[Federal Register Volume 62, Number 106 (Tuesday, June 3, 1997)]
[Rules and Regulations]
[Pages 30260-30270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14442]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 80
[FRL-5834-4]
Regulations of Fuels and Fuel Additives: Extension of the
Reformulated Gasoline Program to the Phoenix, Arizona Moderate Ozone
Nonattainment Area
AGENCY: Environmental Protection Agency (``EPA'').
ACTION: Final rule.
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SUMMARY: Under section 211(k)(6) of the Clean Air Act, as amended
(``Act'' or ``CAA''), the Administrator of EPA must require the sale of
reformulated gasoline (``RFG'') in an ozone nonattainment area
classified as Marginal, Moderate, Serious, or Severe upon the
application of the governor of the state in which the nonattainment
area is located. As requested by the Governor of Arizona, today's
action extends the requirement to sell RFG to the Phoenix, Arizona
moderate ozone nonattainment area, effective July 3, 1997 for all
persons other than retailers and wholesale purchaser-consumers (i.e.,
refiners, importers, and distributors), and August 4, 1997 for
retailers and wholesale purchaser-consumers. As of the implementation
date for retailers and wholesale purchaser-consumers, the Phoenix ozone
nonattainment area will be a covered area for all purposes in the
federal RFG program. The federal Phase I RFG program provides
reductions in ozone-forming volatile organic compounds (``VOC'')
emissions and air toxics, and prohibits increase in oxides of nitrogen
(``NOX'') emissions. Reductions in VOCs are environmentally
significant because of the associated reductions in ozone formation.
Exposure to ground-level ozone (or smog) can cause respiratory
problems, chest pain, and coughing and may worsen bronchitis,
emphysema, and asthma.
DATES: This final rule is effective July 3, 1997.
ADDRESSES: Materials relevant to the final rule have been placed in
Docket A-97-02. 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 on business days from 8:00 a.m. to 5:30 p.m. A reasonable fee
may be charged for copying docket material. An identical docket is also
located in EPA's Region IX office in Docket A-AZ-97. The docket is
located at 75 Hawthorne Street, AIR-2, 17th Floor, San Francisco,
California 94105. Documents may be inspected from 9:00 a.m. to noon and
from 1:00--4:00 p.m. A reasonable fee may be charged for copying docket
material.
FOR FURTHER INFORMATION CONTACT: Janice Raburn at U.S. Environmental
Protection Agency Office of Air and Radiation, 401 M Street, SW
(6406J), Washington, DC 20460, (202) 233-9856.
SUPPLEMENTARY INFORMATION:
Availability on the TTNBBS
The preamble, regulatory language and regulatory support document
are also available electronically from the EPA Internet Web site and
via dial-up modem on the Technology Transfer Network (TTN), which is an
electronic bulletin board system (BBS) operated by EPA's Office of Air
Quality Planning and Standards. Both services are free of charge,
except for your existing cost of Internet connectivity or the cost of
the phone call to TTN. Users are able to access and download files on
their first call using a personal computer per the following
information. The official Federal Register version is made available on
the day of publication on the primary Internet sites listed below. The
EPA Office of Mobile Sources also publishes these notices on the
[[Page 30261]]
secondary Web site listed below and on the TTN BBS.
Internet (Web)
http://www.epa.gov/docs/fedrgstr/EPA-AIR/
(either select desired date or use Search feature)
http://www.epa.gov/OMSWWW/
(look in What's New or under the specific rulemaking topic)
TTN BBS: 919-541-5742
(1200-14400 bps, no parity, 8 data bits, 1 stop bit)
Voice Help line: 919-541-5384
Off-line: Mondays from 8:00 AM to 12:00 Noon ET
A user who has not called TTN previously will first be required to
answer some basic informational questions for registration purposes.
After completing the registration process, proceed through the
following menu choices from the Top Menu to access information on this
rulemaking.
Gateway to TTN Technical Areas (Bulletin Boards)
OMS--Mobile Sources Information
(Alerts display a chronological list of recent documents)
Rulemaking & Reporting
At this point, choose the topic (e.g., Fuels) and subtopic (e.g.,
Reformulated Gasoline) of the rulemaking, and the system will list all
available files in the chosen category in date order with brief
descriptions. To download a file, type the letter ``D'' and hit your
Enter key. Then select a transfer protocol that is supported by the
terminal software on your own computer, and pick the appropriate
command in your own software to receive the file using that same
protocol. After getting the files you want onto your computer, you can
quit the TTN BBS with the oodbye command.
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.
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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 would have been regulated by this action, you should
carefully examine the list of areas covered by the reformulated
gasoline program in section 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.
The remainder of this preamble is organized into the following
sections:
I. Background
A. Clean Air Act Opt-in Provision
B. EPA Procedures and Arizona Opt-in Request
II. Action
III. Response to Comments
A. EPA Interpretation of section 211(k)(6) of the Clean Air Act
B. Phoenix Circumstances
1. Need for Air Quality Benefits of Federal RFG
2. Supply
C. Implementation Issues
1. Enforcement Relief Provided by EPA
2. Other Implementation Issues
IV. Environmental Impact
V. Statutory Authority
VI. Regulatory Flexibility
VII. Public Participation
VIII. Executive Order 12866
IX. Paperwork Reduction Act
X. Unfunded Mandates
XI. Judicial Review
XII. Submission to Congress
XIII. List of Subjects in 40 CFR Part 80
I. Background
A. Clean Air Act Opt-in Provision
As part of the Clean Air Act Amendments of 1990, Congress added a
new subsection (k) to section 211 of the Act. Subsection (k) requires
the sale of gasoline that EPA has certified as reformulated in the nine
worst ozone nonattainment areas beginning January 1, 1995. Section
211(k)(10)(D) defines the areas required to be covered by the
reformulated gasoline (``RFG'') program as the nine ozone nonattainment
areas having a 1980 population in excess of 250,000 and having the
highest ozone design values during the period 1987 through 1989.
1 Under section 211(k)(10)(D), any area reclassified as a
severe ozone nonattainment area under section 181(b) must also be
included in the RFG program. 2 EPA published final
regulations for the RFG program on February 16, 1994. See 59 FR 7716.
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\1\ Applying these criteria, EPA has determined the nine covered
areas to be the metropolitan areas including Los Angeles, Houston,
New York City, Baltimore, Chicago, San Diego, Philadelphia, Hartford
and Milwaukee.
\2\ Sacramento was reclassified from Serious to Severe effective
June 1, 1995 and became a mandatory covered RFG area effective June
1, 1996.
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Any ozone nonattainment area classified as Marginal, Moderate,
Serious, or Severe may be included in the program at the request of the
Governor of the state in which the area is located. Section
211(k)(6)(A) provides that upon the application of a Governor, EPA
shall apply the prohibition against selling conventional gasoline
(``CG'') in any area requested by the Governor which has been
classified under subpart 2 of Part D of Title I of the Act as a
Marginal, Moderate, Serious or Severe ozone nonattainment
area.3 Subparagraph 211(k)(6)(A) further provides that EPA
is to apply the prohibition as of the date the Administrator ``deems
appropriate, not later than January 1, 1995, or 1 year after such
application is received, whichever is later.'' In some cases the
effective date for a potential opt-in area may be extended beyond the
one year required by section 211(k)(6)(A). Such an extension, as
provided in section 211(k)(6)(B), would be based on a determination by
EPA that there is ``insufficient domestic capacity to produce'' RFG.
Finally, section 211(k)(6)(A) requires that EPA publish a governor's
application in the Federal Register.
