1
6560­
50­
P
ENVIRONMENTAL
PROTECTION
AGENCY
40
CFR
Parts
51
and
96
[
OAR
2003­
0053;
FRL
B
]

RIN
2060
­

Rule
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone
(
Clean
Air
Interstate
Rule):
Reconsideration
AGENCY:
Environmental
Protection
Agency
(
EPA).

ACTION:
Final
Notice
of
Reconsideration.

SUMMARY:
On
May
12,
2005,
EPA
published
in
the
Federal
Register
the
final
"
Rule
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone"
(
Clean
Air
Interstate
Rule
or
CAIR).
The
CAIR
requires
certain
upwind
States
to
reduce
emissions
of
nitrogen
oxides
(
NOx)
and/
or
sulfur
dioxide
(
SO2)
that
significantly
contribute
to
nonattainment
of,
or
interfere
with
maintenance
by,
downwind
States
with
respect
to
the
fine
particle
and/
or
8­
hour
ozone
national
ambient
air
quality
standards
(
NAAQS).
Subsequently,
EPA
received
12
petitions
for
reconsideration
of
the
final
rule.

On
December
2,
2005,
EPA
published
a
notice
of
its
decision
to
grant
reconsideration
of
four
issues
raised
in
the
petitions
for
reconsideration,
and
granted
an
additional
opportunity
for
public
comment.
On
December
29,
2005,
EPA
2
published
a
notice
of
its
decision
to
grant
reconsideration
of
an
additional
issue
raised
by
a
petition
for
reconsideration,
and
again
granted
an
additional
opportunity
for
public
comment.
In
this
notice,
EPA
is
announcing
its
final
decisions
on
the
five
specific
issues
addressed
in
the
December
2005
notices.

FOR
FURTHER
INFORMATION
CONTACT:
For
general
questions
concerning
today's
action,
please
contact
Carla
Oldham,
U.
S.

EPA,
Office
of
Air
Quality
Planning
and
Standards,
Air
Quality
Strategies
and
Standards
Division,
Mail
Code
C504­

03,
Research
Triangle
Park,
NC
27711,
phone
number
(
919)

54l­
3347,
e­
mail
address
oldham.
carla@
epa.
gov.
For
questions
concerning
the
analyses
described
in
section
III
of
this
notice,
please
contact
Chitra
Kumar,
U.
S.
EPA,

Office
of
Atmospheric
Programs,
Clean
Air
Markets
Division,

Mail
Code
6204J,
1200
Pennsylvania
Avenue,
NW.,
Washington,

DC,
20460,
telephone
(
202)
343­
9128,
e­
mail
address
kumar.
chitra@
epa.
gov.
For
legal
questions,
please
contact
Sonja
Rodman,
U.
S.
EPA,
Office
of
General
Counsel,
Mail
Code
2344A,
1200
Pennsylvania
Avenue,
NW.,
Washington,
DC,
20460,

telephone
202­
564­
4079,
e­
mail
address
rodman.
sonja@
epa.
gov.

SUPPLEMENTARY
INFORMATION:

Does
this
Action
Apply
to
Me?
The
CAIR
does
not
directly
regulate
emissions
sources.
Instead,
it
requires
States
to
3
develop,
adopt,
and
submit
SIP
revisions
that
would
achieve
the
necessary
SO2
and
NOx
emissions
reductions,
and
leaves
to
the
States
the
task
of
determining
how
to
obtain
those
reductions,
including
which
entities
to
regulate.

How
Can
I
Get
Copies
of
This
Document
and
Other
Related
Information?

1.
Docket.
EPA
has
established
a
docket
for
action
related
to
the
CAIR
under
Docket
ID
No.
EPA­
HQ­
OAR­
2003­

0053.
All
documents
in
the
docket
are
listed
in
the
www.
regulations.
gov
index.
Although
listed
in
the
index,

some
information
is
not
publicly
available,
e.
g.,
CBI
or
other
information
whose
disclosure
is
restricted
by
statute.

Certain
other
material,
such
as
copyrighted
material,
will
be
publicly
available
only
in
hard
copy.
Publicly
available
docket
materials
are
available
either
electronically
in
www.
regulations.
gov
or
in
hard
copy
at
the
EPA
Docket
Center
(
Air
Docket),
EPA/
DC,
EPA
West,
Room
B102,
1301
Constitution
Ave.,
NW,
Washington,
DC.
The
Public
Reading
Room
is
open
from
8:
30
a.
m.
to
4:
30
p.
m.,
Monday
through
Friday,

excluding
legal
holidays.
The
telephone
number
for
the
Public
Reading
Room
is
(
202)
566­
1744.

2.
Electronic
Access.
You
may
access
this
Federal
Register
document
electronically
through
the
EPA
Internet
under
the
"
Federal
Register"
listings
at
4
http://
www.
epa.
gov/
fedrgstr/.
In
addition,
the
EPA
has
established
a
website
for
the
CAIR
at
http://
www.
epa.
gov/
cleanairinterstaterule
or
more
simply
http://
www.
epa.
gov/
cair/.

Outline
I.
Background
II.
Today's
Action
III.
Discussion
of
Issues
A.
SO2
Allocation
Methodology
in
the
CAIR
Model
Trading
Rules
B.
Fuel
Adjustment
Factors
Used
to
Set
State
NOx
Budgets
C.
PM2.5
Modeling
for
Minnesota
D.
Inclusion
of
Florida
in
the
CAIR
Region
for
Ozone
E.
Impact
on
CAIR
Analyses
of
D.
C.
Circuit
Decision
in
New
York
v.
EPA
IV.
Statutory
and
Executive
Order
Reviews
A.
Executive
Order
12866:
Regulatory
Planning
and
Review
B.
Paperwork
Reduction
Act
C.
Regulatory
Flexibility
Act
D.
Unfunded
Mandates
Reform
Act
E.
Executive
Order
13132:
Federalism
F.
Executive
Order
13175:
Consultation
and
Coordination
with
Indian
Tribal
Governments
G.
Executive
Order
13045:
Protection
of
Children
from
Environmental
Health
and
Safety
Risks
H.
Executive
Order
13211:
Actions
That
Significantly
Affect
Energy
Supply,
Distribution
or
Use
I.
National
Technology
Transfer
Advancement
Act
J.
Executive
Order
12898:
Federal
Actions
to
Address
Environmental
Justice
in
Minority
Populations
and
Low
Income
Populations
K.
Congressional
Review
Act
L.
Judicial
Review
I.
Background
On
May
12,
2005,
the
EPA
(
Agency
or
we)
published
the
final
"
Rule
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone"
(
Clean
Air
Interstate
Rule
or
5
CAIR)(
70
FR
25162).
In
this
action,
EPA
found
that
28
States
and
the
District
of
Columbia
contribute
significantly
to
nonattainment
of,
and
interfere
with
maintenance
by,

downwind
States
with
respect
to
the
NAAQS
for
fine
particles
(
PM2.5)
and/
or
8­
hour
ozone.
The
CAIR
requires
these
upwind
States
to
revise
their
State
implementation
plans
(
SIPs)
to
include
control
measures
to
reduce
emissions
of
SO2
and/
or
NOx.
Sulfur
dioxide
is
a
precursor
to
PM2.5
formation
and
NOx
is
a
precursor
to
PM2.5
and
ozone
formation.
By
reducing
upwind
emissions
of
SO2
and
NOx,
CAIR
will
assist
downwind
PM2.5
and
8­
hour
ozone
nonattainment
areas
in
achieving
the
NAAQS.

The
CAIR
implements
the
"
good
neighbor"
provision
of
the
Clean
Air
Act
(
CAA),
section
110(
a)(
2)(
D),
which
establishes
State
obligations
to
address
interstate
transport
of
pollution.
The
EPA
conducted
extensive
air
modeling
to
determine
the
extent
to
which
emissions
from
certain
upwind
States
were
impacting
downwind
nonattainment
areas.
All
States
found
to
contribute
significantly
to
downwind
PM2.5
nonattainment
and
maintenance
problems
are
included
in
the
CAIR
region
for
PM2.5
and
are
required
to
reduce
annual
emissions
of
SO2
and
NOx.
All
States
found
to
contribute
significantly
to
downwind
8­
hour
ozone
nonattainment
and
maintenance
problems
are
included
in
the
6
CAIR
region
for
ozone
and
are
required
to
reduce
NOx
emissions
during
the
5­
month
ozone
season
(
May­
September).

The
CAIR
establishes
regional
emission
reduction
requirements
for
annual
SO2
and
NOx
emissions
and
seasonal
NOx
emissions.
The
reduction
requirements
are
based
on
performance
of
control
technologies
which
are
known
to
be
highly
cost
effective
for
reducing
emissions
of
electric
generating
units
(
EGUs).
The
first
phase
of
NOx
reductions
starts
in
2009
(
covering
2009­
2014)
and
the
first
phase
of
SO2
reductions
starts
in
2010
(
covering
2010­
2014).
The
second
phase
of
both
SO2
and
NOx
reductions
starts
in
2015
(
covering
2015
and
thereafter).

Each
State
covered
by
CAIR
may
independently
determine
which
emission
sources
to
control,
and
which
control
measures
to
adopt.
States
that
choose
to
base
their
programs
on
emissions
reductions
from
EGUs
may
allow
their
EGUs
to
participate
in
an
EPA­
administered
cap
and
trade
program.
The
CAIR
includes
model
rules
for
multi­
State
cap
and
trade
programs
for
annual
SO2
and
NOx
emissions,
and
seasonal
NOx
emissions.
States
may
choose
to
adopt
these
rules
to
meet
the
required
emissions
reductions
in
a
flexible
and
highly
cost­
effective
manner.
To
learn
more
about
the
CAIR
and
its
impacts,
the
reader
is
encouraged
to
read
the
preamble
to
the
CAIR
(
70
FR
25162;
May
12,
2005).
7
The
CAIR
was
promulgated
through
a
process
that
involved
significant
public
participation.
The
EPA
published
a
notice
of
proposed
rulemaking
on
January
30,

2004
(
69
FR
4566)
and
a
supplemental
notice
of
supplemental
proposed
rulemaking
on
June
10,
2004
(
69
FR
32684).
The
EPA
also
published
a
notice
of
data
availability
on
August
6,

2004
(
69
FR
47828).
The
Agency
held
public
hearings
on
the
January
2004
proposed
rule
on
February
25
and
26,
2004,
and
an
additional
hearing
on
the
supplemental
proposal
on
June
3,
2004.
In
addition,
the
EPA
received
thousands
of
comments
on
the
proposals.
We
responded
to
all
significant
public
comments
in
the
preamble
to
the
final
rule
and
in
the
final
response
to
comments
document
available
in
the
CAIR
docket
(
Docket
No.
OAR­
2003­
0053­
2172).

Following
publication
of
the
final
rule,
the
Administrator
received
twelve
petitions
requesting
reconsideration
of
certain
aspects
of
the
final
CAIR.
These
petitions
were
filed
pursuant
to
section
307(
d)(
7)(
B)
of
the
CAA.
Under
this
provision,
the
Administrator
is
to
initiate
reconsideration
proceedings
if
the
petitioner
shows
that
an
objection
is
of
central
relevance
to
the
rule
and
either
that
it
was
impracticable
to
raise
the
objection
to
the
rule
within
the
public
comment
period,
or
that
the
grounds
for
the
objection
arose
after
the
end
of
the
public
comment
8
period
but
before
the
time
for
seeking
judicial
review
had
expired.
The
petitions
for
reconsideration
of
the
CAIR
asked
EPA
to
reconsider
several
specific
aspects
of
the
final
rule,
and
many
of
the
petitions
made
similar
requests.

By
letters
dated
August
1,
2005,
EPA
granted
reconsideration
of
the
definition
of
"
electric
generating
unit"
or
"
EGU"
as
it
relates
to
solid
waste
incinerators
(
and
particularly
municipal
waste
incinerators).
1
The
EPA
explained
that
the
issue
would
be
addressed
in
the
proposed
rule
signed
the
same
day.
That
proposed
rule,
entitled
"
Rulemaking
on
Section
126
Petition
from
North
Carolina
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone;
Federal
Implementation
Plans
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone;
Revisions
to
the
Clean
Air
Interstate
Rule;
Revisions
to
the
Acid
Rain
Program;
Proposed
Rule,"
was
published
on
August
24,
2005
(
70
FR
49708).
In
that
proposal,
EPA
reconsidered
the
definition
of
"
EGU"
in
the
final
CAIR
as
it
relates
to
solid
waste
incinerators
(
70
FR
at
49738).
We
proposed
revisions
to
the
definition
of
"
EGU"
and
requested
comment
on
that
issue.

On
December
2,
2005,
EPA
published
a
notice
of
its
1
These
letters
are
available
in
the
CAIR
Docket.
(
OAR­
2003­
0053­
2209
and
2210).
9
decision
to
grant
reconsideration
of
four
additional
issues
presented
in
the
petitions
for
reconsideration,
and
solicited
public
comment
on
those
issues.
On
December
29,

2005,
EPA
published
a
notice
of
its
decision
to
grant
reconsideration
of
one
additional
issue
raised
by
petition
for
reconsideration,
and
again
solicited
public
comment
on
that
issue.
In
those
two
notices
EPA
did
not
propose
any
modifications
to
the
final
CAIR,
as
we
did
not
believe
that
any
of
the
information
that
had
been
submitted
demonstrated
that
EPA's
final
decisions
in
the
CAIR
rulemaking
were
erroneous
or
inappropriate.

The
EPA
requested
comment
only
on
the
issues
specifically
described
in
Section
III
of
each
December
2005
notice.
We
did
not
reconsider
or
re­
open
for
further
comment
any
other
provisions
in
the
CAIR.

The
EPA
also
received
three
limited
requests
to
stay
CAIR.
The
implementation
of
the
CAIR
in
limited
geographic
areas
pending
resolution
of
this
reconsideration
process.

One
petitioner
requested
a
stay
of
implementation
of
the
CAIR
in
the
State
of
Florida,
and
one
petitioner
requested
a
stay
of
implementation
of
the
CAIR
in
the
State
of
Minnesota,
and
one
petitioner
requested
a
stay
of
CAIR
for
a
limited
subset
of
affected
sources.
By
letter
dated
August
1,
2005,
EPA
declined
to
stay
implementation
of
the
CAIR
in
10
Florida.
2
Finally,
in
addition
to
petitions
for
reconsideration,

fourteen
petitions
for
judicial
review
of
the
final
rule
were
filed
with
the
U.
S.
Court
of
Appeals
for
the
District
of
Columbia.
3
The
fourteen
cases
have
been
consolidated
into
a
single
case,
State
of
North
Carolina
v.
EPA
(
No.
05­

1244)
(
D.
C.
Cir).
Many
of
the
parties
who
petitioned
EPA
for
reconsideration
of
the
CAIR
also
petitioned
for
judicial
review
of
the
rule.

II.
Today's
Action
This
notice
addresses
the
five
specific
issues
upon
which
we
granted
reconsideration
and
solicited
comment
in
the
December
2,
2005
and
December
29,
2005
notices.
Today's
action
is
one
of
three
actions
EPA
is
taking
today
to
resolve
all
remaining
issues
relating
to
the
petitions
for
reconsideration
of
CAIR.

2
This
letter
is
also
available
in
the
CAIR
Docket
(
OAR­
2003­
0053­
2208).
3
State
of
North
Carolina
v.
EPA
(
No.
05­
1244);
Minnesota
Power
v.
EPA
(
No.
05­
1246);
ARIPPA
v.
EPA
(
No.
05­
1249);
South
Carolina
Public
Service
Authority
et
al.
v.
EPA
(
No.
05­
1250);
Entergy
Corp.
v.
EPA
(
No.
05­
1251);
Florida
Ass'n
of
Electric
Utilities
(
No.
05­
1252);
FPL
Group
v.
EPA
(
No.
05­
1253);
Northern
Indiana
Public
Service
Co.
v.
EPA
(
No.
05­
1254);
South
Carolina
Electric
&
Gas
Co.
v.
EPA
(
No.
05­
1256);
Integrated
Waste
Services
Ass'n
v.
EPA
(
No.
05­
1257);
AES
Corp
v.
EPA
(
No.
05­
1259);
City
of
Amarillo,
Texas
et
al.
v.
EPA
(
No.
05­
1260);
Appalachian
Mountain
Club
et
al.
v.
EPA
(
No.
05­
1246
);
Duke
Energy
v.
EPA
(
No.
05­
1246).
11
This
notice
takes
action
only
with
respect
to
the
five
issues
identified
in
the
December
2005
notices.
In
those
notices,
we
announced
our
decision
to
grant
reconsideration
and
solicited
comments
on
the
specific
issues
to
be
reconsidered.
We
did
not,
however,
propose
any
changes
to
the
CAIR
or
re­
open
for
comment
any
other
issues
determined
in
the
CAIR.
In
this
action,
we
take
final
action
on
the
five
issues
identified
in
the
notices
of
reconsideration
and
respond
to
comments
received
during
the
reconsideration
process.
The
first
issue
addressed
in
the
December
2,
2005
notice
relates
to
analyses
done
by
EPA
to
address
petitioner's
claims
regarding
alleged
inequities
arising
from
the
application
of
the
SO2
allowance
allocation
approach
to
be
used
by
States
choosing
to
participate
in
the
EPA­
administered
SO2
trading
program.
The
second
issue
relates
to
EPA's
use
of
specific
fuel
adjustment
factors
to
establish
NOx
budgets
for
each
State.
The
third
issue
relates
to
modeling
inputs
used
by
EPA
to
determine
whether
emissions
from
Minnesota
should
be
included
in
the
CAIR
region
for
PM2.5.
The
fourth
issue
relates
to
EPA's
determination
that
the
State
of
Florida
should
be
included
in
the
CAIR
region
for
ozone.
The
issue
raised
in
the
December
29,
2005
notice
relates
to
the
potential
impact
of
a
recent
judicial
opinion,
New
York
v.
EPA,
413
F.
3d
3
(
D.
C.
12
Cir.
2005),
certain
analyses
done
for
the
CAIR
relating
to
the
identification
of
highly
cost­
effective
controls
and
the
timing
of
CAIR
deadlines.
New
York
v.
EPA,
413
F.
3d
3
(
D.
C.

Cir.
2005)
was
decided
on
June
24,
2005
­­
after
the
final
CAIR
was
published
but
before
the
time
for
judicial
review
of
the
rule
had
run.
Each
issue
is
described
in
greater
detail
in
Section
III
of
this
notice.

EPA
also
is
taking
two
additional
actions
relating
to
the
petitions
for
reconsideration
of
CAIR.
First,
EPA
is
sending
nine
separate
letters
to
the
petitioners
with
outstanding
requests
for
reconsideration.
These
letters
address
their
requests
that
EPA
reconsider
the
following
ten
issues:
(
1)
the
0.2ug/
m3
threshold
used
to
determine
if
a
state's
emissions
contribute
significantly
to
PM2.5
nonattainment
and
maintenance
problems
in
downwind
states
(
multiple
requests
for
reconsideration
arguing
both
that
the
threshold
is
too
high
and
that
it
is
two
low);
(
2)
the
inclusion
of
the
full
state
of
Florida
in
the
CAIR
region
for
PM2.5
(
two
requests
for
reconsideration
challenging
EPA's
decision
to
determine
significant
contribution
on
a
statewide
basis);
(
3)
the
inclusion
of
the
full
state
of
Texas
in
the
CAIR
region
for
PM2.5
(
two
requests
for
reconsideration
challenging
EPA's
decision
to
determine
significant
contribution
on
a
statewide
basis);
(
4)
the
NOx
13
budget
allocated
to
the
State
of
Connecticut
(
two
requests
for
reconsideration);
(
5)
the
treatment
of
previously
allocated
2009
NOx
Budget
Trading
Program
allowances;
(
6)

the
SO2
retirement
ratio
for
Title
IV
allowances
as
applied
to
units
that
receive,
through
2009,
"
bonus"
allocations
under
section
405(
a)(
2)
of
the
Clean
Air
Act;
(
7)
the
phase
I
NOx
compliance
date
of
2009;
(
8)
EPA's
interpretation
of
the
"
interfere
with
maintenance"
prong
of
section
110
of
the
Clean
Air
Act;
(
9)
the
method
used
to
identify
downwind
nonattainment
areas;
and
(
10)
the
creation
of
a
compliance
supplement
pool
for
the
annual
NOx
trading
program.

Finally,
the
petitions
for
reconsideration
contain
two
outstanding
requests
to
stay
CAIR:
one
asking
for
CAIR
to
be
stayed
in
the
state
of
Minnesota
and
one
asking
that
CAIR
be
stayed
only
for
the
subset
of
sources
that
has
either
already
received
2009
NOx
Budget
Trading
Program
allowances
or
is
currently
receiving
"
bonus"
allowances
under
section
405(
a)(
2)
of
Title
IV
of
the
Clean
Air
Act.

EPA
has
carefully
considered
each
of
these
requests
for
reconsideration.
We
have
concluded
that
reconsideration
of
these
issues
is
not
warranted
under
section
307(
d)(
7)(
B)
of
the
Clean
Air
Act.
EPA
is
therefore
denying
all
remaining
requests
for
reconsideration.
In
addition,
EPA
is
denying
the
remaining
requests
to
stay
CAIR.
These
decisions
are
14
fully
explained
in
the
letters
to
petitioners
which
are
available
in
the
CAIR
docket
(
EPA­
HQ­
OAR­
2005­
0053).

In
a
separate
action
signed
today,
EPA
is
taking
final
action
on
the
request
for
reconsideration
discussed
in
the
August
1,
2005
Federal
Register
notice.
This
action
is
taken
as
part
of
our
final
action
responding
to
North
Carolina's
section
126
petition
and
promulgating
Federal
implementation
plans
for
all
states
in
the
CAIR
regions.
In
that
action,
we
also
take
final
action
on
the
request
reconsider
EPA's
treatment
in
CAIR
of
solid
waste
incinerators
(
particularly
municipal
waste
combustors),
and
finalize
the
revisions
to
the
definition
of
"
EGU"
proposed
in
response
to
that
request.
This
action,
titled
"
Rulemaking
on
Section
126
Petition
from
North
Carolina
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone;
Federal
Implementation
Plans
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone;
Revisions
to
the
Clean
Air
Interstate
Rule;
Revisions
to
the
Acid
Rain
Program,"
4
will
be
published
shortly
in
the
Federal
Register.

