Air Quality State Implementation Plans; Approvals and Promulgations: Arizona, Maricopa County Air Quality Department; Mobile Source Emission Reduction Credits

Conditional Approval of Arizona State Implementation Plan Revisions; Maricopa County Air Quality Department; Mobile Source Emission Reduction Credits

Supplementary Information

Throughout this document, "we," "us," and "our" refer to the EPA.

Table of Contents

I. The State's Submittal

A. What rule did the State submit?

B. Are there other versions of this rule?

C. What is the purpose of the submitted rule?

II. The EPA's Evaluation and Action

A. How is the EPA evaluating the rule?

B. Does the rule meet the evaluation criteria?

C. Deferred Action

D. Proposed Action and Public Comment

III. Incorporation by Reference

IV. Statutory and Executive Order Reviews

I. The State's Submittal

A. What rule did the State submit?

Table 1 lists the rule addressed by this proposal with the date it was adopted by the MCAQD and submitted by the Arizonia Department of Environmental Quality (ADEQ), which is the governor's designee for Arizona SIP submittals.

On November 4, 2023, the submittal of Rule 205 was deemed complete by operation of law.

B. Are there other versions of this rule?

There are no previous versions of Rule 205 in the Maricopa County portion of the Arizona SIP.

C. What is the purpose of the submitted rule?

Portions of Maricopa County are currently designated as "Moderate" nonattainment for the 2008 and 2015 ozone National Ambient Air Quality Standards (NAAQS) and as "Serious" nonattainment for the 1987 particulate matter equal to or less than 10 micrometers (PM ₁₀ ) NAAQS. ⁽¹⁾ Therefore, the MCAQD is required to implement a NNSR program, which requires sources emitting ozone precursors in large quantities to provide surplus emission reductions to offset a proposed project's projected emission increases. In Maricopa County, the quantity of surplus emission reductions available for use as offsets does not appear sufficient to support current and projected economic growth.

Rule 205, "Emission Offsets Generated by Voluntary Mobile Source Emission Reduction Credits," is intended to provide a regulatory structure for the generation and use of nontraditional emission reduction credits (ERCs) from mobile sources to be used as offsets for new and modified major sources. When ERCs are generated from mobile sources, they are referred to as mobile ERCs or "MERCs." The rule allows mobile source fleet owners that reduce emissions from their fleets to sell those reductions to stationary sources, who can then use them to offset their proposed emission increases. Rule 205 outlines the requirements a "permitted generator" of emission reductions must meet before the Department can certify these emission reductions as meeting the offset integrity criteria specified for NNSR programs. ⁽²⁾ Generally speaking, the rule requires the permitted generator to submit certain information in its application; procedures for processing an application; use of specific methodologies to calculate emission reductions; issuance of MERC certificates; and ongoing monitoring, recordkeeping, and reporting requirements. The rule also contains certain requirements for the MERC user and the Control Officer. More information on the contents of Rule 205 can be found in the Technical Support Document (TSD) included in the docket for this action.

II. The EPA's Evaluation and Action

A. How is the EPA evaluating the rule?

In evaluating Rule 205 we reviewed it for compliance with the requirements for offsets found in 40 CFR 51.165(a)(3)(ii)(C)( 1 )( i ) and CAA section 173 and the substantive CAA requirements for SIPs and SIP revisions as set forth in CAA sections 110(a)(2), 110(l), and 193. Throughout our evaluation we also referred to our 2001 Economic Incentive Programs (EIP) guidance document.

The requirements for emission reductions used as NNSR offsets are found in 40 CFR 51.165(a)(3)(ii)(C). Specifically, paragraph (a)(3)(ii)(C)( 1 )( i ) requires emission reductions to be surplus, permanent, quantifiable, and federally enforceable. We refer to this group of requirements as the "offset integrity criteria." In addition, CAA section 173(a) requires increased emissions to be offset by reductions in "actual" emissions, meaning that the pollutant was actually emitted during the baseline period and is not a paper reduction in a source's potential to emit; in other words, it requires that each offset represents emissions that have been taken out of the air. CAA section 173(c)(1) also provides a timing requirement for the offsets, in that the emission reductions must be, "by the time a new or modified source commences operation, in effect and enforceable."