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\3\ EPA recently published a proposed rulemaking that would
allow areas previously classified as Marginal through Severe to opt-
in. 62 FR 15074 (March 28, 1997).
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Although section 211(k)(6) provides EPA discretion to establish the
effective date for this prohibition to apply to such areas, EPA does
not have discretion to deny a Governor's request. Therefore, the scope
of EPA's Notice of Proposed Rulemaking (``NPRM'') was limited to
proposing an effective date for Phoenix's opt-in to the RFG program.
EPA solicited comments addressing the proposed implementation date and
stated in the NPRM that it was not soliciting comments that supported
or opposed Phoenix participating in the RFG program.
B. EPA Procedures and Arizona Opt-in Request
The Governor of Arizona established in May 1996 an Air Quality
Strategies Task Force (``Arizona Task Force'') to develop a report
describing long- and short-term strategies that would contribute to
attainment of the federal national ambient air quality standards
(``NAAQS'') for ozone, carbon monoxide and particulates. In July 1996,
this task
[[Page 30262]]
force recommended establishment of a Fuels Subcommittee to evaluate
potential short-term and long-term fuels options for the Phoenix ozone
nonattainment area. The Fuels Subcommittee was composed of
representatives of a diverse mixture of interests including gasoline-
related industries, public health organizations, and both in-county and
out-of-county interests. Several members of the refining industry
supported the opt-in to the federal RFG program for Phoenix for the
onset of the 1997 VOC control season. The subcommittee submitted its
final report to the Arizona Task Force on November 26,
1996.4
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\4\ See Docket A-97-02, II-A-3.
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By letter dated January 17, 1997, the Governor of the State of
Arizona applied to EPA to include the Phoenix moderate ozone
nonattainment area in the federal RFG program. The Governor requested
an implementation date of June 1, 1997. EPA published the Governor's
letter in the Federal Register, as required by section 211(k)(6). The
Direct Final rule published by EPA on February 18, 1997 (62 FR 7164)
extended the RFG program to the Phoenix moderate ozone nonattainment
area by setting two implementation dates. EPA set an effective date of
June 1, 1997 for refiners, importers, and distributors, and July 1,
1997 for retailers and wholesale purchaser-consumers. The Agency
published a Direct Final Rule because it viewed setting the effective
date for the addition of the Phoenix ozone nonattainment area to the
federal RFG program as non-controversial and anticipated no adverse or
critical comments.
Also on February 18, 1997 EPA published an NPRM (62 FR 7197), in
which EPA proposed to apply the prohibitions of subsection 211(k)(5) to
the Phoenix, Arizona nonattainment area. EPA proposed to adopt the same
two implementation dates for Phoenix specified in the Direct Final
Rule. EPA published an NPRM so that, in the event that it did receive
an adverse comment in response to the Direct Final Rule, the Agency
would proceed with notice-and-comment rulemaking. EPA is today taking
final action on that NPRM.
After publication of the Direct Final Rule and the NPRM, EPA
received several requests for a hearing. A copy of these comments can
be found in Air Docket A-97-02. (See ADDRESSES) Since EPA received a
request for a hearing, the Direct Final Rule adding the Phoenix ozone
nonattainment area to the RFG program was withdrawn by the
Administrator on March 31, 1997. See 62 FR 16082 (April 4, 1997.) EPA
published a Notice of public hearing on March 12, 1997 (62 FR 11405)
and held a public hearing in Phoenix, Arizona on March 18, 1997.
II. Action
Pursuant to the governor's letter and the provisions of section
211(k)(6), EPA is today adopting regulations that apply the
prohibitions of subsection 211(k)(5) to the Phoenix, Arizona moderate
ozone nonattainment area. EPA believes the implementation dates adopted
today achieve a reasonable balance between requiring the earliest
possible start date to achieve air quality benefits in Phoenix and
providing adequate lead time for industry to prepare for program
implementation. These dates are consistent with the state's request
that EPA require that the RFG program begin in the Phoenix area as
early as possible in the high ozone season, which begins June 1. These
dates will provide environmental benefits by allowing Phoenix to
achieve VOC reduction benefits for some of the 1997 VOC-controlled
season.
EPA has concluded, based on its analysis of available information,
including public comments received and discussed below (See III.
Response to Comments), that the refining and distribution industry's
capacity to supply federal RFG to Phoenix this summer exceeds the
estimated demand. EPA has also concluded that the implementation dates
adopted today provide adequate lead time to industry to set up storage
and sales agreements to ensure supply of RFG to the Phoenix ozone
nonattainment area.
The Governor's request seeks a single implementation date of June 1
for the RFG program in the Phoenix area. However, pursuant to its
discretion to set an effective date under section 211(k)(6), EPA is
establishing two implementation dates. For all persons other than
retailers and wholesale purchaser-consumers (i.e., refiners, importers,
and distributors), implementation shall take effect on the effective
date of this rule, July 3, 1997. This date applies to the refinery
level and all other points in the distribution system other than the
retail level. For retailers and wholesale purchaser-consumers,
implementation shall take effect 30 days after the effective date of
this rule, August 4, 1997. As of the implementation date for retailers
and wholesale purchaser-consumers, the Phoenix ozone nonattainment area
will be treated as a covered area for all purposes of the federal RFG
program.
III. Response to Comments
A. EPA Interpretation of Section 211(k)(6) of the Clean Air Act
Several parties noted that EPA would be setting a precedent for
future opt-ins by the criteria it uses to determine an appropriate
effective date for the Phoenix opt-in. They noted that the decision
would have a national impact and asked for assurance from EPA that it
would apply these criteria uniformly. One commenter stated that the
compliance date set for the first opt-in requests allowed refiners many
months to set up the systems and organizations necessary to comply with
the rules. This timing provided industry with the certainty it needed
to make informed compliance decisions and the time it needed to
implement the required changes either in the production of different
fuels or in the administrative requirements for compliance. The
commenter said that EPA had never contemplated such a rapid opt-in
process as the one proposed for Phoenix and recommended that EPA avoid
setting an undesirable precedent.
The Arizona opt-in request is the first request EPA has received
since the federal RFG program began in January 1995.5
Previous opt-in requests were sent in from two to three and a half
years before January 1, 1995. Section 211(k)(6)(A) authorizes EPA to
set an effective date for an area's opt-in that is no later than one
year from the date of the request, or January 1, 1995, whichever is
later. In the case of these early opt-in requests, January 1, 1995, was
later than one year from the date of the requests. Therefore, EPA set
an effective date of January 1, 1995, for those areas to opt-in. EPA
received one opt-in request shortly before the federal RFG program
began. For that request, EPA set an effective date of June 1, 1995,
less than one year from the Governor's opt-in request.6
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\5\ Voluntarily covered federal RFG areas (``opt-in'' areas)
currently exist in twelve States and the District of Columbia. Each
of these areas submitted opt-in requests (a letter from the State
Governor to the EPA Administrator) between June 1991 and October
1992. EPA responded to these requests to set an effective date under
section 211(k)(6)(A) of the CAA by (1) publishing a ``Notice of
Application for the Extension of the RFG program'' in which EPA set
an effective date of January 1, 1995, the date when the federal RFG
program was required to begin; and (2) including these areas as
``covered areas'' under 40 CFR section 80.70(j) in the Final Rule
for Standards for Reformulated and Conventional Gasoline 59 FR 7716,
7852 (February 16, 1994), as amended at 59 FR 36944, 36964 (July 20,
1994).
