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Transitional and General Opt Out Procedures for Phase II Reformulated Gasoline Requirements
Related Material
[Federal Register: October 20, 1997 (Volume 62, Number 202)]
[Rules and Regulations]
[Page 54551-54558]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20oc97-27]
[[Page 54551]]
_______________________________________________________________________
Part IV
Environmental Protection Agency
_______________________________________________________________________
40 CFR Part 80
Transitional and General Opt Out Prodecures for Phase II Reformulated
Gasoline Requirements; Final Rule
[[Page 54552]]
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80
[FRL-5903-3]
Transitional and General Opt Out Procedures for Phase II
Reformulated Gasoline Requirements
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: This final rule revises the regulations for states to opt-out
of the federal reformulated gasoline (RFG) program for areas where a
state had previously voluntarily opted into the program. The previously
published opt-out provisions provide that EPA-approved opt-out
petitions become effective 90 days from approval. Under today's action,
if a state has not submitted an opt-out petition to EPA by December 31,
1997, it must participate in the federal RFG program until December 31,
2003. The Agency believes this rule is necessary to ensure a smooth
transition between the two phases of the reformulated gasoline program.
The use of Phase II RFG will provide greater health benefits than Phase
I by requiring further reductions from the refiners' 1990 gasoline
baseline for volatile organic compounds (VOCs) and toxics by about 25%
and 20% respectively. The requirements also include a nitrogen oxides
(NOX) reduction of about 6%.
Effective January 1, 2004, the current opt-out procedures become
effective again. States that want to end their involvement in the
federal RFG program prior to December 31, 1999, and not participate in
Phase II of the program, must submit a complete opt-out petition to EPA
by December 31, 1997.
Today's action does not affect the regulations for opting in to the
RFG program. In a separate action EPA will publish a final rule which
would permit former ozone nonattainment areas to opt into the federal
reformulated gasoline program.
EFFECTIVE DATE: This final rule is effective November 19, 1997.
FOR FURTHER INFORMATION CONTACT: Christine Hawk or Diane Turchetta at
U.S. Environmental Protection Agency, Office of Air and Radiation, 401
M Street, SW (6406J), Washington, DC 20460, (202) 233-9000.
SUPPLEMENTARY INFORMATION: A copy of this action is available on the
OAQPS Technology Transfer Network Bulletin Board System (TTNBBS) and on
the Office of Mobile Sources' World Wide Web cite, http://www.epa.gov/
OMSWWW. The TTNBBS can be accessed with a dial-in phone line and a
high-speed modem (PH# 919-541-5742). The parity of your modem should be
set to none, the data bits to 8, and the stop bits to 1. Either a 1200,
2400, or 9600 baud modem should be used. When first signing on, the
user will be required to answer some basic informational questions for
registration purposes. After completing the registration process,
proceed through the following series of menus:
(M) OMS
(K) Rulemaking and Reporting
(3) Fuels
(9) Reformulated gasoline
A list of ZIP files will be shown, all of which are related to the
reformulated gasoline rulemaking process. Today's action will be in the
form of a ZIP file and can be identified by the following title:
OPTOUT.ZIP. To download this file, type the instructions below and
transfer according to the appropriate software on your computer:
ownload, rotocol, xamine, ew, ist, or elp Selection
or to exit: D filename.zip
You will be given a list of transfer protocols from which you must
choose one that matches with the terminal software on your own
computer. The software should then be opened and directed to receive
the file using the same protocol. Programs and instructions for de-
archiving compressed files can be found via Systems Utilities from
the top menu, under Archivers/de-archivers. Please note that due to
differences between the software used to develop the document and the
software into which the document may be downloaded, changes in format,
page length, etc. may occur.
Regulated Entities
Entities potentially regulated by this action are those which
produce, supply or distribute motor gasoline. Regulated categories and
entities include:
------------------------------------------------------------------------
Examples of regulated
Category entities
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Industry.................................. Petroleum refiners, motor
gasoline distributors and
retailers.
State governments......................... State departments of
environmental protection.
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This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be regulated by this
action. This table lists the types of entities that EPA is now aware
could potentially be regulated by this action. Other types of entities
not listed in the table could also be regulated. To determine whether
your business is regulated by this action, you should carefully examine
the list of areas covered by the reformulated gasoline program in
Sec. 80.70 of title 40 of the Code of Federal Regulations. If you have
questions regarding the applicability of this action to a particular
entity, consult the person listed in the preceding FOR FURTHER
INFORMATION CONTACT section.
Extended Summary
EPA published a Notice of Proposed Rulemaking on March 28, 1997,
(62 FR 15077) proposing changes to the existing opt-out rule which
provides criteria and general procedures for states to opt-out of the
RFG program through December 31, 1997. This final rule promulgates the
revisions as proposed by EPA with minor changes. 61 FR 35673 (July 8,
1996).
