Skip to Content

Rule

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

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble Start Printed Page 25328

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Notice of final rulemaking (NFR).

SUMMARY:

Today, EPA is taking actions to address the interstate transport of emissions of nitrogen oxides (NOX) and sulfur dioxide (SO2) that contribute significantly to nonattainment and maintenance problems with respect to the national ambient air quality standards (NAAQS) for fine particulate matter (PM2.5) and 8-hour ozone. As one part of today's action, EPA is providing its final response to a petition submitted to EPA by the State of North Carolina under section 126 of the Clean Air Act (CAA). The petition requests that EPA find that SO2 and/or NOX emissions from electric generating units (EGUs) in 13 States are significantly contributing to PM2.5 and/or 8-hour ozone nonattainment and maintenance problems in North Carolina, and requested that EPA establish control requirements to prohibit such significant contribution. The EPA is denying the petition because, in today's action, EPA is promulgating Federal implementation plans (FIPs) for all jurisdictions covered by the Clean Air Interstate Rule (CAIR) to address interstate transport.

The FIPs will regulate EGUs in the affected States and achieve the emissions reductions requirements established by the CAIR until States have approved State implementation plans (SIPs) to achieve the reductions. As the control requirement for the FIPs, EPA is adopting the model trading rules that EPA provided in CAIR as a control option for States, with minor changes to account for Federal rather than State implementation.

Today's action also revises CAIR SIP model trading rules in order to address the interaction between the EPA-administered CAIR FIP trading programs being promulgated today and the EPA-administered CAIR State trading programs that will be created by any State that elects to submit a SIP establishing such a trading program to meet the requirements of the CAIR. In addition, EPA is taking final action on our reconsideration of the definition of “EGU” as it relates to solid waste incinerators.

Today's action also makes revisions to the Acid Rain Program in order to make the administrative appeals procedures, which currently apply to final determinations by the Administrator under the EPA-administered CAIR State trading programs, also apply to the EPA-administered trading programs under the FIP action. In addition, we are making certain minor revisions to the Acid Rain Program that will apply to all affected units.

DATES:

This action is effective on June 27, 2006.

ADDRESSES:

The EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2004-0076. All documents in the docket are listed on the http://www.regulations.gov Web site. Although listed in the index, some information is not publicly available, e.g., confidential business information (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 through http://www.regulations.gov 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) 566-1744 and the telephone number for the Air Docket is (202) 566-1742.

Start Further Info

FOR FURTHER INFORMATION CONTACT:

For general questions concerning today's section 126 action, please contact Carla Oldham, U.S. EPA, Office of Air Quality Planning and Standards, Air Quality Policy Division, C504-05, Research Triangle Park, NC 27711, telephone (919) 541-3347, e-mail at oldham.carla@epa.gov. For general questions concerning today's FIP action, please contact Tom Coda, U.S. EPA, Office of Air Quality Planning and Standards, Air Quality Policy Division, C539-01, Research Triangle Park, NC 27711, telephone (919) 541-3037, e-mail at coda.tom@epa.gov. For legal questions concerning the section 126 action, please contact Steven Silverman, U.S. EPA, Office of General Counsel, Mail Code 2344A, 1200 Pennsylvania Avenue, NW., Washington, DC 20460, telephone (202) 564-5523, e-mail at silverman.steven@epa.gov. For legal questions concerning the FIP action, please contact Sonja Rodman, U.S. EPA, Office of General Counsel, Mail Code 2344A, 1200 Pennsylvania Avenue, NW., Washington, DC 20460, telephone (202) 564-4097, e-mail at rodman.sonja@epa.gov. For questions regarding the cap-and-trade programs and emissions budgets, please contact Meg Victor, U.S. EPA, Office of Atmospheric Programs, Clean Air Markets Division, Mail Code 6204J, 1200 Pennsylvania Avenue, NW., Washington, DC 20460, telephone (202) 343-9193, e-mail at victor.meg@epa.gov. For questions regarding the revisions to the CAIR and Acid Rain Programs, please contact Dwight Alpern, U.S. EPA, Office of Atmospheric Programs, Clean Air Markets Division, Mail Code 6204J, 1200 Pennsylvania Avenue, NW., Washington, DC 20460, telephone (202) 343-9151, e-mail at alpern.dwight@epa.gov.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

I. Does This Action Apply to Me?

Categories and entities potentially regulated by this action include the following:

CategoryNAICS code 1Examples of potentially regulated entities
Industry221112Fossil fuel-fired electric utility steam generating units.
Federal government2 221122Fossil fuel-fired electric utility steam generating units owned by the Federal government.
State/local/Tribal government2 221122Fossil fuel-fired electric utility steam generating units owned by municipalities.
Start Printed Page 25329
921150Fossil fuel-fired electric utility steam generating units in Indian Country.
1 North American Industry Classification System.
2 Federal, State, or local government-owned and operated establishments are classified according to the activity in which they are engaged.

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. To determine whether your facility is affected by this action, you should examine the definitions and applicability criteria in §§ 72.2, 72.6, 72.7, 72.8, and 74.2 for purposes of the Acid Rain Program revisions and §§ 97.102, 97.104, 97.105, 97.202, 97.204, 97.205, 97.302, 97.304, and 97.305 for purposes of the FIP action. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding section under FOR FURTHER INFORMATION CONTACT.

II. Availability of Related Information

The EPA has conducted separate rulemakings that contain actions and information related to today's action. The final “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule)” was published on May 12, 2005 (70 FR 25162) (see also proposal at 69 FR 4566, January 30, 2004; supplemental proposal at 69 FR 32684, June 10, 2004; and notice of data availability at 69 FR 47828, August 6, 2004). The EPA subsequently reconsidered several aspects of the final CAIR (see 70 FR 72268; December 2, 2005 and 70 FR 77101; December 29, 2005) and is taking final action on reconsideration in a separate action today. In addition, the EPA issued a proposal to include Delaware and New Jersey in CAIR for PM2.5 (70 FR 25408, May 12, 2005) and is finalizing that rulemaking today, also in a separate action. Documents related to the CAIR, including the actions on reconsideration and to include Delaware and New Jersey in CAIR for PM2.5, are available for inspection in docket EPA-HQ-OAR-2003-0053 at the address and times given above. The EPA has established a website for the CAIR at http://www.epa.gov/​cleanairinterstaterule or more simply http://www.epa.gov/​cair/​ which also includes information on the section 126 rulemaking. The rulemaking docket for the CAIR contains information and analyses that are relied upon in today's actions. Therefore, EPA is including by reference the entire CAIR record for purposes of the section 126 and FIP rulemakings.

III. Judicial Review

Under CAA section 307(b), judicial review of this final action is available only by filing a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit on or before June 27, 2006. Under CAA section 307(d)(7)(B), only those objections to the final rule that were raised with specificity during the period for public comment may be raised during judicial review. Moreover, under CAA section 307(b)(2), the requirements established by today's final rule may not be challenged separately in any civil or criminal proceedings brought by EPA to enforce these requirements.

Section 307(d)(7)(B)also provides a mechanism for the EPA to convene a proceeding for reconsideration if the petitioner demonstrates that it was impracticable to raise an objection during the public comment period or if the grounds for such objection arose after the comment period (but within the time for judicial review) and if the objection is of central relevance to the rule. Any person seeking to make such a demonstration to EPA should submit a Petition for Reconsideration, clearly labeled as such, to the Office of the Administrator, U.S. EPA, Room 3000, Ariel Rios Building, 1200 Pennsylvania Ave., Washington, DC 20460, with a copy to the Associate General Counsel for the Air and Radiation Law Office, Office of General Counsel, Mail Code 2344A, U.S. EPA, 1200 Pennsylvania Ave., NW., Washington, DC 20460.

Outline

I. Background and Summary of Rule

A. Summary of Rule

B. General Background on PM2.5 and Ozone

1. The PM2.5 Problem

2. The 8-Hour Ozone Problem

3. Other Environmental Effects Associated With SO2 and NOX Emissions

C. What Is the Statutory and Regulatory Background for Today's Action?

1. What Is the “Good Neighbor” Provision?

2. What Is the CAA Section 126 Provision?

3. What Is EPA's Previous Section 126 Rulemaking?

4. What Is the Clean Air Interstate Rule?

5. What Are the Findings of Failure to Submit for the Section 110(a)(2)(D) Plans?

6. What Are the Petitions for Reconsideration of the CAIR?

D. Summary of North Carolina's Section 126 Petition

1. What Sources Does the Petition Target?

2. What Control Remedy Does the Petition Request?

3. What Is the Technical Support for the Petition?

E. What Is the Consent Decree on the Section 126 Rulemaking Schedule?

II. What Is EPA's Legal and Analytical Approach for the Section 126 Petition?

III. What Is EPA's Final Action on the Section 126 Petition?

A. What Is EPA's Final Action With Respect to the 8-Hour Ozone NAAQS?

B. What Is EPA's Final Action With Respect to the PM2.5 NAAQS?

IV. What Is the Federal Implementation Plan for the CAIR?

A. What Is the Legal Framework for the FIPs?

B. What Is the Timing and Scope of the CAIR FIP Actions?

C. What Are the FIP Control Measures?

D. When and How Will EPA Remove the FIP Requirements if EPA Approves a SIP to Meet the CAIR?

V. Emission Reduction Requirements for the CAIR FIP

A. Introduction

B. Regionwide SO2 and NOX Caps

C. State SO2 Emission Budgets

D. State NOX Annual and NOX Ozone Season Emission Budgets

E. State NOX Annual Compliance Supplement Pool

VI. CAIR FIP NOX and SO2 Cap-and-trade Programs for EGUs

A. Purpose of CAIR FIP NOX and SO2 Cap-and-trade Programs and Relationship to the CAIR

B. Relationship of Emissions Trading Programs to Section 126 Relief

C. Abbreviated SIP Revisions Covering Elements of the CAIR FIP Cap-and-trade Programs

D. Overall Structure of the CAIR FIP Cap-and-trade Programs

1. SO2 Annual Program

2. NOX Annual Program

3. NOX Ozone Season Program

E. Sources Subject to the CAIR FIP Cap-and-trade Programs

F. Allocation of NOX Emission Allowances to Sources

1. Schedule for Determining and Recording NOX Allocations

2. Method for Allocating NOX Allowances

G. Allocation of SO2 Allowances to Sources

H. Allowance Banking

I. Incentives for Early Reductions

1. SO2 Annual Program

2. NOX Annual Program

3. NOX Ozone Season Program

J. Monitoring and Reporting Requirements

K. Interactions with Other CAA Programs Start Printed Page 25330

VII. What are the Revisions of the CAIR SIP Rule, Including the CAIR Model Cap-and-trade Rules?

VIII. What Are the Revisions of the Acid Rain Program Regulations?

IX. 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

K. Congressional Review Act

I. Background and Summary of Rule

A. Summary of Rule

In this rule, EPA is taking two final actions related to the interstate transport of emissions of NOX and SO2 that contribute significantly to nonattainment and maintenance problems with respect to the NAAQS for PM2.5 and 8-hour ozone. First, EPA is providing its final response to the petition submitted to EPA by the State of North Carolina under section 126 of the CAA. Second, EPA is promulgating FIPs for all jurisdictions covered by the CAIR. The EPA is also making revisions to the final CAIR to clarify certain provisions, to correct minor errors, and to take final action on reconsideration of the definition of “EGU” as it relates to solid waste incinerators. Finally, EPA is making minor revisions to the Title IV Acid Rain Program.

The North Carolina petition requests that EPA establish control requirements for EGUs in 13 States based on findings that these sources are significantly contributing to PM2.5 and/or 8-hour ozone nonattainment and maintenance problems in North Carolina. (See Petition, Docket No. EPA-HQ-OAR-2004-0076-0002.)

The EPA's response (as well as the petition itself) is based on extensive analyses conducted for the CAIR (70 FR 25162; May 12, 2005). The EPA is denying the petition in full. For sources in States not shown in the final CAIR to be linked to (that is, to significantly contribute to) nonattainment and maintenance problems in North Carolina, the lack of significant contribution to North Carolina is the basis for this denial. For sources in States that are linked to North Carolina under the CAIR for the PM2.5 NAAQS, EPA is denying the petition because, concurrently with the section 126 response, EPA is promulgating FIPs that require elimination of the significant contribution. The FIPs will control the significant transport from sources in States named in the petition as well as from sources in the other CAIR States, in the event that the States do not have timely, approved SIPs meeting the CAIR requirements. The States named in the petition with respect to the PM2.5 NAAQS are: Alabama, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia. Of these, Illinois and Michigan are not linked to North Carolina in the final CAIR.

The States named in the petition with respect to the 8-hour ozone NAAQS are: Georgia, Maryland, South Carolina, Tennessee, and Virginia. There are no States linked to North Carolina under the CAIR for the 8-hour ozone NAAQS because North Carolina is projected to be in attainment in the 2010 baseline for the analyses.

As mentioned above, in today's action, EPA is also promulgating FIPs to address interstate transport of NOX and SO2 under section 110(a)(2)(D) for all jurisdictions that are covered by the CAIR. In the CAIR, EPA determined that 28 States and the District of Columbia contribute significantly to nonattainment of the NAAQS for PM2.5 and/or 8-hour ozone in downwind States. The CAIR explains EPA's basis for determining significant contribution to downwind nonattainment and maintenance problems. In that rule, the EPA required the affected upwind States to revise their SIPs to include control measures to reduce emissions of SO2 and/or NOX. Sulfur dioxide is a precursor to PM2.5 formation, and NOX is a precursor to both ozone and PM2.5 formation.

In an action published on the same day as the final CAIR, EPA proposed to find that Delaware and New Jersey contribute significantly to PM2.5 nonattainment and maintenance problems in downwind States considering these States as a single entity (70 FR 25408; May 12, 2005). These States were included in the final CAIR only with respect to their impacts on downwind 8-hour ozone nonattainment and maintenance problems. Today, in a separate action, EPA is issuing the final rule to include Delaware and New Jersey in the CAIR region for PM2.5. Therefore, today's FIP rule includes emissions reductions requirements for Delaware and New Jersey to address their significant contribution to nonattainment or maintenance problems for the PM2.5 NAAQS.

The FIPs will regulate EGUs in the affected States and achieve the emissions reductions required by the CAIR until States have approved SIPs to achieve the reductions. The CAIR emissions budgets were based on control requirements that are highly cost effective for EGUs.

The EPA intends the CAIR FIPs to address the requirements of section 110(a)(2)(D)(i) to prevent interstate transport that contributes significantly to nonattainment or interferes with maintenance in downwind areas and to provide a Federal backstop for CAIR. In no way should the FIPs for CAIR be viewed as a sign of any concern about States meeting their SIP responsibilities under CAIR. There are no sanctions associated with these FIPs and EPA does not intend for CAIR FIPs to have any negative consequences for the affected States. The EPA is providing FIP approaches that are flexible and intended to provide States options for getting their SIPs in place.

As the control requirement for the FIPs, EPA is adopting the model trading rules that EPA provided in CAIR as a control option for States, with minor changes to account for Federal rather than State implementation. The CAIR FIP NOX and SO2 trading programs provide emissions reductions equal to those required under the CAIR in affected States.

These trading programs provide emissions reductions equal to those required under CAIR in the affected States. The CAIR FIP trading programs are integrated with the EPA-administered State CAIR trading programs that are based on the model rules so that sources can trade with one another under the respective emissions caps. The EPA emphasizes that the FIPs do not limit the options available to States to meet the requirements of the CAIR. We do not intend to record NOX allocations in sources' allowance accounts (or take any other steps to implement FIP requirements that could impact a State's ability to regulate their sources in a different manner) until a year after the CAIR SIP submission deadline.[1] This will allow EPA time to Start Printed Page 25331take rulemaking action to approve timely SIPs before implementation of FIP requirements occurs. In addition, States could replace the FIP requirements at a later time.

In today's action, EPA is also making revisions to the CAIR in order to address the interaction of EPA-administered NOX and SO2 trading programs under the CAIR and under the FIP action. In addition, EPA is making revisions to the CAIR in order to clarify certain provisions and to correct certain minor errors and taking final action on reconsideration of the definition of “EGU” as it relates to solid waste incinerators.

The EPA is also revising the Title IV Acid Rain Program in order to make the administrative appeals procedures (in 40 CFR part 78), which currently apply to final determinations by the Administrator under the EPA-administered State CAIR trading programs, also apply to the EPA-administered trading programs under the FIPs. In addition, EPA is making minor revisions that would apply to all affected units under the Acid Rain Program.

B. General Background on PM2.5 and Ozone

1. The PM2.5 Problem

In an action published on July 18, 1997, we revised the NAAQS for particulate matter (PM) to add new standards for fine particles, using as the indicator particles with aerodynamic diameters smaller than a nominal 2.5 micrometers, termed PM2.5 (62 FR 38652). We established health- and welfare-based (primary and secondary) annual and 24-hour standards for PM2.5. The annual standard is 15 micrograms per cubic meter, based on the 3-year average of annual mean PM2.5 concentrations. The 24-hour standard is 65 micrograms per cubic meter, based on the 3-year average of the annual 98th percentile of 24-hour concentrations. The annual standard is generally considered the more limiting value.[2]

Fine particles are associated with a number of serious health effects including premature mortality, aggravation of respiratory and cardiovascular disease (as indicated by increased hospital admissions, emergency room visits, absences from school or work, and restricted activity days), lung disease, decreased lung function, asthma attacks, and certain cardiovascular problems. (See EPA, Air Quality Criteria for Particulate Matter (EPA/600/P-99/002bF, October 2004) at 9.2.2.3).) The EPA has estimated that attainment of the current PM2.5 standards would prolong tens of thousands of lives and would prevent, each year, tens of thousands of hospital admissions as well as hundreds of thousands of doctor visits, absences from work and school, and respiratory illnesses in children.

Individuals particularly sensitive to fine particle exposure include older adults, people with heart and lung disease, and children. More detailed information on health effects of fine particles can be found on EPA's Web site at: http://www.epa.gov/​ttn/​naaqs/​standards/​pm/​s_​pm_​index.html.

The secondary or welfare-based PM2.5 standards are designed to protect against major environmental effects caused by PM such as visibility impairment, soiling, and materials damage.

As discussed in other sections of this preamble, SO2 and NOX emissions both contribute to fine particle concentrations. In addition, NOX emissions contribute to ozone concentrations, described in the next section.

The PM2.5 ambient air quality monitoring for the 2001-2003 period shows that areas violating the standards are located across much of the eastern half of the United States and in parts of California and Montana. The EPA published the PM2.5 attainment and nonattainment designations on January 5, 2005 (70 FR 944) and issued supplemental amendments on April 14, 2005 (70 FR 19844).

2. The 8-Hour Ozone Problem

In an action published on July 18, 1997, we promulgated identical revised primary and secondary ozone standards that specified an 8-hour ozone standard of 0.08 parts per million (ppm). Specifically, under the standards, the 3-year average of the fourth highest daily maximum 8-hour average ozone concentration may not exceed 0.08 ppm. In general, the revised 8-hour standards are more protective of public health and the environment and more stringent than the pre-existing 1-hour ozone standards.

Short-term (1- to 3-hour) and prolonged (6-to 8-hour) exposures to ambient ozone have been linked to a number of adverse health effects. At sufficient concentrations, short-term exposure to ozone can irritate the respiratory system, causing coughing, throat irritation, and chest pain. Ozone can reduce lung function and make it more difficult to breathe deeply. Breathing may become more rapid and shallow than normal, thereby limiting a person's normal activity. Ozone also can aggravate asthma, leading to more asthma attacks that may require a doctor's attention and the use of additional medication. Increased hospital admissions and emergency room visits for respiratory problems have been associated with ambient ozone exposures. Longer-term ozone exposure can inflame and damage the lining of the lungs, which may lead to permanent changes in lung tissue and irreversible reductions in lung function. A lower quality of life may result if the inflammation occurs repeatedly over a long time period (such as months, years, or a lifetime). There is also recent epidemiological evidence suggesting that there may be a correlation between short-term ozone exposure and premature mortality.

People who are particularly susceptible to the effects of ozone include people with respiratory diseases, such as asthma. Those who are exposed to higher levels of ozone include adults and children who are active outdoors.

In addition to causing adverse health effects, ozone affects vegetation and ecosystems, leading to reductions in agricultural crop and commercial forest yields; reduced growth and survivability of tree seedlings; and increased plant susceptibility to disease, pests, and other environmental stresses (e.g., harsh weather). In long-lived species, these effects may become evident only after several years or even decades and have the potential for long-term adverse impacts on forest ecosystems. Ozone damage to the foliage of trees and other plants can also decrease the aesthetic value of ornamental species used in residential landscaping, as well as the natural beauty of our national parks and recreation areas. More detailed information on health effects of ozone can be found at the following EPA Web site: http://www.epa.gov/​ttn/​naaqs/​standards/​ozone/​s_​o3_​index.html.

Presently, wide geographic areas, including most of the nation's major population centers, experience ozone levels that violate the NAAQS for 8-hour ozone. These areas include much of the eastern part of the United States and large areas of California. The EPA published the 8-hour ozone attainment and nonattainment designations in the Federal Register on April 30, 2004 (69 FR 23858).Start Printed Page 25332

3. Other Environmental Effects Associated With SO2 and NOX Emissions

In addition to the enumerated human health and welfare benefits resulting from reductions in ambient levels of PM2.5 and ozone, reductions in NOX and SO2 will contribute to substantial visibility improvements in many parts of the eastern United States. Reductions in these pollutants will also reduce acidification and eutrophication of water bodies in the region. In addition, reducing emissions of NOX and SO2 from EGUs can be expected to reduce emissions of mercury. Reduced mercury emissions in turn may reduce mercury loadings in lakes and thereby potentially decrease both human and wildlife exposure to fish containing mercury.

C. What Is the Statutory and Regulatory Background for Today's Action?

1. What Is the “Good Neighbor” Provision?

Following promulgation of new or revised NAAQS, the CAA requires all areas, regardless of their designation as attainment, nonattainment, or unclassifiable, to submit SIPs containing provisions specified under section 110(a)(2). Among these requirements are those specified by the so-called “good neighbor” provision section 110(a)(2)(D) which addresses interstate transport of air pollution.

Section 110(a)(2)(D) requires that a SIP contain adequate provisions—

(i) Prohibiting, consistent with the provisions of this title, any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will—

(I) Contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to [any] national primary or secondary ambient air quality standard, or

(II) Interfere with measures required to be included in the applicable implementation plan for any other State under part C to prevent significant deterioration of air quality or to protect visibility.

(ii) Insuring compliance with the applicable requirements of sections 126 and 115 (relating to interstate and international pollution abatement);

Section 126 is discussed in the following section and section II of this preamble explains the relationship between CAA sections 110 and 126 with respect to our final response to the section 126 petition and the CAIR FIPs.

2. What Is the CAA Section 126 Provision?

Subsection (a) of section 126 requires, among other things, that SIPs require major proposed new (or modified) stationary sources to notify nearby States for which the air pollution levels may be affected by the fact that such sources have been permitted to commence construction. Subsection (b) provides:

Any State or political subdivision may petition the Administrator for a finding that any major source or group of stationary sources emits or would emit any air pollutant in violation of the prohibition of section 110(a)(2)(D)[(i)] [of] this section* * *.

Subsection (c) of section 126 states that—

[I]t shall be a violation of this section and the applicable implementation plan in such State [in which the source is located or intends to locate]—

(1) For any major proposed new (or modified) source with respect to which a finding has been made under subsection (b) to be constructed or to operate in violation of this section and the prohibition of section 110(a)(2)(D)[(i)] [3] [of] this section, or

(2) for any major existing source to operate more than three months after such finding has been made with respect to it.

However, subsection (c) further provides that EPA may permit the continued operation of such major existing sources beyond the 3-month period, if such sources comply with EPA-promulgated emissions limits within 3 years of the date of the finding.

3. What Is EPA's Previous Section 126 Rulemaking?

The EPA has previously taken action under section 126 to address interstate ozone transport (64 FR 28250; May 25, 1999 and 65 FR 2674; January 18, 2000). Because there are many parallels between that earlier action and today's rule, we briefly discuss our earlier action here.

Like the present rulemaking, EPA's previous section 126 rulemaking, dealing with interstate transport of NOX, occurred essentially in conjunction with an EPA rulemaking dealing with interstate transport of the same pollutants, the NOX SIP Call (62 FR 60318; November 7, 1997). As in today's rule, EPA concluded that section 126 and section 110(a)(2)(D)(i) are integrally connected (due to the reference to the section 110(a)(2)(D)(i) prohibition found in section 126 (b)). Thus, the interstate transport problem at issue could be addressed under either provision, and once the underlying section 110(a)(2)(D)(i) SIP deficiency is eliminated, there no longer is a basis for EPA to make a positive finding under section 126. (See sections II and III below for a more detailed discussion.) In the earlier rulemaking, we therefore concluded that emissions reductions sufficient to eliminate a section 110(a)(2)(D) SIP deficiency would also be sufficient to satisfy section 126.

The NOX SIP Call required SIP revisions eliminating the amount of emissions that contribute significantly to nonattainment in downwind States, the amount of emissions reductions corresponding to the quantity of emissions that could be eliminated by the application of highly cost-effective controls on specified sources in each upwind State. The section 126 remedy consequently called for the same set of highly cost-effective controls for the section 126 source categories, based on the record of the NOX SIP Call. We are adopting this same conceptual approach in today's rulemaking.

There are also parallels between our earlier section 126 action and this action with regard to timing of actions in the section 126 proceeding and in the closely-related interstate transport proceeding under section 110(a)(2)(D)(i). Because a section 126 finding turns on the existence of a section 110(a)(2)(D)(i) deficiency, in the May 1999 Section 126 Rule, we determined which petitions had technical merit, but we stopped short of granting the findings sought by the petitions. Instead, we stated that because we had promulgated the NOX SIP Call, as long as an upwind State remained on track to comply with that rule, EPA would defer making the section 126 findings (See 64 FR 28271-28272). Later judicial action staying the NOX SIP Call rule resulted in EPA granting the section 126 petitions at issue, but the new rule retained the basic linkage between section 126 and section 110(a)(2)(D)(i) by providing that EPA would withdraw the section 126 findings upon EPA approval of a SIP satisfying the emission reduction requirements of the NOX SIP Call rule or upon EPA's promulgation of a FIP that achieved the emissions reductions. [See 65 FR at 2683 and Appalachian Power v. EPA, 249 F. 3d 1032, 1039 (D.C. Cir., 2001).] Similarly, in our proposal on the North Carolina section 126 petition, we proposed to deny the section 126 petition if we approved SIPs which satisfied the emission reduction requirements of the CAIR, or if we promulgated a FIP which included the emission reduction requirements of the CAIR. (In today's final rule, we are denying the petition because we are promulgating FIPs concurrently with the final section 126 response, which FIPs eliminate the significant Start Printed Page 25333contribution from upwind sources to North Carolina.)

Finally, in the earlier section 126 rule, EPA adopted as a remedy for section 126 a Federal NOX cap-and-trade program patterned after the model NOX cap-and-trade program that EPA developed for States as an option to meet their NOX SIP Call requirements. See 65 FR 2686. The EPA proposed the same approach for the North Carolina section 126 petition, in the event that EPA granted the petition.

4. What Is the Clean Air Interstate Rule?

The EPA developed the CAIR to address interstate pollution transport with respect to the newly adopted PM2.5 and 8-hour ozone NAAQS.

In the CAIR, based on air quality modeling analyses and cost analyses, EPA concluded that SO2 and NOX emissions in certain States in the eastern part of the country, through the phenomenon of air pollution transport,[4] contribute significantly to PM2.5 and/or 8-hour ozone nonattainment and maintenance problems in downwind States. The CAIR establishes emission reduction requirements for the affected upwind States under CAA section 110(a)(2)(D)(i). The affected States and the District of Columbia have until September 11, 2006 to adopt and submit SIP revisions to achieve these required reductions. The SIP revision must contain measures that will assure that sources in the State reduce their SO2 and/or NOX emissions sufficiently to eliminate the amounts of SO2 and NOX that contribute significantly to nonattainment downwind. Reducing upwind precursor emissions will assist the downwind PM2.5 and 8-hour ozone areas in achieving and maintaining the NAAQS. Moreover, attainment will be achieved in a more equitable, cost-effective manner than if each nonattainment area attempted to achieve attainment by implementing local emissions reductions alone. The EPA specified that the CAIR emissions reductions be implemented in two phases. The first phase of NOX reductions starts in 2009 (covering 2009-2014) and the first phase of SO2 reductions starts in 2010 (covering 2010-2014); the second phase of reductions for both NOX and SO2 starts in 2015 (covering 2015 and thereafter). The emissions reduction requirements are based on controls that are known to be highly cost effective for EGUs; however, States have the flexibility to determine what measures to adopt to achieve the necessary reductions. In the CAIR, EPA provided model SO2 and NOX trading programs for EGUs that States can choose to adopt to meet the emissions reduction requirements in a flexible and highly cost-effective manner.

With the inclusion of Delaware and New Jersey in the CAIR PM2.5 region, EPA estimates that the CAIR will reduce SO2 emissions by 3.6 million tons in 2010 and by 3.9 million tons in 2015; and will reduce annual NOX emissions by 1.2 million tons in 2009 and by 1.5 million tons in 2015. (These numbers reflect the annual SO2 and NOX requirements.) If all these States choose to achieve these reductions through EGU controls, then EGU SO2 emissions in the affected States would be capped at 3.7 million tons in 2010 and 2.6 million tons in 2015; [5] and EGU annual NOX emissions would be capped at 1.5 million tons in 2009 and 1.3 million tons in 2015.

Based on the promulgated CAIR (70 FR 25162), EPA estimates that the required SO2 and NOX emissions reductions would, by themselves, bring into attainment 52 of the 79 counties that are otherwise projected to be in nonattainment for PM2.5 in 2010, and 57 of the 74 counties that are otherwise projected to be in nonattainment for PM2.5 in 2015. The EPA further estimates that the required NOX emissions reductions would, by themselves, bring into attainment 3 of the 40 counties that are otherwise projected to be in nonattainment for 8-hour ozone in 2010, and 6 of the 22 counties that are projected to be in nonattainment for 8-hour ozone in 2015. In addition, the CAIR will improve PM2.5 and 8-hour ozone air quality in the areas that would remain in nonattainment for those two NAAQS after implementation of the CAIR. Because of CAIR, the States with those remaining nonattainment areas will find it less burdensome and less expensive to reach attainment by adopting additional local controls. The CAIR will also reduce PM2.5 and 8-hour ozone levels in attainment areas, providing significant health and environmental benefits in all areas of the eastern United States.

For a more complete description of the CAIR and its impacts, the reader is encouraged to review the preamble to the CAIR.

5. What Are the Findings of Failure To Submit for the Section 110(a)(2)(D) Plans?

In a final rule published on April 25, 2005 (70 FR 21147), we made national findings that States have failed to submit SIPs required under section 110(a)(2)(D) to address interstate transport with respect to the 8-hour ozone and PM2.5 NAAQS.

The April 25, 2005 findings started a 2-year clock for EPA to promulgate a FIP to address the requirements of section 110(a)(2)(D). Under section 110(c)(1), EPA may issue a FIP any time after such findings are made and must do so unless a SIP revision correcting the deficiency is approved by EPA before the FIP is promulgated. For States affected by CAIR, an approved SIP meeting the CAIR requirements would satisfy the requirement and turn off the FIP clock. As discussed below in section IV, EPA is today promulgating FIPs for States affected by the CAIR. However, EPA intends to withdraw the FIP in a State in coordination with approval of a SIP for the State that meets the CAIR requirements.

The findings do not start a sanctions clock pursuant to section 179 because the findings do not pertain to a part D plan for nonattainment areas required under section 110(a)(2)(I) and because the action is not a SIP Call pursuant to section 110(k)(5).

6. What Are the Petitions for Reconsideration of the CAIR?

Following publication of the final CAIR, EPA received twelve petitions requesting reconsideration of certain aspects of the final rule. The EPA considered all issues raised in the petitions and decided to reconsider six issues. In the notice of proposed rulemaking for this rule, EPA announced its decision to reconsider one issue: the definition of “EGU” as it relates to certain solid waste incineration units. Subsequently, on December 2, 2005 (70 FR 72268), and December 29, 2005 (70 FR 77101), EPA published in the Federal Register notices announcing its decisions to reconsider five additional aspects of CAIR and requesting comment on those issues.

As part of this rule, EPA is taking final action on reconsideration of the definition of “EGU” as it relates to certain solid waste incineration units. As explained in sections VI.E and VII below, EPA has revised the definition of EGU to establish a specific exemption for certain solid waste incineration units.

In a separate notice signed today, EPA is taking final action on the five Start Printed Page 25334additional aspects of CAIR for which EPA granted petitions for reconsideration. The EPA also is taking final action today to deny the remaining issues raised in the twelve petitions for reconsideration. These actions are discussed in greater detail in the preamble for the notice of final action on reconsideration, titled “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule): Reconsideration” and all related documents are available in the docket for the CAIR (EPA-HQ-OAR-2003-0053).

D. Summary of North Carolina's Section 126 Petition

1. What Sources Does the Petition Target?

The North Carolina petition requests reductions of certain emissions from large EGUs located in 13 States. With respect to the PM2.5 NAAQS, the petition requests that EPA find that NOX and SO2 emissions from large EGUs in 12 States (Alabama, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia) are significantly contributing to nonattainment in, or interfering with maintenance by, North Carolina. With respect to the 8-hour ozone NAAQS, the petition requests that EPA find that NOX emissions from large EGUs in 5 States (Georgia, Maryland, South Carolina, Tennessee, and Virginia) are significantly contributing to nonattainment in, or interfering with maintenance by, North Carolina (Petition, p.1).

The petition defines the term “EGUs” as all facilities meeting the criteria described in the proposal for the CAIR. (See 69 FR 4566, 4610; January 30, 2004.) In the proposal for the CAIR, we defined EGUs as “fossil-fuel fired boilers and turbines serving an electric generator with a nameplate capacity of greater than 25 megawatts (MW) producing electricity for sale.” (Id.) (See sections VI.E. and VII of today's preamble for clarification of the EGU definition.)

2. What Control Remedy Does the Petition Request?

In its petition, North Carolina states that compliance with the NOX and SO2 emissions budgets in the proposal for the CAIR would satisfy the requirements of the petition. These emissions budgets were based on controls that are highly cost effective for EGUs [the highly cost effective control metric being a component of determining which emissions contribute significantly (see State of Michigan v. EPA, 213 F.3d 663, 674-80 (D.C. Cir., 2000) (upholding consideration of cost as an aspect of significant contribution)]. North Carolina also states that it does not oppose the flexibility discussed by EPA (69 FR at 4622) to allow equivalent reductions from other source categories in given States, so long as those reductions are real and enforceable (Petition, p. 24).

In the CAIR, EPA provided model NOX and SO2 cap-and-trade programs for EGUs as control options for States to choose to meet the CAIR emissions reductions requirements. The trading programs allow interstate trading among sources in all States subject to the CAIR that adopt the programs. In its petition, North Carolina said it recognizes the value of allowing sources flexibility to reduce their emissions in the most cost-effective manner consistent with the statute. However, North Carolina expressed concerns about a regional trading program (Petition, pp. 25-28). We address this issue below in sections II and VI.

3. What Is the Technical Support for the Petition?

To support its claim that EGUs outside North Carolina are contributing significantly to nonattainment and maintenance problems in the State, North Carolina relies largely on EPA's technical analyses for the proposed CAIR. Therefore, as discussed above, the petition targets sources in the same States that EPA linked to North Carolina in the proposed CAIR. As corroborative support, North Carolina cites analyses conducted by the Southern Appalachian Mountains Initiative (SAMI) on PM2.5 transport, North Carolina's further evaluation of the SAMI's analyses, as well as back trajectory analyses performed by the North Carolina Division of Air Quality from PM2.5 monitors in two counties. (See Petition, pp. 13-17.)

E. What Is the Consent Decree on the Section 126 Rulemaking Schedule?

On March 19, 2004, EPA received a petition from the State of North Carolina filed under CAA section 126. Section 126(b) requires EPA to make the requested finding, or to deny the petition, within 60 days of receipt. It also requires EPA to provide a public hearing before acting on the petition. In addition, EPA's action under section 126 is subject to the procedural requirements of section 307(d) of the CAA. [See section 307(d)(2)-(5).] One of these requirements is that EPA conduct notice-and-comment rulemaking. Section 307(d)(10) provides for a time extension, under certain circumstances, for rulemakings subject to that provision. Specifically, it allows statutory deadlines that require promulgation in less than 6 months from proposal to be extended to not more than 6 months from proposal to afford the public and the Agency adequate opportunity to carry out the purposes of section 307(d). In an action published on May 26, 2004 (69 FR 30038), EPA extended the deadline for EPA to take action on the North Carolina petition by the full 6 months, to November 18, 2004.

On February 17, 2005, the State of North Carolina and the citizen's group Environmental Defense filed complaints against EPA seeking to compel EPA to take action on the State's section 126 petition: State of North Carolina v. Johnson, No. 5:05-CV-112 (E.D. N.C.) and Environmental Defense v. Johnson, No. 5:05-CV-113 (E.D. N.C.). The EPA, North Carolina, and Environmental Defense filed a proposed consent decree that would establish a schedule for EPA to act on the petitions. Pursuant to CAA section 113(g), the EPA solicited comments on the proposed consent decree, by notice dated March 2, 2005 (70 FR 10089). The comment period closed April 1, 2005 without EPA receiving negative comment. On May 9, 2005, the court entered a slightly modified version of the consent decree.

The schedule in the consent decree required EPA to sign a proposal to grant or deny the petition by August 1, 2005, a date EPA met. (See 70 FR 49746.) The consent decree also required EPA to hold a public hearing on the proposal during the week of September 12 in North Carolina, and EPA held hearings in Research Triangle Park, North Carolina and Washington, DC during that week. The EPA must also take final action to grant or deny the petition by March 15, 2006, and is doing so in this rule. With the signature of today's final response to the petition, EPA has thus fulfilled all the deadlines and provisions of the consent decree.

II. What Is EPA's Legal and Analytical Approach for the Section 126 Petition?

For the PM2.5 NAAQS, EPA proposed to deny the petition with respect to sources in any State having an approved SIP meeting the CAIR emissions reductions requirements, and with respect to sources in any State for which EPA promulgated a FIP with those same emission reductions requirements. In either case, there would no longer be a violation of the prohibition in section 110(a)(2)(D)(i). Since a violation of that prohibition is a condition precedent for granting a section 126 petition, EPA Start Printed Page 25335necessarily would deny the petition. (See 70 FR at 49716-49717.)

A number of commenters disagreed with EPA's approach. In their view, section 126 guarantees a particular result: reductions of emissions from designated upwind sources linked to North Carolina nonattainment or maintenance problems, which reductions are to occur within three years.

In the commenters' view, if an approved SIP or a FIP does not provide this result within the three year time frame stated in section 126(c), then EPA must grant the petition. Thus, the argument goes, EPA must find that certain sources significantly contribute to nonattainment problems in North Carolina regardless of whether there is a current violation of the section 110(a)(2)(D)(i) prohibition. The commenters maintain that the statute, case-law, and past EPA practice all compel their interpretation.

