattainment
8. Assessment of State Contributions
D. Comparison of Upwind and Downwind Contributions to
Nonattainment and Costs of Controls
III. Statewide Emissions Budgets
A. General Approach for Calculating Budgets
1. Overview
2. Relationship of Proposed Budget Approach to the OTAG Recommendations
3. Uniform Application of Control Measures
a. OTAG
b. Collective Contribution and Equity Considerations
c. Modeling Assumptions and Potential Synergistic Effects
d. Electrical Generation and Emissions Shifting
e. Alternative Approaches Based on Non-Uniform Application of
Control Measures
4. Seasonal vs Annual Controls
5. Consideration of Areas with CAA Section 182(f) NO_X Waivers
6. Relation of OTC NO_X MOU to Budgets in the Ozone
Transport SIP Rulemaking
B. Budget Development Process
1. Overview
2. Description of and Rationale for Proposed Control Assumptions
a. Considering the Cost Effectiveness of Other Actions
b. Determining the Cost Effectiveness of NO_X Controls
c. Summary of Measures Assumed in Proposed Budget Calculation
3. Proposed Assumptions for Electric Utilities
a. Affected Entities
b. Methodology Used to Determine the Proposed Electric Utility
Budget Component
i. Proposed Utility Budget Component Calculation and Alternatives
ii. Seasonal Utilization
iii. Growth Considerations
c. Summary and Proposed Utility Budget Components
4. Proposed Assumptions for Other Stationary Sources
a. Affected Entities
b. Methodology Used to Determine the Proposed Area and
Nonutility Point Source Budget Components
c. Summary and Proposed Area and Nonutility Point Source Budget
Components
5. Proposed Assumptions for Highway Vehicles
a. Affected Entities
b. Methodology Used to Develop the Proposed Highway Vehicle
Budget Component
i. Budget Component Determination Method and Alternatives Considered
ii. Activity Level Projections and Growth Considerations
iii. Seasonal/Weekday/Weekend Adjustment
iv. Comparison to OTAG Recommendations
c. Summary and Proposed Highway Vehicles Budget Components
d. Conformity
6. Proposed Assumptions for Nonroad Sources
a. Affected Entities
b. Methodology Used to Determine the Proposed Nonroad Budget Component
i. Budget Component Determination Method and Alternatives Considered
ii. Activity Level Projections and Growth Considerations
iii. Seasonal/Weekday/Weekend Adjustment
iv. Comparison to OTAG Recommendations
c. Summary and Proposed Nonroad Budget Components
C. State-by-State Emissions Budgets
D. Recalculation of Budgets
IV. Implementation of Revised Air Quality Standards
A. Introduction
B. Background
C. Implementation Policy
1. Areas Eligible for the Transitional Classification
2. Areas Not Eligible for the Transitional Classification
V. SIP Revisions and Approvability Criteria
A. SIP Revision Requirements and Schedule
B. SIP Approval Criteria
1. Budget Demonstration
2. Control Strategies
a. Enforceable Measures Approach
b. Fixed Tonnage Budgets
3. Control Strategy Implementation
4. Growth Estimates
5. Promoting End-Use Energy Efficiency
C. Review of Compliance
D. 2007 Reassessment of Transport
E. Sanctions
1. Failure to Submit
2. Failure to Implement
F. Federal Implementation Plans (FIPs)
1. Legal Framework
2. Timing of FIP Action
3. Statewide Emissions Budgets
4. FIP Control Measures
5. FIP Trading Program
6. Section 105 Grants
G. Other Consequences
VI. States Not Covered by This Rulemaking
VII. Model Cap-and-Trade Program
VIII. Regulatory Analysis
IX. Air Quality Analyses
X. Nonozone Benefits of NO_X Reductions
XI. Impact on Small Entities
XII. Unfunded Mandates Reform Act
Appendix A--References
Appendix B--OTAG Recommendations
Appendix C--Tables for Section II. Weight of Evidence
Determination of Significant Contribution
Appendix D--Figures for Section II. Weight of Evidence
Determination of Significant Contribution

I. Preamble

A. Summary of Rulemaking and Affected States

The CAA has set forth many requirements to address nonattainment of
the ozone NAAQS. Many States have found it difficult to demonstrate
attainment of the NAAQS due to the widespread transport of ozone and
its precursors. The Environmental Council of the States (ECOS)
recommended formation of a national work group to allow for a
thoughtful assessment and development of consensus solutions to the
problem. This work group, OTAG, was established 2 years ago to
undertake an assessment of the regional transport problem in the
Eastern half of the United States. The OTAG was a collaborative process
conducted by representatives from the affected States, EPA, and
interested members of the

[[Page 60320]]

public, including environmental groups and industry, to evaluate the
ozone transport problem and develop solutions. The OTAG region includes
the following 37 States and the District of Columbia: Alabama,
Arkansas, Connecticut, Delaware, District of Columbia, Florida,
Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,
Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri,
Nebraska, New Hampshire, New Jersey, New York, North Carolina, North
Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina,
South Dakota, Tennessee, Texas, Vermont, Virginia, West Virginia and
Wisconsin. Today's action builds on the work of OTAG.
Through the OTAG process, the States concluded that widespread
NO_X reductions are needed in order to enable areas to attain
and maintain the ozone NAAQS. The EPA believes, based on data generated
by OTAG and other data sources, that certain downwind States receive
amounts of transported ozone and ozone precursors that significantly
contribute to nonattainment in the downwind States. Today's action
proposes SIP requirements under section 110(a)(1) and section 110(k)(5)
in order to meet the requirements of section 110(a)(2)(D) to prohibit
ozone precursor emissions from sources or activities in those States
from ``contribut(ing) significantly to nonattainment in, or interfer(ing)
with maintenance by,'' a downwind State of the ozone NAAQS.
Upon this determination, the EPA is requiring SIP revisions in
order to take steps toward ensuring that the necessary regional
reductions are achieved that will enable current ozone nonattainment
areas in the eastern half of the United States to prepare attainment
demonstrations and that will enable all areas to demonstrate
noninterference with maintenance of the ozone standard.
The OTAG's July 8, 1997 final recommendations (see Section I.F.
OTAG Process and Appendix B) identify control measures for States to
achieve additional reductions in emissions of NO_X and do not
identify such measures for volatile organic compounds (VOC) beyond
EPA's promulgation of national VOC measures. The OTAG Regional and
Urban Scale Modeling and Air Quality Analysis Work Groups reached the
following relevant conclusions:
• Regional NO_X emissions reductions are effective
in producing ozone benefits; the more NO_X reduced, the
greater the benefit.
• VOC controls are effective in reducing ozone locally and
are most advantageous to urban nonattainment areas. (See Appendix B).
The EPA agrees with these OTAG conclusions and, thus, is not
proposing new SIP requirements for VOC emissions for the purpose of
reducing the interstate transport of ozone. States may, however, need
to consider additional reductions in VOC emissions as they develop
local plans to attain and maintain the ozone standards.
Therefore, this rulemaking is intended to make a finding of
significant contribution to a nonattainment problem, or interference
with a maintenance problem, and to assign, specifically, the emissions
budgets for NO_X that each of the identified States must meet
through SIP measures. As indicated, the EPA is proposing to require the
submission of SIP controls to meet the specified budgets. However, this
requirement permits each State to choose for itself what measures to
adopt to meet the necessary emission budget. Consistent with OTAG's
recommendations to achieve NO_X emission decreases primarily
from large stationary sources in a trading program, EPA encourages
States to consider electric utility and large boiler controls under a
cap-and-trade program as a cost-effective strategy. This is described
in more detail in section III, Statewide Emission Budgets. The EPA also
recognizes that promotion of energy efficiency can contribute to a
cost-effective strategy. The EPA is working to develop guidance on how
States can integrate energy efficiency into their SIPs to help meet
their NO_X budgets at least cost.
The EPA proposes to find, after considering OTAG's recommendations
and other relevant information, that the following 22 States and the
District of Columbia significantly contribute to nonattainment in, or
interfere with maintenance by, a downwind State: Alabama, Connecticut,
Delaware, Georgia, Illinois, Indiana, Kentucky, Massachusetts,
Maryland, Michigan, Missouri, North Carolina, New Jersey, New York,
Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia,
West Virginia, and Wisconsin. These findings proposed today reflect the
air quality modeling and other technical work done by OTAG, as well as
other relevant information.
Under this proposal, these States would be required to adopt and
submit, within 12 months after publication of the notice of final
rulemaking, SIPs containing control measures that will mitigate the
ozone transport problem by meeting the assigned statewide emissions
budget. Section II, Weight of Evidence Determination of Significant
Contribution, describes how EPA determined which States to propose as
significant contributors, and section III, Statewide Emission Budgets,
describes how EPA determined the appropriate statewide emission budgets
and proposes to assign specific emission budgets for the States
identified above. Section V, SIP Revisions and Approvability Criteria,
describes the proposed SIP requirements.
The EPA believes that expedited implementation of regional control
strategies to facilitate attainment is necessary. On July 18, 1997, EPA
published its final rule for strengthening the NAAQS for ozone by
establishing a new, 8-hour NAAQS (62 FR 38856). This results in more
areas and larger areas with monitoring data indicating nonattainment.
Thus, it will be even more critical to implement regional control
strategies which will mitigate transport into areas in violation of the
new standard and thus enable these areas to demonstrate attainment. The
regional NO_X reduction strategy proposed in today's action
will provide a mechanism to achieve reductions that will be necessary
for States to enable them to attain and maintain this revised standard.
The proposed regional reductions alone should be enough to allow most
of the new nonattainment counties in States covered by this rulemaking
to be able to comply with the new standard. States that are not
required to comply with the requirements set forth in today's action
would also benefit from the NO_X strategy EPA is proposing if
they adopt similar measures. On July 16, 1997, President Clinton issued
a directive on the implementation of the revised air quality standards.
This implementation policy is described in section IV, Implementation
of Revised Air Quality Standards.
Many of the States that EPA is not proposing to find as significant
contributors to the ozone nonattainment problem, and, therefore, do not
have a proposed NO_X statewide emissions budget to mitigate
ozone transport, still may need, as recommended by OTAG, to cooperate
and coordinate SIP development activities with other States. States
with local interstate nonattainment areas for the 1-hour standard and/
or the new 8-hour standard are expected to work together to reduce
emissions to mitigate local scale interstate transport problems in
order to provide for attainment in the nonattainment area as a whole.
In addition, areas in these States (those covered by OTAG modeling but

[[Page 60321]]

not covered by this proposal) may be able to receive the transitional
classification as described in section IV, Implementation of Revised
Air Quality Standards. An area in the State would satisfy one of the
eligibility requirements for the transitional area classification by
attaining the 1-hour standard and submitting a SIP attainment
demonstration by 2000 for the 8-hour standard. The OTAG's modeling (in
particular, OTAG strategy Run 5 described in section II.B.2, OTAG
Strategy Modeling) shows that a strategy in which a State adopted
NO_X emission decreases similar to those EPA proposes to
establish in this rulemaking would be helpful in achieving attainment
in most of these areas. The EPA strongly suggests that these States
(those covered by OTAG modeling but not covered by this proposal) with
new nonattainment counties for the 8-hour standard should consider the
option of this strategy since our analysis indicates that nearly all
new nonattainment counties are projected to come into attainment as a
result of this strategy. The benefits of this regional strategy for
States not required to implement the proposed strategy under this
rulemaking are described below in section VI, States Not Covered by
this Rulemaking.
The EPA plans to publish a supplemental notice of proposed
rulemaking (SNPR) in early 1998. The Agency intends to include in the
SNPR a proposed model cap-and-trade rule, air quality analyses of the
proposed statewide emission budgets, emissions reporting and State
reporting requirements, a discussion of the interaction with the Title
IV NO_X rule (including EPA's plans to proceed with
rulemaking on remanded elements of that rule relating to flexible
implementation where an appropriate cap-and-trade system is in place),
and proposed rule language for the rulemaking discussed in today's
action. There will be another public comment period following
publication of the SNPR. All comments received regarding either today's
action or the proposed rule language in the SNPR will be considered
before promulgation of a final rule.

B. General Factual Background

In today's proposal, EPA takes a significant step in order to
reduce ozone in the eastern half of the country. Ground-level ozone,
the main harmful ingredient in smog, is produced in complex chemical
reactions when its precursors, VOC and NO_X, react in the
presence of sunlight. The chemical reactions that create ozone take
place while the pollutants are being blown through the air by the wind,
which means that ozone can be more severe many miles away from the
source of emissions than it is at the source.
At ground level, ozone can cause a variety of ill effects to human
health, crops and trees. Specifically, ground-level ozone induces the
following health effects:
• Decreased lung function, primarily in children active outdoors.
• Increased respiratory symptoms, particularly in highly
sensitive individuals.
• Hospital admissions and emergency room visits for
respiratory causes, among children and adults with pre-existing
respiratory disease such as asthma.
• Inflammation of the lung.
• Possible long-term damage to the lungs.
The new 8-hour primary ambient air quality standard will provide
increased protection to the public from these health effects.
Each year, ground-level ozone above background is also responsible
for several hundred million dollars worth of agricultural crop yield
loss. It is estimated that full compliance of the newly promulgated
ozone NAAQS will result in about $500 million of prevented crop yield
loss. Ozone also causes noticeable foliar damage in many crops, trees,
and ornamental plants (i.e., grass, flowers, shrubs, and trees) and
causes reduced growth in plants. Studies indicate that current ambient
levels of ozone are responsible for damage to forests and ecosystems
(including habitat for native animal species).
The science of ozone formation, transport, and accumulation is
complex. Ozone is produced and destroyed in a cyclical set of chemical
reactions involving NO_X, VOC and sunlight. Emissions of
NO_X and VOC are necessary for the formation of ozone in the
lower atmosphere. In part of the cycle of reactions, ozone
concentrations in an area can be lowered by the reaction of nitric
oxide with ozone, forming nitrogen dioxide; as the air moves downwind
and the cycle continues, the nitrogen dioxide forms additional ozone.
The importance of this reaction depends, in part, on the relative
concentrations of NO_X, VOC and ozone, all of which change
with time and location.
As part of the efforts to reduce harmful levels of smog, EPA today
proposes to require certain States to revise their SIPs in order to
implement the regional reductions in transported ozone and its
precursors that are needed to enable areas in the Eastern United States
to attain and maintain the NAAQS. Since air pollution travels across
county and State lines, it is essential for State governments and air
pollution control agencies to cooperate to solve the problem.

C. Statutory and Regulatory Background

1. Clean Air Act Provisions
a. 1970 and 1977 Clean Air Act Amendments. For almost 30 years,
Congress has focused major efforts on curbing tropospheric ozone. In
1970, Congress amended title I of the CAA to require, among other
things, that EPA issue, and periodically review and if necessary
revise, NAAQS for ubiquitous air pollutants (sections 108 and 109).
Congress required the States to submit SIPs to attain those NAAQS, and
Congress included, in section 110, a list of minimum requirements that
SIPs must meet. Congress anticipated that areas would attain the NAAQS
by 1975.
In 1977, Congress amended the CAA to provide, among other things,
additional time for areas to attain the ozone NAAQS, as well as to
impose specific SIP requirements for those nonattainment areas. These
provisions first required the designation of areas as attainment,
nonattainment, or unclassified, under section 107; and then required
that SIPs for ozone nonattainment areas include the additional
provisions set out in part D of title I, as well as demonstrations of
attainment of the ozone NAAQS by either 1982 or 1987 (section 172).
In addition, the 1977 Amendments included two provisions focused on
interstate transport of air pollutants: the predecessor to current
section 110(a)(2)(D), which requires SIPs for all areas to constrain
emissions with certain adverse downwind effects; and section 126, which
authorizes a downwind State (or political subdivision) to petition for
EPA to impose limits directly on upwind sources found to adversely
affect that State. Section 110(a)(2)(D), which is key to the present
action, is described in more detail below.
b. 1990 Clean Air Act Amendments. In 1990, Congress amended the CAA
to better address, among other things, continued nonattainment of the
1-hour ozone NAAQS, the requirements that would apply if EPA revised
the 1-hour standard, and transport of air pollutants across State
boundaries (Pub. L. 101-549, Nov. 15, 1990, 104 Stat. 2399, codified at
42 U.S.C. 7401-7671q). Numerous provisions added, or revised, by the
1990 Amendments are relevant to today's proposal.

[[Page 60322]]

i. 1-hour Ozone NAAQS. In the 1990 Amendments, Congress required
the States and EPA to review and, if necessary, revise the designation
of areas as attainment, nonattainment, and unclassifiable under the
ozone NAAQS in effect at that time, which was the 1-hour standard
(section 107(d)(4)). Areas designated as nonattainment were divided
into, primarily, five classifications based on air quality design value
(section 181(a)(1)). Each classification carries specific requirements,
including new attainment dates (sections 181-182). In increasing
severity of the air quality problem, these classifications are
marginal, moderate, serious, severe and extreme. The OTAG region
includes all classifications except extreme.
As amended in 1990, the CAA requires States containing ozone
nonattainment areas classified as serious, severe, or extreme to submit
several SIP revisions at various times. One set of SIP revisions
included specified control measures, such as reasonably available
control technology (RACT) for existing VOC and NO_X sources
(section 182(b)(2), 182(f)). In addition, the CAA requires the
reduction of VOC in the amount of 15 percent by 1996 from a 1990
baseline (section 182(b)(1)). Further, the CAA requires the reduction
of VOC or NO_X emissions in the amount of 9 percent over each
3-year period from 1996 through the attainment date (the rate-of-
progress (ROP) SIP submittals) under section 182(c)(2)(B). In addition,
the CAA requires a demonstration of attainment (including air quality
modeling) for the nonattainment area (the attainment demonstration), as
well as SIP measures containing any additional reductions that may be
necessary to attain by the applicable attainment date (section 182(c)-
(e)). The CAA established November 15, 1994 as the required date for
the ROP and attainment demonstration SIP submittals.¹
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\1\ For moderate ozone nonattainment areas, the attainment
demonstration was due November 15, 1993 (section 182(b)(1)(A),
except that if the State elected to conduct an urban airshed model,
EPA allowed an extension to November 15, 1994.
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ii. Revised Ozone NAAQS. Section 109(d) of the CAA requires
periodic review and, if appropriate, revision of the NAAQS. As amended
in 1990, the CAA further requires designating areas as attainment,
nonattainment, and unclassifiable under a revised NAAQS (section
107(d)(1)). The CAA authorizes EPA to classify areas that are
designated nonattainment under a new NAAQS, and to establish for those
areas attainment dates not to exceed 10 years from the date of
designation (section 172(a)).
The CAA continues, in revised form, certain requirements, dating
from the 1970 Amendments, which pertain to all areas, regardless of
their designation. All areas are required to submit SIPs within certain
time frames (section 110(a)(1)), and those SIPs must include specified
provisions, under section 110(a)(2). In addition, SIPs for
nonattainment areas are generally required to include additional
specified control requirements, as well as controls providing for
attainment of the revised NAAQS and periodic reductions providing
``reasonable further progress'' in the interim (section 172(c)).
iii. Provisions Concerning Transport of Ozone and Its Precursors.
The 1990 Amendments reflect general awareness by Congress that ozone is
a regional, and not merely a local, problem. As described above, ozone
and its precursors may be transported long distances across State lines
to combine with ozone and precursors downwind, thereby exacerbating the
ozone problems downwind. In the case of ozone, this transport
phenomenon was not generally recognized until relatively recently. Yet,
ozone transport is a major reason for the persistence of the ozone
problem, notwithstanding the imposition of numerous controls, both
Federal and State, across the country.
Section 110(a)(2)(D) provides one of the most important tools for
addressing the problem of transport. This provision, which applies by
its terms to all SIPs for each pollutant covered by a NAAQS, and for
all areas regardless of their attainment designation, provides that a
SIP must contain provisions preventing its sources from contributing
significantly to nonattainment problems or interfering with maintenance
in downwind States.
Section 110(k)(5) authorizes EPA to find that a SIP is
substantially inadequate to meet any CAA requirement, as well as to
mitigate interstate transport of the type described in section 184
(concerning ozone transport in the northeast) or section 176A
(concerning interstate transport in general) and thereby require the
State to submit, within a specified period, a SIP revision to correct
the inadequacy. The CAA further addresses interstate transport of
pollution in section 126, which Congress clarified in 1990.
Subparagraph (b) of that provision authorizes each State (or political
subdivision) to petition EPA for a finding that emissions from ``any
major source or group of stationary sources'' in an upwind State
contribute significantly to nonattainment in, or interfere with
maintenance by, the downwind State. If EPA makes such a finding in
support of a section 126 petition, EPA would impose limits on the
affected source or group of sources (section 126(c)).²
---------------------------------------------------------------------------

\2\ In addition, section 115 authorizes EPA to require a SIP
revision when a State's emitters ``cause or contribute to air
pollution which may reasonably be anticipated to endanger public
health or welfare in a foreign country.''
---------------------------------------------------------------------------

In addition, the 1990 Amendments included specific provisions
focused on the interstate transport of ozone. Section 184 delineates a
multistate ozone transport region (OTR) in the Northeast, requires
specific additional controls for all areas (not only nonattainment
areas) in that region, and establishes the Ozone Transport Commission
(OTC) for the purpose of recommending to EPA regionwide controls
affecting all areas in that region.
2. Regulatory Structure
a. March 2, 1995 Policy. Notwithstanding significant efforts, the
States generally were not able to meet the November 15, 1994 statutory
deadline for the attainment demonstration and other SIP submissions
required under section 182(c). The major reason for this failure was
that States were not able to address or control transport. As a result,
in a memorandum from Mary D. Nichols, Assistant Administrator for Air
and Radiation, dated March 2, 1995, entitled ``Ozone Attainment
Demonstrations,'' (March 2, 1995 Memorandum or the Memorandum), EPA
recognized the efforts made by States and the remaining difficulties in
making the ROP and attainment demonstration submittals. The EPA
recognized that development of the necessary technical information, as
well as the control measures necessary to achieve the large level of
reductions likely to be required, had been particularly difficult for
the States affected by ozone transport.
Accordingly, as an administrative remedial matter, the Memorandum
indicated that EPA would establish new time frames for SIP submittals.
The Memorandum indicated that EPA would divide the required SIP
submittals into two phases. Phase I generally consisted of: SIP
measures providing for ROP reductions due by the end of 1999, an
enforceable SIP commitment to submit any remaining required ROP
reductions on a specified schedule after 1996, and an enforceable SIP
commitment to submit the additional SIP measures needed for attainment.
Phase II consists of the remaining submittals, beginning in 1997.
Ten States and the District of Columbia failed to submit Phase I

[[Page 60323]]

elements within the specified time. By notice dated July 10, 1996 (61
FR 36292), EPA issued findings and thereby started sanctions clocks for
these areas for those Phase I submittals.
The Phase II submittals primarily consisted of the remaining ROP
SIP measures, the attainment demonstration and additional local rules
needed to attain, and any regional controls needed for attainment by
all areas in the region. The March 2, 1995 Memorandum indicated that
the attainment demonstration, target calculations for the post-1999 ROP
milestones, and identification of rules needed to attain and for post-
1999 ROP were due in mid-1997. To allow time for States to incorporate
the results of the OTAG modeling into their local plans, EPA, in its
Final Policy for Implementation of the 1-hour and Pre-Existing PM-10
Standards, is extending the mid-1997 submittal date to April 1998.
b. OTAG. In addition, the March 2 1995 Memorandum called for an
assessment of the ozone transport phenomenon. The Environmental Council
of States (ECOS) had recommended formation of a national work group to
allow for a thoughtful assessment and development of consensus
solutions to the problem. The OTAG has been a partnership between EPA,
the 37 easternmost States and the District of Columbia, industry
representatives and environmental groups. This effort has created an
opportunity for the development of an Eastern United States ozone
strategy to address transport and to assist in attainment of the 1-hour
ambient ozone standard.
The EPA believes that the OTAG process has been invaluable in
demonstrating the types of regional ozone precursor reductions that are
needed to enable areas in the Eastern United States to attain and
maintain the ambient air quality standard for ozone. Indeed, today's
action to propose to mandate SIP revisions under section 110(a)(2)(D)
is a first step directed at providing the regulatory structure to
implement the kinds of broad regional precursor reductions recommended
by OTAG.
c. EPA's Transport SIP Call Regulatory Efforts. Shortly after OTAG
began its work, EPA began to indicate that it intended to issue a SIP
call to require States to implement the reductions necessary to address
the ozone transport problem. On January 10, 1997 (62 FR 1420), EPA
published a Notice of Intent that articulated this goal and indicated
that before taking final action, EPA would carefully consider the
technical work and any recommendations of OTAG.
By a letter to Mary Gade, Chair of OTAG, dated April 16, 1997, EPA
Assistant Administrator Mary D. Nichols stated that on the basis of
technical work performed by EPA staff, it appeared that EPA would issue
a SIP call to specified States and the District of Columbia. The EPA
staff issued a technical support document, ``Preliminary Assessment of
States Making a Significant Contribution to Downwind Ozone
Nonattainment,'' dated April, 1997, which explained EPA's technical
basis for those tentative conclusions. Please refer to section II,
Weight of Evidence Determination of Significant Contribution, for EPA's
revised conclusions.
As described below in section I.F., OTAG Process, OTAG completed
its work in June 1997 and issued its final recommendations to EPA on
July 8, 1997. The OTAG's technical work and recommendations form part
of the basis of today's proposal.
d. Revision of the Ozone NAAQS. On July 18, 1997 (62 FR 38856), EPA
issued its final action to revise the NAAQS for ozone. The EPA's
decision to revise the standard was based on the Agency's review of the
available scientific evidence linking exposures to ambient ozone to
adverse health and welfare effects at levels allowed by the pre-
existing 1-hour ozone standards. The 1-hour primary standard was
replaced by an 8-hour standard at a level of 0.08 parts per million
(ppm), with a form based on the 3-year average of the annual fourth-
highest daily maximum 8-hour average ozone concentration measured at
each monitor within an area. The new primary standard will provide
increased protection to the public, especially children and other at-
risk populations, against a wide range of ozone-induced health effects.
Health effects are described in section I.B, General Factual
Background. The EPA retained the applicability of the 1-hour NAAQS for
certain areas to ensure adequate health protection during the
transition to full implementation of the 8-hour NAAQS.
The pre-existing 1-hour secondary ozone standard was replaced by an
8-hour standard identical to the new primary standard. The new
secondary standard will provide increased protection to the public
welfare against ozone-induced effects on vegetation as described in
section I.B, General Factual Background.
e. Impacts of NO_X Emissions. At the August 7, 1997 Clean
Air Act Advisory Committee meeting, EPA announced the availability of a
document (``Nitrogen Oxides: Impacts on Public Health and the
Environment,'' EPA-452/R-97-002, August 1997) that describes the
multiple impacts of NO_X emissions on public health and the
environment and the consequent implications for national policy. In
addition to helping attain public health standards for ozone, decreases
in emissions of NO_X are helpful to reducing acid deposition,
greenhouse gases, nitrates in drinking water, stratospheric ozone
depletion, excessive nitrogen loadings to aquatic and terrestrial
ecosystems, and ambient concentrations of nitrogen dioxide, particulate
matter and toxics. These impacts are described in more detail in
section X, Nonozone Benefits of NO_X Reductions.

D. EPA's Proposed Analytical Approach

1. Process for Requiring Submission of Section 110(a)(2)(D) SIP
Revisions
As described above, SIPs for all areas must meet the requirements
of section 110(a)(2), including section 110(a)(2)(D), which imposes
limits on sources that affect the ability of downwind areas to attain
and maintain the NAAQS. Because many areas are currently required to
attain two ozone NAAQS--the 1-hour standard and the 8-hour standard--
with different SIP planning requirements, EPA proposes that section
110(a)(2)(D) be applied in different ways with respect to each of the
ozone NAAQS.
Under the 1-hour ozone NAAQS, each area is currently required to
have a SIP in place. Moreover, EPA has determined that the 1-hour
standard will continue to apply to areas designated nonattainment for
the 1-hour NAAQS until EPA determines that the area has air quality
meeting this standard (40 CFR 50.9(a) (62 FR 38894 (July 18, 1997)).
Accordingly, each area is under a current obligation to include in its
SIP, provisions that meet the requirements of section 110(a)(2)(D) for
the 1-hour NAAQS.
This obligation to meet section 110(a)(2)(D) under the 1-hour
standard applies even after EPA determines that an upwind area has
attained the 1-hour standard, and the applicability of that standard
thereby terminates for the upwind area. Regardless of the status of the
1-hour standard with respect to the upwind area's air quality, a
downwind area may continue to have a nonattainment problem under the 1-
hour standard, and the upwind area's sources may continue to impact
that downwind nonattainment problem. Under these circumstances, the
upwind area would be required to retain or adopt SIP provisions that
meet the requirements of section 110(a)(2)(D).

[[Page 60324]]

To assure that SIPs include required controls, section 110(k)(5)
authorizes EPA to find that a SIP is substantially inadequate to meet
an CAA requirement, and to require (``call for'') the State to submit,
within a specified period, a SIP revision to correct the inadequacy.
This EPA requirement for a SIP revision is known as a ``SIP call.''
Specifically, section 110(k)(5) provides, in relevant part:

Whenever the Administrator finds that the applicable
implementation plan for any area is substantially inadequate to
attain or maintain the relevant [NAAQS], to mitigate adequately the
interstate pollutant transport described in section 176A or section
184, or to otherwise comply with any requirement of this Act, the
Administrator shall require the State to revise the plan as
necessary to correct such inadequacies. The Administrator shall
notify the State of the inadequacies, and may establish reasonable
deadlines (not to exceed 18 months after the date of such notice)
for the submission of such plan revisions.

By today's action, EPA is proposing to determine that the SIPs
under the 1-hour ozone NAAQS for the States identified in today's
action are substantially inadequate to comply with the requirements of
section 110(a)(2)(D) and to mitigate adequately the regional,
interstate ozone transport described in section 184, because ozone
precursor emissions and transported ozone from those States contribute
significantly to nonattainment downwind. Based on these findings, EPA
today proposes a SIP call to require the identified States to reduce
emissions to mitigate their contribution.
If a State fails to submit the required SIP provisions in response
to this SIP call, EPA is required to issue a finding that the State
failed to make a required SIP submittal under section 179(a). This
finding has implications for sanctions as well as EPA's promulgation of
a Federal implementation plan (FIP). Sanctions and a FIP are discussed
in section V., SIP Revisions and Approvability Criteria.
Under the 8-hour ozone NAAQS, areas have not yet been designated as
attainment, nonattainment, or unclassifiable, and are not yet required
to have SIPs in place. When those SIPs become due, they must meet the
applicable requirements of section 110, which apply to all areas, and
SIPs for areas designated nonattainment must also meet the additional
requirements in subpart 1 of part D applicable to nonattainment areas.
Section 110(a)(1) provides, in relevant part--

Each State shall * * * adopt and submit to the Administrator,
within 3 years (or such shorter period as the Administrator may
prescribe) after the promulgation of a national primary ambient air
quality standard (or any revision thereof) * * * a plan which provides
for implementation, maintenance, and enforcement of such primary
standard in each (area) within such State.

Section 110(a)(2) provides, in relevant part--

Each implementation plan submitted by a State under this CAA
shall be adopted by the State after reasonable notice and public
hearing. Each such plan shall (meet certain requirements, including
those found in section 110(a)(2)(D)).

These two provisions, read together, require SIP revisions under
the revised NAAQS within 3 years of the date of the revision, or
earlier if EPA so requires, and require that those SIP revisions meet
the requirements of section 110(a)(2), including subparagraph (D). It
should be noted that the schedule for these section 110(a)(2) SIP
submissions for all ozone areas differs from the schedule for the SIP
submissions required under section 172(b) for part D SIP submissions
for ozone nonattainment areas. These part D SIP submissions are
required for all areas that are designated nonattainment under the 8-
hour NAAQS and must be submitted within 3 years of the date of
designation. The submission of SIP revisions containing the regional
NO_X reductions proposed under this rulemaking earlier than
the part D nonattainment submissions will assist the downwind
nonattainment areas in their attainment planning.
The EPA believes it has the authority to establish different
submittal schedules for different parts of the section 110(a)(1) SIP
revision. Specifically, EPA proposes to require first the portion of
the section 110(a)(1) SIP revision that contains the controls required
under section 110(a)(2)(D). The EPA proposes to require the section
110(a)(2)(D) submittal first for the purpose of securing upwind
reductions at an earlier stage in the regional SIP planning process.
This information on controls in upwind States is essential to the
downwind States in the latter States' attainment planning.
In summary, EPA is proposing to determine, under section 110(k),
that the 1-hour ozone NAAQS SIPs for certain States are deficient
because the SIPs do not impose sufficient controls on their sources to
meet the requirements of section 110(a)(2)(D), and EPA is proposing to
require those States to submit SIP revisions containing adequate
controls. The EPA is proposing to require, under section 110(a)(1),
that certain States must submit SIP revisions under the 8-hour ozone
NAAQS to meet the requirements of section 110(a)(2)(D). For simplicity,
today's rulemaking occasionally uses the term ``SIP call'' to describe
both EPA actions.
2. Overview of Elements of Section 110(a)(2)(D)
a. Summary of Section 110(a)(2)(D). As noted above, section
110(a)(2)(D) is the operative provision for determining whether
additional controls are required to mitigate the impact of upwind
sources on downwind air quality, with respect to both the 1-hour and 8-
hour ozone NAAQS. Separate determinations must be made for each NAAQS.
Section 110(a)(2)(D) provides, in relevant part, that each SIP must:
* * * contain adequate provisions * * * prohibiting, consistent with
the provisions of this title, any source or other type of emissions
activity within the State from emitting any air pollutant in amounts
which will * * * contribute significantly to nonattainment in, or
interfere with maintenance by, any other State with respect to any
such national primary or secondary ambient air quality standard * * *.