\6\ The Governor of Wisconsin requested to opt-in some areas in
April 1994; in August 1994, the Governor requested the effective
date of June 1995. EPA published a Direct Final Rule on January 11,
1995 (60 FR 2693) setting June 1, 1995 as the effective date.
Wisconsin subsequently withdrew its opt-in request by letter dated
March 31, 1995 and EPA published a Notice to Withdraw Final Rule on
May 3, 1995 (60 FR 21724).
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[[Page 30263]]
EPA recognizes that each ozone nonattainment area that submits an
opt-in request will have a unique set of circumstances that has led the
State to select federal RFG as a control measure. Section 211(k)(6)(A)
of the Act gives the Administrator discretion to ``establish an
effective date * * * as he deems appropriate* * *.'' EPA interprets
this provision to mean that it has broad discretion to consider any
factors reasonably relevant to the timing of the effective date. This
would include factors that affect industry and the potential opt-in
area. The factors that affect industry could include productive
capacity and capability, other markets for RFG, oxygenate supply, cost,
lead time, supply logistics for the area, potential price spikes, and
potential disruption to business. The circumstances of the potential
opt-in area could include environmental benefits and the timing of such
benefits; amount and types of reductions it needs; and effects of
transport, geography, climate, and weather patterns on air quality. EPA
will review each opt-in request and the particular facts pertaining to
the potential opt-in area and the suppliers for that area to determine
the appropriate implementation date. EPA believes that Phoenix is an
ozone nonattainment area in extraordinary circumstances. (See
discussion in III.B.1. below.) Thus, at the request of the Arizona
Governor, EPA has reviewed this opt-in request as expeditiously as
possible. EPA has provided the flexibility refiners need to meet the
effective date by providing enforcement relief for several
implementation issues. (See discussion in III.C. below.)
Some commenters were concerned that EPA viewed its scope of review
for the Phoenix opt-in too narrowly. They suggested that EPA should
consider all issues relevant to a successful and orderly
implementation.7 One commenter argued that the Arizona
Governor made four requests in his January 17, 1997 letter and that EPA
should consider all these requests together: that EPA set an effective
date for Phoenix to opt-in to federal RFG; that EPA grant two waivers
under section 211(c)(4)(C) of the Act from EPA, one for a state Reid
vapor pressure (``RVP'') standard of 7.0 pounds per square inch
(``psi'') and one for a state wintertime oxygenated fuel standard; and
that EPA allow Phoenix to opt-out of federal RFG.8 The
commenter asked that EPA justify its decision to address opt-in first
and separated from these other requests.
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\7\ EPA stated in the Notice of public hearing (62 FR 16082
(March 12, 1997)) that comments regarding Arizona's decision to opt-
in to federal RFG; EPA opt-out procedures; the Arizona Reid vapor
pressure (RVP) waiver; and enforcement issues would not be relevant
to the limited scope of the opt-in rulemaking. EPA has discussed the
RVP waiver and enforcement issues, to the extent that they are
relevant to setting the effective date, in the preamble to today's
final rule.
\8\ See Docket A-97-02, II-D-1.
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EPA interprets the Governor's January 17 letter as a request to
opt-in to federal RFG. The first paragraph of the letter states that
the purpose of the letter is to request that EPA require federal RFG to
be supplied to the Phoenix ozone nonattainment area beginning June 1,
1997. In addition, the fact that the Governor's letter requesting to
opt-in to RFG raises other issues on which EPA action may be pending
does not require EPA to resolve those issues in conjunction with the
Agency's action on the opt-in request.
The Governor's letter includes references to the pending RVP and
oxygenated fuels standards waivers, but these references simply seek
expeditious approval of these previously submitted waiver requests.
EPA's Region 9 is currently considering these 211(c)(4)(C) waiver
requests.9
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\9\ The Arizona Department of Environmental Quality (``ADEQ'')
re-submitted a formal request, (a SIP Revision with supporting
documentation) for the RVP waiver by letter dated April 29, 1997 to
Region 9. A copy of this letter (without attachments) is in Docket
A-97-02, IV-D. A copy of the letter (with attachments) can be found
in the Region 9 Docket for this rulemaking (A-AZ-97) and the Region
9 Docket for the RVP Waiver (AZ-RVP-97).
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Commenters stated that in determining an appropriate effective date
EPA should consider the capacity to supply both RFG and low RVP
gasoline. Commenters argued that EPA should address the RVP waiver
request and the timing of the waiver decision, and acknowledge the
impact on refiners. EPA has considered the effect of a state 7.0 psi
RVP program on timing and supply for federal RFG. While refiners stated
that they need to know exactly what the fuel specifications are going
to be, EPA received comments from refiners stating that they could
supply RFG to Phoenix without having a final 7.0 psi RVP waiver
preemption in place. EPA acknowledges the importance for refiners to
know what all the specifications will be for Phoenix gasoline. EPA also
acknowledges that until EPA waives preemption for a state 7.0 psi RVP
standard under section 211(c)(4)(C), Arizona is preempted from
enforcing that standard. Nonetheless, the waiver of preemption is a
separate action. If EPA waives preemption and refiners need some
transition time, because the RVP program would be a state program,
Arizona would have authority to provide the appropriate transition
time.
Regarding the wintertime oxygenated fuel waiver request, the state
has not yet submitted the documentation for this request. When it does,
Region 9 will address it in a timely manner. Regarding Arizona's
potential opt-out, EPA does not consider the January 17 letter to be an
opt-out request. While the Governor asked for clarification of EPA opt-
out procedures, he did not request to opt-out; he did not ask EPA to
set an opt-out effective date or discuss any of the criteria required
in the Opt-Out Procedures Rule.10 The Governor simply made a
statement of current intent to submit an opt-out request if a certain
condition exists. That is, if Arizona were to decide that a different
fuel would better meet its needs, the Governor would submit an opt-out
request by December 31, 1997.11
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\10\ 61 FR 35673 (July 8, 1996).
\11\ See 62 FR 15077 (March 28, 1997), EPA Notice of Proposed
Rulemaking for Transitional and General Opt Out Procedures for Phase
II Reformulated Gasoline Requirements. EPA proposed, inter alia that
states decide and submit to EPA a complete opt-out petition by
December 31, 1997, if they want a current opt-in area to opt-out
before December 31, 1999.
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Several commenters believe EPA should consider the Governor's
statement of intent to opt-out in the future in setting the effective
opt-in date. Given that EPA has not received from Arizona an opt-out
request and thus no request for a particular opt-out effective date,
EPA cannot determine what effect, if any, a potential opt-out would
have on supply as of the opt-in effective date. While EPA is concerned
with potential supply disruptions and uncertainty for the regulated
community that could result with cyclic state opt-in and opt-out, the
CAA allows states to determine which control measures for meeting
federal air quality standards are most appropriate and best meet their
needs.12 In addition, the Opt-out Procedures Rule provides a
process a state must follow to petition for removal from the program,
the criteria used by EPA to evaluate a request, and the necessary
transition period before the opt-out becomes effective.13
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\12\ There is no indication that Arizona intends to initiate
another cycle of federal RFG adoption.
\13\ 61 FR 35673, 35674 (July 8, 1996).
