6560-50-P

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[EPA-HQ-OAR-2003-0079, FRL-XXXX-X]

RIN 2060-AJ99

Phase 2 of the Final Rule to Implement the 8-Hour Ozone National Ambient
Air Quality Standard –Notice of Reconsideration

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Proposed Rule.  

SUMMARY:  On November 29, 2005, EPA published Phase 2 of the final rule
to implement the 8-hour ozone national ambient air quality standard
(NAAQS).  Subsequently, EPA received a petition to reconsider specific
aspects of this final rule.  In this action, EPA is announcing its
decision to reconsider and take additional comment on three provisions
in the final Phase 2 8-hour ozone implementation rule:  the
determination that electric generating units (EGUs) that comply with
rules implementing the Clean Air Interstate Rule (CAIR) and that are
located in States where all required CAIR emissions reductions are
achieved from EGUs meet the 8-hour ozone State implementation plan (SIP)
requirement for application of reasonably available control technology
(RACT) for nitrogen oxide (NOx) emissions; a new source review (NSR)
requirement allowing sources to use certain emission reductions as
offsets under certain circumstances; and an NSR provision  addressing
when requirements for the lowest achievable emission rate (LAER) and
emission offsets may be waived.  In addition, EPA requests comment on
postponing the submission date for the RACT SIP for RACT SIPs for EGUs
in the CAIR region.  The EPA is seeking comment only on the three issues
specifically identified in this notice and the submission date issue. 
We do not intend to respond to comments addressing other provisions of
the final 8-hour ozone implementation rule that we are not
reconsidering.

DATES:  Comments. Comments must be received on or before [INSERT 30 DAYS
FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER].  

	If anyone contacts us requesting a public hearing by [INSERT 10 DAYS
FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER], the hearing will be
held on [INSERT DATE – ], in [INSERT LOCATION—likely EPA/RTP].  ]. 
If a public hearing is requested, the record for this action will remain
open until [INSERT THE DATE 30 DAYS FOLLOWING THE PUBLIC HEARING] to
accommodate submittal of information related to the public hearing.  For
additional information on the public hearing, see the SUPPLEMENTARY
INFORMATION section of this notice of reconsideration.

ADDRESSES:  Submit your comments, identified by Docket ID No.
EPA-HQ-OAR-2003-0079, by one of the following methods:

www.regulations.gov:  Follow the on-line instructions for submitting
comments.  

E-mail: a-and-r-docket@epa.gov.  

Mail:  EPA Docket Center, EPA West (Air Docket), Attention Docket ID No.
EPA-HQ-OAR-2003-0079, Environmental Protection Agency, Mail Code: 6102T,
1200 Pennsylvania Ave., NW, Washington, D.C. 20460.  Please include two
copies if possible.

Hand Delivery:  EPA Docket Center (Air Docket), Attention Docket ID No.
EPA-HQ-OAR-2003-0079, Environmental Protection Agency, 1301 Constitution
Avenue, N.W., Room B102, Washington, D.C.  Such deliveries are only
accepted during the Docket Center’s normal hours of operation, and
special arrangements should be made for deliveries of boxed information.
 NOTE:  The EPA Docket Center suffered damage due to flooding during the
last week of June 2006.  The Docket Center is continuing to operate. 
However, during the cleanup, there will be temporary changes to Docket
Center telephone numbers, addresses, and hours of operation for people
who wish to make hand deliveries or visit the Public Reading Room to
view documents.  Consult EPA's Federal Register notice at 71 FR 38147
(July 5, 2006) or the EPA website at www.epa.gov/epahome/dockets.htm for
current information on docket operations, locations and telephone
numbers.  The Docket Center’s mailing address for U.S. mail and the
procedure for submitting comments to www.regulations.gov are not
affected by the flooding and will remain the same.

Instructions:  Direct your comments to Docket ID No.
EPA-HQ-OAR-2003-0079.  The EPA's policy is that all comments received
will be included in the public docket without change and may be made
available on-line at www.regulations.gov, including any personal
information provided, unless the comment includes information claimed to
be confidential business information (CBI) or other information whose
disclosure is restricted by statute.  Do not submit information that you
consider to be CBI or otherwise protected through www.regulations.gov,
or e-mail.  The www.regulations.gov website is an “anonymous access”
system, which means EPA will not know your identity or contact
information unless you provide it in the body of your comment.  If you
send an e-mail comment directly to EPA without going through
www.regulations.gov, your e-mail address will be automatically captured
and included as part of the comment that is placed in the public docket
and made available on the Internet.  If you submit an electronic
comment, EPA recommends that you include your name and other contact
information in the body of your comment and with any disk or CD-ROM you
submit.  If EPA cannot read your comment due to technical difficulties
and cannot contact you for clarification, EPA may not be able to
consider your comment.  Electronic files should avoid the use of special
characters, any form of encryption, and be free of any defects or
viruses.  For additional information about EPA’s public docket, visit
the EPA Docket Center homepage at
http://www.epa.gov/epahome/dockets.htm.  For additional instructions on
submitting comments, go to the SUPPLEMENTARY INFORMATION section of this
document.

Docket:  All documents in the docket are listed in www.regulations.gov. 
Although listed in the index, some information is not publicly
available, i.e., CBI or other information whose disclosure is restricted
by statute.  Certain other material, such as copyrighted material, is
not placed on the Internet and will be publicly available only in hard
copy form.  Publicly available docket materials are available either
electronically in www.regulations.gov or in hard copy at the EPA Docket
Center (Air Docket), EPA/DC, EPA West, Room B102, 1301 Constitution
Ave., N.W., Washington, D.C.  The Public Reading Room is open from 8:30
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays.  The
telephone number for the Public Reading Room is (202) 566-1744. For
information on accessing docket materials during the temporary closure
of the EPA docket center see note above.

FOR FURTHER INFORMATION CONTACT: For further information on the issue
relating to NOx RACT for EGU sources in CAIR States, contact Mr. John
Silvasi, Office of Air Quality Planning and Standards, U.S.
Environmental Protection Agency, (C539-01), Research Triangle Park, NC
27711, phone number (919) 54l-5666, fax number (919) 54l-0824 or by
e-mail at silvasi.john@epa.gov or Ms. Denise Gerth, Office of Air
Quality Planning and Standards, U.S. Environmental Protection Agency,
(C539-01), Research Triangle Park, NC 27711, phone number (919)
54l-5550, fax number (919) 54l-0824 or by e-mail at   HYPERLINK
"mailto:gerth.denise@epa.gov"  gerth.denise@epa.gov .  For further
information on the NSR issues discussed in this notice, contact Mr.
David Painter, Office of Air Quality Planning and Standards, (C504-03),
U.S. EPA, Research Triangle Park, North Carolina 27711, telephone number
(919) 541-5515, fax number (919) 541-5509, e-mail: 
painter.david@epa.gov.

SUPPLEMENTARY INFORMATION:

I.  General Information 

A. Does This Action Apply to Me?

1.  Issue on Determination of CAIR/RACT Equivalency for NOx EGUs

	Entities potentially affected by the subject rule for today's action
include States (typically State air pollution control agencies), and, in
some cases, local governments that develop air pollution control rules,
in the region affected by the CAIR.  The EGUs are also potentially
affected by virtue of State action in SIPs that implement provisions
resulting from final rulemaking on today’s action; these sources are
in the following groups:  

Industry group	SICa	NAICSb

Electric Services	492	221111, 221112, 221113, 221119, 221121, 221122

a Standard Industrial Classification.

b North American Industry Classification System.

2.  NSR Issues

	Entities potentially affected by the subject rule for today's action
include sources in all industry groups. The majority of sources
potentially affected are expected to be in the following groups.

Industry group	SICa	NAICSb

Electric Services	492	221111, 221112, 221113, 221119, 221121, 221122

Petroleum Refining	291	324110

Industrial Inorganic Chemicals	281	325181, 325120, 325131, 325182,
211112, 325998, 331311, 325188

Industrial Organic Chemicals	286	325110, 325132, 325192, 325188, 325193,
325120,  325199

Miscellaneous Chemical Products	289	325520, 325920, 325910, 325182,
325510

Natural Gas Liquids	132	211112

Natural Gas Transport	492	486210, 221210

Pulp and Paper Mills	261	322110, 322121, 322122, 322130

Paper Mills	262	322121, 322122

Automobile Manufacturing	371	336111, 336112, 336211, 336992, 336322,
336312, 336330, 336340, 336350, 336399, 336212, 336213

Pharmaceuticals	283	325411, 325412, 325413, 325414

a Standard Industrial Classification.

b North American Industry Classification System.

Entities potentially affected by the subject rule for today's action
also include State, local, and Tribal governments that are delegated
authority to implement these regulations.

B. What Should I Consider as I Prepare My Comments for EPA?

	1.  Submitting CBI.  Do not submit this information to EPA through
www.regulations.gov or e-mail.  Clearly mark the part or all of the
information that you claim to be CBI.  For CBI information in a disk or
CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as
CBI and then identify electronically within the disk or CD ROM the
specific information that is claimed as CBI.  In addition to one
complete version of the comment that includes information claimed as
CBI, a copy of the comment that does not contain the information claimed
to be CBI must be submitted for inclusion in the public docket. 
Information so marked will not be disclosed except in accordance with
procedures set forth in 40 CFR part 2.

2.  Tips for Preparing Your Comments.  When submitting comments,
remember to:

Identify the rulemaking by docket number and other identifying
information (subject heading, Federal Register date and page number).

Follow directions - The agency may ask you to respond to specific
questions or organize comments by referencing a Code of Federal
Regulations (CFR) part or section number.

Explain why you agree or disagree; suggest alternatives and substitute
language for your requested changes.

Describe any assumptions and provide any technical information and/or
data that you used.

If you estimate potential costs or burdens, explain how you arrived at
your estimate in sufficient detail to allow for it to be reproduced.

Provide specific examples to illustrate your concerns, and suggest
alternatives.