According to section 110(a)(2)(D), the SIP for each area,
regardless of its designation as nonattainment or attainment (including
unclassifiable), must prohibit sources within the area from emitting
emissions that: ``contribute significantly'' to ``nonattainment'' in a
downwind State, or that ``interfere with maintenance'' in a downwind State.
b. Significant Contribution to Nonattainment. The initial prong
under section 110(a)(2)(D) is whether sources ``contribute
significantly'' to ``nonattainment in * * * any other State'' with
respect to the NAAQS. The initial inquiry for this prong is to identify
and determine the geographic scope of ``nonattainment'' downwind. The
EPA proposes to interpret this term to refer to air quality and not to
be limited to currently-designated nonattainment areas. Section
110(a)(2)(D) does not refer to ``nonattainment areas,'' which is a
phrase that EPA interprets to refer to areas that are designated
nonattainment under section 107 (section 107(d)(1)(A)(I)). Rather, the
provision includes only the term ``nonattainment'' and does not define
that term. Under these circumstances, EPA has discretion to give the
term a reasonable definition, and EPA proposes to define it to include
areas whose air quality currently violates the NAAQS, and will likely
continue for some time to violate,

[[Page 60325]]

regardless of the designation of those areas (compare section
181(b)(2)(A) (referring to ozone ``nonattainment area'' which EPA
interprets as an area designated nonattainment) and section
211(k)(10)(D)).
For present purposes, EPA is examining the air quality for the
1993-1995 years, but EPA expects to refer to 1996 (and perhaps 1997)
data as the rulemaking proceeds.
As discussed below, to determine whether emissions from sources in
an upwind area significantly contribute to nonattainment downwind, EPA
proposes to compare NO_X emissions reductions upwind with
ozone reductions downwind. For this purpose, EPA assumes that areas
with current air quality indicating nonattainment for the 1-hour
standard will be required to implement certain controls under the CAA,
through the year 2007, which is the attainment date for ozone
nonattainment areas classified as severe-17. Accordingly, EPA proposes
to determine, through air quality modeling, which areas with current
air quality indicating nonattainment for both the 1-hour and 8-hour
standards will continue to be in nonattainment in the year 2007, even
after implementation of controls specifically required under the CAA.
Because this projection is occurring through the year 2007, it is also
necessary to take into account growth in emissions, generally due to
economic growth and greater use of vehicles, to that time. If an area
with air quality currently indicating nonattainment is modeled to
continue to be in nonattainment as of the year 2007, then emissions
from sources in upwind areas may be considered to ``contribute
significantly'' to the current nonattainment problem, depending on the
factors described below. On the other hand, if an area the current air
quality of which measures nonattainment is modeled to be in attainment
in the year 2007 due to imposition of required CAA controls, then EPA
proposes not to consider emissions from sources in upwind areas to
``contribute significantly'' to that downwind area.
The EPA's decision is explained below for choosing the year 2007 as
the date for assuming the implementation of controls and for modeling
air quality.
The EPA proposes a similar analysis for purposes of the 8-hour
NAAQS. The EPA will consider as ``nonattainment'' any area that has
monitored nonattainment air quality currently, and for which modeling
shows is likely to continue to be in nonattainment in the year 2007
after application of controls specifically required under the CAA.
After determining the scope of the downwind nonattainment problem,
EPA must next analyze whether the emissions from sources in the upwind
area ``contribute significantly'' to the nonattainment problem. As
described below, EPA analyzed all NO_X emissions in specified
upwind areas, made proposed determinations as to significant
contributions based on the entire inventory of the area's
NO_X emissions and is requiring SIP revisions that address
overall levels of NO_X emissions. By contrast, EPA is not, in
this rulemaking, determining whether particular sectors of the
NO_X inventory ``contribute significantly'' and is not
mandating controls on particular sectors of that inventory.
Neither the CAA nor its legislative history provides meaningful
guidance for interpreting the term, ``contribute significantly''
(H.Rept. 101-491, 101st Cong., 2d sess., 1990, 218). The simpler part
of the analysis concerns the term, ``contribute.'' In EPA's view, if
emissions have an impact on downwind nonattainment, those emissions
should be considered to contribute to the nonattainment problem.
Generally, because ozone is a secondary pollutant formed as a result of
complex chemical reactions, it is not possible to determine downwind
impact on a source-by-source basis. However, if air quality modeling
shows that the aggregation of emissions from a particular geographic
region affect a nonattainment problem, then all of the emissions in that
region should be considered as contributors to that nonattainment problem.
Whether a contribution from sources in a particular upwind area is
``significant'' depends on the overall air quality context. The EPA is
proposing a ``weight of evidence'' test under which several factors are
considered together, but none of them individually constitutes a
bright-line determination.
The EPA is proposing and soliciting comment on two alternative
interpretations of section 110(a)(2)(D). Each of the two
interpretations relies on a set of factors to make the determinations
required under section 110(a)(2)(D). In addition, each of the two
relies on the same factors. However, each relies on different factors
in different parts of the analysis.
Under the first interpretation of section 110(a)(2)(D), the weight
of evidence test for determining significant contribution focuses on
factors concerning amounts of emissions and their ambient impact,
including the nature of how the pollutant is formed, the level of
emissions and emissions density (defined as amount of emissions per
square mile) in the particular upwind area, the level of emissions in
other upwind areas, the amount of contribution to ozone in the downwind
area from upwind areas, and the distance between the upwind sources and
the downwind nonattainment problem. Under this approach, when emissions
and ambient impact reach a certain level, as assessed by reference to
the factors identified above, those emissions would be considered to
``contribute significantly'' to nonattainment. The EPA would then
determine what emissions reductions must be required in order to
adequately mitigate these contributions. Evaluation of the costs of
available measures for reducing upwind emissions enters into this
determination, as well as to the extent known (at least qualitatively),
the relative costs of, amounts of emission reductions from, and ambient
impact of, measures available in the downwind areas. The EPA proposes
to require upwind areas to implement a NO_X budget reflecting
cost-effective controls that compare favorably, at least qualitatively,
with the costs of controls downwind and that reduces ozone levels downwind.
Under the second interpretation of section 110(a)(2)(D), the weight
of evidence test for determining significant contribution includes all
of the factors identified immediately above, including the factors that
comprise the adequate mitigation test. That is, the relevant factors
concern upwind emissions and ambient impact therefrom, as well as the
costs of the available measures for reducing upwind emissions and, to
the extent known (at least qualitatively), the relative costs of,
amounts of emissions reductions from, and ambient impact of measures
available in the downwind areas. Thus, under this second
interpretation, the cost effectiveness of controlling upwind emissions
would be an important, but not necessarily a controlling factor in
evaluating whether emissions meet the significant contribution test. As
a result, EPA may conclude that a certain amount of the upwind
emissions contributes significantly to downwind problems because, among
other things, that amount may be eliminated through controls that are
relatively more cost effective. However, EPA would not conclude that
the remaining emissions contribute significantly because the additional
available controls that might be implemented are not as cost effective.
Under this second interpretation, once EPA determines what amount of
emissions contribute significantly to problems downwind, the remedy
would be for EPA to require the elimination of

[[Page 60326]]

that amount of upwind emissions and to determine the NO_X
budgets accordingly.
Under either the first or second interpretation of section
110(a)(2)(D), EPA would be considering the relative costs and cost
effectiveness of various controls in deciding how much each State would
need to reduce its emissions. The methodology EPA would employ to reach
this result under either interpretation is set forth more fully in
sections II and III of today's action.
As discussed above, unhealthful levels of ozone result from
emissions of NO_X and VOC from thousands of stationary
sources and millions of mobile sources across a broad geographic area.
Each source's contribution is a small percentage of the overall
problem; indeed, it is rare for emissions from even the largest single
sources to exceed 1 percent of the inventory of ozone precursors for a
single metropolitan area. Under these circumstances, even complete
elimination of any given source's emissions may well have no measurable
impact in ameliorating the nonattainment problem. Rather, attainment
requires controls on numerous sources across a broad area. Ozone is a
regional scale problem that requires regional scale reductions.
The National Academy of Sciences (NAS) study, ``Rethinking the
Ozone Problem in Urban and Regional Air Pollution'' (2) emphasized this
aspect of ozone formation. According to this report, high
concentrations of ozone occur concurrently in the Eastern United States
in urban, suburban and rural areas on scales of over 1000 kilometers.
The NAS report describes a ``persistent blanket of high ozone in the
Eastern United States'' that can last for several days. Since rural
ozone values commonly exceed 90 parts per billion (ppb) on these
occasions, an urban area needs an ozone increment of only 30 ppb to
cause an exceedance of the 1-hour ozone standard in a downwind area.
Clearly, attainment strategies must include controls on numerous
sources across broad areas.
In light of this ``collective contribution'' characteristic of
ozone formation and control, EPA proposes that if contributions from an
upwind area's emissions, taken together, are considered to be an
important portion of the downwind area's nonattainment problem, then
this factor tends to indicate that the upwind emissions as a whole, as
well as each of the upwind emitters, make a ``significant''
contribution. The fact that emissions from any particular source, or
even a group of sources, may in-and-of-themselves be small, does not
mean those sources' emissions are not ``significant'' within the
meaning of section 110(a)(2)(D). Those sources' emissions are generally
``significant'' if, when they are combined with emissions from other
sources in the same upwind area, they total upwind emissions that are
``significant.'' Even so, it should be noted that the collective
contribution factor is only one of various factors that EPA proposes to
consider in determining whether emissions from an area constitute a
``significant'' contribution to a downwind problem. The amounts of
emissions from the area and, in certain cases, emissions density,
remain important factors. Depending on all the facts and circumstances,
these other factors may tend to indicate that emissions from a
particular area should not be considered to contribute significantly,
notwithstanding the fact that those emissions may be linked in some
manner with emissions from other upwind areas that are considered to be
significant contributors.
In several rulemakings promulgated and court decisions handed down,
in the 1980's, EPA interpreted and applied the predecessors to sections
110(a)(2)(D) and 126 (e.g., State of New York v. EPA, 852 F.2d 574
(D.C. Cir. 1988); Air Pollution Control District of Jefferson County,
Kentucky v. EPA, 739 F.2d 1071 (6th Cir. 1984); Connecticut v. EPA, 696
F.2d 147 (2d Cir. 1982)). Although these rulemakings and court
decisions generally employed multifactor formulas for the ``significant
contribution'' test that bear some similarity to the formula EPA is
proposing today, they have limited relevance to the issues in the
present rulemaking because of the numerous differences in the relevant
factors. For example, in the earlier rulemakings compared to the
present rulemaking, the pollutants and precursors are different, and
the inventories of emissions and number of emitters in the upwind and
downwind areas are different. The significant contribution test is a
facts-and-circumstances analysis that depends on these factors, and
differences among these factors may yield different results under this
test. Accordingly, the differences in the key factors between the
earlier decisions and today's proposal means that those earlier
decisions are not determinative for today's proposed action.
For purposes of today's rulemaking, EPA determined the amount of
contribution to downwind air quality, under both the 1-hour NAAQS and
the 8-hour NAAQS, by employing an air quality model that assumed a zero
level of anthropogenic emissions from the various upwind areas. The
results of those model runs, as well as their other assumptions and
characteristics, are described in detail below.
As described below, EPA made separate determinations as to which
upwind areas ``contribute significantly'' to nonattainment under the 1-
hour NAAQS and under the 8-hour NAAQS. Those separate determinations
resulted in identifying the same States for both the 1-hour and the 8-
hour NAAQS.
c. Interfere with Maintenance. Section 110(a)(2)(D) also prohibits
emissions that ``interfere with maintenance'' of the NAAQS in a
downwind State. An area is obligated to maintain the NAAQS after the
area has reached attainment. This requirement of section 110(a)(2)(D)
does not, by its terms, incorporate the qualifier of ``significantly.''
Even so, EPA believes that for present purposes, the term ``interfere''
should be interpreted much the same as the term ``contribute
significantly,'' that is, through the same weight of evidence approach.
With respect to the 1-hour NAAQS, the ``interfere-with-
maintenance'' prong appears to be inapplicable. The EPA has determined
that the 1-hour NAAQS will no longer apply to an area after EPA has
determined that the area has attained that NAAQS. Under these
circumstances, emissions from an upwind area cannot interfere with
maintenance of the 1-hour NAAQS.
With respect to the 8-hour NAAQS, the ``interfere-with-
maintenance'' prong remains important. After an area has reached
attainment of the 8-hour NAAQS, that area is obligated to maintain that
NAAQS (sections 110(a)(1) and 175A). Emissions from sources in an
upwind area may interfere with that maintenance.
The EPA proposes to apply much the same approach in analyzing the
first component of the ``interfere-with-maintenance'' issue, which is
identifying the downwind areas whose maintenance of the NAAQS may
suffer interference due to upwind emissions. The EPA has analyzed the
``interfere-with-maintenance'' issue for the 8-hour NAAQS by examining
areas whose current air quality is monitored as attaining the 8-hour
NAAQS, but for which air quality modeling shows nonattainment in the
year 2007. This result is projected to occur, notwithstanding the
imposition of certain controls required under the CAA, because of
projected increases in emissions due to growth in emissions generating
activity. Under these circumstances, emissions from upwind areas may
interfere with the downwind area's ability to maintain the 8-hour
NAAQS. Ascertaining the impact on the

[[Page 60327]]

downwind area's air quality of the upwind area's emissions aids in
determining whether the upwind emissions interfere with maintenance.
d. Remedying the Significant Contribution. After identifying States
whose sources do ``contribute significantly'' to a nonattainment
problem or interfere with maintenance downwind, it is necessary to
determine the appropriate limit on emissions required in each upwind
SIP. The EPA is proposing, in the alternative, two different analyses
for the remedies which are tied to the two alternatives for the
``weight of evidence'' test.
i. Adequate Mitigation. Under the first interpretation of section
110(a)(2)(D), EPA does not consider costs in determining whether upwind
emissions contribute significantly to nonattainment or interfere with
maintenance. Instead, once EPA determines, on the basis of factors
generally related to emissions, that those emissions do contribute
significantly to nonattainment (or interfere with maintenance), EPA
then determines what emissions reductions must be required in order to
adequately mitigate these contributions. Evaluation of relative costs
enters into this determination.
Adequate mitigation would amount to eliminating a sufficient
portion of the upwind emissions so that they no longer contribute
significantly to nonattainment or interfere with maintenance.
In the present case, EPA proposes to determine an allowable level
of NO_X emissions for each of the 23 jurisdictions with
sources that trigger the requirements of section 110(a)(2)(D). Given
the need to reduce this overall regional level of ozone, as discussed
earlier, EPA determined this ``budget'' of emissions by, in the first
instance, calculating the emissions achievable by applying the most
reasonable, cost-effective controls on NO_X emissions in the
23 jurisdictions. The control measures considered and those determined
to be the most reasonable and cost-effective are detailed below. In
selecting those control measures determined to be the most reasonable
and cost-effective, EPA carefully considered the recommendations made
by OTAG on July 8, 1997. (The OTAG process is described in section I.F.
of this rulemaking.) The budget calculations described below generally
fall within the range of OTAG's recommendations.
The statewide emissions budgets proposed in this rulemaking were
not modeled directly to determine their air quality benefits. The EPA
believes, however, that the air quality impact of implementing these
reductions would be very similar to results previously modeled by OTAG.
This modeling is identified in section IX, Air Quality Analyses. The
downwind air quality benefits from these reductions are sufficient for
EPA to conclude that they would adequately mitigate the contribution
from the upwind sources.
ii. Elimination of Contribution. Under the second interpretation of
section 110(a)(2)(D), costs are considered as part of the calculation
as to what (if any) amount of emissions contribute significantly to
nonattainment or interfere with maintenance. The EPA proposes to
determine those amounts for each State by considering the factors
described above and the extent to which the State's emissions can be
reduced through the most cost-effective controls that reduce ozone
levels downwind. Once EPA makes this determination, EPA would conclude
that requiring those cost-effective controls is mandated under the
provisions of section 110(a)(2)(D) that require SIP provisions
``prohibiting'' that amount of emissions. Thus, under this alternative
interpretation, a SIP meets the requirement for ``prohibiting''
emissions that contribute significantly to nonattainment, or interfere
with maintenance, downwind, by implementing cost-effective controls
determined to improve air quality downwind.
iii. Comparison of the Two Legal Interpretations of Section
110(a)(2)(D). The EPA solicits comments on which of the two legal
interpretations of section 110(a)(2)(D), as described above, should be
used. Each interpretation relies on the same factors (although certain
factors enter into different parts of the analysis under the two
interpretations). Because each relies on the same factors, there is
little technical difference between the two interpretations. Each
requires the same determinations as to, for example, the ambient impact
of upwind emissions and the cost effectiveness of controls.
Moreover, as proposed in today's action, each interpretation leads
to the same conclusion as to which States are considered to have
emissions that significantly contribute to downwind problems, and as to
the amounts of NO_X budgets that those States should meet.
However, the two interpretations have different legal
justifications. As noted above, section 110(a)(2)(D) provides that the
SIP for the upwind area must ``contain adequate provisions * * *
prohibiting * * * [sources] from emitting any air pollutant in amounts
which will * * * contribute significantly to nonattainment in, or
interfere with maintenance by, any other State * * *'' Under the first
interpretation, EPA may determine that a relatively larger inventory of
emissions contributes significantly to nonattainment (or interferes
with maintenance) in light of the fact that the costs of controlling
those emissions are not considered in determining significant
contribution. The EPA would then require adequate mitigation of the
full set of emissions that contribute to nonattainment or interfere
with maintenance.
Other relevant provisions indicate that the CAA could be construed
to require mitigation, and not necessarily complete elimination, of
emissions that contribute to air quality problems downwind. Section
110(k)(5) authorizes the Administrator to promulgate a SIP call
whenever she finds that a SIP is ``substantially inadequate to attain
or maintain the relevant [NAAQS], to mitigate adequately the interstate
pollutant transport described in section 176A or 184, or to otherwise
comply with any requirement of this Act'' (emphasis added). Section
176A describes interstate transport of air pollutants generally, and
section 184 describes ozone transport in the northeast region in
particular, which constitutes part of the transport phenomenon at issue
in today's proposal. Section 176A authorizes the creation of a
transport region when emissions from one or more States contribute
significantly to a NAAQS violation in another State and further
authorizes a transport commission to, among other things, assess
strategies for mitigating the interstate pollution. These provisions,
read together, indicate that adequate mitigation of transport is an
appropriate response to a SIP call. Arguably, this interpretation
should hold when EPA issues a SIP call based on section 110(a)(2)(D),
and when EPA mandates a SIP revision under section 110(a)(1), based on
section 110(a)(2)(D).
The second interpretation focuses on the provisions of section
110(a)(2)(D) that the SIP must include provisions to ``prohibit'' any
emitting activity from emitting in ``amounts'' that contribute
significantly to downwind nonattainment or interfere with maintenance.
The EPA has determined the States whose full set of NO_X
emissions contribute markedly to downwind problems. The term
``prohibit'' could be interpreted to require EPA, upon finding that a
State's full set of emissions ``contribute significantly'' to
nonattainment, must then require the SIP to eliminate that full set of
emissions. This construction

[[Page 60328]]

could mean that EPA must require the State to shut down all of the
emission-generating activities. It is doubtful Congress would have
intended this result.
The EPA's second interpretation avoids this possible result by
taking into account the relative cost effectiveness of the upwind and
downwind controls in defining the ``amounts'' of emissions in each
State that contribute significantly to the downwind problem. Once EPA
has set those ``amounts'' in light of its consideration of the cost
factors, the SIPs for the affected States would then need to prohibit
only those amounts.
iv. Other Issues. States will have the flexibility to choose their
own mix of control measures to meet the proposed statewide emissions
budgets. That is, States are not constrained to adopt measures that
mirror the measures EPA used in calculating the budgets. In fact, EPA
believes that many control measures not on the list relied upon to
develop EPA's proposed budgets are reasonable--especially those like
enhanced vehicle inspection and maintenance programs that yield both
NO_X and VOC emissions reductions. Thus, one State may choose
to primarily achieve emissions reductions from stationary sources while
another State may focus emission reductions from the mobile source
sector. Furthermore, States may choose to pursue cost-effective energy
efficiency opportunities as a means to reduce the control measures
necessary to meet their statewide emission budgets.
e. Control Implementation and Budget Attainment Dates. The EPA
proposes to require that the SIP revisions impose an implementation
date for the required controls of 3 years from the date of the required
SIP submission, which would result in compliance by those sources by no
later than September 2002. However, the EPA is soliciting comments on
the range of implementation dates from between September 2002 and
September 2004. The EPA seeks comment on which date within this 2-year
range is appropriate, in light of the feasibility of implementing
controls and the need to provide air quality benefits as expeditiously
as practicable. The EPA is proposing an implementation date of
September 2002 in order to allow coordination of this rulemaking with
its response to 8 section 126 petitions which are discussed below in
section I.E, Section 126 Petitions. Although the EPA's actual proposed
compliance date is September 2002, because the Agency is seeking
comment on a range from September 2002 to September 2004, the Agency
refers to the range of implementation dates throughout this rulemaking.
The EPA further proposes that States be required to meet the mandated
budgets by the end of the year 2007, by which time additional
reductions from various Federal measures will also be achieved.
The EPA believes that requiring implementation of the upwind
controls, and thereby mandating upwind reductions, by no later than
these 2002-4 dates, is consistent with the attainment schedule for the
downwind areas. Because the downwind areas depend on upwind reductions
to reach attainment, mandating upwind controls on a schedule consistent
with downwind attainment requirements is appropriate.
A review of the attainment schedule under the 1-hour NAAQS would be
useful. Under the attainment schedule, serious areas are required to
attain by the end of 1999, severe-15 areas are required to attain by
the end of 2005, and severe-17 areas are required to attain by the end
of 2007 (section 181(a)(1)). If a serious area fails to meet its 1999
attainment date, it is to be reclassified (``bumped up'') to severe-15
(section 181(b)(2)). However, an area may fail to reach attainment by
its attainment date, but avoid bump up, if EPA grants a 1-year
extension. An area is eligible for a 1-year extension if, among other
things, it has no more than one exceedance of the NAAQS in the
attainment-date year. The EPA may grant another extension for the next
year under the same conditions (section 181(a)(5)). If an area receives
two 1-year extensions, it may reach attainment in the following year
(the second year after the attainment-date year) if, again, it has no
more than one exceedance of the NAAQS. Under these circumstances, the
area will have had no more than three exceedances over a 3-year period
(the attainment-date year and the 2 next years), which would qualify it
for attainment under the 1-hour NAAQS. The EPA has indicated that once
it determines that an area has achieved air quality that satisfies the
1-hour NAAQS, the NAAQS will be rescinded with respect to that area.
Although controls on upwind emissions are designed to assist
downwind nonattainment areas in reaching the NAAQS, EPA is aware that
at this point, it is not possible for EPA to mandate controls on upwind
areas within the OTAG region in sufficient time to help serious areas
reach attainment by their end-of-1999 attainment date. The amount of
time that is necessary to assure that the rulemaking proposed today is
well considered by all affected parties, added to the amount of time
necessary for the States to adopt the required SIP revisions, and the
amount of lead-time necessary to implement the required controls, means
that those controls cannot be expected to be in place in time to assist
the serious areas in reaching their attainment date.
The next attainment date is 2005, which applies to severe-15 areas,
such as the Baltimore area, and which would apply to any serious area
that is bumped up. The EPA's proposal to require upwind controls to be
implemented by no later than September 2004--in time for the beginning
of the ozone season for the affected States--is sensible in light of
this 2005 attainment date. Implementing controls earlier than September
2004, or at least phasing in some controls, if not all of them, prior
to that date, would improve the chance for minimizing exceedances
during the 3-year period up to, and including, 2005, which will
facilitate reaching attainment as of this date. In particular, to the
extent that the State chooses controls on major stationary sources of
NOx, EPA believes it would be feasible to implement some of those
controls earlier than September 2004. However, EPA is aware that
implementation of controls for other sources may be more problematic.
The EPA solicits comments on what dates within the range of 3 to 5
years of the required SIP submission would be appropriate for
implementation of the controls.
Full implementation by no later than September 2004 would mean that
all of the upwind controls required under the rulemaking proposed today
would be in place as of the November 15, 2005 attainment date for the
downwind severe-15 areas. Failure to implement those controls prior to
September 2004 may mean that the downwind area may record too many
exceedances in the 3-year period prior to the end of 2005, so that it
would not be possible to reach attainment as of that time. However,
implementation of these reductions by September 2004, coupled with any
necessary additional reductions from the downwind sources, may result
in no more than one exceedance in the downwind area during the
attainment year and during each of the next 2 years thereafter. Under
these circumstances, the downwind area would be eligible for the 1-year
extensions described above and would reach attainment by the year 2007.
Similarly, full implementation by September 2004 would mean that
severe-17 areas would receive the benefit of reduced upwind emissions
during the 3-year period up to, and including, their 2007 attainment
year. In the OTAG region, the severe-17 areas

[[Page 60329]]

include the Philadelphia, New York, Milwaukee, and Chicago areas. These
reductions should greatly assist the downwind areas in reaching
attainment by the end of 2007.
An implementation date of between September 2002 September 2004 is
also consistent with the attainment date scheme for the 8-hour NAAQS.
The EPA intends to promulgate designations for areas under the 8-hour
NAAQS by the year 2000. The CAA provides for attainment dates of up to
5 years or 10 years after designation. Therefore, the first attainment
date for many areas under the 8-hour standard could be 2005. Section
172(a)(2)(C) has a two, 1-year extension scheme applicable for areas
under the 8-hour NAAQS that is similar to that described above, under
section 181(a)(5), applicable to areas under the 1-hour NAAQS.
Accordingly, full implementation of mandated SIP controls in the upwind
areas by no later than September 2004 may allow downwind areas to reach
attainment of the 8-hour NAAQS by 2007, counting the two 1-year
extensions in the same manner as for severe-15 areas under the 1-hour
NAAQS. In addition, the EPA believes that compliance no later than
September 2004 by the utility and nonutility sector, with the emission
limits assumed in setting the emission budgets or application of
controls to other source categories, is feasible.
Further, EPA notes that the September 27, 1994 OTC NO_X
Memorandum of Understanding (MOU) provides that large utility and
nonutility NOx sources should comply with the Phase III controls by the
year 2003. The levels of control in the MOU are 75 percent or 0.15 lb/
10⁶ btu in the inner and outer zones, levels comparable to
the controls assumed in setting the budget for this rulemaking. In
addition, in comments to EPA's proposed Phase II NOx reduction program
under the Acid Rain provisions of the CAA ³, the Institute
of Clean Air Companies (ICAC) stated that more than sufficient vendor
capacity existed to supply retrofit of selective catalytic control to
the boilers affected by the proposed rule. The ICAC in fact indicated
that additional catalyst capacity could be added if needed.
---------------------------------------------------------------------------

\3\ Letter of January 29, 1997 from Jeffrey C. Smith, Executive
Director, Institute of Clean Air Companies, to Docket No. A-95-28:
Acid Rain Program, Nitrogen Oxides Emission Reduction.
---------------------------------------------------------------------------

Although EPA is proposing today that SIPs mandate implementation of
the required SIP controls by a date within a range of September 2002
and September 2004, EPA is also proposing that the affected States
demonstrate achievement of their NO_X budgets as of the end
of the year 2007. In addition, EPA used the 2007 date to analyze for
modeling purposes the impact of upwind emissions on nonattainment air
quality. Using the 2007 date means that the States will be able to
account for the additional reductions from Federal measures occurring
between the date that SIP controls are implemented and the end of 2007,
although the State must also account for growth in emissions during
this time. Using the 2007 date is sensible in part because OTAG used
this date for these purposes and compiled substantial technical
information--such as information concerning inventories--based on this
date. It is, therefore, efficient for EPA to use this same information.
Developing comparable information for an earlier date would be time
consuming and resource intensive. In addition, it is uncertain that
there would be significant differences in amounts of emissions and
impact on ambient air quality between an earlier date and 2007, in
light of the fact that during this period, emissions would generally
increase somewhat as a result of growth in activities that generate
emissions, but would also decrease due to continued application of
federally mandated controls. Accordingly, requiring accounting for a
budget as of the 2007 date is both practicably indicated and is a
reasonable surrogate for requiring this accounting as of September 2004.

E. Section 126 Petitions

The EPA has received section 126 petitions from eight States:
Connecticut, Maine, Massachusetts, New Hampshire, New York,
Pennsylvania, Rhode Island and Vermont. The petitions vary as to the
type and geographic location of sources they identify as meriting a
finding of significant contribution. The petitions also vary as to the
levels of controls they recommend. In addition, EPA has received a
petition from the State of Wisconsin asking EPA to promulgate a SIP
call under section 110(k)(5) requiring the States of Illinois, Indiana,
Iowa, Kentucky and Missouri to submit SIP revisions addressing the
purported impact of their emissions on Wisconsin. By letter dated
August 8, 1997, from Mary D. Nichols, Assistant Administrator for Air
and Radiation, to Michael J. Walls, Chief, Environmental Protection
Bureau, Office of the Attorney General, State of New Hampshire, EPA
provided technical guidance concerning section 126 petitions. The EPA
is now studying the petitions and will prepare a notice(s) of proposed
rulemaking to grant or deny them.
The EPA's response to a section 126 petition differs from today's
action in several ways. Today's action is a proposed SIP call under
section 110(k)(5) for SIP provisions meeting the requirements of
section 110(a)(2)(D) for the 1-hour ozone NAAQS, coupled with a
proposed requirement under section 110(a)(1) for submission of SIP
provisions meeting the requirements of section 110(a)(2)(D) for the 8-
hour ozone NAAQS. The EPA bases this action on a technical analysis as
to whether the entire NO_X emissions inventory of an
individual upwind State contributes significantly to an ozone
nonattainment problem downwind. If EPA concludes that the
NO_X emissions from that State make such a significant
contribution, EPA will require the State to submit SIP provisions that
limit the State's NO_X emissions to the level mandated by
EPA, but through any combination of measures affecting any sector of
the inventory chosen by the State. If the State does not make the
required submission, EPA may, among other things, promulgate a FIP in
accordance with section 110(c).
By comparison, a section 126 petition, by the terms of section
126(b)-(c), is limited to upwind major stationary sources and not other
sectors of the upwind emissions inventory. Moreover, a section 126
petition may seek a finding concerning upwind sources in more than one
State. Further, if EPA grants the petition, it is EPA, and not the
States, that promulgates direct controls for the major sources.
The EPA's response to section 126 petitions would bear relevance to
today's action. The section 126 petitions and section 110(k)(5)/
110(a)(1) action both require technical analysis of whether upwind
sources contribute significantly to a downwind nonattainment or
maintenance problem. However, EPA's section 110(k)(5)/110(a)(1) action
results in a mandate for the States to submit SIP revisions that
conform to only minimum guidance provided by EPA. On the other hand,
the section 126 petitions, if granted, would result in EPA selection
and imposition of controls directly on major stationary sources. These
controls could provide a template for the SIP provisions the States
must include in their rulemaking response to EPA's section 110(k)(5)/
110(a)(1) rulemaking or, if necessary, a FIP.
EPA believes that both the 110 process as outlined and 126 petition
processes are aimed at addressing regional transport of ozone forming
pollutants and can be fully coordinated. The 110 process outlined
provides the potential to deal comprehensively with

[[Page 60330]]

transported pollutants that contribute significantly to downwind
nonattainment, and importantly, allows individual States to make
choices about cost-effective source controls best fitting their unique
State situations. The 126 petition process provides assurance to
petitioning States that upwind sources of air pollution will be
addressed in a timely manner. Thus, each of these processes may provide
important and complementary tools to address the regional ozone
transport problem.
Over the next several months, EPA will be working with the affected
States to ensure these two processes are fully coordinated. This will
provide maximum certainty for State and business planning requirements.
The EPA's goal in this effort will be to ensure that States achieve the
air quality reductions EPA determines through rulemaking are necessary
to address regional transport while providing the maximum flexibility
to those States in identifying the appropriate means to meet those goals.

F. OTAG Process

The OTAG has completed the most comprehensive analysis of ozone
transport ever conducted. The process has resulted in more technical
information being gathered and more modeling and monitoring analyses on
regional ozone transport than ever before. The OTAG process was
fundamentally different from previous efforts undertaken by the Federal
Government and the States to assess and solve air pollution problems.
What was unique about the multistate, multistakeholder OTAG process is
that for the first time, the Federal Government has looked to the
States involved to provide the necessary technical information and to
aid in determining an outcome which has local, regional and national
implications.
The OTAG was organized into a number of subgroups and work groups
that included members from the States, EPA, industry and environmental
groups. The OTAG's Policy Group, comprised of the State Environmental
Commissioners, provided overall direction to its subgroups for the
assessment of ozone formation and transport, as well as the development
of control strategies that will reduce concentrations of ozone and its
precursors. The subgroups within OTAG addressed issues relating to
emissions inventories, monitoring, modeling, and evaluated the
availability, effectiveness, and costs of potential national, regional
and local air pollution control strategies. Specific issues such as
trading and market-based incentives were also addressed.
The OTAG's initial meetings were on May 18, 1995, in Reston, VA,
and June 19, 1995, in Washington, DC. The OTAG continued to meet
regularly for 2 years until their final meeting in Washington, DC on
June 19, 1997. The goal of OTAG was to:

* * * identify and recommend a strategy to reduce transported ozone
and its precursors which, in combination with other measures, will
enable attainment and maintenance of the national ambient ozone
standard in the OTAG region. A number of criteria will be used to
select the strategy including, but not limited to, cost
effectiveness, feasibility, and impacts on ozone levels. (1)

To meet its goal, OTAG used technical information from air quality
analyses and photochemical modeling. The OTAG modeled three rounds of
emission reduction scenarios and strategies, including varying control
measures geographically. The first round of modeling was performed
during September and October 1996 and provided an initial evaluation of
possible OTAG emission reduction scenarios. The second round was
performed during November and December 1996 and refined the emission
reduction level for the strategies. The third round was performed
during January through March 1997 and evaluated the geographic
applicability of the OTAG strategies. These geographic modeling runs
provided information on applying different levels of controls on
utilities and nonutility point sources at incremental steps. Round-3
also included a limited number of additional modeling runs needed to
address comments made by a number of States related to the geographical
boundaries of the zones defined for round-3 modeling. The OTAG modeling
results are discussed in section II, Weight of Evidence Determination
of Significant Contribution, and are also available on the OTAG
webpage. This modeling, along with other OTAG-generated information,
provided the technical information necessary to make recommendations to
the Policy Group and to EPA on what is needed to meet the OTAG goal.
The EPA received OTAG's final recommendations on July 8, 1997. These
recommendations are included in Appendix B.