III.
Discussion
of
Issues
4
See
www.
regulations.
gov,
Docket
ID
No.
EPA­
HQ­
OAR­
2003­
0053.
7
EPA's
methodology
to
calculate
the
Regional
and
State
15
A.
SO2
Allowance
Allocation
(&
State
Budget)
Approach
in
the
CAIR
Model
Trading
Rules
As
noted
above,
EPA
decided
to
grant
reconsideration
on
six
issues
related
to
the
final
CAIR.
The
first
of
these
issues
relates
to
the
SO2
allocation
approach
in
the
CAIR
model
rules.
EPA
received
one
petition
for
reconsideration
that
asked
EPA
to
reconsider
the
SO2
allocation
approach
to
be
used
by
States
participating
in
the
EPA­
administered
CAIR
SO2
trading
program.
This
petitioner
argued
that
the
SO2
allowance
allocation
approach
is
unreasonable
and
inequitable.
The
petitioner
argued
that
the
approach
is
unreasonable
because
other
approaches
would
be
more
appropriate.
According
to
the
petitioner,
the
approach
is
inequitable
because
it
results
in
owners
of
units
that
have
historically
lower
emission
rates
being
forced
to
buy
allowances
from
historically
higher
emitting
units
that
install
new
emission
controls.
The
petitioner
asked
EPA
to
establish
a
different
approach.
As
described
in
the
Notice
of
Reconsideration,
EPA
does
not
agree
with
petitioner's
conclusions
about
this
issue.
EPA
continues
to
believe
that
the
approach
selected
is
reasonable
for
the
reasons
explained
in
the
CAIR
final
rule
and
further
discussed
below.
Furthermore,
numerous
opportunities
for
public
16
comment
on
this
issue
were
provided,
and
a
full
discussion
of
the
allowance
allocation
options
occurred
during
the
rule
development
process.
Nonetheless,
given
the
intense
public
interest
in
this
issue,
EPA
decided
to
grant
the
petition
for
reconsideration
insofar
as
it
raised
issues
regarding
alleged
inequities
resulting
from
the
application
of
EPA's
SO2
allowance
allocation
approach.

In
the
Notice
of
Reconsideration,
EPA
announced
its
decision
to
reconsider
this
issue
and
solicited
additional
public
input.
EPA
also
solicited
comment
on
additional
analyses
it
conducted
in
response
to
the
petition
for
reconsideration
concerning
the
impact
of
the
SO2
allowance
allocation
approach
adopted
in
the
CAIR
model
trading
rule.

This
additional
analysis
compared
the
SO2
allocation
approach
in
CAIR
to
various
alternatives
EPA
also
considered
during
the
rulemaking
process.
In
response
to
comment
on
the
Notice
of
Reconsideration,
EPA
has
further
refined
some
of
its
analyses
and
carefully
considered
the
arguments
of
the
petitioner.
EPA
continues
to
believe
that
these
analyses
show
that
EPA's
selected
approach
to
SO2
allowance
allocations
is
appropriate,
given
the
objectives
of
CAIR
and
other
relevant
considerations.
Moreover,
EPA
believes
that
the
approach
produces
a
reasonable
result,
not
the
inequities
alleged
by
the
petitioner.
Therefore,
in
this
17
Notice
of
Final
Action
on
Reconsideration
notice,
EPA
is
not
altering
the
approach
taken
in
CAIR
for
SO2
allowance
allocation.
EPA's
response
to
public
comments
on
the
analyses
presented
in
the
Notice
of
Reconsideration
and
further
discussion
of
the
petitioner's
concerns
are
provided
below
(
and
in
the
accompanying
Technical
Support
Document
and
Response
to
Comment
document).

Title
IV
and
CAIR
The
CAIR
model
SO2
trading
program
relies
on
the
use
of
title
IV
SO2
allowances
for
compliance
with
the
allowanceholding
requirements
of
CAIR.
Title
IV
SO2
allowances
have
already
been
allocated
on
a
unit­
by­
unit
basis
in
perpetuity,
based
on
formulas
set
forth
in
sections
405
and
406
of
the
Clean
Air
Act
(
CAA),
which
EPA
implemented
through
final
regulations
issued
in
1998
(
See
42
U.
S.
C.

7651d
and
7651e;
and
18
CFR
73.10(
b)).
The
statutory
formulas
for
allocation
of
title
IV
SO2
allowances
were
based
on
unit
data
for
1985­
1987
and,
for
some
units,
data
for
years
up
to
1995.
For
the
title
IV
SO2
trading
program,

each
allowance
authorizes
one
ton
of
SO2
emissions.

For
the
CAIR
SO2
trading
program,
SO2
reductions
will
be
achieved
by
generally
requiring
CAIR
sources
to
retire
more
than
one
title
IV
allowance
of
2010
and
later
vintages
of
allowances
for
each
ton
of
SO2
emissions
in
2010
and
18
thereafter.
Specifically,
each
title
IV
SO2
allowance
issued
for
2009
or
earlier
will
be
used
for
compliance
by
CAIR
sources
at
a
ratio
of
one
allowance
per
ton
of
SO2
emissions
and
would
authorize
one
ton
of
SO2
emissions.

Each
title
IV
allowance
of
vintage
2010
through
2014
will
be
used
for
compliance
under
CAIR
at
a
two­
to­
one
ratio
and
authorize
0.5
tons
of
SO2
emissions.
Each
title
IV
allowance
of
vintage
2015
and
later
will
be
used
at
a
2.86­

to­
1
ratio
and
authorize
0.35
tons
of
SO2
emissions.
See
discussion
in
the
preamble
to
the
final
CAIR
in
section
VII
(
70
FR
25255­
25273)
and
section
IX
(
70
FR
25290­
25291).

Response
to
Comments
on
EPA's
Statutory
Authority
Several
commenters
expressed
support
of
EPA's
chosen
allocation
approach,
arguing
that
EPA
was
entirely
within
its
legal
authority
to
use
title
IV
allowances
to
implement
the
SO2
trading
program
under
CAIR.
These
commenters
generally
argued
that
EPA's
use
of
title
IV
allowances
to
implement
CAIR
reductions
was
necessary
to
maintain
the
viability
of
the
program
and
continued
confidence
in
capand
trade
programs.

A
few
commenters
on
the
Notice
of
Reconsideration
assert
that
EPA
has
exceeded
its
statutory
authority
under
title
IV
of
the
CAA
by
tying
CAIR
SO2
allocations
to
title
IV
allowances.
In
addition,
a
few
commenters
argue
that
19
EPA's
final
CAIR
SO2
allocation
approach
unlawfully
limits
States'
discretion
under
section
110
of
the
CAA
to
determine
how
to
meet
their
"
good
neighbor"
obligations
and
to
meet
national
ambient
air
quality
standards.
These
same
concerns
were
also
raised
during
the
CAIR
rulemaking
process
and
EPA
provided
a
detailed
justification
for
its
use
of
title
IV
allowances
under
CAIR,
including
direct
responses
to
these
comments
in
the
CAIR
preamble
(
70
FR
25290­
96).
EPA
maintains
that
its
approach
of
using
title
IV
allowances
in
the
CAIR
SO2
trading
program
and
imposing
an
allowanceretirement
requirement
on
States
that
do
not
adopt
the
CAIR
SO2
trading
program
is
within
its
statutory
authority
and
is
a
reasonable
exercise
of
that
authority.
Additionally,

there
is
nothing
in
section
110
of
the
CAA
that
would
bar
the
use
of
title
IV
allowances
to
accomplish
attainment
goals
under
110(
a)(
2)(
d).

One
commenter
suggests
that
EPA's
SO2
allocation
approach
using
title
IV
allowances
is
in
violation
of
CAA
section
110(
a)(
2)(
D)
because
it
distributes
allowances
among
States
in
a
way
that
would
effectively
result
in
different
emissions
rates
among
States,
and
different
resulting
control
costs.
The
commenter
then
cites
section
102(
a)
of
the
CAA,
arguing
that
the
provision
"
directs
EPA
to
promote
the
development
of
air
pollution
control
laws
at
the
state
20
and
local
level
that
are
as
`
uniform'
from
jurisdiction
to
jurisdiction
as
practicable."
The
commenter
then
proceeds
to
argue
that
EPA's
use
of
title
IV
allowance
allocations
for
SO2
allowance
allocations
under
CAIR
violates
this
notion
of
parity
without
reason
and
is
therefore
unlawful.

EPA
disagrees
with
the
commenter's
interpretation
of
these
two
CAA
provisions.
First,
nothing
in
section
110(
a)(
2)(
D)
indicates
how
EPA
should
allocate
allowances
under
a
cap­
and­
trade
program.
Second,
in
developing
an
approach
for
achieving
highly
cost­
effective
emission
reductions,
EPA
utilized
a
regional
trading
program
rather
than
State­
specific
control
programs,
such
that
concerns
about
EPA
requiring
one
State
to
be
a
"
better"
neighbor
than
another
in
terms
of
addressing
contributions
to
nonattainment
are
not
relevant.
Third,
section
102(
a)
of
the
CAA
indicates
that
"
The
Administrator
shall 
encourage
the
enactment
of
improved
and,
so
far
as
practicable
in
the
light
of
varying
conditions
and
needs,
uniform
State
and
local
laws
relating
to
the
prevention
and
control
of
air
pollution".
As
is
discussed
throughout
this
section
of
the
CAIR
Notice
of
Final
Action
on
Reconsideration,
the
existence
of
title
IV
creates
a
set
of
conditions
where
it
is
not
"
practicable"
to
create
a
new
set
of
allowance
allocations
for
SO2
for
the
purposes
of
CAIR.
Finally,
the
21
use
of
the
phrase
"
The
Administrator
shall
encourage"
in
section
102(
a)
indicates
that
this
provision
is
in
no
way
a
directive
that
requires
the
Agency
to
obtain
any
specific
result
during
its
rulemakings.
Finally,
the
use
of
a
capand
trade
program
assures
that
the
marginal
cost
paid
for
a
ton
of
emission
reduction
should
be
close
to
the
observed
allowance
price,
assuring
a
uniform
marginal
cost
from
State
to
State.

SO2
Allocation
Options
Discussed
in
CAIR
EPA
considered
and
analyzed
a
variety
of
SO2
allowance
allocation
methodologies
during
the
CAIR
rulemaking
process.

After
careful
analysis,
EPA
decided
to
use
the
allocation
approach
chosen
by
Congress
in
title
IV
of
the
Clean
Air
Act.
EPA
also
considered
the
following
alternative
approaches,
which
are
explained
in
the
final
CAIR
Corrected
Response
to
Significant
Public
Comments
on
the
Proposed
Clean
Air
Interstate
Rule,
Corrected
April
2005
(
Docket
Number
OAR­
2003­
0053):

­
Allocations
based
on
historic
tons
of
actual
emissions
from
more
recent
years,

­
Allocations
based
on
heat
input
(
with
alternatives
based
on
heat
input
from
all
fossil
generation,

and
heat
input
from
coal­
and
oil­
fired
generation
only)
and
22
­
Allocations
based
on
electricity
output
(
with
alternatives
based
on
all
generation
and
all
fossil­
fired
generation).

In
addition
to
these
alternatives,
EPA
has
analyzed
other
heat
input­
based
allocation
approaches
in
the
reconsideration
process,
explained
below.
Each
allocation
approach
suggested
by
the
petitioner
and
other
commenters
during
the
CAIR
rulemaking
and
reconsideration
process
has
advantages
and
disadvantages
for
different
companies
and
States.
However,
as
explained
in
the
CAIR
final
rule,
EPA
believes
that
the
approach
used
in
the
final
CAIR
rule
is
the
most
appropriate
among
the
alternatives
for
several
reasons.

First,
EPA
believes
 
based
on
strong
policy
and
air
quality
concerns
 
that
it
is
necessary
to
use
the
existing
title
IV
allowances
in
order
to
preserve
the
viability
and
emissions
reductions
of
the
highly
successful
title
IV
program.
The
disruption
of
the
title
IV
SO2
trading
program
will
also
potentially
result
in
increased
emissions
outside
of
the
CAIR
region
starting
in
2010
because,
with
title
IV
allowances
having
little
or
no
value,
the
title
IV
program
will
no
longer
constrain
SO2
emissions
in
those
States.

Further,
if
title
IV
allowances
are
not
used
for
compliance
in
the
CAIR
SO2
trading
program,
the
likely
result
will
be:
23
a
significant
surplus
of
title
IV
allowances;
a
collapse
of
the
price
of
title
IV
allowances;
and
a
title
IV
SO2
trading
program
that,
contrary
to
Congressional
intent,
no
longer
provides
incentives
to
minimize
emissions
control
costs
and
encourage
pollution
prevention
and
innovation.

If
EPA
adopts
an
approach
that
does
not
preserve
the
structure
of
the
title
IV
allowance
market
and
the
value
of
those
allowances,
the
confidence
in
the
cap­
and­
trade
policy
instrument
and
allowance
markets
in
general,
and
in
the
CAIR
cap­
and­
trade
programs
in
particular,
would
likely
decline.

Such
an
outcome
could
result
in
a
reduced
willingness
of
the
owners
of
sources
in
cap­
and­
trade
programs
to
invest
in
control
technologies
that
would
generate
excess
allowances
for
sale,
or
to
purchase
allowances
for
compliance,
for
fear
that
the
rules
might
change.
If
owners
were
to
ignore
the
incentives
provided
by
cap­
and­
trade
in
such
a
manner,

efficiency
and
cost­
savings
provided
by
these
programs
would
be
lost.
The
preservation
of
title
IV
allowances
for
use
in
CAIR,
then,
is
integral
to
the
viability
and
effectiveness
of
both
title
IV
and
the
CAIR
trading
programs.
See
discussion
in
preamble
to
the
final
CAIR
in
section
IX
(
70
FR
25293­
25295).

Second,
EPA
relied
on
the
permanent
allocation
methodology
established
by
Congress
in
title
IV
for
purposes
24
of
reducing
SO2
emissions.
Congress
chose
a
policy
of
not
revisiting
and
revising
these
allocations
and,
apparently,

believed
that
its
allocation
methodology
for
title
IV
allowances
would
be
appropriate
for
future
time
periods.

Third,
title
IV
allowance
allocations
provide
a
logical
and
well
understood
starting
point
from
which
additional
electric
generation
unit
(
EGU)
SO2
emission
reductions
can
be
achieved
for
Acid
Rain
units,
which
account
for
over
90
percent
of
the
SO2
emissions
from
CAIR
EGUs.

Finally,
in
response
to
comments
on
the
proposed
CAIR,

EPA
performed
an
analysis
comparing
the
title
IV
methodology
to
other
methodologies.
At
the
outset,
EPA
notes
that
the
objective
of
CAIR
is
not
to
ensure
that
each
State
receives
the
maximum
amount
of
SO2
allowances
possible
under
any
approach.
The
goal
of
CAIR
is
to
achieve
the
SO2
emissions
reductions
through
the
region­
wide
budgets.
As
EPA
has
noted,
selecting
the
most
appropriate
SO2
allowance
allocation
approach
for
CAIR
has
required
addressing
a
number
of
different
considerations.
The
policy
and
air
quality
concerns
specific
to
the
CAIR
SO2
trading
program
and
noted
by
EPA
above
necessitate
that
EPA
implement
the
CAIR
SO2
program
using
the
existing
structure
of
title
IV.

Nevertheless,
EPA
has
analyzed
the
impact
of
using
title
IV
allocations
on
States
relative
to
other
possible
allocation
25
approaches.

EPA's
analysis
indicates
that
the
use
of
title
IV
allowances
in
the
CAIR
SO2
trading
program
has
a
reasonable
result
(
See
CAIR
Corrected
Response
to
Comments,
section
X.
A.
26,
Docket
#:
EPA­
HQ­
OAR­
2003­
0053­
2172).
This
analysis
compares
State
budgets
(
as
a
percent
of
the
total
CAIR
regional
budget)
calculated
based
on
title
IV
allowances
with
State
budgets
calculated
using
the
other
suggested
SO2
allocation
approaches.
In
more
than
two­
thirds
of
CAIR
States
(
which
account
for
about
80
percent
of
the
total
heat
input
in
the
CAIR
region
from
1999­
2002),
the
use
of
title
IV
allowances
results
in
each
State
having
neither
the
highest
nor
the
lowest
percentage
of
the
region­
wide
SO2
budget,
but
instead,
a
percentage
that
is
well
within
the
range
of
percentages
that
the
States
would
receive
under
all
of
the
alternative
options
considered.
For
example,
Ohio's
trading
budget
for
2010
under
EPA's
method
is
333,520
tons,

which
is
about
9
percent
of
the
CAIR
region
trading
budget
of
3,619,196
tons.
7
If
Ohio's
budget
were
calculated
based
on
historic
tons
of
emissions,
it
would
receive
approximately
12
percent
of
the
total
CAIR
budget.
If
Ohio's
budget
were
calculated
based
on
output,
it
would
receive
approximately
5
percent
of
the
total
CAIR
budget.

The
allocation
approach
based
on
title
IV,
thus,
provides
26
Ohio
with
a
budget
in
the
middle
of
the
range
of
the
options
analyzed.
EPA
recognizes,
of
course,
that
the
relative
impact
of
allocations
based
on
title
IV
allowances
as
compared
to
alternative
approaches
will
vary
among
States
and
individual
companies.
However,
each
alternative
allocation
approach
would
disadvantage
some
States
or
companies
relative
to
another
alternative
allowance
allocation
approach.
EPA
must,
nevertheless,
select
a
method
for
SO2
allowance
allocation
and
must
be
sensitive
to
competing
considerations.

In
summary,
EPA's
use
of
title
IV
allowances
in
the
CAIR
SO2
trading
program
is
supported
by:
(
1)
EPA's
determination
that
this
approach
is
necessary
to
maintain
the
efficacy
of
the
title
IV
program
and
prevent
erosion
of
confidence
in
cap­
and­
trade
programs
in
general;
and
(
2)

EPA's
analysis
showing
that
the
allocations
resulting
from
this
approach
are
reasonable.
Nevertheless,
as
a
part
of
this
reconsideration,
EPA
performed
additional
analyses,

explained
below,
to
evaluate
the
SO2
allocation
approach
in
the
final
CAIR
in
light
of
the
petitioner's
concerns.

Equitability
of
CAIR
SO2
Allocation
Approach
While
the
petitioner
stated
that
the
CAIR
final
allocation
approach
is
"
inequitable"
because
lower
emitting
units
would
buy
allowances
from
higher
emitting
units
that
27
install
emission
controls,
it
is
unclear
why
such
a
result
would
actually
be
inequitable.
On
the
contrary,
the
owner
of
each
of
the
units
involved
would
be
choosing
to
adopt
the
most
economic
compliance
strategy
in
light
of
the
unit's
emission
control
costs
and
the
market
value
of
allowances.

The
ability
of
the
owners
to
make
such
choices
reflects
the
flexibility
provided
by
a
cap­
and­
trade
program,
its
inherent
cost­
effectiveness,
and
its
promotion
of
least­
cost
compliance
for
all
program
participants.

Response
to
Comments
on
the
Equitability
of
CAIR
SO2
Allocation
Approach
One
commenter
argued
that
EPA
should
use
the
same
metrics
and
methodologies
used
to
evaluate
NOx
allowance
allocation
approaches
to
evaluate
SO2
allowance
allocation
approaches.
The
commenter
suggests
that
the
metrics
by
which
EPA
assessed
NOx
allocations
included
(
1)
whether
the
EPA
method
avoids
penalizing
coal­
fired
generation
units
that
already
have
installed
emissions
controls
and
(
2)

whether,
relative
to
the
alternative
allocation
approaches,

the
EPA
method
better
minimizes
for
each
State
the
disparity
between
allowances
provided
and
projected
emissions,
and
argued
that
EPA
cites
these
rationales
in
justifying
its
chosen
NOx
allocation
approach.
This
commenter
also
suggests
that
EPA's
use
of
title
IV
allowances
penalizes
new
28
units
and
independent
power
producers
(
IPPs)
and
results
in
large
wealth
transfers
from
low­
emitting
to
high­
emitting
States.

While
EPA
agrees
that
the
Agency
considered
these
factors
(
among
several
others)
in
choosing
its
allocation
approach
under
the
CAIR
NOx
trading
programs,
EPA
does
not
fully
agree
with
the
commenter's
characterization
of
EPA's
considerations.
EPA
believes
that
the
commenter
has
omitted
some
of
the
significant
context
and
caveats
that
were
included
in
the
discussion
of
NOx
allocations
and
the
use
of
fuel
adjustment
factors
in
the
reconsideration
notice,
as
well
as
a
number
of
other
factors
that
EPA
must
consider,

particularly
in
the
context
of
SO2
allocations.
First,
EPA
noted
in
the
June
10,
2004
Supplemental
Notice
of
Proposed
Rulemaking
and
in
the
reconsideration
notice
that,
"
in
contrast
to
allocations
based
on
historic
emissions,
the
factor
would
also
not
penalize
coal­
fired
plants
that
have
already
installed
pollution
controls"
(
69
FR
32869,
70
FR
72276,
emphasis
added).
This
language
explains
that
allocations
using
historic
heat
input
adjusted
for
fuel
type,
while
providing
additional
allowances
to
coal­
fired
units
that
will
likely
install
controls
under
CAIR,
would
not
simultaneously
penalize
coal­
fired
units
that
had
already
made
investments
in
emissions
controls.
An
approach
29
based
on
historic
emissions,
on
the
other
hand,
would
also
provide
additional
allowances
to
units
that
would
likely
have
to
install
controls,
but
would
simultaneously
penalize
units
that
had
already
done
so.
While
EPA
makes
this
argument
in
support
of
its
chosen
approach
for
NOx
allocations,
the
Agency
does
not
raise
this
point
to
establish
a
criterion
for
evaluating
allowance
allocation
approaches.
Rather,
it
simply
notes
that
its
chosen
approach
for
NOx
allocations
can
provide
an
advantage
to
one
set
of
coal­
fired
units
without
disadvantaging
another
set
of
coal­
fired
units.

Second,
while
the
commenter
is
correct
in
noting
that
EPA
stated
in
its
discussion
of
NOx
allocations
in
the
reconsideration
approach
that
it
is
in
the
public
interest
to
attempt
to
minimize
the
disparity
between
individual
State
budgets
and
projected
emissions
for
each
State,
EPA
did
not
set
this
goal
as
one
of
only
two
primary
criteria
for
adoption
of
a
given
allocation
strategy,
as
the
commenter
suggests.
Rather,
EPA
notes
that
"
In
the
absence
of
other
considerations,
EPA
believes
that
it
is
in
the
public
interest
to
reduce
the
disparity
between
the
number
of
allowances
in
a
State
budget
and
total
projected
State
EGU
emissions"
(
70
FR
72276,
emphasis
added).
As
EPA
has
noted,
equity
is
one
of
many
considerations
faced
by
EPA
in
30
choosing
an
SO2
allowance
allocation
approach.
In
particular,
unlike
in
the
case
of
NOx,
EPA
had
to
consider
an
existing,
nationwide
trading
program
implemented
by
statute
in
the
case
of
SO2.