Explain your views as clearly as possible, avoiding the use of profanity
or personal threats.

Make sure to submit your comments by the comment period deadline
identified.

C. Where Can I Get a Copy of This Document and Other Related
Information?

	In addition to being available in the docket, an electronic copy of
today's notice is also available on the World Wide Web.  A copy of
today's notice will be posted at   HYPERLINK
"http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/" 
http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/  .

D. What Information Should I Know About the Public Hearing?

	If requested, EPA will hold a public hearing on today’s notice. The
EPA will hold a hearing only if a party notifies EPA by [INSERT THE DATE
10 DAYS FOLLOWING PUBLICATION OF THIS NOTICE IN THE FEDERAL REGISTER],
expressing its interest in presenting oral testimony on issues addressed
in today’s notice. Any person may request a hearing by calling Ms.
Pamela S. Long at (919) 541–0641 before 5 p.m.  by [INSERT THE DATE 10
DAYS FOLLOWING PUBLICATION OF THIS NOTICE IN THE FEDERAL REGISTER]. Any
person who plans to attend the hearing should visit the EPA’s Web site
at   HYPERLINK "http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/" 
http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/  and contact Ms. Pamela S.
Long at (919) 541–0641 to learn if a hearing will be held.

	If a public hearing is held on today’s notice, it will be held on
[INSERT DATE – ], 2006 at the EPA, Building C, Room _____, 109 T.W.
Alexander Drive, Research Triangle Park, NC 27709.   Because the hearing
will be held at a U.S. Government facility, everyone planning to attend
should be prepared to show valid picture identification to the security
staff in order to gain access to the meeting room.  Please check our Web
site at http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/ for information and
updates concerning the public hearing.

	If held, the public hearing will begin at 10 a.m. and end at 2 p.m. 
The hearing will be limited to the subject matter of this document. 
Oral testimony will be limited to 5 minutes.  The EPA encourages
commenters to provide written versions of their oral testimony either
electronically (on computer disk or CD ROM) or in paper copy.  The list
of speakers will be posted on EPA’s Web site at   HYPERLINK
"http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/" 
http://www.epa.gov/ttn/naaqs/ozone/o3imp8hr/  .Verbatim transcripts and
written statements will be included in the rulemaking docket.

	A public hearing would provide interested parties the opportunity to
present data, views, or arguments concerning issues addressed in
today’s notice.  The EPA may ask clarifying questions during the oral
presentations, but would not respond to the presentations or comments at
that time.  Written statements and supporting information submitted
during the comment period will be considered with the same weight as any
oral comments and supporting information presented at a public hearing.

	If a public hearing is held, the record for this action will remain
open until [INSERT THE DATE 30 DAYS FOLLOWING THE PUBLIC HEARING] to
accommodate submittal of information related to the public hearing. 
Otherwise, if a hearing is not held, the record for this action will
remain open until [INSERT THE DATE 30 DAYS FOLLOWING PUBLICATION OF THIS
NOTICE IN THE FEDERAL REGISTER].

E. How Is This Notice Organized?

The information presented in this notice is organized as follows:

I. 	General Information

A.	Does This Action Apply To Me?

B. 	What Should I Consider as I Prepare My Comments for EPA?

C. 	Where Can I Get a Copy of This Document and Other Related
Information?

D. 	What Information Should I Know About the Public Hearing?

E. 	How Is This Notice Organized?

II. 	Background

A.  	NOx RACT for EGUs in CAIR States

1.  	Our Previous Proposed and Final Rules  

2.  	Petition for Reconsideration.

B.  	NSR Issues 

1. 	 Proposed and Final rules and Guidance.  

2.  	Petition for Reconsideration.

III. 	This Action

A.	NOx RACT for EGUs in CAIR States

1.  	Reconsideration and Request for Comment on NOx RACT for EGUs in
CAIR States

2.  	Supplemental Technical Analysis

3.  	Request for Public Comment Period On Submission Date For RACT SIP
For NOx For EGUs In CAIR Region 

B.   	Provisions of Final Rule Regarding the Criteria for Emission
Reduction Credits from Shutdowns And Curtailments

1.  	Why We Changed Major Source NSR Criteria for Emission Reduction
Credits (ERC) from Shutdowns and Curtailments 

2.  	Legal Basis for Changes to Criteria for Emission Reduction Credits
from Shutdowns and Curtailments 

3.  	Reconsideration of Emission Reduction Credits Final Rule Language
and Request for Public Comments

C.   	Applicability of Appendix S, Section VI

1.  	Final Changes to Applicability of Appendix S, Section VI 

2.  	Legal Basis for Changes to Applicability of Appendix S and the
Transitional NSR Program

3.  	Reconsideration of Appendix S, Section VI Final Rule Language and
Request for Public Comments 

IV. 	Statutory and Executive Order Reviews

A. 	Executive Order 12866:  Regulatory Planning and Review

B. 	Paperwork Reduction Act

C. 	Regulatory Flexibility Act (RFA)

D. 	Unfunded Mandates Reform Act

E. 	Executive Order 13132:  Federalism

F. 	Executive Order 13175:  Consultation and Coordination With Indian
Tribal Governments

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

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

I. 	National Technology Transfer and Advancement Act

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

V. Statutory Authority

II.  Background

On November 29, 2005, EPA published the final Phase 2 rulemaking to
implement the 8-hour ozone NAAQS (the Phase 2 Rule). That rule
established requirements relating to several specific elements of the
SIPs for nonattainment areas for the 8-hour ozone standard including: 
the attainment demonstration; the RACT requirement; the reasonable
further progress (RFP) requirement; and new source review.  

The Natural Resources Defense Council (NRDC) filed a petition for
reconsideration dated January 30, 2006 under section 307(d) of the Clean
Air Act (CAA) concerning three provisions of the Phase 2 rule. The EPA
has granted the petition and, in this notice, EPA announces its decision
to reconsider the three provisions discussed below and requests public
comment on these issues.

A.  NOx RACT for EGUs in CAIR States

1.  Proposed and Final Rules and Guidance.  In the Phase 2 rulemaking to
implement the 8-hour ozone NAAQS, EPA determined that EGU sources
complying with rules implementing the CAIR requirements meet ozone NOx
RACT requirements in States where all required CAIR emissions reductions
are achieved from EGUs only.  We noted that the CAIR final rulemaking
established a region-wide NOx emissions cap, effective in 2009, at a
level that, assuming the reductions are achieved from EGUs, would result
in EGUs installing emission controls on the maximum total capacity on
which it is feasible to install emission controls by that date.  In
addition, the CAIR’s 2015 NOx cap will eliminate all NOx emissions
from EGUs that are highly cost effective to control, and the 2009 cap
represents an interim step toward that end.   We also noted additional
arguments in the phase 2 rule, which we are summarizing below under
Section III. A. 1. below.  

2.  Petition for Reconsideration

	The EPA received a petition for reconsideration of the final Phase 2
rule from the NRDC.  This petition raised several objections to EPA’s
determination that, in certain circumstances, EGUs in CAIR States may
satisfy the NOx RACT requirement for ozone if they comply with rules
implementing the CAIR.  Specifically, they argued that:

The EPA unlawfully and arbitrarily failed to seek public comment on the
final rule's determination that the CAIR satisfies NOx RACT
requirements.

The EPA’s CAIR-RACT determinations are unlawful and arbitrary because
EPA’s action illegally abrogates the Act’s RACT requirements.

	The EPA granted NRDC’s petition by letter of June 21, 2006.  In this
action, EPA is announcing the initiation of the reconsideration process
and requesting additional public comment on this issue.  Also, EPA is
supplementing the record with additional technical analyses that
addresses the determination that the CAIR satisfies the NOx RACT
requirement for covered EGUs.

B.  NSR Issues

1.  Our previous proposed and final rules

	The major NSR provisions in the November 29, 2005 Phase 2 rulemaking
were proposed as part of two different regulatory packages.  On July 23,
1996 (61 FR 38250), we proposed changes to the major NSR program,
including codification of the requirements of part D of title I of the
1990 CAA Amendments for major stationary sources of volatile organic
compounds (VOC), NOx, particulate matter having a nominal aerodynamic
diameter less than or equal to 10 microns (PM10), and CO.  On June 2,
2003 (68 FR 32802), we proposed a rule to implement the 8-hour ozone
NAAQS.  In the 2003 action, we proposed a rule to identify the statutory
requirements that apply for purposes of developing SIPs under the CAA to
implement the 8-hour ozone NAAQS (68 FR 32802).  We did not propose
specific regulatory language for implementation of NSR under the 8-hour
NAAQS.  However, we indicated that we intended to revise the
nonattainment NSR regulations to be consistent with the rule for
implementing the 8-hour ozone NAAQS (68 FR 32844).  On April 30, 2004
(69 FR 23951), we published a final rule that addressed classifications
for the 8-hour NAAQS.  The April 2004 rule also included the NSR
permitting requirements for the 8-hour ozone standard, which necessarily
follow from the classification scheme chosen under the terms of subpart
1 and subpart 2.

	In 1996, we proposed to revise the regulations limiting offsets from
emissions reductions due to shutting down an existing source or
curtailing production or operating hours below baseline levels
(“shutdowns/curtailments”).  We proposed substantive revisions in
two alternatives that would ease, under certain circumstances, the
existing restrictions on the use of emission reduction credits from
source shutdowns and curtailments as offsets. 

	On July 23, 1996, we proposed to revise 40 CFR 52.24 to incorporate
changes made by the 1990 CAA Amendments related to the applicability of
construction bans (61 FR 38305).  To clarify our intent, our proposed
8-hour ozone NAAQS implementation rule in June 2003 explained that
section 52.24(k) remained in effect and would be retained.  In that
action, we also proposed that we would revise section 52.24(k) to
reflect the changes in the 1990 CAA Amendments (68 FR 32846).  On June
2, 2003 (68 FR 32802), we explained implementation of the major NSR
program under the 8-hour ozone NAAQS during the SIP development period,
and proposed flexible NSR requirements for areas that expected to attain
the 8-hour NAAQS within 3 years after designation. 

