1
IX.
Interactions
With
Other
Clean
Air
Act
Requirements
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
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
collapse
of
the
price
of
title
IV
allowances,
disruption
of
operation
of
the
title
IV
allowance
market
and
the
title
IV
SO2
cap
and
trade
system,
and
the
potential
for
increased
SO2
emissions.
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
trade
system,
would
undermine
the
efficacy
2
of
the
title
IV
program
and
could
erode
confidence
in
cap
and
trade
programs
in
general.

Title
IV
has
successfully
reduced
emissions
of
SO2
using
the
cap
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
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
and
maintain
the
integrity
of
the
market
for
title
IV
allowances
and
the
title
IV
cap
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
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
3
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
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
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
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
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
trade
program,
then
EPA
4
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
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.
5
1.
Legal
Authority
for
Using
Title
IV
Allowances
in
CAIR
Model
SO2
Cap
and
Trade
Program.

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
cap
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
allowanceholding
requirement
of
the
new
program
and
retirement
under
the
CAIR
SO2
cap
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
trade
program
using
title
IV
allowances
that
sources
must
hold
generally
at
a
ratio
of
greater
than
one
allowance
per
ton
of
SO2
emissions
is
contrary
to
title
IV.
Most
of
these
commenters
prefer
the
approach
of
allowing
States
to
use
a
new
EPA­
administered
cap
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
6
authorization.
Other
commenters
state
that
title
IV
does
not
bar
EPA
from
establishing
a
new
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
cap
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
section
V
above,

EPA
has
the
authority
under
section
110(
a)(
2)(
D)
to
establish
a
new
SO2
cap
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
construed
as
affecting
the
application
of,
or
compliance
with,
any
other
provision
of
this
Act
to
an
affected
7
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
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
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
8
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).
authority
to
establish
a
new
cap
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
trade
program
rely
on
the
above­
noted
provision
in
section
402(
3)
stating
that
an
allowance
is
an
authorization
to
emit
one
ton
of
SO2.

However,
this
provision
does
not
bar
EPA
from
requiring
either:
use
of
title
IV
allowances
in
a
new
cap
and
trade
program
under
a
different
title
of
the
CAA
at
a
reduced
9
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
and
trade
program,
as
well
as
to
facilitate
the
coordination
of
these
two
SO2
trading
programs.
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
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
§
73.35
adopted
in
today's
action.
Moreover,
the
CAIR
model
SO2
cap
and
trade
rule
coordinates
the
determinations
­­
made
by
EPA
for
sources
subject
to
both
title
IV
and
the
CAIR
­­
of
compliance
with
the
title
IV
and
CAIR
allowance­
holding
10
3
The
commenters'
assertion
that
the
sources
in
a
State
that
does
not
participate
in
the
CAIR
SO2
cap
and
trade
program
will
be
cut
off
from
the
Acid
Rain
cap
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
not
be
subject
to
the
allowance­
holding
requirement
and
the
compliance
process
in
the
CAIR
model
SO2
cap
and
trade
rule.
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
oneallowance
per­
ton­
of­
emissions
requirement
in
the
Acid
Rain
Program
as
provided
in
§
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
§
§
73.35(
d)
and
77.4.

See
final
§
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

tonof
emissions
authorization
under
section
402(
3).
3
In
contrast
with
the
one­
allowance­
per­
ton­
of­
emissions
requirement
under
the
Acid
Rain
Program,
the
CAIR
SO2
cap
11
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
allowances
may
or
may
not
be
used
outside
the
Acid
Rain
Program.
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
allowanceholding
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
trade
program
established
under
title
I.
4
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
12
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
cap
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
trade
program
has
the
effect
of
reducing
the
"
title
IV
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
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
trade
program
effectively
reduces
the
"
title
IV
cap"
appears
to
be
that
elimination
of
the
13
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.
ability
to
use,
in
the
Acid
Rain
Program,
title
IV
allowances
that
will
be
used
for
compliance
in
the
CAIR
model
SO2
cap
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
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,
14
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.
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
cap
and
trade
program
is
unlawful
under
the
court's
holding
in
Clean
Air
Markets
Group
v.
Pataki,
338
F.
3d
82
(
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
15
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.

