Proposed Rules. Notice of proposed rulemaking and notice of public hearing

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BILLING CODE 4160-01-S DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-124988-05] RIN 1545-BE72 Updated Mortality Tables for Determining Current Liability AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking and notice of public hearing. SUMMARY: This document contains proposed regulations under section 412(l)(7)(C)(ii) of the Internal Revenue Code

(Code)and section 302(d)(7)(C)(ii) of the Employee Retirement Income Security Act of 1974 (ERISA) (Pub. L. 93-406, 88 Stat. 829). These regulations provide the public with guidance regarding mortality tables to be used in determining current liability under section 412(l)(7) of the Code and section 302(d)(7) of ERISA. These regulations affect plan sponsors and administrators, and participants in and beneficiaries of, certain retirement plans. DATES: Written or electronic comments and requests to speak and outlines of topics to be discussed at the public hearing scheduled for April 19, 2006, at 10 a.m., must be received by March 29, 2006. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-124988-05), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-124988-05), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. Alternatively, taxpayers may submit comments electronically directly to the IRS Internet site at *http://www.irs.gov/regs.* The public hearing will be held in the Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Bruce Perlin or Linda Marshall at

(202)622-6090 (not a toll-free number); concerning submissions and the hearing and/or to be placed on the building access list to attend the hearing, Treena Garrett at

(202)622-7180 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background Section 412 of the Internal Revenue Code provides minimum funding requirements with respect to certain defined benefit pension plans. 1 Section 412(l) provides additional funding requirements for certain of these plans, based in part on a plan's unfunded current liability, as defined in section 412(l)(8). 1 Section 302 of ERISA sets forth funding rules that are parallel to those in section 412 of the Code. Under section 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713) and section 302 of ERISA, the Secretary of the Treasury has interpretive jurisdiction over the subject matter addressed in these proposed regulations for ERISA, as well as the Code. Thus, these proposed Treasury regulations issued under section 412 of the Code apply as well for purposes of section 302 of ERISA. Pursuant to section 412(c)(6), if the otherwise applicable minimum funding requirement exceeds the plan's full funding limitation (defined in section 412(c)(7) as the excess of a specified measure of plan liability over the plan assets), then the minimum funding for the year is reduced by that excess. Under section 412(c)(7)(E), the full funding limitation cannot be less than the excess of 90% of the plan's current liability (including the expected increase in current liability due to benefits accruing during the plan year) over the value of the plan's assets. For this purpose, the term *current liability* generally has the same meaning given that term under section 412(l)(7). Section 412(l)(7)(C)(ii) provides that, for purposes of determining current liability in plan years beginning on or after January 1, 1995, the mortality table used is the table prescribed by the Secretary. Under section 412(l)(7)(C)(ii)(I), the initial mortality table used in determining current liability under section 412(l)(7) must be based on the prevailing commissioners' standard table (described in section 807(d)(5)(A)) used to determine reserves for group annuity contracts issued on January 1, 1993. For purposes of section 807(d)(5), Rev. Rul. 92-19 (1992-1 C.B. 227) specifies the prevailing commissioners' standard table used to determine reserves for group annuity contracts issued on January 1, 1993, as the 1983 Group Annuity Mortality Table (1983 GAM). Accordingly, Rev. Rul. 95-28 (1995-1 C.B. 74) sets forth two gender-specific mortality tables—based on 1983 GAM—for purposes of detemining current liability for partcipants who are not entitled to disability benefits. 2 2 Section 417(e)(3)(A)(ii)(I) requires the present value of certain distributions to be determined using a table prescribed by the Secretary based on the prevailing commissioners' standard table (described in section 807(d)(5)(A)) used to determine reserves for group annuity contracts issued on the date as of which present value is being determined. Thus, in contrast to the mortality table initially prescribed for determining current liability under section 412(l)(7)(C)(ii)(I), the mortality table used to determine present value under section 417(e)(3)(A)(ii)(I) is not fixed as of a specified date but, rather, must be updated when the prevailing commissioner's standard table changes. Rev. Rul. 95-6 (1995-1 C.B. 80) set forth tables under section 417(e)(3)(A)(ii)(I) based on 1983 GAM, which was the prevailing commissioner's standard table at that time. The 1994 Group Annuity Reserving Table became the prevailing commissioners' standard table under section 807(d)(5)(A) for annuities issued on or after January 1, 1999. See Rev. Rul. 2001-38 (2001-2 C.B. 124). Accordingly, Rev. Rul. 2001-62 (2001-2 C.B. 632) required plans to adopt a new mortality table (based on the 1994 Group Annuity Reserving Table) for calculating the minimum present value of distributions pursuant to section 417(e). Section 412(l)(7)(C)(iii)(I) specifies that the Secretary is to establish different mortality tables to be used to determine current liability for individuals who are entitled to benefits under the plan on account of disability. One such set of tables is to apply to individuals whose disabilities occur in plan years beginning before January 1, 1995, and a second set of tables for individuals whose disabilities occur in plan years beginning on or after such date. Under section 412(l)(7)(C)(iii)(II), the separate tables for disabilities that occur in plan years beginning after December 31, 1994 apply only with respect to individuals who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder. Rev. Rul. 96-7 (1996-1 C.B. 59) sets forth the mortality tables established under section 412(l)(7)(C)(iii). Under section 412(l)(7)(C)(ii)(III), the Secretary of the Treasury is required to periodically (at least every 5 years) review any tables in effect under that subsection and, to the extent necessary, by regulation update the tables to reflect the actual experience of pension plans and projected trends in such experience. Section 412(l)(7)(C)(ii)(II) provides that the updated tables are to take into account the results of available independent studies of mortality of individuals covered by pension plans. Pursuant to section 412(l)(7)(C)(ii)(II), any new mortality tables prescribed by regulation can be effective no earlier than the first plan year beginning after December 31, 1999. Under section 412(l)(10), increases in current liability arising from the adoption of such a new mortality table generally are required to be amortized over a 10-year period. In order to facilitate the review of the applicable mortality tables pursuant to section 412(l)(7)(C)(ii)(III), Rev. Rul. 95-28 requested comments concerning the mortality table to be used for determining current liability for plan years beginning after December 31, 1999, and information on existing or upcoming independent studies of mortality of individuals covered by pension plans. In Announcement 2000-7 (2000-1 C.B. 586), the IRS and the Treasury Department also requested comments regarding mortality tables to be used for determining current liability for plan years beginning after December 31, 1999, but indicated that it was anticipated that in no event would there be any change in the mortality tables for plan years beginning before January 1, 2001. Notice 2003-62 (2003-2 C.B. 576) was issued as part of the periodic review by the IRS and the Treasury Department of the mortality tables used in determining current liability under section 412(l)(7). At the time the Notice 2003-62 was issued, the IRS and the Treasury Department were aware of two reviews of mortality experience for retirement plan participants undertaken by the Retirement Plans Experience Committee of the Society of Actuaries (the UP-94 Study and the RP-2000 Mortality Tables Report), 3 and commentators were invited to submit any other independent studies of pension plan mortality experience. Notice 2003-62 also requested the submission of studies regarding projected trends in mortality experience. With respect to projecting mortality improvements, the IRS and the Treasury Department requested comments regarding the advantages and disadvantages of reflecting these trends on an ongoing basis through the use of generational, modified generational, or sequentially static mortality tables. 3 The UP-94 Study, prepared by the UP-84 Task Force of the Society of Actuaries, was published in the Transactions of the Society of Actuaries, Vol. XLVII (1995), p. 819. The RP-2000 Mortality Table Report was released in July, 2000. Society of Actuaries, RP-2000 Mortaality Tables Report, at *http://www.soa.org/ccm/content/research-publications/experience-studies-tools/the-rp-2000-mortality-tables/.* In addition, Notice 2003-62 requested comments on whether certain risk factors should be taken into account in predicting an individual's mortality. Comments were requested as to the extent that separate mortality tables should be prescribed that take into account these factors, with particular attention paid to the administrative issues in applying such distinctions. In this regard, comments were specifically requested as to how it would be determined which category an individual fits into, the extent to which an individual, once categorized, remains in that same category, the classification of individuals for whom adequate information is unavailable, whether distinctions are applicable to beneficiaries, and the extent to which distinctions may overlap or work at cross purposes. Some examples of factors that were listed in Notice 2003-62 are the following: gender, tobacco use, job classification, annuity size, and income. Comments were also requested as to whether classification systems, if permitted, should be mandatory or optional. A number of comments were submitted regarding the issues identified in Notice 2003-62. The IRS and the Treasury Department have reviewed the mortality tables that are used for purposes of determining current liability for participants and beneficiaries (other than disabled participants). The existing mortality table for determining current liability (1983 GAM) was compared to independent studies of mortality of individuals covered by pension plans, after reflecting projected trends for mortality improvement through 2007. The comparison indicates that the 1983 GAM is no longer appropriate for determining current liability. For example, comparing the RP-2000 Combined Healthy Mortality Table for males projected to 2007 (when this proposed regulation would take effect) with the 1983 GAM shows that a current mortality table reflects a 52% decrease in the number of expected deaths at age 50, a 26% decrease at 65, and an 19% decrease at age 80. Comparing annuity values derived under these updated mortality rates with annuity values determined under the 1983 GAM shows an increase in present value of 12% for a 35-year-old male with a deferred annuity payable at age 65, a 5% increase for a 55-year-old male with an immediate annuity, and a 7% increase for a 75-year-old male with an immediate annuity (all calculated at a 6% interest rate). Female mortality rates also changed, although with a different pattern. For females, the number of expected deaths decreased by 10% at age 50, but increased by 33% at age 65 and increased by 2% at age 80. 4 Comparing annuity values derived under these updated mortality rates with annuity values determined under the 1983 GAM shows a decrease in present value of 3% for a 35-year-old female with a deferred annuity payable at age 65, a 2% decrease for a 55-year-old female with an immediate annuity, and a 2% decrease for a 75-year-old female with an immediate annuity (all calculated at a 6% interest rate). 4 The developers of the 1983 GAM table acknowledged that the number of female lives used to develop the table had been relatively small and they recommended an age setback to the male table be used rather than a separate female table. See Development of the 1983 Group Annuity Mortality Table, Transaction of the Society of Actuaries, Vol. XXXV (1983), pp. 859, 883-84. Based on this review of the 1983 GAM compared to more recent mortality experience, the IRS and Treasury Department have determined that updated mortality tables should be used to determine current liability for participants and beneficiaries (other than disabled participants). 5 5 The IRS and Treasury are in the process of reviewing recent mortality experience and expected trends for disabled participants to determine whether updated mortality tables under section 412(l)(7)(C)(iii) are needed. Explanation of Provisions The proposed regulations would set forth the methodology the IRS and Treasury would use to establish mortality tables to be used under section 412(l)(7)(C)(ii) to determine current liability for participants and beneficiaries (other than disabled participants). The mortality tables that would apply for the 2007 plan year are set forth in the proposed regulations. The mortality tables that would be used for subsequent plan years would be published in the Internal Revenue Bulletin. Comments are requested regarding whether it would be desirable to publish a series of tables for each of a number of years (such as five years) along with final regulations, with tables for subsequent years to be published in the Internal Revenue Bulletin. These new mortality tables would be based on the tables contained in the RP-2000 Mortality Tables Report. Commentators generally recommended that the RP-2000 mortality tables be the basis for the mortality tables used under section 412(l)(7)(C)(ii) (although one commentator urged that large employers be permitted to use mortality tables tailored to their actual mortality experience). The IRS and the Treasury Department have reviewed the RP-2000 mortality tables and the accompanying report published by the Society of Actuaries, and have determined that the RP-2000 mortality tables form the best available basis for predicting mortality of pension plan participants and beneficiaries (other than disabled participants) based on pension plan experience and expected trends. Accordingly, the proposed regulations would change the mortality tables used to determine current liability from tables based on 1983 GAM to updated tables based on the RP-2000 mortality tables. As under the currently applicable mortality tables, the mortality tables set forth in these proposed regulations are gender-distinct because of significant differences between expected male mortality and expected female mortality. The proposed regulations would provide for separate sets of tables for annuitants and nonannuitants. This distinction has been made because the RP-2000 Mortality Tables Report indicates that these two groups have significantly different mortality experience. This is particularly true at typical ages for early retirees, where the number of health-induced early retirements results in a population that has higher mortality rates than the population of currently employed individuals. Under the proposed regulations, the annuitant mortality table would be applied to determine the present value of benefits for each annuitant. The annuitant mortality table is also used for each nonannuitant ( *i.e.* , an active employee or a terminated vested participant) for the period after which the nonannuitant is projected to commence receiving benefits, while the nonannuitant mortality table is applied for the period before the nonannuitant is projected to commence receiving benefits. Thus, for example, with respect to a 45-year-old active participant who is projected to commence receiving an annuity at age 55, current liability would be determined using the nonannuitant mortality table for the period before the participant attains age 55 ( *i.e.* , so that the probability of an active male participant living from age 45 to the age of 55 using the mortality table that would apply in 2007 is 98.59%) and the annuitant mortality table after the participant attains age 55. Similarly, if a 45-year-old terminated vested participant is projected to commence an annuity at age 65, current liability would be determined using the nonannuitant mortality table for the period before the participant attains age 65 and the annuitant mortality table for ages 65 and above. The mortality tables that would be established pursuant to this regulation would be based on mortality improvements through the year of the actuarial valuation and would reflect the impact of further expected improvements in mortality. Commentators generally stated that the projection of mortality improvement is desirable because it reflects expected mortality more accurately than using mortality tables that do not reflect such projection. The IRS and Treasury agree with these comments, and believe that failing to project mortality improvement in determining current liability would tend to leave plans underfunded. The regulations would specify the projection factors that are to be used to calculate expected mortality improvement. These projection factors are from Mortality Projection Scale AA, which was also recommended for use in the UP-94 Study and RP-2000 Mortality Tables Report. The mortality tables for annuitants are generally based on a future projection period of 7 years, and the mortality tables for nonannuitants are generally based on a future projection period of 15 years. These projection periods were selected as the expected average duration of liabilities and are consistent with projection periods suggested by commentators. The RP-2000 Mortality Tables Report did not develop mortality rates for annuitants younger than 50 years of age or for nonannuitants older than 70 years of age. The mortality tables for annuitants use the values that apply for the nonannuitant mortality tables at younger ages, with a smoothed transition to the annuitant mortality tables by age 50. Similarly, the mortality tables for both male and female nonannuitants use the values that apply for the annuitant mortality tables at older ages ( *i.e.* , ages above 70), with a smoothed transition to the nonannuitant mortality tables by age 70. The mortality tables for annuitants applicable for the 2007 plan year would use the values that apply for the nonannuitant mortality tables at ages 40 and younger for males and at ages 44 and younger for females with a smoothed transition to the annuitant mortality tables between the ages of 41 and 49 for males and between 45 and 49 for females. Similarly, the mortality tables for both male and female nonannuitants applicable for the 2007 plan year use the values that apply for the annuitant mortality tables at ages 80 and older, with a smoothed transition to the nonannuitant mortality tables between the ages of 71 and 79. The proposed regulations would provide an option for smaller plans ( *i.e.* , plans where the total of active and inactive participants is less than 500) to use a single blended table for all healthy participants—in lieu of the separate tables for annuitants and nonannuitants—in order to simplify the actuarial valuation for these plans. This blended table would be constructed from the separate nonannuitant and annuitant tables using the nonannuitant/annuitant weighting factors published in the RP-2000 Mortality Tables Report. However, because the RP-2000 Mortality Tables Report does not provide weighting factors before age 50 or after age 70, the IRS and the Treasury Department would extend the table of weighting factors for ages 41 through 50 (ages 45-50 for females) and for ages 70 through 79 in order to develop the blended table. The proposed regulations do not provide for the use of generational mortality tables to compute a plan's current liability. Although commentators generally stated that the use of generational mortality tables provides a more accurate prediction of participant mortality, they urged against requiring the use of generational mortality tables, arguing that many actuarial valuation systems are not currently capable of using a generational approach to mortality improvement. However, several commentators requested that the use of generational mortality tables be permitted on an optional basis. The IRS and the Treasury Department agree that the use of generational mortality tables would be preferable, but believe that the approach taken in the proposed regulations ( *i.e.* , projecting liabilities for annuitants and nonannuitants to average expected duration) is appropriate because it reasonably approximates the use of generational tables without being overly complex to apply. In light of several comments requesting that the use of generational tables be optional, the IRS and the Treasury Department are considering adopting such a rule and request comments regarding any issues that might arise in implementing an optional use of a generational table. In addition, comments are requested regarding how much lead time would be appropriate if generational mortality tables were to be required in the future. The RP-2000 mortality tables and the accompanying report analyze differences in expected mortality based on a number of factors, including job classification, annuity size, employment status ( *i.e.* , active or retired), and industry. The IRS and the Treasury Department have considered whether separate mortality tables should be provided based on any of these distinctions, or on other distinctions cited in Notice 2003-62, such as tobacco use or income level. The IRS and the Treasury Department have concluded that it is inappropriate to apply distinctions other than the annuitant and nonannuitant distinction described above. In general, these other distinctions were not made because of the complexity involved in the process. For example, no distinction was made for tobacco use because of the difficulty in obtaining, maintaining, and documenting accurate data on the extent of tobacco use. Although several commentators recommended that separate mortality tables apply to plans that are determined to be “white collar” or “blue collar” in nature, the IRS and Treasury have not adopted this recommendation because of serious administrability concerns. Commentators recognized that it may be difficult to identify whether a specific individual falls into the category of blue collar or white collar (especially if an individual has shifted job classifications during his or her career), and suggested that the classification be based on whether the plan is primarily composed of blue collar employees or white collar employees or whether a plan covers a mixed population of blue collar and white collar employees. While the plan-wide classification may avoid the difficulties of categorizing those individuals who are hard to classify as either blue collar or white collar, it would create additional problems if a plan shifted between these categories. More importantly, the RP-2000 Mortality Tables Report indicates that plans that are primarily blue collar in nature, but that provide large annuities, tend to have significantly better mortality experience than the average mortality for individuals in the RP-2000 Mortality Tables Report. As a result, classifying such a plan as blue collar and allowing the plan to use a weaker mortality table will lead to systematic underfunding of the plan. 6 Other concerns weighing against the use of separate tables for blue collar and white collar plans include the risk of anti-selection by plans in the absence of mandatory adjustments and the lack of research showing the extent to which any mortality differences attributable to blue collar or white collar status extend to beneficiaries of the plan. 6 Although some commentators suggested addressing this problem by treating some highly compensated union employees as if they were white collar workers, the developers of the RP-2000 Mortality Tables Report (and the researchers they hired to apply a multivariate analysis of the data) were unable to find a practical model to apply the combined effect of collar and annuity amount on mortality. As noted above, the mortality experience is significantly different for annuitants and nonannuitants. While the use of separate mortality rates for these groups of individuals will likely entail changes in programming of actuarial software, the IRS and Treasury believe that the improvement in accuracy resulting from the the use of separate mortality tables for annuitants and nonannuitants more than offsets the added complexity. Furthermore, the annutant/nonannuitant distinction does not have the same difficult administrative issues as separate tables based on collar type, annuity size, or tobacco. This is because it is usually a straightforward process to categorize an individual as an annuitant or a nonannuitant, and once an indvidual is categorized as an annuitant, the individual's status usually does not change again. Proposed Effective Date These regulations are proposed to apply to plan years beginning on or after January 1, 2007. Special Analyses It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based upon the fact that these regulations provide for special rules to simplify the application of these regulations by actuaries who provide services for small entities. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight

