Page
1
51
FR
43814
LEXSEE
51
FR
43814
ENVIRONMENTAL
PROTECTION
AGENCY
AGENCY:
Environmental
Protection
Agency.

[
FRL­
3085­
8]

51
FR
43814
December
4,
1986
Emissions
Trading
Policy
Statement;
General
Principles
for
Creation,
Banking
and
Use
of
Emission
Reduction
Credits
ACTION:
Final
policy
statement
and
accompanying
technical
issues
document.

SUMMARY:
This
Policy
Statement
replaces
the
original
bubble
policy
(
44
FR
71779,
December
11,
1979)
and
makes
final
revisions
in
an
Interim
Emissions
Trading
Policy
which
was
published
April
7,
1982
(
47
FR
15076)
and
on
which
further
comments
were
requested
August
31,
1983
(
48
FR
39580).

The
policy
describes
emissions
trading
and
sets
out
general
principles
EPA
will
use
to
evaluate
emissions
trades
under
the
Clean
Air
Act
and
applicable
federal
regulations.
Emissions
trading
includes
bubbles,
netting,
and
offsets,
as
well
as
banking
(
storage)
of
emission
reduction
credits
(
ERCs)
for
future
use.
These
alternatives
do
not
alter
overall
air
quality
requirements;
they
give
states
and
industry
more
flexibility
to
meet
those
requirements.
EPA
endorses
emissions
trading
and
encourages
its
sound
use
by
states
and
industry
to
help
meet
the
goals
of
the
Clean
Air
Act
more
quickly
and
inexpensively.

However,
EPA
also
recognizes
that
without
strict
accounting
practices
and
other
safeguards,
emissions
trades
may
cause
potential
environmental
harm.
Accordingly,
this
policy
provides
more
explicit
guidance
on
baselines
and
related
tests
for
environmental
equivalence
and
environmental
progress.
It
includes
numerous
tightenings
and
clarifications
meant
to
assure
the
future
environmental
integrity
of
bubbles
and
other
trading
transactions.

Among
other
general
steps,
the
policy
states
that
the
lower
of
actual
or
allowable
emissions
must
usually
be
used
as
the
baseline
for
emissions
trades.
Divergences
from
this
baseline
will
be
allowed
only
where
the
state
or
applicant
shows
that
any
potential
increase
in
actual
emissions
will
not
jeopardize
National
Ambient
Air
Quality
Standards
(
NAAQS),
PSD
increments
or
visibility
protection.

General
showings
to
this
effect
may
be
made
only
by
establishing
that
allowable
values
were
clearly
incorporated
in
or
assumed
by
an
approved
demonstration
of
attainment
or
maintenance.
Specific
showings
to
this
effect
may
be
made
only
in
narrow
circumstances
described
in
the
accompanying
Technical
Issues
Document.

Other
general
matters
addressed
and
significantly
clarified
by
this
policy
include
requirements
for
air
quality
modeling
and
approvable
state
generic
bubble
rules,
additional
enforcement
safeguards,
and
additional
safeguards
related
to
bubbles
involving
pollutants
listed,
regulated
or
proposed
to
be
regulated
under
Section
112
of
the
Act.

This
policy
also
sets
forth
new,
tighter
requirements
for
bubbles
in
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations
that
national
ambient
standards
for
healthy
air
will
be
attained.
In
addition
to
requiring
lowest­
of­
actual­
SIP
allowable­
or­
RACT­
allowable
emissions
baselines
in
these
areas,
use
of
past
shutdowns,
curtailments
or
other
reductions
which
occurred
before
application
for
credit
is
essentially
eliminated,
and
a
further
reduction
of
at
least
20
percent
beyond
the
baseline
is
required.
Broadly
speaking,
sources
may
secure
bubble
credit
in
these
areas
only
if
claimed
reductions
meet
these
baseline
and
further
reduction
requirements;
were
reasonably,
objectively
elicited
by
the
opportunity
to
trade;
and
are
accompanied
by
state
assurances
that
the
trade
is
consistent
with
the
state's
efforts
to
attain
the
ambient
air
quality
standard.
EPA
will
approve
bubbles
which
meet
these
requirements
because
they
Page
2
51
FR
43814
are
consistent
with
the
attainment
needs
of
these
areas
and
will
yield
a
net
air
quality
benefit.
Such
bubbles
can
produce
economic
savings
and
environmental
improvement
at
the
same
time.

The
policy
announced
today
does
not
constitute
final
action
of
the
Agency
within
the
meaning
of
section
307(
b)
of
the
Clean
Air
Act,
and
therefore
is
not
judicially
reviewable.
Rather,
it
establishes
general
guidance
on
approvable
voluntary
trades.
EPA
will
implement
this
guidance
in
later
rulemaking
actions
that
will
be
judically
reviewable.
Applicants
for
emissions
trades
remain
free,
following
publication
of
today's
notice,
to
advance
the
appropriateness
of
different
trading
requirements
in
the
context
of
rulemaking
actions
on
their
individual
trades.

EFFECTIVE
DATE:
This
Policy
Statement
is
effective
December
4,
1986.

[
See
Material
in
original]

FOR
FURTHER
INFORMATION
CONTACT:
Inquiries
regarding
the
general
implementation
of
this
policy
may
be
directed
to:
Barry
Gilbert,
Office
of
Air
Quality
Planning
and
Standards
(
MD­
15),
Research
Triangle
Park,
NC
27711,
(
919)
541­
5516.

Inquiries
regarding
specific
applications
to
use
this
policy
may
be
directed
to
the
appropriate
EPA
Regional
Office
(
see
Appendix
A
of
the
Technical
Issues
Document).

Inquiries
regarding
the
development
and
basis
of
this
policy
may
be
directed
to:
Barry
Elman,
Regulatory
Reform
Staff
(
PM­
223),
U.
S.
Environmental
Protection
Agency,
401
M
Street
SW.,
Washington,
DC
20460,
(
202)
382­
2727.

TEXT:
SUPPLEMENTARY
INFORMATION:
Under
Executive
Order
12291,
EPA
must
judge
whether
this
action
is
"
major"
and
therefore
subject
to
the
requirement
of
a
Regulatory
Impact
Analysis.
This
action
is
not
major
because
it
establishes
policies,
as
opposed
to
regulations,
and
can
substantially
reduce
the
costs
of
complying
with
the
Clean
Air
Act.

This
Policy
Statement
was
submitted
to
the
Office
of
Management
and
Budget
for
review.
Any
comments
from
OMB
to
EPA
are
available
for
public
inspection
in
Docket
G­
81­
2.
Pursuant
to
U.
S.
C.
605(
b),
I
hereby
certify
that
this
action
will
not
have
a
significant
economic
impact
on
a
substantial
number
of
small
entities.
As
a
policy
designed
to
allow
firms
flexibility
to
meet
previously
established
regulatory
requirements,
it
will
impose
no
burdens
on
either
small
or
large
entities.

The
contents
of
today's
preamble
are
indicated
in
the
following
outline.
The
outline
is
followed
by
the
preamble
itself,
and
then
by
the
Policy
Statement
and
accompanying
Technical
Issues
Document.

