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/ 1998
/ January
/ Wednesday, January 07, 1998
[Federal Register: January 7, 1998 (Volume 63, Number 4)]
[Rules and Regulations]
[Page 925-987]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ja98-22]
[[Page 925]]
_______________________________________________________________________
Part II
Environmental Protection Agency
_______________________________________________________________________
40 CFR Parts 9, 85, and 86
Control of Air Pollution From New Motor Vehicles and New Motor Vehicle
Engines: State Commitments to National Low Emission Vehicle Program;
Final Rule
[[Page 926]]
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 9, 85, and 86
[AMS-FRL-5938-8]
RIN 2060-AF75
Control of Air Pollution From New Motor Vehicles and New Motor
Vehicle Engines: State Commitments to National Low Emission Vehicle
Program
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: Today EPA is finalizing the necessary federal regulations for
a voluntary clean car program called the National Low Emission Vehicle
(``National LEV'') program, which is designed to reduce smog and other
pollution from new motor vehicles. The program will come into effect
only if the northeastern states (members of the Ozone Transport
Commission or ``OTC'') and the auto manufacturers sign up for it. The
National LEV regulations allow manufacturers to commit to meet tailpipe
standards for cars and light light-duty trucks that are more stringent
than EPA can mandate. Manufacturers have said they would be willing to
commit to the program if the OTC States also make binding commitments
to the program. Once the program comes into effect, it would be
enforceable in the same manner as any other federal new motor vehicle
program.
After spending years helping to develop the program, the OTC States
and the auto manufacturers must now decide whether to commit to it and
allow the country to benefit from significant reductions in pollution.
National LEV would also achieve the same (or better) emission
reductions in the Ozone Transport Region (OTR) as would OTC State
adopted new motor vehicle programs. Under National LEV there would be
substantial harmonization of federal and California new motor vehicle
standards and test procedures, which would enable manufacturers to
design and test vehicles to one set of standards nationwide. The
program would demonstrate how cooperative, partnership efforts can
produce a smarter, cheaper program that reduces regulatory burden while
increasing protection of the environment and public health.
DATES: This regulation is effective January 7, 1998. The information
collection requirements contained in this rule has been approved by the
Office of Management and Budget (OMB) and has an assigned OMB control
number of 2060-0345.
ADDRESSES: Materials relevant to this final rule have been placed in
Public Docket No. A-95-26. The docket is located at the Air Docket
Section, U.S. Environmental Protection Agency, 401 M Street SW,
Washington, DC 20460 (Telephone 202-260-7548; Fax 202-260-4400) in Room
M-1500, Waterside Mall, and may be inspected weekdays between 8:00 a.m.
and 5:30 p.m. A reasonable fee may be charged by EPA for copying docket
materials. For further information on electronic availability of this
final rule, see the SUPPLEMENTARY INFORMATION section below.
FOR FURTHER INFORMATION CONTACT: Karl Simon, Office of Mobile Sources,
U.S. Environmental Protection Agency, 401 M Street SW, Washington, DC
20460. Telephone (202) 260-3623; Fax (202) 260-6011; e-mail
simon.karl@epamail.epa.gov.
SUPPLEMENTARY INFORMATION:
Regulated entities
Entities potentially regulated by this action are those that
manufacture and sell motor vehicles in the United States. Regulated
categories and entities include:
------------------------------------------------------------------------
Examples of regulated
Category entities
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Industry.................................. New motor vehicle
manufacturers.
------------------------------------------------------------------------
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 activities are regulated by this action, you should carefully
examine the applicability criteria in Sec. 86.1701-99. 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.
Obtaining Electronic Copies of the Regulatory Documents
The preamble, regulatory language, response to comments document,
and other related documents are also available electronically from the
EPA Internet Web site. This service is free of charge, except for any
cost you already incur for internet connectivity. The electronic
Federal Register version is made available on the day of publication on
the primary Web site listed below. The EPA Office of Mobile Sources
also publishes Federal Register notices and related documents on the
secondary Web site listed below.
1. http://www.epa.gov/docs/fedrgstr/EPA-AIR/ (either select desired
date or use Search feature)
2. http://www.epa.gov/OMSWWW/lev-nlev.htm
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.
I. Outline
The preamble is organized into the following sections.
I. Outline
II. Background
III. National LEV Start Date
IV. National LEV Will Produce Larger VOC and NOx Emission Reductions
in the OTR Compared to OTC State Adopted Section 177 Programs
V. OTC State Commitments
A. Duration of OTC State Commitments and of the National LEV
Program
B. Timing of OTC State Commitments, Manufacturer Opt-Ins, and
EPA Finding that National LEV is in Effect
C. OTC State Commitments, Manufacturer Opt-Ins, and EPA Finding
that National LEV is in Effect
1. Initial Opt-In by OTC States
2. Manufacturer Opt-Ins
3. EPA Finding that National LEV is in Effect
4. SIP Revisions
VI. Incentives for Parties to Keep Commitments to Program
A. Offramp for Manufacturers for OTC State Violation of
Commitment
1. OTC State No Longer Accepts National LEV as a Compliance
Alternative
2. OTC State Fails to Submit SIP Revision Committing to National
LEV
3. OTC State Submits Inadequate SIP Revision Committing to
National LEV
4. OTC State Without an Existing ZEV Mandate Adopts a Backstop
ZEV Mandate
B. Offramp for Manufacturers if OTC State or Manufacturer
Legitimately Opts Out of National LEV
C. Offramp for Manufacturers for EPA Failure to Consider In-Use
Fuel Issues
D. Offramps for OTC States
1. Manufacturer Opt-Out
2. Periodic Equivalency Determination
E. Lead Time Under Section 177
VII. National LEV Will Produce Creditable Emissions Reductions
Because it is Enforceable
A. OTC States Will Keep Their Commitments to National LEV
B. It is Unlikely That National LEV Would Be Found Not to
Produce Emission Reductions Equivalent to OTC State Section 177
Programs
[[Page 927]]
C. EPA is Unlikely to Fail to Consider In-Use Fuels Issues Upon
a Manufacturer's Request
VIII. Additional Provisions
A. Early Reduction Credits for Northeast Trading Region
B. Calculation of Compliance with Fleet Average NMOG Standards
C. Certification of Tier 1 Vehicles in a Violating State
D. Provisions Relating to Changes to Stable Standards
E. Nationwide Trading Region
F. Elimination of Five-Percent Cap on Sales of Tier 1 Vehicles
and TLEVs in the OTR
G. Technical Corrections to Final Framework Rule
H. Clarifications to Final Framework Rule
1. Operation of National LEV Vehicles on In-Use Fuels
2. Clarification of Banking and Trading Provisions
3. Recordkeeping Requirements
IX. Supplemental Federal Test Procedures
A. Background
B. Elements of the CARB Proposal and Applicability Under
National LEV
1. Test Procedure
2. Emission Standards
a. LEVs and ULEVs
b. Tier 1 Vehicles and TLEVs
3. Implementation Schedule
4. Implementation Compliance
X. Administrative Requirements
A. Administrative Designation
B. Regulatory Flexibility
C. Unfunded Mandates Reform Act
D. Congressional Review of Agency Rulemaking
E. Reporting and Recordkeeping Requirements
F. Effective Date
XI. Judicial Review
XII. Statutory Authority
II. Background <SUP>1</SUP>
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\1\ Although this section contains a brief summary of the
National LEV program and the process that led up to it, this notice
assumes that the reader has an in-depth understanding of the
National LEV program and is familiar with the previous National LEV
rulemaking notices (i.e., the August, 1997, Supplemental Notice of
Proposed Rulemaking (SNPRM); the October, 1995, Notice of Proposed
Rulemaking (NPRM); and the June, 1997, Final Framework Rule cited in
n.2). Readers should review those documents for in-depth discussion
of the program, the process and other background information.
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Today's Final Rule (FRM) is another step towards a voluntary clean
car program (``National LEV'') that can help control emissions
nationwide as well as in the northeastern states. As discussed in
previous Federal Register notices,<SUP>2</SUP> there have been a number
of regulatory and other steps in the development of this program.
Today's notice concludes the federal regulatory steps necessary to set
up the voluntary clean car program, which will then come into effect if
the auto manufacturers and the OTC States commit to it. In June of this
year, EPA published a final rule setting forth the framework for the
program, including the specific standards that would apply to new motor
vehicles if manufacturers opted in. See 62 FR 31192 (June 6, 1997)
(``Final Framework Rule''). Today's rule finalizes the regulations for
the National LEV program. It is now up to the OTC States and the auto
manufacturers to determine whether the program will come into effect.
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\2\ See 60 FR 4712 (Jan. 24, 1995), 60 FR 52734 (Oct. 10,
1995); 62 FR 31192 (June 6, 1997); 62 FR 44754 (Aug. 22, 1997).
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Under the National LEV program, auto manufacturers will have the
option of agreeing to comply with tailpipe standards that are more
stringent than EPA can mandate prior to model year (MY) 2004. Once
manufacturers commit to the program, the standards will be enforceable
in the same manner that other federal motor vehicle emissions control
requirements are enforceable. See the Final Framework Rule at 62 FR
31201-31223 for a detailed discussion of the program structure,
tailpipe and related standards, and legal authority for and
enforceability of National LEV. Manufacturers have indicated their
willingness to volunteer to meet these tighter emissions standards if
EPA and the northeastern states (i.e., those in the Ozone Transport
Commission (OTC) or the ``OTC States'') agree to certain conditions,
including providing manufacturers with regulatory stability and
reducing regulatory burdens by harmonizing federal and California motor
vehicle emissions standards.
The National LEV program has been developed through an
unprecedented, cooperative effort by the OTC States, auto
manufacturers, environmentalists, fuel providers, EPA and other
interested parties. The OTC States and environmentalists provided the
opportunity for this cooperative effort by pushing for adoption of the
California Low Emission Vehicle (CAL LEV) program throughout the
northeast Ozone Transport Region (OTR). Under EPA's leadership, the
states, auto manufacturers, environmentalists, and other interested
parties then embarked on a process to develop a voluntary National LEV
program, a process marked by extensive public participation and a focus
on joint problem solving. See the Final Framework Rule at 62 FR 31199
and the NPRM at 60 FR 52739-52740 for further discussion of public
participation in the National LEV decision making process.
National LEV will provide public health and environmental benefits
by reducing air pollution nationwide. Both inside and outside the OTR,
National LEV will reduce ground level ozone, the principle harmful
component in smog, as well as emissions of other pollutants, including
particulate matter (PM), benzene, and formaldehyde. The Final Framework
Rule contains a substantive discussion on the health and environmental
benefits of the National LEV program. See 62 FR 31195. EPA has
determined that the National LEV program will result in emissions
reductions in the OTR that are equivalent to or greater than the
emissions reductions that would be achieved through adoption of the CAL
LEV program in the OTR. National LEV will also provide manufacturers
regulatory stability and reduce regulatory burden by harmonizing
federal and California motor vehicle standards. This will reduce
testing and design costs for motor vehicles, as well as allow more
efficient distribution and marketing of vehicles nationwide. See the
Final Framework Rule at 60 FR 31195-31197 and 31224 for further
discussion of the benefits of the National LEV program.
In addition to the national public health benefits that would
result from National LEV, the program has been motivated largely by the
OTC's efforts to reduce motor vehicle emissions either by adoption of
the CAL LEV program throughout the OTR or by adoption of the National
LEV program. One of the OTC States' efforts was a petition the OTC
filed with EPA. On December 19, 1994, EPA approved this petition, which
requested that EPA require all OTC States to adopt the CAL LEV program
(called the Ozone Transport Commission Low Emission Vehicle (OTC LEV)
program). See 60 FR 4712 (January 24, 1995) (``OTC LEV Decision''). See
the Final Framework Rule at 60 FR 31195 for a summary of EPA's
decision. In March, 1997, the U.S. Court of Appeals for the District of
Columbia affirmed states' rights to adopt the CAL LEV program, but
reversed EPA's decision requiring the OTC States to do so. Virginia v.
EPA, 108 F.3d 1397 (D.C. Cir. 1997). Some, but not all, OTC States have
adopted CAL LEV programs to date.