(8)copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department specifically request comments on the clarity of the proposed regulations and how they may be made easier to understand. All comments will be available for public inspection and copying. A public hearing has been scheduled for April 19, 2006, at 10 a.m. in the auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must use the main building entrance on Constitution Avenue. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For more information about having your name placed on the list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble. The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit written (signed original and eight

(8)copies) or electronic comments and an outline of the topics to be discussed and the time to be devoted to each topic by March 29, 2006. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing. Drafting Information The principal authors of these regulations are Bruce Perlin and Linda S.F. Marshall, Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury participated in the development of these regulations. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Amendments to the Regulations Accordingly, 26 CFR part 1 is proposed to be amended as follows: PART 1—INCOME TAXES **Paragraph 1.** The authority citation for part 1 continues to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * **Par. 2.** Section 1.412(l)(7)-1 is added to read as follows: § 1.412(l)(7)-1 Mortality tables used to determine current liability.

(a)*General rules.* This section sets forth the basis used to generate mortality tables to be used in connection with computations under section 412(l)(7)(C)(ii) for determining current liability for participants and beneficiaries (other than disabled participants). The mortality tables, which reflect the probability of death at each age, that are to be used for plan years beginning during 2007, are provided in paragraph

(e)of this section. The mortality tables to be used for later plan years are to be provided in guidance published in the Internal Revenue Bulletin. See § 601.601(d) of this chapter.

(b)*Use of the tables* —(1) *Separate tables for annuitants and nonannuitants* . Separate tables are provided for use by annuitants and nonannuitants. The annuitant mortality table is applied to determine the present value of benefits for each annuitant, and to each nonannuitant for the period after which the nonannuitant is projected to commence receiving benefits. For purposes of this section, an annuitant means a plan participant who is currently receiving benefits and a nonannuitant means a plan participant who is not currently receiving benefits (e.g., an active employee or a terminated vested participant). A participant whose benefit has partially commenced is treated as an annuitant with respect to the portion of the benefit which has commenced and a nonannuitant with respect to the balance of the benefit. The nonannuitant mortality table is applied to each nonannuitant for the period before the nonannuitant is projected to commence receiving benefits. Thus, for example, with respect to a 45-year-old active participant who is projected to commence receiving an annuity at age 55, current liability would be determined using the nonannuitant mortality table for the period before the participant attains age 55 ( *i.e.* , so that the probability of an active male participant living from age 45 to the age of 55 for the table that applies in plan years beginning in 2007 is 98.59%) and the annuitant mortality table for the period ages 55 and above. Similarly, if a 45-year-old terminated vested participant is projected to commence an annuity at age 65, current liability would be determined using the nonannuitant mortality table for the period before the participant attains age 65 and the annuitant mortality table for ages 65 and above.

(2)*Small plan tables* . As an alternative to the separate tables specified for annuitants and nonannuitants, a small plan can use a combined table that applies the same mortality rates to both annuitants and nonannuitants. For this purpose, a small plan is defined as a plan with fewer than 500 participants (including both active and inactive participants).

(c)*Construction of the tables* —(1) *Source of basic data* . The mortality tables are based on the separate mortality tables for employees and healthy annuitants under the RP-2000 Mortality Tables Report ( *http://www.soa.org/ccm/content/research-publications/experience-studies-tools/the-rp-2000-mortality-tables/)* , as set forth in paragraph

(d)of this section.

(2)*Projected mortality improvements* . The mortality rates under the basic mortality tables are projected to improve using Projection Scale AA, as set forth in paragraph

(d)of this section. The annuitant mortality rates for a plan year are based on applying the improvement factors from 2000 until 7 years after the plan year. The nonannuitant mortality rates for a plan year are based on applying the improvement factors from 2000 until 15 years after the plan year. The projection scale is applied using the following equation: Projected mortality rate = base mortality rate * [(1−projection factor)‸(number of years projected)].

(3)*Treatment of young annuitants and older nonannuitants* . The mortality tables for annuitants use the values that apply for the nonannuitant mortality tables at younger ages, with a smoothed transition to the annuitant mortality tables by age 50. Similarly, the mortality tables for both male and female nonannuitants use the values that apply for the annuitant mortality tables at older ages ( *i.e.* , ages above 70), with a smoothed transition to the nonannuitant mortality tables by age 70.

(4)*Construction of the combined table for small plans* . The combined table for small plans is constructed from the separate nonannuitant and annuitant tables using the nonannuitant weighting factors as set forth in paragraph

(d)of this section. The weighting factors are applied to develop this table using the following equation: Combined mortality rate = [non-annuitant rate * (1 − weighting factor)] + [annuitant rate * weighting factor].