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.
16
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
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.
Therefore,
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
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
17
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.
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
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
18
CAIR
model
SO2
cap
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
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
the
CAIR
SO2
program
would
increase
by
about
260,000
tons
(
or
about
29
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
19
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
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
20
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
0.9
million
tons
of
emissions
in
the
non­
CAIR
SO2
region
with
the
retirement
of
surplus
title
IV
allowances;
plus
260,000
tons
of
increased
non­
CAIR
SO2
region
emissions
if
the
surplus
title
IV
allowances
are
not
retired.
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
and
demand,
EPA
concludes
that,
with
the
amount
of
allowances
allocated
nation
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
21
million
tons),
the
value
of
title
IV
allowances
would
fall
to
zero,
and
all
but
260,000
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
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
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
260,000
of
the
3.65
million
surplus
allowances
in
2010;
or,
as
provided
in
today's
action,
(
2)
to
adopt
a
CAIR
SO2
model
cap
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
22
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
(
260,000
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
system
under
title
IV
­­
which
would
be
the
binding
cap
and
trade
system
only
for
sources
in
the
States
outside
the
CAIR
SO2
region
­­
would
lose
all
efficacy.
The
title
IV
cap
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
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
trade
23
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,"
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).
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
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
24
11
While
the
title
IV
cap
and
trade
system
could
be
replaced
by
a
new
CAIR
SO2
cap
and
trade
system
that
did
not
address
the
problems
caused
by
surplus
title
IV
allowance,
that
new
cap
and
trade
system
would
not
be
nationwide
like
the
title
IV
cap
and
trade
system
and
so
would
not
cover
sources
outside
the
CAIR
SO2
region.
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
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
and
trade
system
would
significantly
erode
confidence
in
cap
and
trade
programs
in
general
and
the
CAIR
model
cap
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,
1­
day
allowance
auctions
held
by
EPA,
one
as
recently
as
March
22,

2004
when
title
IV
allowances
were
purchased
for
about
$
50
25
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
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
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
otherwise
be
provided
by
new
cap
and
trade
programs
(
such
as
the
CAIR
model
cap
and
trade
programs).

Finally,
as
noted
above,
such
disruption
of
the
Acid
Rain
Program
would
potentially
result
in
significantly
increased
SO2
emissions
(
about
29
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
26
meet
the
CAIR
allowance
holding
requirement
beginning
in
2010.
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.
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").

In
light
of
these
considerations,
13
EPA
concludes,
on
balance,
that
structuring
the
CAIR
model
SO2
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
rule
is
consistent
with,
and
preserves,

such
operation
­­
while
providing
States
a
tool
for
imposing
the
more
stringent
SO2
emission
limitations
required
under
27
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
Program.

As
discussed
above,
a
State
has
the
additional
options
of
achieving
the
SO2
emissions
reductions
required
by
today's
actions
through:
EGU
emission
reductions
only
but
without
using
the
model
SO2
cap
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
28
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
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
29
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
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
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
30
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
allowance­
retirement
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.

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
§
§
51.124(
p)
and
96.254(
b))
and
in
the
final
rules
adopted
by
today's
action
(
i.
e.,
in
final
§
§
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
31
program
in
§
96.254(
b)
or
otherwise
retired
in
accordance
with
§
51.124(
p)
cannot
be
used
to
meet
the
allowance­
holding
requirement
in
the
Acid
Rain
Program.
Additional
revisions
of
the
Acid
Rain
Program
regulations
are
discussed
below.

3.
Revisions
to
Acid
Rain
Regulations.

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
32
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
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
1
33
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.
Currently,
EPA
is
in
the
process
of
conducting
a
general
review
and
re­
engineering
of
the
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
1
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
34
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
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
35
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
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
36
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
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
trade
program)
is
inconsistent
with
unit­
level
compliance
in
the
NOx
SIP
Call
cap
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
trade
program.

Under
the
NOx
SIP
Call
program,
each
source
may
have
a
37
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
with
over­
draft
accounts.
Relatively
few
owners
in
the
NOx
SIP
Call
cap
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
sourcelevel
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
38
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."

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
39
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
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
40
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).
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
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
rule
to
unit­
level
compliance
that
should
be
revised
to
reflect
source­
level
compliance.
In
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
41
emissions;
make
the
existing
Acid
Rain
permits
meaningless;

make
the
individual
unit
allowance
allocations
meaningless;

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
already
have
these
types
of
agreements
in
cases
of
units
or
sources
42
with
multiple
owners.
This
is
because
the
Acid
Rain
Program
regulations
already
allow
a
unit
at
a
multi­
unit
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
source­
level
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,
source­
level
compliance
does
not
make
the
unit­
by­
unit
allocations
meaningless;
the
unitby
unit
allocations
(
set
forth
in
Table
2
of
§
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.
43
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
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
§
72.2
in
June
2002
(
67
FR
40394,
40420;
June
12,
2002).
The
original
definition
in
§
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
Section
126
rule.
However,
the
Section
126
rule
(
and
the
NOx
SIP
Call)

did
not
actually
specify
a
"
cogeneration
unit"
definition.
44
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
§
72.2
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
the
quality
of
the
data"
being
submitted
to
EPA.
However,
45
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
1­
day
newspaper
notice
for
designation
of
designated
representatives
and
authorized
account
representatives.
One
46
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
§
73.32
(
prescribing
the
contents
of
an
allowance
account)
and
§
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
subaccounts
and
future
year
subaccounts,
as
well
as
47
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).
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
§
73.32
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
§
73.32
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
trade
rule
and
State
cap
and
trade
rules
under
the
NOx
SIP
Call
lack
a
provision
analogous
to
§
73.32,

EPA
is
removing
§
73.32.
EPA
notes
that
the
removal
of
the
48
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
§
73.51.