Table
of
Contents:
Preamble
I.
Introduction
II.
Major
Issues
A.
Baselines
1.
Determining
Baselines
­­
General
Guidance
2.
Comments
on
Baselines
in
Nonattainment
Areas
with
Approved
Demonstrations
of
Attainment
3.
EPA's
Resolutions
on
Baselines
in
Nonattainment
Areas
with
Approved
Demonstrations
of
Attainment
B.
Baseline
and
Other
Requirements
for
Bubbles
in
Primary
Nonattainment
Areas
Which
Require
But
Lack
Approved
Demonstrations
of
Attainment
1.
EPA's
Resolutions
Regarding
Baseline
and
Other
Requirements
a.
Specific
"
Progress"
Requirements
Page
3
51
FR
43814
b.
Additional
"
Progress"
Requirement:
State
Assurances
2.
Basic
Rationale
3.
Additional
Considerations
Regarding
the
Benefits
of
Bubbles
III.
Additional
Policy
Changes
and
Clarifications
A.
Generic
Bubble
Rules
1.
Substantive
Progress
Requirements
2.
Procedural
Requirements
B.
Bubbles
Involving
Hazardous
or
Toxic
Air
Pollutants
C.
Banking
Emission
Reduction
Credits
(
ERCs)

D.
OBERS
Projections
and
Double­
Counting
E.
Improved
Modeling
and
De
Minimis
Requirements
1.
De
Minimis
Levels
2.
Modeling
Requirements
F.
Enforcement
Issues
PREAMBLE
­­
EMISSIONS
TRADING
POLICY
STATEMENT
I.
Introduction
Today's
policy
makes
final
the
Agency's
prior
guidance
on
general
principles
for
creating,
storing
(
banking)
and
using
emission
reduction
credits
in
trading
actions
under
the
Clean
Air
Act.
This
preamble
responds
to
written
comments
EPA
received
on
major
issues
raised
by
its
proposed
emissions
trading
policy
statement
(
47
FR
15076,
April
7,
1982)
and
subsequent
request
for
further
comment
(
48
FY
39580,
August
31,
1983).
It
also
explains
the
Agency's
principal
decisions
on
these
issues.

Today's
notice
is
the
primary
source
of
EPA
guidance
on
existing­
source
bubbles,
state
generic
bubble
rules,
and
emission
reduction
banking.
It
replaces
the
original
bubble
policy
(
44
FR
71779,
December
11,
1979)
as
well
as
the
proposed
emissions
trading
policy
statement,
which
was
effective
April
7,
1982
as
interim
guidance.
The
notice
addresses
how
emission
reduction
credits
(
ERCs)
­­
the
currency
of
trading
­­
may
be
used
for
bubbles,
as
well
as
for
netting
or
offsets.
Netting
and
offsets
are
part
of
emissions
trading,
but
are
governed
by
EPA
and
state
regulations
for
new
source
review.
n1
n
1
See,
e.
g.,
40
CFR
51.18,
51.24,
51,307,
52.21,
52.24,
52.27
and
52.38.

On
November
7,
1986,
EPA
restructured
CFR
Part
51
and
renumbered
many
of
that
Part's
sections
(
51
FR
40656).
Because
most
readers
will
be
more
familiar
with
prior
designations,
today's
notice
contains
citations
based
on
the
organization
of
Part
51
as
it
existed
before
this
restructuring.
Interested
parties
may
use
Appendix
F
of
today's
Technical
Issues
Document
to
convert
today's
Part
51
citations
to
the
corresponding
new
ones.

Nothing
in
today's
notice
alters
EPA
new
source
review
requirements
or
exempts
owners
or
operators
of
stationary
sources
from
compliance
with
applicable
preconstruction
permit
regulations
in
accord
with
40
CFR
51.18,
51.24,
51.307,
52.21,
52.24,
52.27
and
52.28.
Interested
parties
should,
however,
be
aware
that
bubble
trades
are
not
subject
to
preconstruction
review
or
regulations
where
these
trades
do
not
involve
construction,
reconstruction,
or
modification
or
a
source
within
the
meaning
of
those
terms
in
the
regulations
listed
above.
Page
4
51
FR
43814
The
policy
announced
today
does
not
constitute
final
action
of
the
Agency
within
the
meaning
of
section
307(
b)
of
the
Clean
Air
Act,
and
therefore
is
not
judicially
reviewable.
Rather,
it
establishes
general
guidance
for
reviewing
and
approving
voluntarily
submitted
trades.
EPA
will
implement
this
guidance
in
later
rulemaking
actions
that
will
be
judicially
reviewable.
Applicants
for
emissions
trades
remain
free,
following
publication
of
today's
notice,
to
advance
the
appropriateness
of
different
trading
requirements
in
the
context
of
rulemaking
actions
on
their
individual
trades.

Under
today's
notice,
EPA
continues
to
authorize
use
of
bubbles,
banks,
and
generic
bubble
rules
in
all
areas
of
the
country,
and
provides
for
the
fair
and
prompt
processing
of
bubble
applications
which
have
been
pending
before
EPA
under
the
1982
policy.
However,
based
on
experience
under
the
1982
policy,
and
in
order
to
ensure
the
environmental
integrity
of
future
emissions
trades,
today's
notice
significantly
tightens
requirements
applicable
to
certain
trading
actions,
particularly
existing­
source
bubbles
in
primary
nonattainment
areas
which
require
but
lack
demonstrations
of
attainment.
It
also
clarifies
approval
criteria
in
ways
which
should
make
review
and
approval
of
environmentally­
sound
trades
more
rapid
and
predictable.
Among
other
safeguards
or
safeguarding
clarifications,
it
requires
that:

­­
Bubbles
may
no
longer
result
in
any
increase
in
applicable
net
baseline
emissions
in
any
area,
whether
attainment
or
nonattainment,
except
under
stringent
conditions
which
assure
that
ambient
equivalence
will
nevertheless
be
achieved;
n2
n
2
This
change
constitutes
a
significantly
more
stringent
definition
of
what
may
be
considered
a
bubble
under
the
Emissions
Trading
Policy.
Specific
ambient
tests
which
must
be
met
to
qualify
for
an
exception
from
this
restriction
can
be
found
in
the
Technical
Issues
Document,
Section
I.
B.
1.
c
Actions
which
may
no
longer
be
treated
as
bubbles
under
today's
notice
must
be
processed
under
general
EPA
criteria
applicable
to
SIP
revisions.

­­
Baselines
for
sources
participating
in
a
bubble
in
any
area
must
take
into
account
all
three
factors
relevant
to
total
emissions
(
i.
e.,
emission
rate,
capacity
utilization,
and
hours
of
operation)
in
order
to
provide
an
accurate
accounting
of
emissions
before
and
after
the
trade;

­­
Bubbles
in
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations
of
attainment
must
use
the
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
emissions
baseline,
as
described
below,
for
each
source
involved
in
the
trade;

­­
Bubbles
in
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations
must
contribute
to
progress
toward
attainment
by
providing
a
20%
net
reduction
in
emissions
remaining
after
application
of
the
baseline
above
to
all
sources
involved
in
the
trade
or,
if
the
bubble
is
being
processed
under
a
state
generic
rule,
the
greater
of
a
20%
net
reduction
or
the
percent
reduction
which
would
be
required
from
all
controllable
stationary
sources
in
that
area
(
e.
g.,
taking
into
account
expected
mobile
source
reductions
and
disregarding
area­
source
contributions)
in
order
to
achieve
attainment;