(d)*Tables* . As set forth in paragraph

(c)of this section, the following values are used to develop the mortality tables that are used for determining current liability under section 412(l)(7)(C)(ii) and this section. Age Male Non-annuitant table (year 2000) Annuitant table (year 2000) Projection scale AA 7 Weighting factors for small plans 8 Female Non-annuitant table (year 2000) Annuitant table (year 2000) Projection scale AA Weighting factors for small plans 1 0.000637 0.020 0.000571 0.020 2 0.000430 0.020 0.000372 0.020 3 0.000357 0.020 0.000278 0.020 4 0.000278 0.020 0.000208 0.020 5 0.000255 0.020 0.000188 0.020 6 0.000244 0.020 0.000176 0.020 7 0.000234 0.020 0.000165 0.020 8 0.000216 0.020 0.000147 0.020 9 0.000209 0.020 0.000140 0.020 10 0.000212 0.020 0.000141 0.020 11 0.000219 0.020 0.000143 0.020 12 0.000228 0.020 0.000148 0.020 13 0.000240 0.020 0.000155 0.020 14 0.000254 0.019 0.000162 0.018 15 0.000269 0.019 0.000170 0.016 16 0.000284 0.019 0.000177 0.015 17 0.000301 0.019 0.000184 0.014 18 0.000316 0.019 0.000188 0.014 19 0.000331 0.019 0.000190 0.015 20 0.000345 0.019 0.000191 0.016 21 0.000357 0.018 0.000192 0.017 22 0.000366 0.017 0.000194 0.017 23 0.000373 0.015 0.000197 0.016 24 0.000376 0.013 0.000201 0.015 25 0.000376 0.010 0.000207 0.014 26 0.000378 0.006 0.000214 0.012 27 0.000382 0.005 0.000223 0.012 28 0.000393 0.005 0.000235 0.012 29 0.000412 0.005 0.000248 0.012 30 0.000444 0.005 0.000264 0.010 31 0.000499 0.005 0.000307 0.008 32 0.000562 0.005 0.000350 0.008 33 0.000631 0.005 0.000394 0.009 34 0.000702 0.005 0.000435 0.010 35 0.000773 0.005 0.000475 0.011 36 0.000841 0.005 0.000514 0.012 37 0.000904 0.005 0.000554 0.013 38 0.000964 0.006 0.000598 0.014 39 0.001021 0.007 0.000648 0.015 40 0.001079 0.008 0.000706 0.015 41 0.001142 0.009 0.0045 0.000774 0.015 42 0.001215 0.010 0.0091 0.000852 0.015 43 0.001299 0.011 0.0136 0.000937 0.015 44 0.001397 0.012 0.0181 0.001029 0.015 45 0.001508 0.013 0.0226 0.001124 0.016 0.0084 46 0.001616 0.014 0.0272 0.001223 0.017 0.0167 47 0.001734 0.015 0.0317 0.001326 0.018 0.0251 48 0.001860 0.016 0.0362 0.001434 0.018 0.0335 49 0.001995 0.017 0.0407 0.001550 0.018 0.0419 50 0.002138 0.005347 0.018 0.0453 0.001676 0.002344 0.017 0.0502 51 0.002288 0.005528 0.019 0.0498 0.001814 0.002459 0.016 0.0586 52 0.002448 0.005644 0.020 0.0686 0.001967 0.002647 0.014 0.0744 53 0.002621 0.005722 0.020 0.0953 0.002135 0.002895 0.012 0.0947 54 0.002812 0.005797 0.020 0.1288 0.002321 0.003190 0.010 0.1189 55 0.003029 0.005905 0.019 0.2066 0.002526 0.003531 0.008 0.1897 56 0.003306 0.006124 0.018 0.3173 0.002756 0.003925 0.006 0.2857 57 0.003628 0.006444 0.017 0.3780 0.003010 0.004385 0.005 0.3403 58 0.003997 0.006895 0.016 0.4401 0.003291 0.004921 0.005 0.3878 59 0.004414 0.007485 0.016 0.4986 0.003599 0.005531 0.005 0.4360 60 0.004878 0.008196 0.016 0.5633 0.003931 0.006200 0.005 0.4954 61 0.005382 0.009001 0.015 0.6338 0.004285 0.006919 0.005 0.5805 62 0.005918 0.009915 0.015 0.7103 0.004656 0.007689 0.005 0.6598 63 0.006472 0.010951 0.014 0.7902 0.005039 0.008509 0.005 0.7520 64 0.007028 0.012117 0.014 0.8355 0.005429 0.009395 0.005 0.8043 65 0.007573 0.013419 0.014 0.8832 0.005821 0.010364 0.005 0.8552 66 0.008099 0.014868 0.013 0.9321 0.006207 0.011413 0.005 0.9118 67 0.008598 0.016460 0.013 0.9510 0.006583 0.012540 0.005 0.9367 68 0.009069 0.018200 0.014 0.9639 0.006945 0.013771 0.005 0.9523 69 0.009510 0.020105 0.014 0.9714 0.007289 0.015153 0.005 0.9627 70 0.009922 0.022206 0.015 0.9740 0.007613 0.016742 0.005 0.9661 71 0.024570 0.015 0.9766 0.018579 0.006 0.9695 72 0.027281 0.015 0.9792 0.020665 0.006 0.9729 73 0.030387 0.015 0.9818 0.022970 0.007 0.9763 74 0.033900 0.015 0.9844 0.025458 0.007 0.9797 75 0.037834 0.014 0.9870 0.028106 0.008 0.9830 76 0.042169 0.014 0.9896 0.030966 0.008 0.9864 77 0.046906 0.013 0.9922 0.034105 0.007 0.9898 78 0.052123 0.012 0.9948 0.037595 0.007 0.9932 79 0.057927 0.011 0.9974 0.041506 0.007 0.9966 80 0.064368 0.010 1.0000 0.045879 0.007 1.0000 81 0.072041 0.009 1.0000 0.050780 0.007 1.0000 82 0.080486 0.008 1.0000 0.056294 0.007 1.0000 83 0.089718 0.008 1.0000 0.062506 0.007 1.0000 84 0.099779 0.007 1.0000 0.069517 0.007 1.0000 85 0.110757 0.007 1.0000 0.077446 0.006 1.0000 86 0.122797 0.007 1.0000 0.086376 0.005 1.0000 87 0.136043 0.006 1.0000 0.096337 0.004 1.0000 88 0.150590 0.005 1.0000 0.107303 0.004 1.0000 89 0.166420 0.005 1.0000 0.119154 0.003 1.0000 90 0.183408 0.004 1.0000 0.131682 0.003 1.0000 91 0.199769 0.004 1.0000 0.144604 0.003 1.0000 92 0.216605 0.003 1.0000 0.157618 0.003 1.0000 93 0.233662 0.003 1.0000 0.170433 0.002 1.0000 94 0.250693 0.003 1.0000 0.182799 0.002 1.0000 95 0.267491 0.002 1.0000 0.194509 0.002 1.0000 96 0.283905 0.002 1.0000 0.205379 0.002 1.0000 97 0.299852 0.002 1.0000 0.215240 0.001 1.0000 98 0.315296 0.001 1.0000 0.223947 0.001 1.0000 99 0.330207 0.001 1.0000 0.231387 0.001 1.0000 100 0.344556 0.001 1.0000 0.237467 0.001 1.0000 101 0.358628 0.000 1.0000 0.244834 0.000 1.0000 102 0.371685 0.000 1.0000 0.254498 0.000 1.0000 103 0.383040 0.000 1.0000 0.266044 0.000 1.0000 104 0.392003 0.000 1.0000 0.279055 0.000 1.0000 105 0.397886 0.000 1.0000 0.293116 0.000 1.0000 106 0.400000 0.000 1.0000 0.307811 0.000 1.0000 107 0.400000 0.000 1.0000 0.322725 0.000 1.0000 108 0.400000 0.000 1.0000 0.337441 0.000 1.0000 109 0.400000 0.000 1.0000 0.351544 0.000 1.0000 110 0.400000 0.000 1.0000 0.364617 0.000 1.0000 111 0.400000 0.000 1.0000 0.376246 0.000 1.0000 112 0.400000 0.000 1.0000 0.386015 0.000 1.0000 113 0.400000 0.000 1.0000 0.393507 0.000 1.0000 114 0.400000 0.000 1.0000 0.398308 0.000 1.0000 115 0.400000 0.000 1.0000 0.400000 0.000 1.0000 116 0.400000 0.000 1.0000 0.400000 0.000 1.0000 117 0.400000 0.000 1.0000 0.400000 0.000 1.0000 118 0.400000 0.000 1.0000 0.400000 0.000 1.0000 119 0.400000 0.000 1.0000 0.400000 0.000 1.0000 120 1.000000 0.000 1.0000 1.000000 0.000 1.0000