CAA section 110(a)(2) requires that regulations submitted to the EPA for SIP approval be clear and legally enforceable. CAA section 110(l) requires that states provide public notice and an opportunity for public hearing of SIP revisions prior to their submittal and prohibits the EPA from approving any SIP revisions that would interfere with attainment or maintenance of a NAAQS, reasonable further progress (RFP), or other applicable requirements of the CAA. CAA section 193 prohibits the modification of any SIP-approved control requirement in effect before November 15, 1990, in a nonattainment area, unless the modification ensures equivalent or greater emission reductions of the relevant pollutants.

In 2001, the EPA issued a guidance document entitled "Improving Air Quality with Economic Incentive Programs" ("2001 EIP guidance"), ⁽³⁾ which sets out the EPA's non-binding guidelines on discretionary EIPs. ⁽⁴⁾ An EIP is a regulatory program that implements market-based strategies to achieve an air quality objective. Rule 205 is classified as an EIP because it provides a framework for generating ERCs from mobile sources. The ERCs generated under the EIP may be traded with stationary sources to provide the offsets required under a NNSR program. ⁽⁵⁾ Our 2001 EIP guidance document does not represent final EPA action on the requirements for EIPs, but rather it identifies several different types of EIPs and proposed elements for each type that, if met, would assure that the program would meet the applicable CAA requirements.

B. Does the rule meet the evaluation criteria?

In general, we find that Rule 205 complies with most applicable requirements but does not satisfy the requirements pertaining to offset trading programs and requirements for SIPs to be clear and enforceable, including provisions found in 40 CFR 51.165(a)(3)(ii)(C)(1)(i), and CAA Sections 110(a)(2) and 173. Our technical support document (TSD), which is included in the docket for this action, contains a detailed and complete discussion of the applicable CAA requirements and our evaluation of whether Rule 205 satisfies these requirements. Section 6 of the TSD identifies the deficiencies that must be addressed to ensure full approval of a future revision of Rule 205. Please see the TSD included in the docket for this proposed rulemaking for additional information.

C. Deferred Action

At this time, the EPA is not taking action on Rule 205, Appendix A, paragraph D, titled "High Pollution Area Incentive," which contains a provision allowing a permitted generator with a vehicle fleet located in an "area of high pollution" to calculate its baseline emissions using the original fleet vehicle emission rates rather than a current model year vehicle type emission rate. The EPA will act on this portion of the rule in a separate rulemaking unless the provision is withdrawn by the MCAQD.

D. Proposed Action and Public Comment

The EPA has reviewed Rule 205, "Emission Offsets Generated by Voluntary Mobile Source Emission Reduction Credits," in accordance with the evaluation criteria described earlier in this preamble. CAA section 110(k)(4) authorizes the EPA to conditionally approve a plan revision based on a commitment by the state to adopt specific enforceable measures by a date certain but not later than one year after the date of the plan approval. In letters dated May 1, 2024, and May 6, 2024, the MCAQD and the ADEQ committed to adopt and submit specific enforceable measures to address the identified deficiencies in Rule 205 within one year after the date of final approval. ⁽⁶⁾ Accordingly, pursuant to section 110(k)(4) of the Act, we are proposing a conditional approval of Rule 205. We are proposing to conditionally approve Rule 205 based on our determination that, apart from the deficiencies listed in Section II.B of this preamble and Section 6 of our TSD, the rules satisfy the applicable statutory and regulatory requirements for offset trading programs and the general requirements for SIPs to be clear and enforceable, including provisions found in 40 CFR 51.165(a)(3)(ii)(C) and CAA Sections 110(a)(2) and 173. Moreover, we conclude that if the MCAQD and the ADEQ submit the changes listed in their commitment letters, the identified deficiencies will be cured.

The intended effect of our proposed conditional approval action is to update the applicable SIP while providing the Department the opportunity to correct the identified deficiencies. If we finalize this action as proposed, our action will be codified through revisions to 40 CFR 52.120 (Identification of plan) and 40 CFR 52.119 (Identification of plan-conditional approval).

If the State meets its commitment to submit the required revisions and the EPA approves the submission, then the deficiencies listed above will be cured. However, if the Department fails to submit these revisions within the required timeframe, explained in section II.C, the conditional approval will automatically convert to a disapproval, and the EPA will issue a finding of disapproval. The EPA is not required to propose the finding of disapproval.

