Transitional and General Opt Out Procedures for Phase II Reformulated Gasoline Requirements

Related Material

Other Related Documents

[Federal Register: March 28, 1997 (Volume 62, Number 60)]
[Proposed Rules]
[Page 15077-15082]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28mr97_dat-30]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 80

[FRL-5803-6]


Transitional and General Opt Out Procedures for Phase II
Reformulated Gasoline Requirements

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rule making.

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SUMMARY: In this document EPA is proposing to change 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. Under this proposal, if a state has not submitted an opt-
out petition to EPA by December 31, 1997, it must participate in Phase
II RFG until December 31, 2003. The Agency believes this proposed
process is necessary to ensure a smooth transition between the two
phases of the reformulated gasoline program.
    The Agency is also proposing, that effective January 1, 2004, the
current opt-out procedures, which provide that EPA-approved opt-out
petitions become effective 90 days from approval, become effective
again.
    In addition, this proposed rule would require that states decide
and submit to EPA a complete opt-out petition by December 31, 1997, if
they want an opt-in area to continue to participate in Phase I of the
RFG program up to December 31, 1999, but do not wish to participate in
Phase II of the program.
    This action does not affect the policies for opting in to the RFG
program. In a separate action EPA is publishing a notice of proposed
rulemaking, simultaneous with this proposal, which would permit former
ozone nonattainment areas to opt into the federal reformulated gasoline
program. EPA has not made a final determination on the policy for
attainment area RFG implementation.

DATES: The Agency will hold a public hearing on this proposal if one is
requested by April 4, 1997. If a public hearing is held, it will take
place on April 18, 1997.
    If a public hearing is held on this proposal, comments must be
received by May 19, 1997. If a hearing is not held, comments must be
receved by April 28, 1997. Please direct all correspondence to the
address shown below.
    To request a hearing, or to find out if and where a hearing is
held, please call Christine Hawk at (202) 233-9000.

ADDRESSES: Comments should be submitted (in duplicate, if possible) to
Air Docket Section, Mail Code 6102, U.S. Environmental Protection
Agency, 401 M Street, SW, Washington, DC 20460. A copy should also be
sent to Ms. Christine Hawk at U.S. Environmental Protection Agency,
Office of Air and Radiation, 401 M Street, SW (6406J), Washington, DC
20460.
    Materials relevant to this notice have been placed in Docket A-94-
68. The docket is located at the Air Docket Section, Mail Code 6102,
U.S. Environmental Protection Agency, 401 M Street, SW, Washington, DC
20460, in room M-1500 Waterside Mall. Documents may be inspected from
8:00 a.m. to 5:30 p.m. A reasonable fee may be charged for copying
docket material.
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 rchivers/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:

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                                               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

[[Page 15078]]

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

    Based upon EPA and industry concerns regarding smooth
implementation of Phase II of the RFG program and public comments that
were solicited in the Notice of Proposed Rulemaking [60 FR 31269]
published June 14, 1995, EPA is proposing the following 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. 61
FR 35673 (July 8, 1996).
    This notice applies to areas where the state voluntarily opted into
the program and subsequently decides to withdraw from the reformulated
gasoline program, an action referred to as ``opt-out.'' This proposed
rule provides the Agency's rules concerning criteria and procedures for
states to opt-out certain areas from the RFG program after December 31,
1997. This proposal would 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. This proposal does change 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
first four years of Phase II (January 1, 2000, to December 31, 2003).
The proposal also maintains the requirements that the governor, or the
governor's authorized representative, submit an opt-out petition.
    This proposal specifies that for all opt-out petitions received as
of December 31, 1997, the existing procedures will apply and that the
effective date that an area will be removed from the list of covered
areas defined in 40 CFR Sec. 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 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 written
notification to the State approving the opt-out petition, whichever
date is later. Today's proposed requirements will also cover those
areas opting into the RFG program subsequent to December 31, 1997.
(i.e. areas opting-in during the transitional period must remain in the
program at least until December 31, 2003). The opt-out procedures would
revert back to the existing rule (90 day requirements) as of January 1,
2004.
    Today's proposal will help provide certainty to the industry as it
makes decisions that are likely to affect the supply and cost of
reformulated gasoline, which in turn could affect the cost-
effectiveness of Phase II RFG. Additionally, the proposal maintains the
flexibility that states have in air quality planning to the degree
possible and practicable.