(e)*Tables for plan years beginning during 2007.* The following tables are to be used for determining current liability under section 412(l)(7)(C)(ii) for plan years beginning during 2007. Age Male Non-annuitant table Annuitant table Optional combined table for small plans Female Non-annuitant table Annuitant table Optional combined table for small plans 1 0.000408 0.000408 0.000408 0.000366 0.000366 0.000366 2 0.000276 0.000276 0.000276 0.000239 0.000239 0.000239 3 0.000229 0.000229 0.000229 0.000178 0.000178 0.000178 4 0.000178 0.000178 0.000178 0.000133 0.000133 0.000133 5 0.000163 0.000163 0.000163 0.000121 0.000121 0.000121 6 0.000156 0.000156 0.000156 0.000113 0.000113 0.000113 7 0.000150 0.000150 0.000150 0.000106 0.000106 0.000106 8 0.000138 0.000138 0.000138 0.000094 0.000094 0.000094 9 0.000134 0.000134 0.000134 0.000090 0.000090 0.000090 10 0.000136 0.000136 0.000136 0.000090 0.000090 0.000090 11 0.000140 0.000140 0.000140 0.000092 0.000092 0.000092 12 0.000146 0.000146 0.000146 0.000095 0.000095 0.000095 13 0.000154 0.000154 0.000154 0.000099 0.000099 0.000099 14 0.000167 0.000167 0.000167 0.000109 0.000109 0.000109 15 0.000176 0.000176 0.000176 0.000119 0.000119 0.000119 16 0.000186 0.000186 0.000186 0.000127 0.000127 0.000127 17 0.000197 0.000197 0.000197 0.000135 0.000135 0.000135 18 0.000207 0.000207 0.000207 0.000138 0.000138 0.000138 19 0.000217 0.000217 0.000217 0.000136 0.000136 0.000136 20 0.000226 0.000226 0.000226 0.000134 0.000134 0.000134 21 0.000239 0.000239 0.000239 0.000132 0.000132 0.000132 22 0.000251 0.000251 0.000251 0.000133 0.000133 0.000133 23 0.000267 0.000267 0.000267 0.000138 0.000138 0.000138 24 0.000282 0.000282 0.000282 0.000144 0.000144 0.000144 25 0.000301 0.000301 0.000301 0.000152 0.000152 0.000152 26 0.000331 0.000331 0.000331 0.000164 0.000164 0.000164 27 0.000342 0.000342 0.000342 0.000171 0.000171 0.000171 28 0.000352 0.000352 0.000352 0.000180 0.000180 0.000180 29 0.000369 0.000369 0.000369 0.000190 0.000190 0.000190 30 0.000398 0.000398 0.000398 0.000212 0.000212 0.000212 31 0.000447 0.000447 0.000447 0.000257 0.000257 0.000257 32 0.000503 0.000503 0.000503 0.000293 0.000293 0.000293 33 0.000565 0.000565 0.000565 0.000323 0.000323 0.000323 34 0.000629 0.000629 0.000629 0.000349 0.000349 0.000349 35 0.000692 0.000692 0.000692 0.000372 0.000372 0.000372 36 0.000753 0.000753 0.000753 0.000394 0.000394 0.000394 37 0.000810 0.000810 0.000810 0.000415 0.000415 0.000415 38 0.000844 0.000844 0.000844 0.000439 0.000439 0.000439 39 0.000875 0.000875 0.000875 0.000465 0.000465 0.000465 40 0.000904 0.000904 0.000904 0.000506 0.000506 0.000506 41 0.000936 0.000963 0.000936 0.000555 0.000555 0.000555 42 0.000974 0.001081 0.000975 0.000611 0.000611 0.000611 43 0.001018 0.001258 0.001021 0.000672 0.000672 0.000672 44 0.001071 0.001493 0.001079 0.000738 0.000738 0.000738 45 0.001131 0.001788 0.001146 0.000788 0.000791 0.000788 46 0.001185 0.002142 0.001211 0.000839 0.000896 0.000840 47 0.001244 0.002554 0.001286 0.000889 0.001054 0.000893 48 0.001304 0.003026 0.001366 0.000962 0.001265 0.000972 49 0.001368 0.003557 0.001457 0.001039 0.001528 0.001059 50 0.001434 0.004146 0.001557 0.001149 0.001844 0.001184 51 0.001500 0.004226 0.001636 0.001272 0.001962 0.001312 52 0.001570 0.004254 0.001754 0.001442 0.002173 0.001496 53 0.001681 0.004312 0.001932 0.001637 0.002445 0.001714 54 0.001803 0.004369 0.002134 0.001861 0.002771 0.001969 55 0.001986 0.004514 0.002508 0.002117 0.003155 0.002314 56 0.002217 0.004749 0.003020 0.002414 0.003608 0.002755 57 0.002488 0.005069 0.003464 0.002696 0.004088 0.003170 58 0.002803 0.005501 0.003990 0.002947 0.004588 0.003583 59 0.003095 0.005972 0.004529 0.003223 0.005156 0.004066 60 0.003421 0.006539 0.005177 0.003521 0.005780 0.004640 61 0.003860 0.007284 0.006030 0.003838 0.006450 0.005354 62 0.004244 0.008024 0.006929 0.004170 0.007168 0.006148 63 0.004746 0.008989 0.008099 0.004513 0.007932 0.007084 64 0.005154 0.009947 0.009159 0.004862 0.008758 0.007996 65 0.005553 0.011015 0.010377 0.005213 0.009662 0.009018 66 0.006073 0.012379 0.011951 0.005559 0.010640 0.010192 67 0.006447 0.013705 0.013349 0.005896 0.011690 0.011323 68 0.006650 0.014940 0.014641 0.006220 0.012838 0.012522 69 0.006974 0.016504 0.016231 0.006528 0.014126 0.013843 70 0.007115 0.017971 0.017689 0.006818 0.015607 0.015309 71 0.008002 0.019884 0.019606 0.007450 0.017078 0.016784 72 0.009777 0.022078 0.021822 0.008714 0.018995 0.018716 73 0.012439 0.024592 0.024371 0.010610 0.020819 0.020577 74 0.015988 0.027435 0.027256 0.013139 0.023074 0.022872 75 0.020425 0.031057 0.030919 0.016299 0.025117 0.024967 76 0.025749 0.034615 0.034523 0.020092 0.027673 0.027570 77 0.031961 0.039054 0.038999 0.024516 0.030911 0.030846 78 0.039059 0.044018 0.043992 0.029573 0.034074 0.034043 79 0.047046 0.049617 0.049610 0.035261 0.037618 0.037610 80 0.055919 0.055919 0.055919 0.041582 0.041582 0.041582 81 0.063476 0.063476 0.063476 0.046024 0.046024 0.046024 82 0.071926 0.071926 0.071926 0.051021 0.051021 0.051021 83 0.080176 0.080176 0.080176 0.056651 0.056651 0.056651 84 0.090433 0.090433 0.090433 0.063006 0.063006 0.063006 85 0.100383 0.100383 0.100383 0.071188 0.071188 0.071188 86 0.111295 0.111295 0.111295 0.080522 0.080522 0.080522 87 0.125051 0.125051 0.125051 0.091080 0.091080 0.091080 88 0.140385 0.140385 0.140385 0.101448 0.101448 0.101448 89 0.155142 0.155142 0.155142 0.114246 0.114246 0.114246 90 0.173400 0.173400 0.173400 0.126258 0.126258 0.126258 91 0.188868 0.188868 0.188868 0.138648 0.138648 0.138648 92 0.207683 0.207683 0.207683 0.151126 0.151126 0.151126 93 0.224037 0.224037 0.224037 0.165722 0.165722 0.165722 94 0.240367 0.240367 0.240367 0.177747 0.177747 0.177747 95 0.260098 0.260098 0.260098 0.189133 0.189133 0.189133 96 0.276058 0.276058 0.276058 0.199703 0.199703 0.199703 97 0.291564 0.291564 0.291564 0.212246 0.212246 0.212246 98 0.310910 0.310910 0.310910 0.220832 0.220832 0.220832 99 0.325614 0.325614 0.325614 0.228169 0.228169 0.228169 100 0.339763 0.339763 0.339763 0.234164 0.234164 0.234164 101 0.358628 0.358628 0.358628 0.244834 0.244834 0.244834 102 0.371685 0.371685 0.371685 0.254498 0.254498 0.254498 103 0.383040 0.383040 0.383040 0.266044 0.266044 0.266044 104 0.392003 0.392003 0.392003 0.279055 0.279055 0.279055 105 0.397886 0.397886 0.397886 0.293116 0.293116 0.293116 106 0.400000 0.400000 0.400000 0.307811 0.307811 0.307811 107 0.400000 0.400000 0.400000 0.322725 0.322725 0.322725 108 0.400000 0.400000 0.400000 0.337441 0.337441 0.337441 109 0.400000 0.400000 0.400000 0.351544 0.351544 0.351544 110 0.400000 0.400000 0.400000 0.364617 0.364617 0.364617 111 0.400000 0.400000 0.400000 0.376246 0.376246 0.376246 112 0.400000 0.400000 0.400000 0.386015 0.386015 0.386015 113 0.400000 0.400000 0.400000 0.393507 0.393507 0.393507 114 0.400000 0.400000 0.400000 0.398308 0.398308 0.398308 115 0.400000 0.400000 0.400000 0.400000 0.400000 0.400000 116 0.400000 0.400000 0.400000 0.400000 0.400000 0.400000 117 0.400000 0.400000 0.400000 0.400000 0.400000 0.400000 118 0.400000 0.400000 0.400000 0.400000 0.400000 0.400000 119 0.400000 0.400000 0.400000 0.400000 0.400000 0.400000 120 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000

(f)*Effective date.* The mortality tables described in this section apply for plan years beginning on or after January 1, 2007. Mark E. Matthews, Deputy Commissioner for Services and Enforcement. [FR Doc. E5-6742 Filed 12-1-05; 8:45 am] BILLING CODE 4830-01-P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 51 and 96 [OAR 2003-0053; FRL-8003-7] Rule To Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule): Reconsideration AGENCY: Environmental Protection Agency (EPA). ACTION: Notice of reconsideration; request for comment; notice of public hearing. SUMMARY: On May 12, 2005, EPA published in the **Federal Register** the final “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone” (Clean Air Interstate Rule or CAIR). The CAIR requires certain upwind States to reduce emissions of nitrogen oxides (NO X ) and/or sulfur dioxide (SO 2 ) that significantly contribute to nonattainment of, or interfere with maintenance by, downwind States with respect to the fine particle and/or 8-hour ozone national ambient air quality standards (NAAQS). Subsequently, EPA received 11 petitions for reconsideration of the final rule. In this notice, EPA is announcing its decision to reconsider four specific issues in the CAIR and is requesting comment on those issues. The EPA is seeking comment only on the aspects of the CAIR specifically identified in this notice. We will not respond to comments addressing other provisions of the CAIR or any related rulemakings. DATES: Comments must be received on or before January 13, 2006. A public hearing will be held on December 14, 2005 in Washington, DC. For additional information on the public hearing, see the SUPPLEMENTARY INFORMATION section of this preamble. ADDRESSES: Submit your comments, identified by Docket ID No. OAR-2003-0053, by one of the following methods: • Federal Rulemaking Portal: *http://www.regulations.gov.* Follow the on-line instructions for submitting comments. Attention E-Docket No. OAR-2003-0053. • Agency Web site: *http://www.epa.gov/edocket.* EDOCKET, EPA's electronic public docket and comment system, is EPA's preferred method for receiving comments. Follow the on-line instructions for submitting comments. Attention E-Docket No. OAR-2003-0053. • E-mail: *A-and-R-Docket@epa.gov.* Attention E-Docket No. OAR-2003-0053. • Fax: The fax number of the Air Docket is

(202)566-1741. Attention E-Docket No. OAR-2003-0053. • Mail: EPA Docket Center, EPA West (Air Docket), Attention E-Docket No. OAR-2003-0053, Environmental Protection Agency, Mail Code: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460. • Hand Delivery: EPA Docket Center (Air Docket), Attention E-Docket No. OAR-2003-0053, Environmental Protection Agency, 1301 Constitution Avenue, NW., Room B102, Washington, DC. 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. OAR-2003-0053. The EPA's policy is that all comments received will be included in the public docket without change and may be made available on-line at *http://www.epa.gov/edocket,* including any personal information provided, unless the comment includes information claimed to be Confidential Business Information

(CBI)or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through EDOCKET, regulations.gov, or e-mail. (For instructions on submitting CBI, see below under SUPPLEMENTARY INFORMATION .) The EPA EDOCKET and the Federal regulations.gov Web sites are “anonymous access” systems, which means EPA 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 EPA without going through EDOCKET or 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, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. For additional information about EPA's public docket visit EDOCKET on-line or see the **Federal Register** of May 31, 2002 (67 FR 38102). For additional information on submitting comments, go to the SUPPLEMENTARY INFORMATION section of this document. *Docket:* All documents in the docket are listed in the EDOCKET index at *http://www.epa.gov/edocket.* Although listed in the index, some information is not publicly available, i.e., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically in EDOCKET or in hard copy at the EPA Docket Center (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)566-1742 and the fax number is

(202)566-1741. FOR FURTHER INFORMATION CONTACT: For general questions concerning today's action, please contact Carla Oldham, U.S. EPA, Office of Air Quality Planning and Standards, Air Quality Strategies and Standards Division, Mail Code C539-02, Research Triangle Park, NC 27711, phone number

(919)541-3347, e-mail address *oldham.carla@epa.gov.* For questions concerning the analyses described in section III of this notice, please contact Chitra Kumar, U.S. EPA, Office of Atmospheric Programs, Clean Air Markets Division, Mail Code 6204J, 1200 Pennsylvania Avenue, NW., Washington, DC 20460, telephone

(202)343-9128, e-mail address *kumar.chitra@epa.gov.* For legal questions, please contact Sonja Rodman, U.S. EPA, Office of General Counsel, Mail Code 2344A, 1200 Pennsylvania Avenue, NW., Washington, DC 20460, telephone 202-564-4079, e-mail address *rodman.sonja@epa.gov.* For information concerning the public hearing, please contact Jo Ann Allman, U.S. EPA, Office of Air Quality Planning and Standards, Air Quality Strategies and Standards Division, Mail Code C539-02, Research Triangle Park, NC 27711, phone number

(919)541-1815, e-mail address *allman.joann@epa.gov.* SUPPLEMENTARY INFORMATION: Does This Action Apply to Me? The CAIR does not directly regulate emissions sources. Instead, it requires States to develop, adopt, and submit SIP revisions that would achieve the necessary SO 2 and NO X emissions reductions, and leaves to the States the task of determining how to obtain those reductions, including which entities to regulate. *Public Hearing.* On December 14, 2005, EPA will hold a public hearing on today's notice at EPA Headquarters, 1310 L Street (closest cross street is 13th Street), 1st floor conference rooms 152 and 154, Washington, DC. The closest Metro stop is McPherson Square (Orange and Blue lines)—take 14th Street/Franklin Square Exit. Because the hearing will be held at a U.S. government facility, everyone planning to attend should be prepared to show valid picture identification to the security staff in order to gain access to the meeting room. The hearing will begin at 9 a.m. and end at 12 noon. Persons wishing to speak at the public hearing should contact Jo Ann Allman by December 9 at telephone number

(919)541-1815 or by e-mail at *allman.joann@epa.gov.* The hearing will be limited to the subject matter of this document. Oral testimony will be limited to 5 minutes. The EPA encourages commenters to provide written versions of their oral testimonies either electronically (on computer disk or CD-ROM) or in paper copy. The public hearing schedule, including the list of speakers, will be posted on EPA's Web site at: *www.epa.gov/cair.* Verbatim transcripts and written statements will be included in the rulemaking docket. The public hearings will provide interested parties the opportunity to present data, views, or arguments concerning the proposed rules. The EPA may ask clarifying questions during the oral presentations, but will not respond to the presentations or comments at that time. Written statements and supporting information submitted during the comment period will be considered with the same weight as any oral comments and supporting information presented at a public hearing. Because of the need to resolve the issues in this document in a timely manner, EPA will not grant requests for extensions of the public comment period. What Should I Consider as I Prepare My Comments for EPA? Note that general instructions for submitting comments are provided above under the ADDRESSES section. *Submitting CBI* . Do not submit comments that include CBI to EPA through EDOCKET, 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 ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM 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. Send or deliver information identified as CBI only to the following address: Roberto Morales, U.S. EPA, Office of Air Quality Planning and Standards, Mail Code C404-02, Research Triangle Park, NC 27711, telephone