This final rule applies to areas where the state voluntarily opted
into the federal RFG program and subsequently decides to withdraw from
it referred to as ``opt-out.'' This final rule establishes the criteria
and procedures for states to opt-out from the RFG program after
December 31, 1997. Today's rule does not change the process a state
must follow to petition for removal from the program or the criteria
used by EPA to evaluate a request. For example, the rule maintains the
requirements that the governor, or the governor's authorized
representative, submit an opt-out petition. This rule changes the time
period before the opt-out becomes effective for opt-out petitions
received from January 1, 1998, through December 31, 2003. This period
includes the remaining two years of Phase I (January 1, 1998 to
December 31, 1999) and the first four years of Phase II (January 1,
2000, to December 31, 2003).
This final rule specifies that for all opt-out petitions received
on or before December 31, 1997, the previously published procedures (61
FR 35673) will apply and that the effective date that an area will no
longer be a covered area as defined in 40 CFR section 80.70 will be 90
days (or more at a state's request) from the date of EPA's letter of
notification to the Governor of the requesting state or from the
effective date of an agency approval of a revision to the State
Implementation Plan (SIP) where applicable. States which have opted in
to the RFG program that do not submit a completed opt-out request by
December 31, 1997 and subsequently submit an opt-out request before
January 1, 2004, will be required to participate in the federal RFG
program, including
[[Page 54553]]
Phase II of the program, until at least December 31, 2003. The opt-out
request will be effective January 1, 2004 or 90 days from the Agency's
written notification to the State approving the opt-out petition,
whichever date is later, unless the Governor requests a later date.
The Agency may grant up to a five month extension to the December
31, 1997 deadline in limited circumstances. An extension can be granted
where the State's Legislature has pending legislation on the use of
federal RFG that was active prior to March 28, 1997, when this opt-out
rule was proposed. The request for an extension must demonstrate that
the legislation cannot reasonably be acted upon until after the
December deadline. Such legislation must be related to either opting
out of or remaining in the RFG program. The Governor must submit a
request for an extension to EPA containing such information before
December 31, 1997. The Agency can then grant an extension up to May 31,
1998.
Today's requirements will also cover those areas opting into the
RFG program subsequent to December 31, 1997; areas opting-in during
that time period must remain in the program at least until December 31,
2003. The opt-out procedures would revert back to the previously
published rule (90 day requirements) as of January 1, 2004.
Today's action will help provide certainty to the industry as it
makes decisions that are likely to affect the supply and cost of RFG,
which in turn could affect the cost-effectiveness of Phase II RFG.
Additionally, the action maintains the flexibility that states have in
air quality planning to the degree possible and practicable.
I. Opt-out Petitions Received January 1, 1998 Through December 31,
2003; and After December 31, 2003
A. Background
The federal reformulated gasoline (RFG) program is designed to
reduce ozone levels and air toxics in areas of the country that are
required to or volunteer to adopt the program. Reformulated gasoline
reduces motor vehicle emissions of the ozone precursors, specifically
volatile organic compounds (VOC), through fuel reformulation. RFG also
achieves a significant reduction in air toxics. In Phase II of the
program emissions of nitrogen oxides (NOX), another
precursor of ozone, are also reduced. The Clean Air Act requires RFG in
ten metropolitan areas with the highest levels of ozone.1 In
section 211(k)(6), Congress provided the opportunity for states to opt-
in to the RFG program for other areas classified under Subpart 2 of
Part D of Title I as ozone nonattainment areas.
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\1\ EPA recognizes that there are currently ten areas required
to use Federal RFG and that these areas currently do not have an
opt-out option. Those areas are: Los Angeles-Anaheim-Riverside, CA;
San Diego County, CA; Hartford-New Haven-Meriden-Waterbury, CT; New
York-Northern New Jersey-Long Island-Connecticut area; Philadelphia-
Wilmington-Trenton-Cecil County, MD; Chicago-Gary-Lake County, IL-
Indiana-Wisconsin area; Baltimore, MD; Houston-Galveston-Brazoria,
TX; Milwaukee-Racine, WI; Sacramento, CA.
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EPA issued final rules establishing requirements for RFG on
December 15, 1993. 59 FR 7716 (February 16, 1994). During the
development of the RFG rule, a number of states inquired as to whether
they would be permitted to opt-out of the RFG program at a future date,
or opt-out of certain requirements. This was based on their concern
that the air quality benefits of RFG, given their specific needs, might
not warrant the cost of the program, specifically focusing on the more
stringent standards in Phase II of the program (starting in the year
2000). States with that concern wished to retain the flexibility to
opt-out of the program. Other states indicated they viewed RFG as an
interim strategy to help bring their nonattainment areas into
attainment sooner than would otherwise be the case.
The regulation issued on December 15, 1993, did not include
procedures for opting-out of the RFG program because EPA had not
proposed and was not ready to adopt such procedures at that time. Since
then, the Agency has adopted general procedures for future opt-outs. 61
FR 35673 (July 8, 1996). These procedures apply to opt-out petitions
received through December 31, 1997.