EPA disagrees. In our view, section 126 provides a mechanism forcing EPA to act, but does not force adoption of controls beyond those necessary to remove the underlying SIP deficiency which violates the prohibition of section 110(a)(2)(D)(i). In essence, section 126 provides States a means to force EPA to take action to reduce specific emissions when EPA has not taken the actions required by section 110(a)(2)(D)(i) to address significant contribution to downwind receptors, but does not force further action. It follows, therefore, that once EPA has taken action to eliminate the SIP deficiencies by approving SIPs which implement CAIR (i.e., which eliminate the significant contribution), or itself promulgates a CAIR FIP for states with SIP deficiencies, there is no longer a cause of action under section 126.[6]

This interpretation is consistent with the text of the statute, which links action under section 126 inextricably with the existence of an underlying section 110(a)(2)(D)(i) SIP deficiency: “[a]ny State * * * may petition the Administrator for a finding that any major source or group of stationary sources emits * * * any air pollutant in violation of the prohibition of section 110(a)(2)(D)[(i)][7] o[f] this section” (emphasis added). Case law likewise makes clear that EPA's determination of whether or not to grant a section 126 petition turns on whether SIPs are in violation of section 110(a)(2)(D)(i). Appalachian Power v. EPA, 249 F.3d 1032, 1045-46 (D.C. Cir. 2001). Similarly, in the rulemaking dealing with a section 126 petition in circumstances most analogous to those here (EPA's response to the Northeastern states' petition regarding interstate transport of ozone precursors, issued roughly contemporaneously with the NOX SIP Call), EPA stated that it “interprets section 126 to provide that a source is emitting in violation of the prohibition of section 110(a)(2)(D)(i) where the applicable SIP fails to prohibit (and EPA has not remedied this failure through a FIP) a quantity of emissions from that source that EPA has determined contributes significantly to nonattainment or interferes with maintenance in a downwind [S]tate” (64 FR at 28272; May 25, 1999). Thus, “[a]n upwind State and EPA may remedy this excessive interstate transport of air pollutants through adoption and approval of a SIP revision barring the emission of such pollutants. Alternatively, a downwind State and EPA may remedy this excessive interstate transport of air pollutants through the State petitioning EPA under section 126 and EPA regulating the sources directly” (65 FR 2680; January 18, 2000).

Commenters argued, however, that the reference in section 126(b) and (c) to “the prohibition of section 110(a)(2)(D) [(i)]” must be to the functional prohibition in section 110(a)(2)(D)(i), by which they mean a cessation of emissions that contribute significantly to nonattainment in a downwind state. Under this reading, a remedy under section 126 must entail emission reductions, not merely SIP revisions. EPA agrees that the prohibition referred to is the functional prohibition on significant contribution to downwind states, and therefore, for example, EPA cannot defer granting a section 126 petition merely because a state is under a legal obligation to revise its SIP. Appalachian Power, 249 F.3d at 1044. However, adoption of a SIP implementing CAIR (or EPA enacting a CAIR FIP) addresses the functional prohibition of section 110(a)(2)(D)(i) by eliminating the SIP deficiency triggering the prohibition through requirements on sources to eliminate the significant contribution to downwind receptors. Moreover, to the extent the commenters are maintaining that the ‘functional prohibition in section 110(a)(2)(D)(i)’ refers to some specific environmental result, such as North Carolina coming into attainment (see Comments of North Carolina Attorney General at 17), we disagree. EPA interprets “significant contribution” in the CAIR and in this proceeding to include both an emission component and a feasibility/cost-effectiveness component, so that what is prohibited are specific levels of emissions which can feasibly be reduced in a highly cost-effective manner. See also 65 FR at 2677 (applying cost effectiveness component of the significant contribution standard in granting a section 126 petition). Adoption of a CAIR SIP (or EPA adopting a CAIR FIP) fully addresses this prohibition.

In the same vein, other commenters argued that sections 110(a)(2)(D) and 126 are independent provisions, and that EPA is vitiating that independence by substituting a section 110 remedy for the section 126 remedy, the implication again being that section 126 commands an environmental result which must be effectuated once the section 110(a)(2)(D) prohibition is violated. EPA disagrees with the premise of the comment. Although the two provisions unquestionably may be applied independently, they are also closely linked in that a violation of the prohibition in section 110(a)(2)(D)(i) is a condition precedent for action under section 126 and, critically, that significant contribution is construed identically for purposes of both provisions (since the identical term naturally is interpreted as meaning the same thing in the two linked provisions). See Appalachian Power, 249 F. 3d at 1049-50. If EPA or a State has adopted provisions that eliminate the significant contribution to downwind states, then there simply is no violation of the section 110(a)(2)(D) prohibition. Moreover, since we interpret significant contribution to mean the same thing under both provisions, relief under section 126 to eliminate significant contribution must in any case mean eliminating those emissions which can feasibly be controlled in a highly cost-effective manner as defined in the CAIR. Put another way, requiring additional reductions would result in eliminating emissions which do not contribute significantly, an action beyond the scope of section 126.

Commenters further argued that relief under section 126 must occur within 3 years and therefore that the CAIR emission reductions do not satisfy Start Printed Page 25336section 126 because although those reductions commence within 3 years they are phased in over a longer time. These comments assume that EPA must make the section 126 findings, however, in which case sources covered by the petition would indeed have to eliminate significant contribution within 3 years. But as just explained, a condition precedent to making section 126 findings is the existence of an underlying SIP deficiency, which EPA has chosen to address directly through action under section 110(a)(2)(D). Moreover, this choice is appropriate. As a result of today's action, not only will there be an approved SIP or a CAIR FIP in place requiring emission reductions which eliminate the significant contribution to North Carolina, but these reductions occur within 3 years, commencing in 2009 when NOX controls (a PM2.5 precursor) are required (70 FR at 49718). This is similar to EPA's decisions in the parallel NOX SIP Call/section 126 rulemakings where EPA initially deferred making section 126 findings because there would be approved SIPs in place requiring elimination of significant contribution to downwind States with emission reductions to commence (although not be concluded) within the 3-year period (64 FR at 28275).[8] When the NOX SIP Call rule was judicially stayed, it was no longer appropriate to defer making the section 126 findings because there were no longer “explicit and expeditious deadlines for compliance with the NOX SIP Call” (65 FR 2680). Here, the certainty of SIP submissions (or action under a CAIR FIP) coupled with explicit and certain compliance deadlines calling for emissions reductions commencing in the same timeframe as the section 126 3-year window make it appropriate for EPA to utilize the section 110(a)(2)(D) remedy.

We note further that in arguing that EPA must order all emissions reductions from designated sources which contribute to North Carolina PM2.5 nonattainment to occur within 3 years, commenters again ignore the feasibility/cost-effectiveness prong of the significant contribution test. EPA has found that the CAIR emissions reductions are highly cost effective based on the compliance schedule established in that rule, and further found that that compliance schedule is needed for reasons of technical feasibility (70 FR at 25195-25229). Requiring those reductions to occur on a more rapid timeframe would thus require considerably more than merely eliminating significant contribution, and so would exceed the scope of section 126. Moreover, commenters presented no independent analysis showing that emission reductions from the designated sources could be obtained cost-effectively (or even feasibly) within 3 years.[9]

Commenters also argued that because a SIP (or the CAIR FIP) could (or in the case of the FIP, would) reflect a trading component, such a scheme would not satisfy section 126. The legal argument is that section 126 requires emission reductions to come from designated sources, a result not possible to guarantee under a trading regime. More basically, commenters stated that under a trading regime there was no certainty that there would be reduction of emissions to North Carolina, so that at the least, trading should be limited to sources designated in the petition as contributing significantly to nonattainment in North Carolina. These arguments again assume that EPA must grant the petition, which is not our view so long as the underlying SIP deficiencies are rectified, as explained above. The arguments also do not address the critical point that availability of trading options are part of the basis for EPA's findings that reductions are highly cost effective, and hence are an element of the finding that emissions contribute significantly to nonattainment.[10] The approach here is also consistent with the one EPA adopted initially in the NOX SIP Call/section 126 rulemaking, where EPA deferred granting section 126 petitions based on the existence of the NOX SIP Call remedy, which included a trading scheme across the entire region. 63 FR at 56309-320; see generally 64 FR at 28307-309 (appropriateness of trading as a section 126 remedy). Indeed, as noted earlier, EPA adopted a trading scheme when granting that earlier section 126 petition. See 65 FR at 2686; see also Appalachian Power, 249 F. 3d at 1039 noting that EPA's section 126 rule included a cap-and-trade program. Further discussion of issues relating to the trading regime are found in section VI.B of this preamble.

Some commenters also challenged EPA's basis for proposing to deny the petition with respect to ozone. EPA did so because no area in North Carolina is projected to be in nonattainment with the ozone 8-hour NAAQS in the CAIR base case and therefore upwind states would (by definition) not be contributing significantly to North Carolina nonattainment (70 FR at 25162). Commenters argued that EPA is obligated to consider current conditions, and not base findings on future conditions, because some areas in North Carolina are presently in nonattainment. They base this argument on the use of the present tense in section 126(b) (“emits or would emit any air pollutant in violation of the prohibition of section 110(a)(2)(D)[(i)]”), plus equitable consideration of the need to address existing pollution problems.

EPA disagrees. With respect to the statutory language, both section 126(b) and 110(a)(2)(D)(i) do not specify the time by which EPA must evaluate significance of contribution. Indeed, section 110(a)(2)(D)(i) is written exclusively in the future tense, and the reference to “emits or would emit” in section 126(b) is naturally read as making clear that controls can apply to both existing and new sources. See Appalachian Power, 249 F. 3d at 1056-57. Moreover, it makes sense for significant contribution determinations to be based on conditions at the time at which potential controls are contemplated. Suppose, for example, that due to future rules (a clutch of effective mobile source controls, for example) it can reliably be predicted that an area will be in attainment although it is not so presently. We do not believe that the statute mandates immediate assessment of interstate contribution to address a nonattainment problem that will no longer exist at the time controls on the interstate emissions would be implemented. EPA thus has consistently adopted this future-looking approach when assessing interstate transport, and believes it reasonable to continue doing so here. See 63 FR at 57375 (adopting this approach in NOX SIP Call). Start Printed Page 25337

Finally, commenters argued that EPA had ignored the statutory requirement in section 110(a)(2)(D)(i) (incorporated within section 126(b) and (c)) to prohibit interstate transport that “interefere[s] with maintenance” by North Carolina of the 8-hour ozone NAAQS. They further stated that a number of North Carolina counties projected to attain the ozone NAAQS are modeled to do so by narrow margins that should be deemed to fall within the interfere with maintenance test based on modeling uncertainties and historic ozone variability patterns in the counties in question.

EPA stated in the CAIR rule that it would apply the interfere with maintenance provision in section 110(a)(2)(D) in conjunction with the significant contribution to nonattainment provision and so did not use the maintenance prong to separately identify upwind States subject to CAIR (70 FR at 25193). EPA did this so as not to give the interfere with maintenance requirement greater weight than the significant contribution requirement, thus avoiding giving greater weight to the potentially lesser environmental effect. (See CAIR Response to Comments Response at p. 63.) EPA's reading also promotes a reasonable balance between controls on upwind states and in-state controls, an important objective in applying the section 110 and 126 interstate transport provisions. (See 70 FR at 25193.) Suppose, for example, that a downwind area is projected to attain by the effective date of potential section 110(a)(2)(D) (or section 126(b)) controls, so that those controls are unnecessary to prevent significant contribution to nonattainment. Applying controls on upwind sources in these circumstances not only could be environmentally unnecessary, but could even create a perverse incentive for downwind states to increase local emissions.[11]

We note further that even if (against our view) the interference with maintenance standard were to be applied in cases where there is no evidence of significant contribution to nonattainment, EPA would still interpret the standard as requiring consideration of cost and technical feasibility since EPA already considers these factors as aspects of significant contribution, and it would make little sense to interpret the interfere with maintenance language (the lesser environmental effect) as allowing reductions without considering those same factors. See also 63 FR 57370 (interfere with maintenance must also reflect significant contribution to be cognizable under section 110 remedies for interstate transport. Moreover, given that maintenance addresses the less significant environmental effect, EPA would likely require that emission reductions be no less highly cost effective than those which significantly contribute to nonattainment, and might require that reductions be even more highly cost effective. It is thus difficult to see that further emission reductions than those already required under CAIR would be warranted.

III. What Is EPA's Final Action on the Section 126 Petition?

In determining whether emissions from EGUs in the States named in the North Carolina section 126 petition contribute significantly to 8-hour ozone and/or PM2.5 nonattainment and maintenance problems in North Carolina, EPA is relying on the conclusions drawn in the final CAIR. As discussed in section I above, North Carolina based its petition in large part on the analyses for the proposed CAIR—identifying EGUs in the same upwind States that EPA proposed to link to North Carolina. The EPA conducted new modeling analyses using updated emissions inventories for the final CAIR. The EPA also applied a different value for the threshold contribution level for the air quality portion of the significant contribution determination for PM2.5 in the final CAIR. Therefore, the upwind State-to-downwind State linkages differed in the final CAIR from the proposal.

A. What Is EPA's Final Action With Respect to the 8-Hour Ozone NAAQS?

In its petition, North Carolina requested that EPA make findings that large EGUs in Georgia, Maryland, South Carolina, Tennessee, and Virginia contribute significantly to nonattainment in, or interfere with maintenance by, North Carolina with respect to the 8-hour ozone NAAQS. In the proposed CAIR, EPA linked these States to 8-hour ozone air quality problems in Mecklenburg County, North Carolina. In the final CAIR, EPA's updated analyses project all of North Carolina to be in attainment for 8-hour ozone in the CAIR 2010 base case. Therefore, EPA did not link any upwind States to North Carolina with respect to the 8-hour ozone NAAQS in the final CAIR (See CAIR preamble, Table VI-9 at 70 FR at 25249). Consequently, EPA is denying the section 126 petition with respect to the 8-hour ozone NAAQS.

B. What Is EPA's Final Action With Respect to the PM 2.5 NAAQS?

In its petition, North Carolina also requested that EPA make findings that large EGUs in Alabama, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia contribute significantly to nonattainment in, or interfere with maintenance by, North Carolina with respect to the PM2.5 NAAQS. In the proposed CAIR, these 12 States were linked to PM2.5 nonattainment problems in North Carolina. In the final CAIR, as noted, EPA used different, updated modeling and also applied a 0.2 (μ/m3 contribution threshold level rather than the proposed 0.15 (μ/m3 for the air quality portion of the significant contribution determination (70 FR 25190-25191). Based on the updated modeling and the 0.2 (μ/m3 contribution threshold level, EPA determined in CAIR that only the following 10 States are significantly contributing to PM2.5 air quality problems in North Carolina: Alabama, Georgia, Indiana, Kentucky, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia (see preamble Table VI-8; 70 FR at 25248-25249). This means for purposes of section 126(b) that sources within these States for which EPA determined highly cost-effective controls are available are also contributing significantly to PM2.5 nonattainment problems in North Carolina.

In determining what action to take in response to the PM2.5 portion of the section 126 petition, EPA is taking into consideration the CAIR FIPs that are being promulgated today in conjunction Start Printed Page 25338with the section 126 action (see section IV below). The FIP action establishes control requirements for each of the States affected by the CAIR in order to achieve the emissions reductions required to address interstate transport.

In the proposal for the section 126 action, for EGUs in States linked to North Carolina in CAIR (and therefore, for which EPA proposed a FIP), EPA proposed in the alternative (1) to deny the petition if EPA issued the final FIPs to address the interstate transport no later than the final section 126 response or (2) to grant the petition and make section 126 findings if EPA did not promulgate the FIPs prior to or concurrently with the final section 126 response. Because the FIPs would fully address the PM2.5-related interstate transport problem identified in CAIR and thus eliminate the section 110(a)(2)(D) violation, there would no longer be a basis for the section 126 findings. In today's action, EPA is finalizing the CAIR FIPs. Therefore, EPA is denying the section 126 petition for EGUs in States linked to North Carolina for PM2.5.

For EGUs located in Illinois and Michigan, which are not linked to North Carolina in the final CAIR with respect to the PM2.5 NAAQS (70 FR 25247-25248), EPA is also denying the petition.

IV. What Is the Federal Implementation Plan for the CAIR?

A. What Is the Legal Framework for the FIPs?

Section 110(c)(1) of the CAA requires the Administrator to promulgate a FIP within 2 years of: (1) Finding that a State has failed to make a required submittal, (2) finding that a submittal received does not satisfy the minimum completeness criteria established under section 110(k)(1)(A), or (3) disapproving a SIP submittal in whole or in part. The EPA may issue a FIP any time after making one of these findings or the Agency may issue a SIP disapproval. However, EPA is relieved of the obligation to promulgate the FIP if a SIP revision correcting the deficiency identified is approved by EPA before such a FIP is promulgated.

As discussed in paragraph I.D.5, in a final rule signed the same day as CAIR, EPA found that States have failed to submit SIPs to satisfy the interstate transport requirement under section 110(a)(2)(D)(i) of the CAA for the PM2.5 and 8-hour ozone NAAQS (70 FR 21147). These findings started the 2-year clock for the promulgation of a FIP. They did not start a “sanctions clock” as there are no mandatory sanctions associated with the FIP or the finding of State failure to submit SIPs to satisfy 110(a)(2)(D)(i).

The EPA's authority to act when it has identified deficiencies in SIPs is derived from multiple sources. First, EPA may promulgate any measure which it is permitted to issue pursuant to pre-existing independent statutory authority—for example, the provisions of title II. That is, EPA may promulgate any measure which it has authority to issue in a non-FIP context, without reliance on section 110(c). Second, EPA may invoke section 110(c)'s general FIP authority and act in accordance with this provision, and the CAA more broadly, to cure a SIP deficiency. Third, under section 110(c), the courts have held that EPA may exercise all authority that the State may exercise under the CAA.

The first type of authority, EPA's general authority, is independent of section 110(c). It is not dependent on or altered by finding a deficiency in a SIP.

The second type of authority, EPA's general authority under section 110(c), is essentially remedial. The EPA has broad power under that section to cure a defective State plan. Thus, in promulgating a FIP, EPA may exercise its own, independent regulatory authority in accordance with section 110(c), and the CAA more broadly. When EPA has promulgated a FIP, courts have not required explicit authority for specific measures: “We are inclined to construe Congress' broad grant of power to the EPA as including all enforcement devices reasonably necessary to the achievement and maintenance of the goals established by the legislation.” (South Terminal Corp. v. EPA, 504 F.2d 646, 669. (1st Cir., 1974)).

Third, the same authority that is exercised by the States under the CAA in connection with the adoption, implementation, and enforcement of a SIP may be assumed to be available to the EPA when the agency issues a FIP, after determining that a State has not adopted a satisfactory SIP. As the Ninth Circuit has held, when EPA acts in place of the State pursuant to a FIP under section 110(c), EPA “stands in the shoes of the defaulting State, and all of the rights and duties that would otherwise fall to the State accrue instead to EPA,” (Central Arizona Water Conservation District v. EPA, 990 F.2d 1531, at 1541 9th Cir., 1993). The First Circuit, in an early FIP case, agreed:

* * * the Administrator must promulgate promptly regulations setting forth an implementation plan for a State should the State itself fail to propose a satisfactory one. The statutory scheme would be unworkable were it read as giving to EPA when promulgating an implementation plan for a State, less than those necessary measures allowed by Congress to a State to accomplish Federal clean air goals. We do not adopt any such crippling interpretation.

South Terminal Corporation v. EPA, 504 F.2d 668 (1st Cir., 1974).

In the case of Federally-recognized Indian Tribes, as we explained in the CAIR, (70 FR 25167-25168) Tribes are subject to section 110(a)(2)(D), but are not required to submit implementation plans. The EPA is required to promulgate FIPs for Indian country as necessary or appropriate to protect air quality. See 40 CFR 49.11(a). Presently, there are no emissions sources in Indian country within the region affected by CAIR which would make a FIP necessary or appropriate. In the event of the planned construction of such a source within Indian country in the 28-State region subject to CAIR, EPA will work with the relevant Tribal government to regulate the source through a Tribal or Federal implementation plan. In the case of an EGU, the EPA anticipates that the Tribal implementation plan (TIP) or FIP would involve the participation of the EGU in the EPA administered cap-and-trade program. The EPA will also work with the Tribe and affected States to determine how allowances allocated to the Indian country source will affect State allowance allocations. Because any FIPs for Indian country will necessarily be tailored to the specific circumstances, today's action contains no such FIP. The reader is referred to the CAIR for a more detailed discussion of the potential impact of the CAIR in Indian country (70 FR 25167-25168, 25315).

B. What Is the Timing and Scope of the CAIR FIP Actions?

As described in the CAIR, EPA views seriously its responsibility to address the issue of regional transport. Decreases in NOX and SO2 emissions are needed in the States identified in the CAIR to enable downwind States to develop and implement plans to achieve and maintain the PM2.5 and 8-hour ozone NAAQS. The CAIR identified the amount of emissions reductions necessary for each State identified in the CAIR to meet their section 110(a)(2)(D) interstate transport obligations. Implementation of these reductions is necessary to help downwind States to achieve the NAAQS in order to provide clean air for their residents.

Therefore, EPA is promulgating FIPs today in conjunction with the action responding to North Carolina's section 126 petition concerning transport of Start Printed Page 25339PM2.5 and 8-hour ozone. The EPA is promulgating these FIPs at the same time as its response to North Carolina's section 126 petition, which is required to be finalized no later than March 15, 2006 in accordance with a judicially-enforceable consent decree. The EPA believes it is appropriate to coordinate these two actions because they both address interstate transport, both apply to EGUs, and because the States of concern in the section 126 petition are a geographical subset of the States covered by CAIR. Promulgating the CAIR FIPs at this time provides a backstop of Federal controls for all States covered by CAIR for PM2.5 and/or 8-hour ozone, not just those States that significantly contribute to North Carolina for PM2.5. This provides a level playing field, giving assurance to all the affected downwind States that the upwind emissions reductions required under CAIR will be achieved on time. Further, EPA believes that the CAIR reductions are best implemented as a unified program. The EPA believes that States will submit SIP revisions implementing the CAIR reductions in their States in a unified manner, and that this reduces workload for the States and provides sources with more certainty. Finally, promulgating the 8-hour ozone FIP as well as the PM2.5 FIP as early as possible gives States more flexibility to take advantage of the abbreviated SIP option discussed below and in section VI.C. This could further reduce workload for States to meet the requirements of CAIR. In today's action, EPA is not promulgating FIPs for any States not covered by CAIR.

The Agency is taking this action to provide a Federal backstop for CAIR where all States may not be able to develop and submit timely, approvable SIP revisions. In no way should the FIP for CAIR be viewed as a sign of any concern about States ultimately making the emission reductions required under CAIR. There are no sanctions associated with today's rule, and EPA does not intend CAIR FIPs to have any negative consequences for the affected States. To the contrary, EPA is finalizing FIP approaches that are flexible and allow States a full opportunity to get their SIP revisions in place, with minimal disruption in transitioning from Federal to State implementation.

Moving quickly to promulgate a FIP is consistent with Congress' intent that attaining the standard occurs in these downwind nonattainment areas “as expeditiously as practicable” (sections 181(a) and 172(a)(2)(B)). The FIP will help ensure that all emissions reductions required by CAIR, and the associated environmental benefits, will be achieved by the CAIR deadlines. In addition, the FIP will ensure that sources in all States covered by CAIR, regardless of whether they were included in the North Carolina section 126 petition, will be required to achieve emissions reductions at the same time.

By finalizing the FIP well before the deadline for States to submit their CAIR SIPs, EPA is providing States an additional option for complying with the requirements of CAIR. States planning to adopt the model trading programs contained in the CAIR rule, can accept the FIP and significantly reduce the State resources needed to establish a program to implement the CAIR. Since there are no punitive consequences for States associated with the FIP or the finding of failure to submit SIPs to satisfy section 110(a)(2)(D)(i), some States could avoid much of the time and expense of revising their SIPs to comply with CAIR. Some States, particularly those subject to the NOX SIP Call, may need to prepare minor SIP revisions regardless of whether they accept the FIP implementing the requirements of CAIR; yet the time and expense involved would be significantly reduced.

The EPA is finalizing, with certain changes described in section VI.C, the approach that a State can choose to modify the application of the CAIR FIP through abbreviated SIP revisions. The abbreviated SIP revisions approach covers specific elements of the FIP trading programs without submitting full SIP revisions to meet the requirements of CAIR. By accepting such abbreviated SIP revisions, EPA is providing additional options for States to comply with CAIR. A State can choose to retain control of these specific elements of the trading programs, without submitting a full SIP revision to meet the requirements of CAIR. As there are no sanctions associated with the FIP, EPA anticipates that some States will prefer to avoid spending the time and money necessary to submit a full SIP revision.

The Agency will accept abbreviated SIP revisions for any or all of the following four specific elements of the FIP trading programs: (1) Provisions for otherwise unaffected units to opt-in to the FIP trading programs, (2) allocating annual and/or ozone season NOX, (3) allocating allowances from the annual NOX Compliance Supplement Pool (CSP), and (4) including NOX SIP Call trading sources that are not EGUs under CAIR in the Federal CAIR ozone season NOX cap-and-trade program. Upon approval of any such SIP revisions, EPA anticipates that the corresponding portions of the FIP for that State would be replaced or their application to sources would be modified.

In offering a framework for abbreviated SIP revisions, the Agency anticipates that many States will wish to retain control over the allocation of allowances. Additionally, the Agency recognizes that States may wish to meet their NOX SIP Call obligations by allowing NOX budget units (that is, units in the NOX SIP Call trading program) that are not EGUs under CAIR to participate in the CAIR ozone season trading program.

In its proposal, the EPA invited comment on the option for States to submit abbreviated SIPs covering specific elements of the Federal trading programs. A more complete discussion of the proposed abbreviated SIP provisions and the comments received is found in section VI of today's preamble.

Thus, the FIP will increase the options available for a State to comply with CAIR. Through the CAIR rulemaking actions, EPA has provided States with a great deal of data and analyses concerning air quality and control costs, as well as a determination whether upwind sources contribute significantly to downwind nonattainment under section 110(a)(2)(D). The EPA recognizes that States would face great difficulties in developing transport SIPs to meet the requirements of section 110(a)(2)(D) without these data and policies. Indeed, EPA acknowledged in the CAIR that the Agency's extensive analyses and data, including the multi-year operation of a federally-funded monitoring system (and the considerable information generated through that system) was a necessary element in the Agency's conclusion that it was appropriate to impose such requirements on States (70 FR 25267).

States have 18 months from the signature date of the CAIR, or until September 11, 2006, to develop, adopt, and submit revisions to their SIPs that meet the requirements of CAIR. The EPA will withdraw the FIP once EPA approves a SIP that meets the CAIR requirements in that State.

Having the FIP in place early provides for a transition to a CAIR trading program with the greatest continuity, administrative ease, and cost savings for States that would otherwise develop a program identical to the model trading programs. The EPA's goal is to have approvable programs in place that meet the requirements of the CAIR whether they are in the form of a SIP or a FIP. By finalizing a FIP today, EPA in no way precludes a State from developing its own SIP to either adopt the trading Start Printed Page 25340rules with any discretionary elements allowed by the CAIR or from meeting the State emissions budget through different measures of the State's choosing. The EPA has considered the timing of each element of the FIP process to make sure to preserve each State's freedom to develop and implement SIPs. In this way, EPA has enhanced each State's options for complying with the requirements of the CAIR while ensuring that all the emissions reductions and environmental benefits of the CAIR are realized.

C. What Are the FIP Control Measures?

In contrast to the SIP process—where selection and implementation of control measures is the primary responsibility of the State—in the case of a FIP, it is EPA's responsibility to select the control measures for sources and assure compliance with those measures. Thus, while the FIP is designed by EPA to achieve the same total emissions reductions described in the CAIR, the specific control measures assigned in the FIP may be different from what a State might choose.

In selecting the control measures for the FIP, EPA is adopting the same measures used in the CAIR for calculating the required emissions reductions. In the CAIR, EPA is requiring States to achieve specified levels of emissions reductions based on levels that are achievable through implementation of highly cost-effective controls on EGUs. See the discussion in section IV of the CAIR, “What Amounts of SO2 and NOX Emissions Did EPA Determine Should Be Reduced?” The EPA is including by reference the technical basis and supporting rationale for EPA's conclusions as to the highly cost-effective strategy developed for the CAIR.

The SO2 and NOX cap-and-trade programs for the FIP are discussed below in section VI. The unit NOX allocations will be provided in a later action and will meet the State EGU budgets that are established in the CAIR for States that choose to meet the required emissions reductions by controlling EGUs only.

D. When and How Will EPA Remove the FIP Requirements if EPA Approves a SIP To Meet the CAIR?

As discussed previously, EPA is finalizing the FIP today concurrently with EPA's response to the section 126 petition from North Carolina. The EPA intends to withdraw the FIP in a State in coordination with EPA's approval of a SIP for that State that meets the CAIR requirements. It is EPA's preference that States regulate sources to control the interstate transport; therefore, EPA will work with States to help ensure that the FIP would not need to be implemented.

The EPA intends to withdraw the FIP requirements as soon as practical after receiving approvable CAIR SIP revisions. The EPA will work with States to ensure a timely withdrawal of the FIP and recording of State NOX allocations in source accounts (for States choosing to allocate NOX allowances). A more detailed discussion of the timing for recording allocations is found in section VI.F.1 of this preamble.

V. Emission Reduction Requirements for the CAIR FIP

A. Introduction

In the CAIR (70 FR 25162), EPA determined that SO2 and NOX emissions from sources in the District of Columbia and the following 23 States contribute significantly to downwind PM2.5 nonattainment: Alabama, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.

In a separate rulemaking signed the same day as this action, EPA finds that SO2 and NOX emissions from sources in Delaware and New Jersey also contribute significantly to downwind PM2.5 nonattainment.

In the CAIR, the Agency also determined that the District of Columbia and the following 25 States contribute significantly to downwind 8-hour ozone nonattainment: Alabama, Arkansas, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, and Wisconsin.

The EPA established CAIR annual SO2 and NOX emission reduction requirements for States that contribute significantly to downwind PM2.5 nonattainment and established NOX ozone season emission-reduction requirements for States that contribute significantly to downwind 8-hour ozone nonattainment. The CAIR requires upwind States to revise their SIPs to include control measures to reduce emissions of SO2 and/or NOX to meet the requirements in CAIR (SO2 is a precursor to PM2.5 formation, and NOX is a precursor to both ozone and PM2.5 formation).

The CAIR requires that the emission reductions be implemented in two phases. The first phase of CAIR NOX reductions starts in 2009 (covering 2009-2014) and the first phase of CAIR SO2 reductions starts in 2010 (covering 2010-2014); the second phase of CAIR reductions for both NOX and SO2 starts in 2015, covering 2015 and thereafter.

In CAIR, EPA determined the extent of reductions required to eliminate significant contribution (i.e., to remove the section 110(a)(2)(D) violation). EPA interprets significant contribution as a specific level of emissions that can be feasibly reduced in a highly cost-effective manner. The required reductions are expressed as statewide budgets of SO2 and NOX emissions. Regionwide emissions trading programs for large EGUs (within the constraints of the emissions caps based on these statewide emission budgets [12] ) provide one option for eliminating significant contribution and thus also eliminating the section 110(a)(2)(D) violation. The violation is eliminated once a State adopts a SIP containing the CAIR trading programs (or a SIP containing other emission reduction options meeting the requirements specified in CAIR), or EPA promulgates a FIP to achieve those same reductions. The CAIR includes model rules for regionwide EGU SO2 annual, NOX annual, and NOX ozone season emission cap-and-trade programs. States can choose to adopt these model rules (the CAIR SIP model trading rules) to obtain the required reductions in a flexible and cost-effective manner.

Today, EPA is finalizing FIPs that implement the emission reduction requirements of the CAIR in all States covered by CAIR. The Agency is promulgating today's FIPs to provide a federal backstop for CAIR.

EPA decided to adopt, as the FIP for each State in the CAIR region, the SIP model trading programs in the final CAIR, modified slightly to allow for federal instead of State implementation.[13] The specific requirements of the FIP trading programs are explained in greater detail in section VI below.

The CAIR FIPs will require SO2 annual and NOX annual emission Start Printed Page 25341reductions from EGUs in States contributing significantly to PM2.5 nonattainment and NOX ozone season emission reductions from EGUs in States contributing significantly to ozone nonattainment through participation in the regionwide cap-and-trade programs. The requirements of these trading programs were developed in the SIP model trading rules. The SIP model trading rules provide flexibility to the implementing organization only in certain specific areas. In adopting these model trading programs as FIPs, the Agency adopts the requirements of the model trading rules. As the implementing organization, therefore, it has only the same flexibility that is available to States that choose to implement the model trading programs.

The CAIR FIP trading programs will achieve the emission reductions required by CAIR by the deadlines established in that rule, with the same highly cost-effective EGU control measures forming the basis for the emission budgets. The regionwide emission reduction requirements, State emission budgets and trading rules that are the basis for today's FIPs were established in the final CAIR rule. They were developed through a process that involved significant public participation. In the CAIR rulemaking, EPA determined that the CAIR emission reduction requirements can be met in a highly cost-effective manner using regionwide SO2 and NOX cap-and-trade programs for large EGUs (70 FR 25195-25229). The incentives provided by such regionwide cap-and-trade programs encourage economically efficient compliance over the entire region.

The applicability provisions of the FIPs promulgated in today's final rule, which cover large EGUs, are identical to the applicability provisions in the CAIR SIP model rules including the revisions finalized today. See sections VI.E and VII in today's preamble for detailed discussion of applicability. The FIPs and the CAIR SIP model rules apply to large EGUs because EPA determined that their emissions can be reduced through the application of highly cost-effective controls (70 FR 25195-25229).

During development of the CAIR, the Agency considered the interactions between the existing title IV Acid Rain Program and the new CAIR (see the preamble to the final CAIR for discussion, 70 FR 25290). As explained in CAIR, “In the absence of an approach for taking account of the title IV program, a new program (i.e., the CAIR) that imposes a significantly tighter cap on SO2 emissions for a region encompassing most of the sources and most of the SO2 emissions covered by title IV would likely result in a significant excess in the supply of title IV allowances, a collapse of the price of title IV allowances, disruption of operation of the title IV allowance market and the title IV SO2 cap-and-trade system, and the potential for increased SO2 emissions.” These impacts would undermine the efficacy of the title IV program and could erode confidence in emissions trading programs in general. For these same reasons, today's FIP SO2 trading program is integrated with the title IV program (see discussion of FIP SO2 trading program in section VI, below). EPA was petitioned for and granted reconsideration of CAIR on claims that inequities result from applying the SO2 allocation methodology (which is based on title IV allocations). In the notice of final action on reconsideration, signed the same day as this action, EPA decided not to alter the approach taken in the final CAIR (see further discussion of reconsideration in section VI.G, below).

Today's FIPs implement the CAIR emission reduction requirements by adopting the CAIR SIP model trading rules; the FIPs do not develop new emission reduction requirements or trading programs. For these reasons, the Agency did not re-open in the FIP rulemaking any elements of the reduction requirements and trading programs (except for the elements such as NOX allocations and opt-ins where States had flexibility) that were determined in the CAIR NFR and that were not modified by today's rule. By adopting as FIPs the CAIR SIP model trading programs, the Agency intends to implement the requirements of CAIR in a highly cost-effective manner and to ease the transition for sources that might initially be covered by the FIP programs and subsequently be covered by SIP programs that also adopt the model trading rules.

The Agency is promulgating these FIPs to provide a Federal backstop for CAIR. In no way should the FIPs be viewed as a sign of any concern about States ultimately making the emission reductions required under CAIR. There are no sanctions associated with today's rule, and EPA does not intend CAIR FIPs to have any negative consequences for the affected States. To the contrary, EPA is finalizing FIP approaches that are flexible and allow States a full opportunity to get their SIP revisions in place, with minimal disruption in transitioning from Federal to State implementation.

B. Regionwide SO 2 and NO X Caps

Today's final rule provides a federal backstop for achieving the CAIR emission reduction requirements. Today's rule does not establish those reduction requirements, which were established in the CAIR rulemaking.

In the preamble to the CAIR NFR, the Agency explained how it determined regionwide SO2 and NOX emissions caps. See section IV in the CAIR NFR preamble (70 FR 25195-25229). The EPA also summarized the process for determining the regionwide CAIR SO2 and NOX emissions caps in the preamble to the proposed CAIR FIP (70 FR 49722). The CAIR FIP proposal did not reopen for public comment EPA's determination of the CAIR regionwide caps or the caps themselves. The EPA received a few comments on the CAIR regionwide caps during the public comment process on the proposed FIP. Those comments are not within the scope of today's final rule. As discussed above, in today's FIP rule the Agency is implementing the emission reduction requirements (including regionwide SO2 and NOX caps) that EPA developed in the CAIR rulemaking through a process that included extensive public participation.

The CAIR regionwide caps (including the States of Delaware and New Jersey) are: for SO2, 3.7 million tons and 2.6 million tons in 2010 and 2015, respectively; for NOX annual, 1.5 million tons and 1.3 million tons in 2009 and 2015, respectively; for NOX ozone season, 0.6 million and 0.5 million tons in 2009 and 2015, respectively.

C. State SO 2 Emission Budgets

In the preamble to the final CAIR, the EPA explained how it determined CAIR State annual SO2 emission budgets (see section V.A.1.a of the CAIR NFR preamble, 70 FR 25229-25230; see also the rulemaking, signed the same day as this action, to include Delaware and New Jersey in CAIR for PM2.5). The EPA also summarized the process for determining CAIR State SO2 budgets in the preamble to the proposed FIP (70 FR 49723). The CAIR FIP proposal did not reopen for public comment EPA's determination of the CAIR State SO2 budgets or the budgets themselves. As discussed above, in today's FIP rule, the Agency is implementing the emission reduction requirements (including State SO2 emission budgets) that EPA developed in the CAIR rulemaking through a process that included extensive public participation.

Today's final FIP rule will achieve the required SO2 emission reductions Start Printed Page 25342through a regionwide SO2 cap-and-trade program for EGUs. As discussed further in section VI, below, the CAIR FIP SO2 cap-and-trade program will rely on title IV allowances, which sources will retire at specified ratios generally greater than 1-to-1 for compliance with the CAIR FIP SO2 program. Congress has already allocated title IV SO2 allowances to sources in perpetuity. State SO2 emissions budgets would not affect the distribution of SO2 allowances for the CAIR FIP SO2 trading program (because SO2 allowances are already allocated to sources) and are not directly relevant for today's final FIP rule.

After EPA finalized CAIR, the Agency was petitioned for and granted reconsideration on claims that inequities result from applying the CAIR SIP model rule SO2 allocation methodology (which is based on existing title IV allocations). The Agency announced its decision to reconsider this issue in a Federal Register action dated December 2, 2005 (70 FR 72268) and is taking final action on the reconsideration in a separate action signed the same day as this action. EPA decided not to alter the approach taken in the final CAIR (see further discussion of reconsideration in section VI.G, below).