­­
Bubbles
in
attainment
areas
and
nonattainment
areas
with
approved
demonstrations
must
use
the
lower
of
actual
or
allowable
values
for
each
of
the
three
baseline
components,
unless
allowable
values
higher
than
corresponding
actual
values
are
clearly
used
or
reflected
in
the
demonstration
or
otherwise
shown
not
to
jeopardize
ambient
standards,
PSD
increments
or
visibility;

­­
In
all
areas,
emission
reductions
must
be
made
state­
enforceable
in
order
to
qualify
as
ERCs
and
be
deposited
in
an
EPA­
approvable
bank;

­­
In
all
areas,
bubbles
must
meet
more
stringent
tests
for
ambient
equivalence,
including
additional
ambient
significance
levels,
more
protective
air
quality
modeling
requirements,
and
more
conservative
definitions
of
de
minimis
trades;

­­
In
all
areas,
the
total
of
any
incidental
emissions
of
hazardous
or
potentially
hazardous
air
pollutants
associated
with
a
criteria
pollutant
in
a
bubble
trade
must
remain
equal
or
be
decreased,
whether
such
hazardous
pollutants
have
been
regulated,
proposed
for
regulation,
listed,
or
the
subject
of
a
notice­
ofintent
to­
list
under
Clean
Air
Act
112;

­­
States
must
provide
assurances
to
EPA
that
bubbles
submitted
for
EPA
approval
in
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations
are
consistent
with
the
state's
SIP­
Page
5
51
FR
43814
planning
and
attainment
objectives.
For
generic
rules,
the
state
must
make
certain
assurances
in
conjunction
with
its
submittal
of
the
generic
rule
to
EPA,
and
certain
additional
assurances
with
the
state's
proposed
and
final
approval
of
each
individual
bubble
under
that
rule;

­­
Bubbles
in
such
primary
nonattainment
areas
may
not
use
credit
from
reductions
made
before
application
to
bank
or
trade
such
credit;

­­
Where
sources
in
such
areas
seek
to
bank
credits
in
the
future,
"
application
to
bank,"
for
purposes
of
evaluating
credits
for
use
in
bubbles,
means
the
time
of
filing
an
application
to
make
the
proposed
credits
state­
enforceable
through
or
concurrent
with
use
of
a
formal
or
informal
banking
mechanism;

­­
Bubbles
must
not
impede
compliance
or
enforcement
(
e.
g.,
the
policy
states
that
compliance
extensions
may
no
longer
be
granted
under
generic
rules
in
any
nonattainment
area,
and
that
bubble
applications
do
not
per
se
suspend
underlying
SIP
limits
or
defer
source
obligations
to
achieve
those
limits);

­­
Generic
rules
in
all
areas
will
be
subject
to
increased
EPA
oversight,
including
EPA
participation
in
the
state's
public
notice
and
comment
process
prior
to
state
approval
of
individual
bubbles,
subsequent
reviews
of
individual
generic
approvals,
and
reviews
of
the
general
implementation
of
the
rules
themselves,
in
order
to
assure
that
approved
rules
are
being
properly
implemented;
and
­­
EPA
or
state
notices
of
proposed
and
final
bubble
approvals,
in
all
areas,
must
clearly
indicate
any
changes
in
actual
as
well
as
allowable
emissions
at
all
sources
involved
in
the
bubble,
so
the
ambient
effects
of
these
trades
may
be
known.

These
and
other
changes
announced
today
will
generally
be
applied
to
all
SIP
revision
bubbles
and
state
generic
bubble
rules
that
have
not
been
approved
by
EPA
as
of
this
date.
n3
n
3
See,
however,
discussion
of
"
pending
bubbles"
in
Section
I.
G.
of
today's
Policy
Statement
and
Section
I.
A.
1.
b.(
4)
of
today's
Technical
Issues
Document.

On
June
25,
1984
the
Supreme
Court
unanimously
ruled
that
EPA
may
allow
states
to
use
a
single,
plantwide
definition
of
"
stationary
source"
for
new
source
review
(
NSR)
purposes
in
nonattainment
areas
as
well
as
attainment
areas,
provided
use
of
that
definition
would
not
interfere
with
attainment
and
maintenance
of
national
ambient
air
quality
standards
(
NAAQS).
n4
Under
the
"
plantwide"
definition,
increases
and
decreases
occurring
anywhere
on
plant
property
from
emission
units
within
the
same
twodigit
SIC
code
are
generally
eligible
for
netting,
n5
and
may
be
used
to
balance
each
other
without
triggering
preconstruction
permit
requirements
for
major
new
sources
or
modifications,
so
long
as
actual
plantwide
emissions
would
not
significantly
increase.

n
4
Chevron
U.
S.
A.,
Inc.
v.
Natural
Resources
Defense
Council,
104
S.
Ct.
2778,
14
ELR
20507,
overruling
Natural
Resources
Defense
Council,
Inc.
v.
Gorsuch,
685
F.
2d
718,
12
ELR
20942
(
D.
C.
Cir.
1982).

n
5
SIC
Code
means
codes
described
in
the
Standard
Industrial
Classification
Manual,
1972,
amended
1977
(
U.
S.
Government
Printing
Office,
stock
numbers
4101­
0066
and
003­
005­
00176­
0,
respectively).

States
and
sources
considering
the
use
of
netting
should,
however,
be
aware
that
applicable
New
Source
Performance
Standards
(
NSPS),
preconstruction
review
requirements
under
40
CFR
51.18
(
a)­(
h)
and
(
1),
NESHAPS,
and
SIP
limits
continue
to
apply
to
such
modifications.
EPA
is
currently
developing
guidance
for
states
that
wish
to
adopt
a
plant­
wide
definition
of
"
source"
for
nonattainment
areas
into
their
new
source
review
regulations.
n6
n
6
Many
states
currently
employ
the
so­
called
"
dual
definition"
of
"
statutory
source,"
under
which
both
the
plant
and
each
emitting
piece
of
equipment
within
it
are
"
stationary
sources."
Under
this
definition,
when
any
individual
piece
of
equipment
is
large
enough
in
terms
of
potential
Page
6
51
FR
43814
emissions
to
be
defined
as
a
"
major
stationary
source,"
only
increases
and
decreases
in
actual
emissions
from
that
individual
unit
are
eligible
to
"
net."

While
the
plantwide
definition
provides
greater
opportunity
for
netting
in
general,
netting
is
also
allowed
under
the
dual
definition.
Indeed,
where
no
individual
piece
of
emitting
equipment
is
a
"
major
stationary
source,"
the
"
dual
definition"
allows
the
same
opportunity
to
"
net"
as
the
"
plantwide"
definition.

Pending
or
future
litigation
or
rulemaking,
particularly
final
resolution
of
the
settlement
agreement
arising
from
the
industry
challenge
to
ERA's
1980
promulgation
of
revised
NSR
rules
(
Chemical
Manufacturers
Association
v.
EPA,
No.
79­
1112,
D.
C.
Cir.,
February
1982),
may
alter
aspects
of
this
policy,
especially
regarding
certain
transactions
under
EPA
new
source
review
regulations.
See
48
FR
28742
(
August
25,
1983)
(
proposed
revisions).
However,
unless
and
until
EPA
finally
revises
the
relevant
regulations,
the
current
requirements
remain
in
effect.