II. Weight of Evidence Determination of Significant Contribution

A. Introduction

This section documents the technical information and analyses for
the factors concerning emissions and contributions to ambient air
quality that EPA uses to determine which States in the OTAG domain make
a significant contribution to nonattainment in downwind
States.⁴ To a large extent, this assessment is based upon
the results of OTAG modeling and air quality analyses as well as
information from other non-OTAG modeling studies. The OTAG modeling
available for this analysis includes a set of initial emissions
sensitivity runs, the regional strategy runs in rounds 1, 2, and 3, and
the geographic sensitivity runs performed to support the design of
strategies in round-3.
---------------------------------------------------------------------------

\4\ Under the two alternative interpretations of section
110(a)(2)(D) that EPA is proposing today, if upwind emissions meet
the factors related to emissions and contribution to ambient air
quality, EPA would conclude either that the emissions significantly
contribute to a nonattainment problem, or the emissions may
significantly contribute, depending on further analysis of other
factors, including costs.
---------------------------------------------------------------------------

B. Background Technical Information

The importance of interstate transport to the regional ozone
problem and contributions from upwind States to downwind States is
supported by numerous studies of air quality measurements and modeling
analyses. In general, ozone episodes can occur on many spatial and
temporal scales ranging from localized subregional events lasting a day
or 2, up to regionwide episodes lasting as long as 10-14 days. The
frequency of localized versus regional episodes depends on the
characteristics of the large-scale meteorological patterns which
control the weather in a particular summer season. Local controls alone
are not sufficient to reduce ozone during regionwide episodes since a
substantial amount of ozone may be transported into the area from
upwind sources. The National Research Council report, ``Rethinking the
Ozone Problem in Urban and Regional Air Pollution'', (2) cites numerous
studies of widespread ozone episodes during summertime meteorological
conditions in the East. These episodes typically occur when a large,
slow-moving, high pressure system envelopes all, or a large portion of,
the Eastern United States. The relatively clear skies normally
associated with such weather systems favor high temperatures and strong
sunlight, which enhances the formation of high ozone concentrations. In
addition, the wind flow patterns can lead to a build up of ozone
concentrations and the potential for long-range ozone transport.
Specifically, winds are generally light in the center of high pressure
systems so that areas

[[Page 60331]]

under the center may have near-stagnation conditions resulting in the
formation of high ozone levels. As the high pressure system moves
eastward, winds become stronger on the ``backside'' which increases the
potential for these high ozone levels to be transported to more distant
downwind locations. Over several days, the emissions from numerous
small, medium and large cities, major stationary sources in rural
areas, as well as natural sources, combine to form a ``background'' of
moderate ozone levels ranging from 80 to 100 ppb (2) of which 30 to 40
ppb may be due to natural sources. Concentration levels in the range of
80 to 100 ppb and higher have also been measured by aircraft aloft,
upwind of the Lake Michigan area (3), as well as the Northeast Corridor
(4). Because this level of background ozone is so close to the NAAQS, even
a small amount of locally-generated ozone will result in an exceedance.
The importance of the episodic meteorological conditions is
heightened by the spatial distribution of emissions across the region.
The EPA has examined the State total emissions and emissions density
projected by OTAG to 2007, as described in section B.2, OTAG Strategy
Modeling. Both of these measures of emissions (i.e., total and density)
are important considerations for ozone formation. Total emissions
indicate the amount of mass emitted by a State while emissions density
indicates the degree to which those emissions are concentrated within
the State and provides a way to compare emissions between
geographically large and small States on a more equivalent basis. The
State total emissions in Table II-1 indicate that there is no single
State or group of adjacent States that stand out as the major
contributors to the total manmade emissions in the OTAG region. Rather,
many States in the Midwest, Northeast and Southeast have high levels of
emissions. For example, Illinois, Indiana, Ohio, Kentucky, Michigan,
Pennsylvania, New York, Alabama, Georgia, Florida, North Carolina and
Tennessee each have total NO_X emissions exceeding 1000 tons
per day. Even some other smaller States like Connecticut, Delaware,
Maryland, Massachusetts, and Rhode Island, along with the District of
Columbia, have a high spatial density of NO_X emissions as
indicated in Table II-2. Thus, considering the distribution of
emissions, a broad range of emissions from many States contribute to
the regional background ozone during episodic meteorological
conditions. In this situation, there is a cumulative effect in that the
thousands of stationary sources and millions of motor vehicles
throughout the OTAG region collectively cause downwind contributions as
they generate emissions and those emissions interact over multiple days.
1. OTAG Modeling Process
As described in the OTAG Modeling Protocol (5), state-of-the-
science models and data bases were used in OTAG for simulating the
physical and chemical processes involved in the formation and transport
of ozone and precursor species over multiday episodes and regional
scales. As such, the OTAG modeling system provides the most complete,
scientifically-credible tools and data available for the assessment of
interstate transport. All of the OTAG model runs were made for an area
covering a large portion of the Eastern United States, as shown in
Figure II-1. This area includes all or portions of 37 States, the
District of Columbia and southern Canada. In general, the OTAG
``modeling domain'' (i.e., OTAG region) was set large enough to
encompass the widespread spatial extent of high ozone levels measured
during multiday episodes in the eastern half of the United States. As
such, the domain is designed to handle the synoptic (i.e., large) scale
meteorological conditions associated with regional transport and to
include the major emissions source areas in the East. The horizontal
grid configuration used by OTAG (see Figure II-1) includes a ``Fine
Grid'' at 12 km resolution ``nested'' within a ``Coarse Grid'' at 36 km
resolution. The size and location of the ``Fine Grid'' was determined
based on the location of areas with high ozone concentrations, the
geographic variations in emissions density, the meaningful resolution
of some model inputs, computer hardware limitations, and model run
times. As described in section B.3, OTAG Geographic Modeling, OTAG
applied different levels of controls in the ``Fine Grid'' versus the
``Coarse Grid'' as part of the round-3 modeling.
Four specific episodes were selected by OTAG for model simulations
in order to provide information on a range of meteorological conditions
which occur during periods of elevated ozone levels. These episodes
are: July 1-11, 1988; July 13-21, 1991; July 20-30, 1993 and July 7-18,
1995. Each of these episodes represents somewhat different episodic
characteristics in terms of transport patterns and the spatial extent
of high ozone concentrations in the East (6). The 1988 and 1995
episodes featured high ozone concentrations in the Northeast, Midwest,
and Southeast with wind regimes that provided the meteorological
potential for intra- and inter-regional transport. During the 1991
episode, high ozone was confined mainly to the northern portion of the
OTAG domain, whereas the 1993 episode was a ``Southeast'' episode with
relatively low ozone levels outside this region. It should be noted
that none of the OTAG episodes include extensive periods of high ozone
in the far western portions of the domain nor in areas along the gulf
coast.
As part of OTAG, an objective evaluation of model predictions was
conducted for each of these four episodes in order to determine the
performance of the modeling system for representing regional ozone
concentration levels. This evaluation focused on a number of
statistical metrics comparing predicted ozone to ground-level ozone
measurements (7). The results indicate generally good agreement between
simulated and observed values. Most importantly, areas of predicted
high ozone correspond to areas of observed high ozone. However, a few
relatively minor concerns were found, such as:
• A tendency to underestimate concentrations in the North
and overestimate concentrations in the South;
• Concentrations at night are somewhat underestimated
relative to daytime predictions;
• Low observed concentrations tend to be overestimated and
higher observed values tend to be underestimated; and
• Concentrations at the start of the episode tend to be
underestimated with a tendency for concentrations at the end of the
episode to be overestimated.
The success of the model for predicting pollutant concentrations
aloft is also important from a transport perspective. During the day,
when the atmosphere is ``well mixed,'' ground-level ozone values can
serve as a good measure of both local formation and transport. However,
at night, ozone is depleted in a very shallow layer near the ground due
to deposition and nighttime chemical reactions. Thus, during the
overnight and early morning, ground-level measurements and predictions
do not adequately reflect pollutant transport. Aircraft-measured
pollutant data and model predictions during these periods indicate
moderate to high levels of ozone aloft which can then mix down during
the day and further elevate ground-level concentrations. A limited
amount of measured data aloft are available from non-OTAG field studies
for several of the days in the 1991 and 1995 episodes. An initial
comparison of these data to

[[Page 60332]]

the model predictions (6) indicates that model performance aloft is not
as good as for ground-level ozone. In general, the model tends to
underestimate ozone aloft. This suggests that the model may somewhat
underestimate the amount of ozone transport aloft, especially overnight
into the early morning hours. Thus, the contribution of upwind source
regions to ozone levels in downwind areas may actually be greater than
estimated by the model.
2. OTAG Strategy Modeling
The OTAG strategy modeling was conducted in several phases. In each
phase, the effects on ozone ⁵ of various changes in
emissions were examined relative to a future-year baseline. This
baseline reflects the projection of emissions from 1990 to 2007.
Included in the 2007 baseline are the net effects of growth and
specific control programs prescribed in the 1990 Amendments. The
control measures included in the 2007 baseline are listed in Table II-
3. Overall, domainwide emissions of NO_X in the 2007 baseline
are approximately 12 percent lower than 1990 while emissions of VOC are
approximately 20 percent lower. The procedures for developing the 1990
base inventory and the 2007 baseline are described by Pechan (8). The
key findings (6) from comparing the model predictions for the 2007
baseline to the 1990 base case scenario are:
---------------------------------------------------------------------------

\5\ Although the OTAG assessments focussed on 1-hour
concentrations, the impacts on 8-hr average concentrations were
found to be similar to these for 1-hour values.
---------------------------------------------------------------------------

• Ozone levels are generally reduced across most of the
region, including nonattainment areas;
• Some increases in ozone are predicted in areas where
higher economic growth is expected to occur, especially in the South;
• Ozone levels aloft along regional ``boundaries'' are
reduced, but average concentrations above 100 ppb and peak
concentrations above 120 ppb are still predicted on several days; and
• Ozone concentrations above the 1-hr and/or 8-hr NAAQS may
still occur in the future under similar meteorological conditions in
many of the counties currently violating either or both of these NAAQS.
The 2007 baseline emissions were reduced in an initial set of
sensitivity modeling performed to assess several broad strategy-
relevant issues. All of these model runs involved ``across-the-board''
emissions reductions (i.e., no source category-specific reductions).
The results (6) of these simulations are as follows:
• Regional reductions in NO_X emissions decrease
ozone across broad portions of the region including ozone in areas
violating the NAAQS;
• Regional reductions in VOC emissions decrease ozone in and
near the core portions of urban areas with relatively small regional
benefits;
• Both elevated and low-level NO_X reductions
decrease ozone concentrations;
• NO_X reductions can produce localized, transient
increases in ozone (mostly due to low-level, urban NO_X
reductions) in some areas on some days; most increases occur on days
and in areas where ozone is low (i.e., below the NAAQS);
• NO_X plus VOC reductions lessen ozone increases
in urban areas, but provide little additional regional benefits
compared to NO_X-only reductions; and
• The magnitude and spatial extent of changes in 8-hour
ozone concentrations are consistent with the changes predicted in 1-
hour concentrations.
Based upon the findings of the sensitivity runs, OTAG subsequently
developed and simulated source-specific regionwide control strategies
in two rounds of modeling. These strategies were derived from a range
of control measures applied to individual source categories of VOC and
NO_X (8). The controls were grouped into various levels of
relative ``stringency'' as listed in Tables II-4a and II-4b. The round-
1 and round-2 modeling consisted of strategies that contained various
combinations of controls from the least (level ``0'') to most stringent
(level ``3'') for each source category. The control levels and
domainwide emissions associated with these strategies are given in
Tables II-5a and II-5b.
The round-1 modeling was a ``bounding analysis'' with runs that
ranged from the lowest level of control on all source categories (Run
1) to the highest level of control on all sources (Run 2). Runs 3 and
4b were included to isolate the effects of the most stringent OTAG
controls on utilities only, versus this level of control on the other
source categories. In the round-2 modeling, eight runs were simulated
to examine the relative benefits of progressively increasing the level
of control on utilities, under two alternative levels of control
applied to area, nonroad and mobile sources. The results (6) of the
round-1 and round-2 modeling are given in Table II-6.
The findings from the round-1 and round-2 OTAG strategy modeling
which are particularly relevant to this analysis are:
• Clean Air Act programs will likely provide a reduction in
ozone concentrations in many nonattainment areas; however, some areas
currently in nonattainment will likely remain nonattainment in the
future and new 8-hr nonattainment and/or maintenance problem areas may
develop as a result of economic growth in some areas;
• NO_X reductions from elevated and low-level
sources are both beneficial when considered on a regional basis; and
• Further mitigation of the ozone problem will require
regional NO_X-oriented control strategies in addition to
local VOC and/or NO_X controls necessary for attainment in
individual areas.
3. OTAG Geographic Modeling
In the round-1 and round-2 strategy modeling, controls were applied
across the entire domain. In round-3, controls were applied on a
geographic basis in order to assess the relative effects of different
strategies in various portions of the region. Prior to developing these
strategies, a series of sensitivity tests was conducted by OTAG to
provide information on the spatial scales of transport in order to help
determine where to apply various levels of control. The most relevant
tests are the ``subregional'' modeling and the ``rollout'' modeling.
The base case for these tests was the 2007 baseline scenario. In the
subregional modeling, the domain was divided into the 12 subregions
shown in Figure II-2. For one set of subregional modeling, all
anthropogenic emissions were eliminated from each subregion,
individually in separate model runs. These runs, called the ``zero-
out'' subregional scenarios, were performed for the 1988 and 1995
episodes. In a second set of subregional modeling, emissions were
reduced, but not eliminated in each subregion. The level of reductions
were 60 percent for elevated point-source NO_X emissions, 30
percent from all other sources of NO_X, and 30 percent from
all sources of VOC. These runs are referred to as the ``5c''
subregional scenarios. The ``5c'' scenarios were run for most, but not
all, subregions for the 1988, 1991 and 1995 episodes. In addition to
looking at individual subregions, there were runs for 1988 and 1991
which applied the ``5c'' reductions in subregions 5, 6, and 9 (Figure
II-2) combined in order to determine the relative impacts of expanding
the size of the area of emissions reductions.
In the rollout modeling, the ``5c'' emissions reductions were
applied first within selected areas and, then, outward

[[Page 60333]]

in incremental steps (rollouts) of approximately 200 km from these
areas, in subsequent runs. Three major nonattainment areas in the
region (Atlanta, the Lake Michigan Area, and New York City) were
selected by OTAG for this type of modeling.
The results (6) of the OTAG geographic modeling indicate the following:
• Emissions reductions in a given multistate region/
subregion have the most effect on ozone in that same region/subregion;
• Emission reductions in a given multistate region/subregion
also affect ozone in downwind multistate regions/subregions;
• Downwind ozone benefits decrease with distance from the
source region/subregion (i.e., farther away, less effect);
• Downwind ozone benefits increase as the size of the upwind
area being controlled increases, indicating that there is a cumulative
benefit to extending controls over a larger area; and
• Downwind ozone benefits increase as upwind emission reductions
increase (the larger the upwind reduction, the greater the downwind
benefits).
The round-3 strategies were based in large part on the results of
the geographical sensitivity runs. The cornerstone of round-3 was a set
of geographic ``zones'' (see Figure II-3) which was used to vary the
level of control across the OTAG region. For the most part, OTAG
focussed the round-3 controls on zones in the ``Fine Grid.'' This was
based upon an analysis indicating that, in general, the greatest
potential for regional transport leading to inter-state impacts of
concern occurs within the ``Fine Grid'' portion of the OTAG region. The
individual zones were used to differentiate the impacts of controls in
and close to the three major 1-hour nonattainment areas of the ``Fine
Grid'' (i.e., the Northeast Corridor, Atlanta, and Chicago/Milwaukee)
versus controls in zones farther upwind of these areas. Specifically,
in round-3 various levels of utility and nonutility controls were
applied by zone in different runs. The level of control for each
strategy is given in Table II-7. In general (except for Run F), the
round-3 runs progressively increase the level and spatial extent of
utility and nonutility controls starting with the reference run (Run A)
through the most stringent run (Run I). In addition, there were a
number of supplemental round-3 runs (6) performed using a modified
version of the zones. The most relevant of these were Runs CA and CB
which altered the configuration of zones II, III, and IV to correspond
more closely to the borders of the OTR.
The results (6) of the OTAG round-3 runs indicate the following:
• The greater the emissions reductions the greater the ozone
benefits (Run I was the most effective strategy and Run A the least);
• There was no bright-line between the incremental
application of controls nor any leveling off of benefits with the more
stringent controls;
• Increasing the spatial extent of emissions reductions
increases the amount and spatial extent of ozone benefits downwind;
areas farther upwind may need a higher level of control to have a given
effect in a particular downwind area;
• In general, emissions reductions in a given zone have the
greatest effects within that zone; but there are also impacts on high
ozone concentrations in other zones downwind;
• Emissions reductions in zones I, III, and V are
``effective and necessary'' (6) to reduce ozone in the Lake Michigan
area, the Northeast Corridor, and Atlanta, respectively which are the
closest downwind areas to each of these zones;
• Emissions reductions in more distant zones also help
reduce ozone in these three major nonattainment areas; emissions
reductions in zone II benefit the Northeast Corridor and the Lake
Michigan area; emissions reductions in zone IV benefit Atlanta and the
Lake Michigan area;
• Emissions reductions in zones II and IV are also
``effective and necessary'' (6) to reduce ozone in ``problem areas''
within these zones (e.g., Birmingham, Nashville, Charlotte, Richmond,
Louisville, and Cincinnati);
• When viewed on a regional basis, it may be ``difficult to
geographically distinguish between control levels'' (6) because there
are ozone problem areas in every zone within the ``Fine Grid'' and
there are clearly interzonal impacts;
• Additional emissions reductions in ``Coarse Grid'' States
``are not very effective'' (6) in reducing high ozone levels downwind
in problem areas of the ``Fine Grid''; and
• Although the OTAG assessments focused on 1-hour
concentrations, the impacts on 8-hour average concentrations were found
to be similar to those for 1-hour peak values, suggesting that ``a
regional strategy designed to help meet'' the 1-hour NAAQS ``will also
help meet'' the 8-hour NAAQS (6).
Overall, the findings from the OTAG sensitivity and strategy
modeling indicate that:
• Areas of high ozone, both measured and predicted for the
future, occur, or will occur, in most portions of the modeling domain;
• Several different scales of transport (i.e., inter-city,
intra-state, inter-state, and inter-regional) are important to the
formation of high ozone in many areas of the East;
• The greatest potential for inter-state and inter-regional
impacts associated with transport occurs between States within the
multistate ``Fine Grid'' area;
• A regional strategy focussing on NO_X reductions
across a broad portion of the region will help mitigate the ozone
problem in many areas of the East;
• There are ozone benefits across the range of controls
considered by OTAG; the greatest benefits occur with the most emissions
reductions; there was no ``bright line'' beyond which the benefits of
emissions reductions diminish significantly;
• Even with the large ozone reductions that would occur if
the most stringent controls considered by OTAG were implemented, there
may still remain high concentrations in some portions of the OTAG region;
• A regionalNO_Xemissions reduction strategy
coupled with localNO_Xand/or VOC reductions may be needed
to enable attainment and maintenance of the NAAQS in this region.
It should be noted that urban-scale analyses will be necessary in
order for States to develop local attainment plans. These analyses will
take into account more geographically refined emissions and local
meteorological factors, such as lake and sea breezes and/or topography.
Urban-scale modeling is also necessary to more precisely evaluate the
degree and extent of anyNO_Xdisbenefit.
4. Other Relevant Analyses
In addition to the OTAG modeling described above, the potential for
regional ozone transport has been examined by the OTAG Air Quality
Assessment Work Group using trajectory analyses, wind vector
characterization, and statistical analyses of ozone measurements. The
trajectory analyses (9) were used to identify a ``distance scale''
indicative of the 1- to 2-day transport distance of ozone and
precursors. The results suggest that ozone-laden air may travel
distances of 150 miles to 500 miles or more into and across the Midwest
and Northeast. Analyses, as part of the Southern Oxidants Study (10),
indicate that most southern episodes may be more closely linked to
near-stagnation conditions and thus, shorter transport distances might

[[Page 60334]]

be expected within the Southeast. Additional information on regional
transport patterns comes from an analysis conducted by OTAG to
characterize the regional wind flow patterns typically associated with
high ozone in the Northeast, Southeast, and Midwest (9). These wind
vectors (Figure II-4) indicate that regional episodes are typically
associated with broad-scale anticyclonic (i.e., clockwise) flow regimes
centered over the Ohio-Tennessee Valley area. Under these conditions,
there are typically lighter winds and weaker transport within the South
compared to other regions. However, the information also indicates the
potential for transport from the South to other portions of the region.
For example, in the Midwest, high ozone is generally associated with
wind flows from States located to the south and southwest. For the
Northeast, the data suggest a strong westerly flow favoring transport
from States farther to the west.
Another method for estimating the potential range of transport was
developed by Rao (11) based on correlating daily ambient ozone
measurements between monitoring sites for the period 1985 through 1994
for several nonattainment areas (i.e., Atlanta, Washington DC,
Cincinnati, Pittsburgh and Chicago). The analysis indicates the
presence of ``ozone clouds'' surrounding these areas which are likely
the result of pollutant transport, spatial patterns in emissions, and
weather conditions conducive to ozone formation. The spatial extent of
these ``ozone clouds'' is on the order of 300 miles or more, extending
from the central portion of the nonattainment area along the axis of
the major transport direction.
The importance of mitigating transported ozone for solving the
nonattainment problem for many cities in the East has been examined as
part of ongoing urban scale modeling analyses by various State
agencies. In urban scale modeling, transport into the nonattainment
area is represented by specifying pollutant concentrations along the
sides and top of the modeling domain. These ``boundary condition''
concentrations reflect ozone transport into the urban area at the
surface and aloft. As such, incoming ozone (as well as precursor
chemical species) moves into the urban area and mixes with local
emissions to increase the formation of ozone. The available urban scale
modeling work is summarized in a report commissioned by OTAG (12). It
should be noted that these modeling analyses were conducted to address
1-hour attainment problems. Still, the information is expected to be
generally applicable to 8-hour ozone concentrations as well. The
findings from this report which are relevant include:
• New York City--a reduction in transport into the New York
area associated with upwind emissions reductions on the order of 75
percent forNO_Xand 25 percent for VOC along with local VOC
andNO_Xreductions may be needed for attainment in New York;
• Philadelphia--transport appears to be a major component in
peak ozone concentrations in the Philadelphia domain, contributing 90
percent to the peak in one of the scenarios modeled;
• Lake Michigan--transported ozone levels coming into the
Lake Michigan area contribute 40-60 percent to the peak concentration
downwind of urban centers in this area; background concentrations in
the range of 80-100 ppb may need to be reduced to around 60 ppb for
attainment in this region;
• Southeast Michigan--ozone transport into this area
``contributed significantly to the simulated peak ozone concentrations
on many of the episode days;
• St. Louis--predicted ozone concentrations in this area are
sensitive to incoming levels of ozone/precursor transport;
• Atlanta--the amount of ozone transported into the area was
found to be one of the factors contributing to the difficulty for this
area to demonstrate attainment;
• Richmond--transported ozone contributes to predicted high
ozone on certain episode days, and regional controls on upwind sources
may be necessary to reduce ozone in this area during some of the
episode days modeled;
• Charlotte--transported ozone appears to be a ``significant
component'' of ozone in the area during some episodes, particularly
with winds from a northerly direction; and
• Nashville--transported ozone was predicted to be a major
contributor to ozone in this area on 1 of the 2 high ozone days modeled.
In addition to the preceding qualitative analyses, there are
several non-OTAG regional modeling analyses which provide information
on interstate contributions due to transport. First, modeling by EPA
for the OTC, using the Regional Oxidant Model (ROM), examined the
impact of controls outside the OTR on ozone within this region (13).
The results indicate that a 0.15 lb/MMBtu NO_X emissions
limit on certain stationary sources outside the OTR, together with
other controls, would likely have the following effects within the OTR:
• Reductions of up to 15-18 ppb in daily maximum 1-hour
ozone in the western part of the OTR, and
• Reductions of up to 6-9 ppb along the Northeast Corridor
from Washington, DC to northern New Jersey.
Second, a new modeling technique, the ``Comprehensive Air-quality
Model with extensions'' (CAMx), has been developed (14) in an attempt
to identify the contribution of upwind source areas to specific
downwind locations. The Ozone Source Apportionment Technology (OSAT) in
CAMx was used by the Midwest Ozone Group (MOG) to quantify the
contributions of emissions from upwind sources on high ozone
concentrations in the Northeast Corridor and the Lake Michigan area.
The CAMx analysis modeled the OTAG July 1991 episode only and
considered 1-hour ozone predictions above two cut-points: 100 ppb and
120 ppb. Also, the MOG CAMx report (14) did not examine the
contributions from emissions in individual upwind States, but rather,
the analysis examined the impacts of emissions from concentric
geographic ``rings'' upwind of the Northeast Corridor and Lake Michigan
areas. In general, the results are consistent with the OTAG geographic
sensitivity modeling in that much of the contribution to ozone in a
particular multistate area comes from sources within that same
multistate area, considerable contributions also come from sources
outside the multistate area, and anthropogenic NO_X emissions
in upwind areas contribute much more to transport than upwind VOC
emissions. Some of the findings from the CAMx analysis relative to the
contributions to high ozone in the Northeast Corridor and Lake Michigan
area are as follows:
• On average, nearly 50 percent of the high ozone levels in
these two areas come from upwind (mostly NOx) sources;
• On average, for the Northeast Corridor a large portion (90
percent) of the contribution from upwind sources comes from States to
the west and south within approximately 390 km of the Corridor (this
may include all or portions of States as far upwind as Ohio, North
Carolina, and West Virginia); nearly all (95 percent) of the
contribution comes from upwind sources within approximately 570 km of
the Corridor (this may add portions of Kentucky, Tennessee, and South
Carolina as potential upwind contributors);
• On average, for the Lake Michigan area a large portion (90
percent) of the contribution from upwind sources

[[Page 60335]]

comes from States to the west and southwest within approximately 650 km
of this area (this may include all or portions of States as far as
Iowa, Minnesota, Missouri, and Tennessee); nearly all (95 percent) of
the contribution comes from upwind sources within approximately 770 km
of the Lake Michigan area (this adds portions of Arkansas, Kansas,
Nebraska, North Dakota, and South Dakota); and
• Transport distances for individual high ozone days are
even longer, in some cases, than the episode averages indicated above.
A third non-OTAG modeling study that is relevant to this assessment
was performed by a group of northwest OTAG States (Iowa, Minnesota,
Nebraska, North Dakota, and South Dakota) (15). One part of this study
included modeling similar to the OTAG subregional modeling, except that
``zero-out'' and ``5c'' emissions reductions were applied in various
combinations in these States only, using the OTAG July 1995 episode. In
these runs, emissions in all other States in the OTAG region were
simulated with the 2007 baseline emissions. The modeling results were
analyzed in terms of the contributions of emissions in these five
States to daily maximum 1-hour ozone above 100 ppb in downwind areas.
The results indicate the following:
• Emissions in Minnesota, Nebraska, North Dakota, South Dakota,
and the ``Coarse Grid'' portion of Iowa (see Figure II-1) collectively
contribute less than 2 ppb to downwind ozone above 100 ppb; and
• Emissions from these States including the ``Fine Grid''
portion of Iowa, contribute in the range of 2 to 6 ppb to ozone above
100 ppb in grid cells downwind near Lake Michigan, Detroit, and Cincinnati.
Collectively, the studies cited here indicate that:
• The meteorological conditions and air trajectories during
regional-scale, high ozone episodes provide the potential for
multistate ozone transport;
• Ambient measurements indicate that ozone episodes can have a
large multistate spatial extent within which 1-to 2-day transport may occur;
• Examination of emissions data indicates that numerous
sources of NO_X may be contributing to high regional
background ozone concentrations;
• State urban-scale modeling analyses for areas in various
portions of the OTAG region indicate that transport from upwind areas
is an impediment to attainment of the NAAQS;
• Regional modeling studies indicate contributions to high
ozone in the Northeast Corridor and the Lake Michigan area may come
from States as far away as 570 km and 770 km, respectively; and
• Non-OTAG multistate modeling indicates that emissions from
States in the northwest portion of the ``Coarse Grid'' may not make
large contributions to high ozone in downwind States elsewhere in the
OTAG region.

C. Technical Analysis of Significant Contribution

1. Criteria for Determining Significant Contribution
Whether a contribution is ``significant'' depends on the overall
context. There may be no single amount of contribution which could be
considered as a bright line indicator of ``significant'' that would be
applicable and appropriate in all circumstances. As described above,
under one interpretation of the CAA's section 110(a)(2)(D), factors to
be considered in determining whether a contribution is significant include:
• The level of emissions in the area upwind of a nonattainment area;
• The amount of the contribution (ppb above the level of the
standard) made to the downwind nonattainment area;
• The transport distance between the upwind source area and
the downwind problem area; and
• The geographic extent of the contribution downwind. For
example, ozone is generally the result of emissions of NO_X
and VOC from hundreds of stationary sources and millions of vehicles,
each of which is likely to be responsible for much less than 1 percent
of the overall inventory of precursor emissions. A source or group of
sources should not be exempted from treatment as a significant
contributor merely because it may be a small part, in terms of total
emissions, of the overall problem when all or most other contributors,
individually, are also relatively small parts of the overall problem.
This situation, in which a number of individual (and sometimes small)
sources collectively cause a significant impact, is a major aspect of
the contribution issue. The moderate-to-high ozone levels which cover
broad regions are the result of emissions from millions of individual
sources interacting over multiple days. The contribution to downwind
nonattainment results from the cumulative contribution from all sources
involved in this process. Given these issues, it is not appropriate to
define a bright line test for ``significant contribution.'' Rather, EPA
is using a ``weight of evidence'' approach, based on a range of
information, for determining whether a State makes a significant
contribution to downwind nonattainment. The EPA is also proposing a
second, alternative interpretation to section 110(a)(2)(D), under which
the weight of evidence approach incorporates other factors, including
the relative costs of controlling downwind emissions, as described in
section I.D.2.b., Significant Contribution to Nonattainment.
2. Overview of Technical Approach
The findings from the relevant background studies and the OTAG
modeling results provide a basis for concluding that ozone transport
results in interstate contributions to high ozone levels during
multiday episodic conditions within portions of the OTAG region. An
overview of the approach for analyzing this information in an
assessment of States that make a significant contribution to downwind
nonattainment is as follows:
• The air quality and modeling analyses cited in section
B.4, Other Relevant Analyses, were considered in a qualitative manner
to identify, from a regional perspective, States which may contribute
to multistate transport;
• The results of the OTAG subregional modeling runs were
used to quantify the extent that each subregion contributes to downwind
nonattainment for the 1-hour and/or 8-hour NAAQS; and
• State NO_X emissions data were used to translate
the findings from the subregional modeling to a State-by-State basis.
The specific model runs used in this analysis include the ``zero-
out'' runs in which all anthropogenic emissions from individual
subregions (comprised of portions of small groups of States) are
removed, and the contributions to downwind ozone are predicted. This
set of model runs was chosen since it provides an appropriate way to
quantify the contribution of the full set of anthropogenic emissions in
one area to ozone concentrations in another. As described in section
B.2, OTAG Strategy Modeling, zero-out runs were made for the 1988 and
1995 episodes only. The results for both episodes were combined in this
assessment. Also, the analysis of emissions data focussed on
NO_X since the OTAG and non-OTAG modeling results indicate
that NO_X emissions reductions lower ozone transport across
broad portions of the OTAG region, whereas, VOC emissions reductions
have primarily local benefits.
The air quality, modeling, and emissions information was used

[[Page 60336]]

collectively to determine, based on the weight of evidence, which
States make a significant contribution to downwind nonattainment.
3. Identification of Ozone ``Problem Areas''
As described above, in order to quantify the contribution from
upwind States to nonattainment downwind, EPA identified areas which
currently have a 1-hour and/or 8-hour ozone nonattainment problem and
are expected to continue to have a nonattainment problem in the future,
based on modeling. In addition, EPA considered areas which may have a
future maintenance problem for the 8-hour NAAQS. For current
nonattainment areas, EPA used air quality data for the period 1993
through 1995 to determine which counties are violating the 1-hour and/
or 8-hour NAAQS. These are the most recent 3 years of fully quality-
assured data which were available in time for this assessment. A list
of these counties is provided in Tables II-8a and II-8b. The EPA is
reviewing more recent air quality data for 1996 and 1997. In the event
that these data alter the results of this assessment in any meaningful
way, EPA will make the appropriate adjustments to the findings.
Concerning projected future nonattainment areas, EPA used the OTAG
model predictions for the 2007 baseline, as described in section
II.C.5, Approaches for Analyzing Subregional Modeling Data. For ease of
communication, the technical discussions frequently use the term
``nonattainment'' to refer to these areas. It should be noted that this
use of the term ``nonattainment'' in reference to a specific area is
not meant as an official designation or determination as to the
attainment status of the area.
4. Analysis of Air Quality, Trajectory, and Non-OTAG Modeling Information
The EPA examined the findings from the air quality, trajectory, and
non-OTAG modeling analyses in section B.4. to identify certain States
which may potentially contribute to nonattainment in downwind areas.
First, EPA applied both the lower and upper ends of the OTAG transport
distance scale (i.e., 150 miles and 500 miles (9)) to 1-hour
nonattainment areas in the northern half of the OTAG region. Using the
lower end of the transport scale indicates that the following States
and Washington DC may potentially contribute to ozone in downwind
nonattainment areas: Connecticut, Delaware, Illinois, Indiana,
Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New
Jersey, New York, Ohio, Pennsylvania, Rhode Island, Tennessee,
Virginia, West Virginia, Wisconsin and Vermont. Using the upper limit
of transport distance indicates that the following additional States
may potentially contribute to downwind nonattainment areas: Alabama,
Arkansas, Georgia, Iowa, Kansas, Minnesota, Mississippi, Missouri,
Nebraska, North Carolina, Oklahoma and South Carolina. Also, examining
the findings from the non-OTAG regional modeling results (13, 14, 15)
indicates that collectively, a large portion of the contributions to
high ozone in the Northeast Corridor and/or the Lake Michigan area may
come from States as far upwind as: Missouri, North Carolina, Ohio,
Tennessee and West Virginia.
5. Approaches for Analyzing Subregional Modeling Data
The subregional modeling runs provide a method to quantify the
amount of contribution by upwind States to downwind nonattainment. Four
approaches were included in the analysis of subregional modeling
results. Approaches 1 and 2 were designed to address the contribution
to 1-hour nonattainment and Approaches 3 and 4 the contribution to 8-
hour nonattainment. Approaches 1 and 3 examine the contributions in
areas which have both monitored and modeled nonattainment. Approaches 2
and 4 examine the contributions in areas with modeled nonattainment.
The rationale for each approach is described below.
a. Approaches for 1-Hour Nonattainment. Approach 1 was designed to
focus on contributions to areas that have an observed 1-hour ozone
problem and in which the model predicts an ozone problem. In this
regard, the analysis was restricted to those grid cells in the domain
that had 1-hour daily maximum ozone predictions ³125 ppb
⁶ in the 2007 baseline, and were within one of the counties
currently violating the 1-hour NAAQS. However, the requirement that
high ozone predictions spatially coincide with violating counties may
be overly restrictive given the uncertainties in the modeled wind
regimes associated with the regional nature of the meteorological
inputs. Also, the analysis was limited to only two episodes, only one
of which, July 1995, actually occurred during the 3-year period used to
identify the violating counties. Another limitation of Approach 1 was
that it excludes all grid cells that are over water and not touching
any State land areas. This may be too restrictive since, in the real
atmosphere, sea breeze and lake breeze wind flows can transport high
ozone levels that occur over water back on-shore to affect coastal land
areas. This meteorological process, often associated with high ozone
along the shoreline of Lake Michigan and along the New England coast,
is not adequately treated by the regional scale meteorological inputs
used in OTAG. Thus, high concentrations predicted just offshore may be
inappropriately excluded from the analysis. Approach 2 was designed to
address these concerns. In this approach, all grid cells over land that
had a 1-hour daily maximum ozone prediction ³125 ppb in the
baseline were included. Also included were grid cells with predictions
³125 ppb over each of the Great Lakes and in a band 60 km (5
grid cells) wide along the East Coast.
---------------------------------------------------------------------------

