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Energy Policy Act of 2005 Diesel Emissions Reduction Program; State Clean Diesel Grant Program Funding Fiscal Year 2008

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Environmental Protection Agency (EPA).


Notice of Availability of Funding for the Fiscal Year 2008 State Clean Diesel Grant Program Under the 2005 Energy Policy Act.


The Energy Policy Act of 2005 (H.R. 6) signed into law on August 8, 2005 (Pub. L. 109-58) incorporates provisions to achieve significant reductions in diesel emissions. Section 793 of the Energy Policy Act of 2005 authorizes the U.S. Environmental Protection Agency (EPA) to support grant and loan programs administered by States that are designed to achieve significant reductions in diesel emissions. This program authorized in Section 793 is referred to as the State Clean Diesel Grant Program for this Notice. EPA expects to have approximately $14.8 million available in fiscal year 2008 in the form of assistance agreements to issue under the State Clean Diesel Grant Program.


In order to participate, States must notify EPA of their intent to apply to the State Clean Diesel Grant Program through a Notice of Intent to Apply as described in Section 6 of this Notice on or before April 24, 2008 at 11:59 p.m. Pacific Time. States must submit applications to EPA as described in Section 6 of this Notice on or before June 23, 2008 at 11:59 p.m. Pacific Time. Failure to meet these deadlines could result in ineligibility for fiscal year 2008 funding.

Contact Information: States must e-mail the Notice of Intent to Apply to EPA's Office of Transportation and Air Quality (OTAQ) at and include in the subject line “Intent to Apply: State Clean Diesel Grant Program—[NAME OF STATE].” States must then submit applications to the appropriate Regional Clean Diesel contact listed in this notice under Section 11.

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Jennifer Keller, U.S. EPA, 1200 Pennsylvania Ave., NW., Washington, DC 20460, Mail-Stop: 6405-J. Phone (202) 343-9541, Fax (202) 343-2803, You may access this Federal Register document electronically through the EPA Internet under the “Federal Register” listings at​fedrgstr/​. This document will also be available at the EPA National Clean Diesel Campaign Web site,​cleandiesel. Please note that due to differences between the software used to develop the documents and the software into which the documents may be downloaded, changes in format, page length, etc., may occur.

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(1) General Information

a. What Is the Statutory Authority for the State Clean Diesel Grant Program?

The 2005 Energy Policy Act (EPAct of 2005), Public Law 109-58, signed into law August 8, 2005, authorized an annual appropriation of up to $200,000,000 under the Diesel Emissions Reduction portion of the legislation (Subtitle G—Diesel Emissions Reduction or “DERA”) for each of fiscal years 2007 through 2011 to remain available until expended. In December 2007, Congress appropriated $49.2 million under EPAct of 2005 to help reduce harmful emissions from heavy-duty diesel engines. Section 793 of EPAct of 2005 outlines provisions for the State Clean Diesel Grant Program which includes that, “the Administrator shall provide to States guidance for use in applying for grant or loan funds under this section.” Per statutory requirements, thirty percent of the $49.2 million ($14.8M for FY08), is available through the State Clean Diesel Grant Program.

b. What Is the Catalog of Federal Domestic Assistance (CDFA) Number for the Diesel Emission Reduction Grants?

The number assigned to the State Clean Diesel Grant Program is Program Code 66.040.

(2) Background Information

Reducing emissions from diesel engines is one of the most important air quality challenges facing the country. Even with EPA's more stringent heavy-duty highway and non-road engine standards taking effect over the next decade, millions of diesel engines already in use will continue to emit large amounts of nitrogen oxides, particulate matter and air toxics, which contribute to serious public health problems. These emissions are linked to premature deaths, asthma attacks, lost work days, and other health impacts every year.

EPA created the National Clean Diesel Campaign (NCDC) to build on the success of its regulatory and voluntary efforts to reduce emissions from diesel engines. Through this effort, EPA is working to reduce the pollution emitted from the existing fleet by promoting a variety of cost-effective and innovative emission reduction strategies.

