Draft Boutique Fuels List Under Section 1541(b) of the Energy Policy Act and Request for Public Comment

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Notice.

SUMMARY:

The Energy Policy Act of 2005 includes a number of provisions addressing the issue of boutique fuels. Section 1541(b) of this Act requires EPA, in consultation with the Department of Energy, to determine the total number of fuels approved into all state implementation plans (SIPs) as of September 1, 2004, under section 211(c)(4)(C) of the Clean Air Act (CAA). The EPAct also requires us to publish a list of such fuels, including the states and Petroleum Administration for Defense District (PADD) in which they are used for public review and comment. Today we are publishing the draft list along with an explanation of our rationale in developing it. The list consists of seven different types of SIP boutique fuels.

DATES:

Comments must be received on or before August 7, 2006.

ADDRESSES:

Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2006-0340, by one of the following methods:

• http://www.regulations.gov: Follow the on-line instructions for submitting comments.
• E-mail: a-and-r-docket@epa.gov.
• Fax: (202) 566-1741, Attention Docket ID No. EPA-HQ-OAR-2006-0340.
• Mail: Air Docket, Attention Docket ID No. EPA-HQ-OAR-2006-0340, Environmental Protection Agency, Mailcode: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460.
• Hand Delivery: USEPA, Air Docket, 1301 Constitution Ave, NW., Room B102, Washington, DC 20004, Attention Docket ID No. EPA-HQ-OAR-2006-0340. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information.

Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-2006-0340. Our policy is that all comments received will be included in the public docket without change and may be made available online at http://www.regulations.gov , including any personal information provided, unless the comment includes information claimed to be confidential business information (CBI) or other information for which disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through http://www.regulations.gov . The http://www.regulations.gov Web site is an “anonymous access” system, which means we will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to us without going through http://www.regulations.gov , your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the internet. If you submit an electronic comment, we recommend that you include your name and other contact information in the body of your comment and with any disk or CD you submit. If we cannot read your comment due to technical difficulties and cannot contact you for clarification, we may not be able to consider your comment. Electronic files should avoid the use of special characters, should not use any form of encryption, and should be free of any defects or viruses. For additional information about our public docket visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm . For additional instructions on submitting comments, go to Section I of the SUPPLEMENTARY INFORMATION section of this document.

Docket: All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g., CBI or other information for which disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in http://www.regulations.gov or in hard copy at the Air Docket, EPA/DC, EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT:

Anne Pastorkovich, Environmental Protection Agency, MC 6406J, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone number: 202-343-9623; fax number: 202-343-2801; e-mail address: pastorkovich.anne-marie@epa.gov.

SUPPLEMENTARY INFORMATION:

I. What Should I Consider as I Prepare My Comments for EPA?

1. Submitting CBI. Do not submit CBI to us through http://www.regulations.gov or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD that you mail to EPA, mark the outside of the disk or CD as CBI and then identify electronically within the disk or CD the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.

2. Tips for Preparing Your Comments. When submitting comments, remember to:

• Identify the rule or notice by docket number and other identifying information (subject heading, Federal Register date and page number).
• Follow directions—The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.
• Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.
• Describe any assumptions and provide any technical information and/or data that you used.
• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.
• Provide specific examples to illustrate your concerns, and suggest alternatives.
• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.
• Make sure to submit your comments by the comment period deadline identified.

3. Docket Copying Costs. You may be charged a reasonable fee for photocopying docket materials, as provided by 40 CFR part 2.

II. Publication of the Boutique Fuels List

A. Background

Under the Clean Air Act (CAA), state fuel programs respecting a fuel characteristic or component that we have regulated under section 211(c)(1) are preempted. EPA may waive preemption through approval of the fuel program into a State Implementation Plan (SIP). Approval into the SIP requires a demonstration that the state fuel program is necessary to achieve the National Ambient Air Quality Standards (NAAQS) that the plan implements. “Necessary” means that no other measures exist that would bring about timely attainment or that other measures exist and are technically possible to implement, but are unreasonable or impracticable. These state fuels programs are often referred to as “boutique” fuels programs because they differ from the Federal fuel required in the area, and have been adopted by the state to address a specific local air quality issue. The issue presented by boutique fuels is that when events (such as hurricanes or pipeline and refinery breakdowns) lead to fuel supply shortages, varying fuel standards can complicate the process of quickly solving the problem. The Energy Policy Act of 2005 (EPAct) amends the CAA and places three additional restrictions on our authority to waive preemption by approving a state fuel into the SIP. These restrictions are:

• First, we may not approve a state fuel program into the SIP if it would cause an increase in the “total number of fuels” approved into SIPs as of September 1, 2004. To implement this provision, we are required to determine the total number of fuels approved as of that date and to publish a list identifying the fuels, including the states and PADD in which they are used. We may remove a fuel from the list if it ceases to be included in the SIP, or if it is identical to a Federal fuel control. This removal does not reduce the total number of fuels authorized under the list, but in effect “makes room” for potential approval of state fuel programs that were not on the list as of September 1, 2004.