	In the final regulations, we included several revisions to the
regulations governing the nonattainment NSR programs mandated by section
110(a)(2)(C) and part D of title I of the CAA.  First, we codified
requirements added to part D of title I of the CAA in the 1990
Amendments related to permitting of major stationary sources in areas
that are nonattainment for the 8-hour ozone, particulate matter (PM),
and carbon monoxide (CO) NAAQS.  Second, we revised the criteria for
crediting emissions reductions credits from shutdowns and curtailments
as offsets.  Third, we revised the regulations for permitting of major
stationary sources in nonattainment areas in interim periods between
designation of new nonattainment areas and EPA’s approval of a revised
SIP.  Also, we changed the regulations that impose a moratorium (ban)
prohibiting construction of new or modified major stationary sources in
nonattainment areas where the State fails to have an implementation plan
meeting all of the requirements of part D. 

	2.  Petition for reconsideration

The NRDC petition for reconsideration raised two objections to the major
NSR aspects of the Phase 2 rulemaking:

Allowing sources to use emission reductions as offsets if they occur
after the last day of the base year for the SIP planning process; and

Changes to Section VI of Appendix S allowing for waiver of nonattainment
major NSR requirements for some source categories.

The EPA granted the petition by letter of June 21, 2006 and in this
action EPA announces its decision to reconsider and to request
additional public comment on these issues.

III.  This Action

A.  NOx RACT for EGUs in CAIR States

1.  Reconsideration and request for comment on NOx RACT for EGUs in CAIR
States

In this notice, EPA announces its decision to reconsider and request
additional comment on the determination that EGU sources complying with
rules implementing CAIR requirements meet ozone NOx RACT requirements in
States where all required CAIR reductions are achieved from EGUs only. 
This determination provided the basis for our determination that, for
purposes of meeting the NOx RACT requirement, States need not perform
(or submit) NOx RACT analyses for sources subject to a NOx trading
program meeting the CAIR NOx requirements (in a State achieving all CAIR
reductions from EGUs only).  According to this provision, States relying
on this conclusion for the affected EGU sources need to document their
reliance on EPA’s determination in their RACT SIPs.  A full discussion
of EPA’s rationale and the conditions under which the above
determination is valid appears in the Phase 2 Rule preamble at FR
71656-71658 (November 29, 2005).  However, we are summarizing that
rationale here:

In the Phase 2 rulemaking to implement the 8-hour ozone NAAQS, EPA
determined that EGU sources complying with rules implementing the CAIR
requirements meet ozone NOx RACT requirements in States where all
required CAIR emissions reductions are achieved from EGUs only.  We
noted that the CAIR final rulemaking established a region-wide NOx
emissions cap, effective in 2009, at a level that, assuming the
reductions are achieved from EGUs, would result in EGUs installing
emission controls on the maximum total capacity on which it is feasible
to install emission controls by that date.  In addition, the CAIR’s
2015 NOx cap will eliminate all NOx emissions from EGUs that are highly
cost effective to control, and the 2009 cap represents an interim step
toward that end.   We also noted the following in the Phase 2
rulemaking:

The EPA’s prior views on the details of the NOx RACT program were set
forth in the “NOx Supplement to the General Preamble,” November 25,
1992 (57 FR 55620).  In that document, EPA determined that in the
majority of cases, RACT will result in an overall level of control
equivalent to specified maximum allowable emission rates (in pounds of
NOx per million Btu) for certain specified electric utility boilers. 
Section 4.6 of this document (57 FR 55625) noted in part, “In general,
EPA considers RACT for utilities to be the most effective level of
combustion modification reasonably available to an individual unit. 
This implies low NOx burners, in some cases with overfire air and in
other instances without overfire air; flue gas recirculation; and
conceivably some situations with no control at all.”  The NOx
Supplement also provided, “. . . the State may allow individual
owners/operators in the nonattainment area (or, alternatively, Statewide
within an ozone transport region) to have emission limits which result
in greater or lesser emission reductions so long as the areawide average
emission rates described above are met on a Btu-weighted average.” (57
FR at 55625).  The NOx Supplement also set forth (in section 4.7)
guidance on RACT for utility boilers other than those specified in
section 4.6 and also for other source categories.  This section noted in
part, “In general, EPA expects that NOx RACT for these other sources
will be set at levels that are comparable to the RACT guidance specified
above [in section 4.6] . . .”  

“The [CAIR] budgets are based on the level of emissions that can be
achieved through highly cost-effective controls that EPA determined are
available from EGUs; however, States have flexibility to choose the
measures they will use to achieve the necessary emissions reductions. 
Due to feasibility constraints, EPA is requiring the CAIR budgets to be
achieved in two phases.  For summertime NOx, the first phase starts in
2009 (covering 2009-2014); the second phase of NOx reductions begins in
2015 (covering 2015 and thereafter).” (70 FR 71621).  We also noted in
the June 2, 2003, proposal that we considered highly-cost effective
controls for NOx for EGUs and non-EGUs that were used to establish the
Statewide NOx emission caps in the NOx SIP call to constitute a greater
level of control than RACT.  (68 FR 32839.)

In general, we expect that the largest-emitting EGU sources will be the
first to install NOx control technology and that such control technology
will gradually be installed on progressively smaller-emitting EGU
sources until the ultimate cap is reached. 

We do not believe that requiring source-specific RACT controls on EGUs
in nonattainment areas will reduce total NOx emissions from EGU sources
covered by the CAIR below the levels that would be achieved under the
CAIR alone.  

We believe that EGU source-specific RACT would result in more costly
emission reductions on a per ton basis.  We noted the following:  “As
discussed more fully in the CAIR final rulemaking, EPA has set the 2009
CAIR NOx cap at a level that, assuming the reductions are achieved from
EGUs, would result in EGUs installing emission controls on the maximum
total capacity on which it is feasible to install emission controls by
those dates.  The 2015 NOx cap is specifically designed to eliminate all
NOx emissions from EGUs that are highly cost effective to control (the
first cap represents an interim step toward that end) . . . In general,
we expect that the largest-emitting sources will be the first to install
NOx control technology and that such control technology will gradually
be installed on progressively smaller-emitting sources until the
ultimate cap is reached.” (70 FR 71657, col. 3).

The combination of EGU source specific RACT and the CAIR emissions cap
would not reduce the collective total emissions from EGUs covered by the
CAIR, but would likely achieve the same total emissions reductions as
the CAIR alone, in a more costly way.  

As a result, we believe that EGUs subject to the CAIR NOx emissions cap
meet the RACT requirement for NOx (in States that require all CAIR NOx
reductions from EGUs).  

The EPA made the finding for all areas in the CAIR region, such that
States meeting the CAIR emissions reduction requirements with reductions
from EGUs only, need not submit RACT analyses for covered EGU sources
subject to and in compliance with rules implementing CAIR requirements. 
At this time, EPA is not proposing to make any changes to this
provision.  The petition for reconsideration did not provide information
sufficient to convince EPA that any aspect of the determination in the
final Phase 2 8-hour ozone rule was in error, and EPA’s supplemental
technical analysis lends support to this determination.  However, EPA
acknowledges that the agency did not provide sufficient opportunity for
public comment on this determination.  We recognize the significant
public interest in this issue and request additional comment on this
determination. 

	As explained in the preamble to the final Phase 2 Rule, EPA does not
believe that requiring source-specific RACT controls on EGUs in
nonattainment areas will reduce total NOx emissions from sources covered
by the CAIR below the levels that would be achieved under the CAIR
alone.  As discussed more fully in the CAIR final rulemaking, EPA has
set the 2009 CAIR NOx cap at a level that, assuming the reductions are
achieved from EGUs, would result in EGUs installing emission controls on
the maximum total capacity on which it is feasible to install emission
controls by that date.  Under cap-and-trade programs such as the CAIR
program, there is a direct relationship between the total number of
allowances held by participating sources and the collective emissions
from those sources.  EGU source-specific control requirements (such as
EGU source-by-source RACT) layered on top of the overall allowance-based
emissions cap may affect the temporal distribution of emissions (by
reducing banking and thus delaying early reductions) or the spatial
distribution of emissions (by moving them around from one place to
another), but such requirements do not affect total allowed emissions in
the CAIR region.

Furthermore, we believe that EGU source-specific RACT could result in
more costly emission reductions on a per ton basis.  The 2015 NOx cap is
specifically designed to eliminate all NOx emissions from EGUs that are
highly cost effective to control (the 2009 cap represents an interim
step toward that end).  In general, we expect that the largest-emitting
EGU sources will be the first to install NOx control technology and that
such control technology will gradually be installed on progressively
smaller-emitting EGU sources until the ultimate cap is reached.  If
States choose to require smaller-emitting EGU sources in nonattainment
areas to meet source-specific RACT requirements by 2009 (the required
compliance date for RACT), they would likely use labor and other
resources that would otherwise be used for emission controls on larger
EGU sources.  Because of economies of scale, more boiler-makers (skilled
workers needed to install control equipment on EGUs) and other resources
may be required per megawatt of power generation for smaller units than
for larger units.  Thus, the cost of achieving such reductions would be
greater on a per ton basis.  If it were possible to strategically target
source-specific requirements at the EGUs that can be controlled most
cost effectively, then the imposition of source-specific controls would
achieve the same temporal and spatial distribution of controls as the
projected CAIR cap-and-trade program.  But this would require accurate
forehand knowledge of each EGU’s control costs, which would be
practically difficult for regulators to obtain.  Without this accurate
source-specific control cost information, the imposition of EGU
source-specific requirements would make any given level of emission
reduction more costly than it would be under the cap-and-trade program
alone.  Thus, in States that achieve all CAIR reductions from EGUs,
requiring both source-specific RACT on EGUs and compliance with rules
implementing the CAIR would not achieve greater collective total
emissions reductions from EGUs covered by the CAIR, and the collective
reductions would likely be achieved at higher overall cost.  