To date more than $50 million has been awarded to over 200 organizations to establish new clean diesel programs. Through NCDC, EPA will continue to award grants and loans to assist its eligible partners in building diesel emission reduction programs across the country to achieve public health goals. The programs outlined in EPAct of 2005 are part of NCDC's Clean Diesel Programs. Information regarding the Clean Diesel Programs can be found at​cleandiesel.

There are several programs outlined in EPAct of 2005 as part of the National Clean Diesel Campaign. There are two main components of the program: A National component and a State component. A brief description is provided below.

Within the National component, 70 percent of the funds ($34.4 million FY08) are made available on a competitive basis to provide grants and low-cost revolving loans to eligible entities for the deployment of verified and certified technologies to reduce diesel emissions. This program has three separate competitions: (1) National Clean Diesel Funding Assistance Program: A competitive grant program for the deployment of EPA and/or California Air Resources Board (CARB) certified and/or verified clean diesel technologies and verified idle reduction technologies, (2) National Clean Diesel Finance Program: A competitive grant program for innovative finance mechanisms such as national low-cost revolving loans, and (3) Clean Diesel Emerging Technologies Program: A competitive grant program to deploy emerging technologies not yet verified but for which an approvable application for verification and test plan are received by EPA. States, as eligible entities, may apply to all three of the competitions above, in addition to the State Clean Diesel Grant Program. Start Printed Page 12729

The second component is the State Clean Diesel Grant Program. With this component, 30% of the funds ($14.8 million FY08) are made available through an allocation to States. Except where indicated, the remainder of this notice refers specifically to this component: The State Clean Diesel Grant Program. Additional information regarding the State Clean Diesel Grant Program is available at​cleandiesel under the State Program section.

(3) Eligible Entities

Throughout this document, the term “applicant,” “recipient,” or “State” includes the 50 States. EPA presumes that the State Agency with jurisdiction over air quality will be the lead agency to receive these funds. If a State's circumstances dictate that another State agency administer the funds, then a letter from the State Governor or designee to the Administrator of EPA is required in order to certify one State Agency as the recipient of funds who has the legal and administrative authority to enter into a grant or cooperative agreement with EPA. Upon receipt, EPA will consider that State Agency the lead agency from that point forward. However, if there is a change, a new Governor's letter to the Administrator must be submitted during the renewal process and the new agency would be considered the lead agency for future grants. For fiscal year 2008, the letter to identify an alternate lead agency and provide specific contact information should be sent to the EPA Administrator at the contact information listed in Section 11 of this Notice and be received on or before April 24, 2008 at 11:59 p.m. Pacific Time.

(4) Allocation of Funds

a. How Much Funding Is Available?

In fiscal year 2008, Congress allocated $49.2 million for Subtitle G, Diesel Emissions Reduction Program under EPAct of 2005. For fiscal year 2008, 30 percent of these funds (approximately $14.8M) under this subtitle are for the State Clean Diesel Grant Program. The President's fiscal year 2009 budget request outlines similar levels. State Agencies that are eligible entities under the National Clean Diesel Grant and Loan Program may also apply for competitive national grants.

b. How Will Funding Be Allocated in Fiscal Year 2008?

For fiscal year 2008, EPA expects to award grants to all States for which applications are approved based on an allocation formula that is outlined in EPAct of 2005. Accordingly, for fiscal year 2008, EPA will allocate 20 percent of the funds for base level funding and reserve 10 percent of the funds for the State matching incentive. Pursuant to EPAct of 2005, funding levels for the State Clean Diesel Grant Program may change in future years, but the base allocation of funding will not be more than 20 percent of the funds available in a fiscal year.

The specific allocation methodology for the State program for fiscal year 2008 as prescribed in EPAct of 2005 Section 793(c) of Subtitle G is outlined below:

(1) Base funding (20 percent or $9.84M)

(a) If all 50 States elect to participate, then 2 percent is available for each State ($196,000).

(b) If fewer than 50 States elect to participate, then a base allocation of 2 percent plus a proportional population formula will be used. The total population of the State will be divided by the total population of all qualifying States for a fiscal year/grant cycle. The total population of qualifying States would not be determined until all qualifying States are selected. EPA will use the latest available population estimate data of the U.S. Census Bureau. This fraction of State population over total population of qualifying States is multiplied by the remaining funds from the 20 percent allocated to the qualifying States.