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[[Page 30264]]
B. Phoenix Circumstances
1. Need for Air Quality Benefits of Federal RFG
Many commenters addressed Phoenix's air quality situation, the
conclusion by the Arizona Task Force that federal RFG was the most
effective short-term control measure for Phoenix, and the consequences
for Phoenix air quality if it does not receive those
benefits.14 A representative of the Arizona Department of
Environmental Quality (``ADEQ'') testified at the hearing, providing
the following reasons for why the State of Arizona needs EPA to
expeditiously set an effective date for Phoenix to opt-in to federal
RFG this summer. First, Arizona has some of the toughest combinations
of strategies to address ozone pollution in the nation. Arizona
implemented the Inspection and Maintenance 240 program, including the
pressure test; has a trip reduction program more stringent than was
required for Severe ozone nonattainment areas; has a regulatory remote
sensing program; and has had a state low (7.0 psi) RVP standard since
1994.15
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\14\ Some commenters discussed what they considered to be the
best fuel for Phoenix in the long-term. As stated in the NPRM and
Notice of public hearing, Arizona's short-or long-term fuel choice
is not relevant to this opt-in rulemaking.
\15\ A remote sensor is an instrument that measures emissions in
a pathway across a road as a vehicle drives by. At the same time the
vehicle drives by, a photograph is taken of the license plate.
Remote sensing programs are designed to target the highest emitting
vehicles in an unobtrusive way. Arizona's program requires owners of
vehicles that are found to be exceeding emissions standards (with
remote sensing) to bring their vehicle in for further emissions
testing and possible repair.
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Despite these requirements, ozone violations persist in the Phoenix
nonattainment area. Twenty-nine exceedances were recorded in the summer
of 1995, and ten exceedences were recorded in 1996. In addition,
Phoenix has a long ozone season; ADEQ documents violations from mid-May
to early September. These ozone violations have significant health
implications because they affect large numbers of people in the Phoenix
metropolitan area. For example, ADEQ estimates that as many as 496,000
people could have been exposed to unhealthful levels of air quality due
to violations on July 23, 1996.
ADEQ pointed out that Phoenix is currently a Moderate nonattainment
area, but the State is concerned about potential redesignation to
Serious because of the new source review (``NSR'') requirements that
would come with it. ADEQ believes, based on its current emissions
inventory, that NSR requirements would not produce significant air
quality benefits and thus would not be an effective ozone attainment
strategy for Phoenix.16 ADEQ has been working with EPA's
Region 9 on a Voluntary Early Ozone Plan (``VEOP'') to bring cleaner
air to Phoenix sooner and obviate the need for reclassification to
Serious. The tonnage reductions represented by federal RFG for 1997
through 1999 in Phoenix are a critical portion of the emissions
reductions that ADEQ needs to show in the VEOP.
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\16\ ADEQ's current emissions inventory shows that contributions
to ozone nonattainment from mobile sources are in excess of twenty-
five percent and from stationary sources are approximately six
percent. ADEQ is currently reevaluating the inventory that it used
for the Voluntary Early Ozone Plan (``VEOP'') because they have
reason to believe that mobile emissions may have been underestimated
and biogenic emissions overestimated.
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ADEQ also stated that the Arizona Task Force concluded that supply
of RFG for Phoenix would not be at issue, based on an independent
contractor study on fuel and refining capabilities.17 The
report was reviewed by dozens of stakeholders, many of whom were fuel
suppliers. The consultant determined that there was an adequate supply
of federal RFG available for Phoenix.
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\17\ See ``Final Report: Assessment of Fuel Formulations Options
for Maricopa County for State of Arizona Department of Environmental
Quality'' performed under Contract 97-0013AA by MathPro Inc. with
Air Improvement Resource, Inc., November 7, 1996 (``MathPro
Report''), EPA Air Docket A-97-02, II-A-2.
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One commenter who served on the Arizona Task Force stated at the
hearing that, after reviewing the analysis done by a contractor, the
Task Force concluded that opt-in to federal RFG was the single most
effective measure that the state could adopt in the short term to
improve air quality in Phoenix.18 In addition to providing
the emissions reductions Phoenix needs, supply was available and the
federal enforcement mechanism was in place. The commenter added that if
there was a delay in the opt-in effective date for Phoenix, they would
move into this summer's ozone season when humidity and higher
temperatures could result in an ozone violation this summer, and this
was what the Arizona Task Force was seeking to avoid by adopting a
short-term fuels measure. One commenter, on the other hand, argued that
the summer emissions benefits of federal RFG for Phoenix would be small
(2-4 percent) for ground level ozone.
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\18\ Id.
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2. Supply
Commenters asked EPA to list the criteria it would use to determine
that adequate supply of RFG exists in a potential opt-in area. As
stated earlier, EPA believes section 211(k)(6)(A) provides broad
discretion to the Administrator to establish an appropriate effective
date. In setting an effective date for a potential opt-in area, EPA
believes it should review the many factors that could affect the supply
of gasoline to that area. These include, but are not limited to, supply
logistics, cost, potential price spikes, the number of current and
potential suppliers for that market, whether such suppliers have
experience producing RFG or the capability to produce RFG, intent of
suppliers to withdraw from the market, availability of adequate
gasoline volumes, and the amount of lead time needed by suppliers and
the distribution industry to set up storage and sales agreements to
ensure supply. By evaluating these and other factors, EPA can make a
determination as to whether industry's capacity to supply RFG for an
opt-in area meets or exceeds the demand.
EPA has determined that capacity to supply federal RFG to Phoenix
this summer exceeds the estimated gasoline demand. EPA has concluded
that refiners will be able to adequately supply federal RFG for Phoenix
within 30 days of publication of the final rule, the effective date for
terminal compliance. EPA has concluded that retailers will be able to
supply RFG within 60 days of publication of the final rule, the
effective date for retailers and wholesale purchaser-consumers. The
following is a discussion of the factors EPA considered in reaching
this conclusion.
a. Logistics
Many commenters stated that Phoenix is in a unique logistical
situation. It has no pipeline access to the large production facilities
on the Gulf Coast. It is relatively isolated from refineries and
dependent on two common carrier pipelines, one coming from the east and
one coming from the west.19 Commenters emphasized to EPA the
importance of Phoenix having a reliable supply of gasoline from both
the east and west because temporary shutdowns have occurred on each
side, disrupting supply up to 24 hours or longer. One commenter
testified at the hearing that these disruptions happen periodically.
The pipelines are primarily constructed on railroad right-of-ways, so
train derailments cause the pipeline to
[[Page 30265]]
shutdown. A shutdown occurred recently on the west pipeline due to a
train derailment, and the downtime was 24 hours. The downtime could be
longer, depending on the severity of the derailment or other problem,
such as heavy rains.
---------------------------------------------------------------------------
\19\ The Santa Fe Pacific Pipeline (``SFPP'') is the common
carrier that transports gasoline and other products (diesel, jet
fuel, and heating oil) to Phoenix by one pipeline from the west
(originating in Los Angeles, California) and one pipeline from the
east (originating in El Paso, Texas).
---------------------------------------------------------------------------
The west pipeline now delivers approximately 70 thousand B/D of
gasoline to Phoenix and about 12 percent (8,000) of that continues on
to Tucson. The east pipeline now delivers approximately 25 thousand B/D
of gasoline to Phoenix.20 Both the east and west pipelines
have significant additional capacity beyond what is currently being
shipped.21 About 20 percent of the Phoenix total is
ultimately shipped to markets outside Maricopa County and will not be
RFG unless market conditions result in a give-away.22
---------------------------------------------------------------------------
\20\ MathPro Report at pages 20-27.
\21\ See Docket A-97-02, IV-E-7, Memorandum to EPA Air Docket
regarding telephone conversations between EPA and industry
representatives on the issue of supply to Phoenix.
\22\ MathPro Report at pages 20-27. A give-away occurs when
higher quality gasoline, that costs more to produce, is sold at a
lower price, one reflective of conventional gasoline. MathPro Report
at page 30.
