United States: Progress Toward Implementing The Eight-Hour Ozone National Ambient Air Quality Standard — Stay Tuned

On April 15, 2004, the Environmental Protection Agency (EPA) notified 31 states that they must develop new pollution controls because the air in some of their counties did not meet the federal health standard for ozone.¹ The first question for any regulated entity is "How does this affect me?" As is evidenced by how long it took to get to this point, for the immediate future, there will be little change.

These designations have been long awaited. Beginning in 1997, the EPA issued new standards for ground-level ozone and particulate matter (PM) because of a concern that the requirements were not providing adequate protection. The agency replaced the existing one-hour, 0.12 parts-per-million (ppm) standard with a tighter version based on eight-hour average concentration levels. The new eight-hour standard was set at 0.08 ppm, which according to the EPA, is roughly equivalent to a one-hour version set at 0.09 ppm. As is often the case, the revision of the rule led to litigation and delays. On April 15, the EPA took the first significant steps toward making the revision a reality, although, as is discussed below, it will be at least three more years before there is any real impact to most areas that have been designated nonattainment for this new standard.

The EPA revised the ozone and PM National Ambient Air Quality Standards (NAAQS) in 1997 in response to a lawsuit by public health and environmental groups seeking to compel action because the agency had not revised the previous ozone standard since 1979 and the PM standard since 1987.² Three states and dozens of industry plaintiffs quickly challenged the new standard. In 1999, the D.C. Circuit Court of Appeals sent the new standard back to the EPA for further study.³ The EPA appealed to the United States Supreme Court. In February 2001, in a much anticipated decision due to the nondelegation issues raised by the D.C. Circuit, the Supreme Court unanimously upheld the EPA’s authority to set federal air standards and refused to require the EPA to factor the cost of regulation into the process of setting the NAAQS. The Court did find the EPA’s implementation plan for the new standard making Title I, Part D, Subpart 2 obsolete to be unlawful.⁴ Following remand to the Court of Appeals, the Supreme Court required the EPA to develop a reasonable interpretation of how Subpart 1 and Subpart 2 interact under the new ozone NAAQS.⁵ In March 2002, the D.C. Circuit rejected all remaining challenges to the eight-hour ozone standard. In 2003, several environmental groups filed suit in district court claiming the EPA had not met its statutory obligation to designate areas for the eight-hour NAAQS. The EPA entered into a consent decree that required the EPA to issue the designations by April 15, 2004.

Following the April 15 notification, the EPA published the Air Quality Designations and Classifications for the 8-Hour Ozone National Ambient Air Quality Standards; Early Action Compact Areas with Deferred Effective Dates in the Federal Register on April 30, 2004. The designation rule became effective June 15, 2004.⁶ In making the designations and classifications, the EPA relied on the most recent three years of monitoring data. Most of the designated counties are in the eastern third of the country. The counties in nonattainment included most of California, a ring of states around the Great Lakes, and a concentration of Northeast states from the Washington, D.C. area to Boston. Also, parts of eastern Tennessee, Georgia, North Carolina, and the Dallas, Houston, and San Antonio areas in Texas are in nonattainment. Eighteen entire states, including Iowa, Minnesota, Florida, Mississippi, Vermont, Hawaii, and Alaska, are meeting the new more protective standard. For areas not in attainment, states must submit a revised SIP to the EPA describing how they will bring these areas into compliance. The states will have three years to draw up these SIPs.

The EPA also published the Final Rule to Implement the 8-Hour Ozone National Ambient Air Quality Standard—Phase 1 in the April 30, 2004 federal register.⁷ According to the EPA, Phase 2 will be issued within the next several months. Phase 2 will address requirements for reasonable further progress, modeling and attainment demonstrations, reasonably available control measures, and reasonably available control technology. Phase 1 of the implementation rule is effective June 15, 2004. The two core issues addressed in Phase 1 are how the CAA classification provisions will apply for the eight-hour ozone NAAQS and the transition from the one-hour NAAQS to the eight-hour NAAQS, including when the one-hour NAAQS will be revoked and applicability of the anti-backsliding principles. Neither Phase 1 nor Phase 2 will address the appropriate tests under the eight-hour ozone NAAQS for demonstrating conformity of federal actions to SIPs. A proposed rule was published on November 5, 2003, addressing transportation conformity requirements applicable in eight-hour ozone nonattainment areas, and the EPA will revise its general conformity regulations in the spring of 2004.

After considering several options to implement the eight-hour rule and revoke the one-hour rule, the EPA chose the option that will place more areas in lower classifications. This reclassification will eventually affect the attainment deadline, the area’s obligations and the applicability of the New Source Review (NSR) and Prevention of Significant Deterioration (PSD) programs, and planning. Potentially, there may be challenges to either the final rule designating and classifying the areas or the final rule implementing Phase 1, which will result in further delays. Assuming there are no challenges to these final rules, most states will not be required to submit their revised SIPs to the EPA for approval until 2007. Following approval by the EPA, depending on its designation and classification, the areas will have from three years to 20 years to achieve attainment status.

