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2
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
IX.
Interactions
with
Other
Clean
Air
Act
Requirements
A.
How
Does
this
Rule
Interact
with
the
NOx
SIP
Call?

A
majority
of
States
affected
by
the
CAIR
are
also
affected
by
the
NOx
SIP
Call.
This
section
addresses
the
interactions
between
the
two
programs.

The
EPA
proposed
that
States
achieving
all
of
the
annual
NOx
reductions
required
by
the
CAIR
from
only
EGUs
would
not
need
to
continue
to
impose
seasonal
NOx
limitations
on
EGUs
from
which
they
required
reductions
for
purposes
of
complying
with
the
NOx
SIP
Call.
Also,
EPA
also
proposed
that
States
would
have
the
option
of
retaining
such
seasonal
NOx
limitations.
The
EPA
also
proposed
to
keep
the
NOx
SIP
Call
in
place
for
non­
EGUs
currently
subject
to
the
NOx
SIP
Call
and
to
continue
working
with
States
to
run
the
NOx
SIP
Call
Budget
Trading
Program
for
all
sources
that
would
remain
in
the
program.
In
response
to
commenters,
EPA
is
making
several
modifications
to
its
proposed
approach.

States
Affected
by
the
CAIR
for
Ozone
and
PM2.5
Will
Be
Subject
to
a
Seasonal
and
an
Annual
NOx
Limitation
A
number
of
commenters
recommended
leaving
the
current
NOx
SIP
Call
ozone
season
NOx
limitation
in
place
as
a
way
to
ensure
that
ozone
season
NOx
reductions
from
EGUs
required
by
the
NOx
SIP
Call
would
continue
to
be
achieved.

Some
commenters
argued
this
would
also
help
non­
EGUs
3
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
currently
subject
to
the
NOx
SIP
Call
by
allowing
them
to
continue
trading
with
EGUs
in
a
seasonal
NOx
program.
Many
of
the
same
commenters
suggested
a
dual­
season
or
bifurcated
CAIR
trading
program
as
a
mechanism
for
maintaining
an
ozone
season
NOx
limitation
for
EGUs
under
the
CAIR.
In
response
to
these
commenters,
EPA
is
requiring
that
States
subject
to
the
CAIR
for
PM2.5
be
subject
to
an
annual
limitation
and
that
States
subject
to
the
CAIR
for
ozone
be
subject
to
an
ozone
season
limitation.
This
means
that
States
subject
to
the
CAIR
for
both
PM2.5
and
ozone
are
subject
to
both
an
annual
and
an
ozone
season
NOx
limitation.
The
annual
and
ozone
season
NOx
limitations
are
described
in
section
IV.

States
subject
to
the
CAIR
for
ozone
only
are
only
subject
to
an
ozone
season
NOx
limitation.
To
implement
these
NOx
limitations,
EPA
will
establish
and
operate
two
NOx
trading
programs,
i.
e.,
a
CAIR
annual
NOx
trading
program
and
a
CAIR
ozone
season
NOx
trading
program.
The
CAIR
ozone
season
NOx
trading
program
will
replace
the
current
NOx
SIP
Call
as
discussed
in
more
detail
later
in
this
section.

What
Will
Happen
to
Non­
EGUs
Currently
in
the
NOx
SIP
Call?

A
number
of
commenters
were
concerned
that
the
cost
of
compliance
for
non­
EGUs
in
the
NOx
SIP
Call
would
increase
if
they
were
not
allowed
to
continue
to
trade
with
EGUs.
In
4
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
response
to
these
commenters,
EPA
is
modifying
its
proposed
approach.
The
EPA
is
allowing
States
affected
by
the
NOx
SIP
Call
that
wish
to
use
EPA's
model
trading
rule
to
include
non­
EGUs
currently
covered
by
the
NOx
SIP
Call
in
the
CAIR
ozone
season
NOx
trading
program.
This
will
ensure
that
non­
EGUs
in
the
NOx
SIP
Call
will
continue
to
be
able
to
trade
with
EGUs
as
they
currently
do
under
the
NOx
SIP
Call.
This
will
not
require
States
to
get
additional
reductions
from
non­
EGUs.
Budgets
for
these
units
would
remain
the
same
as
they
are
currently
under
the
NOx
SIP
Call.
States
will,
however,
be
required
to
modify
their
existing
NOx
SIP
Call
regulations
to
reflect
the
replacement
of
the
NOx
SIP
Call
with
the
CAIR
ozone
season
NOx
trading
program.
The
EPA
will
continue
to
operate
the
NOx
SIP
Call
trading
program
until
implementation
of
the
CAIR
begins
in
2009.
The
EPA
will
no
longer
operate
the
NOx
SIP
Call
trading
program
after
the
2008
ozone
season
and
the
CAIR
ozone
season
NOx
trading
program
will
replace
the
NOx
SIP
Call
trading
program.
If
States
affected
by
the
NOx
SIP
Call
do
not
wish
to
use
EPA's
CAIR
ozone
season
NOx
trading
program
to
achieve
reductions
from
non­
EGU
boilers
and
turbines
required
by
the
NOx
SIP
Call,
they
would
be
required
to
submit
a
SIP
Revision
deleting
the
requirements
related
to
non­
EGU
participation
in
the
NOx
SIP
Call
Budget
5
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
Trading
Program
and
replacing
them
with
new
requirements
that
achieve
the
same
level
of
reduction.

Compliance
with
the
NOx
SIP
Call
for
States
that
Are
Subject
to
Both
the
CAIR
Ozone
Season
NOx
Reduction
Requirements
and
the
NOx
SIP
Call
If
the
only
changes
a
State
makes
with
respect
to
its
NOx
SIP
Call
regulations
are:
1)
to
bring
non­
EGUs
that
are
currently
participating
in
the
NOx
SIP
Call
Budget
Trading
Program
into
the
CAIR
ozone
season
program
using
the
same
non­
EGU
budget
and
applicability
requirements
that
are
in
their
existing
NOx
SIP
Call
Budget
Trading
Program;
and
2)

to
achieve
all
of
the
emissions
reductions
required
under
the
CAIR
from
EGUs
by
participating
in
the
CAIR
ozone
season
NOx
trading
program,
EPA
will
find
that
the
State
continues
to
meet
the
requirements
of
the
NOx
SIP
Call.

If
the
only
changes
a
State
makes
with
respect
to
its
NOx
SIP
Call
regulations
are
not
those
described
above,
see
section
VII
for
a
discussion
of
how
the
State
would
satisfy
its
NOx
SIP
Call
obligations.

States
in
the
NOx
SIP
Call
but
not
Affected
by
the
CAIR
(
Rhode
Island)

Rhode
Island
is
the
only
State
in
the
NOx
SIP
Call
that
is
not
affected
by
the
CAIR.
To
continue
meeting
its
NOx
SIP
Call
obligations
in
2009
and
beyond,
Rhode
Island
will
6
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
have
two
choices.
It
may
either
modify
its
NOx
SIP
Call
trading
rule
to
conform
to
the
new
CAIR
ozone
season
NOx
trading
rule
if
it
wishes
to
allow
its
sources
to
continue
to
participate
in
an
interstate
NOx
trading
program
run
by
EPA
or,
it
will
need
to
develop
an
alternative
method
for
obtaining
the
required
NOx
SIP
Call
reductions.
In
either
case,
Rhode
Island
must
continue
to
meet
the
budget
requirements
of
the
existing
NOx
SIP
Call.

Use
of
Banked
SIP
Call
Allowances
in
the
CAIR
Program
As
explained
earlier
in
today's
noticefinal
rule,

banked
allowances
from
the
NOx
SIP
Call
may
be
used
in
the
CAIR
ozone
season
NOx
trading
program.

Other
Comments
and
EPA's
Responses
One
commenter
wrote
that
because
attainment
demonstrations
for
early
action
compacts
were
made
based
on
having
EGUs
and
non­
EGUs
together
in
the
NOx
SIP
Call,
EPA
could
not
allow
EGUs
to
leave
the
NOx
SIP
Call
and
still
have
valid
early
action
compacts
(
EACs).
As
discussed
above,
EPA
is
allowing
States
to
keep
EGUs
and
non­
EGUs
in
the
NOx
SIP
Call
together
in
one
ozone
season
program
(
CAIR
ozone
season
trading
program).
The
NOx
reductions
required
by
the
CAIR
ozone
season
trading
program
are
slightly
more
stringent
than
the
reductions
required
by
the
NOx
SIP
Call.

As
a
result,
the
attainment
demonstrations
for
EACs
would
7
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
remain
valid
under
the
CAIR.
Having
said
that,
the
EAC
program
will
have
ended
(
April
2008)
before
the
CAIR
rule
is
implemented.
Thus,
the
compacts
will
no
longer
be
applicable
when
the
CAIR
takes
effect.

Another
commenter
proposed
to
have
non­
EGUs
under
the
NOx
SIP
Call
subject
to
an
annual
NOx
cap
similar
to
EGUs
under
the
CAIR
so
that
non­
EGUs
could
continue
to
trade
with
EGUs.
By
adopting
a
CAIR
ozone
season
trading
program
that
includes
non­
EGUs
covered
by
the
NOx
SIP
Call,
non­
EGUs
will
be
able
to
continue
to
trade
with
EGUs.

B.
How
Does
this
Rule
Interact
with
the
Acid
Rain
Program?

As
EPA
developed
this
regulatory
action,
much
consideration
was
given
to
interactions
between
the
existing
title
IV
Acid
Rain
Program
and
today's
action
designed
to
achieve
significant
reductions
in
SO2
emissions
beyond
title
IV.
Requiring
sources
to
reduce
emissions
beyond
what
title
IV
mandates
has
both
environmental
and
economic
implications
for
the
existing
title
IV
SO2
cap­
and­
tradecap
and
trade
program.
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
8
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
collapse
of
the
price
of
title
IV
allowances,
disruption
of
operation
of
the
title
IV
allowance
market
and
the
title
IV
SO2
cap­
and­
tradecap
and
trade
system,
and
the
potential
for
increased
SO2
emissions.
The
potential
for
increased
emissions
would
exist
in
the
entire
country
for
the
years
before
the
CAIR
implementation
deadline
and
would
continue
after
implementation
for
States
not
covered
by
the
CAIR.

These
negative
impacts,
particularly
those
on
the
operation
of
the
title
IV
cap­
and­
tradecap
and
trade
system,
would
undermine
the
efficacy
of
the
title
IV
program
and
could
erode
confidence
in
cap­
and­
trade
cap
and
trade
programs
in
general.

Title
IV
has
successfully
reduced
emissions
of
SO2
using
the
cap­
and­
tradecap
and
trade
approach,
eliminating
millions
of
tons
of
SO2
from
the
environment
and
encouraging
billions
of
dollars
of
investments
by
companies
in
pollution
controls
to
enable
the
sale
of
allowances
reflecting
excess
emissions
reductions
and
in
allowance
purchases
for
compliance.
In
view
of
these
already
achieved
reductions
and
existing
investments
under
title
IV,
the
likelihood
of
disruption
of
the
allowance
market
and
the
title
IV
cap­

andtradecap
and
trade
system,
and
the
potential
for
SO2
emission
increases,
it
is
necessary
to
consider
ways
to
preserve
the
environmental
benefits
achieved
under
title
IV
9
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
and
maintain
the
integrity
of
the
market
for
title
IV
allowances
and
the
title
IV
cap­
and­
tradecap
and
trade
system.
The
EPA
maintains
that
it
is
appropriate
to
provide
States
the
opportunity
to
achieve
the
SO2
emission
reductions
required
under
today's
action
by
building
on,
and
avoiding
undermining,
this
existing,
successful
program.

The
EPA
has
developed,
in
the
model
SO2
cap­

andtradecap
and
trade
rule,
an
approach
to
build
on
and
coordinate
with
the
title
IV
SO2
program
to
ensure
that
the
required
reductions
under
today's
action
are
achieved
while
preserving
the
efficacy
of
the
title
IV
program.
The
EPA's
approach
provides
States
the
opportunity
to
impose
more
stringent
control
requirements
for
EGUs'
SO2
emissions
than
under
title
IV
through
an
EPA­
administered
cap­
and­
tradecap
and
trade
program
that
requires
the
use
of
title
IV
allowances
for
compliance
at
a
ratio
of
2
allowances
per
ton
of
emissions
for
allowances
allocated
for
2010
through
2014
and
2.86
allowances
per
ton
of
emissions
for
allowances
allocated
for
2015
or
thereafter.
(
The
program
also
allows
the
use
of
banked
title
IV
allowances
allocated
for
years
before
2010
to
be
used
at
a
ratio
of
1
allowance
per
ton
of
emissions.)
Title
IV
allowances
continue
to
be
freely
transferable
among
sources
covered
by
the
Acid
Rain
Program
and
sources
covered
by
the
model
SO2
cap­
and­
tradecap
and
10
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
trade
program
under
CAIR.
However,
each
title
IV
allowance
used
to
comply
with
a
source's
allowance­
holding
requirement
in
the
CAIR
model
SO2
cap­
and­
tradecap
and
trade
program
is
removed
from
the
source's
allowance
tracking
system
account
and
cannot
be
used
again
for
compliance,
either
in
the
CAIR
model
SO2
cap­
and­
tradecap
and
trade
program
or
the
Acid
Rain
Program.

In
addition,
as
discussed
above,
if
a
State
wants
to
achieve
the
SO2
emissions
reductions
required
by
today's
action
through
more
stringent
EGU
emission
limitations
only
but
without
using
the
model
cap­
and­
tradecap
and
trade
program,
then
EPA
is
requiring
that
the
State
include
in
its
SIP
a
mechanism
for
retiring
the
excess
title
IV
allowances
that
will
result
from
imposition
of
these
more
stringent
EGU
requirements.
In
this
case,
the
State
must
retire
an
amount
of
title
IV
allowances
equal
to
the
total
amount
of
title
IV
allowances
allocated
to
the
units
in
the
State
minus
the
amount
of
title
IV
allowances
equivalent
to
the
tonnage
cap
set
by
the
State
on
SO2
emissions
by
EGUs,
and
the
State
can
choose
what
retirement
mechanism
to
use.

Further,
as
discussed
above,
if
a
State
wants
to
meet
the
SO2
emissions
reductions
requirement
in
today's
action
through
reductions
by
both
EGUs
and
non­
EGUs,
then
EPA
is
also
requiring
the
State's
SIP
to
include
a
mechanism
for
11
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
retiring
excess
title
IV
allowances.
In
that
case,
the
amount
of
title
IV
allowances
that
must
be
retired
equals
the
total
amount
of
title
IV
allowances
allocated
to
the
units
in
the
State
minus
the
amount
of
title
IV
allowances
equivalent
to
the
tonnage
cap
set
by
the
State
on
SO2
emissions
by
EGUs,
and
the
State
can
choose
what
retirement
mechanism
to
use.
Further,
as
discussed
above,
if
a
State
wants
to
meet
the
SO2
emissions
reduction
requirement
in
today's
action
through
reductions
by
both
EGUs
and
non­

EGUs,
then
EPA
is
also
requiring
the
State's
SIP
to
include
a
mechanism
for
retiring
excess
title
IV
allowances.
In
that
case,
the
amount
of
title
IV
allowances
that
must
be
retired
equals
the
total
amount
of
title
IV
allowances
allocated
to
the
units
in
the
State
minus
the
amount
of
title
IV
allowances
equivalent
to
the
tonnage
cap
set
by
the
State
on
EGU
SO2
emissions,
and
the
State
can
choose
what
retirement
mechanism
to
use.

Finally,
as
discussed
above,
if
the
State
wants
to
achieve
the
SO2
emissions
reductions
requirement
in
today's
action
through
reductions
by
non­
EGUs
only,
then
EPA
is
not
imposing
any
requirement
to
retire
title
IV
allowances.

1.
Legal
Authority
for
Using
Title
IV
Allowances
in
CAIR
Model
SO2
Cap­
and­
TradeCap
and
Trade
Program.
12
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
The
EPA
maintains
that
it
has
the
authority
to
approve
and
administer,
if
requested
by
a
State
in
the
SIP
submitted
in
response
to
today's
action,
the
new
CAIR
model
SO2
capand
tradecap
and
trade
program
meeting
the
SO2
emission
reduction
requirement
in
today's
action
that
requires
use
of
title
IV
allowances
to
comply
with
the
more
stringent
allowance­
holding
requirement
of
the
new
program
and
retirement
under
the
CAIR
SO2
cap­
and­
tradecap
and
trade
program
and
the
Acid
Rain
Program
of
title
IV
allowances
used
for
such
compliance.
Some
commenters
claim
that
EPA's
establishment
of
such
a
cap­
and­
tradecap
and
trade
program
using
title
IV
allowances
that
sources
must
hold
generally
at
a
ratio
of
greater
than
one
allowance
per
ton
of
SO2
SO2
emissions
is
contrary
to
title
IV.
Most
of
these
commenters
prefer
the
approach
of
allowing
States
to
use
a
new
EPAadministered
cap­
and­
tradecap
and
trade
program
to
meet
lawful
emission
reduction
requirements
under
title
I
and
of
allowing
(
but
not
requiring)
sources
to
use
title
IV
allowances
in
the
new
program.
However,
these
commenters
argue
that
title
IV
prohibits
requiring
sources
to
use
title
IV
allowances
in
such
a
program,
whether
at
the
same
tonnage
authorization
(
i.
e.,
one
allowance
per
ton
of
emissions)

established
in
title
IV
or
at
a
different
tonnage
authorization.
Other
commenters
state
that
title
IV
does
13
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
not
bar
EPA
from
establishing
a
new
cap­
and­
trade
cap
and
trade
program
that
requires
the
use
of
title
IV
allowances.