(919)541-0880, e-mail at *morales.roberto@epa.gov* , Attention Docket ID No. OAR-2003-0053. *Tips for Preparing Your Comments* . When submitting comments, remember to: i. Identify the rulemaking by docket number and other identifying information (subject heading, **Federal Register** date and page number). ii. 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. iii. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes. iv. Describe any assumptions and provide any technical information and/or data that you used. v. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced. vi. Provide specific examples to illustrate your concerns, and suggest alternatives. vii. Explain your views as clearly as possible, avoiding the use of profanity or personal threats. viii. Make sure to submit your comments by the comment period deadline identified. Availability of Related Information Documents related to the CAIR are available for inspection in docket OAR-2003-0053 at the address and times given above. The EPA has established a Web site for the CAIR at *http://www.epa.gov/cleanairinterstaterule* or more simply *http://www.epa.gov/cair/* . Outline I. Background II. Today's Action A. Grant of Reconsideration B. Schedule for Reconsideration III. Discussion of Issues A. SO 2 Allocation Methodology in the CAIR Model Trading Rules B. Fuel Adjustment Factors Used To Set State NO X Budgets C. PM 2.5 Modeling for Minnesota D. Inclusion of Florida in the CAIR Region for Ozone IV. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments G. Executive Order 13045: Protection of Children From Environmental Health and Safety Risks H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution or Use I. National Technology Transfer Advancement Act J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low Income Populations I. Background On May 12, 2005, the EPA (Agency or we) promulgated the final “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone” (Clean Air Interstate Rule or CAIR) (70 FR 25162). In this action, EPA found that 28 States and the District of Columbia contribute significantly to nonattainment of, or interfere with maintenance by, downwind States with respect to the NAAQS for fine particles (PM 2.5 ) and/or 8-hour ozone. The CAIR requires these upwind States to revise their State implementation plans

(SIPs)to include control measures to reduce emissions of SO 2 and/or NO X . Sulfur dioxide is a precursor to PM 2.5 formation and NO X is a precursor to PM 2.5 and ozone formation. By reducing upwind emissions of SO 2 and NO X , CAIR will assist downwind PM 2.5 and 8-hour ozone nonattainment areas in achieving the NAAQS. The EPA promulgated the CAIR based on the “good neighbor” provision of the Clean Air Act (CAA), section 110(a)(2)(D), which establishes State obligations to address interstate transport of pollution. The EPA conducted extensive air modeling to determine the extent to which emissions from certain upwind States were impacting downwind nonattainment areas. All States found to contribute significantly to downwind PM 2.5 nonattainment or maintenance problems are included in the CAIR region for PM 2.5 and are required to reduce annual emissions of SO 2 and NO X . All States found to contribute significantly to downwind 8-hour ozone nonattainment are included in the CAIR region for ozone and required to reduce NO X emissions during the 5-month ozone season (May-September). The CAIR establishes regional emission reduction requirements for annual SO 2 and NO X emissions and seasonal NO X emissions. The reduction requirements are based on control technologies known to be highly cost effective for electric generating units (EGUs). The first phase of NO X reductions starts in 2009 (covering 2009-2014) and the first phase of SO 2 reductions starts in 2010 (covering 2010-2014). The second phase of both SO 2 and NO X reductions starts in 2015 (covering 2015 and thereafter). Each State covered by CAIR may independently determine which emission sources to control, and which control measures to adopt. States that choose to base their programs on emissions reductions from EGUs may allow their EGUs to participate in an EPA-administered cap and trade program. The CAIR includes model rules for multi-State cap and trade programs for annual SO 2 and NO X emissions, and seasonal NO X emissions. States may choose to adopt these rules to meet the required emissions reductions in a flexible and highly cost-effective manner. To learn more about the CAIR and its impacts, the reader is encouraged to read the preamble to the CAIR (70 FR 25162; May 10, 2005). The CAIR was promulgated through a process that involved significant public participation. The EPA published a notice of proposed rulemaking on January 30, 2004 (69 FR 4566) and a notice of supplemental rulemaking on June 10, 2004 (69 FR 32684). The EPA also published a notice of data availability on August 6, 2004 (69 FR 47828). The Agency held public hearings on the January 2004 proposed rule on February 25 and 26, 2004, and an additional hearing on the supplemental proposal on June 3, 2004. In addition, the EPA received thousands of comments on the proposals. We responded to all significant public comments in the preamble to the final rule and the final response to comments document available in the CAIR docket (Docket No. OAR-2003-0053-2172). Following publication of the final rule on May 12, 2005, the Administrator received eleven petitions requesting reconsideration of certain aspects of the final CAIR. These petitions were filed pursuant to section 307(d)(7)(B) of the CAA. Under this provision, the Administrator is to initiate reconsideration proceedings if the petitioner can show that an objection is of central relevance to the rule and that it was impracticable to raise the objection to the rule within the public comment period or that the grounds for the objection arose after the public comment period but before the time for judicial review had run. The petitions for reconsideration of the CAIR ask EPA to reconsider several specific aspects of the final rule, and many of the petitions make similar requests. This notice addresses four of the issues raised in those petitions. The EPA expects to issue decisions on all remaining issues raised in the petitions for reconsideration by March 15, 2006. The complete petitions are available in the docket for the CAIR. 1 1 Petitions for reconsideration were filed by: State of North Carolina (OAR-2003-0053-2192); FPL Group OAR-2003-0053-2201); Florida Association of Electric Utilities (OAR-2003-0053-2200); Entergy Corporation (OAR-2003-0053-2195 and 2198 (attachment 1)); Massachusetts Department of Environmental Protection (OAR-2003-0053-2199); Integrated Waste Services Association (OAR-2003-0053-2193); Texas Commision on Environmental Quality (OAR-2003-0053-2212); Northern Indiana Public Service Corporation (OAR-2003-0053-2194 and 2213 (supplemental petition)); City of Amarillo, Texas, El Paso Electric Company, Occidental Permian Ltd, and Southwestern Public Service Company d/b/a/ Xcel Energy (OAR-2003-0053-2196 and 2197 (attachment 1) and 2205-2207 (attachments 2-4)); Connecticut Business and Industry Ass'n (OAR-2003-0053-2203); and Minnesota Power, a division of ALLETE. Inc. (OAR-2003-0053-2212). In addition, fourteen petitions for judicial review of the final rule were filed with the U.S. Court of Appeals for the District of Columbia. 2 The fourteen cases have been consolidated into a single case, *State of North Carolina* v. *EPA* (No. 05-1244) (D.C. Cir). Many of the parties who petitioned EPA for reconsideration of the CAIR also petitioned for judicial review of the rule. 2 *State of North Carolina* v. *EPA* (No. 05-1244); *Minnesota Power* v. *EPA* (No. 05-1246); *ARIPPA* v. *EPA* (No. 05-1249); *South Carolina Public Service Authority et al.* v. *EPA* (No. 05-1250); *Entergy Corp.* v. *EPA* (No. 05-1251); *Florida Ass'n of Electric Utilities* (No. 05-1252); *FPL Group* v. *EPA* (No. 05-1253); *Northern Indiana Public Service Co.* v. *EPA* (No. 05-1254); *South Carolina Electric & Gas Co.* v. *EPA* (No. 05-1256); *Integrated Waste Services Ass'n* v. *EPA* (No. 05-1257); *AES Corp* v. *EPA* (No. 05-1259); *City of Amarillo, Texas et al.* v. *EPA* (No. 05-1260); *Appalachian Mountain Club et al.* v. *EPA* (No. 05-1246); *Duke Energy* v. *EPA* (No. 05-1246). By letters dated August 1, 2005, EPA granted reconsideration of the definition of “electric generating unit” or “EGU” as it relates to solid waste incinerators (and particularly municipal waste incinerators). 3 The EPA explained that the issue would be addressed in the proposed rule signed the same day. That proposed rule, entitled “Rulemaking on Section 126 Petition from North Carolina to Reduce Interstate Transport of Fine Particulate Matter and Ozone; Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone; Revisions to the Clean Air Interstate Rule; Revisions to the Acid Rain Program; Proposed Rule,” was published on August 24, 2005 (70 FR 49708). In that proposed rule, EPA reconsidered the definition of “EGU” in the final CAIR as it relates to solid waste incinerators (70 FR 49738). We proposed revisions to the definition of “EGU” and requested comment on this issue. In that action, we did not address any other issues raised in the petitions for reconsideration of the CAIR. Today's action does not reopen for comment any aspect of the August 24, 2005, proposed rule. 3 These letters are available in the CAIR Docket. (OAR-2003-0053-2209 and 2210). The EPA also received two requests to stay the implementation of the CAIR in limited geographic areas pending resolution of this reconsideration process. One petitioner requested a stay of implementation of the CAIR in the State of Florida, and one petitioner requested a stay of implementation of the CAIR in the State of Minnesota. By letter dated August 1, 2005, EPA declined to stay implementation of the CAIR in Florida. 4 The EPA has not yet acted on the request to stay implementation of the CAIR in Minnesota. 4 This letter is also available in the CAIR Docket (OAR-2003-0053-2208). By letters dated November 21, 2005, we informed several petitioners of our intent to grant reconsideration on one or more issues addressed in their petitions for reconsideration. We indicated in those letters that we would initiate the reconsideration process by publishing this notice. II. Today's Action A. Grant of Reconsideration In this notice, EPA is announcing its decision to grant reconsideration on four issues raised in the petitions for reconsideration. This notice initiates that reconsideration process and requests comment on the issues to be addressed. Given the intense public interest in this rule, EPA has decided to provide this additional opportunity for public comment. At this time, however, EPA does not believe that any of the information submitted to date demonstrates that EPA's final decisions were erroneous or inappropriate. Therefore, we are not proposing any modifications to the final CAIR. The first issue on which EPA is requesting comment relates to analysis done by EPA to address petitioner's claims regarding alleged inequities resulting from the application of the SO 2 allowance allocation methodology that States choosing to participate in the trading program would use to allocate SO 2 allowances to sources. The second issue relates to EPA's use of specific fuel adjustment factors to establish NO X budgets for each State. The third issue relates to modeling inputs used by EPA to determine whether emissions from Minnesota should be included in the CAIR region for PM 2.5 . And the fourth issue relates to EPA's determination that the State of Florida should be included in the CAIR region for ozone. Each issue is described in greater detail in Section III of this notice. The EPA is requesting comment only on the issues specifically described in Section III. We are not taking comment on any other provisions in the CAIR or otherwise reopening any other issues decided in the CAIR for reconsideration or comment. B. Schedule for Reconsideration For the four issues addressed in this notice, EPA expects to take final action on reconsideration by March 15, 2006. By that date, EPA will finalize the process of reconsideration by issuing a final rule or proposing a new approach. EPA also expects, by March 15, 2006, to issue decisions on all remaining issues raised in the petitions for reconsideration. III. Discussion of Issues A. SO 2 Allocation Methodology in the CAIR Model Trading Rules One petitioner argues that the SO 2 allowance allocation methodology in the CAIR model trading rules is unreasonable and inequitable, and asks EPA to establish a different approach. According to the petitioner, the methodology is inequitable because it results in owners of units that have lower emission rates, historically, buying allowances from historically higher emitting units that install new emission controls. EPA does not accept the petitioner's characterization of this issue. EPA continues to believe that the methodology selected is reasonable for the reasons explained in the final rule and further outlined below. Furthermore, numerous opportunities for public comment on this issue were provided, and a full discussion of the allowance allocation options occurred during the rule development process. Nonetheless, given the intense public interest in this issue, EPA has decided to grant the Petition for Reconsideration insofar as it raises issues regarding alleged inequities resulting from the application of the SO 2 allowance allocation. As explained below, EPA has conducted additional analyses concerning the impact of the SO 2 allowance allocation approach adopted in the model rules, comparing this approach to various other alternatives considered during the rulemaking process. These analyses further illustrate that the approach selected produces a reasonable result, not the inequities alleged in the Petition for Reconsideration. Therefore EPA is not proposing any changes to the CAIR SO 2 allocation approach as part of this reconsideration notice. We are taking comment on the analyses conducted and our discussion of the petitioner's concerns. Title IV and CAIR The CAIR model SO 2 trading program relies on the use of title IV SO 2 allowances for compliance with the allowance-holding requirements of CAIR. Title IV SO 2 allowances have already been allocated on a unit-by-unit basis in perpetuity, based on formulas set forth in section 405 and 406 of title IV, which were implemented through final regulations issued in 1998 (Sec 42 U.S.C. 7651d and 7651e; and 18 CFR 73.10(b)). The statutory formula for SO 2 allocations was generally based on unit data for 1985-1987 and, for some units, data for years up to 1995. For the title IV SO 2 trading program, each allowance authorizes one ton of SO 2 emissions. For the CAIR SO 2 trading program, SO 2 reductions would be achieved by generally requiring CAIR sources to retire more than one title IV allowance for each ton of their SO 2 emissions for 2010 and thereafter. Specifically, each title IV SO 2 allowance issued for 2009 or earlier would be used for compliance by CAIR sources at a ratio of one allowance per ton of SO 2 emissions and would authorize one ton of SO 2 emissions. Each title IV allowance of vintage 2010 through 2014 would be used for compliance under CAIR at a two-to-one ratio and authorize 0.5 tons of SO 2 emissions. Each title IV allowance of vintage 2015 and later would be used at a 2.86-to-1 ratio and authorize 0.35 tons of SO 2 emissions. See discussion in the preamble to the final CAIR in section VII (70 FR 25255-25273) and section IX (70 FR 25290-25291). SO 2 Allocation Options in CAIR A variety of SO 2 allowance allocation methodologies were raised and analyzed during the rulemaking process, including the one EPA selected. Alternative methodologies analyzed included allocating on the basis of historic tonnage emissions, heat input (with alternatives based on heat input from all fossil generation, and heat input from coal- and oil-fired generation only) and output (with alternatives based on all generation and all fossil-fired generation). While every allocation methodology suggested by commenters during the rulemaking process has its advantages and disadvantages for different companies and States, EPA explained in the final rule that its chosen methodology is reasonable on several grounds. First, EPA believes that “achieving SO 2 reductions for EGUs using the title IV allowances is necessary in order to ensure the preservation of a viable title IV program” (Response to Comments