The EPA has designated which eight-hour nonattainment areas are covered under Part D, Subpart 1 or Subpart 2 of the CAA. Any area with a one-hour ozone design value at the time of designation that meets or exceeds the statutory level of 0.121 ppm will be classified under Subpart 2 and will be subject to the more specific control obligations. Any area with a one-hour design value at the time of designation that is below the level of 0.121 ppm will be covered under Subpart 1 and subject to the more general control obligations.

The EPA created an overwhelming transport classification for Subpart 1 areas that demonstrate they are affected by overwhelming transport of ozone and its precursors and demonstrate they meet the definition of a rural transport area as defined in the CAA. Overwhelming ozone transport classification areas will not have to demonstrate that transport is due solely to sources from outside the State. The EPA did not classify any of the Subpart 1 areas, but only designated those areas in the final rule for information purposes. As with the previous rule, Subpart 2 nonattainment areas are classified as either marginal, moderate, serious, severe, or extreme based on the area’s eight-hour design value at the time of designation. For areas classified as marginal to extreme, virtually all requirements are additive (e.g., a moderate area has to meet all marginal and moderate requirements, unless otherwise specified). Each classified area will have to meet requirements related to mandatory control measures, discretionary control measures, and measures to address growth, such as NSR/PSD permitting. Areas with more serious ozone pollution are subject to more prescribed requirements. Phase 2 of the implementation rule will address the control obligations that apply to areas under both Subpart 1 and 2.

The EPA has classified Subpart 2 areas into four groups in relation to the NSR obligations that will apply once the one-hour ozone NAAQS is revoked. After the EPA revokes the one-hour NAAQS on June 15, 2005, the major source applicability cutoffs and offset ratios for the area’s one-hour classification will not continue to apply; instead, NSR under the new eight-hour ozone NAAQS will apply. After the revocation of the one-hour NAAQS, areas that are attainment for the eight-hour NAAQS but nonattainment for the one-hour NAAQS must comply with Prevention of Significant Deterioration, but not New Source Review.

By the EPA’s design, under the eight-hour NAAQS, many areas will be reclassified to a lower Subpart 2 nonattainment classification, (i.e., from serious to moderate) or from a Subpart 2 designation to Subpart 1. While the NSR permitting requirements continue to apply, the designation and classification of an area may change and affect the requirements for the permit. Thus, prior to the effective date of the new rule, an area classified as serious for the one-hour ozone NAAQS would be subject to the major stationary source threshold of 50 tons per year (tpy) and the emission offset ratio of at least 1.2:1 for VOC emissions. If that area was reclassified to moderate, as of June 15, 2005, that area will be subject to the requirements for a moderate area and not a serious area. The major stationary source cutoff would move from 50 tpy to 100 tpy and the offset ratio from 1.2:1 to 1.15:1. Or, an area may be reclassified from a Subpart 2 area to a Subpart 1 area. In that instance, the offset ratio would be 1:1. The potential downside of this lower classification is that the area will also have less time to reach attainment.

The EPA has created a bump-up or bump-down rule for those areas that are within five percent of next-lower or -higher classification. States may petition the EPA to move to the next-lower classification but may not move from a Subpart 1 to a Subpart 2 area. The EPA encouraged 10 areas that were within five percent of the next-higher classification to request a reclassification upward in order to have more time to achieve attainment.⁸ Most importantly, states must petition the EPA for a bump up or bump down no later than July 15, 2004. Finally, the EPA may bump some or all of the 10 areas up on its own initiative.

For areas subject to Subpart 1 of the CAA, the period for attainment will be no later than five years after the effective date of the designation; however, the EPA may grant an area an attainment date no later than 10 years after designation, if warranted under the CAA. For areas subject to Subpart 2 of the CAA, the maximum period to achieve the eight-hour ozone standard will run from the effective date of designation and is determined by the severity of the nonattainment. The more serious the nonattainment, the longer the area will have to achieve attainment. For example, marginal ozone nonattainment areas will have three years to meet the standard while extreme nonattainment areas will have up to 20 years.

The EPA has not announced all the procedures for the implementation and transition from the one-hour standard to the eight-hour standard. This can create confusion about which standard applies, at what time. For example, the eight-hour NAAQS is effective June 15, 2004; however, the one-hour rule remains in place for one year, until June 15, 2005. The states are not required to submit the new SIP, which enforces the eight-hour standard, to the EPA until 2007. In short, the best approach while the EPA sorts out the implementation process is: 1) if you have a permit, for example under NSR, follow the permit; and/or 2) follow the requirements of the current SIP.