(2) Matching Incentive (10 percent or $4.96M)

(a) If States choose to match their entire allocation dollar for dollar, they will receive an additional 50 percent of their State base funding.

(3) Unclaimed funds from the State Clean Diesel Grant Program will revert to the National Clean Diesel Funding Assistance Program. Unclaimed funds may consist of funds from the matching incentive pool which were not matched by States and/or any funds from the base allocation portion if EPA were to provide less than 20 percent base allocation. Any funds reverting to the National Clean Diesel Funding Assistance Program will be subject to the statutory distribution requirements.

Award amounts could range from approximately $196,000 to $2,000,000 based on the number of States who apply. For examples of potential funding scenarios, see​cleandiesel under the State Program section.

c. What Are the Match Requirements?

Under the State Clean Diesel Grant Program, a match is not required. However, as an incentive, States are encouraged to match the entire Federal allocation dollar for dollar. If the entire base allocation is matched dollar for dollar, States qualify for an additional 50 percent of their original allocation.

Pursuant to 40 CFR 31.24, States that choose to match the Federal allocation can use a combination of non-Federal grants or financial contributions over which the State has control from non-Federal third parties and/or through in-kind contributions that are applicable to the period to which the matching requirements apply. A matching requirement may not be met by costs borne by another Federal grant. Eligible categories for matching funds include State funds or private funds which can either be cash donations or in-kind contributions. A State may not use any Federal funds received under Subtitle G, Diesel Emissions Reduction Program under EPAct of 2005 as match for the State Clean Diesel Grant Program.

A recipient is legally obligated to expend any voluntary matching share included in the approved project budget. This match must be met by eligible and allowable costs as outlined in 40 CFR part 31 and is subject to the match provisions in the assistance agreement regulations. A recipient who fails to provide any matching share that is included in the approved budget would be in breach of the assistance agreement, and EPA can take enforcement actions authorized by the assistance regulations. Costs and third party in-kind contributions used to satisfy a match must be verifiable from records of grantees and subgrantee or cost-type contractors. These records must show how the value placed on third party in-kind contributions was derived. States are encouraged to submit letters of commitment from private funding secured for match as part of the State's application. Start Printed Page 12730

(5) Permissible Use of Funds

a. What Projects and Activities Are Allowable Under This Program?

States shall use any funds provided under the State Clean Diesel Grant Program to develop and implement Clean Diesel grant and low-cost revolving loan programs in the State as are appropriate to meet State needs and goals relating to the reduction of diesel emissions. Per EPAct of 2005 Section 793(d)(3) Use of Funds, a State, through a grant or loan, may fund a project that utilizes verified or certified technologies through EPA's verification or certification programs or through the California Air Resources Board's (CARB) verification or certification programs. A list of EPA verified technologies is available at​cleandiesel. CARB-verified technologies may be found at​diesel/​verdev/​verdev.htm. In general, States may implement grant or loan programs to fund the costs of the following:

(1) A retrofit technology (including any incremental costs of a repowered or new diesel engine) that significantly reduces emissions through development and implementation of a certified engine configuration, verified technology, or emerging technology for

(a) A bus;

(b) A medium-duty truck or a heavy-duty truck;

(c) A marine engine;

(d) A locomotive; or

(e) A non-road engine or vehicle used in


—Handling of cargo (including at a marine port or airport);


—Mining; or

—Energy production (e.g., generator sets); or

(2) Programs or projects to reduce long-duration idling using verified technology involving a vehicle or equipment described above. A list of EPA-verified idling technologies is available at​cleandiesel.

All recipients of grants made through the State's grant or loan program must comply with applicable requirements for subawards or subgrants including those contained in 40 CFR Part 31.

States cannot use subgrants or subawards to avoid requirements in EPA grant regulations for competitive procurement by using these instruments to acquire commercial services or products from for-profit organizations to carry out its assistance agreement. The nature of the transaction between the State and the subawardee or subgrantee must be consistent with the standards for distinguishing between vendor transactions and subrecipient assistance under Subpart B Section .210 of OMB Circular A-133, and the definitions of “subaward” at 40 CFR 30.2 or “subgrant” at 40 CFR 31.3, as applicable.

b. What Are Program Priorities?