Given statutory constraints on EPA, National LEV will be
implemented only if it is agreed to by the OTC States and the auto
manufacturers. EPA does not have authority to force either the OTC
States or the manufacturers to sign up to the program. EPA cannot
require the auto manufacturers to meet the National LEV standards,
absent the manufacturers' consent, because section 202(b)(1)(C) of the
Clean Air Act (CAA, or ``the Act'') prevents EPA itself from mandating
new exhaust standards applicable before model year 2004. The auto
manufacturers have indicated that they would be willing to opt into
[[Page 928]]
National LEV only if the OTC States make certain commitments, including
committing to allow the manufacturers to comply with National LEV in
lieu of certain CAL LEV programs adopted under section 177 of the CAA
(Section 177 Programs). EPA cannot require the OTC States to make such
commitments (although EPA can issue regulations to help make the
commitments enforceable). Thus, National LEV cannot come into effect
absent the agreement of the auto manufacturers and the OTC States.
Over the past several years, the OTC States and the auto
manufacturers have conducted negotiations to develop an agreement on
National LEV to be contained in a Memorandum of Understanding (MOU).
The parties have reached agreement on most provisions of the National
LEV program. Each side has sent EPA an MOU that it has initialed,
indicating its agreement with the National LEV program as contained in
that Memorandum of Understanding.<SUP>3</SUP> Although there are
differences in the two Memoranda, they show that agreement has been
reached between the OTC States and the auto manufacturers on most of
the provisions of the National LEV program. Based on the MOUs provided
to the Agency, EPA issued the Final Framework Rule on June 6, 1997,
setting the framework for and describing most of the elements of the
National LEV program.
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\3\ See Docket No. A-95-26, IV-G-31 and IV-G-34.
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Although the parties had hoped to jointly sign a comprehensive MOU
affirming their mutual agreement on the National LEV program, the
parties now agree that further discussions are unlikely to result in
resolution of the last outstanding issues. Nonetheless, EPA and the
parties believe that National LEV would provide substantial public
health and environmental benefits. Failure to come to agreement on a
National LEV program would be a significant lost opportunity to improve
the nation's air quality.
EPA believes there is sufficient common ground between the parties
to provide a basis for a National LEV program to which all parties
could agree to opt into. EPA believes that finalizing a program for the
OTC States and manufacturers to evaluate as a whole presents the
greatest likelihood that the country will achieve the benefits of
National LEV, on which many stakeholders worked hard over the years.
EPA encourages the auto manufacturers and OTC States to opt in so the
country does not lose the significant benefits of National LEV.
Today's final rule (FRM) finalizes regulations on issues relating
to how the OTC States will voluntarily opt in to the National LEV
program and commit to allow motor vehicle manufacturers to comply with
the National LEV program in lieu of state Section 177 Programs. These
issues include the duration of the OTC State commitments, the
instruments and process through which the OTC States will commit to the
program, and the substantive details of their commitments.
Today's FRM also addresses several other outstanding structural
details of the National LEV program. These provisions include the
timing of OTC State and auto manufacturer opt-ins to the National LEV
program, incentives for the parties to keep their commitments to the
National LEV program and conditions under which OTC States and
manufacturers could exit the program (``offramps''), and the start date
of the National LEV program.
In addition, today's FRM includes several modifications and
clarifications of several issues addressed to some extent in the Final
Framework Rule. These include provisions relating to how the off-cycle
supplemental federal test procedure would apply to National LEV
vehicles and provisions relating to banking and trading of emissions
credits. For additional explanation of the rationale for today's rule
and responses to comments, see the Summary and Analysis of Comments for
the Final Rule.
III. National LEV Start Date
In the SNPRM, EPA proposed to have the National LEV program start
in MY1999, which reflected a change from the original proposed start
date of MY1997.<SUP>5</SUP> See 62 FR 44756-57. EPA explained that this
change in the start date was necessary because requiring a start date
of MY1997 or MY1998 was unrealistic given the delays associated with
finalizing the program and the inability of manufacturers to produce
and certify National LEV vehicles before MY1999. Additionally, EPA
noted that there was no longer a legal requirement for National LEV to
produce emissions reductions at least equivalent to those that would be
produced by OTC LEV due to the court case overturning EPA's decision
granting the OTC's petition. (See Virginia v. EPA, supra.) EPA received
no negative comments regarding this proposed change in program start
date. EPA is today finalizing its proposal to have the National LEV
program start in MY1999 in the OTR.
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\5\ The National LEV program will start in MY2001 nationwide.
The nationwide start date was not at issue in the SNPRM.
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The change in program start date reflects in part EPA's belief
that, given the voluntary nature of the National LEV program, it would
be unreasonable to retain the MY1997 start date and have the program
begin with some manufacturers having debits from not meeting the fleet
average NMOG standards for MY1997 and MY1998. Such debits would be
difficult to erase given the increasing stringency of the fleet average
NMOG standards and the limited ability of manufacturers to modify their
production plans quickly, once the program is in effect, to manufacture
a number of National LEV vehicles sufficient to demonstrate compliance
with the applicable fleet average NMOG standards.
The MY1999 start date for the National LEV program does not mean
that the program is being delayed two years, but merely that the
National LEV requirements for MY1997 and MY1998 are being dropped from
the regulations. Therefore, the fleet average NMOG standards for MY1999
are 0.148 g/mi for light-duty vehicles and light-duty trucks (0-3750
pounds LVW) and 0.190 g/mi for light-duty trucks between 3750-5750
pounds LVW. As stated above, the MY2001 nationwide fleet average NMOG
standards remain unchanged.
EPA also took comment on allowing manufacturers to sell California-
certified vehicles <SUP>6</SUP> instead of National LEV vehicles
throughout the Northeast Trading Region (NTR) for MY1999 and MY2000 as
a means to help manufacturers meet their fleet average NMOG standards
for these two model years. Manufacturers expressed concern that they
might have difficulty producing and certifying National LEV vehicles
for MY1999 given that certification of MY1999 vehicles will likely
start before EPA is able to find that National LEV is in effect. EPA
believes it is appropriate to provide some limited flexibility to
manufacturers in a way that does not undercut the environmental
benefits of the fleet average NMOG standards in the first year of the
program. Thus, for MY1999 only, EPA will issue federal National LEV
certificates that will allow manufacturers to sell California-certified
TLEV, LEV, ULEV, and ZEV vehicles throughout the NTR and will count
[[Page 929]]
those vehicles to determine compliance with National LEV requirements.
For MY2000, EPA will also issue certificates that will allow
manufacturers to sell California-certified TLEVs throughout the NTR and
to count those vehicles to determine compliance with National LEV
requirements.
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\6\ ``California-certified vehicles'', as the term is used in
this rule, are those vehicles which have received an Executive Order
from California and a federal certificate of conformity which allows
the sale of such vehicles only in the state of California and other
states that have adopted the California motor vehicle emission
standards under Section 177 of the Clean Air Act.
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The harmonization of the federal and California motor vehicle
emission requirements have left few differences between National LEV
and California-certified TLEV and cleaner vehicles. EPA believes that
production and certification of vehicles meeting both federal and
California requirements, done currently by some manufacturers, should
be much more attractive when the National LEV program is in effect.
However, program differences do exist and federal requirements such as
the Certification Short Test (CST) and high-altitude requirements
remain part of the federal program.<SUP>7</SUP> Using Federal
certificates to allow manufacturers to certify and sell MY1999
California-certified TLEVs, LEVs, ULEVs, and ZEVs throughout the NTR
will give them an additional mechanism to comply with the fleet average
NMOG standards by increasing the production and sale of their
California-certified vehicles. Manufacturers may still certify and sell
National LEV vehicles for MY1999 using the National LEV program
requirements, and such vehicles could be sold nationwide. EPA is not
allowing sale of California Tier 1 vehicles throughout the NTR because
EPA does not believe that certification of vehicles to California Tier
1 standards proves that such vehicles meet the Federal Tier 1 tailpipe
emission standards and EPA cannot justify replacing Federal Tier 1
vehicles with California Tier 1 vehicles in the federal motor vehicle
emissions program. EPA has consistently taken this position on
California Tier 1 vehicles throughout the development of the National
LEV program.
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\7\ There are different federal and California test procedures
for evaporative emissions. Manufacturers generally use the option in
California's regulations which allows testing using the federal
requirements. EPA expects manufacturers will continue using this
option when certifying vehicles for sale in California. The National
LEV program requires emission testing using the federal
requirements.
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California-certified TLEVs, LEVs, ULEVs and ZEVs can be sold in the
NTR in MY1999 if they receive a federal National LEV certificate. This
certificate will state that, for MY1999, a California-certified vehicle
sold in the NTR only will be considered a National LEV vehicle and meet
all National LEV requirements. EPA believes that the compliance testing
done to obtain a California certificate of conformity for these vehicle
categories is sufficient to meet the certification requirements for the
National LEV program in MY1999. Allowing California certification to
substitute for National LEV certification for vehicles sold in the NTR
does not mean that EPA is waiving compliance with the Certification
Short Test (CST) and high-altitude requirements. However, EPA believes
that a vehicle complying with the MY1999 California TLEV, LEV, ULEV, or
ZEV emission standards will also most likely meet the Federal Tier 1
CST and high-altitude requirements. Currently, Federal Tier 1 vehicles
are being certified as meeting the CST and high-altitude requirements
and EPA, in its certification review and testing, has not identified
any problems manufacturers have had in complying with these two
requirements. EPA expects that California-certified TLEVs, LEVs, ULEVs,
and ZEVs would also meet the Federal Tier 1 CST and high-altitude
certification requirements and is thus willing to allow a degree of
uncertainty regarding actual demonstration of compliance with these
requirements in MY1999 in order to facilitate the start of the National
LEV program for those manufacturers which may find it difficult to
certify and sell National LEV vehicles in the NTR. EPA does not believe
it is appropriate to waive demonstration with these requirements beyond
MY1999 because manufacturers will have had sufficient time to
incorporate compliance with the CST and high-altitude requirements into
their MY2000 National LEV vehicles. EPA believes there should be
minimal adverse environmental impact from substituting California-
certified TLEVs, LEVs, ULEVs and ZEVs for National LEV vehicles in
MY1999.
Today's Final Rule addresses the issue of National LEV vehicle
sales in MY1999 by issuing a Federal National LEV certificate to those
vehicles sold in the NTR instead of expanding current policies and
allowing the sale of California-certified vehicles throughout the NTR.
By granting a Federal certificate to these vehicles, EPA retains its
authority to enforce the provisions of the National LEV program.
Compliance with many of these provisions, such as compliance with the
fleet average NMOG requirements and credit trading, is dependent on
meeting conditions associated with the National LEV certificate. EPA is
not waiving compliance with the National LEV requirements in the NTR in
MY1999. By requiring a federal National LEV certificate for MY1999
California-certified vehicles sold in the NTR, this provision ensures
that EPA may enforce all of the National LEV regulations applicable to
MY1999 vehicles.<SUP>8</SUP> California-certified vehicles receiving a
Federal National LEV certificate allowing sale in the NTR may not be
sold outside the NTR.
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\8\ The manufacturers have suggested that EPA address the issue
of MY1999 and MY2000 vehicles through expansion of the cross border
sales policy, which currently allows sales of vehicles certified to
California's emissions standards and other requirements in states
contiguous to, or within 50 miles of, California and states that
have a program adopted under section 177 in place. See note 49 for
further discussion of the cross border sales policy. The approach
that EPA is adopting in today's rule is separate from and will have
no effect on the cross border sales policy.