Third,
as
EPA
discussed
in
the
CAIR
Response
to
Comments,
while
commenters
express
concern
that
about
the
availability
of
allowances
for
non­
Acid
Rain
units,
it
should
be
noted
that
not
all
sources
covered
under
the
Acid
Rain
program
received
allowances.
By
the
design
of
the
title
IV
program
(
as
outlined
by
Congress),
because
of
the
permanent
allocation
of
allowances,
new
units
beginning
commercial
operation
after
1995
or
beginning
construction
after
1990
did
not
receive
title
IV
allowances.
Thus,

Congress
recognized
that,
over
time,
new
units
would
be
built
and
covered
under
the
program,
but
felt
it
reasonable
that
such
units
would
be
able
to
obtain
title
IV
allowances
either
through
the
auction
or
from
the
market.
Under
the
auction,
250,000
title
IV
allowances
will
be
auctioned
annually
for
the
years
2012
and
beyond,
and
these
allowances
can
be
used
for
compliance
with
CAIR.
The
availability
of
these
allowances
ensures
that
all
sources,
including
new
units
and
non­
title
IV
sources,
will
have
access
to
a
pool
of
allowances,
protecting
them
from
potential
exercise
of
market
power
by
market
participants
holding
allowances.
31
Finally,
IPPs
have
the
option
of
opting
in
to
title
IV
until
their
exemption
expires
in
order
to
obtain
title
IV
allowances.
EPA
addresses
other
issues
specific
to
IPPs
in
section
VI.
E
of
today's
CAIR
FIP
preamble.

Fourth,
while
the
commenter
asserts
that
EPA's
use
of
title
IV
allowances
in
the
CAIR
SO2
trading
program
will
result
in
significant
wealth
transfers
from
low­
emitting
to
high­
emitting
States,
EPA's
analysis
of
SO2
coverage
ratios
(
the
ratio
of
allowances
to
projected
emissions)
discussed
to
some
degree
in
this
section
and
presented
in
the
TSD),
is
not
suggestive
of
this
trend.
In
fact,
looking
at
the
differences
in
States'
projected
emissions
and
coverage
ratios
between
the
base
case
and
CAIR
it
becomes
evident
that
both
low
and
high­
emitting
States
are
projected
to
make
investments
in
emissions
reductions
under
CAIR,
reducing
their
demand
for,
or
freeing
up
allowances
for
sale,
in
the
process.
States
that
might
be
categorized
as
high­
emitting
are
not
guaranteed
to
be
net
sellers
of
allowances,
and
States
that
might
be
categorized
as
low­
emitting
are
not
guaranteed
to
be
net
purchasers
of
allowances.

Another
commenter
argues
that
smaller
units
would
be
forced
to
purchase
SO2
allowances
from
the
market
in
order
to
comply
with
CAIR.
This
commenter
argues
that
the
SO2
allowance
market
is
not
efficient
and
subjects
forced
32
participants
to
endure
an
undue
amount
of
financial
burden
and/
or
risk.
EPA
believes
that
the
commenter's
claims
about
the
state
of
the
SO2
allowance
market
are
unfounded.
As
is
discussed
is
discussed
in
the
Acid
Rain
Program
Report
(
EPA
43­
R­
05­
012,
October
2005)
notes
that
about
20,000
allowance
transactions,
affecting
about
15.3
million
allowances
were
recorded
in
the
EPA
Allowance
Tracking
System
in
2004.
In
addition,
title
IV
compliance
costs
have
been
lower
than
projected
and
allowance
prices
in
the
SO2
allowance
market
have
generally
reflected
this.
Finally,
as
discussed
earlier
in
this
section
sources
have
the
option
of
purchasing
allowances
directly
from
the
annual
auction.

Further,
in
raising
equity
concerns,
a
couple
of
commenters
argue
for
conflicting
measures
of
equity
within
their
own
comments.
These
commenters
argued
that
an
equitable
emissions
allocation
approach
will
result
in
an
equivalent
effective
emissions
rate
across
States.
These
commenters
then
point
to
EPA's
chosen
CAIR
NOx
emissions
allocation
approach
as
an
exemplary
allocation
approach
because
it
limits
the
disparity
between
individual
State
budgets
and
projected
emissions.
However,
the
commenters
fail
to
realize
that,
that
approach
does
not
actually
result
in
an
equivalent
emissions
rate
across
States.
Such
a
result
underscores
the
notion
that
improving
equity
along
33
one
metric
can
actually
reduce
it
along
another.

Finally,
some
commenters
argued
that
the
use
of
title
IV
allowance
allocations
penalizes
sources
who
have
already
installed
scrubbers
prior
to
the
start
of
the
Acid
Rain
Program.
This
is
because,
in
general,
allowances
under
title
IV
were
allocated
to
units
that
had
not
installed
controls
at
a
higher
rate
relative
to
units
that
had
installed
controls.
The
title
IV
approach,
in
that
sense,

is
somewhat
similar
to
the
approach
taken
for
NOx
under
CAIR,
in
that
it
provides
additional
allowances
for
units
expected
to
install
controls
under
the
rule.
EPA
believes
that
the
commenters'
arguments
that
the
continued
use
of
title
IV
allowances
penalizes
sources
that
installed
controls
prior
to
the
Acid
Rain
Program
are
unfounded.

First,
these
controls
were
installed
over
20
years
ago
and
are
at
this
point
a
sunk
cost.
Second,
these
control
installations
were
completed
within
a
regulated
electricity
sector,
such
that
in
most
cases
the
cost
of
installing
these
controls
should
have
been
recovered
through
an
electricity
price
rate
increase.
Third,
these
controls
were
installed
in
response
to
requirements
separate
from
both
CAIR
and
the
Acid
Rain
Program.
Fourth,
Congress
was
clearly
aware
of
the
issues
raised
by
commenters
when
designing
the
SO2
trading
program
in
1990,
and
consciously
used
a
formula
for
34
future
allocations
for
the
length
of
time
it
believed
was
reasonable.
In
general,
the
Acid
Rain
Program
has
enjoyed
10
years
of
operation
without
substantial
concern
over
this
issue
and
with
industry
at­
large
appreciating
the
program's
merits
in
providing
a
cost­
effective,
flexible,
and
fair
way
to
provide
environmental
protection.
Finally,
analysis
by
one
of
these
two
commenters,
which
estimates
the
windfall
of
allowances
that
a
hypothetical
unscrubbed
coal­
fired
unit
would
attain
by
installing
a
scrubber
and
reducing
emissions,
neglects
the
fact
that
this
unit
would
have
to
endure
the
costs
of
installing
controls.
Thus,
the
ostensible
windfall
would
be
significantly
smaller
than
was
suggested
by
the
commenter.

Analysis
of
SO2
Allocation
Options
Presented
in
the
Notice
of
Reconsideration
In
the
Notice
of
Reconsideration,
EPA
compared
three
alternative
SO2
allowance
allocation
methodologies
to
the
approach
in
the
final
CAIR.
However,
in
these
analyses,
EPA
examined
how
allowances
would
be
distributed
to
individual
companies
instead
of
examining
how
they
would
be
distributed
to
States.
According
to
the
petitioner,
the
allowance
distribution
will
result
in
the
petitioner's
relatively
lowemitting
units
being
forced
to
buy
allowances
from
other
companies'
relatively
high­
emitting
units.
They
thus
argue
35
the
allocation
approach
used
in
CAIR
is
per
se
inequitable
and
unreasonable.
To
evaluate
this
concern,
EPA
compared
projected
allocations
not
just
to
individual
units,
but
to
individual
companies
who
own
these
units
under
various
methodologies
relative
to
projected
SO2
emissions
of
all
the
units
owned
by
those
companies.

EPA
believes
that,
for
purposes
of
evaluating
the
various
allocation
methodologies,
computing
allocations
on
a
company­
by­
company
basis
is
more
appropriate
than
comparing
allocations
on
a
unit­
by­
unit
basis.
While
one
unit
could
be
allocated
fewer
allowances
under
one
approach,
the
approach
could
result
in
another
unit
owned
by
the
same
company
being
allocated
more
allowances,
which
may
offset
the
smaller
allocation
of
the
first
unit.
If
the
units
are
at
the
same
source,
the
allowances
can
be
used
to
cover
emissions
from
either
unit;
if
the
units
are
at
different
sources,
it
is
often
the
case
that
allowances
can
be
transferred
from
one
source
to
the
other
at
little
or
no
cost.
8
Thus,
EPA
analyzed
the
projected
distribution
of
8
Some
individual
company
commenters
alleged
that
this
is
not
applicable
to
them
because
they
have
contractual
arrangements
that
prevent
such
intra­
company
transfers
of
allowances.
However,
even
if
certain
companies
cannot
36
allowances
at
the
parent
company
level
(
e.
g.,
at
the
holding
company
level
where
applicable).
EPA
also
analyzed
the
distribution
of
allowances
at
the
operating
company
level.

Performing
the
analysis
at
the
operating
company
level
recognizes
that
holding
companies
may
incur
costs
to
shift
allowances
between
operating
companies
(
which
typically
consist
of
units
within
a
single
State),
especially
in
States
with
price­
regulation
over
power
generation.
EPA
performed
this
portion
of
the
analysis
to
test
the
assumption
that
these
costs
would
not
have
a
major
effect
on
the
outcome
of
its
analyses
comparing
the
various
allocation
approaches.

EPA
utilized
the
best
heat
input
and
emissions
data
currently
available
to
the
Agency.
EPA's
analyses
encompassed
about
two­
thirds
of
the
total
number
of
CAIR
plants,
over
95
percent
of
total
annual
allocations
for
all
methodologies,
and
about
97
percent
of
the
total
projected
freely
transfer
allowances
among
their
units,
the
net
financial
impact
on
the
company
of
some
of
its
units
having
more
and
some
of
its
units
having
fewer
allowances
than
they
need
is
the
same
because
the
units
with
excess
allowances
selling
these
allowances
at
market
prices
will
offset
the
units
needing
allowances
and
purchasing
at
market
prices.
37
emissions
in
the
CAIR
region.
These
percentages
apply
to
each
of
the
analyses
EPA
conducted:
those
for
the
years
2010
and
2015
and
for
both
sets
of
projected
emissions
data,
the
CAIR
control
case
and
base
case.
(
Figures
and
tables
from
analysis
presented
in
the
reconsideration
notice
can
be
found
in
the
docket,
EPA­
HQ­
OAR­
2003­
0053,
"
SO2
Allowance
Allocation
Methodology
Comparative
Analysis
Data
Files".)

The
three
alternative
allowance
allocation
methodologies
EPA
analyzed
were
suggested
by
various
commenters
during
the
rulemaking
process
and
this
reconsideration
process.
These
methodologies
are:

­
Allocating
allowances
based
on
more
recent
heat
input
data;

­
Allocating
allowances
based
on
more
recent
heat
input
data
adjusted
for
fuel
type
(
e.
g.,
coal,
oil
and
gas);
and
­
Allocating
allowances
based
on
more
recent
heat
input
data
adjusted
both
for
fuel
type
and
for
coal
type
(
e.
g.,
bituminous,
sub­
bituminous
and
lignite).

In
comparing
the
CAIR
SO2
allocation
approach
and
the
three
alternative
methodologies,
EPA
took
into
account
certain
factors
that
are
applicable
to
the
CAIR
final
allocation
approach
but
not
to
the
three
alternative
38
methodologies.
For
all
four
methodologies,
EPA
analyzed
the
resulting
total
allowance
allocations,
and
the
total
projected
emissions,
for
companies'
sources
located
in
the
States
subject
to
CAIR.
In
addition,
for
all
the
methodologies,
EPA
analyzed
the
relationship
between
allowances
and
emissions
in
two
ways.
First,
EPA
calculated
the
ratio
of
allowances
to
total
projected
emissions
before
CAIR
controls
(
base
case
emissions).
This
provides
a
reasonable
estimate
of
the
extent
to
which
each
company's
future
emissions
will
exceed
its
allowances
and,
thus,

indicates
how
much
effort
a
company
must
expend
for
compliance
either
by
purchasing
allowances
or
installing
controls.
Second,
EPA
calculated
the
ratio
of
allowances
to
total
projected
emissions
after
the
installation
of
CAIR
controls
(
control
case
emissions).
This
provides
a
reasonable
estimate
of
the
number
of
allowances
a
company
would
need
to
purchase
or
would
be
able
to
sell
after
any
controls
are
installed.
Some
companies
with
low­
emitting
units
may
have
excess
allowances
to
sell
even
if
no
controls
are
installed.

In
its
analysis
of
the
CAIR
approach,
EPA
also
considered
both
the
allowance
allocations
and
the
emissions
for
companies'
units
both
within
the
CAIR
region
and
outside
the
CAIR
region.
EPA
believes
that
this
is
appropriate
39
because,
under
the
CAIR
approach,
if
a
company's
units
outside
the
CAIR
region
have
more
title
IV
allowances
than
needed
to
cover
their
emissions
under
the
Acid
Rain
Program,

the
company
might
be
able
to
transfer,
at
little
or
no
net
cost,
excess
allowances
to
the
company's
units
in
the
CAIR
region
for
use
to
cover
emissions
under
the
CAIR
trading
program.
Under
the
three
alternative
methodologies,
all
of
which
would
require
creating
new
CAIR
SO2
allowances
independent
of
the
existing
title
IV
allocations,
CAIR
sources
could
not
use
title
IV
allowances
held
for
sources
outside
(
or
inside)
the
CAIR
region
for
compliance
with
the
CAIR
SO2
allowance
holding
requirement.

Further,
in
the
analysis
of
the
CAIR
approach,
EPA
considered
the
allocation
of
title
IV
allowances
to
CAIR
units
that
are
not
currently
in
the
Acid
Rain
Program
but
that
could
opt
into
the
Acid
Rain
Program
and
receive
title
IV
allowances
(
see
42
U.
S.
C.
7651i
and
18
CFR
part
74;
and
the
discussion
below
concerning
the
ability
of
units
to
opt
in).
This
analysis
assumed
that
companies
owning
non­
Acid
Rain
units
subject
to
CAIR
would
elect
to
opt
into
the
Acid
Rain
Program
because
they
would
receive
title
IV
allowances
to
cover
a
portion
of
the
units'
emissions
under
CAIR.
EPA
believes
this
assumption
is
reasonable
because
any
of
these
units
has
the
option
of
becoming
an
Acid
Rain
Program
opt­
in
40
unit
and
thereby
providing
the
company
additional
allowances,
at
little
or
no
additional
cost,
and
the
value
of
title
IV
allowances
could
be
substantial.
In
contrast,

the
analysis
of
the
three
alternative
methodologies
did
not
consider
the
impact
of
Acid
Rain
Program
opt­
ins
because
these
approaches
do
not
use
title
IV
allowances
for
CAIR
compliance.

EPA's
analysis
indicated
that
while
allocations
vary
from
company
to
company
under
the
four
methodologies,

overall
the
distributions
of
allowances
that
companies
received
relative
to
their
projected
emissions
for
the
CAIR
control
case
are
very
similar.
EPA
came
to
similar
conclusions
when
looking
at
the
base
case.

Response
to
Comments
on
EPA's
analysis
EPA
received
several
comments
on
various
aspects
of
the
SO2
allocation
analyses
presented
in
the
Notice
of
Reconsideration.
A
few
commenters
claimed
that
EPA
should
have
focused
its
analyses
on
State
budgets
rather
than
on
projected
allocations
to
companies
because,
with
an
alternative
allocation
approach,
States
would
have
the
responsibility
for
allocating
allowances
to
their
respective
affected
sources
and
could
meet
control
requirements
differently
than
assumed
in
EPA's
analyses.
Further,
these
commenters
claimed
a
State­
by­
State
analysis
is
more
41
consistent
with
the
analysis
of
NOx
allocation
methodologies
in
the
Notice
of
Reconsideration
and
the
final
CAIR
itself.

Finally,
one
commenter
noted
that
company­
specific
analysis
can
obscure
state­
by­
state
variation,
and
may
not
be
reliable
given
continual
shifts
in
ownership
structure.

EPA
agrees
with
the
commenters
that
one
method
of
evaluating
the
reasonableness
of
SO2
allocation
approaches
is
(
in
addition
to
company­
by­
company
analyses)
to
compare
State
budgets
calculated
according
to
various
methodologies.

EPA
performed
the
company­
by­
company
analyses
described
above
in
response
to
a
specific
petitioner's
claims
that
the
SO2
allowance
allocation
approach
created
inequities
at
the
company­
level.
Despite
one
commenter's
assertion
that
such
an
analysis
is
made
unreliable
by
constantly
changing
corporate
structures,
EPA
believes
that
such
an
analysis
remains
instructive.
A
State­
level
analysis
provides
additional
perspective
on
the
impact
of
various
allocation
approaches,
though
of
course,
it
will
obscure
some
of
the
potential
company­
level
variability
among
allowance
approaches.

EPA
presented
such
a
State­
by­
State
analysis
in
the
final
CAIR
RTC
(
final
CAIR
Corrected
Response
to
Significant
Public
Comments
on
the
Proposed
Clean
Air
Interstate
Rule,

Corrected
April
2005
(
Docket
Number
OAR­
2003­
0053)).
EPA
42
recognizes
that
the
analysis
prepared
for
the
CAIR
RTC
did
not
consider
two
of
the
alternative
methods
discussed
above.

For
today's
notice,
EPA
has
analyzed
State
budgets
calculated
under
eight
different
approaches
(
title
IV
and
seven
alternatives).
These
eight
approaches
are
described
in
Table
1,
below.

Table
1.
Description
of
Allocation
Approaches
Included
in
EPA
Analysis
Approach
Name
Description
of
Approach
EPA
Title
IV
Title
IV
allocations
adjusted
for
the
2.86
to
1
allowance
retirement
ratio
in
2010­
2014,
and
the
3
to
1
allowance
retirement
ratio
in
2015
and
thereafter.
EPA's
chosen
approach.

Average
1999
­
2002
(
Pure)
Heat
Input
For
each
State,
calculates
the
average
heat
input
over
the
years
1999­
2002.
Apportions
the
region­
wide
SO2
cap
to
individual
States
based
on
each
State's
share
of
the
total
region­
wide
average
for
those
years.

1999
­
2002
Heat
Input
w/
Fuel
Factors
For
each
State,
calculates
the
average
adjusted
heat
input
over
the
years
1999­
2002.
Adjusts
heat
input
using
factors
of
1.0
for
coal,
0.009
for
natural
gas,
and
0.3
for
oil.
Apportions
the
region­
wide
SO2
cap
to
individual
States
based
on
each
State's
share
of
the
total
region­
wide
average
adjusted
heat
input
for
those
years.

1999
­
2002
Heat
Input
w/
Fuel
Factors
&
Coal
Type
For
each
State,
calculates
the
average
adjusted
heat
input
over
the
years
1999­
2002.
Adjusts
heat
input
using
factors
of
2.6
for
bituminous
coal,
1.0
for
subbituminous
and
lignite
coals,
0.2
for
natural
gas,
and
0.7
for
oil.
Apportions
the
region­
wide
SO2
cap
to
individual
43
States
based
on
each
State's
share
of
the
total
region­
wide
average
adjusted
heat
input
for
those
years.

Average
1999
­
2002
Heat
Input
Coal
+
Oil
For
each
State,
calculates
the
average
heat
input
from
coal­
and
oil­
fired
units
over
the
years
1999­
2002.
Apportions
the
region­
wide
SO2
cap
to
individual
States
based
on
each
State's
share
of
the
total
region­
wide
average
heat
input
from
these
units
for
those
years.

Average
1999
­
2002
SO2
Emissions
For
each
State,
calculates
the
average
emissions
over
the
years
1999­
2002.
Apportions
the
region­
wide
SO2
cap
to
individual
States
based
on
each
State's
share
of
the
total
region­
wide
average
emissions
for
those
years.
Average
1999
­
2002
Generation
Output
(
all
sources
fossil
and
nonfossil
For
each
State,
calculates
the
average
output
over
the
years
1999­
2002.
Apportions
the
region­
wide
SO2
cap
to
individual
States
based
on
each
State's
share
of
the
total
region­
wide
average
output
for
those
years.

1999
­
2002
Generation
Output
(
Fossilfuel
fired
units
only)
For
each
State,
calculates
the
average
output
from
fossil
fuel­
fired
units
over
the
years
1999­
2002.
Apportions
the
region­
wide
SO2
cap
to
individual
States
based
on
each
State's
share
of
the
total
region­
wide
average
output
from
these
units
for
those
years.

As
is
shown
in
Table
2,
the
first
component
of
EPA's
State­
level
analysis
compared
the
individual
State
shares
of
total
region­
wide
SO2
allocations
under
the
various
approaches.
The
revised
analysis
reaffirms
EPA's
original
conclusion,
which
was
that
calculating
State
budgets
using
the
title
IV
allowances
results
in
about
80
percent
of
the
44
States
receiving
a
percentage
of
total
SO2
allocations
that
is
within
the
range
of
the
percentages
that
resulted
for
these
States
under
other
suggested
SO2
allocation
approaches
(
Sulfur
Dioxide
Allowance
Allocation
Methodology
Comparative
Analysis
Technical
Support
Document(
Docket
ID:
EPA­
HQ­
OAR­

2003­
0053)).
In
other
words,
80
percent
of
States
get
neither
the
most
nor
the
least
allowances
relative
to
what
they
receive
under
the
other
allocation
approaches,
under
the
title
IV
approach.
Furthermore,
when
compared
specifically
to
the
methods
supported
by
commenters
(
pure
heat
input,
heat
input
with
fuel
factors,
heat
input
with
fuel
factors
and
coal
type,
coal
and
oil
heat
input
and
average
output
all),
distribution
of
State
budgets
using
title
IV
allocations
results
in
an
individual
State
receiving
its
smallest
or
greatest
share
of
total
SO2
allocations
relative
to
what
the
individual
State
receives
under
the
alternative
approaches
the
same
number
of
times
as
the
pure
heat
input
methodology
and
fewer
times
than
the
other
methodologies
supported
by
commenters
(
see
the
last
three
rows
of
Table
1).
Such
results
suggest
that
this
approach
performs
as
well
as
three
of
the
other
allocation
approaches
suggested
by
commenters,
suggesting
that
EPA's
argument
that
its
chosen
allocation
approach
is
reasonable.

While
the
coal
and
oil
heat
input
approach
appears
to
45
perform
best
in
this
analysis,
this
approach
received
more
limited
commenter
support.

In
examining
the
results
of
this
analysis
for
the
State's
of
the
commenters
that
submitted
adverse
comments
on
the
use
of
title
IV
(
FL,
IN,
MN,
NC,
SC),
it
becomes
apparent
that
each
allocation
approach
makes
some
States
better
off
and
others
worse
off.
For
example,
North
Carolina
receives
3.8
percent
of
the
total
region­
wide
SO2
budget
under
the
title
IV
approach,
and
South
Carolina
receives
1.6
percent.
Under
a
heat
input
with
fuel
factors
approach,
South
Carolina
receives
2.3
percent
of
the
total
budget,
while
North
Carolina
receives
only
2.2
percent.