A few commenters on the proposed CAIR FIP expressed concern with the use of title IV to establish State SO2 emission budgets. The FIP State SO2 budgets and the FIP unit SO2 allocations are both based on existing title IV allocations. The EPA responds to comments on the budgets and allocations for the FIP together in section VI.G, below.

The Agency is finalizing its proposed approach regarding SO2 budgets for the CAIR FIP SO2 trading programs.

D. State NO X Annual and NO X Ozone Season Emission Budgets

In the preamble to the final CAIR, the EPA explained how it determined CAIR State NOX annual and NOX ozone season emission budgets (see section V.A.1.a of the CAIR NFR preamble, 70 FR 25230-25233; see also the rulemaking, signed the same day as this action, to include Delaware and New Jersey in CAIR for PM2.5).

The EPA also summarized the process for determining CAIR State NOX annual and NOX ozone season budgets in the preamble to the proposed FIP (70 FR 49723). The CAIR FIP proposal did not reopen for public comment EPA's determination of the CAIR State NOX annual and NOX ozone season budgets or the budgets themselves. As discussed above, in today's FIP rule the Agency is implementing the emission reduction requirements (including State NOX annual and NOX ozone season emission budgets) that EPA developed in the CAIR rulemaking through a process that included extensive public participation.

After EPA finalized CAIR, the Agency was petitioned for and granted reconsideration on the use of fuel adjustment factors in determining CAIR State NOX annual and NOX ozone season emission budgets. The EPA announced its decision to reconsider this issue in a Federal Register notice dated December 2, 2005 (70 FR 72268) and is taking final action on the reconsideration in a separate action signed the same day as this action. EPA decided not to alter the approach taken in the final CAIR.

A commenter on the proposed CAIR FIP raised concerns regarding the use of fuel adjustment factors in determining State NOX emission budgets. Concerns raised by the commenter with respect to EPA's use of fuel adjustment factors in determining State emission budgets are the same issues that the Agency is addressing in the context of the CAIR reconsideration process. The Agency's responses to this commenter on the use of fuel adjustment factors in setting FIP State NOX emission budgets are addressed in the CAIR reconsideration notice. See the December 2, 2005 Federal Register notice announcing the reconsideration (70 FR 72268) as well the notice of final action on reconsideration signed the same day as this action.

Some commenters addressed the use of fuel adjustment factors in the proposed FIP methodology for unit-by-unit NOX allocations. The Agency's responses regarding the use of fuel adjustment factors in the NOX allocation methodology are discussed in section VI.F in this preamble.

The State annual and ozone season EGU NOX budgets for today's final CAIR FIP trading programs are the same as the budgets in the final CAIR. For each State affected by the FIP NOX trading programs, the State NOX budgets are the total amount of allowances [14] that the Agency will allocate to sources in the State or that States will allocate using an abbreviated SIP revision. See section VI.F, below, for EPA's methodology and schedule for allocating NOX allowances to affected sources.

Table V-1 shows the State NOX emission budgets for the final FIP NOX cap-and-trade program. These are the same State NOX budgets as in the final CAIR (see Table V-2 in the CAIR NFR preamble (70 FR 25231); see also the rulemaking, signed the same day as this action, to include Delaware and New Jersey in CAIR for PM2.5).

Table V-1.—CAIR FIP NOX Annual Electric Generating Units Budgets

[tons]

StateState NOX annual budget 2009-2014State NOX annual budget 2015 and thereafter
Alabama69,02057,517
Delaware4,1663,472
District of Columbia144120
Florida99,44582,871
Georgia66,32155,268
Illinois76,23063,525
Indiana108,93590,779
Iowa32,69227,243
Kentucky83,20569,337
Louisiana35,51229,593
Maryland27,72423,104
Michigan65,30454,420
Minnesota31,44326,203
Mississippi17,80714,839
Missouri59,87149,892
New Jersey12,67010,558
New York45,61738,014
North Carolina62,18351,819
Ohio108,66790,556
Pennsylvania99,04982,541
South Carolina32,66227,219
Tennessee50,97342,478
Texas181,014150,845
Virginia36,07430,062
West Virginia74,22061,850
Wisconsin40,75933,966
CAIR Region Total1,521,7071,268,091

Table V-2 shows the State NOX ozone season emission budgets for the final CAIR FIP NOX ozone season cap-and-trade program. These are the same State NOX ozone season budgets as in the final CAIR (see Table V-4 in the CAIR NFR preamble (70 FR 25233).

Table V-2.—CAIR FIP NOX Ozone Season Electricity Generating Unit Budgets

[tons]

State *State NOX ozone season budget 2009-2014State NOX ozone season budget 2015 and thereafter
Alabama32,18226,818
Arkansas11,5159,596
Connecticut2,5592,559
Delaware2,2261,855
District of Columbia11294
Florida47,91239,926
Start Printed Page 25343
Illinois30,70128,981
Indiana45,95239,273
Iowa14,26311,886
Kentucky36,04530,587
Louisiana17,08514,238
Maryland12,83410,695
Massachusetts7,5516,293
Michigan28,97124,142
Mississippi8,7147,262
Missouri26,67822,231
New Jersey6,6545,545
New York20,63217,193
North Carolina28,39223,660
Ohio45,66439,945
Pennsylvania42,17135,143
South Carolina15,24912,707
Tennessee22,84219,035
Virginia15,99413,328
West Virginia26,85926,525
Wisconsin17,98714,989
CAIR Region Total567,744484,506
* For States that have lower EGU budgets under the NOX SIP Call than their 2009 CAIR budget, table V-2 includes their SIP Call budget. For Connecticut, the NOX SIP Call budget is also used for 2015 and beyond.

E. State NO X Annual Compliance Supplement Pool

The CAIR established State Compliance Supplement Pools (CSP) of NOX annual allowances of vintage 2009. In the FIP NPR, the Agency proposed to include in the CAIR FIP NOX trading program the same State CSP amounts as were established in CAIR.

The Agency received several comments on its proposal to include the CAIR CSPs in the CAIR FIP NOX trading program. The EPA responds to comments on inclusion of the CAIR CSPs in the FIP program, as well as comments on EPA's proposed method for distributing CSP allowances to sources, in section VI.I in today's preamble, below.

The Agency is finalizing its proposal to include the CAIR CSPs in the FIP trading programs. Table V-3 shows the State CSP amounts for the final CAIR FIP NOX trading program. These are the same CSP amounts as shown in the CAIR NFR preamble (see Table V-3 in the CAIR NFR at 70 FR 25232; see also the rulemaking, signed the same day as this action, to include Delaware and New Jersey in CAIR for PM2.5).

The CSPs provide, for each affected State, a pool of CAIR NOX annual allowances from which EPA, or a State using an abbreviated SIP revision, can distribute allowances for use in complying with the CAIR FIP NOX annual trading program (see section VI.I in today's preamble for further discussion regarding distribution of CSP allowances).

Table V-3.—CAIR FIP NOX Annual Compliance Supplement Pool

[tons]

StateCompliance supplement pool
Alabama10,166
Delaware843
District Of Columbia0
Florida8,335
Georgia12,397
Illinois11,299
Indiana20,155
Iowa6,978
Kentucky14,935
Louisiana2,251
Maryland4,670
Michigan8,347
Minnesota6,528
Mississippi3,066
Missouri9,044
New Jersey660
New York0
North Carolina0
Ohio25,037
Pennsylvania16,009
South Carolina2,600
Tennessee8,944
Texas772
Virginia5,134
West Virginia16,929
Wisconsin4,898
Total199,997

VI. CAIR FIP NOX and SO2 Cap-and-Trade Programs for EGUs

A. Purpose of CAIR FIP NO X and SO 2 Cap-and-Trade Programs and Relationship to the CAIR

In today's action, EPA is finalizing CAIR FIP NOX and SO2 cap-and-trade programs for EGUs as the Implementation Plan remedy for CAIR. The Agency is finalizing 3 separate CAIR FIP cap-and-trade programs: (1) SO2 annual; (2) NOX annual; and (3) NOX ozone season. The EPA decided to adopt, as the FIP for each State in the CAIR region, the model cap-and-trade programs in the final CAIR, modified slightly to allow for Federal instead of State implementation. [15] Emissions cap-and-trade programs are a proven method for achieving highly cost-effective emissions reductions while providing regulated sources of emissions with flexibility in adopting compliance strategies. The incentives provided by regionwide cap-and-trade programs encourage economically efficient compliance over the entire region. The specific elements of the 3 trading programs in the FIP were developed by EPA, with significant public participation, during the CAIR development process.

Participation in the new CAIR FIP NOX and SO2 cap-and-trade programs is mandatory for all sources covered by the final CAIR FIP. See section VI.E in today's preamble for discussion of affected sources (applicability). Regulatory text for today's new CAIR FIP NOX and SO2 cap-and-trade programs will be located in part 97 in title 40 of the CFR.

The CAIR established State EGU emissions budgets that each State will use to determine its required emissions reductions. Today's final CAIR FIP cap-and-trade programs set specific rules for EGUs to decrease NOX and SO2 emissions sufficiently to achieve emission reductions that are required under CAIR. As explained above in section IV, EPA will withdraw a State's FIP in coordination with approval of a SIP implementing the requirements of CAIR.

States may choose to meet their emission reduction obligations under CAIR by adopting, as part of their SIPs, the model cap-and-trade rules set forth in the CAIR and participating in the EPA administered trading programs. Any such participation will be fully integrated with the CAIR FIP NOX and SO2 cap-and-trade programs that are finalized in today's action.

In order to be eligible to participate in an emissions cap-and-trade program, the Agency believes that there are two principal criteria that sources must meet, as stated in the supplemental proposal for the NOX SIP Call (62 FR 25923). The first criterion requires that sources be able to account accurately and consistently for all of their emissions to ensure the trading program goal of maintaining emissions within a cap. Emissions monitoring must be accurate and consistent among all sources so that each allowance turned in, represents its assigned amount of emissions. The second criterion for participation in a trading program is the ability to identify a responsible party for each regulated source who would be accountable for demonstrating and ensuring compliance with the program's provisions. The EPA believes that today's rule meets those criteria. The Agency also believes that, because Start Printed Page 25344today's rule contains the same mandatory program elements as are in the part 96 CAIR SIP model trading programs and is designed to meet the same environmental goals and caps sources at the same levels as those model trading programs, it is appropriate to integrate today's CAIR FIP with the CAIR SIP trading programs.

Sources subject to trading programs under the FIP and sources in States choosing to participate in the EPA-administered CAIR SIP trading programs will be able to trade allowances with one another under common emissions caps across participating States. Integration of the trading programs reduces the possibility of inconsistent or conflicting deadlines or requirements, increases the potential cost savings for sources, and streamlines program administration. Unnecessary inconsistency in trading programs could hamper sources' ability to plan and achieve the needed reductions as cost effectively as possible. In addition, if a State submits and EPA approves a SIP revision including the CAIR SIP model trading programs after EPA establishes trading programs under today's FIP, disruptions to sources that shift from regulation under a FIP to regulation under a SIP will be minimized due to the consistency between the respective CAIR SIP and FIP programs.

The EPA establishes (in part 97) the geographic boundaries of the common trading programs as those States that submit SIP revisions in response to the CAIR implementing the EPA-administered trading programs or that are subject to FIPs. The EPA will administer these common trading programs in collaboration with affected States.

For the final CAIR FIP NOX and SO2 cap-and-trade programs, EPA adopted the CAIR model trading programs with slight revisions to allow for Federal implementation. The FIP trading programs are thus virtually identical to the CAIR SIP model trading programs. The CAIR FIP cap-and-trade programs include all of the mandatory elements that States are required to include in their SIPs in order to participate in the EPA-administered cap-and-trade programs for CAIR.

The Agency is finalizing, with certain changes described in section VI.C, the proposal to provide States that are subject to today's CAIR FIP requirements with the option to submit abbreviated SIP revisions covering specific elements of the FIP trading programs without submitting full SIP revisions to meet the requirements of CAIR. See section VI.C in this preamble for further discussion of abbreviated SIP revisions.

B. Relationship of Emissions Trading Programs to Section 126 Relief

In section II of today's preamble, EPA responds to commenters who argued that, because a CAIR SIP could or the CAIR FIP would reflect a trading component, such an implementation plan would not satisfy section 126 as a matter of law. As explained in section II, these arguments assume that the Agency must grant the petition, which is not EPA's view so long as the underlying SIP deficiencies are rectified.

Although EPA is denying the section 126 petition as discussed elsewhere in today's preamble, based on modeling projections the Agency believes that sources in States upwind of North Carolina will reduce emissions under the CAIR trading regime.

As discussed in the FIP NPR (70 FR 49737), EPA believes that upwind sources in States that were found to contribute significantly to North Carolina nonattainment will in fact reduce emissions of PM2.5 precursors under the CAIR trading regime. The Agency explained that its Integrated Planning Model (IPM) [16] analysis conducted for the CAIR NFR—which assumes emissions trading—projects decreases in annual SO2 and NOX emissions under CAIR compared to the Base Case (i.e., compared to projections without CAIR) in both 2010 and 2015 for each of the States found in the CAIR NFR analysis to contribute significantly to nonattainment of the PM2.5 NAAQS in North Carolina.

The EPA further explained that the Agency's CAIR modeling—which, again, assumes interstate emissions trading—projects that under CAIR by 2010, with the projected emission reductions, there will be no remaining PM2.5 nonattainment counties in North Carolina. Thus, the emission reductions under CAIR are projected to be sufficient to eliminate PM2.5 nonattainment in North Carolina and, necessarily, no States will contribute to nonattainment.[17] This discussion of the Agency's analysis of CAIR is informational and is not intended to reopen or reconsider any issue related to that analysis.

As discussed in section II in today's preamble, some commenters argued that relief under section 126 must occur within 3 years and therefore that the CAIR emission reductions do not satisfy section 126 because although those reductions commence within 3 years they are phased in over a longer time. We respond to legal arguments in section II, above.

In any case, the EPA believes that many emission sources in States upwind of North Carolina will install NOX and/or SO2 emission control technology before 2009. As explained above, EPA modeling projects that North Carolina will come into attainment of the PM2.5 standards by 2010 under CAIR, including trading programs. Much of the emission reductions that will bring North Carolina counties into attainment with the PM2.5 standards will result from use of selective catalytic reduction (SCR) for NOX control and flue gas desulphurization (FGD) for SO2 control on units in upwind States. For the following reasons, EPA believes that many of these controls will be installed before 2009.

Early emission reductions occur for several reasons. Today's CAIR FIP trading rules and the CAIR SIP model trading rules include incentives for early emission reductions. For example, sources may bank title IV SO2 allowances into the CAIR FIP or CAIR SIP SO2 trading programs (see section VI.I, below, for further discussion of incentives for early reductions). Another reason why sources may reduce emissions early is the need to stagger control installations at plants where multiple units will be retrofitted to avoid operational disruptions.

As discussed elsewhere in today's preamble, the 10 States that EPA determined in CAIR contribute to North Carolina's nonattainment of the PM2.5 standards are Alabama, Georgia, Indiana, Kentucky, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia. Table VI-1, below, summarizes for these 10 States the total coal-fired electric generating capacity expected to be on-line by the end of 2006 as well as the portion of that capacity expected to be controlled with SCR or FGD.[18] In addition, the table Start Printed Page 25345summarizes for the 10 States the generating capacity that EPA expects to be controlled with SCR or FGD through the end of 2008 based on research that the Agency conducted for today's action.[19] The table also summarizes for the 10 States the generating capacity that EPA projects will be controlled with SCR or FGD by the end of 2010 based on IPM modeling projections.[20] As Table VI-1 indicates, many of the emission controls that EPA's modeling projects will be installed by the end of 2010 are actually likely to be installed before 2009.

Table VI-1.—SCR and FGD Summary for 10 States Contributing to North Carolina's Nonattainment of the PM2.5 Standards

Total generating capacity by end of 2006Expected capacity with emission controls by end of 2006Expected capacity with emission controls by end of 2008Projected capacity with emission controls by end of 2010 under CAIR
132 GW (466 units)SCR: 67 GW (126 units)SCR: 70 GW (130 units)SCR: 82 GW (184 units)
FGD: 48 GW (111 units)FGD: 64 GW (137 units)FGD: 73 GW (167 units)

EPA believes that even more controls may be installed before 2009 than were identified in the Agency's research. It is reasonable to suppose that, once CAIR SIP revisions are submitted and approved, additional plans for control retrofits will be adopted due to SIP revisions.

Some commenters supported the use of trading programs in connection with a section 126 remedy and some did not. A commenter, using South Carolina as an example, questioned why emissions can be above State budget amounts through allowance trading. This commenter points out that EPA's IPM modeling for CAIR projects emissions in South Carolina above the State's 2015 SO2 emissions budget 5 years after 2015 and asserts that emissions over the State budget “will still contribute to attainment problems in North Carolina.” However, as explained above, based on modeling for CAIR—which assumes interstate emissions trading—by 2010 there will be no remaining PM2.5 nonattainment counties in North Carolina. In other words, the EGU emission reductions projected by IPM to occur under the CAIR trading regimes are the amounts that are projected to be sufficient to bring North Carolina into attainment in 2010, regardless of whether for some States emissions are projected to be above the State EGU emissions budgets.

C. Abbreviated SIP Revisions Covering Elements of the CAIR FIP Cap-and-Trade Programs

In the FIP NPR (70 FR 49720, 49727-49739), the Agency proposed to provide States that are covered by CAIR with the option to submit abbreviated SIP revisions covering specific elements of the CAIR FIP trading programs without submitting full SIP revisions to meet the requirements of CAIR. By proposing to accept such abbreviated SIP revisions, the Agency intended to increase the options available for States to comply with CAIR. A State could choose to retain control of these specific elements of the trading programs without submitting a full SIP revision.

As proposed, a State would submit an abbreviated SIP revision that would modify the application of certain elements of the FIP in order to better meet the needs of the State. The EPA proposed that a State could choose to modify the application of the FIP through abbreviated SIP revisions that would do any or all of the following:

  • Make applicable, to the State, provisions in the FIP for otherwise unaffected units to opt into the FIP trading programs,
  • Allow the State, rather than EPA, to allocate NOX annual and/or NOX ozone season allowances,
  • Allow the State, rather than EPA, to allocate allowances from the NOX annual Compliance Supplement Pool (CSP), and
  • Include NOX SIP Call trading sources that are not EGUs under CAIR in the CAIR FIP NOX ozone season cap-and-trade program.

As there are no sanctions or penalties for leaving the CAIR FIP trading programs in place, EPA anticipates that some States may prefer to avoid spending the time and money necessary to submit a full SIP revision and may just modify the application of certain parts of the FIP.

The final CAIR (70 FR 25162) requires States to submit SIP revisions complying with the CAIR requirements to the Agency by September 11, 2006 and to submit the initial set of NOX allocations by October 31, 2006.

In the CAIR FIP NPR, the Agency proposed that States choosing to submit abbreviated SIP revisions addressing the specific elements identified in the proposal would be required to submit such revisions to EPA by March 31, 2007, and—if choosing to address NOX allocations in an abbreviated SIP revision—would be required to submit the initial set of NOX allocations by September 30, 2007 (70 FR 49731).[21] The EPA proposed allowing States to submit abbreviated SIP revisions later than full revisions because the Agency anticipates that it will be able to complete the approval process more quickly for abbreviated revisions due to their narrower scope.

The Agency proposed to include appendices in part 97 that will be amended in the future to list any States for which the Administrator approves abbreviated SIP revisions covering opt-ins, allocation of NOX allowances, distribution of CSP allowances, or inclusion of non-CAIR NOX SIP Call trading sources in the CAIR FIP NOX ozone season trading program.

The Agency received a number of comments on its proposal to allow submission of abbreviated SIP revisions for CAIR. Several commenters supported the abbreviated SIP revision approach. A commenter states that the approach provides States added flexibility, helps facilitate eventual transitions from a FIP-implemented to a State-implemented CAIR, and provides Start Printed Page 25346sources with better certainty regarding key operational elements (such as NOX allocations) over the initial years of the program. Commenters generally supported the choice of specific elements that EPA proposed to allow States to control using abbreviated SIP revisions.

Several commenters argued against the Agency's proposed submission deadline for abbreviated SIP revisions. Commenters who argued against the proposed submission deadline generally did so in relation to the timing for NOX allocations. The EPA discusses the schedule for determining and recording NOX allocations in detail in the NOX allocations section in today's preamble (section VI.F, below) and responds in that section to commenters' concerns regarding submission deadlines for abbreviated SIP revisions in relation to NOX allocation timing.

One commenter that did not support the proposal for abbreviated SIP revisions suggested that allowing such revisions to be submitted later than the deadline for a full SIP revision sets a poor procedural precedent. The Agency disagrees. The proposal to allow abbreviated SIP revisions for CAIR is based on the unique circumstances in this case and does not set precedent for other different circumstances.

The EPA is finalizing, with certain changes described below, the approach that a State can choose to modify the application of the CAIR FIP through abbreviated SIP revisions that do any or all of the following:

  • Make applicable, to the State, provisions in the FIP for otherwise unaffected units to opt into the FIP trading programs,
  • Allow the State, rather than EPA, to allocate annual and/or ozone season NOX allowances,
  • Allow the State, rather than EPA, to allocate allowances from the annual NOX Compliance Supplement Pool (CSP), and
  • Include NOX SIP Call trading sources that are not EGUs under CAIR in the CAIR FIP NOX ozone season cap-and-trade program.

Thus a State could choose, through its abbreviated SIP revision, to bring its NOX SIP Call trading sources that are not EGUs under CAIR from the NOX SIP Call trading program into the CAIR NOX ozone season trading program.

With regard to the provision allowing an abbreviated SIP revision to provide for State allocation of annual and/or ozone season NOX allowances, EPA is revising that provision to give States the same flexibility concerning such allocations as States have in a full SIP revision. In a full SIP revision, States have the option of allocating allowances to CAIR units or to other entities (such as renewable energy facilities) or of auctioning allowances. The States must submit the CAIR unit allocations to the Administrator by specified deadlines so that the allowances can be recorded in the allowance tracking system, but the requirements for a full SIP revision do not address what happens if the State fails to meet these deadlines. In contrast, under the proposed provision for an abbreviated SIP revision allowing for State allowance allocations, a State's allocation provisions must provide that, if a State does not inform the Administrator of the allocations to CAIR units by the specified deadlines, the Administrator will assume that the units get the same allocations for the year as in the prior year and will record such unit allocations. (EPA notes that the deadline for submitting the initial set of allocations is changed, as described below, from the proposed deadline of September 30, 2007 to April 30, 2007.)

The difficulty with the proposed approach is that it assumes that the State is distributing (not auctioning) allowances and is providing them to CAIR units (not to other entities). In order to clarify that States have the same flexibility in allocating in abbreviated SIP revisions and full SIP revisions, EPA is removing the abbreviated SIP revision language concerning the Administrator's actions in the event a State fails to inform in a timely manner the Administrator of the allocations. However, it should be noted that the provisions for both abbreviated SIP revisions and full SIP revisions set deadlines for State submission of allocations to the Administrator for recordation and that, in reviewing such SIP revisions, EPA intends to ensure that the SIP revisions are consistent with those deadlines.

With regard to the provision allowing an abbreviated SIP revision to provide for State allocation of the CSP, EPA is revising that provision to give States the same flexibility with regard to CSP allocations as States have in a full SIP revision. Under § 51.123(e)(4)(iii), States may use in a full SIP revision one or both of the mechanisms described for CSP allocation, one based on early reductions and one based on need. Under the proposed provision for an abbreviated SIP revision concerning State CSP allocations, a State must use the allocation methods detailed in either § 96.143 or § 97.143. In order that an abbreviated SIP revision provides States the same flexibility as a full SIP revision, EPA is revising the abbreviated SIP revision language to give States the options of using the § 96.143 or § 97.143 provisions or the provisions under § 51.123(e)(4).

The EPA will include appendices in part 97 that will be amended in the future to list any States for which the Administrator approves abbreviated SIP revisions covering any of the 4 specific elements listed above. The EPA anticipates coordinating such amendments of the appendices with the Administrator's final decision to approve such SIP revisions.

D. Overall Structure of the CAIR FIP Cap-and-Trade Programs

In the CAIR NFR, the Agency provided SIP model rules for the CAIR NOX annual, CAIR NOX ozone season, and CAIR SO2 annual trading programs that States can use to meet the emission reduction requirements in the CAIR (in part 96). For the final CAIR FIP cap-and-trade programs, EPA decided to adopt the CAIR SIP model rules with minor changes to allow for Federal implementation.

The emission reductions mandated by today's final rule will be achieved from EGUs (see sections VI.E and VII, below, for discussion of applicability provisions).

The CAIR FIP cap-and-trade programs rely on the detailed unit-level emissions monitoring and reporting procedures of part 75 and consistent allowance management practices. All affected sources are required to monitor and report their emissions using part 75. Source information management, emissions data reporting, and allowance trading will be accomplished using on-line systems similar to those currently used for the Acid Rain SOX and NOX SIP Call trading programs.

The penalty provisions for excess emissions under today's FIP trading programs were also adopted from the CAIR model trading rules. As discussed in section VII in today's preamble, the Agency revised the excess emission penalties in the CAIR SO2 trading program to clarify the penalties for units that have excess emissions under both the Acid Rain Program and the CAIR SO2 trading program. The penalty provisions adopted for the final FIP thus are the excess emissions penalty provisions in the CAIR with the revised CAIR SO2 trading program penalties.

1. SO2 Annual Program

The final CAIR FIP SO2 cap-and-trade program requires affected sources to hold SO2 allowances sufficient to cover their emissions for each control period. For the FIP SO2 program, EPA decided to adopt the CAIR model SO2 trading rule (with minor changes to allow for Federal implementation) which is based Start Printed Page 25347on the existing Acid Rain Program and relies on title IV SO2 allowances.

As in the CAIR SIP SO2 model trading program, the SO2 reductions for the CAIR FIP SO2 trading program will be achieved by requiring sources to retire, in most cases, more than one title IV allowance for each ton of SO2 emissions.[22] Sources can use pre-2010 title IV SO2 allowances for compliance with the CAIR FIP SO2 cap-and-trade program at a 1-to-1 ratio (i.e., SO2 allowances of vintage 2009 and earlier will offset one ton of SO2 emissions). Allowances of vintages 2010 through 2014 will offset 0.5 tons of emissions (i.e., such allowances will need to be retired at a ratio of 2-to-1 for CAIR compliance, in other words 2 allowances for every ton of emissions). Allowances of vintages 2015 and beyond will offset 0.35 tons of emissions (i.e., such allowances will need to be retired at a ratio of 2.86-to-1, in other words 2.86 allowances for every ton of emissions). The emission value of an SO2 allowance is independent of the year in which it is used, but rather is be based on its vintage (i.e., the year for which the allowance is issued). These SO2 allowance retirement ratios are the retirement ratios in the CAIR NFR, which EPA adopted in the CAIR FIP SO2 trading program (see discussion in section VII in the CAIR NFR preamble at 70 FR 25255-25273, as well as in section IX at 70 FR 25290-25291).

The Agency uses the single term, “CAIR SO2 allowance, ” to refer to an SO2 allowance under a CAIR SIP using the model trading rule or CAIR FIP.[23] A CAIR SO2 allowance can be used for compliance with the SO2 allowance-holding requirement in a CAIR SIP or CAIR FIP SO2 trading program. Sources in States governed by either of these SO2 trading programs can trade CAIR SO2 allowances with each other.

2. NO X Annual Program

The final CAIR FIP NOX annual cap-and-trade program requires affected sources to hold NOX annual allowances sufficient to cover their emissions for each control period. For the FIP NOX trading program, EPA adopted the CAIR SIP model NOX trading program with minor revisions to allow for Federal implementation. The FIP NOX program relies on CAIR NOX annual allowances that will be allocated to affected units by the EPA (see section VI.F in today's preamble for discussion of the methodology and schedule for allocating NOX allowances) or allocated by States using abbreviated SIP revisions. A NOX annual allowance authorizes the emission of one ton of NOX.

The Agency is finalizing the proposed Compliance Supplement Pool (CSP) of allowances that will be allocated to sources and can be used for compliance with the CAIR FIP NOX annual cap-and-trade program. See sections V and VI.I in today's preamble for further discussion of the CSP.

NOX ozone season allowances issued under the NOX SIP Call or under the CAIR FIP NOX ozone season trading program can't be used for compliance with the CAIR FIP NOX annual reduction requirement. (Pre-2009 NOX ozone season allowances issued under the NOX SIP Call can be banked into the CAIR FIP NOX ozone season program; see discussion of FIP NOX ozone season program, below.)

The Agency uses the single term, “CAIR NOX allowance,” to refer to a NOX allowance issued under a CAIR SIP using the model trading rule or CAIR FIP. A CAIR NOX allowance can be used for compliance in a CAIR SIP or CAIR FIP NOX annual trading program. Sources in States governed by either of these NOX annual trading programs can trade CAIR NOX allowances with each other.

3. NOX Ozone Season Program

The final CAIR FIP NOX ozone season cap-and-trade program requires affected sources to hold CAIR NOX ozone season allowances sufficient to cover their emissions for each control period. For the ozone season program, the control period extends from May 1 through September 30 for each year of the program. For this trading program also, EPA adopted the trading program from the CAIR SIP model NOX ozone season trading rule with minor modifications to allow for Federal implementation. Under the FIP program, a NOX ozone season allowance authorizes the emission of one ton of NOX during the ozone season.

The FIP program relies on CAIR NOX ozone season allowances that will be allocated to affected sources by the EPA (see section VI.F in today's preamble for discussion of the methodology and schedule for allocating NOX allowances) or allocated by States using abbreviated SIP revisions. In addition, pre-2009 NOX SIP Call allowances can be banked into the CAIR FIP NOX ozone season program and used by affected sources for compliance with that program. NOX allowances issued under the CAIR FIP NOX annual program can't be used for compliance with the CAIR FIP NOX ozone season reduction requirement.

As discussed in the CAIR NFR and the CAIR FIP NPR, certain emission sources that do not meet the applicability requirements of CAIR are included in the existing EPA-administered NOX Budget Trading Program under the NOX SIP Call. (The types of NOX Budget Trading Program units that are not EGUs under CAIR include industrial boilers and turbines, cement kilns, and small EGUs.) As explained in the CAIR NFR and CAIR FIP NPR, EPA will no longer administer the NOX SIP Call ozone season cap-and-trade program for ozone seasons after 2008; however, NOX SIP Call requirements will remain in place. The CAIR NFR provides that States that choose to participate in the CAIR EPA-administered NOX ozone season cap-and-trade program may choose whether or not to bring their non-CAIR NOX SIP Call trading sources into the CAIR ozone season trading program, through their SIP revisions. Bringing the non-CAIR NOX SIP Call trading sources into the CAIR ozone season program is one way to continue to meet NOX SIP Call requirements. See section VII in the CAIR NFR (70 FR 25255-25273) and section IX.A. (70 FR 25289-25290).

As discussed above, the Agency is finalizing its proposal that States may choose to submit an abbreviated SIP revision to bring their non-CAIR NOX SIP Call trading sources into the CAIR FIP NOX ozone season cap-and-trade program. The abbreviated SIP revision may increase a State's NOX ozone season trading budget under the CAIR FIP NOX ozone season cap-and-trade program by an amount equal to the portion of the State's NOX SIP Call State trading budget that is attributed to such units.

The Agency uses the single term, “CAIR NOX Ozone Season allowance,” to refer to a NOX ozone season allowance issued under a CAIR SIP using the model trading rule or CAIR FIP. A CAIR NOX ozone season allowance could be used for compliance in a CAIR SIP or CAIR FIP NOX ozone season trading program. Sources in States governed by either of these NOX ozone season trading programs can trade CAIR NOX Ozone Season allowances with each other.Start Printed Page 25348

E. Sources Subject to the CAIR FIP Cap-and-Trade Programs

Under the proposed CAIR FIP cap-and-trade programs, only EGUs were subject to the proposed rules. The proposed applicability provisions are, by design, identical to the provisions for applicability the CAIR SIP model trading programs and incorporated the FIP NPR revisions to the applicability provisions of the final CAIR SIP model trading rules. The revisions to CAIR SIP model rule applicability include exemptions for (1) municipal solid waste incinerators and (2) existing units that have not served a generator since before November 15, 1990. Incorporating these exemptions into the applicability provisions in both the CAIR SIP and CAIR FIP trading programs provides clarity and aligns the provisions more closely with the provisions in the title IV Acid Rain Program. A detailed discussion of the rationales for including these exemptions may be found in section VII of the CAIR FIP NPR. (See section VIII.C. in the CAIR NFR preamble for applicability discussion at 70 FR 25276-25278 and section VII in today's preamble for additional discussion of changes to the CAIR EGU definition).

Public comment on the proposed applicability provisions of the CAIR FIP trading programs primarily expressed interest in additional exemptions for waste coal-fired units, biomass-fired units, and low emissions units. These are discussed in detail below.

Applicability in the Final CAIR FIP. Today's action finalizes that, in any jurisdiction for which a final CAIR FIP is promulgated, units will be subject to the CAIR FIP trading programs (i.e., to the CAIR FIP SO2, NOX annual, or NOX ozone season programs, as appropriate) if they are stationary, fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion turbine serving at any time, since the later of November 15, 1990 or the start-up of the unit's combustion chamber, a generator with nameplate capacity of more than 25 MWe producing electricity for sale. Certain cogeneration units or solid waste incinerators are exempt from the CAIR FIP and are described below.

Cogeneration Unit Exemption. As in the CAIR NFR, certain cogeneration units are exempt from the CAIR FIP trading programs. Cogeneration units include units having equipment used to produce electricity and useful thermal energy for industrial, commercial, heating, or cooling purposes through sequential use of energy and meeting certain operating and efficiency standards. The program has different applicability provisions for non-cogeneration units and cogeneration units. Any cogeneration unit, serving (since the later of November 15, 1990 or the start-up of the unit), a generator with a nameplate capacity of greater than 25 MW and supplying more than 1/3 potential electric output capacity and more than 219,000 MW-hrs annually to any utility power distribution system for sale, will be subject to the requirements of the CAIR FIP trading rules. Otherwise, the unit will qualify for an exemption under the FIP rules. This cogeneration unit exemption is identical to the exemption in the CAIR NFR, as revised by today's action. Section VIII.C.3. of the CAIR NFR preamble describes the cogeneration unit exemption and discusses the specific elements of how units would qualify and remain qualified for the exemption (70 FR 25276-25278).

Solid Waste Incinerator Exemption. Today's action includes an exemption for certain solid waste incinerators in both the CAIR and CAIR FIP cap-and-trade programs. Specifically, a solid waste incineration unit commencing operation before January 1, 1985, for which the average annual fuel consumption of non-fossil fuels during 1985-1987 exceeded 80 percent and during any 3 consecutive calendar years after 1990 the average annual fuel consumption of non-fossil fuels exceeds 80 percent, is not subject to either the CAIR or CAIR FIP cap-and-trade programs. (Section VII of the preamble for today's rule provides additional discussion.)

Individual Unit Opt-ins. Today's action includes provisions for individual units to opt-in to the CAIR FIP trading programs. These units, when they opt-in, become “affected” by the CAIR FIP trading program and, as a result, must comply with allowance holding requirements, monitor and report emissions, and receive CAIR allowances.

The opt-in provisions of the CAIR FIP trading programs would become applicable to sources in a given State only if the State chooses to submit an abbreviated SIP revision that would provide for the inclusion of opt-ins in the CAIR FIP trading programs. The EPA considered requiring all States to have opt-in provisions in the proposed CAIR FIP trading programs. By not requiring opt-in provisions in all States covered by the proposed FIP trading programs, the Agency seeks to preserve the States' flexibility to decide whether to allow opt-in units. In addition, the EPA believes that including opt-in provisions only in States that have elected to include them in an abbreviated SIP revision avoids the possibility of “stranding” some opt-in units. More specifically, this requirement avoids a situation where a unit might make investments based upon assumption that it will opt-in to a CAIR FIP trading program only to be stranded if the CAIR FIP program was later supplanted by EPA approving a CAIR SIP submitted by the State that did not include opt-in provisions.

If States choose to submit abbreviated SIP revisions to provide for the inclusion of opt-ins in the CAIR FIP trading programs, the SIP revisions must include the opt-in provisions that are provided in the CAIR final rule. See section VIII.G. of the CAIR NFR preamble for discussion of opt-in provisions (70 FR 25286-25288).

Waste Coal-Fired Units Under CAIR FIP. The EPA received comments requesting an exemption for waste coal-fired units from both the CAIR and CAIR FIP SO2 annual programs. Some commenters claimed that their costs to comply with the programs are excessively high. The economics of a waste coal-fired unit are different depending upon whether the unit has a fixed price power purchase agreement in place or whether it is selling electricity on the wholesale market.

Units that had power purchase agreements with fixed prices in place on November 15, 1990, are exempt from title IV and do not receive title IV allowances. The commenters state that, while their agreements are in effect, these units are not able to pass through cost increases, such as the cost of compliance with CAIR, except where specific escalations are provided (e.g., compensation for increases in fuel costs or inflation).

While under the agreements and exempt from title IV, the units can opt into the title IV program and receive allowances as opt-in units. Commenters claim that the title IV opt-in provisions could allocate allowances to them at levels below their projected emissions because the years on which title IV bases the allocations are early in the units operation and might under-represent the unit's typical heat input. The commenters add that it is not cost effective for the units to reduce SO2 emissions by installing advanced emission controls because the units already achieve significant reductions and have fixed price contracts that do not allow them to pass through control costs.

The second scenario is the period beginning when the units' power purchase agreements expire and the units lose their title IV exemption. As title IV affected units, they lose their Start Printed Page 25349title IV opt-in status and can no longer receive title IV allowances under the title IV opt-in provisions. These units are no longer locked into their power purchase contracts and are free to participate in the wholesale electricity markets. The commenters contend that reducing emissions—even when they are free to pass through the cost of compliance—is not cost-effective, because most waste coal-fired facilities already operate at lower SO2 emission rates than many other sources. This, however, belies the real issue, since under a trading program, sources have multiple compliance options including installing emission controls, switching fuels or purchasing allowances. If a source's control costs are above the marginal cost of control in the region, the unit is likely to comply by purchasing allowances, thereby reducing their cost of control to the market price.

In general, information regarding the cost of generation, electricity markets, and cost of controlling emissions may be found through publicly available sources. This information is used, and in some cases developed, by EPA in its regulatory efforts (e.g., IPM modeling results, technical support documents (TSD) examining the cost and feasibility of control options). However, information regarding specific terms of the contracts, such as found in the power purchase agreements of the waste coal-fired units, is generally proprietary and is claimed to vary widely from contract to contract. Although complete information on contracts (e.g., the fixed price for electricity, price escalators) could have been provided in order to perform a thorough analysis, commenters provided EPA with some limited information (much of it after the public comment period closed) that did not support the commenters' case for the broad closure of waste coal-fired units as a category of sources. In addition, commenters presented some limited analysis of the ratio of their estimated cost of compliance with CAIR to their projected revenue. Again, EPA's evaluation of this limited analysis showed that it did not support the commenters claims that they would not be economically viable. (The results of EPA's evaluation of the commenters' analysis are discussed later in this section.) Because the unit-specific information provided by the commenters was limited, EPA conducted an analysis using generally available information to evaluate the potential impact of the cost of complying with CAIR for a typical CFB combusting waste coal. This analysis shows that the typical waste coal-fired unit would remain economically viable under CAIR. (The results of this analysis are discussed later in this section.)