Between June 15, 2004 and June 15, 2005, regulated entities must adhere to the requirements under the higher classification. For example, if located in an area that designated marginal nonattainment under Subpart 2 for the one-hour standard but is redesignated nonattainment under Subpart 1 for the eight-hour standard, the higher classification still applies between June 15, 2004 and June 15, 2005. As of June 15, 2005, the EPA will revoke the one-hour standard; however, many states may not have revised their SIP. Thus, the one-hour standard will still apply until the SIP is revised. Once the SIP is revised and approved, the eight-hour standard will apply. Under NSR, which is a permitting program, the requirements of the permit obtained under the one-hour standard apply until a new permit is obtained under the eight-hour standard. Lastly, there are some states with a SIP that automatically applies the eight-hour standard upon its effective date, so there will be no SIP revision, and the eight-hour standard will apply at the time of the revocation of the one-hour standard. However, if an entity operates under a permit issued under the one-hour standard, then the current permit applies until a new permit is obtained.

While most nonattainment areas will not be affected in the near future by revisions to their SIP, 33 areas that voluntarily entered into Early Action Compacts (EAC) prior to December 31, 2002 with the EPA Administrator will submit plans and implement controls approximately two years sooner than required by the CAA.⁹ The EAC was originally an EPA program, but based upon comments during the rule-making process, the EPA promulgated a rule for the EAC that was published on April 30, 2004.¹⁰ The EPA required the EAC areas to meet a series of milestones. These communities have had their nonattainment status deferred as a result. If any one of the milestones is not achieved, then the compact area will be redesignated nonattainment.

The local area was required to submit a preliminary list and description of potential local control measures under consideration by June 16, 2003.¹¹ All 33 communities met this deadline. A complete local plan was required to be submitted to the area by March 31, 2004. The EAC areas submitted local plans, which included measures for adoption that were to be "specific, quantified, and permanent," and would be enforceable under the state SIP. The plans were to include specific implementation dates for the local controls, as well as a technical assessment of whether the area could attain the eight-hour zone NAAQS by the December 31, 2007 milestone. Following review of these plans, the EPA concluded that the Knoxville, Memphis, and Chattanooga, Tennessee EAC areas failed to meet the March 31, 2004 milestone and consequently designated these areas nonattainment, effective June 15, 2004. Due to the failure to meet this milestone, the Knoxville, Memphis, and Chattanooga areas will be subject to the full planning requirements of Title I, Part D of the CAA. In addition, several EAC areas do not meet the eight-hour ozone rule but did comply with the March 31, 2004 milestone.¹² These areas are designated nonattainment with a deferred effective date of September 30, 2005. The EPA intends to have approved the revised SIPs by that date and if approved, the local plan will be eligible for an extension of the deferred effective date. If the local plan is disapproved, the nonattainment status will become effective immediately.

The next deadline requires the state with an EAC area to submit a revised SIP by December 31, 2004, consisting of the local plan, including all adopted control measures, and a demonstration that the applicable area will attain the eight-hour ozone national ambient air quality standard not later than December 31, 2007. The compact area must implement expeditiously, but not later than December 31, 2005, the local control measures that are incorporated in the SIP. The EPA will approve or disapprove the local plans by September 30, 2005. Historically, the EPA SIP approval process is delayed. The new SIP will be enforceable by the state and the old SIP will be enforceable by the EPA until the EPA approves the new SIP. These areas must attain the new eight-hour ozone standard no later than December 31, 2007. If the requirements are met, the administrator shall designate the area as attainment and the designation shall become effective no later than April 15, 2008.

Although the EPA revised the ozone NAAQS in 1997, little has happened that directly affects businesses and states due to the court challenges to the new rule. On April 15, 2004, the EPA moved the process closer to completion by designating those areas that are nonattainment or attainment for ozone, determining whether the area will be subject to the controls of Subpart 1 or 2 of the CAA, and further classifying the Subpart 2 areas from marginal to extreme nonattainment. In addition, the EPA published its Phase I implementation plan on April 30, 2004, discussing the interaction between Subpart 1 and 2, the transition to the new standard, and the revocation of the old standard. The EPA designed the implementation rule so that areas would be reclassified to a lower classification. The eventual impact is that these areas will have a loosening of the requirements relating to major stationary source thresholds and offset ratios. Those areas will also have reduced time to achieve attainment. In most instances, the SIPs will not be implemented for the next three years. Thirty local areas that agreed to enter into an early compact with the EPA will face a shorter time line. The EPA intends to approve or disapprove the revised SIPs for these areas by September 30, 2005. Businesses and states will eventually be affected by the new eight-hour standard and the controls to implement it; however, so much information is still lacking on the implementation of the new standard that predictions remain challenging. Stay tuned.

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