---------------------------------------------------------------------------
Phoenix is considered part of the West Coast distribution area that
supplies 1.3 million B/D of gasoline.23 Industry
representatives believe that it is inconsequential whether a small
shortfall in RFG supply for Phoenix occurs in the east or the west
pipeline. The west pipeline has the capacity, with some disruption, to
adjust and meet the majority of the Phoenix demand for all types of
gasoline in the event of loss of the east line supply. The loss of the
east supply has happened before, when one of the two suppliers was down
for periodic maintenance and a breakdown occurred at the other. Several
refiners agreed that the only situation that is likely to cause an RFG
shortage in Phoenix is a break or stoppage in the west
pipeline.24 Given that the total Phoenix/Tucson area
gasoline demand is 110 thousand B/D and the maximum east pipeline flow
rate is 55 thousand B/D for all products, shortages and price increases
are inevitable if the west pipeline goes down.25 This would
occur regardless of the type of gasoline required by Arizona;
therefore, the state's opt-in to RFG does not affect this situation.
---------------------------------------------------------------------------
\23\ See Docket A-97-02, IV-E-7.
\24\ Id.
\25\ MathPro Report at pages 20-27.
---------------------------------------------------------------------------
b. Estimated Phoenix Gasoline Market and Refiner Capability to Supply
The total gasoline demand for the state of Arizona is approximately
130 thousand B/D. The total gasoline now being delivered to Phoenix
terminals by both pipelines is about 88 thousand B/D. Approximately 80
percent (70 thousand B/D) of the Phoenix terminal volume is used in
Maricopa County (the Phoenix ozone nonattainment area). The remaining
20 percent of the Phoenix terminal volume is shipped to five other
Arizona counties.26
---------------------------------------------------------------------------
\26\ Id.
---------------------------------------------------------------------------
Based on the comments received, EPA believes at least six refiners
will supply federal RFG from the west and two to three refiners will
supply RFG from the east. This assures some supply of federal RFG to
Phoenix from both the west and the east. Most of the refiners that
commented, with one exception, stated that they intend to supply
federal RFG for the Phoenix market for the summer of 1997. In addition,
one company stated that it intends to supply Phoenix by displacement;
that is, it supplies the Texas and California markets with federal RFG
and California RFG (``CaRFG''), thus making it possible for Texas and
California refiners to supply the Phoenix market. Furthermore, one
commenter submitted a plot of the price difference between RFG and CG
in the New York, Gulf Coast, and California markets. The commenter
concluded that the very narrow differential, which was about 2 cents in
the federal program and about 4 cents for the California gasoline,
indicates that supplies are more than adequate. And finally, the
Arizona Task Force contractor stated in its report that its analysis of
the gasoline distribution system (which includes the refineries, the
SFPP South Pipeline System, and the local bulk terminals) led to the
finding that in general ``the existing distribution system has the
capability to deliver the required volumes of special Maricopa County
gasolines meeting any of the proposed standards [the Arizona Task Force
considered several fuels options] .'' 27
---------------------------------------------------------------------------
\27\ Id. at pages 76-77.
---------------------------------------------------------------------------
One refiner commented that it currently supplies Phoenix from a
refinery located in El Paso and will not be able to produce RFG for
this summer at that refinery. The company stated, however, that they
are looking at various options to replace those volumes. Another party
stated that for the few refiners that might not be able to meet the RFG
specifications this summer, the industry has an often-utilized method
of arranging exchanges or trades of gasoline in one market for gasoline
in another. This arrangement is designed to provide relief for refiners
and marketers during company-specific supply disruptions.
c. Potential for Phoenix RFG Supply Shortage
Industry has told EPA in written comments and in meetings that the
continuous buying, selling and trading of gasoline stocks in response
to the spot prices makes supply shortages of types of gasoline, like
RFG, very unlikely.28 The short term price increases that
occurred when CaRFG was introduced in California was caused by an
unusual and unexpected combination of refinery disruptions not expected
to occur in Phoenix. Typical spot prices are: (1) CaRFG--$0.70/gallon;
(2) federal RFG-$0.69/gallon; and (3) CG--$0.66/gallon. Generally, the
differences in price correspond to difference in refining costs. Thus,
in order to supply RFG, a trader could opt to buy any of the gasoline
types, whether barged from Texas, San Francisco, Washington, or other
more distant locations, and, if necessary, turn CG into RFG, at a cost
of 3 cents/gallon.29 In effect, the cost of purchasing of
RFG would be about the same as the cost of purchasing CG and converting
it to RFG. The Energy Information Administration (EIA) recently
informed EPA that there was an oversupply of gasoline in California and
the price of CaRFG dropped 8 cents during the first week in
May.30 One commenter, however, argued that the Phoenix
requirement to supply federal RFG with a 7.0 psi RVP makes the gasoline
unique. This commenter believes that fewer refiners will supply the
Phoenix gasoline, resulting in recurring shortages, accompanied by
price spikes. As discussed in this preamble, however, most refiners
that currently supply gasoline to Phoenix commented that they intend to
continue to do so.
---------------------------------------------------------------------------
\28\ ``Spot Market'' is defined as commodity transactions
whereby participants make buy-and-sell commitments of relatively
short duration, in contrast to the ``contract'' market in which
transactions are long term. U.S. Petroleum Refining, Meeting
Requirements for Cleaner Fuels and Refiners, Volume I--Analyses and
Results, National Petroleum Council, August 1993 at GL-8. ``Spot
prices'' are the prices for a single sale of a product, i.e.,
gasoline, on the Spot Market.
\29\ See Docket A-97-02, IV-E-7.
\30\ See Docket A-97-02, IV-E-8.
---------------------------------------------------------------------------
d. Oxygenate Supply
Federal RFG requires the addition of oxygenates (2.0 percent by
weight). This addition of oxygenate will increase the volume of
gasoline supply by approximately 10 percent. If Phoenix requires 65
thousand B/D of RFG and industry continues to provide that amount of
gasoline, the supply will
[[Page 30266]]
increase by approximately 6500 B/D just by the addition of oxygenate.
Several commenters provided information that there is a plentiful
supply of oxygenates. A commenter stated that given that oxygenate
producers are presently operating at approximately 90 percent of
manufacturing capacity, an RFG program for Phoenix is not expected to
cause any disruptions in oxygenate supply or drastic impacts on the
oxygenate marketplace.
e. Infrastructure and Reformulation
EPA received comments that the needed infrastructure, blending, and
segregation capability are in place for Phoenix. Phoenix has had a
winter oxygenated gasoline program since 1989, so the infrastructure
associated with oxygenate blending and product segregation is already
present. This will help ensure a smooth transition to RFG. A commenter
stated that based on its study of Arizona's distribution system, it
believed that the time required to get RFG to the marketplace will be a
month or less after it is produced.
EPA received comment that relatively small quality changes will be
required by refiners to produce RFG. Most refiners providing
conventional gasoline to Phoenix currently meet the RFG specifications
except for benzene. The most significant change in the formulation will
be the reduction of benzene to one volume percent. The addition of two
weight percent oxygen to the gasoline will contribute to the reduction
of benzene.
f. Effective Dates
In the NPRM, EPA proposed that 30 days be allowed between the
terminal and retail compliance dates and requested comment on whether a
shorter time period would be appropriate. The Agency received two
comments on this issue. One refiner stated that under the best
conditions, thirty days was feasible but not guaranteed. The refiner
explained that thirty days at a minimum was needed due to potential
difficulties in blending gasoline and in order to assure compliance at
low-volume stations. Another refiner stated it supported the 30 days
but thought 15 sufficient. Two commenters did not speak directly to
this issue but included in their comments potential schedules for opt-
in compliance. One allowed 21 days and one allowed 15 days between the
two dates. EPA has decided that 30 days is an appropriate time period
to allow between terminal and retail compliance dates. While it appears
that 15 days would be sufficient for high-volume stations, the
additional 15 days could be important for low-volume stations.