	The CAIR is implemented on an annual and (for ozone) a seasonal basis. 
We believe that these averaging periods on which RACT is being
implemented under the Phase 2 Rule are not in conflict with existing EPA
policy.  In general, the RACT requirement is applied on a short-term
basis up to 24 hours.  However, EPA guidance permits averaging times
longer than 24 hours under certain conditions.  Although these earlier
EPA guidance documents were directed at VOC, the NOx Supplement to the
General Preamble  provides, “While this guidance has been largely
directed at application within the VOC program, much of the guidance is
also applicable to RACT for stationary sources of NOx.”  Section 4.6
(“RACT for Certain Electric Utility Boilers”) of the NOx Supplement
provides generally applicable NOx RACT emission rates for certain
utility boilers on a pounds of NOx per million Btu basis and indicates,
“Compliance with these limits may be determined on a continuous basis
through the use of a 30 day rolling average emission rate, calculated
each operating day as the average of all hourly data for the
pr[e]ceeding 30 operating days.”

	Other EPA guidance and policy allow for longer averaging times in
certain circumstances.  The EPA’s “Economic Incentive Policy” 
(EIP) provides guidance on use of long-term averages for RACT and
generally provides for averaging times of no greater than 30 days. 
However, that guidance also states, “For NOx sources that are required
to comply with the [Ozone Transport Region] NOx MOU regulation or the
NOx SIP call, the averaging time of an emission limit must not exceed a
compliance period of an area’s ozone season.  Sources involved with
EIP trades must meet all requirements applicable to the program.”  The
EPA interprets this policy as applying to all trading programs and
providing that the averaging time may not exceed the period for
determining compliance with the trading program (e.g., one year for the
CAIR annual trading programs –and the ozone season for the CAIR ozone
season trading program).	

	In addition, the RACT emission reductions need to be permanent, i.e.,
once implemented, they also need to be continuously implemented.  The
EPA believes that emissions reductions from the CAIR will continue to be
applied on a permanent basis.  The EPA believes that EGUs covered by the
CAIR that make the economic decision to install permanent controls will
generally reduce their emissions for an extended period of time and not
fluctuate in their level of control significantly over short periods,
since it will generally be in their economic interest to control in
order to generate emission allowances for sale to EGUs that opt not to
install controls.  Sources that comply with the CAIR comply with the
overall NOx emission caps on an annual and (for ozone) a seasonal basis.
 We note that sources covered by the CAIR are expected to reduce
emissions to either comply with State emission limits (or to
“overcontrol” beyond mere compliance and create surplus emission
reduction credits that would be used to provide allowances to
under-controlling sources) through permanent installation of emission
controls such as selective catalytic reduction or selective
non-catalytic reduction or combustion modification.  As we noted in the
Phase 2 Rule preamble in relation to the NOx SIP call, “In addition to
operating advanced controls at least in the ozone season, many sources
have installed combustion controls that function all the time; emissions
reductions from these controls will occur year round.” (70 FR 71656). 
Therefore, because of the expected general level of permanence of the
controls on individual sources, EPA believes that sources that install
controls will generally continue to provide the level of control for an
extended period of time.

For these reasons, we continue to believe that EGUs subject to rules
implementing the CAIR NOx emission reduction requirements satisfy the
RACT requirements for NOx (in States that require all CAIR NOx
reductions from EGUs).  Thus, at this time, EPA is not proposing to make
any changes to the determination concerning NOx RACT for EGUs in CAIR
States in the Phase 2 Rule.  The EPA continues to support its
determination that States achieving all CAIR reductions from EGUs need
not submit RACT analyses for EGU sources that are subject to and in
compliance with rules implementing the CAIR requirements.

	The determination that EGU sources complying with rules implementing
CAIR requirements thereby also meet ozone NOx RACT requirements applies
only to EGUs in States achieving all required CAIR reductions from EGUs,
except as noted below.  As explained in the preamble to the final Phase
2 Rule, under the CAIR, a State may elect to meet its State budget for
NOx emissions solely through requiring reductions from EGUs or through
requiring reductions from a combination of sources, including non-EGUs. 
If the State requires reductions from sources other than EGUs, it is not
eligible to participate in the EPA-administered CAIR trading programs. 
Additionally, separate provisions of the CAIR rule allow States to
choose to allow large NOx sources that are not EGUs to opt-in to the
trading programs.  States that elect to allow such opt-ins, and States
that require reductions from sources other than EGUs in implementing
CAIR, may not rely on EPA’s determination that EGUs complying with
rules implementing the CAIR satisfy NOx RACT.  If only part of the CAIR
reductions are required from EGUs, and the balance of the reductions
obtained from non-EGU sources, then the stringency of the CAIR EGU
control would be diminished to some extent (an amount that cannot be
determined until a State submits a SIP indicating which sources are
participating in the program).  Therefore, in these cases, the rationale
for our determination that these sources satisfy the RACT requirement
would not necessarily apply.

	Nonetheless, a State that elects to bring its NOx SIP Call non-EGU
sources into the CAIR ozone season trading program may continue to rely
on EPA’s determination that RACT is met for EGU sources covered by the
CAIR trading program.  It may rely on this determination if and only if
the State retains a summer season EGU budget under the CAIR that is at
least as restrictive as the EGU budget that was set in the State(s NOx
SIP call SIP. The rationale for this determination is that the sources
covered by the NOx SIP call were shown to meet a level of NOx control
that exceeds EPA’s presumption of control under NOx RACT.  Note that
EPA is not reconsidering or requesting additional comment on its
determination that the NOx SIP Call constitutes RACT for sources covered
by the NOx SIP Call.  Therefore, as explained in the final Phase 2 Rule,
if the summer season EGU budget under CAIR is at least as restrictive as
set out in the NOx SIP call SIP, then those EGUs are meeting a level of
control at least as stringent as RACT.  (See 68 FR 32839, col 1
“Proposed Approach for NOx RACT Determinations in Areas Affected by
the NOx SIP Call;” and 70 FR 71656, col 3, “NOx SIP Call.”)  If
the State does not retain a summer season EGU budget under CAIR that is
at least as restrictive as the EGU budget set under the NOx SIP Call
SIP, the State would need to conduct RACT analyses for EGUs (either on
an individual basis, or using the averaging approach within the
nonattainment area).  

In addition, as we noted in the Phase 2 Rule, a State has discretion to
require beyond-RACT NOx reductions from any source (including sources
covered by the CAIR or NOx SIP Call programs), and has an obligation to
demonstrate attainment of the 8-hour ozone standard as expeditiously as
practicable.  In certain areas, States may require NOx controls based on
more advanced control technologies as necessary to provide for
attainment of the ozone standards.

2.  Supplemental Technical Analysis

To provide further support for the determination regarding CAIR and
ozone NOx RACT, EPA conducted an additional technical analysis.  For
each geographic area within the CAIR region where 8-hour ozone RACT
determinations are required, EPA examined whether the emissions
reductions projected from the CAIR equal or exceed the emissions
reductions projected to occur from application of source-by-source RACT.
 Specifically, this analysis was conducted for operating coal-, oil-,
and gas-fired EGUs for each ozone transport region (OTR) State within
the CAIR region and for each nonattainment area in the CAIR region for
which a RACT SIP, separate from an attainment demonstration SIP, is
expected to be required.  The analysis was conducted on the basis of
annual emissions and also summer season emissions.  This analysis
illustrates that the CAIR achieves greater overall emissions reductions
across the CAIR region and across the OTR than would be achieved through
the application of EGU source-by-source RACT controls.  The docket
contains a Technical Support Document describing the analysis.

This emissions analysis, though not quantitatively definitive, is
suggestive of the appropriateness of the determination that areas meet
the 8-hour ozone SIP requirement for application of RACT for NOx
emissions where all EGUs comply with rules implementing the CAIR and
those areas are located in States where all required CAIR emissions
reductions are achieved exclusively from EGUs.  There is uncertainty in
the assumptions made in the analysis, although, as noted in the
Technical Support Document, the assumptions tended to be conservative,
i.e., erring on the side of projecting more emission reductions under
the RACT scenario.  The analysis does not project that CAIR emission
reductions are equivalent to or exceed the reductions from
source-by-source RACT for EGUs for every relevant nonattainment area and
every State within the OTR.  However, CAIR emission reductions are
overall significantly greater regionwide than reductions obtained from
source-by-source RACT for EGUs in both the CAIR region and the OTR.  It
is our belief that, due to the nature of regional emissions transport,
local nonattainment area emissions reductions alone will not achieve the
most effective or economically efficient impact on ozone air quality in
nonattainment areas.  We believe a combination of local and broader
regional reductions, such as those driven by the CAIR requirements for
EGUs, will achieve a more effective and economically efficient air
quality improvement in nonattainment areas than application of
source-by-source RACT.

Further, EPA believes that the term “reasonable” in RACT may be
construed to allow consideration of the air quality impact of required
emissions reductions from a region-wide cap and trade program such as
the CAIR.  As stated earlier, the region-wide CAIR NOx emissions cap for
2009 was established based on the maximum total capacity on which it was
possible to install controls by that date.  So by design, the 2009 CAIR
region-wide NOx emissions cap for EGUs represents the most reductions
that are reasonable to achieve.

3.  Request for  Public Comment Period on Submission Date For RACT SIP
for RACT SIPs for EGUs In CAIR Region

	Because EPA is reconsidering the RACT determination discussed above, we
believe it is appropriate to postpone the submission date for the
portion of the 8-hour ozone SIP that addresses NOx RACT for EGUs in the
CAIR region.  The EPA therefore proposes a new date of June 15, 2007 for
States in the CAIR region to submit RACT SIPs for these sources. 

	Such a postponement would affect only moderate 8-hour ozone
nonattainment areas in the CAIR region and only the portion of the RACT
SIPs that covers EGUs.  For moderate areas in the CAIR region, the
States must still submit RACT SIPs for all other affected sources per 40
CFR 51.912 (a) by September 15, 2006.