(RTC)at page 511, section X.A.26, 2005). *See also* discussion in preamble to the final CAIR in section IX (70 FR 25290-25291). Second, in using the title IV allowances, EPA relied on the selection by Congress of the permanent allocation methodology established in title IV for purposes of reducing SO 2 emissions. As stated in the RTC (page 512), “Congress clearly did not choose a policy to regularly revisit and revise these allocations, believing that its allocations methodology for title IV allowances would be appropriate for future time periods.” Third, title IV allowance allocations provide a logical and well understood starting point from which additional EGU SO 2 emission reductions can be achieved for Acid Rain units, which account for over 90% of the SO 2 emissions from CAIR EGUs. Finally, EPA's State-by-State analysis of several methods for SO 2 allocations shows that the use of title IV allowances to develop state budgets creates a reasonable result (See RTC, section X.A.26). The policy decision to base the CAIR SO 2 budgets on the existing title IV allowance system, and EPA's demonstration that the result of using the system is reasonable fully support the use of an allocation system based on title IV allowances. Analysis of SO 2 Allocation Options As a part of this reconsideration, EPA performed additional analyses, explained below, to evaluate the SO 2 allocation methodology in the final CAIR rule in light of the petitioner's concerns. In these analyses, EPA compared three alternative SO 2 allowance allocation methodologies to the methodology in the final CAIR to see how companies fared in terms of the amount of allowances allocated relative to their projected SO 2 emissions. The allocation allowance methodologies evaluated by EPA were the ones referred to by the petitioner in the Petition for Reconsideration. EPA believes that, for purposes of evaluating the various allocation methodologies, computing allocations on a company-by-company basis is more appropriate than comparing allocations on a unit-by-unit basis. This is because, while one unit could be allocated fewer allowances under one methodology, another unit owned by the same company could be allocated more allowances, which may offset the smaller allocation of the first unit. The three alternative allowance allocation methodologies EPA analyzed were suggested by various commenters during the rulemaking process. Also note that methodologies 2 and 3 were suggested by the petitioner. These methodologies are: 1. Allocating allowances based on more recent heat input data; 2. Allocating allowances based on more recent heat input data adjusted for fuel type (e.g., coal, oil and gas); 3. Allocating allowances based on more recent heat input data adjusted both for fuel type (e.g., coal, oil and gas) and for coal type (e.g., bituminous, sub-bituminous and lignite). In comparing the CAIR final SO 2 allocation methodology and the three alternative methodologies, EPA took into account certain factors that are applicable to the CAIR final allocation methodology but not to the three alternative methodologies. For all four methodologies, EPA analyzed the resulting total allowance allocations, and the total projected emissions, for companies' sources located in the States subject to CAIR. In addition, for all the methodologies, EPA analyzed the relationship between allowances and emissions in two ways. In the first, EPA calculated the ratio of allowances to total projected emissions before CAIR controls (base case). This measures how much each company falls short of allowance needs. Then, in the second approach, EPA calculated the ratio of allowances to total projected emissions with CAIR controls installed (control case). This way measures how many allowances a company would need to purchase after controls are installed. For the CAIR final methodology, EPA also considered both the allowance allocations and emissions for companies' sources both in the CAIR region and outside the CAIR region. EPA believes that this is appropriate because, under the CAIR final methodology, if a company's sources outside the CAIR region have more title IV allowances than needed to cover their emissions under the Acid Rain Program, the company could transfer, at little or no net cost, excess allowances to the company's sources in the CAIR region for use to cover emissions under the CAIR trading program. Under the three alternative methodologies, which would require creating new CAIR SO 2 allowances independent of the existing title IV allocations, CAIR sources could not use title IV for compliance with the CAIR SO 2 allowance holding requirements. Further, in the analysis of the CAIR final methodology, EPA considered the allocation of title IV allowances to CAIR region units that are not currently in the Acid Rain Program but that could opt into the Acid Rain Program and receive title IV allowances (see 42 U.S.C. 7651i and 18 CFR part 74). This analysis assumed that companies owning non-Acid Rain units affected by CAIR would opt into the Acid Rain Program because they would receive title IV allowances to cover a portion of the unit's emissions under CAIR. EPA believes this assumption is reasonable because there is very little cost associated with opting into the Acid Rain Program. 5 In contrast, the analysis of the three alternative methodologies did not consider Acid Rain Program opt-in allowances because these approaches do not use title IV allowances for CAIR compliance. 5 The greatest cost associating with opting in to the title IV program is the cost of monitoring. Since these sources are already required to monitor using the same monitoring methodologies that would be required if they were to opt in, their costs for opting in are significantly reduced. EPA's analyses, of which a detailed description is available in the docket, encompassed 112 (control case) to 114 (base case) parent/holding companies with sources covered by the CAIR. These 112 to 114 companies represent about two-thirds of the total number of CAIR plants, over 95 percent of total annual allocations for all methodologies during 2015, and about 97 percent of the total projected emissions in the CAIR region in 2015. 6 6 According to EPA inventory data, there are a total of 921 CAIR affected plants. EPA did not have complete owner, parent company information for all of these plants. While allocations vary from company to company under the four methodologies, overall, the distributions of allowances that companies received relative to their projected emissions for both the base case and control case are very similar. In other words, no methodology stands out as providing a more reasonable method of allocation across all companies when examining allowance needs under either the base case or control case. Figures 1 and 2, below, show the distribution of values for each methodology under the two cases, and support this conclusion. EPA repeated these analyses for 2010, which show similar results. Separate analyses of owner/operating company allowances compared to emissions in 2010 and 2015, show similar results, as well. *See* TSD Memo, “Technical Support Document for Clean Air Interstate Rule Response to Petition for Reconsideration.” BILLING CODE 6560-50-P EP02DE05.037 EP02DE05.038 BILLING CODE 6560-50-C EPA also notes that, while the Petitioner states that the CAIR final allocation methodology is “inequitable” because lower emitting units would buy allowances from higher emitting units that install emission controls, it is unclear why such a result would actually be inequitable. On the contrary, the owner of each of the units involved would be choosing to adopt the most economic compliance strategy in light of the unit's emission control costs and the market value of allowances. The ability of the owners to make such choices reflects the flexibility provided by a cap and trade program. The EPA requests comment on its analyses of the four allocation methodologies and on the above discussion of the Petitioner's concerns. B. Fuel Adjustment Factors Used To Set State NO X Budgets Several petitioners argue the Agency did not provide adequate notice regarding the use of specific fuel adjustment factors to establish NO X budgets for States in the CAIR region. As explained below, EPA believes that it provided adequate notice both that the fuel adjustment factors might be used and of the calculation procedures that it would use to determine the specific factors. Nevertheless, given the significant public interest in this issue, EPA has decided to grant reconsideration of, and to take comment on, EPA's use of fuel adjustment factors ( *i.e.* , 1.0 for coal, 0.4 for gas, and 0.6 for fuel oil) in setting State NO X budgets. Today's action also presents additional analysis that EPA conducted to further explain the impact of these factors on State annual NO X budgets. This analysis demonstrates that the factors selected are reasonable and decrease the disparity between most States' actual electric generation unit