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EPA believes it is also appropriate to issue Federal certificates
that will allow manufacturers to sell California-certified TLEVs
throughout the NTR in MY2000. As discussed below in sections VIII.E and
IX, EPA does not expect manufacturers to produce and sell many TLEVs
after MY2000 because other provisions in the National LEV and
California LEV programs will provide incentives and requirements which
will minimize TLEV production. EPA believes it would be more
environmentally beneficial and cost-effective to have manufacturers use
their resources to certify and produce cleaner LEVs and ULEVs rather
than TLEVs, which will shortly be phased out of production.<SUP>9</SUP>
Issuing Federal certificates to allow manufacturers to sell California-
certified TLEVs in the NTR in MY2000 does not mean that more TLEVs will
be sold in this region because manufacturers will still need to
demonstrate compliance with the fleet average NMOG standard in the NTR
in MY2000, and all TLEVs sold in the NTR are to be included in the
compliance calculations. Instead, EPA is making the determination that
the environmental benefits of issuing Federal certificates allowing the
sale of California-certified TLEVs in the NTR in MY2000 outweighs the
cost and any environmental detriment associated with manufacturers not
completing all of the testing generally required to meet the
certification requirements necessary to produce and sell a National LEV
TLEV in the NTR in MY2000. EPA is not waiving compliance with any
National LEV standards, but is accepting California certification as
sufficient to
[[Page 930]]
demonstrate compliance with TLEV standards for the purpose of
certification.
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\9\ Manufacturers can continue to produce and sell TLEV vehicles
after MY2000 under the National LEV and California LEV programs as
long as they obtain a National LEV certificate for the TLEVs and
meet the applicable fleet average NMOG standards. EPA is not
requiring manufacturers to discontinue TLEV production, which
remains a manufacturer decision.
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This special provision regarding the sale of California-certified
TLEVs is applicable only in the NTR and only in MY2000. This provision
is intended to provide manufacturers with flexibility in meeting the
fleet average NMOG standards in the NTR. When the National LEV
requirements are effective nationally in MY2001, however,
manufacturers' full production efforts will be focused on meeting
California and National LEV requirements. If a manufacturer plans to
continue producing TLEVs after MY2000, then such vehicles must meet all
of the National LEV requirements, including the CST and high-altitude
requirements. In meeting the certification requirements for a MY2001
National LEV TLEV, manufacturers may carry over any appropriate data
from their MY2000.
EPA is not issuing Federal certificates allowing California-
certified vehicles to be sold under National LEV outside the NTR in
MY1999. There is no justification for allowing such sales and, unlike
in the NTR, there is no requirement that manufacturers produce anything
but Federal Tier 1 vehicles. If manufacturers wish to generate early
reduction credits in the All State Trading Region in MY1999 and MY2000,
they must do so using National LEV vehicle sales in that region.
IV. National LEV Will Produce Larger VOC and NO<INF>X</INF> Emission
Reductions in the OTR Compared to OTC State Adopted Section 177
Programs
Modeling done in support of the Final Framework Rule showed that
the National LEV program would provide greater emission reductions than
those from OTC LEV (which is equivalent to state-by-state adoption of
the CAL LEV program throughout the OTR). See 62 FR 44757. The SNPRM
proposed several changes to modeling assumptions. As proposed, and in
light of public comments, EPA has modified some of the assumptions in
the modeling, particularly regarding when various programs would start.
This modeling supports EPA's conclusion in today's rule that, given
current assumptions and best information about future vehicle
performance <SUP>10</SUP> and the migration of people and vehicles, the
NO<INF>X</INF> and VOC emission reductions from National LEV are
equivalent to or greater than those from state-by-state adoption of
Section 177 Programs throughout the OTR.
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\10\ EPA's National LEV modeling does not incorporate any
factors relating to the effect of fuel sulfur levels on the
emissions performance of National LEV vehicles, outside of any
factors already included in the MOBILE 5a model. Studies being
conducted by the auto and oil industries analyzing the impact of
sulfur on the emissions performance of LEV vehicles are ongoing. EPA
has not attempted to quantify a sulfur impact on National LEV
vehicle emissions as part of the equivalency modeling because the
studies and associated analyses have not yet been completed.
Additionally, any quantifiable impact would apply to both the
National LEV and OTC State Section 177 Programs and would not alter
any equivalency determination.
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The first set of changes to the modeling relates to the start dates
of National LEV and Section 177 Programs. As proposed in the SNPRM, the
updated modeling includes a start date of MY1999 (rather than MY1997)
for the National LEV program. The updated modeling analysis for the OTC
State Section 177 Programs (in the absence of National LEV) also more
accurately reflects expected reductions from OTC State Section 177
Programs than did the analysis described in the Final Framework Rule.
The modeling for that rule assumed that all of the OTC States had
Section 177 Programs in effect for MY1999 and later. In reality, only
six of the OTC States have adopted programs that could be effective in
MY1999 and there is no longer a specific legal requirement for the
other states to adopt a Section 177 Program. Thus, EPA's analysis
assumes Section 177 Programs will exist only in those OTC States that
have adopted a Section 177 Program.<SUP>11</SUP> EPA believes that this
realistic assumption is the proper comparison to National LEV since
legally, individual state adoption is the only manner in which
California vehicles can be required in the Northeast.
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\11\ Start date assumptions for EPA's modeling are MY1999 for
the National LEV program in the OTR, MY2001 for the National LEV
program nationwide, MY1996 for Section 177 Programs in New York and
Massachusetts, MY1998 for a Section 177 Program in Connecticut, and
MY1999 for Section 177 Programs in Rhode Island, New Jersey, and
Vermont. The dates for state Section 177 Programs reflect the
effective dates for current state Section 177 Programs. Maine has
taken steps to adopt a Section 177 Program. EPA has included Maine
with the other six OTC States that have adopted a Section 177
Program, and has given Maine's program a start date of MY2001,
recognizing that even though Maine has not yet completed all the
steps to make its program go into effect, it has finished most of
the actions and is expected to complete its adoption actions in the
near future.
---------------------------------------------------------------------------
EPA believes its current modeling makes the appropriate assumptions
and correctly estimates a realistic level of OTC State Section 177
Programs. However, to test its assumptions, EPA also ran as a third
case a sensitivity analysis assuming that all of the OTC States adopted
Section 177 Programs. For the six OTC States without a Section 177
Program in place as of July 1, 1997, EPA assumed that the programs
became effective in MY2001, the earliest time a state that had not yet
adopted a Section 177 Program could legally enforce such a program,
given the two year lead time requirement in section 177 of the Act.
This analysis showed that, even with all 13 OTC States having a Section
177 Program in place at the earliest possible times, National LEV still
provided greater emission reductions in the Northeast.
EPA has also changed some of its modeling assumptions regarding the
status of federal and state motor vehicle programs in MY2005 and later,
in part as a result of changes EPA made regarding the duration of
National LEV. To the extent possible, EPA has attempted to make these
new assumptions, which affect all three cases analyzed by EPA,
consistent from one case to the next. Although EPA has made assumptions
regarding future regulatory actions, these assumptions in no way limit
EPA's options in future regulatory actions, nor do they indicate that
EPA has prejudged those future actions.
In the National LEV case, EPA assumes National LEV will be in place
in all OTC States through MY2005, which is the latest model year the
program would be considered a compliance alternative in those OTC
States which have adopted a Section 177 Program if EPA issues Tier 2
standards at least as stringent as National LEV standards by December
15, 2000. In MY2006, the seven OTC States with Section 177 Programs
already adopted are assumed, for modeling purposes, to have those
programs go into effect.<SUP>12</SUP> The model assumes the rest of the
country will have a Tier 2 program which, for modeling purposes, is
considered to be equivalent to the National LEV program.
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\12\ Under the National LEV program duration requirements (see
section V.A) the OTC States are only committed to have the Naitonal
LEV program as a compliance alternative to a Section 177 Program
until MY2006.
---------------------------------------------------------------------------
The two modeling cases which analyze emission reductions without
the National LEV program assume, for modeling purposes, that a Tier 2
program equivalent to National LEV would go into effect in MY2005. One
case assumes Tier 1 standards in effect until then in those states that
have not adopted a Section 177 Program. The other case assumes Tier 1
standards in effect until then in all states outside the OTR (except
California). The MY2005 start date for Tier 2 was chosen as a
reasonable estimation for modeling purposes, given the National LEV
program deadline of December 15, 2000
[[Page 931]]
date for EPA action on the Tier 2 program (which has been incorporated
into the modeling assumption for the National LEV case) in conjunction
with lead time for manufacturers to prepare to comply with Tier 2
standards. The MY2005 start date for Tier 2 also represents a
reasonable midpoint, for modeling purposes, between the MY2004 and
MY2006 deadlines included in the MOUs. EPA is not precluded by the
National LEV program from implementing a Tier 2 program in MY2004 if it
determines Tier 2 standards should apply in that model year.
EPA's modeling shows that National LEV would achieve greater
emission reductions in the OTR than individual OTC State Section 177
Programs. EPA's conclusion would not change even if all OTC States were
to adopt Section 177 Programs. The emission levels are listed in the
Table 1 below. The modeling is based on National LEV starting in MY1999
in the OTR and MY2001 in the rest of the country, with Federal Tier 1
vehicles making up the federal non-NLEV fleet. EPA did not include
existing OTC State zero emission vehicle (ZEV) sales mandates in either
of its modeling runs since these mandates are not affected by the
National LEV rule. ZEV sales mandates would thus have similar effects
on emission levels in both modeling cases and would not affect the
relative emissions benefits of National LEV compared to those of OTC
State Section 177 Programs.
All other assumptions used in the modeling included in the Final
Framework Rule, the SNPRM, and today's rule remain consistent with
those used throughout the National LEV process. EPA believes it is
important to keep consistent assumptions to provide a comparison
between benefits from the National LEV program and state Section 177
Programs in the OTR.
Table 1.--Ozone Season Weekday Emissions for Highway Vehicles in the OTR
(tons/day)
------------------------------------------------------------------------
OTC State National
Year Pollutant CAL LEV LEV
------------------------------------------------------------------------
2005.......................... NMOG............ 1,573 1,499
NO<INF>X............. 2,526 2,403
2007.......................... NMOG............ 1,480 1,366
NO<INF>X............. 2,427 2,226
2015.......................... NMOG............ 1,386 1,148
NO<INF>X............. 2,367 1,899
------------------------------------------------------------------------
V. OTC State Commitments
This section describes the substance of the OTC States' commitments
to National LEV. It also addresses the process (including timing) by
which OTC States and auto manufacturers would commit to National LEV
and by which EPA would find the program in effect.
A. Duration of OTC State Commitments and of the National LEV Program
Today's Final Rule takes a different approach to the duration of
the OTC State commitments than was proposed in the SNPRM. As discussed
in the SNPRM, the MOUs initialed by the OTC States and the auto
manufacturers both had the duration of the National LEV program (and
hence the duration of both the OTC States' and the auto manufacturers'
commitments) depend on whether, by January 1, 2001, EPA issued
mandatory new motor vehicle standards (``Tier 2 standards'') that were
at least as stringent as National LEV and that would go into effect no
later than MY2006. If EPA issued the specified standards by that time,
the auto manufacturers would stay in National LEV until the Tier 2
standards became effective, and the OTC States would not enforce their
own state Section 177 Programs until MY2006. If EPA did not issue the
specified regulations by that time, then National LEV would end with
MY2003 and, starting in MY2004, in any state where California or OTC
LEV standards were not in place, the applicable standards for
manufacturers would revert back to the federal Tier 1 standards.
Although EPA rejected the MOU approach in the Final Framework Rule, EPA
has reconsidered the issue based on the comments submitted by the OTC
States and the auto manufacturers, and has decided to adopt the
approach agreed upon by the OTC States and the auto manufacturers.
Thus, under 40 CFR 1701(c) and 1705(e) and (g) of today's rule, the
commitments of the OTC States and the auto manufacturers to National
LEV last until MY2006, unless EPA fails to promulgate Tier 2 standards
at least as stringent as National LEV on or before December 15, 2000,
in which case the commitments last until MY2004.<SUP>13</SUP>
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\13\ If EPA promulgates Tier 2 standards at least as stringent
as National LEV on or before December 15, 2000, and those standards
are in effect in MY2004 or MY2005, the manufacturers will become
subject to those standards upon their effective date, but the OTC
States' commitments to National LEV will not end until MY2006.
