draft 7/21/02

d. Should prescribed requirements of Subpart 2 apply in all 8-hour nonattainment areas classified under subpart 2, or is there flexibility to apply equivalent measures, or drop some requirements altogether if in certain narrowly defined circumstances they are determined to be inappropriate?

(1) Background

As discussed above under "What is the background on the 8-hour ozone standard?" the Supreme Court drastically limited EPA's ability to avoid the mandatory requirements of subpart 2–particularly those requiring VOC emission reductions for areas where NOx emission reductions are clearly more beneficial in controlling ozone.

During the public meetings and in subsequent comments submitted to EPA, a number of commenters recommended that EPA allow for flexibility in implementing the 8-hour ozone standard and not require mandatory measures, such as local VOC measures, where they would not be very effective in achieving attainment of the standard. In many cases, particularly for areas that would be new nonattainment areas under the 8-hour standard, region-wide NOx controls and national VOC controls on mobile sources are predicted to greatly reduce the areas' ozone levels and to bring many into attainment without additional local VOC emission controls. Areas classified under subpart 2, however, face requirements for mandatory measures applicable for their classification. Mandatory subpart 2 requirements include NSR size cutpoints, specific ROP requirements (including 15% VOC reduction for moderate areas), size cutpoints for RACT, NOx RACT, and Stage II vapor recovery.

With respect to the requirements of subpart 2, the Supreme Court stated: "	The principal distinction between Subpart 1 and Subpart 2 is that the latter eliminates regulatory discretion that the former allowed. The Court went on to state, "Whereas Subpart 1 gives the EPA considerable discretion to shape nonattainment programs, Subpart 2 prescribes large parts of them by law. Compare 7502(c) and (d) with 7511a ." The Court also stated: "EPA may not construe the statute in a way that completely nullifies textually applicable provisions meant to limit its discretion."

Once an area is classified under subpart 2, the subpart 2 requirements apply.

EPA may have some limited ability to change or limit subpart 2 controls, consistent with the statutory language, but EPA cannot broadly waive those requirements. For example, EPA may have some flexibility to modify regulatory requirements for programs such as vehicle inspection and maintenance (I/M) or NSR. Furthermore, subpart 2 provides discretion to EPA in implementing certain provisions already, such as waivers for stage II vapor recovery, and waivers for NOx RACT and NOx NSR. In addition, case law may provide EPA with some flexibility to waive federally applicable requirements on a case-by-case basis where application of that would produce an "absurd result."

EPA considered the following options and obtained input on them at three public meetings.

Option 1. Assume no changes can be made to the statutory requirements of subpart 2.

Option 2. Identify a legal justification to allow areas covered under subpart 2 to substitute measures that will provide equivalent ozone reductions.

Option 3. Identify a legal justification to allow EPA to determine on a case-by-case basis which of the mandatory control measures under subpart 2 can be waived by the State in preparation of its attainment demonstration. The area would still have to provide controls sufficient to attain the standard by the attainment date for its classification.

Option 4. Review each of the individual control requirements in subpart 2 to determine what, if any flexibility may be provided for that specific requirement (e.g., can the 15% VOC reduction requirement be deemed to have been met for areas that have already achieved a 15% reduction in VOC reductions for the 1-hour standard? For serious and above areas, can EPA determine that onboard vapor recovery is in widespread use and thus, under section 202(a)(6) revise or waive the stage II requirement for those areas?)

Although a number of comments were received on the issue of flexibility, many commenters on this issue took the position that they would prefer areas to be classified under subpart 1 rather than subpart 2. Some commenters did recommend that EPA make the argument that new information about the relative benefits of NOx and VOC control would lead to allowing more tailored controls for a number of areas, rather than the one-size-fits-all approach of subpart 2. However, commenters did not suggest how the CAA could be interpreted to allow the flexibility they were advocating for the mandatory requirements of subpart 2. In fact, certain commenters argued that the subpart 2 measures are mandatory under the Clean Air Act for areas classified under subpart 2 and that the CAA does not provide flexibility to waive those requirements.

EPA has not been able to identify specific "absurd results" as a result of application of subpart 2 requirements. However, EPA solicits comment on whether there are specific "absurd results" that would occur as a result of implementation of specific subpart 2 requirements.

With regard to Option 4, EPA has considered whether the 15 percent rate of progress requirement for VOC emission reductions for the first 6 years after a nonattainment designation could be interpreted to require only 3 percent reduction per year of either VOC or NOx or both if the area had already accomplished such reductions for the period 1990 to 1996. EPA is proposing this option in the section on reasonable further progress. EPA is still evaluating whether the stage II vapor recovery provision can be waived.

(2) Approach Being Proposed

EPA does not believe the CAA permits EPA to waive broadly the subpart 2 mandatory measures. EPA is proposing that subpart 2 requirements would apply to all areas covered under subpart 2 consistent with the area's classification. (In that respect EPA's proposal is similar to the former Option 1 described above.) EPA is proposing also to consider allowing case-by-case waivers of specific subpart 2 requirements when sufficient evidence is presented that absurd results that would occur through compliance with the specific subpart 2 requirement. (In that respect, EPA's proposal is similar to the former options 2 and 3 above.) Evidence of an absurd result might, for example, include a modeled demonstration that future VOC reductions required under subpart 2 for a particular area would actually cause ozone to increase more than a de minimis amount and therefore increase the amount of NOx emission reductions needed for the attainment demonstration. A State attempting such a demonstration would have to work very closely with EPA to ensure that the demonstration passes the highest standards of technical credibility. The State would of course have to subject this demonstration to the same public process carried out for the SIP submission itself prior to submission to EPA of the SIP containing the demonstration. In no way would this waiver exempt an area from the requirement to demonstrate attainment by the attainment date or to demonstrate reasonable further progress toward attainment consistent with the area's classification.