The
EPA
maintains
that
it
has
the
authority
under
section
110(
a)(
2)(
D)
and
title
IV
to
establish
a
new
capand
tradecap
and
trade
program
requiring
the
use
of
title
IV
allowances
at
a
different
tonnage
authorization
than
under
the
Acid
Rain
Program
and
the
retirement
of
such
allowances
for
purposes
of
both
programs.
First,
as
discussed
in
Ssection
V
above,
EPA
has
the
authority
under
section
110(
a)(
2)(
D)
to
establish
a
new
SO2
cap­
and­
tradecap
and
trade
program,
administered
by
EPA
if
requested
in
a
State's
SIP,
to
prohibit
emissions
that
contribute
significantly
to
nonattainment,
or
interfere
with
maintenance,
of
the
PM
2.5
NAAQS.
Further,
EPA
notes
that
under
section
402(
3),
a
title
IV
allowance
is:

an
authorization,
allocated
to
an
affected
unit
by
the
Administrator
under
this
title
[
IV],
to
emit,
during
or
after
a
specified
calendar
year,
one
ton
of
sulfur
dioxide.
42
U.
S.
C.
7651(
a)(
3).

However,
section
403(
f)
states
that:

An
allowance
allocated
under
this
title
is
a
limited
authorization
to
emit
sulfur
dioxide
in
accordance
with
the
provision
of
this
title
[
IV].
Such
allowance
does
not
constitute
a
property
right.
Nothing
in
this
title
[
IV]
or
in
any
other
provision
of
law
shall
be
construed
to
limit
the
authority
of
the
United
States
to
terminate
or
limit
such
authorization.
Nothing
in
this
section
relating
to
allowances
shall
be
1
The
EPA's
interpretation
is
based
on
the
language
of
section
403(
f)
and
the
legislative
history
of
the
provision.
The
language
in
CAA
section
403(
f)
contrasts
with
language
that
was
in
section
503(
f)
of
the
House
bill
­­
but
was
excluded
from
the
final
version
of
the
Clean
Air
Act
Amendments
of
1990
­­
referring
to
the
authority
of
the
"
United
States"
to
terminate
or
limit
such
authorization
"
by
Act
of
Congress"
and
stating
that
"[
a]
llowances
under
this
title
may
not
be
extinguished
by
the
Administrator."
U.
S.
Senate
Committee
on
Environment
and
Public
Works,
A
Legislative
History
of
The
Clean
Air
Act
Amendments
of
1990
(
Legis.
Hist.
of
CAAA),
S.
Prt.
38,
103d
Cong.,
1st
Sess.,
Vol.
II
at
2224
(
Nov.
1993).
Further,
unlike
CAA
section
403(
f),
the
House
bill
did
not
state
that
an
allowance
did
not
constitute
a
property
right.
Section
403(
f)
of
the
Senate
bill
that
was
considered,
along
with
the
House
bill,
in
conference
committee
had
language
different
than
both
CAA
section
403(
f)
and
the
House
bill
and
stated
that
"
allowances
may
be
limited,
revoked
or
otherwise
modified
in
accordance
with
the
provisions
of
this
title
or
other
authority
of
the
Administrator"
and
that
an
allowance
"
does
not
constitute
a
property
right."
Legis.
Hist.
of
CAAA,
Vol.
III
at
4598.
While
the
scope
of
the
reference
to
the
"
United
States"
in
CAA
section
403(
f)
is
not
clear,
EPA
maintains
that
the
term
is
clearly
broad
enough
to
include
the
Administrator.
Moreover,
even
if
the
term
were
considered
ambiguous
with
regard
to
the
Administrator,
EPA
believes
that
interpreting
the
term
to
include
the
Administrator
is
reasonable.
Specifically,
EPA
maintains
14
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
construed
as
affecting
the
application
of,
or
compliance
with,
any
other
provision
of
this
Act
to
an
affected
unit
or
source,
including
the
provisions
related
to
applicable
National
Ambient
Air
Quality
Standards
and
State
implementation
plans.
42
U.
S.
C.
7651b(
f).

EPA
interprets
the
reference
in
section
403(
f)
to
the
authority
of
the
"
United
States"
to
terminate
or
limit
the
authorization
otherwise
provided
by
a
title
IV
allowance
to
mean
that
EPA
(
acting
in
accordance
with
its
authority
under
other
provisions
of
the
CAA),
as
well
as
Congress,
has
such
authority.
1
Therefore,
EPA
maintains
that
it
has
the
that,
by
eliminating
the
explicit
House
bill
language
that
required
Congressional
action
and
including
the
general
reference
to
the
"
United
States"
and
the
"
not
a
property
right"
language,
CAA
section
403(
f)
essentially
adopted
the
Senate's
approach
and
allows
the
United
States
­­
either
through
Congressional
or
administrative
(
i.
e.,
EPA)
action
­
­
to
terminate
or
limit
the
allowance
authorization.
See
Legis.
Hist.
of
CAAA,
Vol.
I
at
754,
1034,
and
1084
(
Oct.
27,
2000
floor
statements
of
Sen.
Symms,
Sen.
Baucus,
and
Sen.
McClure
indicating
EPA
has
authority
to
take
such
action);
but
see
Cong.
Rec.
at
E
3672
(
Nov.
1,
2000)(
extension
of
remarks
of
Cong.
Oxley
indicating
that
only
Congress
has
such
authority).

15
Section
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
authority
to
establish
a
new
cap­
and­
tradecap
and
trade
program
in
accordance
with
section
110(
a)(
2)(
D)
that
requires:
the
holding
of
title
IV
allowances
under
a
more
limited
authorization
(
i.
e.,
2
or
2.86
allowances
per
ton
of
emissions)
by
sources
in
States
participating
in
the
new
program;
and
the
termination
of
the
authorization
through
retirement
under
the
new
program
and
the
Acid
Rain
Program
of
those
title
IV
allowances
used
to
meet
the
allowanceholding
requirement
of
the
new
program.

Commenters'
arguments
based
on
title
IV.

The
commenters
claiming
that
EPA
is
barred
by
title
IV
from
requiring
use
of
title
IV
allowances
at
a
reduced
tonnage
authorization
in
a
new
cap­
and­
tradecap
and
trade
program
rely
on
the
above­
noted
provision
in
section
402(
3)

stating
that
an
allowance
is
an
authorization
to
emit
one
ton
of
sulfur
dioxideSO2.
However,
this
provision
does
not
bar
EPA
from
requiring
either:
use
of
title
IV
allowances
in
2
As
discussed
below,
today's
action
revises
the
Acid
Rain
Program
regulations
to
provide
for
source­
based,
instead
of
unit­
based,
compliance
with
the
allowance­
holding
requirement.
These
revisions
are
adopted
for
reasons
independent
of
the
adoption
of
the
CAIR
model
SO2
cap­
andtrade
cap
and
trade
program,
as
well
as
to
facilitate
the
coordination
of
these
two
SO2
trading
programs.

16
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
a
new
cap­
and­
tradecap
and
trade
program
under
a
different
title
of
the
CAA
at
a
reduced
tonnage
authorization;
or
retirement
in
this
new
program
and
the
Acid
Rain
Program
of
allowances
used
in
this
manner.

At
the
outset,
it
should
be
noted
that
the
CAIR
model
SO2
cap­
and­
tradecap
and
trade
program
does
not
change
the
tonnage
authorization
of
individual
title
IV
allowances
for
purposes
of
the
Acid
Rain
Program
until
such
an
allowance
is
used
to
meet
the
allowance­
holding
requirement
of
the
CAIR
SO2
program.
The
authorization
provided
by
each
title
IV
allowance
for
a
source
to
emit
one
ton
of
SO2
emissions,
as
well
as
the
requirement
that
each
source
hold
title
IV
allowances
covering
annual
SO2
emissions,
continue
to
be
in
effect
in
the
Acid
Rain
Program
whether
or
not
the
source
is
also
covered
by
the
CAIR
SO2
program.
In
fact,
the
Acid
Rain
Program
regulations
continue
to
reflect
both
this
tonnage
authorization
and
this
allowance­
holding
requirement.
2
See
final
revisions
to
40
CFR
§
73
§
73.35
adopted
in
today's
action.
Moreover,
the
CAIR
model
SO2
cap­
and­
tradecap
and
trade
rule
coordinates
the
3
The
commenters'
assertion
that
the
sources
in
a
State
that
does
not
participate
in
the
CAIR
SO2
cap­
and­
trade
cap
and
trade
program
will
be
cut
off
from
the
Acid
Rain
cap­
andtradecap
and
trade
program
is
incorrect
on
its
face.
Such
a
source
will
continue
to
be
subject
to
the
allowance­
holding
requirement
and
the
compliance
process
in
§
73.35
and
will
17
Section
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
determinations
­­
made
by
EPA
for
sources
subject
to
both
title
IV
and
the
CAIR
­­
of
compliance
with
the
title
IV
and
CAIR
allowance­
holding
requirements
so
that
such
determinations
are
made
in
a
multi­
step,
end­
of­
year
process
of
comparing
allowances
held
and
emissions.
First,
EPA
determines
whether
the
source
holds
sufficient
title
IV
allowances
to
comply
with
the
one­
allowance­
per­
ton­

ofemissions
requirement
in
the
Acid
Rain
Program
as
provided
in
§
73
§
73.35;
and
subsequently
EPA
determines
whether
the
source
holds
the
additional
title
IV
allowances
that,
when
added
to
those
held
for
Acid
Rain
Program
compliance,
are
sufficient
to
meet
the
CAIR
allowance­
holding
requirement.

Violations
of
the
Acid
Rain
allowance­
holding
requirement
will
result
in
imposition
of
the
penalty
for
excess
emissions
(
i.
e.,
the
one­
allowance
offset
plus
$
2,000
(
inflation­
adjusted)
per
ton
of
excess
emissions)
under
CAA
section
411
and
§
§
73
§
§
73.35(
d)
and
77.4.
See
final
§
96
§
96.254(
b)(
1)
adopted
in
today's
action.
Thus,
the
Acid
Rain
allowance­
holding
requirement
continues
as
a
separate
requirement
and
reflects
the
one­
allowance­
per­
ton­

ofemissions
authorization
under
section
402(
3).
3
not
be
subject
to
the
allowance­
holding
requirement
and
the
compliance
process
in
the
CAIR
model
SO2
cap­
and­
trade
cap
and
trade
rule.
4
The
commenters
also
seem
to
argue
that
the
allowance
definition
itself
bars
EPA
from
requiring
use
of
Acid
Rain
allowances
in
the
CAIR
SO2
trading
program
even
on
a
oneallowance
per­
ton­
of­
emissions
basis.
However,
as
noted
above,
the
definition
is
silent
on
whether
title
IV
18
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
In
contrast
with
the
one­
allowance­
per­
ton­
of­
emissions
requirement
under
the
Acid
Rain
Program,
the
CAIR
SO2
capand
tradecap
and
trade
program
requires
each
source
generally
to
hold
2
or
2.86
Acid
Rain
allowances
for
each
ton
of
SO2
emissions.
Contrary
to
the
commenters'
claim,

this
CAIR
allowance­
holding
requirement
is
not
barred
by
the
definition
of
the
term
"
allowance"
in
section
402(
3).
While
section
402(
3)
defines
the
term
"
allowance"
as
an
authorization
to
emit
one
ton
of
SO2,
this
provision
expressly
applies
the
definition
to
the
term
"[
a]
s
used
in
this
title
[
IV]"
and
therefore
does
not
apply
to
the
treatment
of
title
IV
allowances
in
a
different
program
under
a
different
title
of
the
CAA.
Moreover,
as
noted
above,
section
403(
f)
allows
EPA
to
limit
(
or
terminate)
the
authorization
to
emit
that
an
allowance
otherwise
provides
under
section
402(
3).
Consequently,
the
allowance
definition
in
section
402(
3)
does
not
bar
the
treatment
of
a
title
IV
allowance
as
authorizing
less
than
one
ton
of
SO2
emissions
under
the
CAIR
SO2
cap­
and­
tradecap
and
trade
program
established
under
title
I.
4
allowances
may
or
may
not
be
used
outside
the
Acid
Rain
Program.

19
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
Once
a
title
IV
allowance
is
used
to
meet
the
more
stringent
allowance­
holding
requirement
in
the
CAIR
SO2
program,
that
allowance
is
deducted
from
the
source's
allowance
tracking
system
account
and
cannot
be
used
again,

either
in
the
CAIR
SO2
program
or
the
Acid
Rain
Program.
As
noted
above,
EPA
has
the
authority
under
section
403(
f)
to
require
this
termination
of
such
a
title
IV
allowance's
tonnage
authorization
for
purposes
of
the
Acid
Rain
Program.

In
addition
to
referencing
section
402(
3)
to
support
claims
that
EPA
is
barred
from
adopting
the
CAIR
model
capand
tradecap
and
trade
program
provisions
on
the
use
of
title
IV
allowances,
the
commenters
rely
on
other
title
IV
provisions
that
they
characterize
as
setting
a
"
title
IV
cap"
on
SO2
emissions.
Stating
that
the
requirement
to
use
title
IV
allowances
in
the
CAIR
model
SO2
cap­
and­
tradecap
and
trade
program
has
the
effect
of
reducing
the
"
title
IV
cap",
cap,"
these
commenters
indicate,
with
little
explanation,
that
such
requirement
is
unlawful.
In
mentioning
the
title
IV
cap,
the
commenters
are
apparently
referring
to
the
fact
that
section
403(
a)(
1)
(
requiring
allowance
allocations
resulting
in
emissions
not
exceeding
8.90
million
tons
of
SO2)
and
section
405(
a)(
3)
(
requiring
additional
allocations
of
50,000
allowances)
require
EPA
to
5
Similarly,
to
the
extent
title
IV
allowances
are
used
in
the
CAIR
SO2
trading
program
by
non­
Acid
Rain
sources,
the
"
title
IV
cap"
seems
to
be
effectively
reduced
because
more
allowances
are
used
in
the
CAIR
SO2
trading
program
and
effectively
removed
from
use
in
the
Acid
Rain
Program.

20
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
allocate
annually,
starting
in
2010,
a
total
amount
of
allowances
authorizing
no
more
than
8.95
million
tons
of
SO2
emissions.
The
commenters'
argument
about
how
the
CAIR
model
SO2
cap­
and­
tradecap
and
trade
program
effectively
reduces
the
"
title
IV
cap"
appears
to
be
that
elimination
of
the
ability
to
use,
in
the
Acid
Rain
Program,
title
IV
allowances
that
will
be
used
for
compliance
in
the
CAIR
model
SO2
cap­
and­
tradecap
and
trade
program
has
the
effect
of
reducing
the
annual
8.95
million
ton
cap
on
SO2
emissions.
This
effective
reduction
of
the
"
title
IV
cap"

seems
to
occur
when
title
IV
allowances
are
used
in
the
CAIR
SO2
trading
program
with
a
reduced
tonnage
authorization
so
that
more
title
IV
allowances
are
deducted
per
ton
of
emissions
than
would
be
deducted
for
compliance
with
the
Acid
Rain
Program.
5
The
commenters
claim
that
such
a
reduction
in
the
8.95
million
ton
cap
is
contrary
to
title
IV.

In
asserting
an
overarching
principle
that
EPA
is
barred
from
adopting
any
requirement
that
would
have
the
effect
of
reducing
the
8.95
million
ton
cap
under
title
IV,

the
commenters
do
not
point
to
any
specific
statutory
6
In
light
of
this
provision,
the
statement
in
the
NPR
(
particularly
as
it
is
interpreted
by
the
commenters)
that
EPA
lacks
authority
to
tighten
the
requirements
of
title
IV
(
69
FR
4618,
col.
1)
is
overly
broad
and
is
not
repeated
or
adopted
in
today's
preamble.

21
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
provision
in
support.
The
EPA
maintains
that
not
only
are
there
no
such
supporting
provisions,
but
also
certain
title
IV
provisions
contradict
this
purported
principle.

Specifically,
while
sections
403
and
405
require
annual
allowance
allocations
authorizing
no
more
than
8.95
million
tons
of
emissions,
section
403(
f)
provides,
as
noted
above,

that
EPA
may
terminate
or
limit
the
one­
allowance­
per­

tonof
emissions
authorization
for
a
title
IV
allowance.
6
Because
any
termination
or
limitation
of
the
tonnage
authorization
provided
by
a
title
IV
allowance
for
purposes
of
the
Acid
Rain
Program
would
have
the
effect
of
reducing
the
total
tonnage
of
emissions
allowed
by
the
allowance
allocations
(
i.
e.,
the
8.95
million
ton
cap)
under
sections
403
and
405,
the
commenters'
claim
that
EPA
is
barred
from
adopting
any
provision
that
has
such
an
effect
is
wrong
on
its
face.

Commenters'
argument
based
on
Clean
Air
Markets
Group
case
The
commenters
also
state
that
the
CAIR
model
SO2
capand
tradecap
and
trade
program
is
unlawful
under
the
court's
holding
in
Clean
Air
Markets
Group
v.
Pataki,
338
F.
3d
82
22
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
(
2d
Cir.
2003).
According
to
the
commenters,
the
required
use
of
title
IV
allowances
in
the
CAIR
SO2
program
constitutes
an
unlawful
interference
with
the
operation
of
the
interstate
title
IV
SO2
trading
program,
presumably
similar
to
the
unlawful
interference
found
by
the
court
in
Clean
Air
Markets
Group.
However,
the
commenters
provide
little
explanation
of
how
such
use
of
title
IV
allowances
(
with
or
without
a
reduced
tonnage
authorization)

purportedly
interferes
with
interstate
operation
of
the
Acid
Rain
Program
and
how
the
holding
in
Clean
Air
Markets
Group
applies
to
the
CAIR
SO2
program.