Similarly,
while
Florida
receives
its
largest
share
of
allowances
under
a
fossil
output­
based
approach
or
pure
heat
input
approach,
Minnesota
performs
receives
its
greatest
share
of
allowances
under
an
approach
using
heat
input
with
fuel
factors.
Both
Florida
and
Indiana
receive
more
allowances
under
the
title
IV
approach
than
they
would
under
the
heat
input
with
fuel
factors
approach.
9
9
Also,
it
is
worth
noting
that
these
five
commenters
are
all
in
cost­
of­
service
States,
where
they
should
be
able
to
pass
through
costs.
In
other
words,
sources
in
these
States
are
likely
to
recover
their
cost
of
compliance,
and
the
rate
impact
in
these
States,
spread
over
all
generation,
transmission,
and
distribution
is
likely
to
be
minimal.
For
instance,
EPA's
RIA
for
CAIR
forecasts
a
les
than
one
to
a
little
more
than
one
percent
increase
in
average
electricity
46
Table
2
 
States
Share
of
Budget
under
Various
Allocation
Approaches
State
EPA
Title
IV
Averag
e
1999
­
2002
(
Pure)
Heat
Input
1999
­
2002
Heat
Input
w/
Fuel
Factors
1999
­
2002
Heat
Input
w/
Fuel
Factors
&
Coal
Type
Average
1999
­
2002
Heat
Input
Coal
+
Oil
Average
1999
­
2002
Emissions
Average1
999
­
2002
Output
All
Averag
e
1999
­
2002
Output
Fossil
AL
4.4%
4.3%
4.9%
5.2%
4.7%
5.0%
4.7%
4.2%
DC
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
FL
7.0%
7.7%
5.6%
6.7%
7.3%
6.0%
7.2%
7.7%
GA
5.9%
4.1%
4.7%
5.3%
4.5%
5.2%
4.5%
4.2%
IA
1.8%
4.7%
5.4%
4.4%
2.3%
1.4%
1.5%
1.8%
IL
5.3%
6.5%
7.9%
7.9%
5.2%
4.7%
6.6%
4.4%
IN
7.0%
1.9%
2.4%
1.2%
7.5%
8.6%
4.6%
6.2%
KY
5.2%
4.9%
6.0%
7.3%
5.8%
5.8%
3.5%
4.5%
LA
1.7%
3.3%
1.6%
1.0%
1.5%
1.1%
3.4%
3.6%
MD
2.0%
1.8%
1.9%
2.3%
2.0%
2.7%
1.9%
1.7%
MI
4.9%
4.2%
4.4%
3.7%
4.3%
3.7%
4.1%
4.2%
MN
1.4%
1.9%
2.3%
1.1%
2.2%
1.0%
1.9%
1.7%
MO
3.8%
1.4%
1.0%
1.0%
4.1%
2.4%
2.9%
3.4%
MS
0.9%
3.6%
4.3%
2.3%
1.1%
1.2%
1.6%
1.6%
NC
3.8%
4.0%
2.2%
2.7%
4.3%
4.7%
4.5%
3.8%
NY
3.7%
3.7%
4.5%
5.5%
3.4%
2.7%
5.3%
3.9%
OH
9.2%
6.4%
7.9%
9.6%
7.5%
12.2%
5.4%
6.5%
PA
7.6%
6.0%
7.1%
8.4%
6.9%
9.5%
7.4%
6.1%
SC
1.6%
2.0%
2.3%
2.9%
2.2%
2.1%
3.4%
2.0%
TN
3.8%
3.0%
3.7%
4.4%
3.5%
4.0%
3.5%
3.0%
TX
8.9%
15.3
%
9.4%
5.5%
9.0%
6.0%
13.9%
16.6
%
VA
1.8%
2.3%
2.5%
3.1%
2.5%
2.3%
2.8%
2.3%
WI
2.4%
4.4%
5.4%
6.7%
2.8%
2.0%
2.2%
2.2%
WV
6.0%
2.5%
2.9%
1.8%
5.2%
5.8%
3.4%
4.5%
100%
100%
100%
100%
100%
100%
100%
100%

prices
in
2010
and
2015
respectively.
The
region
containing
North
Carolina
and
South
Carolina
is
forecast
to
have
a
1.5%
and
a
little
over
2
percent
price
increae
in
2010
and
2015
repsectivley.
47
#
of
times
method
provides
least
allowanc
es
3
4
1
7
0
2
4
4
#
of
times
method
provides
most
allowanc
es
2
1
5
6
0
4
4
4
Total
(
most
+
least)
5
5
6
13
0
6
8
8
Source:
EPA,
2006.

Two
commenters
performed
alternative
analyses
of
State
budgets,
modeled
after
the
calculations
done
for
the
CAIR
Reconsideration
related
to
NOx
budgets
(
CAIR
Statewide
NOx
Budget
Calculations,
EPA
Docket
Number
OAR­
2003­
0053,

December
2005).
The
commenters
claim
that
their
analysis
proves
that
EPA's
SO2
allowance
allocation
approach
is
inferior
to
a
fuel­
adjusted
heat
input
method,
such
as
the
allocation
approach
used
in
the
CAIR
NOx
model
trading
rule.

They
assert
that
EPA's
analysis
of
NOx
allocation
methodologies
is
also
the
appropriate
way
to
compare
the
reasonableness
of
the
SO2
allocation
alternatives.

As
EPA
explained
in
the
NOx
TSD,
to
quantitatively
48
evaluate
whether
the
fuel
factor
approach
is
providing
States
with
annual
NOx
budgets
that
more
closely
reflected
their
projected
emissions,
EPA
calculated
the
arithmetic
mean
of
the
(
absolute)
difference
between
the
ratio
of
each
State's
allowance
allocation
under
each
approach
to
its
projected
emissions
under
CAIR
(
coverage
ratio),
and
1.0
(
i.
e.,
the
value
representing
a
State's
projected
emissions
matching
the
State's
CAIR
NOx
budget).
In
other
words,
EPA
calculated
how
far
off
the
State's
coverage
ratio
was
from
1.0,
and
then
determined
the
average
value
of
this
difference
for
each
approach.

One
commenter
performed
a
similar
analysis
of
State
budgets,
comparing
each
State's
projected
emissions
to
its
projected
allowances
under
each
allocation
method.
The
commenter
analyzed
the
results
in
relation
to
a
coverage
ratio
of
1.0
(
as
EPA
did
in
its
NOx
analysis)
and
averaged
the
values
for
each
approach.
Another
commenter
performed
a
similar
analysis,
but
presented
the
results
as
the
cumulative
value
(
sum)
of
absolute
differences
between
the
coverage
ratios
and
1.0.

EPA
disagrees
with
the
commenters'
assertion
that
the
methodology
that
the
Agency
used
to
evaluate
State
NOx
allocations
should
be
the
primary
means
by
which
to
evaluate
the
reasonableness
of
the
SO2
allocation
methodology.
As
49
explained
in
the
CAIR
preamble,
in
the
case
of
SO2,
EPA
needs
to
balance
various
considerations,
including
the
need
to
allocate
SO2
allowances
in
a
way
that
is
less
disruptive
to
the
title
IV
program.
In
light
of
these
considerations,

minimizing
the
disparity
between
a
State's
allocation
and
projected
emissions
cannot
be
the
the
primary
objective.

For
SO2,
there
is
a
pre­
existing
national
trading
program
(
the
Acid
Rain
SO2
trading
program)
that
Congress
intended
to
continue
as
a
viable
program
into
the
future
and
under
which
allowances
have
been
allocated
in
perpetuity.
For
NOx,
there
is
no
pre­
existing
national
trading
program
where
efficiency
and
effectiveness
would
be
jeopardized
by
creating
new
CAIR
NOx
allowances.
There
is,
of
course,
a
pre­
existing
regional
NOx
ozone­
season
program
covering
a
portion
of
the
CAIR
region
(
the
NOx
Budget
Trading
Program,

established
by
regulation,
rather
than
directly
by
Congress).
Under
the
existing
NOx
ozone­
season
program,
no
State
has
allocated
allowances
past
2009
(
and
only
a
handful
of
States
have
allocated
allowances
past
2008).
Therefore,

in
contrast
with
EPA's
determination
concerning
SO2
allocations,
evaluation
of
potential
approaches
to
NOx
allocations
did
not
involve
concerns
about
Congressional
intent
to
preserve
an
existing
trading
program
and
about
preserving
the
value
of
allowances
already
allocated
in
50
perpetuity.
For
NOx,
EPA
does
not
need
to
consider
other
important
policy
concerns
that
are
important
for
SO2
(
as
explained
above
and
in
the
CAIR
final
rule).

While
the
methodology
used
by
EPA
to
evaluate
NOx
allocation
methodologies
for
CAIR
can
be
applied
to
analysis
of
SO2
allocations,
EPA
believes
that
the
commenters
performed
their
State­
by­
State
analyses
incorrectly,

overlooking
a
fundamental
difference
between
the
CAIR
NOx
and
SO2
trading
programs,
which
is
the
existence
of
a
significant
bank
of
pre­
2010
allowances
that
will
be
eligible
for
use
for
compliance
with
CAIR.
Because
of
the
existence
of
an
SO2
allowance
bank,
EPA
believes
that
the
commenter's
comparison
of
allocation
approaches
using
a
coverage
ratio
of
1,
which
would
assume
that
in
a
given
year
total
SO2
emissions
in
the
region
are
equal
to
the
total
region­
wide
SO2
budget,
is
not
appropriate
for
evaluating
the
SO2
State
budgets
resulting
from
the
various
SO2
allocation
methodologies.
A
State
that
had
a
coverage
ratio
of
1
would
have
enough
allowances
to
cover
its
emissions,

and
while
this
ratio
would
be
a
meaningful
target
in
the
context
of
the
CAIR
NOx
trading
program,
it
is
not
for
SO2,

because
2010
and
2015
emissions
will
be
higher
than
the
region­
wide
cap
due
to
the
use
of
banked
allowances.
For
SO2,
the
region­
wide
ratios
of
allowances
to
projected
51
emissions
are
0.70
for
2010
and
0.60
for
2015.
On
average,

one
would
expect
States
to
have
coverage
ratios
similar
to
the
region­
wide
average.

While
in
both
the
NOx
annual
and
NOx
ozone
season
trading
programs
some
allowances
beyond
the
State
Budgets,

(
i.
e.,
compliance
supplement
pool
allowances
in
the
annual
program
and
banked
allowances
from
the
NOx
Budget
Trading
Program
in
the
ozone­
season
program)
will
be
available
to
sources,
the
amounts
of
these
extra
allowances
will
be
too
small
the
affect
the
State­
by­
State
NOx
analysis.

Consequently,
EPA
believes
that
a
more
appropriate
way
to
evaluate
SO2
allocation
methods
is
to
use
the
0.70
(
for
2010)
and
0.60
(
for
2015)
coverage
ratios,
rather
than
a
ratio
of
1.0.
Further,
because
each
allocation
methodology
results
in
allocation
that
are
advantageous
for
different
companies
and
States,
EPA
believes
that
the
reasonableness
of
a
given
allocation
method
should
be
judged
by
its
overall
impact
on
companies
and
States,
not
its
specific
impact
on
any
single
company
or
State
or
on
a
few
companies
or
States.

EPA
has
redone
the
commenters'
analysis,
using
the
methodology
used
by
EPA
in
its
analysis
of
NOx
allocations
and
corrected
coverage
ratios
described
above.
This
analysis
is
presented
in
the
Technical
Support
Document
52
"
CAIR
SO2
Allocation
Approach
Analysis,"
available
in
the
docket.
While
the
title
IV
SO2
allocation
approach
does
not
perform
the
best
of
the
allocation
approaches
considered,

the
differences
observed
among
the
approaches
are
of
a
lower
magnitude
than
those
suggested
by
the
commenters.
The
commenters
did
not
provide
any
benchmark
in
their
analysis
for
assessing
whether
or
not
a
given
allocation
approach
was
reasonable.
Further,
although
the
commenters
discuss
some
of
the
implications
of
the
differences
observed
between
an
allocation
approach
based
on
fuel
factors
and
the
allocation
approach
based
on
title
IV,
they
do
not
provide
with
their
analyses
any
meaningful
arguments
that
EPA's
approach
is
not
reasonable.

As
EPA
noted
earlier
in
this
section,
there
are
a
number
of
ways
by
which
to
assess
the
equitability
of
a
given
allowance
allocation
approach.
EPA
believes
that
a
further
understanding
of
the
overall
relative
impacts
of
the
various
allocation
methods,
EPA
believes
that
it
is
useful
to
apply
the
statistical
concepts
of
(
1)
bias
and
(
2)

consistency.
EPA
determined
that
an
appropriate
statistic
for
examining
the
bias
of
a
given
allocation
approach
is
the
average
difference
between
a
State's
coverage
ratio
and
the
coverage
ratio
for
the
entire
region
(
e.
g.,
0.70
for
2010
or
0.60
for
2015).
The
degree
of
bias
inherent
in
a
given
53
allocation
approach
cannot
be
discerned
from
the
absolute
value
statistic,
because
it
ignores
the
degree
to
which
positive
and
negative
differences
cancel
each
other
out.
A
perfectly
unbiased
distribution
under
a
given
allocation
approach
would
be
one
that
resulted
in
an
average
difference
of
zero,
meaning
that
on
average
a
State­
by­
State
coverage
ratio
higher
than
the
regional
coverage
ratio
is
balanced
out
by
a
ratio
below.
Another
useful
statistic
is
the
percent
of
time
that
the
allocation
approach
yields
a
State
coverage
ratio
that
is
high
(
or
low)
relative
to
the
regional
coverage
ratio.
Lack
of
bias
would
be
indicated
if
50
percent
of
the
State
coverage
ratios
are
higher
than
the
regional
coverage
ratio,
and
50
percent
are
lower.

EPA
evaluated
the
four
allocation
approaches
considered
during
the
CAIR
rulemaking
(
title
IV,
pure
heat
input,
heat
input
with
fuel­
factors,
and
heat
input
with
fuel
factors
and
coal
type
factors)
along
these
metrics.
From
EPA's
calculations
(
Table
3),
all
the
approaches
are
biased
high
for
2010
and
all
but
one
is
biased
high
for
2015
(
with
CAIR
controls).
The
average
differences
for
EPA's
approach,
0.04
(
range,
0.03
to
0.69)
in
2010
and
0.15
(
range,
­
0.15
to
0.17)
in
2015,
are
among
the
closest
to
zero
compared
to
the
alternatives
examined.
The
one
approach
(
heat
input
with
fuel
and
coal
adjustment
factors)
that
exhibits
less
bias
54
than
the
title
IV
approach
in
2010
exhibits
bias
of
the
same
magnitude
(
but
opposite
direction)
as
the
title
IV
approach
in
2015.
In
addition,
the
percent
of
positive
differences
for
EPA's
approach
for
2010
and
2015
are
near
50
percent
and
do
not
greatly
vary
from
the
alternative
methods
analyzed.

This
demonstrates
that
EPA's
approach
provides
a
reasonable
result.

Table
3.
Evaluation
of
Bias
and
Consistency
of
Four
Different
SO2
Allocation
Approaches,
2010
and
2015
2010
2015
EPA
Title
IV
Averag
e
1999
­
2002
(
Pure)
Heat
Input
1999
­
2002
Heat
Input
w/
Fuel
Factors
1999
­
2002
Heat
Input
w/
Fuel
Factors
&
Coal
Type
EPA
Title
IV
Avera
ge
1999
­
2002
(
Pure)
Heat
Input
1999
­
2002
Heat
Input
w/
Fuel
Factors
1999
­
2002
Heat
Input
w/
Fuel
Factors
&
Coal
Type
Averag
e
Differe
nce
0.0
4
0.09
0.69
0.03
0.15
0.15
0.17
­
0.15
Percen
t
Positiv
e
39
%
39%
43%
48%
52%
48%
52%
43%
Source:
EPA
2006
One
commenter,
who
disagreed
with
EPA's
focus
on
how
states
fare
under
different
methodolodies,
suggested
using
an
"
effective
emission
rate
comparison."
However,
the
commenter
proceeded
to
perform
this
comparison
using
of
the
ratio
of
the
adjusted
state
SO2
budgets
to
recent
adjusted
55
heat
input
in
each
affected
state.
The
commenter
fails
to
realize
that
using
the
adjusted
state
SO2
budget
in
the
numerator
and
adjusted
heat
input
(
i.
e.,
the
heat
input
values
adjusted
with
fuel
factors,
which
were
used
to
calculate
the
State
budgets)
in
the
denominator
results
in
a
constant
ratio
across
states.
Based
on
the
commenter's
arguments,
it
appears
it
should
have
used
the
adjusted
state
budget
divided
by
the
actual
projected
heat
input.
This
approach,
however,
would
not
result
in
the
constant
effective
emission
rates,
which
the
commenter
insinuates
is
most
desirable.
The
commenter's
argument,
therefore,
is
faulty.

One
commenter
criticized
EPA's
company­
by­
company
analysis
on
the
grounds
that
EPA
determined
allowance
allocations
under
the
various
allocation
alternatives
using
on
the
title
IV­
based
CAIR
State
budgets,
rather
than
using
State
budgets
that
were
calculated
using
corresponding
heat
input
allocation
methodology.
EPA
agrees
with
the
commenter
that
determination
of
company
allocations
under
a
given
alternative
allocation
methodology
should
be
based
on
State
budgets
calculated
using
the
same
methodology.
EPA
has
reanalyzed
company
level
allocations
using
this
approach,

and
the
revised
analyses
are
included
in
a
technical
support
document
See
Final
Reconsideration
TSD
for
SO2
Allocations
56
and
State
Budgets
(
Docket
ID:
EPA­
HQ­
OAR­
2003­
0053).
The
results
of
the
revised
analyses
are
very
similar
to
those
reported
in
the
Notice
of
Reconsideration,
and
the
conclusion
stated
in
the
text
of
that
notice,
as
follows,

remains
valid:

"
While
allocations
vary
from
company
to
company
under
the
four
methodologies,
overall,
the
distributions
of
allowances
that
companies
received
relative
to
their
projected
emissions
for
both
the
base
case
and
control
case
are
very
similar.
In
other
words,
no
methodology
stands
out
as
providing
a
more
reasonable
method
of
allocation
across
all
companies
when
examining
allowance
needs
under
either
the
base
case
or
[
CAIR]
control
case."

EPA's
analyses
for
2010
and
2015
for
parent/
holding
companies
and
owner/
operating
companies
all
show
similar
results.

Potential
for
Regional
Emissions
Increases
As
discussed
above
and
in
the
CAIR
preamble,
another
important
reason
for
use
of
the
title
IV
allowances
is
to
avoid
SO2
emissions
increases
in
2010
and
thereafter
in
non­

CAIR
States.
If
title
IV
allowances
were
not
used
in
the
CAIR
SO2
trading
program,
the
resulting
reduction
in
the
57
value
of
title
IV
allowances
would
result
in
an
increase
in
emissions
in
non­
CAIR
States.
EPA
estimates
that
emissions
"
leakage"
of
title
IV
allowances
from
the
CAIR
region
into
the
non­
CAIR
region
would
be
approximately
260,000
tons
annually
in
2010
and
thereafter.

One
commenter
argues
that
EPA
has
not
sufficiently
evaluated
and
compared
the
impact
of
the
potential
for
increases
in
CAIR
region
emissions
under
the
approach
of
using
title
IV
allowances
that
could
result
from
allocations
to
title
IV
opt­
in
units
and
title
IV
allowances
traded
into
the
CAIR
region
from
non­
CAIR
States
to
the
potential
for
emissions
increases
in
non­
CAIR
States
from
"
leakage"
of
title
IV
allowances
from
CAIR
States
to
non­
CAIR
States
under
an
allocation
approach
that
does
not
rely
on
title
IV.

EPA
has
in
fact
considered
the
issue
of
emissions
"
leakage"
outside
of
the
CAIR
region
throughout
its
analysis
of
CAIR,
and
also
analyzed
the
potential
increases
outside
of
the
CAIR
region
if
EPA
were
to
not
use
an
allocation
system
based
on
title
IV.
EPA
estimates,
based
on
its
CAIR
analysis,
that
title
IV
allowances
from
the
non­
CAIR
region
equivalent
to
about
150,000
tons
of
SO2
emissions
may
be
traded
into
the
CAIR
region
in
2010,
which
represent
about
4
percent
of
the
projected
CAIR
region
emissions
in
2010.

This
compares
to
approximately
260,000
title
IV
allowances,
58
representing
that
many
tons
of
SO2
emissions,
that
sources
in
non­
CAIR
States
would
have
incentive
to
use
(
rather
than
control
emissions)
if
we
chose
an
alternative
system
that
is
not
based
on
title
IV
(
an
increase
equal
to
about
30
percent
of
the
0.9
million
tons
of
emissions
EPA
projects
for
non­

CAIR
region),
because
title
IV
allowances
would
have
no
economic
value.

EPA
has
also
considered
the
impact
of
opt­
in
unit
allocations
and
projects
that
in
2010
allowances
equivalent
to
approximately
25,000
tons
could
be
generated
by
units
opting
into
the
Acid
Rain
Program
and
used
for
compliance
in
the
CAIR
SO2
trading
program.
This
is
less
than
one
percent
of
the
projected
CAIR
region­
wide
emissions
in
2010.
(
See
technical
support
document.)
Thus,
EPA
believes
that
the
effect
of
selecting
the
title
IV
allocation
approach
for
SO2
under
CAIR
will
not
significantly
affect
the
overall
SO2
emission
reduction
objectives
of
the
rule.

It
should
also
be
noted
that
an
alternative
to
including
non­
title
IV
sources
under
CAIR
and
allowing
them
to
use
opt­
in
allowances
from
title
IV
would
be
excluding
these
units
altogether
from
CAIR.
In
choosing
to
opt­
in
to
title
IV
to
provide
allowances
for
use
under
CAIR,
these
units
would
have
to
reduce
emissions
from
the
baseline
at
which
they
were
allocated
in
order
to
generate
excess
title
59
IV
allowances.
Thus,
actual
cumulative
net
emissions
increases
within
the
CAIR
region
from
title
IV
opt­
in
sources
subject
to
CAIR
are
unlikely.
Alternatively,

excluding
these
units
from
CAIR
and
keeping
the
same
SO2
allowance
retirement
ratios
(
and
the
same
State
budgets)

would
achieve
many,
but
not
all,
of
the
highly
costeffective
SO2
reductions
and
could
result
in
emissions
leakage
within
the
CAIR
region
at
these
sources,
as
generation
(
and
thus
emissions)
shift
from
the
EGUs
covered
by
the
cap
to
EGUs
not
covered
by
the
cap.

Opting
into
the
Acid
Rain
Program
As
discussed
above,
EPA's
analyses
of
the
distribution
of
allowances
under
EPA's
allocation
approach
included
allowances
allocated
to
CAIR
units
that
can
opt
into
the
title
IV
Acid
Rain
Program.
The
statutory
and
regulatory
provisions
governing
Acid
Rain
Program
opt­
in
units
allow
units
that
are
subject
to
CAIR,
but
not
to
the
Acid
Rain
Program,
to
opt
into
the
Acid
Rain
Program.
Under
section
410(
a)
of
the
Clean
Air
Act,
the
owner
or
operator
of
any
unit
that
emits
SO2
and
"
is
not,
nor
will
become,
an
affected
unit"
under
the
general
applicability
provisions
of
CAA
title
IV
(
i.
e.,
starting
in
2000,
CAA
sections
403(
e)(
for
new
units)
and
405
(
for
existing
units))
may
apply
to
have
the
unit
become
an
opt­
in
unit
under
the
Acid
60
Rain
Program.
42
U.
S.
C.
7651i(
a).
(
The
separate
treatment
of
"
process
sources"
under
sections
410(
a)
and
(
e)
is
not
applicable
to
electric
generating
units
covered
by
CAIR.)