Based upon EPA concerns regarding smooth implementation of Phase II
of the RFG program and public comments that were received in response
to the Notice of Proposed Rulemaking (60 FR 31269) published June 14,
1995, EPA is changing the regulations in this final rule for opt-out
petitions received between January 1, 1998, through December 31, 2003.
The previously published procedures in place today (61 FR 35673) will
take effect again beginning January 1, 2004.
In the proposal to the previous opt-out rulemaking, EPA outlined
its rationale for determining that it is appropriate to interpret
section 211(k) as authorizing states to opt-out of the program. 60 FR
31269 (June 14, 1995). EPA concluded that any conditions on opting out
should be focused on achieving a reasonable transition out of the
program. There were two primary areas of concern to the Agency. The
first was coordination of air quality planning. The second involved
appropriate lead time for industry to transition out of the program.
Today's final rule addresses this lead time concern by changing the
conditions for opting out during the period from January 1, 1998, to
December 31, 2003. As the effective date for Phase II RFG (January 1,
2000) approaches, industry must make investment decisions based in part
on anticipated demand for RFG. Unanticipated changes in demand, due to
opt-outs, could make cost recovery of investment difficult. To avoid
this, refiners would tend to minimize capital investments and rely on
costly operational changes which may be more to meet the Phase II
requirements. This approach to compliance requirements could lead to
higher gasoline prices which would diminish the cost-effectiveness of
EPA's RFG program. Thus, EPA believes it must consider these special
circumstances which affect industry directly and consumers indirectly
and make appropriate changes to the opt-out procedures. Therefore, EPA
is requiring states to decide by December 31, 1997 if they intend for
opt-in areas to participate in Phase I RFG up to December 31, 1999,
and/or to participate in Phase II RFG, which begins on January 1, 2000.
If a state has not submitted an opt-out petition by December 31, 1997,
it must continue to participate in Phase I RFG through December 31,
1999, and participate in Phase II RFG until December 31, 2003. The
Agency however may grant up to a five month extension to the December
31, 1997 deadline if the state meets specific criteria.
B. Statutory Authority
The statutory authority for the action in this rule is granted to
EPA by section 211(c) and (k) and section 301(a) of the Clean Air Act
as amended, 42 U.S.C. 7545 (c) and (k) and 7601(a). For a more complete
discussion of statutory authority, see the proposal for general rules
establishing criteria and procedures for states to opt-out of the RFG
program. 60 FR 31271 (June 14, 1995).
As discussed there, EPA believes it is appropriate to interpret
section 211(k) as authorizing states to opt-out of the RFG program,
provided that a process is established for a reasonable transition out
of the program. EPA believes allowing states to opt out is consistent
[[Page 54554]]
with the Act's recognition that states have the primary responsibility
to develop a mix of appropriate control strategies needed to reach
attainment with the NAAQS. Given this deference to state decision
making, it follows that the conditions on opting out should be geared
towards achieving a reasonable transition out of the RFG program, as
compared to requiring a state to justify its decision.
EPA has identified two principal areas of concern in this regard.
The first involves coordination of air quality planning. The second
involves appropriate lead time for industry to transition out of the
program. Today's rule addresses the latter concern. EPA's authority
allows it the discretion to authorize opt-outs in a way that
appropriately balances the interests of the parties affected by the
regulations. The previous rule establishing opt-out criteria and
procedures placed only limited conditions on the states, focusing on
the information that must be submitted before EPA may approve an opt-
out request. The previous rule also generally required a 90-day time
period to pass before an EPA-approved opt-out became effective. Today,
EPA is proposing to lengthen this time period for certain future opt-
outs because it believes the circumstances affecting industry have
changed enough to warrant an appropriate change.
C. Need for a Required Participation Period
In the NPRM, EPA proposed a four year required participation period
in Phase II for RFG opt-in areas. EPA solicited comments on the impact
of future opt-outs during this time period, and the expected impacts on
supply and cost from such opt-outs if they were allowed to occur. Two
petroleum associations commented that they support the establishment of
a minimum participation period for the Phase II RFG program which would
provide market certainty and stabilization. One association
specifically remarked that industry needs market certainty to not only
ensure adequate planning and investments to satisfy RFG demand at the
lowest cost, but to continue investments in RFG facilities by providing
assurance that the program would be in effect for a reasonable time to
allow a return on investment. It further commented that EPA must make
every effort to guarantee a stable regulatory climate for the highly
capital intensive RFG program. The other association remarked that it
agreed with the U.S. Department of Energy's (DOE's) comments to the
Agency's June 1995 NPRM, specifically the cost recovery issue. Several
refiners/suppliers commented that they agree with the associations'
comments. One company added that the Agency must take into account the
long term impact on all parties, including small refiners and marketers
when deciding RFG opt-ins or opt-outs. A state commented that consumers
would benefit from a stable price market which would be encouraged by a
long-term commitment to the program. The Agency did not receive any
comments arguing against the need for a required participation period.