  SEQ CHAPTER \h \r 1 B.   Provisions of Final Rule Regarding the
Criteria For Emission Reduction Credits From Shutdowns And Curtailments

1.  Why We Changed Major Source NSR Criteria For Emission Reduction
Credits (ERC) From Shutdowns And Curtailments 

	The final 8-hour ozone implementation rule removed the requirement that
a State must have an approved attainment plan before a source may use
pre-application credits from shutdowns or curtailments as offsets.  It
also revised the availability of creditable offsets, consistent with the
requirements of section 173 of the CAA.  We revised the provisions at 40
CFR 51.165(a)(3)(ii)(C) and appendix S concerning emission reduction
credits generated from shutdowns and curtailments as proposed in
Alternative 2 of the 1996 proposal, with one exception.  Alternative 2
of the 1996 proposal provided that, in order to be creditable, the
shutdown of an existing emission unit or curtailing of production or
operating hours must have occurred after the “most recent emissions
inventory.”  We agreed with the commenter who found the regulatory
term “most recent emissions inventory” confusing.  In particular,
the commenter believed this language could be mistaken to mean that the
base year for the purpose of determining emissions that may be used as
creditable offsets would continue to shift.  The commenter noted that it
would be more accurate to state that the base year emissions inventory
is the starting point, and all creditable emissions reductions must
result from the shutdown or curtailment of emissions that have been
reported in the base year inventory or a subsequent emissions inventory.
 (For the 8-hour ozone NAAQS, the base year is   2002. )  We agreed with
the commenter that the terminology “most recent emissions inventory”
could be confusing and revised 40 CFR 51.165(a)(3)(C)(1) and Appendix S
paragraph IV.C.3. accordingly, specifying the cutoff date after which
the shutdown or curtailment of emissions must occur as “the last day
of the base year for the SIP planning process.  For purposes of this
paragraph, a reviewing authority may choose to consider a prior shutdown
or curtailment to have occurred after the last day of the base year if
the projected emissions inventory used to develop the attainment
demonstration explicitly includes the emissions from such previously
shutdown or curtailed emission units.”  This provision is consistent
with the previous regulation which also allowed the reviewing authority
to treat prior shutdowns or curtailments as occurring after the date of
the most recent emissions inventory, but we have modified the regulatory
language to clarify the appropriate emissions inventory.  Further, this
regulatory language is consistent with our previous guidance on how
emission reduction credits from shutdowns and curtailments are used in
attainment planning.  The base year inventory includes actual emissions
from existing sources and would not normally reflect emissions from
units that were shutdown or curtailed before the base year, as these
emissions are not "in the air."  To the extent that these emission
reduction credits are to be considered available for use as offsets and
are thus “in the air” for purposes of demonstrating attainment, they
must be specifically included in the projected emissions inventory used
in the attainment demonstration along with other growth in emissions
over the base year inventory.  This step assures that emissions from
shutdown and curtailed units are accounted for in attainment planning. 
As with the prior rules, reviewing authorities thus retain the ability
to consider a prior shutdown or curtailment to have occurred after the
last day of the base year if emissions that are eliminated by the
shutdown or curtailment are emissions that were accounted for in the
attainment demonstration.  However, in no event may credit be given for
shutdowns that occurred before August 7, 1977, a provision carried over
from the previous regulation.  See 40 CFR 51.165(a)(3)(C)(1)(ii)  and 40
CFR Part 51 Appendix S Paragraph IV.C.3.

	Other changes made to the provisions of the final Phase 2 Rule
regarding emissions reduction credits from shutdowns and curtailments
were nonsubstantive and merely clarified the restrictions on credits
from shutdowns or curtailments.  Specifically, the rule proposed on June
2, 2003 retained the requirement that a State have an approved
attainment demonstration before a source may use preapplication credits
from shutdowns or curtailments as offsets, but made that requirement
inapplicable where the credits occurred after the last day of the base
year for the SIP planning process or where they were included in the
most recent emissions inventory.  Our final rule recognized there is no
requirement for an approved attainment demonstration in those
circumstances, and thus deleted the reference to that former requirement
since under the revised rule it would never apply. 

2.  Legal Basis For Changes To Criteria For Emission Reduction Credits
From Shutdowns And Curtailments 

	The revisions made to the rules governing use of emissions reductions
from shutdowns/curtailments as offsets were warranted by the more
detailed attainment planning and sanction provisions of the 1990 CAA
Amendments.  These provisions specifically address air quality concerns
in nonattainment areas lacking EPA-approved attainment demonstrations. 
As a threshold matter, we noted (See 70 FR 71677, November 29, 2005)
that CAA section 173 does not mandate the prior restrictions on shutdown
credits, specifically, the requirement to have an approved attainment
demonstration before shutdown credits may be allowed.  (See 48 FR 38742,
38751; August 25, 1983).  Rather, in promulgating these restrictions in
1989, EPA recognized that it had a large degree of discretion under the
CAA to shape implementing regulations, as well as the need to exercise
that discretion such that offsets are consistent with reasonable further
progress (RFP) as required in CAA section 173.  (See 54 FR 27286, 27292;
June 28, 1989).  Originally, EPA believed that areas without approved
attainment demonstrations lacked adequate safeguards to ensure that
shutdown/curtailment credits would be consistent with RFP.  We thus
subjected those areas to more restrictive requirements to ensure a link
between the new source and the source being shutdown/curtailed (that is,
shutdown/curtailment must occur after the application for a new or
modified major source is filed).

	The 1990 CAA Amendments changed the considerations involved.  For areas
subject to subpart 2 of CAA Part D, Congress emphasized the emission
inventory requirement in section 172(c)(3) as a fundamental tool in air
quality planning (See Section 182(a)(1).  Congress also added new
provisions keyed to the inventory requirement, including specific
reduction strategies (e.g., section 182(b)(3) and (4) (regarding
gasoline vapor recovery and motor vehicle inspection and maintenance
programs))  and “milestones” that measure progress toward attainment
from the base year emissions inventory or subsequent revised inventories
(See section 182(b)(1)).  Where the emission reduction credits pre-date
the base year, State and local agencies must include the credits from
the shutdown/curtailment in the projected emissions inventory used to
develop the attainment demonstration.  Subpart 4 sets forth specific
reduction strategies and milestones for attainment of the PM10
standards.  Additionally, there are now several adverse consequences
where States fail to meet the planning or emissions reductions
requirements of the CAA.  For example, the CAA contains mandatory
increased new source offset sanctions at a 2:1 ratio where the
Administrator finds that a State failed to submit a required attainment
demonstration (See section 179).  In areas that are subject to subpart 2
and subpart 4, failure to attain the air quality standard by the
attainment deadline results in the area being bumped up to a higher
classification (see sections 181(b)(2) and 188(b)(2)).  Additional
regulatory requirements are imposed as a result of the higher
classification (see, e.g., section 182(c), (d), and (e), and section
189(b)).  These statutory changes justify shifting the focus of the
prior regulations from individual offset transactions between a specific
new source and shutdown source and towards a systemic approach. 
Considering the changes to the 1990 CAA Amendments, we now believe that
continuing the prohibition on the use of shutdown/curtailment credits
generated in a nonattainment area that is without an approved attainment
demonstration is not warranted.  We believe that use of emission
reduction credits from shutdowns/curtailments will be consistent with
RFP towards attainment under CAA section 173, even in the absence of an
approved attainment demonstration, if the shutdown or curtailment occurs
after the last day of the base year for the SIP planning process or is
included in the projected emissions inventory used to develop the
attainment demonstration.  From an air quality planning perspective,
emissions from the shutdown source actually impacted the measurements of
air quality used in determining the nonattainment status of an area. 
Therefore, emissions reductions from such source shutdowns/curtailments
are actual emissions reductions, and their use as emission offsets at a
ratio of 1:1 or greater is consistent with RFP towards improved air
quality as set forth in CAA section 173(a)(1)(A) provided they are
included in the baseline emissions inventory.

3.  Reconsideration of Emission Reduction Credits Final Rule Language
and Request for Public Comments

In its January 30, 2006, petition for reconsideration, NRDC requested
that EPA reconsider provisions in the final Phase 2 Rule that pertain to
ERC.  NRDC argued that EPA failed to present portions of the rule’s
“shutdown-curtailment offset provisions” and accompanying rationales
to the public for comment.  As noted above, the EPA is of the opinion
that the basis for the ERC provisions of the final rule were fully
explained in the November 29, 2005 rulemaking and in earlier actions
leading to that rulemaking.  The November 29, 2005 preamble included a
lengthy description of preceding actions in which our rationale was
developed.  Furthermore, the November 29, 2005 preamble detailed our
response to comments pertaining to the proposal.  The particular
comments that triggered the change in wording from usage of the term
“most recent emissions inventory” to the term “projected emissions
inventory used to develop the attainment demonstration” directly
resulted from public comments we received in response to the July 23,
1996 proposal.  The commenters voiced concerns that emission inventory
updates would periodically eliminate emissions that could be used as
emission reduction credits even though those emissions had been included
in the projected inventory to be used for establishing attainment
progress.  Such was not our intent and we changed the language specific
to the inventory in question in the interest of making a clarification. 
Petitioners assert in their request for reconsideration that our
clarifying amendments to the ERC provisions of the final rule were not a
logical outgrowth of the ERC provisions we proposed.  In contrast, we
saw our language change in the final rule as a technical clarification
and not as a change to the nature or scope of our proposal.

Nonetheless, we do see value in presenting the final rule language for
public comment as requested by the petitioners.  It was and is our
position that the changes reflected in the final rule were made in a
procedurally correct manner and that the public comments reflected in
the final rule were factually and logically compelling.  Nevertheless,
we encourage and welcome additional input.  At proposal, we presented
two options, one of which was adopted following our consideration of the
public comments.  We thus propose for reconsideration and seek public
comment on the ERC provisions in the final Phase 2 Rule set forth at 40
CFR 51.165  SEQ CHAPTER \h \r 1 (a)  SEQ CHAPTER \h \r 1 (3)(ii)(C)(1)
and (2), and Appendix S paragraph IV.C.3.