---------------------------------------------------------------------------
EPA had proposed in the SNPRM that the OTC States would commit to
the National LEV program until MY2006. This meant that the OTC States
would have committed to accept manufacturers' compliance with National
LEV (or equally or more stringent mandatory federal standards) as an
alternative to compliance with a state Section 177 Program through
MY2005. The length of the auto manufacturers' commitment was set in the
Final Framework Rule. Under that rule, manufacturers that opted into
the program would be bound to comply with National LEV until the first
model year for which manufacturers would be subject to a mandatory
federal tailpipe emissions program at least as stringent as the
National LEV program with respect to NMOG, NO<INF>X</INF> and carbon
monoxide (CO) exhaust emissions (``Tier 2 standards''). Under section
202(b)(1)(C) of the Clean Air Act, EPA could not mandate such standards
prior to MY2004. Thus, the manufacturers' commitment to National LEV
was to last at least until MY2004 and could last longer.
In the Final Framework Rule, EPA did not accept the MOU provisions
for setting the duration of the National LEV program. EPA rejected the
MOU provisions because it was concerned about setting up a program that
would have the country take a step backward environmentally if the
Agency failed to act by a specified deadline. EPA has reconsidered its
views.
The main reason for changing the program duration is the comments
received from the OTC States and the auto industry. The auto industry
made it clear that stability until MY2006 is very important, and the
OTC States were clear that they were uncomfortable with committing to
allow National LEV as a compliance alternative until MY2006 if EPA were
not to issue Tier 2 standards by January 1, 2001. The OTC States'
primary reason for wanting to tie the duration of the program to
promulgation of Tier 2 standards is that they need to know sooner
rather than later how the Tier 2 standards and the California LEV
program compare so that they can determine whether they will need to
have an enforceable California LEV program to meet their air quality
goals. EPA believes that an orderly air quality planning process is
important and believes that the OTC States are in the best position to
know what would be most useful to them in that process. EPA has decided
to defer to the OTC States' judgment on this matter.
Having decided that the length of the OTC States' commitment should
depend on whether EPA issues Tier 2 standards, EPA believes it would be
unfair not to have the manufacturers' commitment also depend on whether
EPA issues Tier 2 standards. First, that is the agreement that was
reached by the OTC States and the manufacturers. It would be unfair to
hold the manufacturers in for longer than they had agreed to in the MOU
[[Page 932]]
while giving the OTC States the benefit of the agreement. Second, an
unintended consequence of EPA's decision not to tie the end of National
LEV to EPA's issuance of the Tier 2 regulations is that several groups
interpreted that as a signal that EPA was not intending to perform its
statutory duty under CAA section 202(i)(3) to evaluate the need for,
technological feasibility of, and cost effectiveness of new standards,
and to issue new standards if warranted. EPA has every intention of
meeting its statutory obligations under the CAA and does not want to
send a contrary message. Third, EPA now believes that if National LEV
comes into effect and manufacturers change all their manufacturing
facilities over to build LEV technology, it is highly unlikely that
they would actually change the technology back to Tier 1. A combination
of the cost of changing back to old technology and adverse publicity
from selling ``dirty'' cars probably should be sufficient incentive to
keep manufacturers using LEV technology. One manufacturer's decision,
announced this summer, to sell LEV technology (albeit certified at Tier
1 levels) nationally and various marketing campaigns touting clean cars
are evidence that ``clean'' cars can be used as a selling point. Thus,
today's Final Rule modifies the duration of the manufacturers'
commitment to National LEV.
B. Timing of OTC State Commitments, Manufacturer Opt-Ins, and EPA
Finding That National LEV Is in Effect
EPA is establishing a process and deadlines for the OTC States and
the manufacturers to opt into the National LEV program and for EPA to
find the program in effect. The process and timing are unchanged from
EPA's proposal in the SNPRM. Because National LEV needs to be in place
as soon as possible to ensure that it is available for MY1999, 40 CFR
86.1706 sets the following deadlines based on the date of signature of
this Final Rule.<SUP>14</SUP> Seventy-five days from signature of this
FRM, EPA must determine whether the National LEV program is in effect
(see section V.C.3 below for the criteria for finding National LEV in
effect). This finding will be based on the OTC States' initial opt-in
packages from their Governors and state environmental commissioners or
secretaries (discussed below in section V.C) that were submitted no
later than 45 days from the date of signature of this rule and on the
manufacturers' opt-ins submitted no later than 60 days from signature
of this rule.<SUP>15</SUP> If EPA finds National LEV in effect, all
parties are bound by their commitments to the program. While any party
that misses its deadline for opt-in is not barred from submitting a
late opt-in, EPA is only required to consider timely opt-ins in
determining whether National LEV is in effect. Moreover, given the very
short timeframe for the opt-in process and the fact that some parties
may be reluctant to opt in before they know whether others will do so,
a late opt-in is likely to jeopardize the start-up of the program.
---------------------------------------------------------------------------
\14\ EPA will provide directly affected parties actual notice
and make copies of the FRM available within a week of signature.
Upon request, copies of the FRM will also be made available to other
parties in the same timeframe.
\15\ If one of these deadlines would otherwise fall on a weekend
or federal holiday, the FRM sets the deadline as the next business
day.
---------------------------------------------------------------------------
As proposed, after the initial opt-ins and an EPA finding that the
program is in effect, the OTC States will generally have one year from
the date of the in-effect finding to submit the final portion of their
opt-ins, which is a SIP revision committing the state to the National
LEV program and allowing manufacturers to comply with National LEV as
an alternative to a state Section 177 Program, as described in more
detail in section V.C.4 below. For a few states, specifically Delaware,
New Hampshire, Virginia and the District of Columbia, the deadline is
eighteen months, rather than one year, from the date of the in-effect
finding. These states have particular circumstances related to their
state rulemaking processes that make a one-year deadline unrealistic.
If a state were to miss its deadline for submission of its SIP revision
committing to National LEV, the manufacturers would have the
opportunity to opt out of the program, as discussed further in section
VI.
C. OTC State Commitments, Manufacturer Opt-Ins, and EPA Finding That
National LEV Is in Effect
This section describes the process for the OTC States and the
manufacturers to commit to the National LEV program and for EPA to find
the program in effect. This includes how the OTC States will commit to
the program, the elements of their commitments, the permissible
conditions on OTC State and manufacturer opt-ins, and the criteria that
EPA will use to find the program in effect.
1. Initial Opt-In by OTC States
As proposed, the OTC States will commit to National LEV in two
steps, the first of which is an opt-in package from each state's
Governor and environmental commissioner, indicating the OTC State's
intent to opt into National LEV. The second step is a SIP revision
incorporating the OTC States' commitment to National LEV in state
regulations, which EPA will approve into the federally-enforceable SIP.
To opt into National LEV, within 45 days of signature of this rule,
the Governor (or Mayor, in the District of Columbia) will submit to EPA
an executive order or a letter committing the OTC State to the National
LEV program. As specified in 40 CFR 86.1705(e), the executive order or
letter will contain three main elements. First, it will state that its
purpose is to opt the state into National LEV. Second, it will state
that the Governor is forwarding a letter signed by the head of the
state environmental agency (or other appropriate agency or department),
which specifies the details of the state's commitment to the National
LEV program. Third, it will state that the Governor has directed the
head of the state environmental agency to take the necessary steps to
adopt regulations and submit a SIP revision committing the state to
National LEV in accordance with the requirements of the National LEV
regulations. In addition, OTC States with existing ZEV mandates
<SUP>16</SUP> may add language confirming that the opt-in will not
affect the state's requirements pertaining to ZEVs.
---------------------------------------------------------------------------
\16\ ZEV mandates are those state regulations or other laws that
impose (or purport to impose) obligations on auto manufacturers to
produce or sell a certain number or percentage of ZEVs. Any OTC
State with a ZEV mandate that was adopted prior to the signature
date of this rule is considered a state with an existing ZEV
mandate.
---------------------------------------------------------------------------
The Governor's executive order or letter will enclose a letter
signed by the state environmental commissioner or secretary of the
appropriate state department (``commissioner's letter''), which
specifies the details of the state's commitment to National LEV.
Alternatively, if an OTC State has proposed regulations meeting the
requirements for a SIP revision specified below, the state may
substitute the proposed regulations for the portions of the
commissioner's letter for which they are duplicative. In that case, the
Governor will send to EPA the Governor's executive order or letter, the
proposed regulations, and a letter from the commissioner, which will
contain the elements specified below that were not included in the
proposed regulations.
As proposed, the commissioner's letter will include the following
elements. First, it will indicate that National LEV would achieve
reductions of VOC and NO<INF>x</INF> emissions equivalent to or greater
than the reductions that
[[Page 933]]
would be achieved through state adopted Section 177 Programs in the
OTR. Second, it will indicate that the state intends National LEV to be
the state's new motor vehicle emissions control program. Third, it will
state that for the duration of the state's participation in National
LEV, the state will accept National LEV or mandatory federal standards
of at least equivalent stringency as a compliance alternative to any
state Section 177 Program. As EPA is defining it here, a state Section
177 Program is any regulation or other law, except a ZEV mandate,
adopted by an OTC State in accordance with section 177 and which is
applicable to passenger cars, light-duty trucks up through 6,000 pounds
GVWR, and/or medium-duty vehicles from 6,001 to 14,000 pounds GVWR if
designed to operate on gasoline, as these vehicle categories are
defined under the California regulations. (This commitment would not
restrict states from adopting and implementing requirements under
section 177 for heavy-duty trucks and engines and diesel-powered
vehicles between 6,001 and 14,000 pounds GVWR.) The letter will further
state that the state's participation in National LEV extends until
MY2006, except as provided in the National LEV regulations' provisions
addressing the duration of the OTC State commitments and state
offramps. However, in a change from the proposal (discussed in section
V.A above), the letter will add that if no later than December 15,
2000, EPA does not issue mandatory new motor vehicle standards (``Tier
2 standards'') at least as stringent as National LEV and that would go
into effect no later than MY2006, then the state's participation in
National LEV extends only until MY2004, except as provided in the
National LEV provisions for state offramps. The offramps allow the OTC
States to exit National LEV if an auto manufacturer were to decide to
exit the program. OTC States without existing ZEV mandates would add a
statement that the state accepts National LEV as a compliance
alternative to any ZEV mandates. OTC States with existing ZEV mandates
would add a statement that their acceptance of National LEV as a
compliance alternative for state Section 177 Programs does not include
or have any effect on the OTC State's ZEV mandates.
Fourth, the commissioner's letter will include both an explicit
recognition that the manufacturers are opting into National LEV in
reliance on the OTC States' opt-ins, and a recognition that the
commitments in the initial OTC State opt-in package have not yet gone
through the state rulemaking process to be incorporated into state
regulations, so they do not yet have the force of law; in addition, the
letter will recognize that the state's executive branch must comply
with any laws passed by the state legislature that might affect the
state's commitment. The manufacturers' comments opposed inclusion of
the proposed language stating that the provisions of the state's letter
would not have the force of law until adopted as state regulations and
that the state must comply with any state legislation that might affect
the commitment. The manufacturers expressed concern that these
provisions undermine the states' commitments. However, a number of
states have indicated to EPA that they could not make a commitment of
this nature before completing the states' rulemaking processes, unless
they included language to clarify the legal nature of the initial state
commitment. In light of the fact that the states will not have
sufficient time to complete a rulemaking before opting into National
LEV, EPA believes it is appropriate for the opt-in provisions to allow
the states to include the language that EPA proposed. EPA does not
believe this language will in any way affect the degree to which the
states are legally or politically bound by their initial opt-ins.
Fifth, the commissioner's letter will include an acknowledgment
that, if a manufacturer were to opt out of National LEV pursuant to the
opt-out provisions in the National LEV regulations, the transition from
the National LEV requirements to any state Section 177 Program or ZEV
mandate would be governed by the National LEV regulations. Sixth,
similar to the manufacturers' opt-in letters, the commissioner's letter
will state that the state supports the legitimacy of the National LEV
program and EPA's authority to promulgate the National LEV regulations.