In
Clean
Air
Markets
Group,
the
Court
reviewed
a
State
law
that
imposed
a
monetary
assessment
on
any
title
IV
allowance
sold
by
a
New
York
utility
to
a
utility
in
any
of
14
specified
States
or
subsequently
transferred
to
such
a
utility,
with
the
assessment
equaling
the
proceeds
received
in
the
allowance
sale.
The
law
also
required
that
each
allowance
sold
include
a
covenant
barring
subsequent
transfer
of
the
allowance
to
a
utility
in
any
of
those
States.
The
Court
held
that
the
State
law
was
pre­
empted
by
title
IV
because
the
State
law
impermissibly
interfered
with
the
method
chosen
by
Congress
in
title
IV
to
reduce
utilities'
SO2
emissions,
i.
e.,
the
opportunity
for
nationwide
trading
of
title
IV
allowances.
Id.
at
87­
88.
23
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
In
particular,
the
Court
found
that
the
assessment
of
100
percent
of
sale
proceeds
"
effectively
bans"
sales
of
any
allowance
by
New
York
utilities
to
utilities
in
the
specified
States
and
that
the
restrictive
covenant
"
indisputedly
decreases"
the
value
of
the
allowances.
Id.

at
88.

The
EPA
maintains
that
today's
action
is
distinguishable
from
the
facts
and
holding
in
Clean
Air
Markets
Group.
In
particular,
EPA
believes
that
the
exercise
of
its
explicit
authority
under
section
403(
f)
to
limit
the
tonnage
authorization
of
a
title
IV
allowance
in
the
CAIR
SO2
cap­
and­
tradecap
and
trade
program
and
to
terminate
the
tonnage
authorization
in
the
Acid
Rain
Program
once
the
allowance
is
used
in
the
CAIR
SO2
program
is
consistent
with
­­
and
necessary
to
preserve
­­
the
operation
of
the
Acid
Rain
Program.
EPA
tTherefore,
EPA
concludes
that
its
approach
of
limiting
and
terminating
of
the
tonnage
authorization
of
title
IV
allowances
does
not
impermissibly
interfere
with
the
interstate
operation
of
the
Acid
Rain
Program
and
is
reasonable.

Unlike
the
circumstances
in
Clean
Air
Markets
Group,

under
EPA's
approach
in
today's
action,
each
title
IV
allowance
is
freely
transferable
nationwide
unless
and
until
a
source
uses
the
allowance
to
meet
the
allowance­
holding
7
While
section
403(
b)(
as
well
as
section
403(
d))
refer
specifically
to
the
allowance
system
regulations
required
to
be
promulgated
by
the
EPA
Administrator
within
18
months
of
November
15,
1990
(
the
enactment
date
of
the
CAA),
the
EPA
Administrator
has
authority
under
section
301
to
amend
such
regulations
"
as
necessary
to
carry
out
his
functions
under
[
the
CAA]."
42
U.
S.
C.
7601.

24
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
requirements
of
the
CAIR
SO2
program,
at
which
time
the
allowance
is
deducted
from
the
source's
allowance
tracking
system
account
and
retired
for
purposes
of
both
the
CAIR
SO2
program
and
the
Acid
Rain
Program.
Further,
EPA
expects
that
the
ability
to
use
title
IV
allowances
to
meet
the
more
stringent
emission
limitation
under
the
CAIR
SO2
program
to
maintain
or
increase
(
not
decrease)
the
value
of
each
title
IV
allowance,
until
the
allowance
is
used
to
meet
the
CAIR
SO2
program
allowance­
holding
requirement
and
is
retired.

Of
course,
this
retirement
of
title
IV
allowances
once
they
are
used
to
meet
the
CAIR
allowance­
holding
requirement
means
that
they
cannot
thereafter
be
transferred
to
any
person
or
be
used
again,
e.
g.,
to
meet
the
Acid
Rain
Program
allowance­
holding
requirement.
As
noted
by
the
Court
in
Clean
Air
Markets
Group,
section
403(
b)
provides
that
title
IV
allowances
"
may
be
transferred
among
designated
representatives
of
owners
or
operators
of
affected
sources
under
[
title
IV]
and
any
other
person
who
holds
such
allowances,
as
provided
by
the
allowance
system
regulations"

promulgated
by
EPA.
7
42
U.
S.
C.
7651b(
b).
Moreover,
section
25
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
403(
d)(
1)
requires
that
the
allowance
system
regulations
"
specify
all
necessary
procedures
and
requirements
for
an
orderly
and
competitive
functioning
of
the
allowance
system."
42
U.
S.
C.
7651b(
d).
In
the
context
of
these
statutory
requirements,
EPA
maintains
that,
on
balance,
the
retirement
of
title
IV
allowances
used
for
compliance
in
the
CAIR
model
SO2
cap­
and­
tradecap
and
trade
program
does
not
constitute
impermissible
interference
with
the
interstate
operation
of
the
Acid
Rain
Program,
but
rather
is
consistent
with,
and
necessary
to
preserve,
the
operation
of
the
Acid
Rain
Program.

As
noted
above,
the
imposition
of
an
SO2
emission
limitation
(
such
as
in
today's
action)
that
is
significantly
more
stringent
than
the
one
under
title
IV
and
covers
most
of
the
sources
and
emissions
covered
by
title
IV
­
 
but
without
addressing
the
impact
on
the
Acid
Rain
Program
­­

would
likely
have
several
adverse
consequences.
These
adverse
consequences
would
be:
a
significant
excess
of
title
IV
allowances;
a
collapse
of
the
price
of
title
IV
allowances;
disruption
of
the
title
IV
allowance
market
and
the
title
IV
SO2
cap­
and­
tradecap
and
trade
system;
and
potential
SO2
emission
increases,
particularly
in
States
outside
the
CAIR
SO2
region.
The
EPA
modeling
indicates
that,
in
2010,
EGU
SO2
emissions
in
States
not
affected
by
26
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
the
CAIR
SO2
program
would
increase
by
about
2260,000
tons
(
or
about
249
percent
of
the
approximately
0.9
million
tons
of
SO2
emissions
projected
for
the
non­
CAIR
SO2
region
in
2010)
in
the
absence
of
an
approach
for
addressing
the
impact
of
the
CAIR
SO2
program
on
title
IV.
This
is
because,
with
the
imposition
of
the
more
stringent
CAIR
SO2
emission
limitation
in
the
CAIR
SO2
region,
this
more
stringent
limitation
becomes
the
binding
limitation
for
sources
in
that
region.
These
CAIR
SO2
sources
must
comply
with,
and
cannot
use
title
IV
allowances
to
exceed,
the
CAIR
SO2
emission
limitation.
Consequently,
the
portion
of
the
title
IV
allowances
that
equals
the
difference
between
the
CAIR
and
the
title
IV
emission
limitations
is
excess
and
would
be
available
for
use
only
by
Acid
Rain
sources
that
are
outside
the
CAIR
SO2
region.

This
excess
amount
of
title
IV
allowances
is
potentially
very
significant.
Today's
action
requires
that
the
States
in
the
CAIR
SO2
region
achieve
an
amount
of
SO2
emission
reductions
in
2010
and
2015
equal
to
50
percent
and
65
percent,
respectively,
of
the
amount
of
title
IV
allowances
(
about
7.3
million
allowances
out
of
the
total
nationwide
allocation
of
8.95
million
allowances)
allocated
to
the
units
in
the
CAIR
SO2
region.
If
the
States
achieve
all
the
required
CAIR
SO2
reductions
through
emission
8
The
surpluses
for
2010
and
2015
respectively
are
calculated
as:
7.3
million
allowances
minus
((
100
percent
minus
the
percentage
reduction
requirement
for
the
year)
times
7.3
million
allowances).

9
The
4.8
million
ton
figure
is
the
sum
of:
3.65
million
tons
of
emissions
(
equal
to
the
tonnage
equivalent
of
the
allowance
allocations
in
the
CAIR
SO2
region);
plus
about
27
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
reductions
by
EGUs
(
which
are
largely
the
same
units
that
are
subject
to
the
Acid
Rain
Program)
and
if
EGUs
held
only
one
title
IV
allowance
for
each
ton
of
SO2
emissions
as
required
in
the
Acid
Rain
Program,
the
amount
of
surplus
allowances
allocated
to
the
States
in
the
CAIR
SO2
region
would
be
about
3.65
million
allowances
and
4.75
million
allowances,
respectively
in
2010
and
2015.8
Moreover,
the
vast
majority
of
EGUs
nationwide
(
about
90
percent)
and
of
EGU
SO2
emissions
nationwide
(
about
90
percent)
are
covered
by
the
CAIR
SO2
program.
The
net
result
would
be
a
large
surplus
of
title
IV
allowances
that
would
not
be
usable
in
the
CAIR
SO2
region
and
would
be
usable
only
by
the
small
subset
of
EGUs
(
about
10
percent)
located
in
non­
CAIR
SO2
region
States.
Looking
at
the
nation
as
a
whole
(
both
CAIR
and
non­
CAIR
SO2
States)
in
2010,
there
would
be
total
allocations
in
the
Acid
Rain
Program
of
8.95
million
title
IV
allowances
but,
according
to
EPA
modeling
and
analysis
of
the
CAIR
without
a
requirement
to
retire
surplus
title
IV
allowances,
total
projected
SO2
emissions
for
EGUs
of
only
about
4.8
million
tons.
9
Based
on
the
principles
of
supply
0.9
million
tons
of
emissions
in
the
non­
CAIR
SO2
region
with
the
retirement
of
surplus
title
IV
allowances;
plus
2260,000
tons
of
increased
non­
CAIR
SO2
region
emissions
if
the
surplus
title
IV
allowances
are
not
retired.

28
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
and
demand,
EPA
concludes
that,
with
the
amount
of
allowances
allocated
nation­
widenation
wide
exceeding
SO2
emissions
for
EGUs
nationwide
in
2010
by
about
86
percent
(
i.
e.,
8.95
million
allowances
minus
4.8
million
tons
divided
by
4.8
million
tons),
the
value
of
title
IV
allowances
would
fall
to
zero,
and
all
but
2260,000
of
the
surplus
allowances
would
have
no
market
and
so,
as
a
practical
matter,
would
not
be
transferable.

The
EPA
notes
that
this
effect
on
allowances
would
occur
no
matter
how
the
State
implements
the
more
stringent
SO2
emission
limitation
required
under
the
CAIR,
e.
g.,

whether
implementation
is
through
a
new
cap­
and­
tradecap
and
trade
program
(
like
in
the
model
rule)
or
through
a
fixed
(
command
and
control)
tonnage
emission
limit
imposed
on
each
individual
source.
Consequently,
the
alternatives
faced
by
EPA
are
either:
(
1)
to
establish
a
CAIR
model
cap­

andtradecap
and
trade
program
(
or
allow
States
to
use
another
means
of
achieving
CAIR
SO2
emissions
reductions)
that
does
not
retire
the
3.65
million
surplus
allowances
and
that
results
in
the
devaluation
of
all
title
IV
allowances
to
zero
and
the
effective
non­
transferability
of
all
but
2260,000
of
the
3.65
million
surplus
allowances
in
2010;
or,
29
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
as
provided
in
today's
action,
(
2)
to
adopt
a
CAIR
SO2
model
cap­
and­
tradecap
and
trade
program
(
or
another
means
of
achieving
reductions)
that
retires
the
3.65
million
surplus
allowances
and
that
results
in
the
non­
transferability
of
the
entire
3.65
million
surplus
of
title
IV
allowances
and
ensures
the
remaining,
unused
title
IV
allowances
have
market
value.
Thus,
with
regard
to
the
impact
on
the
transferability
of
title
IV
allowances,
EPA's
decision
to
adopt
the
second
alternative
of
retiring
the
surplus
allowances
adversely
affects
the
transferability
of
only
a
relatively
small
amount
(
2260,000
out
of
8.95
million
per
year)
of
allowances,
as
compared
to
the
amount
of
allowances
whose
transferability
would
be
adversely
affected
under
the
first
alternative.

Moreover,
with
the
total
collapse
of
the
title
IV
allowance
price
in
the
Acid
Rain
Program,
the
nationwide
cap­
and­
trade
cap
and
trade
system
under
title
IV
­­
which
would
be
the
binding
cap­
and­
tradecap
and
trade
system
only
for
sources
in
the
States
outside
the
CAIR
SO2
region
­­

would
lose
all
efficacy.
The
title
IV
cap­
and­
tradecap
and
trade
system
operates
by:
making
owners
of
sources
pay
for
the
authorization
to
emit
SO2
by
surrendering,
to
EPA,

allowances
that
have
a
market
value;
and
by
allowing
owners
(
e.
g.,
those
who
choose
to
reduce
emissions)
to
sell
unused
10
See
Sen.
Rep.
No.
101­
228,
101st
Cong.,
1st
Sess.
at
324
(
Dec.
20,
1989)(
stating
that
"[
a]
llowances
are
intended
to
function
like
a
currency
that
is
sufficiently
valuable
to
stimulate
efforts
to
acquire
it
through
innovative
and
aggressive
efforts
to
reduce
emissions
more
than
required"
and
that,
in
the
event
of
"
inflation
in
the
currency",
currency,"
the
incentives
to
"
reduce
pollution...
will
be
seriously
weakened."
In
the
instant
case,
without
a
requirement
to
retire
excess
title
IV
allowances,
the
currency
would
be
inflated
to
a
value
of
zero.
See
also
Legis.
Hist.
of
CAAA,
Vol.
I
at
1033
(
Oct.
27,
1990
floor
statement
of
Sen.
Baucus
explaining
that
"[
s]
ince
units
can
gain
cash
revenues
from
the
sale
of
allowances
they
do
not
use,
they
will
have
a
financial
incentive
both
to
make
greater­
than­
required
reductions
and/
or
reductions
earlier
than
required"
and
that
"
incentives
created
by
the
allowance
market
should
stimulate
innovations
in
the
technologies
and
strategies
used
to
reduce
emissions"
including
energy
efficiency).

30
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
allowances.
Whether
the
sources'
allowances
were
originally
allocated
to
the
sources
or
were
purchased,
the
owners
must
decide
the
extent
to
which
it
is
more
efficient
to
give
up
the
market
value
of
such
allowances
or
to
reduce
emissions.

If
title
IV
allowances
were
to
have
no
market
value,
the
title
IV
cap­
and­
tradecap
and
trade
system
would
no
longer
affect
the
choice
of
whether
to
emit
or
to
reduce
emissions.
10
The
EPA
maintains
that
such
a
result
is
contrary
to
Congressional
intent.
The
purposes
of
title
IV
include
not
only
reductions
of
annual
SO2
emissions
from
1980
levels,

but
also
the
encouragement
of
"
energy
conservation,
use
of
renewable
and
clean
alternative
technologies,
and
pollution
prevention
as
a
long­
range
strategy,
consistent
with
the
11
While
the
title
IV
cap­
and­
tradecap
and
trade
system
could
be
replaced
by
a
new
CAIR
SO2
cap­
and­
tradecap
and
trade
system
that
did
not
address
the
problems
caused
by
surplus
title
IV
allowance,
that
new
cap­
and­
tradecap
and
trade
system
would
not
be
nationwide
like
the
title
IV
capand
tradecap
and
trade
system
and
so
would
not
cover
sources
outside
the
CAIR
SO2
region.

31
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
provisions
of
this
title,
for
reducing
air
pollution
and
other
adverse
impacts
of
energy
production
and
use."
42
U.
S.
C.
7651(
b).
Reflecting
these
purposes,
Congress
required
EPA
to
promulgate
allowance
system
regulations
for
the
Acid
Rain
Program
that
would
promote
"
an
orderly
and
competitive
functioning
of
the
allowance
system."
42
U.
S.
C.

7651b(
d)(
1).
See
Sen.
Rep.
No.
101­
228,
101st
Cong.,
1st
Sess.
at
320
(
explaining
that
"
the
allowance
system
is
intended
to
maximize
the
economic
efficiency
of
the
program
both
to
minimize
costs
and
to
create
incentives
for
aggressive
and
innovative
efforts
to
control
pollution").

As
discussed
above,
if
title
IV
allowances
were
to
have
no
market
value,
the
cap­
and­
tradecap
and
trade
system
under
title
IV
would
no
longer
affect
owners'
decisions
on
whether
to
emit
or
to
control
emissions
and
so
would
no
longer
provide
encouragement
(
e.
g.,
incentives
for
innovation)
for
avoidance
or
reduction
of
SO2
emissions.
11
In
addition,
EPA
is
concerned
that
such
disruption
of
the
title
IV
allowance
market
and
the
title
IV
SO2
cap­

andtradecap
and
trade
system
would
significantly
erode
32
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
confidence
in
cap­
and­
tradecap
and
trade
programs
in
general
and
the
CAIR
model
cap­
and­
tradecap
and
trade
programs
in
particular.
As
noted
above,
under
the
Acid
Rain
Program,

companies
have
made
billions
of
dollars
of
investments
in
emission
controls
in
order
to
be
able
to
sell
excess
title
IV
allowances
and
in
purchasing
title
IV
allowances
for
future
compliance
(
e.
g.,
under
annual,
one­
day1­
day
allowance
auctions
held
by
EPA,
one
as
recently
as
March
22,

2004
when
title
IV
allowances
were
purchased
for
about
$
50
million).
While
in
a
market­
based
program
like
the
Acid
Rain
Program,
investments
are
necessarily
subject
to
the
vagaries
of
the
market,
EPA
believes
that
it
should
try,
to
the
extent
possible
consistent
with
statutory
requirements,

to
avoid
taking
administrative
actions
that
would
cause
such
extensive
disruption
of
the
Acid
Rain
Program.
Allowing
such
disruption
to
occur
could
significantly
reduce
the
willingness
of
owners
of
sources
in
new
cap­
and­
tradecap
and
trade
programs
to
invest
in
measures
that
would
result
in
excess
allowances
for
sale
or
to
purchase
allowances
for
compliance.
To
the
extent
owners
would
ignore
the
allowance­
trading
option
and
simply
control
emissions
to
the
level
equal
to
their
source's
allocations,
this
would
obviate
the
incentives
for
innovation,
and
hamper
realization
of
the
potential
for
cost
savings,
that
would
12
The
EPA
notes
that
the
potential
for
increased
emissions
within
the
CAIR
SO2
region
would
occur
before
the
implementation
of
the
CAIR
SO2
program
and
is
addressed
by
allowing
pre­
2010
banked
title
IV
allowances
to
be
used
to
meet
the
CAIR
allowance
holding
requirement
beginning
in
2010.