Section
410
was
added
to
the
Clean
Air
Act
by
the
Clean
Air
Act
Amendments
of
1990,
which
were
enacted
on
November
15,

1990.

EPA
interprets
section
410(
a)
to
allow
any
SO2­
emitting
unit
not
currently
covered
by
the
general
applicability
provisions
to
opt
into
the
Acid
Rain
Program
and
receive
SO2
allowances,
provided
that
certain
requirements
(
e.
g.,

emissions
monitoring
and
reporting
requirements
under
part
75
of
the
Acid
Rain
regulations)
are
met.
The
use
of
two
separate
terms,
one
to
refer
to
a
unit
that
"
is
not"
an
affected
unit,
and
the
other
to
refer
to
a
unit
that
"
will
not
become"
an
affected
unit
reflects
the
fact
that
there
are
two
separate
applicability
provisions,
section
405
applying
to
units
in
existence
and
generating
electricity
for
sale
when
the
CAA
Amendments
were
enacted
and
section
403(
e),
applying
to
units
to
be
constructed
at
some
later
date.
In
short,
section
410(
a)
included
language
using
both
a
verb
in
the
present
tense
(
i.
e.,
"
is
not")
to
refer
to
existing
units
and
a
verb
in
the
future
tense
(
i.
e.,
"
nor
will
become")
to
refer
to
begin
generation
or
begin
construction
in
the
future.
EPA
does
not
interpret
the
term
61
"
nor
will
become"
to
bar,
from
opting
in,
currently
operating
units
that
are
not
covered
by
the
generally
applicability
provisions
but
that
may
become
subject
to
those
provisions
sometime
in
the
future.
Consequently,
a
unit
that
currently
has
an
exemption
from
the
general
applicability
provisions
(
e.
g.,
an
exempt
cogeneration
unit
under
CAA
section
402(
17)(
C)
or
405(
g)(
6)(
A)),
may
opt
in
under
section
410(
a))
even
if
the
exemption
may
be
lost
sometime
in
the
future.
Such
a
unit
may
become
and
remain
an
opt­
in
unit
until
the
unit
loses
its
exemption.

This
interpretation
of
section
410(
a)
is
reflected
in
the
implementing
regulations.
For
example,
§
74.2
states
that
the
opt­
in
regulations
apply
to
units
that
"
are
not
affected
units
under
§
72.6
[
the
general
applicability
provisions]...
and
that
are
operating
and
are
located
in
the
48
contiguous
States
of
the
District
of
Columbia".
40
CFR
74.2.
The
opt­
in
regulations
do
not
exclude
operating
units
that
are
currently
exempt
from
the
general
applicability
provisions
but
that
may
subsequently
lose
their
exemption.

Moreover,
§
74.46(
b)(
iii)
specifically
addresses
how
to
treat
opt­
in
allowance
allocations
for
operating
units
that
opt
in
but
subsequently
become
subject
to
the
general
applicability
provisions.
The
provision
explains
how
to
treat
such
allowance
allocations
for
the
year
in
which
the
62
units
lose
their
exemption
and
for
subsequent
years.
This
supports
EPA's
interpretation
that
currently
exempt
units
may
become
opt­
in
units
even
though
they
may
lose
their
exemption
in
the
future.

EPA
notes
that
the
additional
cost
for
CAIR
units
of
opting
into
the
Acid
Rain
Program
will
be
minimal.
The
major
cost
for
any
unit
to
opt
in
is
the
cost
of
meeting
emissions
monitoring
and
reporting
costs
under
part
75.

Whether
or
not
they
become
Acid
Rain
Program
opt­
in
units,

all
units
under
CAIR
already
have
to
meet,
and
incur
the
costs
of,
part
75
emissions
monitoring
and
reporting
requirements.
EPA
also
notes
that
currently
under
the
Acid
Rain
Program
only
a
small
number
of
units
have
opted
into
the
program.
Because
EPA
anticipates
that
the
existence
of
the
CAIR
program
will
result
in
more
units
opting
in,
EPA
will
work
with
potential
opt­
in
sources
to
consider
opportunities
to
improve
the
opt­
in
program.

B.
Fuel
Adjustment
Factors
Used
to
Set
State
NOx
Budgets
As
described
in
the
December
2,
2005
Notice
of
Reconsideration
for
CAIR,
EPA
received
several
petitions
for
reconsideration
asking
EPA
to
reconsider
its
decision
to
use
fuel
adjustment
factors
(
FAF)
to
establish
NOx
budgets
for
State
in
the
CAIR
region.
Petitioners
contended
that
the
Agency
did
not
provide
adequate
notice
and
that
the
use
of
63
the
FAF
approach
adversely
impacted
States
with
large
gasand
oil­
fired
generation
portfolios.
Given
the
significant
public
interest
in
this
issue,
EPA
granted
reconsideration
and
solicited
additional
public
comment
on
this
issue.

The
Notice
of
Reconsideration
explained
that
EPA
believes
that
it
provided
adequate
notice
both
that
the
fuel
adjustment
factors
might
be
used
and
of
the
calculation
procedures
that
it
would
use
to
determine
the
specific
factors.
Nevertheless,
in
light
of
the
significant
public
interest
in
this
issue,
EPA
granted
reconsideration
on
the
the
use
FAFs
(
i.
e.,
1.0
for
coal,
0.4
for
gas,
and
0.6
for
fuel
oil)
in
the
development
of
statewide
NOx
budgets.
The
Notice
of
Reconsideration
provided
an
additional
opportunity
for
public
comment
on
the
issue
and
presented
additional
analysis
that
EPA
conducted
to
further
explain
the
impact
of
these
factors
on
State
annual
NOx
budgets.
That
additional
analysis
demonstrated
that
the
factors
selected
are
reasonable
and
decrease
the
disparity
between
most
States'

projected
electric
generation
unit
(
EGU)
emissions
and
their
State
NOx
budgets.
The
Notice
of
Reconsideration
did
not
propose
to
change
any
aspect
of
how
the
CAIR
apportions
the
regionwide
NOx
budget
among
States.

Today's
action
responds
to
public
comment
received
on
the
Notice
of
Reconsideration
and
presents
some
additional
64
analysis
that
supports
the
analysis
presented
in
the
Notice
of
Reconsideration.

Background
on
the
Use
of
NOx
FAFs
in
the
Statewide
NOx
Budgets
The
CAIR
establishes
regional
emission
budgets
for
annual
and
seasonal
NOx
emissions.
These
regional
budgets
are
then
further
divided
into
State
budgets,
with
a
share
of
each
total
regionwide
budget
apportioned
to
each
State
in
the
corresponding
CAIR
region.
The
CAIR
determines
each
State's
pro­
rata
share
of
the
regionwide
budget
by
using
that
State's
share
of
the
regionwide
heat
input,
as
adjusted
by
the
FAFs
(
i.
e.,
1.0
for
coal,
0.4
for
gas,
and
0.6
for
fuel
oil).
Petitioners
asked
EPA
to
reconsider
this
methodology.

As
explained
in
the
Notice
of
Reconsideration,
States
choosing
to
participate
in
the
trading
program
may
allocate
their
statewide
budgets
to
sources
in
their
respective
State.
In
a
cap­
and­
trade
system,
however,
the
methodology
used
to
allocate
allowances
in
any
given
year
would
not
affect
where
control
technologies
are
installed.
10
Rather,

10
A
permanent
allocation
approach,
such
as
the
CAIR
allocation
methodology
in
the
model
trading
rules,
should
not
affect
where
controls
are
installed.
This
is
true
regardless
of
the
type
of
approach
used
to
permanently
allocate
allowances
(
e.
g.,
heat
input,
adjusted
heat
input,
65
the
determinant
would
be
the
cost
of
adding
controls
compared
to
the
cost
of
buying,
or
the
profit
from
selling,

allowances.
Controls
are
expected
to
be
installed
where
it
is
relatively
less
expensive,
without
regard
to
which
units
received
the
initial
allocation
of
allowances.
Further,
the
total
cost
to
industry
of
controlling
emissions
and
the
total
amount
of
reductions
achieved
would
not
be
affected
by
the
allocation
methodology
in
a
given
year
(
for
a
permanent
system).
The
allocation
method,
however,
could
have
financial
impacts
on
individual
units
and
companies.
A
unit
that
receives
more
allocations
than
it
has
emissions
would
get
a
benefit
at
the
expense
of
a
unit
that
does
not
receive
enough
allocations
to
cover
its
emissions.
While
States
choosing
to
participate
in
the
cap­
and­
trade
program
can
determine
how
to
allocate
allowances
among
their
units,

companies
in
States
whose
budgets
exceed
projected
EGU
emissions
would
likely
receive
a
financial
benefit
while
companies
in
States
whose
budgets
are
lower
than
their
EGU
emissions
would
likely
incur
additional
costs.
In
the
absence
of
other
considerations,
EPA
believes
that
it
is
in
the
public
interest
to
reduce
the
disparity
between
the
number
of
allowances
in
a
State
budget
and
total
projected
or
output).
The
use
of
an
updating
allocation
system,
on
the
other
hand,
could
have
some
impact
future
generation.
66
State
EGU
emissions.
In
the
case
of
NOx
allowances,
there
are
no
considerations
that
offset
the
desirability
of
reducing
the
disparity
between
a
State's
budget
and
projected
emissions.
This
contrasts
with
the
case
of
SO2
allowances,
as
described
above,
where
there
are
counterbalancing
considerations,
such
as
the
importance
of
preserving
the
efficacy
of
the
existing
title
IV
SO2
trading
program.

1.
Summary
of
Additional
Analysis
Presented
in
the
Notice
of
Reconsideration
The
Notice
of
Reconsideration
presented
two
analyses
that
EPA
conducted
to
evaluate
the
potential
impact
of
using
the
adjusted
heat
input
method
versus
the
simple
heat
input
method
on
State
annual
NOx
budgets:
one
regionwide
analysis
and
a
second
State­
by­
State
analysis.

The
regionwide
analysis
of
the
potential
impacts
compared
regionwide
budgets
using
both
approaches
(
i.
e.,

simple
heat
input
and
fuel
factor)
to
the
regionwide
projected
emissions
of
units
fired
with
that
fuel.
11
That
analysis
illustrated
that:
under
either
approach,
the
portion
of
the
State
budgets
derived
from
the
heat
input
11
It
should
be
noted
that
simple
heat
input
or
adjusted
heat
input
are
used
to
set
State
budgets
and
do
not
imply
that
States
would
allocate
allowances
to
units
in
that
manner.
In
the
proposal,
EPA
gives
States
flexibility
in
67
from
the
gas­
fired
units
generally
exceeds
both
the
historical
and
the
future
projected
emissions
from
these
units;
the
fuel
factor
approach
generally
provides
additional
allowances
to
States
with
large
amounts
of
coalfired
units
that
are
making
the
majority
of
the
investments
in
emission
control
measures
and
technologies;
and,
using
the
fuel
factor
approach,
the
disparity
between
the
number
of
allowances
provided
to
each
type
of
fossil
fuel­
fired
electric
generation
and
the
projected
emissions
for
each
fossil
fuel
type
is
less
than
under
the
simple
heat
input
method.

The
second
analysis
presented
in
the
Notice
of
Reconsideration
examined
the
potential
impacts
of
the
two
approaches
for
developing
Statewide
budgets
(
i.
e.,
simple
heat
input
and
fuel
factor)
on
a
State­
by­
State
basis.
That
analysis
showed
that
States
receiving
fewer
allowances
using
a
fuel
factor
approach,
generally
still
receive
Statewide
budgets
that
are
greater
than
their
projected
emissions
in
2009
and
2015.
This
results
because
a
substantial
portion
of
their
generation
portfolio
consists
of
gas­
fired
sources
with
generally
low
NOx
emission
levels.
More
specifically,

the
analysis
illustrated
that
while
States
dominated
by
gasfired
generation
(
i.
e.,
District
of
Columbia,
Florida,

the
distribution
of
allowances.
68
Louisiana,
Mississippi,
New
York,
and
Texas)
receive
fewer
allowances
under
a
fuel
factor
approach,
they
are
provided
with
reasonable
Statewide
budgets
that
are
comparable
to
their
projected
emissions
in
2009
and
2015.
In
addition,

this
analysis
shows
that,
relative
to
the
simple
heat
input
method,
the
fuel
factor
method
reduces
the
disparity
between
projected
State
emissions
and
State
budgets,
e.
g.,

allocating
State
budgets
that
are
generally
closer
to
projected
State
emissions.

EPA
conducted
the
same
analyses
for
the
annual
NOx
programs
proposed
for
Delaware
and
New
Jersey,
which
are
being
included
in
the
CAIR
PM2.5
finding
of
significant
contribution
in
a
separate
rulemaking
published
today.
This
analysis
showed
results
similar
to
that
found
for
the
other
CAIR
PM2.5
States.

Finally,
to
ensure
that
our
estimates
appropriately
reflect
the
distribution
of
emissions
in
the
case
of
higher
electricity
demand
and
increased
gas
and
oil
prices,
the
Notice
of
Reconsideration
presented
EPA
analysis
based
upon
a
sensitivity
run
using
EIA's
forecast
of
higher
electricity
demand
and
gas
and
oil
prices.
This
run
produced
very
similar
emissions
results
to
the
original
NOx
analysis,

showing
that
EPA's
original
analysis
is
robust
enough
to
support
the
fuel
adjusted
heat
input
approach
finalized
in
69
CAIR.
(
See
the
"
CAIR
Statewide
NOx
Budget
Calculations
Technical
Support
Document,
EPA
2005,
for
additional
discussion
of
the
analysis.)

2.
Public
Comments
on
Analysis
Presented
in
the
Notice
of
Reconsideration
Many
commenters
supported
the
EPA
analysis
presented
in
the
Notice
of
Reconsideration
that
demonstrated
that:

 
under
either
approach,
the
portion
of
the
State
budgets
derived
from
the
heat
input
from
the
gas­
fired
units
generally
exceeds
both
the
historical
and
the
future
projected
emissions
from
these
units;

 
the
fuel
factor
approach
generally
provides
additional
allowances
to
States
with
large
amounts
of
coal­
fired
units
that
are
making
majority
of
the
investments
in
emission
control
measures
and
technologies;
and,

 
using
the
fuel
factor
approach,
the
disparity
between
the
number
of
allowances
provided
and
the
emissions
is
less
than
under
the
simple
heat
input
method.

Adverse
Comments
on
the
Notice
of
Reconsideration
a.
Comments
on
EPA's
Characterization
of
Operational
Costs
for
Low­
Emitting
Generation
in
Analysis
Some
commenters
contended
that
EPA
analysis
of
the
projected
impacts
on
different
types
of
power
generation
(
i.
e.,
coal­
fired,
gas­
and
oil­
fired
units)
was
inaccurate
70
because
it
did
not
reflect
inherent
differences
in
the
cost
(
e.
g.,
fuel
costs)
to
operate
each
type
of
unit.

Specifically,
the
commenters
claim
that
gas­
fired
units
"
have
incurred
historical
costs
to
burn
a
cleaner
but
higher­
priced
fuel."
The
commenter
continues
with
"
while
gas­
fired
plants
have
continually
paid
the
price
for
cleaner
fuels,
under
CAIR
these
owners
may
be
penalized
with
additional
costs
of
purchasing
allowances."
The
commenters
believed
that,
as
a
result,
EPA
analysis
of
the
potential
impacts
of
using
the
FAF
approach
 
which
was
based
on
comparing
CAIR
NOx
allowances
to
the
projected
emissions
 

has
not
properly
considered
the
economic
impacts
to
these
units
and
their
customers.

EPA
disagrees
that
higher
fuel
costs
of
oil­
and
gasfired
units
are
not
properly
considered
in
the
analysis
of
potential
impacts
of
using
the
FAF
method
in
developing
statewide
NOx
budgets.
In
projecting
which
sources
would
install
advanced
controls
under
CAIR,
EPA
modeling
factoredin
the
operating
characteristics
of
the
each
source,

including
fuel
costs.
12
This
modeling
showed
that
coalfired
units
 
not
gas­
and
oil­
fired
units
 
would
make
the
significant
investment
in
advanced
controls
in
order
to
12
IPM
modeling
uses
"
model
plants"
to
represent
the
characteristics
of
a
group
of
actual
facilities.
71
achieve
the
CAIR
mandated
emission
reductions.
The
commenter
did
not
demonstrate
that
EPA
modeling,
used
in
the
development
of
CAIR
and
the
Notice
of
Reconsideration
analysis,
mischaracterized
the
operating
costs
of
these
units.
Further,
the
commenter
did
not
explain
how
a
decision
to
build
a
gas­
or
oil­
fired
unit
prior
to
CAIR
that
has
high
operating
costs,
warrants
an
award
of
valuable
allowances
to
offset
operating
costs
that
they
would
have
with
or
without
CAIR.
Notably,
although
natural
gas
inherently
burns
with
lower
NOx
emissions,
its
choice
in
the
CAIR
region
historically
is
based
much
more
on
the
economics
to
meet
electric
demand
requirements
 
electric
generation
from
natural
gas
has
been
the
cheapest
approach.

In
addition,
it
is
not
clear
why
the
commenter
believes
that
using
the
FAF
approach
would
result
in
gas­
fired
units
having
to
purchase
NOx
allowances.
Analysis
presented
in
the
Notice
of
Reconsideration
showed
that,
in
general,

States
that
with
predominantly
gas­
and
oil­
fired
generation
are
provided
with
reasonable
statewide
budgets
that
are
comparable
to
their
projected
emissions
in
2009
and
2015.

If
the
States
were
to
directly
pass
through
allowances
to
their
gas­
fired
units,
these
units
would
still
have
excess
allowances.
Furthermore
in
most
cases,
these
States
still
receive
a
larger
budget
than
they
need
to
cover
their
72
projected
emissions.

In
conclusion,
EPA
believes
the
projected
emission
levels
used
in
EPA's
analysis
of
the
potential
impacts
of
using
a
FAF
method
to
apportion
statewide
NOx
budgets
appropriately
considers
the
operational
costs
of
oil­
and
gas­
fired
units.

b.
Comments
on
EPA
Projections
of
Oil­
and
Gas­
Fired
Boilers
Retirement
and
Impacts
on
Analysis
A
few
commenters
believed
that
EPA
inaccurately
accounted
for
their
projected
emissions
because
the
IPM
modeling
did
not
consider
requirements,
outside
of
environmental
regulatory
programs,
to
maintain
reserve
electricity
generation
capacity.
The
commenter
claims
that,

as
a
result,
there
are
oil­
fired
units
that
would
continue
to
operate
even
though
IPM
projects
that
they
would
retire
because
they
are
no
longer
economical
to
run.
The
commenter
believes
that
this
potential
underestimation
of
projected
NOx
emissions
is
significant
enough
to
change
the
outcome
of
EPA's
analysis
which
demonstrated
that
predominantly
gasfired
States
would
have
receive
CAIR
NOx
allowances
sufficient
to
account
for
their
future
NOx
emissions.

EPA
disagrees
with
the
commenters'
contention
that
the
potential
underestimation
of
emissions
for
oil­
fired
boilers
would
significantly
impact
the
EPA's
analysis
comparing
73
apportioning
statewide
NOx
budgets
using
simple
heat
input
and
the
FAF
approach.
The
EPA
analysis
showed
that
Florida,

the
State
of
concern
to
the
commenter,
has
coverage
ratios
(
i.
e.,
the
ratio
of
the
statewide
NOx
budget
and
the
projected
NOx
emissions)
of
1.45
and
1.35
under
CAIR
in
2009
and
2015,
respectively.
In
other
words,
the
statewide
NOx
budget
provides
145
percent
of
the
allowances
that
Florida
sources
would
need
to
account
for
their
projected
emissions.

EPA
modeling
projected
that
approximately
11
percent
of
the
oil­
and
gas­
fired
generation
capacity
(
other
than
coalfired
generation
and
combined­
cycle
turbines)
would
retire
early
in
both
2009
and
2015,
respectively.
These
retirements
comprise
4
and
5
percent
of
Florida's
total
capacity
in
2009
and
2015,
respectively.
Even
if
it
was
necessary
for
all
of
these
units
to
remain
in
operation
to
comply
with
requirements
for
reserve
capacity,
it
is
not
clear
that
this
relatively
small
portion
of
the
total
capacity
would
emit
enough
NOx
to
significantly
change
the
outcome
of
the
EPA
analysis.
Should
all
or
some
portion
of
these
units
remain
in
service,
Florida's
NOx
budget
 
which
is
45
percent
and
35
percent
above
their
projected
emissions
according
to
EPA
analysis
 
would
have
a
surplus
of
allowances
that
it
could
provide
to
these
units
to
offset
emissions.
Further,
these
units
could
choose
to
reduce
74
their
emissions
using
a
range
of
advanced
control
options
that,
in
some
cases,
achieve
greater
emission
reduction
levels
than
found
in
coal­
fired
units.

3.
Public
Comment
on
the
Notice
of
Reconsideration
Discussion
of
Notice
Several
commenters
supported
EPA's
position
that
adequate
notice
was
provided
on
the
use
of
FAFs
in
the
development
of
the
statewide
NOx
budgets.
Many
of
these
commenters
also
supported
the
analysis
EPA
presented
in
the
Notice
of
Reconsideration
(
discussed
below.)

Other
commenters
maintained
that
the
final
CAIR
did
not
provide
sufficient
notice
on
the
use
of
the
FAF
approach
to
developing
statewide
budgets.
The
methodology
used
for
developing
the
statewide
budgets,
the
FAFs,
and
the
actual
statewide
budgets
were
discussed
in
detail
in
the
CAIR
NFR
(
70
FR
25230)
and
supporting
documentation.
13
By
granting
reconsideration
and,
thereby,
requesting
public
comment
on
this
issue
in
response
to
the
Notice
of
Reconsideration,
the
Agency
has
provided
an
additional
opportunity
for
public
involvement.
As
a
result,
EPA
believes
that
it
provided
13
Both
the
"
Corrected
Response
to
Significant
Public
Comments
on
the
Proposed
Clean
Air
Interstate
Rule"
(
pp.
520­
576)
and
the
"
Technical
Support
Document
for
the
Clean
Air
Interstate
Rule
Notice
of
Final
Rulemaking,
Regional
and
State
SO2
and
NOx
Emissions
Budgets"
include
information
on
the
use
of
FAFs
for
developing
the
statewide
NOx
budgets.
75
ample
notice
and
opportunity
for
comment
on
the
use
of
fuel
adjustment
factors,
the
calculation
procedures
used
to
determine
the
specific
factors,
and
the
specific
factors
themselves.