The OTC States have indicated that they support certain commitments
regarding ZEV mandates by including those provisions in the MOU voted
on by the OTC and initialed by the OTC pursuant to the vote. Consistent
with the provisions in the MOU initialled by the OTC, for states
without existing ZEV mandates, the commissioner's letter will state
that the state intends to forbear from adopting a ZEV mandate effective
during the period of the state's participation in National LEV. In this
rule, EPA is defining an existing ZEV mandate as a ZEV mandate adopted
by an OTC State prior to the signature date of this rule. The
manufacturers commented that the states should commit that they will
forbear from adopting ZEV mandates, rather than only stating their
intent to forbear from such action. However, the OTC States have
expressed their concern about attempting to bind future legislatures in
this way and have consistently indicated that such language would not
be acceptable to them. As it stated in the NPRM (60 FR 52740) and SNPRM
(62 FR 44760) for National LEV, EPA believes that the decision
regarding adoption of ZEV mandates by OTC States must be left up to
each individual OTC State, to the extent permitted under section 177.
Thus, EPA believes it is appropriate to include the language supported
by the OTC States here. If any OTC State would prefer to commit that it
will forbear from adopting a ZEV mandate, it may make that commitment
in its opt-in.
The commissioner's letter from OTC States that have not adopted a
Section 177 Program at the time of signature of this rule need not
include a commitment or statement of intent to forbear from adopting a
Section 177 Program effective during the period of the state's
commitment to National LEV, as long as the state commits to accept
National LEV as a compliance alternative to any such program. EPA took
comment on such a provision in the SNPRM (60 FR 44760) because the
draft MOU initialed by the manufacturers included a statement that
certain OTC States would forbear from adopting such ``backstop''
Section 177 Programs,<SUP>17</SUP> while the draft MOU initialed by the
OTC States did not include any statement regarding adoption of such
backstop programs. The comments on the SNPRM from the manufacturers and
the OTC States reiterate these positions. In particular, the
manufacturers stated that allowing all OTC States to adopt backstop
Section 177 Programs would destabilize the National LEV program. The
manufacturers are concerned that the prospect of a return to Tier 1
vehicles in at least some OTC States if a state violates its commitment
to National LEV is a powerful incentive for states to abide by their
commitments that would be lost with widespread backstops. EPA agrees
that the absence of backstops in some OTC States would contribute to
program stability in the manner that the manufacturers suggest.
However, EPA does not believe it is necessary to bar states from
adopting backstops to provide this source of stability, as it is highly
unlikely that all or nearly all OTC States will adopt backstop Section
[[Page 934]]
177 Programs effective during the relevant time period and it is
unlikely that more than a few (if any) states outside the OTR would
adopt backstop programs. In addition, the OTC States said that they are
unwilling to commit not to adopt backstop programs. Thus, EPA does not
believe it is appropriate to include a provision committing not to
adopt a backstop Section 177 Program as an element of the OTC States'
commitments to National LEV.
---------------------------------------------------------------------------
\17\ ``Backstop'' Section 177 Programs are programs that allow
National LEV as a compliance alternative to the Section 177 Program
requirements.
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Finally, the commissioner's letter may include a statement that the
state's opt-in to National LEV is conditioned on all of the motor
vehicle manufacturers listed in the National LEV regulations opting
into National LEV pursuant to the National LEV regulations and on EPA
finding National LEV to be in effect. However, as with the
manufacturers' opt-ins, no conditions other than those specified in the
regulations may be placed on any of the state opt-in instruments (the
Governor's executive order or letter, the commissioner's letter, or the
SIP revision).
The OTC States commented that the regulations should allow an OTC
State to condition its opt-in on signature of an acceptable independent
agreement with the manufacturers to promote advanced technology
vehicles (ATVs). An agreement on ATVs has not been contemplated to be
part of the National LEV regulations, but has been discussed as a
separate agreement between the OTC States and the auto manufacturers.
At one point, the OTC States and manufacturers reached consensus on the
substance and language of an ATV agreement, which was to establish
mechanisms for sharing information not only about advanced technology
vehicles and alternative fuels, but also about the incentives and
infrastructure development necessary to make new technology feasible.
This agreement was attached to the MOUs initialed by the manufacturers'
organizations and the OTC. EPA supports this agreement, but does not
believe that opt-ins to National LEV need be conditioned on final
signature of the agreement. If the OTC States and manufacturers want to
finalize the agreement (contingent on National LEV coming into effect),
they can and should do so before the due date for the OTC State opt-
ins. There is no reason to delay finalizing the ATV agreement until
after the OTC States have opted in. Thus, although OTC States can
refuse to opt in if there is no ATV agreement, they cannot send in an
opt-in which is conditioned on an ATV agreement being signed.
In the regulations at 40 CFR 86.1705 (e) and (g), EPA is providing
specific language for each element of the OTC States' opt-ins to be
included in the Governor's executive order or letter, the
commissioner's letter, and the SIP revision. Although it is somewhat
unusual for EPA to identify specific language for state submissions,
EPA believes that this is an appropriate situation to do so. Because
the OTC States and manufacturers are signing up for a voluntary program
and are unlikely to sign an MOU, using specified language will ensure
that they sign up to the same program. Otherwise, the opt-ins might not
represent agreement on the terms and conditions of the voluntary
National LEV program. However, in a slight modification to the proposed
approach, the final regulations provide that for the Governors' and
commissioners' letters, a state may opt into National LEV using the
specified language or ``substantively identical language.'' Because the
first step of the OTC States' commitments to National LEV will occur
before the states can complete their rulemaking processes, EPA
recognizes that some slight wording variations may be necessary for
individual states. For the subsequent SIP revisions, however, states
will have the opportunity to go through notice-and-comment rulemaking
on the specified language. Moreover, because the deadline for
manufacturers to opt into National LEV is after the deadline for the
OTC States, the manufacturers will have the opportunity to assess the
adequacy of any state opt-ins that vary from the specified language. If
the variation is sufficient to undercut the assurance that the state
will carry out its commitment to National LEV, the manufacturers may
decide not to opt into National LEV. However, the manufacturers would
not have an opportunity to assess beforehand any variations in the SIP
revision language submitted by the states. Prior to opt-in, the
manufacturers can evaluate the SIP revision language specified in the
regulations to determine whether they view the language as an adequate
expression of the states' commitments to National LEV, but they would
not have the opportunity to evaluate any variations on that specified
language. The importance of ensuring that all parties know what they
are signing up to at the time of opt-in further supports the
requirement for states to use exact language for the SIP revisions.
Despite the possibility that states may opt into National LEV even
with slight non-substantive variations in the language of the
Governor's letter or commissioner's letter, EPA emphasizes that any
differences must be minor and non-substantive. Because the Governor's
letter and commissioner's letter are political as well as legal
documents, even language without direct legal effect is important to
bind the state politically to carry out its commitment. Hence, EPA and/
or the manufacturers are likely to view variations in such language as
substantive changes to the state's commitment. To avoid invalid opt-
ins, EPA expects most, if not all, OTC States to use the specified
language unmodified. Only a few OTC States commented that they might
need to make unspecified changes in the language. In addition, as
discussed further below, EPA will find National LEV in effect without
providing for additional notice-and-comment on whether the conditions
are met for finding National LEV in effect. EPA may proceed without
additional rulemaking or other process if the Agency's in-effect
finding is essentially a nondiscretionary action based on clear factual
determinations. If EPA must use its discretion to determine whether a
state has adequately committed to National LEV, that might require
further rulemaking and substantially delay implementation of the
program. However, if the OTC States use the language specified in the
regulations, which EPA has determined to be adequate through a notice-
and-comment rulemaking, EPA will be able to find National LEV in effect
on that basis.
EPA also recognizes that a state may wish to include background
information, especially in the Governor's executive order or letter.
This is permissible under today's regulations, providing that the
additional information does not add conditions to the state's opt-in.
2. Manufacturer Opt-Ins
As proposed, the motor vehicle manufacturers' opt-ins to National
LEV are due within 60 days from signature of this Final Rule. As
provided in the Final Framework Rule, a manufacturer will opt into
National LEV by submitting a written notification signed by the Vice
President for Environmental Affairs (or a company official of at least
equivalent authority who is authorized to bind the company to the
National LEV program) that unambiguously and unconditionally states
that the manufacturer is opting into the program, subject only to
conditions expressly contemplated by the regulations. See 40 CFR
86.1705(c)(2). The only permissible conditions on a manufacturer's opt-
in notification would be that the OTC States or the auto manufacturers
specified by the manufacturer opt into National LEV pursuant to the
National
[[Page 935]]
LEV regulations and that EPA find the program to be in effect. These
conditions parallel the permissible conditions described above for the
OTC States' opt-ins.
One commenter voiced a concern that the opt-in language that would
commit the manufacturers ``not to seek to certify any vehicle except in
compliance with the regulations in subpart R'' would prevent
manufacturers from certifying heavy-duty vehicles. The statement would
not have that effect. Heavy-duty vehicles are not covered by the
National LEV program, so they would not need to be (and could not be)
certified under the National LEV regulations. Similarly, this opt-in
language would not preclude manufacturers from seeking to certify a
vehicle for sale only in California and states that have the California
program in effect. The opt-in language also would not commit
manufacturers to obtain National LEV certificates for vehicles sold
outside the United States.
3. EPA Finding That National LEV Is In Effect
The OTC States' and the auto manufacturers' opt-ins will become
effective upon EPA's receipt of the opt-in notification or, if the opt-
in is conditioned, upon the satisfaction of that condition. As provided
in 40 CFR 86.1706, EPA will find National LEV in effect if each of the
listed manufacturers submits an opt-in notification that complies with
the requirements for opt-ins, each of the opt-in notifications
submitted by an OTC State complies with the requirements for opt-ins,
and any conditions placed upon any of the opt-ins are satisfied. Thus,
if all the parties that opted into National LEV agree to participate in
the program, even if fewer than all OTC States opt into National LEV,
EPA will find the program in effect. EPA believes that National LEV
should be a national program--effective in all states but California.
This would provide the OTR with emissions reductions greater than what
could be achieved without National LEV and would simplify distribution
and other aspects of the sale of motor vehicles. Moreover, the
manufacturers have stated that they are not willing to opt into
National LEV unless each and every OTC State opts into National LEV.
However, if the OTC States and auto manufacturers are willing to
participate in a National LEV program even if all OTC States do not opt
in, EPA will not stand in the way of National LEV going into effect. By
allowing each of the parties in National LEV to condition their
agreement to opt in on specified other parties opting in, EPA is
leaving it up to each of the parties to decide what is an acceptable
basis for its own participation. EPA expects that each motor vehicle
manufacturer and each OTC State will carefully evaluate the National
LEV program as a whole and make the choice as to whether and under what
conditions it chooses to participate.
Once all conditions on opt-ins are satisfied, the manufacturers
will be subject to the National LEV requirements for new motor vehicles
for the duration of the program, and the OTC States that opt in will be
committed to participate in the National LEV program for the duration
of their commitments, as discussed above in section V.A.
While the OTC States' SIP revisions are a necessary component of
their commitments to National LEV, EPA will make the finding as to
whether National LEV is in effect and National LEV will begin before
the OTC States' SIP revisions are due. Through an executive order or
letter, the Governor of each state will have opted into National LEV
and started the process for submission of an approvable SIP revision.
Also, as discussed further below, an OTC State's failure to submit the
SIP revision within the time provided for submission would give
manufacturers an opportunity to opt out of the National LEV program.
See Sec. VI.A.2; 40 CFR 86.1707(f). Together, this high level directive
for action and the consequences of a failure to conclude the action
provide substantial assurance that the OTC States will submit their SIP
revisions within the specified time.
EPA will publish the finding that National LEV is in effect in the
Federal Register, but the Agency will not go through additional
rulemaking to make this determination. In the Final Framework Rule, EPA
stated that further Agency rulemaking to find National LEV in effect
would be unnecessary because EPA would establish the criteria for the
finding through notice-and-comment rulemaking, and EPA's finding that
the criteria are satisfied would be an easily verified objective
determination. See 62 FR 31226 (June 6, 1997). The public has had full
opportunity to comment on the adequacy of the elements of the
manufacturers' and OTC States' opt-ins. Thus, EPA will find that
National LEV is in effect without conducting further rulemaking if the
Agency determines that each of the listed manufacturers has submitted
an opt-in notification that includes the specified elements in approved
language without qualifications, each of the opt-in notifications
submitted by an OTC State includes the specified elements in specified
or substantively identical language without qualifications, and any
conditions placed upon any of the opt-ins have been satisfied.