Based on these comments, EPA maintains its belief in the need for a
required Phase II participation period as proposed. The proposed
requirement was prompted by the concerns expressed by DOE in its
comments during the previous opt-out rulemaking. Specifically, DOE
commented that a short time frame to opt-out by states who originally
intended to participate in Phase II of the RFG program makes it
difficult for refiners to recover their investments in refinery
facilities needed to comply with the requirements of Phase II RFG. (Air
Docket A-94-68) The Department further explained in its comments that
the ability to price gasoline at a level that recovers investments
depends very heavily on marginal supply and demand. Small unanticipated
changes in demand, whether due to market forces or changing regulatory
requirements, can make cost recovery of investment difficult, and cause
gasoline prices to rise or fall.
Refinery investments for Phase II RFG were originally estimated by
the U.S. Department of Energy (DOE) to be about $1 billion for East
Coast refiners and about $2 billion for Gulf Coast PADD III refiners.
These estimates were included in DOE's December 1994 report, Estimating
the Costs and Effects of RFG. Using improved modeling and real-world
RFG production volume data, EPA worked closely with API and DOE to
improve the DOE refinery model. This work was conducted in concert with
EPA's review of the NOX waiver petition submitted by the
American Petroleum Institute (API). Based on the over 200 improvements
and changes to the refinery model, DOE released an updated report in
1997 entitled Re-Estimation of the Refining Cost of RFG NOX
Control. The updated investment estimates in this report for 6.8%
NOX reduction range from about $0.2 to $0.8 billion for PADD
I and about $0.0 to $0.6 billion for PADD III.
The investment estimates decreased for several reasons but
predominantly because refiners are producing a lower volume of RFG than
was originally anticipated in 1994 due to subsequent opt-outs, due to a
smaller quantity of spillover than anticipated, and because the
refinery models used have been revised to more accurately project
capital investments by the refining industry. Although the investment
estimates are lower, EPA agrees with DOE's assessment that the
estimated investments remain significant and that a required
participation period is still appropriate. Such a requirement will
encourage refiners to make the appropriate investments which in turn
will help keep RFG prices low.
Refiners who expect to be producing Phase II RFG starting January
1, 2000, and who need additional facilities to meet the requirements of
that gasoline, are likely to begin making commitments to refinery
investments in 1997, two years in advance of the Phase II start date.
The decision to invest in the capital needed to comply with Phase II
RFG is based on each refiner's product capabilities, desire to
participate in the program, and likely anticipated demand.
Those refiners who chose to supply Phase II RFG are each uniquely
situated to comply with the year 2000 Phase II requirements. Different
levels of investment will be pursued by each refiner when investment is
chosen or is necessary. The largest investments are expected to be made
in the areas of desulfurization and alkylation to control sulfur and
olefins. Some are expected to make early refinery changes to come into
compliance with the complex model requirements in 1998. While the
economic burden of Phase II compliance will fall disproportionately on
some refiners, the Agency's main concern in this final rule is to
provide a stable regulatory environment which will not unreasonably
inhibit cost recovery, given that this could lead to supply problems
and cost fluctuations that could diminish the appeal and cost-
effectiveness of the RFG program.
D. Four Year Required Participation Period From January 1, 2000 to
December 31, 2003
In the NPRM, EPA proposed a four year required participation period
to attempt to strike a balance between the potential adverse impacts if
refiners have too little time to recoup their Phase II investments and
the need of states for some flexibility in using RFG. The Agency
solicited comments on the range of investment recovery periods needed
by the refineries who plan to invest capital in refining equipment for
Phase II RFG.
[[Page 54555]]
Several refiners and petroleum associations commented that a four
year commitment period is not necessarily sufficient or is the minimum
amount of time refiners would need to recover investments made to
produce Phase II RFG. These commenters referenced DOE's comments that
an eight year period is more adequate given the current competitive
gasoline market, as well as EPA's statement that refiners would need a
six year investment recovery period assuming a 10% real rate of return
(62 FR 15077). Two refiners encouraged EPA to adopt a six year
participation period while one suggested at least ten years based on
the argument that manufacturing Phase II RFG is a long range project
with expected pay outs of 10-20 years. Conversely, two states and two
refiners/suppliers of RFG commented that a four-year period is adequate
for several reasons including that it strikes a balance between
sufficient certainty for RFG producers and flexibility for states to
chose air quality control measures, markets tend to become more
efficient over time, and that an extended required period may not
provide additional cost recovery but instead create a disincentive to
continue participation in the program.