Pursuant to EPAct of 2005 Section 793(d)(1), States should, to the extent practicable, provide funding to projects that, as determined by the State

(a) Maximize public health benefits;

(b) Are the most cost-effective;

(c) Serve areas

—With highest population density;

—That are poor air quality areas, including areas

i. In nonattainment or maintenance of national ambient air quality standards for a criteria pollutant;

ii. Federal or State Class I areas; or

iii. Areas with toxic air pollutant concerns;

—That receive disproportionate quantity of air pollution from diesel fleets, including truck stops, marine ports, rail yards, terminals, and distribution centers; or

—That use community-based multi-stakeholder processes to reduce toxic emissions;

(d) Include a certified engine configuration, verified technology, or emerging technology that has a long expected useful life;

(e) Will maximize the useful life of any certified engine configuration, verified technology, or emerging technology used or funding by the State;

(f) Conserve diesel fuel; and

(g) Use ultra low sulfur diesel fuel (15 parts per million or less of sulfur content) ahead of EPA's mandates (for non-road or marine projects).

c. Are There Any Funding Restrictions?

States and/or subgrantees must use a competitive process for obtaining contracts for services and products and conduct cost and price analyses to the extent required by Federal, State or local procurement requirements. All contracts and the purchase of supplies and equipment must be conducted in a manner providing free and open competition, to the maximum extent practicable. As such, applicants should refrain from mentioning specific technology manufacturers in their proposals unless they are sole source providers.

States must ensure that the costs of proposed activities are allowable according to Office of Management and Budget (OMB) Circular A-87 “Allowable Costs.” This should be reviewed in conjunction with 40 CFR Part 31. OMB defines allowable costs as those costs that are “eligible, reasonable, necessary, and allocable.” For a cost to be eligible, the cost must not be prohibited by the statute, and it must be incurred during the budget period. Additionally, costs should be judged in context to determine that they are reasonable and necessary, and detailed budgets must include appropriate budget categories and funds must be allocated appropriately. For the purposes of implementing this program, the amount of funding used to cover these allowable costs, as identified in OMB Circular A-87 Attachment B, may be up to 15 percent of your State's allocation.

Recipients need to ensure that proper documentation is in the file to meet the procurement regulation requirement in 40 CFR part 31 and/or State procurement rules. All grant expenditures are subject to audit for the final determination of allowability of costs.

(6) Application Procedures

a. What Is the Application Process for States?

The process begins with a required Notice of Intent to Apply from the designated lead State Agency. Once the notices are received by EPA, the allocation formula described in Section 4 of this Notice will be used to determine a target budget for each State. EPA plans to inform States of this target budget on or before May 9, 2008 at 11:59 p.m. Eastern Time via e-mail to the contact identified in the Notice of Intent to Apply. Following notification of a target budget, States must prepare the application package in consultation with the EPA Regional Office. The Application Package will contain a program work plan, budget, and required administrative documents as directed in Section 6(c) of this Notice. The full application package must be submitted to the Regional Clean Diesel contact indicated in Section 11 of this Notice on or before June 23, 2008, at 11:59 p.m. Pacific Time. EPA Regional Offices and the Office of Transportation and Air Quality will evaluate applications for compliance with the requirements listed in EPAct of 2005 and this Notice.

Important Dates:

(1) April 24, 2008—Required Notice of Intent to Apply from applicants to EPA.

(2) May 9, 2008—EPA informs applicants of target budget.Start Printed Page 12731

(3) June 23, 2008—State application packages due to EPA Regions.

(4) August 2008—Regional Grant Offices award grants.

(5) September—October 2008—Project period begins.

(6) Quarterly—Post-award monitoring, evaluation and reporting of results of grant.

(7) Annually—Renewal of application.

b. How Do State Agencies Submit the Notice of Intent To Apply?

A template (sample letter) for the Notice of Intent to Apply is available on the National Clean Diesel Campaign Web site at​cleandiesel under the State Program section. Components of the Notice should include (1) the intent to apply for the State Clean Diesel Grant Program, (2) signature of appropriate State official(s) with authority to commit the State (electronic signature via e-mail will be considered officially signed), (3) State's potential ability to match allocation and potential source categories of match, and (4) relevant programmatic and financial contact information (name, address, e-mail and phone). This Notice must be submitted electronically from the State's Commissioner or delegated official to EPA's Office of Transportation and Air Quality at on or before April 24, 2008 at 11:59 p.m. Pacific Time. The subject line of the e-mail should read “Intent to Apply: State Clean Diesel Grant Program—[STATE NAME].”

c. What Should the Application Package Contain?