I. EPA's Proposal for 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 vehicle emissions of the ozone precursors, specifically
volatile organic compounds (VOC), through fuel reformulation.
Reformulated gasoline also achieves a significant reduction in air
toxics. In Phase II of the program nitrogen oxides (NO_X), another
precursor of ozone, are also reduced. The 1990 Amendments to the Clean
Air Act require reformulated gasoline in the nine largest cities with
the highest levels of ozone.¹In section 211(k)(6), Congress
provided the opportunity for states to opt-in to the RFG program for
other ozone nonattainment areas.
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    \1\ EPA recognizes that there are currently ten areas required
to use Federal Reformulated Gasoline 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
Britain--Middletown--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 reformulated
gasoline 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 of the 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. 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. Today's proposal provides new procedures for
opt-out petitions received between January 1, 1998, through December
31, 2003. The existing procedures in place today 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 proposal addresses this lead time concern by changing the
conditions for opting out during the period from January 1, 1998, to
December 31, 2003. Before the effective date for Phase II RFG (January
1, 2000) approaches, industry must make investments decisions based in
part on anticipated demand for RFG. 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. Higher gasoline costs caused by
regulatory uncertainty would diminish the benefits and cost-
effectiveness of EPA's RFG program. Thus, EPA believes it must consider
these special circumstances which affect industry directly and
consumers indirectly and propose appropriate

[[Page 15079]]

changes to the opt-out procedures. Therefore, EPA today is proposing
that states must decide by a certain date (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.

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
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 proposal addresses the latter concern. EPA's authority
allows it the discretion to authorize opt-outs in a way that balances
the interests of the parties affected by the regulations. The 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 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.
    Today's proposal changes 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
reformulated gasoline. These decisions are likely to affect supply and
ultimately affect the cost of reformulated gasoline. Uncertainty of
supply and cost fluctuations could cause problems for and possibly
diminish the benefits and cost-effectiveness of EPA's RFG program.
Section 211(k) of the Act requires that reformulated gasoline achieve
the greatest reductions in VOCs and toxics emissions, ``taking into
consideration the cost of achieving such emission reductions . . .''
Thus, EPA believes it must consider these circumstances affecting
industry that could potentially affect cost. EPA's proposal is designed
to reduce the potential for adverse cost and supply impacts on the
reformulated gasoline program.

C. Need for a Required Participation Period Until January 1, 2004

    Under EPA's current opt-out provisions, some states may effectively
opt-out of the reformulated gasoline program as of 90 days from the
date EPA approves a state petition for the opt-out. 61 FR 35673 (July
8, 1996). The U.S. Department of Energy expressed its concerns in
comments during the previous rulemaking that such a time frame to opt-
out by states who originally intended to participate in Phase II of the
reformulated gasoline program makes it more difficult for refiners to
recover their investments in refinery facilities needed to comply with
the requirements of Phase II reformulated gasoline. (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.
    EPA shares the Department's concerns and, in the interest of
minimizing the adverse supply and cost impacts for this gasoline
program, is proposing a required participation period for reformulated
gasoline opt-in areas intending to participate in Phase II of the
reformulated gasoline program.
    Refinery investments for Phase II RFG have been estimated by the
U.S. Department of Energy to be about $1 billion for East Coast
refiners and $2 billion for Gulf Coast PADD III refiners. Refiners who
expect to be producing Phase II reformulated gasoline starting January
1, 2000, and who need additional facilities to meet the requirements of
that gasoline, are likely to be making commitments to refinery
investments through 1997, two years in advance of the Phase II start
date. This decision to invest in the refining equipment needed to
comply with Phase II is based on each refiner's product capabilities
and likely anticipated demand for Phase II reformulated gasoline.
    To comply with the Phase II requirements in 2000, each refiner is
uniquely situated. For those refiners that plan to modify their
refineries, different levels of investment would be required. 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 proposal is to provide a stable
regulatory environment which will not inhibit cost recovery, given that
this could lead to supply problems and cost fluctuations that could
diminish the overall cost-effectiveness of the RFG program.
    The Agency, in its estimates of the Phase II reformulated gasoline
program costs [as stated in the regulatory impact analysis (RIA) for
the final RFG rulemaking 59 FR 7716], has assumed a 10 percent real
rate of return. Based on this assumed rate of return, refiners would
need a six year investment recovery period. The Agency is soliciting
comments on the range of investment recovery periods needed by the
refineries who plan to invest capital in refining equipment for Phase
II reformulated gasoline, the impact of future opt-outs on this period,
and the expected impacts on supply and cost from such opt-outs.
    The time required to recover refinery investments is highly
variable, depending on a number of factors, including the size and type
of investment, the refiner's financial situation and market conditions.
The U.S. Department of Energy believes, based on the National Petroleum
Council 1993 refinery study and on the Department's own examination of
this issue, that at a minimum, a four-year period is required for the
industry as a whole to recover its Phase II investments. The Department
also