The above comments do not represent any new information or
compelling arguments to change the proposed four-year participation
period beyond four years. Thus the EPA continues to believe that a four
year period is the most appropriate. The Agency is not trying to assure
that all refiners will recover investments made in Phase II RFG
production in a given time period. EPA is instead seeking to structure
the federal RFG program in a way that minimizes the potential abrupt
decrease in demand that could occur to refiners, thereby making it
difficult to recover investments associated with producing this
product. The potential for such decreases in demand soon after the
implementation of Phase II RFG could be a disincentive to refiners to
invest in the kind of capital that would tend to reduce future supply
problems and to sustain the cost-effectiveness of the program. This is
because a refiner's decision to invest in Phase II RFG is based, in
part, upon an opt-in state's decision to have EPA require the sale of
Phase II RFG in a particular area. RFG market uncertainty is increased
when opt-in states are not bound to remain in the RFG program and by
the relatively simple process for states to opt out of the RFG program
provided for in the previously published rule. Without greater
assurance of the markets for Phase II reformulated gasoline over a
sufficient period of time, refiners may limit or delay investments and
prepare for a smaller than currently-predicted RFG demand.
EPA is committed to ensuring that non-attainment areas around the
country attain the National Ambient Air Quality Standards (NAAQS),
including the ozone standard. EPA recognizes, however, that under the
Clean Air Act the states play a primary role in attaining the NAAQS,
including choosing those control measures they prefer to include in
their plans to attain and maintain the NAAQS. EPA is committed to
maintaining, if possible and practical, the flexibility that states
have in air quality planning by establishing procedures to opt out and
substitute alternative control measures where the state considers
appropriate. The Agency believes that requiring RFG in opt-in states
for a period greater than four years may create a disincentive for
continued participation in those areas where this program is currently
considered a cost-effective control measure for the control of ground-
level ozone and toxics.
EPA believes that today's action achieves a balance between
allowing states with voluntary RFG areas the flexibility to opt-out of
the program and giving industry a certain level of assurance as to a
predictable demand for Phase II RFG during the important investment
recovery period of the program's early years. Today's action helps
maintain a consistent market, adequate supplies and reasonable prices,
thus maintaining the RFG program's cost-effectiveness.
E. Effective Date for Approved Opt-Out Petitions
In the NPRM, EPA proposed to change the date on which EPA-approved
opt-out petitions become effective for opt-out petitions received
January 1, 1998, through December 31, 2003. The EPA proposed that
States which previously opted in to the RFG program that do not submit
an opt-out request by December 31, 1997, and subsequently submit a
completed opt-out request before January 1, 2004, will be required to
participate in Phase II of the program until December 31, 2003. The
opt-out request will be effective January 1, 2004 or 90 days from the
Agency's written notification to the State approving the opt-out
petition, whichever is later.
The Agency also proposed that if a state submits an opt-out request
prior to December 31, 1997, the state can designate the opt-out to
occur at any future date beyond the minimum 90-day period required
under current opt-out procedures as long as it is not a date beyond
December 31, 1999. Areas opting into the RFG program subsequent to
December 31, 1997, will be treated the same as areas opting in prior to
that date and will also be included in Phase II of the program until
December 31, 2003.
A state commented that the December 31, 1997 deadline should be
extended if the Agency revises the National Ambient Air Quality
Standards (NAAQS) in the summer of 1997. It stated that a change in the
NAAQS would require analysis to verify the appropriateness of RFG as a
control strategy and that the proposed opt-out deadline would not be
sufficient for the state to make such a decision. The Agency
understands this air quality planning concern for a revision to the
NAAQS, but extending the opt-out deadline a few months would not be of
any significant value to the states for purposes of making decisions on
control strategies to meet the new ozone standard. Extending the
deadline much beyond December 31, 1997 could jeopardize the intent of
the rulemaking by not providing industry with sufficient lead time to
make necessary investment decisions.
A representative of the state of Maine commented that the opt-out
deadline should be extended at least until end of May 1998. The state
discussed the controversy within that state surrounding the decision of
whether or not to stay in the RFG program and expressed the importance
of providing its legislature the opportunity to approve such decisions.
The state's legislative session ended June 1997 and is not scheduled to
reconvene until January 1998. In January 1997, a bill was introduced in
Maine's Legislature to opt the state out of the RFG program. The
Legislature did not act on this legislation and carried it over to the
next legislative session beginning January 1998 for consideration. The
EPA believes that a limited extension is justified under these
circumstances and that a limited extension would not negate the intent
of the rulemaking since only a small refining market would be affected.
Thus in this final rule EPA is allowing a Governor, that requests an
extension so the legislature can consider a decision, to submit a
letter to EPA before December 31, 1997 to request an extension up to
May 31, 1998. To be eligible for an extension, the State's Legislature
must have pending RFG legislation that cannot reasonably be acted upon
until after the December deadline. Such legislation must be related to
either opting out of or
[[Page 54556]]
remaining in the RFG program and it must have been introduced prior to
March 28, 1997, the date of the opt-out proposal. The Governor must
submit a request for an extension to EPA containing such information
before December 31, 1997. The Agency then may grant an extension up to
May 31, 1998.