4. SIP Revisions
Within one year (eighteen months for a few specified states, as
discussed above in section V.B) of the date set for EPA's finding that
National LEV is in effect, the OTC States will complete the second
phase of their commitments to National LEV by submitting SIP revisions
to EPA incorporating their commitments (``National LEV SIP
revisions''). As proposed and specified in 40 CFR 86.1705(g), the SIP
revisions will contain the following elements incorporated in
enforceable state regulations.
The first regulatory provision will commit that, for the duration
of the state's commitment to National LEV, the manufacturers may comply
with National LEV or mandatory federal standards of at least equivalent
stringency as a compliance alternative to any state Section 177 Program
(which is any regulation or other law, except a ZEV mandate, adopted by
an OTC State in accordance with section 177 and which is applicable to
passenger cars, light-duty trucks up through 6,000 pounds GVWR, and
medium-duty vehicles from 6,001 to 14,000 pounds GVWR if designed to
operate on gasoline, as these vehicle categories are defined under the
California regulations).<SUP>18</SUP> This provision would not restrict
states from adopting and implementing requirements under section 177
for heavy-duty trucks and engines and diesel-powered vehicles between
6,001 and 14,000 pounds GVWR. The regulations will also commit the
state to participate in National LEV until MY2006, except as provided
in the National LEV regulatory provisions for the duration of the OTC
State commitments, including provisions for state offramps. However, as
discussed in section V.A above, the regulations will also provide that
if, no later than December 15, 2000, EPA has not issued mandatory new
motor vehicle standards (``Tier 2 standards'') at least as stringent as
National LEV that would go into effect no later than MY2006, then the
state is committed to participate in National LEV only until MY2004,
except as provided in the National LEV provisions for state offramps.
States that do not have an existing ZEV mandate (see n. 16 above)
[[Page 936]]
will additionally provide that manufacturers may comply with National
LEV as a compliance alternative to any ZEV mandates for the duration of
the state's commitment to National LEV.
---------------------------------------------------------------------------
\18\ OTC States that had Section 177 Programs at the time of
opt-in would need to modify their existing regulations in accordance
with this provision.
---------------------------------------------------------------------------
The second element of the state regulations will explicitly
acknowledge that, if a manufacturer were to opt out of National LEV
pursuant to the opt-out provisions in the National LEV regulations, the
transition from the National LEV requirements to any state Section 177
Program or ZEV mandate (for states without existing ZEV mandates) would
be governed by the National LEV regulations, thereby incorporating
these National LEV provisions by reference into state law.
The SIP submission to EPA will include state regulations containing
the elements discussed above, and a transmittal letter or similar
document from the state commissioner forwarding those regulations. As
proposed, four additional elements of the SIP commitment must be
included either in the transmittal letter or the state regulations.
First, the state will commit to support National LEV as an acceptable
alternative to state Section 177 Programs for the duration of the
state's commitment to National LEV. Second, the state would recognize
that its commitment to National LEV is necessary to ensure that
National LEV remain in effect. Third, the state will state that it is
submitting the SIP revision to EPA in accordance with the National LEV
regulations. Fourth, each OTC State without an existing ZEV mandate
(see n. 16 above) will state that, for the duration of the state's
commitment to National LEV, the state intends to forbear from adopting
a ZEV mandate effective during the period of the state's participation
in National LEV. See section V.C.1 above for further discussion of OTC
State commitments relating to ZEV mandates. As discussed in section
V.C.1 above, OTC States that had not adopted a Section 177 Program at
the time of signature of this rule would not need to commit not to
adopt backstop Section 177 Programs.
EPA will be able to find that an OTC States' SIP submission meets
the National LEV SIP requirements and to approve it into the SIP
without further rulemaking as long as the submission both includes the
language specified in the regulations without additional conditions and
meets the CAA requirements for approvable SIP submissions. In the
SNPRM, EPA provided full opportunity for public comment on the language
that the states would use in their SIP revisions. Today's rule
finalizes that language with a few modifications arising from the
public comments. Thus, in reviewing such a SIP submittal, EPA will only
have to determine whether the submittal includes the specified language
without additional conditions, and whether it meets the statutory
criteria for approvable SIP submissions, as laid out in sections
110(a)(2) and 110(l) of the CAA. Section 110(a)(2), in relevant part,
specifies that the state must have provided public notice and a hearing
on the SIP provisions and the submission must provide necessary
assurances that the state will have adequate personnel, funding and
authority under state law to carry out the provisions. Section 110(l)
(discussed in more detail below) provides that SIP revisions must not
interfere with attainment or any other applicable requirement.
In this case, these requirements for EPA's approval are easily
verified objective criteria. They leave EPA little discretion in
deciding whether a state submission meets the requirements for a
National LEV SIP revision, and consequently remove any benefits to be
derived from conducting notice-and-comment rulemaking on each approval.
Determining whether the language of the SIP submittal tracks the
language provided in the final regulations and whether the state has
substantively qualified or conditioned that language through
modifications or additions is a straightforward, essentially
ministerial task. This is also true for assessing whether the state has
provided notice and a public hearing on the SIP submission. Because
National LEV is a federal program, the state needs no personnel or
funding to carry it out, so there is nothing related to the requirement
for adequate personnel and funding for EPA to evaluate. For a state
with existing regulations requiring compliance with a state Section 177
Program, EPA will merely have to determine whether the state has
modified its regulations to include the language in the National LEV
regulations to accept National LEV as a compliance alternative for the
specified duration of the state commitment, as well as the additional
provisions specified above. Again, this is a very simple, objective
assessment. Finally, EPA has determined that National LEV would provide
reductions in the OTR equivalent to or greater than OTC State Section
177 Programs in the OTR (see section IV), so that an OTC State
commitment to National LEV would not interfere with attainment or any
other Act requirement. See below for further discussion of this point.
Incorporating the OTC States' commitments to National LEV in state
regulations approved into the SIPs will substantially enhance the
stability of the National LEV program and support giving states credit
for SIP purposes for emissions reductions from National LEV. A SIP
revision would clearly indicate a state's commitment to National LEV
and would reiterate the state executive branch's support for the
National LEV program. More importantly, an approved SIP revision is
federal law and hence has binding legal effect. General Motors Corp. v.
U.S., 496 U.S. 530, 540 (1990).
In the SNPRM, EPA explained the circumstances under which EPA
believes these SIP commitments would have binding effect. Several
commenters disagreed with EPA's legal interpretations. Of course,
whether a subsequent state law or regulation could be approved into the
SIP or whether it would be preempted by the earlier National LEV SIP
revision would be a fact-specific determination that could not be made
unless and until a state took final action arguably in conflict with
its National LEV SIP revision. Although this is an issue that might
never arise, EPA believes it is appropriate to lay out the key legal
principles that EPA believes would apply in such circumstances so that
any OTC State that submits a National LEV SIP revision does so with a
full understanding of how its commitment to National LEV would be
enforceable.
A National LEV SIP revision would provide that the state commits to
accept National LEV or mandatory federal standards of at least
equivalent stringency as a compliance alternative to a state program
under section 177 for a specified time period. EPA approves SIP
submissions through a federal notice-and-comment rulemaking process
under section 110(k) of the Act. Approved SIP submissions are
incorporated by reference into the CFR and are enforceable federal law.
If a state adopted new state law or regulations that violated this
commitment in the SIP (e.g., by requiring compliance only with a state
Section 177 Program), this new state law would conflict with the
federally-approved National LEV SIP revision and would not be valid
prior to EPA approval into the SIP of the new law. Prior to such
action, the new state law would be precluded by the federal law with
which it conflicted (i.e., the SIP revision EPA had approved). The
courts have held that where Congress has the power under the Supremacy
Clause of the U.S. Constitution to preempt an area of state law (which
it has with respect to air pollution controls), state law is preempted
if either Congress evidences
[[Page 937]]
an intent to occupy a given field, or to the extent that the state law
actually conflicts with federal law. Hence, the later state regulation
that did not allow National LEV as a compliance alternative would be
preempted by the federally-approved National LEV SIP provision and
would be unenforceable against the manufacturers. Manufacturers could
bring suit against the state to clarify that the new state law was not
enforceable until approved by EPA, thereby enforcing the initial SIP
commitment in federal court.
To revise the SIP, the state would have to submit the new
provisions and EPA would have to approve them into the SIP through
notice-and-comment rulemaking. If EPA approved the new provisions, they
would take effect. If EPA disapproved the new provisions, then the new
state law would continue to conflict with the federally-approved SIP
revision (which is federal law) containing the state commitment to
National LEV, and manufacturers could seek a judicial determination
that the federally-approved National LEV SIP revision commitment
preempted the new state law.
Once a state has an approved SIP provision committing to accept
National LEV as a compliance alternative for a specified duration,
under section 110(l) of the CAA, EPA would be obligated to disapprove a
subsequent SIP revision that violated the state's commitment if EPA
were to find that the SIP revision would interfere with other states'
ability to attain or maintain the national ambient air quality
standards (NAAQS). Specifically, section 110(l) provides that EPA must
disapprove a plan revision if it ``interfere[s] with any applicable
requirement concerning attainment and reasonable further progress * * *
or any other applicable requirement of this Act.'' By the terms of its
rulemaking, National LEV comes into and stays in effect only if all
relevant states commit to allow it as a compliance alternative. If
National LEV comes into effect, a number of OTC States, as well as
states outside the OTR, are likely to rely on National LEV as a means
of attaining and maintaining the ozone NAAQS. These states are likely
to forego adoption of other control measures because they will count on
reductions from National LEV to meet their attainment and maintenance
obligations. In this manner, other states will be relying on each of
the OTC States keeping its commitment to National LEV. An OTC State
breaking its commitment to allow National LEV as a compliance
alternative could lead to the dissolution of the National LEV program,
which in turn would likely deprive other states of the emission
reductions from National LEV, and could thereby interfere with those
other states' ability to attain. As discussed above, in the SIP
revisions committing to National LEV, each OTC State would explicitly
recognize that the state's commitment to National LEV is necessary to
ensure that the program remain in effect.
One commenter opposed EPA's reading of section 110 on several
grounds, focusing in particular on the potential effects on states
downwind from the violating state. The commenter objects to anything
that would discourage a state that committed to National LEV from
implementing a Section 177 Program if that state finds in the future
that National LEV will not prevent emissions within that state from
interfering with attainment in downwind states. The commenter claims
that the commitment to National LEV would violate the section
110(a)(2)(D) requirement that emissions in a state cannot interfere
with attainment or maintenance in downwind states.
EPA rejects the suggestion that a state's commitment to National
LEV has the potential to interfere with that state's ability to comply
with section 110(a)(2)(D). Section 110(a)(2)(D) requires SIPs to
``contain adequate provisions prohibiting * * * any source or other
type of emissions activity within the State from emitting any air
pollutant in amounts which will * * * contribute significantly to
nonattainment in, or interfere with maintenance by, any other state. *
* *'' Thus, section 110(a)(2)(D) holds a state responsible for reducing
a given quantity of emissions that contributes significantly to
nonattainment in another state. It does not mandate any particular
measure for reducing those emissions, and the Circuit Court of Appeals
for the District of Columbia, in Virginia v. EPA, 108 F. 3d 1397 (D.C.