II.
Major
Issues
A.
Baselines
The
baseline
for
a
given
source
is
that
level
of
emissions
below
which
any
additional
reductions
may
be
counted
(
credited)
for
use
in
trades.
Questions
relating
to
appropriate
bubble
baselines
for
particular
emitting
sources
or
types
of
sources
in
nonattainment
areas
generated
the
principal
issues
resolved
by
today's
notice.
EPA's
resolutions
strengthen
SIP
integrity
and
states'
ability
to
make
progress
toward
attainment
by
(
a)
identifying
more
precisely
the
three
factors
which
must
be
addressed
in
calculating
baseline
emissions;
(
b)
reaffirming
that
for
bubbles
in
nonattainment
areas
with
demonstrations
of
attainment
that
have
been
approved
and
not
subsequently
found
by
EPA
to
be
substantially
inadequate
to
attain
ambient
standards,
the
baseline
must
be
consistent
with
assumptions
used
to
develop
the
area's
demonstration
or
must
otherwise
be
shown
by
appropriate
ambient
dispersion
modeling
to
protect
air
quality
standards;
and
(
c)
specifying
a
number
of
special
"
progress"
requirements
for
bubbles
in
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations
of
attainment,
including
stringent
new
baseline
requirements,
a
ban
on
the
use
of
reductions
produced
before
application
to
bank
or
trade,
and
a
mandatory
extra
reduction
of
at
least
20%
beyond
applicable
baseline
emissions.
Together
with
tightened
criteria
for
modeled
demonstrations
of
ambient
equivalence,
a
well
as
other
new
requirements
for
bubbles,
banks,
and
generic
rules,
these
resolutions
will
assure
continued
environmental
progress
through
trades.

1.
Determining
Baselines
­­
General
Guidance
A
source's
baseline
emissions
are
calculated
by
multiplying
three
factors:
the
source's
emission
rate
(
usually
expressed
as
emissions
per
quantity
of
production
or
throughput);
its
hours
of
operations
or
hourly
usage
over
some
representative
time
period;
and
its
capacity
utilization
(
e.
g.,
the
units
of
production
per
hour
of
use).
n7
All
three
factors
must
be
addressed,
since
a
source's
emissions
for
a
given
period
may
vary
widely
despite
a
constant
emission
rate,
depending,
for
example,
on
whether
it
is
operated
at
low
capacity
for
a
small
number
of
hours
or
utilized
near
full
capacity
for
a
large
number
of
hours.
The
product
of
this
baseline
calculation
is
generally
expressed
in
pounds
of
emissions
per
day
or
tons
of
emissions
per
year
(
TPY),
or
both.

n
7
For
detailed
discussion
of
baseline
emissions
and
baseline
factors,
see
Technical
Issues
Document,
Appendix
B.

Today's
policy
clarifies
EPA's
original
intent
regarding
appropriate
methods
for
determining
these
three
baseline
factors.
In
general,
in
nonattainment
areas
with
approved
demonstrations,
a
source's
baseline
emissions
for
bubble
purposes
must
be
calculated
using
the
lower
of
it
actual
emission
rate
or
allowable
emission
limit,
plus
the
lower
of
its
actual
or
allowable
capacity
utilization
and
hours
of
operation.
That
is,
baseline
emissions
in
these
areas
must
generally
be
calculated
using
lower
of
actual
or
allowable
values
for
all
three
baseline
factors.
n8
Page
7
51
FR
43814
n
8
Netting
and
offset
transactions
are
governed
by
EPA's
regulations
at
40
CFR
51.18,
51.24,
51.307,
52.21,
52.24,
52.27
and
52.28.
Accordingly,
this
discussion
of
baseline
applies
only
to
bubbles.

Actual
values
for
these
factors
are
based
on
some
representative
historical
time
period
(
generally
the
average
of
the
two
years
preceding
the
source's
application
to
bank
or
trade).

However,
where
the
state
or
applicant
shows
that
the
SIP,
a
source­
specific
preconstruction
permit,
or
an
equivalent
document
clearly
assumes
or
specifies
allowable
values
which
are
higher
than
corresponding
actual
values
for
one
or
more
baseline
factors,
and
that
document
post­
dates
the
baseline
inventory
year
for
a
SIP's
attainment
demonstration,
these
values
may
replace
actual
values
for
calculating
the
bubble
baseline.
Where
only
one
value
(
typically
the
emission
rate)
is
specified,
the
other
two
baseline
factors
must
generally
be
based
on
actual
levels.
n9
n
9
See
Section
I.
A.
1
and
Appendix
B
of
today's
Technical
Issues
Document
for
further
details
on
baseline
calculation.

Such
showings
must
be
based
on
either
data
from
the
SIP
or
data
used
in
SIP
preparation.
n10
Applicants
may
alternatively
perform
appropriate
modeling
to
demonstrate
that
use
of
allowable
values
which
are
higher
than
actual
values
will
not
delay
or
jeopardize
attainment
and
maintenance
of
ambient
standards,
protection
of
PSD
increments,
or
visibility.
Upon
either
type
of
showing,
these
allowable
values
may
be
used.
n11
n
10
This
could
include
documentation
such
as
the
demonstration
calculations
themselves,
accompanying
materials,
or
affidavits
from
those
who
constructed
the
demonstration.

n
11
Use
of
such
higher
allowable
values
which
must
be
justified
by
modeling
because
they
are
not
shown
to
be
clearly
reflected
in
or
assumed
by
the
demonstration
or
an
equivalent
document,
would
require
such
bubbles
in
nonattainment
areas
with
approved
demonstrations
to
be
processed
as
SIP
revisions,
since
Level
III
modeling
would
be
required
for
their
justification
under
today's
modeling
screen.
In
addition,
the
SIP's
reasonable
further
progress
(
RFP)
calculations
would
generally
have
to
be
revised.

The
principal
difference
between
use
of
such
higher
allowable
values
in
these
nonattainment
areas
and
in
attainment
areas
is
that
in
attainment
areas,
ambient
evaluations
more
limited
than
Level
III
modeling
may
justify
use
of
such
allowable
values.
However,
for
bubbles
processed
as
case­
by­
case
SIP
revisions
in
attainment
areas,
the
Region
retains
discretion
to
require
additional
technical
support,
where
limited
air
quality
dispersion
modeling
is
proposed
to
justify
use
of
such
allowable
baseline
values.
See
Section
I.
A.
1.
a.
of
today's
Technical
Issues
Document.

All
bubbles
in
attainment
areas
relying
on
allowable
values
not
used
or
reflected
in
an
approved
demonstration
must
be
evaluated
for
ambient
impact
based
on
a
comparison
of
before­
trade
actual
emissions
and
post­
trade
allowable
emissions
(
i.
e.,
the
"
worst
case"),
in
order
to
assure
that
any
potential
increase
in
actual
emissions
are
identified
and
that
their
effects
are
consistent
with
applicable
Clean
Air
Act
requirements.
See
today's
Technical
Issues
Document,
Section
I.
A.
1.
a.

This
approach
is
required
because
control
of
existing
sources
through
approved
SIP
measures
is
the
Clean
Air
Act's
principal
mechanism
for
timely
attainment,
and
because
many
approved
demonstrations
either
do
not
contain
stated
assumptions
regarding
all
three
baseline
factors,
or
were
based
on
combinations
of
actual
and
allowable
values
for
these
factors.
It
recognizes
that
bubble
baselines
must
accurately
reflect
the
SIP
assumptions
for
all
three
baseline
factors
in
order
to
maintain
SIP
integrity.