The application package must contain a work plan narrative and budget narrative in addition to the standard EPA grant application forms. The National Clean Diesel Campaign Web site,​cleandiesel, will include all application materials and/or instructions necessary to complete the forms under the State Program section.

Work plans must contain sufficient detail so that EPA can determine that the proposed work meets the goal of significant reductions in diesel emissions and meets the statutory eligibility requirements and grant conditions. The work plan should include details on fleets or industry sectors the grants or loan program will target initially in year one of the program and a plan or framework to sustain the program for future years. Plans should designate resources (e.g., personnel, contracts, supplies, equipment) for the current budget period and corresponding outputs in quantifiable and measurable results. Work plans should also indicate how the State plans to meet the priority areas outlined in Section 5 of this Notice. A work plan and budget narrative template is available at​cleandiesel under the State Program section.

State Agencies must submit application packages to the appropriate EPA Regional Office on or before June 23, 2008, at 11:59 p.m. Pacific Time. EPA Regional Offices will make awards after review of the application package for the applicable requirements. See Section 11 of this Notice for a list of EPA Regional contacts.

d. Are Quality Assurance and Quality Control (QA/QC) Required for Application?

Pursuant to 40 CFR 31.45, QA/QC plans and procedures may be required if a grantee's project involves environmentally related measurements or data generation.

e. Can State Clean Diesel Grant Funds Be Used With National Clean Diesel Grant Funds?

For fiscal year 2008, States can apply for both the National and State components of National Clean Diesel Programs. State agencies with jurisdiction over transportation or air quality are eligible for funding under the National Clean Diesel Program; the 50 States are eligible for funding under the State Clean Diesel Program. States will need to submit separate applications and distinct work plans for each program. Applications through the National component are awarded through a competitive process and decisions are made separately. In fiscal year 2008, decisions on the National component are likely to follow the award of the State Clean Diesel grants. See​cleandiesel for links to regional competitions under the National Clean Diesel Funding Assistance Program.

(7) Selection Process

For the State Clean Diesel Program, EPA expects to award grants to all eligible States that meet the applicable requirements described in this Notice. As pursuant to Section 793(b)(2)(B) of EPAct of 2005, the process by which the Administrator or delegated authority shall approve or disapprove each application will be as follows. States must substantially comply with the application process outlined in Section 6 of this Notice including the submittal of the Notice of Intent to Apply and the application package. Work plans must also substantially comply with the guidelines and requirements as outlined in Section 5 of this Notice, Use of Funds. EPA will follow EPAct of 2005, Subtitle G Section 793 criteria and this Notice to approve or disapprove applications.

(8) Reporting Requirements

Recipients must submit progress reports and financial reports as required in 40 CFR 31.40 and 31.41 throughout the award period and a final performance report following the expiration of funding and/or prior to renewal of funding.

40 CFR part 31 requires all grantees to submit timely and comprehensive progress reports on the activities funded by the grant. These reports provide EPA with the information it needs to ensure that each grantee is meeting the schedule and commitments contained in the assistance agreement. More importantly, they provide a mechanism for evaluating the environmental progress brought about by the State's Clean Diesel Program, and for reporting to Congress on this progress pursuant to Section 794 of Subtitle G, Diesel Emissions Reduction Program under EPAct of 2005. Regions may request that States submit quarterly reports and a final performance report following the end of the reporting period. Reporting requirements may include actual and estimated air quality and diesel fuel conservation benefits, cost-effectiveness, and cost-benefits. Reporting schedules and submittal dates are to be specified in the individual assistance agreements, and each State will be expected to adhere to its agreed-upon schedule.

States should pay particular attention to the grant and program conditions attached to their award documents. Some are standard conditions required by regulation or policy, others are “special conditions” added by the program which may be specific to the particular region. Compliance with these conditions will be considered as part of the program evaluation process.