(EGU)emissions and their State NO X budgets. For that reason, EPA is not proposing any changes to the final CAIR at this time. The CAIR establishes regional emission budgets for annual NO X , and seasonal NO X emissions. These regional budgets are then further divided into State budgets, with a share of each total regional budget allocated to each State in the corresponding CAIR region. States choosing to participate in the trading programs will be able to allocate, to sources in their State, the number of allowances in their budgets. Petitioners challenge the methodology EPA used to establish these State budgets for annual and seasonal NO X . Background For States choosing to participate in the trading program, these budgets determine the number of allowances that could be allocated to sources in that State. In a cap and trade system, however, the methodology used to allocate allowances in any given year would not affect where control technologies are installed. 7 Rather, the determinant would be the cost of adding controls compared to the cost of buying, or the profit from selling, allowances. Controls are expected to be installed where it is relatively less expensive, without regard to which units received the initial allocation of allowances. Further, the total cost to industry of controlling emissions and the total amount of reductions achieved would not be affected by the allocation methodology in a given year (for a permanent system). The allocation method, however, could have financial impacts on individual units and companies. A unit that receives more allocations than it has emissions would get a benefit at the expense of a unit that does not receive enough allocations to cover its emissions. While States choosing to participate in the cap and trade program can determine how to allocate allowances among their units, companies in States whose budgets exceed projected EGU emissions would likely receive a financial benefit while companies in States whose budgets are lower than their EGU emissions would likely incur additional costs. In the absence of other considerations, EPA believes that it is in the public interest to reduce the disparity between the number of allowances in a State budget and total projected State EGU emissions. 7 A permanent allocation approach, such as the CAIR allocation methodology in the model trading rules, should not affect where controls are installed. This is true regardless of the type of approach used to permanently allocate allowances (e.g., heat input, adjusted heat input, or output). The use of an updating allocation system, on the other hand, could impact future generation behavior. Notice of Fuel Factor Use in CAIR Promulgation In the CAIR notice of proposed rulemaking (NPR), EPA proposed to use the simple heat input method. (69 FR 4566) This approach used the un-adjusted heat input to set budgets based on heat input data from the years 1999 through 2002. EPA proposed to give each State a pro rata share of the regional NO X budget based on the ratio of its average annual heat input to the regional total average annual heat input. In the Supplemental Notice of Proposed Rulemaking (SNPR), EPA proposed to supplement and update the data used to calculate the State annual NO X budgets (69 FR 32684). EPA also described an alternative method that could be used to calculate the budgets—the adjusted heat input (fuel factor) method. This approach, EPA explained, would “* * * reflect the inherently higher emissions rate of coal-fired plants, and consequently the greater burden on coal plants to control emissions.” (See 69 FR 32689.) The SNPR further explains “in contrast to allocations based on historic emissions, the factors would also not penalize coal-fired plants that have already installed pollution controls” (69 FR 32689). In the SNPR, EPA also described the method that it would use to derive specific fuel factors if this adjusted heat input method was selected. EPA explained, “States' shares would be determined by the amount of the State heat input, as adjusted, in proportion to the total regional heat input. The factors could be based on average historic emissions rates (in lbs/mmBtu) by fuel type (coal, gas, and oil) for the years 1999-2002” (69 FR 32689). The SNPR did not identify the specific numeric factors that would be used. EPA received and responded to numerous comments addressing this alternative fuel factor approach. ( *See* “Corrected Response to Significant Public Comments on the Proposed Clean Air Interstate Rule,” pp. 520-576.) EPA established State NO X budgets for the final CAIR using the adjusted heat input method. The specific fuel factors used to adjust heat input data were 1.0 for coal, 0.4 for gas and 0.6 for oil. These factors are based on the average historic NO X emissions rate for each fuel. They reflect for each fuel, the 1999-2002 average emissions by State summed for the CAIR region, divided by average heat input by fuel by State, summed for the CAIR region (70 FR 25230-25231). EPA Analyses of Potential Impacts EPA conducted two analyses to evaluate the potential impact of using the adjusted heat input method versus the simple heat input method on State annual NO X budgets: one on a regionwide scale and the second on a State-by-State level. The regionwide analysis of the potential impacts compared regionwide budgets using both approaches (i.e. simple heat input and fuel factor) to the regionwide projected emissions of units fired with that fuel. 8 Regional budgets and emissions, by fuel type, are summarized in Table 1. 8 It should be noted that simple heat input or adjusted heat input are used to set State budgets and do not imply that States would allocate allowances to units in that manner. In the proposal, EPA gives States flexibility in the distribution of allowances. Table 1.—Regionwide Comparison of CAIR Allowance Distributions and Emissions by Fuel Type [Thousand tons] Projected 2009* emissions and allowances Coal Other fossil** Total Projected 2015 emissions and allowances Coal Other fossil Total Base Case Emissions 2,635 97 2,732 2,650 96 2,746 CAIR Emissions 1,404 99 1,503 1,151 89 1,254 Simple Heat Input Allowances 1,197 308 1,505 998 256 1,254 Fuel Factor Adjusted Allowances 1,349 156 1,505 1,124 130 1,254 * Numeric value is based on 2010 projections. ** Numeric value includes wood and refuse in three States. Assuming allowancesare often passed through to generation units in the same way that they are apportioned to the States, Table 1 illustrates that under either approach natural gas-fired and other non-coal-fired generation receives more allowances than their projected emissions in both 2009 and 2015 and therefore States with more units of this type receive a greater share of the budget. However, using the fuel factor approach, the disparity between the number of allowances provided and the emissions is less than under the simple heat input method. Table 1 also demonstrates that the majority of emission reductions are made by coal-fired sources. States with more of these types of units receive a greater share of the regional budget under the fuel factor approach (however, the portion of the budget derived from the heat input from these units is still generally smaller than their projected emissions). Therefore, the fuel factor approach generally provides additional allowances to States with large amounts of coal-fired units that are making the investments in emission control measures and technologies. Conversely the simple heat input approach provides more allowances to States with larger amounts of gas-fired units that are not making reductions. Note that under either approach the portion of the State budgets derived from the heat input from the gas-fired units generally exceeds both the historical and the future projected emissions from these units. This finding led EPA to believe that the fuel factor approach better reduced the disparity between projected emissions and State budgets. EPA conducted a second analysis that examined the potential impacts of the two approaches for developing Statewide budgets (i.e., simple heat input and fuel factor) on a State-by-State basis. This analysis, summarized in Tables 2 and 3 below, shows that States receiving fewer allowances using a fuel factor approach, generally still receive Statewide budgets that are greater than their projected emissions in 2009 and 2015. This results because a substantial portion of their generation portfolio consists of gas-fired sources with generally low NO X emission levels. Table 2.—Comparison of Projected NO X Missions and State Budgets for CAIR States Not Dominated by Coal Generation [Thousand tons] State Projected 2009 * emissions and budgets Coal Other fossil Total Projected 2015 emissions and budgets Coal Other fossil Total DC ** Base Case Emissions 0 0 0 0 <1 <1 CAIR Emissions 0 <1 <1 0 <1 <1 Simple Heat Input Budget 0 <1 <1 0 <1 <1 Fuel Factor Adjusted Budget 0 <1 <1 0 <1 <1 LA Base Case Emissions 45 5 49 45 5 50 CAIR Emissions 30 4 35 27 5 32 Simple Heat Input Budget 19 23 42 16 26 42 Fuel Factor Adjusted Budget 21 14 36 18 12 30 NY Base Case Emissions 38 7 45 38 6 44 CAIR Emissions 29 7 36 15 6 21 Simple Heat Input Budget 19 42 61 16 35 51 Fuel Factor Adjusted Budget 21 25 46 17 21 38 TX Base Case Emissions 141 45 186 141 39 179 CAIR Emissions 122 44 166 122 35 157 Simple Heat Input Budget 114 118 231 95 98 192 Fuel Factor Adjusted Budget 128 53 181 106 44 151 MS Base Case Emissions 36 1 37 36 2 37 CAIR Emissions 30 1 31 6 2 8 Simple Heat Input Budget 11 10 21 9 8 18 Fuel Factor Adjusted Budget 13 5 18 10 4 15 FL Base Case Emissions 132 19 151 132 18 151 CAIR Emissions 51 17 69 44 18 61 Simple Heat Input Budget 58 58 116 48 48 97 Fuel Factor Adjusted Budget 65 34 99 54 28 83 * Numeric value is based on 2010 projections. ** For DC: Projected Base Case emissions are 35 tons in 2015. CAIR Emissions are projected to be 35 tons in both 2009 and 2015. Simple Heat Input budgets are 213 and 178 tons in 2009 and 2015, respectively. Fuel Factor budgets are 144 and 120 tons in 2009 and 2015, respectively. Table 2 lists those States in the CAIR region that have significant amounts ( *i.e.* , 40 percent or greater) of generation sources that combust fossil fuels other than coal. As illustrated by Table 2, DC, FL, LA, MS, NY, and TX, while receiving fewer allowances under a fuel factor approach, are provided with reasonable Statewide budgets that are comparable to their projected emissions in 2009 and 2015. If the States were to directly pass through allowances to their gas-fired units, these units would still have excess allowances. Furthermore in most cases, these States still receive a larger budget than they need to cover their projected emissions. Table 3.—Comparison of Projected NO X Emissions and State Budgets for CAIR States [Thousand tons] State Projected 2009 * emissions and budgets Emissions Base case CAIR Budget Simple heat input Fuel factor adjusted Percent change Projected 2015 emissions and budgets Emissions Base case CAIR Budget Simple heat input Fuel factor adjusted Percent change DC ** 0 <1 <1 <1 −32 <1 <1 <1 <1 −33 LA 49 35 50 36 −29 50 32 42 30 −29 NY 45 36 61 46 −25 44 21 51 38 −25 TX 186 166 231 181 −22 179 157 192 151 −22 MS 37 31 21 18 −16 37 8 18 15 −16 FL 151 69 116 99 −14 151 61 97 83 −14 MI 117 88 64 65 3 120 90 53 54 3 MD 57 13 27 28 4 57 12 22 23 4 VA 68 43 35 36 5 60 39 29 30 5 AL 132 65 64 69 8 134 49 53 58 8 GA 143 106 61 66 9 141 67 51 55 9 IL 146 66 70 76 9 159 65 58 64 9 WI 71 47 37 41 9 69 34 31 34 9 PA 198 86 90 99 10 193 72 75 83 10 SC 49 38 30 33 10 50 36 25 27 10 MO 116 64 54 60 10 118 66 45 50 10 MN 72 36 28 31 11 74 37 24 26 11 NC 60 59 56 62 11 61 49 47 52 11 IN 234 121 98 109 11 233 79 81 91 11 OH 264 91 97 109 12 274 90 81 91 12 TN 106 37 46 51 12 106 27 38 42 12 KY 176 99 74 83 12 176 74 62 69 12 IA 76 45 29 33 12 81 47 24 27 12 WV 179 62 66 74 13 176 40 55 62 13 Total 2732 1503 1505 1505 0 2746 1254 1254 1254 0 * Numeric value is based on 2010 projections. ** For DC: Projected ** Base Case emissions are 35 tons in 2015. CAIR Emissions are projected to be 35 tons in both 2009 and 2015. Simple Heat Input budgets are 213 and 178 tons in 2009 and 2015, respectively. Fuel Factor budgets are 144 and 120 tons in 2009 and 2015, respectively. Table 3 shows that relative to the simple heat input method the fuel factor method reduces the disparity between projected State emissions and State budgets, because the fuel factor approach allocates State budgets that are generally closer to projected State emissions. As explained above, the States that receive smaller budgets under the fuel factor method are still generally receiving budgets that exceed their projected emissions. States that receive larger budgets under the fuel factor method are generally States with a large amount of coal-fired generation that are installing post combustion controls as a result of CAIR. Analysis of Potential Delaware and New Jersey Impacts The analyses described above were conducted for the States in the CAIR PM 2.5 region only. EPA has proposed to add Delaware and New Jersey to the CAIR region for PM 2.5 (“Inclusion of Delaware and New Jersey in the Clean Air Interstate Rule”, EPA, May 10, 2005), but has not yet taken final action on this proposal. EPA proposed a separate 2-State “regional” budget for Delaware and New Jersey of just over 14,000 tons. EPA's analysis, presented in Table 4, shows that apportioning this budget between the two States based on a fuel factor method instead of a simple heat input method, is reasonable. (“Inclusion of Delaware and New Jersey in the Clean Air Interstate Rule”, EPA, May 10, 2005) Table 4.—Comparison of Projected NO X Emissions and State Budgets for New Jersey and Delaware [Thousand tons] State Projected 2009 * emissions and allowance allocation Base case emissions CAIR emissions Simple heat input budget Fuel factor adjusted budget Percent change Projected 2015 emissions and allowance allocation Base case emissions CAIR emissions Simple heat input budget Fuel factor adjusted budget Percent change NJ 16.8 12.0 13.4 12.7 −5.6 17.9 12.8 11.2 10.6 −5.6 DE 9.4 8.5 3.4 4.2 22.1 10.7 9.5 2.8 3.5 22.2 * Numeric value is based on 2010 projections. Other Considerations EPA notes that the analyses above were conducted for State annual NO X budgets established in the CAIR. CAIR also establishes seasonal NO X budgets using the fuel factor approach. EPA did not conduct a similar analysis of the seasonal NO X budgets. EPA modeling indicates that the ozone season program is likely to function as a backstop to the annual NO X program, and that the annual NO X program is likely to impose the binding constraint on NO X emissions. Finally, to ensure that our estimates appropriately reflect the distribution of emissions in the case of higher electricity demand and increased gas and oil prices, EPA conducted a sensitivity run using EIA's forecast of higher electricity demand and gas and oil prices. This run produced very similar emissions results to the original NO X analysis, showing that EPA's original analysis is robust enough to support the fuel adjusted heat input approach finalized in CAIR. (See the “CAIR Statewide NO X Budget Calculations Technical Support Document, EPA 2005, for additional discussion of the analysis.) C. PM 2.5 Modeling for Minnesota One petitioner asserts that EPA's modeling to determine whether emissions from Minnesota significantly contribute to downwind nonattainment of the PM 2.5 NAAQS failed to take into account certain emissions reductions required by State programs. The petitioner asserts that if these reductions had been properly included in the modeling done for CAIR, the modeling might show that the State of Minnesota does not significantly contribute to downwind nonattainment of the PM 2.5 NAAQS. The petitioner also asked EPA to stay implementation of the CAIR in Minnesota. The Agency is not taking action on the request for a stay at this time. The Agency agrees that EPA's modeling of the contribution of emissions from Minnesota to downwind PM 2.5 nonattainment for the final CAIR did not fully account for the effects on future year emissions of certain State control programs. In order to ensure that all parties have ample opportunity to comment on all aspects of this issue, EPA is reconsidering the air quality modeling inputs for Minnesota. Using the corrected inputs described below, EPA recently remodeled the PM 2.5 contributions from emissions in Minnesota. In this analysis, EPA used the same PM 2.5 modeling platform that was used for the final CAIR modeling. This modeling platform is described in the CAIR Air Quality Modeling Technical Support Document (“Technical Support Document for the Final Clean Air Interstate Rule, Air Quality Modeling,” March 2005, OAR-2003-0053-2123). The EPA is not taking comment on the modeling platform itself, only on the corrected 2010 emissions inputs for Minnesota, as described below. The result of the revised 2010 Minnesota PM 2.5 contribution modeling is that Minnesota contributes a maximum of 0.20 μg/m 3 to PM 2.5 nonattainment in Chicago, IL. This result confirms the findings from the CAIR PM 2.5 contribution modeling that emissions in Minnesota make a significant contribution to PM 2.5 nonattainment in Chicago, IL. The 2010 emissions inputs used in the revised Minnesota modeling and the revised contributions to each downwind nonattainment receptor county can be found in the CAIR docket. The following discussion provides background on the corrected emissions inputs for Minnesota and on air quality analyses that the Agency conducted prior to finalizing CAIR. The emissions for the electric power sector used in EPA's contribution modeling for the final CAIR were derived from the Integrated Planning Model (IPM). The IPM is designed to forecast the projected impact of environmental polices on the electric power sector. The Agency updated its IPM modeling for the final CAIR. As part of a routine model update to the IPM and in response to comments from various parties, EPA updated the inventory of EGUs, made revisions to several model assumptions, and added various State rules, regulations, and New Source Review settlements to best reflect available data and information. In that IPM update for the final CAIR, the Agency included emission reduction actions that are required by Minnesota for certain units, based on the data available. However, as discussed in the RTC for the final CAIR (“Corrected Response to Significant Public Comments on the Proposed Clean Air Interstate Rule,” March 2005, corrected April 2005, OAR-2003-0053-2172) as well as in a memorandum to the CAIR docket entitled “Emissions in Minnesota: Additional Analysis” (OAR-2003-0053-2091) (”Minnesota memorandum”), the Agency discovered that there may be some discrepancies between how the Agency represented the Minnesota emissions reductions in the final CAIR IPM update and how the reductions would be implemented. The Agency revised its IPM model to better reflect the emissions reductions from those Minnesota units and conducted revised emissions modeling using the IPM (in the memorandum mentioned above, the revised emissions modeling is described as a sensitivity analysis.) The revised emissions modeling (sensitivity analysis) resulted in somewhat lower NO X and SO 2 emission projections for Minnesota in the base case, compared to the emissions modeling done for the final CAIR. The revised emissions modeling was discussed in the RTC for the final CAIR and in the Minnesota memorandum. Specifically, that revised IPM modeling projects statewide utility NO X emissions roughly 16,500 tons lower and SO 2 emissions about 5,800 tons lower than the emissions modeling used in the final CAIR. These revised NO X and SO 2 emission projections result in lower total NO X and SO 2 emissions of 4.6 percent and 4.3 percent, respectively, than the emission projections used in the final CAIR modeling. In order to account for these revised emission projections, the Agency performed two analyses to estimate whether air quality modeling based on the lower emission projections would show that Minnesota's downwind contribution was below the PM 2.5 significance threshold of 0.2 μg/m 3 . The EPA's modeling of Minnesota for the final CAIR showed that Minnesota's maximum downwind contribution is 0.21 μ/m 3 to Cook County, Illinois. The Agency's analyses of the effects of the lower emission projections on Minnesota's maximum contribution, which were presented in the RTC for the final CAIR and the Minnesota Memorandum, are summarized below: • Analysis 1: We reduced the maximum PM 2.5 contribution by the larger of the percent reduction in NO X and SO 2 emissions ( *i.e.* , the 4.6 percent reduction in NO X ). The maximum PM 2.5 contribution after making this adjustment is 0.2 μg/m 3 . • Analysis 2: We reduced the sulfate and nitrate portions of the maximum PM 2.5 contribution by the corresponding reductions in SO 2 and NO X emissions. Specifically, the sulfate portion (including sulfate, ammonium, and particle-bound water) was reduced by the 4.3 percent reduction in SO 2 emissions and the nitrate portion was reduced by the 4.6 percent reduction in NO X emissions. We then recalculated the maximum contribution using these lower components. The result is that the adjusted maximum PM 2.5 contribution is 0.2 μg/m 3 . Thus, the analyses presented in the RTC and the Minnesota memorandum indicate that Minnesota makes a significant contribution to PM 2.5 nonattainment, even after considering the lower emissions levels in the revised emissions modeling. 9 9 Although the petition acknowledges that the Agency revised its IPM emissions analysis to reflect emission reductions at certain Minnesota units, it states incorrectly that “EPA subsequently learned that emission levels in the IPM sensitivity analysis were overstated by an additional 16,500 tons of annual NO X emissions and 5,800 tons of annual SO 2 emissions” (petition, p. 7). As discussed above, the emission projections in EPA's revised IPM modeling (the sensitivity analysis) were in fact lower by 16,500 tons of annual NO X emissions and 5,800 tons of SO 2 emissions than the emission projections in EPA's modeling for the final CAIR. For the same reason, the petition is incorrect in stating (p. 7) that EAP failed to consider these emission reductions in its analysis. Although the Agency's analyses of downwind impacts from Minnesota which were based on the revised emissions modeling (and presented in the RTC and the Minnesota memorandum) indicate that the State makes a significant contribution to downwind PM 2.5 nonattainment, the Agency acknowledges that it did not at that time conduct air quality modeling based on the revised emissions modeling. However, as discussed above, the Agency has now remodeled the PM 2.5 contribution from emissions in Minnesota and the results of that revised modeling confirm that emissions in Minnesota make a significant contribution to PM 2.5 nonattainment in Chicago, IL. This revised PM 2.5 contribution modeling used the same modeling platform as EPA used for the final CAIR modeling coupled with the revised emissions inputs for Minnesota discussed above. The EPA is taking comment only on the revised inputs for Minnesota discussed above. D. Inclusion of Florida in the CAIR Region for Ozone Florida petitioners (the Florida Association of Electric Utilities and FPL Group) maintain that neither the proposed rule nor the supplemental proposal or notice of additional data availability gave adequate notice that Florida might be included within the CAIR region as a significant contributor for ozone. They further maintain that EPA's ultimate determination to include Florida within the ozone CAIR region was based on modeling inputs not readily available for comment. The petitioners state that they therefore lacked adequate opportunity to comment on this issue. The EPA does not fully accept the Florida petitioners' characterization. Clearly, for example, EPA gave notice that it would utilize a different modeling platform for the final rule, with the necessary implication that this could change the makeup of the CAIR ozone (and PM 2.5 ) regions (69 FR 47828; August 6, 2004). The EPA also provided access to the data inputs for the modeling runs, including emissions data and the information necessary to process that emissions data into model-ready files. Nonetheless, considering all the factors here (notably the absence of Florida from the CAIR region for ozone in the NPR and SNPR), EPA has decided to provide an opportunity for additional public comment on the inclusion of Florida within the CAIR region for ozone. IV. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review Under Executive Order 12866 (58 FR 51735, October 4, 1993), the Agency must determine whether the regulatory action is “significant” and, therefore, subject to Office of Management and Budget