33
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
otherwise
be
provided
by
new
cap­
and­
tradecap
and
trade
programs
(
such
as
the
CAIR
model
cap­
and­
tradecap
and
trade
programs).

Finally,
as
noted
above,
such
disruption
of
the
Acid
Rain
Program
would
potentially
result
in
significantly
increased
SO2
emissions
(
about
249
percent
in
2010)
in
States
covered
by
the
Acid
Rain
Program
but
outside
the
CAIR
SO2
region.
12
This
would
have
the
effect
of
reversing,
at
least
in
part,
the
beneficial
effect
that
the
Acid
Rain
Program
has
had
on
SO2
emissions
in
those
States,
even
though
the
overall
goal
of
nationwide
SO2
emissions
reductions
would
still
be
met.
See
42
U.
S.
C.(
a)(
1)

(
Congressional
finding
that
"
the
presence
of
acidic
compounds
and
their
precursors
in
the
atmosphere
and
in
deposition
from
the
atmosphere
represents
a
threat
to
natural
resources,
ecosystems,
materials,
visibility,
and
public
health").
13
While
the
potential
for
increased
emissions
outside
the
CAIR
SO2
region
supports
EPA's
conclusion,
EPA
maintains
that,
even
in
the
absence
of
any
such
increase,
the
other
considerations
discussed
above
are
sufficient
to
justify
the
conclusion
that
the
retirement
of
title
IV
allowances
does
not
impermissibly
interfere
with
the
Acid
Rain
Program
and
is
reasonable.

34
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
In
light
of
these
considerations,
13
EPA
concludes,
on
balance,
that
structuring
the
CAIR
model
SO2
cap­
and­
trade
cap
and
trade
program
in
a
way
that
avoids
such
extensive
disruption
of
the
Acid
Rain
Program
(
i.
e.,
by
requiring
retirement
from
the
Acid
Rain
Program
of
title
IV
allowances
used
for
compliance
in
the
CAIR
SO2
program)
does
not
constitute
impermissible
interference
with
the
interstate
operation
of
the
Acid
Rain
Program.
Rather,
this
approach
in
the
model
SO2
cap­
and­
trade
cap
and
trade
rule
is
consistent
with,
and
preserves,
such
operation
­­
while
providing
States
a
tool
for
imposing
the
more
stringent
SO2
emission
limitations
required
under
title
I
­­
and
is
a
reasonable
exercise
of
EPA's
authority
under
section
403(
f)

to
terminate
or
limit
the
tonnage
authorization
of
title
IV
allowances.

2.
Legal
Authority
for
Requiring
Retirement
of
Excess
Title
IV
Allowances
if
State
Does
Not
Use
CAIR
Model
SO2
Cap­
and­
Trade
cap
and
trade
Program.

As
discussed
above,
a
State
has
the
additional
options
of
achieving
the
SO2
emissions
reductions
required
by
35
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
today's
actions
through:
EGU
emission
reductions
only
but
without
using
the
model
SO2
cap­
and­
tradecap
and
trade
rule;

some
EGU
and
some
non­
EGU
emissions
reductions;
or
non­
EGU
reductions
only.
The
requirement
to
retire
excess
title
IV
allowances
applies
only
in
the
first
and
second
of
these
three
additional
options.
The
State
must
retire
an
amount
of
title
IV
allowances
equal
to
the
total
amount
of
title
IV
allowances
allocated
to
units
in
the
State
minus
the
amount
of
allowances
equivalent
to
the
tonnage
cap
set
by
the
State
on
EGUs'
SO2
emissions
and
can
choose
what
mechanism
to
use
to
achieve
such
retirement.
The
EPA
has
the
authority
to
require
that
the
State
include
in
its
SIP
a
mechanism
for
retiring
the
excess
title
IV
allowances
that
will
result
under
these
two
options.

As
discussed
above,
EPA
has
the
authority
under
section
403(
f)
to
terminate
or
limit
the
authorization
to
emit
otherwise
provided
by
a
title
IV
allowance.
Specifically,

EPA
has
the
authority
to:
require
that
any
EGU
SO2
emission
reduction
program,
chosen
by
a
State
to
meet
(
in
full
or
in
part)
the
requirements
of
section
110(
a)(
2)(
D),
include
provisions
for
retiring
excess
title
IV
allowances
resulting
from
the
implementation
of
the
more
stringent
emission
reduction
requirement
under
the
State
program;
and
to
require
that
such
retired
title
IV
allowances
cannot
be
used
36
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
in
the
Acid
Rain
Program.
As
discussed
above,
the
commenters'
claims
that
such
a
retirement
requirement
is
barred
by
title
IV
(
relying
on,
e.
g.,
the
section
402(
3)

definition
of
"
allowance"
and
on
the
"
title
IV
cap")
lack
merit.
Also,
for
the
reasons
discussed
above,
the
retirement
requirement
is
not
unlawful
under
Clean
Air
Markets
Group
and
is
a
reasonable
exercise
of
EPA's
authority
under
section
403(
f)
to
terminate
or
limit
the
tonnage
authorization
of
title
IV
allowances.

Some
commenters
also
claim
that
the
retirement
requirement
unlawfully
constrains
the
States'
authority
to
determine
in
the
first
instance
the
control
measures
to
use
in
meeting
emission
reduction
requirements
necessary
to
comply
with
section
110(
a)(
2)(
D).
According
to
the
commenters,
since
only
EGUs
are
subject
to
title
IV,
the
requirement
to
retire
title
IV
allowances
is
in
effect
a
mandate
that
the
State
control
EGU
emissions.

However,
EPA
is
imposing
the
requirement
for
a
State
mechanism
to
retire
title
IV
allowances
only
if
the
State
decides
in
the
first
instance
to
require
any
EGU
SO2
emissions
reductions
to
meet
the
emission
reduction
requirements
under
today's
action.
A
State
that
decides
not
to
require
any
EGU
SO2
emissions
reductions
for
this
purpose
is
not
required
to
retire
title
IV
allowances.
Further,
the
37
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
amount
of
the
required
allowance
retirement
is
limited
to
the
amount
of
EGU
SO2
emissions
reductions
that
the
State
decides
in
the
first
instance
to
require
from
EGUs
(
i.
e.,

the
total
title
IV
allowance
allocations
in
the
State
minus
the
tonnage
amount
of
the
cap
set
by
the
State
for
EGUs'
SO2
emissions).
In
short,
the
allowance
retirement
requirement
echoes
the
State's
decision
in
the
first
instance
concerning
the
amount
of
SO2
emissions
reductions
to
require
from
EGUs
in
the
State.
The
EPA
simply
requires
the
State
to
implement
the
State's
EGU­
SO2­
emission­
reduction­
requirement
decision
in
a
manner
that
avoids
the
otherwise
likely,

extreme
disruption
of
the
title
IV
SO2
cap­
and­
tradecap
and
trade
system
that
is
described
above.
Further,
the
State
may
choose
what
mechanism
to
include
in
its
SIP
revision
for
achieving
the
required
allowance
retirement,
and
EPA
will
review
the
effectiveness
of
the
mechanism
in
achieving
such
retirement,
and
approve
and
adopt
the
mechanism
if
appropriate,
in
an
EPA
rulemaking
concerning
the
SIP
revision.
Therefore,
EPA
concludes
that
the
allowanceretirement
requirement
is
lawful
and
is
a
reasonable
condition
for
EPA
approval
of
those
State
SIPs
that
require
EGU
SO2
emission
reductions
without
using
the
CAIR
model
SO2
trading
program.
38
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
The
EPA
notes
that
the
requirement
to
retire
excess
title
IV
allowances
­­
where
a
State
adopts
the
CAIR
model
SO2
trading
program
or
where
a
State
SIP
obtains
EGU
emissions
reductions
through
some
other
means
­­
is
reflected
in
provisions
in
both
the
proposed
rules
in
the
SNPR
(
i.
e.,
in
proposed
§
§
51
§
§
51.124(
p)
and
96.254(
b))
and
in
the
final
rules
adopted
by
today's
action
(
i.
e.,
in
final
§
§
51
§
§
51.124(
p)
and
96.254(
b)).
In
reviewing
the
proposed
rules
in
light
of
the
comments
received,
EPA
has
concluded
that,
for
consistency
and
clarity,
the
Acid
Rain
Program
regulations
should
also
reference
this
same
retirement
requirement.
Consequently,
today's
action
adds
a
new
paragraph
(
a)(
3)
to
§
73.35
of
the
Acid
Rain
Program
regulations
that
reiterates
the
requirement
­­
addressed
in
the
preamble
and
regulations
in
both
the
SNPR
and
today's
action
­­
that
title
IV
allowances
previously
used
to
meet
the
allowance­
holding
requirement
in
the
CAIR
model
trading
program
in
§
96
§
96.254(
b)
or
otherwise
retired
in
accordance
with
§
51
§
51.124(
p)
cannot
be
used
to
meet
the
allowanceholding
requirement
in
the
Acid
Rain
Program.
Additional
revisions
of
the
Acid
Rain
Program
regulations
are
discussed
below.

3.
Revisions
to
Acid
Rain
Regulations.
39
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
In
the
SNPR,
EPA
proposed
to
revise
the
Acid
Rain
Program
regulations,
effective
July
1,
2005,
to
implement
the
allowance­
holding
requirement
on
a
source­
by­
source,

rather
than
on
a
unit­
by­
unit,
basis.
Instead
of
requiring
each
unit
to
hold
an
amount
of
allowances
in
its
Allowance
Tracking
System
account
(
as
of
the
allowance
transfer
deadline)
at
least
equal
to
the
tonnage
of
SO2
emissions
for
the
unit
in
the
preceding
calendar
year,
the
proposal
required
each
source
to
hold
an
amount
of
allowances
in
its
Allowance
Tracking
System
account
at
least
equal
to
the
tonnage
of
SO2
emissions
for
all
affected
units
at
the
source
for
such
calendar
year.
Because
language
reflecting
or
referencing
the
unit­
by­
unit
compliance
approach
is
included
in
many
provisions
of
the
Acid
Rain
Program
regulations,
a
significant
number
of
proposed
rule
revisions
were
necessary
to
implement
source­
by­
source
allowance
holding.

In
today's
final
rule,
EPA
is
adopting,
with
minor
modifications,
the
proposed
rule
revisions
implementing
source­
by­
source
compliance
with
the
allowance­
holding
requirement.
As
explained
in
detail
in
the
SNPR
(
69
FR
32698­
32701),
EPA
finds
that:
title
IV
is
ambiguous
with
regard
to
whether
unit­
by­
unit
compliance
is
required
and
so
EPA
has
discretion
in
this
matter;
it
is
important
to
40
Section
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2005
DRAFT
Do
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Quote
or
Cite
provide
additional
compliance
flexibility
by
allowing
a
unit
at
a
source
to
use
allowances
from
any
other
unit
at
the
same
source;
and
many
other,
non­
allowance­
holding
provisions
of
title
IV
evidence
a
unit­
by­
unit
orientation.

Further,
as
discussed
in
the
SNPR,
EPA
concludes
that
the
adoption
of
source­
level
compliance
reasonably
balances
these
considerations.
In
balancing
these
considerations,

EPA
also
concludes
that
company­
level
compliance
is
not
appropriate
because
it
represents
too
much
of
a
deviation
from
the
unit­
by­
unit
orientation
in
the
non­

allowanceholding
provisions
of
title
IV
and
is
likely
to
require
much
more
dramatic
changes
in
the
operation
of
the
Acid
Rain
Program.
See
69
FR
32699­
700.
It
is
important
to
note
that
the
final
rule
revisions,
like
the
proposed
revisions,

change
only
the
allowance­
holding
requirement
and
not
the
emissions
monitoring
and
reporting
requirements,
which
continue
to
be
applied
unit
by
unit.

In
today's
action,
EPA
is
making
the
source­

levelcompliance
rule
revisions
effective
July
1,
2006,
which
is
one1
year
later
than
proposed.
The
shift
from
unit­
level
to
source­
level
compliance
will
require
software
changes
and
testing
to
ensure
that
the
Allowance
Tracking
System
operates
properly.
EPA
is
cCurrently,
EPA
is
in
the
process
of
conducting
a
general
review
and
re­
engineering
of
the
41
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DRAFT
Do
Not
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or
Cite
Allowance
Tracking
System
and
Emissions
Tracking
System
and
anticipates
completing
the
process
in
2006.
The
process
of
shifting
the
Allowance
Tracking
System
to
source­
level
compliance
will
be
much
more
efficient
and
less
likely
to
have
adverse
results
on
the
system
if
the
shift
is
coordinated
with
the
general
review
and
re­
engineering
and
therefore
implemented
starting
July
1,
2006.
Further,
as
discussed
below,
this
delay
of
implementation
for
one1
additional
year
will
give
owners
additional
time
to
make
changes
that
they
determine
are
necessary
in
order
to
adapt
to
source­
level
compliance.

Some
commenters
support
the
shift
to
source­
by­
source
allowance
holding,
and
some
oppose
the
change.
One
commenter
opposing
the
change
claims
that
a
source­
by­
source
allowance­
holding
requirement
is
"
contrary
to
market­
based
principles."
According
to
the
commenter,
market­
based
systems
give
operators
the
tools
for
achieving
compliance
through
allowance
transfers,
but
with
source­
level
compliance
the
operators
do
not
have
to
take
any
action
to
maintain
sufficient
allowances
because
EPA
will
move
the
allowances
around
for
them.

The
commenter's
argument
is
based
on
an
incorrect
premise.
Whether
compliance
is
unit­
by­
unit
or
source­

bysource
the
owner
or
owners
of
the
affected
units
at
each
42
Section
IX
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2005
DRAFT
Do
Not
Quote
or
Cite
source
must
take
the
same
types
of
actions
in
order
to
comply
with
the
applicable
allowance­
holding
requirement.

In
particular,
under
source­
level
compliance,
such
owner
or
owners
must
reduce
emissions,
retain
allowances
allocated
to
such
units,
obtain
additional
allowances,
or
take
a
combination
of
these
actions
to
ensure
that
the
Allowance
Tracking
System
account
for
the
source
holds
enough
allowances
to
cover
the
total
emissions
of
the
affected
units
at
the
source.
The
owner
or
owners
also
have
the
option
of
reducing
emissions
below
allocations
so
that
there
are
extra
allowances
available
to
hold
for
future
use
or
sale.
If
the
owner
or
owners
do
not
have
enough
allowances
to
cover
the
emissions
from
the
source,
EPA
will
not
move,

on
its
own
initiative,
allowances
into
the
source's
compliance
account
from
other
sources'
accounts
or
from
general
accounts,
even
if
there
are
extra
allowances
in
the
other
accounts.
The
only
difference
between
the
types
of
actions
owners
must
take
under
the
unit­
level
and
sourcelevel
approaches
is
that,
under
unit­
level
compliance,
the
owners
must
transfer
allowances
from
one
unit
at
a
source
to
a
second
unit
at
that
source
in
order
to
use
the
first
unit's
allowances
for
compliance
by
the
second
unit
while,

under
source­
level
compliance,
any
allowance
held
for
compliance
for
the
first
unit
can
be
used
­­
without
a
43
Section
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2005
DRAFT
Do
Not
Quote
or
Cite
transfer
­­
for
compliance
by
the
second
unit.
This
difference
is
reflected
in
the
Allowance
Tracking
System,

which,
under
the
unit­
level
approach,
includes
a
separate
account
for
each
unit
and,
under
the
source­
level
approach,

includes
a
single
account
for
all
the
affected
units
at
a
single
source.

In
summary,
the
mechanism,
and
the
owners'

responsibilities,
for
achieving
compliance
with
the
allowance­
holding
requirements
are
analogous
under
unit­

byunit
and
source­
by­
source
compliance,
except
that,
under
source­
by­
source
compliance,
allowances
need
not
be
transferred
among
units
at
the
same
source.
The
EPA
does
not
believe
that
the
source­
by­
source
approach
is
any
less
market­
based
than
the
unit­
by­
unit
approach.
Owners
will
still
have
the
ability
to
reduce
emissions
or
purchase
or
sell
allowances
and
the
responsibility
to
take
actions
(
including
the
holding
of
extra
allowances)
to
ensure
they
have
enough
allowances
to
cover
emissions.
Moreover,
the
market­
price
of
allowances
will
still
play
a
crucial
role
in
owners'
decisions
on
what
actions
to
take.
The
EPA's
adoption
of
source­
by­
source
compliance
preserves
marketbased
principles,
while
reasonably
balancing
of
the
ambiguity
of
title
IV,
the
need
for
additional
compliance
44
Section
IX
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2005
DRAFT
Do
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Quote
or
Cite
flexibility,
and
the
unit­
by­
unit
orientation
of
many
provisions
in
title
IV.
See
69
FR
32699­
700.

The
commenter
also
argues
that
having
a
source­
level
allowance­
holding
requirement
in
the
Acid
Rain
Program
(
and
the
CAIR
model
cap­
and­
tradecap
and
trade
program)
is
inconsistent
with
unit­
level
compliance
in
the
NOx
SIP
Call
cap­
and­
tradecap
and
trade
program.
However,
other
than
pointing
out
this
difference,
the
commenter
fails
to
explain
why
the
programs
must
be
identical
in
this
regard.
Based
on
experience
with
the
Acid
Rain
Program
(
as
well
as
the
NOx
SIP
Call
trading
program),
EPA
concludes
that
a
source­
level
allowance­
holding
requirement
will
result
in
a
somewhat
less
complicated
program
and
a
reduced
likelihood
of
inadvertent,

minor
errors,
while
achieving
the
program's
environmental
goals.
See
69
FR
32699­
700.