F. Return to Existing Procedures
EPA further proposed that, beginning on January 1, 2004, opt-out
requests from states again be approved based on the opt-out provisions
in effect before January 1, 1998. A petroleum association commented
that opt-outs must follow formal rulemaking process as provided for
under the CAA, and that approved opt-outs published by July 1 in a
given year should be effective January 1 of the following year to
provide adequate time for refiners to meet averaging requirement
planning and survey programs.
EPA does not agree that a separate rulemaking must be conducted for
each future opt-out request. The petition based process established in
the previous opt-out rulemaking (61 FR 35673) addresses, on a case by
case basis, future individual state requests to opt out of the federal
RFG program. The regulations establish clear and objective criteria for
EPA to apply in these future non-rulemaking actions. These criteria
address when a state's petition is complete and the appropriate
transition time under the regulations. This application of regulatory
criteria on a case by case basis to future individual situations does
not require notice and comment rulemaking, either under section 307(d)
of the Clean Air Act or the Administrative Procedure Act.
The EPA believes the petition approach is the most appropriate as
it will allow for expeditious and consistent Agency action on the
individual opt-out requests presented by states. It also provides
greater certainty in the market than individual rulemakings could
provide. Lastly, it provides quick approval for opt-out requests while
maintaining a sufficient transition period to minimize costly market
disruptions. In certain cases, the affected parties will be able to
comment on the state action. In those states where the RFG program is
included as a part of an approved state implementation plan (SIP),
affected parties that are concerned with the impacts of an opt-out
would have the opportunity to comment on a state's revised plan that
removes RFG as an air control measure.
At a state's request, the opt-out could be effective later than 90
days after approval of the petition or revised SIP. In such a case, a
state must indicate in its petition to the Agency the desired effective
date for the opt-out. EPA recommends that a state consider an opt-out
date which becomes effective on one of the RFG program's natural
transition points. These natural transition points are identified as
January 1, the start of the averaging season, and May 1 and September
15, the beginning and end, respectively, of the VOC control season. The
Agency supports state efforts to accommodate these natural transition
points.
G. Variations to Proposal
In the NPRM, EPA requested comments on two specific possible
variations to the proposal in anticipation of interest in these options
by outside parties:
(1) An area that reaches attainment of the ozone standard and is
redesignated during the period of January 1, 1998, through December 31,
2003, would be allowed to submit an opt-out request to be approved by
EPA using the same 90 day opt-out effective date applicable before
December 31, 1997 (See 61 FR 35673, July 8, 1996). A petroleum
association commented that it opposed this variation of allowing areas
to opt out of the program if they redesignate to attainment. It
specified that this variation would undercut, possibly negate, the
opportunity for cost recovery, create investment uncertainties and
instability that EPA is trying to avoid through this rulemaking, and is
inconsistent with the rationale underlying the rest of the proposal.
Most comments from industry agreed with the association's argument
against the variation. One RFG supplier, however, commented that such a
variation is important to state, local, and consumer involvement to
have every incentive to reach attainment classification as soon as
possible.
The EPA believes that this variation could jeopardize the intent of
the rule and thus is not including it in the final rule. While the
Agency agrees that states should have every incentive to reach
attainment, EPA does not believe this variation provides an incentive
great enough to outweigh the risk of undercutting the purpose of the
rule. If some states have areas that are redesignated to attainment
during the required participation period, their state implementation
plans (SIP), if applicable, would need to be revised. Even if these
processes were completed within the required period, it is likely that
the state would need to retain RFG in its maintenance plan to remain in
attainment. Thus this variation would not necessarily provide an
additional incentive to reach attainment of the ozone standard but
instead would retain an element of market uncertainty which contradicts
the purpose of the requirement.
(2) A similar participation period for areas first opting into the
RFG program subsequent to December 31, 1999, requiring these areas to
participate in Phase II of the program for at least four years from the
date of their opt-in. This variation, referred to as a ``rolling
required period'', would establish the effective date for the removal
of an area from the program as January 1, 2004, or 90 days from the
Agency's written notification approving the opt-out, or four years from
the effective date of their opt-in, whichever date is later, for all
opt-out requests received after January 1, 2000.
Several commenters supported a rolling period to avoid stranded
investments. However, one supplier remarked that it may not be
necessary to continue with a four year period beyond 2003. The EPA
believes that with the information available today and with the
uncertainty of the future, the Agency cannot conclude that there is a
need for a rolling period to assure a continued cost-effective RFG
program. The Agency did not receive a compelling argument or
information to continue with a required period for new opt-in areas.
The program which began in 1995 has remained very stable with only one
new opt-in. If a few areas were to opt-in the future, they may well be
located near a pipeline or appropriate infrastructure to meet the new
demand without additional refinery investments. However, if new areas
opt in remote locations or if there are numerous new areas, industry
may need to make unanticipated investments which could impact the price
of RFG. In this latter instance a rolling period may be necessary.