• Second, in cases where our approval would not increase the total number of fuels on the list because the total number of fuels in SIPs at that point is below the number of fuels as of the September 1, 2004, then our approval requires a finding that the new fuel will not cause supply or distribution problems or have significant adverse impacts on fuel producibility in the affected or contiguous areas.

• Third, we may not approve a state fuel unless that fuel is already approved in at least one SIP in the applicable PADD.

In this Federal Register notice, we provide our provisional interpretation of the EPAct provisions and our determination of the total number of fuels approved under CAA section 211(c)(4)(C) as of September 1, 2004, based on this interpretation, and the resulting draft list of these fuels. We invite comment on all of these matters and after evaluating all comments we will issue a final list.

B. Fuel Type Versus State Specific Interpretation and Our Recommended Approach

The first step in determining the total number of fuels approved under section 211(c)(4)(C) is to interpret what is meant by the term “total number of fuels.” The EPAct does not define this term, and the legislative history is relatively limited and does not resolve what Congress meant. We believe that the central term “total number of fuels” is ambiguous and could potentially be interpreted in one of two basic ways:

• Fuel Type Interpretation—Each type or kind of fuel could be considered a separate fuel, without respect to the number of different state implementation plans that include such fuel. For example, all state fuels with a Reid Vapor Pressure of 7.8 pounds per square inch (psi) could be considered one fuel in determining the total number of fuels approved as of September 1, 2004. While several states had a 7.8 psi RVP program on that date, they would not be treated as different fuels in determining the “total number of fuels,” but as different states using a single fuel type. For ease of reference this will be called “the fuel type interpretation.” This would result in seven (7) different fuel types.

• State Specific Interpretation—As an alternative to the “fuel type interpretation,” each individual state using a type or kind of fuel in a SIP could be considered a separate fuel. For example, each state having 7.8 psi RVP in its SIP could be treated as having a separate fuel for purposes of determining the “total number of fuels.” For ease of reference, this will be called “the state specific interpretation.” The state specific interpretation would lead to as many fuels as there are state fuel programs in the various PADDs and would result in 15 different fuels.

The two interpretations would lead to different results when considering approval of future state fuel programs. For example, under the fuel type interpretation, a state RVP program of 7.8 or 7.2 psi could generally be approved under the EPAct provisions, as long as that same RVP program was already in a SIP within that PADD. Under the fuel type interpretation, approval of that state RVP program would not increase the total number of approved fuels because that type of RVP program is already on the list. It would expand the number of states using that fuel type, but would not increase the number of fuel types. However, under the state specific fuel interpretation, the same state RVP program could not be approved unless some other state fuel program had been removed from the list, in effect “making room” for the newer program.

EPA recognizes that a few states had a 9.0 psi RVP fuel program in their SIP as of September 1, 2004. We do not believe that state RVP programs that require 9.0 psi should be included in the boutique fuels list required by EPAct. Beginning in 1989, we set RVP standards under CAA section 211(c) for gasoline sold during the summertime, in two phases (Phase I and II). Generally, under Phase I, which was effective in the summer of 1989, we set the RVP level at 10.5 psi in the northern states, and under Phase II, which was effective in the summer of 1992, we set RVP levels at 9.0 psi in the northern states. Between 1989 and 1992, we also approved state 9.0 psi RVP fuel programs into the SIPs for several northeastern states, under CAA section 211(c)(4)(C). These fuel programs continue to be included in the state SIPs. As earlier mentioned, the EPAct requires that we publish a list based on the total number of fuels approved into SIPs under section 211(c)(4)(C) as of September 1, 2004. We are also required to remove a fuel from the published list if the fuel is “identical to a Federal fuel formulation implemented by the Administrator.” Because the current Federal RVP requirement in all of these northeastern states is 9.0 psi RVP, reading these provisions literally would require EPA to include 9.0 psi RVP on the list but to remove it from the list at the same time. We believe, however, that Congress would not have intended this somewhat illogical approach, and we also do not believe that 9.0 psi RVP would be viewed as contributing to the proliferation of “fuel islands” that Congress was concerned about in enacting this new provision. We believe the appropriate way to reconcile these apparently conflicting provisions are not to include the current state 9.0 psi RVP programs on the list.

In evaluating these two interpretations, we also looked to the EPAct provisions related to the boutique fuels list. The EPAct requires that we publish a list based on the total number of fuels approved into SIPs as of September 2004, identifying usage by state and PADD. Under the state specific fuel interpretation, the requirement to “includ[e] the states * * * in which they are used” in the published list of fuels would appear to be redundant, as under that interpretation the identification of the fuel is by definition state specific. Under the fuel type interpretation, the requirement to provide usage by state and PADD is logically included for informational purposes.