The
commenter
suggests
that,
instead
of
adopting
source­
level
compliance,
EPA
revise
the
Acid
Rain
Program
regulations
to
allow
for
source
over­
draft
accounts,
like
those
allowed
in
the
NOx
SIP
Call
cap­
and­
tradecap
and
trade
program.
Under
the
NOx
SIP
Call
program,
each
source
may
have
a
source
over­
draft
account,
in
which
may
be
held
extra
allowances
that
may
be
used
for
compliance
by
any
affected
unit
at
the
source.
However,
EPA
believes
that
source­
level
compliance
is
a
better
approach
than
unit­
level
compliance
45
Section
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2005
DRAFT
Do
Not
Quote
or
Cite
with
over­
draft
accounts.
Relatively
few
owners
in
the
NOx
SIP
Call
cap­
and­
tradecap
and
trade
program
actually
put
allowances
in
over­
draft
accounts,
and
achievement
of
compliance
is
made
more
complicated
by
the
ability
of
all
units
at
a
source
to
draw
on
the
over­
draft
account
(
if
any
allowances
are
put
in
it)
but
the
inability
of
any
unit
to
use
extra
allowances
held
instead
by
another
unit
at
the
source.
Consequently,
rather
than
adopting
in
the
Acid
Rain
Program
the
unit­
level
approach
with
over­
draft
accounts,

EPA
is
today
adopting
the
source­
level
approach
in
the
Acid
Rain
Program
and
may
consider
in
the
future,
as
appropriate,

adopting
the
source­
level
approach
in
other
programs
using
unit­
level
compliance.

One
commenter
states
that
EPA
should
revise
the
Acid
Rain
Program
regulations
to
allow
owners,
each
year,
the
option
of
choosing
whether
to
use
unit­
level
or
source­
level
compliance.
According
to
the
commenter,
significant
investments
have
been
made
to
monitor
and
report
emissions
and
surrender
allowances
under
the
existing
Acid
Rain
Program
regulations,
and
shifting
to
source­
level
compliance
will
require
substantial
resources
and
time.
The
commenter
also
states
that
unit­
based
compliance
should
be
retained
as
an
option
"
to
accommodate
joint
ownership
and
other
special
arrangements
that
may
not
affect
an
entire
facility."
46
Section
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2005
DRAFT
Do
Not
Quote
or
Cite
The
EPA
rejects
the
suggestion
of
allowing
each
owner
the
option,
for
each
year
and
for
each
source,
of
choosing
between
unit­
level
and
source­
level
compliance.
Such
an
approach
would
significantly
complicate
the
achievement
by
sources,
and
the
determination
by
EPA,
of
compliance.
The
potential
for
error
(
e.
g.,
due
to
erroneous
assumptions
about
whether
unit­
or
source­
level
compliance
would
be
applicable
to
a
particular
source
for
a
particular
year)
on
the
part
of
owners
or
EPA
would
be
significantly
increased.

Moreover,
this
complicated
approach
would
result
in
inconsistent
treatment
from
source
to
source
and
year
to
year.
Further,
the
commenter
provided
only
vague
assertions
about
the
benefits
of
unit­
based
compliance
in
certain
circumstances
and
did
not
assert
­­
much
less
show
­­
that
source­
level
compliance
cannot
be
accommodated
under
those
circumstances.
The
EPA
maintains
that
the
only
reasonable
options
for
the
allowance­
holding
requirement
in
the
Acid
Rain
Program
are
either
generally
requiring
compliance
by
all
sources
each
year
on
a
unit­
level
basis
(
as
in
the
existing
regulations)
or
requiring
compliance
by
all
sources
each
year
on
a
source­
level
basis
(
as
in
the
proposed
revisions
to
the
regulations).
For
the
reasons
discussed
above,
EPA
believes
that
source­
level
compliance
for
the
allowance­
holding
requirement
is
preferable.
By
postponing
47
Section
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2005
DRAFT
Do
Not
Quote
or
Cite
until
July
1,
2006
the
effective
date
of
the
rule
revisions
shifting
to
source­
level
compliance
(
with
the
result
that
2006
is
the
first
year
of
source­
level
compliance),
EPA
is
providing
owners
a
reasonable
amount
of
time
to
make
any
necessary
adjustments,
such
as
those
claimed
by
the
commenter.
Further,
as
noted
above,
the
rule
revisions
change
only
the
allowance­
holding
requirement
and
not
the
emissions
monitoring
and
reporting
requirements.
This
should
limit
the
scope
of
adjustments
necessary
for
owners
to
implement
source­
level
compliance
and
will
preserve
the
availability
of
reliable,
unit­
level
emissions
data.

Because
unit­
level
compliance
is
reflected
throughout
the
Acid
Rain
Program
regulations,
numerous
revisions
of
the
regulations
are
necessary
to
implement
source­
level
compliance.
(
None
of
these
changes
are
to
the
emissions
monitoring
and
reporting
provisions
in
part
75
since
monitoring
and
reporting
continue
to
be
on
a
unit
basis.)

One
commenter
requested
that
EPA
provide
"
more
in­
depth
detail"
on
the
proposed
revisions.
However,
in
the
SNPR,

EPA
described
the
types
of,
and
reasons
for,
revisions
that
are
necessary
for
source­
level
compliance
(
69
FR
32700­
01)

and
set
forth
all
of
the
specific,
proposed
changes
(
69
FR
3273­
41).
Moreover,
no
commenters
stated
that
they
did
not
understand
any
specific,
proposed
revision
or
the
reason
for
14
This
approach
is
consistent
with
the
SNPR,
where
EPA
proposed
to
convert
all
references,
including
any
initially
missed
in
the
SNPR,
from
unit­
to
source­
level
compliance.
(
69
FR
32700).

48
Section
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2005
DRAFT
Do
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Quote
or
Cite
any
specific
revision.
The
EPA
notes
that
in
reviewing
the
proposed
Acid
Rain
rule
revisions
in
light
of
the
comments,

EPA
found
some
additional
references
in
the
Acid
Rain
rules
to
unit­
level
compliance
that
should
be
revised
to
reflect
source­
level
compliance.
EPA
is
adopting
iIn
today's
action,
EPA
is
adopting
revisions
of
these
additional
references
(
e.
g.,
changing
references
to
a
"
unit's
account"

or
a
"
unit
account"
to
a
source's
"
compliance
account")
that
are
analogous
to
the
revisions
specifically
identified
in
the
SNPR.
14
Another
commenter
opposed
the
rule
revisions
implementing
source­
level
compliance
on
several
other
grounds.
The
commenter
claims,
without
citing
any
statutory
support,
that
the
Acid
Rain
Program
is
based
on
"
control
of
emissions
at
the
unit
level"
so
that,
in
the
event
of
excess
emissions,
the
"
source
as
a
whole
would
not
be
punished"
and
"
corrective
action
could
take
place"
at
the
particular
unit.
According
to
the
commenter,
source­
level
compliance
will:
make
it
harder
to
determine
which
unit
caused
excess
emissions;
make
the
existing
Acid
Rain
permits
meaningless;

make
the
individual
unit
allowance
allocations
meaningless;
49
Section
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2005
DRAFT
Do
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Quote
or
Cite
and
cause
confusion
over
which
units
at
a
source
are
affected
units.

While
there
are
many
non­
allowance­
holding
provisions
in
title
IV
that
have
a
unit­
by­
unit
orientation,
EPA
disagrees
with
the
commenter's
basic
assertion
that
the
purpose
of
the
Acid
Rain
Program
is
to
control
emissions
on
a
unit­
by­
unit
basis
and
that
there
is
a
need
to
"
distinguish"
the
compliance
of
each
individual
unit.
The
provisions
concerning
application
of
the
allowance­
holding
requirement
are
ambiguous
as
to
whether
EPA
must
implement
the
requirement
on
a
unit­
level
or
a
source­
level,
and
the
environmental
benefits
of
the
Acid
Rain
Program
will
still
be
realized
with
source­
level
compliance.
See
69
FR
32699­

700.
Further,
while
EPA
will
determine
compliance
on
a
source­
by­
source
basis,
nothing
in
the
regulations
prevents
owners
(
e.
g.,
owners
of
units
at
sources
with
multiple
units
and
multiple
owners
or
owners
of
units
with
multiple
owners
and
exhausting
through
a
common
stack)
from
determining
by
agreement
which
owners
will
bear
any
excess
emissions
penalties
that
occur
at
the
plant
and
have
to
take
correction
actions.
Indeed,
owners
are
likely
to
have
already
have
these
types
of
agreements
in
cases
of
units
or
sources
with
multiple
owners.
This
is
because
the
Acid
Rain
Program
regulations
already
allow
a
unit
at
a
multi­
unit
50
Section
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2005
DRAFT
Do
Not
Quote
or
Cite
source
to
use
some
allowances
from
other
units
at
the
source
(
albeit
to
cover
most
but
not
all
of
the
potential
excess
emissions)
and
already
allow
one
unit
exhausting
from
a
common
stack
to
use
allowances
from
another
unit
at
that
stack
(
without
any
limitation
on
such
use).
See
40
CFR
73.35(
b)(
3)
and
(
e).
In
addition,
while
the
Acid
Rain
permits
will
have
to
be
revised
in
the
future
to
reflect
source­
level
compliance,
today's
rule
does
not
make
sourcelevel
compliance
effective
until
2006.
Permits
will
not
have
to
be
revised
until
around
the
end
of
2006,
which
should
provide
States
a
reasonable
opportunity
to
amend
the
permits.
Contrary
to
the
claims
of
the
commenter,

sourcelevel
compliance
does
not
make
the
unit­
by­
unit
allocations
meaningless;
the
unit­
by­
unit
allocations
(
set
forth
in
Table
2
of
§
72
§
72.10)
will
determine
the
amount
of
allocations
reflected
in
each
Allowance
Tracking
System
source
account,
which
amount
will
equal
the
sum
of
the
allocations
for
all
affected
units
at
the
source.
Finally,

the
commenter
failed
to
explain
how
the
source­
level
allowance­
holding
requirement
could
cause
"
confusion"
over
which
units
are
affected
units.
This
source­
level
requirement
does
not
change
the
applicability
provisions,

which
are
still
applied
unit
by
unit.
51
Section
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2005
DRAFT
Do
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Quote
or
Cite
As
discussed
in
the
SNPR,
EPA
proposed
­­
in
addition
to
the
rule
revisions
to
implement
source­
level
compliance
­­
other
revisions
of
the
Acid
Rain
Program
regulations
in
order
to
facilitate
coordination
of
the
Acid
Rain
Program
and
the
CAIR
SO2
cap­
and­
tradecap
and
trade
program.
These
additional
revisions
were
described
and
explained
in
the
SNPR
(
69
FR
32701).
The
EPA
is
adopting
these
revisions
for
the
reasons
in
the
SNPR,
as
amplified
below.
Most
of
these
revisions
are
supported,
or
not
opposed,
by
commenters,
but
some
commenters
objected
to
certain
revisions.

For
example,
EPA
noted
that
it
had
recently
changed
the
"
cogeneration
unit"
definition
in
§
72
§
72.2
in
June
2002
(
67
FR
40394,
40420,;
June
12,
2002).
The
original
definition
in
§
72
§
72.2
had
been
used
since
the
commencement
of
the
Acid
Rain
Program.
The
only
significant
difference
between
the
original
and
revised
definitions
is
that
the
former
refers
to
a
unit
"
having
the
equipment
used
to
produce"
electricity
and
useful
thermal
energy
through
sequential
use
of
energy,
while
the
latter
simply
refers
to
a
unit
"
that
produces"
electricity
and
useful
thermal
energy
in
that
manner.
The
reason
that
EPA
gave
for
revising
the
definition
in
June
2002
was
to
conform
with
the
definition
in
the
sSection
126
rule.
However,
the
sSection
126
rule
(
and
the
NOx
SIP
Call)
did
not
actually
specify
a
52
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
"
cogeneration
unit"
definition.
Consequently,
there
is
no
reason
to
use
the
June
2002
revised
definition.
Moreover,

EPA
is
concerned
that
the
change
in
the
definition
of
"
cogeneration
unit"
as
of
June
2002
may
cause
confusion
or
raise
question
about
what
units
qualify
for
exemptions
for
"
cogeneration
units"
from
the
Acid
Rain
Program.
Under
these
circumstances,
EPA
concludes
that
the
definition
should
be
changed
back
to
the
original
definition
in
§
72
§
72.2
and,
in
any
event,
intends
to
interpret
the
June
2002
revised
definition
as
having
the
same
meaning
as
the
original
definition.
One
commenter
raised
concerns
that
EPA
did
not
provide
any
"
detailed
analysis"
of
the
implications
of
changing
the
"
cogeneration
unit"
definition.
However,
as
discussed
above,
the
change
simply
reinstates
the
definition
that
had
been
used
in
the
Acid
Rain
Program
from
the
initial
promulgation
of
implementing
regulations
in
1993
until
2002.

No
commenter
asserted
that
reverting
to
the
longstanding,

original
definition
would
be
disruptive.

Another
Acid
Rain
Program
rule
revision
proposed
in
the
SNPR
is
the
elimination
of
the
requirement
for
owners
and
operators
to
submit
an
annual
compliance
certification
report
for
each
source.
One
commenter
expressed
concern,

because
the
purpose
of
the
annual
certification
is
to
ensure
that
the
designated
representative
is
"
aware
and
has
assured
53
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
the
quality
of
the
data"
being
submitted
to
EPA.
However,

as
noted
in
the
SNPR,
designated
representatives
must
evidence
such
awareness
and
compliance
by
submitting,
with
each
quarterly
emissions
report,
a
certification
that
the
monitoring
and
reporting
requirements
under
part
75
of
the
Acid
Rain
Program
regulations
have
been
met.
See
40
CFR
75.64(
c).
Quarterly
emissions
reports
are
available
on­
line
to
the
public
and
the
States.
In
addition,
owners
and
operators
of
sources
subject
to
the
Acid
Rain
Program
must
submit,
under
title
V
of
the
CAA,
annual
compliance
certification
reports
concerning
all
CAA
requirements
(
including
Acid
Rain
Program
requirements).
Under
these
circumstances,
EPA
maintains
that
the
separate
Acid
Rain
Program
annual
compliance
certification
reports
are
duplicative
and
unnecessary.
The
EPA
notes
that
it
appears
that
few,
if
any,
requests
for
copies
of
these
Acid
Rain
Program
reports
have
been
made
by
States
or
any
other
persons
since
the
commencement
of
the
Acid
Rain
Program.

Apparently,
other
certifications
and
submissions
required
of
owners
and
operators
have
been
sufficient
for
the
purposes
cited
by
the
commenter.

The
SNPR
also
included
proposed
revisions
eliminating
the
requirement
under
the
Acid
Rain
Program
for
a
one­
day1­

day
newspaper
notice
for
designation
of
designated
54
Section
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
representatives
and
authorized
account
representatives.
One
commenter
suggests
that
this
notice
should
be
replaced
by
a
requirement
to
notify
the
State
permitting
authority.
The
EPA
notes
that
information
on
designated
representatives
and
authorized
account
representatives
is
already
available
to
State
permitting
authorities
through
on­
line
access
to
the
Allowance
Tracking
System.
Moreover,
EPA
is
in
the
process
of
developing,
and
anticipates
establishing
in
the
near
future,
the
ability
to
send
State
permitting
authorities
(
at
their
request)
on­
line
notices
of
changes
in
designated
representatives
(
who
are
also
the
authorized
account
representatives
for
affected
sources'
accounts).

Other
proposed
Acid
Rain
Program
rule
revisions
on
which
EPA
received
adverse
comment
are
the
removal
of
§
73
§
73.32
(
prescribing
the
contents
of
an
allowance
account)

and
§
73
§
73.51
(
prohibiting
the
transfer
of
allowances
from
a
future
year
subaccount
to
a
subaccount
for
an
earlier
year).
Section
73.32
sets
forth
a
rather
self­
evident
list
of
information
that
must
be
recorded
in
an
allowance
account
in
the
Allowance
Tracking
System,
such
as
the
name
of
the
authorized
account
representative,
the
persons
represented
by
the
authorized
account
representative,
and
the
transfers
of
allowances
in
and
out
of
the
account.
This
section
also
references
information
on
compliance
or
current
year
15
In
reviewing
the
proposed
Acid
Rain
Program
rule
revisions,
EPA
found
some
additional
references
to
"
subaccounts"
that
were
not
specifically
noted
in
the
SNPR.
For
consistency
and
clarity
in
the
Acid
Rain
Program
rules,
EPA
is
adopting
in
today's
action
revisions
(
e.
g.,
changing
the
term
"
subaccount"
to
"
compliance
account")
of
these
additional
references,
which
revisions
are
analogous
to
those
specifically
set
forth
in
the
SNPR.
This
approach
is
consistent
with
the
SNPR,
where
EPA
proposed
to
convert
all
references,
including
any
initially
missed
in
the
SNPR,
from
subaccount
to
compliance
account.
,
(
69
FR
32700).

55
Section
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2005
DRAFT
Do
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Quote
or
Cite
subaccounts
and
future
year
subaccounts,
as
well
as
emissions
information.
As
discussed
in
the
SNPR,
several
items
on
the
list
of
informational
contents
for
allowance
accounts
are
out­
of­
date
in
that
they
do
not
reflect
how
the
electronic
Allowance
Tracking
System
operates
or
will
operate
in
the
near
future.
For
example,
the
electronic
Allowance
Tracking
System
does
not
currently
use
or
refer
to
subaccounts,
which
will
continue
to
be
unnecessary
in
the
context
of
source­
level
compliance.
15
See
69
FR
32700­
01.