In support of this proposed action, we have also concluded that our conditional approval of Rule 205 would comply with sections 110(l) and 193 of the Act because the submitted rule as a whole would not interfere with continued attainment of the NAAQS in Maricopa County and would not relax control technology and offset requirements.

We will accept comments from the public on this proposal until September 23, 2024.

III. Incorporation by Reference

In this rulemaking, the EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is proposing to incorporate by reference Rule 205, "Emission Offsets Generated by Voluntary Mobile Source Emission Reduction Credits," which establishes a program allowing fleet owners/operators to generate emission reduction credits (ERCs) by either retrofitting existing fleet vehicles or replacing existing fleet vehicles with lower emitting vehicles and meeting other ongoing requirements. The EPA has made, and will continue to make, these materials available through https://www.regulations.gov and in hard copy at the EPA Region IX Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information).

IV. Statutory and Executive Order Reviews

Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to review state choices and approve those choices if they meet the minimum criteria of the Act. Accordingly, this proposed action proposes conditionally approve state law as meeting federal requirements and does not impose additional requirements beyond those imposed by state law.

Additional information about these statutes and Executive Orders can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.

A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review

This action is not a significant regulatory action and was therefore not submitted to the Office of Management and Budget (OMB) for review.

B. Paperwork Reduction Act (PRA)

This action does not impose an information collection burden under the PRA because this action does not impose additional requirements beyond those imposed by state law.

C. Regulatory Flexibility Act (RFA)

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. This action will not impose any requirements on small entities beyond those imposed by state law.

D. Unfunded Mandates Reform Act (UMRA)

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. This action does not impose additional requirements beyond those imposed by state law. Accordingly, no additional costs to state, local, or tribal governments, or to the private sector, result from this action.

E. Executive Order 13132: Federalism

This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.

F. Executive Order 13175: Coordination With Indian Tribal Governments

This action does not have tribal implications, as specified in Executive Order 13175, because the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction, and will not impose substantial direct costs on tribal governments or preempt tribal law. Thus, Executive Order 13175 does not apply to this action.

G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of "covered regulatory action" in section 2-202 of the Executive Order. Therefore, this action is not subject to Executive Order 13045 because it merely proposes to conditionally approve state law as meeting federal requirements. Furthermore, the EPA's Policy on Children's Health does not apply to this action.

H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use

This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act (NTTAA)

Section 12(d) of the NTTAA directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. The EPA believes that this action is not subject to the requirements of section 12(d) of the NTTAA because application of those requirements would be inconsistent with the CAA.

J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Population

Executive Order 12898 (Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, February 16, 1994) directs Federal agencies to identify and address "disproportionately high and adverse human health or environmental effects" of their actions on minority populations and low-income populations to the greatest extent practicable and permitted by law. The EPA defines environmental justice (EJ) as "the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies." The EPA further defines the term fair treatment to mean that "no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies."

The State did not evaluate EJ considerations as part of its SIP submittal; the CAA and applicable implementing regulations neither prohibit nor require such an evaluation. The EPA did not perform an EJ analysis and did not consider EJ in this action. Consideration of EJ is not required as part of this action, and there is no information in the record inconsistent with the stated goal of Executive Order 12898 of achieving EJ for people of color, low-income populations, and Indigenous peoples.

[FR Doc. 2024-18570 Filed 8-21-24; 8:45 am]

BILLING CODE 6560-50-P

⁽¹⁾  40 CFR 81.303.

⁽²⁾  See, e.g., 40 CFR 51.165(a)(3)(ii)(C)( 1 )( i ) and CAA sections 172(a) and (c)(1).

⁽³⁾  U.S. EPA, Improving Air Quality with Economic Incentive Programs, EPA-452/R-01-001 (January 2001), available at https://www.epa.gov/sites/default/files/2015-07/documents/eipfin.pdf.

⁽⁴⁾  A discretionary EIP is not subject to the requirements for mandatory EIPs found in 40 CFR part 51, subpart U.

⁽⁵⁾ See id.

⁽⁶⁾  See the May 1, 2024 and May 6, 2024 commitment letters from the MCAQD and the ADEQ for additional information about how the MCAQD will correct the identified deficiencies. These letters are contained in the docket for this rulemaking.