4.
Use
of
FAF
Approach
to
Determining
Statewide
NOx
Budgets
in
the
Final
CAIR
Today's
action
does
not
change
the
use
of
the
FAF
methodology
to
determine
the
statewide
NOx
budgets
for
the
CAIR.
While
EPA
believes
that
adequate
notice
was
provided
on
the
use
of
the
FAF
approach
and
the
specific
FAFs,
EPA
granted
the
petitions
on
this
issue
in
consideration
of
general
public
interest
in
the
matter.
EPA
believes
that
today's
action,
in
conjunction
with
the
Notice
of
Reconsideration,
adequately
responds
to
concerns
raised
by
the
petitioners.

C.
PM2.5
Modeling
for
Minnesota
One
Petition
for
Reconsideration
asked
EPA
to
reconsider
whether
emissions
from
Minnesota
significantly
contribute
to
downwind
nonattainment
of
the
PM2.5
NAAQS.

The
petitioner
(
Minnesota
Power,
or
MP)
asserted
that
EPA's
modeling
failed
to
account
for
certain
emissions
reductions
required
by
State
programs
(
especially
those
required
under
the
Minnesota
Emissions
Reduction
Program,
or
MERP).
In
granting
reconsideration,
EPA
explained
that
it
was
aware
of
76
the
emission
reductions
in
question
when
it
made
the
significant
contribution
determinations
in
the
final
CAIR.

EPA
had
accounted
for
these
reductions
during
the
rulemaking
by
conducting
a
sensitivity
analysis
(
available
in
the
CAIR
docket),
but
had
not
conducted
revised
air
quality
modeling
(
70
FR
at
72279­
280).
In
response
to
the
reconsideration
petition,
EPA
conducted
revised
air
quality
modeling
which
used
the
inputs
reflecting
emission
reductions
required
by
the
MERP.
This
modeling
showed
(
consistent
with
the
sensitivity
analysis)
that
Minnesota
contributes
a
maximum
of
0.20
ug/
m3
to
the
downwind
PM
2.5
nonattainment
area
of
Chicago­
Gary­
Lake
County,
IL­
IN.
This
modeling
thus
supported
EPA's
conclusion
that
Minnesota's
contribution
met
the
criteria
in
CAIR
for
determining
"
significant
contribution."
Id.
This
revised
air
quality
modeling
used
the
same
modeling
platform
used
for
all
of
the
air
quality
modeling
in
CAIR.
In
the
Notice
of
Reconsideration,
EPA
solicited
comment
on
the
inputs
used
to
model
Minnesota
emissions,
but
declined
to
reconsider
or
reopen
for
public
comment
issues
relating
to
the
air
quality
modeling
platform
itself.
Id.
at
72280.

Most
of
the
comments
received
on
this
issue
in
response
to
the
Notice
of
Reconsideration
supported
EPA's
conclusion.

These
include
comments
from
the
Minnesota
Pollution
Control
77
Agency
(
MPCA),
the
entity
with
the
most
direct
knowledge
of
emission
reductions
required
by
state
programs.
EPA
also
received
no
adverse
comments
from
Xcel
Energy,
the
entity
that
entered
into
the
MERP
with
the
MPCA
and
whose
projected
emission
levels
were
the
centerpiece
of
the
reconsideration
petition.
In
fact,
no
other
power
generation
source
in
the
Minnesota
besides
Minnesota
Power
offered
adverse
comments.
14
EPA
views
these
comments
as
confirmation
of
the
reasonableness
of
the
modeling
approach
used
by
EPA
to
assess
significance
of
contribution
of
the
State.
EPA
also
views
these
comments
as
confirmation
that
its
revised
modeling
accurately
accounts
for
the
MERP
reductions.

Minnesota
Power
(
MP)
did
not
comment
on
the
revised
emissions
modeling
done
for
power
sector
units
in
Minnesota
and
instead
directed
its
comments
to
the
original
emissions
modeling
done
for
the
Final
CAIR
that
did
not
fully
account
for
the
MERP
reductions.
MP
does
not
directly
challenge
EPA's
conclusion
that
the
revised
modeling
accurately
accounts
for
the
emission
reductions
required
by
the
MERP.

MP
claims,
nonetheless,
that
the
model
inputs
for
the
final
CAIR
modeling
(
not
the
modeling
done
for
the
Notice
of
Reconsideration,
as
just
noted)
contain
errors.
To
the
14
Another
power
company
in
the
Midwest
region,
Midwest
Generation,
supported
EPA
emissions
assessment
for
78
extent
these
alleged
errors
relate
to
the
MERP,
EPA
has
corrected
the
errors
as
explained
above.
15
The
additional
"
errors"
of
which
MP
complains
relate
to
inputs
regarding
the
projected
2010
emissions
for
certain
units
in
Minnesota.

Although
MP
states
that
EPA
has
mischaracterized
emissions
from
some
units,
EPA
believes
that
the
emissions
projections
done
to
provide
inputs
for
the
revised
air
quality
modeling
described
in
the
Notice
of
Reconsideration
are
appropriate.

EPA
believes
its
method
of
projecting
power
sector
emissions
for
units
in
Minnesota
reflects
a
more
accurate
and
robust
method
for
projecting
emissions
than
the
method
used
by
MP.
MP
presents
a
method
for
projecting
2010
Minnesota.
15
The
revised
IPM
modeling
performed
for
the
reconsideration
fully
accounted
for
emission
reductions
attributable
to
the
MERP.
These
include
emission
reductions
from
the
repowering
of
the
two
units
at
the
Riverside
plant
from
coal
to
natural
gas
and
the
retirement
of
a
third
coal
unit
at
the
plant.
The
inputs
to
the
revised
modeling
for
the
Notice
of
Reconsideration
also
accounted
for
emission
reductions
from
retrofit
of
the
coal
unit
at
the
Allen
S.
King
plant
with
advanced
pollution
controls
(
scrubber
for
SO2
removal
and
selective
catalytic
reduction
technology
for
NOx
removal)
and
for
emission
reductions
from
re­
powering
of
two
units
at
the
High
Bridge
plant
that
will
re­
powered
from
coal
to
natural
gas.
It
should
be
noted
that
MP
has
submitted
revised
projected
emission
levels
for
certain
Xcel
units
covered
by
the
MERP.
These
projections
do
not
correspond
precisely
with
the
projections
EPA
used
in
its
revised
modeling
(
but
are
very
similar).
However,
as
explained
below,
EPA
believes
the
projections
for
these
units
used
by
EPA
are
more
accurate
than
the
projections
MP
suggests
should
be
used.
79
emissions
for
certain
select
units
using
the
combination
of
a
2001
emission
rate
(
based
on
Title
IV
data)
and
EPA's
projected
2010
heat
input
projection
under
the
2010
base
case
(
no
CAIR).
MP
applies
this
method
to
several
of
its
own
units
and
several
owned
by
Xcel
Energy.

MP
claims
that
if
these
lower
emissions
were
used
as
inputs
to
the
PM2.5
modeling,
that
modeling
would
show
that
Minnesota's
contribution
is
below
the
PM2.5
significance
threshold
of
0.2
µ
g/
m3.
However,
the
petitioner
was
selective
in
its
application
of
its
methodology
for
projecting
emissions.
MP
applies
their
method
only
for
units
where
that
method
results
in
emissions
projections
that
are
lower
than
the
original
EPA
emissions
projections.

Application
of
this
approach
to
all
units
in
Minnesota
would
result
in
emissions
levels
for
several
units
in
2010
that
are
above
EPA's
projections.
In
such
cases,
however,

MP
relies
upon
the
lower
EPA
projections.
Selectively
developing
projections
in
this
manner
is
an
insufficient
approach
for
developing
power
sector
forecasts
(
see
further
discussion
on
IPM
below).

MP
also
comments
that
"
EPA
had
erroneously
assigned
2010
sulfur
dioxide
emission
rates
on
scrubbed
Minnesota
units
at
values
as
much
as
double
that
of
the
performance
levels
posted
in
2001."
MP
Comment
p.
4.
After
reviewing
80
the
modeling
results,
EPA
is
unable
to
find
any
instances
in
Minnesota
where
EPA
projected
SO2
emission
rates
of
scrubbed
units
from
the
revised
power
sector
modeling
that
are
double
that
of
the
2001
performance
level.
Id.
Although
the
emission
rates
are
higher
in
EPA
2010
projections
for
the
3
Sherburne
County
Plant
units
than
2001
levels,
they
are
well
within
permitted
levels
at
those
units
and
reflect
projected
changes
in
unit
operations
to
maximize
efficiency
(
see
further
discussion
on
IPM
below).

MP
also
claims
that
"
NOx
emission
rates
deviated
between
2001
and
2010
without
supportive
operating
rationale."
Id.
The
difference
in
NOx
rates
that
MP
alludes
to
is
again
based
upon
the
modeling
for
the
Final
CAIR,
not
for
the
Notice
of
Reconsideration.
In
addition,
MP's
characterization
is
inaccurate.
First
and
most
important,

EPA's
2010
projections
of
NOx
emission
rates
are
generally
lower
than
2001
NOx
emission
rate
data
for
Minnesota
units.

EPA's
projections
show
that
for
the
7
non­
MERP
units
in
Minnesota
where
MP
provided
revised
NOx
emission
estimates,

4
units
have
lower
emission
rates
in
2010
under
EPA
projections
and
only
3
units
will
have
higher
emission
rates
(
compared
to
2001
data).
Of
the
3
units
where
the
2010
emission
rate
values
are
higher
for
those
units
in
EPA
revised
emissions
modeling
versus
2001
data,
EPA
finds
that
81
one
unit
is
higher
by
2
percent
and
two
units
are
higher
by
about
7
percent.
Differences
in
emission
rates
of
this
magnitude
can
occur
for
a
variety
of
reasons
and
without
significant
operational
changes
to
a
particular
unit.
Also,

the
petitioner
has
also
failed
to
demonstrate
that
EPA's
projected
NOx
emission
rates
are
inaccurate.

Another
comment
from
MP
stated
that
"
the
EPA
IPM
modeling
had
shifted
heat
input
from
large,
lower
emission
units
to
higher
emission
units."
Id.
A
comparison
of
the
historical
data
from
2001
with
the
revised
emissions
modeling
does
not
support
this
broad
conclusion.
Heat
input
usage
does
not
change
significantly,
and
although
there
are
some
shifts
in
heat
input
usage
between
2010
EPA
projections
and
the
2001
data,
these
shifts
occur
where
the
IPM
projects
it
will
be
cost­
effective
to
make
relatively
small
changes
to
where
electricity
is
produced.
In
addition,
EPA
does
not
accept
the
suggestion
that
because
a
certain
rate
applied
in
2001
it
should
be
applied
in
2010.
This
argument
is
not
adequate
and
ignores
the
many
other
factors
that
may
change
in
the
future
which
could
cause
a
change
in
the
way
a
unit
produces
electricity.
These
include
(
among
others)
fuel
supply
and
demand
dynamics,
the
cost
of
technologies
to
reduce
emissions,
relative
performance
changes
in
power
generation
technologies,
and
the
price
of
an
allowance.
EPA
82
used
a
version
of
IPM
completed
in
2004
that
incorporated
the
best
available
data
for
EPA's
power
sector
database
and
the
most
recent
cost
and
performance
of
technologies
at
that
time,
focusing
on
what
emissions
and
emission
rates
are
likely
to
occur
in
2010
with
full
consideration
of
all
the
key
factors
of
power
plant
operations
that
can
influence
future
emission
levels.

The
power
sector
is
a
complicated,
interrelated,
and
interdependent
system
of
operation,
and
must
be
looked
at
holistically
to
ascertain
the
sector's
response
to
a
certain
set
of
conditions
or
constraints.
The
petitioner's
approach
selectively
chooses
the
methodology
for
determining
emissions
at
certain
units
and
ignores
the
changes
that
may
occur
at
other
units
as
a
result.
In
addition,
it
is
easy
to
question
the
choices
or
assumptions
that
one
makes
for
selective
forecasts
of
this
nature,
since
methodologies
can
be
developed
to
support
foregone
conclusions,
like
lower
emission
levels
in
a
future
year.
For
this
reason,
EPA
uses
the
Integrated
Planning
Model
to
develop
its
power
sector
emissions
projections.

IPM
is
a
detailed,
sophisticated,
and
comprehensive
electric
power
sector
model
that
is
used
to
derive
all
manner
of
projections
for
the
power
sector
and
is
used
to
develop
the
power
sector
emissions
projections
that
are
used
83
in
air
quality
modeling.
The
model
accurately
reflects
the
power
sector
and
contains
millions
of
variables
to
best
ascertain
how
specific
facilities
will
produce
electricity
to
meet
demand
in
the
most
cost­
effective
manner
possible.

The
variables
are
based
upon
the
best
available
data,
both
current
and
anticipated,
and
include
permitted
emission
rates
for
units,
unit
efficiency,
cost
data,
and
operational
constraints.
This
model
has
been
used
to
support
the
development
of
Title
IV
of
the
Clean
Air
Act
(
the
Acid
Rain
Program),
the
NOx
SIP
Call,
the
Clean
Air
Interstate
Rule,

the
Clean
Air
Mercury
Rule,
and
the
Clean
Air
Visibility
Rule.
In
addition,
it
is
used
by
the
Federal
Energy
Regulatory
Commission,
private
sector,
non­
profits,
research
groups,
States,
and
regional
planning
organizations
for
power
sector
projections.
The
model
has
undergone
extensive
peer­
review
and
scrutiny,
and
EPA
believes
it
is
an
appropriate
tool
for
use
in
developing
power
sector
emission
projections
and
better
accounts
for
the
many
dynamics
that
exist
in
the
power
sector
(
http://
www.
epa.
gov/
airmarkets/
epa­
ipm/
index.
html).

MP
does
not
challenge
the
use
of
IPM
for
developing
power
sector
emission
projections
for
certain
units,
but
comments
that
at
other
units,
a
revised
methodology
should
be
used.
EPA
believes
that
a
holistic
approach
is
necessary
84
and
using
a
modeling
tool
that
reflects
the
integrated
nature
of
the
power
sector
as
accurately
as
possible
is
the
most
rational
approach
to
forecasting
emissions
for
all
units
comprehensively.

To
its
credit,
MP
also
points
out
that
emissions
from
the
Taconite
Harbor
Facility
(
a
facility
that
was
recently
converted
from
an
industrial
source
to
an
electricity
generating
source)
were
not
included
by
EPA
in
either
the
power
sector
emissions
data
or
in
other
emissions
inventory
used
for
CAIR
modeling.
EPA
will
include
the
facility
in
the
next
version
of
the
IPM.
If
the
facility
had
been
included
in
the
inventory,
emissions
in
Minnesota
would
have
been
higher
by
almost
2,000
tons
of
SO2
and
about
1,150
tons
NOx
than
what
EPA
projected
(
according
to
the
commenter).

Since
EPA
did
not
include
this
facility,
EPA
believes
that
its
own
projections
of
emissions
in
Minnesota
underestimate
likely
future
emissions.

MP
also
stated
that
it
is
"
noteworthy
that
there
are
other
reductions
that
Minnesota
Power
has
not
modeled
that
should
warrant
consideration
by
EPA,
including
those
resulting
from
emission
controls
provided
on
Minnesota
BART
eligible
units
for
the
regional
haze
program."
MP
Comment
p.

6.
The
Regional
Haze
program
requires
Best
Available
Retrofit
Technology
or
BART
to
be
installed
and
operational
85
on
sources
that
the
State
finds
subject
to
BART
within
five
years
after
EPA
approves
a
State's
regional
haze
SIP.
These
SIPs
are
due
in
December,
2007.
EPA
does
not
believe
that
States
will
require
the
installation
or
operation
of
BART
controls
before
2010.
Thus,
it
is
highly
unlikely
that
2010
emissions
would
be
affected
by
the
BART
requirements.
In
addition,
MP
does
not
quantify
any
reductions
it
believes
will
occur
due
to
the
application
of
BART
in
Minnesota.

Thus,
MP
has
not
established
that
there
will
be
additional
reductions
due
to
BART
that
must
be
taken
into
account
when
projecting
2010
emissions
for
units
in
MN.
It
is
also
important
to
note
that
EPA
has
determined
that
CAIR
achieves
greater
progress
than
BART,
and
may
be
used
by
States
in
the
CAIR
region
as
an
alternative
to
BART.

In
sum,
EPA
continues
to
believe
its
emission
projections
have
reasonably
accounted
for
emission
trends
within
Minnesota
and
fully
account
for
emission
reductions
attributable
to
the
MERP.
EPA
believes
the
inputs
used
for
the
modeling
discussed
in
the
Notice
of
Reconsideration
are
reasonable
and
rational
projections
of
2010
emissions
in
Minnesota.
17
For
these
reasons,
EPA
is
not
making
any
additional
changes
to
the
inputs
to
the
PM2.5
modeling
for
Minnesota,
beyond
those
changes
described
in
the
Notice
of
Reconsideration.
86
For
more
detail
on
EPA's
characterization
of
power
sector
units
in
Minnesota
and
power
sector
emission
inputs
to
the
air
quality
modeling,
please
see
the
Technical
Support
Document
titled
"
Emissions
in
Minnesota:
Additional
Analysis
as
Part
of
the
CAIR
Reconsideration"
that
is
part
of
the
record
for
this
proceeding.

Minnesota
Power
also
raised
a
new
issue
in
its
comments
on
the
Notice
of
Reconsideration,
which
is
that
EPA
should
use
a
more
recent
version
of
its
modeling
platform
to
conduct
air
quality
modeling.
MP
argues
that
if
EPA
had
done
so,
Minnesota
would
be
below
the
PM2.5
significance
threshold.
EPA's
modeling
for
the
entire
final
CAIR
(
as
well
as
the
revised
Minnesota
air
quality
analysis)
used
the
Community
Multiscale
Air
Quality
(
CMAQ)
model
4.3.

Minnesota
Power,
however,
advocates
use
of
the
post­
CAIR
CMAQ
4.5.
The
commenter
states
that
the
CMAQ
4.5
includes
corrections
to
a
mass
stability
problem
in
the
version
(
4.3)

used
by
EPA.

As
noted
earlier,
EPA
stated
when
granting
reconsideration
that
it
was
not
reopening
any
issues
dealing
with
the
modeling
platforms
used
for
the
revised
Minnesota
modeling.
We
reiterate
that
position
here.
EPA
used
CMAQ
4.3
for
all
of
the
air
quality
analyses
conducted
for
the
final
CAIR,
and
provided
full
notice
and
opportunity
to
87
comment
on
the
appropriateness
of
the
model.
See
69
FR
47828
(
August
6,
2004)(
announcing
plan
to
use
CMAQ
4.3
for
the
final
rule);
see
also
70
FR
25234­
36
(
summarizing
the
use
of
CMAQ
4.3).
There
was
ample
opportunity
to
comment
on
any
issues
regarding
the
adequacy
of
the
model
during
the
rulemaking.
Nor
is
the
existence
of
a
new
iteration
of
the
model
"
grounds
for
 
objection
ar[
ising]
after
the
period
for
public
comment"
(
CAA
section
307
(
d)
(
7)
(
B)).

Predictive
models
are
of
course
open
to
the
possibility
of
updating
and
so
are
often
adjusted.
Such
adjustments
do
not
normally
occasion
new
opportunities
for
comment,

particularly
after
the
close
of
a
rulemaking.
Indeed,
doing
so
would
create
a
perverse
incentive
to
leave
models
unadjusted.
The
ultimate
issue
is
whether
the
model
used
in
the
rulemaking
bears
a
"
rational
relationship
to
the
characteristics
of
the
data
to
which
it
is
applied".

Appalachian
Power
v.
EPA,
249
F.
3d
1032,
1052
(
D.
C.
Cir.

2001).
There
has
already
been
full
opportunity
to
comment
on
this
issue.

Accordingly,
after
careful
examination
of
Minnesota
Power's
petition,
as
well
as
all
comments
submitted
in
response
to
EPA's
notice,
EPA
continues
to
find
that
Minnesota
emissions
contribute
significantly
to
downwind
nonattainment
of
the
PM2.5
NAAQS.
EPA
is
therefore
not
88
amending
the
rule
to
remove
Minnesota
from
the
CAIR
PM2.5
region.

D.
Inclusion
of
Florida
in
the
CAIR
Region
for
Ozone
Several
petitioners
sought
reconsideration
of
EPA's
determination
to
include
Florida
within
the
CAIR
ozone
region.
Although
there
were
substantial
arguments
that
EPA
had
already
provided
adequate
notice
on
this
issue
(
see
70
FR
at
72280;
several
commenters
also
indicated
that
this
issue
had
already
been
noticed
sufficiently),
EPA
decided
to
grant
the
petition.

EPA
included
Florida
within
the
CAIR
ozone
reason
because
emissions
passed
all
of
the
contribution
metrics
EPA
uses
to
evaluate
significance
of
contribution
for
ozone,
and
because
highly
cost
effective
controls
are
available
to
control
NOx
emissions
from
the
state.
Specifically,
Florida
is
contributes
significantly
to
nonattainment
of
the
8­
hour
ozone
NAAQS
in
Fulton
County,
Georgia
(
which
includes
Atlanta).
See
70
FR
at
25249
(
Table
VI­
9).

Many
commenters
agreed
with
EPA's
analysis.
Other
commenters
(
notably
the
petitioners)
argued,
however,
that
Florida
should
not
be
included
within
the
CAIR
ozone
region
at
all,
or
that
at
most,
only
the
northern
portion
of
the
State
should
be
included.
Although
the
reconsideration
petitions
originally
challenged
EPA's
factual
basis
for
89
including
Florida
within
the
CAIR
ozone
region,
the
petitioners
have
abandoned
this
claim
because
they
essentially
duplicated
EPA's
modeling
results
relating
to
magnitude
of
contribution,
frequency
of
contribution,
and
relative
amount
of
contribution
(
the
three
factors
EPA
evaluated
in
determining
whether
an
upwind
State's
contribution
to
a
downwind
State
could
be
considered
significant).
Rather,
the
commenters
are
now
challenging
how
to
interpret
the
relative
amount
of
contribution
factor.

In
assessing
relative
amount
of
contribution,
EPA
stated
that
the
amount
would
not
be
considered
to
contribute
significantly
if
it
was
"
less
than
one
percent
of
total
nonattainment
in
the
downwind
area".
70
FR
at
25191.
The
average
percent
of
nonattainment
of
Florida
to
Fulton
County
is
0.81
%.
Cite.
18
Commenters
argued
that
because
0.81
%
is
18
There
are
three
parts
to
the
calculation
of
the
average
percent
of
nonattainment
metric.
In
step
1,
the
ozone
values
for
each
of
the
exceedance
periods
in
a
particular
downwind
area
(
here,
Fulton
Co.)
are
summed
over
the
three
episodes.
In
step
2,
the
total
ozone
from
the
previous
step
that
is
due
to
anthropogenic
sources
is
calculated
based
on
the
source
apportionment
results.
In
step
3,
the
contributions
from
a
given
source
region
to
this
downwind
area
are
summed
over
the
exceedance
periods.
The
total
contribution
calculated
in
step
3
is
then
divided
by
the
total
nonattainment
ozone
resulting
from
manmade
sources
in
step
2
to
determine
the
fraction
of
ozone
that
is
due
to
emissions
from
the
upwind
source
area.
The
fractional
value
is
multiplied
by
100
to
express
the
metric
in
terms
of
percent.
The
values
in
steps
1
and
2
are
reported
to
the
nearest
integer.
The
value
in
step
3
is
reported
with
one
digit
to
90
less
than
one
percent,
the
relative
amount
of
contribution
is
too
small
and
therefore
should
not
create
a
significant
contribution
linkage.