EPA understands that waste coal-fired facilities have not received a title IV SO2 allowance allocation because they have been exempt from title IV under the IPP exemption. Title IV's IPP exemption applies to units that had power purchase agreements with fixed prices in place on November 15, 1990, and includes units other than waste coal-fired facilities. Congress limited this exemption to only those units with power purchase commitments in effect, thereby acknowledging that once the unit was freed from its power purchase commitment, it was free to pass through compliance costs to its customers. The unit may lose this exemption even before the full-term of the contract if the power purchase commitment changes after November 15, 1990, in a way that allows the cost of compliance with the Acid Rain Program to be shifted to the purchaser. For example, expiration or termination of the power purchase commitment or modification so that the price is increased (e.g., changed to a market price) results in loss of the exemption. The purpose of the exemption is to protect IPP facilities subject to contract prices that were set before passage of the CAA Amendments of 1990 (including the Acid Rain Program in title IV) and that did not allow pass through of the costs of Acid Rain Program compliance. Congress has limited the exemption to apply to the Acid Rain Program and did not mandate the Agency with maintaining the exemption in future programs. EPA believes that this exemption was aimed at easing the transition of such facilities into the Acid Rain Program and that there is no basis for maintaining this exemption for every subsequent cap-and-trade program.

Waste coal-fired units are designed and operated for the purpose of generating electricity for sale. As a result, they are reasonably treated as part of the power generation sector, which comprises the category of sources the CAIR and CAIR FIP trading programs aimed at regulating. For this reason, EPA modeling for CAIR included waste coal-fired EGUs as part of the power sector, which was shown to collectively be able to make highly cost-effective SO2 and NOX emission reductions. The marginal cost of control and the average cost of control, shown to be highly cost-effective, reflect a range of power sector control costs that include costs from sources such as waste coal-fired units. Notably, the model considers where control will be least expensive and that some units will purchase allowances in the determination of which units are projected to dispatch. EPA modeling shows that waste coal-fired units continue to be dispatched even when the cost of complying with CAIR is part of the unit's production costs. Commenters did not provide any basis for changing EPA's treatment of waste coal-fired units in the modeling or for challenging EPA's modeling results.

EPA agrees that these units do not have large SO2 emissions. These units may emit based on a reduction in SO2 from sulfur content in the fuel of approximately 90 percent, or in some cases greater, reductions in SO2 from sulfur content of the fuel.[24] However, many continue to emit at rates above those recently achieved by coal-fired units with advanced SO2 controls (i.e., scrubbers). Nevertheless, because these units tend to be relatively small and have lower total emissions, they would be required to purchase significantly fewer allowances than other, potentially higher emitting, sources that also may not have received SO2 allowances under title IV.

However, EPA does not believe that the CAIR SO2 annual requirements would impose an undue or inequitable “economic burden” on waste coal-fired units that would “threaten the viability” of all, or even many, of these units. EPA considered the potential impacts for both the periods of the concern identified by the commenter: (1) When the power purchase agreement is in place and the unit is exempt from title IV; and (2) after the power purchase agreement has expired and the unit is title IV affected.

For the period in which the waste coal-fired unit has a power purchase contract in place, EPA examined the analysis presented by the commenters in support of their argument that CAIR compliance costs would threaten their economic viability. EPA believes the commenters' analysis substantially overestimated the potential compliance costs of CAIR and the CAIR FIP (by inaccurately accounting for the future projected cost of emitting one ton of SO2, underestimating access to title IV SO2 allowances through the title IV opt-in provisions, and inaccuracies in other analytical assumptions) and, when more realistic assumptions are correctly applied, these units are much better off. (Section VI.A of the CAIR FIP Response to Comment Document presents the results of this analysis.) Start Printed Page 25350

As mentioned above, while waste coal-fired units have a valid power purchase agreement (and, subsequently, an exemption from title IV), they may choose to opt-in to the title IV program and receive SO2 allowances. The title IV opt-in provisions provide units with SO2 allowances based upon their heat input (i.e., the average of their annual heat input for the years 1985 through 1987 or their first 3 whole years of operation) and their emission rate (i.e., the lesser of their actual emission rate during the first baseline year or, their lowest permitted emission limit in year they apply that will be effective that year or any time after). As a result, these units could receive SO2 allowances sufficient to authorize all of their future, annual emissions under the title IV program. Other units, that may operate more than they did during the baseline years, may receive SO2 allowances from the title IV opt-in provisions at levels lower than their future emissions. Assuming the waste coal-fired units made no additional reduction in SO2 emissions, this same opt-in allocation level would authorize half of their emissions, and require them to purchase SO2 allowances equal to half of their emissions, under the first phase of CAIR or the CAIR FIP.[25] Considering that waste coal-fired CFB units generally achieve greater than 90 percent SO2 emission reductions, the unit would purchase SO2 allowances equal 5 percent of this total, uncontrolled emissions. The retirement ratio for the second phase of CAIR or the CAIR FIP would result in the sources purchasing SO2 allowances equivalent to 7 percent of this uncontrolled emissions level (i.e., two thirds of the remaining 10 percent of the uncontrolled emissions). From the evidence that EPA has been provided, the commenters have not demonstrated that purchasing allowances equal to approximately 5 percent or 7 percent of uncontrolled emissions in the phases 1 and 2 of the CAIR FIP (and CAIR), respectively, would result in the units not being economically viable.

The commenters concerns about the economic viability of waste coal-fired units continue for periods of time when the power purchase agreements have expired (i.e., the units have lost the exemption from title IV) and the units are free to participate in the electricity markets. EPA addressed this concern by conducting additional analysis using generally available information to evaluate the potential impact of the cost of complying with CAIR for a typical CFB combusting waste coal. More specifically, EPA examined how the potential cost to operate a typical waste coal-fired CFB unit (in $/MWh) compares to the potential price it would receive on the electricity market. This analysis estimated the potential cost of producing electricity for a waste coal-fired CFB (including the cost of complying with CAIR) to be significantly less than the EPA projected wholesale price and the forecasted price of electricity. In general, waste coal-fired facilities will continue to be profitable, even when factoring in the cost of complying with CAIR.

EPA also notes that, upon the expiration of the power purchase agreements, waste coal-fired units will participate in the electricity markets and be required to comply with all applicable emission control programs, including the title IV Acid Rain Program, just as other coal-fired facilities. Some of these coal-fired units have installed emission control equipment, emit SO2 at lower rates than the waste coal-fired units, and are complying with title IV while they compete in the electricity markets. Additionally, new units continue to come online and are economically viable even though they must acquire title IV SO2 allowances on the market.

In addition, commenters mentioned that waste coal-fired facilities provide benefits outside of air emissions, such as assisting in the mitigation of waste coal impacts on the land. EPA notes that, in case of waste coal-fired units, there are a variety of avenues of potential relief for States that wish to assist these units as they transition to competitive markets. Options for States to encourage certain types of generation include, but are not limited to: Revenue from renewable portfolio standards (where waste coal-fired units can qualify); and providing valuable CAIR NOX annual and ozone season allowances, as well as mercury allowances under the Clean Air Mercury Rule (which are options in Pennsylvania, where most of the commenters waste coal-fired units are located). EPA also notes that, in the case of waste coal-fired units that have contended that they provide multi-media benefits, that they will have the flexibility to develop integrated, multi-pollutant compliance strategies under CAIR.

In summary, EPA does not agree with commenters that believe that complying with the CAIR FIP or CAIR SO2 annual program would result in this category of units not being economically viable. These units are designed to generate electricity for sale on the grid and are part of the power generation sector. The CAIR FIP and CAIR trading programs are designed to achieve emission reductions from EGUs while providing the flexibility for the markets to find the least-cost reductions. Once their contracts expire, waste coal-fired units, just as other coal-fired generation sources which may or may not receive title IV SO2 allowances, will be expected to hold SO2 allowances and compete in the electricity markets. In addition, the commenter has not provided analysis that demonstrates that waste coal-fired units, as a category, would not be economically viable as a result of CAIR. For these reasons, EPA has not included an exemption for waste coal-fired units or IPPs in the CAIR FIP or CAIR trading programs.

Biomass-Fired Units under CAIR FIP. EPA received comment that biomass-fired units should be exempt from the CAIR and CAIR FIP trading programs. These commenters claimed that their operations are similar to those of solid waste incineration units, which EPA proposed to exempt in the CAIR FIP NPR. Commenters added that they could meet fossil fuel use criteria used in the solid waste incineration unit exemption (i.e., the average annual fuel consumption of non-fossil fuels not exceeding 80 percent for the years 1985-1987 (or for a unit commencing operation after January 1, 1985, the first 3 years of operation) and during any 3 consecutive calendar years after 1990). In addition, commenters noted that this would be consistent with the title IV exemptions for biomass-fired units as “qualifying facilities.”

EPA disagrees with commenters that request that biomass-fired EGUs be exempted from the CAIR and CAIR FIP trading programs because they are similar to solid waste incinerators. While biomass-fired EGUs may be able to meet the criteria for limited combustion of fossil fuel used in the solid waste incineration unit exemption in the CAIR and CAIR FIP trading programs, they differ from solid waste incineration units in that biomass-fired units are designed and operated for the purpose of generating electricity for sale. As a result, they are reasonably treated as part of the power generation sector, which comprises the category of sources the CAIR and CAIR FIP trading programs aimed at regulating. For this reason, EPA modeling for CAIR included biomass-fired EGUs as part of the power sector, which was shown to be able to make highly cost-effective SO2 and NOX emission reductions. The marginal cost of control and the average Start Printed Page 25351cost of control, shown to be highly cost-effective, reflect a range of power sector control costs that include costs from sources such as biomass-fired units. Commenters did not provide any basis for changing EPA's treatment of biomass-fired units in the modeling or for challenging EPA's modeling results.

Biomass-fired units included in the CAIR and CAIR FIP trading programs are distinguishable from solid waste incineration units exempt from the CAIR and CAIR FIP trading programs. First, while the purpose of biomass-fired units are to generate electricity (and, in some cases, useful thermal energy), solid waste incineration units are designed and operated for the purpose of disposing of solid waste, with electricity generation incidental to this purpose. In fact, the term “solid waste incineration unit” excludes sources whose primary purpose is something other than waste disposal, such as “material recovery facilities * * * which combust for the primary purpose of recovering materials” and “qualifying small power production facilities * * * or qualifying cogeneration facilities * * * which burn homogeneous waste for the production of electric energy * * * for the production of electric energy and steam or forms of useful energy (such as heat) * * *” (18 U.S.C. 7429(g)(1)) Thus, it was reasonable for EPA to treat biomass-fired units, but not solid waste incineration units, as part of the power sector. Second, as explained in the CAIR FIP NPR, emission reductions from solid waste incineration units, treated as a separate source category, were not considered in EPA's determination of highly cost-effective reductions from the power sector. Biomass-fired units were treated as part of the power sector, which was shown in EPA's modeling to be able to make highly cost-effective reductions.

EPA does not believe that the title IV exemption for qualifying biomass-fired units means that these units should be exempt from all cap-and-trade programs developed after the Acid Rain Program. Under the Acid Rain Program, an IPP facility (such as a biomass-fired unit) that has, as of November 15, 1990, a qualifying power purchase commitment (including a sales price) to sell at least 15 percent of planned net output capacity and has installed net output capacity not exceeding 130 percent of planned net output capacity is exempt from the program. However, if the power purchase commitment changes after November 15, 1990 in a way that allows the cost of compliance with the Acid Rain Program to be shifted to the purchaser, then the IPP facility loses the exemption. For example, expiration or termination of the power purchase commitment or modification so that the price is increased (e.g., changed to a market price) results in loss of the exemption. The purpose of the exemption is to protect IPP facilities subject to contract prices that were set before passage of the CAA Amendments of 1990 (including the Acid Rain Program in title IV) and that did not allow pass through of the costs of Acid Rain Program compliance. However, EPA maintains that this exemption was aimed at easing the transition of such facilities into the Acid Rain Program and that there is no basis for maintaining this exemption for every subsequent cap-and-trade program.

Under the CAIR trading programs, a biomass-fired unit can be allocated NOX allowances, just as any other CAIR unit. Further, although biomass-fired units are not generally allocated title IV allowances, which are used in the CAIR SO2 annual trading program, those units can opt into the Acid Rain Program and receive title IV allowances as long as they retain their IPP exemption. If they lose the exemption because they are no longer bound by their power purchase commitment, then they can pass through compliance costs to the same extent any CAIR unit can do so.

For the reasons discussed above, the EPA is not including an exemption from the CAIR and CAIR FIP trading programs for biomass-fired units in today's final rule.

Low Emissions Units Under CAIR FIP. EPA received comment requesting that units with low emissions, such as units that emit less than 25-tons annually, be exempt from the CAIR and CAIR FIP trading programs. This includes simple cycle turbines that are operated infrequently, primarily during peak demand or when there are operational difficulties with baseload units. Commenters claim that the cost of monitoring and reporting their emissions is excessively burdensome and that special provisions in part 75 monitoring for low mass emitting (LME) units does not provide adequate relief.

Today's final CAIR FIP trading rules do not include an exemption for low emitting units. While low emitting, these units are designed and operated for the purposes of generating electricity for sale. As a result, they are reasonably treated as part of the power generation sector, which comprises the category of sources the CAIR and CAIR FIP trading programs aimed at regulating. For this reason, low-emitting units were included as part of the power sector, which was shown through EPA modeling for CAIR to be able to make highly cost-effective emission reductions. The marginal cost of control and the average cost of control, shown to be highly cost effective, reflect a range of power sector control costs that include costs from low-emitting units (including simple-cycle turbines).

Commenters advocating an exemption of these units did not provide any basis for changing EPA's treatment of these units in the modeling or for challenging EPA's modeling results.

The NOX SIP Call did include an exemption for units that could demonstrate that their permits imposed an operating hour limitation under which their potential emissions during the ozone season did not exceed 25 tons (the “25-ton exemption”). Units wishing to obtain the 25-ton exemption were required to use conservative emission estimates of their potential emissions and State budgets were adjusted to remove the equivalent of their potential emissions from that State's trading program budget. In general, this exemption was undersubscribed and complex. EPA also notes that it received little comment on including a 25-ton exemption, with only a single facility claiming that this exemption is necessary. EPA does not see compelling justification to include this exemption in the CAIR and CAIR FIP trading programs.

EPA does not agree with commenters that contend that the LME provisions do not adequately relieve the cost of monitoring and reporting for low emitting units. The part 75 LME provisions provide qualifying sources with multiple options to allow facilities to choose the approach that best fits their circumstances. First, units may choose to use EPA-provided, conservative emission factors in lieu of installing and operating Continuous Emissions Monitoring Systems (CEMS). The LME provisions provide a second option that allows facilities to determine unit-specific emission factors for use in estimating their annual emissions. Additionally, EPA provides the software necessary to generate the quarterly emissions reports for these sources to further lessen the burden on these sources. These streamlined monitoring and reporting procedures relieve much of the administrative burden, and therefore, the compliance costs, for LME qualifying units. This allows EPA to accurately and cost-effectively account for the emissions, even at low emission levels, and allow these units to participate in the CAIR trading programs. Start Printed Page 25352

F. Allocation of NO X Emission Allowances to Sources

The EPA presented in the NPR (70 FR 49730-49734) its proposed schedules and methods for allocating NOX allowances to sources, including allowances for the CAIR FIP NOX annual trading program and the CAIR FIP NOX ozone season trading program. The Agency proposed to use NOX allocation methods that are consistent with the NOX allocation methods in the CAIR SIP model trading rules.

As discussed above, the Agency proposed that a State could choose to modify the application of the FIP through abbreviated SIP revisions that would allow the State, rather than EPA, to allocate NOX annual and/or ozone season allowances for the CAIR FIP trading programs.

The EPA proposed formulas for EPA-determined allocations of NOX allowances to units (both existing units with sufficient baseline data and new units) under the CAIR FIP trading programs. Further, the Agency proposed schedules for applying the allocation formulas and for determining such NOX allocations for the CAIR FIP trading programs. The EPA also proposed schedules for States to apply State-determined allocation formulas under abbreviated SIP revisions. In addition, EPA proposed a schedule for the Administrator to record NOX allocations (whether EPA-or State-determined) in source accounts.

The EPA received a number of comments on each of these elements of its proposed schedules and methods for NOX allocations. The Agency discusses the comments and presents the final schedules and methods for NOX allocations below.

See section VI.I in today's preamble for a discussion of the Agency's method for distributing FIP NOX annual allowances from the NOX annual CSP.

1. Schedule for Determining and Recording NOX Allocations

The Agency's preference is for States to make decisions about NOX allocations for their sources. Although EPA will determine NOX allocations for the CAIR FIP trading programs, we intend to only record EPA-determined allocations in allowance accounts for sources located in a State without a timely, approved CAIR SIP revision (or timely, approved abbreviated CAIR SIP revision providing for State-determined allocations).

While EPA's proposal included schedules for determining and recording NOX allocations for both existing units with sufficient baseline data and new units, this section of the preamble—and the public comments—focus on the allocations for existing units.[26]

As discussed further below, EPA intends to determine NOX allocations for the CAIR FIP trading programs by October 31, 2006 (covering 2009-2014). For any State choosing to determine CAIR FIP NOX allocations using an abbreviated SIP revision, the deadline for States to notify EPA of their first set of NOX allocations (covering at least 2009-2011) is April 30, 2007. The Agency will record EPA-determined allocations for the CAIR FIP trading programs by September 30, 2007 (covering 2009), September 30, 2008 (covering 2010) and September 30, 2009 (covering 2011-2013). If State-determined NOX allocations are approved earlier than these recordation deadlines (under a full SIP revision or an abbreviated SIP revision), the Agency intends to record the State-determined allocations in source accounts rather than EPA-determined allocations, as soon as possible. Table VI-2, below, summarizes the final deadlines for recording CAIR FIP NOX allocations (EPA-determined allocations or State-determined allocations using an abbreviated SIP revision). Table VI-3 summarizes the final deadlines for recording CAIR SIP NOX allocations for States choosing to use the CAIR model trading rules (full SIP revisions).

As discussed in the NPR, the Agency developed proposed schedules for recording CAIR F IP NOX allocations for existing units in source accounts with the objective of balancing the following two goals: (1) Providing both adequate certainty to sources regarding their CAIR NOX allocations and adequate time for sources to make compliance decisions, and (2) providing States choosing to allocate CAIR NOX allowances with time to submit, and EPA to approve, abbreviated or full SIP revisions that provide for State-determination of allowance allocations.

The final CAIR (70 FR 25162) requires States to submit SIP revisions complying with the CAIR requirements to the Agency by September 11, 2006 and to submit the initial set of NOX allocations by October 31, 2006.

In the CAIR FIP NPR, the Agency proposed that States choosing to submit abbreviated SIP revisions would be required to submit such revisions to EPA by March 31, 2007, and—if choosing to address NOX allocations in an abbreviated SIP revision—would be required to submit the initial set of NOX allocations by September 30, 2007. The EPA proposed allowing States to submit abbreviated SIP revisions later than full revisions because the Agency anticipates being able to complete the approval process more quickly for abbreviated revisions due to their narrower scope.

The Agency stated in the FIP NPR its intention to determine final NOX allocations for 2009 through 2014 for the FIP trading programs prior to December 1, 2007 (70 FR 49732). The EPA has further considered its plans for determining these final NOX allocations and now intends to determine them by October 31, 2006. The Agency intends to publish a Notice of Data Availability (NODA) during spring 2006 with NOX allocations for 2009 through 2014. The public will have an opportunity to make objections to any of the data used in these allocations. EPA will publish a NODA with the final NOX allocations for 2009 through 2014 (adjusted if necessary in light of any objections) by October 31, 2006. In this manner, the Agency intends to provide earlier notice to sources of the EPA-determined NOX allocations.

The EPA proposed to determine NOX allocations by July 31, 2011 and July 31 of each year thereafter for the control period in the fourth year after the year of the deadline for the determination and then to provide opportunity for submission of objections to the determination. The EPA would make any necessary adjustments to the allocations in light of any objections, before the deadline for EPA to record the allocations. The EPA is now finalizing this schedule. For example, the Agency will determine allocations by July 31, 2011 for the 2015 control period and then provide opportunity for submission of objections. The Agency intends to make any necessary adjustments to these allocations, in light of any objections, as soon as possible after the receipt of objections and before the recordation deadline [27] of December 1, 2011. As discussed further below, the Agency intends to record EPA-determined NOX allocations in source accounts only in the absence of a timely, approved full CAIR SIP revision or a timely, approved abbreviated CAIR SIP revision providing for State-determined allocations.

The EPA presented in the FIP NPR its proposed deadlines for recording NOX allocations in source accounts for the CAIR FIP trading programs (see Table Start Printed Page 25353VI-1 in the NPR at 70 FR 49732.) The proposed recordation deadlines for FIP NOX allocations were as follows: By December 1, 2007 for the 2009 control period; by December 1, 2008 for the 2010 control period; by December 1, 2009 for the 2011, 2012 and 2013 control periods; by December 1, 2010 and December 1 of each year thereafter for the control period in the fourth year after the recordation deadline. These proposed recordation deadlines were the latest dates by which EPA proposed to record NOX allocations for the CAIR FIP trading programs. The EPA proposed to record EPA-determined NOX allocations only in the absence of a timely, approved full CAIR SIP revision or a timely, approved abbreviated CAIR SIP revision providing for State-determined NOX allocations. The Agency intended to record any NOX allocations determined by a State using an abbreviated SIP revision as soon as feasible after approval of the abbreviated SIP revision; EPA did not intend to wait until the proposed deadlines to record such State-determined allocations. Likewise, the Agency intended to record any NOX allocations determined by a State using a full SIP revision as soon as feasible after approval of the full revision (and according to the recordation deadlines in the CAIR SIP rules at §§ 96.153 and 96.353).[28]

In the FIP NPR (70 FR 49739), the Agency proposed to remove the deadline to record NOX allocations for the first set of years submitted in a SIP revision (i.e., in a full SIP revision) that used the model allocation method in part 96, but to retain the deadlines to record the subsequent allocations. The CAIR NOX model trading rules, as finalized at 70 FR 25162, required the Administrator to record the initial set of NOX allocations submitted by the States by December 1, 2006 (§§ 96.153 and 96.353). However, since the SIP revisions that include such allocations are not due until September 11, 2006, it is highly unlikely that all the SIP revisions will be approved by EPA in time for the allocations to be recorded by December 1, 2006. CAIR NOX allowance allocations should not be recorded, and thereby be tradable in the allowance market, before the SIP revision on which the allocations are based is final; it would be highly disruptive to the allowance market if allocations that are recorded and could be traded could subsequently be rendered invalid due to disapproval of the SIP revision on which the allocations are based.

The Agency's proposal to remove the deadline to record the first set of NOX allocations submitted in a full SIP revision did not include an alternative recordation deadline. Some commenters suggested that EPA should set an alternative deadline, and one commenter suggested that the deadline should be within 30 to 60 days following EPA approval of a State's SIP revision. The Agency is finalizing a recordation deadline of September 30, 2007 for the first set of NOX allocations submitted with a full SIP revision. This recordation deadline is based on the Agency's belief that full SIP revisions can be approved in about a year from submission, that is by about September 2007.

Some industry commenters who supported the abbreviated SIP revision approach did not support the proposed schedule for abbreviated revisions, in particular with regard to the schedule for NOX allocations. Some suggested that abbreviated SIP revisions should be due on the same schedule as full SIP revisions (i.e., that the deadline for abbreviated SIP revisions should be September 11, 2006, instead of March 31, 2007 as proposed) or, as suggested by one commenter, on an even earlier schedule than full SIP revisions. Similarly, some suggested that the deadline for the first set of NOX allocations submitted with an abbreviated SIP revision should be the same as the NOX allocations deadline for a full SIP revision (i.e., that the deadline for allocations in an abbreviated revision should be October 31, 2006, instead of the proposed deadline).[29] Some commenters suggested that sources should be provided earlier knowledge of their allocations in order to plan for compliance.

A State commenter asserts that submitting an abbreviated SIP revision under the proposed schedule will be problematic for some States that may not be able to complete a State rulemaking prior to the deadline for such submission.

The EPA is finalizing the proposed March 31, 2007 deadline for submission of abbreviated SIP revisions to the Agency. Because of the narrower scope of abbreviated SIP revisions, EPA anticipates that it will be able to complete the approval process more quickly for such revisions than for full SIP revisions. The EPA believes that it can approve abbreviated SIP revisions in about 6 months from submission. With abbreviated SIP revisions due to the Agency about 6 months later than the deadline for full SIP revisions, EPA anticipates that approval for both types of submissions would be feasible by about the same time, that is by about September 2007.

The Agency is finalizing a deadline of April 30, 2007—instead of September 30, 2007 as proposed—for States to submit to EPA their first set of NOX allocations associated with an abbreviated SIP revision (covering at least 2009, 2010 and 2011). The Agency revised this deadline in order to provide sources with an earlier opportunity to have notice of the State-determined NOX allocations.

A few industry commenters argued that the deadlines for recording NOX allocations in source accounts for the CAIR FIP trading programs should be earlier than proposed, to provide earlier knowledge to sources of their allocations. One recommended that NOX allocations for the CAIR FIP trading programs—whether determined by EPA or determined by a State using an abbreviated SIP revision—be recorded in source accounts by December 1, 2006 for 2009 through 2011.

Another industry commenter suggested that, if a State fails to meet the October 31, 2006 deadline for allowance allocations in a full SIP revision, EPA should immediately record the FIP allowance allocations. The same commenter also suggested that NOX allocations should be recorded in source accounts a minimum of 3 years prior to the date they can be used for compliance and asserted that, if a source did not know until a year before the compliance deadline what its allocation will be, the source “would be completely unable to plan for compliance.”

A State commenter suggests that the requirements for notification of allocations under CAIR SIP trading programs and the CAIR FIP trading programs should be the same. According to the commenter, if EPA finalizes a lead time for recording NOX allocations under the CAIR FIP trading programs of less than 3 years for the first 4 control periods, “the same flexibility Start Printed Page 25354should be extended to approved CAIR SIP trading programs.”

In determining the final NOX allocation recordation deadlines, abbreviated SIP submission deadlines, and schedules for determining NOX allocations, the Agency is balancing the goals of (1) providing information in advance to source owners and operators regarding their future CAIR NOX allocations in order to facilitate their decision-making concerning compliance with the requirements to hold allowances and (2) providing States choosing to allocate CAIR NOX allowances sufficient time to prepare and submit SIP revisions (full or abbreviated revisions) setting forth the State allocation methodology and prepare and submit unit allocations for specific years and providing EPA sufficient time to review and approve these SIP revisions and record these unit allocations. The EPA made adjustments to the proposed NOX allocation schedules in response to public comments received on the proposal. The Agency believes that the final schedules achieve a reasonable balance between these goals within the constraints of the available time.

The Agency is finalizing a deadline of September 30, 2007 (instead of December 1, 2007 as proposed) for recording NOX allocations for 2009 for the CAIR FIP trading programs, whether EPA-determined or State-determined using an abbreviated SIP revision. This is the same deadline that EPA is finalizing for recording the first set of State-determined NOX allocations in a full SIP revision, as discussed above. This is the earliest feasible recordation date based on EPA's assumption that it will take about a year to approve a full revision and about 6 months to approve an abbreviated revision. The EPA would like to stress that, if State-determined NOX allocations are approved earlier than this deadline (under a full SIP revision or an abbreviated SIP revision) the Agency intends to record the State-determined allocations in source accounts as soon as possible. The Agency does not intend to wait until the recordation deadline to record State-determined allocations and will record EPA-determined allocations for 2009 by this deadline in the absence of an approved full SIP revision or an approved abbreviated SIP revision providing for State-determined allocations.

Similarly, the Agency is finalizing a recordation deadline of September 30, 2008 (instead of December 1, 2008) for recording CAIR FIP NOX allocations for 2010; and September 30, 2009 (instead of December 1, 2009) for recording CAIR FIP NOX allocations for 2011, 2012 and 2013. The Agency does not intend to wait until these deadlines to record State-determined allocations and will record EPA-determined allocations for 2010, 2011, 2012 and 2013 according to these deadlines in the absence of an approved full SIP revision or an approved abbreviated SIP revision providing for State-determined allocations. The Agency will record EPA-determined allocations in source accounts one year at a time for 2009 and 2010 in order to provide flexibility to States to determine allocations for their sources.

Beginning with allocations for the 2014 compliance year, EPA is finalizing the proposed recordation deadlines for CAIR FIP NOX allowances. That is, beginning with the 2014 control period and for each control period thereafter, EPA intends to record NOX allocations for the CAIR FIP trading programs in source accounts by December 1 of each year for the control period 4 years after the year in which the allocations are recorded. This approach will provide sources with their allocations about 3 years in advance. For example, EPA will record FIP allocations for the 2014 control period by December 1, 2010. The Agency will record EPA-determined allocations only in the absence of an approved full SIP revision or an approved abbreviated SIP revision providing for State-determined allocations.

Table VI-2, below, summarizes the final NOX allocation recordation deadlines for the CAIR FIP trading programs. Deadlines for future control periods not shown in the table follow the same pattern shown for 2014 through 2016. Note that these are the latest dates by which EPA will record CAIR FIP NOX allocations. The EPA intends to record State-determined CAIR FIP NOX allocations as soon as possible after approval of abbreviated SIP revisions.

Table VI—2.—Recordation Deadlines for CAIR FIP NOX Allocations

CAIR control periodDeadline by which FIP NOX allocations are recorded (EPA-determined allocations or state-determined allocations using abbreviated SIP revision)
2009September 30, 2007.
2010September 30, 2008.
2011September 30, 2009.
2012September 30, 2009.
2013September 30, 2009.
2014December 1, 2010.
2015December 1, 2011.
2016December 1, 2012.

As discussed in the FIP NPR (70 FR 49731), EPA acknowledges that it is preferable for source owners and operators to have at least 3 years lead time with regard to allowance allocations when feasible. A shorter lead time would reduce the period for buying or selling allowances and could prevent sources from participating in allowance futures markets, a mechanism for hedging risk and lowering costs (CAIR NFR, 70 FR 25279). Although lead time may impact the selection of trading strategies, as discussed further below, EPA believes that the selection of compliance methods (e.g., installation of emission control technology, fuel switching, or allowance purchases) should not be impacted by the amount of allowances a source is allocated for a given year.

The final schedule for recording NOX allocations for the CAIR FIP trading programs in today's rulemaking provides that allocations will be recorded with at least 3 years lead time in all but the initial 4 compliance years. For those initial years, the Agency will work with the States to be able to record State-determined NOX allocations as soon as feasible and will record EPA-determined allocations by the recordation deadlines in the absence of timely, approved full SIP revisions or timely, approved abbreviated SIP revisions providing for State-determined allocations.

Table VI-3, below, summarizes the final recordation deadlines for NOX allocations for the CAIR SIP model trading rules (i.e., NOX allocations contained in full SIP revisions). Deadlines for future control periods not shown in the table follow the same pattern shown for 2015 and 2016. The EPA intends to record State-determined allocations as soon as possible after approval of full SIP revisions.

Table VI—3.—Recordation Deadlines for CAIR SIP Model Rule NOX Allocations

CAIR control periodDeadline by which SIP NOX allocations are recorded (for States choosing to use the CAIR SIP model rules)
2009September 30, 2007.
2010September 30, 2007.
2011September 30, 2007.
2012September 30, 2007.
2013September 30, 2007.
2014September 30, 2007.
2015December 1, 2009.
2016December 1, 2010.

It is likely that source owners and operators will know or at least have a reasonable understanding of the likely Start Printed Page 25355amounts of their NOX allocations substantially earlier than the deadlines for recording allocations in source accounts. States submitting full CAIR SIP revisions must notify EPA of their initial set of unit-by-unit NOX allocations (covering at least 2009, 2010 and 2011) by October 31, 2006. As indicated in the CAIR, the States have broad discretion in making unit-by-unit allocations, and EPA's review will center on whether the total allocations in a given year exceed the State's trading budget. See §§ 51.123(o)(2)(ii)(A) and (aa)(2)(iii)(A). The Agency intends to determine unit-by-unit NOX allocations for the initial compliance years of the CAIR FIP trading programs by the same date, October 31, 2006 (covering 2009 through 2014). States submitting abbreviated SIP revisions must notify EPA of their unit-by-unit NOX allocations for the CAIR FIP trading programs by April 30, 2007 (covering at least 2009, 2010 and 2011). As is the case for States submitting full SIP revisions, EPA's review of unit-by-unit allocations will center on ensuring that the State budget would not be exceeded.

Moreover, through each State's public rulemaking, adjudicative, and/or legislative processes for determining allocations, source owners and operators will likely be aware of their State's plans regarding NOX allocations even in advance of the deadlines by which the States must submit their unit-by-unit allocations to EPA. For example, the public is likely to know whether the State is planning to allocate using the example NOX allocation method provided in the CAIR SIP model rules, or what alternative allocation method the State is planning to use. This knowledge would give owners and operators a sense for what their allocations will be.

An industry commenter asserted that, if a source did not know until a year before the compliance deadline what its allocation will be the source “would be completely unable to plan for compliance,” stating as a reason “it takes longer than a year to install the controls that might be necessary to meet an unexpectedly low allocation.” Another commenter asserted that “Sources use the period of time between finalization of source-by-source allocations and the control period to plan and implement any strategy necessary to achieve compliance.” The Agency disagrees with these arguments. The EPA believes—and general economic theory suggests—that for owners and operators of sources covered by CAIR trading programs, the determination regarding what will be the lowest cost compliance methods (e.g., installation of emission control technology, fuel switching, or allowance purchases) should not be impacted by the amount of allowances a source is allocated for a given year.

The Agency believes the decision to install NOX control technology will be made based on evaluating the cost to that source of installing controls compared to the price of NOX allowances in the allowance market. For a particular source, if the cost to control a ton of NOX emissions is lower than the NOX allowance price, then the source will likely choose to control emissions. This is the case regardless of the amount of allowances allocated to the source since using an allocated allowance to cover emissions has an opportunity cost (i.e., the value of that allowance if it were sold in the allowance market) just as using a purchased allowance to cover emissions has a cost (i.e., the price of purchasing that allowance in the allowance market).

Such a source may choose to over-control and make greater reductions than those required on average by the NOX trading program cap either to free up allocated allowances that can then be sold for more than it cost to free up the allowances or in order to avoid purchasing allowances in the allowance market. In contrast, for a particular source, if the cost to control a ton of NOX emissions is higher than the NOX allowance price, the source will likely choose to use allocated allowances or buy allowances to cover its NOX emissions since that will cost less than installing control technology.

The Agency strongly urges States to submit CAIR SIP revisions (full or abbreviated revisions) to EPA in a timely manner. The EPA will endeavor to work with States to ensure that the Agency can timely approve SIP revisions and record State NOX allocations in source accounts.[30] However, once EPA-determined NOX allocations are recorded for a particular control period (which would only occur in the absence of a timely, approved full CAIR SIP revision, or a timely, approved abbreviated CAIR SIP revision providing for State-determined allocations), EPA intends not to record overlapping State-determined allocations for that same control period. Rather, EPA will work with the States to approve SIP revisions with State allocations for control periods after the last control period for which EPA-determined allocations have been recorded in source accounts. It would be highly disruptive to the allowance market if EPA-determined allocations that had been recorded and could be traded in the market could subsequently be rendered invalid due to approval of overlapping State allocations for the same control period.[31]

For States choosing to submit full SIP revisions for CAIR, the Agency suggests they consider designating any of the 4 specific elements that can be included in abbreviated SIP revisions (e.g., NOX allocations) as being submitted for purposes of both a full SIP revision and an abbreviated SIP revision. Because the Agency anticipates that it will be able to approve abbreviated SIP revisions more quickly than full SIP revisions, a State's designation of its NOX allocations as an abbreviated SIP revision (as well as part of a full SIP revision) may result in EPA being able to approve the allocations portion more quickly and being able to record the State-determined unit-by-unit allocations sooner.

The Agency intends to work with any State choosing to allocate NOX allocations (whether through a full SIP revision or an abbreviated SIP revision) and to ensure that the State's allocations, rather than EPA-determined allocations, will be recorded as soon as possible.

The Clean Air Act is designed to give States the first obligation (and opportunity) to prevent significant contribution to a downwind State's nonattainment problems. The EPA only acts in the case where a State does not meet this obligation. The Agency is promulgating CAIR FIPs as soon as possible to assure downwind States that emission reductions will occur in time to help them meet their nonattainment deadlines. Even though EPA is Start Printed Page 25356promulgating FIPs, the Agency recognizes that the Clean Air Act assigns first responsibility to the States, and it is EPA's preference to defer, wherever possible, to States the decisions about control mechanisms to prevent significant contribution, including States' decisions about allocation of NOX allowances.

2. Method for Allocating NOX Allowances

Proposed NOXAllocation Methodology. In the NPR, EPA proposed a NOX allocation approach for both annual and ozone season allowances that is consistent with the example methodology presented in the CAIR SIP model trading rules. The proposed methodology was the same for annual NOX allowances and for ozone season NOX allowances, except that the ozone season method uses ozone season heat input not annual heat input.

For existing units, the proposed NOX allocation methodology used input-based allocations, adjusting the heat input by factors based on fuel type (described later in this section). As in the example allocation methodology in the CAIR SIP model trading rules, for existing units the Agency proposed to use heat input based on the average of the 3 highest amounts of a unit's adjusted heat input for 5 years (2000 through 2004). The EPA took comment on using heat input based on 3 or 4 years of data rather than 5 years.

For new units that have established baselines, EPA proposed that allocations would be based on generation using a modified output approach to convert output to heat input (described below), and allocations to existing units would be updated to take into account new generation, because new units would receive allocations from the pool of allowances shared with existing sources. New units that have not yet established baseline data would receive allowances from a new unit set-aside.

The Agency proposed that EPA would allocate allowances to existing units from the State's EGU NOX budget for the first 6 control periods (2009 through 2014) for existing sources on the basis of historic baseline heat input. Consistent with CAIR, EPA proposed January 1, 2001 as the proposed cut-off on-line date for considering units as existing units. Allowances for 2015 and later would be allocated from the State's EGU NOX budget annually, 3 years in advance. These allocations would take into account output data from new units with established baselines (modified by heat input conversion factors to yield heat input numbers, as described below). As new units enter into service and establish a baseline, they would be allocated allowances in proportion to their share of the total calculated region-wide heat input. Allowances allocated to existing units would slowly decline as their share of total calculated heat input decreases with the entry of new units. (Note that once a baseline heat input was established for existing units, this baseline heat input would not change).

EPA proposed to allocate allowances from a new unit set aside to new units that have entered service but have not yet established a 5-year baseline. The allowances from the set-aside would be distributed based on a unit's reported emissions from the previous control period, which would provide allowances for use in meeting the allowance-holding requirement during the interim period before the unit would be allocated allowances on the same basis as existing units.