EPA proposed that the terminal effective date be 30 days following
the publication of the final opt-in rule. One commenter argued that 45
days would be more appropriate because a longer transition time would
allow terminals to gradually convert to RFG by slowly replacing their
normal inventory levels of conventional gasoline. A shorter time period
would mean that the terminal must draw down their conventional gasoline
to lower levels in order to accelerate the conversion. If a refinery
outage were to occur while inventories are artificially low, the
possibility of a physical shortage would increase and higher prices
could result. This situation could be exacerbated by the timing of the
conversion, well into the high demand summer driving season. One
commenter concerned with the precedent set by an effective date 30 days
after publication questioned whether this would provide adequate lead
time regardless of ability to supply.
EPA has decided that a terminal effective date of 30 days after
publication of the final rule provides refiners sufficient lead time.
Refiner ability to supply RFG is one of the factors EPA considers in
setting the effective date for an opt-in request, and several refiners
who supply Phoenix have stated that they have the ability to supply
federal RFG to Phoenix within 30 days of publication of the final rule.
One commenter stated that if EPA resolved issues regarding enforcement
of the RFG requirements in Phoenix by May 1, service stations could
supply federal RFG in Phoenix by mid-July. Moreover, as several
commenters stated, industry has been on notice that Phoenix would opt-
in since the date of the Arizona Governor's letter, January 17, 1997.
EPA proposed that the terminal compliance date be 30 days after
publication of the final rule or June 1, whichever was later. Based on
this proposed date, SFPP stated in its comments that it would have to
begin shipments by April 22. Refiners testified at the hearing that
they could supply RFG to Phoenix by the proposed date of June 1 if EPA
worked with them to resolve certain implementation issues. EPA has
agreed to provide enforcement relief on several implementation issues
(See discussion in III.C.1. below) and expects that refiners will be
ready to supply RFG by the terminal compliance date, which will be
later than the proposed date. The fact that EPA has set an effective
date of 30 days from publication of the final rule does not mean,
however, that EPA will decide that is the appropriate amount of lead
time for future opt-in requests. As discussed above, pursuant to
section 211(k)(6)(A), EPA will review all relevant factors for each
opt-in request to determine the appropriate effective date for a
particular area.
EPA received one comment requesting that in setting a Phoenix opt-
in effective date, EPA consider any effect that could have on the
supply of CaRFG in California. The commenter stated that a reduction in
production of CaRFG could have an adverse effect on gasoline price and
availability in California. Several California refiners commented that
they intend to supply federal RFG to Phoenix. None of these refiners
indicated that producing federal RFG would limit their production of
CaRFG. EPA has not received any information that would indicate that
the Phoenix opt-in effective date will affect the supply of CaRFG in
California.
EPA asked parties at the hearing to comment on whether supplying
RFG to Phoenix would affect the supply of CG to Arizona. EPA received
one comment on this issue from a refiner who stated that it could meet
its CG contracts for Arizona.
C. Implementation Issues
Several refiners and one trade association representing the
refiners identified implementation and enforcement issues they faced in
preparing to provide RFG to Phoenix in the summer of 1997. These issues
resulted from the lead time available for the Phoenix opt-in resulting
from the date of the Arizona Governor's opt-in request and his
requested implementation date; and the fact that much of the gasoline
supplied to Phoenix (approximately two-thirds) is produced at
refineries located in California. These California refineries are
covered by the California Enforcement Exemption in the federal RFG
rules (40 CFR 80.81). The association stated, however, that it did not
support delay of the proposed effective date. Its members could supply
RFG to Phoenix if EPA could provide some enforcement relief for the
identified implementation issues. In addition, one refiner commented
that while it encouraged EPA to grant enforcement relief, it did not
believe the issues were any reason to delay the implementation date
because refiners had actually been on notice that they would need to
prepare to supply Phoenix with RFG since January 17, 1997, the date of
the Governor's letter to EPA.
[[Page 30267]]
1. Enforcement Relief Provided by EPA
EPA provided enforcement relief from certain RFG requirements
related to compliance in an April 18, 1997 letter from Steven A.
Herman, EPA Assistant Administrator for Enforcement and Compliance
Assurance, to Urvan Sternfels, President of the National Petroleum
Refiner's Association. 31 The enforcement relief is provided
only until January 1, 1998, and consists of the following:
---------------------------------------------------------------------------
\31\ See Docket A-97-02, IV-C-6.
---------------------------------------------------------------------------
a. Registration of Parties
40 CFR 80.76 requires that refiners, importers and oxygenate
blenders register with EPA no later than three months prior to the date
they intend to produce or import RFG in order to provide EPA with
information about the companies and their facilities. In light of the
timing associated with the Phoenix opt-in, EPA will not enforce the
requirement to register three months in advance, provided a party
registers before producing any RFG for Phoenix, including the
requirement to notify EPA of which independent laboratory a party will
use.
b. Submittal of RFG Survey Plan
Section 80.68 requires certain refiners to submit to EPA a plan for
conducting gasoline quality surveys in each RFG covered area. This plan
must be submitted no later than September 1 of the year preceding the
year the surveys are to be conducted. However, given the date of
Governor Symington's opt-in letter, EPA will not enforce the
requirement to submit a Phoenix survey plan by September 1, 1996,
provided that within 30 days of EPA's final Phoenix opt-in rule a
Phoenix survey plan that meets all the requirements of section 80.68 is
submitted.
c. Use of California Test Methods
Both the federal RFG and the California Air Resources Board
(``CARB'') Phase 2 programs require refiners to use certain test
methods to demonstrate compliance with the standards applicable under
these programs. In the case of the tests for certain parameters the
methods specified under the two programs are different.
Section 80.81 allows California refiners to use CARB test methods
as an acceptable federal test method when producing CARB gasoline. This
exemption is limited to gasoline used in California, and refiners are
required to use federal test methods for gasoline exported from
California.
A letter of February 29, 1996 from Steve Herman to the Western
States Petroleum Association allows California refiners to use CARB
test methods for CG exported from California, subject to certain
conditions, but does not allow non-federal test methods for RFG
exported from California because of the stringent requirements
associated with federal RFG. However, the Phoenix opt-in presents a
situation where limited use of CARB test methods for certain federal
RFG requirements is appropriate in the case of RFG used in Phoenix.
Section 80.65(e) requires RFG refiners to use federal test methods
to analyze each RFG batch in order to certify compliance with the
federal RFG standards, and under section 80.75(a) to report results to
EPA on a quarterly basis. In addition, section 80.65(e) provides that
before a refiner can ship RFG the refiner must have received the
results of federal tests for parameters that are subject to downstream
standards, i.e., the federal test results for oxygen and benzene, and
RVP for VOC-controlled RFG, in order to prevent the introduction into
commerce of RFG that violates a downstream standard.
EPA believes that refiners in California can meet the requirement
to use federal test methods for purposes of determining batch
properties that are reported to EPA, either by using the federal test
methods at the refinery or by using an independent laboratory to
conduct federal tests. However, a refiner using an independent
laboratory may not have received the test results before the RFG
normally would be shipped. As a result, such a refiner would be
required to purchase the equipment necessary to conduct the federal
tests on site, which EPA estimates would cost about $150,000 for both
the oxygen and the benzene tests. The federal RVP test equipment costs
much less, and is already owned by most or all refiners.