For
all
relative
amount
of
contribution
calculations
(
not
just
those
involving
Florida
and
Fulton
County),
EPA
rounded
the
average
percent
of
contribution
figure
up
or
down
to
the
nearest
integer
value,
so
that
values
0.5%
and
higher
were
rounded
up
to
one
percent,
and
values
less
than
0.5%
were
rounded
down
to
zero.
19
EPA
agrees
with
the
petitioners
(
and
other
commenters)
that
it
would
have
been
the
right
of
the
decimal
place.
The
final
average
percent
of
nonattainment
value
is
reported
to
the
nearest
integer.

Applied
to
Florida
NOx
emissions
to
Fulton
County,
this
methodology
yields
the
following:

Step
1:
Over
the
three
episodes
modeled,
there
was
120,511
ppb
of
ozone
greater
than
or
equal
to
85.0
ppb
(
the
level
of
the
8­
hour
NAAQS)
in
Fulton
County.

Step
2:
From
source
apportionment
modeling,
96,067
ppb
of
the
ozone
in
Fulton
Co.
was
determined
to
be
of
anthropogenic
origin.

Step
3:
781.0
ppb
of
the
8­
hour
ozone
greater
than
or
equal
to
85.0
ppb
was
determined
via
the
source
apportionment
approach
to
be
from
emissions
in
Florida.
Thus
the
average
percent
nonattainment
is
0.81
percent.
This
value
was
rounded
to
1
percent.

19
These
commenters
pointed
out
correctly
that
EPA
also
rounded
values
two
digits
to
the
right
of
the
decimal
point
up
or
down
to
the
next
highest
value,
so
that
(
for
example)
.45
%
would
be
rounded
up
to
.5%
(
and
then
further
rounded
to
one
percent).
This
protocol
has
no
practical
consequence
here.
91
preferable
if
EPA
had
stated
this
rounding
protocol
explicitly.
20
That
being
said,
however,
it
is
commonplace
to
round
fractions
up
or
down
to
the
nearest
integer.
As
to
the
commenters'
argument
that
an
effective
average
percent
of
contribution
of
.5%
is
too
small
to
be
considered
significant.
Commenters
further
argued
that
EPA
was
applying
the
rounding
protocol
inconsistently
because
in
other
instances,
which
they
view
as
comparable,
EPA
truncates
fractional
digits
(
i.
e.
simply
eliminates
them),

rather
than
round
them.
The
examples
given
are
in
applying
the
ozone
magnitude
of
contribution
metric
(
actual
amount
of
ozone
contributed
by
emissions
in
the
upwind
State
to
nonattainment
in
the
downwind
area),
and
the
annual
average
PM
2.5
contribution
threshold.

EPA
does
truncate
when
determining
each
of
these
metrics.
The
ozone
magnitude
of
contribution
metric
quantifies
a
maximum
impact
(
in
parts
per
billion)
on
predicted
exceedances
for
a
downwind
nonattainment
area.

The
exceedance
level
 
i.
e.
the
level
of
the
standard
­­
for
the
8­
hour
ozone
NAAQS
is
85
parts
per
billion
(`
ppb')
is
obtained
by
"
report[
ing]
parts
per
million
values
to
the
third
decimal
place,
with
additional
digits
to
the
right
being
truncated".
40
CFR
Part
50
App.
I
("
Interpretation
of
[
92
the
8­
Hour
Primary
and
Secondary
National
Ambient
Air
Quality
Standard
for
Ozone")
at
2.1.1.
The
truncation
in
the
magnitude
of
contribution
metric
is
thus
directly
related
to
the
form
of
the
NAAQS
itself.
Because
the
magnitude
of
contribution
metric
is
tied
directly
to
the
8­

hour
NAAQS
exceedance
level,
EPA
uses
the
identical
truncation
protocol
as
is
used
in
the
NAAQS.
In
contrast,

the
average
percent
of
nonattainment
metric
is
not
directly
related
to
the
form
of
the
8­
hour
ozone
NAAQS
(
indeed,
it
is
not
related
at
all).
As
stated
earlier,
and
illustrated
in
note
above,
the
metric
assesses
overall
impacts
which
are
expressed
by
aggregating
all
the
impacts
of
a
State
on
a
downwind
receptor
divided
by
the
total
impacts
from
all
anthropogenic
emissions.
Since
there
is
no
direct
comparison
with
the
ozone
NAAQS,
there
is
no
reason
to
utilize
the
conventions
used
in
expressing
that
NAAQS.

The
comments
also
maintain
that
EPA
used
a
different
protocol
to
evaluate
when
an
upwind
State's
contribution
to
downwind
nonattainment
of
the
PM
2.5
NAAQS
is
significant.

EPA's
metric
for
determining
significant
contribution
to
PM
2.5
NAAQS
nonattainment
is
1
%
of
the
standard,
or
.15
ug/
m3
which
EPA
rounds
up
to
0.2
ug/
m3.
70
FR
at
25191.
EPA
took
this
step
to
avoid
expressing
the
contribution
metric
using
a
greater
level
of
precision
(
i.
e.
a
greater
number
of
93
digits)
than
are
used
in
the
NAAQS
itself.
Id.
Since
the
PM2.5
contribution
metric
is
expressed
as
a
direct
percentage
of
the
NAAQS
itself,
it
is
appropriate
that
it
conform
to
the
form
of
the
NAAQS.
The
percent
of
nonattainment
metric
at
issue
here,
as
explained
above,
is
not
directly
related
to
the
form
of
the
8­
hour
ozone
NAAQS,

so
there
is
no
reason
to
adopt
the
conventions
which
are
part
of
that
form.
For
the
same
reason,
there
is
no
inconsistency
in
EPA's
approach
in
choosing
for
purposes
of
PM
contribution
expressed
in
terms
of
a
percent
of
the
PM
2.5
NAAQS
to
use
the
conventions
used
in
the
form
of
that
NAAQS.
21
The
comments
go
on
to
say
that
even
if
it
is
reasonable
to
include
Florida
within
the
CAIR
ozone
region,

only
a
portion
of
the
state
(
the
northern
portion
as
delineated
in
the
comments)
should
be
included
rather
than
the
entire
state.
The
comments
note
that
EPA
itself
excluded
a
small
part
of
the
southern
portion
of
Florida,

and
argue
that
this
approach
should
be
extended
based
upon
modeling
results
presented
with
the
comment.

This
is
not
true
for
the
remainder
of
the
State.
The
21
EPA
in
fact
uses
standard
rounding
conventions
in
compiling
PM2.5
monitoring
results
for
comparison
to
the
level
of
the
annual
PM
2.5
NAAQS.
See
Part
50
App.
N
at
2.3.
94
commenters
have
the
burden
of
demonstrating
that
EPA's
approach
of
assessing
significant
contribution
based
on
the
collective
emissions
from
the
entire
state
lacks
rationality.
Appalachian
Power
v.
EPA,
249
F.
3d
1032,
1050
(
D.
C.
Cir.
2001);
see
also
State
of
Michigan
v.
EPA,
213
F.

3d
663,
683­
84
(
D.
C.
Cir.
2000)
(
burden
is
on
the
party
seeking
to
exclude
a
portion
of
a
State
to
demonstrate
that
the
portion
is
"
innocent
of
material
contribution")
.
As
EPA
explained
in
responding
to
these
same
commenters'

motions
for
a
stay
of
the
rule
in
the
D.
C.
Circuit
(
which
response
is
part
of
the
administrative
record
for
this
proceeding),
not
only
have
the
commenters
failed
to
carry
their
burden,
but
their
modeling
confirms
that
Florida
represents
a
classic
instance
of
collective
contribution
to
downwind
nonattainment.
The
commenters'
report
shows
that
both
the
(
posited)
northern
and
southern
regions
contribute
substantial
portions
of
the
total
ozone
loading
from
Florida
to
Fulton
County,
namely
69
per
cent
from
the
northern
region
and
31
per
cent
from
the
southern
region.
Ozone
Report
at
5­
3.22
Nor
does
there
appear
to
be
any
22
Other
comparisons
likewise
show
that
the
contribution
is
collective
across
the
State,
not
regionalized.
The
average
percent
contribution
is
0.25
percent
for
the
southern
portion
and
0.55
for
the
northern
portion;
the
highest
daily
average
is
1.88
ppb
for
the
southern
portion
and
3.42
ppb
for
the
northern
portion;
and
the
maximum
8­
hour
95
principled
basis
for
the
north
 
south
divisions
put
forward
in
the
comments.
Not
only
does
the
report
underlying
the
comments
itself
concede
that
there
are
a
multitude
of
potential
divisions
(
the
Report
suggests
six
ozone
subregions
in
various
permutations,
and
the
Report
further
states
that
"
clearly
numerous
other
ones
could
be
also
be
constructed"
(
Ozone
Report
at
5­
1)),
but
that
the
ones
put
forward
were
done
so
essentially
to
show
that
the
(
posited)

northern
portion
met
significance
criteria
but
the
(
posited)

southern
portion(
s)
does
not.
Ozone
Report
at
3­
2.
The
suggested
division(
s)
for
ozone
are
not
even
the
same
as
the
one
the
commenter
asserts
are
necessary
for
assessing
contribution
of
PM2.5.
Ozone
Report
at
ES­
2,
PM
Report
at
ES­
1.23
This
frankly
appears
to
be
more
an
arbitrary
balkanization
than
a
principled
division.
Accordingly,
EPA
is
not
accepting
the
commenters'
arguments
that
contribution
must
be
assessed
on
a
different
basis
than
EPA
used
in
the
rule.

E.
Impact
on
CAIR
Analyses
of
D.
C.
Circuit
Decision
in
New
contribution
is
2.11
for
the
southern
portion
and
3.80
for
the
northern
portion.
Ozone
Report
at
Table
5­
2
at
page
5­
3.
23
The
commenters'
explanation
for
this
inconsistency
is
that
the
difference
"
merely
reflects
the
unsurprising
reality
that
modeling
contribution
to
different
pollutants
(
PM2.5
and
ozone)
yields
slightly
different
results."
FPL
Group
comment
p.
7.
96
York
v.
EPA
As
described
in
the
December
29,
2005
CAIR
Supplemental
Notice
of
Reconsideration,
"
Rule
To
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone
(
Clean
Air
Interstate
Rule):
Supplemental
Notice
of
Reconsideration"

(
70
FR
77101­
13),
EPA
decided
to
grant
Petitioner's
request
that
EPA
reconsider
the
impact
of
New
York
v.
EPA,
413
F.
3d
3
(
D.
C.
Cir.
2005)
on
certain
analyses
prepared
for
the
final
CAIR.
One
petitioner
claimed
that
this
June
2005
opinion
of
the
D.
C.
Circuit
raised
questions
about
the
sufficiency
of
certain
analyses
prepared
for
the
CAIR.

Among
other
things,
the
opinion
vacated
a
provision
of
the
New
Source
Review
(
NSR)
regulations,
commonly
known
as
the
pollution
control
project
(
PCP)
exclusion.
The
CAIR
Supplemental
Notice
of
Reconsideration
explained
that
EPA
reviewed
the
petition
for
reconsideration
and
analyzed
the
potential
impact
of
New
York
v.
EPA
on
CAIR
analyses
regarding
cost­
effectiveness
and
timing.
This
analysis
indicated
that,
as
a
result
of
the
New
York
v.
EPA
decision,

some
electric
generating
units
(
EGUs)
that
install
SO2
and/
or
NOx
controls
for
CAIR
may
incur
relatively
minor
additional
costs
and
a
few
such
units
may
be
subject
to
additional
permitting
requirements,
but
that
these
potential
impacts
will
neither
affect
the
highly
cost­
effective
97
determination
that
the
Agency
made
in
CAIR
nor
impact
the
timeframe
for
CAIR
reductions.

The
CAIR
Supplemental
Notice
of
Reconsideration
presented
this
and
concluded
that
the
potential
impacts
of
the
D.
C.
Circuit
Decision
in
New
York
v.
EPA
do
not
alter
the
final
highly
cost­
effective
determination
made
in
the
final
CAIR
and
do
not
affect
the
feasibility
of
implementing
the
CAIR
reductions
in
the
required
timeframe.
Thus,
the
CAIR
Supplemental
Notice
of
Reconsideration
did
not
propose
any
modifications
to
the
final
CAIR.

Today's
action
finalizes
EPA's
determination
that
no
modifications
to
the
final
CAIR
are
needed
to
address
this
issue
and
responds
to
public
comments
received
on
the
CAIR
Supplemental
Notice
of
Reconsideration.

1.
Background
on
the
Impact
on
CAIR
Analyses
of
D.
C.

Circuit
Decision
in
New
York
v.
EPA
For
background
information
on
this
issue,
please
refer
to
the
CAIR
Supplemental
Notice
of
Reconsideration
(
70
FR
77103­
13).

2.
Additional
Analysis
on
the
Impact
on
CAIR
Analyses
of
D.
C.
Circuit
Decision
in
New
York
v.
EPA
Presented
in
the
CAIR
Supplemental
Notice
of
Reconsideration
The
CAIR
Supplemental
Notice
of
Reconsideration
presented
analysis
that
EPA
conducted
to
evaluate
the
98
potential
impact
on
CAIR
Analyses
of
the
D.
C.
Circuit
Decision
in
New
York
v.
EPA.
The
analysis
first
examined
the
potential
cost
and
timing
impacts
of
the
decision,

assuming
units
would
take
measures
to
mitigate
any
potential
significant
collateral
increases
in
emissions
of
NSRregulated
pollutants.
Then,
the
analysis
examined
the
potential
impact
of
NSR
permitting
on
the
CAIR
costeffectiveness
and
timing
analyses.

First,
the
analysis
looked
at
the
potential
costs
and
timing
implications
of
measures
that
could
be
taken
to
mitigate
collateral
emission
increases
and
thus
avoid
NSR
permitting.
As
part
of
the
analysis,
EPA
made
several
assumptions
it
believes
to
be
generally
very
conservative.

However,
the
analysis
still
showed
that
the
potential
impacts
would
neither
affect
the
highly
cost­
effective
determination
that
the
Agency
made
in
the
CAIR
nor
impact
the
timeframe
for
CAIR
reductions.
(
See
70
FR
77105­
9).

Second,
the
analysis
examined
the
potential
impact
of
NSR
permitting.
It
showed
that,
although
sources
installing
controls
for
CAIR
generally
will
have
options
to
avoid
triggering
NSR
for
collateral
increases,
some
sources
may
conduct
projects
that
could
result
in
a
net
emissions
increase
despite
possible
mitigation
measures.
These
sources
might
therefore
apply
for
and
obtain
the
necessary
99
NSR
permits
to
address
such
increase.
EPA's
analysis
showed,
however,
that
the
impact
of
permitting
of
such
sources
on
EPA's
CAIR
analyses
is
minimal.
The
Agency
believes
that
the
impacts
of
choosing
to
undertake
NSR
for
these
units
are
not
substantial
enough
to
affect
the
CAIR
highly
cost­
effective
determination
or
the
feasibility
and
timing
analysis.
(
See
70
FR
77109­
11).

Overall,
the
analysis
presented
in
the
CAIR
Supplemental
Notice
of
Reconsideration
showed
that
the
decision
to
vacate
the
PCP
exclusion
under
NSR
does
not
require
any
modification
of
the
final
CAIR.
The
Notice
thus
did
not
propose
any
changes
to
the
CAIR.

3.
Public
Comment
on
the
CAIR
Supplemental
Notice
of
Reconsideration
EPA
received
several
comments
on
the
Supplemental
Notice
of
Reconsideration.
24
Most
of
the
commenters
supported
the
conclusions
in
EPA's
analysis
regarding
the
impact
of
the
New
York
v.
EPA
decision
on
both
the
costeffectiveness
analysis
and
timing
analysis
prepared
for
CAIR.
Some
commenters,
however,
did
disagree
with
some
aspects
of
the
analysis
that
EPA
performed
in
coming
to
its
conclusion.

24
These
documents
are
available
in
the
docket
for
the
CAIR
(
EPA­
OAR­
2003­
0053).
100
One
commenter,
who
generally
agreed
with
EPA's
conclusion
that
the
potential
impacts
of
D.
C.
Circuit
Decision
in
New
York
v.
EPA
do
not
alter
the
final
highly
cost­
effective
determination
made
in
the
final
CAIR
and
do
not
affect
the
feasibility
of
implementing
the
CAIR
reductions
in
the
required
timeframe,
disagreed
with
several
points
in
the
supporting
analysis.
First,
the
commenter
does
not
believe
that
the
emissions
increases
associated
with
coal
switching
identified
in
two
categories
of
controls
in
EPA's
analysis
would
be
considered
in
calculating
collateral
emission
increases.
While
EPA
agrees
that
in
most
cases
coal
switching
would
not
be
included
in
calculating
collateral
emission
increases
for
a
PCP,
this
inclusion/
exclusion
is
dependent
upon
the
specific
permit
of
the
affected
source.
In
its
analysis,
EPA
made
the
conservative
assumption
that
coal
switching
would
be
included
in
calculating
collateral
emission
increases
for
PCPs
involving
SCR
and/
or
FGD
retrofits.

In
its
cost­
effectiveness
analysis,
EPA
also
made
the
conservative
assumptions
that
all
EGUs
that
will
install
SCR
and/
or
wet
FGD
will
experience
a
significant
emissions
increase
in
sulfuric
acid
mist
and
that
all
of
those
EGUs
will
install
a
wet
ESP
to
mitigate
those
emissions.
The
commenter
believes
these
assumptions
are
unrealistic.
The
101
Agency
agrees
that
these
assumptions
lead
to
an
overestimate
of
the
cost
impact
of
the
decision
in
New
York
v.
EPA,
since
the
number
of
EGUs
with
collateral
increases
in
sulfuric
acid
mist
will
be
much
smaller
than
the
universe
assumed
in
EPA's
analysis
and
that
the
BACT
determinations
in
those
cases
with
significant
increases
in
sulfuric
acid
mist
may
not
involve
the
installation
of
wet
ESP
due
to
its
high
cost.
As
mentioned
in
the
CAIR
Supplemental
Notice
of
Reconsideration,
historically,
BACT
for
sulfuric
acid
mist
at
combustion
sources
generally
has
been
switching
to
lower
sulfur
coal
or
installation
of
wet
FGD.

The
commenter
argued
that
EPA
improperly
assumed
that
condensable
emissions
are
regulated
as
a
component
of
PM,

and
suggested
that
EPA's
analysis
was
flawed
in
this
respect.
It
should
also
be
noted
that
EPA
is
not
taking
action
to
change
the
manner
in
which
EPA
treats
condensable
emissions.
Further,
the
status
of
condensable
emissions
as
a
regulated
NSR
pollutant
does
not
change
the
outcome
of
the
Agency
analysis
discussed
here.
This
analysis,
which
assumed
that
sulfuric
acid
mist
would
be
regulated
as
a
component
of
particulates,
concludes
that
the
New
York
v.
102
EPA
decision
will
not
change
the
conclusions
of
the
costeffectiveness
and
timing
analyses
prepared
for
CAIR.
26
If
EPA
were
to
assume,
as
the
commenter
suggests,
that
these
emissions
are
not
regulated
as
NSR
pollutants,
the
conclusion
of
EPA's
analysis
would
only
be
strengthened.
27
The
same
commenter
also
suggested
that
for
some
large
EGUs
burning
high
sulfur
coal
and
installing
wet
FGD,

sulfuric
acid
mist
emissions
may
exceed
the
NSR
threshold.

While
this
may
be
true
in
some
cases,
EPA
does
not
feel
that
this
will
undermine
the
conclusions
of
the
analysis
in
the
CAIR
Supplemental
Notice
of
Reconsideration
because
of
the
very
conservative
assumptions
made
throughout
the
analysis
(
For
purposes
of
its
cost
analysis,
EPA
assumed
that
these
units
installed
wet
ESP).
It
is
difficult
to
estimate
the
number
of
such
units
without
permit
information
for
all
units
at
which
this
may
occur.
Further,
as
mentioned
in
the
26
The
commenter
challenges
these
conclusions
and
says
they
only
hold
true
if
condensables
are
not
regulated.
However,
the
commenter
offers
no
analysis
to
support
this
assertion
or
to
identify
any
errors
in
EPA's
analysis
to
support
this
argument.

27
The
commenter
further
notes
that
it
would
disagree
with
the
conclusions
in
EPA's
analysis
if
it
assumes
condensables
are
regulated;
however,
it
does
not
provide
any
analysis
to
demonstrate
that
EPA's
conclusions
are
flawed.
As
explained
above
and
in
the
Supplemental
Notice
of
Reconsideration,
EPA's
analysis
shows
that,
even
when
very
conservative
assumptions
are
made,
the
court
decision
does
not
alter
the
conclusions
of
the
analyses
supporting
the
CAIR.
103
CAIR
Supplemental
Notice
of
Reconsideration,
much
of
the
SO3
produced
by
SCR
does
not
reach
the
stack;
SCR
conditions
favor
a
reaction
between
SO3
and
ammonia
that
produces
ammonia
bisulfate,
which
condenses
to
form
solid
PM,
the
majority
of
which
will
be
captured
in
the
unit's
particulate
control
device.
Thus,
EPA
does
not
feel
that
many
such
units
will
reach
the
NSR
threshold
for
sulfuric
acid
mist.

Another
commenter
disagreed
with
EPA's
assessment
of
potential
collateral
increases
in
CO
from
low
NOx
burners
(
LNB).
While
EPA
believes
that
installing
combustion
control
systems
can
lead
to
collateral
increases
in
CO,

triggering
NSR,
generally
LNB
will
not
significantly
affect
the
combustion
process
and
production
of
CO.
It
is
the
Agency's
position
that
increases
in
CO
can
be
minimized
through
adjustments
of
combustion
control
systems
(
e.
g.,

good
combustion
practices),
and
at
this
time
there
are
no
other
cost­
effective
control
options
for
reducing
CO.

Therefore,
even
in
cases
where
NSR
is
triggered,
no
significant
additional
control
costs
would
be
incurred.

A
third
commenter
asserts
that
"
based
upon
EPA's
discussion
in
the
Reconsideration
Decision,
[
the
commenter]

understands
that
only
those
analyses
performed
by
EPA
and
described
in
the
Reconsideration
Decision
are
needed
to
assess
whether
a
PCP
undertaken
for
CAIR
compliance
would
104
increase
emissions
of
any
NSR
regulated
pollutant
in
an
amount
that
exceeds
the
applicable
NSR
significance
level.