\6\ Values above 124 ppb are considered to be exceedances of the
0.12 ppm 1-hour ozone NAAQS in view of the rounding convention
established for monitoring data whereby ozone concentrations between
125 ppb and 129 ppb are rounded up to 0.13 ppm.
---------------------------------------------------------------------------

b. Approaches for 8-Hour Nonattainment. The two approaches for
assessing contribution for 8-hour nonattainment were similar in design
to those used for 1-hour nonattainment. However, the inconsistency
between the form of the 8-hour NAAQS, which considers 3 years of data,
and the limited predictions available from the OTAG episodes introduced
a complication to the analysis. Basically, it was not possible to use
the model predictions in a way that explicitly matches the 3-year
average of the 4th highest 8-hour form of the NAAQS. Instead, an
analysis was performed to link the model predictions to the NAAQS as
closely as possible. This analysis consisted of comparing the average
4th highest 8-hour concentrations, based on 3 years of ambient data, to
the average 1st, 2nd, 3rd, and 4th highest 8-hour values using ambient
data limited to the three most recent OTAG episodes (i.e., 1991, 1993,
and 1995). The results of this analysis indicate that the average of
the episodic 2nd highest 8-hour ozone concentration corresponds best,
overall, to the average of the 4th highest 8-hour NAAQS.
Approach 3 is intended to focus on the contributions to areas that
have an observed 8-hour ozone problem and where the model predicts an
8-hour ozone problem. The analysis for this approach was restricted to
those grid cells in the domain that had an average (over the 1988 and
1995 episodes) 2nd high 8-hour ozone prediction ³85 ppb in
the 2007 baseline, and were within one of the counties currently
violating the 8-

[[Page 60337]]

hour NAAQS. The same technical concerns and limitations discussed above
for Approach 1 are also applicable to Approach 3. To address these
concerns for the 8-hour analysis, Approach 4 was constructed to include
all grid cells that had an average 2nd high 8-hour ozone prediction
³85 ppb over land areas, the Great Lakes, and in the offshore
waters, as in Approach 2 for the 1-hour NAAQS. In addition, by
including all grid cells with predicted nonattainment in 2007, Approach
4 provides a way to consider areas which are currently measuring
attainment, but which may become nonattainment for the 8-hour NAAQS in
the future.
c. Methods for Presenting 1-Hour and 8-Hour Assessments. All of the
approaches for both 1-hour and 8-hour nonattainment quantify the
impacts of emissions in each subregion on ozone concentrations in
downwind States (i.e., States outside the particular subregion). It
should be noted that the calculated contributions represent the impacts
from individual upwind subregions and not the cumulative impacts from
multiple subregions, which would be even greater in magnitude. In
Approaches 2 (1-hour) and 4 (8-hour), grid cells off the East Coast
were added to the totals of the adjacent States, whereas the impacts
for areas over each of the Great Lakes were tabulated separately. In
all cases, the ozone impacts were quantified by calculating the
difference in predicted ozone between each subregional zero-out run and
the 2007 baseline scenario. The contributions from emissions in each
subregion to nonattainment in downwind States are summarized for all
approaches in Tables II-9a and II-9b. This summary shows the
contributions in terms of both the frequency of impacts and the number
of downwind States impacted for specific concentration ranges, as
described below. More detailed information including the contributions
to individual States is provided in Tables II-10 through II-13, for
Approaches 1 through 4, respectively. The contributions are grouped
into one of six ranges: >2 to 5 ppb, >5 to 10, >10 to 15, >15 to 20,
>20 to 25, and >25 ppb. A value of 2 ppb was chosen as the minimum
level for this analysis following the convention generally used by OTAG
for evaluating the impacts of emissions changes. As an example, Table
II-10 shows the frequency of contributions from each subregion to
nonattainment in downwind States for Approach 1. Note that the
frequency of contributions for the 1-hour NAAQS is determined by
tallying the total ``number of days and grid cells'' with impacts
within the specified range. However, the frequency of contributions for
the 8-hour NAAQS includes the total ``number of grid cells'' only. That
is, the averaging procedure used to reflect the form of the 8-hour
NAAQS results in a single ``average'' value for each grid cell, instead
of values for each day modeled. In the following sections, Approach 1
and Approach 3 are referred to as the ``violating-county'' approaches,
whereas Approach 2 and Approach 4 are referred to as the ``all grid-
cell'' approaches for the 1-hour and 8-hour NAAQS, respectively. Also,
as mentioned previously, the term ``nonattainment'' is used to refer to
those areas (grid cells) which meet the criteria for a given approach.
For example, in the analysis of Approach 1, ``nonattainment'' refers to
those areas which have both measured violations and model predictions
of 1-hour ozone ³125 ppb.
6. Contributions to 1-Hour Nonattainment
The information from the subregional modeling analyses provided in
Tables II-10 and II-11 were examined from both a ``receptor'' and
``source'' perspective. The results for the ``county-violation''
approach (Approach 1--Table II-10) and the ``all grid-cell'' approach
(Approach 2--Table II-11) are both considered. Examining the data in
Table II-10 indicates that many nonattainment areas are affected by
multiple source areas. Considering the impacts on violating counties
indicates, for example, that:
• Nonattainment areas in Pennsylvania receive contributions
of more than 2 ppb from Midwest and Southeast States located in five
subregions (2, 5, 6, 7, and 8) with contributions over 25 ppb from
States in subregions 6 and 7;
• Nonattainment areas in New Jersey receive contributions of
more than 2 ppb from Midwest States as well as adjacent States in six
subregions (1, 2, 3, 5, 6, and 7) with contributions over 25 ppb from
subregions 3 and 7;
• Nonattainment areas in Maryland receive contributions of
more than 2 ppb from Midwest States and adjacent States in six
subregions (1, 2, 3, 4, 5, and 6) with contributions in the range of 15
to 20 ppb from subregions 3 and 6;
• Nonattainment areas in Illinois receive contributions of 5
to 10 ppb from Southeast States in subregion 9; and
• Nonattainment areas in Georgia and Alabama receive
contributions of 15 to 20 ppb from Midwest States in subregion 5 as
well as from adjacent Southeast States in subregion 8.
Considering the ``all grid cell'' approach increases the frequency
and magnitude of impacts, as would be expected. For example, the
contributions from States in subregion 2 to nonattainment in
Pennsylvania increase to the range of 10 to 15 ppb; contributions from
Southeast States in subregion 9 in the range of 2 to 5 ppb are evident
in nonattainment in Maryland; and Midwest States in subregions 1 and 5
contribute 5 to 10 ppb to nonattainment in Ohio.
As indicated above, the subregional modeling results were also
examined in terms of the impact of each subregion on ozone in downwind
States outside the particular subregion. The following results
highlight the contributions of each subregion to downwind nonattainment
(see Tables II-10 and II-11). Results are presented for the ``violating
county'' approach (Approach 1) and supplemented with results from the
``all grid-cell'' approach (Approach 2) to the extent that this later
approach adds key information to the findings.
Subregion 1 (portions of Illinois, Wisconsin, Indiana, and Iowa):
emissions in this subregion contribute 2 to 5 ppb on numerous occasions
to nonattainment in violating counties in four States along the
Northeast Corridor having serious or severe nonattainment (i.e.,
Connecticut, Maryland, New Jersey, and New York); downwind
contributions as high as 5 to 10 ppb are evident near Detroit over Lake
St. Clair, as well as over Lakes Erie and Ontario based on the ``all
grid-cell'' approach.
Subregion 2 (portions of Michigan, Indiana, and Ohio): emissions in
this subregion contribute 5 to 10 ppb to nonattainment in violating
counties in five downwind States; contributions over 10 ppb are evident
in seven downwind States from the ``all grid-cell approach.''
Subregion 3 (portions of Pennsylvania, New York and Delaware):
emissions in this subregion contribute over 2 ppb to violating counties
in nine downwind States with contributions of 15 ppb or more in three
States.
Subregion 4 (New Jersey, Connecticut and portions of New York,
Pennsylvania and Delaware): emissions from this subregion contribute
more than 25 ppb on numerous occasions to three downwind States along
the Northeast Corridor.
Subregion 5 (portions of Illinois, Indiana, Kentucky, Missouri, and
Tennessee): emissions from this subregion contribute 2 to 5 ppb to
violating counties in three downwind States along the Northeast
Corridor with contributions of over 10 ppb in three other downwind
States in the region;

[[Page 60338]]

considering the ``all grid-cell'' approach shows contributions of over
20 ppb to the south in Alabama and 5 to 10 ppb over Lakes Erie and St.
Clair.
Subregion 6 (portions of Ohio, Indiana, Kentucky, Tennessee, West
Virginia and Virginia): emissions in this subregion contribute over 5
ppb to violations in eight States (and as far downwind as Massachusetts
with the ``all grid-cell'' approach); contributions over 15 ppb are
predicted in two of the eight States.
Subregion 7 (Maryland, Washington, DC, and portions of Delaware,
North Carolina, Virginia and West Virginia): emissions in this
subregion contribute more than 15 ppb to violating counties in downwind
States along the Northeast Corridor with over 25 ppb contribution on
numerous occasions to two of these States; the ``all grid-cell''
approach indicates contributions from this subregion to South Carolina
as well as to Kentucky and Ohio.
Subregion 8 (portions of North Carolina, South Carolina and
Georgia): emissions in this subregion contribute 2 to 5 ppb to
violating counties in four States including several which are
relatively far downwind (i.e., Missouri and Illinois) with
contributions over 15 ppb to one other State; considering the ``all
grid-cell'' approach indicates contributions of over 10 ppb to two
States along the Northeast Corridor.
Subregion 9 (portions of Tennessee, Georgia, Alabama, Mississippi,
North and South Carolina and Arkansas): emissions in this subregion
contribute over 2 ppb to violating counties in four downwind States
with contributions over 10 ppb in Indiana; contributions over 10 ppb
are evident in three downwind States and far away as Lakes Michigan
from the ``all grid-cell'' approach.
Subregion 10 (Florida and portions of Mississippi, Alabama, Georgia
and Louisiana): emissions in this subregion do not contribute above 2
ppb to violating counties in any other States; considering the ``all
grid-cell'' approach indicates one occurrence of a contribution in the
range of 2-5 ppb.
Subregion 11 (portions of Texas, Louisiana, Arkansas and Oklahoma):
emissions in this subregion contribute 2 to 5 ppb to violating counties
in two downwind States.
Subregion 12 (portions of Missouri, Iowa, Wisconsin, Minnesota,
North Dakota, South Dakota, Nebraska, Kansas and Oklahoma): emissions
in this subregion contribute 2 to 5 ppb in violating counties in two
downwind States with 5 to 10 ppb contributions also evident in one of
these States (i.e., Michigan, including Lake Michigan).
The results presented in Tables II-10 and II-11, and discussed
above, indicate that in general, large contributions to downwind
nonattainment occur on numerous occasions even though the analysis was
limited to only two episodes. Although the level of contribution varies
from subregion to subregion, a consistent pattern is apparent. In view
of the relatively high magnitude of the contributions, and/or the
relatively high frequency of the contributions, and/or the distance
downwind to which the contributions occur, and/or the geographic extent
of the downwind contributions, EPA believes that emissions from
subregions 1 through 9 make a marked contribution to 1-hour
nonattainment in numerous downwind States. Contributions to downwind
nonattainment were also evident from subregions 10, 11, and 12,
although to a lesser magnitude and extent.
7. Contributions to 8-Hour Nonattainment
In general, the downwind contributions to 8-hour nonattainment are
more geographically extensive than those for 1-hour nonattainment. This
is not unexpected because there are many more violating counties for
the 8-hour NAAQS and, likewise, the model predicts ``nonattainment''
over a much broader portion of the region. The following examples
illustrate the extent and magnitude of contributions to violating
counties (Approach 3--Table II-12) that are beyond what was found for
the 1-hour assessment:
• Contributions to nonattainment areas in Pennsylvania from
States in subregion 2 are over 25 ppb rather than 2 to 5 ppb;
• In addition to the contributions from States in subregions
1, 2, 3, 5, 6, and 7 (ranging up to 15 to 20 ppb from subregion 3),
nonattainment areas in New Jersey also receive a 2 to 5 ppb impact from
southeastern States in subregion 8;
• Nonattainment areas in Illinois receive contributions of 5
to 10 ppb from States to the east in subregion 6 and south in subregion 9;
• Nonattainment areas in Ohio receive contributions of 5 to
10 ppb from States in five subregions in the Midwest, Northeast, and
Southeast (1, 3, 5, 7, 8, 9) with contributions over 10 ppb from States
in subregion 5;
• Nonattainment areas in North Carolina receive
contributions of 5 to 10 ppb from two subregions (7 and 9) with
contributions of over 25 ppb from Midwest States in subregion 6; and
• Nonattainment areas in Tennessee receive contributions of
10 to 15 ppb from three subregions (5, 6, and 8) with 15 to 20 ppb
contributed by Midwest States in subregion 6.
Highlights of the 8-hour contributions from a ``source''
perspective are given below based on the information in Tables II-12
and II-13. The following discussion is structured similar to that for
the 1-hour nonattainment analysis in that results are presented for the
``violating county'' approach and supplemented with results from the
``all grid-cell'' approach.
Subregion 1 (portions of Illinois, Wisconsin, Indiana, and Iowa):
emissions in this subregion contribute over 25 ppb to nonattainment in
Michigan with contributions of 5 to 10 ppb in Ohio as well as
contributions of 2 to 5 ppb to six other States.
Subregion 2 (portions of Michigan, Indiana, and Ohio): emissions in
this subregion contribute 2 to 5 ppb to 16 States as far downwind as
New Hampshire and Maine with contributions of 5 to 10 ppb or more in
five States.
Subregion 3 (portions of Pennsylvania, New York and Delaware):
emissions in this subregion contribute 10 to 15 ppb to three States
along the Northeast Corridor with contributions of 5 to 10 ppb in
Massachusetts and New Hampshire.
Subregion 4 (New Jersey, Connecticut and portions of New York,
Pennsylvania and Delaware): emissions from this subregion contribute
over 25 ppb to Rhode Island and Massachusetts with contributions of 15
to 20 ppb in Maine.
Subregion 5 (portions of Illinois, Indiana, Kentucky, Missouri, and
Tennessee): emissions from this subregion contribute 2 ppb or more to
13 States with contributions of 10 to 15 ppb in two States.
Subregion 6 (portions of Ohio, Indiana, Kentucky, Tennessee, West
Virginia and Virginia): emissions in this subregion contribute 5 to 10 ppb
or more to 10 States with contributions of 15 ppb or more in two States.
Subregion 7 (Maryland, Washington, DC, and portions of Delaware,
North Carolina, Virginia and West Virginia): emissions in this
subregion contribute 10 to 15 ppb or more to four States with
contributions of 5 to 10 ppb as far downwind as Rhode Island and
Massachusetts and 2 to 5 ppb in Maine.
Subregion 8 (portions of North Carolina, South Carolina and
Georgia): emissions in this subregion contribute 10 to 15 ppb to three
States and 15 to 20 ppb to one of these States; multiple contributions
of 2 to 5 ppb are predicted as far downwind as New Jersey.
Subregion 9 (portions of Tennessee, Georgia, Alabama, Mississippi, North

[[Page 60339]]

and South Carolina and Arkansas): emissions in this subregion
contribute 5 to 10 ppb to six States with contributions of 10 to 15 ppb
in two States.
Subregion 10 (Florida and portions of Mississippi, Alabama, Georgia
and Louisiana): emissions in this subregion contribute 2 to 5 ppb in
two States and 5 to 10 ppb in one State.
Subregion 11 (portions of Texas, Louisiana, Arkansas and Oklahoma):
emissions in this subregion contribute 2 to 5 ppb in six States.
Subregion 12 (portions of Missouri, Iowa, Wisconsin, Minnesota,
North Dakota, South Dakota, Nebraska, Kansas and Oklahoma): emissions
in this subregion contribute 2 to 5 ppb in three States; considering
the ``all grid-cell'' approach indicates multiple contributions of 2 to
5 ppb downwind over Lake Michigan and Lake Erie.
The results indicate that the contributions to 8-hour nonattainment
are very consistent with those for 1-hour nonattainment. Subregions 1
through 9 have a much greater magnitude, frequency, and geographic
extent of contribution compared to the other subregions. Thus, based on
this assessment, EPA believes that emissions from subregions 1 through
9 make a marked contribution to downwind nonattainment for the 8-hour
NAAQS. In fact, the extent of contributions from most of these
subregions (i.e., 1 through 9) is even larger for 8-hour nonattainment
while the contribution from the other subregions (i.e., 10, 11, and 12)
still remains relatively low by comparison.
8. Assessment of State Contributions
The preceding air quality, trajectory, emissions, and modeling
analyses provide a number of pieces of information for determining,
based on the weight of evidence, which States make a significant
contribution to downwind nonattainment. The assessment of the State
contributions is divided into three parts. States which are wholly or
partially contained within subregions 1-9 are considered first since
emissions from these States make a marked contribution to downwind
nonattainment for both the 1-hour and 8-hour NAAQS, based upon the
subregional modeling. States which were not included in any of the OTAG
subregions (i.e., some of the New England States) are considered
second. States located in subregions 10, 11 and 12, which did not have
a marked contribution to downwind nonattainment for either the 1-hour
or 8-hour NAAQS, are discussed last.
The subregional modeling results indicate that emissions from
States in subregions 1 through 9 produce large downwind contributions
in terms of the magnitude, frequency, and geographic extent of the
downwind impacts. In addition, nonattainment areas within many States
in the OTAG region receive large and/or frequent contributions from
emissions in these subregions. The EPA believes that the following
States whose emissions are wholly or partially contained within one or
more of these subregions (i.e., Alabama, Connecticut, Delaware,
Washington DC, Georgia, Illinois, Indiana, Kentucky, Maryland,
Michigan, Missouri, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, and
Wisconsin) is making a significant contribution to downwind
nonattainment. In addition to the marked levels of contributions
described above, this finding is based on:
• OTAG strategy modeling and non-OTAG modeling indicates
that NO_X emissions reductions across these States would
produce large reductions in 1-hour and 8-hour ozone concentrations
across broad portions of the region including 1-hour and 8-hour
nonattainment areas;
• The air quality, trajectory, and wind vector analyses
indicate that these States are upwind from nonattainment areas within
the 1- to 2-day distance scale of transport;
• These States form a contiguous area of manmade emissions
covering most of the core portion of the OTAG region;
• 11 of the States that are wholly within these nine
subregions (i.e., Illinois, Indiana, Kentucky, New Jersey, North
Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and
West Virginia) have a relatively high level of NO_X emissions
from sources in their States; these States are ranked in the top 50
percent of all States in the region in terms of total NO_X
emissions and/or have NO_X emissions exceeding 1000 tons per
day, as indicated in Table II-1;
• States wholly within subregions 1 through 9 with lesser
emissions (i.e., Connecticut, Delaware, Maryland) and Washington, DC
have a relatively high density of NO_X emissions, as
indicated in Table II-2;
• For the nine States that are only partially contained in
one of subregions 1 through 9 (i.e., Arkansas, Iowa, Michigan,
Mississippi, Missouri, Alabama, Georgia, Wisconsin, and New York) the
State total NO_X emissions in Table II-1 as well as each
State's contribution to NO_X emissions in the subregions (see
Tables II-14a and II-14b) indicate that six of these States (i.e.,
Michigan, Missouri, Alabama, Georgia, Wisconsin, and New York) each
have: NO_X emissions that are generally more than 10 percent
of the total NO_X emissions in one of these subregions, and
either NO_X emissions in the top 50 percent among all States,
and/or a majority of the State's NO_X emissions are within
one of these subregions.
For the New England States that were not included in any of the
OTAG zero-out subregions (i.e., Maine, Massachusetts, New Hampshire,
Rhode Island, and Vermont), State emissions data indicate that both
Massachusetts and Rhode Island have a high density of NO_X
emissions (see Table II-2). Also, the trajectory and wind vector
analyses indicate that these States are immediately upwind of
nonattainment areas in Maine and New Hampshire. Thus, EPA believes that
these two States (i.e., Massachusetts and Rhode Island) also make a
significant contribution to downwind nonattainment for both the 1-hour
and 8-hour NAAQS.
In summary, based on the weight of evidence, EPA believes that the
22 States plus the District of Columbia's consolidated metropolitan
statistical area which make a significant contribution to downwind
nonattainment for both the 1-hour and 8-hour NAAQS are:

Alabama,
Connecticut,
Delaware,
District of Columbia,
Georgia,
Illinois,
Indiana,
Kentucky,
Maryland,
Massachusetts,
Michigan,
Missouri,
New Jersey,
New York,
North Carolina,
Ohio,
Pennsylvania,
Rhode Island,
South Carolina,
Tennessee,
Virginia,
West Virginia,
Wisconsin.

It should be noted that under EPA's alternative interpretation of
section 110(a)(2)(D), these areas would be determined to significantly
contribute to nonattainment problems downwind only after consideration
of additional factors, including the respective costs of controls on
emissions in upwind and

[[Page 60340]]

downwind areas, to the extent this information is at least
qualitatively available. Those additional factors, discussed in section
II.D. below, leads EPA to propose to conclude that these areas
contribute significantly under this interpretation as well.
For the nine States in the OTAG region which are wholly within
subregions 10, 11, and 12 (i.e., Florida, Kansas, Louisiana, Minnesota,
Nebraska, North Dakota, Oklahoma, South Dakota, and Texas), the OTAG
and non-OTAG modeling information indicates that emissions from these
States make at most a relatively small contribution to downwind
nonattainment. Also, most of these States are relatively distant from
many of the downwind nonattainment areas in the OTAG region and have a
relatively low amount of manmade NO_X emissions and/or
NO_X emissions density. Thus, as discussed in section VI,
States Not Covered By This Rulemaking, the weight of evidence available
does not support a finding that these States make a significant
contribution to downwind nonattainment.

D. Comparison of Upwind and Downwind Contributions to Nonattainment and
Costs of Controls

Important parts of EPA's determination of whether, and to what
extent, to require controls on upwind NO_X emissions that are
linked to regional transport are comparing the contribution to downwind
nonattainment problems of upwind NO_X emissions as opposed to
local, downwind NO_X or VOC emissions; as well as comparing
the costs of achieving downwind ozone reductions through upwind
emissions reductions, as opposed to through downwind emissions
reductions. Depending on the interpretation for section 110(a)(2)(D),
the relative downwind contribution and the respective costs are either
a factor in the determination of what emissions limitations constitute
adequate mitigation of that contribution, or they are a factor in the
significant contribution test.
Under the CAA requirements, downwind nonattainment areas are
already obligated to implement significant controls. The provisions for
classified areas mandate cascading control requirements so that higher
classified areas must implement the same controls as lower classified
areas, plus additional controls. These mandated controls generally are
assumed in the OTAG/EPA modeling for the 2007 base case, as described
above. These mandated controls may be viewed as the first increment of
required controls that will bring the nonattainment areas into
attainment. Today's proposal indicates that the next increment of
controls should be the regional controls, for the reasons described below.
The EPA has developed preliminary data indicating that regional
NO_X emissions reductions in the OTAG region are a cost-
effective means for reducing ozone levels in nonattainment areas
downwind, compared to the costs of further reductions in local VOC and
NO_X emissions in those nonattainment areas. The EPA
developed this information based on data from the recent regulatory
impact analysis (RIA) for the new ozone standard. The EPA estimated the
amount of VOC and/or NO_X emissions reductions which would be
needed for areas to attain the new standard as well as the air quality
improvement resulting from a regional NO_X strategy. The EPA
then compared the potential cost of achieving attainment through a
strictly local emission reduction approach alone to the cost of a
regional NO_X strategy.
The preliminary cost comparison was based on a simplified analysis
that illustrates the potential control cost difference between a
regionally-coordinated NO_X strategy and a collection of
local control strategies in projected ozone nonattainment areas. The
analysis estimates that the existence of a 22-States and the District
of Columbia (``23 jurisdiction'') regional NO_X strategy has
the potential to avoid from $2.9 to $12.8 billion dollars of the total
annual cost that would be incurred under the alternative local control
strategy. This ``cost avoided'' can be compared to the estimated annual
cost of $2.8 billion for the regional NO_X strategy assumed
in the RIA to evaluate the relative efficiency of a regional strategy.
The EPA's analysis is based on two runs of the ROM. The first run,
called the local control strategy (LCS) run, estimates ozone air
quality based on a 2007 emissions projection assuming CAA-mandated
controls, but not including a regional NO_X strategy. The
second run, called the regional control strategy (RCS) run, estimates
ozone air quality based on a 2007 emissions projection with a regional
NO_X strategy. This strategy includes a regionwide emissions
cap based on a 0.15 lb/MMBtu NO_X limit on utilities and
large industrial boilers, and the National Low Emission Vehicle (NLEV)
program. While not identical to the regional control assumptions in
this rulemaking, the RCS run is similar enough to offer insights for
this cost comparison.
Using the LCS ROM runs, EPA estimated the potential local
NO_X and/or VOC emission reductions needed in 17 projected
ozone nonattainment areas to attain the new 8-hour ozone standard. An
additional 13 areas are also projected to be nonattainment under the
LCS scenario, but emission reduction targets were not established for
these areas. These additional areas are not included in this analysis;
thus, the estimates presented in this analysis of the potential local
control cost avoided due to the regional NO_X strategy are
likely underestimated.
Based on the ROM run for the RCS scenario, EPA estimated the effect
of the regional NO_X strategy on future ozone concentrations
for the 17 areas. Seven of these 17 areas are projected to attain the
new ozone standard as a result of controls in the RCS scenario. These 7
areas are given a 2007 RCS reduction target credit of 100 percent
(i.e., further local reductions may not be needed for attainment). For
the 10 remaining nonattainment areas, the RCS is estimated to be 32
percent effective \7\ toward achieving the air quality attainment
target relative to the LCS. This is based on a comparison of ROM
predictions for the LCS and RCS scenarios versus the air quality target
(0.08 ppm/8-hour/4th max ozone standard). Therefore, all remaining
areas are given a 32 percent credit toward their respective VOC and/or
NO_X emission reduction targets. For the regional
NO_X strategy, the total avoided local VOC reductions are
over 513,000 tons, and the total avoided local NO_X
reductions are nearly 767,000 tons. This analysis indicates that the
regional NO_X emissions reductions provide equivalent air
quality benefits to a large portion of the local VOC and/or
NO_X emissions reductions which may be needed to attain in
these areas. This finding weighs in favor of concluding that the
regional NO_X reductions are appropriate to mitigate the
upwind contribution or, under the second interpretation of section
110(a)(2)(D), that the relevant upwind areas significantly contribute
to nonattainment problems downwind.
---------------------------------------------------------------------------

\7\ 32 percent is the median effectiveness of the RCS
considering all nonattainment areas in the OTAG region.
---------------------------------------------------------------------------

As discussed in the next section, EPA has identified a set of
regional NO_X controls in a cost range of $1,650 to $1,700
per ton. These regional upwind and downwind control costs appear to
compare favorably to the potential control costs associated with the
downwind local controls, as indicated in Table II-15. The avoided cost
of local VOC control is assumed to range from

[[Page 60341]]

a low-end cost of $2,400 per ton to a high-end cost of $10,000 per ton.
The avoided cost of local NO_X control is assumed to range
from a low-end cost of $2,200 per ton to a high-end cost of $10,000 per
ton. The low-end costs are derived from the nationwide average
incremental costs of VOC- and NO_X-related control measures
selected in the RIA for the new ozone standard. The high-end cost of
$10,000 per ton is assumed based on the Presidential Directive for the
Administrator of EPA regarding ``Implementation of Revised Air Quality
Standards for Ozone and Particulate Matter'' issued by President Clinton.
The foregoing analysis suggests, at least directionally, that the
regional NO_X reductions that would result from today's
proposal may have the same ambient impact, but at lower cost, than
available local VOC and NO_X reductions. Thus, this analysis
is another factor supporting EPA's proposed conclusion that the SIPs
for States in this region are required, under section 110(a)(2)(D), to
reduce NO_X emissions.

III. Statewide Emissions Budgets

A. General Approach for Calculating Budgets

This section describes the general approach EPA is proposing to use
to develop emission budgets under today's action and the rationale for
that approach. In addition to a description of how control measures
were selected, this section addresses other issues related to
calculating budgets, including: relationship to OTAG recommendations,
uniform application of controls, seasonal versus annual controls, and
treatment of areas with NO_X waivers.
1. Overview
In earlier parts of today's action, EPA proposed to determine that
NO_X emissions from 23 jurisdictions contribute significantly
to nonattainment problems in downwind areas in the OTAG region. In this
and subsequent parts, EPA proposes to require a NO_X budget
for each of these jurisdictions for those emissions that will result in
sufficient reductions to adequately mitigate the contribution. The EPA
proposes as the criteria for establishing the budget the relative cost
effectiveness of the emissions reductions associated with the available
controls, combined with reference to the ambient impact of the
emissions reductions. The EPA solicits comment on alternative
approaches for establishing State emissions budgets that factor in the
differential effects of NO_X reductions in different
geographic locations on downwind air quality.
Specifically, for the proposed approach, EPA employed the following
steps in determining the budget levels that EPA proposes constitute
adequate mitigation under the first interpretation of significant
contribution. First, EPA compiled a list of available NO_X
control measures for the various emissions sectors in the upwind areas.
For the control measures on this list, EPA estimated the average cost
effectiveness of those controls. The average cost effectiveness is
defined as the cost of a ton of reductions from the source category
based on full implementation of the proposed controls, as compared to
the pre-existing level of controls.
Second, EPA developed a rationale for determining which of the
NO_X control measures should form the basis of the budget.
The EPA focused on average cost effectiveness of the controls. As a
point of comparison, EPA determined the average cost effectiveness of a
representative sample of recent current and planned State and Federal
controls. The EPA believes that the average cost effectiveness for the
measures proposed today to form the basis for the budgets should be
comparable to the average cost effectiveness of those recently
undertaken and planned controls.
Third, EPA evaluated control measures to determine whether they
should be assumed in the budget calculation based on this rationale.
The EPA proposes that when controls on utilities in the 23
jurisdictions are extended to the level proposed today, and when
controls on nonutility point sources are similarly extended, then the
average cost effectiveness of the utility controls and of the
nonutility point source controls are both comparable to the average
cost effectiveness of recently undertaken and planned controls.
At the same time, EPA analyzed the average cost effectiveness for
NO_X reductions from source categories other than utilities
or other point sources. The EPA is today proposing that additional
controls (beyond the current and planned measures described in section
III.B.2.b) from those categories should not form the basis for any of
the budgets because their costs, for the purpose of reducing only
NO_X emissions, are significantly higher than those of the
utilities and other point sources and/or additional feasible controls
have either not been identified or are more appropriate for local, not
regional, implementation.
Fourth, EPA determined the state-by-state budgets for
NO_X emissions based on the selected controls.
Fifth, EPA determined that these budget levels--or generally
comparable levels--result in an adequate level of ambient reductions
downwind. The EPA did not conduct ambient air quality modeling for the
level of emissions contained in the budgets proposed today. However,
OTAG conducted air quality modeling for a set of controls that,
although somewhat different from the utility and point source controls
EPA is today proposing to rely on, yielded comparable emission levels,
on a regionwide basis, to those proposed today. This modeling indicated
a noticeable improvement in ozone concentrations due to implementation
of the required emissions budget. The Agency intends to include air
quality analyses of the proposed NO_X emissions budgets in
the SNPR. Although EPA is proposing that States be required to achieve
the emissions budgets specified and has based those budgets on a
particular set of cost-effective controls, States may select their own
mix of controls that meet this budget.
Sixth, EPA determined that, based on current information, requiring
upwind NO_X emissions reductions, based on an assessment of
their costs and ambient impact, is more appropriate than requiring
downwind VOC emissions reductions, based on an assessment of their
costs and ambient impacts. The EPA's current information is limited for
this aspect of today's rulemaking, but generally consists of the analyses
performed for the RIA for the revised ozone and particulate matter NAAQS.
The alternative interpretation for section 110(a)(2)(D) of the CAA,
which EPA is also proposing today, should also be noted. Under this
interpretation, the various factors included in the weight of evidence
approach discussed above concerning the upwind emissions and ambient
contributions, therefore, would be part of the determination as to
whether the emissions contribute significantly to nonattainment
problems (or interfere with maintenance downwind). The EPA would then
undertake the same cost analysis as described above as an additional
factor in the weight of evidence test. If EPA concluded that the
regional NO_X emissions controls are appropriately cost
effective, EPA would conclude, on the basis of all the factors, that
the emissions subject to those controls are considered to contribute
significantly to nonattainment. Under this interpretation of section
110(a)(2)(D), the State budget levels, which are based on the cost-
effective control measures, are necessary to prohibit the amount of the
State's emissions determined to