Cir. 1997), precluded EPA from requiring states to adopt a program
under section 177. States commonly make choices between emissions
control measures, and the decision to adopt one measure often precludes
another, usually due to practical constraints such as incompatible
technology, limited resources, lead time requirements, etc. The choice
of National LEV is no different. In selecting National LEV as a means
of controlling emissions from new motor vehicles, a state will be fully
aware that the choice requires giving up the ability to adopt a state
Section 177 Program for a given period of time, except under specified
circumstances. EPA has determined that National LEV produces equivalent
or greater emissions reductions than OTC State-by-State adoption of
Section 177 Programs. Thus, the only way in which adoption of OTC State
Section 177 programs in lieu of National LEV could help meet OTC
States' section 110(a)(2)(D) obligations is if California were to adopt
more stringent CAL LEV requirements, all or almost all OTC States also
adopted such standards, and the timing of the adoptions was such that
the standards would become effective earlier than the date on which the
OTC States' participation in National LEV would have ended had the
states opted into National LEV instead. For National LEV to come into
effect in MY1999, OTC States must evaluate the alternatives based on
the information available at this time and make a choice now as to
whether to opt into National LEV. As is often the case, if state
regulators wait until they have perfect information about all possible
options, one option--National LEV, which now looks to be the most
attractive option--will no longer be available. Nor is it an option for
OTC States to opt into National LEV without making an enforceable
commitment for the specified duration. National LEV is a voluntary
program for both states and manufacturers, and manufacturers are
unwilling to supply National LEV vehicles without assurance that their
future compliance obligations will remain stable for the specified
duration. Therefore, a commitment by OTC States to accept compliance
with National LEV for the specified duration is an integral and
critical element of National LEV. Based on the options and information
available now to OTC States and only the possibility that California
will tighten its standards at some point in the future, an OTC State
that made an enforceable commitment to National LEV for the specified
duration could not be said to be interfering with attainment of
downwind states, nor could that commitment be held unenforceable in the
future. Of course, for most OTC States, National LEV is only one of the
actions they will need to take to meet their CAA obligations. States
committed to National LEV would remain responsible for compliance with
section 110(a)(2)(D) and would be able to use other means to achieve
the necessary reductions. Thus, the state commitments to National LEV
in no way violate section 110(a)(2)(D), nor are they consequently
unenforceable as the commenter suggests.
The commenter further asserts that EPA is attempting to prohibit
states from adopting Section 177 Programs
[[Page 938]]
and this is illegal and contrary to section 177, which provides states
the right to adopt state standards for new motor vehicles that are
identical to California standards. EPA agrees that section 177 clearly
provides states the right to adopt the California standards. Under
National LEV, states make the choice whether to exercise that right and
implement the California standards, or to commit to accept
manufacturers' compliance with an alternative set of emissions controls
on new motor vehicles for a limited period of time. The OTC States and
the manufacturers developed the basic framework and requirements for
the National LEV program and the fundamental agreement on which it is
based. EPA does not have the authority to require the manufacturers to
produce National LEV vehicles without their agreement or to require the
OTC States to commit to National LEV. Absent the voluntary actions of
the manufacturers and OTC States there will be no National LEV Program.
However, if the manufacturers and OTC States choose to commit to
National LEV and bring the program into being, it is in no way contrary
to section 177 or any other provision of the Clean Air Act for EPA to
enforce the agreement in the manner provided in today's rule.
The commenter further contends that EPA's reading of section 110(l)
is incorrect for several reasons. As discussed above, under EPA's
interpretation, section 110(l) could bar EPA from approving into the
SIP a state submission that would revoke an earlier SIP provision
committing a state to accept National LEV as a compliance alternative
for a specified duration. First, the commenter states that based on the
same analysis, EPA could use its authority under section 110(k)(5) to
require even unwilling states to revise their SIPs to accept National
LEV as a compliance alternative on the theory that failure to do so
would frustrate National LEV and thus interfere with attainment in
neighboring states. The commenter states that EPA has no such authority
under section 110(k)(5), (under Commonwealth of Virginia v.
Environmental Protection Agency, 108 F.3d 1397 (D.C. Cir. 1997).
EPA rejects the contention that the section 110(k)(5) analysis is
comparable to EPA's interpretation of section 110(l). As emphasized
above, National LEV is a voluntary program. Enforcing an agreement that
states have voluntarily entered into is a fundamentally different
action from mandating that states enter into an agreement. More
specifically, EPA's interpretation of section 110(l) relies on the
effect that a violation of a state commitment is likely to have on
other states that have relied upon the National LEV program. A program
will not be useful for state air pollution control and planning
purposes unless there is some assurance that it will continue over
time, and EPA has attempted to structure National LEV so as to provide
such an assurance of stability. Given this structure, states will
likely reasonably rely on achieving a certain quantity of emissions
reductions from National LEV and hence will likely decide not to adopt
other pollution control measures. Since most measures take time to
adopt and implement, the sudden and unexpected loss of emissions
reductions from National LEV would be likely to cause a significant
delay in some states' emissions control efforts. As a consequence, it
would affect such states' ability to meet the statutory and regulatory
deadlines for attainment as well as the obligation to protect the
health and welfare of their citizens. In contrast, if OTC States did
not commit to National LEV and the program never came into effect,
while the opportunity for emissions reductions from National LEV would
be lost, states would never have expected to receive those reductions,
would not have foregone opportunities for other types of emissions
reductions, and would not be disadvantaged in their ability to pursue
other measures. Under those circumstances, EPA would have no basis for
finding that failure to include a commitment to National LEV would make
a SIP substantially inadequate to attain the NAAQS or otherwise comply
with any requirement of the CAA.
The commenter also cites section 110(a)(2)(D) to argue that section
110 holds each state responsible only for emissions within its
jurisdiction and requires a state to take action only if those
emissions are interfering with attainment in another state. EPA agrees
that section 110(a)(2)(D) only applies to emissions activity within the
state, but EPA is here relying on section 110(l), not section
110(a)(2)(D). Section 110(l) simply provides that EPA shall not approve
a revision if it ``would interfere with any applicable requirement
concerning attainment and reasonable further progress * * * or any
other applicable requirement of [the] Act.'' (Emphasis added.) Section
110(l) makes no reference to emissions activities within the state, and
EPA declines to attempt to read in such a limitation.
The commenter states further that it would not violate section 110
for EPA to approve into a SIP state provisions that replace National
LEV with a section 177 program when the section 177 program would
result in equivalent or lower emissions within the state. If the
manufacturers might choose to opt out of National LEV as a consequence
of an EPA approval of such a revision, the revision would jeopardize
all of the emissions reductions from the National LEV program and
states without backstop programs could experience the significantly
higher emissions that would be produced by Tier 1 vehicles. Thus, it is
highly unlikely that the proposed SIP revision would not interfere with
attainment in at least some states that had relied upon National LEV,
even if emissions in the violating state remained stable or decreased
and vehicles from the violating state that migrated into other states
emitted at the same or lower levels. For these reasons, section 110(l)
could require EPA to disapprove the state's proposed revision.
Finally, the commenter states that EPA could not find that a
proposed SIP revision breaking the state's commitment to National LEV
would interfere with attainment under section 110(l) because
manufacturers would be allowed to sell Tier 1 vehicles in the violating
state even if they do not opt out of National LEV. In that situation,
approval of the section 177 program would reduce emissions in that
state in comparison to the Tier 1 requirements that would otherwise
apply. EPA disagrees with the commenter's analysis of how this
situation would relate to the requirements of section 110(l). Given the
likelihood that manufacturers would opt out of National LEV if EPA were
to approve the SIP revision, approval of the SIP revision would be
likely to result in overall higher emissions from Tier 1 requirements
in many states, not just one, and a number of these states are likely
to be relying on the reductions from National LEV. Moreover, the
violating state has the ability to avoid some or all of the negative
emissions effects of its action, either by not taking the action in the
first place, or by curing its violation, as discussed above in section
VI.A.1.<SUP>19</SUP> In contrast, other states cannot prevent a state
from violating, but rather must rely on EPA's disapproval to retain the
emissions reductions that they are relying on for
[[Page 939]]
attainment. Under these circumstances, the fact that the violating
state had taken action that caused Tier 1 requirements to apply in that
state would not prevent EPA from disapproving that state's SIP revision
on the grounds that the revision would interfere with attainment in
other states.
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\19\ If a state violated its commitment, it would have the
ability to limit the period of time for which it would receive Tier
1 vehicles to approximately two full model years by curing the
violation. Even if EPA were to approve the SIP revision, the state
would receive Tier 1 vehicles for two years pursuant to the
requirement for lead time under section 177. Thus, an EPA
disapproval of a violating state's proposed SIP revision would not
necessarily result in higher emissions in the violating state
compared to the result if EPA had approved the proposed SIP
revision.
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VI. Incentives for Parties to Keep Commitments to Program
Once it comes into effect, National LEV is designed to be a stable
program that will remain in effect until replaced by mandatory federal
tailpipe standards of at least equivalent stringency, provided such
standards are necessary and cost-effective. Manufacturers have the
option, but not the requirement, to participate in National LEV.
Manufacturers have indicated a willingness to opt into the program, but
only if the EPA and the OTC States make certain commitments. To give
the manufacturers both assurance that the commitments will be kept and
recourse if they are not, the program includes a few specified
conditions (``offramps'') that would allow manufacturers to opt out of
National LEV if EPA or the OTC States did not keep their commitments.
In addition, the OTC States also need assurance that National LEV will
continue to provide the benefits they anticipated when they opted into
the program, both in terms of the number of manufacturers covered by
the program and the level of emissions reductions that the program was
designed to achieve. Thus, National LEV also includes limited offramps
for the OTC States to protect against changes in anticipated emission
benefits or the number of covered manufacturers. Both the
manufacturers' and the OTC States' offramps, set forth in 40 CFR
86.1707, are structured to maximize all parties' incentives to maintain
the agreed-upon program provisions and thereby to maximize the
stability of National LEV over its intended duration.
In the unlikely event that any of the offramps were triggered and
manufacturers or OTC States opted out, today's regulations set forth
which requirements would apply, the timing of such requirements, the
states in which they would apply, and the manufacturers that would have
to comply with them. The main purpose of these provisions is to enhance
the stability of the program by minimizing the incentives for EPA or
the OTC States to act in a manner that would trigger an offramp.
Additionally, EPA has structured the offramp provisions such that no
single event automatically would end the National LEV program. EPA will
continue to make National LEV available as long as one or more
manufacturers and one or more OTC States wish to remain in the program.
EPA recognizes, of course, that if a significant number of OTC States
or manufacturers were to opt out of National LEV, after a certain point
it is unlikely that the remaining parties would choose to continue the
program. However, the issue is highly unlikely to arise, and if it did,
it is not clear what would be the critical mass of opt-outs sufficient
to end the program. Rather than deciding now how many OTC State and
auto manufacturer opt-outs would be significant enough to end National
LEV, EPA believes it is both more appropriate and more efficient to
leave that decision to the OTC States and manufacturers to decide, in
the unlikely event that an offramp is triggered and significant opt-
outs occur. EPA has received no comments on the SNPRM opposing this
general approach.
In the NPRM, EPA proposed that the manufacturers' right to opt out
of the National LEV program would be limited to two conditions. These
offramps were: (1) EPA modification of a Stable Standard, except as
specifically provided, and (2) an OTC State's failure to meet or keep
its commitment regarding adoption or retention of a state motor vehicle
program under section 177. The Final Framework Rule addressed the first
offramp (recodified in today's rule at 40 CFR 86.1707(d)), which would
allow manufacturers to opt out of National LEV if EPA were to modify a
Stable Standard except as provided for under the National LEV
regulations. The second offramp is addressed in today's Final Rule. EPA
also is adding a third type of offramp related to auto manufacturers'
concerns regarding the effects of using federal fuel (instead of
California fuel) on emissions control systems. This is discussed in
section VI.C below. In addition, as proposed in the SNPRM, today's
Final Rule includes a fourth type of offramp that allows manufacturers
to opt out based on an OTC State or another manufacturer legitimately
opting out of National LEV. Today's rule also finalizes two offramps
for OTC States. An OTC State may opt out if a manufacturer opts out or
if EPA makes a finding that National LEV will not produce (or is not
producing) emissions reductions in the OTR equivalent to state Section
177 Programs in the OTR. Finally, this section discusses EPA's
interpretation of Section 177 if an offramp is taken.
A. Offramp for Manufacturers for OTC State Violation of Commitment
As established in today's Final Rule, there are several ways in
which an OTC State might break its commitment and thereby allow
manufacturers to opt out of National LEV. These are: (1) taking final
action in violation of the commitment to continue to allow National LEV
as a compliance alternative to a Section 177 Program or to a ZEV
mandate (in those OTC States without existing ZEV mandates); (2)
failing to submit a National LEV SIP revision within the timeframe set
forth in the National LEV regulations; (3) submitting an inadequate
National LEV SIP revision; and (4) taking final action (by an OTC State
without an existing ZEV mandate) adopting a ZEV mandate effective
during the state's commitment to National LEV. <SUP>20</SUP> The
discussion below addresses each of these possible types of OTC State
violations individually. EPA does not believe that any of these
scenarios are likely to arise under the National LEV program.