EPA believes that based on information available today there is not
sufficient justification to include a rolling period in this final
rule. However, since the Agency is committed to ensuring a cost-
effective RFG program to achieve air quality goals, EPA will take any
necessary action in the future if new information indicates a rolling
period is warranted.
II. Environmental Impact
If an area opts out of the RFG program, it will not receive the
reductions in VOCs, oxides of nitrogen (NOX), and air toxics
that are expected from this program. Instead, the areas would be
subject to the federal controls on Reid vapor pressure for gasoline in
the summertime, and would only
[[Page 54557]]
receive control of NOx and air toxics through the requirements of the
conventional gasoline anti-dumping program. These latter requirements
are designed to ensure that gasoline quality does not degrade from the
levels found in 1990. These areas would be foregoing the air quality
benefits obtained from the use of RFG.
In this final rule, EPA continues to recognize that states have the
primary responsibility to develop the mix of control strategies needed
to attain and maintain the NAAQS, and should have flexibility in
determining the mix of control measures needed to meet their air
pollution goals. However, the final rule also seeks to ensure through
the required participation period that the potential for a state to
decide to opt-out of Phase II of the RFG program does not cause adverse
impacts on the market demand for Phase II RFG during the initial years
of the program and thus maintains the cost-effectiveness of the RFG
program. EPA expects that states will in fact act prudently in
exercising their ability to opt-out under these rules. Any
environmental impacts of opting out are, therefore, not expected to
occur in isolation, but in a context of states exercising their
responsibility and developing appropriate control strategies for their
areas' air pollution goals.
III. Executive Order 12866
Under Executive Order 12866,2 the Agency must determine
whether a regulation is ``significant'' and therefore subject to OMB
review and the requirements of the Executive Order. The Order defines
``significant regulatory action'' as one that is likely to result in a
rule that may:
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\2\ See 58 FR 51735 (October 4, 1993).
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(1) Have an annual effect on the economy of $100 million or more,
or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments of communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof, or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
this Executive Order.3
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\3\ Id. at section 3(f)(1)-(4).
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It has been determined that this rule is not a ``significant
regulatory action'' under the terms of Executive Order 12866 and is
therefore not subject to OMB review.
IV. Unfunded Mandates
Under Section 202 of the Unfunded Mandates Reform Act of 1995
(``UMRA''), P.L. 104-4, EPA must prepare a budgetary impact statement
to accompany any general notice of final rulemaking or final rule that
includes a Federal mandate which may result in estimated costs to
State, local, or tribal governments in the aggregate, or to the private
sector, of $100 million or more. Under Section 205, for any rule
subject to Section 202 EPA generally must select the least costly, most
cost-effective, or least burdensome alternative that achieves the
objectives of the rule and is consistent with statutory requirements.
Under Section 203, before establishing any regulatory requirements that
may significantly or uniquely affect small governments, EPA must take
steps to inform and advise small governments of the requirements and
enable them to provide input.
EPA has determined that today's final rule does not trigger the
requirements of UMRA. The rule does not include a Federal mandate that
may result in estimated annual costs to State, local or tribal
governments in the aggregate, or to the private sector, of $100 million
or more, and it does not establish regulatory requirements that may
significantly or uniquely affect small governments.
V. Economic Impact and Impact on Small Entities
The Administrator has determined that this rule will not have a
significant impact on a substantial number of small entities. A
regulatory flexibility analysis has therefore not been prepared. This
final rule is not expected to result in any additional compliance cost
to regulated parties and in fact is expected to decrease compliance
costs and decrease costs to consumers in the affected areas by
providing more certainty for regulated parties. This final rule imposes
no new requirements on states.
With respect to the portion of today's action which requires
participation until January 1, 2004, of opt-in areas unless they
request to opt-out prior to January 1, 1998, today's final rule is not
expected to result in any additional compliance cost to regulated
parties. It does no more than maintain the status quo for those
entities who have been supplying RFG to the RFG opt-in areas and
imposes no additional requirements on parties that must comply with the
RFG regulations.
With respect to the portion of today's final rule which would apply
to opt-out requests applied for on or after January 1, 2004, the final
rule is not expected to result in any additional compliance cost to
regulated parties and in fact is expected to decrease compliance costs
to those entities who previously supplied RFG to the area opting out.
This rule also establishes a transition period which maximizes affected
parties' ability to plan for smooth transition from the RFG program,
minimizing disruption to the motor gasoline marketplace. This
transition period is reasonably expected to allow parties to turn over
existing stocks of RFG to conventional gasoline.
VI. Paperwork Reduction Act
This action does not add any new requirements under the provisions
of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The Office of
Management and Budget (OMB) has approved the information collection
requirements contained in the final FRG/anti-dumping rule and has
assigned OMB control number 2060-0277 (EPA ICR No. 1591.03).