[[Page 60342]]

contribute significantly to nonattainment.
2. Relationship of Proposed Budget Approach to the OTAG Recommendations
In selecting those control measures determined to be the most
reasonable and cost effective for the purpose of achieving regional
NO_X reductions, EPA carefully considered the recommendations
made by OTAG on July 8, 1997 (Appendix B). The OTAG process is
described in section I.F, OTAG Process, of this rulemaking. The control
measures assumed in the proposed budget calculations described below
generally fall within the range of OTAG's recommendations.
The OTAG recommendations call for implementation of several Federal
measures to achieve NO_X emissions decreases through a NLEV
program, inspection and maintenance (I/M) programs (where required by
the CAA), and reformulated gasoline (RFG) in mandated and current opt-
in areas. Emissions reductions following these recommendations are
included in EPA's calculation of the highway vehicle budget component
as part of the 2007 Clean Air Act base.
The OTAG recommendations endorse the development and implementation
of ozone action-day programs. The recommendations also encourage EPA to
evaluate emission benefits of cetane adjustments with respect to diesel
fuel. While EPA supports these recommendations, it should be noted that
they do not translate into specific emissions reductions at this time
and, thus, EPA did not calculate emissions reductions from these
programs as part of the proposed budget calculation.
The OTAG recommendations also cover electric utilities and other
large-and medium-sized point sources. Specifically, OTAG recommended
controls discussed below in all of the ``fine grid'' areas. The OTAG
recommended that emissions from sources in the portion of States that
are in the ``coarse grid'' be exempted from the budget calculation. The
EPA is proposing to include entire States rather than exempting
portions based on the division between coarse and fine grid. This
affects New York, Michigan, Wisconsin, Missouri, Alabama and Georgia.
The EPA proposes to take this approach because the division between
fine and coarse grid areas was based, in part, on technical modeling
limitations; because the additional emissions decreases will help the
downwind nonattainment areas; and because a statewide budget creates
fewer administrative difficulties than a partial-state budget. The OTAG
fine grid States are the same as the 23 jurisdictions proposed in this
rulemaking as having a significant contribution, with the exception of
the States of Maine, New Hampshire and Vermont. The portion of these
three States in the OTAG fine grid are included in the OTAG
recommendation for additional controls, but are not included in today's
proposal for the reasons described in section II, Weight of Evidence
Determination of Significant Contribution, of this rulemaking. The EPA
is soliciting comments on this approach; specifically, whether partial
States should be included, which States or parts of States should be
excluded, the appropriate rationale for excluding States or parts of
States, and how to address administrative difficulties associated with
excluding parts of a State.
For electric utilities, OTAG recommended that the range of utility
NO_X controls in the fine grid fall between CAA controls
(about a 30 percent reduction from 1990 levels) and the less stringent
of 85 percent reduction from the 1990 rate or 0.15 lb/MMBtu. As
discussed below, EPA's proposed utility budget component calculation is
based on the 0.15 lb/MMBtu emission rate without the 85 percent
reduction option. Thus, EPA's proposed utility budget component
calculation is similar to the upper bound recommended by OTAG, but with
a slightly lower overall emission rate (since it excludes the 85
percent reduction criterion) and slightly different total area (since
whole States--not just the fine grid portion--but fewer States are
included). The alternatives considered and explanation of the
methodology proposed to make these calculations are more fully
discussed below and in the technical support document (TSD) which is
included in the Docket to this rulemaking.
For nonutility point sources, OTAG recommended that the stringency
of controls for large sources be established in a manner equitable with
utility controls. The OTAG recommendation includes a definition of
large sources (e.g., industrial boilers with a heat input greater than
250 MMBtu) and recommends control levels ranging from 55-70 percent
reduction. The OTAG Policy Group further recommended that RACT should
be considered for individual medium-sized nonutility point sources
(e.g., industrial boilers with a heat input between 100 and 250 MMBtu).
The EPA-proposed nonutility budget component calculations generally
follow the OTAG recommendations. Missing data in the OTAG emissions
inventories, however, preclude EPA from precisely following the
recommended definitions of large-and medium-sized sources. The
alternatives considered and explanation of the methodology proposed to
make these calculations are more fully discussed below.
3. Uniform Application of Control Measures
The EPA is proposing that the budget for each State that has been
determined to contribute significantly to nonattainment in a downwind
State be calculated using the same control measure assumptions. This is
true under either interpretation, described above, of section
110(a)(2)(D). An alternative approach would be for EPA to attempt to
identify for each State or a group of adjacent States (e.g., Ohio
Valley, Great Lakes, Southern, or Northeastern States) a unique set of
control levels on which to base emissions budgets that, together with
other States' emission budgets, would eliminate significant
contribution to downwind nonattainment areas. The EPA is soliciting
comment on methodologies that might be used to implement such an
approach. The decision to propose to calculate budgets based on uniform
control measures is based primarily on cost effectiveness (cost per ton
removed) and also in consideration of the OTAG recommendations,
collective contribution, equity concerns, modeling assumptions and
concerns over emissions shifting. These are discussed further below.
a. OTAG. Although OTAG did note that the range of transport is
generally longer in the North than in the South, the OTAG
recommendations did not specifically indicate whether controls should
be applied at differing levels over the fine grid.
b. Collective Contribution and Equity Considerations. The EPA
believes that certain downwind States receive amounts of transported
ozone and ozone precursors that significantly contribute to their
nonattainment. The EPA further believes that it is the ``collective''
emissions of ``several'' upwind States that result in significant
contributions. All States included within a group of States whose
collective emissions significantly contribute to nonattainment may be
assumed to contribute significantly. Because each State's contribution
is viewed with reference to other States' contributions, EPA believes it
is appropriate to require the same type of remedial action for each State.
The proposed approach results in the calculation of statewide emissions

[[Page 60343]]

budgets based on the consistent application of potential controls
across the States determined to contribute significantly. This approach
treats the 23 jurisdictions in a like manner for the purpose of
calculating the proposed statewide emissions budgets.
c. Modeling Assumptions and Potential Synergistic Effects. In
theory, it would be possible to derive more precise contributions made
by individual States to collective transport of ozone and precursors to
downwind States. In practice, however, this is a more challenging
analysis. First, the relative impact of individual States, within a
collective group of States, on transport varies as a function of
meteorology. For example, the impact of more distant States may be
relatively greater when there is a well defined windfield. In contrast,
effects of nearby States may be most pronounced under stagnant or semi-
stagnant conditions. Modeling may therefore not sufficiently
characterize the relative importance of emissions in individual States
to regional transport, unless many days reflecting a variety of
meteorological conditions are modeled.
Second, the impact of an individual State on downwind transport of
ozone and precursors depends on what is assumed about emissions in
other States in the collective group shown to result in significant
transport. This is exacerbated by the fact that ozone formation and
transport is not a linear function of precursor emissions. Rather,
there is likely to be a synergistic effect which arises from reducing
emissions in several neighboring States. Thus, the predicted relative
importance of emissions from a single State might change substantially
if emissions from other States in the group were reduced. There is a
myriad of assumptions which can be made about emission controls in
neighboring States. It is not feasible to model them all. Thus, a
definitive, precise estimate of the relative importance of a single
State's contribution to transport is unlikely. On the other hand, OTAG
has performed modeling showing the air quality impacts of applying
differential levels of controls in different zones of the OTAG domain
(see section II.B.3, OTAG Geographic Modeling). In section III.A.3.e
below, EPA is requesting comment on the possibility of using this or
some other analysis as a means for considering an alternative approach
to developing NO_X budgets.
d. Electrical Generation and Emissions Shifting. Among many factors
that EPA considered in weighing whether to propose uniform or variable
emissions limits in calculating States' emission budgets was the
concern that different controls in one part of the OTAG fine grid
region in combination with an interstate emissions trading program may
lead to increases in pollution within areas having more restrictive
controls. That is, if unrestricted interstate emissions trading were
allowed, emissions reductions might be expected to shift away from
States assigned more restrictive controls to States which received less
restrictive control requirements due to the lower control costs likely
to exist in States with less restrictive controls. This may result in
emissions above the budget level in areas with more restrictive
controls. Such shifts are an important concern and may be most
significant for large combustion sources because they emit a large
portion of the total regional NO_X emissions and dominate
point source emissions.
On the other hand, having the interstate trading program
incorporate control levels that vary from State to State by varying the
value of an emission credit or allowance would complicate
administration of the trading program. Such complexity would increase
transaction costs and could discourage emissions trading which may
result in higher regionwide control costs. Alternatively, the scope of
the trading program could be confined to those States with similar
control levels. However, each subregional trading program would have
fewer participants. A trading program that covers a smaller market area
will provide less flexibility and reduce the possible savings for the
affected sources as compared with larger trading programs.
e. Alternative Approaches Based on Non-Uniform Application of
Control Measures. The EPA is proposing to derive State NO_X
emissions budgets using uniform control measures. As discussed earlier
in this section, EPA believes it is appropriate to require comparable
levels of control of NO_X emissions throughout the 23
jurisdictions covered by today's action. The EPA selected these
proposed levels primarily by considering the cost effectiveness of
control at the source (i.e., the control cost per ton of NO_X
reduced for each type of source). Although not all such emissions
reductions are equally effective in reducing ozone concentrations in
target nonattainment areas, EPA believes that other benefits of
NO_X reductions and equity considerations are also important
and support this type of approach.
In a July 1997 Memorandum to the EPA Administrator, the President
directed the Agency to maximize common sense, flexibility, and cost
effectiveness in implementing the revised ozone and particulate matter
standards. Fulfilling this mandate by developing the least burdensome
strategy for achieving air quality improvements, and ultimately
attainment in nonattainment areas, requires technically complex
analysis of regional transport, similar to that undertaken as part of
the OTAG process. As noted elsewhere in this package, a number of other
factors, including distance and meteorology, influence how effective
different tons of emissions reductions are in reducing ambient ozone
concentrations in nonattainment areas.
The EPA recognizes that analytic approaches other than one based on
using uniform control measures might be useful in deriving State
NO_X emissions budgets. For example, one approach would be to
attempt to quantify more explicitly the cost effectiveness in terms of
the ambient ozone improvement in nonattainment areas (measured, for
example, as cost per population weighted changes in parts per billion
of peak ozone concentrations) taking into account the location of
control measures through regional modeling. This alternative, if
feasible, would clarify the linkage between the budget calculation and
ambient ozone improvement in nonattainment areas and, depending on its
effect on interstate emissions trading, could thereby lower the overall
cost of achieving comparable ambient ozone improvements in
nonattainment areas. Alternative approaches to measuring cost
effectiveness that would more directly link cost effectiveness to
improvements of air quality in nonattainment areas could also be adopted.
The EPA solicits comment on alternative approaches for establishing
State emissions budgets that factor in the differential effects of
NO_X reductions in different geographic locations on downwind
air quality. Comments advocating alternative approaches would be most
helpful if they set forth concrete proposals on what analysis should
form the basis for budget calculations. The EPA plans to review
alternative approaches and perform additional air quality and economic
analysis in developing the final rule. If, after review of alternative
approaches, EPA concludes that a new basis for the State emissions
budgets is appropriate, EPA would issue a SNPR.
4. Seasonal vs Annual Controls
Today's proposal is for the purpose of helping attain and maintain
the NAAQS for ozone. High ambient concentrations

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of ozone are associated with periods of elevated temperature and solar
radiation. Thus, in most parts of the country, high ozone episodes
occur only during summer months. Accordingly, the control of
NO_X emissions primarily on a summer season basis may be part
of some areas' strategies to attain the ozone standard at least cost.
The OTAG analyses have assumed that the control requirements flowing
from this process would be required only over the ozone season, which
OTAG considered to be May 1 through September 30. For the purpose of
decreasing the regional transport of ozone and ozone precursors, EPA
agrees that control measures that focus over the ozone season may be
appropriate and is proposing seasonal NO_X budgets.
Because NO_X emissions have adverse impacts on the
environment in several ways (as described in section IX., Nonozone
Benefits of NO_X Reductions), it should be noted that the
timing of the NO_X emissions can be important to the
subsequent environmental impacts. For example, year-round reductions in
NO_X emissions are more helpful than seasonal approaches at
minimizing the impacts of acid deposition and eutrophication, although
summertime NO_X emissions reductions are most helpful in
attaining the ozone standard. Application of NO_X emissions
controls that focus emissions reductions in the summer will, in many
cases, also achieve significant emission reductions on a year-round
basis. For example, efforts to decrease emissions from large boilers
will usually include installation of low NO_X burners--which
will achieve year-round moderate amounts of emission reductions--and
may include, in addition, some type of summer season control, such as
switching to a cleaner fuel or post-combustion technology. Therefore,
while the purpose of this rulemaking is to address ozone transport that
significantly contributes to downwind nonattainment, which is primarily
a concern during the ozone season, States may wish to consider the
total environmental impacts when adopting measures to achieve the
NO_X emissions decreases.
The OTAG modeling used emissions inventory information that
represented typical summer day emissions. In this rulemaking, EPA is
proposing seasonal emission budgets for each of the 23 affected
jurisdictions. Thus, in developing the budget, a conversion is needed
to arrive at a seasonal budget. As in the OTAG process, EPA is
proposing to use May 1 through September 30 as the ozone season. The
detailed procedures for converting the daily emissions into the
seasonal budgets are described below for each source sector. The
proposed budgets are in units of tons of anthropogenic NO_X
for the season May 1 to September 30. Since States will generally only
be able to affect anthropogenic sources, the proposed budget does not
include biogenic or geogenic sources.
5. Consideration of Areas With CAA Section 182(f) NO_X Waivers
The OTAG process included lengthy discussions on the potential
increase in local ozone concentrations in some urban areas that might
be associated with a decrease in local NO_X emissions. The
OTAG modeling results indicate that urban NO_X emissions
decreases produce increases in ozone concentrations locally, but the
magnitude, time, and location of these increases generally do not cause
or contribute to high ozone concentrations. That is, NO_X
reductions can produce localized, transient increases in ozone (mostly
due to low-level, urban NO_X reductions) in some areas on
some days, but most increases occur on days and in areas where ozone is
low. The OTAG recommended that the States work together and with EPA
toward completing local SIPs, including evaluation of possible local
NO_X disbenefits. The EPA agrees that further analysis of
this effect is needed as part of the development of local attainment
plans. With respect to regional ozone transport and today's proposed
action, EPA believes it is not appropriate to give special treatment to
areas with NO_X waivers as discussed below.
In calculating the proposed statewide NO_X emissions
budget, EPA considered the options of: (1) requiring less reductions
from a State that had been granted a NO_X waiver under
section 182(f) of the CAA, or (2) ignoring the NO_X waiver
for purposes of calculating the transport budget. As described below,
EPA believes it is inappropriate to give special treatment to areas
with NO_X waivers when considering measures to reduce the
regional transport of ozone and ozone precursors. Therefore, EPA is
proposing to calculate the statewide emissions budget without special
consideration for areas with NO_X waivers. The EPA views the
effect of NO_X waivers on air quality as appropriate for
further analysis by each State as part of its local attainment planning
process, and EPA will consider such results when working with each
State's attainment plan.
In option (1), the upwind States with NO_X waivers would
achieve only a portion of the emissions decreases otherwise required
under the statewide emissions budget. Thus, the downwind nonattainment
areas would receive less improvement in air quality and would need to
adopt additional control measures in their States. To some degree this
approach defeats the purpose of today's action because fewer emissions
reductions in the upwind areas would lead to higher ozone
concentrations in the downwind areas.
In option (2), the upwind States may be able to achieve the
NO_X emissions decreases needed to meet their budgets in
those portions of the State where NO_X emissions decreases
are not a problem. On the other hand, the State may need to implement
some NO_X emissions decreases in areas where such decreases
may lead to increases in ozone concentrations on some days. Thus,
additional VOC control measures may be needed to offset associated
ozone increases due to NO_X emissions decreases in the
sensitive areas. This approach is more consistent with the purpose of
today's action and may or may not result in additional VOC controls
being needed.
In proposing option (2), it is helpful to look more closely at why
the NO_X waivers were initially granted and the manner in
which they were granted. Most of the NO_X waivers granted
were not supported by local or regional scale air quality modeling
analyses indicating that NO_X emissions decreases would
result in ozone increases. In fact, most of the waivers were granted
based solely on local air quality data indicating the areas were
already attaining the ozone standard. Thus, technical support for
option (1) is substantially incomplete. In addition, relevant modeling
analyses completed by OTAG and others regarding the issue of
NO_X waiver areas need to be considered as described below.
The CAA requires EPA to view NO_X waivers in a narrow
manner. In general, section 182(f) provides that waivers must be
granted if states show that reducing NO_X within a
nonattainment area would not contribute to attainment of the ozone
NAAQS within the same nonattainment area. Only the role of local
NO_X emissions on local attainment of the ozone standard is
considered in nonattainment areas outside an ozone transport region.
The role of NO_X in regional attainment is addressed
separately under section 110(a)(2)(D) of the Act, which prohibits one
State from significantly polluting another State's downwind areas.
In response to State NO_X waiver petitions submitted between
1992-1995, EPA granted NO_X waivers under section 182. Most
waivers were granted on the basis that the area had already attained

[[Page 60345]]

the ozone standard and, thus, additional NO_X (or VOC)
reductions ``would not contribute to ozone attainment in the area.'' In
some cases, the waivers were granted based on dispersion modeling which
showed that the area would attain just as expeditiously based solely on
additional VOC reductions or that local NO_X reductions
increased local peak ozone concentrations; this also meets the above
test that additional NO_X reductions would not contribute to
ozone attainment in the area.
Specifically, the EPA received petitions for a NO_X
waiver for 51 ozone nonattainment areas. Of these petitions, EPA has
approved waivers for 48 nonattainment areas and 3 are pending. Most of
the waivers granted (28 of 48) were simply based on air quality
monitoring data over a period of 3 or more years indicating the area
had attained the ozone standard (and, thus, additional NO_X
reductions were not needed for attainment). Several States submitted
NO_X waiver petitions (7 of 48) accompanied by an attainment
plan showing achievement of the ozone standard by the statutory
deadline through additional VOC controls only. None of these 35
nonattainment areas with approved NO_X waivers have
demonstrated or even sought to demonstrate that NO_X
reductions might increase ozone concentrations in specific areas. Only
in the cases of the Lake Michigan (9 nonattainment areas), Phoenix AZ,
Baton Rouge LA and the Houston/Beaumont TX areas was information
submitted to show that, in some episodes, NO_X emissions
decreases lead to increases in peak ozone concentrations (13 of 48).
Thus, the technical support for option (1) is substantially incomplete.
Even for the few areas which had modeling information, those analyses
were generally considered preliminary analyses that would be replaced
with more complete modeling associated with attainment plans.
In the Federal Register notices approving individual waiver
petitions, EPA gave notice that approval of the local petition, under
section 182(f) of the CAA, is on a contingent or temporary basis
because subsequent modeling or monitoring data for an area may show
attainment benefits from NO_X reductions, and stated that
additional local and regional NO_X emissions reductions may
be needed to reduce the long range transport of ozone. Where such
additional NO_X reductions are necessary to reduce the long
range transport of ozone, EPA stated that authority provided under
section 110(a)(2)(D) of the CAA would be used and that a section 182(f)
NO_X waiver would, in effect, be superseded for those control
requirements needed to meet the section 110(a)(2)(D) action. Further,
EPA noted that States may require additional NO_X reductions
in these nonattainment areas for nonozone purposes, such as attainment
of the PM-10 standard or achieving acid rain reduction goals.
The OTAG addressed the complex issue of regional impacts due to
transport of NO_X and VOC emissions. The OTAG modeling
results indicate that urban NO_X reductions produce
widespread decreases in ozone concentrations on high ozone days. In
addition, urban NO_X reductions also produce limited
increases in ozone concentrations locally, but the magnitude, time, and
location of these increases generally do not cause or contribute to
high ozone concentrations. Most urban ozone increases modeled in OTAG
occur in areas already below the ozone standard and, thus, in most
cases, urban ozone increases resulting from NO_X reductions
do not cause exceedance of the ozone standard. There are a few days in a
few urban areas where NO_X reductions are predicted to produce ozone
increases in portions of an urban area with high ozone concentrations.
In other words, modeling analyses conducted as part of the OTAG
process indicated that, in general, NO_X reduction
disbenefits are inversely related to ozone concentration. On the low
ozone days leading up to an ozone episode (and sometimes the last day
or so), the increases are greatest, and on the high ozone days, the
increases are least (or nonexistent); the ozone increases occur on days
when ozone is low and the ozone decreases occur on days when ozone is
high. This indicates that, in most cases, urban ozone increases may not
contribute to exceedances of the ozone standards. Overall, OTAG
modeling thus suggests that the ozone reduction benefits of
NO_X control may outweigh the disbenefits of urban ozone
increases in both magnitude of ozone reduction and geographic scope.
It should be noted that the modeling analyses completed within the
OTAG process necessarily utilized a larger grid size than States are
likely to use in their attainment plans. That is, future analyses by
States will likely use smaller grid sizes. The smaller grid sizes may
provide additional information on effects such as local NO_X
emissions reacting with local ozone. The additional information will be
important as States develop their attainment plans.
In summary, the EPA views ozone pollution as a regional problem as
well as a local problem. Thus, achieving ozone attainment for an area,
and thereby protecting its citizens from ozone-related health effects,
often depends on the ozone and precursor emission levels of upwind
areas. In order to achieve the needed upwind NO_X emissions
decreases, areas that were granted NO_X waivers may need to
control NO_X emissions for transport purposes, even if the
waivers remain in place. Today's action is part of the process that is
leading to additional NO_X reductions requirements in
attainment and nonattainment areas across broad parts of the Nation to
reduce interstate transport of ozone. The requirements of today's
action apply both to areas with approved NO_X waiver
petitions and areas without such petitions. That is, any nonattainment
areas with NO_X waiver petitions approved by EPA in the past
or in the future are not proposed to be exempt from today's action.
At the same time, EPA is sensitive to the concerns of those areas
(primarily in the Lake Michigan area) that may be required to achieve
NO_X reductions that produce local increases in ozone
concentrations in order to reduce concentrations in downwind areas. The
EPA is, thus, taking comments on approaches that might be used to
address such concerns on a case-by-case basis. The EPA wishes to stress
that it would only consider an approach that targets areas with
concrete modeling results documenting a likelihood of local disbenefits
from NO_X reductions at locations and on days with high ozone
concentrations. As already discussed, EPA does not believe adjustments
to NO_X budgets are appropriate for areas with waivers based
solely on their ability to attain the NAAQS without further reductions.
6. Relation of OTC NO_X MOU to Budgets in the Ozone Transport
SIP Rulemaking
The 2007 Budgets for the electric utilities and the nonutilities
were developed independently of the OTC NO_X MOU. The Ozone
Transport SIP Rulemaking allows States flexibility to achieve
reductions from any source category; however, implementation of these
requirements could be coordinated. The MOU covers large boilers, both
utility and nonutility boilers. The Ozone Transport SIP Rulemaking
covers these sources as well as other categories of major
NO_X stationary sources. Although the OTC NO_X MOU
does not cover these other categories, the OTC States regulated
emissions from these categories through

[[Page 60346]]

implementation of the RACT program, beginning in 1995.
The EPA believes that implementation of Phase II of the MOU should
proceed as scheduled, with achievement of the reductions by May 1999.
These emissions reductions are needed to help reduce ozone transport
and make progress toward attainment. Further, these reductions do not
conflict with the requirements imposed by the Ozone Transport SIP
Rulemaking because they do not exceed the required reductions. In Phase
III of the MOU, however, the timing and the amount of the reductions
required by the OTC's MOU and RACT provisions are much closer to the
timing and reductions from the Ozone Transport SIP Rulemaking. The
emissions reductions required by the Ozone Transport SIP Rulemaking are
likely to be somewhat more stringent overall than the OTC's Phase III
requirements, and Phase III implementation could occur about the same
time as the Ozone Transport SIP Rulemaking reductions. Therefore, EPA
intends to work with the OTC States to coordinate Phase III
implementation with implementation of the emissions reductions required
by the Ozone Transport SIP Rulemaking.
The States in the OTC not covered by the Ozone Transport SIP
Rulemaking should continue to develop, adopt and implement Phases II
and III of the MOU. Such reductions may be necessary to provide for
attainment of the ozone NAAQS in those areas, although they may not be
significant with respect to long distance transport. Further, such
reductions may help to attain and/or maintain the new 8-hour ozone standard.

B. Budget Development Process

1. Overview
The EPA is proposing to develop seasonal budgets for each State by
determining the amount of emissions that would remain in each State
after application of reasonable, cost-effective control measures. For
all sectors except electric utilities and nonutility point sources, EPA
proposes using the 2007 Clean Air Act inventory developed by OTAG as
the starting point for this calculation. This inventory reflects
implementation of all mandatory national and nonattainment area Clean
Air Act controls, plus any additional regional and State-specific
controls. It also includes growth assumptions between 1990 and 2007.
The specific assumptions on which this inventory is based are
documented in a June 1997 draft Emissions Inventory Development Report
(8). To determine the overall State budgets, EPA proposes applying
controls to various source sectors, as discussed below, calculating
budget components based on these controls, and summing the budget
components for each sector to get the total budget.
In the case of electric utilities, EPA proposes using a slightly
different approach. Instead of using the OTAG 2007 emissions and
applying controls, EPA proposes to calculate the utility component of
the budget using data provided by utilities to EPA for 1995 and 1996
and increasing the emissions to reflect activity growth projected for
2007. This is discussed in more detail below in section III.B.3.
In the case of nonutility point sources, EPA proposes using the
OTAG 2007 emissions with one adjustment. The inventory needs to be
adjusted to represent uncontrolled levels, rather than CAA control
levels, because the OTAG recommendation is based on uncontrolled
levels. This is discussed in section III.B.4, Proposed Assumptions for
Area and Nonutility Point Sources.
2. Description of and Rationale for Proposed Control Assumptions
An important issue to be addressed in today's action is the
reasonableness of the cost of control of emissions in States that
significantly contribute to another State's ozone nonattainment. The
EPA proposes to address this issue by examining the cost effectiveness
of various regionwide ozone season control measures and determining
what measures can be considered the most reasonable in light of other
actions taken by EPA and States to control NO_X.
a. Considering the Cost Effectiveness of Other Actions. The EPA is
proposing to base the budget component levels on NO_X
emissions controls that are available and the most cost effective in
relation to other recently undertaken or planned NO_X
measures. Table III-1 provides a reference list of measures that EPA
and States have undertaken to reduce NO_X and their average
annual costs per ton of NO_X reduced. Most of these measures
fall in the $1,000 to $2,000 per ton range. With few exceptions, the
average cost effectiveness of these measures is representative of the
average cost effectiveness of the types of controls EPA and States have
needed to adopt most recently, since their previous planning efforts
have already taken advantage of opportunities for even cheaper
controls. The measures listed in Table III-1 represent costs that the
Nation has been willing to bear to date to reduce NO_X. The
EPA believes that the cost effectiveness of measures that it or States
have adopted, or proposed to adopt, forms a good reference point for
determining which of the available additional NO_X control
measures can most reasonably be implemented by upwind States that
significantly contribute to nonattainment.

Table III-1.--Average Cost Effectiveness ofNO_XControl Measures
Recently Undertaken
[In 1990 dollars]
------------------------------------------------------------------------
Cost per
Control measure ton of NO_X
removed
------------------------------------------------------------------------
NO_X RACT................................................... 150-1,300
Phase II Reformulated Gasoline............................. \1\ 3,400
State Implementation of the Ozone Transport Commission
Memorandum of Understanding............................... 950-1,600
Proposed New Source Performance Standards for Fossil Steam
Electric Generation Units................................. 1,290
Proposed New Source Performance Standards for Industrial
Boilers................................................... 1,790
------------------------------------------------------------------------
\1\ Average cost representing the midpoint of $1,500 to $5,300 per ton.
This cost represents the projected additional cost of complying with
the Phase II RFGNO_Xstandards, beyond the cost of complying with the
other standards for Phase II RFG.

The Federal Phase II RFG costs presented in Table III-1 are not
strictly comparable to the other costs cited in the table. Federal
Phase II RFG will provide large VOC reductions in addition to
NO_X reductions. Federal RFG is required in nine cities with
the Nation's worst ozone nonattainment problems; other nonattainment
areas have chosen to opt into the program as part of their attainment
strategy. The mandated areas and those areas in the OTAG region that
have chosen to opt into the program are areas where significant local
reductions in ozone precursors are needed; such areas may value RFG's
NO_X and VOC reductions differently for their local ozone
benefits than they would value NO_X reductions from RFG or
other programs for ozone transport benefits.
The EPA notes that there are also a number of less expensive
measures recently undertaken by the Agency to reduce NO_X
emission levels that do not appear in Table III-1. These actions
include: (1) The Title IV NO_X reduction program, (2) the
Federal locomotive standards, (3) the 1997 proposed Federal nonroad
diesel engine standards, (4) the Federal heavy duty highway engine 2g/
bhp-hour standards, and (5) the Federal marine engine standards. These
lower cost actions do not represent a useful measure of the

[[Page 60347]]

willingness to make reasonable expenditures to reduce NO_X
emissions in order to achieve air quality goals. Decisions to undertake
these measures are low cost steps toward NO_X reduction.
Though these actions are very cost effective, the Agency must now focus
on what other measures exist, at a potentially higher cost-
effectiveness value, that can further reduce NO_X emissions.
The Agency is focusing on these other actions because they may also be
of reasonable cost effectiveness and obtaining these reductions are
less costly than further local reductions of VOC and NO_X in
nonattainment areas. Table III-1 is thereby useful as a reference of
the next higher level of NO_X reduction cost effectiveness
that the Agency considers reasonable to undertake.
The Agency is also aware that to come into attainment with the new
ozone NAAQS, many localities will spend several thousand dollars per
ton of NO_X or VOC reduction.
b. Determining the Cost Effectiveness of NO_X Controls.
In an effort to consider a cost-effective mix of controls on which to
base each component of the proposed budget (i.e., electricity
generating sources, nonutility point sources, area sources, and mobile
sources) the Agency considered the average cost effectiveness of
alternative levels of controls for each source. Among the plausible
levels of control are the controls included in OTAG's recommendations.
The average cost effectiveness of the controls assumed in
calculating each sector's budget component was calculated from a
baseline level that included all currently applicable Federal or State
NO_X control measures. The baseline did not include Phase 2
and Phase 3 of the OTC NO_X MOU since they have not yet been
adopted by all the involved States ⁸; if the MOU were
included in the baseline, the overall costs would be lower. The costs
and emissions reductions for point sources are determined using an
emissions cap-and-trade approach since EPA believes that this approach
is the most cost-effective way for point sources to meet an emissions
budget, and EPA expects that States are also interested in employing
the most cost-effective approach. Table III-2 shows in the first column
of numbers the average cost per ton of NO_X removed during
the ozone season of various potential EPA actions, arranged by source
sector. The action is presented in the form of a regionwide budget for
each source sector (i.e., the electric power industry and other
stationary sources), and the cost-effectiveness values are for the
ozone season. The Agency used its estimates of the average cost
effectiveness of reducing NO_X emissions during the ozone
season to develop the budget components for the electric power industry
and other stationary sources.
---------------------------------------------------------------------------

\8\ However, in the Regulatory Analysis of this action, EPA
evaluates the economic impact of including the MOU in the baseline
for the electric power industry.
---------------------------------------------------------------------------

The next three columns in the Table contain the average cost per
ton of NO_X annually reduced, the incremental cost per ton of
NO_X reduced during the ozone season, and the incremental
cost per ton of NO_X annually reduced. The average cost per
ton of NO_X reduced annually is the annual costs of a source
category complying with a NO_X budget component option
divided by the NO_X emissions reductions that occur
throughout the entire year. The incremental cost per ton of
NO_X reduced during the ozone season is the difference in the
annual cost of the option examined and the next cheapest option divided
by the difference in seasonal NO_X reduction in these two
options. The incremental cost per ton of NO_X reduced
annually is the difference in the annual cost of the option examined
and the next cheapest option divided by the difference in the annual
NO_X reduction in these two options. For the option with the
lowest annual cost for each source category's NO_X budget
component, the average and incremental costs are the same, which
assumes that ultimately the cheapest option is no additional controls,
or the baseline.
The EPA has provided these other measures of cost effectiveness to
provide additional perspective on the decision that the Agency made for
the level of each source category budget component. Each of these cost-
effectiveness measures has advantages in being used in conjunction with
other factors to make a decision on environmental controls under
certain circumstances. They each also have limitations. The annual
measures are valuable since there are NO_X reduction benefits
that the public will gain throughout the year from controls on the
sources covered in this rulemaking. They do not, however, focus as well
on the primary objectives of the ozone transport rule of providing
reductions of ozone during the time of year when it does the most harm
and in which exceedances of the ozone standards are likely to occur.
The incremental measures are valuable since they show the additional
costs of the additional reductions from increasing the stringency of
pollution controls. However, for this rulemaking, it is difficult to
compare the incremental costs of increasing levels of stringency for
large stationary sources with other Agency and State analyses that have
been developed in the past. For instance, because incremental cost
comparisons will differ depending on the size of the increment in
stringency being considered, care must be used in using incremental
cost estimates from earlier rulemakings.
The Agency solicits comments on its use of average seasonal cost
effectiveness as the measure it wants to rely on to judge the cost
effectiveness of the NO_X reductions that will occur from the
NO_X budget components that EPA has chosen for the electric
power industry and other stationary sources. Commenters offering other
measures, or combinations of cost-effectiveness measures, that EPA
needs to consider, should provide their rationale for their views.
The EPA is not choosing to base its proposed budgets on an
expansion of I/M programs beyond the extent required by the CAA or
otherwise reflected in existing SIPs in its calculation of State
NO_X budgets. The cost effectiveness of I/M programs in
reducing ozone precursors (including both NO_X and VOC) can
vary widely due to differences in the design and operation of
individual I/M programs. The EPA's current estimate of the cost
effectiveness of I/M programs ranges from $500 to $3,000 per ton of
ozone precursor, on an annualized summer ton basis.⁹
Although this range suggests that the cost effectiveness of I/M
programs in reducing ozone precursors (including both NO_X
and VOC) may be comparable to the cost of the utility NO_X
reductions proposed in today's rulemaking, the cost effectiveness of I/
M programs in reducing NO_X alone would be significantly
higher since most of the ozone precursor reductions from enhanced I/M
programs are VOC reductions. Both VOC and NO_X reductions are
valuable for achieving local attainment, but as discussed in section
II, Weight of Evidence Determination of Significant Contribution,
today's rulemaking

[[Page 60348]]

focuses on reducing NO_X emissions since such reductions
offer greater potential for reducing regional transport than would VOC
reductions.
---------------------------------------------------------------------------

\9\ All estimates of I/M program cost effectiveness in this
rulemaking are presented in terms of the cost per annualized summer
ton of ozone precursor, i.e., the cost per ton of VOC or
NO_X. Cost per annualized summer ton is calculated as the
total cost of the program divided by the number of tons that would
be reduced annually if the level of reduction achieved during the
summer were achieved year round. It thus understates the cost per
actual ton of reduction of ozone precursors. The EPA believes this
procedure is appropriate because I/M programs reduce other pollutants
beside ozone precursors (e.g., air toxics and carbon monoxide (CO)).
---------------------------------------------------------------------------

Similarly, EPA is not choosing to base its proposed budgets on an
expansion of Federal Phase II RFG beyond its current extent in its
calculation of State NO_X budgets. The EPA's current estimate
of the cost effectiveness of Federal Phase II RFG ranges from $2,600 to
$3,500 per ton of ozone precursor, on an annualized summer
ton.¹0 This cost exceeds the cost of the utility
NO_X reductions proposed in today's rulemaking. Furthermore,
the cost effectiveness of Federal Phase II RFG programs in reducing
NO_X alone would be significantly higher since most of the
ozone precursor reductions from RFG would be in the form of VOC
reductions which, while valuable for achieving local attainment, are
not the focus of today's action since NO_X reductions offer
greater potential for reducing regional transport.
---------------------------------------------------------------------------

\10\ This cost represents the midpoint of the expected range of
$2,600 to $3,500 per ton (depending on the degree of expansion of
the program), on an annualized summer ton basis, for both VOC and
NO_X. All estimates of RFG cost effectiveness in this
rulemaking are presented in terms of the cost per annualized summer
ton of ozone precursor, i.e., the cost per ton of VOC or
NO_X. Cost per annualized summer ton is calculated as the
total cost of the programs divided by the number of tons that would
be reduced annually if the level of reduction achieved during the
summer were achieved year round. It thus understates the cost per
actual ton of reduction of ozone precursors. The EPA believes this
procedure is appropriate because the use of RFG reduces other
pollutants besides ozone precursors (e.g., air toxics and CO).