[[Page 15080]]

emphasized that an eight-year period was more adequate given the
current competitive gasoline market.
    If the Agency were to extend the current opt-out provisions, it
would reduce the ability of refiners to plan for a relatively stable
level of demand for Phase II reformulated gasoline and refiners would
have a disincentive to invest in Phase II of the reformulated gasoline
program. Without greater assurance of the markets for Phase II
reformulated gasoline for a period sufficient for investment recovery,
refiners may limit or delay investment and prepare for a smaller than
currently-predicted reformulated gasoline demand. Refiners could
minimize their production of and stocks for reformulated gasoline to
protect refiners and gasoline distributors from the potential loss of
reformulated gasoline markets. If refiners react to uncertain market
conditions in these ways, there would be the increased potential for
reformulated gasoline cost increase and supply shortages.
    These potential actions, taken by refiners reacting to Phase II
reformulated gasoline market uncertainty, would increase costs to
refiners, ultimately resulting in higher gasoline prices for consumers.
Limited or delayed investment in Phase II reformulated gasoline would
create the potential for spot shortages or some refiners may attempt to
quickly recoup their investment in Phase II, both situations causing
gasoline price increases. EPA is concerned that the cost-effectiveness
of the reformulated gasoline program would be jeopardized by regulatory
uncertainty, as it pertains to the regulated community's ability to
plan for providing the manufacturing capacity to produce reformulated
gasoline to specified control areas. Section 211(k) of the Clean Air
Act Amendments of 1990 requires that reformulated gasoline achieve the
greatest reductions in volatile organic compounds (VOCs) and toxics
emissions, ``taking into consideration the cost of achieving such
emission reductions . . .'' Today's proposal is designed to reduce the
potential for the adverse cost and supply impacts on the reformulated
gasoline program.
    The Agency is not trying to assure that all refiners will recover
investments made in Phase II reformulated gasoline production in a
given time period. EPA is instead seeking to structure the federal
reformulated gasoline program in a way that minimizes the potential
cost and supply impacts that could occur to refiners, thereby making it
difficult to recover investments associated with producing this
product. A refiner's decision to invest in reformulated gasoline is
based, in part, upon an opt-in state's decision to have EPA require the
sale of RFG in a particular area. Reformulated gasoline market
uncertainty is increased when opt-in states are not bound to remain in
the reformulated gasoline program and by the relatively simple process
for states to opt out of the reformulated gasoline program provided for
in the existing rule.
    EPA is committed to ensuring that 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, to a degree
possible and practicable, 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.
    EPA believes that today's proposal 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 reformulated gasoline during the
important investment recovery period of the program's early years.
Today's proposal helps maintain a consistent market, adequate supplies
and reasonable prices, thus maintaining the reformulated gasoline
program's cost-effectiveness. EPA's own estimate of Phase II
reformulated gasoline costs suggests consideration of a required
participation period of six years, but the Agency believes that
requiring reformulated gasoline 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. Although a longer recovery period of six or eight years may be
needed by some refiners to fully recover all Phase II investments and
less time for those who already have the capability to produce Phase II
reformulated gasoline, the ability of states to opt-out again after
2004 does not mean that such opt-outs will occur. Refiners in general
will still have significant demand for Phase II RFG for many years
after 2004. EPA is proposing four years to attempt to strike a balance
between the potential adverse impacts if refiners have too short of a
time to recoup their Phase II investments and the need of states for
some flexibility in using reformulated gasoline. EPA further believes
that this balance benefits reformulated gasoline consumers by
attempting to provide market consistency which should encourage
adequate supplies and reasonable prices.