We must remove a fuel from the published list if the fuel is removed from “a [SIP]” or if “a fuel in a [SIP]” is identical to a federal fuel. Under the state specific interpretation, the use of the word “a” would mean that modification of a single SIP program would affect the list of fuels, regardless of fuel type. Under the fuel type interpretation, “a [SIP]”would have to be read to mean all SIPs. A fuel type would be removed from the list only if it was removed from all SIPs with that type of fuel program.

The EPAct refers to a “new fuel.” Specifically, it provides that before approving a “new fuel” into a SIP, where there is room on the list for additional fuels, we must make a finding concerning impact on fuel supply, distribution, and producibility. Under the state specific fuel interpretation, a “new fuel” would be a new state specific fuel that EPA has not already approved into a SIP. Under the fuel type interpretation, the term “new fuel” is problematic. A new fuel type would be a fuel type that is not already on the list. However, the PADD restriction would already preclude the approval of a new fuel type, because a new fuel type would not already be approved into a SIP in a PADD. There is, however, an exception to the PADD restriction, for a 7.0 psi RVP program, such that there are limited circumstances that would give meaning to the term “new fuel” under the fuel type interpretation.

The EPAct constrains our approval of “any fuel unless that fuel” was already approved into at least one SIP in the applicable PADD. Under the state specific fuel interpretation, a state fuel could not be approved unless “that fuel” had already been approved into another state's SIP. In that context, “that fuel” would have to refer to the type of fuel, not the state specific fuel, as the state specific fuel could not be already approved into another state's SIP. Under the fuel type interpretation, this provision requires that at least one SIP in the PADD already have a program for that fuel type.

We believe that the EPAct boutique fuels provisions are ambiguous and are susceptible to two plausible interpretations. However, the fuel type interpretation appropriately balances the concerns at the heart of the EPAct provision by preserving some flexibility for states to adopt state fuel programs that can be useful in attaining the NAAQS, while limiting the potential for fuel supply and distribution concerns by controlling the growth in state boutique fuel programs. We recognize that the PADD restriction places a strong constraint on future approval of state specific fuels under either interpretation because it effectively limits state fuels to the types currently in existence and to the PADDs in which they are currently found. For a state fuel program to be approved into a SIP in the future, the fuel type must have been approved into a SIP in that PADD as of September 1, 2004 (with the one exception for 7.0 psi RVP programs). Under the fuel type interpretation, states could generally adopt fuels programs but only in those limited cases where that fuel type is already found in their PADD. This addresses the “fuel islands” concerns, while preserving an important degree of state flexibility in developing a state's air pollution control program. Under the state specific interpretation there is little, if any, opportunity for a state to adopt a fuel program in the future. This is because, in addition to the PADD restriction, some other state's fuel program would have to be removed from the list to make room for addition of the new state fuel program.

We believe the fuel type interpretation is the more appropriate of the two interpretations from the standpoint of state flexibility in establishing air pollution control programs. Our suggested interpretation would also strictly limit the burden of new state fuel programs upon regulated industry, including small businesses. The fuel type interpretation, combined with the PADD restriction, clearly limits the introduction of new boutique fuels, avoiding future pressure on the production, distribution and storage of fuels, including small entities involved in those industries. We believe that issuing this list will reduce future burdens on all parties in the fuel production and distribution system, whether large entities or small entities. We believe that issuing this list will have no adverse impact on any such parties.

For the reasons described above, we are issuing a draft list of seven (7) fuel types, as described in the following section.

C. Draft Boutique Fuel List

A list of the seven (7) fuel types approved into SIPs under section 211(c)(4)(C) as of September 1, 2004, the states, and the PADD they are used in is set forth in the following Table:

We would use this recommended list in implementing the three EPAct criteria for approval of a state fuel into a SIP. Specifically:

• We could not approve a state fuel if it would cause an increase in the total number of fuel types on the list.

• We would remove a fuel from the list if that fuel type either ceased to be included in any SIP or if it became identical to a Federal fuel. Removal of a fuel type from the list, however, would not change or impact the total number of fuel types authorized.

Our authority to approve a state fuel is limited to fuel types that are already in a SIP in that PADD. This restriction would not extend to the 7.0 psi RVP fuel type. EPA's approval of a 7.0 psi RVP program would, however, be subject to the other EPAct provisions.

We are not recommending a state specific interpretation, as explained above. However, we have generated the following table to illustrate the list under that alternative:

We invite comment on all elements of this notice, especially with regard to the recommended and alternate lists and our interpretation of the relevant provisions of the EPAct. Interested parties should submit comments according to the guidelines described at the beginning of this notice. After fully considering comments received, we will generate and publish a final list in the Federal Register.