(9) Renewal Process

Each year that adequate appropriations are available for State Grant and Loan Programs under Section 793 EPAct of 2005 Subtitle G, States with current programs under this authority will need to follow EPA guidelines on renewing funds. Renewal decisions will be based, in part, on satisfactory performance the previous year on the work plan's stated activities. EPA has established a streamlined process for renewal of existing grants that will include at a minimum, evaluation of submitted quarterly Start Printed Page 12732reports, whether awardees are making adequate progress in meeting their Stated goals, and a revised work plan to identify next year's activities. EPA will provide specific dates and guidelines for the renewal process through a Federal Register Notice as funding is appropriated by Congress. Eligible entities who did not apply in fiscal year 2008 will have an opportunity to participate in the program for following years and may be required to submit a Notice of Intent to Apply. Specific processes and deadlines will be available through subsequent Federal Register Notices.

(10) Resources and Tools

EPA has developed resources and tools for States including technical guidance on the cost-effectiveness of retrofit technologies for on-highway and non-road heavy-duty diesel engines. These resources are available at​cleandiesel.

(11) EPA OTAQ and Regional Clean Diesel Contacts

a. Office of Transportation and Air Quality (Headquarters)—Washington, DC, Jennifer Keller, U.S. EPA, 1200 Pennsylvania Ave., NW., Washington, DC 20460, Mail-Stop: 6405-J. Phone (202) 343-9541, Fax (202) 343-2803,

b. Administrator Address:

U.S. Environmental Protection Agency, Administrator Stephen L. Johnson, 1200 Pennsylvania Ave, NW., Washington, DC 20460.

c. Regional Clean Diesel Contacts

(1) Region I—Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont: Lucy Edmondson, USEPA Region I, EPA New England, One Congress Street, Boston, MA, T: (617) 918-1004; F: (617) 918-0004;

(2) Region II—New Jersey, New York: Melanie Zeman, USEPA Region II, 290 Broadway, 25th floor—Air Programs Branch, New York, NY 10007-1866, T: (212) 637-4022; F: (212) 637-3901;

(3) Region III—Delaware, Maryland, Pennsylvania, Virginia, West Virginia: Bill Jones, USEPA Region III, 1650 Arch Street, Philadelphia, PA 19103, T: (215) 814-2023; F: (215) 814-2101;

(4) Region IV—Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee: Scott Davis, USEPA Region IV, Sam Nunn Atlanta Federal Center, 61 Forsyth Street, SW., Atlanta, GA 30303-8960, T: (404) 562-9127; F: (404) 562-9019;

(5) Region V—Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin: Steve Marquardt, USEPA Region V, 77 West Jackson Blvd., Mail Code A-18J, Chicago, IL 60604, T: (312) 353-3214; F: (312) 886-0617;

(6) Region VI—Arkansas, Louisiana, New Mexico, Oklahoma, Texas: Ruben Casso, USEPA Region VI, 1445 Ross Avenue, Dallax, TX 75202, Mail Code: 6PD-Q, T: (214) 665-6763; F: (212) 665-6762;

(7) Region VII—Iowa, Kansas, Nebraska, Missouri: Alan Banwart, USEPA Region VII, 901 N. 5th Street, Kansas City, KS 66101, T: (913) 551-7819; F: (913) 551-7844;

(8) Region VIII—Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming: Rebecca Russo, USEPA Region VIII, 1595 Wynkoop Street, Denver, CO 80202, T: (303) 312-6757; F: (303) 312-6064;

(9) Region IX—Arizona, California, Hawaii, Nevada: Michael Mann, USEPA Region IX (Air-1), 75 Hawthorne Street, San Francisco, CA 94105, T: (415) 972-3505; F: (415) 947-3581;

(10) Region X—Alaska, Idaho, Oregon, Washington: Wayne Elson, USEPA Region X, 1200 Sixth Avenue, Suite 900, M/S AWT-107, Seattle, WA 98101, T: (206) 553-1463; F: (206) 553-0110;

Start Signature

Dated: February 27, 2008.

Margo Tsirigotis Oge,

Director, Office of Transportation and Air Quality.

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[FR Doc. E8-4702 Filed 3-7-08; 8:45 am]