Table III-2.--Cost Effectiveness of Options for the Ozone SeasonNO_XBudget Components for Selected Source
Categories
[In 1990 dollars per ton ofNO_Xreduced]
----------------------------------------------------------------------------------------------------------------
Average Incremental
cost per Average cost per Incremental
ton ofNO_X cost per ton ofNO_X cost per
Source category: Options for ozone seasonNO_Xbudget reduced ton ofNO_X reduced ton of NO_X
components during the reduced during the reduced
ozone annually ozone annually
season season
----------------------------------------------------------------------------------------------------------------
Electric Power Industry:
815 thousand tons....................................... $1,100 $850 $1,100 $850
652 thousand tons....................................... 1,300 1,050 2,100 2,100
489 thousand tons....................................... 1,700 1,400 3,600 3,400
391 thousand tons....................................... 2,100 1,750 6,350 5,200
326 thousand tons....................................... 2,450 2,000 8,700 6,850
Other Stationary Sources
484 thousand tons \1\................................... 1,450 750 1,450 750
466 thousand tons \2\................................... 1,650 900 4,400 2,150
380 thousand tons \3\................................... 2,750 1,400 6,300 3,050
----------------------------------------------------------------------------------------------------------------
\1\ This measure approximates the emission reductions that would be obtained if Level 1 controls were placed on
medium sized sources and Level 2 controls were placed on large sized sources. The calculation process used to
calculate cost for nonutility units selects control measures (at a State level) so that the cost minimizing
set of controls that meet the required emissions reductions are chosen. This approach provides a downward bias
to the costs and cost-effectiveness values compared to any way the States might obtain the emission
reductions, including consideration of other factors (e.g., administrative costs that are not included in this
analysis). While a least-cost approach simulates either costless emissions trading or a cost minimizing
command and control approach with perfect information, either approach is unlikely to include the smaller
sources used in this analysis.
\2\ This option considers a 70 percent reduction of summerNO_Xemissions from large sources and RACT controls on
medium size sources. This approach is what OTAG recommended occur, if EPA considered reductions of electric
power industry emissions of equivalent to .15 pounds ofNO_Xper MMBtus, or an 85 percent reduction of
uncontrolled levels, whichever is less stringent. The EPA's proposal for theNO_Xbudget component for the
electric power industry is based on a comparable level of controls to the .15/85 percent reduction.
\3\ This measure approximates budgets of an 80 percent control of baseline emissions for large sized sources and
Level 1 control on the medium sources. The calculation process used to calculate cost effectiveness on
nonutility units provides a downward bias for the reasons explained in the above footnote.
Note: The options for electric power industryNO_Xbudget component are based on pollution controls on electric
generation units meeting summer seasonNO_Xemission limitations in pounds ofNO_Xper million Btus of heat
input of .25, .20, .15, .12, and .10, respectively. The cost-effectiveness calculations are based on
implementing these controls through a cap-and-trade program. The controls on which the options for theNO_X
budget component for Other Stationary Sources are based are provided in the footnotes. The cost-effectiveness
calculations are based on each State implementing a least-cost approach to compliance.

Considering the $1,000 to $2,000 per ton average cost-effectiveness
range from Table III-1, and the level of control achievable with each
sector's NO_X control technologies, EPA believes that it is
reasonable to require the following levels of reductions: (1) For the
electric power industry, a budget component of 489 thousand tons (which
is equivalent to an average NO_X emission rate of 0.15 lb/
MMBtu) since it is both cost effective and achievable, on average, by
the affected sector sources; and (2) for other stationary sources, a
budget component of 466 thousand tons, which is consistent with OTAG's
recommendation that nonutility point source controls be comparable in
stringency to the selected level of electric power industry controls,
which for .15 lbs/MMBtus would be 70 percent control on large-sized
sources (e.g., boilers greater than 250 MMBtu/hour) and RACT controls
on medium-sized sources (e.g., sources emitting between 1 and 2 tons
per day). The RACT controls result in NO_X reductions
generally in the range of 25-50 percent. This corresponds closely with
the OTAG recommendation given the proposed level of electric power
industry controls, and EPA believes it is a reasonable level of control
based on average cost effectiveness as discussed above.
For mobile sources, EPA proposes constructing the budget component
by including: (1) those controls that would be implemented federally or
by States in the absence of today's action, and (2) those controls that
are viewed today as being feasible in the 2007 time frame and that meet
EPA's proposed NO_X cost-effectiveness criterion. The EPA did
not include in the proposed mobile source

[[Page 60349]]

budget component a number of control measures that offer multipollutant
benefits and hence may be attractive control measures for local
attainment and maintenance. These measures include Tier 2 light-duty
vehicle and light-duty truck standards and more extensive
implementation of I/M and Federal Phase II RFG. When compared with
other available options, these measures are reasonable control measures
when these measures' full range of benefits are considered, including
CO, toxic air pollutants, and VOC benefits in addition to their
NO_X benefits. Some of these measures, such as I/M, RFG and
Clean Fuel Fleets, can be implemented in specific areas seeking to meet
local air quality objectives rather than region or nationwide. While
EPA did not choose to assume their regionwide implementation in
calculating NO_X budgets because their cost effectiveness for
NO_X reductions alone did not justify including them in the
set of assumed controls, EPA continues to believe that these measures'
nonozone benefits and VOC benefits (which provide local ozone
reductions but tend not to provide significant reductions in regional
ozone transport) make them attractive for areas seeking to meet local
ozone attainment, or maintenance objectives, or other air quality
goals. Although these strategies were not included in the budget
calculation, States can opt to implement these measures as part of
their SIP revision in response to today's proposal. Each of these
programs is discussed in more detail below.
The EPA's approach to the NO_X budget component for the
electric power industry relies on the consideration of the States using
a cap-and-trade program to reduce emissions from this source category.
The Agency's analysis shows that this type of approach is 25 percent
more cost effective (lower in cost per ton reduced) than the use of a
comparable traditional command-and-control approach, such as setting
rate-based NO_X emissions limitations at .15 lbs of
NO_X per million Btus of heat input at every source.
The EPA did not examine the implications of each State setting up
its own trading programs for the electric power industry, which could
occur if the Agency is unable to work with the States to put together a
viable trading program across the 23 jurisdictions covered in this
rulemaking. Based on analysis done for OTAG in the past, the Agency
believes this type of approach would lead to somewhat higher costs, but
would still be less expensive than a command-and-control program in
every State. This conclusion is based on work that EPA did for OTAG,
where it divided a similar area to the one covered in this rule into
five trading zones versus a single trading zone.¹ Although
the costs did increase, they were not dramatically higher. Further
support for this conclusion results from the examination of EPA's
Regulatory Analysis supporting this proposed rulemaking. The Agency
found that in the vast majority of States, electric generation units
would make significant NO_X emissions reductions under a cap-
and-trade system that allowed trading between all the States covered.
This means that the electric power generation units that can reduce
NO_X emissions most cost-effectively are spread throughout
the region covered by the Ozone Transport SIP Rulemaking.
---------------------------------------------------------------------------

\11\ U.S. Environmental protection Agency, ``Round 3 Analysis of
Cap-and-Trade Strategies to Lower NO_X Emissions from
Electric Power Generation in OTAG'', March 25, 1997.
---------------------------------------------------------------------------

In calculating States' budgets, EPA assumed implementation of the
following mobile source control measures in addition to those measures
already implemented or otherwise promulgated in final form:

Nonroad

• Federal Small Engine Standards, Phase II
• Federal Marine Engine Standards
• Federal Heavy-Duty (³50 hp) Nonroad Standards,
Phase I
• Federal Reformulated Gasoline, Phase II (in statutory and
current opt-in areas)
• Federal Locomotive Standards
• 1997 Proposed Nonroad Diesel Engine Standards

Highway

• Tier 1 Light-Duty and Heavy-Duty Vehicle Standards
• Enhanced I/M (serious and above areas)
• Low Enhanced I/M (rest of OTR)
• Basic I/M (mandated areas)
• Clean Fuel Fleets (mandated areas)
• Federal Reformulated Gasoline, Phase II (in statutory and
current opt-in areas)
• National Low Emission Vehicle Standards
• Heavy-Duty Engine 2 g/bhp-hour standard
• Revisions to Emissions Test Procedure
With the exception of the Clean Fuel Fleets, I/M, and RFG programs,
all of these control measures are or will be implemented nationally (or
in the 49 States outside of California). The EPA assumed that the Clean
Fuel Fleets, I/M, and RFG programs would be implemented to the extent
required by the CAA or existing SIPs, or as reflected in current levels
of State opt-in to these programs. The reader is referred to sections
III.B.5 and III.B.6 for a more extensive discussion of the development
of the highway vehicles and nonroad budget components, respectively.
At the current time, the standards presumed for locomotives, marine
engines, small gasoline engine, nonroad diesel engines, and heavy-duty
highway engines in calculating State NO_X budgets represent
the most technically feasible emissions performance levels achievable
in the 2007 time frame. For this reason, the Agency did not evaluate
any more stringent standards for these sources in its calculation of
State NO_X budgets.
c. Summary of Measures Assumed in Proposed Budget Calculation. The
EPA is proposing to calculate the budgets described in this section by
assuming the application of the most reasonable, cost-effective
controls for the purpose of achieving regional NO_X
reductions. Table III-3 summarizes the controls that were assumed for
each source sector. More detailed discussions of the controls assumed
are contained in the sections that describe each sector.

Table III-3.--Summary ofNO_XControl Measures Applied in the Development
of Proposed Statewide SeasonalNO_XEmissions Budgets *
------------------------------------------------------------------------
Controls Applied in Developing
Emissions Source Sector Proposed StatewideNO_X
Emissions Budgets for 2007
------------------------------------------------------------------------
Large Electricity Generating Devices Statewide seasonal tonnage
(fossil-fuel burning electric utility budget based on applying a NO_X
units and nonutility units serving emission rate of 0.15 lb/MMBtu
electricity generators 25MWe or on all applicable sources.
greater).

[[Page 60350]]

Nonutility point sources (boilers, 70 percent controls on large-
reciprocating internal combustion sized sources (e.g., >250
engines, turbines, cement kilns, etc.). MMBtu/hour)
RACT controls on medium-sized
sources (e.g., 100-250 MMBtu/
hour).
Nonroad Sources (commercial marine Federal small engine standards
engines, small engines such as lawn (Phase II)
and garden equipment, and larger Federal marine engine standards
engines such as construction equipment (diesel >50 horsepower)
and locomotives). Federal locomotive standards
1997 proposed nonroad diesel
engine standards.
Highway Vehicle Sources (cars, trucks, National Low Emission Vehicle
buses, motorcycles--gas and diesel Program
highway engines). 2004 Heavy-Duty Vehicle
Standards.
Revisions to Emissions Test
Procedure **
Area (Small Stationary) Sources (open Full implementation of programs
burning, small commercial, industrial required by the CAA and
and residential fuel combustion outlined in existing State
devices). implementation plans.
------------------------------------------------------------------------
* Controls already required under the 1990 Amendments to the CAA and
those applied through existing SIPs were assumed in the development of
the statewideNO_Xbudgets but are not explicitly listed in this table.

** Other measures used in developing some state budgets include I/M
programs (where mandated), Federal Phase II RFG (where mandated or in
areas which have already opted into the program as of the date of
today's rulemaking ), and clean fuel fleet programs. Potential
reductions from Tier 2 light-duty vehicle standards were not
incorporated since they are still under review.

In determining what controls to assume in calculation of the
proposed budgets, EPA considered the conclusions that were reached in
the OTAG process as well as the cost-effectiveness rationale described
above. Any special effort to address ozone transport, such as today's
action, must be part of an integrated regulatory solution developed by
EPA and States to provide national compliance with the current (1-hour)
and new (8-hour) NAAQS. The OTAG's air quality modeling showed that
even with the most stringent control measures that were evaluated for
NO_X and VOC, not all areas would come into attainment with
the current ozone NAAQS. It is also evident that with no actions to
address ozone transport, some areas will have ``background levels''
that will not allow even aggressive local controls to bring them into
compliance, and others will face severe measures in an effort to do so.
Therefore, today's action complements local programs to address
attainment with the ozone NAAQS. The EPA recognizes the need to provide
pollutant reductions where it would be more cost effective to do so
rather than place all of the burden on localities. The recent RIA in
support of the new ozone standard shows that the last tons of localized
NO_X and VOC reduction needed for meeting that standard in
some areas can easily cost from $5,000 to $10,000 a ton to achieve.
Avoiding such expenditures is a major objective of today's action.
3. Proposed Assumptions for Electric Utilities
This section presents the rationale and resulting proposed State-
by-State NO_X budget components for fossil fuel-burning
electric utility units under today's action. Three different proposed
NO_X emission scenarios and their resulting State-by-State
emission allocations are presented.
a. Affected Entities. The sources of information used in this
section are: (1) for electric utility units submitted by utilities to
EPA under the requirements of 40 CFR part 75 (emissions monitoring
provisions of title IV, section 412; and (2) for nonutility units
(e.g., units owned by Independent Power Producers), projected by EPA
using the Integrated Planning Model (IPM) from base year information
supplied to the North-American Electricity Reliability Council (NERC),
Energy Information Agency (EIA), and trade sources.
Utility emissions represent approximately 36 percent of the total
anthropogenic NO_X emissions after application of current CAA
controls in the States covered by today's action. The calculations
described below apply to large sources that have generators greater
than 25 MWe. The EPA believes that it is reasonable to assume no
further control of emissions from smaller sources based on the current
availability of emissions and utilization data for these sources. While
EPA has quality-assured NO_X emissions and utilization data
for electric utility units larger than 25 MWe, such data are not
currently available for smaller units. Therefore, the contribution of
the smaller sources to the utility component of each State's budget
cannot currently be assessed with certainty. The EPA solicits comment
on: (1) whether sources equal to or smaller than 25 MWe should be
included in the utility component of each State's budget, and (2)
sources of emissions and utilization data for sources equal to or
smaller than 25 MWe.
Larger sources were found to be large contributors to
NO_X emissions and, with the application of NO_X
controls, were found to be able to achieve reductions cost-effectively.
Specifically, EPA performed an analysis to determine the cost
effectiveness of NO_X controls applied to large utility
boilers and how it compared to other sector NO_X controls.
The results indicate that controlling emissions to an average level of
0.15 lb/MMBtu was cost effective for large utility boilers (see section
III.B.2.).
This section does not include combustion units which generate
electricity for purposes internal to a plant. These units, for the
purposes of the overall State budget, are considered industrial units
and are included in the corresponding section. Some of these units
(e.g., units with capacity greater than 25 MWe or the equivalent in
thermal output, measured in MMBtu) may more appropriately be included
with the utility sector emissions, with similar required levels of
control, since controls for these units may be as cost effective as
utility unit controls. Additionally, certain large industrial
combustion sources (e.g., boilers with a heat input larger than about
250 MMBtu/hour, used only for steam, not electricity generation) may be
able to achieve levels of control equal to that of the electric utility
units with comparable cost effectiveness. The EPA solicits comment on
the appropriateness of including such units in the utility emissions by
assuming the same level of control from these units as from utility units.
b. Methodology Used to Determine the Proposed Electric Utility
Budget Component. The proposed emissions budget component for electric
utilities (in tons) is calculated as the product of

[[Page 60351]]

two separate components: (1) source activity level, measured in MMBtu;
and (2) pollutant emission rate, measured in pounds of pollutant per
MMBtu. Since both components influence the emissions, it is important
to use the most accurate information when calculating each component.
i. Proposed Utility Budget Component Calculation and Alternatives.
Four alternatives were considered for calculating the utility budget
component (Table III-4).

Table III-4.--Summary of Alternatives
------------------------------------------------------------------------
Activity level (heat
Alternative input) NO_Xrate (lb/MMBtu)
------------------------------------------------------------------------
1................... Future Activity (current Higher of:
with estimated growth (1) 0.15 or
to 2007). (2) an 85% reduction of
historic emission rate.
2................... Current Activity........ Higher of:
(1) 0.15 or
(2) an 85% reduction of
current emission rate.
3................... Future Activity (current 0.15.
with estimated growth
to 2007).
4................... Current Activity........ 0.15.
------------------------------------------------------------------------

After evaluating each alternative, EPA is proposing to base the
electric utility emissions on a projected future activity level and a
desired emission rate (scenario 3). The following subsections discuss
each technique separately. Detailed results of each alternative are
available in the TSD.
Alternative 1: Future Activity With Historic (or Desired) Emission Rates
This technique involves calculating the emissions based on a
projected future activity level (e.g., using an electric utility
generation forecasting model such as IPM) and the higher of: (1) a
desired emission rate, or (2) a rate resulting from a percent reduction
from some past baseline year emission rate (e.g., 1990). This was the
technique used in many OTAG analyses. On its face, this approach may
appear to equitably determine an emissions budget. However, this
requires the determination of the NO_X emission rates from
1990 for every unit in a State's inventory. In addition to the accuracy
problems encountered in determining an historic emissions rate, this
approach relies on a percent reduction from an historic rate, which
benefits States that were higher emitters over States that had cleaner
fuels. Thus, EPA believes that this approach is neither the most
technically accurate nor the most equitable.
Alternative 2: Current Activity With Current (or Desired) Emission Rates
This technique involves calculating emissions based on a current
activity level (e.g., 1995 or 1996) and the higher of: (1) a desired
emission rate, or (2) a rate resulting from a percent reduction from a
current year (e.g., 1996) for which accurate emission rates per unit
exist. The benefit of this approach is that both activity and emission
rates are available for all utility units included in the emissions
budget. This approach requires that all changes in the utilization of
utility units be accommodated within the utility budget component.
However, to the extent this approach relies on percent reduction, it
would benefit currently high emitters and disadvantage units that
installed controls in order to comply with other provisions of the Act.
Thus, though simpler (because it relies on current actual data without
projections), this approach may not be viewed as equitable.
Alternative 3: Future Activity With Desired Emission Rate
This technique involves calculating the utility budget component
based on a future activity level (i.e., inflating the current measured
utilization by an estimated growth factor) and a desired emission rate.
The benefit of this approach is that it acknowledges the inherent
inequity of using any past or current emission rates and treats all
units equally based on a future standard emission rate (e.g., 0.15 lb/
MMBtu). Further, by projecting future changes in utilization, this
approach more directly accommodates changes in unit utilization to the
extent such future utilization can be reasonably projected. The
potential for error in making such projections is minimized when
starting with actual unit-specific utilizations. Thus, though more
complicated than the previous technique (because of its reliance on a
projection of industry growth), this approach is viewed as more
equitable, particularly since other source categories included in the
overall State-specific budget reflect growth.
Alternative 4: Current Activity With Desired Emission Rate
This technique involves calculating emissions based on a current
activity level (e.g., 1995 or 1996) and a desired future emission rate.
Similar to the above approach, this approach acknowledges the inherent
inequity of using any past or current emission rates and treats all
units equally based on a desired standard emission rate (e.g., 0.15 lb/
MMBtu). Unlike the above approach, however, it uses current activity to
determine the utility budget component, providing for the highest
degree of accuracy. Changes in the utilization of utility units must be
accommodated within the utility budget component. This approach is
simple (because it relies on current actual data without projections),
but it may be viewed as less equitable for States with significantly
higher projected utilization.
ii. Seasonal Utilization. The proposed utility budget component is
based on utilization over the course of a summer season (i.e., May 1 to
September 30). Utilization can be significantly different from season
to season and the degree of this difference can vary from State to
State (e.g., some States can have much higher utilization in the summer
due, for example, to high usage of air conditioning or shifting load to
another State). Thus, it is important to accurately characterize the
summer usage of every State separately. Because of the high seasonal
variability, it is less accurate to simply take total annual
utilization and divide by the number of summer months. Similarly,
because of the geographic variation, it is less accurate to take
regionwide summer utilization and equally apportion the utilization to
all States.
There are currently only two sources of information that provide
actual data and take account for seasonal and State variations in
utilization: (1) the EIA's Form 767, and (2) EPA's Emission Tracking
System containing data reported by utilities in accordance with 40 CFR
part 75. Both sources contain unit-by-unit utilization; EIA on a
monthly basis and EPA on an hourly

[[Page 60352]]

basis. There is, however, one important difference: while the method
used to determine and report utilization to EIA can differ
significantly from utility to utility, the information submitted to EPA
is determined and reported using consistent techniques as required by
40 CFR part 75.
Thus, EPA is proposing to use its information to determine each
unit's (and thereby each State's) utilization for the period beginning
May 1 and ending September 30. It should be noted that in the case of
units owned by nonutility sources (e.g., Independent Power Producers),
EPA does not have current utilization information available. For the
purpose of estimating the emissions for these units, EPA is proposing
to use the IPM-predicted utilization for the year 2007. The predicted
utilizations are projected from base year information supplied to the
NERC, EIA and trade sources.
One way of accounting for State-by-State shifts in electricity
generation, from 1 year to the next, during the period beginning May 1
and ending September 30, is to calculate the utility budget component
based on a composite utilization: using the State-by-State utilization
for the higher of 1995 or 1996 (i.e., for each State, using the higher
of its overall 1995 or 1996 summer utilization). This is the approach
proposed by EPA. Though this approach results in a slightly exaggerated
baseline utilization, the inflation to emissions is moderate and the
equity that it provides is potentially significant for some situations.
Table III-5 ¹2 compares the State-by-State utilizations
using the composite method versus using 1996 only. The impact is most
evident on the District of Columbia (which has a 1995 utilization
substantially greater than its 1996 utilization) for which 1996 may
have been an unrepresentative summer. Another option would be to use
the annual average of the highest 2 out of 3 recent years (e.g., 1995,
1996, and 1997) when data for 1997 becomes available. The EPA solicits
comment on both approaches.
---------------------------------------------------------------------------

\12\ It should be noted that units owned by Independent Power
Producers were not included in Table III-5 since neither their 1995
nor their 1996 utilizations are known. The projected 2007
utilization for these units is, however, included in the utility
portion of each State's budget.

Table III-5.--Comparison of State-by-State 1995, 1996 and ``Composite'' Utility Unit Summer Utilizations
----------------------------------------------------------------------------------------------------------------
State-by-State
1995 1996 higher of 1995
State Utilization Utilization or 1996
(MMBtu) (MMBtu) utilization
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 342,060,000 349,950,000 349,950,000
Connecticut..................................................... 26,500,000 40,890,000 40,890,000
Delaware........................................................ 30,890,000 33,830,000 33,830,000
District of Columbia............................................ 2,030,000 130,000 2,030,000
Georgia......................................................... 349,310,000 335,330,000 349,310,000
Illinois........................................................ 331,120,000 344,470,000 344,470,000
Indiana......................................................... 511,420,000 512,420,000 512,420,000
Kentucky........................................................ 397,540,000 395,800,000 397,540,000
Maryland........................................................ 130,530,000 123,060,000 130,530,000
Massachusetts................................................... 96,290,000 100,150,000 100,150,000
Michigan........................................................ 280,730,000 287,790,000 287,790,000
Missouri........................................................ 267,710,000 270,240,000 270,240,000
New Jersey...................................................... 44,140,000 43,310,000 44,140,000
New York........................................................ 249,260,000 223,360,000 249,260,000
North Carolina.................................................. 286,710,000 310,600,000 310,600,000
Ohio............................................................ 549,050,000 565,990,000 565,990,000
Pennsylvania.................................................... 445,030,000 481,950,000 481,950,000
Rhode Island.................................................... 320,000 11,940,000 11,940,000
South Carolina.................................................. 130,150,000 150,370,000 150,370,000
Tennessee....................................................... 279,730,000 268,880,000 279,730,000
Virginia........................................................ 150,870,000 136,740,000 150,870,000
West Virginia................................................... 269,840,000 302,850,000 302,850,000
Wisconsin....................................................... 196,840,000 191,730,000 196,840,000
----------------------------------------------------------------------------------------------------------------

iii. Growth Considerations. In general, new units built to meet
economic growth are lower emitting than the older units they augment or
replace. Thus, though the industry's fuel utilization may increase over
time, the industry's average NO_X rate may decrease as newer,
cleaner units are built and operated, and total emissions may or may
not increase.
Two approaches were considered for accommodating potential
emissions growth under an emissions budget. One approach was to
calculate emissions based on recent historic utilization, as was done
in the sulfur dioxide program under title IV of the Act. Under this
approach, States with significant projected increases in utilization
would be required to either: (1) reduce their NO_X rates
further, or (2) burn fuel more efficiently in order to compensate. For
such States, the ability to trade emissions regionwide is particularly
attractive because States with low increases or decreases in
utilization can trade emissions with States having significantly
increased utilization.
An alternative approach was to project each State's change in
utilization from current levels to some future year and set a budget
based on that future year's utilization. This approach directly
addresses industry growth. Additionally, this was the type of approach
taken by OTAG in investigating various State budgets. Thus, EPA is
proposing to use this type of approach for addressing activity growth
and, as described below, using the IPM growth projections. However,
there are several other ways in which growth can be reflected in budget
allocations. For example, recognizing that several utility companies
span more than one State and that electricity is dispatched across
State boundaries, an average regional growth rate could be

[[Page 60353]]

applied to each State's current utilization. The EPA solicits comment
on these and other approaches addressing activity growth in
establishing a statewide utility budget component.
c. Summary and Proposed Utility Budget Components. For reasons
discussed in the previous section, EPA is proposing to calculate each
State's summer season electric utility emissions using a specific
NO_X emission rate and the projected summer season
utilization of the year 2007. Specifically, EPA proposes calculating
each State's utility NO_X budget component by multiplying:
(1) each State's summer activity level, measured in MMBtu, (EPA
selected the higher of each State's overall 1995 or 1996 summer
utilization), by (2) each State's projected growth between 1996 and
2007 (using the IPM model), by (3) a NO_X rate of 0.15 lb/
MMBtu. The resulting figure, in lbs, was divided by 2000 (lbs per ton)
to determine tons. For electricity-generating units owned by
nonutilities (e.g., Independent Power Producers), EPA used their IPM-
predicted utilization for 2007 in place of steps (1) and (2). The EPA
compared the IPM-generated growth factors of each State to those
developed by OTAG for the electric utility sector in every State. In
general, the IPM-predicted growth was about 60 percent higher than the
growth projected by OTAG. Regionwide, the OTAG-predicted growth was
about 6 percent from 1996 to 2007, and the IPM-generated growth was
about 15 percent for the same period. However, for some States such as
Alabama and New Jersey, the IPM growth factor was lower than the OTAG
growth factor. The TSD describes in detail how the IPM and OTAG growth
factors were calculated.
For the proposed rule, EPA selected the IPM's State-by-State growth
factors over the growth factors developed by OTAG. Unlike the OTAG
electric utility growth projections, the IPM's were not developed
separately for each State, but were developed by analyzing performance
of utilities as a regionwide system. Therefore, the IPM growth factors
are considered to be more consistent than the OTAG growth factors. The
EPA solicits comment on the appropriateness of using the IPM model to
determine State-specific growth factors for the period between 1996 and
2007. Further, EPA solicits comment on what other reasonable regionwide
approaches can be used to develop growth factors.
Table III-6 presents the resulting proposed utility (and
electricity-generating nonutility) budget components per State along
with the 2007 CAA base.

Table III-6.--State-by-State Budget Component for Electricity-Generating Units
----------------------------------------------------------------------------------------------------------------
Proposed
2007 CAA base budget Percent
State (tons) component reduction
(tons)
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 81,704 26,946 67
Connecticut..................................................... 5,715 3,409 40
Delaware........................................................ 10,901 4,390 60
District of Columbia............................................ 385 152 61
Georgia......................................................... 92,946 30,158 68
Illinois........................................................ 115,053 31,833 72
Indiana......................................................... 177,888 48,791 73
Kentucky........................................................ 128,688 35,820 72
Maryland........................................................ 35,332 11,364 68
Massachusetts................................................... 28,284 12,956 54
Michigan........................................................ 82,057 25,402 69
Missouri........................................................ 92,313 22,932 75
New Jersey...................................................... 14,553 5,041 65
New York........................................................ 39,639 24,653 38
North Carolina.................................................. 83,273 27,543 67
Ohio............................................................ 185,757 46,758 75
Pennsylvania.................................................... 125,195 39,594 68
Rhode Island.................................................... 773 905 -17
South Carolina.................................................. 43,363 15,090 65
Tennessee....................................................... 71,994 19,318 73
Virginia........................................................ 45,719 16,884 63
West Virginia................................................... 83,719 23,306 72
Wisconsin....................................................... 51,004 15,755 69
Total........................................................... 1,596,255 489,000 69
----------------------------------------------------------------------------------------------------------------

4. Proposed Assumptions for Other Stationary Sources
a. Affected Entities. This section presents the rationale and
resulting proposed State-by-State NO_X budget components for
other stationary sources, specifically, the area and nonutility point
source sectors. Area sources of NO_X emissions include, for
example, emissions from wildfires, open burning, and residential water
heaters. Emissions from area sources represent only 7 percent of total
anthropogenic NO_X emissions in the States covered by today's
action (based on OTAG 2007 CAA emissions). The highest percentage in
any one State is 18 percent. Nonutility point sources include boilers,
process heaters, reciprocating internal combustion engines, turbines,
cement kilns and other categories. Emissions from sources in this
sector represent 14 percent of the total anthropogenic NO_X
emissions in the States covered by today's action, with a range of 3-22
percent.
b. Methodology Used to Determine the Proposed Area and Nonutility
Point Source Budget Components. The proposed State-by-State seasonal
(May 1-September 30) budget components for the area and nonutility
point sectors generally reflect the OTAG recommendations. For area
sources, EPA proposes applying OTAG Level 0 (i.e., no new controls).
The EPA is proposing this level of control because EPA and OTAG were
not able to identify any reasonable control measures for sources in
this sector. Controls for wildfires, feasible alternatives for open
burning, and

[[Page 60354]]

reasonable cost-effectiveness levels for control of existing
residential water heaters have not yet been identified for these
States. Therefore, EPA believes that application of Level 0 controls
for this sector is appropriate.
The OTAG recommendations for the nonutility point sector are to
reduce emissions from medium- and large-sized units in a manner
equitable with utility controls. Specifically, OTAG recommended that
large nonutility sources should meet approximately 70 percent reduction
and medium-sized sources should meet RACT if utilities are subject to
the 0.15 lb/MMBtu utility limit.
As discussed in section III.B.2., EPA is proposing to apply the
OTAG recommendations. The EPA believes that these are reasonable levels
of controls for these sources for the reasons outlined in section
III.B.2.
For purposes of the budget calculation, EPA believes that it is
reasonable to not calculate reductions from sources with emissions less
than 1 ton per day. The OTAG's recommendation to focus controls on the
large sources rather than all sources for purposes of establishing the
budget is a reasonable approach from an administrative and data
availability perspective and does not preclude States from eventually
adopting controls on other sizes or categories of sources as an
alternative way of meeting their budgets. ¹³ In addition,
emissions data for the smaller nonutility sources have more
uncertainty, especially source size and utilization data which are
important in making a budget calculation. As described in section
III.B.2, EPA's cost analysis does not key on source sizes; rather, it
is a least cost approach that considers small, medium and large sources
in determining the overall cost of the sector budget. Further, controls
on smaller sources are frequently less cost effective than the same
controls on larger sources. It should also be noted that the 1 ton per
day cutoff for nonutility sources approximately corresponds to the 25
MWe cutoff for utility sources. The EPA solicits comment on: (1)
whether sources with NO_X emissions less than 1 ton per day
should be included in the nonutility component of each State's budget,
and (2) sources of emissions and utilization data for sources with
NO_X emissions less than 1 ton per day.
---------------------------------------------------------------------------

\13\ If States chose to not seek reductions from some smaller
sources, then the overall costs estimated for this sector would be
expected to increase.
---------------------------------------------------------------------------

Other approaches to calculating the nonutility point source budget
component were considered, including a combined Level 2 for large
sources and Level 1 for smaller sources, an 80 percent reduction from
large sources with Level 1 for the smaller sources (see Table III-2),
and Level 1 or Level 2 applied across the entire sector. A Level 1
approach across the entire sector has a relatively low cost
effectiveness (less than $1000 per ton) and is not as equitable as the
OTAG recommendations, considering the reductions calculated for the
electric utility sector and the importance of the nonutility point
source sector from a total emissions standpoint. On the other hand, EPA
considered a Level 2 approach across the entire sector to be less cost
effective and administratively more difficult than the OTAG
recommendations. That is, Level 2 nonutility costs for some of the
smaller sources are likely to be higher in some cases than the Level 3
utility costs and the number of units included in the nonutility point
source category is large, creating an administrative burden. As
discussed in section II.B.3, another alternative approach would be to
assume a higher level of control for combustion units which generate
electricity for purposes internal to a plant. Some of these units may
more appropriately be included with the utility sector emissions, with
similar required levels of control, since controls for these units may
be as cost effective as utility unit controls. Additionally, certain
large industrial combustion sources (e.g., boilers with a heat input
larger than about 250 MMBtu/hour, used only for steam, not electricity
generation) may be able to achieve levels of control equal to that of
the electric utility units with comparable cost effectiveness. The EPA
solicits comment on these and other approaches for calculating the
nonutility point source budget component.
In applying the proposed controls, the EPA closely approximated but
could not precisely calculate emissions based on the size of nonutility
point sources as defined by OTAG because the emissions inventories
available do not have the level of detail specified in the OTAG
recommendation.
For example:
• The OTAG recommendation separates boilers by size (i.e.,
less than 100 MMBtu, between 100 and 250 MMBtu and greater than 250
MMBtu). Available emissions inventory data are incomplete especially
for the smaller size boilers.
• The OTAG recommendation separates stationary reciprocating
internal combustion engines by size (i.e., less than 4000 horsepower
(hp), between 4000 and 8000 hp, and greater than 8000 hp). Available
emissions inventory data generally does not include hp capacities.
• The OTAG recommendation separates gas turbines by less
than 10,000 hp, between 10,000 and 20,000 hp, and greater than 20,000
hp. Available emissions inventory data generally do not include hp
capacities.
• The OTAG recommendations also include application of RACT
on medium-sized sources; RACT is generally considered equal to Level 1
OTAG measures. However, since RACT may be a case-by-case decision, a
precise forecast of emissions decreases cannot be made.
In order to calculate the proposed budget components based on
application to the controls discussed above, EPA applied 70 percent
reduction controls for boilers greater than 250 MMBtu/hour and other
large sources (see TSD for details). Boiler size was determined on an
SCC basis (i.e., the same level of control was applied to all boilers
within a specific SCC regardless of the size of individual boilers). In
addition, EPA applied RACT controls for sources not classed ``large''
and emitting between 1-2 tons per day; these reductions are generally
in the range of 25-50 percent emissions decrease. Where information on
boiler size was not available, EPA assumed that the source was medium-
sized and applied RACT controls. For other medium- and large-sized
nonutility sources, EPA applied 70 percent reduction controls where
information on size of sources was available, and RACT controls for the
remaining sources (see Budget TSD for details). Due to the lack of data
in the inventories, especially for internal combustion engines and
turbines, EPA could not base a budget calculation precisely on OTAG's
recommendation of 70 percent reduction for large sources.
The proposed procedures for calculating seasonal emissions for
these sectors differs from that used for utilities because, unlike
utilities, day specific emissions are not available for each day of the
season. In general, a three-step process is proposed to obtain summer
season emission totals for the area and nonutility sectors. First, OTAG
emissions reflecting the above controls are obtained for ``typical''
summer weekday, Saturday, and Sunday operating conditions for each
sector for each State. The underlying procedures and assumptions used
for deriving these emissions are described in the OTAG Emissions
Inventory Development Reports (8). Second, the weekday

[[Page 60355]]

emissions are multiplied by 109 (the total number of weekdays in the
period May 1 through September 30), and the Saturday and Sunday
emissions are each multiplied by 22 (the total number of weekends in
the 5-month season). In the third step, these estimates are summed for
each day-type to get the summer season total emissions by sector by State.
c. Summary and Proposed Area and Nonutility Point Source Budget
Components. The resulting proposed nonutility point and area budget
components are contained in Table III-7 below along with a comparison
for nonutility point sources to the 2007 CAA base. The area budget
components are not compared to the 2007 base because no reductions were
calculated for this budget sector. For the nonutility point sources,
EPA applied controls that approximate the OTAG recommendations. For the
area and nonutility sectors, we used the summer weekday, Saturday, and
Sunday emissions that were available in the OTAG data base for these
control levels. The OTAG growth assumptions were used for area and
nonutility point source sectors.