D. Effective Date for Approved Opt-Out Petitions

    Today's proposal changes the date on which EPA-approved opt-out
petitions become effective for opt-out petitions received January 1,
1998, through December 31, 2003.
    This proposal modifies the existing requirement for any opt-out
request received between January 1, 1998, and January 1, 2004. 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.
    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. For example, a state
could submit an opt-out request before the December 31, 1997, deadline
which specifies that the opt-out would not be effective until the end
of the year 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.
    EPA also proposes 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.
    EPA requests comments on two specific possible variations to this
proposal in anticipation of interest in these options by outside
parties:
    (1) a possible exception to the required participation for areas
which are redesignated as attainment areas during the period of January
1, 1998, through December 31, 2003. Such an exception would allow 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.]
    (2) a similar participation period for areas first opting into the
RFG program

[[Page 15081]]

subsequent to December 31, 1999, requiring these area to participate in
Phase II of the program for at least four years from the date of their
opt-in. This variation 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.

II. Environmental Impact

    If an area opts out of the reformulated gasoline program, it will
not receive the reductions in VOCs, oxides of nitrogen (NO_X), 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 receive control of NO_X
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 reformulated gasoline.
    In this proposal, 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 proposal 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 RFG 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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    Pursuant to the terms of Executive Order 12866, Office of
Management and Budget (OMB) has notified EPA that it considers this a
significant regulatory action within the meaning of the Executive
Order. EPA submitted this action to OMB for review. Changes made in
response to OMB suggestions or recommendations will be documented in
the public record.

IV. Unfunded Mandates

    Under Section 202 of the Unfunded Mandates Reform Act of 1995
(``UMRA''), Public Law 104-4, EPA must prepare a budgetary impact
statement to accompany any general notice of proposed 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 proposed 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

    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5
U.S.C. 605(b), the Administrator certifies that this rule will not have
a significant impact on a substantial number of small entities. This
proposed 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 proposed rule
imposes no new requirements on states.
    With respect to the portion of today's action which proposes to
require participation until January 1, 2004, of opt-in areas unless
they request to opt-out prior to January 1, 1998, today's proposal 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 reformulated gasoline to the
reformulated gasoline 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 proposed rule which would
apply to opt-out requests applied for on or after January 1, 2004, the
proposed 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 reformulated
gasoline to the area opting out. This rule also establishes a
transition period which maximizes affected parties' ability to plan for
smooth transition from the reformulated gasoline program, minimizing
disruption to the motor gasoline marketplace. This transition period is
reasonably expected to allow parties to turn over existing stocks of
reformulated gasoline 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,

[[Page 15082]]

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.

List of Subjects in 40 CFR Part 80

    Environmental protection, Air pollution control, Fuel additives,
Gasoline, Motor vehicle pollution.

    Dated: March 21, 1997.
Carol M. Browner,
Administrator.

    40 CFR Part 80 is proposed to be amended as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

    1. The authority citation for part 80 continues to read as follows:

    Authority: Section 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), (c)(1) and
(c)(2) and by adding paragraphs (c)(3) through (c)(7) 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 prior to and including
December 31, 1997, except as provided in paragraph (c)(2) 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 prior to and including December
31, 1997, where reformulated gasoline 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 90 days
from the effective date for Agency approval of a revision to the plan
that removes reformulated gasoline as a control measure.
    (3) For opt-out petitions received January 1, 1998 through December
31, 2003, except as provided in paragraph (c)(4) of this section, the
Administrator shall set January 1, 2004 or 90 days from the Agency's
written notification to the state approving the opt-out petition,
whichever date is later, as the effective date for removal of an area
under paragraph (a) of this section.
    (4) For opt-out petitions received January 1, 1998 through December
31, 2003, where reformulated gasoline 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) this section
shall be January 1, 2004, or 90 days from the effective date for Agency
approval of a revision to the plan that removes reformulated gasoline
as a control measure, whichever date is later.
    (5) For opt-out petitions received on or after January 1, 2004,
except as provided in paragraph (c)(6) 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.
    (6) For opt-out petitions received on or after January 1, 2004,
where reformulated gasoline 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 90 days from the effective date for Agency approval of a revision to
the plan that removes reformulated gasoline as a control measure.
    (7) An area opting into the RFG program after December 31, 1997,
will be subject to all requirements of this section.
* * * * *
[FR Doc. 97-7953 Filed 3-27-97; 8:45 am]
BILLING CODE 6560-50-P
Notices For
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Transitional and General Opt Out Procedures for Phase II Reformulated Gasoline Requirements

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