C  SEQ CHAPTER \h \r 1 .   Applicability of Appendix S, Section VI

1.  Final Changes to Applicability of Appendix S, Section VI 

Section VI allows new sources locating in an area designated as
nonattainment to be exempt from the requirements of Section IV.A. of
Appendix S if the date for attainment has not yet passed.  Section VI
provides a management tool to provide a limited degree of flexibility in
situations where a new source would not interfere with an area’s
ability to meet an attainment deadline.  The final Phase 2 Rule made a
procedural change to limit the applicability of appendix S, section VI
to only those instances in which the Administrator has specifically
approved doing so.  Although we did not include the regulatory language
to accomplish this goal in the June 2, 2003 proposal, we did clearly
state our intention of doing so.  As we noted at 68 FR 32848, section VI
as worded without any amendment could apply in any nonattainment area
where the dates for attainment have not passed even if the source meets
all applicable SIP emission limitations and would not interfere with the
area’s ability to meet its attainment date.  As codified prior to the
amendment in the Final Phase 2 Rule, section VI contained no provision
conditioning its applicability on approval by the Administrator.  We
noted at proposal, however, that States generally would not be able to
show that a nonattainment area would continue to meet its attainment
date if it does not apply LAER or offsets to major new sources and major
modifications in the absence of safeguards (68 FR 32848).

	Further, we stated in the preamble to the Phase 2 Rule that we
continued to believe, as we stated in the proposal, that States should
not interpret section VI as allowing a blanket exemption from LAER and
offsets for all major new sources and major modifications in a given
area before attainment dates have passed for that area.  At proposal, we
also offered for comment two broad programmatic proposals to modify the
then-existing section VI for the purpose of providing greater
flexibility. Overall, commenters considered the programmatic options to
be impracticable.  However most commenters did express support for the
flexibility provided by section VI.  For this reason, we retained the
original eligibility conditions for determining when section VI applies,
but added the  procedural requirement that the Administrator determine
that the two previously existing conditions of Section VI are satisfied,
and that  the Administrator provide public notice of that determination.
 Thus, in the final rule we retained the previously existing
requirements of Section VI, and added a further requirement that the
Administrator independently determine and provide public notice that
those requirements have been met.  This requirement will achieve the
proposal’s purpose of assuring that States do not interpret section VI
to provide a broad exemption to all major new sources and major
modifications in any nonattainment area for which the attainment date
has not passed.

2.  Legal Basis for Changes to Applicability of Appendix S and the
Transitional NSR Program

	For the purposes of today’s reconsideration, we will not expand our
prior expressions of the legal basis for section VI of Appendix S.  The
legal basis for Appendix S, including section VI, was discussed in
detail in section V.B.3.b. of the preamble to the final Phase 2 Rule. 
We have historically recognized that the SIP development period provided
for in section 172(b) leaves a gap in part D major NSR permitting and
have determined that this gap is to be filled with an interim major NSR
program that is substantially similar to the requirements of part D,
including the LAER and offset requirements from part D, subject to a
limited exemption where the attainment deadline will be met (57 FR
18070, 18076).  This interim NSR program has been implemented to date
through Appendix S. 

	The section VI exemption, as limited by the final Phase 2 Rule, is
consistent with the section 110(a)(2)(C) requirement that
preconstruction permitting is implemented “as necessary to assure that
the [NAAQS] are achieved.”  While the Phase 2 Rule did not adopt the
eligibility criteria that were proposed to ensure satisfaction of the
original section VI conditions, we did add the proposed requirement that
the Administrator determine that sources exempted from LAER and offsets
under section VI will meet those conditions, in particular,
noninterference with the attainment deadline.  Section VI also is
consistent with the exercise of our gap filling authority under section
301, as informed by the legislative history.  That is, Appendix S
reflects Congressional intent that standards equivalent to part D govern
the issuance of NSR permits, subject to a limited degree of flexibility
under conditions where attainment of the NAAQS by the attainment
deadline is assured.

3.  Reconsideration of Appendix S, Section VI Final Rule Language and
Request for Public Comments

In its January 30, 2006, petition, NRDC requested that EPA reconsider
provisions in the final Phase 2 Rule that pertain to Appendix S, section
VI.  NRDC argued that EPA failed to provide the public with an
opportunity to comment on the language of Appendix S, Section VI that
was included in the final rule. As is the case with respect to the ERC
provisions, EPA believes that our rationale was fully explained in the
November 29, 2005 rulemaking and in earlier actions leading to that
rulemaking.  The preamble to the final rule included a lengthy
description of preceding actions in which our rationale was developed. 
Further, the preamble to the final rule detailed our response to
comments pertaining to the proposal.  In our June 2, 2003 notice we
proposed two possible programs for the implementation of the provisions
contained in Section VI.  Commenters recommended against the proposed
approaches and we responded by dropping both proposed programs at
promulgation.  As noted above, what we did in the final rule was add one
provision to the already existing language of Appendix S, section VI to
limit use of Section VI to only those instances publicly approved of by
the Administrator.  Although we did not include in the June 2, 2003
proposal the regulatory language added to the final rule at Appendix S,
Section VI.C., we did clearly state our intention as to the change to be
made.  From our perspective, we made the smallest change possible and
achieved closure of a gap in section VI.  Thus, we disagree with the
petitioner’s assertion that the final rule language is not a logical
outgrowth of the proposal.  As well, we disagree with the petitioner’s
assertion that the final rule constitutes an open-ended scheme to evade
the strictures of Part D.  If anything, the prior rule language could
have been construed as open-ended.  The sole intention of our language
change was to close what we perceived to be a loophole allowing just the
type of outcome to which the petitioners object.  Congress required just
such closure through the provisions of the original section 129 as
included in the August 7, 1977 amendments to the Act.  At that time,
Congress made clear its opinion that it would be the role of the
Administrator to determine whether waiver of the appendix S provisions
in question might be appropriate.

The change made to Section VI in the final rule providing that the
Administrator must determine whether the conditions of Section VI have
been satisfied provides a positive safeguard to prevent just the kinds
of unchecked application of its provisions as envisioned by the
petitioners.  We continue to see section VI as a gap-filler that goes
away as of the attainment date.  It was and is our position that the
changes reflected in the final rule were made in a procedurally correct
manner and that the public comments reflected in the final rule were
factually and logically compelling.  Nonetheless, we see value in
presenting for public comment the changes made to Section VI of Appendix
S in the final Phase 2 Rule.  Therefore, we seek comment on subsection
C. of Section VI of Appendix S as added in the final Phase 2 rule as
requested by the petitioners.

Following today’s action, we anticipate two possible outcomes.  First,
should we not receive compelling arguments to the contrary, the
provision promulgated on November 29, 2005, and proposed today in
section VI.C. would remain as promulgated.  That is, the language
proposed herein is actually already codified in the Code of Federal
Regulations and we would make no further changes.  The second possible
outcome of our reconsideration of this provision could be that
commenters might make compelling arguments that it was inappropriate for
us to add to the final Phase 2 Rule the requirement of Section VI.C.
that the Administrator determine that requirements A and B of Section VI
have been satisfied and to provide notice of such determination.  Should
that occur, our final rule would consist of amendatory language to
revert the text of section VI to that which existed prior to November
29, 2005.  That is, we would retract section VI.C. and remove the
specification for the Administrator to be the determinant of when
section VI might be applied.  We invite comment on these two options. 
We currently believe that the correct approach is the approach we took
in the final Phase 2 Rule.  While section 129 has been amended to
address matters largely unrelated to those addressed in 1977, Congress
did previously legislate a course parallel to that which we have thus
far chosen to pursue.

IV.  STATUTORY AND EXECUTIVE ORDER REVIEWS

A.  Executive Order 12866: Regulatory Planning and Review 

	A.  Executive Order 12866: Regulatory Planning and Review

 	Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this
action is a "significant regulatory action.”  This action is
significant because it raises novel legal or policy issues. 
Accordingly, EPA submitted this action to the Office of Management and
Budget (OMB) for review under EO 12866 and any changes made in response
to OMB recommendations have been documented in the docket for this
action.

Paperwork Reduction Act  

The information collection requirements in this reconsideration notice
are addressed along with those covering the Phase 1 Rule (April 30,
2004; 69 FR 23951) and the Phase 2 Rule (November 29, 2005; 70 FR 71612)
which was submitted for approval to OMB under the Paperwork Reduction
Act, 44 U.S.C. 3501 et seq.  [EPA ICR # 2236.01.]  The information
collection requirements are not enforceable until OMB approves them
other than to the extent required by statute.

This action announces EPA’s decision to reconsider and take additional
comment on several provisions of the Phase 2 Rule, namely the RACT
provisions and selected NSR provisions.  This action does not establish
any new information collection burden on States beyond what was required
in the Phase 2 Rule.

The EPA has projected cost and hour burden for the statutory SIP
development obligation for the Phase 2 Rule, and prepared an Information
Collection Request (ICR).  Assessments of some of the administrative
cost categories identified as a part of the SIP for an 8-hour standard
are already conducted as a result of other provisions of the CAA and
associated ICRs (e.g. emission inventory preparation, air quality
monitoring program, conformity assessments, NSR, inspection and
maintenance program).

The burden estimates in the ICR for the Phase 2 rule are incremental to
what is required under other provisions of the CAA and what would be
required under a 1-hour standard.  Burden means the total time, effort,
or financial resources expended by persons to generate, maintain,
retain, or disclose or provide information to or for a Federal agency. 
This includes the time needed to review instructions; develop, acquire,
install, and utilize technology and systems for the purposes of
collecting, validating, and verifying information, processing and
maintaining information, and disclosing and providing information;
adjust the existing ways to comply with any previously applicable
instructions and requirements; train personnel to be able to respond to
a collection of information; search data sources; complete and review
the collection of information; and transmit or otherwise disclose the
information.  