In
addition,
while
§
73
§
73.32
states
that
emissions
data
are
reflected
in
the
Allowance
Tracking
System
account,
such
data
are
currently
available
instead
through
the
electronic
Emissions
Tracking
System.
Because
the
information
list
in
§
73
§
73.32
contains
either
self­
evident
items
or
items
that
are
out­
of­
date
and
because
the
NOx
Allowance
Tracking
System
has
been
operating
successfully
even
though
the
model
NOx
Budget
cap­
and­
tradecap
and
trade
rule
and
State
capand
tradecap
and
trade
rules
under
the
NOx
SIP
Call
lack
a
56
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
provision
analogous
to
§
73
§
73.32,
EPA
is
removing
§
73
§
73.32.
EPA
notes
that
the
removal
of
the
section
will
not
mean
that
the
information
contained
in
allowance
accounts
"
can
be
changed
at
will."
The
format
for
allowance
accounts
is
set
forth
in
the
electronic
Allowance
Tracking
System
and
implements
the
requirements
in
the
Acid
Rain
Program
regulations
concerning
the
holding,
transferring,

recording,
and
deducting
of
allowances.

Section
73.51
prohibits
the
transfer
of
allowances
from
a
future
year
subaccount
to
a
subaccount
for
an
earlier
year.
The
removal
of
this
section
is
consistent
with
the
elimination
throughout
the
rest
of
the
Acid
Rain
Program
regulations,
as
discussed
in
the
SNPR
(
id.),
of
any
references
to
such
subaccounts.
Further,
the
prohibition
on
using
allowances
allocated
for
a
year
to
meet
the
allowanceholding
requirement
for
a
prior
year
is
retained
in
other
provisions
of
the
Acid
Rain
Program
regulations.

Consequently,
EPA
is
removing
§
73
§
73.51.

C.
How
Does
the
Rule
Interact
with
the
Regional
Haze
Program?

This
section
discusses
the
relationship
of
the
CAIR
cap
and
trade
program
for
EGUs
with
the
regional
haze
program
under
sections
169A
&
169B
of
the
ActCAA,
in
particular
the
requirements
for
Best
Available
Retrofit
Technology
(
BART)
57
Section
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
for
certain
source
categories
including
EGUs.
The
legislative
and
regulatory
background
of
the
BART
provisions
were
presented
in
some
detail
in
the
SNPR.
(
See
69
FR
32684,
32702
 
704,
June
10,
2004).
In
brief,
BART
regulations
consist
of
two
components.
The
first,

promulgated
in
1980,
addresses
visibility
impairment
that
can
be
"
reasonably
attributed"
to
a
single
source
or
small
group
of
sources.
(
45
FR
80085,;
December
2,
1980,
codified
at
40
CFR
51.302.
The
second
component
addresses
BART
in
relation
to
regional
haze
(
visibility
impairment
caused
by
a
multitude
of
broadly
distributed
sources)
and
was
promulgated
as
part
of
the
Regional
Haze
Rule.
(
64
FR
35714,;
July
1,
1999).
Certain
parts
of
the
BART
provisions
in
that
rule
were
vacated
by
the
U.
S.
Court
of
Appeals
for
the
DCD.
C.
Circuit
in
American
Corn
Growers
et
al.
v.
EPA,

291
F.
3d
1
(
DCD.
C.
Cir.,
2002).
To
address
that
decision,

in
May
2004,
EPA
proposed
changes
to
the
Regional
Haze
Rule
and
reproposed
the
Guidelines
for
BART
Determinations
(
originally
proposed
in
2001).
(
69
FR
25185,
May
5,
2004).

On
February
18,
2005,
the
DCD.
C.
Circuit
decided
another
case
dealing
with
BART
and
a
BART
alternative
program,
Center
for
Energy
and
Economic
Development
v.
EPA,

[
citation]
No.
03­
1222,(
D.
C.
Cir.
Feb.
18,
2005)("
CEED
v.

EPA""
CEED").
In
this
case,
the
court
granted
a
petition
16
Arizona,
California,
Colorado,
Oregon,
Idaho,
Nevada,
New
Mexico,
Utah,
Washington,
and
Wyoming,
17
The
trading
program
is
referred
to
as
a
"
backstop"
because"
backstop"
because
under
the
WRAP
Annex,
States
have
the
opportunity
to
achieve
specified
emission
milestones
using
voluntary
measures,
with
the
trading
program
coming
into
effect
only
if
those
milestones
are
exceeded.

58
Section
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
challenging
provisions
of
the
regional
haze
rule
governing
the
optional
emissions
trading
program
for
certain
western
States
and
tTribes
(
the
"
WRAP
Annex
Rule").
The
holdings
of
the
case
are
relevant
to
today's
action
in
several
respects.

Most
importantly
for
purposes
of
the
CAIR,
CEED
v.
EPA
affirmed
EPA's
interpretation
of
CAA
169A(
b)(
2)
as
allowing
for
non­
BART
alternatives
where
those
alternatives
make
greater
progress
than
BART.
[
Slip(
CEED,
slip.
op.
at
13]

)(
finding
that
EPA's
interpretation
of
CAA
169(
a)(
2)
as
requiring
BART
only
as
necessary
to
make
reasonable
progress
passes
the
two­
pronged
Chevron
test).

The
particular
provisions
involved
in
CEED
v.
EPA
applied,
on
an
optional
basis,
only
to
nine
western
States16
(
none
of
which
are
in
the
CAIR
region)
and
the
Tribes
therein.
The
provisions,
contained
in
40
CFR
51.309
("
§
309"
§
309")
required
among
other
things
that
States
choosing
to
participate
in
a
"
backstop"
17
cap
and
trade
program
must
demonstrate
that
the
emissions
reductions
under
the
program
resulted
in
greater
progress
towards
the
national
visibility
goals
than
would
BART.
At
issue
was
the
particular
18
The
methodology
is
prescribed
in
40
CFR
51.308(
e)(
2)
and
incorporated
into
§
309
by
reference
at
40
CFR
51.309(
f).

59
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
methodology
required
for
this
demonstration.
Specifically,

EPA's
rule
required
that
visibility
improvements
under
source­
specific
BART
 
the
benchmark
for
comparison
to
the
cap
and
trade
program
 
must
be
calculated
based
on
the
application
of
BART
controls
to
all
sources
subject
to
BART.
18
Although
American
Corn
Growers
had
vacated
this
cumulative
visibility
approach
in
the
context
of
determining
BART
for
individual
sources,
the
EPA
believed
that
it
was
still
permissible
to
require
this
methodology
in
the
context
of
a
BART­
alternative
program.
The
DCD.
C.
Circuit
in
CEED
v.
EPA
held
otherwise,
stating:
"
EPA
cannot
under
§
309
require
states
to
exceed
invalid
emission
reductions
(
or,
to
put
it
more
exactly,
limit
them
to
a
§
309
alternative
defined
by
an
unlawful
methodology)."
[
Slip
Op(
Id.
at
14]).

Thus,
CEED
v.
EPA
firmly
established
two
principles:

(
1)
the
CAA
allows
States
to
substitute
other
programs
for
BART
where
the
alternative
achieves
greater
progress,
and
(
2)
EPA
may
not
require
States
to
evaluate
visibility
improvement
on
a
cumulative
basis
as
a
condition
for
approval
of
a
BART­
alternative.
The
first
principle
validates
EPA's
proposal
to
allow
the
CAIR
to
substitute
for
BART.
The
second
principle
is
not
at
issue
in
the
CAIR
context,
because
EPA
is
not
proposing
to
impose
the
60
Section
IX
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2005
DRAFT
Do
Not
Quote
or
Cite
cumulative
visibility
methodology
upon
States,
nor
to
require
States
to
treat
the
CAIR
as
having
satisfied
their
BART
obligations.

Nonetheless,
the
EPA
has
determined
that
it
is
premature
to
make
a
final
determination
regarding
the
sufficiency
of
the
CAIR
as
a
BART
alternative,
primarily
because
(
1)
the
guidelines
for
source­
specific
BART
determinations,
in
response
to
American
Corn
Growers
have
not
been
finalized,
and
(
2)
there
is
now
a
need
to
revise
the
rRegional
hHaze
rRule
and
the
guidelines
for
BARTalternative
programs
in
response
to
CEED
v.
EPA.
The
sourcespecific
BART
guidelines
will
be
finalized
on
or
before
April
15,
2005,
under
a
consent
decree.
The
rule
changes
and
revisions
to
the
BART­
alternative
guidelines
will
be
proposed
soon
thereafter.

Therefore,
we
are
making
no
final
determination
in
today's
action
with
respect
to
BART.
The
EPA
continues
to
believe,
however,
that
the
CAIR
will
result
in
greater
progress
in
visibility
improvement
than
BART,
as
explained
below.

1.
How
Does
this
Rule
Relate
to
Requirements
for
Best
Available
Retrofit
Technology
(
Bart)
BART
under
the
Visibility
Provisions
of
the
CAA?
19
The
SNPR
preamble
used
the
term
"
exemption"
in
describing
this
policy.
As
clarified
below,
and
as
consistent
with
the
proposed
regulatory
language,
the
better­
than­
BART
policy
is
not
actually
an
exemption
but
rather
an
alternative
means
of
compliance.

61
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
a.
Supplemental
Notice
of
Proposed
Rulemaking
In
the
SNPR,
we
proposed
that
States
which
adopt
the
CAIR
cap
and
trade
program
for
SO2
and
NOx
would
be
allowed
to
treat
the
participation
of
EGUs
in
this
program
as
a
substitute
for
the
application
of
BART
controls
for
these
pollutants
to
affected
EGUs.
19
To
give
this
option
effect,

we
proposed
an
amendment
to
the
Regional
Haze
Rule
which
would
add
a
section
at
40
CFR
51.308(
e)(
3),
as
follows:

(
3)
A
State
that
opts
to
participate
in
the
Clean
Air
Interstate
Rule
cap­
and­
trade
program
under
part
96
AAA­
EEE
need
not
require
affected
BARTeligible
EGUs
to
install,
operate,
and
maintain
BART.
A
State
that
chooses
this
option
may
also
include
provisions
for
a
geographic
enhancement
to
the
program
to
address
the
requirement
under
§
51.302(
c)
related
to
BART
for
reasonably
attributable
impairment
from
the
pollutants
covered
by
the
CAIR
cap­
and­
tradecap
and
trade
program.

This
proposal
is
consistent
with
currently
existing
provisions
which
allow
States
to
develop
cap
and
trade
62
Section
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2005
DRAFT
Do
Not
Quote
or
Cite
programs
or
other
alternative
measures
in
lieu
of
the
application
of
BART
on
a
source
specific
basis.
(
See
40
CFR
51.308(
e)(
2)
and
64
FR
35714,
35741
 
35743,
July
1,
1999).

The
proposal
was
based
on
the
application
of
the
proposed
two­
pronged
test
for
whether
an
alternative
to
BART
is
"
better
than
BART"
which
was
proposed
in
the
2001
BART
guidelines
and
reproposed
without
changes
in
our
May,
2004
proposed
guidelines
for
BART
determinations.
(
69
FR
25184,

May
5,
2004).

Specifically,
the
re­
proposed
BART
Guidelines
provide
that
if
the
geographic
distribution
of
emissions
reductions
is
anticipated
to
be
similar
under
both
programs,
the
trading
program
(
or
other
alternative
measure)
must
be
shown
to
achieve
greater
overall
emissions
reductions
than
the
application
of
source­
specific
BART.
If
the
trading
program
is
anticipated
to
result
in
a
different
geographic
distribution
of
emissions
reductions
than
would
sourcespecific
BART,
the
trading
program
must
be
shown
to
result
in
no
decline
in
visibility
at
any
Class
I
area,
and
in
an
overall
improvement
in
visibility
on
an
average
basis
over
all
affected
Class
I
areas.
(
69
FR
25184,
25231).
Because
we
haved
not
yet
determined
whether
there
is
a
difference
in
the
geographic
distribution
of
emissions
reductions
between
the
CAIR
and
the
application
of
source­
specific
BART
in
the
63
Section
IX
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2005
DRAFT
Do
Not
Quote
or
Cite
CAIR
region,
we
assessed
the
difference
between
the
two
programs
by
evaluating
the
visibility
impacts
of
each
program,
using
this
proposed
two­
pronged
test.

The
emissions
projections
and
air
quality
modeling
used
to
demonstrate
that
the
CAIR
satisfies
this
proposed
twopronged
test
were
presented
in
a
document
entitled
Supplemental
Air
Quality
Modeling
Technical
Support
Document
(
TSD)
for
the
Clean
Air
Interstate
Rule
(
May
4,
2004).
In
brief,
we
found
that
the
CAIR
would
not
result
in
a
degradation
of
visibility
from
current
conditions
at
any
Class
I
Area
nationwide.
Within
the
CAIR­
affected
States
and
New
England,
the
EPA
found
that
the
CAIR
would
produce
greater
visibility
benefits
 
specifically,
an
average
improvement
of
2.0
deciviews,
as
compared
to
1.0
for
BART.

The
EPA
also
found
that
average
visibility
improvement
for
Class
I
Aareas
nationwide
would
be
0.7
deciviews
under
the
CAIR,
compared
to
0.4
deciviews
under
BART.
The
EPA
noted
in
the
SNPR
and
the
TSD
that
because
the
emissions
scenarios
used
in
these
analyses
were
developed
for
different
purposes,
the
scenarios
varied
slightly
from
the
scenarios
which
would
be
ideal
for
this
test.
The
EPA
committed
to
conduct
additional
analyses,
and
those
analyses
have
now
been
done.
The
new
modeling
and
results
are
discussed
in
more
detail
in
section
IX.
C.
2
below.
64
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
b.
Comments
and
EPA's
Responses
Several
commenters
argued
that
a
categorical
exclusion
of
sources
from
BART
would
violate
the
CAA,
as
interpreted
by
the
U.
S.
Court
of
Appeals
for
the
DCD.
C.
Circuit
in
American
Corn
Growers
v.
EPA,
291
F.
3d
1,
2002,
by
illegally
constraining
the
discretion
Congress
conferred
to
States
in
making
BART
determinations
and
by
depriving
States
of
an
adequate
opportunity
to
evaluate
the
emissions
reductions
in
light
of
the
BART
requirement.
Some
States
also
expressed
a
desire
to
retain
their
discretion
to
require
BART.

Additionally,
some
commenters
asserted
that
EPA
could
not
offer
an
exemption
to
BART
unless
the
conditions
for
exemptions
provided
by
CAA
169A(
c)
are
met,
including
a
showing
that
the
source
in
question
will
not,
alone
or
in
combination
with
other
sources,
emit
any
pollutant
which
may
reasonably
be
anticipated
to
cause
or
contribute
to
impairment
at
any
Class
I
area,
and
the
concurrence
of
the
appropriate
Federal
Land
Manager
with
the
exemption
determination.

The
EPA
agrees
that
under
the
CAA
and
the
American
Corn
Growers
case,
EPA
may
not
preclude
a
State
from
conducting
its
own
BART
analysis,
nor
from
requiring
BART
controls
at
individual
sources
as
determined
appropriate
through
such
analysis.
Accordingly,
as
noted
above,
the
proposed
65
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
regulatory
change
to
the
Regional
Haze
Rule
would
provide
that
a
CAIR
affected
State
"
need
not
require
affected
BARTeligible
EGUs
to
install,
operate,
and
maintain
BART"
if
such
State
opts
to
participate
in
the
CAIR
cap
and
trade
program.
The
optional
nature
of
this
language
("
need
not"

rather
than
"
may
not")
is
consistent
with
the
American
Corn
Growers
decision,
because
it
does
not
attempt
to
mandate
that
States
must
consider
the
CAIR
as
having
met
the
requirements
of
BART.

The
SNPR
preamble
summarized
the
proposal
by
stating
that
"
EPA
proposes
that
BART­
eligible
EGUs
in
any
State
affected
by
CAIR
may
be
exempted
from
BART
controls
for
SO2
and
NOx
if
that
State
complies
with
the
CAIR
requirements
through
adoption
of
the
CAIR
cap­
and­
trade
programs
for
SO2
and
NOx
emissions."
(
69
FR
at
32702
(
emphasis
added3270).

That
statement
accurately
reflected
the
optional
nature
of
the
better­
than­
BART
substitution
policy,
by
providing
that
sources
"
may"
be
granted
such
regulatory
flexibility.

However,
the
use
of
the
term
"
exempted"
in
this
context
was
somewhat
imprecise.
The
EPA
agrees
that
sources
may
not
be
"
exempt"
from
BART
requirements
unless
the
requirements
of
169A(
c)
are
fulfilled.
The
better­
than­
BART
policy
is
not
an
"
exemption"
from
BART;
it
is
an
alternative
regulatory
program
that
would
allow
Congressionally
required
emissions
66
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
reductions
from
BART­
eligible
sources
to
be
made
in
a
more
cost­
effective
manner.
Moreover,
as
explained
elsewhere
in
the
SNPR
and
again
below,
BART­
eligible
EGUs
would
not
be
"
exempt"
from
BART
because,
until
the
emissions
reductions
required
by
the
CAIR
are
fully
realized,
such
sources
would
remain
subject
to
the
possibility
of
being
required
to
install
BART
controls
if
deemed
necessary
to
meet
requirements
regarding
reasonably
attributable
visibility
impairment,
as
provided
by
40
CFR
51.302.

Several
commenters
asserted
that
because
Congress
singled
out
26
source
categories
for
the
application
of
BART,
there
is
no
basis
in
law
for
EPA
to
"
exempt"
some
of
these
categories.
These
comments
amount
to
facial
challenges
of
EPA's
authority
to
approve
SIPs
which
contain
alternative
strategies,
rather
than
source­
specific
BART
requirements,
for
BART­
eligible
sources.