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 are listed in 40 CFR Part 9 and 48 CFR Chapter 15.
VII. Submission to Congress and the General Accounting Office
Under 5 U.S.C. 801(a)(1)(A) as added by the Small Business
Regulatory Enforcement Fairness Act of 1996, EPA submitted a report
containing this rule and other required information to the U.S. Senate,
the U.S. House of Representatives and the Comptroller General of the
General Accounting
[[Page 54558]]
Office prior to publication of the rule in today's Federal Register.
This rule is not a ``major rule'' as defined by 5 U.S.C. 804(2).
List of Subjects in 40 CFR Part 80
Environmental protection, Fuel additives, Gasoline, Imports, Motor
vehicle pollution, Penalties, Reporting and recordkeeping requirements.
Dated: October 9, 1997.
Carol M. Browner,
Administrator.
Final Rulemaking
Accordingly, 40 CFR part 80 is amended as follows:
PART 80--REGULATION OF FUELS AND FUEL ADDITIVES
1. The authority citation for part 80 continues to read as follows:
Authority: Secs. 114, 211, and 301(a) of the Clean Air Act, as
amended (42 U.S.C. 7414, 7545 and 7601(a)).
2. Section 80.72 is amended by revising paragraphs (a) and (c) to
read as follows:
Sec. 80.72 Procedures for opting out of the covered areas.
(a) In accordance with paragraph (b) of this section, the
Administrator may approve a petition from a state asking for removal of
any opt-in area, or portion of an opt-in area, from inclusion as a
covered area under Sec. 80.70. If the Administrator approves a
petition, he or she shall set an effective date as provided in
paragraph (c) of this section. The Administrator shall notify the state
in writing of the Agency's action on the petition and the effective
date of the removal when the petition is approved.
* * * * *
(c)(1) For opt-out petitions received on or before December 31,
1997, except as provided in paragraphs (c)(2) and (c)(3) of this
section, the Administrator shall set an effective date for removal of
an area under paragraph (a) of this section as requested by the
Governor, but no less than 90 days from the Agency's written
notification to the state approving the opt-out petition, and no later
than December 31, 1999.
(2) For opt-out petitions received on or before December 31, 1997,
except as provided in paragraph (c)(3) of this section, where RFG is
contained as an element of any plan or plan revision that has been
approved by the Agency, other than as a contingency measure consisting
of a future opt-in, then the effective date under paragraph (a) of this
section shall be the date requested by the Governor, but no less than
90 days from the effective date of Agency approval of a revision to the
plan that removes RFG as a control measure.
(3)(i) The Administrator may extend the deadline for submitting
opt-out petitions in paragraphs (c)(1) and (2) of this section for a
state if:
(A) The Governor or his authorized representative requests an
extension prior to December 31, 1997;
(B) The request indicates that there is active or pending
legislation before the state legislature that was introduced prior to
March 28, 1997;
(C) The legislation is concerning opting out of or remaining in the
reformulated gasoline program; and
(D) The request demonstrates that the legislation cannot reasonably
be acted upon prior to December 31, 1997.
(ii) The Administrator may extend the deadline until no later than
May 31, 1998. If the deadline is extended, then opt-out requests from
that state received during the extension shall be considered under the
provisions of paragraphs (c)(1) and (2) of this section.
(4) For opt-out petitions received January 1, 1998 through December
31, 2003, except as provided in paragraph (c)(5) of this section, the
Administrator shall set an effective date for removal of an area under
paragraph (a) of this section as requested by the Governor but no
earlier than January 1, 2004 or 90 days from the Agency's written
notification to the state approving the opt-out petition, whichever
date is later.
(5) For opt-out petitions received January 1, 1998 through December
31, 2003, where RFG is contained as an element of any plan or plan
revision that has been approved by the Agency, other than as a
contingency measure consisting of a future opt-in, then the effective
date for removal of an area under paragraph (a) of this section shall
be the date requested by the Governor, but no earlier than January 1,
2004, or 90 days from the effective date of Agency approval of a
revision to the plan that removes RFG as a control measure, whichever
date is later.
(6) For opt-out petitions received on or after January 1, 2004,
except as provided in paragraph (c)(7) of this section, the
Administrator shall set an effective date for removal of an area as
requested by the Governor, but no less than 90 days from the Agency's
written notification to the state approving the opt-out petition.
(7) For opt-out petitions received on or after January 1, 2004,
where RFG is contained as an element of any plan or plan revision that
has been approved by the Agency, other than as a contingency measure
consisting of a future opt-in, then the effective date for removal of
an area under paragraph (a) of this section shall be the date requested
by the Governor, but no less than 90 days from the effective date of
Agency approval of a revision to the plan that removes RFG as a control
measure.
* * * * *
[FR Doc. 97-27725 Filed 10-17-97; 8:45 am]
BILLING CODE 6560-50-P