Under
this
approach,
determination
of
bubble
baselines
consistent
with
approved
demonstrations
is
a
sequential,
tiered
process.
That
process
was
implicit
in
both
EPA's
1982
policy
and
its
1983
request
for
further
comment,
as
well
as
actual
practice
in
bubble
actions
under
those
notices.
EPA
is
making
it
explicit
in
response
to
concerns
that
"
paper
trades"
might
undermine
attainment
demonstrations
because
approved
SIPs
do
not
always
state
all
assumptions
on
which
their
demonstrations
rely.
By
requiring
that
unstated
or
ambiguous
values
for
all
baseline
factors
be
resolved
in
favor
of
lower
actual
values,
today's
notice
Page
8
51
FR
43814
provides
additional
assurance
that
bubbles
in
nonattainment
areas
with
approved
demonstrations
will
not
threaten
ambient
standards,
PSD
increments,
or
visability
protection.

2.
Comments
on
Baselines
in
Nonattainment
Areas
With
Approved
Demonstrations
of
Attainment
Comments
on
baselines
in
these
areas
indicated
wide
disagreement
over
where
EPA
require
states
to
set
this
baseline
level.
The
1982
policy
noted
that
"
In
nonattainment
areas
with
approved
demonstrations
of
attainment,
the
baseline
must
be
consistent
with
assumptions
used
to
develop
the
area's
SIP."
That
policy
generally
required
that
where
approved
SIP
demonstrations
relied
on
actual
emission
levels
at
particular
sources,
those
actual
levels
would
have
to
be
reflected
in
bubble
baselines.
Where
SIP
demonstrations
were
based
on
allowable
emissions,
the
1982
policy
authorized
baselines
reflecting
such
allowable
levels,
despite
the
fact
that
some
sources'
actual
emissions
are
currently
or
historically
lower
than
their
"
allowables."
n12
n
12
See
n.
13
below.

The
great
majority
of
commenters
supported
this
SIP
foundation
for
trading
baselines,
noting
that
SIPs
are
the
cornerstone
of
the
Act's
approach
to
air
quality
management.
These
commenters
also
asserted
that
regardless
of
sources'
actual
emissions,
measuring
reductions
from
allowable
levels
assumed
in
a
valid
SIP
demonstration
was
entirely
appropriate
for
use
in
trading,
since
the
area
would
still
attain
ambient
standards
in
a
timely
manner.
See,
e.
g.,
48
FR
39582
(
August
31,
1983).

However,
other
commenters
asserted
this
approach
was
either
"
too
loose"
or
"
too
tight."
The
first
group
stated
that
credit
should
only
be
granted
for
reductions
below
current
actual
emissions,
provided
actual
emissions
met
applicable
SIP
limits.
n13
They
advanced
various
reasons
for
this
position,
including
assertions
that
reliance
on
past
reductions,
while
consistent
with
approved
plans
for
attainment,
might
not
comport
with
"
broader"
clean
air
goals.
Some
felt
that
SIPs
were
insufficently
precise
to
serve
as
a
basis
for
trading.

n
13
The
1982
policy
assumed,
but
did
not
specify,
the
components
of
"
actual"
emissions,
such
as
capacity
usage
or
number
of
hours
of
operation
of
a
particular
source.
It
also
assumed,
but
did
not
expressly
require,
that
actual
emission
levels
must
be
reduced
to
compliance
levels
before
further
reductions
were
eligible
for
credit.

A
second
group
of
comments
went
in
the
opposite
direction,
asserting
that
baselines
should
always
be
maximum
allowable
source
emissions,
regardless
of
assumptions
used
in
SIP
development.
These
commenters
noted
that
emission
rates
(
e.
g.,
emissions
per
volume
of
throughput
or
unit
of
production)
specified
in
SIP
emission
limits
are
generally
the
only
enforceable
limits
applicable
to
existing
sources.
Since
existing
sources
can
legally
emit
up
to
annual
levels
equivalent
to
maximum
output
and
round­
theclock
operations
so
long
as
they
meet
these
SIP
emission­
rate
limitations,
these
commenters
reasoned,
companies
should
receive
credit
for
agreeing
to
binding
limits
on
output
or
hours
of
operations
which
forgo
such
production
flexibility.

Today's
notice
responds
in
two
principal
ways
to
these
concerns.
First,
it
clarifies
the
components
of
baselines,
how
these
are
to
be
determined,
and
who
bears
the
burden
of
demonstrating
that
a
proposed
baseline
is
consistent
with
a
particular
SIP.
Several
comments
indicated
that
confusion
related
to
the
determination
of
baselines
may
have
generated
unnecessary
concern
over
use
of
allowables
baselines
under
approved
SIPs.
Second,
it
reiterates
and
further
supports
EPA's
position
that
where
SIP
demonstrations
are
approved
as
adequate,
the
Clean
Air
Act
simply
requires
trading
to
be
consistent
with
assumptions
used
to
develop
the
area's
SIP.

3.
EPA's
Resolutions
on
Baselines
in
Nonattainment
Areas
With
Approved
Demonstrations
of
Attainment
Where
a
state
has
demonstrated
it
will
attain
an
ambient
standard,
and
EPA
has
approved
the
demonstration
and
not
subsequently
found
it
substantially
inadequate
to
assure
attainment,
bubbles
relying
on
baseline
levels
used
or
reflected
in
that
demonstration
amount
to
routine
SIP
revisions.
The
state
then
has
discretion
to
maintain
its
demonstration
through
any
alternative
combination
of
emission
reductions,
so
Page
9
51
FR
43814
long
as
these
are
adequate
for
attainment
and
maintenance
of
the
ambient
standards.
Since
EPA
cannot
require
states
to
do
more
than
demonstrate
timely
attainment
and
maintain
ambient
standards,
EPA
will
approve
such
trades
as
long
as
they
are
enforceable
and
do
not
undermine
the
demonstration.
See,
e.
g.,
Train
v.
NRDC,
421
U.
S.
60,
79­
80
(
1975);
Union
Electric
Co.
v.
EPA,
427
U.
S.
246
(
1976).
This
means
that
credits
must
not
be
doubled­
counted,
that
they
must
be
calculated
from
a
baseline
consistent
with
the
approved
demonstration,
and
that
tests
of
air
quality
equivalence
to
the
original
SIP
emission
limits
must
be
met.

In
short,
under
the
Clean
Air
Act
an
approved
attainment
demonstration
creates
a
legal
and
logical
boundary.
The
state
has
met
its
statutory
responsibility
and
can
substitute
reductions
not
relied
on
in
the
SIP
for
those
assumed
by
the
SIP,
so
long
as
air
quality
impacts
are
equivalent.
This
holds
true
for
all
types
of
emission
reductions
­­
whether
derived
from
process
changes,
extra
pollution
control
equipment,
improved
operating
or
maintenance
procedures,
or
other
actions
­­
as
long
as
the
substitute
reductions
have
not
been
relied
on
in
the
approved
SIP.
1
n4
n
1
4
It
also
holds
true
where
the
Agency
may
suspect,
but
has
not
formally
indicated,
that
a
previously
approved
SIP
demonstration
is
no
longer
adequate
to
assure
timely
attainment.
For
reasons
of
policy
continuity,
regulatory
predictability
and
fair
notice,
until
EPA
makes
a
formal
finding
of
SIP
inadequacy,
the
approved
demonstration
controls.
See
Clean
Air
Act
section
110(
a)(
2)(
H),
110(
c)(
1);
48
FR
39582
(
August
31,
1983).