Consistent with the CAIR SIP example allocation methodology, the new unit set-aside would be equal to 5 percent of a State's emission budget for the years 2009-2013 and 3 percent of a State's emission budget for subsequent years. New units would begin receiving allowances from the set-aside for the control period immediately following the control period in which the new unit commences commercial operation, based on the unit's emissions from the preceding control period. EPA would allocate allowances from the set-aside to all new units in any given year as a group. If there were more allowances requested than exist in the set-aside, allowances would be distributed on a pro-rata basis.

EPA received a number of comments on various aspects of the proposed NOX allocation methodology. First, while most commenters were supportive of allocating allowances to existing units using historic heat input, some commenters advocated the use of output data for determining allocations, suggesting that such an approach would reward cleaner, more efficient generation, particularly with updating.

Second, most commenters supported the use of a 5-year baseline for allocating allowances based on heat input, noting that a longer period of data collection is more likely to capture a unit's normal operating conditions. One commenter suggested that a shorter baseline period would allow new sources to enter the existing source pool in a more timely manner and thus provide existing sources with more certainty.

One commenter requested clarification on the treatment of replacement units under the allocation provisions, regarding whether they would be treated as new units, and have to reestablish a baseline, or maintain their allowance allocation similarly to retired units.

Several industry commenters made suggestions regarding the use of new unit set-asides in the FIP NOX allocation methodology. Some stated that EPA should provide that unused allowances from the set-aside would be returned to existing units. The Agency proposed to do so, and is finalizing that any unallocated allowances that remain in the new unit set-asides will be allocated on a prorated basis to the units that received allocations. See §§ 97.142(d) and 97.342(d). One commenter argued against using a new unit set-aside. Another commenter supported the use of a set-aside but argued that new units should be provided access to allocations during their initial year of operation.

In today's rule, EPA is finalizing most of the NOX allowance allocation provisions as proposed. First, EPA is finalizing the use of an input-based approach for allocating allowances. This approach uses a baseline heat input comprised of operating data from the years 2000-2004, and uses the average of the 3 highest heat input years from this time period for allowance allocation calculations for existing units. This baseline heat input will not be updated over time.

EPA believes, as it stated in the final CAIR, that allocating to existing units based on a baseline of historic heat input data, rather than output data, is desirable because accurate protocols currently exist for monitoring this data and reporting it to EPA, and several years of certified data are available for most of existing units. EPA has chosen not to utilize an updating system for allocating allowances, in order to avoid the subsidization of increased fuel use (or increased electricity generation) and the associated market distortions. If allocations were based on updated heat input (or updated output) data then increased fuel use (or increased electricity generation) would result in increased future allocations and thus would in effect be subsidized.

For new units, EPA is finalizing the use of the proposed modified output approach for calculating baseline heat input, described in detail below, as well as the allocation to new units without a baseline from a new unit set aside of 5 percent of a State's emission budget for the years 2009-2013 and 3 percent of a State's emission budget for subsequent years.

The Agency believes that it is reasonable to provide a set-aside for allocations to new units and further Start Printed Page 25357believes that it is reasonable not to provide access to allocations for a new unit during its initial year of operation. The Agency's final methodology provides allocations to new units based on the prior year's emissions until the new unit establishes a baseline and is allocated as an existing unit. The methodology does not provide allowances to a unit in its first year of operation; however, it is straightforward, reasonable to implement, and predictable (see preamble to final CAIR, 70 FR 25281).

As in the CAIR SIP example methodology, after 5 years of operation, a new unit will have an adequate operating baseline of output data to be incorporated into the calculations for NOX allocations for existing units. (However, as discussed below in section VII of this preamble, allowances are allocated to existing units several years in advance, and a new unit with a baseline may need to continue to get allowances from the new unit set-aside for a few years after the unit's baseline is established.) The average of the highest 3 years from these 5 years will be multiplied by a heat-input conversion factor of 7,900 Btu/KWh to calculate the heat input value used to determine the new unit's allocation from the pool of allowances for existing units. New units will update the heat input numbers only once—for the initial 5-year baseline period after they start operating. As in the CAIR SIP example methodology, existing units as a group will not update their heat input. This eliminates the potential for a generation subsidy because current or future operating behavior will not impact the units' allocations. Retired units will continue to receive allowances indefinitely, thereby avoiding creation of a disincentive to retire less efficient units.

As discussed in section VII in today's preamble, EPA is adopting technical changes to the SIP rules that make it clear that a separate request for new-unit-set-aside allowances must be submitted for each control period for which they are sought and must be submitted by May 1 (rather than July 1) of that control period; the final FIP rules are consistent with these technical changes.

Regarding replacement units, EPA's allocation approach allows such units to retain their NOX allowance allocation, so as not to provide a disincentive to replace (e.g., repower) older, less-efficient units. As discussed in section VII in today's preamble, a definition of “replacement” has been added and the definition of “commence commercial operation” has been clarified in the CAIR SIP model trading rules in order to clarify the treatment of replacement units. The final CAIR FIP rules are consistent with these changes in the SIP rules.

Adjustments to Heat Input Data by Fuel Factors. In the NPR, EPA proposed an allocation methodology based on the example allocation methodology in the CAIR SIP model rules, which included adjustments to heat input by fuel type, using fuel adjustment factors that are based on average historic NOX emissions rates by 3 fuel types (coal, natural gas, and oil) for the years 1999—2002. These adjustment factors are 1.0 for coal-fired units, 0.6 for oil-fired units, and 0.4 for units fired with all other fuels (e.g., natural gas). The factors reflect the inherently different emissions rates of different fossil fuel-fired units.

A number of commenters supported the use of the proposed fuel factors to adjust heat input, arguing that adjusting heat input for fuel type results in a more equitable allocation scheme that would provide allowances that are in closer proportion to historic emissions. Commenters supporting the use of fuel factors also noted that EPA should retain these fuel factors in order to maintain consistency with the model cap-and-trade rule, which would ease any necessary transitions from a CAIR FIP to a CAIR SIP if most States are expected to eventually adopt the model rule. One commenter opposing the use of fuel factors for individual unit allocations argued that adjusting baseline heat input for fuel use is inequitable and penalizes clean generation and is irreconcilable with EPA's “highly cost-effective” determination and EPA's air quality modeling. This same commenter also questioned EPA's legal authority to use fuel adjustment factors in the allocation of allowances.

EPA is finalizing the use of the proposed adjustment factors (1.0 for coal-fired units, 0.6 for oil-fired units, and 0.4 for units fired with all other fuels (e.g., natural gas)), to adjust baseline heat input. EPA believes that these adjustment factors appropriately consider the inherently higher emissions rate of coal-fired units and the relatively greater burden on these units to control emissions.

EPA's determination that CAIR control levels are highly cost effective was assessed at the regional, rather than the State, level because of the ability of sources to meet control requirements through a regional cap-and-trade program for EGUs. While the chosen allocation methodology can affect the distribution of compliance costs under the cap-and-trade program, it will have little effect on overall compliance costs or environmental outcome. This is because the incentives provided by cap-and-trade encourage economically efficient compliance over the entire region, as discussed above. The economically efficient outcome will not depend on the relative levels of individual unit allowance allocations.

For this same reason, air quality modeling is not relevant to the determination of allowance allocations, and a given allowance allocation approach, particularly one based on historic data, would have no affect on air quality modeling.

Finally, EPA disagrees with the commenter who questioned its legal authority to use this allocation scheme. The approach selected by EPA is reasonable, is supported by the information available to EPA and is well within the scope of EPA's authority to act. For further discussion of this issue, see the CAIR notice of final action on reconsideration signed the same day as the final FIP notice. While the reconsideration notice addresses the use of fuel factors in the context of determining the State NOX budgets, the same rationale applies to the use of fuel factors for individual unit allocations.

Cogeneration Units. In the NPR, EPA proposed that for a new cogeneration unit that is a boiler, annual heat input values used to calculate the unit's baseline heat input for purposes of allowance allocations would be determined by converting the available thermal output (Btu) of useable steam from the boiler to an equivalent heat input by dividing the total thermal output (Btu) by a standard boiler/heat exchanger efficiency rate of 80 percent. In today's rule, EPA is finalizing this approach.

For new cogeneration combustion turbines, EPA proposed in the NPR to calculate annual heat input for such a unit by: Converting the available thermal output of useable steam from a heat recovery steam generator (HRSG) to an equivalent heat input by dividing the total thermal output (Btu) by a standard boiler/heat exchanger efficiency rate of 80 percent; and then adding the equivalent heat input for the electrical generation from the combustion turbine, which is calculated by multiplying the turbine's generation (in KWh) by the conversion factor of 3,413 Btu/kWh. EPA is finalizing this approach as proposed.

One commenter suggested that EPA's approaches for allocating to new cogeneration boilers and combustion turbines be modified. This commenter argued that EPA's proposed Start Printed Page 25358methodology improperly rewards new cogeneration units by not matching the rate of allocation with the degree of benefits realized by a specific cogeneration unit. The commenter further asserts that EPA's methodology would give a unit that only slightly improves its efficiency the same allowance allocation benefit as a unit that achieves a large increase in efficiency.

The commenter proposes an alternative allocation approach for cogeneration units, the primary goal of which is rewarding electricity as a higher value product than steam.

As EPA noted in the final CAIR preamble, steam and heat output, like electrical output, are useable forms of energy that can be utilized to power other processes. Because it would be nearly impossible to adequately define the efficiency in converting steam energy into the final product for each of the various processes and uses for these outputs, EPA selected an approach that focuses on the effectiveness of a cogeneration unit in capturing energy from fuel input and converting it into the useable forms of steam and electricity. EPA's approach does not attempt to regulate the efficiency of the processes that are powered by the steam output from cogeneration units.

Further, EPA disagrees with the commenters suggestion that the Agency's approach would not provide an incentive for cogeneration units to operate efficiently. The use of modified output, rather than actual heat input, as the basis of determining allowance allocations will promote the development of cleaner and more efficient generation of both electricity and process steam. EPA's approach rewards cogeneration combustion turbines that have HRSGs capable of recapturing greater than 80 percent of the available heat from the combustion turbine exhaust and any auxiliary burners. Furthermore, EPA's use of a 3,413 btu/KWh factor to convert electrical output from the combustion turbine to an equivalent heat input assumes that 100 percent of the combustion turbine's heat input that is not converted to electricity is sent to the HRSG as heat. This approach neglects energy losses in the combustion turbine and generator. EPA believes that any efficiency gains made by reducing these losses will be rewarded by the Agency's approach, by resulting in greater electricity and/or steam output for a given amount of heat input.

Comments on providing sources owned by small entities with a greater share of allowances: In the NPR, EPA took comment on allocating NOX allowances in such a way as to provide sources owned by small entities with a greater share of allowances. As discussed at proposal, this option was based on the recommendation of one of the Small Business Advocacy Review Panel members. This option would necessitate reducing the number of NOX allowances available to other affected sources in order to ensure that the overall reduction requirements of CAIR are achieved, but could potentially provide economic relief to small entities that demonstrate economic hardship as a result of the rulemaking.

A number of commenters expressed opposition to such an allocation approach arguing that it is inappropriate for EPA to subsidize small entity sources through additional allocations that result in reduced allowance allocations and increased compliance costs for larger sources. Additionally, some of these commenters noted that such an approach could open the NOX allowance allocation system to gaming, such as through a company establishing subsidiaries in order to obtain additional allowances made available for small entities. Finally, one of these commenters suggested that such an approach would deviate from the CAIR model rules, and could restrict a State's freedom if the State plans to transition from CAIR FIP allocations to CAIR SIP allocations. One commenter expressed support for the approach described in the NPR, but noted the need for additional clarification on the definition of hardship and how such an approach would fit in with the compliance supplement pool. No potentially affected small entities, as defined in the NPR, submitted comments in support of this approach.

EPA is not finalizing a NOX allocation approach that gives a greater share of allowances to small entities that demonstrate hardship. EPA believes that the flexibilities inherent in the CAIR FIP trading program, as well as the existence of the Compliance Supplement Pool in the first year of the program, will reasonably address concerns about the economic impact of the rule on all sources. Additionally, the lack of commenter support for such an approach suggests that such an approach may not be warranted.

Comments on use of an auction to distribute NOXallowances. In the NPR, the Agency asked for comment on using a combination of direct allocation and auctions for distributing NOX allowances in the proposed CAIR FIP trading programs. The proposed approach was analogous to the approach in the Administration's proposed Clear Skies legislation: For the first CAIR NOX control period (2009) the Agency would allocate 100 percent of the allowances using the fuel-factor adjusted heat input approach described above. For the second control period (2010) the Agency would allocate 99 percent of allowances to units and auction the remaining 1 percent. The percentage of allowances distributed via auction would increase over time, with the Agency distributing via auction an additional 1 percent of allowances every year for 20 years and then an additional 2.5 percent of allowances every year thereafter, until eventually 100 percent of allowances would be distributed via auction. The Agency also requested comment on appropriate auction procedures for the proposed CAIR FIP trading programs.

The majority of commenters opposed the use of an auction for allocating allowances. One commenter expressed support for an auction and the specific approach that EPA outlined at proposal. This commenter suggested that EPA modeled the auction procedure after that used in the Acid Rain Program. EPA does not necessarily agree with the specifics of the arguments submitted by commenters opposing the use of an auction. However, in light of the comments, EPA is concerned that adoption of the auction approach would be premature because the Agency lacks sufficient information about the potential impact of such auctions on sources and about the appropriate procedures for implementing such auctions. Consequently, the allocation provisions for today's final rule do not include auctions. Today's final allocation methodology, described earlier in this section, provides for the direct distribution of allowances to affected units.

G. Allocation of SO 2 Allowances to Sources

The Agency proposed a CAIR FIP SO2 cap-and-trade program substantively identical to the CAIR SIP model SO2 trading rule, which relies on title IV allowances. Title IV allowances have already been allocated in perpetuity to individual units by title IV of the CAA (70 FR 25278). Thus, the FIP proposal did not include an allocation methodology for SO2 allowances, except with regard to opt-in units.

The Agency received several comments on the use of the title IV allowances in the CAIR FIP SO2 program. EPA also received several petitions for reconsideration of the CAIR, and granted reconsideration concerning claims that inequities result from using title IV allowance allocations in the CAIR program. EPA received, considered, and responded to numerous Start Printed Page 25359comments on this issue as part of the reconsideration process. As explained in the CAIR Notice of Final Action on Reconsideration signed the same day as this action, EPA has decided not to alter the approach taken in the final CAIR.

In today's action, EPA is adopting the CAIR model SO2 trading rules as the CAIR FIP SO2 trading rules, with minor revisions to allow for Federal implementation. Thus, EPA is adopting the approach taken in the final CAIR for SO2 allowance allocation and State SO2 budgets, which was not changed during the reconsideration process. This approach is explained below, with a brief explanation of EPA's response to the major comments received on this process. A more complete discussion of this issue and the comments received appears in the preamble to the CAIR Notice of Final Action on Reconsideration.

Several issues on SO2 allowance allocations and State budgets were raised both in comments on the proposed CAIR FIP and in the context of the CAIR reconsideration process. EPA has responded to such FIP comments in the CAIR Notice of Final Action on Reconsideration, a separate action signed the same day as this notice. These comments include the following claims:

  • Inequities result from EPA's allocation approach, i.e., using title IV allowance allocations in the CAIR FIP trading program. A few commenters suggested that EPA instead create new CAIR SO2 allowances and allocate these allowances using a methodology similar to that adopted in the CAIR SIP model trading rule for NOX.
  • EPA's approach to SO2 allowance allocation and State budgets creates inequities between States.
  • New units and independent power production (IPP) facilities, which did not receive allocations under the Acid Rain Program, are unfairly disadvantaged by the CAIR SO2 budget and allocation methodology.

A variety of approaches to SO2 allowance allocation were raised and analyzed during the CAIR rulemaking process, including the approach EPA adopted in the final CAIR SIP model rule and in today's final FIP trading rule. Alternative approaches analyzed for the final CAIR included the creation of new CAIR SO2 allowances and allocating on the basis of historic tonnage emissions, heat input (with alternatives based on heat input from all fossil generation or heat input from coal- and oil-fired generation only), and output (with alternatives based on all generation and all fossil-fired generation). (See CAIR Corrected Response to Comments, section X.A.26, Docket #: EPA-HQ-OAR-2003-0053-2172).

Furthermore, as a part of the CAIR reconsideration, EPA reanalyzed State differences in allocation approaches using the same methodology as for the final CAIR, comparing the title IV approach and seven alternative approaches (those discussed above, and those raised by the commenters on the reconsideration, discussed below). EPA also performed additional analyses to evaluate the use of title IV allowance allocations in the final CAIR to see how companies and States fared in terms of the amount of allowances allocated relative to their projected SO2 emissions. In these analyses, EPA compared 3 alternative SO2 allowance allocation methodologies that were either referred to by the petitioner in the petition for reconsideration or by commenters on the proposed response to the petition, to the use of title IV SO2 allowance allocations. EPA considered the following approaches, all using 1999-2002 data: (1) Pure heat input; (2) heat input adjusted for fuel type (e.g., coal, oil and gas); and (3) heat input adjusted for fuel type and coal type (e.g., bituminous, sub-bituminous, and lignite).

Each allocation methodology suggested by the petitioner and commenters during the CAIR rulemaking results in both advantages and disadvantages for different companies and States. However, as EPA explained in the CAIR Response to Comments and again in the CAIR Notice of Final Action on Reconsideration, the analyses performed by EPA demonstrate that EPA's use of title IV allowance allocations is reasonable (see CAIR Notice of Final Action on Reconsideration, signed in a separate action the same day as this notice).

Comments about new units and IPPs, which did not receive allocations under the acid rain program, being disadvantaged by the CAIR SO2 budget and allocation methodology are also addressed in the CAIR Notice of Final Action on Reconsideration, as well as in the applicability section (VI.E) of this final FIP action. 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). EPA assumes that companies owning non-Acid Rain units subject to CAIR will opt into the Acid Rain Program to receive title IV allowances to cover a portion of the units' emissions under CAIR. EPA believes this assumption is reasonable because, as explained in the CAIR Notice of Final Action on Reconsideration, each of these units has the option of becoming an Acid Rain Program opt-in unit at little cost.

The fact that non-Acid Rain units may opt into the Acid Rain Program and receive allocations addresses the concern that the CAIR applicability provisions sweep in units that are not covered under the Acid Rain Program and thus do not receive Acid Rain Program allocations. EPA maintains that the statutory and regulatory provisions governing Acid Rain Program opt-in units allow units that are subject to CAIR, but not to the Acid Rain Program, to opt into the Acid Rain Program. See CAIR Notice of Final Action on Reconsideration—signed the same day as the final FIP rule—for additional discussion of authority under section 410(a) of the Clean Air Act.

Further, it should be noted, that not all units required to participate in the Acid Rain Program receive allocations under the Acid Rain Program. While, as noted above, the Acid Rain Program provides allowances for non-Acid Rain units opting into the program as long as they remain non-Acid Rain units, the Acid Rain Program provides no allocations for virtually all new Acid Rain units (i.e., Acid Rain units commencing commercial operation on or after November 15, 1990) and for all existing units that were not Acid Rain units when the allowance allocations were completed in 1998 but that become Acid Rain units thereafter. By using title IV allowance allocations in the CAIR SIP SO2 model trading program (adopted today as the CAIR FIP SO2 trading program), EPA is taking the same approach to allocations for these units.

Finally, it is worth noting that not all title IV allowances for future years have been allocated. 250,000 allowances will continue to be auctioned for the years 2012 and thereafter, and these allowances could be used to comply with the requirements of CAIR. The availability of these allowances ensures that all sources, including new units and non-title IV sources, will have access to a pool of allowances.

In summary, EPA's use of title IV allowances in the CAIR (and CAIR FIP) SO2 trading program is supported by: (1) EPA's determination that this approach is necessary to maintain the efficacy of the title IV program and prevent erosion of confidence in cap-and-trade programs in general; and (2) the results of EPA's analysis which indicate that the allocations resulting from this approach are reasonable. Start Printed Page 25360

A few comments related to SO2 budgets and allocations submitted in response to the proposed CAIR FIP were unique to this action and, therefore, are addressed below.

One FIP commenter states that the CAIR final allocation methodology is “inequitable” because lower emitting units would buy allowances from higher emitting units that install emission controls. However, 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.

Moreover, EPA believes that for purposes of evaluating 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.

This same commenter performed its own analysis of differences in SO2 State budgets for select States, comparing EPA's finalized method to “a heat input method (similar to the NOX allowance allocation method).” The commenter described the 6 of its selected States as “[l]ow-emitting states that already have made substantial investments in SO2 emissions controls (e.g., South Carolina, Minnesota, Iowa, Wisconsin, Virginia, and North Carolina).” Another 5 States the commenter analyzed were described as “high-emitting states (e.g., Ohio, Georgia, West Virginia, Pennsylvania and New York).” See Docket ID: EPA-HQ-OAR-2004-0076-0204. The commenter's characterization of States as “low-” or “high-emitting” and as having made “substantial” SO2 control investments is entirely unsupported. The commenter provided no criteria or factual basis for making such characterization, and the analysis submitted by the commenter appears to disregard the cost of installing controls in order to generate any excess allowances in States that are characterized as “high-emitting.” Further, only 3 utilities from the State's listed as “low-emitting” by the commenter, submitted adverse comments on EPA's use of title IV.

Nevertheless, as mentioned above, EPA performed a comprehensive State-by-State SO2 budget analysis of all CAIR States and a variety of alternative methodologies to evaluate the claim of inequity as a part of the CAIR Notice of Final Action on Reconsideration. In that analysis, EPA demonstrated that the CAIR (and CAIR FIP) SO2 State budget and allocation methodology provides a reasonable result. EPA's use of title IV allowances in the CAIR (and CAIR FIP) SO2 trading program is supported by: EPA's determination that this approach is necessary to maintain the emissions reductions from, and effectiveness of, the title IV program; prevent erosion of confidence in cap-and-trade programs in general; and EPA's analysis showing that the allocations resulting from this approach is reasonable.

H. Allowance Banking

Allowance banking is the retention of unused emissions allowances from one calendar year for use in a later calendar year (or from one ozone season for use in a later ozone season). Banking allows sources to make reductions beyond required levels and “bank” the unused allowances for use later. Generally speaking, banking has several advantages. Allowance banking can encourage earlier or greater reductions than are required from sources, stimulate the market and encourage efficiency, and provide flexibility in achieving emissions reduction goals. The CAIR FIP NPR proposed a trading program with unrestricted banking.

Comments on the Banking of Allowances

Several commenters supported EPA's proposal to allow unrestricted banking of allowances. In general, they agreed with EPA that this approach: provides incentives for sources to make emission reductions beyond required levels, in some cases earlier emission reductions; is consistent with the CAIR SIP model trading rules; and provides flexibility in compliance strategies. Supporters of unrestricted banking also agreed with the EPA assessment that the use of banking restrictions, such as the “flow control” in the Ozone Transport Commission (OTC) cap-and-trade program, is complicated to understand and implement and caused market complexity.

Other commenters supported the use of banking restrictions claiming that allowing unrestricted banking delays emission reductions. These commenters did not provide additional details regarding an alternative to banking or, if banking were to be restricted, what restrictions should be used.

Final CAIR FIP Cap-and-Trade Program

Today's final CAIR FIP cap-and-trade programs allow unrestricted banking. EPA disagrees with commenters who claimed that unrestricted banking simply delays emission reductions. The ability of sources to sell allowances, without restriction, provides incentives for sources to over-control their emissions prior to emission reduction deadlines. As discussed in the CAIR NFR (section VIII.E), this creates a “glide path” towards the final emission cap levels. Emission levels along the glide path, which may not equate to the emissions caps for any given year, are the levels of emission reductions that are shown to address the pollution transport issue.

EPA also agrees with supporting commenters that banking restrictions, such as “flow control,” introduce uncertainty into source planning by introducing the potential for devaluing allowances on short notice. EPA also agrees that allowing unrestricted banking in the CAIR FIP cap-and-trade programs provides consistency with the CAIR cap-and-trade programs.

I. Incentives for Early Reductions

When sources reduce their SO2 and NOX emissions prior to the first phase of a multi-phase cap-and-trade program, it creates a slope of emissions that gradually declines over time, an emission reduction “glide path” that provides early environmental benefit and lowers the costs of compliance. Each of the cap-and-trade programs proposed in the CAIR FIP NPR incorporated the incentives for early reductions provided in the respective CAIR model trading programs: i.e., the banking of title IV allowances allocated of vintage years pre-2010 into the CAIR SO2 trading program, the compliance supplement pool (CSP) in the CAIR NOX annual program, and the banking of NOX SIP Call allowances of pre-2009 vintage into the CAIR NOX ozone season program. While EPA believes that modeling has shown that the CAIR and CAIR FIP timelines are as early as feasible, early reductions incentives provide a mechanism for those facilities that can reduce their emissions prior to the implementation deadline to receive some credit. By shifting some emission reductions earlier, some environmental benefit is realized earlier. In addition, the CAIR FIP trading programs' early reduction mechanisms provide a way for companies that may have some difficulty meeting the implementation timeline to start early and achieve the mandated reductions on a more gradual pace. These mechanisms, along with Start Printed Page 25361public comment on each, are discussed below.

1. SO2 Annual Program

The proposed CAIR FIP SO2 annual cap-and-trade program would provide incentives for sources to reduce their SO2 emissions prior to the 2010 implementation date by allowing affected sources to use title IV SO2 allowances of vintage 2009 and earlier for compliance with the CAIR FIP program at a 1-to-1 ratio. The CAIR FIP trading program adopts the early reductions incentive mechanism in the CAIR model trading rules. The modeling for the CAIR assumed the existence of such incentive mechanisms and showed that the SO2 cap-and-trade program, with this early incentive mechanism, will achieve the level of SO2 reductions needed to meet the CAIR goals.

Comments on Early Emission Reduction Incentives in the CAIR FIP SO2Cap-and-trade Program. In general, commenters supported EPA's approach of allowing sources to bank title IV SO2 allowances into the CAIR FIP SO2 trading program at a 1-to-1 ratio. One commenter opposed this mechanism because “EPA does not explain how carrying these allowances over to the CAIR bank creates an incentive for reductions if the allowances already exist.” The commenter continues by highlighting that EPA modeling projects emissions to be approximately 37 percent above the annual CAIR emission caps for the first 5 years after the compliance deadline.

Final CAIR FIP SO2Annual Cap-and-trade Program. Today's action allows sources to bank title IV SO2 allowances into the Federal CAIR SO2 annual cap-and-trade program at a 1-to-1 ratio. EPA disagrees with the comment that allowing banked allowances does not promote early reductions because allowances were banked before CAIR was proposed or finalized. Allowing sources to bank title IV allowances in the CAIR FIP SO2 annual program provides incentive for sources to: (1) Preserve reductions already made (whether before or after CAIR was proposed) rather than negating these reductions by increasing their emissions before 2010 and “spending down” their bank; and (2) to reduce further emissions before 2010 and increase their bank. This incentive is created by allowing sources to benefit financially from allowances banked before 2010 that retain their value in the CAIR FIP and CAIR SO2 trading programs. All pre-2010 vintage allowances will retain their value in the CAIR and CAIR FIP trading programs because they can be used (on a one-allowance-per-ton basis) to meet the requirement to hold allowance to cover emissions under the CAIR FIP (and CAIR) trading programs. In summary, a source has an incentive to continue banking allowances before 2010, which results in the preservation of existing emission reductions and the creation of further reductions.

The commenter noted that allowing banking into the CAIR FIP SO2 annual program results in the emissions being greater than the cap levels. However, the gradually declining emissions “glide slope” is one of the keys to cap-and-trade programs achieving cost-effective reductions. As discussed above, EPA's modeling for CAIR showed that, with the pre-2010 title IV SO2 allowance banking and subsequent use of the bank, the environmental goals of reducing the interstate transport of pollution will be achieved.

2. NOX Annual Program

The FIP NPR proposed a CAIR FIP NOX annual cap-and-trade program that included a Compliance Supplement Pool (CSP) to provide an incentive for early, annual NOX annual emission reductions. The CSP would provide, for each affected State, a pool of CAIR NOX annual allowances from which EPA could distribute allowances for early, surplus NOX emissions reductions occurring in the years 2007 and 2008. The CSP would provide a total of 200,000 annual NOX allowances of vintage 2009 for the CAIR region (including Delaware and New Jersey's share of the pool), apportioned to each State, which would be in addition to each State's annual NOX budgets. Table V-3 in this preamble sets forth the CSP amounts by State. The CAIR FIP trading program adopts the CSP established in the CAIR model trading program. However, where the CAIR model trading program provides States with flexibility to determine what constitutes an early reduction qualifying for an allocation of allowances from the CSP, the Administrator allocates the CSP in the CAIR FIP trading program. As a result, the CAIR FIP, provides a specific methodology for determining early reductions than is in the CAIR model rules. This methodology is explained below.

As proposed, Federal CSP allowances could be distributed to sources based upon: (1) Implementing NOX control measures that result in early emission reductions in 2007 or 2008, i.e., reductions beyond what is required by any applicable State or Federal emissions limitation; or, (2) a demonstration of need for an extension of the 2009 deadline for implementing emission controls. See section VII.A. in the CAIR NFR preamble (70 FR 25256-25263). The Agency proposed that, in order for early emission reductions to qualify for allowances from the CAIR FIP CSP, sources would have to demonstrate that—for each year for which they apply for CAIR FIP CSP allowances—they had an annual NOX emission rate below 0.25 lb/mmBtu. In addition, sources who also participate in a title IV NOX averaging plan would have to demonstrate that the plan-wide weighted-average annual NOX emission rate for each such year was equal to or lower than the plan-wide rate for the preceding year. Sources meeting this criterion could request early reduction credit equal to the difference between 0.25 lb/mmBtu and the unit's actual emission rate multiplied by the unit's actual heat input for the applicable control period.

Comments on Federal CSP. Several commenters supported the use of a CAIR FIP CSP to encourage early emission reductions and provide sources access to some additional allowances for demonstrated reliability needs. Some commenters supported including a CAIR FIP CSP but were concerned about the use of additional criteria (i.e., a 0.25 lb/mmBtu threshold and the limitation on emissions under a title IV NOX averaging plan). Other commenters believed that providing additional allowances would delay emission reductions and that EPA's analysis already demonstrated that the mandated emission reduction levels and timelines are feasible.

EPA disagrees with commenters that believe the CAIR FIP CSP should not include the criterion that units can only request early reduction credit equal to the difference between 0.25 lb/mmBtu and the unit's actual emission rate multiplied by the unit's actual heat input for the applicable control period. EPA believes that the 0.25 lb/mmBtu threshold (coupled with the limitation on emissions under a title IV NOX averaging plan) provides a reasonable proxy for the more general standard that emission reductions exceed what is required under State or Federal law.[32] Applying these criteria will provide reasonable assurance that only early reductions (i.e., reductions exceeding existing requirements) will be awarded CAIR FIP CSP allowances. Further, because these criteria are clearer and more precise than the general standard that reductions exceed existing Start Printed Page 25362requirements, the criteria will give owners and operators greater certainty when making reasonable projections about how many allowances they may receive for their early reductions and will, thereby, encourage early emission reductions.

Additionally, EPA disagrees with commenters that believe the CAIR FIP CSP should not include the distribution criterion that units in a title IV NOX averaging plan would have to demonstrate that the current plan-wide average NOX emission rate be less than the plan-wide average for the previous year. The averaging plan criterion acknowledges the unique circumstances for units that are in title IV NOX averaging plans, where emission reductions by one unit in the plan may be offset by emission increases by another unit in the plan, thereby, making it difficult to determine whether early reductions are taking place. As discussed above, EPA believes that this criterion, coupled with the 0.25 lb/mmBtu criterion, provides a reasonable proxy for the general standard that reductions exceed existing requirements and that the criteria provide greater certainty about the rewarding of CAIR FIP CSP allowances. EPA believes it is appropriate to base the averaging plan criterion on a single, prior year's plan-wide average emission rate because the averaging of emissions across a plan tends to mitigate year-to-year fluctuations.

EPA disagrees with commenters that believe a CAIR FIP CSP will significantly delay emission reductions. For the CAIR NFR, EPA conducted IPM modeling of the CAIR trading programs to evaluate the effect of the 200,000 CAIR annual CSP NOX allowances. The modeling shows that these CSP allowances do not have a significant impact on regionwide NOX emissions.

CAIR FIP CSP Finalized in Today's Action. Today's rule finalizes the CAIR FIP CSP mechanism proposed in the FIP NPR. EPA believes that including a CAIR FIP CSP will encourage early emission reductions and alleviate concerns of some sources that they have unique issues concerning compliance with the 2009 implementation deadline of the CAIR FIP trading program. (See 70 FR 25286 for additional discussion of the CAIR CSP.) EPA also believes that the CSP will not significantly impact the achievement of emission reduction goals.

The CAIR FIP CSP includes specific criteria for distributing allowances based upon early emission reductions that do not appear in the CAIR SIP trading programs. (Note that, as discussed in section IV.E of today's action, States choosing the abbreviated SIP revision option may choose to use the CAIR FIP CSP or the CAIR CSP mechanism or may choose another mechanism consistent with § 51.123(e)(4).) EPA believes that the criteria will reasonably ensure that the award of CSP allowances will be aimed at early reductions and give owners and operators greater certainty to make reasonable projections about how many allowances they may receive for their early reductions.

3. NOX Ozone Season Program

The final CAIR FIP NOX ozone season cap-and-trade program allows the banking of NOX SIP Call allowances of vintage years 2008 and earlier and their use in the CAIR FIP NOX ozone season program to meet the requirement to hold allowances covering their emissions. This provides incentive for sources in the NOX SIP Call to reduce their ozone season NOX emissions before 2009 and bank additional allowances into the CAIR FIP NOX ozone season program. This early-reduction incentive mechanism is in the CAIR NOX ozone season model rule and is adopted as part of the CAIR FIP NOX ozone season cap-and-trade programs. EPA did not receive any comments specifically addressing the early-reduction incentive mechanism in the CAIR FIP NOX ozone season program. However, several commenters generally supported mechanisms to provide incentives for early emission reductions. The Agency is finalizing this mechanism.

J. Monitoring and Reporting Requirements

Under the CAIR SIP model cap-and-trade rules, sources are required to monitor and report NOX and SO2 mass emissions in accordance with 40 CFR part 75. (See Section VIII.H. of the CAIR NFR preamble, 70 FR 25288.) Many CAIR sources are measuring and reporting SO2 mass emissions and NOX emission rate year round under the Acid Rain Program. Many additional sources are also reporting NOX mass emissions at least during the ozone season and often year round under the NOX SIP Call. The CAIR SIP model rules require continuous monitoring of NOX mass emissions by all existing, affected units by January 1, 2008 using part 75 certified monitoring systems for the NOX annual program and May 1, 2008 for the NOX ozone season program. SO2 emissions must be monitored by those same units beginning January 1, 2009.

Today's rulemaking requires part 75 monitoring, reporting, and recordkeeping for all units subject to the CAIR FIP cap-and-trade programs. This is consistent with the CAIR model cap-and-trade programs. For additional discussion on monitoring and reporting requirements, see Section VIII.H. in the CAIR NFR preamble (70 FR 25288).

K. Interactions With Other CAA Programs

In the CAIR NFR preamble, section IX discusses interactions between the NOX SIP Call and CAIR. Section IX also discusses interactions between the title IV Acid Rain Program and CAIR. Today's final rule covers the same States as the CAIR and adopts as FIP trading programs the CAIR SIP model trading rules, thus the interactions would be as described in CAIR (70 FR 25289-25299).

VII. What Are the Revisions of the CAIR SIP Rule, Including the CAIR Model Cap-and-Trade Rules?

The EPA is adopting several revisions of the CAIR SIP rule. One such revision is part of EPA's final action on reconsideration concerning the applicability provisions as they relate to solid waste incineration units. In particular, for the reasons stated in the preamble of the August 24, 2005 proposed rule, EPA is finalizing the EGU definition in §§ 51.123(cc) and 51.124(q). The EGU definition, as adopted, excludes certain solid waste incineration units from being EGUs; limits EGUs to units that, as of November 15, 1990 or any time later, serve a generator with a greater than 25 MWe nameplate capacity producing electricity for sale; and clarifies language concerning cogeneration units. The final EGU definition is the same as the definition proposed on reconsideration except for a few minor changes, e.g., to clarify the circumstances under which a unit that is not an EGU, but that begins to combust fossil fuel or to serve a generator with a 25 MWe nameplate, becomes an EGU. (For the reasons in the preamble of the August 24, 2005 proposed rule, the language in the final EGU definition is also reflected in final applicability provisions of the CAIR model trading rules and the CAIR FIP trading programs.) EPA is also finalizing, as discussed in detail above, provisions allowing States to submit abbreviated SIP revisions.

EPA is also adopting a number of revisions of the CAIR SIP model cap-and-trade rules. The revisions are generally necessary to integrate each of the CAIR SIP model cap-and-trade programs with its corresponding CAIR FIP cap-and-trade program, and some of the final revisions reflect needed technical and clarifying changes. The revisions are consistent with the Start Printed Page 25363analogous provisions of the final CAIR FIP trading programs. One such revision is part of EPA's final action on reconsideration concerning the applicability provisions as they relate to solid waste incineration units.

In particular, several definitions of terms are revised, and a few new definitions are added. For example, the definitions of “CAIR designated representative” and “alternate CAIR designated representative” are modified to require that the respective individuals designated for these positions be the same individuals as designated, for a given source, as the designated representative and alternate designated representative under any applicable trading program under the Clean Air Mercury Rule (CAMR). (CAMR was promulgated in May 2005 to achieve reduction of national mercury (Hg) emissions. See 70 FR 28606, May 18, 2005.) This will greatly simplify the administration of the allowance tracking systems for the trading programs, including the Hg trading programs, for which EPA intends to propose analogous changes. (In order to implement this change, a new definition for “Hg Budget Trading Program” is added to the CAIR SIP model trading rules.)

As a further example, a new definition is added (“solid waste incineration unit”), and certain definitions are modified (“commence commercial operation” and “commence operation”), to reflect final changes in the applicability provisions for the CAIR model trading rule and to clarify and streamline the language in the definitions. In particular, the modified definitions are consistent with the above-noted revisions of the applicability provisions that: exempt certain solid waste incineration units from the CAIR trading programs; limit applicability to units that, as of November 15, 1990 or any time later, serve a generator with a greater than 25 MWe nameplate capacity producing electricity for sale; and clarify the language concerning cogeneration units. In addition, the “commence commercial operation” and “commence operation” definitions are simplified by removing unnecessary language, such as the language referring to CAIR opt-in units, which is unnecessary because these terms are not used in the CAIR opt-in rule provisions. Also, the simplified definition of “commence operation” means that all units will use the same “commence operation” definition in determining, for purposes of allocations under § 96.142 and 96.342, their baseline periods for calculating adjusted or converted heat input. (The provisions for opt-in units that subsequently become subject to the allocation provisions of § 96.142 and 96.342 and lose their opt-in status are also revised to reflect this approach.)