Given the fact that Governor Symington's letter states that he may
request to opt-out of the RFG program by December 31, 1997, and the
cost of the equipment necessary to conduct the federal oxygen and
benzene tests, EPA believes it is appropriate to allow use of CARB test
methods to meet the RFG pre-shipping testing requirement. However,
refiners and importers using the CARB test methods also must test each
RFG batch using federal test methods, and the results of the federal
tests must be used to satisfy the batch reporting requirements of
section 80.75(a).
Therefore, EPA will not enforce the requirement at section
80.65(e)(1) that refiners and importers must have received the results
of federal oxygen and benzene tests before shipping RFG, provided the
following conditions are met.
(1) The refiner or importer does not have the equipment necessary
to conduct the federal benzene and/or oxygen tests at its refinery or
import facility.
(2) The refiner or importer has received the results of CARB
benzene and/or oxygen tests before shipping any RFG batch, these test
results have been correlated with the federal test method, and these
test results must demonstrate compliance with the federal downstream
standards. If the results of federal benzene and/or oxygen tests show
the RFG violated the federal downstream standards the refiner or
importer will have violated these standards regardless of the results
of the CARB tests. This would be true whether the federal tests are
conducted by the refiner's independent laboratory, by another regulated
party or by EPA.
(3) The refiner or importer must retain the results of any tests
conducted using CARB methods, and records demonstrating correlation
between the CARB and federal test methods, and must supply these
records to EPA on request. Enforcement of the RFG requirements in this
manner will expire on January 1, 1998.
d. Adjustment of the Reid Vapor Pressure Lower Limit
The federal RFG program includes standards for the RVP of gasoline.
The maximum RVP of RFG is controlled primarily because of the increased
VOC emissions that result from gasoline with higher RVP levels. A
minimum RVP is included because of limited availability of RVP data at
the time the simple model standards were developed. In addition, the
minimum RVP standard addresses vehicle driveability problems, such as
poor starting and running, that can occur when low volatility gasoline
does not vaporize in the vehicle engine. As a result, under section
80.42(c)(1) the minimum RVP allowed for RFG is 6.6 pounds per square
inch (``psi''), although under section 80.45(f)(1) this minimum RVP
standard changes to 6.4 psi beginning in 1998.
Arizona has regulations that require that Phoenix be subject to a
maximum summertime volatility standard of 7.0 psi. As a result,
refiners supplying RFG for Phoenix for use during the summer will have
to meet an RVP standard of 6.6 psi minimum (the federal RFG standard)
and 7.0 psi maximum (the state-imposed standard). Some refiners have
said this narrow RVP range would create gasoline production problems
because of testing variability, but that this problem would be resolved
if the
[[Page 30268]]
RVP minimum standard were 6.4 psi. In addition, the American Automobile
Manufacturers Association commented, stating that it did not believe a
summertime 6.4 RVP minimum in Phoenix would pose significant risk of
vehicle performance problems.
For these reasons, EPA believes it is appropriate to allow a
minimum RVP of 6.4 psi for VOC-controlled RFG in Phoenix. As a result,
EPA will not enforce the 6.6 psi minimum RVP standard under section
80.42(c)(1) for VOC-controlled RFG used in Phoenix, including RFG
produced for the Phoenix market that is used in non-RFG areas around
Phoenix, provided the following conditions are met.
(1) RFG must meet a minimum RVP standard of 6.4 psi during the
period May 1 through October 31.
(2) All other RFG must meet a minimum RVP standard of 6.6 psi.
(3) The refiner or importer must specify in the product transfer
documents, required in section 80.77, the VOC-controlled RFG is for use
only in the Phoenix covered area.
2. Other Implementation Issues
One refiner stated its support of EPA extension of the CARB
certified laboratory tests for gasoline properties as an alternative
for all refineries. This would include recognition of the GC-FTIR (ASTM
5986) for Aromatics, Benzene and Oxygen content. EPA intends to issue
proposed regulations establishing a performance based analytical test
method approach for the measurement of the RFG parameters specified in
section 80.46. Under this approach, quality assurance specifications
would be developed under which the performance of alternate analytical
test methods would be deemed acceptable for compliance. The Agency
envisions that this approach, if adopted, would provide additional
flexibility to the regulated industry in their choice of analytical
test methods to be utilized for compliance under the RFG and
conventional gasoline programs for analytical test methods that differ
from the designated analytical test method.
Refiners raised the issue that due to modeling effects, winter
gasoline via simple (and complex) model gives a lower toxics reduction
than summer gasoline. Since it is difficult to meet the toxics
reduction on a per gallon basis with winter gasoline, supply
flexibility is enhanced by averaging. With only part of the year being
available for averaging, it is important to implement the rule early
enough so that the partial year does not have more winter than summer
months than a full calendar year would have.
EPA proposed that if refiners produce RFG prior to June 15, 1997,
it would not be necessary to change anything because there is a balance
of summer and winter days. EPA proposed to refiners (that have
registered) that any gasoline produced and federally certified as
Federal RFG, even if produced before the effective date for Phoenix,
will count for refiner averaging. Various refiners indicated to EPA
that this approach satisfactorily addressed their concerns on this
issue.32
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\32\ See Docket A-97-02, IV-E-6.
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Another implementation issue raised by refiners arose from the
independent laboratory sampling program required in the RFG
regulations. While this should not pose a problem in areas such as Los
Angeles, Houston or Dallas where many such labs are located, there
could be a lead time problem in West Texas and New Mexico where the
refineries are more isolated and there are no labs. EPA proposed to
refiners that enforcement discretion was not needed because isolated
refiners could meet the independent lab requirements by mail. Various
refiners indicated to EPA that this approach satisfactorily addressed
their concerns on this issue.33
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\33\ Id.
---------------------------------------------------------------------------
One refiner commented that a minor implementation problem results
from the fact that in-line blender certification by EPA could require
six months to a year. The refiner suggested that a solution would be
for EPA to certify promptly new in-line blenders within thirty days.
EPA believes the appropriate way to address this issue is contained in
the RFG regulations (40 CFR 80.65(f)(4)). In addition, EPA has
expeditiously reviewed any in-line blending petitions received to
address any supply issues.
Refiners commented that transitions from conventional gasoline to
RFG always pose unique problems. One refiner stated it was willing to
work with industry, EPA, and Arizona to ensure a successful transition.
Another refiner commented that Phoenix may be facing two fuel
transitions in rapid succession--a transition from conventional
gasoline to federal RFG and a transition from federal RFG to federal
RFG plus 7.0 RVP. The refiner urged EPA to work with Arizona to educate
the public about these changes because public acceptance of the fuels
changes coming to Phoenix is critical to acceptance of longer-term
presumably more stringent, fuels solutions now being devised for the
Phoenix area.
EPA agrees that a public education strategy is important for fuel
changes. EPA's Office of Mobile Sources and Region 9 have been working
with Arizona, which has prepared a public outreach and education plan
that includes meetings with stakeholders, television advertisements,
hotlines, informational brochures provided directly to motorists, and
training for technicians and service station employees. EPA has also
provided some funding for the Phoenix federal RFG public education
program.
IV. Environmental Impact
Gasoline vapors and vehicle exhaust contain VOCs and NOX
that react in the atmosphere in the presence of sunlight and heat to
produce ozone, a major component of smog. Vehicles also release toxic
emissions, one of which (benzene) is a known human carcinogen. Federal
RFG contains less of the ingredients that contribute to these harmful
forms of air pollution. Consequently, RFG reduces the exposure of the
U.S. public overall to ozone and certain air toxics.