EPA
accordingly
reaffirms
the
general
principle
that
states
may
grant
sources
credit
for
reductions
below
levels
assumed
by
approved
demonstrations.
This
generally
means
that
where
actual
values
for
emission
rate,
capacity
utilization
and
hours
of
operation
form
the
basis
for
an
approved
demonstration,
sources
proposing
a
bubble
must
use
the
lower
of
actual
or
allowable
values
for
those
factors
in
calculating
baseline
emissions,
and
that
where
an
approved
demonstration
was
based
on
allowable
values
which
are
higher
than
corresponding
actual
values
for
any
of
these
baseline
factors,
those
allowable
values
may
be
used
for
such
factors
in
calculating
the
baseline.

B.
Baseline
and
Other
Requirements
for
Bubbles
in
Primary
Nonattainment
Areas
Which
Require
But
Lack
Approved
Demonstrations
of
Attainment
EPA's
1982
policy
proposed
two
baseline
mechanisms
for
bubbles
in
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations
of
attainment.
These
areas
needed
additional
emission
reductions
to
attain
national
ambient
health
standards,
but
had
not
yet
fully
determined
what
amount
of
reductions
would
be
necessary
for
attainment
or
which
sources
would
be
required
to
produce
them.
Nevertheless,
that
policy
said,
states
could
allow
existing
sources
in
these
areas
to
trade
on
an
interim
basis,
either
(
1)
by
using
baselines
reflecting
Reasonably
Available
Control
Technology
(
RACT)
provisions
which
EPA
had
already
approved,
or
(
2)
where
EPA
had
not
yet
approved
general
state
RACT
provisions,
by
using
"
negotiated
RACT"
baselines
agreed
to
between
the
source,
the
state
and
EPA.
1
n5
Both
the
1982
policy
and
subsequent
notices
advanced
detailed
programmatic
and
environmental
rationales
for
this
approach,
including
the
fact
that
RACT
was
the
Act's
most
stringent
general
requirement
for
existing
sources
in
nonattainment
areas;
that
appropriately
determined
RACT
baselines
were
consistent
with
current
attainment
needs;
and
that
trades
using
such
baselines
could
produce
faster
interim
progress
by
providing
incentives
for
sources
voluntarily
to
define
RACT,
disclose
better
emissions
or
ambient
data,
or
take
other
steps
to
do
more
than
the
minimum
required.
See,
e.
g.,
47
FR
15076,
15080­
81;
48
FR
39582­
83,
39585.

n
1
5
The
1982
policy
also
authorized
limited
use
of
higher
actual
(
rather
than
RACT­
allowable)
baselines
in
certain
nonattainment
"
extension"
areas
which
did
not
then
have
complete
approved
SIPs.
See
47
FR
15077,
15080
(
April
7,
1982).
Expiration
of
the
July
1982
statutory
deadline
for
submitting
such
SIPs
vitiated
this
third
baseline
option.
See,
e.
g.,
48
FR
at
39580
and
n.
2,
39582
and
n.
7,
39584­
85
(
August
31,
1983).

Many
commenters
on
the
1982
policy
approved
this
"
negotiated
RACT"
approach,
finding
it
innovative
and
acceptable.
However,
two
groups
of
commenters
again
asserted
that
it
was
either
"
too
Page
10
51
FR
43814
restrictive"
or
"
insufficiently
constrained."
The
first
group
maintained
that
for
reasons
of
administrative
efficiency,
bubbles
should
be
based
either
on
existing
SIP
reduction
requirements
or
on
actual
emissions,
without
the
need
to
negotiate
new
source­
specific
RACT
baselines.
Since
trading
sources
in
these
areas
would
eventually
be
subject
to
RACT
requirements
in
any
case,
they
reasoned,
no
new
interim
baseline
should
be
required.
In
partial
support
of
this
position
some
alluded
to
the
one
instance
in
which
Congress
has
explicitly
addressed
such
baseline
issues
­­
its
1977
declaration
that
in
nonattainment
areas
without
adequate
demonstrations,
existing
SIP
limits
would
for
the
next
several
years
be
the
baseline
for
offset
transactions,
which
were
then
the
only
types
of
emissions
trades.
1
n6
n
1
6
See,
e.
g.,
Clean
Air
Act
Amendments
of
1977,
section
129,
codified
at
42
U.
S.
C.
7502
note;
3
Legislative
History
of
the
Clean
Air
Act
Amendments
of
1977,
pp.
537,
713;
44
FR
2174­
75
(
January
16,
1979).
This
Congressional
mandate
was
largely
superseded
by
eventual
state
adoption
of
supervening
SIP
limits.
Under
current
EPA
regulations
such
SIP
allowable
emission
rates
may
ordinarily
be
used
to
compute
the
baseline
for
offsets
only
where
an
approved
SIP
demonstration
used
inventoried
allowable
emissions
in
its
demonstration
of
reasonable
further
progress.
See
Clean
Air
Act
173(
1)(
A),
42
U.
S.
C.
7503(
1)(
A).

The
second
group
asserted
that
no
bubbles
should
be
allowed
in
such
areas,
since
regulators
could
not
know
which
reductions
were
surplus
until
demonstrations
were
completed
and
approved.

In
August
1983,
"
in
light
of
formal
comments
on
the
[
1982]
Policy,
the
NRDC
v.
Gorsuch
decision
[
since
reversed]
.
.
.
and
the
need
to
further
articulate
the
Policy's
approach
in
this
area,"
EPA
requested
further
comment
on
certain
issues
relating
to
credit
from
plant
shutdowns
or
production
curtailments
for
use
in
existing­
source
bubbles,
particularly
bubbles
in
primary
nonattainment
areas
requiring
but
lacking
demonstrations.
48
FR
39580.
While
most
comments
on
the
1982
policy
supported
continued
use
of
such
credits
without
further
restrictions,
some
commenters
had
special
concerns
about
shutdowns
in
these
areas.
These
commenters
stated
that
shutdowns
can
hasten
attainment,
and
suggested
that
granting
credit
for
shutdowns
that
'
might
have
happened
anyway'
might
not
be
consistent
with
the
Act's
requirement
for
attainment
"
as
expeditiously
as
practicable."

In
the
August
1983
notice
EPA
addressed
these
concerns
in
detail,
noting
that:

.
.
.
Unlike
surplus
reductions
from
additional
pollution
control
or
less­
polluting
process
changes,
shutdowns
produce
a
total
reduction
of
emissions,
100%
of
which
might
benefit
air
quality
if
credit
were
not
allowed.
Granting
full
or
partial
credit
for
their
use
in
existing­
source
bubbles
might
reduce
that
benefit
.
.
.
at
least
where
the
source
would
have
shut
down
anyway.
This
reasoning
[
reflecting
a
desire
to
avoid
granting
credit
for
reductions
that
may
not
be
"
surplus"
because
they
would
have
occurred
in
any
event]
underlies
some
commenters'
suggestions
that
credit
be
allowed
only
if
credit
were
a
sole
or
principal
reason
for
the
shutdown
.
.
.

Unfortunately
the
issue
is
not
this
simple.
So
long
as
it
has
not
been
double­
counted
and
a
proper
RACT
baseline
is
applied,
the
shutdown
does
contribute
to
air
quality
progress,
since
much
less
than
100%
credit
will
be
granted.
Moreover,
the
opportunity
for
credit
may
improve
air
quality
by
encouraging
early
shutdown
of
high­
polluting
facilities
that
might
otherwise
be
kept
running,
either
because
replacement
is
too
expensive
or
to
preserve
credit
for
further
plant
expansion.