If
there
are
other
methods
or
means
by
which
EPA
believes
a
PCP
performed
for
CAIR
compliance
would
trigger
NSR,
or
if,

using
EPA
emission
increase
methodologies,
EPA
believes
or
would
find
that
other
air
pollutant
emissions
would
increase
above
an
applicable
NSR
significance
level
as
a
result
of
PCPs
that
are
expected
to
be
performed
for
CAIR
compliance,

then
the
Reconsideration
Decision
is
deficient."

The
analysis
presented
in
the
CAIR
Supplemental
Notice
of
Reconsideration
addresses
only
those
general
categories
of
projects
that
would
have
qualified
as
PCPs
under
the
NSR
rules
vacated
by
the
court
and
that
we
believe
have
the
potential
to
increase
collateral
emissions
of
NSR
regulated
pollutants
enough
to
trigger
NSR.
It
is
not
our
intent,
nor
is
it
within
the
scope
of
our
analysis,
to
consider
at
this
time
what
permitting
requirements
might
apply
to
all
categories
of
pollution
control
activities
(
including
those
that
were
not
listed
as
a
PCP
under
the
NSR
rules)
that
might
be
undertaken
by
EGUs
attempting
to
comply
with
the
CAIR
requirements.
The
analysis
was
conducted
to
determine
whether
the
elimination
of
the
PCP
exemption
would
impact
the
cost­
effectiveness
and
timing
analyses
for
the
CAIR.

Potential
permitting
requirements
for
categories
of
105
activities
that
would
not
have
been
subject
to
that
exemption
are
not
relevant
to
that
analysis.
28
On
all
other
major
points,
commenters
agreed
with
EPA's
analysis,
and
half
of
the
commenters
also
explicitly
agreed
with
EPA's
conclusion
that
impacts
of
D.
C.
Circuit
Decision
in
New
York
v.
EPA
do
not
alter
the
final
highly
costeffective
determination
made
in
the
final
CAIR
and
do
not
affect
the
feasibility
of
implementing
the
CAIR
reductions
in
the
required
timeframe.
It
should
also
be
noted
that
other
than
the
four
commenters,
no
other
affected
parties
offered
problems
associated
with
the
impacts
of
D.
C.
Circuit
Decision
in
New
York
v.
EPA
that
might
undermine
the
final
CAIR
cost­
effective
determination
and
timing
of
compliance
dates.

Today's
action
does
not
modify
the
final
CAIR.
In
the
CAIR
Supplemental
Notice
of
Reconsideration,
EPA
announced
that
it
would
reconsider
the
impact
of
the
New
York
v.
EPA
decision
on
cost­
effectiveness
and
timing
analyses
prepared
28
The
analysis
addresses
all
relevant
categories
of
PCPs
of
which
EPA
is
currently
aware.
The
commenter
failed
to
identify
any
concrete
problems
that
they
were
concerned
about
facing
or
other
relevant
categories
of
PCPs.
Moreover,
in
addressing
the
relevant
general
categories
of
PCPs,
EPA
does
not
purport
to
make
determinations
about
whether
NSR
would
be
triggered
in
any
specific
PCPs
undertaken
to
comply
with
the
CAIR,
EPA
will
consider,
and
make
determinations
based
on,
the
specific
circumstances
of
those
projects.
106
for
the
CAIR.
The
EPA
analyzed
the
potential
impact
of
the
decision
and
solicited,
considered
and
responded
to
public
comment
on
that
analysis.
The
EPA's
analysis
shows
that
the
D.
C.
Circuit
Decision
in
New
York
v.
EPA
does
not
significantly
impact
either
the
CAIR
cost­
effectiveness
determination
or
the
compliance
dates.
For
that
reason,
EPA
has
determined
that
modifications
to
the
final
CAIR
are
not
warranted.
The
Agency
believes
that
installation
of
emission
controls
for
CAIR,
as
well
as
other
programs,
is
extremely
beneficial
and
is
working
on
ways
to
minimize
permitting
issues
associated
with
installation
of
these
devices
in
a
way
that
is
consistent
with
the
D.
C.
Circuit
Decision
in
New
York
v.
EPA.

IV.
Statutory
and
Executive
Order
Reviews
A.
Executive
Order
12866:
Regulatory
Planning
and
Review
Under
Executive
Order
12866
(
58
FR
51735,
October
4,

1993),
the
Agency
must
determine
whether
the
regulatory
action
is
A
significant
@

and,
therefore,
subject
to
Office
of
Management
and
Budget
(
OMB)
review
and
the
requirements
of
the
Executive
Order.
The
Order
defines
A
significant
regulatory
action
@

as
one
that
is
likely
to
result
in
a
rule
that
may:

(
1)
have
an
annual
effect
on
the
economy
of
$
100
million
or
more
or
adversely
affect
in
a
material
way
the
107
economy,
a
sector
of
the
economy,
productivity,
competition,

jobs,
the
environment,
public
health
or
safety,
or
State,

local,
or
Tribal
governments
or
communities;

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

(
3)
materially
alter
the
budgetary
impact
of
entitlements,
grants,
user
fees,
or
loan
programs
or
the
rights
and
obligations
of
recipients
thereof;
or
(
4)
raise
novel
legal
or
policy
issues
arising
out
of
legal
mandates,
the
President
=

s
priorities,
or
the
principles
set
forth
in
the
Executive
Order.

Pursuant
to
the
terms
of
Executive
Order
12866,
OMB
has
determined
that
this
is
not
a
significant
regulatory
action.

This
notice
does
not
promulgate
any
modifications
to
the
CAIR.

B.
Paperwork
Reduction
Act
This
action
does
not
promulgate
information
collection
request
requirements
under
the
provisions
of
the
Paperwork
Reduction
Act,
44
U.
S.
C.
3501
et
seq.
Therefore,
an
information
collection
request
document
is
not
required.

Burden
means
the
total
time,
effort,
or
financial
resources
expended
by
persons
to
generate,
maintain,
retain,

or
disclose
or
provide
information
to
or
for
a
Federal
agency.
This
includes
the
time
needed
to
review
108
instructions;
develop,
acquire,
install,
and
utilize
technology
and
systems
for
the
purposes
of
collecting,

validating,
and
verifying
information,
processing
and
maintaining
information,
and
disclosing
and
providing
information;
adjust
the
existing
ways
to
comply
with
any
previously
applicable
instructions
and
requirements;
train
personnel
to
be
able
to
respond
to
a
collection
of
information;
search
data
sources;
complete
and
review
the
collection
of
information;
and
transmit
or
otherwise
disclose
the
information.

An
agency
may
not
conduct
or
sponsor,
and
a
person
is
not
required
to
respond
to
a
collection
of
information
unless
it
displays
a
currently
valid
OMB
control
number.

The
OMB
control
numbers
for
EPA's
regulations
in
40
CFR
are
listed
in
40
CFR
part
9.

C.
Regulatory
Flexibility
Act
The
Regulatory
Flexibility
Act
generally
requires
an
Agency
to
prepare
a
regulatory
flexibility
analysis
of
any
rule
subject
to
notice
and
comment
rulemaking
requirements
under
the
Administrative
Procedures
Act
or
any
other
statute
unless
the
Agency
certifies
the
rule
will
not
have
a
significant
economic
impact
on
a
substantial
number
of
small
entities.
Small
entities
include
small
businesses,
small
organizations,
and
small
governmental
jurisdictions.
109
For
purposes
of
assessing
the
impacts
of
today
=

s
notice
on
small
entities,
small
entity
is
defined
as:
(
1)
a
small
business
that
is
a
small
industrial
entity
as
defined
in
the
U.
S.
Small
Business
Administration
(
SBA)
size
standards.

(
See
13
CFR
part
121.);
(
2)
a
governmental
jurisdiction
that
is
a
government
of
a
city,
county,
town,
school
district
or
special
district
with
a
population
of
less
than
50,000;
and
(
3)
a
small
organization
that
is
any
not­
for­
profit
enterprise
which
is
independently
owned
and
operated
and
is
not
dominant
in
its
field.

After
considering
the
economic
impacts
of
today
=

s
notice
on
small
entities,
I
certify
that
this
action
will
not
have
a
significant
economic
impact
on
a
substantial
number
of
small
entities.
This
notice
does
not
impose
any
requirements
on
small
entities.
This
notice
does
not
promulgate
any
modifications
to
the
CAIR.
We
continue
to
be
interested
in
the
potential
impacts
of
the
notice
on
small
entities
and
welcome
comments
on
issues
related
to
such
impacts.

D.
Unfunded
Mandates
Reform
Act
Title
II
of
the
Unfunded
Mandates
Reform
Act
of
1995
(
UMRA),
Public
Law
104­
4,
establishes
requirements
for
Federal
agencies
to
assess
the
effects
of
their
regulatory
actions
on
State,
local,
and
Tribal
governments
and
the
110
private
sector.
Under
section
202
of
the
UMRA,
EPA
generally
must
prepare
a
written
statement,
including
a
cost­
benefit
analysis,
for
proposed
and
final
rules
with
"
Federal
mandates"
that
may
result
in
expenditures
by
State,

local,
and
Tribal
governments,
in
the
aggregate,
or
by
the
private
sector,
of
$
100
million
or
more
in
any
1
year.

Before
promulgating
an
EPA
rule
for
which
a
written
statement
is
needed,
UMRA
section
205
generally
requires
EPA
to
identify
and
consider
a
reasonable
number
of
regulatory
alternatives
and
adopt
the
least
costly,
most
costeffective
or
least­
burdensome
alternative
that
achieves
the
objectives
of
the
rule.
The
provisions
of
section
205
do
not
apply
when
they
are
inconsistent
with
applicable
law.

Moreover,
section
205
allows
EPA
to
adopt
an
alternative
other
than
the
least­
costly,
most
cost­
effective,
or
leastburdensome
alternative
if
the
Administrator
publishes
with
the
final
rule
an
explanation
why
that
alternative
was
not
adopted.
Before
EPA
establishes
any
regulatory
requirements
that
may
significantly
or
uniquely
affect
small
governments,

including
tribal
governments,
it
must
have
developed,
under
section
203
of
the
UMRA,
a
small
government
agency
plan.

The
plan
must
provide
for
notifying
potentially
affected
small
governments,
enabling
officials
of
affected
small
governments
to
have
meaningful
and
timely
input
in
the
111
development
of
EPA's
regulatory
proposals
with
significant
Federal
intergovernmental
mandates,
and
informing,

educating,
and
advising
small
governments
on
compliance
with
the
regulatory
requirements.

The
EPA
has
determined
that
today's
notice
does
not
contain
a
Federal
mandate
that
may
result
in
expenditures
of
$
100
million
or
more
for
State,
local,
and
Tribal
governments,
in
the
aggregate,
or
the
private
sector
in
any
1
year.
Today's
notice
does
not
add
new
requirements
that
would
increase
the
cost
of
the
CAIR.
Thus,
today's
notice
is
not
subject
to
the
requirements
of
sections
202
and
205
of
the
UMRA.
In
addition,
EPA
has
determined
that
today's
notice
does
not
significantly
or
uniquely
affect
small
governments
because
it
contains
no
requirements
that
apply
to
such
governments
or
impose
obligations
upon
them.

Therefore,
today's
notice
is
not
subject
to
section
203
of
the
UMRA.

E.
Executive
Order
13132:
Federalism
Executive
Order
13132,
entitled
A
Federalism
@

(
64
FR
43255,
August
10,
1999),
requires
EPA
to
develop
an
accountable
process
to
ensure
A
meaningful
and
timely
input
by
State
and
local
officials
in
the
development
of
regulatory
policies
that
have
federalism
implications.@

A
Policies
that
have
federalism
implications
@

is
defined
in
112
the
Executive
Order
to
include
regulations
that
have
A
substantial
direct
effects
on
the
States,
on
the
relationship
between
the
national
government
and
the
States,

or
on
the
distribution
of
power
and
responsibilities
among
the
various
levels
of
government.@

This
action
does
not
have
federalism
implications.
It
would
not
have
substantial
direct
effects
on
the
States,
on
the
relationship
between
the
national
government
and
the
States,
or
on
the
distribution
of
power
and
responsibilities
among
the
various
levels
of
government,
as
specified
in
Executive
Order
13132.
The
CAA
establishes
the
relationship
between
the
Federal
Government
and
the
States,
and
this
action
would
not
impact
that
relationship.
Thus,
Executive
Order
13132
does
not
apply
to
this
action.

F.
Executive
Order
13175:
Consultation
and
Coordination
with
Indian
Tribal
Governments
Executive
Order
13175,
entitled
A
Consultation
and
Coordination
with
Indian
Tribal
Governments
@

(
65
FR
67249,

November
9,
2000),
requires
EPA
to
develop
an
accountable
process
to
ensure
A
meaningful
and
timely
input
by
Tribal
officials
in
the
development
of
regulatory
policies
that
have
Tribal
implications.@
113
For
the
same
reasons
stated
in
the
final
CAIR29,

today's
notice
does
not
have
Tribal
implications
as
defined
by
Executive
Order
13175.
It
does
not
have
a
substantial
direct
effect
on
one
or
more
Indian
Tribes,
since
no
Tribe
has
implemented
a
federally­
enforceable
air
quality
management
program
under
the
CAA
at
this
time.
Furthermore,

this
action
does
not
affect
the
relationship
or
distribution
of
power
and
responsibilities
between
the
Federal
government
and
Indian
Tribes.
The
CAA
and
the
Tribal
Air
Rule
establish
the
relationship
of
the
Federal
government
and
Tribes
in
developing
plans
to
attain
the
NAAQS,
and
today's
notice
does
nothing
to
modify
that
relationship.
Because
this
notice
does
not
have
Tribal
implications,
Executive
Order
13175
does
not
apply.

If
one
assumes
a
Tribe
is
implementing
a
Tribal
implementation
plan,
the
CAIR
could
have
implications
for
that
Tribe,
but
it
would
not
impose
substantial
direct
costs
upon
the
Tribe,
nor
would
it
preempt
Tribal
Law.

Although
Executive
Order
13175
does
not
apply
to
the
CAIR
or
this
notice
of
final
action
on
reconsideration
of
the
CAIR,
EPA
consulted
with
Tribal
officials
in
developing
the
CAIR.

G.
Executive
Order
13045:
Protection
of
Children
from
29
www.
epa.
gov/
cair.
114
Environmental
Health
and
Safety
Risks
Executive
Order
13045:
A
Protection
of
Children
From
Environmental
Health
and
Safety
Risks
@

(
62
FR
19885,
April
23,
1997)
applies
to
any
rule
that
(
1)
is
determined
to
be
A
economically
significant
@

as
defined
under
Executive
Order
12866,
and
(
2)
concerns
an
environmental
health
or
safety
risk
that
EPA
has
reason
to
believe
may
have
disproportionate
effect
on
children.
If
the
regulatory
action
meets
both
criteria,
the
Agency
must
evaluate
the
environmental
health
or
safety
effects
of
the
planned
rule
on
children,
and
explain
why
the
planned
regulation
is
preferable
to
other
potentially
effective
and
reasonably
feasible
alternatives
considered
by
the
Agency.

This
notice
is
not
subject
to
Executive
Order
13045
because
it
does
not
involve
decisions
on
environmental
health
risks
or
safety
risks
that
may
disproportionately
affect
children.
The
EPA
believes
that
the
emissions
reductions
from
the
CAIR
will
further
improve
air
quality
and
children's
health.

H.
Executive
Order
13211:
Actions
That
Significantly
Affect
Energy
Supply,
Distribution,
or
Use
Executive
Order
13211
(
66
FR
28355,
May
22,
2001)

provides
that
agencies
shall
prepare
and
submit
to
the
Administrator
of
the
Office
of
Regulatory
Affairs,
OMB,
a
115
Statement
of
Energy
Effects
for
certain
actions
identified
as
"
significant
energy
actions."
Section
4(
b)
of
Executive
Order
13211
defines
"
significant
energy
actions"
as
"
any
action
by
an
agency
(
normally
published
in
the
Federal
Register)
that
promulgates
or
is
expected
to
lead
to
the
promulgation
of
a
final
rule
or
regulation,
including
notices
of
inquiry,
advance
notices
of
final
rulemaking,
and
notices
of
final
rulemaking
(
1)
(
i)
a
significant
regulatory
action
under
Executive
Order
12866
or
any
successor
order,
and
(
ii)
likely
to
have
a
significant
adverse
effect
on
the
supply,
distribution,
or
use
of
energy;
or
(
2)
designated
by
the
Administrator
of
the
Office
of
Information
and
Regulatory
Affairs
as
a
"
significant
energy
action."
The
final
CAIR
is
a
significant
regulatory
action
under
Executive
Order
12866,
and
EPA
concluded
that
the
final
CAIR
rule
may
have
a
significant
adverse
effect
on
the
supply,
distribution,
or
use
of
energy.
The
impacts
are
detailed
in
the
final
CAIR
(
70
FR
25315).
Today's
notice
is
not
a
significant
action
under
Executive
Order
12866
and
does
not
change
EPA's
previous
conclusions.

I.
National
Technology
Transfer
Advancement
Act
Section
12(
d)
of
the
National
Technology
Transfer
Advancement
Act
of
1995,
Public
Law
No.
104­
113,
section
12(
d)
(
15
U.
S.
C.
272
note)
directs
EPA
to
use
voluntary
116
consensus
standards
in
its
regulatory
activities
unless
to
do
so
would
be
inconsistent
with
applicable
law
or
otherwise
impractical.
Voluntary
consensus
standards
are
technical
standards
(
e.
g.,
materials
specifications,
test
methods,

sampling
procedures,
and
business
practices)
that
are
developed
or
adopted
by
voluntary
consensus
standards
bodies.
The
National
Technology
Transfer
Advancement
Act
of
1995
directs
EPA
to
provide
Congress,
through
OMB,

explanations
when
the
Agency
decides
not
to
use
available
and
applicable
voluntary
consensus
standards.

Today's
notice
does
not
involve
technical
standards.

Therefore,
the
National
Technology
Transfer
and
Advancement
Act
of
1995
does
not
apply.

J.
Executive
Order
12898:
Federal
Actions
to
Address
Environmental
Justice
in
Minority
Populations
and
Low­
Income
Populations
Executive
Order
12898,
"
Federal
Actions
to
Address
Environmental
Justice
in
Minority
Populations
and
Low­
Income
Populations,"
requires
Federal
agencies
to
consider
the
impact
of
programs,
policies,
and
activities
on
minority
populations
and
low­
income
populations.
According
to
EPA
guidance,
30
agencies
are
to
assess
whether
minority
or
low­

30
U.
S.
Environmental
Protection
Agency,
1998.
Guidance
for
Incorporating
Environmental
Justice
Concerns
in
EPA's
NEPA
117
income
populations
face
risks
or
a
rate
of
exposure
to
hazards
that
are
significant
and
that
"
appreciably
exceed
or
is
likely
to
appreciably
exceed
the
risk
or
rate
to
the
general
population
or
to
the
appropriate
comparison
group."

(
EPA,
1998).

In
accordance
with
Executive
Order
12898,
the
Agency
has
considered
whether
the
CAIR
may
have
disproportionate
negative
impacts
on
minority
or
low
income
populations.
The
EPA
expects
the
CAIR
to
lead
to
reductions
in
air
pollution
and
exposures
generally.
Therefore,
EPA
concluded
that
negative
impacts
to
these
sub­
populations
that
appreciably
exceed
similar
impacts
to
the
general
population
are
not
expected.
For
the
same
reasons,
EPA
is
drawing
the
same
conclusion
for
today's
notice
to
reconsider
certain
aspects
of
the
CAIR.

K.
Congressional
Review
Act
The
Congressional
Review
Act,
5
U.
S.
C.
801
et
seq.,
as
added
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
of
1996,
generally
provides
that
before
a
rule
may
take
effect,
the
agency
promulgating
the
rule
must
submit
a
rule
report,
which
includes
a
copy
of
the
rule,
to
each
House
of
the
Congress
and
to
the
Comptroller
General
of
the
United
Compliance
Analyses.
Office
of
Federal
Activities,
Washington,
D.
C.,
April,
1998.
118
States.
The
EPA
will
submit
a
report
containing
this
notice
and
other
required
information
to
the
U.
S.
Senate,
the
U.
S.

House
of
Representatives,
and
the
Comptroller
General
of
the
United
States
prior
to
publication
of
the
notice
in
the
Federal
Register.
A
major
rule
cannot
take
effect
until
60
days
after
it
is
published
in
the
Federal
Register.
This
action
is
not
a
"
major
rule"
as
defined
by
5
U.
S.
C.
804.

L.
Judicial
Review
Section
307(
b)(
1)
of
the
CAA
indicates
which
Federal
Courts
of
Appeal
have
venue
for
petitions
of
review
of
final
actions
by
EPA.
This
section
provides,
in
part,
that
petitions
for
review
must
be
filed
in
the
Court
of
Appeals
for
the
District
of
Columbia
Circuit
if
(
i)
the
agency
action
consists
of
"
nationally
applicable
regulations
promulgated,
or
final
action
taken,
by
the
Administrator,"

or
(
ii)
such
action
is
locally
or
regionally
applicable,
if
"
such
action
is
based
on
a
determination
of
nationwide
scope
or
effect
and
if
in
taking
such
action
the
Administrator
finds
and
publishes
that
such
action
is
based
on
such
a
determination."

Final
actions
described
in
this
Notice
of
Final
Action
on
Reconsideration
are
"
nationally
applicable"
within
the
meaning
of
section
307(
b)(
1).
This
Notice
explains
the
final
actions
EPA
is
taking
on
the
petitions
for
119
reconsideration
of
the
CAIR.
It
describes
EPA's
final
action
on
the
six
issues
for
which
EPA
previously
granted
reconsideration,
and
provides
notice
of
EPA's
decision
to
deny
reconsideration
of
several
additional
issues.
EPA
has
determined
that
all
of
these
actions
are
of
nationwide
scope
and
effect
for
purposes
of
section
307(
d)(
1)
because
the
actions
directly
affect
the
CAIR,
which
previously
was
found
to
be
of
nationwide
scope
and
effect.
Thus,
any
petitions
for
review
of
the
final
described
in
this
Notice
must
be
filed
in
the
Court
of
Appeals
for
the
District
of
Columbia
Circuit
within
60
days
from
the
date
this
Notice
is
published
in
the
Federal
Register.
120
Rule
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone
(
Clean
Air
Interstate
Rule):
Reconsideration
page
61
of
61
List
of
Subjects
40
CFR
Part
51
Administrative
practice
and
procedure,
Air
pollution
control,
Intergovernmental
relations,
Nitrogen
oxides,

Ozone,
Particulate
matter,
Regional
haze,
Reporting
and
recordkeeping
requirements,
Sulfur
dioxide.

40
CFR
Part
96
Administrative
practice
and
procedure,
Air
pollution
control,
Electric
utilities,
Nitrogen
oxides,
Reporting
and
recordkeeping
requirements,
Sulfur
dioxide.

_______________________________

Dated
________________________________

Stephen
L.
Johnson
Administrator
121