Nevertheless, spelling out in the regulations the consequences under
each of these scenarios will provide the parties certainty regarding
the worst-case outcomes, and more importantly, allows EPA to structure
the consequences so as to minimize the likelihood that any of these
scenarios will occur.
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\20\ In addition, as discussed in the following section,
manufacturers may opt out if an OTC State takes a legitimate
offramp.
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1. OTC State No Longer Accepts National LEV as a Compliance Alternative
The most significant way in which an OTC State could violate its
commitment to National LEV would be to attempt to have a Section 177
Program that was in effect during the state's commitment to National
LEV <SUP>21</SUP> and that did not allow National LEV or mandatory
federal standards of at least equivalent stringency as a compliance
alternative. <SUP>22</SUP> (An OTC State would not be in violation of
its commitment under National LEV if it had (or adopted) a Section 177
Program that was effective after the end of its commitment to National
LEV that did not allow National LEV as a compliance alternative.) This
could happen if an
[[Page 940]]
OTC State accepted National LEV as a compliance alternative to a state
Section 177 Program or a ZEV mandate (in an OTC State without an
existing ZEV mandate) and then took final action purportedly removing
the alternative compliance provisions from its regulations, leaving
only the state Section 177 Program or ZEV mandate requirements in
place. It would also happen if an OTC State took final action
purportedly adopting a Section 177 Program or a ZEV mandate (in an OTC
State without an existing ZEV mandate) without providing for National
LEV as a compliance alternative. <SUP>23</SUP> This violation of the
OTC State's commitment to National LEV attempts to impose a compliance
burden directly on the manufacturers and would abandon the most
fundamental element of the agreement underlying the voluntary National
LEV program.
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\21\ An OTC State's commitment to National LEV lasts until
MY2006, unless EPA fails to issue Tier 2 standards at least as
stringent as National LEV on or before December 15, 2000, in which
case the commitment lasts until MY2004.
\22\ Throughout this preamble, EPA often uses ``National LEV as
a compliance alternative'' as shorthand for ``National LEV or
mandatory federal standards of at least equivalent stringency as a
compliance alternative.''
\23\ In addition, an OTC State with a Section 177 Program in its
regulations at the time of opt-in that does not already permit
manufacturers to comply with National LEV as a compliance
alternative might fail to modify those existing regulations within
the time-frame provided, which is the same as the deadline for
submission of the state's SIP revision. The consequences of this
type of violation would differ slightly from the consequences of
other types of violations that attempted to have a Section 177
Program without allowing National LEV as a compliance alternative,
as noted below in n.24.
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The consequences of such a violation, as discussed below and set
forth in 40 CFR 86.1707(e), take into account the seriousness of the
breach of the commitment, even though the violation would not
necessarily directly burden the manufacturers. Once a state adequately
commits to National LEV through an approved SIP revision, even if the
state were to change its regulations to disallow compliance with
National LEV, the requirement would not be enforceable until EPA
approved a further SIP revision incorporating the change, as discussed
above in section V.C.4. Yet, although the violation might not actually
impose any burden on the manufacturers because it is not enforceable,
manufacturers should not be bound to comply with more stringent
National LEV requirements in the violating state and should not be
bound to continue in the National LEV program, as even an unenforceable
Section 177 Program would create risks and uncertainties for
manufacturers. Manufacturers would be at risk of having to defend
against a state enforcement action. The question of whether EPA could
approve a proposed state SIP revision deleting National LEV as a
compliance alternative--if only by virtue of the lack of precedence for
this issue and its dependence on the specific facts--would create
further uncertainty for manufacturers.
Manufacturers would be able to opt out at any time after an OTC
State took final action that would (or attempted to) require
manufacturers to comply with a Section 177 Program or a ZEV mandate (in
an OTC State without an existing ZEV mandate) prior to the end of the
state's commitment to National LEV without allowing them to comply with
National LEV or mandatory federal standards of at least equivalent
stringency as an alternative, even if the effective date of the state
requirement were some time in the future. The final state action would
be the action promulgating the state law or regulations at issue, not
the act of defending such law or regulations in litigation. Thus, a
self-effectuating state law purporting to impose a Section 177 Program
without including National LEV as a compliance alternative would be
final state action, as would final state regulations purporting to
impose such a program. A state law directing the relevant state agency
to change its regulations to remove National LEV as a compliance
alternative would not be a final state action, but the regulations
promulgated in accordance with that directive would be final state
action.
The manufacturers commented that the definition of ``final state
action'' should include the date on which a state passes legislation
that requires a state environmental agency to eliminate National LEV as
a compliance alternative, even if that state legislation is not self-
effectuating. EPA is concerned that it may not necessarily be clear in
a particular instance how a law directing a state agency to change its
regulations relating to National LEV would actually be implemented by
the state agency. Depending on the substantive results of the state
rulemaking process implementing the directives of the law and the
timing of such regulations, the state may or may not actually violate
its commitment to the program. Rather than attempting to hypothesize
the effect of final state regulations once promulgated, EPA believes it
is appropriate to define a final state action as the action that
finalizes the state law or regulations that would be directly
applicable to the motor vehicle manufacturers upon the effective date
of such law or regulations.
Today's rule provides that, if an OTC State were to violate its
commitment by purportedly disallowing National LEV as a compliance
alternative, there would be both automatic consequences in the
violating state and an opportunity for manufacturers to opt out of
National LEV.<SUP>24</SUP> Two significant elements determine the
consequences in the violating state. The first element is the
manufacturers' National LEV compliance obligations in the violating
state. The second element is when the state Section 177 Program or ZEV
mandate requirements apply to manufacturers. Outside of the violating
state, manufacturers would continue to be subject to the National LEV
requirements unless they opted out of the National LEV program.
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\24\ In an OTC State that had a Section 177 Program in its
regulations at the time of opt-in and that had never accepted
National LEV as a compliance alternative to the Section 177 Program
requirements, the consequences in the violating state discussed in
this section would not apply, given EPA's interpretation of section
177. See section VI.E. However, the provisions for a manufacturer's
offramp would be the same for a state that failed to modify existing
regulations to accept National LEV as a compliance alternative as
for any other state action not allowing National LEV as a compliance
alternative.
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Until the violating state's Section 177 Program or ZEV mandate
requirements apply, the manufacturers' compliance obligations in that
state would be governed by the terms of the National LEV regulations.
In a state that had violated its commitment by attempting to have a
Section 177 Program or ZEV mandate without allowing National LEV as a
compliance alternative, beginning with the next model
year,<SUP>25</SUP> the National LEV regulations would allow
manufacturers to sell vehicles complying with Tier 1 tailpipe standards
in that state and those vehicles would not be counted in determining
whether the NLEV fleet average NMOG standard was met. Because model
years generally run somewhat ahead of the calendar years with the same
numbers, generally this will result in a near-term or immediate change
in the manufacturers' compliance obligations.
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\25\ The ``next model year'' would be the model year named for
the calendar year following the calendar year in which the OTC State
took final state action violating its commitment. For example, if an
OTC State violated its commitment by taking final state action in
calendar year 1999, the next model year would be MY2000.
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EPA had proposed that, until the violating state's Section 177
Program requirements applied (which might not be until MY2006), the
manufacturers would only have to meet the federal Tier 1 tailpipe
standards for vehicles sold in the violating state, and those vehicles
would not be used to calculate the manufacturers' fleet NMOG averages.
Several commenters objected to this provision on the basis that the
violating state or a downwind state might need emissions reductions
from controls on new motor vehicles in the
[[Page 941]]
violating state during the timeframe in which National LEV regulations
required that federal Tier 1 standards be met in the violating state.
In response, EPA is modifying this provision slightly to allow a
violating state to ``cure'' a violation and regain the benefits of
National LEV (with respect to manufacturers that had not opted out of
National LEV) by reversing the action that caused the violation. EPA
believes it is highly unlikely that a state would violate its
commitment in the first place, let alone that it would do so and then
reverse its action shortly thereafter. Nevertheless such a scenario can
be envisioned, for example, in the situation where a state was counting
on an alternative means of obtaining needed emissions reductions and
then found that the alternative was for some reason not viable. EPA
believes that it is appropriate to structure the National LEV
regulations so as to maximize states' incentives to uphold their
commitments to National LEV without, under certain circumstances,
foreclosing a state from obtaining the benefits of National LEV for the
remainder of the National LEV program.
Under today's final rule, rather than allowing manufacturers to
sell only Tier 1 vehicles in a violating state for as long as the
manufacturers are governed by National LEV in that state, if the
violating state reverses its action (by taking final action
withdrawing, nullifying or otherwise reversing the final action that
violated its commitment), after a transition period, vehicles sold in
that state by manufacturers that had not opted out of National LEV
would once again be subject to the National LEV fleet average NMOG
requirements. Vehicles would be subject to the fleet average NMOG
standard as of the model year named for the second calendar year after
the violating state took the final action reversing the action that
broke its commitment or as of the model year named for the fourth
calendar year following the calendar year in which the violating state
took the final action, whichever is later. For example, if the
violating action occurred in 1999 and the violating state reversed that
action in 2000, vehicles sold in that state would count towards the
NLEV NMOG fleet average starting with MY2003 (the model year named for
the fourth calendar year following the calendar year in which the
violating action occurred). If the violating action action occurred in
1999 and was reversed in 2002, vehicles in that state would count
towards the NLEV NMOG fleet average starting with MY2004 (the model
year named for the second calendar year in which the violating action
was reversed). EPA believes that it is important to provide OTC States
that commit to National LEV with an incentive to keep their commitments
and that this approach provides such an incentive.<SUP>26</SUP>
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\26\ The commenters mistakenly assumed that, in the absence of
this provision, a state that broke its commitment would immediately
get the benefits of a state Section 177 Program. Rather, under
section 177, a violating state would only be entitled to Tier 1
vehicles for at least two years after it broke its commitment. Thus,
for at least two years, the National LEV provision that
manufacturers that stay in the program are obligated to provide only
Tier 1 vehicles in the violating state is consistent with what would
happen under section 177 if the violating state's action ended the
program. (For ease of administration, if a violating state is in and
then out and then back in the National LEV program, EPA has extended
the period that would otherwise be provided by section 177 to ensure
that when a states' vehicles again count towards calculation of the
NMOG average, all of a manufacturer's vehicles in the first covered
model year count towards the NMOG average.) Even were lead time not
required by section 177, EPA believes it is appropriate to give
manufacturers time to comply with new motor vehicle requirements
pursuant to a change in a state's requirements.
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The earliest date on which the violating state's Section 177
Program or ZEV mandate would apply is governed by the two model-year
lead time requirement of section 177, EPA's regulations on model year
at 40 CFR part 85 subpart X and the National LEV regulations. This date
would apply only for any auto manufacturer that opted out of National
LEV as a result of the violating state's action (provided that it is
later than the effective date of the opt-out), for any auto
manufacturer that decided to comply with the violating state's
requirements even though it otherwise chose to stay in National LEV,
and for all manufacturers if EPA approved the violating state's program
into the SIP.<SUP>27</SUP> (As discussed above, EPA believes the
violating state's refusal to allow National LEV as a compliance
alternative would not otherwise be effective until MY2006 (or MY2004,
if EPA failed to issue Tier 2 standards at least as stringent as
National LEV on or before December 15, 2000).) Thus, if none of these
situations occurred, the only requirements applicable to manufacturers
in the violating state would be the National LEV regulations, which
would allow manufacturers to sell in the violating state vehicles that
meet Tier 1 tailpipe standards and to exclude those vehicles from the
fleet average NMOG calculation for the time period discussed above.
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\27\ Some commenters have expressed the view that, if an OTC
State were to delete National LEV as a compliance alternative, the
State's new (or revised) Section 177 Program would not be preempted
by the federally approved National LEV SIP revision nor would EPA
have the legal authority to disapprove the revised state program if
it were submitted to EPA for approval into the SIP. As discussed in
this preamble and the Response to Comments for today's rule, EPA
disagrees with these commenters. However, if these commenters were
correct regardi |