The federal Phase I RFG program provides reductions in ozone-
forming VOC emissions and air toxics, and prohibits any increase in
NOX emissions. Reductions in VOCs are environmentally
significant because of the associated reductions in ozone formation and
in secondary formation of particulate matter, with the associated
improvements in human health and welfare. Exposure to ground-level
ozone (or smog) can damage sensitive lung tissue, reduce lung function,
cause lung inflammation, increase susceptibility to respiratory
infection, and increase sensitivity of asthmatics to allergens (e.g.,
pollen) and other bronchoconstrictors. Symptoms from short-term
exposure to ozone include coughing, eye and throat irritation, and
chest pain. Animal studies suggest that long-term exposure (months to
years) to ozone can damage lung tissue and may lead to chronic
respiratory illness.
Toxic emissions from motor vehicles have been estimated to account
for roughly half of the total exposure of the urban U.S. population to
toxic air emissions. Reductions in emissions of toxic air pollutants
are environmentally important because they carry significant benefits
for human health and welfare primarily by reducing the number of cancer
cases each year. The reduction of benzene provides the majority of air
toxics emission reductions from RFG. New monitoring data from the 1995
EPA Air Quality Trends Report shows that in RFG areas, benzene was
reduced by 43 percent. A number of adverse non-
[[Page 30269]]
cancer health effects, such as eye, nose, and throat irritation, have
also been associated with exposure to elevated levels of these air
toxics.
The Arizona Task Force estimates that if federal RFG is required to
be sold in Phoenix, VOC emissions will be cut by more than nine tons
per day. In addition, all vehicles would have improved emissions and
the area would also get reductions in toxic emissions.
V. Statutory Authority
The Statutory authority for the action proposed today is granted to
EPA by sections 211(c) and (k) and 301 of the Clean Air Act, as
amended; 42 U.S.C. 7545 (c) and (k) and 7601.
VI. Regulatory Flexibility
For the following reasons, EPA has determined that it is not
necessary to prepare a regulatory flexibility analysis in connection
with this rule. EPA has also determined that this rule will not have a
significant economic impact on a substantial number of small entities.
In promulgating the RFG and anti-dumping regulations, the Agency
analyzed the impact of the regulations on small businesses. The Agency
concluded that the regulations may possibly have some economic effect
on a substantial number of small refiners, but that the regulations may
not significantly affect other small entities, such as gasoline
blenders, terminal operators, service stations and ethanol blenders.
See 59 FR 7810-7811 (February 16, 1994). As stated in the preamble to
the final RFG/anti-dumping rule, exempting small refiners from the RFG
regulations would result in the failure of meeting CAA standards. 59 FR
7810. However, since most small refiners are located in the mountain
states or in California, which has its own RFG program, the vast
majority of small refiners are unaffected by the federal RFG
requirements (although all refiners of conventional gasoline are
subject to the anti-dumping requirements). Moreover, all businesses,
large and small, maintain the option to produce conventional gasoline
to be sold in areas not obligated by the Act to receive RFG or those
areas which have not chosen to opt into the RFG program. A complete
analysis of the effect of the RFG/anti-dumping regulations on small
businesses is contained in the Regulatory Flexibility Analysis which
was prepared for the RFG and anti-dumping rulemaking, and can be found
in the docket for that rulemaking. The docket number is: EPA Air Docket
A-92-12.
Today's rule will affect only those refiners, importers or blenders
of gasoline that choose to produce or import RFG for sale in the
Phoenix ozone nonattainment area, and gasoline distributors and retail
stations in those areas. As discussed above, EPA determined that,
because of their location, the vast majority of small refiners would be
unaffected by the RFG requirements. For the same reason, most small
refiners will be unaffected by today's action. Other small entities,
such as gasoline distributors and retail stations located in Phoenix,
which will become a covered area as a result of today's action, will be
subject to the same requirements as those small entities which are
located in current RFG covered areas. The Agency did not find the RFG
regulations to significantly affect these entities.
VII. Public Participation
The Agency held a public hearing on March 18, 1997 to hear comments
on the Notice of Proposed Rulemaking (62 FR 7197) published February
18, 1997. Comments were provided at the hearing by the Arizona
Department of Environmental Quality, fuel oxygenate producers, and
representatives of the oil industry, environmental organizations, and
other businesses that participated on the Arizona Air Quality
Strategies Task Force. In addition, EPA reviewed and considered written
comments on the proposal submitted by the same groups. These comments
have been presented and addressed in the preamble above (See III.
Response to Comments). All comments received by the Agency are located
in the EPA Air Docket A-97-02 (See ADDRESSES).
VIII. Executive Order 12866
Under Executive Order 12866,34 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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\34\ 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.35
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\35\ 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.
IX. Paperwork Reduction Act
Today's action does not impose any new information collection
burden. Refiners are currently subject to the information collection
requirements for federal reformulated gasoline and conventional
gasoline. Today's rule adds an additional ozone nonattainment area as a
federal RFG covered area; the rule does not change the information
collection requirements already associated with federal RFG. The Office
of Management and Budget (OMB) has previously approved the information
collection requirements contained in the final RFG/antidumping rule
under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et
seq. and has assigned OMB control number 2060-0277 (EPA ICR No. 1951).
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.
Copies of the ICR document(s) may be obtained from Sandy Farmer,
Information Policy Branch; EPA; 401 M St., SW. (mail code 2136);
Washington, DC 20460 or by calling (202) 260-2740. Include the ICR and/
or OMB number in any correspondence.
X. 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 proposed rulemaking or final rule
that includes a Federal mandate which may result in estimated costs to
State, local,
[[Page 30270]]
or tribal governments in the aggregate, or to the private sector, of
$100 million or more in any one year. 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 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.
XI. Judicial Review
Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action to extend the federal RFG program to the
Phoenix ozone nonattainment area must be filed in the United States
Court of Appeals for the appropriate circuit by August 4, 1997. Filing
a petition for reconsideration by the Administrator of this final rule
does not affect the finality of this rule for the purposes of judicial
review nor does it extend the time within which a petition for judicial
review may be filed, and shall not postpone the effectiveness of such
rule or action. This action may not be challenged later in proceedings
to enforce its requirements (see section 307(b)(2)).
XII. Submission to Congress
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 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).
Environmental protection, Air pollution control, Fuel additives,
Gasoline, and Motor vehicle pollution.
Dated: May 28, 1997.
Carol M. Browner,
Administrator.
40 CFR part 80 is amended as follows:
PART 80--REGULATION OF FUELS AND FUEL ADDITIVES
1. The authority citation for part 80 is revised 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 80.70 is amended by adding paragraph (m) as follows:
Sec. 80.70 Covered areas.
* * * * *
(m) The prohibitions of section 211(k)(5) will apply to all persons
other than retailers and wholesale purchaser-consumers July 3, 1997.
The prohibitions of section 211(k)(5) will apply to retailers and
wholesale purchaser-consumers August 4, 1997. As of the effective date
for retailers and wholesale purchaser-consumers, the Phoenix, Arizona
ozone nonattainment area is a covered area. The geographical extent of
the covered area listed in this paragraph shall be the nonattainment
boundaries for the Phoenix ozone nonattainment area as specified in 40
CFR 81.303.
[FR Doc. 97-14442 Filed 6-2-97; 8:45 am]
BILLING CODE 6560-50-P