Table III-7.--Proposed Budget Components for Nonutility Point and Area Sectors
[Tons of NO^X per Ozone Season]
----------------------------------------------------------------------------------------------------------------
2007 CAA base 2007 Budget components Percent
------------------------------------------------ reduction
State ---------------
Nonutility Nonutility Area Nonutility
point point point
----------------------------------------------------------------------------------------------------------------
Alabama......................................... 47,182 25,131 25,229 47
Connecticut..................................... 4,732 4,475 4,587 5
Delaware........................................ 5,205 3,206 1,035 38
District of Columbia............................ 312 312 741 0
Georgia......................................... 34,012 20,472 11,901 40
Illinois........................................ 63,642 39,855 7,270 37
Indiana......................................... 51,432 35,603 25,545 30
Kentucky........................................ 18,817 12,258 38,801 35
Maryland........................................ 6,729 4,825 8,123 28
Massachusetts................................... 10,683 7,590 10,297 29
Michigan........................................ 57,190 35,317 28,126 38
Missouri........................................ 12,248 8,174 6,626 33
New Jersey...................................... 32,663 26,741 11,388 18
New York........................................ 19,889 16,930 15,585 15
North Carolina.................................. 32,107 21,113 9,193 34
Ohio............................................ 50,946 32,799 19,446 36
Pennsylvania.................................... 64,224 59,622 17,103 7
Rhode Island.................................... 328 328 420 0
South Carolina.................................. 34,791 20,097 8,420 42
Tennessee....................................... 65,051 32,138 11,991 51
Virginia........................................ 23,333 15,529 25,261 33
West Virginia................................... 41,510 31,377 4,901 24
Wisconsin....................................... 21,209 12,269 10,361 42
---------------------------------------------------------------
Total................................... 698,235 466,158 302,350 33
----------------------------------------------------------------------------------------------------------------

5. Proposed Assumptions for Highway Vehicles
a. Affected Entities. The highway vehicle sector encompasses those
sources that normally operate on roads and highways. All light-duty
cars and trucks, medium-duty trucks, heavy-duty trucks, motorcycles,
and buses are included in this category. NO_X emissions from
these sources, including the effects of the fuel used to power these
sources, are included in the estimate of emissions from the highway
vehicle sector. These estimates also incorporate the effects of
emission control programs which are intended to reduce emissions from
these sources.
b. Methodology Used to Develop the Proposed Highway Vehicle Budget
Component
i. Budget Component Determination Method and Alternatives
Considered. The EPA proposes to derive States' highway vehicle budget
component by estimating the State-by-State NO_X emissions
from highway vehicles in 2007. These estimates were developed by
modeling the emissions expected in 2007 from all highway vehicles. The
estimates are based on: (1) a projection for each State's number of
vehicle-miles-traveled (VMT) by vehicle category in 2007, as described
in section III.B.5.b.iii; and (2) the estimated emission rate for each
vehicle category in 2007, assuming implementation of those measures
incorporated in existing SIPs, measures already implemented federally,
and those additional measures expected to be implemented federally. The
additional Federal measures include:
• National Low Emission Vehicle Standards
• 2004 Heavy-Duty Engine Standards
• Revisions to Emissions Test Procedure.
These measures either have been promulgated in final form or are
expected to have been promulgated by the time today's proposal is made
final. All of these measures are expected to be implemented nationwide
or in the 49 States other than California and hence would be in effect
in those States required to submit a transport SIP under this proposal.
Since these measures would be in effect as of 2007, EPA believes it is
appropriate to reflect the impact of these measures in 2007 in
calculating States' highway vehicle budget components and proposes to
do so. However, it should be noted that the NLEV program is a voluntary
program that will not take effect until the Northeastern States and the
auto manufacturers agree to participate. While EPA expects such an
agreement to be reached, the Agency acknowledges that such an agreement
is not certain at the current time. Should the

[[Page 60356]]

Northeastern States and the auto manufacturers fail to agree to
implement NLEV, EPA proposes to revise States' highway vehicle budget
components and overall NO_X budgets accordingly. This
revision would increase States' NO_X budgets. The EPA
requests comment on this proposal.
The EPA proposes not to incorporate in its calculation of the
highway vehicle budget component any benefits from Tier 2 light-duty
vehicle standards. The Agency's decision to go forward with such
standards is contingent on the determination that such standards are
necessary to achieve air quality objectives and can be done so in a
cost-effective manner. The EPA is currently engaged in an investigation
of these and other issues related to Tier 2 standards, and it is
premature to assume that such standards will be implemented prior to
2007. Therefore, EPA cannot at this time model the impact of a
potential set of Tier 2 standards on emissions from affected States in
2007. If such standards are promulgated and implemented prior to 2007,
EPA proposes to adjust States' highway vehicle budget components and
overall NO_X budgets accordingly to reflect implementation of
these standards. The EPA requests comment on this approach for Tier 2
emission standards.
The EPA proposes to assume full implementation of other highway
vehicle emission control programs as required by the CAA or contained
in existing SIPs and maintenance plans in calculating each State's
highway vehicle budget component for the purpose of establishing a
statewide NO_X emission budget. This proposal would encompass
I/M programs, Federal Phase II RFG, Clean Fuel Fleet programs, and
other programs intended to reduce NO_X emissions from highway
vehicles. The EPA further proposes to assume continued participation in
the RFG program by the mandatory RFG areas and by those areas which
have opted into the program. The EPA requests comment on the
appropriateness of these proposals. In particular, EPA requests comment
on whether the extent of the RFG coverage area chosen in calculating
the highway vehicle budget component is appropriate, and on whether the
normally-required NO_X reductions from I/M programs in those
areas whose section 182 waivers currently exempt them from the I/M
NO_X performance standard should be assumed when calculating
State highway vehicle budget components and overall NO_X
budgets.
States have the discretion to adopt additional mobile source
control measures as part of their transport SIP revision in order to
meet their NO_X budget or to meet other air quality
obligations. The EPA agrees with OTAG that States should consider such
control measures as RFG, I/M programs, and transportation control
measures beyond those already included in State SIPs. These measures
are applied and implemented locally rather than nationally, and in some
cases their specific features are designed locally as well. The EPA
recognizes that States and localities have more detailed information on
which to base any decision to expand these programs beyond their
current extent than does EPA. State and local decisions to expand these
programs can be based on the unique characteristics of local areas and
the nature of the ozone challenges they face. In particular, these
programs provide VOC reductions larger than the NO_X
reductions they provide, and the OTAG modeling suggests that VOC
reductions affect local ozone levels but have limited impact on
downwind ozone levels. The EPA believes these programs may be
attractive to many States and localities because they can offer large
reductions in VOC, CO, and toxics emissions, in addition to reductions
in NO_X emissions, at a relatively modest cost. Hence States
may want to adopt these or other local measures to achieve or maintain
local ozone or CO attainment or to reduce exposure to toxic air
pollutants, as well as to meet their obligations for NO_X
reductions to meet their statewide NO_X budget. States which
choose to do so may be able to adopt less-stringent controls on other
sectors while still meeting their obligations to reduce NO_X
emissions as described in this rulemaking. For the reasons discussed
above, EPA is not proposing to reduce the budgets to assume further
controls from Federal or State motor vehicle measures. The
NO_X reductions alone from those measures do not appear
sufficiently cost effective in all of the areas that would be subject
to reduced budgets, since for some areas there is no need for local
ozone or CO reductions.
ii. Activity Level Projections and Growth Considerations. The EPA
proposes to use the best available projections of State VMT levels in
2007 in calculating States' budget components for the highway vehicle
sector. For the purposes of providing estimates in today's action, EPA
has used the 2007 projections developed by OTAG. The OTAG projections
were based on actual 1990 VMT levels for each State, based on State
submittals to OTAG where available or on estimates generated by the
Highway Performance Monitoring System (HPMS) otherwise. These base year
VMT levels were then projected to 2007, using growth rates agreed to or
in some cases supplied by the State. The EPA proposes to use the state-
specific estimates of VMT growth by vehicle category through 2007, as
developed in the OTAG process, in calculating States' highway vehicle
budget components and overall NO_X budgets. In most cases,
States accepted OTAG-proposed growth estimates equal to those used by
the Agency in the October 1995 edition of its annual report, ``National
Air Pollutant Emission Trends'' (16), although several States submitted
(and the OTAG inventory incorporated) growth estimates that were
significantly lower than the growth estimates used by the Agency in its
1995 Trends report. One State submitted growth estimates that were
higher than the 1995 Trends report growth estimates.
The EPA has considered a number of options to forecast highway VMT
levels in 2007. For today's proposal, EPA has chosen to use the
projected VMT levels used by OTAG. As discussed above, most of those
growth rate estimates were consistent with EPA's estimates in its
Trends report.¹⁴ Furthermore, the open, collaborative OTAG
process allowed interested parties to review VMT and VMT growth
estimates when constructing future year emission estimates. The EPA
encourages each State subject to today's action to review the OTAG 1990
VMT levels and VMT growth projections again; EPA also requests each
affected State to review these projections for consistency with other
State projections, including projections used in SIPs for nonattainment
areas. The EPA expects that all involved State and local agencies will
coordinate and concur on any new VMT growth rate submissions, as should
be the case when growth rates are developed for use in SIP revisions
containing VMT and emissions projections. The EPA proposes to
incorporate revised VMT growth projections received from States during
the comment period of today's action into its final rule, if
appropriately explained and documented.
---------------------------------------------------------------------------

\14\ The Trends report method projects national VMT based on a
growth rate of about 2% per year and allocates VMT to States based
on Census Bureau forecasts of population levels in each State.
---------------------------------------------------------------------------

The EPA further proposes to use actual 1995 VMT levels as the base
year for the 2007 inventory projections in the final rule, rather than
continuing to rely on the 1990 VMT levels. The Agency believes that the
accuracy of projected 2007 VMT levels would be improved by

[[Page 60357]]

using a more recent base year, since the impact of any deviation
between projected and actual growth rates through 2007 would be
reduced. For this reason, EPA proposes to use and requests States to
submit VMT data for 1995. The EPA requests comment on this proposal to
use actual 1995 VMT levels as the base year for projecting 2007 VMT levels
and on the use of 1990 VMT levels as the base year in today's action.
iii. Seasonal/Weekday/Weekend Adjustment. The EPA proposes to
project States' highway vehicle budget components during the 2007 ozone
season based on the actual number of weekday and weekend days during
the 2007 ozone season. The OTAG inventory projections, by contrast,
were based on the actual number of weekend and weekday days during the
specific ozone episodes modeled by OTAG. The VMT levels on weekdays
differ from VMT levels on weekend days, all other things being equal,
so it is important to use the proper proportion of weekdays and weekend
days when developing highway vehicle budget components and overall
State NO_X budgets. Since States must demonstrate compliance
with their NO_X budgets over the entire ozone season in 2007,
EPA believes that the actual number of weekdays and weekend days during
the 2007 ozone season should be used to calculate highway vehicle
budget components and overall State NO_X budgets. The EPA
requests comment on this proposal.
The EPA also proposes to base its calculation of State highway
vehicle budget components and overall NO_X budgets on the
average temperatures for the affected months. The OTAG projections are
based on the actual daily temperature ranges experienced during the
episodes modeled by OTAG. These temperature ranges may not be
representative of the typical temperatures experienced during the whole
ozone season as defined in today's action, since ozone episodes tend to
occur during periods of above-average temperature. The estimated
highway vehicle budget components presented in Table III-8 are based on
the OTAG temperature ranges and hence are based on temperatures that
may be higher than the average temperatures experienced during the 5
ozone season months. In its final rulemaking, EPA will revise its
highway vehicle budget components to reflect the average temperatures
for the affected months. The impact of these temperature differences on
highway vehicle budget components is expected to be modest, because
even large differences in summer temperatures have only a modest effect
on estimated NO_X emissions from highway vehicles. For
example, as temperature goes from 75 to 95 degrees Fahrenheit,
NO_X emissions increase by approximately 4 percent. The
actual difference between summer average and ozone-episode temperature
ranges is considerably smaller than 20 degrees Fahrenheit, so the size
of the temperature adjustment described above would be correspondingly
smaller. The EPA requests comment on the appropriateness of this
adjustment and on its proposed use of ozone season average temperatures
instead of ozone-episode temperatures in developing States' highway
vehicle budget components and overall NO_X budget.
iv. Comparison to OTAG Recommendations. The set of presumptive
controls modeled by EPA to develop the highway vehicle budget
components and overall NO_X budgets is consistent with the
OTAG recommendations. The OTAG supported expeditious implementation of
Federal measures, including those listed above. The OTAG also
recommended the continued use of RFG in the mandated and current opt-in
areas, as reflected in EPA's proposed method for calculating highway
vehicle budget components. The OTAG supported State flexibility to opt
into the RFG program and encouraged areas which face local
nonattainment, maintenance, or downwind transport challenges to opt
into the RFG program. The EPA proposes to provide States with such
flexibility in devising strategies to meet the NO_X budgets
outlined in section III.C. The EPA believes that Federal Phase II RFG
can provide cost-effective reductions in ozone precursors, since it
will reduce emissions of both VOC and NO_X. Phase II RFG can
provide VOC and NO_X reductions at a cost of $2600-3500 per
ton, depending on the amount of fuel affected by any expansion of the
program offer. Hence EPA encourages States to consider adopting Federal
Phase II RFG in areas eligible to opt into the program as part of their
revised SIP.
The OTAG further recommended that ``The USEPA should adopt and
implement by rule an appropriate sulfur standard to further reduce
emissions and assist the vehicle technology/fuel system [to] achieve
maximum long term performance.'' The EPA is engaged in an extensive
evaluation of gasoline-based emission controls as part of its work to
evaluate the need for and benefits and costs of Tier 2 vehicle emission
standards. This evaluation includes an examination of the costs and
benefits of gasoline sulfur control. At this time, however, EPA has not
yet defined, quantified, or evaluated the impact of sulfur control.
Furthermore, EPA has not at this time decided whether to require sulfur
reductions. Therefore, EPA believes it is not appropriate to assume
such reductions when calculating highway vehicle budget components or
overall NO_X budgets. If the Agency does establish gasoline
sulfur standards, EPA proposes to adjust State highway vehicle budget
components and overall State NO_X budgets to reflect the
emissions impact of such standards on NO_X emissions from
highway vehicles in 2007. The EPA requests comment on this proposal.
The OTAG also recommended that EPA should evaluate the potential
for reformulation of diesel fuel for reducing NO_X emissions
from highway and nonroad diesel engines. The EPA is engaged in an
examination of the need for and potential benefits of diesel fuel
reformulation as part of its assessment of the feasibility of its
proposed 2004 heavy-duty highway vehicle standards. At the present
time, however, EPA does not have sufficient information to adequately
quantify the potential of diesel fuel reformulation to reduce
NO_X emissions or to determine the costs of various
reformulation strategies. Hence EPA has not incorporated any emission
reductions from diesel fuel reformulation in its calculation of highway
vehicle budget components or overall NO_X budgets. The EPA
will continue to evaluate the potential of diesel fuel reformulation to
reduce NO_X emissions and enable the proper functioning of
engine-based emission controls through the collaborative process
developed as a result of the 1995 Statement of Principles. If EPA does
promulgate requirements to reformulate diesel fuel, EPA proposes to
revise at that time States' highway vehicle budget components and
overall NO_X budgets to reflect the projected impact of the
required diesel fuel reformulation on NO_X emission from
highway vehicles.
The OTAG called on the States to adopt inspection and maintenance
programs where required by the CAA. This recommendation is reflected in
EPA's proposed method of calculating the highway vehicle emissions, as
discussed above. The OTAG also called on the States to consider
expanding I/M programs to urbanized areas of greater than 500,000
population in the ``fine grid'' portion of the OTAG region. The EPA
believes that properly designed and operated I/M programs are a
practicable and cost-effective means of reducing ozone precursors.
These programs provide VOC reductions as large or larger than the
NO_X reductions

[[Page 60358]]

they provide, while the OTAG modeling suggests that VOC reductions
affect local ozone levels but have limited impact on downwind ozone
levels. Therefore, while EPA recognizes that many of the States subject
to today's proposal have already implemented or plan to implement I/M
programs, and while EPA encourages the States to consider extending I/M
programs in other areas to reduce ozone precursors as part of their
attainment and maintenance strategy, EPA proposes not to assume
expansion of currently-required I/M programs in calculating States'
highway vehicle budget components or overall NO_X budgets.
The EPA requests comment on this proposal. Notwithstanding this
proposal, because I/M programs cause reductions in NO_X
emissions implicated in ozone transport, EPA encourages the States to
consider implementing effective I/M programs in other areas as part of
their transport SIP.
c. Summary and Proposed Highway Vehicle Budget Components. The
highway vehicle budget components presented in Table III-8 were
developed by evaluating the emissions that would result in 2007 when
existing CAA requirements are met and additional Federal measures are
implemented. These estimates are based on the 1990 VMT levels and
growth rates supplied to OTAG by the States.

Table III-8. Budget Components for Highway Vehicles
[Tons of NO^X per Ozone Season]
----------------------------------------------------------------------------------------------------------------
Proposed
State 2007 CAA base budget Percent
component reduction
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 61,205 56,601 8
Connecticut..................................................... 23,446 17,392 26
Delaware........................................................ 8,867 8,449 5
District of Columbia............................................ 3,081 2,267 26
Georgia......................................................... 88,363 77,660 12
Illinois........................................................ 91,656 77,690 15
Indiana......................................................... 72,294 66,684 8
Kentucky........................................................ 49,789 46,258 7
Maryland........................................................ 39,941 28,620 28
Massachusetts................................................... 35,308 23,116 35
Michigan........................................................ 91,449 81,453 11
Missouri........................................................ 61,778 55,056 11
New Jersey...................................................... 55,783 39,376 29
New York........................................................ 114,234 94,068 18
North Carolina.................................................. 80,955 73,056 10
Ohio............................................................ 104,422 92,549 11
Pennsylvania.................................................... 81,805 73,176 11
Rhode Island.................................................... 7,566 5,701 25
South Carolina.................................................. 53,566 49,503 8
Tennessee....................................................... 72,907 67,662 7
Virginia........................................................ 88,792 79,848 10
West Virginia................................................... 23,267 21,641 7
Wisconsin....................................................... 46,390 41,651 10
-----------------------------------------------
Total..................................................... 1,356,864 1,179,477 13
----------------------------------------------------------------------------------------------------------------

d. Conformity. The CAA section 176 (c) requires federally supported
activities to conform to the purpose of the SIP. Specifically, the
Federal government cannot support an activity that causes or worsens
air quality violations or delays attainment. Conformity applies to
nonattainment and maintenance areas.
The CAA establishes several more specific requirements regarding
how conformity of Federal highway and transit activities must be
determined. For example, the emissions expected from the implementation
of transportation plans and programs must be consistent with estimates
of emissions from highway vehicles and necessary emissions reductions
contained in the SIP. The EPA has promulgated regulations (40 CFR parts
51 and 93) to implement the general and transportation-related
conformity requirements.
The EPA proposes that neither the highway vehicle budget components
nor the overall NO_X budgets proposed in this rulemaking
change the existing conformity process or existing SIPs' motor vehicle
emissions budgets under the conformity rule. The EPA does not believe
that Federal agencies or Metropolitan Planning Organizations (MPOs)
operating in States subject to today's proposal must demonstrate
conformity to the proposed budgets or the highway vehicle budget
component levels used to calculate the budgets. Whereas the conformity
provisions in section 176(c) of the CAA apply to nonattainment and
maintenance areas, the States' emission budgets apply statewide.
Without greater geographic disaggregation in the SIP, Federal agencies
and MPOs will not be able to determine consistency with the emission
estimates in the transport SIP revision being requested in today's
proposal. Furthermore, EPA does not believe that consistency with the
statewide emissions estimates in transport SIPs can be used to
determine whether or not a transportation or other Federal activity
will cause or worsen local air quality violations. The statewide budget
does not represent the level of emissions necessary for attainment or a
reasonable further progress milestone. In contrast, attainment
demonstrations, 15 percent SIPs, post-1996 rate-of-progress, and
maintenance plans--SIPs to which EPA requires conformity--do contain
motor vehicle and other emissions estimates on which the attainment,
maintenance, or progress demonstration depends.

[[Page 60359]]

6. Proposed Assumptions for Nonroad Sources
a. Affected Entities. The nonroad sector encompasses those mobile
sources that normally do not operate on roads and highways. This sector
includes recreational and commercial marine engines; small engines such
as those used to power snowmobiles, chainsaws, or lawn and garden
equipment; larger nonroad engines such as those used to power
agricultural equipment, construction equipment, industrial/commercial
equipment (forklifts, pumps, compressors, generator sets), and mining
equipment; aircraft, and locomotives. Emissions from these sources,
including the effects of the fuel used to power these sources, would be
included in the estimate of emissions from the nonroad sector. These
estimates would also incorporate the effect of emission control
programs which are intended to reduce emissions from these sources.
b. Methodology Used to Determine the Proposed Nonroad Budget Component.
i. Budget Component Determination Method and Alternatives
Considered. The EPA proposes that the States' nonroad budget component
be derived by estimating the State-by-State NO_X emissions
from nonroad engines in 2007. These estimates would be developed by
modeling the emissions expected in 2007 from all nonroad engines. The
estimates would be based on: (1) a projection for each State's number
of engines of each type and application in 2007; (2) a projection of
the level of activity for each type and application of nonroad engine
in 2007; and (3) the estimated emission rate for each engine type and
application in 2007, assuming implementation of those measures
incorporated in existing SIPs, measures already implemented federally,
and those additional measures expected to be implemented federally. The
additional Federal measures include:
• Federal Small Engine Standards, Phase II.
• Federal Marine Engine Standards (for diesels > 50 horsepower).
• Federal Locomotive Standards.
• 1997 Proposed Nonroad Diesel Engine Standards.
All of these measures either have been proposed or are expected to
be proposed in the near future and are sufficiently well-defined to
model their emission impacts in 2007. These measures are expected to be
implemented nationwide and hence would be in effect in those States
required to submit a SIP under this proposal. Since these measures
would be in effect as of 2007, EPA believes it is appropriate to
reflect the impact of these measures in 2007 in calculating States'
nonroad budget components and proposes to do so.
States have the discretion to adopt additional nonroad control
measures as part of their transport SIP revision in order to meet their
NO_X budget or to meet other air quality obligations. The EPA
agrees with OTAG that States should consider such control measures as
RFG, scrappage programs, and activity level control measures beyond
those already included in State SIPs. These measures are applied and
implemented locally rather than nationally, and in some cases their
specific features are designed locally as well. The EPA recognizes that
States and localities have more detailed information on which to base
any decision to expand these programs beyond their current extent than
does EPA. State and local decisions to expand these programs can be
based on the unique characteristics of local areas and the nature of
the ozone challenges they face. In particular, some of these programs
tend to provide VOC reductions that are larger than the NO_X
reductions they provide, along with significant CO, toxics, and
particulate matter reductions. The OTAG modeling suggests that VOC
reductions affect local ozone levels but have limited impact on
downwind ozone levels. Hence States may want to adopt these measures to
help achieve or maintain local attainment, as well as to help meet
their obligation to mitigate transport. States which choose to do so
may be able to adopt less-stringent controls on other sectors while
still complying with their overall budget.
ii. Activity Level Projections and Growth Considerations. The EPA
proposes to use the best available projections of State nonroad
activity levels in 2007 in calculating States' budget components for
the nonroad sector. For the purposes of providing estimates in today's
action, EPA has used the 2007 projections developed by OTAG. The OTAG
projections were based primarily on estimates of actual 1990 nonroad
activity levels found in the October 1995 edition of EPA's annual
report, ``National Air Pollutant Emission Trends.'' Several States
submitted estimates of their 1990 nonroad activity levels that differed
from these estimates. The OTAG growth rates were based on growth
projections issued by the Bureau of Economic Affairs and hence were
consistent with those used by the Agency in its October 1995 ``Trends''
report. At the present time, EPA considers the growth estimates to be
reasonable; however, the Agency requests comment on its proposal to use
the OTAG growth projections of nonroad activity levels in calculating
the nonroad budget components and overall NO_X budgets for
those States subject to today's proposal. The basis of the OTAG growth
projections is explained in greater detail in OTAG's Emission Inventory
Development Report, Volume I, pages 11-13.
The EPA encourages each State subject to today's proposal to review
the OTAG nonroad growth projections again; EPA also requests each
affected State to review these projections for consistency with other
State projections, including projections used in SIPs for nonattainment
areas. The EPA expects that all involved State and local agencies will
coordinate and concur on any new nonroad growth rate submissions, as
should be the case when growth rates are developed for use in SIP
revisions containing nonroad activity level and emissions projections.
The EPA proposes to incorporate revised nonroad growth projections
received from States during the comment period of today's proposal into
its final rule, if appropriately explained and documented. The EPA
requests comment on these proposals.
The EPA further proposes to use estimated historical 1995 nonroad
activity levels as the base year for the 2007 inventory projections in
the final rule, rather than continuing to rely on the 1990 nonroad
activity levels. The Agency believes that the accuracy of projected
2007 nonroad activity levels would be improved by using a more recent
base year, since the impact of any deviation between projected and
actual growth rates through 2007 would be reduced. For this reason, EPA
proposes to use its 1997 ``Trends'' estimate of 1995 nonroad activity
levels in its final rulemaking and requests comment on this proposal.
The EPA also requests comment on its proposal to use actual 1995
nonroad activity levels as the base year for projecting 2007 nonroad
activity levels and on the use of 1990 nonroad activity levels as the
base year in today's action.
iii. Seasonal/Weekday/Weekend Adjustment. The EPA proposes to
project States' nonroad budget components during the 2007 ozone season
based on the actual number of weekday and weekend days during the 2007
ozone season. The OTAG inventory projections, by contrast, were based
on the actual number of weekend and weekday days during the specific
ozone episodes modeled by OTAG. Nonroad activity levels on weekdays
differ from levels on weekend days, all

[[Page 60360]]

other things being equal, so it is important to use the proper
proportion of weekdays and weekend days when developing nonroad budget
component levels and overall State NO_X budgets. Since States
must demonstrate compliance with their NO_X budgets over the
entire ozone season in 2007, EPA believes that the actual number of
weekdays and weekend days during the 2007 ozone season should be used
to calculate budget components and overall State NO_X
budgets. The EPA requests comment on this proposal.
The EPA also proposes to base its calculation of the State nonroad
budget components and overall NO_X budgets on the average
temperatures for the affected months. The OTAG projections are based on
the actual daily temperature ranges experienced during the episodes
modeled by OTAG. These temperature ranges may not be representative of
the typical temperatures experienced during the whole ozone season as
defined in today's proposal, since ozone episodes tend to occur during
periods of above-average temperature. The estimated nonroad emissions
presented in Table III-9 are based on the OTAG temperature ranges and
hence are based on temperatures that may be higher than the average
temperatures experienced during the five ozone season months. In its
final rulemaking, EPA will revise its nonroad budget components and
overall NO_X budgets to reflect the average temperatures for
the affected months. The impact of these temperature differences on
nonroad budget components and overall NO_X budgets is
expected to be modest, because even large differences in summer
temperatures have only a modest effect on estimated nonroad NO_X
emissions. The EPA requests comment on the appropriateness of this
adjustment and on its proposed use of ozone season average temperatures
instead of ozone-episode temperatures in developing States' nonroad budget
components and overall NO_X budget.
iv. Comparison to OTAG Recommendations. The set of presumptive
controls modeled by EPA to develop the nonroad sector budget components
for each State is consistent with the OTAG recommendations. The OTAG
supported expeditious implementation of Federal measures, including
those listed above. The OTAG also recommended the continued use of RFG
in the mandated and current opt-in areas, as reflected in EPA's
proposed method for calculating the nonroad budget components. As
discussed in section III.B.5, OTAG supported State flexibility to opt
into the RFG program and encouraged areas which face local
nonattainment, maintenance, or downwind transport challenges to opt
into the RFG program. Although current EPA guidance indicates that
Phase II RFG will not reduce NO_X emissions from nonroad
engines, Phase II RFG will offer significant VOC emission reduction
benefits from nonroad engines. As discussed in section III.B.5, EPA
encourages States to consider adopting Federal Phase II RFG in areas
eligible to opt into the program as part of their revised SIP.
Current EPA guidance also indicates that changes in fuel sulfur
levels, including any changes that may result from EPA's Tier 2 study,
would not affect NO_X emissions from gasoline-powered nonroad
equipment since such equipment is not equipped with catalytic
converters. Hence EPA proposes not to change States' nonroad budget
components if EPA should promulgate sulfur standards as a result of the
Tier 2 study or any other EPA analysis, unless nonroad engines equipped
with catalytic converters begin to be introduced into the U.S.
marketplace. The EPA requests comment on this proposal.
As discussed in section III.B.5, OTAG recommended that EPA should
evaluate the potential for reformulation of diesel fuel for reducing
NO_X emissions from both highway and nonroad diesel engines.
The EPA is engaged in an examination of the need for and potential
benefits of diesel fuel reformulation as part of its assessment of the
feasibility of its proposed 2004 heavy-duty highway vehicle emission
standards but has not as of this writing completed its examination.
Furthermore, EPA does not have sufficient information at the present
time to quantify adequately the potential of diesel fuel reformulation
to reduce NO_X emissions from nonroad diesel engines or to
determine the costs of various reformulation strategies. For these
reasons, EPA has not incorporated any emission reductions from diesel
fuel reformulation in its calculation of States' nonroad budget
components. If EPA does promulgate requirements to reformulate diesel
fuel, EPA will evaluate whether additional research to determine the
impact of diesel fuel reformulation on NO_X emissions from
nonroad engines is needed. The EPA proposes to defer any consideration
of revisions to States' nonroad sector budget components and overall
NO_X budgets to reflect the impact of diesel fuel
reformulation on NO_X emission from nonroad engines until
such time as diesel fuel reformulation standards, and the effect of
those standards on nonroad engine NO_X emissions, have been
adequately defined. The EPA requests comment on this proposal.
c. Summary and Proposed Nonroad Budget Components. The nonroad
mobile sources sector budget components presented in Table III-9 were
developed by evaluating the emissions that would result in 2007 when
existing CAA requirements are met and additional Federal measures are
implemented. These estimates are based on the 1990 activity levels and
growth rates supplied to OTAG by the States.

Table III-9.--Budget Components for Nonroad Sources
[Tons of NO^X per Ozone Season]
----------------------------------------------------------------------------------------------------------------
Proposed
State 2007 CAA base budget Percent
component reduction
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 21,742 18,727 14
Connecticut..................................................... 11,679 9,581 18
Delaware........................................................ 4,663 4,262 9
District of Columbia............................................ 3,609 3,582 1
Georgia......................................................... 27,151 22,714 16
Illinois........................................................ 66,122 56,429 15
Indiana......................................................... 30,489 27,112 11
Kentucky........................................................ 25,327 22,530 11
Maryland........................................................ 21,717 18,062 17
Massachusetts................................................... 22,865 19,305 16
Michigan........................................................ 29,005 24,245 16

[[Page 60361]]

Missouri........................................................ 22,582 19,102 15
New Jersey...................................................... 25,150 21,723 14
New York........................................................ 35,934 30,018 16
North Carolina.................................................. 22,867 18,898 17
Ohio............................................................ 46,214 42,032 9
Pennsylvania.................................................... 33,707 29,176 13
Rhode Island.................................................... 2,511 2,074 17
South Carolina.................................................. 15,446 12,831 17
Tennessee....................................................... 54,710 47,065 14
Virginia........................................................ 29,160 25,357 13
West Virginia................................................... 10,966 10,048 8
Wisconsin....................................................... 19,208 15,145 21
-----------------------------------------------
Total..................................................... 582,824 500,018 14
----------------------------------------------------------------------------------------------------------------

C. State-by-State Emissions Budgets

The EPA is proposing a statewide emission budget for the year 2007
for each State covered by today's action. The proposed statewide
budgets were calculated by summing the budget components which were
calculated as described above. Budget components were calculated for
the following five sectors: electric utility, nonutility point, area,
nonroad engines, and highway vehicles.
The proposed overall budgets to be achieved by 2007 include
reductions from all Federal programs that would continue to result in
emission reductions from the compliance date for the State-adopted
rules (between September 2002 and September 2004 that EPA establishes
in its final rulemaking) to 2007. In 2007, EPA plans to begin a
reassessment of transport. At that time, EPA will determine how any new
data and tools (such as new air quality models) should be incorporated.
The portion of the budget over which States have control (i.e., the
non-Federal portion) would have to be implemented between September
2002 and September 2004. These concepts are fully discussed in section
V, SIP Revisions and Approvability Criteria, of this rulemaking.
The proposed State-by-State budgets are shown in Table III-10
below. This table compares the proposed budgets to the 2007 CAA
emissions which were the starting point for the calculation.