Further, a definition of “replacement,” a term used in the “commence commercial operation” and “commence operation” definitions, is added in order to clarify the application of the latter two terms to cases when a unit is replaced by another unit, rather than simply being modified. The revised applicability provisions and related definitions in the CAIR SIP model trading rules are consistent with the applicability provisions and related definitions in the final CAIR FIP trading rules and with the above-discussed EGU definition in §§ 51.123(cc) and 51.124(q).

In addition, the definitions of “CAIR NOX allowance,” “CAIR NOX Annual Trading Program,” “CAIR SO2 allowance,” “CAIR SO2 Annual Trading Program,” “CAIR NOX Ozone Season allowance,” and “CAIR NOX Ozone Season Trading Program” are modified to provide for integrated operation of each CAIR SIP trading program administered by EPA for any State with its corresponding CAIR FIP trading program for any State. Under these revised definitions, CAIR NOX, SO2, or NOX Ozone Season allowances issued under either type of program for any State would be a “CAIR NOX allowance,” “CAIR SO2 allowance,” or “CAIR NOX Ozone Season allowance,” respectively, usable by owners and operators for meeting the allowance-holding requirement under the corresponding CAIR SIP model trading program or CAIR FIP trading program for any State.

EPA is also simplifying and clarifying other definitions. For example, the term “allocate” is simplified to cover allocation of allowances for either the CAIR SIP or FIP trading programs. The definition of “maximum design heat input” is simplified, and the definition of “nameplate capacity” is clarified.

Further, the retired unit exemption provisions are revised. The revisions clarify that the provisions concerning CAIR designated representatives and the appeal procedures generally applicable to final actions of the Administrator are applicable to retired units and to final actions of the Administrator with regard to retired units.

In addition, the provisions listing the content of a certificate of representation are revised to clarify that the identification of each unit covered by the certificate of representation includes identification and nameplate capacity of each generator served by the unit. EPA believes that the current rule language requiring “identification” of each unit subject to the trading program is already broad enough to encompass such information concerning each generator served by the unit, particularly since only a unit serving a generator with a nameplate capacity greater than 25 MWe can be subject to the CAIR trading programs. However, EPA is revising the language to make it clear that generator information is required in the certificate of representation.

EPA is also making technical revisions to the provisions concerning the reflection in certificates of representation of the owners and operators of the source and units involved. The changes make it clear that all owners and operators must be listed and that those that should be, but are not, listed are still bound by the certificate of representation and the CAIR designated representative.

Further, new provisions concerning designated representatives and authorized account representatives are added to clarify that such individuals may use agents in order to make electronic submissions. The existing CAIR SIP model trading rules provide for certain submissions (i.e., certificates of representation, applications for general account, allowance transfers, and quarterly emissions reports) required to be “in a format prescribed” or “in a format specified” by the Administrator. (The terms “prescribed” and “specified” have the identical meaning in these contexts.) These submissions may be made, and in the case of quarterly emissions reports must be made, electronically. Although the formats for the CAIR trading programs have not yet been developed, other EPA-administered trading programs (i.e., the Acid Rain Program and the NOX Budget Trading Program) have analogous language concerning submission formats and have existing, prescribed formats for submissions. The electronic formats prescribed by the Administrator for the Acid Rain Program and the NOX Budget Trading Program allow the designated representative or authorized account representative, as appropriate, to designate other individuals (“agents”) who may make the electronic submissions for the designated representative or authorized account representative, who is fully bound by the agent's actions. EPA maintains that the references in the Acid Rain Program and NOX Budget Trading Program regulations to “prescribed” (or “specified”) formats, coupled with the existing electronic formats, provide the legal authority necessary for designated representatives and authorized account Start Printed Page 25364representatives to use agents to make electronic submissions in the applicable trading programs. EPA plans to adopt electronic formats for the CAIR trading programs that, similarly, allow for the use of agents. EPA believes that the existing references in the CAIR SIP model trading rules to “format[s] prescribed ” or “specified” by the Administrator, when coupled with the appropriate electronic formats, will similarly provide the legal authority necessary for the use of agents. However, in order to remove any uncertainty about such legal authority, EPA is adding provisions to the CAIR SIP model trading rules (and to the CAIR FIP trading rules) that explicitly authorize the use of agents for electronic submissions.

In addition, in the permitting provisions, EPA is revising the deadline for submission of CAIR permit applications to run from the later of January 1, 2009 (for the NOX programs) or 2010 (for the SO2 program) or the date on which the unit commences commercial operation, rather than the date on which the unit simply commences operation. A unit's date of commencement of commercial operation is not likely to range from more than a few days to a few months later than the unit's date of commencement of operation since owners and operators of EGUs generally prefer to minimize using fuel without producing electricity. Moreover, running the permit application deadline from the commencement of commercial operation avoids the need for complex provisions in the definition of “commence operation” to address, solely for permitting purposes, units that are not subject to the CAIR trading programs when they first combust fuel and that subsequently become CAIR units. (The simplified definition of “commence operation” reflects this revision.)

Further, EPA is adopting certain technical corrections in the NOX allowance allocation provisions. In particular, the current provisions concerning timing of submission of unit allocations by the permitting authority to the Administrator provide that if the unit allocations are not submitted on time, the Administrator will assume that the allocations are the same as in the prior year. If the year for which allocations are submitted late is 2015 (the beginning of phase II of the CAIR trading programs, the Administrator will assume that the allocations are 83% of the 2014 allocations. EPA is removing these provisions both for existing and new units because they seem unlikely to be used, are unduly complicated, and may result in 2015 in total allocations that do not equal the respective State trading budget. Moreover, there are no comparable provisions in the CAIR FIP trading rules.

EPA is also revising the current provisions for new unit allocations that provide that a new unit is eligible for allocations from the new unit set-aside until that unit has operated long enough to develop a baseline heat input using the 3 highest figures for converted control period heat input out of such figures for the first 5 years of operation. At that point, the unit is supposed to be allocated allowances from the pool of allowances allocated to all units that have a baseline heat input. However, allowances for units with baselines are allocated a number of years in advance of the first year for which such allowances may be used to meet the allowance-holding requirement. Consequently, it is possible for a new unit to have a baseline as of a given year but find that no more allowances are available for that year for units with baselines because the allowances for that year were allocated before the time when the new unit's baseline was developed. A new unit could find that, for some years, it was both ineligible for the new unit set-aside and unable to obtain an allocation from the pool for units with baselines. EPA intended that new units move seamlessly from new-unit-set-aside eligibility to units-with-baselines allocations and not to fall in between the two types of allocation procedures. EPA is revising the allocation provisions to clarify that a new unit continues to be eligible for the new unit set-aside so long as the unit is not allocated allowances from the pool for units with baselines allocations either because the new unit does not yet have a baseline or because all the allowances for units with baselines have already been allocated for the year involved.

EPA also is adopting technical changes that make it clear that a separate request for new-unit-set-aside allowances must be submitted for each control period for which they are sought and must be submitted by May 1 (for the NOX annual program) or February 1 (for the NOX ozone season program) of that control period. This approach will reasonably put the burden on owners and operators to inform the State permitting authority each year. This will ensure that the State permitting authority can keep track, for each control period in the future, of which units are seeking new-unit-set-aside allowances for that control period. These submission deadlines will give the State permitting authorities more time to process (which may include, when appropriate, opportunity for public comment) the requests in time to submit the allocations to the Administrator for recordation by December 1 (for the NOX annual program) or September 1 (for the NOX ozone season program). Similarly, EPA is revising the deadline for submission of requests for allowances from the compliance supplement pool to be May 1, 2009 (rather than July 1, 2009). Just as emissions data for 2008 will be available in time for new-unit-set-aside requests due on May 1, emissions data for 2008 (and 2007) will be available in time for compliance-supplement-pool requests due on May 1. The July 1, 2009 deadline did not provide sufficient time for State permitting authorities to process the requests.

In addition, EPA is adopting technical changes to the provisions for recordation of allowance allocations, for the reasons discussed below and elsewhere in this preamble. For example, the current provisions require the Administrator to record the initial allocations for 2010-2014 by December 1, 2006. Because State plans are not due until September 11, 2006, EPA cannot review and approve all State plans in time to record allowance allocations in those plans by December 1, 2006, which date is changed to September 30, 2007. Further, the current provisions also require the recordation of allocations for subsequent years to occur only after completion of the end-of-year compliance determination process for a previous year. Because of the need to finalize emissions data for a year before the compliance determination process for that year can be completed, the current provisions may delay recordation for a number of months. However, as a matter of logic, there is no necessary connection between one year's compliance determination and the future year's allocation recordation. Consequently, EPA is removing the connection made in the current provisions and is setting an independent deadline (December 1) for allocation recordation, which will result in recordation several months earlier than under the current provisions.

Further, EPA is adopting technical changes to the provisions referring to when an allowance transfer by the owner of an allowance to another allowance tracking system account is “correctly submitted.” The changes clarify that a “correctly submitted” allowance transfer is one that references allowances that both: Were in the owner's allowance tracking system account when the allowance transfer form was submitted to the Start Printed Page 25365Administrator; and continue to be in such account when the allowance transfer form is processed by the Administrator.

In addition, EPA is revising the provisions for deducting allowances to determine compliance with the allowance-holding requirement under the trading programs. The revisions do not change the requirements that an allowance usable for compliance: be allocated for the year, or a year before the year, for which compliance is being determined; and be in or covered by a proper request for transfer into the source's compliance account by the allowance transfer deadline. However, the statement indicating that the allowance must also not be necessary to account for excess emissions for a prior year is removed because it is confusing and inconsistent with the compliance procedures that EPA has been using in its ongoing cap-and-trade programs, i.e., the Acid Rain Program and the NOX Budget Trading Program.

Further, as explained in the preamble of the August 24, 2005 proposed rule, EPA is adopting revisions clarifying the application of excess emissions penalties for a source that is subject to, and has excess emissions under, both the Acid Rain Program and the CAIR SO2 model trading rule. Under these revisions, a given ton of SO2 excess emissions at a source, the owners and operators of the source will be liable, if that ton is an excess emission under both the Acid Rain Program and the CAIR trading program, for the offset (the deduction of one allowance) and the dollar penalty ($2,000 inflation adjusted) under the Acid Rain Program and liable, if that ton is only an excess emission under the CAIR trading program, for the 3-for-1 allowance deduction under the CAIR trading program.

In addition, EPA is revising certain provisions concerning the use of substitute data when the owner or operator of a unit adds a new stack or flue and fails to meet the deadline for monitoring certification. EPA proposed, but is not finalizing, procedures that would allow for substitute data other than data reflecting maximum potential emissions. Because EPA believes that the proposed provisions would in fact still result in the use of data reflecting maximum potential emissions, EPA is not adopting the proposed provisions.

Further, EPA is removing a provision that separately requires units to monitor heat input. The provision is unnecessary because heat input monitoring is already explicitly required in the monitoring provisions in § 96.170, 96.270, and 96.370.

In addition, EPA is revising the requirements for CAIR opt-in permits for owners and operators planning to repower an opt-in unit and seeking special allowance allocations for such unit. The revisions require that the owners and operators state, in the permit application, that they intend to repower the opt-in unit before January 1, 2015. EPA believes that this is a reasonable requirement to prevent frivolous requests for the special allocations for opt-in units to be repowered. The permit application, like any submission for owners and operators, must of course include a certification as to the truth, accuracy, and completeness of the submission.

A few changes are adopted for some other provisions (concerning, e.g., the submission deadlines for quarterly emissions reports for CAIR opt-in units and units applying to be CAIR opt-in units and inclusion of the CAIR opt-in permit in the CAIR permit and the title V permit for the source that includes the CAIR opt-in unit) of the CAIR SIP model trading rules. These other changes are similarly technical or clarifying in nature. All of these changes are consistent with the analogous provisions in the final CAIR FIP trading rules.

VIII. What Are the Revisions of Acid Rain Program Regulations?

A few changes are adopted for the Acid Rain Program regulations. As explained in the preamble of the August 24, 2005 preamble, EPA is adopting revisions aimed at facilitating interaction among the CAIR FIP trading programs, any EPA-administered CAIR SIP trading programs, and the Acid Rain SO2 trading program and revisions related to the change, finalized in the CAIR rulemaking, from unit-level to source-level compliance with the Acid Rain SO2 trading program.

In addition, EPA is revising the provisions listing the content of a certificate of representation to clarify that the identification of each unit covered by the certificate of representation includes identification and nameplate capacity of each generator served by the unit. EPA believes that the current rule language requiring “identification” of each unit subject to the trading program is already broad enough to encompass such information concerning each generator served by the unit, particularly since only a unit serving a generator with a nameplate capacity greater than 25 MWe can be subject to the Acid Rain Program. However, EPA is adopting revised language to make it clear that generator information is required in the certificate of representation.

EPA is also making technical revisions to the provisions concerning the reflection in certificates of representation of the owners and operators of the source and units involved. The changes make these provisions consistent with those in the CAIR trading programs. The changes make it clear that all owners and operators must be listed and that those that should be, but are not, listed are still bound by the certificate of representation and the CAIR designated representative.

Further, EPA is adding a new § 72.26 and a new § 73.33(g) that are analogous to provisions adopted in the CAIR SIP model trading rules and the CAIR FIP trading rules and concern the use of agents by a designated representative and authorized account representative. As discussed above in Section VII of this preamble, EPA maintains that the existing Acid Rain Program regulations already authorize a designated representative or authorized account representative to use agents to make certain electronic submissions. However, in order to remove any uncertainty about such legal authority, EPA is adding provisions to the Acid Rain Program regulations that explicitly authorize such use of agents.

In addition, EPA is revising the appeal provisions of part 78 to apply to the appeals procedures to final actions of the Administrator under the CAIR FIP trading rule, just as these provisions already apply to final Administrator actions under the CAIR SIP model trading rules. Part 78 is revised to refer specifically, where appropriate, to the CAIR FIP trading rules in a similar way to how part 78 currently refers specifically, where appropriate, to the CAIR SIP model trading rules.

IX. 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 a 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 Start Printed Page 25366environment, 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.

Today's action both provides a response to the Section 126 Petition filed by North Carolina and promulgates FIPs to implement the requirements of the recently published CAIR (May 2005) in all affected States. It also makes minor changes to the CAIR and the Acid Rain Program. The FIPs require the same set of air pollution emissions reductions required by the CAIR. For this reason, EPA is relying on the economic analysis conducted for CAIR entitled “Regulatory Impact Analysis of the Final Clean Air Interstate Rule” (March 2005) to serve as the analysis for these rulemakings.

This economic analysis shows that substantial net economic benefits to society are likely to be achieved due to reduction in emissions resulting from the CAIR program. The results show that the CAIR program would be highly beneficial to society, with annual net benefits (benefits less costs) of approximately $71.4 or $60.4 billion in 2010 and $98.5 or $83.2 billion in 2015. These alternative net benefits estimates occur due to differing assumptions concerning the social discount rate used to estimate the annual value of the benefits of the rule with the lower estimates relating to a discount rate of 7 percent and the higher estimates a discount rate of 3 percent. All amounts are reflected in 1999 dollars. The costs and benefits presented in the CAIR economic analysis are an accurate representation of the benefits and costs anticipated for the FIPs. For more information, see the NFR for the CAIR published in the Federal Register (70 FR 25162; May 12, 2005) and the “Regulatory Impact Analysis for the Final Clean Air Interstate Rule” (March 2005).

In view of its important policy implications and potential effect on the economy of over $100 million, this action has been judged to be an economically “significant regulatory action” within the meaning of the Executive Order. As a result, today's action was submitted to OMB for review. Changes made in response to OMB suggestions or recommendations are documented in the public record.

B. Paperwork Reduction Act

The EPA believes that the Paperwork Reduction Act (44 U.S.C. 3501 et seq.) requirements of this rule are satisfied through the Information Collection Request (ICR) (EPA ICR number 2152.02; OMB control number 2060-0570) submitted to the OMB for review and approval on May 12, 2005 as part of the CAIR (70 FR 25162-25405) and approved by the OMB in September 2005. The ICR describes the nature of the information collection and its estimated burden and cost associated with that final rule. In cases where information is already collected by a related program, the ICR takes into account only the additional burden. [This situation arises in States that are also subject to requirements of the Consolidated Emissions Reporting Rule (EPA ICR number 0916.10; OMB control number 2060-0088) or for sources that are subject to the Acid Rain Program (EPA ICR number 1633.13; OMB control number 2060-0258) or NOX SIP Call (EPA ICR number 1857.03; OMB number 2060-0445) requirements.]

The burden of today's rule is essentially the same as the burden estimated for the CAIR. There is a modest transfer of burden from the States to EPA if the Federal plan is implemented rather than the CAIR State plan. The overall total burden is essentially unchanged. Thus, the ICR prepared for CAIR satisfies the requirements of the Paperwork Reduction Act for this rule.

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, after appearing in the preamble of the final rule, are listed in 40 CFR part 9.

C. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that 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 the purposes of this rulemaking, EPA defined small entities according to the following three criteria:

(1) A small business according to the Small Business Administration size standards by the North American Industry Classification System (NAICS) category of the owning entity. The range of small business size standards for electric utilities is 4 billion kilowatt-hours of production or less;

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

(3) A small organization that is any not-for-profit enterprise that is independently owned and operated and is not dominant in its field.

Table IX-1 lists entities potentially affected by this rule with applicable NAICS code.

Table IX-1.—Potentially Regulated Categories and Entities a

CategoryNAICS code bExamples of potentially regulated entities
Industry221112Fossil fuel-fired electric utility steam generating units.
Federal Governmentc 221112Fossil fuel-fired electric utility steam generating units owned by the Federal government.
Start Printed Page 25367
State/Local/c 221112Fossil fuel-fired electric utility steam generating units owned by municipalities.
Tribal Government921150Fossil fuel-fired electric utility steam generating units in Indian Country.
a Include NAICS categories for source categories that own and operate electric generating units only.
b North American Industry Classification System.
c Federal, State, or local government-owned and operated establishments are classified according to the activity in which they are engaged.

After considering the economic impacts of today's final rule on small entities, EPA is certifying that this action will not have a significant economic impact on a substantial number of small entities.

EPA has assessed the potential impact of today's action on small entities. Pursuant to section 603 of the RFA, EPA prepared an initial regulatory flexibility analysis (IRFA) for the proposed rule (70 FR 49708, 49743). Approximately 140 of the estimated 3,000 EGUs potentially affected by today's action are owned by the 58 potentially affected small entities identified by EPA. Of the 140, 49 units are owned by small entities that also share ownership with large entities. Of these units, 34 are believed to be more than 50 percent owned by a large entity.

Beyond the 140, an additional 185 units owned by small entities in these states could be exempted because they have a nameplate capacity less than 25 MW. The above estimates include a number of units that are owned jointly by small and non-small entities. In addition, these estimates represent the maximum number of units potentially affected by the CAIR FIP. Only units in States that fail to submit an approved SIP would be directly regulated under the CAIR FIP. The actual number of affected units will depend on the number of States that do not submit a SIP or do not get their SIP submittal approved.

This analysis is based in large part on EPA's prior analysis of the potential impact of regulations implementing the CAIR model trading programs in the CAIR region. The analysis of the model trading programs was based on the best information available at that time and assumed that 75 small entities could be affected by any eventual implementation of the trading programs. However, EPA subsequently determined that some of these 75 entities either did not meet the definition of a small entity, or had units that were no longer generating. EPA's final analysis thus concluded that only 58 entities would be affected by today's action. Because the Agency's analysis of small entity impacts was based on the earlier estimate of affected small entities (i.e., the impacts were analyzed based on 75 affected entities, not 58 entities), the impact analysis overstates the maximum potential impact of today's action on small entities.

Overall, EPA analysis suggested that about 445 MW of total small entity capacity, or 1.0 percent of total small entity capacity in the CAIR region, is projected to be uneconomic to maintain under regulations implementing the CAIR trading programs relative to the Base Case. In practice, units projected to be uneconomic to maintain may be “mothballed”, retired, or kept in service to ensure transmission reliability in certain parts of the grid. Our IPM modeling is unable to distinguish between these potential outcomes.

Of the 75 initially identified as potentially impacted by regulations implementing the model trading programs, EPA determined that 29 might experience compliance costs in excess of one percent of revenues in 2010 and 46 might in 2015. Potentially affected small entities experiencing compliance costs in excess of 1 percent of revenues have some potential for significant impact resulting from implementation of CAIR.

Pursuant to section 609(b) of the RFA, EPA convened a Small Business Advocacy Review Panel to obtain advice and recommendations from representatives of small entities that would potentially be regulated by the rule. A detailed discussion of the Panel's advice and recommendations is found in the Panel Report (EPA-HQ-OAR-2004-0076-0074). A summary of the Panel's recommendations is presented at 70 FR 49708, 49741.

A detailed discussion of the panel process is provided in the proposed rule. In the proposed rule, EPA took comment on all aspects of the proposed FIP and its impact on small entities. EPA did not receive significant comments in this regard. In addition, in section VI.D of the proposed rule preamble, EPA specifically took comment on one of the panel recommendations, which was to consider providing a greater share of NOX allowances to small entities. A number of utilities submitted comments opposing such a provision, and one State expressed support for such a provision. These comments are discussed in more detail in section VI.F of this preamble.

The decision to certify that this rule will not have a significant economic impact on a substantial number of small entities is largely a result of two factors. First, because the rule only affects sources with a capacity greater than 25 MW, the majority of potentially affected small entities are exempted. The decision to include only units greater than 25 MW in size exempts 185 small entities that would otherwise be potentially affected by today's actions. In the final CAIR, EPA stated its belief that it is reasonable to assume no further control of air emissions from these smaller EGUs. Second, as EPA's analysis of potential impacts of this rulemaking on small entities progressed, we determined that our initial estimates were too high, because some of the entities that EPA had projected to be affected either did not meet the definition of a small entity, or had units that were no longer generating. Finally, as was discussed in the NPR, the use of cap-and-trade in general will limit impacts on small entities relative to a less flexible command-and-control program.

D. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995, 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, 2 U.S.C. 1532, 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 Start Printed Page 25368$100,000,000 or more in any 1 year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and to 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.

In addition, 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 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 this rule contains a Federal mandate that may result in expenditures of $100 million or more in 1 year. The costs of compliance will be borne predominately by sources in the private sector although a small number of sources owned by State and local governments may also be impacted. EPA prepared a written statement meeting the requirements of section 202 of the UMRA during the CAIR rulemaking process. The Federal mandates in today's action relate to its implementation of the CAIR and thus the analyses prepared for CAIR are applicable to today's action.

In accordance with section 202(c) of UMRA, EPA prepared the statement required by section 202 in conjunction with the Regulatory Impact Analysis prepared for the CAIR. This document is available at http://www.epa.gov/​cair/​pdfs/​finaltech08.pdf and contains analyses that meet the requirements of section 202(a) of UMRA. That is, it contains a qualitative and quantitative assessment of the anticipated costs and benefits of the Federal mandate; estimates of future compliance costs and any disproportionate budgetary effects upon any particular regions of the nation; and estimates of the effect on the national economy.

Consultation with State, local and Tribal governments potentially affected by the CAIR emission reduction requirements was conducted during the CAIR rulemaking process. Such consultation was conducted in a manner consistent with the intergovernmental consultation provisions of section 204 of the UMRA, and Executive Order 12875, “Enhancing the Intergovernmental Partnership.”

EPA has determined that this rule contains no regulatory requirements that might significantly or uniquely affect small governments. Therefore, development of a small government plan under section 203 of the Act is not required. The requirements in this action do not distinguish EGUs based on ownership, either for those units that are included within the scope of the rule or for those units that are exempted by the generating capacity cut-off. Consequently, the rule has no requirements that uniquely affect small governments that own or operate EGUs within the region. Further, with respect to the significance of the rule's provisions, EPA's UMRA analysis demonstrates that the economic impact of the rule will not significantly affect State or municipal EGUs or non-EGUs, either in terms of total cost incurred and the impact of the costs on revenue, or increased cost of electricity to consumers.

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 rule does not have federalism implications. It does 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. These effects do not occur from the final rule itself because it is the provisions of the CAA that require EPA, after a State has failed to submit a SIP or a complete SIP, to make a finding to that effect and then to promulgate a FIP within 2 years of the finding. Although EPA is exercising discretion to promulgate the FIP within the early part of the 2-year period, EPA intends to rescind the FIP for each State that submits a SIP that EPA approves, and, if the FIP remains, sources are not required to implement controls until after the close of the 2-year period. Moreover, as emphasized throughout the preamble, States are not required to adopt the FIP provisions, or any particular portion thereof, in order for EPA to approve their SIPs. Thus, Executive Order 13132 does not apply to this rule.

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.” This rule does not have “Tribal implications” as specified in Executive Order 13175.

This rule addresses transport of pollution for precursors of ozone and PM2.5. The CAA provides for States and Tribes to develop plans to regulate emissions of air pollutants within their jurisdictions. The regulations clarify the statutory obligations of States and Tribes that develop plans to implement these rules. The Tribal Authority Rule (TAR) gives Tribes the opportunity to develop and implement CAA programs, but it leaves to the discretion of the Tribe whether to develop these programs and which programs, or appropriate elements of a program, the Tribe will adopt.

This rule 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 because no Tribe has implemented a federally-enforceable air quality management program under the CAA at this time. Furthermore, this rule does not affect the relationship or distribution of power and responsibilities between the Federal Government and Indian Tribes. The CAA and the TAR establish the relationship of the Federal Government and Tribes in developing plans to attain the NAAQS, and this rule does nothing to modify that relationship. Because this rule does not have Tribal implications, Executive Order 13175 does not apply.

If one assumes a Tribe is implementing a Tribal Implementation Plan, today' rule could have implications for that Tribe, but would Start Printed Page 25369not impose substantial direct costs upon the Tribe, nor preempt Tribal law. The EPA has estimated the total annual private costs for the FIP for the CAIR region as implemented by State, local, and Tribal governments to be approximately $2.4 billion in 2010 and $3.6 billion in 2015 (1999$). There are currently very few emissions sources in Indian country that could be affected by these rules and the percentage of Tribal land that will be impacted is very small. For Tribes that choose to regulate sources in Indian country, the costs would primarily be attributed to inspecting regulated facilities and enforcing adopted regulations.

EPA consulted with Tribal officials in developing the final CAIR, which provides the basis for the FIPs in today's rule. The EPA encouraged Tribal input at an early stage. Also, EPA held periodic meetings with the States and the Tribes during the technical development of CAIR. Three meetings were held with the Crow Tribe, where the Tribe expressed concerns about potential impacts of the rule on their coal mine operations. In addition, EPA held three calls with Tribal environmental professionals to address concerns specific to the Tribes. These discussions have given EPA valuable information about Tribal concerns regarding the development of CAIR. During the CAIR rulemaking process, the EPA provided briefings for Tribal representatives and the newly formed National Tribal Air Association (NTAA), and other national Tribal forums. Input from Tribal representatives was taken into consideration in development of 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, Section 5-501 of the Order directs the Agency to 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 rule is not subject to the Executive Order, because it does not involve decisions on environmental health or safety risks that may disproportionately affect children. The EPA believes that the emissions reductions from the strategy in this rule would further improve air quality and would further improve 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 proposed rulemaking, and notices of proposed rulemaking: (1)(i) That is a significant regulatory action under Executive Order 12866 or any successor order, and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action.”

This final rule is a significant regulatory action under Executive Order 12866 and this rule may have a significant adverse effect on the supply, distribution, or use of energy. The energy impacts of this rule come from its implementation of the emission reduction requirements in the CAIR. The impacts for this rule will therefore not differ from those for the CAIR. These impacts are detailed in the final CAIR (70 FR 25315). As discussed in the CAIR NFR, EPA's analysis shows that the EGU emission reductions required under the trading programs are projected to result in a 1.6 percent or less increase in natural gas prices projected from 2010 to 2020. If base case natural gas prices are higher than EPA has assumed in its primary analysis, the impact on natural gas price will be even less.

I. National Technology Transfer Advancement Act

Section 12(d) of the National Technology Transfer Advancement Act (NTTAA) of 1995 (Pub. L. 104-113; 15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory and procurement 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, business practices) developed or adopted by one or more voluntary consensus bodies. The NTTAA directs EPA to provide Congress, through annual reports to OMB, with explanations when an agency does not use available and applicable voluntary consensus standards.

Today's rule implements requirements largely identical to the requirements in the CAIR. This rule requires all sources that participate in the trading programs under part 97 (analogous to the CAIR SIP trading programs under part 96) to meet the applicable monitoring requirements of part 75. Part 75 already incorporates a number of voluntary consensus standards. Consistent with the Agency's Performance Based Measurement System (PBMS), part 75 sets forth performance criteria that allow the use of alternative methods to the ones set forth in part 75. The PBMS approach is intended to be more flexible and cost effective for the regulated community; it is also intended to encourage innovation in analytical technology and improved data quality. At this time, EPA is not recommending any revisions to part 75; however, EPA periodically revises the test procedures set forth in part 75. When EPA revises the test procedures set forth in part 75 in the future, EPA will address the use of any new voluntary consensus standards that are equivalent. Currently, even if a test procedure is not set forth in part 75, EPA is not precluding the use of any method, whether it constitutes a voluntary consensus standard or not, as long as it meets the performance criteria specified; however, any alternative methods must be approved through the petition process under § 75.66 before they are used under part 75.

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, U.S. Environmental Protection Agency, 1998. Guidance for Incorporating Environmental Justice Concerns in EPAs NEPA Compliance Analyses. Office of Federal Activities, Washington, D.C., April, 1998. Agencies Start Printed Page 25370are 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).

In accordance with Executive Order 12898, the Agency has considered whether this rule may have disproportionate negative impacts on minority or low income populations. The Agency expects this rule will lead to reductions in air pollution and exposures generally. In addition, EPA has conducted an air quality modeling analysis to estimate the changes in exposure of minority and low-income populations to ambient concentrations of PM2.5 as a result of implementation of a cap-and-trade program similar to CAIR: the Acid Rain Program. The analysis shows that each racial, ethnic, and income-level group studied is projected to experience similar average improvement in ambient concentrations of PM2.5 in the eastern U.S. (where the vast majority of the emission reductions took place) as a result of the Acid Rain Program in 2010. No disproportionately high and adverse human health or environmental effects of the Acid Rain Program were found for any minority, low-income, or other population. For these reasons, negative impacts to these sub-populations that appreciably exceed similar impacts to the general population are not expected.

K. Congressional Review Act

The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. Therefore, EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is a “major rule” as defined by 5 U.S.C. 804(2). This rule will be effective June 27, 2006.

Start List of Subjects

List of Subjects

and 52

, 73, 74, and 78

and 97

End List of Subjects Start Signature

Dated: March 15, 2006.

Stephen L. Johnson,

Administrator.

End Signature Start Amendment Part

For the reasons set forth in the preamble, parts 51, 52, 72, 73, 74, 78, 96, and 97 of chapter I of title 40 of the Code of Federal Regulations are amended as follows:

End Amendment Part Start Part

PART 51—[AMENDED]

End Part Start Amendment Part

1. The authority citation for Part 51 continues to read as follows:

End Amendment Part Start Authority

Authority: 23 U.S.C. 101; 42 U.S.C. 7401-7671q.

End Authority Start Amendment Part

2. Section 51.123 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (o)(2)(ii)(B), by revising the words “for the year after the year of” to read “for the 4th year after the year of” and by removing the word “and” at the end;

End Amendment Part Start Amendment Part

b. In paragraph (o)(2)(ii)(C), by revising the words “allocated.” to read allocated; and”;

End Amendment Part Start Amendment Part

c. By adding a new paragraph (o)(2)(ii)(D);

End Amendment Part Start Amendment Part

d. By adding a new paragraph (p);

End Amendment Part Start Amendment Part

e. In paragraph (cc), by amending the definition of “Electric generating unit” or “EGU” by:

End Amendment Part Start Amendment Part

i. In paragraph (1) of the definition, by redesignating the paragraph as paragraph “(1)(i)”, by revising the words “since the start-up” to read “since the later of November 15, 1990 or the start-up”, and by adding a new paragraph (1)(ii); and

End Amendment Part Start Amendment Part

ii. By revising paragraph (2) of the definition; and

End Amendment Part Start Amendment Part

f. In paragraph (cc), by adding a new definition for “Solid waste incineration unit”; and

End Amendment Part Start Amendment Part

g. By adding a new paragraph (ee).

End Amendment Part
Findings and requirements for submission of State implementation plan revisions relating to emissions of oxides of nitrogen pursuant to the Clean Air Interstate Rule.
* * * * *

(o) * * *

(ii) * * *

(D) The State's methodology for allocating the compliance supplement pool must be substantively identical to § 97.143 (except that the permitting authority makes the allocations and the Administrator records the allocations made by the permitting authority) or otherwise in accordance with paragraph (e)(4) of this section.

* * * * *

(p) Notwithstanding any other provision of this section, a State may adopt, and include in a SIP revision submitted by March 31, 2007, regulations relating to the Federal CAIR NOX Annual Trading Program under subparts AA through HH of part 97 of this chapter as follows:

(1) The State may adopt, as CAIR NOX allowance allocation provisions replacing the provisions in subpart EE of part 97 of this chapter:

(i) Allocation provisions substantively identical to subpart EE of part 96 of this chapter, under which the permitting authority makes the allocations; or

(ii) Any methodology for allocating CAIR NOX allowances to individual sources under which the permitting authority makes the allocations, provided that:

(A) The State's methodology must not allow the permitting authority to allocate CAIR NOX allowances for a year in excess of the amount in the State's Annual EGU NOX budget for such year.

(B) The State's methodology must require that, for EGUs commencing operation before January 1, 2001, the permitting authority will determine, and notify the Administrator of, each unit's allocation of CAIR NOX allowances by April 30, 2007 for 2009, 2010, and 2011 and by October 31, 2008 and October 31 of each year thereafter for the 4th year after the year of the notification deadline.

(C) The State's methodology must require that, for EGUs commencing operation on or after January 1, 2001, the permitting authority will determine, and notify the Administrator of, each unit's allocation of CAIR NOX allowances by October 31 of the year for which the CAIR NOX allowances are allocated.

(2) The State may adopt, as compliance supplement pool provisions replacing the provisions in ( 97.143 of this chapter: Start Printed Page 25371

(i) Provisions for allocating the State's compliance supplement pool that are substantively identical to § 97.143 of this chapter, except that the permitting authority makes the allocations and the Administrator records the allocations made by the permitting authority;

(ii) Provisions for allocating the State's compliance supplement pool that are substantively identical to § 96.143 of this chapter; or

(iii) Other provisions for allocating the State's compliance supplement pool that are in accordance with paragraph (e)(4) of this section.

(3) The State may adopt CAIR opt-in unit provisions as follows:

(i) Provisions for CAIR opt-in units, including provisions for applications for CAIR opt-in permits, approval of CAIR opt-in permits, treatment of units as CAIR opt-in units, and allocation and recordation of CAIR NOX allowances for CAIR opt-in units, that are substantively identical to subpart II of part 96 of this chapter and the provisions of subparts AA through HH that are applicable to CAIR opt-in units or units for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied;

(ii) Provisions for CAIR opt-in units, including provisions for applications for CAIR opt-in permits, approval of CAIR opt-in permits, treatment of units as CAIR opt-in units, and allocation and recordation of CAIR NOX allowances for CAIR opt-in units, that are substantively identical to subpart II of part 96 of this chapter and the provisions of subparts AA through HH that are applicable to CAIR opt-in units or units for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied, except that the provisions exclude § 96.188(b) of this chapter and the provisions of subpart II of part 96 of this chapter that apply only to units covered by § 96.188(b) of this chapter; or

(iii) Provisions for applications for CAIR opt-in units, including provisions for CAIR opt-in permits, approval of CAIR opt-in permits, treatment of units as CAIR opt-in units, and allocation and recordation of CAIR NOX allowances for CAIR opt-in units, that are substantively identical to subpart II of part 96 of this chapter and the provisions of subparts AA through HH that are applicable to CAIR opt-in units or units for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied, except that the provisions exclude § 96.188(c) of this chapter and the provisions of subpart II of part 96 of this chapter that apply only to units covered by § 96.188(c) of this chapter.

(cc) * * *

Electric generating unit or EGU means:

(1)(i) * * *

(ii) If a stationary boiler or stationary combustion turbine that, under paragraph (1)(i) of this section, is not an electric generating unit begins to combust fossil fuel or to serve a generator with nameplate capacity of more than 25 MWe producing electricity for sale, the unit shall become an electric generating unit as provided in paragraph (1)(i) of this section on the first date on which it both combusts fossil fuel and serves such generator.

(2) A unit that meets the requirements set forth in paragraphs (2)(i)(A), (2)(ii)(A), or (2)(ii)(B) of this definition paragraph shall not be an electric generating unit:

(i)(A) Any unit that is an electric generating unit under paragraph (1)(i) or (ii) of this definition:

(1) Qualifying as a cogeneration unit during the 12-month period starting on the date the unit first produces electricity and continuing to qualify as a cogeneration unit; and

(2) Not serving at any time, since the later of November 15, 1990 or the start-up of the unit's combustion chamber, a generator with nameplate capacity of more than 25 MWe supplying in any calendar year more than one-third of the unit's potential electric output capacity or 219,000 MWh, whichever is greater, to any utility power distribution system for sale.

(B) If a unit qualifies as a cogeneration unit during the 12-month period starting on the date the unit first produces electricity and meets the requirements of paragraphs (2)(i)(A) of this section for at least one calendar year, but subsequently no longer meets all such requirements, the unit shall become an electric generating unit starting on the earlier of January 1 after the first calendar year during which the unit first no longer qualifies as a cogeneration unit or January 1 after the first calendar year during which the unit no longer meets the requirements of paragraph (2)(i)(A) (2) of this section.

(ii)(A) Any unit that is an electric generating unit under paragraph (1)(i) or (ii) of this definition commencing operation before January 1, 1985:

(1) Qualifying as a solid waste incineration unit; and

(2) With an average annual fuel consumption of non-fossil fuel for 1985-1987 exceeding 80 percent (on a Btu basis) and an average annual fuel consumption of non-fossil fuel for any 3 consecutive calendar years after 1990 exceeding 80 percent (on a Btu basis).

(B) Any unit that is an electric generating unit under paragraph (1)(i) or (ii) of this definition commencing operation on or after January 1, 1985:

(1) Qualifying as a solid waste incineration unit; and

(2) With an average annual fuel consumption of non-fossil fuel for the first 3 calendar years of operation exceeding 80 percent (on a Btu basis) and an average annual fuel consumption of non-fossil fuel for any 3 consecutive calendar years after 1990 exceeding 80 percent (on a Btu basis).

(C) If a unit qualifies as a solid waste incineration unit and meets the requirements of paragraph (2)(ii)(A) or (B) of this section for at least 3 consecutive calendar years, but subsequently no longer meets all such requirements, the unit shall become an electric generating unit starting on the earlier of January 1 after the first calendar year during which the unit first no longer qualifies as a solid waste incineration unit or January 1 after the first 3 consecutive calendar years after 1990 for which the unit has an average annual fuel consumption of fossil fuel of 20 percent or more.