(OMB)review and the requirements of the Executive Order. The Order defines “significant regulatory action” as one that is likely to result in a rule that may:

(1)Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or Tribal governments or communities;

(2)Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3)Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4)Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. Pursuant to the terms of Executive Order 12866, OMB has determined that this is not a significant regulatory action. This notice takes comment on several aspects of the CAIR, but does not propose any modifications. B. Paperwork Reduction Act This action does not propose information collection request requirements under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 *et seq.* Therefore, an information collection request document is not required. Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9. C. Regulatory Flexibility Act The Regulatory Flexibility Act generally requires an Agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedures Act or any other statute unless the Agency certifies the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of today's proposed rule on small entities, small entity is defined as:

(1)A small business that is a small industrial entity as defined in the U.S. Small Business Administration

(SBA)size standards. (See 13 CFR part 121.);

(2)a governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and

(3)a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field. After considering the economic impacts of today's proposed rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This notice does not impose any requirements on small entities. We are only announcing our decision to reconsider and request comment on specific issues in the CAIR. We continue to be interested in the potential impacts of the rule on small entities and welcome comments on issues related to such impacts. D. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and Tribal governments and the private sector. Under section 202 of the UMRA, EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures by State, local, and Tribal governments, in the aggregate, or by the private sector, of $100 million or more in any 1 year. Before promulgating an EPA rule for which a written statement is needed, UMRA section 205 generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective, or least-burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other than the least-costly, most cost-effective, or least-burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted. Before EPA establishes any regulatory requirements that may significantly or uniquely affect small governments, including tribal governments, it must have developed, under section 203 of the UMRA, a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of EPA's regulatory proposals with significant Federal intergovernmental mandates, and informing, educating, and advising small governments on compliance with the regulatory requirements. The EPA has determined that today's notice of reconsideration does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and Tribal governments, in the aggregate, or the private sector in any 1 year. Today's notice of reconsideration of the CAIR does not add new requirements that would increase the cost of the CAIR. Thus, today's notice of reconsideration is not subject to the requirements of sections 202 and 205 of the UMRA. In addition, EPA has determined that today's notice of reconsideration does not significantly or uniquely affect small governments because it contains no requirements that apply to such governments or impose obligations upon them. Therefore, today's notice of reconsideration is not subject to section 203 of the UMRA. E. Executive Order 13132: Federalism Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications” “Policies that have federalism implications” is defined in the Executive Order to include regulations that 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.” This action does not have federalism implications. It would 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, as specified in Executive Order 13132. The CAA establishes the relationship between the Federal Government and the States, and this action would not impact that relationship. Thus, Executive Order 13132 does not apply to this action. F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by Tribal officials in the development of regulatory policies that have Tribal implications.” For the same reasons stated in the final CAIR, today's notice does not have Tribal implications as defined by Executive Order 13175. It does not have a substantial direct effect on one or more Indian Tribes, since no Tribe has implemented a federally-enforceable air quality management program under the CAA at this time. Furthermore, this action does not affect the relationship or distribution of power and responsibilities between the Federal government and Indian Tribes. The CAA and the Tribal Air Rule establish the relationship of the Federal government and Tribes in developing plans to attain the NAAQS, and today's notice does nothing to modify that relationship. Because this notice does not have Tribal implications, Executive Order 13175 does not apply. If one assumes a Tribe is implementing a Tribal implementation plan, the CAIR could have implications for that Tribe, but it would not impose substantial direct costs upon the Tribe, nor would it preempt Tribal Law. Although Executive Order 13175 does not apply to the CAIR or this notice of reconsideration of the CAIR, EPA consulted with Tribal officials in developing the CAIR. G. Executive Order 13045: Protection of Children From Environmental Health and Safety Risks Executive Order 13045: “Protection of Children From Environmental Health and Safety Risks” (62 FR 19885, April 23, 1997) applies to any rule that

(1)is determined to be “economically significant” as defined under Executive Order 12866, and

(2)concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency. This notice is not subject to Executive Order 13045 because it does not involve decisions on environmental health risks or safety risks that may disproportionately affect children. The EPA believes that the emissions reductions from the CAIR will further improve air quality and children's health. H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies shall prepare and submit to the Administrator of the Office of Regulatory Affairs, OMB, a Statement of Energy Effects for certain actions identified as “significant energy actions.” Section 4(b) of Executive Order 13211 defines “significant energy actions” as “any action by an agency (normally published in the **Federal Register** ) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of final rulemaking, and notices of final rulemaking (1)(i) a significant regulatory action under Executive Order 12866 or any successor order, and

(ii)likely to have a significant adverse effect on the supply, distribution, or use of energy; or

(2)designated by the Administrator of the Office of Information and Regulatory Affairs as a “significant energy action.” The final CAIR is a significant regulatory action under Executive Order 12866, and EPA concluded that the final CAIR rule may have a significant adverse effect on the supply, distribution, or use of energy. The impacts are detailed in the final CAIR (70 FR 25315). Today's notice of reconsideration of the CAIR is not a significant action under Executive Order 12866 and does not change EPA's previous conclusions. I. National Technology Transfer Advancement Act Section 12(d) of the National Technology Transfer Advancement Act of 1995, Public Law 104-113, section 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The National Technology Transfer Advancement Act of 1995 directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. Today's notice does not involve technical standards. Therefore, the National Technology Transfer and Advancement Act of 1995 does not apply. J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations,” requires Federal agencies to consider the impact of programs, policies, and activities on minority populations and low-income populations. According to EPA guidance, 10 agencies are to assess whether minority or low-income populations face risks or a rate of exposure to hazards that are significant and that “appreciably exceed or is likely to appreciably exceed the risk or rate to the general population or to the appropriate comparison group.” (EPA, 1998). 10 U.S. Environmental Protection Agency, 1998. Guidance for Incorporating Environmental Justice Concerns in EPA's NEPA Compliance Analyses. Office of Federal Activities, Washington, DC, April, 1998. In accordance with Executive Order 12898, the Agency has considered whether the CAIR may have disproportionate negative impacts on minority or low-income populations. The EPA expects the CAIR to lead to reductions in air pollution and exposures generally. Therefore, EPA concluded that negative impacts to these sub-populations that appreciably exceed similar impacts to the general population are not expected. For the same reasons, EPA is drawing the same conclusion for today's notice to reconsider certain aspects of the CAIR. List of Subjects 40 CFR Part 51 Environmental protection, Administrative practice and procedure, Air pollution control, Intergovernmental relations, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides. 40 CFR Part 96 Environmental protection, Administrative practice and procedure, Air pollution control, Nitrogen oxides, Reporting and recordkeeping requirements. Dated: November 22, 2005. Stephen L. Johnson, Administrator. [FR Doc. 05-23501 Filed 12-1-05; 8:45 am]

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