In
addition,
these
commenters'
suggestion
of
a
test
based
on
subjective
motive
appears
administratively
unworkable.
EPA
and
states
would
find
it
exceedingly
difficult
to
evaluate
or
rebut
source
evidence
that
a
shutdown
was
motivated
by
credit
and
that
the
shutdown
facility
would
otherwise
have
operated
[,
e.
g.,]
for
twenty
or
forty
years.
Thus
this
approach
would
likely
result
in
either
de
facto
approval
of
all
such
credits
(
undermining
the
reason
for
the
test),
or
a
burden
of
proof
so
stringent
that
none
would
be
approved
(
penalizing
sources
whose
shutdowns
were
elicited
by
trading).
More
straightforward
approaches
might
either
ban
shutdown
bubbles
until
a
demonstration
of
attainment,
or
acknowledge
their
uncertain
nature
by
applying
a
margin
of
safety
­­
e.
g.,
a
requirement
that
such
bubbles
produce
substantial
air
quality
improvement
­­
sufficient
to
compensate
for
any
uncertainties
and
protect
the
integrity
of
current
or
future
SIPs.
48
FR
at
39583­
84
(
footnotes
omitted.)
Page
11
51
FR
43814
EPA
then
suggested
seven
specific
alternatives
to
the
1982
policy
for
bubbles
in
these
areas,
including:
a
prohibition
on
bubble
credit
from
shutdowns;
a
requirement
of
substantial
air
quality
benefit
from
bubbles
proposing
to
use
shutdown
credit;
or
a
requirement
of
substantial
air
quality
benefit
from
all
bubbles,
with
no
special
restrictions
on
shutdown
credit.
In
partial
support
of
this
last
proposed
alternative,
EPA
indicated
the
administrative
benefits
of
avoiding
special
definition
or
treatment
of
"
shutdowns"
and
"
curtailments,"
and
stated
that:

.
.
.
Requiring
substantial
progress
from
each
bubble
.
.
.
could
accelerate
momentum
toward
attainment,
directly
improve
air
quality
through
each
trade,
and
provide
an
objective
margin
of
safety
against
uncertainties
associated
with
some
individual
shutdowns,
while
leaving
to
the
state
the
task
of
final
SIP
development.
It
would
also
maintain
the
incentive
within
the
[
1982]
Policy
for
industry
to
shut
down
high­
polluting,
economically­
marginal
sources
.
.
.
.
The
more
each
existing­
source
bubble
contributes
directly
to
accelerated
air
quality
progress,
the
stronger
the
justification
for
use
of
surplus
reductions
for
such
bubbles
in
the
absence
of
a
demonstration.
Moreover,
requiring
all
bubbles
to
produce
a
substantial
air
quality
improvement,
beyond
RACT
baselines
and
RACT
equivalence,
could
provide
a
margin
of
safety
sufficient
to
make
special
treatment
of
shutdowns
unnecessary
.
.
.
48
FR
at
39585­
86
(
footnotes
omitted).

Thus,
while
the
issue
explicitly
raised
by
the
August
1983
notice
was
use
of
bubble
credit
from
shutdowns
in
primary
nonattainment
areas
which
lack
approved
demonstrations,
the
underlying
issue
was
use
of
any
type
of
bubble
credit
in
these
areas.
Since
emission
reductions
have
the
same
effect
on
air
quality
whether
produced
by
less­
polluting
process
changes,
more
efficient
operation
of
installed
control
equipment,
additional
pollution
controls,
or
shutdowns
or
production
curtailments,
the
fundamental
question
was
whether
all
such
reductions
or
none
of
them
should
be
prohibited
or
subject
to
special
requirements
when
used
for
bubbles
in
these
areas.
That
question
reflected
a
further
choice.
Should
EPA
defer
bubbles
in
these
areas
until
a
compete
demonstration
was
finally
approved?
Or
should
EPA
authorize
continued
use
of
bubbles,
in
order
to
secure
interim
emission
reductions?

Comments
responding
to
the
August
1983
notice
were
essentially
the
same
as
earlier
ones.
A
large
majority
of
industries
and
state
pollution
control
agencies
commenting
at
that
time
supported
continued
opportunity
for
bubbles
(
including
those
using
credit
from
shutdowns)
in
nonattainment
areas
with
or
without
approved
demonstrations.
Virtually
all
industries
and
states
commenting
with
respect
to
areas
that
have
approved
demonstrations
supported
continued
use
of
the
1982
policy,
without
change.
17
n
Of
13
state
agencies
commenting
with
respect
to
areas
that
do
not
have
approved
demonstrations,
ten
urged
that
shutdown
credits
be
retained
for
these
areas
as
well.
18
n
However,
many
comments
also
supported
or
acknowledged
the
appropriateness
of
a
requirement
for
a
net
air
quality
benefit
­­
in
the
range
of
20%
extra
reductions
in
emissions
remaining
beyond
a
baseline
reflecting
RACT
emission
limits
­­
from
each
bubble,
so
long
as
that
requirement
was
objective
and
easily
administered.
19
n
To
the
extent
they
addressed
this
issue,
these
comments
generally
opposed
efforts
to
test
bubbles
by
examining
the
subjective
motives
underlying
reductions.
20
n
Two
state
of
local
agencies
asked
that
bubbles
be
prohibited
in
these
areas
until
complete
demonstrations
were
approved
by
EPA.

n
17
E.
g.,
Allegheny
County
(
PA)
Health
Department,
Bureau
of
Air
Pollution
Control;
Air
Pollution
Control
District
of
Jefferson
County
(
Louisville),
KY.
Cf.
Dayton
(
OH)
Regional
Air
Pollution
Control
Agency.
See
also,
e.
g.,
comments
of
Chevron
USA.

n
18
E.
g.,
Memphis
Health
Department;
Colorado
Dept.
of
Health,
Air
Pollution
Control
Division.
Cf.
comments
of
Illinois
EPA.

Many
industrial
commenters
also
asserted
the
importance
of
continuing
to
allow
shutdown
credits
in
these
nonattainment
areas.
See,
e.
g.,
Chevron
USA;
Champlin
Petroleum.

n
19
E.
g.,
Bay
Area
(
CA)
Air
Quality
Management
District.
See
also
Southern
California
Gas
Co.