* * * * *

Solid waste incineration unit means a stationary, fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion turbine that is a “solid waste incineration unit” as defined in section 129(g)(1) of the Clean Air Act.

* * * * *

(ee) Notwithstanding any other provision of this section, a State may adopt, and include in a SIP revision submitted by March 31, 2007, regulations relating to the Federal CAIR NOX Ozone Season Trading Program under subparts AAAA through HHHH of part 97 of this chapter as follows:

(1) The State adopt, as applicability provisions replacing the provisions in § 97.304 of this chapter, provisions for applicability that are substantively identical to the provisions in § 96.304 of this chapter expanded to include all non-EGUs subject to the State's emissions trading program approved under § 51.121(p).

(2) The State may adopt, as CAIR NOX Ozone Season allowance allocation provisions replacing the provisions in subpart EEEE of part 97 of this chapter:

(i) Allocation provisions substantively identical to subpart EEEE of part 96 of this chapter, under which the permitting authority makes the allocations; or

(ii) Any methodology for allocating CAIR NOX Ozone Season allowances to Start Printed Page 25372individual sources under which the permitting authority makes the allocations, provided that:

(A) The State may provide for issuance of an amount of CAIR Ozone Season NOX allowances for an ozone season, in addition to the amount in the State's Ozone Season EGU NOX Budget for such ozone season, not exceeding the portion of the State's trading program budget, under the State's emissions trading program approved under § 51.121(p), attributed to the non-EGUs that the applicability provisions in § 96.304 of this chapter are expanded to include under paragraph (ee)(1) of this section.

(B) The State's methodology must not allow the State to allocate CAIR Ozone Season NOX allowances for an ozone season in excess of the amount in the State's Ozone Season EGU NOX Budget for such ozone season plus any additional amount of CAIR Ozone Season NOX allowances issued under paragraph (ee)(2)(ii)(A) of this section for such ozone season.

(C) The State's methodology must require that, for EGUs commencing operation before January 1, 2001, the permitting authority will determine, and notify the Administrator of, each unit's allocation of CAIR NOX Ozone Season allowances by April 30, 2007 for 2009, 2010, and 2011 and by October 31, 2008 and October 31 of each year thereafter for the 4th year after the year of the notification deadline.

(D) The State's methodology must require that, for EGUs commencing operation on or after January 1, 2001, the permitting authority will determine, and notify the Administrator of, each unit's allocation of CAIR NOX Ozone Season allowances by July 31 of the year for which the CAIR NOX Ozone Season allowances are allocated.

(3) The State may adopt CAIR opt-in unit provisions as follows:

(i) Provisions for CAIR opt-in units, including provisions for applications for CAIR opt-in permits, approval of CAIR opt-in permits, treatment of units as CAIR opt-in units, and allocation and recordation of CAIR NOX Ozone Season allowances for CAIR opt-in units, that are substantively identical to subpart IIII of part 96 of this chapter and the provisions of subparts AAAA through HHHH that are applicable to CAIR opt-in units or units for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied;

(ii) Provisions for CAIR opt-in units, including provisions for applications for CAIR opt-in permits, approval of CAIR opt-in permits, treatment of units as CAIR opt-in units, and allocation and recordation of CAIR NOX Ozone Season allowances for CAIR opt-in units, that are substantively identical to subpart IIII of part 96 of this chapter and the provisions of subparts AAAA through HHHH that are applicable to CAIR opt-in units or units for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied, except that the provisions exclude § 96.388(b) of this chapter and the provisions of subpart IIII of part 96 of this chapter that apply only to units covered by § 96.388(b) of this chapter; or

(iii) Provisions for applications for CAIR opt-in units, including provisions for CAIR opt-in permits, approval of CAIR opt-in permits, treatment of units as CAIR opt-in units, and allocation and recordation of CAIR NOX allowances for CAIR opt-in units, that are substantively identical to subpart IIII of part 96 of this chapter and the provisions of subparts AAAA through HHHH that are applicable to CAIR opt-in units or units for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied, except that the provisions exclude § 96.388(c) of this chapter and the provisions of subpart IIII of part 96 of this chapter that apply only to units covered by § 96.388(c) of this chapter.

Start Amendment Part

3. Section 51.124 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (q), by amending the definition of “Electric generating unit” or “EGU” by:

End Amendment Part Start Amendment Part

i. In paragraph (1) of the definition, redesignating the paragraph as paragraph “(1)(i)”, revising the words “since the start-up” to read “since the later of November 15, 1990 or the start-up”, and adding a new paragraph (1)(ii); and

End Amendment Part Start Amendment Part

ii. Revising paragraph (2) of the definition; and

End Amendment Part Start Amendment Part

b. In paragraph (q), add a new definition for “Solid waste incineration unit”; and

End Amendment Part Start Amendment Part

c. Add a new paragraph (r).

End Amendment Part
Findings and requirements for submission of State implementation plan revisions relating to emissions of sulfur dioxide pursuant to the Clean Air Interstate Rule.
* * * * *

(q) * * *

Electric generating unit or EGU means:

(1)(i) * * *

(ii) If a stationary boiler or stationary combustion turbine that, under paragraph (1)(i) of this section, is not an electric generating unit begins to combust fossil fuel or to serve a generator with nameplate capacity of more than 25 MWe producing electricity for sale, the unit shall become an electric generating unit as provided in paragraph (1)(i) of this section on the first date on which it both combusts fossil fuel and serves such generator.

(2) A unit that meets the requirements set forth in paragraphs (2)(i)(A), (2)(ii)(A), or (2)(ii)(B) of this definition paragraph shall not be an electric generating unit:

(i)(A) Any unit that is an electric generating unit under paragraph (1)(i) or (ii) of this definition:

(1) Qualifying as a cogeneration unit during the 12-month period starting on the date the unit first produces electricity and continuing to qualify as a cogeneration unit; and

(2) Not serving at any time, since the later of November 15, 1990 or the start-up of the unit's combustion chamber, a generator with nameplate capacity of more than 25 MWe supplying in any calendar year more than one-third of the unit's potential electric output capacity or 219,000 MWh, whichever is greater, to any utility power distribution system for sale.

(B) If a unit qualifies as a cogeneration unit during the 12-month period starting on the date the unit first produces electricity and meets the requirements of paragraphs (2)(i)(A) of this section for at least one calendar year, but subsequently no longer meets all such requirements, the unit shall become an electric generating unit starting on the earlier of January 1 after the first calendar year during which the unit first no longer qualifies as a cogeneration unit or January 1 after the first calendar year during which the unit no longer meets the requirements of paragraph (2)(i)(A) (2) of this section.

(ii)(A) Any unit that is an electric generating unit under paragraph (1)(i) or (ii) of this definition commencing operation before January 1, 1985:

(1) Qualifying as a solid waste incineration unit; and

(2) With an average annual fuel consumption of non-fossil fuel for 1985-1987 exceeding 80 percent (on a Btu basis) and an average annual fuel consumption of non-fossil fuel for any 3 consecutive calendar years after 1990 exceeding 80 percent (on a Btu basis).

(B) Any unit that is an electric generating unit under paragraph (1)(i) or (ii) of this definition commencing operation on or after January 1, 1985:

(1) Qualifying as a solid waste incineration unit; and

(2) With an average annual fuel consumption of non-fossil fuel for the first 3 calendar years of operation exceeding 80 percent (on a Btu basis) Start Printed Page 25373and an average annual fuel consumption of non-fossil fuel for any 3 consecutive calendar years after 1990 exceeding 80 percent (on a Btu basis).

(C) If a unit qualifies as a solid waste incineration unit and meets the requirements of paragraph (2)(ii)(A) or (B) of this section for at least 3 consecutive calendar years, but subsequently no longer meets all such requirements, the unit shall become an electric generating unit starting on the earlier of January 1 after the first calendar year during which the unit first no longer qualifies as a solid waste incineration unit or January 1 after the first 3 consecutive calendar years after 1990 for which the unit has an average annual fuel consumption of fossil fuel of 20 percent or more.

* * * * *

Solid waste incineration unit means a stationary, fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion turbine that is a “solid waste incineration unit” as defined in section 129(g)(1) of the Clean Air Act.

* * * * *

(r) Notwithstanding any other provision of this section, a State may adopt, and include in a SIP revision submitted by March 31, 2007, regulations relating to the Federal CAIR SO2 Trading Program under subparts AAA through HHH of part 97 of this chapter as follows. The State may adopt the following CAIR opt-in unit provisions:

(1) Provisions for CAIR opt-in units, including provisions for applications for CAIR opt-in permits, approval of CAIR opt-in permits, treatment of units as CAIR opt-in units, and allocation and recordation of CAIR SO2 allowances for CAIR opt-in units, that are substantively identical to subpart III of part 96 of this chapter and the provisions of subparts AAA through HHH that are applicable to CAIR opt-in units or units for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied;

(2) Provisions for CAIR opt-in units, including provisions for applications for CAIR opt-in permits, approval of CAIR opt-in permits, treatment of units as CAIR opt-in units, and allocation and recordation of CAIR SO2 allowances for CAIR opt-in units, that are substantively identical to subpart III of part 96 of this chapter and the provisions of subparts AAA through HHH that are applicable to CAIR opt-in units or units for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied, except that the provisions exclude § 96.288(b) of this chapter and the provisions of subpart III of part 96 of this chapter that apply only to units covered by § 96.288(b) of this chapter; or

(3) Provisions for applications for CAIR opt-in units, including provisions for CAIR opt-in permits, approval of CAIR opt-in permits, treatment of units as CAIR opt-in units, and allocation and recordation of CAIR SO2 allowances for CAIR opt-in units, that are substantively identical to subpart III of part 96 of this chapter and the provisions of subparts AAA through HHH that are applicable to CAIR opt-in units or units for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied, except that the provisions exclude § 96.288(c) of this chapter and the provisions of subpart III of part 96 of this chapter that apply only to units covered by § 96.288(c) of this chapter.

Start Part

PART 52—[AMENDED]

End Part Start Amendment Part

1. The authority citation for part 52 continues to read as follows:

End Amendment Part Start Authority

Authority: 42 U.S.C. 7401 et seq.

End Authority

Subpart A—General Provisions

Start Amendment Part

2. Subpart A is amended by adding §§ 52.35 and 52.36 to read as follows:

End Amendment Part
What are the requirements of the Federal Implementation Plans (FIPs) for the Clean Air Interstate Rule relating to emissions of nitrogen oxides?

The Federal CAIR NOX Annual Trading Program provisions of part 97 of this chapter constitute the Clean Air Interstate Rule Federal Implementation Plan provisions that relate to annual emissions of nitrogen oxides (NOX). These provisions apply to sources in each State that is described in § 51.123(c)(1) and (2) of this chapter, Delaware, and New Jersey, each of which States is subject to a finding by the Administrator that the State failed to submit a State Implementation Plan (SIP) to satisfy the requirements of section 110(a)(2)(D)(I) of the Clean Air Act for the PM2.5 NAAQS. The Federal CAIR NOX Ozone Season Trading Program provisions of part 97 of this chapter constitute the Clean Air Interstate Rule Federal Implementation Plan provisions for emissions of nitrogen oxides (NOX) during the ozone season, as defined in § 97.302 of this chapter. These provisions apply to sources in each State that is described in § 51.123(c)(1) and (3) of this chapter, each of which States is subject to a finding by the Administrator that the State failed to submit a State Implementation Plan (SIP) to satisfy the requirements of section 110(a)(2)(D)(I) of the Clean Air Act for the 8-hour ozone NAAQS. These provisions do not invalidate or otherwise affect the obligations of States, emissions sources, or other responsible entities with respect to all portions of plans approved or promulgated under this part, nor the obligations of States under the requirements of § 51.123 and 51.125 of this chapter.

What are the requirements of the Clean Air Interstate Rule Federal Implementation Plans relating to emissions of sulfur dioxide?

The Federal CAIR SO2 Trading Program provisions of part 97 of this chapter constitute the Clean Air Interstate Rule Federal Implementation Plan provisions for emissions of sulfur dioxide (SO2). These provisions apply to sources in each State that is described in § 51.124(c) of this chapter, Delaware, and New Jersey, each of which States is subject to an EPA finding that the State failed to submit a State Implementation Plan (SIP) to satisfy the requirements of section 110(a)(2)(D)(I) of the Clean Air Act for the PM2.5 NAAQS. These provisions do not invalidate or otherwise affect the obligations of States, emissions sources, or other responsible entities with respect to all portions of plans approved or promulgated under this part, nor the obligations of States under the requirements of §§ 51.124 and 51.125 of this chapter.

Subpart B—Alabama

Start Amendment Part

3. Subpart B is amended by adding §§ 52.54 and 52.55 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Alabama and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Alabama and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Start Printed Page 25374

Subpart E—Arkansas

Start Amendment Part

4. Subpart E is amended by adding §§ 52.184 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Arkansas and for which requirements are set forth under the Federal CAIR NOX Ozone Season Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart H—Connecticut

Start Amendment Part

5. Subpart H is amended by adding §§ 52.386 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Connecticut and for which requirements are set forth under the Federal CAIR NOX Ozone Season Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart I—Delaware

Start Amendment Part

6. Subpart I is amended by adding §§ 52.440 and 52.441 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Delaware and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Delaware and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart J—District of Columbia

Start Amendment Part

7. Subpart J is amended by adding §§ 52.484 and 52.485 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the District of Columbia and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the District of Columbia and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart K—Florida

Start Amendment Part

8. Subpart K is amended by adding §§ 52.540 and 52.541 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Florida and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Florida and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart L—Georgia

Start Amendment Part

9. Subpart L is amended by adding §§ 52.584 and 52.585 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Georgia and for which requirements are set forth under Federal CAIR NOX Annual Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Georgia and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart O—Illinois

Start Amendment Part

10. Subpart O is amended by adding §§ 52.745 and 52.746 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Illinois and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Illinois and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart P—Indiana

Start Amendment Part

11. Subpart P is amended by adding §§ 52.789 and 52.790 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Indiana and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Indiana and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Start Printed Page 25375

Subpart Q—Iowa

Start Amendment Part

12. Subpart Q is amended by adding §§ 52.840 and 52.841 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Iowa and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Iowa and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart S—Kentucky

Start Amendment Part

13. Subpart S is amended by adding §§ 52.940 and 52.941 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Kentucky and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Kentucky and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart T—Louisiana

Start Amendment Part

14. Subpart T is amended by adding §§ 52.984 and 52.985 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Louisiana and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Louisiana and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart V—Maryland

Start Amendment Part

15. Subpart V is amended by adding §§ 52.1084 and 52.1085 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Maryland and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Maryland and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart W—Massachusetts

Start Amendment Part

16. Subpart W is amended by adding § 52.1140 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Massachusetts and for which requirements are set forth under the Federal CAIR NOX Ozone Season Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart X—Michigan

Start Amendment Part

17. Subpart X is amended by adding §§ 52.1186 and 52.1187 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Michigan and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Michigan and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart Y—Minnesota

Start Amendment Part

18. Subpart Y is amended by adding §§ 52.1240 and 52.1241 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Minnesota and for which requirements are set forth under the Federal CAIR NOX Annual Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Minnesota and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart Z—Mississippi

Start Amendment Part

19. Subpart Z is amended by adding §§ 52.1284 and 52.1285 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Mississippi and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must Start Printed Page 25376comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Mississippi and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart AA—Missouri

Start Amendment Part

20. Subpart AA is amended by adding §§ 52.1341 and 52.1342 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Missouri and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Missouri and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart FF—New Jersey

Start Amendment Part

21. Subpart FF is amended by adding §§ 52.1584 and 52.1585 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of New Jersey and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Program in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of New Jersey and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart HH—New York

Start Amendment Part

22. Subpart HH is amended by adding §§ 52.1684 and 52.1685 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of New York and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of New York and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart II—North Carolina

Start Amendment Part

23. Subpart II is amended by adding §§ 52.1784 and 52.1785 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of North Carolina and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of North Carolina and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart KK—Ohio

Start Amendment Part

24. Subpart KK is amended by adding §§ 52.1891 and 52.1892 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Ohio and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Ohio and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart NN—Pennsylvania

Start Amendment Part

25. Subpart NN is amended by adding §§ 52.2040 and 52.2041 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Pennsylvania and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Pennsylvania and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart PP—South Carolina

Start Amendment Part

26. Subpart PP is amended by adding §§ 52.2140 and 52.2141 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of South Carolina and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must Start Printed Page 25377comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of South Carolina and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart RR—Tennessee

Start Amendment Part

27. Subpart RR is amended by adding §§ 52.2240 and 52.2241 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Tennessee and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Tennessee and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart SS—Texas

Start Amendment Part

28. Subpart SS is amended by adding §§ 52.2283 and 52.2284 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Texas and for which requirements are set forth under the Federal CAIR NOX Annual Trading Program in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Texas and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart VV—Virginia

Start Amendment Part

29. Subpart VV is amended by adding §§ 52.2440 and 52.2441 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Virginia and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Virginia and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart XX—West Virginia

Start Amendment Part

30. Subpart XX is amended by adding §§ 52.2540 and 52.2541 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of West Virginia and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of West Virginia and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Subpart YY—Wisconsin

Start Amendment Part

31. Subpart YY is amended by adding §§ 52.2587 and 52.2588 to read as follows:

End Amendment Part
Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of nitrogen oxides?

The owner or operator of each NOX source located within the State of Wisconsin and for which requirements are set forth under the Federal CAIR NOX Annual and Ozone Season Trading Programs in part 97 of this chapter must comply with such applicable requirements.

Interstate pollutant transport provisions; What are the FIP requirements for decreases in emissions of sulfur dioxide?

The owner or operator of each SO2 source located within the State of Wisconsin and for which requirements are set forth under the Federal CAIR SO2 Trading Program in part 97 of this chapter must comply with such applicable requirements.

Start Part

PART 72—[AMENDED]

End Part Start Amendment Part

1. The authority citation for Part 72 continues to read as follows:

End Amendment Part Start Authority

Authority: 42 U.S.C. 7601 and 7651, et seq.

End Authority Start Amendment Part

2. Section 72.2 is amended, in the definition of “Receive or receipt”, by revising the words “official correspondence log” to read “official log”.

End Amendment Part Start Amendment Part

3. Section 72.7 is amended as follows:

End Amendment Part Start Amendment Part

a. By revising paragraph (f)(2); and

End Amendment Part Start Amendment Part

b. In paragraph (f)(4)(i), by revising the words “become an affected unit under the Acid Rain Program and parts 70 and 71 of this chapter” to read, for purposes of applying parts 70 and 71 of this chapter, shall be treated as an affected unit under the Acid Rain Program”. The revision reads as follows:

End Amendment Part
New units exemption.
* * * * *

(f) * * *

(2) For any period for which a unit is exempt under this section:

(i) For purposes of applying parts 70 and 71 of this chapter, the unit shall not be treated as an affected unit under the Acid Rain Program and shall continue to be subject to any other applicable requirements under parts 70 and 71 of this chapter.

(ii) The unit shall not be eligible to be an opt-in source under part 74 of chapter.

* * * * *
Start Amendment Part

4. Section 72.8 is amended as follows:

End Amendment Part Start Amendment Part

a. By revising paragraph (d)(4); and

End Amendment Part Start Amendment Part

b. In paragraph (d)(6)(i) introductory text, by revising the words “become an affected unit under the Acid Rain Program and parts 70 and 71 of this chapter” to read ,“ for purposes of

End Amendment Part

The revision reads as follows:

Retired units exemption.
* * * * *

(d) * * *

(4) For any period for which a unit is exempt under this section:

(i) For purposes of applying parts 70 and 71 of this chapter, the unit shall not be treated as an affected unit under the Acid Rain Program and shall continue to be subject to any other applicable requirements under parts 70 and 71 of this chapter.

(ii) The unit shall not be eligible to be an opt-in source under part 74 of chapter.

* * * * *
[Amended]
Start Amendment Part

5. Section 72.20 is amended, in paragraph (b), by revising the words “his or her actions” to read “his or her representations, actions”.

End Amendment Part
[Amended]
Start Amendment Part

6. Section 72.22 is amended, in paragraph (b), by revising the words “any action, representation, or failure to act” to read “any representation, action, inaction, or submission” whenever they appear.

End Amendment Part
[Amended]
Start Amendment Part

7. Section 72.23 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraphs (a) and (b), by revising the words “submissions, actions, and inactions” to read “representations, actions, inactions, and submissions”; and

End Amendment Part Start Amendment Part

b. In paragraph (c)(1), by revising the words “a new owner” to read “an owner”, by revising the words “such new owner” to read “such owner”, by revising the words “submissions, actions, and inactions” to read “representations, actions, inactions, and submissions”, and by revising the words “the new owner” to read “the owner.”

End Amendment Part
[Amended]
Start Amendment Part

8. Section 72.24 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a)(1) by revising the words “is submitted.” to read “is submitted, including identification and nameplate capacity of each generator served by each such unit”;

End Amendment Part Start Amendment Part

b. In paragraph (a)(6), by revising the words “actions, inactions, or submissions” to read “representations, actions, inactions, or submissions”; and

End Amendment Part Start Amendment Part

c. In paragraph (a)(9)(ii), by revising the words “or ,if such multiple” to read “, except that, if such multiple”.

End Amendment Part
[Amended]
Start Amendment Part

9. Section 72.25 is amended, in paragraph (b), by revising the words “submission, action or inaction” to read “representation, action, inaction, or submission” and revise the words “submission, action, or inaction” to read “representation, action, inaction, or submission”.

End Amendment Part Start Amendment Part

10. Add a new 72.26 to read as follows:

End Amendment Part
Delegation by designated representative and alternate designated representative.

(a) A designated representative may delegate, to one or more natural persons, his or her authority to make an electronic submission (in a format prescribed by the Administrator) to the Administrator provided for or required under this part and parts 73 through 77 of this chapter.

(b) An alternate designated representative may delegate, to one or more natural persons, his or her authority to make an electronic submission (in a format prescribed by the Administrator) to the Administrator provided for or required under this part and parts 73 through 77 of this chapter.

(c) In order to delegate authority to make an electronic submission to the Administrator in accordance with paragraph (a) or (b) of this section, the designated representative or alternate designated representative, as appropriate, must submit to the Administrator a notice of delegation, in a format prescribed by the Administrator, that includes the following elements:

(1) The name, address, e-mail address, telephone number, and facsimile transmission number (if any) of such designated representative or alternate designated representative;

(2) The name, address, e-mail address, telephone number, and facsimile transmission number (if any) of each such natural person (referred to as an “agent”);

(3) For each such natural person, a list of the type or types of electronic submissions under paragraph (a) or (b) of this section for which authority is delegated to him or her; and

(4) The following certification statements by such designated representative or alternate designated representative, as appropriate:

(i) “I agree that any electronic submission to the Administrator that is by an agent identified in this notice of delegation and of a type listed for such agent in this notice of delegation and that is made when I am a designated representative or alternate designated representative, as appropriate, and before this notice of delegation is superseded by another notice of delegation under 40 CFR 72.26(d) shall be deemed to be an electronic submission by me.”

(ii) “Until this notice of delegation is superseded by another notice of delegation under 40 CFR 72.26(d), I agree to maintain an e-mail account and to notify the Administrator immediately of any change in my e-mail address unless all delegation of authority by me under 40 CFR 72.26 is terminated.”

(d) A notice of delegation submitted under paragraph (c) of this section shall be effective, with regard to the designated representative or alternate designated representative identified in such notice, upon receipt of such notice by the Administrator and until receipt by the Administrator of a superseding notice of delegation submitted by such designated representative or alternate designated representative, as appropriate. The superseding notice of delegation may replace any previously identified agent, add a new agent, or eliminate entirely any delegation of authority.

(e) Any electronic submission covered by the certification in paragraph (c)(4)(i) of this section and made in accordance with a notice of delegation effective under paragraph (d) of this section shall be deemed to be an electronic submission by the designated representative or alternate designated representative submitting such notice of delegation.

Start Part

PART 73—[AMENDED]

End Part Start Amendment Part

1. The authority citation for part 73 continues to read as follows:

End Amendment Part Start Authority

Authority: 42 U.S.C. 7601 and 7651, et seq.

End Authority
[Amended]
Start Amendment Part

2. Section 73.31 is amended, in paragraph (c)(1)(v), by revising the words “actions, inactions, or submissions” to read “representations, actions, inactions, or submissions”.

End Amendment Part Start Amendment Part

3. Section 73.33 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (d)(4), by revising the words “action, representation, or failure to act” to read “representation, action, inaction, or submission” and by revising the word “an action” to read “a representation, action, inaction, or submission”;

End Amendment Part Start Amendment Part

b. In paragraph (e), by revising the word “actions” to read “representations, actions, inactions, or submissions”;

End Amendment Part Start Amendment Part

c. In paragraph (f), by revising the words “any submission to” to read “any representation, action, inaction, or submission to” and revise the words “the recordation of transfers submitted

End Amendment Part Start Amendment Part

d. By adding a new paragraph (g) to read as follows:

End Amendment Part
Authorized account representative.
* * * * *

(g) Delegation by authorized account representative and alternate authorized account representative. (1) An authorized account representative may delegate, to one or more natural persons, his or her authority to make an electronic submission (in a format prescribed by the Administrator) to the Administrator provided for or required under this part.

(2) An alternate authorized account representative may delegate, to one or more natural persons, his or her authority to make an electronic submission (in a format prescribed by the Administrator) to the Administrator provided for or required under this part.

(3) In order to delegate authority to make an electronic submission to the Administrator in accordance with paragraph (g)(1) or (2) of this section, the authorized account representative or alternate authorized account representative, as appropriate, must submit to the Administrator a notice of delegation, in a format prescribed by the Administrator, that includes the following elements:

(i) The name, address, e-mail address, telephone number, and facsimile transmission number (if any) of such authorized account representative or alternate authorized account representative;

(ii) The name, address, e-mail address, telephone number, and, facsimile transmission number (if any) of each such natural person (referred to as an “agent”);

(iii) For each such natural person, a list of the type or types of electronic submissions under paragraph (g)(1) or (2) of this section for which authority is delegated to him or her;

(iv) The following certification statements by such authorized account representative or alternate authorized account representative:

(A) “I agree that any electronic submission to the Administrator that is by an agent identified in this notice of delegation and of a type listed for such agent in this notice of delegation and that is made when I am a authorized account representative or alternate authorized representative, as appropriate, and before this notice of delegation is superseded by another notice of delegation under 40 CFR 73.33(g)(4) shall be deemed to be an electronic submission by me.”

(B) “Until this notice of delegation is superseded by another notice of delegation under 40 CFR 73.33(g)(4), I agree to maintain an e-mail account and to notify the Administrator immediately of any change in my e-mail address unless all delegation of authority by me under 40 CFR 73.33(g) is eliminated.”

(4) A notice of delegation submitted under paragraph (g)(3) of this section shall be effective, with regard to the authorized account representative or alternate authorized account representative identified in such notice, upon receipt of such notice by the Administrator and until receipt by the Administrator of a superseding notice of delegation submitted by such authorized account representative or alternate authorized account representative, as appropriate. The superseding notice of delegation may replace any previously identified agent, add a new agent, or eliminate entirely any delegation of authority.

(5) Any electronic submission covered by the certification in paragraph (g)(3)(iv)(A) of this section and made in accordance with a notice of delegation effective under paragraph (g)(4) of this section shall be deemed to be an electronic submission by the designated representative or alternate designated representative submitting such notice of delegation.

Start Part

PART 74—[AMENDED]

End Part Start Amendment Part

1. The authority citation for Part 74 continues to read as follows:

End Amendment Part Start Authority

Authority: 7601 and 7651 et seq.

End Authority
[Amended]
Start Amendment Part

2. In § 74.4, paragraph (c) is removed.

End Amendment Part Start Part

PART 78—[AMENDED]

End Part Start Amendment Part

1. The authority citation for part 78 continues to read as follows:

End Amendment Part Start Authority

Authority: 42 U.S.C. 7401, 7403, 7410, 7426, 7601, and 7651, et seq.

End Authority Start Amendment Part

2. Section 78.1 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (b)(8)(ii), by revising “§ 97.256” to read “§ 96.256”.

End Amendment Part Start Amendment Part

b. By adding new paragraphs (b)(10), (b)(11), and (b)(12) to read as follows:

End Amendment Part
Purpose and scope.
* * * * *

(b) * * *

(10) Under subparts AA through II of part 97 of this chapter,

(i) The decision on the allocation of CAIR NOX allowances under subpart EE of part 97 of this chapter.

(ii) The decision on the deduction of CAIR NOX allowances, and the adjustment of the information in a submission and the decision on the deduction or transfer of CAIR NOX allowances based on the information as adjusted, under § 97.154 of this chapter;

(iii) The correction of an error in a CAIR NOX Allowance Tracking System account under § 97.156 of this chapter;

(iv) The decision on the transfer of CAIR NOX allowances under § 97.161 of this chapter;

(v) The finalization of control period emissions data, including retroactive adjustment based on audit;

(vi) The approval or disapproval of a petition under § 97.175 of this chapter.

(11) Under subparts AAA through III of part 97 of this chapter,

(i) The decision on the deduction of CAIR SO2 allowances, and the adjustment of the information in a submission and the decision on the deduction or transfer of CAIR SO2 allowances based on the information as adjusted, under § 97.254 of this chapter;

(ii) The correction of an error in a CAIR SO2 Allowance Tracking System account under § 97.256 of this chapter;

(iii) The decision on the transfer of CAIR SO2 allowances under § 97.261 of this chapter;

(iv) The finalization of control period emissions data, including retroactive adjustment based on audit;

(v) The approval or disapproval of a petition under § 97.275 of this chapter.

(12) Under subparts AAAA through IIII of part 97 of this chapter,

(i) The decision on the allocation of CAIR NOX Ozone Season allowances under subpart EEEE of part 97 of this chapter.

(ii) The decision on the deduction of CAIR NOX Ozone Season allowances, and the adjustment of the information in a submission and the decision on the deduction or transfer of CAIR NOX Ozone Season allowances based on the information as adjusted, under § 97.354 of this chapter;

(iii) The correction of an error in a CAIR NOX Ozone Season Allowance Tracking System account under § 97.356 of this chapter;

(iv) The decision on the transfer of CAIR NOX Ozone Season allowances under § 97.361;

(v) The finalization of control period emissions data, including retroactive adjustment based on audit;

(vi) The approval or disapproval of a petition under § 97.375 of this chapter.

* * * * *
Start Amendment Part

3. Section 78.3 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (b)(3)(i), by revising the words “under paragraph (a)(4), (5), or (6) of this section” to read “under paragraph (a)(4), (5), (6), (7), (8), or (9) of this section”;

End Amendment Part Start Amendment Part

b. In paragraph (d)(3), by revising the words “account certificate of

End Amendment Part Start Amendment Part

c. By adding new paragraphs (a)(7), (a)(8), (a)(9), (d)(8), (d)(9), and (d)(10) to read as follows:

End Amendment Part
Petition for administrative review and request for evidentiary hearing.

(a) * * *

(7) The following persons may petition for administrative review of a decision of the Administrator that is made under subparts AA through II of part 97 of this chapter and that is appealable under § 78.1(a):

(i) The CAIR designated representative for a unit or source, or the CAIR authorized account representative for any CAIR NOX Allowance Tracking System account, covered by the decision; or

(ii) Any interested person.

(8) The following persons may petition for administrative review of a decision of the Administrator that is made under subparts AAA through III of part 97 and that is appealable under § 78.1(a):

(i) The CAIR designated representative for a unit or source, or the CAIR authorized account representative for any CAIR SO2 Allowance Tracking System account, covered by the decision; or

(ii) Any interested person.

(9) The following persons may petition for administrative review of a decision of the Administrator that is made under subparts AAAA through III of part 97 and that is appealable under § 78.1(a):

(i) The CAIR designated representative for a unit or source, or the CAIR authorized account representative for any CAIR Ozone Season NOX Allowance Tracking System account, covered by the decision; or

(ii) Any interested person.

* * * * *

(d) * * *

(8) Any provision or requirement of subparts AA through II of part 97 of this chapter, including the standard requirements under § 97.106 of this chapter and any emission monitoring or reporting requirements.

(9) Any provision or requirement of subparts AAA through III of part 97 of this chapter, including the standard requirements under § 97.206 of this chapter and any emission monitoring or reporting requirements.

(10) Any provision or requirement of subparts AAAA through IIII of part 97 of this chapter, including the standard requirements under § 97.306 of this chapter and any emission monitoring or reporting requirements.

Start Part

PART 96—NOX BUDGET TRADING PROGRAM AND CAIR NOX AND SO2 TRADING PROGRAMS FOR STATE IMPLEMENTATION PLANS

End Part Start Amendment Part

1. The heading of part 96 is revised to read as set forth above.

End Amendment Part Start Amendment Part

2. The authority citation for part 96 continues to read as follows:

End Amendment Part Start Authority

Authority: 42 U.S.C. 7401, 7403, 7410, 7601, and 7651, et seq.

End Authority Start Amendment Part

3. Section 96.102 is amended as follows:

End Amendment Part Start Amendment Part

a. By revising the definition of “Allocate or allocation”;

End Amendment Part Start Amendment Part

b. In the definition of “Allowance transfer deadline”, by revising the words “midnight of March 1, if it is a business day, or, if March 1 is not a business day, midnight of the first business day thereafter” to read “midnight of March 1 (if it is a business day), or midnight of the first business day thereafter (if March 1 is not a business day),”;

End Amendment Part Start Amendment Part

c. In the definition of “Alternate CAIR designated representative”, by revising the words “in accordance with” to read “, in accordance with” and by adding at the end the words “If the CAIR NO

End Amendment Part Start Amendment Part

d. In the definition of “CAIR authorized account representative”, by revising the words “subparts BB and II” to read “subparts BB, FF, and II”;

End Amendment Part Start Amendment Part

e. In the definition of “CAIR designated representative”, by adding at the end the words “If the CAIR NO

End Amendment Part Start Amendment Part

f. By revising the definition of “CAIR NO

End Amendment Part Start Amendment Part

g. In the definition of “CAIR NO

End Amendment Part Start Amendment Part

h. In the definition of “CAIR NO

End Amendment Part Start Amendment Part

i. In the definition of “CAIR NO

End Amendment Part Start Amendment Part

j. In the definition of “CAIR NO

End Amendment Part Start Amendment Part

k. In the definition of “CAIR NO

End Amendment Part Start Amendment Part

l. By removing the definition of “CAIR NO

End Amendment Part Start Amendment Part

m. In the definition of “CAIR SO

End Amendment Part Start Amendment Part

n. In the definition of “CAIR SO

End Amendment Part Start Amendment Part

o. By removing the definition of “CAIR SO

End Amendment Part Start Amendment Part

p. In paragraph (2) of the definition of “Cogeneration unit”, by revising the words “calendar year after which” to read “calendar year after the calendar year in which”;

End Amendment Part Start Amendment Part

q. In paragraph (2) of the definition of “Combustion turbine”, by revising the words “any associated heat recovery steam generator”to read “any associated duct burner, heat recovery steam generator,”;

End Amendment Part Start Amendment Part

r. By revising the definition of “Commence commercial operation”;

End Amendment Part Start Amendment Part

s. By revising the definition of “Commence operation”;

End Amendment Part Start Amendment Part

t. In the definition of “Control period”, by revising the words “January 1 of a calendar year and” to read “January 1 of a calendar year, except as provided in § 96.106(c)(2), and”;

End Amendment Part Start Amendment Part

u. By revising the definition of “Maximum design heat input”;

End Amendment Part Start Amendment Part

v. In the definition of “Nameplate capacity”, by revising the words “other deratings) as specified” to read “other deratings) as of such installation as specified” and by revising the words “maximum amount as specified” to read

End Amendment Part Start Amendment Part

w. In the definition of “Oil-fired”, by revising the words “in a specified year.” to read “in a specified year and not qualifying as coal-fired.”;

End Amendment Part Start Amendment Part

x. In the definition of “Receive or receipt”, by revising the words “official correspondence log” to read “official log”; and

End Amendment Part Start Amendment Part

y. By adding new definitions of “Hg Budget Trading Program”, “Replacement, replace, or replaced”, and “Solid waste incineration unit” to read as follows:

End Amendment Part
Definitions.
* * * * *

Allocate or allocation means, with regard to CAIR NOX allowances, the determination by a permitting authority or the Administrator of the amount of such CAIR NOX allowances to be initially credited to a CAIR NOX unit, a new unit set-aside, or other entity.

* * * * *

CAIR NOXallowance means a limited authorization issued by a permitting authority or the Administrator under provisions of a State implementation plan that are approved under § 51.123(o)(1) or (2) or (p) of this chapter, or under subpart EE of part 97 or § 97.188 of this chapter, to emit one ton of nitrogen oxides during a control period of the specified calendar year for which the authorization is allocated or of any calendar year thereafter under the CAIR NOX Program. An authorization to emit nitrogen oxides that is not issued under provisions of a State implementation plan that are approved under § 51.123(o)(1) or (2) or (p) of this chapter or subpart EE of part 97 or § 97.188 of this chapter shall not be a CAIR NOX allowance.

* * * * *

Commence commercial operation means, with regard to a unit:

(1) To have begun to produce steam, gas, or other heated medium used to generate electricity for sale or use, including test generation, except as provided in § 96.105 and § 96.184(h).

(i) For a unit that is a CAIR NOX unit under § 96.104 on the later of November 15, 1990 or the date the unit commences commercial operation as defined in paragraph (1) of this definition and that subsequently undergoes a physical change (other than replacement of the unit by a unit at the same source), such date shall remain the date of commencement of commercial operation of the unit, which shall continue to be treated as the same unit.

(ii) For a unit that is a CAIR NOX unit under § 96.104 on the later of November 15, 1990 or the date the unit commences commercial operation as defined in paragraph (1) of this definition and that is subsequently replaced by a unit at the same source (e.g., repowered), such date shall remain the replaced unit's date of commencement of commercial operation, and the replacement unit shall be treated as a separate unit with a separate date for commencement of commercial operation as defined in paragraph (1) or (2) of this definition as appropriate.

(2) Notwithstanding paragraph (1) of this definition and except as provided in § 96.105, for a unit that is not a CAIR NOX unit under § 96.104 on the later of November 15, 1990 or the date the unit commences commercial operation as defined in paragraph (1) of this definition, the unit's date for commencement of commercial operation shall be the date on which the unit becomes a CAIR NOX unit under § 96.104.

(i) For a unit with a date for commencement of commercial operation as defined in paragraph (2) of this definition and that subsequently undergoes a physical change (other than replacement of the unit by a unit at the same source), such date shall remain the date of commencement of commercial operation of the unit, which shall continue to be treated as the same unit.

(ii) For a unit with a date for commencement of commercial operation as defined in paragraph (2) of this definition and that is subsequently replaced by a unit at the same source (e.g., repowered), such date shall remain the replaced unit's date of commencement of commercial operation, and the replacement unit shall be treated as a separate unit with a separate date for commencement of commercial operation as defined in paragraph (1) or (2) of this definition as appropriate.

Commence operation means:

(1) To have begun any mechanical, chemical, or electronic process, including, with regard to a unit, start-up of a unit's combustion chamber, except as provided in § 96.184(h).