The
EPA's
authority
to
approve
alternative
measures
to
BART,
where
those
measures
achieve
greater
reasonable
progress
than
would
BART,
was
recently
upheld
by
the
D.
C.

Circuit
in
.
(
CEED
v,
slip.
EPA,
[
citation,
op.
at
13]).

See
also
Central
Arizona
Water
Conservation
District
v.
EPA,

990
F.
2d
1531,1543,
(
1993)(
Upholding
EPA's
interpretation
of
CAA
169A(
b)(
2)
as
providing
discretion
to
adopt
implementation
plan
provisions
other
than
those
provided
by
20
CAIR
is
linked
to
visibility
improvements
insofar
as
it
attempts
to
make
progress
towards
attainment
of
the
PM2.5
NAAQS,
which
would,
among
other
things,
improve
visibility.

67
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
BART
analyses
in
situations
where
the
agency
reasonably
concludes
that
more
reasonable
progress
will
thereby
be
attained).

Similarly,
some
commenters
stated
that
the
CAIR
could
not
substitute
for
BART
because
the
CAIR
and
BART
are
authorized
by
separate
parts
of
the
CAA.
They
argue
that
allowing
reductions
required
by
a
provision
of
the
ActCAA
not
linked
to
visibility
improvement
to
substitute
for
BART
would
alter
Congress's
"
mandate"
that
certain
source
categories
make
reductions
for
visibility
in
excess
of
what
other
CAA
provisions
require
of
those
sources.
20
Commenters
also
point
to
Regional
Haze
Rule
section
308(
e)(
2),
as
evidence
that
reductions
from
other
programs
such
as
Ttitle
IV
and
the
NOx
SIP
cCall
must
be
achieved
in
addition
to,

and
not
as
a
substitute
for,
BART.
Commenters
also
argue
that
EPA
(
and
States)
will
need
all
available
tools,

including
BART,
to
meet
visibility
and
NAAQS
requirements.

Again,
under
our
interpretation
of
CAA
§
169Asection
169A(
b)(
2)
as
upheld
in
CEED
v.
EPA
and
Central
Arizona
Water,
Congress
did
not
"
mandate"
that
emission
reductions
from
certain
source
categories
be
obtained
by
the
installation
of
BART
controls.
Instead,
the
ActCAA
allows
68
Section
IX
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2005
DRAFT
Do
Not
Quote
or
Cite
for
alternative
measures
to
BART
 
whether
for
EGUs
or
non­

EGUs
 
where
those
measures
result
in
greater
reasonable
progress,
and
as
explained
below,
we
have
determined
that
greater
reasonable
progress
can
be
obtained
from
the
EGU
sector
through
the
use
of
the
CAIR
cap
and
trade
program.

However,
if
a
State
believes
more
progress
can
be
made
at
affected
Class
I
areas
by
utilizing
BART,
the
State
need
not
make
the
determination
that
the
CAIR
substitutes
for
BART
in
that
State.
Therefore
the,
EPA
is
not
eliminating
any
tools
available
to
the
States.

With
respect
to
rRegional
hHaze
rRule
section
308(
e)(
2),
the
EPA
also
does
not
believe
that
this
section
provides
any
support
for
the
notion
that
emissions
reductions
from
other
programs
must
necessarily
be
in
addition
to,
not
substitute,
for
BART.
We
first
note
that
the
decision
in
CEED
v.
EPA
necessitates
revisions
to
308(
e)(
2),
at
least
in
the
provisions
requiring
visibility
to
be
evaluated
on
a
cumulative
basis
in
defining
the
BART
benchmark
for
comparison
to
BART
alternative
programs.
It
remains
to
be
seen
whether
308(
e)(
2)(
iv),
which
requires
that
emissions
reductions
from
the
BART
alternative
be
"
surplus
to
reductions
resulting
from
measures
adopted
to
meet
requirements
as
of
the
baseline
date
of
the
SIP",
SIP,"

will
be
changed.
Even
if
that
section
remains
unchanged,
21
See
"
2002
Base
Year
Emission
Inventory
SIP
Planning:
8­
hr
Ozone,
PM2.5
and
Regional
Haze
Programs,
"
November
8,
2002,
Guidance
Memorandum,
http://
www.
epa.
gov/
ttn/
oarpg/
t1/
memoranda/
2002bye_
gm.
pdf
22
The
purpose
of
providing
a
cut­
off
year
for
SIP
measures
to
which
the
alternative
must
be
surplus
is
to
prevent
an
untenable
situation
where
programs
being
developed
simultaneously
must
be
surplus
to
each
other.
Establishing
a
baseline
year
allows
States
to
continue
to
make
reductions
between
that
baseline
date
and
the
submittal
of
regional
haze
SIPs
without
being
"
penalized"
for
those
reductions
by
not
being
allowed
to
count
them
as
contributing
to
reasonable
progress
towards
the
national
visibility
goal.

69
Section
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
the
CAIR
complies
with
it.
The
baseline
date
of
Regional
Haze
SIPs
is
2002.21
Since
any
emissions
reduction
requirements
to
meet
the
CAIR
would
necessarily
be
adopted
after
2002,
CAIR­
required
reductions
would
clearly
be
surplus
to
measures
adopted
as
of
the
baseline
year.
22
Several
commenters
argued
that
the
question
of
whether
BART
is
better
than
the
CAIR
is
properly
addressed
in
the
BART
rulemaking,
not
in
today's
action,
and
that
the
betterthan
BART
determination
is
otherwise
premature.
While
EPA
believes
that
our
current
analysis
demonstrates
that
the
CAIR
is
better
than
BART,
(
based
on
the
criteria
in
our
May
2004
BART
proposal),
and
that
the
range
of
uncertainty
regarding
the
presumptive
BART
controls
for
EGUs
to
be
finalized
in
the
BART
guidelines
is
not
likely
to
alter
that
demonstration,
we
agree
that
we
cannot
make
a
final
determination
that
CAIR
is
better
than
BART
until
the
70
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
changes
to
the
regional
haze
regulations
required
by
both
American
Corn
Growers
and
CEED
v.
EPA
are
finalized.

Several
commenters
felt
the
CAIR
should
be
considered
better­
than­
BARTbetter
than
BART
for
a
State
whether
or
not
that
State
participates
in
the
CAIR
cap­
and­
tradecap
and
trade
program,
as
long
as
the
State
achieves
its
emission
reduction
requirement
under
the
CAIR.
Conversely,
one
commenter
felt
that
CAIR
reductions
should
be
considered
better­
than­
BARTbetter
than
BART
only
when
a
State
does
not
participate
in
the
cap­
and­
tradecap
and
trade
program,

thereby
ensuring
that
the
reductions
will
occur
in­
sState.

Our
preliminary
demonstration
that
the
CAIR
results
in
more
reasonable
progress
than
BART
for
EGUs
is
based
on
a
comparison
of
emissions
reductions
from
EGUs,
and
attendant
air
quality
effects,
under
the
CAIR
as
compared
to
under
BART
as
proposed
in
May,
2004.
If
emissions
reductions
are
achieved
from
other
source
sectors,
a
similar
analysis
would
have
to
be
conducted
for
those
sector(
s)
before
it
could
be
determined
that
the
reductions
were
better
than
BART
for
affected
source
categories.
For
example,
if
a
State
either
wants
to
use
EGU
emissions
reductions
under
the
CAIR
to
substitute
for
BART
for
non­
EGUs,
or
use
non­
EGU
emissions
reductions
to
substitute
for
BART
for
EGUs,
that
could
be
allowed
as
an
alternative
measure
to
BART
provided
a
similar
71
Section
IX
3/
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2005
DRAFT
Do
Not
Quote
or
Cite
"
better­
than­
BART"
determination
is
made
for
the
sectors
involved.

A
few
commenters
believed
EPA
should
not
limit
the
substitution
of
the
CAIR
for
BART
to
States
that
are
required
to
meet
CAIR
for
both
SO2
and
NOx
on
an
annual
basis,
but
rather
should
also
allow
it
for
States
which
are
only
required
to
reduce
NOx
during
the
ozone
season.

Because
the
modeling
scenarios
were
based
on
the
pollutants
covered
by
the
CAIR
in
each
affected
State,
our
better­
than­

BART
demonstration
is
limited
to
those
scenarios.
A
State
subject
to
the
CAIR
for
NOx
purposes
only
would
have
to
make
a
supplementary
demonstration
that
BART
has
been
satisfied
for
SO2,
as
well
as
for
NOx
on
an
annual
basis.

A
few
commenters
believed
that
the
CAIR
should
satisfy
BART
for
purposes
of
reasonably
attributable
visibility
impairment
as
well
as
BART
for
purposes
of
regional
haze.

Several
others
commented
that
it
was
appropriate
or
legally
necessary
to
preserve
the
authority
of
Federal
Land
Managers
(
FLMs)
and
States
to
certify
impairment
and
make
reasonable
attribution
determinations,
which
could
subject
a
source
to
BART
requirements
even
if
the
source
is
a
participant
in
the
CAIR
cap­
and­
tradecap
and
trade
program.
These
commenters
supported
the
use
of
a
strategy
similar
to
that
employed
by
the
Western
Regional
Air
Partnership,
which
relies
upon
a
72
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IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
Memorandum
Of
Understanding
(
MOU)
between
the
FLMs
and
the
States
regarding
the
criteria
by
which
certifications
of
impairment
may
be
made,
along
with
the
possibility
of
"
geographic
enhancements"
to
the
cap­
and­
tradecap
and
trade
program
to
accommodate
the
imposition
of
source­
specific
BART
control
requirements
on
a
source
within
the
cap­

andtradecap
and
trade
program.

As
proposed
in
the
SNPR,
the
EPA
continues
to
believe
that
reasonably
attributable
visibility
impairment
determinations
under
40
CFR
51.302
must
continue
to
be
a
viable
option
in
order
to
insure
against
any
possibility
of
hot­
spots.
We
believe
that
a
certification
of
reasonably
attributable
visibility
impairment
is
fairly
unlikely,
given
that
there
have
been
few
such
certifications
since
1980,
and
given
that
the
reductions
from
the
CAIR
and
other
recent
initiatives
will
make
such
certifications
decreasingly
likely.
We
believe
sources
can
be
given
sufficient
regulatory
certainty
to
enable
effective
participation
in
a
cap
and
trade
program
through
the
use
of
MOUs
and
geographic
enhancement
provisions.

Some
commenters
believe
that
because
section
169A(
b)(
2)(
A)
requires
BART
for
an
eligible
source
which
may
reasonably
be
anticipated
to
cause
or
contribute
to
any
impairment
of
visibility
in
any
Class
I
area,
EPA
is
23
The
question
of
whether
section
169A(
b)(
2)
requires
BART
based
on
contribution
to
impairment
at
any
Class
I
area
is
separate
from
the
question
of
whether
this
section
requires
source­
specific
BART
under
all
circumstances.
As
noted
earlier,
we
interpret
section
169A
(
b)(
2)
as
requiring
BART
only
as
needed
to
make
reasonable
progress,
thus
allowing
for
alternative
measures
which
make
greater
reasonable
progress.

73
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
without
basis
in
law
or
regulation
to
base
a
better­
than­

BART
determination
on
an
analysis
that
does
not
evaluate
visibility
improvement
at
each
and
every
Class
I
Aarea,
or
one
that
uses
averaging
of
visibility
improvement
across
different
Class
I
Aareas.

The
criteria
we
applied
in
our
present
analysis
 
that
greater
reasonable
progress
is
defined
as
no
degradation
at
any
Class
I
area,
and
greater
overall
average
improvement
 
hasve
not
been
finalized.
However,
we
disagree
with
comments
that
169A(
b)(
2)'
s
requirement
of
BART
for
sources
reasonably
anticipated
to
contribute
to
impairment
at
any
Class
I
area23
means
that
an
alternative
to
the
BART
program
must
be
shown
to
create
improvement
at
each
and
every
Class
I
Aarea.
Even
if
a
BART
alternative
is
deemed
to
satisfy
BART
for
regional
haze
purposes,
based
on
average
overall
improvement
as
opposed
to
improvement
at
each
and
every
Class
I
Area,
169A(
b)(
2)'
s
trigger
for
BART
based
on
impairment
at
any
Class
I
area
remains
in
effect,
because
a
source
may
become
subject
to
BART
based
on
"
reasonably
attributable
visibility
impairment"
at
any
area.
(
The
EPA
74
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
believes
it
is
unlikely
that
a
State
or
FLM
will
have
need
to
certify
reasonably
attributable
visibility
impairment
(
RAVI)
with
respect
to
any
EGU
in
the
CAIR
region,
but
nevertheless
believes
it
is
necessary
to
preserve
this
safeguard).

We
also
received
a
number
of
comments
regarding
the
broader
relationship
between
the
CAIR
and
regional
haze,

including
whether
the
CAIR
meets
reasonable
progress
requirements,
as
well
as
BART,
for
affected
States;
whether
EPA
should
allow
non­
CAIR
sStates
to
opt
in
to
the
CAIR
capand
tradecap
and
trade
program
to
meet
their
BART
requirements;
and
whether
regional
haze
provisions
should
be
used
as
a
basis
for
expanding
the
CAIR
rule
to
the
rest
of
the
States
which
were
not
included
on
the
basis
of
contribution
to
PM2.5
and
ozone
non­
attainment.
The
EPA's
responses
to
comments
on
these
broader
issues,
which
are
not
germane
to
the
issue
of
whether
the
CAIR
may
substitute
for
BART
for
affected
EGUs,
are
contained
in
the
Response
to
Comment
Document.

c.
Today's
Action
As
discussed
above,
EPA
has
the
authority
to
approve
SIPs
which
rely
upon
a
cap­
and­
tradecap
and
trade
program
as
an
alternative
to
BART.
However,
at
this
time,
we
are
deferring
a
final
determination
that,
in
EPA's
view,
the
75
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
CAIR
is
bettermakes
greater
progress
than
BART
for
CAIR
­

affected
States
until
such
time
as
the
BART
guidelines
for
EGUs
and
the
criteria
for
BART­
alternative
programs
are
finalized.
At
that
time,
contingent
upon
supporting
analysis
and
our
final
rules
governing
the
regional
haze
program,
the
EPA
will
make
a
final
determination
as
to
whether
the
CAIR
is
bettermakes
greater
progress
than
BART,

and
can
be
relied
on
as
an
alternative
measure
in
lieu
of
BART.

2.
What
iImprovements
dDid
EPA
mMake
to
the
BART
vBart
Versus
the
CAIR
mModeling,
and
wWhat
aAre
the
nNew
rResults?

a.
Supplemental
Notice
of
Proposed
Rulemaking
For
the
better­
than­
BART
analysis
in
the
SNPR,
we
used
the
Integrated
Planning
Model
(
IPM)
to
estimate
emissions
expected
after
implementation
of
a
source­
specific
BART
approach
and
after
implementation
of
the
CAIR
cap­

andtradecap
and
trade
program
for
EGUs.
We
then
used
the
Regional
Modeling
System
for
Aerosols
and
Deposition
(
REMSAD)
air
quality
model
to
project
the
visibility
impact
of
these
IPM
emissions
predictions
for
both
the
CAIR
and
the
nationwide
source­
specific
BART
scenarios.
Specifically,

EPA
evaluated
the
model
results
for
the
20
percent
best
days
(
that
is,
least
visibility
impaired)
and
the
20
percent
worst
days
at
44
Class
I
areas
throughout
the
country.
76
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
Thirteen
of
these
Class
I
areas
are
within
States
affected
by
the
CAIR
proposal,
and
31
Class
I
areas
are
outside
the
CAIR
region
 
29
in
States
to
the
west
of
the
CAIR
region,

and
2
in
New
England
States
northeast
of
the
CAIR
region.

As
explained
in
the
SNPR,
the
"
CAIR"
scenario
modeled
was
imperfect
for
purposes
of
this
analysis
in
that
it
assumed
SO2
reductions
on
a
nationwide
basis
(
rather
than
in
the
CAIR
region
only)
and
assumed
NOx
reductions
requirements
in
a
slightly
different
geographic
region
than
covered
by
the
proposed
CAIR.
The
ideal
scenario
would
have
correctly
represented
the
geographic
scope
of
the
CAIR
SO2
and
NOx
reduction
requirements,
and
included
sourcespecific
BART
controls
in
areas
outside
the
CAIR
region.

(
This
corrected
scenario
has
been
modeled
for
the
NFR,
as
explained
below).

The
SNPR
REMSAD
modeling
showed
that
under
the
proposed
two­
pronged
test,
CAIR
controls
achieved
equal
or
greater
visibility
improvement
than
the
application
of
sourcespecific
BART
to
EGUs
nationwide.
The
modeling
predicted
that
the
CAIR
cap­
and­
tradecap
and
trade
program
will
not
result
in
degradation
of
visibility,
compared
to
existing
(
1998­
2002)
visibility
conditions,
at
any
of
the
44
Class
I
areas
considered.
It
also
indicated
that
CAIR
emissions
reductions
as
modeled
produce
significantly
greater
77
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
visibility
improvements
than
source­
specific
BART.

Specifically,
for
the
15
Eastern
Class
I
areas
analyzed,
the
average
visibility
improvement
(
on
the
20
percent
worst
days)
expected
solely
as
a
result
of
the
CAIR
was
2.0
deciviews,
and
the
average
degree
of
improvement
predicted
for
source­
specific
BART
was
1.0
deciviews.
Similarly,
on
a
national
basis,
the
visibility
modeling
showed
that
for
all
44
cClass
I
areas
evaluated,
the
average
visibility
improvement,
on
the
20
percent
worst
days,
in
2015
was
0.7
deciviews
under
the
CAIR
cap­
and­
tradecap
and
trade
program,

but
only
0.4
deciviews
under
the
source­
specific
BART
approach.

b.
Comments
and
EPA
Responses
Several
commenters
noted
that
EPA
did
not
model
the
"
correct"
emissions
scenarios
to
compare
the
CAIR
and
BART
controls.
They
suggested
that
a
model
run
with
the
CAIR
controls
in
the
East
and
BART
controls
in
the
West
should
be
compared
to
a
model
run
with
nationwide
BART
controls.