An agency may not conduct or sponsor, and a person is not required to
respond to a collection of information unless it displays a currently
valid OMB control number.  The OMB control numbers for EPA's regulations
in 40 CFR are listed in 40 CFR part 9.  When the ICR for the Phase 2
rule is approved by OMB, the Agency will publish a technical amendment
to 40 CFR part 9 in the Federal Register to display the OMB control
number for the approved information collection requirements contained in
this final rule.  However, the failure to have an approved ICR for this
rule does not affect the statutory obligation for the States to submit
SIPs as required under part D of the CAA.

The information collection requirements associated with NSR permitting
for ozone are covered by EPA(s request to renew the approval of the ICR
for the NSR program, ICR 1230.17, which was approved by OMB on January
25, 2005.  The information collection requirements associated with NSR
permitting were previously covered by ICR 1230.10 and 1230.11.  The OMB
previously approved the information collection requirements contained in
the existing NSR regulations at 40 CFR parts 51 and 52 under the
provisions of the Paperwork Reduction Act, and assigned OMB control
number 2060-0003.  A copy of the approved ICR may be obtained from Susan
Auby, Collection Strategies Division; U.S. Environmental Protection
Agency (2822T); 1200 Pennsylvania Ave., NW, Washington, DC 20460 or by
calling (202) 566-1672. 

C.     Regulatory Flexibility Act

The Regulatory Flexibility Act generally requires an Agency to prepare a
regulatory flexibility analysis of any rule subject to
notice-and-comment rulemaking requirements under the Administrative
Procedures Act or any other statute unless the Agency certifies the rule
will not have a significant economic impact on a substantial number of
small entities.  Small entities include small businesses, small
organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of today’s notice of
reconsideration on small entities, small entity is defined as: (1) a
small business as defined by the Small Business Administration’s (SBA)
regulations at 13 CFR 121.201; (2) a governmental jurisdiction that is a
government of a city, county, town, school district or special district
with a population of less than 50,000; and (3) a small organization that
is any not-for-profit enterprise which is independently owned and
operated and is not dominant in its field.

After considering the economic impacts of the Phase 1 and Phase 2 Rules,
we concluded that those actions did not have a significant economic
impact on a substantial number of small entities. For those same
reasons, I certify that this action will not have a significant economic
impact on a substantial number of small entities.  This notice of
reconsideration will not impose any requirements on small entities.  We
continue to be interested in the potential impacts of our proposed rules
on small entities and welcome comments on issues related to such
impacts.

	Concerning the NSR portion of this notice of reconsideration, a
Regulatory Flexibility Act Screening Analysis (RFASA) was developed as
part of a 1994 draft Regulatory Impact Analysis (RIA) and incorporated
into the September 1995 ICR renewal.  This analysis showed that the
changes to the NSR program due to the 1990 CAA Amendments would not have
an adverse impact on small entities.  This analysis encompassed the
entire universe of applicable major sources that were likely to also be
small businesses (approximately 50 “small business” major sources). 
Because the administrative burden of the NSR program is the primary
source of the NSR program’s regulatory costs, the analysis estimated a
negligible “cost to sales” (regulatory cost divided by the business
category mean revenue) ratio for this source group.  The incorporation
of the major source thresholds and offset ratios from the 1990 CAA
Amendments in section 51.165 and appendix S for the purpose of
implementing NSR for the 8-hour standard does not change this
conclusion.  Under section 110(a)(2)(C), all States must implement a
preconstruction permitting program “as necessary to assure that the
[NAAQS] are achieved,” regardless of changes to today’s regulations.
 Thus, small businesses continue to be subject to regulations for
construction and modification of stationary sources, whether under State
and local agency minor NSR programs, SIPs to implement section 51.165,
or appendix S, to ensure that the 8-hour standard is achieved.

D.  Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and Tribal
governments and the private sector.  Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with (Federal mandates( that may
result in expenditures to State, local, and Tribal governments, in the
aggregate, or to the private sector, of $100 million or more in any 1
year.  Before promulgating an EPA rule for which a written statement is
needed, section 205 of the UMRA generally requires EPA to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, most cost-effective or least burdensome alternative that
achieves the objectives of the rule.  The provisions of section 205 do
not apply when they are inconsistent with applicable law.  Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative was not adopted.  Before EPA establishes any regulatory
requirements that may significantly or uniquely affect small
governments, including Tribal governments, it must have developed under
section 203 of the UMRA a small government agency plan.  The plan must
provide for notifying potentially affected small governments, enabling
officials of affected small governments to have meaningful and timely
input in the development of EPA regulatory proposals with significant
Federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory
requirements.

The EPA has determined that this notice of reconsideration does not
contain a Federal mandate that may result in expenditures of $100
million or more for State, local, and Tribal governments, in the
aggregate, or the private sector in any 1 year.  In promulgating the
Phase 1 and Phase 2 Rules, we concluded that they were not subject to
the requirements of sections 202 and 205 of the UMRA.  For those same
reasons, this notice of reconsideration and request for comment is not
subject to the UMRA.

The EPA has determined that this notice of reconsideration contains no
regulatory requirements that may significantly or uniquely affect small
governments, including Tribal governments.

E.  Executive Order 13132: Federalism

Executive Order 13132 (64 FR 43255, August 10, 1999), requires EPA to
develop an accountable process to ensure (meaningful and timely input by
State and local officials in the development of regulatory policies that
have federalism implications.(  (Policies that have federalism
implications( is defined in the Executive Order to include regulations
that have (substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government.(

This action does not have federalism implications.  It will not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132.  This notice of reconsideration
requests comment on three aspects of the Phase 2 Rule.  For the same
reasons stated in the Phase 1 and Phase 2 Rules, Executive Order 13132
does not apply to this action.

In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and State and local governments,
EPA specifically solicits comment on this action from State and local
officials.

F.  Executive Order 13175: Consultation and Coordination with Indian
Tribal Governments

Executive Order 13175 (65 FR 67249, November 9, 2000), requires EPA to
develop an accountable process to ensure (meaningful and timely input by
Tribal officials in the development of regulatory policies that have
Tribal implications.(  This notice of reconsideration does not have
(Tribal implications( as specified in Executive Order 13175. 

The purpose of this notice of reconsideration is to announce our
decision to reconsider and request comment on specific aspects of the
Phase 2 Rule.  The CAA provides for States and Tribes to develop plans
to regulate emissions of air pollutants within their jurisdictions.  The
Tribal Authority Rule (TAR) gives Tribes the opportunity to develop and
implement CAA programs such as the 8-hour ozone NAAQS, but it leaves to
the discretion of the Tribes whether to develop these programs and which
programs, or appropriate elements of a program, they will adopt.

For the same reasons stated in the Phase 1 and Phase 2 Rules, this
action does not have Tribal implications as defined by Executive Order
13175.  It does not have a substantial direct effect on one or more
Indian Tribes, since no Tribe has implemented a CAA program to attain
the 8-hour ozone NAAQS at this time.  If a Tribe does implement such a
plan, it would not impose substantial direct costs upon it. 
Furthermore, this action does not affect the relationship or
distribution of power and responsibilities between the Federal
government and Indian Tribes.  The CAA and the TAR establish the
relationship of the Federal government and Tribes in developing plans to
attain the NAAQS, and this action does nothing to modify that
relationship.  Because this action does not have Tribal implications,
Executive Order 13175 does not apply.

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

Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any rule
that (1) is determined to be (economically significant( as defined under
Executive Order 12866, and (2) concerns an environmental health or
safety risk that EPA has reason to believe may have disproportionate
effect on children.  If the regulatory action meets both criteria, the
Agency must evaluate the environmental health or safety effects of the
planned rule on children, and explain why the planned regulation is
preferable to other potentially effective and reasonably feasible
alternatives considered by the Agency.

	This notice of reconsideration addresses several provisions in the
Phase 2 Rule that the Agency was requested to reconsider and requests
comment on those provisions.  The action is not subject to Executive
Order 13045 because the Agency does not have reason to believe the
environmental health risks or safety risks addressed by this action
present a disproportionate risk to children.  Nonetheless, we have
evaluated the environmental health or safety effects of the 8-hour ozone
NAAQS on children.  The results of this evaluation are contained in 40
CFR part 50, National Ambient Air Quality Standards for Ozone, Final
Rule (July 18, 1997; 62 FR 38855-38896, specifically, 62 FR 38860 and 62
FR 38865).

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

This action is not a (significant energy action( as defined in Executive
Order 13211, (Actions That Significantly Affect Energy Supply,
Distribution, or Use,( (66 FR 28355, May 22, 2001) because it is not
likely to have a significant adverse effect on the supply, distribution,
or use of energy.  The notice of reconsideration announces our decision
to reconsider and requests comment on several aspects of the Phase 2
Rule, for which EPA did perform an analysis of the energy impacts under
Executive Order 13211.

I.  National Technology Transfer Advancement Act

Section 12(d) of the National Technology Transfer Advancement Act of
1995 (NTTAA), Public Law No. 104-113, section 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards (VCS) in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical.  Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by VCS
bodies.  The NTTAA directs EPA to provide Congress, through OMB,
explanations when the Agency decides not to use available and applicable
VCS.

This action does not involve technical standards.  Therefore, EPA is not
considering the use of any VCS.

The EPA will encourage the States and Tribes to consider the use of such
standards, where appropriate, in the development of the implementation
plans.

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

Executive Order 12898 requires that each Federal agency make achieving
environmental justice part of its mission by identifying and addressing,
as appropriate, disproportionate high and adverse human health or
environmental effects of its programs, policies, and activities on
minorities and low-income populations.