(2) For a unit that undergoes a physical change (other than replacement of the unit by a unit at the same source) after the date the unit commences operation as defined in paragraph (1) of this definition, such date shall remain the date of commencement of operation of the unit, which shall continue to be treated as the same unit.

(3) For a unit that is replaced by a unit at the same source (e.g., repowered) after the date the unit commences operation as defined in paragraph (1) of this definition, such date shall remain the replaced unit's date of commencement of operation, and the replacement unit shall be treated as a separate unit with a separate date for commencement of operation as defined in paragraph (1), (2), or (3) of this definition as appropriate, except as provided in § 96.184(h).

* * * * *

Hg Budget Trading Program means a multi-state Hg air pollution control and emission reduction program approved and administered by the Administrator in accordance subpart HHHH of part 60 of this chapter and § 60.24(h)(6), or established by the Administrator under section 111 of the Clean Air Act, as a means of reducing national Hg emissions.

* * * * *

Maximum design heat input means the maximum amount of fuel per hour (in Btu/hr) that a unit is capable of combusting on a steady state basis as of the initial installation of the unit as specified by the manufacturer of the unit.

* * * * *

Replacement, replace, or replaced means, with regard to a unit, the demolishing of a unit, or the permanent shutdown and permanent disabling of a unit, and the construction of another unit (the replacement unit) to be used instead of the demolished or shutdown unit (the replaced unit).

* * * * *

Solid waste incineration unit means a stationary, fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion turbine that is a “solid waste incineration unit” as defined in section 129(g)(1) of the Clean Air Act.

* * * * *
Start Amendment Part

4. Section 96.103 is revised to read as follows:

End Amendment Part
Measurements, abbreviations, and acroynyms.

Measurements, abbreviations, and acronyms used in this subpart and subparts BB through II are defined as follows:

Btu—British thermal unit.

CO2—carbon dioxide

H2 O—water

Hg—mercury

hr—hour

kW—kilowatt electrical

kWh—kilowatt hour

lb—pound

mmBtu—million Btu

MWe—megawatt electrical

MWh—megawatt hour

NOX—nitrogen oxides

O2—oxygen

ppm—parts per million

scfh—standard cubic feet per hour

SO2—sulfur dioxide

yr—year

Start Printed Page 25382 Start Amendment Part

5. Section 96.104 is revised to read as follows:

End Amendment Part
Applicability.

(a) Except as provided in paragraph (b) of this section:

(1) The following units in a State shall be CAIR NOX units, and any source that includes one or more such units shall be a CAIR NOX source, subject to the requirements of this subpart and subparts BB through HH of this part: any stationary, fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion turbine serving at any time, since the later of November 15, 1990 or the start-up of the unit's combustion chamber, a generator with nameplate capacity of more than 25 MWe producing electricity for sale.

(2) If a stationary boiler or stationary combustion turbine that, under paragraph (a)(1) of this section, is not a CAIR NOX unit begins to combust fossil fuel or to serve a generator with nameplate capacity of more than 25 MWe producing electricity for sale, the unit shall become a CAIR NOX unit as provided in paragraph (a)(1) of this section on the first date on which it both combusts fossil fuel and serves such generator.

(b) The units in a State that meet the requirements set forth in paragraph (b)(1)(i), (b)(2)(i), or (b)(2)(ii) of this section shall not be CAIR NOX units:

(1)(i) Any unit that is a CAIR NOX unit under paragraph (a)(1) or (2) of this section:

(A) Qualifying as a cogeneration unit during the 12-month period starting on the date the unit first produces electricity and continuing to qualify as a cogeneration unit; and

(B) Not serving at any time, since the later of November 15, 1990 or the start-up of the unit's combustion chamber, a generator with nameplate capacity of more than 25 MWe supplying in any calendar year more than one-third of the unit's potential electric output capacity or 219,000 MWh, whichever is greater, to any utility power distribution system for sale.

(ii) If a unit qualifies as a cogeneration unit during the 12-month period starting on the date the unit first produces electricity and meets the requirements of paragraphs (b)(1)(i) of this section for at least one calendar year, but subsequently no longer meets all such requirements, the unit shall become a CAIR NOX unit starting on the earlier of January 1 after the first calendar year during which the unit first no longer qualifies as a cogeneration unit or January 1 after the first calendar year during which the unit no longer meets the requirements of paragraph (b)(1)(i)(B) of this section.

(2)(i) Any unit that is a CAIR NOX unit under paragraph (a)(1) or (2) of this section commencing operation before January 1, 1985:

(A) Qualifying as a solid waste incineration unit; and

(B) With an average annual fuel consumption of non-fossil fuel for 1985-1987 exceeding 80 percent (on a Btu basis) and an average annual fuel consumption of non-fossil fuel for any 3 consecutive calendar years after 1990 exceeding 80 percent (on a Btu basis).

(ii) Any unit that is a CAIR NOX unit under paragraph (a)(1) or (2) of this section commencing operation on or after January 1, 1985:

(A) Qualifying as a solid waste incineration unit; and

(B) With an average annual fuel consumption of non-fossil fuel for the first 3 calendar years of operation exceeding 80 percent (on a Btu basis) and an average annual fuel consumption of non-fossil fuel for any 3 consecutive calendar years after 1990 exceeding 80 percent (on a Btu basis).

(iii) If a unit qualifies as a solid waste incineration unit and meets the requirements of paragraph (b)(2)(i) or (ii) of this section for at least 3 consecutive calendar years, but subsequently no longer meets all such requirements, the unit shall become a CAIR NOX unit starting on the earlier of January 1 after the first calendar year during which the unit first no longer qualifies as a solid waste incineration unit or January 1 after the first 3 consecutive calendar years after 1990 for which the unit has an average annual fuel consumption of fossil fuel of 20 percent or more.

[Amended]
Start Amendment Part

6. Section 96.105 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a)(1), by revising the words “§ 96.106(c)(4) through (8), § 96.107, and subparts EE through GG of this part” to read “§ 96.106(c)(4) through (7), § 96.107, § 96.108, and (subparts BB and EE through GG”;

End Amendment Part Start Amendment Part

b. In paragraph (b)(3), by revising the words “shall retain at the source” to read “shall retain, at the source”; and

End Amendment Part Start Amendment Part

c. In paragraph (b)(7), by revising the words “commences operation and commercial operation” to read “commences commercial operation”.

End Amendment Part
[Amended]
Start Amendment Part

7. Section 96.106 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a)(1)(i), by revising the words “in § 96.121(a) and (b)” to read “in § 96.121”;

End Amendment Part Start Amendment Part

b. In paragraph (c)(2), by revising the words “under paragraph (c)(1) of this section” to read “under paragraph (c)(1) of this section for the control period” and by revising the words “under § 96.170(b)(1), (2), or (5)” to read “under § 96.170(b)(1), (2), or (5) and for each control period thereafter”;

End Amendment Part Start Amendment Part

c. In paragraph (c)(4), by revising the words “subpart EE” to read “subparts FF, GG, and II”;

End Amendment Part Start Amendment Part

d. In paragraph (c)(7), by revising the words “under subpart FF, GG, or II” to read “under subpart EE, FF, GG, or II”, by revising the words “from a CAIR NO

End Amendment Part Start Amendment Part

e. In paragraph (d)(1), by removing the paragraph designation “(1)” and by redesignating paragraph (i) as paragraph (d)(1); and

End Amendment Part Start Amendment Part

f. By removing paragraph (d)(2) and by redesignating paragraph (ii) as paragraph (d)(2).

End Amendment Part
[Amended]
Start Amendment Part

8. Section 96.111 is amended, in paragraph (c), by revising the words “§ 96.151 and 96.182” to read “96.115, 96.151, and 96.182”.

End Amendment Part
[Amended]
Start Amendment Part

9. Section 96.112 is amended, in paragraph (c)(1), by revising the words “a new owner” to read “an owner”, by revising the words “such new owner” to read “such owner”, and by revising the words “the new owner” to read “the owner”.

End Amendment Part
[Amended]
Start Amendment Part

10. Section 96.113 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a)(1), by revising the words “is submitted” to read “is submitted, including identification and nameplate capacity of each generator served by each such unit”; and

End Amendment Part Start Amendment Part

b. In paragraph (a)(4)(iv), by revising the words “where a customer” to read “where a utility or industrial customer”.

End Amendment Part Start Amendment Part

11. Add a new § 96.115 to read as follows:

End Amendment Part
Delegation by CAIR designated representative and alternate CAIR designated representative.

(a) A CAIR designated representative may delegate, to one or more natural persons, his or her authority to make an electronic submission to the Administrator provided for or required under this part.

(b) An alternate CAIR designated representative may delegate, to one or more natural persons, his or her authority to make an electronic Start Printed Page 25383submission to the Administrator provided for or required under this part.

(c) In order to delegate authority to make an electronic submission to the Administrator in accordance with paragraph (a) or (b) of this section, the CAIR designated representative or alternate CAIR designated representative, as appropriate, must submit to the Administrator a notice of delegation, in a format prescribed by the Administrator that includes the following elements:

(1) The name, address, e-mail address, telephone number, and facsimile transmission number (if any) of such CAIR designated representative or alternate CAIR designated representative;

(2) The name, address, e-mail address, telephone number, and facsimile transmission number (if any) of each such natural person (referred to as an “agent”);

(3) For each such natural person, a list of the type or types of electronic submissions under paragraph (a) or (b) of this section for which authority is delegated to him or her; and

(4) The following certification statements by such CAIR designated representative or alternate CAIR designated representative:

(i) “I agree that any electronic submission to the Administrator that is by an agent identified in this notice of delegation and of a type listed for such agent in this notice of delegation and that is made when I am a CAIR designated representative or alternate CAIR designated representative, as appropriate, and before this notice of delegation is superseded by another notice of delegation under 40 CFR 96.115(d) shall be deemed to be an electronic submission by me.”

(ii) “Until this notice of delegation is superseded by another notice of delegation under 40 CFR 96.115(d), I agree to maintain an e-mail account and to notify the Administrator immediately of any change in my e-mail address unless all delegation of authority by me under 40 CFR 96.115 is terminated.”

(d) A notice of delegation submitted under paragraph (c) of this section shall be effective, with regard to the CAIR designated representative or alternate CAIR designated representative identified in such notice, upon receipt of such notice by the Administrator and until receipt by the Administrator of a superseding notice of delegation submitted by such CAIR designated representative or alternate CAIR designated representative, as appropriate. The superseding notice of delegation may replace any previously identified agent, add a new agent, or eliminate entirely any delegation of authority.

(e) Any electronic submission covered by the certification in paragraph (c)(4)(i) of this section and made in accordance with a notice of delegation effective under paragraph (d) of this section shall be deemed to be an electronic submission by the CAIR designated representative or alternate CAIR designated representative submitting such notice of delegation.

[Amended]
Start Amendment Part

12. Section 96.120 is amended, in paragraph (a), by revising the words “otherwise by this subpart and” to read “otherwise by § 96.105, this subpart, and”.

End Amendment Part
[Amended]
Start Amendment Part

13. Section 96.121 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a), by revising the words “commences operation” to read “commences commercial operation, except as provided in § 96.183(a)”; and

End Amendment Part Start Amendment Part

b. In paragraph (b), by revising the words “permit renewal” to read “permit renewal, except as provided in § 96.183(b)”.

End Amendment Part
[Amended]
Start Amendment Part

14. Section 96.123 is amended, in paragraph (b), by revising the words “subpart FF, GG, or II” to read “subpart EE, FF, GG, or II”.

End Amendment Part
[Amended]
Start Amendment Part

15. Section 96.141 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (b)(1), removing the paragraph designation “(1)”;

End Amendment Part Start Amendment Part

b. By removing paragraph (b)(2);

End Amendment Part Start Amendment Part

c. In paragraph (c)(1), removing the paragraph designation “(1)”; and

End Amendment Part Start Amendment Part

d. By removing paragraph (c)(2).

End Amendment Part Start Amendment Part

16. Section 96.142 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a)(2)(ii)(C), by revising the words “3,414 Btu/kWh” to read “3,413 Btu/kWh”;

End Amendment Part Start Amendment Part

b. By revising paragraph (c) introductory text;

End Amendment Part Start Amendment Part

c. In paragraph (c)(1), by revising the words “2009 through 2013” to read “2009 through 2014” and by revising the words “in 2014” to read “in 2015”;

End Amendment Part Start Amendment Part

d. In paragraph (c)(2), by revising the words “The CAIR NO

End Amendment Part Start Amendment Part

e. In paragraph (c)(4)(ii), by revising the words “On or after July 1” to read “On or after May 1”; and revising to read as follows:

End Amendment Part
CAIR NOX allowance allocations.
* * * * *

(c) For each control period in 2009 and thereafter, the permitting authority will allocate CAIR NOX allowances to CAIR NOX units in a State that are not allocated CAIR NOX allowances under paragraph (b) of this section because the units do not yet have a baseline heat input under paragraph (a) of this section or because the units have a baseline heat input but all CAIR NOX allowances available under paragraph (b) of this section for the control period are already allocated, in accordance with the following procedures:

* * * * *
[Amended]
Start Amendment Part

17. Section 96.143 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraphs (b)(2), (c)(1), and (d), by revising the words “July 1” to read “May 1”;

End Amendment Part Start Amendment Part

b. In paragraph (d)(3), by revising the words “ ‘Unit's allocation’ is the number of CAIR NO

End Amendment Part Start Amendment Part

c. In paragraph (d)(4), by revising the words “paragraph (d)(3) or (4)” to read “paragraph (d)(2) or (3)”; and

End Amendment Part Start Amendment Part

d. In paragraph (d)(5), by revising the words “paragraph (d)(5)” to read “paragraph (d)(4)”.

End Amendment Part Start Amendment Part

18. Section 96.151 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (b)(2) introductory text, by revising the word “representative” to read “representative or alternate CAIR authorized account representative”;

End Amendment Part Start Amendment Part

b. In paragraph (b)(3)(iii)(A), by revising the words “a new person” to read “a person”, by revising the words “such new person” to read “such person”, and by revising the words “the new person” to read “the person”;

End Amendment Part Start Amendment Part

c. In paragraph (b)(3)(iii)(B), by revising the words “addition of persons” to read “addition of a new person”;

End Amendment Part Start Amendment Part

d. In paragraph (b)(4) introductory text, by revising the word “representative” to read “representative or alternate CAIR authorized account representative”;

End Amendment Part Start Amendment Part

e. In paragraphs (b)(4)(ii) and (iii), by revising the words “alternative CAIR” to read “alternate CAIR” whenever they appear; and

End Amendment Part Start Amendment Part

f. By adding a new paragraph (b)(5) to read as follows:

End Amendment Part
Start Printed Page 25384
Establishment of accounts.
* * * * *

(b) * * *

(5) Delegation by CAIR authorized account representative and alternate CAIR authorized account representative. (i) A CAIR authorized account representative may delegate, to one or more natural persons, his or her authority to make an electronic submission to the Administrator provided for or required under subparts FF and GG of this part.

(ii) An alternate CAIR authorized account representative may delegate, to one or more natural persons, his or her authority to make an electronic submission to the Administrator provided for or required under subparts FF and GG of this part.

(iii) In order to delegate authority to make an electronic submission to the Administrator in accordance with paragraph (b)(5)(i) or (ii) of this section, the CAIR authorized account representative or alternate CAIR authorized account representative, as appropriate, must submit to the Administrator a notice of delegation, in a format prescribed by the Administrator, that includes the following elements:

(A) The name, address, e-mail address, telephone number, and facsimile transmission number (if any) of such CAIR authorized account representative or alternate CAIR authorized account representative;

(B) The name, address, e-mail address, telephone number, and, facsimile transmission number (if any) of each such natural person (referred to as an “agent”);

(C) For each such natural person, a list of the type or types of electronic submissions under paragraph (b)(5)(i) or (ii) of this section for which authority is delegated to him or her;

(D) The following certification statement by such CAIR authorized account representative or alternate CAIR authorized account representative: “I agree that any electronic submission to the Administrator that is by an agent identified in this notice of delegation and of a type listed for such agent in this notice of delegation and that is made when I am a CAIR authorized account representative or alternate CAIR authorized representative, as appropriate, and before this notice of delegation is superseded by another notice of delegation under 40 CFR 96.151(b)(5)(iv) shall be deemed to be an electronic submission by me.”; and

(E) The following certification statement by such CAIR authorized account representative or alternate CAIR authorized account representative: “Until this notice of delegation is superseded by another notice of delegation under 40 CFR 96.151 (b)(5)(iv), I agree to maintain an e-mail account and to notify the Administrator immediately of any change in my e-mail address unless all delegation of authority by me under 40 CFR 96.151 (b)(5) is terminated.”

(iv) A notice of delegation submitted under paragraph (b)(5)(iii) of this section shall be effective, with regard to the CAIR authorized account representative or alternate CAIR authorized account representative identified in such notice, upon receipt of such notice by the Administrator and until receipt by the Administrator of a superseding notice of delegation submitted by such CAIR authorized account representative or alternate CAIR authorized account representative, as appropriate. The superseding notice of delegation may replace any previously identified agent, add a new agent, or eliminate entirely any delegation of authority.

(v) Any electronic submission covered by the certification in paragraph (b)(5)(iii)(D) of this section and made in accordance with a notice of delegation effective under paragraph (b)(5)(iv) of this section shall be deemed to be an electronic submission by the CAIR designated representative or alternate CAIR designated representative submitting such notice of delegation.

* * * * *
Start Amendment Part

19. Section 96.153 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a), by revising the words “By December 1, 2006,” to read “By September 30, 2007,” and revising the words “at a source” to read “at the source”;

End Amendment Part Start Amendment Part

b. In paragraphs (b) and (d), by removing the words “or as determined by the Administrator”; and

End Amendment Part Start Amendment Part

c. By revising paragraph (c) to read as follows:

End Amendment Part
Recordation of CAIR NOX allowance allocations.
* * * * *

(c) By December 1, 2009 and December 1 of each year thereafter, the Administrator will record in the CAIR NOX source's compliance account the CAIR NOX allowances allocated for the CAIR NOX units at the source, as submitted by the permitting authority in accordance with § 96.141(b), for the control period in the sixth year after the year of the applicable deadline for recordation under this paragraph.

* * * * *
[Amended]
Start Amendment Part

20. Section 96.154 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a)(1), by revising the words “prior year;” to read “prior year; and”;

End Amendment Part Start Amendment Part

b. In paragraph (a)(2), revising the words “§ 96.160 by the allowance transfer deadline for the control period; and” to read “§§ 96.160 and 96.161 by the allowance transfer deadline for the control period.”;

End Amendment Part Start Amendment Part

c. By removing paragraph (a)(3);

End Amendment Part Start Amendment Part

d. In paragraph (c)(2)(ii), by revising the words “to any unit” to read “to any entity”;

End Amendment Part Start Amendment Part

e. In paragraph (e), by revising the words “under paragraph (b) or (d) of this section” to read “under paragraphs (b) and (d) of this section and subpart II”;

End Amendment Part Start Amendment Part

f. In paragraph (f)(2), by revising the words “of this section.” to read “of this section, and record such deductions and transfers.”

End Amendment Part
[Amended]
Start Amendment Part

21. Section 96.155 is amended, in paragraph (b), by revising the words “§ 96.156, or subpart GG” to read “§ 96.156, or subpart GG or II”.

End Amendment Part
[Amended]
Start Amendment Part

22. Section 96.157 is amended, in paragraphs (a) and (b), by revising the words “§ 96.160” to read “§§ 96.160 and 96.161”.

End Amendment Part Start Amendment Part

23. Section 96.170 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (b) introductory text, by revising the words “The owner” to read “Except as provided in paragraph (e) of this section, the owner”;

End Amendment Part Start Amendment Part

b. In paragraph (b)(5), by revising the words “paragraphs (b)(1), (2), and (4) of this section and solely for purposes of § 96.106(c)(2), for the owner” to read “paragraphs (b)(1) and (2) of this section, for the owner”;

End Amendment Part Start Amendment Part

c. In paragraph (c)(1), by removing the paragraph designation “(1)” and by revising the words “Except as provided in paragraph (c)(2) of this section, the owner” to read “The owner”;

End Amendment Part Start Amendment Part

d. By removing paragraph (c)(2);

End Amendment Part Start Amendment Part

e. In paragraph (d)(3), by revising the words “the atmosphere” to read “the atmosphere or heat input”; and

End Amendment Part Start Amendment Part

f. By adding a new paragraph (e) to read as follows:

End Amendment Part
General Requirements.
* * * * *

(e) Long-term cold storage. The owner or operator of a CAIR NOX unit is subject to the applicable provisions of part 75 of this chapter concerning units in long-term cold storage.

Start Printed Page 25385
[Amended]
Start Amendment Part

24. Section 96.171 is amended, in paragraph (c), by revising the words “§ 75.12, § 75.17, or subpart H of part 75” to read “§ 75.12 or § 75.17”.

End Amendment Part
[Amended]
Start Amendment Part

25. Section 96.173 is amended by removing the words “, except that if the unit is not subject to an Acid Rain emissions limitation, the notification is only required to be sent to the permitting authority”.

End Amendment Part Start Amendment Part

26. Section 96.174 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (d)(1)(i), by revising the words “2008; or” to read “2008;”;

End Amendment Part Start Amendment Part

b. In paragraph (d)(1)(ii), by revising the words “2008.” to read “2008;”;

End Amendment Part Start Amendment Part

c. By adding new paragraphs (d)(1)(iii) and (iv); and

End Amendment Part Start Amendment Part

d. In paragraph (d)(3), by revising the words “or CAIR SO

End Amendment Part
Recordkeeping and reporting.
* * * * *

(d) * * *

(1) * * *

(iii) Notwithstanding paragraphs (d)(1)(i) and (ii) of this section, for a unit for which a CAIR opt-in permit application is submitted and not withdrawn and a CAIR opt-in permit is not yet issued or denied under subpart II of this part, the calendar quarter corresponding to the date specified in § 96.184(b); and

(iv) Notwithstanding paragraphs (d)(1)(i) and (ii) of this section, for a CAIR NOX opt-in unit under subpart II of this part, the calendar quarter corresponding to the date on which the CAIR NOX opt-in unit enters the CAIR NOX Annual Trading Program as provided in § 96.184(g).

* * * * *
[Removed]
Start Amendment Part

27. Section 96.176 is removed.

End Amendment Part Start Amendment Part

28. Section 96.183 is amended as follows:

End Amendment Part Start Amendment Part

a. By revising paragraph (a)(5); and

End Amendment Part Start Amendment Part

b. In paragraph (b)(2), by revising the words “CAIR opt-in unit“to read ”CAIR NO

End Amendment Part
Applying for CAIR opt-in permit.

(a)* * *

(5) A statement, in a format specified by the permitting authority, whether the CAIR designated representative requests that the unit be allocated CAIR NOX allowances under § 96.188(b) or § 96.188(c) (subject to the conditions in §§ 96.184(h) and 96.186(g)). If allocation under § 96.188(c) is requested, this statement shall include a statement that the owners and operators of the unit intend to repower the unit before January 1, 2015 and that they will provide, upon request, documentation demonstrating such intent.

* * * * *
[Amended]
Start Amendment Part

29. Section 96.184 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (c)(2), by revising the words “for the control period under paragraph (b)(1)(ii) of this section and for the control periods under paragraph (b)(2) of this section“to read”for the control periods under paragraphs (b)(1)(ii) and (2) of this section”;

End Amendment Part Start Amendment Part

b. In paragraph (d)(2), by revising the words “for the control period under paragraph (b)(1)(ii) of this section and the control periods under paragraph (b)(2) of this section“to read”for the control periods under paragraphs (b)(1)(ii) and (2) of this section”;

End Amendment Part Start Amendment Part

c. In paragraph (d)(3), by revising the words “for such control period” with words”for such control periods”;

End Amendment Part Start Amendment Part

d. In paragraph (f), by revising the words “CAIR NO

End Amendment Part Start Amendment Part

e. In paragraph (h)(2), by revising the words “a CAIR opt-in unit” to read “a CAIR NO

End Amendment Part Start Amendment Part

30. Section 96.185 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a)(5), by revising the words “under § 96.188(c)“to read”§ 96.188(b) or § 96.188(c)”; and

End Amendment Part Start Amendment Part

b. By adding a new paragraph (c) to read as follows:

End Amendment Part
CAIR opt-in permit contents.
* * * * *

(c) The CAIR opt-in permit shall be included, in a format specified by the permitting authority, in the CAIR permit for the source where the CAIR NOX opt-in unit is located and in a title V operating permit or other federally enforceable permit for the source.

[Amended]
Start Amendment Part

31. Section 96.186 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a), by revising the words “CAIR opt-in unit” to read “CAIR NO

End Amendment Part Start Amendment Part

b. In paragraph (b)(2), by revising the words “equal in number to” to read “equal in amount to”.

End Amendment Part Start Amendment Part

32. Section 96.187 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (b)(1), by revising the words “under § 96.123” to read “under § 96.123, and remove the CAIR opt-in permit provisions,”;

End Amendment Part Start Amendment Part

b. In paragraph (b)(2)(i), by revising the words “equal in number to” to read “equal in amount to”;

End Amendment Part Start Amendment Part

c. By revising paragraph (b)(3)(i);

End Amendment Part Start Amendment Part

d. In paragraph (b)(3)(ii), by revising the words “Notwithstanding paragraph (b)(3)(i) of this section, if” to read “If”, by revising the words “January 1” to read “December 31,” and by revising the words “number of CAIR NO

End Amendment Part Start Amendment Part

e. In paragraph (b)(3)(ii)(A), by revising the words “number of CAIR NO

End Amendment Part
Change in regulatory status.
* * * * *

(b) * * *

(3)(i) For every control period after the date on which the CAIR NOX opt-in unit becomes a CAIR NOX unit under § 96.104, the CAIR NOX opt-in unit will be allocated CAIR NOX allowances under § 96.142.

* * * * *
CAIR NOX allowance allocations to CAIR NOX opt-in units.
Start Amendment Part

33. Section 96.188 is amended as follows:

End Amendment Part Start Amendment Part

a. By revising the heading of the section as set forth above;

End Amendment Part Start Amendment Part

b. In paragraph (a)(2), by revising the words “of the control period in which a CAIR opt-in unit” to read “of the control period after the control period in which a CAIR NO

End Amendment Part Start Amendment Part

c. In paragraph (c), by revising the words “issues a CAIR opt-in permit” to read “issues a CAIR opt-in permit (based on a demonstration of the intent to repower stated under § 96.183(a)(5))”; and

End Amendment Part Start Amendment Part

d. In paragraph (d)(2), by revising the words “CAIR opt-in unit” to read “CAIR NO

End Amendment Part Start Amendment Part

34. Section 96.202 is amended as follows:

End Amendment Part Start Amendment Part

a. By revising the definition of “Allocate or allocation”;

End Amendment Part Start Amendment Part

b. In the definition of “Allowance transfer deadline”, by revising the words “midnight of March 1, if it is a business day, or, if March 1 is not a business day, midnight of the first business day thereafter” to read “midnight of March 1 (if it is a business day), or midnight of the first business day thereafter (if March 1 is not a business day),”;

End Amendment Part Start Amendment Part

c. In the definition of “Alternate CAIR designated representative”, by adding at the end the words “If the CAIR SO

End Amendment Part Start Amendment Part

d. In the definition of “CAIR authorized account representative”, by revising the words “subparts BBB and III” to read “subparts BBB, FFF, and III”;

End Amendment Part Start Amendment Part

e. In the definition of “CAIR designated representative”, by adding at the end the words “If the CAIR SO

End Amendment Part Start Amendment Part

f. In the definition of “CAIR NO

End Amendment Part Start Amendment Part

g. In the definition of “CAIR NO

End Amendment Part Start Amendment Part

h. In the definition of “CAIR NO

End Amendment Part Start Amendment Part

i. By removing the definition of “CAIR NO

End Amendment Part Start Amendment Part

j. In the definition of “CAIR NO

End Amendment Part Start Amendment Part

k. By removing the definition of “CAIR NO

End Amendment Part Start Amendment Part

l. In the definition of “CAIR SO

End Amendment Part Start Amendment Part

m. In the definition of “CAIR SO

End Amendment Part Start Amendment Part

n. In the definition of “CAIR SO

End Amendment Part Start Amendment Part

o. In the definition of “CAIR SO

End Amendment Part Start Amendment Part

p. In paragraph (2) of the definition of “Cogeneration unit”, by revising the words “calendar year after which” to read “calendar year after the calendar year in which”;

End Amendment Part Start Amendment Part

q. In the definition of “Combustion turbine”, by revising the words “any associated heat recovery steam generator” to read “any associated duct burner, heat recovery steam generator,”;

End Amendment Part Start Amendment Part

r. By revising the definition of “Commence commercial operation”;

End Amendment Part Start Amendment Part

s. By revising the definition of “Commence operation”;

End Amendment Part Start Amendment Part

t. In the definition of “Control period”, by revising the words “January 1 of a calendar year and” to read “January 1 of a calendar year, except as provided in § 96.206(c)(2), and”;

End Amendment Part Start Amendment Part

u. By revising the definition of “Maximum design heat input”;

End Amendment Part Start Amendment Part

v. In the definition of “Nameplate capacity”, by revising the words “other deratings) as specified” to read “other deratings) as of such installation as specified” and by revising the words “maximum amount as specified” to read “maximum amount as of such completion as specified”;

End Amendment Part Start Amendment Part

w. In the definition of “Receive or receipt”, by revising the words “official correspondence log” to read “official log”;

End Amendment Part Start Amendment Part

x. In the definition of “Useful thermal energy”, by revising in paragraph (2) the word “heat” with the word “heating”; and

End Amendment Part Start Amendment Part

y. By adding new definitions of “Hg Budget Trading Program”, “Replacement, replace, or replaced”, and “Solid waste incineration unit” to read as follows:

End Amendment Part
Definitions.
* * * * *

Allocate or allocation means, with regard to CAIR SO2 allowances issued under the Acid Rain Program, the determination by the Administrator of the amount of such CAIR SO2 allowances to be initially credited to a CAIR SO2 unit or other entity and, with regard to CAIR SO2 allowances issued under provisions of a State implementation plan that are approved under § 51.124(o)(1) or (2) or (r) of this chapter or § 97.288 of this chapter, the determination by a permitting authority of the amount of such CAIR SO2 allowances to be initially credited to a CAIR SO2 unit or other entity.

* * * * *

Commence commercial operation means, with regard to a unit:

(1) To have begun to produce steam, gas, or other heated medium used to generate electricity for sale or use, including test generation, except as provided in § 96.205 and § 96.284(h).

(i) For a unit that is a CAIR SO2 unit under § 96.204 on the later of November 15, 1990 or the date the unit commences commercial operation as defined in paragraph (1) of this definition and that subsequently undergoes a physical change (other than replacement of the unit by a unit at the same source), such date shall remain the date of commencement of commercial operation of the unit, which shall continue to be treated as the same unit.

(ii) For a unit that is a CAIR SO2 unit under § 96.204 on the later of November 15, 1990 or the date the unit commences commercial operation as defined in paragraph (1) of this definition and that is subsequently replaced by a unit at the same source (e.g., repowered), such date shall remain the replaced unit's date of commencement of commercial operation, and the replacement unit shall be treated as a separate unit with a separate date for commencement of commercial operation as defined in paragraph (1) or (2) of this definition as appropriate.

(2) Notwithstanding paragraph (1) of this definition and except as provided in § 96.205, for a unit that is not a CAIR SO2 unit under § 96.204 on the later of November 15, 1990 or the date the unit commences commercial operation as defined in paragraph (1) of this definition, the unit's date for commencement of commercial operation shall be the date on which the unit becomes a CAIR SO2 unit under § 96.204.

(i) For a unit with a date for commencement of commercial operation as defined in paragraph (2) of this definition and that subsequently undergoes a physical change (other than replacement of the unit by a unit at the same source), such date shall remain the date of commencement of commercial operation of the unit, which shall continue to be treated as the same unit. Start Printed Page 25387

(ii) For a unit with a date for commencement of commercial operation as defined in paragraph (2) of this definition and that is subsequently replaced by a unit at the same source (e.g., repowered), such date shall remain the replaced unit's date of commencement of commercial operation, and the replacement unit shall be treated as a separate unit with a separate date for commencement of commercial operation as defined in paragraph (1) or (2) of this definition as appropriate.

Commence operation means:

(1) To have begun any mechanical, chemical, or electronic process, including, with regard to a unit, start-up of a unit's combustion chamber, except as provided in § 96.284(h).

(2) For a unit that undergoes a physical change (other than replacement of the unit by a unit at the same source) after the date the unit commences operation as defined in paragraph (1) of this definition, such date shall remain the date of commencement of operation of the unit, which shall continue to be treated as the same unit.

(3) For a unit that is replaced by a unit at the same source (e.g., repowered) after the date the unit commences operation as defined in paragraph (1) of this definition, such date shall remain the replaced unit's date of commencement of operation, and the replacement unit shall be treated as a separate unit with a separate date for commencement of operation as defined in paragraph (1), (2), or (3) of this definition as appropriate, except as provided in (96.284(h).

* * * * *

Hg Budget Trading Program means a multi-state Hg air pollution control and emission reduction program approved and administered by the Administrator in accordance subpart HHHH of part 60 of this chapter and § 60.24(h)(6), or established by the Administrator under section 111 of the Clean Air Act, as a means of reducing national Hg emissions.

* * * * *

Maximum design heat input means the maximum amount of fuel per hour (in Btu/hr) that a unit is capable of combusting on a steady state basis as of the initial installation of the unit as specified by the manufacturer of the unit.

* * * * *

Replacement, replace, or replaced means, with regard to a unit, the demolishing of a unit, or the permanent shutdown and permanent disabling of a unit, and the construction of another unit (the replacement unit) to be used instead of the demolished or shutdown unit (the replaced unit).

* * * * *

Solid waste incineration unit means a stationary, fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion turbine that is a “solid waste incineration unit” as defined in section 129(g)(1) of the Clean Air Act.

* * * * *
Start Amendment Part

35. Section 96.203 is revised to read as follows:

End Amendment Part
Measurements, abbreviations, and acronyms.

Measurements, abbreviations, and acronyms used in this subpart and subparts BBB through III are defined as follows:

Btu—British thermal unit

CO2—carbon dioxide

H2 O—water

Hg—mercury

hr—hour

kW—kilowatt electrical

kWh—kilowatt hour

lb—pound

mmBtu—million Btu

MWe—megawatt electrical

MWh—megawatt hour

NOX—nitrogen oxides

O2—oxygen

ppm—parts per million

scfh—standard cubic feet per hour

SO2—sulfur dioxide

yr—year

Start Amendment Part

36. Section 96.204 is revised to read as follows:

End Amendment Part
Applicability.

(a) Except as provided in paragraph (b) of this section:

(1) The following units in a State shall be CAIR SO2 units, and any source that includes one or more such units shall be a CAIR SO2 source, subject to the requirements of this subpart and subparts BBB through HHH of this part: any stationary, fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion turbine serving at any time, since the later of November 15, 1990 or the start-up of the unit's combustion chamber, a generator with nameplate capacity of more than 25 MWe producing electricity for sale.

(2) If a stationary boiler or stationary combustion turbine that, under paragraph (a)(1) of this section, is not a CAIR SO2 unit begins to combust fossil fuel or to serve a generator with nameplate capacity of more than 25 MWe producing electricity for sale, the unit shall become a CAIR SO2 unit as provided in paragraph (a)(1) of this section on the first date on which it both combusts fossil fuel and serves such generator.

(b) The units in a State that meet the requirements set forth in paragraph (b)(1)(i), (b)(2)(i), or (b)(2)(ii) of this section shall not be CAIR SO2 units:

(1)(i) Any unit that is a CAIR SO2 unit under paragraph (a)(1) or (2) of this section:

(A) Qualifying as a cogeneration unit during the 12-month period starting on the date the unit first produces electricity and continuing to qualify as a cogeneration unit; and

(B) Not serving at any time, since the later of November 15, 1990 or the start-up of the unit's combustion chamber, a generator with nameplate capacity of more than 25 MWe supplying in any calendar year more than one-third of the unit's potential electric output capacity or 219,000 MWh, whichever is greater, to any utility power distribution system for sale.

(ii) If a unit qualifies as a cogeneration unit during the 12-month period starting on the date the unit first produces electricity and meets the requirements of paragraphs (b)(1)(i) of this section for at least one calendar year, but subsequently no longer meets all such requirements, the unit shall become a CAIR SO2 unit starting on the earlier of January 1 after the first calendar year during which the unit first no longer qualifies as a cogeneration unit or January 1 after the first calendar year during which the unit no longer meets the requirements of paragraph (b)(1)(i)(B) of this section.

(2)(i) Any unit that is a CAIR SO2 unit under paragraph (a)(1) or (2) of this section commencing operation before January 1, 1985:

(A) Qualifying as a solid waste incineration unit; and

(B) With an average annual fuel consumption of non-fossil fuel for 1985-1987 exceeding 80 percent (on a Btu basis) and an average annual fuel consumption of non-fossil fuel for any 3 consecutive calendar years after 1990 exceeding 80 percent (on a Btu basis).

(ii) Any unit that is a CAIR SO2 unit under paragraph (a)(1) or (2) of this section commencing operation on or after January 1, 1985:

(A) Qualifying as a solid waste incineration unit; and

(B) With an average annual fuel consumption of non-fossil fuel for the first 3 calendar years of operation exceeding 80 percent (on a Btu basis) and an average annual fuel consumption of non-fossil fuel for any 3 consecutive calendar years after 1990 exceeding 80 percent (on a Btu basis).

(iii) If a unit qualifies as a solid waste incineration unit and meets the requirements of paragraph (b)(2)(i) or (ii) of this section for at least 3 consecutive Start Printed Page 25388calendar years, but subsequently no longer meets all such requirements, the unit shall become a CAIR SO2 unit starting on the earlier of January 1 after the first calendar year during which the unit first no longer qualifies as a solid waste incineration unit or January 1 after the first 3 consecutive calendar years after 1990 for which the unit has an average annual fuel consumption of fossil fuel of 20 percent or more.

[Amended]
Start Amendment Part

37. Section 96.205 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a)(1), by revising the words “§ 96.206(c)(4) through (8), § 96.207, and subparts FFF and GGG” to read “§ 96.206(c)(4) through (7), § 96.207, § 96.208, and subparts BBB, FFF, and GGG”;

End Amendment Part Start Amendment Part

b. In paragraph (b)(2), by revising the words “shall retain at the source” to read “shall retain, at the source”; and

End Amendment Part Start Amendment Part

c. In paragraph (b)(6), by revising the words “commences operation and commercial operation” to read “commences commercial operation”.

End Amendment Part
[Amended]
Start Amendment Part

38. Section 96.206 is amended as follows:

End Amendment Part Start Amendment Part

a. In paragraph (a)(1)(i), by revising the words “in § 96.221(a) and (b)” to read “in § 96.221”;

End Amendment Part Start Amendment Part

b. In paragraph (c)(2), by revising the words “under paragraph (c)(1) of this section” with “under paragraph (c)(1) of this section for the control period” and by revising the words “under § 96.270(b)(1), (2), or (5)” to read “under § 96.270(b)(1), (2), or (5) and for each control period thereafter”;

End Amendment Part