Table III-10.--Proposed Seasonal NO^X Emissions Budget for States Making a Significant Contribution to Downwind
Ozone Nonattainment
[Tons of NO^X per Ozone Season]
----------------------------------------------------------------------------------------------------------------
2007 CAA Proposed 2007 Percent
State emissions budget reduction
----------------------------------------------------------------------------------------------------------------
Alabama...................................................... 237,062 152,634 36
Connecticut.................................................. 50,159 39,445 21
Delaware..................................................... 30,671 21,342 28
District of Columbia......................................... 8,128 7,054 9
Georgia...................................................... 254,373 162,905 35
Illinois..................................................... 343,742 213,077 38
Indiana...................................................... 357,647 203,734 100
Kentucky..................................................... 261,422 155,667 40
Maryland..................................................... 111,841 70,994 36
Massachusetts................................................ 107,437 73,263 32
Michigan..................................................... 287,827 194,542 32
Missouri..................................................... 195,547 111,890 43
New Jersey................................................... 139,537 104,270 25
New York..................................................... 225,281 181,254 19
North Carolina............................................... 228,395 149,803 34
Ohio......................................................... 406,785 233,584 43
Pennsylvania................................................. 322,034 218,671 32
Rhode Island................................................. 11,599 9,429 19
South Carolina............................................... 155,586 105,941 31
Tennessee.................................................... 276,653 178,173 35
Virginia..................................................... 212,265 162,879 21
West Virginia................................................ 164,362 91,273 44
Wisconsin.................................................... 148,171 95,181 35
--------------------------------------------------
Total.................................................. 334,266,508,374 2,937,005 35
----------------------------------------------------------------------------------------------------------------

[[Page 60362]]

D. Recalculation of Budgets

The EPA is proposing statewide emissions budgets calculated as
described above. The EPA specifically invites public comment on the
overall approach as well as the individual elements that were used in
these calculations (e.g., emission factors, source-specific data, and,
growth assumptions). The EPA is proposing that the same elements and
assumptions used in the EPA budget calculations be used by the States
as they develop revisions to their SIPs in response to today's
proposal. However, EPA recognizes that changes to these individual
elements may be warranted. If changes to any of these elements are
appropriate, based on comments received, EPA proposes recalculating the
budgets with the revised data, as described below. The intention of
this procedure is to take into account new information that would
replace less accurate data previously relied upon. That is, EPA intends
to continue to use the best information available as well as to assure
that the States carry out their plans to reduce emissions so that, in
the end, the transport of ozone and ozone precursors is decreased.
For example, for nonutility point sources, OTAG recommended that
RACT should be considered for individual medium sized nonutility point
sources. The EPA proposed budget calculations generally follow the OTAG
recommendations. Because the definition of RACT may vary from source-
to-source, it is not possible to precisely forecast emissions
reductions due to RACT on a source-specific basis. States, however, may
have source-specific information useful in determining RACT for sources
in their States and may, therefore, provide more precise information.
With respect to the large nonutility point sources, missing data in the
OTAG emissions inventories precludes EPA from precisely following the
recommended definitions of large sources. Thus, States may provide more
precise information for EPA to use in the budget calculations. In such
cases, EPA is proposing to recalculate the budgets to take into account
the better data. New data should be submitted by the end of the public
comment period so that recalculation would occur prior to final
rulemaking on this proposal; if any additional data become available
after EPA's final rulemaking action, such data could be considered
prior to State submittal of revised SIPs. The EPA is soliciting comment
on this approach.
Similarly, with respect to growth assumptions, States should use
the same growth rates EPA used to calculate the proposed budgets,
unless better information indicates that the growth assumptions should
be revised. New data should be submitted by the end of the public
comment period so that recalculation would occur prior to final
rulemaking on this proposal; if any additional data become available
after EPA's final rulemaking action, such data could be considered
prior to State submittal of revised SIPs. Changes in growth that are
the result of clearly identified control strategies which can be shown
to provide real, permanent, and quantifiable changes in growth, such as
programs to reduce VMT, may also be creditable toward meeting the 2007
budget. The EPA is soliciting comment on this approach.
From time to time, EPA updates its models and inventory estimates
to reflect new information. As models change, EPA recognizes that
projected emission levels such as those used to develop the overall
State NO_X budgets and sector-specific budget components
proposed in today's action may change. Furthermore, EPA recognizes that
a set of control strategies which an earlier model projects to result
in a given level of emissions may be estimated to result in a greater
or lesser level of emissions, when evaluated using a newer model, both
in terms of absolute emission levels and the level of emissions
relative to some other set of control strategies. Similar to the
discussion above on source-specific data and growth assumptions, States
should use the same models and inventories EPA used to calculate the
proposed budgets, unless better information indicates that they should
be revised. Changes that are the result of changes in EPA models and/or
inventories may lead to an upward or downward recalculation of the
budget prior to 2007. New data should be submitted by the end of the
public comment period so that recalculation would occur prior to final
rulemaking on this proposal; if any additional data become available
after EPA's final rulemaking action, such data could be considered
prior to State submittal of revised SIPs. The EPA requests comment on
whether the State NO_X budgets and budget components for
specific sectors should be revised when EPA emission and inventory
models change and on whether States' SIP revisions in response to
today's action should be revised. The EPA expects to address this issue
through the process described in section V, SIP Revisions and
Approvability Criteria, to define the reporting and implementation
requirements for today's action.
Finally, it should be noted that it is possible that EPA may
introduce additional Federal measures after State emission budgets are
defined but before 2007. As discussed in this rulemaking, EPA is
proposing to base State NO_X budgets on a calculation of the
NO_X emissions that would result in each affected State in
2007 assuming the implementation of a set of reasonable control
measures. Any additional Federal measures beyond those described in
today's action would be implemented regardless of State action to meet
its transport SIP obligations. The EPA considered two approaches in
this instance: one which would, in effect, provide emissions reduction
credit to the State and one that does not. In the first case, one could
argue that real emissions reductions result from the new Federal
measures and, therefore, the State could receive credits for these
reductions and implement a smaller portion of its planned emission
reductions. In the second approach, the State would be required to
continue to implement the measures in its revised SIP because those
measures continue to be considered reasonable control measures and all
reasonable measures are needed to mitigate transport. The EPA believes
the latter approach is more consistent with the framework of this
proposal. However, EPA requests comment on both of these approaches.
As noted, EPA is proposing to allow recalculation of NO_X
budgets as new information becomes available (e.g., changes in response
to the promulgation of additional Federal standards controlling
NO_X, changes in EPA emission and inventory models, changes
adopted in SIPs in any of the underlying elements or assumptions used
to calculate the State NO_X budget, or less than full
implementation of the NLEV rule). The EPA requests comments on whether
State NO_X budgets and budget components for specific sectors
should be revised in these cases and whether States' SIP revisions in
response to today's action should be revised either at the request of
EPA or upon the initiation of a State.

IV. Implementation of Revised Air Quality Standards

A. Introduction

On July 16, 1997, President Clinton issued a directive to the
Administrator of EPA on implementation of the revised air quality
standards for ozone and particulate matter. In the directive, the
President laid out a plan for how these standards are to be
implemented. A central element in the directive is the incentive it
provides States to act and submit control strategy SIPs early in
exchange for which many areas will

[[Page 60363]]

need little or no additional new local emission reductions beyond those
reductions that will be achieved through the regional control strategy.
This approach avoids additional burdens associated with respect to the
beneficial ozone control measures already under way, while at the same
time achieving public health protection earlier.
The Presidential directive was published in the Federal Register on
July 18, 1997 (62 FR 38421). The parts of the directive's
implementation plan relevant to the regional NO_X reduction
strategy proposed in this rulemaking are described here.

B. Background

Following promulgation of a revised NAAQS, section 107(d)(1) the
CAA provides up to 3 years for State governors to recommend and the EPA
to designate areas according to their most recent air quality. In
addition, under section 172(b) of the CAA, the States will have up to 3
years from a nonattainment designation to develop and submit SIPs to
provide for attainment of the new standard. The EPA anticipates that it
will need the maximum period allowed under the CAA to designate areas
for the 8-hour standard. Thus, EPA will designate areas by July of
2000. Under the Act, States, therefore, would need to submit their
nonattainment SIPs by 2003. Section 172(a) of the CAA then allows up to
10 years plus two 1-year extensions from the date of designation for
areas to attain the revised NAAQS.

C. Implementation Policy

The implementation plan in the Presidential Directive has several
goals. Three of these goals are especially relevant for the
NO_X reduction strategy proposed in this rulemaking:
• Reward State and local governments and businesses that take early
action to reduce air pollution levels through cost-effective approaches.
• Respond to the fact that pollution can travel hundreds of
miles and cross many State lines.
• Minimize planning and regulatory burdens for State and
local governments and businesses where air quality problems are
regional in nature.
To achieve these goals, the implementation plan includes a policy
for areas that attain the 1-hour standard but not the new 8-hour
standard in which EPA will follow a flexible implementation approach
that encourages cleaner air sooner, responds to the fact that ozone is
a regional as well as local problem, and eliminates unnecessary
planning and regulatory burdens for State and local governments. A
primary element of the policy will be the establishment under section
172(a)(1) of the CAA of a special ``transitional'' classification for
areas that participate in the NO_X regional strategy proposed
in this rulemaking and/or that opt to submit early plans addressing the
new 8-hour standard. Because many areas will need little or no
additional new local emission reductions to reach attainment, beyond
those reductions that will be achieved through the regional control
strategy, and will come into attainment earlier than otherwise
required, the EPA will exercise its discretion under the law to
eliminate unnecessary local planning requirements for such areas. The
EPA will revise its rules for new source review (NSR) and conformity so
that States will be able to comply with only minor revisions to their
existing programs in areas classified as transitional. During this
rulemaking, EPA will also reexamine the NSR requirements applicable to
existing nonattainment areas in order to deal with issues of fairness
among existing and new nonattainment areas. The transitional
classification will be available for any area attaining the 1-hour
standard but not attaining the 8-hour standard as of the time EPA
promulgates designations for the 8-hour standard.
Based on the Agency's review of the latest OTAG modeling, a
regional approach, coupled with the implementation of other already
existing State and Federal CAA requirements, will allow the vast
majority of areas that currently meet the 1-hour standard but would not
otherwise meet the new 8-hour standard to achieve healthful air quality
without additional local controls. Of the 96 new counties in the 22-
State plus DC region, 92 are projected to come into attainment as
result of the regional NO_X reductions included in the OTAG
Run 5 modeling run.\15\ A new county is defined as a county that
violates the 8-hour standard but not the 1-hour standard and is not
located in an area for the 1-hour standard designated nonattainment as
of July 1997. (In the docket to this rulemaking is a table with
associated documentation in which EPA lists these 96 new counties in
the 22-State plus DC region with an indication of whether the county is
projected to attain the 8-hour ozone standard based on the OTAG Run 5
modeling run.)
---------------------------------------------------------------------------

\15\ Appendix E contains a description of the controls applied
in run 5.
---------------------------------------------------------------------------

This county information should be understood with two caveats.
First, this list of counties is based on air quality data from 1993-95.
The data from this period will not be the basis for nonattainment area
designations for the 8-hour ozone standard. Those designations will be
made in the 2000 time frame and will be based on the most recent air
quality data available at that time (1997-1999). Therefore, while EPA
expects that the vast majority of new counties will attain as a result
of the NO_X regional control strategy, the number of new
counties may be more or less than the number indicated above. The EPA
is also currently updating this list based on more current air quality
data which will be included in the docket to the final rule.
Second, the estimate of which counties will attain the 8-hour
standard is based on the specific assumptions made by the OTAG in Run
5. Because the proposed budgets are similar but not identical to those
contained in Run 5, the estimate may change when this rule is final and
implemented. In addition, some of the assumptions used to calculate the
proposed budgets may change in response to comments EPA may receive on
various portions of this rulemaking. Therefore, the estimate of which
areas will attain the standards through the final regional
NO_X strategy may be higher or lower than the number
indicated above. In addition, areas in the region covered by the
proposed NO_X reduction strategy in this rulemaking that
would exceed the new standard after the adoption of the regional
strategy, including areas that do not meet the current 1-hour standard,
will benefit as well because the regional NO_X program will
reduce the extent of additional local measures needed to achieve the 8-
hour standard. In many cases these regional reductions may be adequate
to meet CAA progress requirements for a number of years, allowing areas
to defer additional local controls. In the 22-State plus DC region, of
the 124 counties that violate the 8-hour standard which are located in
an area designated nonattainment for the 1-hour standard as of July
1997, 95 are projected to come into attainment of the 8-hour standard
as a result of OTAG Run 5 regional NO_X reductions.\16\ The
caveats noted above for new counties also apply to the information
presented here. (In the docket to this rulemaking is a table with
associated documentation in which EPA lists these 124 counties in the
22-State plus DC region, including an indication of whether the area is
projected to attain the 8-hour ozone standard as a result of regional NO_X

[[Page 60364]]

reductions included in the OTAG Run 5 modeling run.)
---------------------------------------------------------------------------

\16\ Appendix E contains a description of the controls applied
in Run 5.
---------------------------------------------------------------------------

To determine eligibility for the transitional area classification,
ozone areas will follow the approaches described below based on their
status.
1. Areas Eligible for the Transitional Classification
a. Areas attaining the 1-hour standard, but not attaining the 8-
hour standard, that would attain the 8-hour standard through the
implementation of the regional NO_X transport strategy for
the East. Based on the OTAG analyses, areas in the region covered by
this proposal that can reach attainment through implementation of the
regional transport strategy outlined in this rulemaking would not be
required to adopt and implement additional local measures.
When EPA designates these areas under section 107(d), it will place
them in the new transitional classification if they would attain the
standard through implementation of the regional transport strategy and
are in a State that by 2000 submits an implementation plan that
includes control measures to achieve the emission reductions required
by this proposed rule for States in the region covered by this proposed
rule. This is 3 years earlier than an attainment SIP would otherwise be
required. The EPA anticipates that it will be able to determine whether
such areas will attain based on the OTAG and other regional modeling
and that no additional local modeling would be required.
In addition to areas covered by this proposed rule which could
receive the transitional classification, areas in the OTAG region not
required to revise their SIPs in this rulemaking because they do not
significantly contribute to transport may be able to receive the
transitional classification as well. An area in the State could be
eligible for the transitional area classification by submitting a SIP
attainment demonstration in 2000 in which the State adopts
NO_X emissions decreases similar to those EPA proposes to
establish in this rulemaking where NO_X controls are
effective for a given area to demonstrate attainment. The OTAG's
modeling (in particular, OTAG strategy Run 5 described in section
II.B.2, OTAG Strategy Modeling) shows that such a strategy in which a
State adopted NO_X emission decreases similar to those EPA
proposes to establish in this rulemaking would achieve attainment in
most of these areas that would become nonattainment under the 8-hour
standard.
b. Areas attaining the 1-hour standard but not attaining the 8-hour
standard for which a regional transport strategy is not sufficient for
attainment of the 8-hour standard. To encourage early planning and
attainment for the 8-hour standard, EPA will make the transitional
classification available to areas not attaining the 8-hour standard
that will need additional local measures beyond the regional transport
strategy, as well as to areas that are not affected by the regional
transport strategy, provided they meet certain criteria. To receive the
transitional classification, these areas must submit an attainment SIP
prior to the designation and classification process in 2000. The SIP
must demonstrate attainment of the 8-hour standard and provide for the
implementation of the necessary emissions reductions on the same time
schedule as the regional transport reductions. The EPA will work with
affected areas to develop a streamlined attainment demonstration. By
submitting these attainment plans earlier than would have otherwise
been required, these areas would be eligible for the transitional
classification and its benefits and would achieve cleaner air much
sooner than otherwise required.
c. Areas not attaining the 1-hour standard and not attaining the 8-
hour standard. The majority of areas not attaining the 1-hour standard
have made substantial progress in evaluating their air quality problems
and developing plans to reduce emissions of ozone-causing pollutants.
These areas will be eligible for the transitional classification
provided that they attain the 1-hour standard by the year 2000 and
comply with the appropriate provisions of section (a) or (b) above
depending upon which conditions they meet.
2. Areas Not Eligible for the Transitional Classification
Areas that do not attain the 1-hour standard by 2000 are not
eligible for the transitional classification. For these areas, their
work on planning and control programs to meet the 1-hour standard by
their current attainment date (e.g., 2005 for Philadelphia and 2007 for
Chicago) will take them a long way toward meeting the 8-hour standard.
In addition, the regional NO_X reductions proposed in this
rulemaking will also help these areas meet both the 1-hour and 8-hour
standards.
While the additional local reductions that these areas will need to
achieve the 8-hour standard must occur prior to their 8-hour attainment
date (e.g., 2010), for virtually all areas the additional reductions
needed to achieve the 8-hour standard can occur after the 1-hour
attainment date. This approach allows them to make continued progress
toward attaining the 8-hour standard throughout the entire period
without requiring new additional local controls for attaining the 8-
hour standard until the 1-hour standard is attained. These areas,
however, will need to submit an implementation plan within 3 years of
designation as nonattainment for achieving that standard. Such a plan
can rely in large part on measures needed to attain the 1-hour
standard. For virtually all of these areas, no additional local control
measures beyond those needed to meet the requirements of Subpart 2 of
part D and needed in response to the regional transport strategy would
be required to be implemented prior to their applicable attainment date
for the 1-hour standard. Nonattainment areas that do not attain the 1-
hour standard by their attainment date would continue to make progress
in accordance with the requirements of Subpart 2; the control measures
needed to meet the progress requirements under Subpart 2 would
generally be sufficient for meeting the control measure and progress
requirements of Subpart 1 as well.

V. SIP Revisions and Approvability Criteria

A. SIP Revision Requirements and Schedule

For the 1-hour NAAQS, under section 110(k)(5) of the CAA, EPA has
the authority to establish the date by which a State must respond to a
SIP call. This date can be no later than 18 months after the SIP call
is issued in the final rulemaking. The EPA is proposing that the date
for SIP submittal be 12 months after publication of the notice of final
rulemaking. This date is appropriate in light of the fact that States
that are subject to today's rulemaking have already been involved in
the OTAG process. In addition, submitting the transport SIP by this
time will facilitate area-specific SIP planning required under Subpart
2 of CAA. Nonattainment areas required to develop attainment plans need
to know what upwind reductions to expect and when the reductions will
occur. The EPA believes that it is appropriate for all areas subject to
this rulemaking--attainment as well as nonattainment--to meet the same
schedule for making SIP submittals. Upwind attainment area controls are
a critical element for reducing elevated levels of ozone and
NO_X emissions flowing into the downwind nonattainment areas.
For the 8-hour NAAQS, under section 110(a)(1) of the Act, EPA
believes it has the authority to establish different

[[Page 60365]]

schedules for different parts of the section 110(a)(2) SIP revision.
Specifically, EPA proposes to require first the portion of the
110(a)(2) SIP revision that contains the controls required under
section 110(a)(2)(D). The EPA proposes to require that the 110(a)(2)(D)
portions of the SIPs mandated under the 8-hour ozone NAAQS be submitted
within 12 months of the date of final promulgation of this rulemaking.
This will assist areas that are ultimately designated nonattainment for
the 8-hour standard in their SIP planning under section 172(c) of the
CAA and help avoid the kind of delays due to transport that were
experienced by nonattainment areas for the 1-hour standard.
Therefore, under section 110(k)(5) for the 1-hour NAAQS and section
110(a)(1) for the 8-hour NAAQS, a demonstration that each State will
meet the assigned statewide emission budget (including adopted rules
needed to meet the emission budget) must be submitted to EPA as a SIP
revision within 12 months of the date of final promulgation of this
rulemaking. The EPA solicits comment on the time frames described above
and elsewhere in this rulemaking. As discussed in section V.B. of this
rulemaking, EPA will evaluate the SIP based on particular control
strategies selected and whether the strategies as a whole provide
adequate assurance that the budget will be achieved. The SIP revision
should include the following general elements related to the regional
strategy: (1) baseline 2007 statewide NO_X emission inventory
(which includes growth and existing control requirements)-- this would
generally be the emission inventory that was used to calculate the
required statewide budget, (2) a list and description of control
measures to meet statewide budget, (3) fully-adopted State rules for
the regional transport strategy with compliance dates providing for
control between September 2002 and September 2004, depending on the
date EPA adopts in its final rulemaking, (4) clearly documented growth
factors and control assumptions, and (5) a 2007 projected inventory
that demonstrates that the State measures along with national measures
will achieve the State budget in 2007. The control measures must meet
the requirements for public hearing, be adopted by the appropriate
board or authority, and establish by regulation or permit a schedule
and date for each affected source or source category to achieve
compliance. States should follow existing EPA guidance on emission
inventory development and growth projections.
The EPA recognizes that States may need additional detailed
guidance on how to develop effective transport-mitigation SIPs.
Therefore, the EPA intends to establish a work group with States and
affected Federal agencies to determine what types of additional
information and guidance will be helpful. As discussed below, this work
group will also address what types of tracking and reporting procedures
are needed to assure States are making satisfactory progress towards
meeting their required NO_X budget once the SIPs have been
put in place.

B. SIP Approval Criteria

1. Budget Demonstration
In response to the final rulemaking, each State will be required to
submit a SIP revision that clearly demonstrates how the State will
achieve its statewide NO_X budget by 2007. The NO_X
budget demonstration should show how emissions from each sector, or
component, of the NO_X emissions inventory will be addressed
and that the application of the regional strategy along with existing
requirements will allow total NO_X emissions in the State to
be at or below the level of the required NO_X budget by 2007.
In section III, Statewide Emissions Budgets, of this rulemaking,
EPA described the control strategies that EPA used in the development
of the statewide NO_X emissions budgets. The EPA believes
these measures provide the most reasonable, cost-effective means for
mitigating significant interstate transport. In addition, the control
measures are generally consistent with the OTAG control strategy
recommendations. However, States have the flexibility to adopt a
different set of control strategies so long as they achieve the 2007
budget. There are a variety of different control programs that could
provide the necessary NO_X reductions. States may wish to
consider the strategies that EPA used for budget development as a
starting point in developing their specific statewide NO_X
strategy. Where States select different control measures for the
various components of their emissions inventory, they should clearly
define the particular control measures and document the methods used to
estimate emissions reductions from implementation of the measures. For
example, if a State elected to adopt more stringent controls for mobile
sources than were used in EPA's calculation of the statewide budget and
less stringent controls on utilities, the State would identify the
additional regulations that would be applied to the mobile sources and
the different limits that would be applied to utilities. The State
would submit fully adopted rules for those sectors with documentation
of the projected emissions reductions the particular control measures
would achieve, along with the rules for the other sectors, and a
demonstration that the overall control strategy when applied to the
baseline 2007 emissions inventory would achieve the statewide 2007
emission budget. The entire NO_X emissions inventory must be
accounted for in the demonstration.
As discussed in section III.D, Recalculation of Budgets, if a State
has more precise growth estimates and control assumptions that it
wishes to use in developing its NO_X budget demonstration,
and EPA agrees they are appropriate, EPA will recalculate the statewide
budget based on those revised numbers. Because any justifiable lower
growth estimates from the State would be used in EPA's budget
calculation, lower growth could not be considered as part of a State's
NO_X control strategy to attain the budget (unless the change
in growth is the result of clearly identified control strategies which can
be shown to provide real, permanent, and quantifiable changes in growth).
2. Control Strategies
All the control strategies a State selects to meet its
NO_X budget must provide real, permanent, quantifiable, and
enforceable reductions. These attributes are consistent with those
required of all SIP revisions (40 CFR part 51). Control strategies are
generally composed of enforceable limits or measures applied to a
source or group of sources (i.e., sector) for the purpose of reducing
emissions. Control strategies may be expressed as either a tonnage
limit, an emission rate, or a specific technology or measure.
Considerations in addition to compliance with its NO_X
budget, such as local impacts, may lead to selection of a particular
strategy over others. In terms of staying within an emissions budget,
the effectiveness of the different strategies vary significantly. A
control strategy that employs a fixed tonnage limitation (or cap) for a
source or group of sources provides the greatest certainty that a
specific level of emissions will be attained and maintained. With
respect to transport of pollution, an emissions cap also provides the
greatest assurance to downwind States that air emissions from upwind
States will be effectively managed over time. Control strategies
designed and enforced as an emissions rate limitation can achieve a
measurable emissions reduction, but the targeted level of emissions may
or may not be

[[Page 60366]]

reached, depending on the actual activity level of the affected
source(s). Finally, control strategies designed as a specific
technology or measure have the greatest uncertainty for achieving a
targeted emissions level due to uncertainty in both the activity level
of the affected source(s) and uncertainty in the effectiveness of the
technology or measure.
Based on the desire to establish control strategies with the
greatest environmental certainty of providing for achievement and
maintenance statewide NO_X emissions budget, EPA would
recommend that to the maximum extent practicable, all control
strategies be based on a fixed level of emissions for a source or group
of sources. However, EPA recognizes that this option may be difficult
for some sources because: (1) the available emissions control options
may be limited, and (2) the techniques for quantifying mass emissions
to ensure compliance with a tonnage budget may not be adequate.
Therefore, States may select the most appropriate type of control
strategy to achieve and maintain the desired emissions limitation for
each source or group of sources regulated in response to this
rulemaking. To compensate for the lack of certainty inherent in some
types of control strategies (i.e., control strategies that do not set
fixed tonnage budgets) and to address rule effectiveness concerns,
States may want to consider incorporating a compliance margin in their
overall budget calculation. A compliance margin could be used by
increasing the level of controls in the overall budget beyond what is
required by this rulemaking. Section VII discusses an interstate cap-
and-trade program for large combustion sources that EPA intends to
develop, in conjunction with interested States. Because this is a
proven and cost-effective control strategy that provides maximum
flexibility to sources, States may wish to consider this option as part
of their regional NO_X strategy.
The EPA is also considering ways to extend the cap-and-trade
program to other types of sources. The Agency's interest in developing
such approaches is consistent with the goal in the Implementation Plan
for the Revised Air Quality Standards of working ``with the States to
develop control programs which employ regulatory flexibility to
minimize economic impacts on businesses large and small to the greatest
possible degree consistent with public health protection.'' The EPA
recognizes that there are important advantages of developing a broad-
based trading program to provide incentives for the development of
innovative, low-cost ways of controlling emissions from these sources.
Under market-based approaches like a cap-and-trade program, there will
be an incentive for sources to identify and adopt pollution-minimizing
fuels, energy efficiency measures, or changes in product mix that offer
the lower cost reduction in emissions.
The EPA and OTAG have focused on a cap-and-trade program for large
combustion sources because it assures a proven method for achieving and
maintaining a fixed level of emissions. The EPA solicits comments on
approaches that would allow a broader participation in emissions
trading. In addressing expansion of emissions trading beyond large
combustion sources, commenters should address what steps can be taken
to quantify emissions from each source involved in the program to
assure that the emissions cap is met and the costs to Federal, State
and local governments of administering such a program.
a. Enforceable Measures Approach. Enforceable measures include
control strategies expressed as either emission rate limitations or
technology requirements. These control strategies do not provide the
same environmental certainty that a specific emissions level will be
met and maintained as compared to fixed tonnage budgets. However, these
control requirements are an appropriate method for achieving emissions
reductions for many source sectors that have limited options for
controlling and directly measuring emissions.
For control strategies that use emission rate limitations or
technology requirements the SIP must include the following elements:
(1) the enforceable emission rate, technology requirement, or specific
measure for each source that, when applied to year 2007 activity levels
and in aggregate with other controls, would meet the statewide
emissions budget; (2) the projected activity level for each source or
group of sources, as appropriate; (3) other factors necessary to
calculate the effect of the control requirements (e.g., speeds and
temperature for mobile sources necessary to calculate emissions); (4)
emissions rate and activity level measurement and emissions estimation
protocols for all sources, or group of sources; (5) reporting protocols
for emission rate, activity level, and emissions for all sources, or
group of sources (EPA intends to address these requirements in a
supplemental EPA rulemaking); (6) enforcement mechanisms, including
compliance schedules for installation and operation of all control
requirements and institution of all compliance processes by the date
between September 2002 and September 2004 that EPA establishes in its
final action on this proposal; and (7) requirements for adequate
penalties on the sources for exceeding applicable emissions rates or
failing to properly install or operate control technologies or carry-
out compliance measures.
A State or groups of States may choose to develop, adopt and
implement trading programs for sources affected by enforceable
measures. Such trading programs should be consistent with EPA guidance
on trading, including the Economic Incentive Program rules and guidance
as well as guidance provided on Open Market Trading. Such approaches
could be adopted by States to help achieve emission reductions cost
effectively. The EPA does not anticipate managing the emissions data
and market functions of these trading programs that do not incorporate
emissions caps.
b. Fixed Tonnage Budgets. Under this approach, a group of sources
would have their control strategy expressed as a fixed tonnage budget.
Because the fixed tonnage budget approach is designed to maintain a
specific, fixed level of emissions, this approach does not require an
enforceable compliance plan that prescribes exactly how emissions
reductions would be achieved. If a State elects to use a fixed tonnage
budget as a control strategy, the State would have two options for
implementing the program. The State may choose to join the cap-and-
trade program that EPA proposes to develop and assist in implementing
for sources in cooperation with interested States (this program is
discussed in section VII, Model Cap-and-Trade Program, of this
rulemaking), or the State may choose to develop a fixed tonnage budget
regulation separate from EPA's program. The EPA cap-and-trade program
will incorporate all necessary SIP criteria into the program design. If
the State elects to develop a fixed tonnage budget program separate
from EPA's program, the State program must include the following
elements: (1) the total seasonal tonnage emissions limitation for the
category of sources which shall be enforceable at the source level by
the date between September 2002 and September 2004 that EPA establishes
in its final rulemaking through emission tonnage limitations or
emission rate limitations that automatically adjust for growth in
activity levels over time; (2) requirements to measure and electronically
report all emissions from each source; and (3) requirements for

[[Page 60367]]

adequate penalties for exceeding an emissions limitation or emission rate.
To implement a fixed tonnage budget program, a State or group of
States may choose to develop, adopt and implement their own cap-and-
trade program. Such trading programs should be consistent with EPA
guidance on trading, including the Economic Incentive Program rules and
guidance. The EPA does not anticipate managing the emissions data and
market functions of these programs.
3. Control Strategy Implementation
As discussed in section I.D.2.e, Control Implementation and Budget
Attainment Dates, of this rulemaking, EPA is proposing that States must
implement all of their State-adopted NO_X control strategies
by a date between 3 to 5 years from the SIP submittal due date. This
time frame would result in an implementation deadline within the range
from September 2002 and September 2004. The EPA is seeking comment on
which date within this range is appropriate, in light of the
feasibility of implementing controls and the need to provide air
quality benefits as expeditiously as possible. Therefore, for the SIP
to be approvable, State NO_X rules must all have compliance
dates providing for control by the implementation deadline, which will
be specified in the final rulemaking. The EPA believes this is
necessary to assist ozone areas in meeting their attainment obligations
under the 1-hour standard and to assure timely attainment of the 8-hour
standard. The EPA recognizes that the control measures will not be in
place in time to assist serious ozone areas in meeting their 1999
attainment date under the 1-hour standard. This is unavoidable because
of the time needed to complete this rulemaking and for States to adopt
and implement their NO_X measures. The next attainment date
under the 1-hour standard is 2005 for severe-15 areas. For the 8-hour
standard, the CAA provides for attainment dates of up to 5 or 10 years
after designations with 2 potential 1-year extensions. In light of the
projected designation date of 2000, the first attainment date under the
8-hour standard could also be 2005. For these areas, it is important
that the regional NO_X control measures be in place by no
later than September 2004--in time to provide emissions reductions for
the 2005 ozone season. Implementing controls earlier than September
2004, or at least phasing in some controls, would improve the chance
for minimizing exceedances in the 3-year period up to and including the
2005 attainment year. States required to meet a statewide
NO_X budget by 2007 will continue to achieve additional
emissions reductions after September 2004 from continued phase in of
Federal measures. The EPA will provide guidance to the States on the
appropriate amount of emission reduction credit that a State may assume
from Federal measures.
4. Growth Estimates
The EPA believes it is important that consistent emissions growth
estimates be used for the State's budget demonstration and for EPA's
calculation of the required Statewide emissions budget. If a State
wishes to substitute its own growth or control information in its
budget analyses and can provide adequate justification for its
alternative numbers, EPA will evaluate the State's submission and may
recalculate the required statewide budget to reflect the State numbers.
As mentioned in the previous section, because the revised growth
estimates will be included in EPA's budget calculation, lower growth
rates could not be considered part of a State's NO_X control
strategy to attain that budget unless the change in growth is the
result of clearly identified control strategies that can be shown to
provide real, permanent, and quantifiable changes in growth. During the
comment period for this proposal, States will have an opportunity to
comment on EPA's growth assumptions and justifications for emissions
rates and control measures. As described in section III.D,
Recalculation of Budgets, EPA encourages requests for alterations to
the growth estimates or control assumptions be made during the comment
period for this proposal so that the budgets given in the final
rulemaking will incorporate the changes. Addressing these issues prior
to the final rulemaking will allow States to concentrate their efforts
on control strategy development and rule adoption procedures during the
proposed 12-month time frame for submitting their SIP revisions.
5. Promoting End-Use Energy Efficiency
In order to minimize compliance costs, EPA is interested in
allowing States the maximum flexibility practical in meeting their
NO_X budgets. The EPA believes that achievement of energy
efficiency improvements in homes, buildings, and industry can be one
cost-effective component of a comprehensive State strategy. These
energy efficiency improvements would substantially reduce control
measures required to meet NO_X objectives. To this end, EPA
will be investigating, in consultation with the Department of Energy's
Office of Energy Efficiency and Renewable Energy, how energy efficiency
opportunities can be integrated within SIPs, while maintaining the
requisite level of confidence that State budgets will be met. The EPA
intends to provide guidance in this area. The EPA is requesting comment
on how SIPs and associated processes can allow for the incorporation of
cost-effective, end-use energy efficiency.

C. Review of Compliance

The EPA believes it is essential that progress in implementing the
regional control strategy be periodically assessed after the initial
SIP submittal. This will allow early detection of implementation
problems, such as overestimates of control measure effectiveness and
underestimates of growth. The EPA will be carefully tracking State
progress and intends to propose periodic State reporting requirements
in its SNPR. Because nonattainment areas will be relying on emissions
reductions in other States to assist them in reaching attainment, EPA
believes that each State must have an effective program for tracking
progress of the regional strategy. The EPA intends to establish a work
group of affected States and other impacted Federal Agencies to
determine what procedures to put in place to provide adequate assurance
that the necessary emissions reductions are being achieved. The EPA
believes that tracking efforts should be structured to avoid
unnecessary burdens on States. Therefore, EPA intends to integrate
activities to track progress on implementing the regional
NO_X budget with existing program requirements such as
periodic emissions inventories and reporting under title IV for
NO_X. The EPA is soliciting comment on what types of
compliance assurance procedures may be necessary.
The EPA recognizes that success of the program depends, in part, on
the availability of reliable, comprehensive inventories of emissions.
Currently, EPA is developing a separate rulemaking that would require
statewide periodic emissions inventories. This rule would be an
extension of the existing periodic emission inventory requirement for
nonattainment areas. In regard to the regional transport strategy, EPA
intends to use these inventories as a tool to assess progress in
implementing the regional strategy, to determine whether the States
achieved their required budget by 2007, and for future transport studies.
If tracking and periodic reports indicate that a State is not
implementing all of its NO_X control measures or is off-track
to meet its budget by 2007, EPA

[[Continued on page 60368]]

Notices For
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994

Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone

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