Page 50 of 54 – Phase 2 of the Final Rule to Implement the 8-Hour
Ozone National Ambient Air Quality Standard –Notice of Reconsideration

The EPA concluded that the Phase 2 Rule does not raise any environmental
justice issues (See 70 FR at 71695, col. 2; (November 29, 2005)); for
the same reasons, since this action announces our decision to reconsider
and requests comment on several aspects of the Phase 2 rule, this
reconsideration notice does not raise any environmental 

justice issues.  The health and environmental risks associated with
ozone were considered in the establishment of the 8-hour, 0.08 ppm ozone
NAAQS [62 FR 38856 (July 18, 1997)].  The level is designed to be
protective with an adequate margin of safety.  The Phase 2 Rule provides
a framework for improving environmental quality and reducing health
risks for areas that may be designated nonattainment.

List of Subjects in 40 CFR Part 51

Environmental protection, Air pollution control, Carbon monoxide, Lead,
Nitrogen dioxide, Ozone, Particulate matter, Sulfur oxides.

_______________________________

Dated:

________________________________

William L. Wehrum,

Acting Assistant Administrator for Air and Radiation

For the reasons stated in the preamble, title 40, chapter I of the Code
of Federal Regulations is proposed to be amended as follows: 

Part 51–Requirements for Preparation, Adoption, and Submittal of
Implementation Plans

1.  The authority citation for part 51 continues to read as follows:

Authority: 23 U.S.C. 101; 42 U.S.C. 7401-7671q.  

Subpart I - [Amended]

	2.  Section 51.165 is amended by revising paragraph (a)(3)(ii)(C) to
read as follows:.

§51.165  Permit requirements. 

	(a) * * *

	(3) * * *

	(ii) * * * 

	(C)  Emission reduction credits from shutdowns and curtailments.  (1) 
Emissions reductions achieved by shutting down an existing emission unit
or curtailing production or operating hours may be generally credited
for offsets if they meet the requirements in paragraphs
(a)(3)(ii)(C)(1)(i) through (ii) of this section. 

	(i)  Such reductions are surplus, permanent, quantifiable, and
federally enforceable. 

	(ii)  The shutdown or curtailment occurred after the last day of the
base year for the SIP planning process.  For purposes of this paragraph,
a reviewing authority may choose to consider a prior shutdown or
curtailment to have occurred after the last day of the base year if the
projected emissions inventory used to develop the attainment
demonstration explicitly includes the emissions from such previously
shutdown or curtailed emission units.  However, in no event may credit
be given for shutdowns that occurred before August 7, 1977. 

	(2)  Emissions reductions achieved by shutting down an existing
emissions unit or curtailing production or operating hours and that do
not meet the requirements in paragraph (a)(3)(ii)(C)(1)(ii) of this
section may be generally credited only if:

	(i)  The shutdown or curtailment occurred on or after the date the
construction permit application is filed; or 

	(ii)  The applicant can establish that the proposed new emissions unit
is a replacement for the shutdown or curtailed emissions unit, and the
emissions reductions achieved by the shutdown or curtailment met the
requirements of paragraph (a)(3)(ii)(C)(1)(i)of this section.

* * * * *

Appendix S to part 51 - [Amended]

3.  Appendix S to part 51 is amended by revising paragraphs IV.C.3 and
VI to read as follows:

Appendix S to part 51–Emission Offset Interpretative Ruling

* * * * *

	IV. * * *

	C. * * *

	3.  Emission Reduction Credits from Shutdowns and Curtailments.

	(i)  Emissions reductions achieved by shutting down an existing source
or curtailing production or operating hours may be generally credited
for offsets if they meet the requirements in paragraphs IV.C.3.i.1.
through 2 of this section. 

	(1) Such reductions are surplus, permanent, quantifiable, and federally
enforceable. 

	(2)  The shutdown or curtailment occurred after the last day of the
base year for the SIP planning process.  For purposes of this paragraph,
a reviewing authority may choose to consider a prior shutdown or
curtailment to have occurred after the last day of the base year if the
projected emissions inventory used to develop the attainment
demonstration explicitly includes the emissions from such previously
shutdown or curtailed emission units.  However, in no event may credit
be given for shutdowns that occurred before August 7, 1977. 

	(ii)  Emissions reductions achieved by shutting down an existing source
or curtailing production or operating hours and that do not meet the
requirements in paragraphs IV.C.3.i.1. through 2 of this section may be
generally credited only if:

	(1)  The shutdown or curtailment occurred on or after the date the new
source permit application is filed; or 

	(2)  The applicant can establish that the proposed new source is a
replacement for the shutdown or curtailed source, and the emissions
reductions achieved by the shutdown or curtailment met the requirements
of paragraphs IV.C.3.i.1. through 2 of this section.

* * * * *

	VI.  POLICY WHERE ATTAINMENT DATES HAVE NOT PASSED

In some cases, the dates for attainment of primary standards specified
in the SIP under section 110 have not yet passed due to a delay in the
promulgation of a plan under this section of the Act. In addition the
Act provides more flexibility with respect to the dates for attainment
of secondary NAAQS than for primary standards. Rather than setting
specific deadlines, section 110 requires secondary NAAQS to be achieved
within a “reasonable time”. Therefore, in some cases, the date for
attainment of secondary standards specified in the SIP under section 110
may also not yet have passed. In such cases, a new source locating in an
area designated in 40 CFR 81.300 et seq. as nonattainment (or, where
section III of this Ruling is applicable, a new source that would cause
or contribute to a NAAQS violation) may be exempt from the Conditions of
section IV.A if the conditions in paragraphs VI.A through C are met.

A. The new source meets the applicable SIP emission limitations.

B. The new source will not interfere with the attainment date specified
in the SIP under section 110 of the Act.

C. The Administrator has determined that conditions A and B of this
section are satisfied and such determination is published in the Federal
Register.

 Federal Register of  May 12, 2005  (70 FR 25162).

 However, as noted below, a State that elects to bring its NOx SIP Call
non-EGU sources into the CAIR ozone season trading program may continue
to rely on EPA’s determination that RACT is met for EGU sources
covered by the CAIR trading program.  It may rely on this determination
if and only if the State retains a summer season EGU budget under the
CAIR that is at least as restrictive as the EGU budget that was set in
the State(s NOx SIP call SIP.

 However, see footnote 1 above and exception described below.

 However, as noted below, a State that elects to bring its NOx SIP Call
non-EGU sources into the CAIR ozone season trading program may continue
to rely on EPA’s determination that RACT is met for EGU sources
covered by the CAIR trading program.  It may rely on this determination
if and only if the State retains a summer season EGU budget under the
CAIR that is at least as restrictive as the EGU budget that was set in
the State(s NOx SIP call SIP.

The CAIR first phase also provides an annual NOx budget, which also
starts in 2009. 

 See, e.g., 52 FR at 45108  col. 2, “Compliance Periods” (November
24, 1987).  “VOC rules should describe explicitly the compliance
timeframe associated with each emission limit (e.g., instantaneous or
daily).  However, where the rules are silent on compliance time, EPA
will interpret it as instantaneous.

 Memorandum from John O’Connor, Acting Director of the Office of Air
Quality Planning and Standards, January 20, 1984, “Averaging Times for
Compliance with VOC Emission Limits—SIP Revision Policy.”

 57 FR at 55625, col. 1 sec. 4.5 “Relation to VOC RACT Policies”
(November 25, 1992).

 Improving Air Quality with Economic Incentive Programs, January 2001,
available at 
http://www.epa.gov/region07/programs/artd/air/policy/search.htm.

 Since RACT is a technology requirement prescribing year-round controls,
it is appropriate to consider how participation in both CAIR trading
programs (annual and seasonal) will affect annual emissions of NOx and
to compare that to how RACT will affect annual emissions of NOx.

  40 CFR 51.912 (c)(1) (promulgated in the Phase 2 Rule) provides that
for a subpart 1 area “. . . that submits an attainment demonstration 
that requests an attainment date 5 or less years after designation for
the 8-hour NAAQS,  the State shall meet the RACT requirement by
submitting an attainment demonstration SIP demonstrating that the area
has adopted all control measures necessary to demonstrate attainment as
expeditiously as practicable.”  Thus, these areas are not required to
submit RACT SIPs separate from their attainment demonstrations.  
However, a State must submit a RACT SIP separate from an attainment
demonstration SIP for the following areas:  under 40 CFR 51.912 (a),
subpart 2 moderate and above areas; and under 40 CFR 51.912 (c)(2),
subpart 1 areas with attainment dates beyond 5 years after designation.

 Technical Support Document For Phase 2 Of The Final Rule To Implement
The 8-Hour Ozone National Ambient Air Quality Standard –Notice Of
Reconsideration

NOx RACT For EGUs In CAIR States-- Supplemental Technical Analysis.

 68 FR 32833.  See also “2002 Base Year Emission Inventory SIP
Planning: 8-hr Ozone, PM2.5 and Regional Haze Programs,” U.S. EPA, pg.
1 (November 18, 2002).

 See 57 FR 13553.  After the 1990 CAA Amendments were enacted, 1990 was
the base year for 1-hour ozone NAAQS attainment planning purposes.  See
57 FR 13502.  The EPA encouraged States to allow sources to use
pre-enactment banked emissions reductions credits for offsetting
purposes.  States have been allowed to do so if the restored credits
meet all other offset creditability criteria, and States consider such
credits as part of the attainment emissions inventory when developing
their post-enactment attainment demonstration.

 For a discussion of emission inventories for the 8-hour ozone standard,
see our emission inventory guidance, "Emissions Inventory Guidance for
Implementation of Ozone and Particulate Matter National Ambient Air
Quality Standards (NAAQS) and Regional Haze Regulations - Final," at    
HYPERLINK "http://www.epa.gov/ttn/chief/eidocs/eiguid/index.html." 
http://www.epa.gov/ttn/chief/eidocs/eiguid/index.html.   For a
discussion of emission projections used in attainment demonstrations,
see Emission Inventory Improvement Program, Volume X, Emission
Projections, December 1999, available at 
http://www.epa.gov/ttn/chief/eiip/techreport/.

 Technical Appendix:  Potential Impacts of Implementation of the 8-Hour
Ozone NAAQS; Technical Support Document.  July 21, 2005.  Docket
Document EPA-HQ-OAR-2003-0079-0860.

 PAGE   

 PAGE   2 