The
EPA
agrees
(
as
we
have
already
noted
in
the
SNPR)

that
the
suggested
comparison
of
model
runs
is
a
more
appropriate
comparison
of
the
CAIR
and
BART.
The
SNPR
better­
than­
BART
analysis
was
limited
by
the
availability
of
the
model
results
at
the
time.
For
the
NFR,
we
have
modeled
nationwide
BART
for
EGUs
as
proposed
in
the
May
2004
24
Because
the
presumptive
controls
in
the
BART
guidelines
are
applicable
to
coal
­
fired
EGUs,
the
BART
analysis
does
not
assume
controls
on
oil­
and
gas
­
fired
units.
However,
NOx
emissions
from
all
(
not
just
BART­
eligible)
oil
and
gas
steam
plants
and
simple
cycle
turbines
in
the
CAIR
region
in
the
2010
base
case
are
projected
to
be
about
40,000
tons,
or
less
than
1.5%
of
the
projected
total
2010
EGU
emissions
.
By
comparison,
the
modeling
of
the
scenario
of
the
CAIR
(
with
BART
in
the
non­
CAIR
region)
resulted
in
640,000
tons
of
NOx
per
year
less
than
the
projected
emissions
under
a
nationwide
BART
scenario.
Therefore,
even
if
the
40,000
tons
of
NOx
emissions
from
oil
and
gas
EGUs
were
reduced
to
zero
under
the
BART
scenario,
the
CAIR
will
still
produce
significantly
greater
emission
reductions
than
BART.
Also,
not
all
of
the
oil
and
gas
units
associated
with
those
40,000
tons
would
be
eligible
for
BART.
The
IPM
does
not
predict
any
difference
in
SO2
emissions
from
oil
or
gas
fired
units
between
the
CAIR
and
BART.

78
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
guidelines
and
a
separate
scenario
consisting
of
CAIR
reductions
in
the
CAIR­
affected
States
plus
BART­
reductions
in
the
remaining
States
(
excluding
Alaska
and
Hawaii).

Additionally,
we
have
improved
the
BART
control
assumptions
(
in
both
scenarios)
by
increasing
the
number
of
BARTeligible
units
included.
Specifically,
in
the
SNPR
analysis,
controls
were
"
required"
(
i.
e.,
assumed
by
the
model)
for
BART
­
eligible
EGUs
greater
than
250
MW
capacity,

for
both
NOx
and
SO2.
For
today's
action,
BART
controls
are
assumed
for
SO2
for
all
BART
­
eligible
EGU
units
greater
than
100
MW,
and
NOx
controls
for
all
BART
­
eligible
EGU
units
greater
than
25
MW.
24
This,
along
with
a
review
of
potentially
BART
­
eligible
EGUs,
has
expanded
the
universe
25
See
"
Memo
From
Perrin
Quarles
Associates,
Inc.
Re
Follow­
Up
on
Units
Potentially
Affected
by
BART,
July
19,
2004,"
as
Appendix
A
to
the
"
Better
than
BART"
TSD.
26
Some
Class
I
areas
do
not
have
IMPROVE
monitors
and
are
represented
by
nearby
IMPROVE
sites.
27
This
is
the
number
of
IMPROVE
sites
that
are
located
at
or
represent
Class
I
areas.
There
are
additional
IMPROVE
protocol
monitoring
sites
that
are
not
located
at
Class
I
79
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
of
units
assumed
subject
to
BART
in
the
modeling
from
302
to
491.25
Several
commenters
noted
that
the
better­
than­
BART
visibility
analysis
only
covered
44
Class
I
areas
and
did
not
adequately
address
visibility
in
all
areas
of
the
country.

For
the
NFR,
we
have
significantly
expanded
the
number
of
Class
I
areas
covered
by
the
analysis.
The
NPR
and
SNPR
visibility
analysis
was
limited
by
the
availability
of
observed
data
from
Inter­
agency
Monitoring
of
Protected
Visual
Environments
(
IMPROVE)
monitors
during
the
meteorological
modeling
year
of
1996.
There
was
complete
IMPROVE
data
at
44
IMPROVE
sites
which
represented
68
Class
I
areas.
26.
All
of
the
regions
of
the
country
(
as
defined
by
IMPROVE)
were
represented
by
at
least
one
site,
except
the
Northern
Great
Lakes
region.
For
the
final
rule,
the
modeling
has
been
updated
to
use
a
meteorological
year
of
2001.
Therefore,
the
IMPROVE
data
for
2001
was
used
for
the
NFR
better­
than­
BART
analysis.
For
2001,
there
were
81
IMPROVE
sites
with
complete
data,
27
representing
116
Class
I
areas.
28
There
are
5
Class
I
areas
in
the
East
and
33
Class
I
areas
in
the
West
(
outside
of
the
CAIR
control
region)
that
do
not
have
complete
IMPROVE
data
for
2001.

80
Section
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2005
DRAFT
Do
Not
Quote
or
Cite
areas.
The
NFR
analysis
accounts
for
visibility
changes
at
80
percent
of
the
active
IMPROVE
sites
in
the
lower
48
States.
More
importantly
for
today's
rulemaking,
the
number
of
Class
I
areas
in
the
East
has
been
increased
from
15
to
29
and
now
covers
all
IMPROVE­
defined
visibility
regions
within
the
CAIR­
affected
States,
including
the
Northern
Great
Lakes.
28
We,
therefore,
believe
the
expanded
geographic
scope
of
Class
I
areas
covered
is
sufficient
for
purposes
of
this
analysis.

c.
Today's
Action
We
have
compared
the
two
model
runs
(
BART
nationwide
and
BART
in
the
West
with
the
CAIR
in
the
East)
using
the
proposed
two­
pronged
better
­
than
­
BART
test.
The
results
were
analyzed
at
the
116
Class
I
areas
that
have
complete
IMPROVE
data
for
2001
or
are
represented
by
IMPROVE
monitors
with
complete
data.
Twenty
nine
of
the
Class
I
areas
are
in
the
East
and
87
are
in
the
West.
Detailed
modeling
results
for
all
116
Class
I
areas
are
contained
in
the
Better­
than­
29
"
Demonstration
that
CAIR
Satisfies
the
"
Better­
than­
BART"`
Better­
than­
BART'
Test
As
proposed
in
the
Guidelines
for
Making
BART
Determinations,"
DecemberMarch,
20045.
30
See
Better­
than
BART
TSD
for
results
at
each
Class
I
Area.

81
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
BART
TSD.
29
Results
applicable
to
the
better­
than­
BART
proposed
two­
pronged
test
are
summarized
below.

The
updated
visibility
analysis
reaffirms
that
under
the
proposed
two­
pronged
test,
CAIR
controls
are
better
than
BART
for
EGUs.
The
modeling
predicts
that
the
CAIR
cap­

andtradecap
and
trade
program
will
not
result
in
degradation
of
visibility
on
the
20%
20
percent
best
or
20%
20
percent
worst
days
compared
to
the
2015
baseline
conditions,
at
any
of
the
116
Class
I
areas
considered.
30
With
respect
to
the
greater­
average­
improvement
prong,

the
modeling
indicates
that
CAIR
emissions
reductions
in
the
East
produce
significantly
greater
visibility
improvements
than
source­
specific
BART.
Specifically,
for
the
29
Eastern
Class
I
areas
analyzed,
the
average
visibility
improvement,

on
the
20
percent
worst
days,
expected
solely
as
a
result
of
the
CAIR
applied
in
the
East
and
BART
applied
in
the
West
is
1.6
dv,
as
compared
to
the
average
degree
of
improvement
predicted
for
nationwide
source­
specific
BART
of
0.7
dv.

Similarly,
on
a
national
basis,
the
visibility
modeling
showed
that
for
all
116
cClass
I
areas
evaluated,
the
average
visibility
improvement,
on
the
20
percent
worst
days,
in
2015
was
0.5
dv
under
the
CAIR
cap­
and­
tradecap
and
82
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
trade
program
in
the
East
and
BART
in
the
West,
but
only
0.2
deciviews
under
the
nationwide
source­
specific
BART
approach.

The
modeling
showed
similar
results
for
the
20%
20
percent
best
visibility
days,
although
there
is
less
visibility
improvement
on
the
best
days
compared
to
the
worst
days.
For
the
29
Eastern
Class
I
areas
analyzed,
the
average
visibility
improvement,
on
the
20
percent
best
days,

expected
solely
as
result
of
the
CAIR
applied
in
the
East
and
BART
applied
in
the
West
is
0.4
dv,
as
compared
to
the
average
degree
of
improvement
predicted
for
nationwide
source­
specific
BART
of
0.2
dv.
On
a
national
basis,
the
visibility
modeling
showed
that
for
all
116
class
I
areas
evaluated,
the
average
visibility
improvement,
on
the
20
percent
best
days,
in
2015
was
0.1
dv
under
both
the
CAIR
cap­
and­
tradecap
and
trade
program
in
the
East
and
BART
in
the
West,
and
under
the
nationwide
source­
specific
BART
approach.
The
results
are
summarized
in
table
x.
xIX­
1.

Table
x.
xIX­
1
Average
Visibility
Improvement
in
2015
vs.

2015
Base
Case
(
deciviews)
31
Eastern
Class
I
areas
are
those
in
the
CAIR
affected
states,
except
areas
in
west
Texas
which
are
considered
western
and
therefore
included
in
the
national
average,
plus
those
in
New
England.

83
Section
IX
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9/
2005
DRAFT
Do
Not
Quote
or
Cite
CAIR
+
BART
in
West
Nationwide
BART
Class
I
Areas
East*
31
National
East*
National
20%
Worst
Days
1.6
0.5
0.7
0.2
20%
Best
Days
0.4
0.1
0.2
0.1
The
results
clearly
indicate
that
the
CAIR
will
achieve
greater
reasonable
progress
than
BART
as
proposed,
measured
by
the
proposed
better­
than­
BART
test.
At
this
time,
we
can
foresee
no
circumstances
under
which
BART
for
EGUs
could
produce
greater
visibility
improvement
than
the
CAIR.

However,
for
the
reasons
noted
in
section
IX.
C.
1.
above,
we
are
deferring
a
final
determination
of
whether
the
CAIR
makes
greater
reasonable
progress
than
BART
until
the
BART
guidelines
for
EGUs
and
the
criteria
for
BART­
alternative
programs
are
finalized.
D.
How
Will
EPA
Handle
State
Petitions
Under
Section
126
of
the
CAA?
Section
126
of
the
CAA
authorizes
a
downwind
State
to
petition
EPA
for
a
finding
that
any
new
(
or
modified)
or
existing
major
stationary
source
or
group
of
stationary
sources
upwind
of
the
State
emits
or
would
emit
in
violation
of
the
prohibition
of
section
110(
a)(
2)(
D)(
i)
because
their
emissions
contribute
significantly
to
nonattainment,
or
interfere
with
maintenance,
of
a
national
ambient
air
quality
standard
in
the
State.
If
EPA
makes
such
a
finding,
84
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
EPA
is
authorized
to
directly
regulate
the
affected
sources.

Section
126
relies
on
the
same
statutory
provision
that
underlies
the
CAIR.
In
the
January
30,
2004
CAIR
proposal,
EPA
set
forth
its
general
view
of
the
approach
it
expected
to
take
in
responding
to
any
section
126
petition
that
might
be
submitted
which
relies
on
essentially
the
same
record
as
the
CAIR.
That
approach
is
the
one
EPA
used
in
addressing
section
126
petitions
that
were
submitted
to
EPA
in
1997
while
EPA
was
developing
the
NOx
SIP
Call
to
control
ozone
transport.
In
the
NOx
SIP
Call
rule,
we
determined
under
section
110(
a)(
2)(
D)
that
the
SIP
for
each
affected
State
(
and
the
District
of
Columbia)
must
be
revised
to
eliminate
the
amount
of
emissions
that
contributes
significantly
to
nonattainment
in
downwind
States.
The
emissions
reductions
requirement
was
based
on
the
quantity
of
emissions
that
could
be
eliminated
by
the
application
of
highly
cost­
effective
controls
on
specified
sources
in
that
State.
In
May
1999,
shortly
after
promulgation
of
the
NOx
SIP
Call,
EPA
took
final
action
on
the
section
126
petitions
(
64
FR
28250;
May
25,
1999).
The
Section
126
action
relied
on
essentially
the
same
record
as
the
NOx
SIP
Call.
In
addition,
we
established
a
section
126
remedy
based
on
the
same
set
of
highly
cost­
effective
controls.
In
the
May
1999
Section
126
Rule,
we
determined
which
petitions
had
85
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
technical
merit,
but
we
stopped
short
of
granting
the
findings
for
the
petitions.
Instead,
we
stated
that
because
we
had
promulgated
the
NOx
SIP
Call
­
a
transport
rule
under
section
110(
a)(
2)(
D)
­
as
long
as
an
upwind
State
remained
on
track
to
comply
with
that
rule,
EPA
would
defer
making
the
section
126
findings.
The
findings
would
be
triggered
at
either
of
two
future
dates
if
specified
progress
had
not
been
made
by
those
times.
The
Section
126
Rule
included
a
provision
under
which
the
rule
would
be
automatically
withdrawn
for
sources
in
a
State
once
that
State
submitted
and
EPA
fully
approved
a
SIP
that
complied
with
the
NOx
SIP
Call.
(
See
64
FR
28271­
28274;
May
25,
1999.)
The
reason
for
this
withdrawal
would
be
the
fact
that
the
affected
State's
SIP
revision
would
fulfill
the
section
110(
a)(
2)(
D)

requirements,
so
that
there
would
no
longer
be
any
basis
for
the
section
126
finding
with
respect
to
that
State.
In
this
manner,
the
NOx
SIP
Call
and
the
Section
126
Rules
would
be
harmonized.
Under
the
CAIR
proposal,
EPA
received
comments
regarding
its
intended
approach
for
acting
on
any
future
section
126
petitions
that
might
be
filed.
Many
commenters
expressed
support
for
the
approach
that
EPA
had
outlined.
Other
commenters
raised
issues
regarding
the
timing
of
emissions
reductions
under
a
new
section
126
action.
Some
pointed
out
that
the
CAIR
compliance
date
86
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
would
be
later
than
the
3
years
allowed
for
compliance
under
section
126.
Some
were
concerned
that
the
proposed
CAIR
compliance
date
is
later
than
many
attainment
dates
and
States
may
need
section
126
petitions
in
order
to
get
earlier
upwind
reductions
in
order
to
meet
their
attainment
dates.
Some
questioned
the
legal
basis
for
linking
the
two
rules.
Several
commenters
expressed
concern
that
EPA
would
be
restricting
the
use
of
or
weakening
the
section
126
provision.
A
number
of
commenters
urged
EPA
not
to
prejudge
any
petition,
but
to
evaluate
each
on
its
own
merit.
Some
thought
that
any
petitions
submitted
prior
to
designations
or
before
States
had
had
the
opportunity
to
prepare
SIPs
would
be
premature
and
should
be
denied.
Others
suggested
that
CAIR
might
not
solve
all
the
transport
problems
and
that
States
would
need
to
retain
the
section
126
tool
to
seek
further
reductions.
After
issuing
the
CAIR
proposal,
EPA
received,
on
March
19,
2004,
a
section
126
petition
from
North
Carolina
seeking
reductions
in
upwind
NOx
and
SO2
for
purposes
of
reducing
PM2.5
and
8­
hour
ozone
levels
in
North
Carolina.
The
petition
relies
in
large
part
on
the
technical
record
for
the
proposed
CAIR.
When
we
propose
action
on
the
North
Carolina
petition,
we
will
set
forth
our
view
of
the
interaction
between
section
110(
a)(
2)(
D)
and
section
126.
In
that
proposal,
we
will
87
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
take
into
consideration
and
respond
to
the
section
126­

related
comments
we
received
on
the
CAIR.
The
EPA
will
provide
a
comment
period
and
opportunity
for
a
public
hearing
on
the
specifics
of
that
section
126
proposal,

including
an
opportunity
to
comment
on
our
view
of
the
interaction
of
the
2
statutory
provisions.

E.
Will
Sources
Subject
to
CAIR
Also
Be
Subject
To
New
Source
Review?
The
EPA
did
not
propose
any
provisions
in
the
CAIR
related
to
new
source
review
(
NSR).

Nonetheless,
we
received
some
comments
on
the
relationship
between
CAIR
and
the
NSR
provisions
that
may
apply
to
emissions
sources
also
impacted
by
the
CAIR.
Many
commenters
indicated
that
if
an
EGU
is
part
of
an
EPAadministered
regional
cap­
and­
trade
program
for
NOx
and
SO2,

then
that
EGU
should
be
exempted
from
NSR
for
the
covered
pollutants.
The
commenters
cited
Clear
Skies
legislation
as
containing
provisions
affecting
NSR
for
covered
sources.
In
this
final
rule
EPA
is
not
addressing
or
revising
the
provisions
of
NSR.

It
should
be
noted
that
pollution
control
measures
implemented
by
EGUs
in
compliance
with
the
CAIR
may
be
eligible
for
an
exemption
under
the
NSR
pollution
control
project
provision.
31
These
provisions
provide
an
exemption
88
Section
IX
3/
9/
2005
DRAFT
Do
Not
Quote
or
Cite
from
major
NSR
for
controls
such
as
SCR
for
NOx
control
and
wet
scrubbers
for
SO2
control,
provided
that
certain
conditions
identified
in
the
provisions
are
met.