n
20
E.
g.,
Massachusetts
Department
of
Environmental
Quality
Engineering;
South
Coast
(
CA)
Air
Quality
Management
District.
Page
12
51
FR
43814
Several
commenting
environmental
groups
asserted
that
EPA
should
not
permit
any
bubbles
in
nonattainment
areas
lacking
adequate
demonstrations.
One
argued
that
EPA
cannot
determine
that
emission
reductions
are
"
surplus,"
and
therefore
creditable,
in
these
areas
because
to
do
so
would
violate
the
statutory
requirement
to
attain
standards
"
as
expeditiously
as
practicable."
Moreover,
this
group
claimed,
using
RACT
as
a
baseline
would
not
solve
this
problem
because
RACT
limits
are
minimum
measures,
not
a
substitute
for
a
SIP
providing
timely
attainment.
This
group
also
asserted
that
crediting
shutdowns
would
conflict
with
states'
duty
to
meet
air
quality
standards
"
as
expeditiously
as
practicable"
because,
by
"
resurrecting"
emissions
that
have
already
ceased,
it
would
accomplish
less
emission
reduction
than
is
practicable
within
a
given
period
of
time.
Another
group
asserted
that
allowing
shutdown
credits
in
these
areas
would
strain
efforts
to
progress
toward
attainment.
One
environmental
group
went
a
step
further
and
urged
that
opportunity
for
bubbles
be
restricted
solely
to
attainment
areas
which
have
already
met
national
air
quality
standards.
2
n1
n
2
1
In
oral
or
written
submissions
to
the
Administrator
made
in
early
1986
while
final
decisions
on
today's
policy
were
still
pending,
representatives
of
seven
states
and
the
State
and
Territorial
Air
Pollution
Program
Administrators
and
the
Association
of
Local
Air
Pollution
Control
Officers
(
STAPPA/
ALAPCO)
similarly
urged
that
bubbles
no
longer
be
authorized
in
primary
nonattainment
areas
until
a
complete
attainment
demonstration
was
submitted
or
approved.
This
position
was
generally
echoed
by
a
coalition
of
environmental
groups.
Since
this
position
and
related
underlying
issues
had
been
raised
and
articulated
at
length
by
earlier
comments,
it
is
addressed
as
part
of
the
Agency's
final
response
below.

At
the
same
time,
comments
filed
on
Federal
Register
proposals
to
approve
individual
bubbles
as
SIP
revisions
under
the
1982
policy
2
n2
raised
related
issues.
Several
of
these
proposed
bubbles
were
also
located
in
primary
nonattainment
areas
which
required
but
lacked
approved
demonstrations.
The
issue
raised
related
to
bubbles
of
two
types:
(
1)
Those
which
relied
on
reductions
from
shutdowns
that
occurred
long
before
any
application
to
bank
or
trade;
and
(
2)
those
which
relied
on
extra
reductions
produced
by
routine
installation
of
required
control
equipment,
long
before
application
to
bank
or
trade.
Both
types
of
bubbles
raised
the
larger
question
of
whether
SIP
integrity
and
environmental
progress
might
better
be
assured
in
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations
of
attainment
by
allowing
no
bubble
credit,
or
allowing
bubble
credit
only
for
reductions
beyond
actual
emission
levels
already
achieved
as
of
the
time
sources
applied
to
bank
or
trade.

n
2
2
Cf.,
e.
g.,
Union
Carbide
Corp.
(
Texas
City),
47
FR
21533
(
May
19,
1982);
B.
F.
Goodrich
(
Avon
Lake),
49
FR
4796
(
February
8,
1984).

The
final
policy
strikes
what
EPA
believes
to
be
a
reasonable,
environmentally­
sound
balance
between
all
these
views,
and
establishes
numerous
tightening
clarifications
and
new
requirements
to
implement
that
balance.
These
changes
and
the
rationales
supporting
them
are
set
forth
below.

1.
EPA's
Resolutions
Regarding
Baseline
and
Other
Requirements
In
primary
nonattainment
areas
which
require
but
do
not,
at
the
time
of
a
bubble
application,
have
EPA­
approved
demonstrations
that
ambient
health
standards
will
be
attained,
bubbles
will
generally
be
approved
if
they
do
not
rely
on
reductions
which
occurred
before
application
for
credit;
if
they
meet
other
criteria
for
baselines,
ambient
equivalence,
and
consistency
with
future
planning
efforts;
and
if
they
produce
at
least
a
20%
net
reduction
in
emissions
remaining
after
appropriate
baselines
have
been
applied.
These
objective
tests
both
respond
to
previous
comments
on
certain
individual
bubble
applications,
and
go
substantially
beyond
alternatives
discussed
in
EPA's
August
1983
notice.
At
the
same
time
they
assure
greater
predictability
and
ambient
progress,
without
imposing
so
heavy
a
burden
on
voluntary
bubble
transactions
that
the
environmental
benefits
of
such
trades
are
forgone.
They
reflect
the
general
principle
that
because
such
properly­
structured
bubbles
provide
continuing
incentives
for
sources
to
deliberately
overshoot
regulatory
marks
(
rather
than
plan
merely
to
meet
them),
bubble
trades
in
these
areas
can
produce
interim
progress
beyond
current
SIP
requirements,
and
should
be
approved.
Page
13
51
FR
43814
a.
SPECIFIC
"
PROGRESS"
REQUIREMENTS.
Applications
for
existing­
source
bubbles
in
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations
of
attainment
will
be
deemed
to
produce
a
net
air
quality
benefit
and
will
be
processed
for
approval
if
they:

(
i)
Use
"
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable"
emissions
baselines.
Such
baselines
must
be
calculated
using
­­
Either
the
actual
emission
rate,
the
SIP
or
other
federally
enforceable
emission
limit,
or
a
RACT
emission
limit,
whichever
is
lowest,
for
each
source
involved
in
the
trade.
This
baseline
factor
shall
be
determined
as
of
the
time
of
the
source's
application
to
bank
or
trade,
whichever
is
earlier.

­­
The
lower
of
actual
or
allowable
capacity
utilitization
and
hours
of
operation
for
each
source
involved
in
the
trade.
These
baseline
factors
shall
generally
be
based
on
the
two
years
of
operation
preceding
the
application
to
bank
or
trade,
unless
another
two
year
period
is
shown
to
be
more
representative
of
normal
source
operations;

(
ii)
Meet
the
general
ambient
equivalence
tests
outlined
in
today's
policy
(
see
Section
I.
B.
1.
b
of
the
Technical
Issues
Document)
using
the
baselines
described
above
and,
for
the
post­
bubble
case,
emission
levels
that
reflect
overall
emissions
equivalence;
and
(
iii)
Produce
a
substantial
net
reduction
in
actual
emissions
­­
i.
e.,
a
reduction
of
at
least
20%
in
the
emissions
remaining
after
application
of
the
stringent
new
baselines
described
above.
(
A
reduction
of
greater
than
20%
may
be
required
for
bubbles
approved
under
generic
rules
in
some
of
these
nonattainment
areas.
See
discussion
in
Section
III.
A.
1.(
d)
of
this
Preamble,
below.)

With
respect
to
sources
which
seek
to
bank
emission
reductions
after
publication
of
today's
notice,
"
application
to
bank,"
for
purpose
of
evaluating
credit
for
use
in
bubbles,
means
the
time
of
filing
of
an
application
to
make
such
reductions
state­
enforceable
through
or
concurrent
with
use
of
a
formal
or
informal
banking
mechanism.
However,
in
order
to
avoid
needless
disruption
and
inequitable
retroactivity,
this
definition
does
not
apply
to
reductions
which
sources
have
previously
applied
to
bank.
See
Section
I.
A.
1.
b.(
1)
of
the
Technical
Issues
Document.

b.
Additional
"
Progress"
Requirement:
State
Assurances.
In
concluding
that
properly­
structured
bubbles
as
defined
above
can
produce
valuable
interim
progress
in
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations,
EPA
also
considered
whether
other
showings
might
be
necessary
to
assure
that
individual
bubbles
do
produce
such
progress.
The
Agency
has
concluded
that
few
such
showings,
whether
bubble­
related
or
otherwise,
are
practicable
or
workable.
It
did,
however,
conclude
that
certain
representations
meant
to
assure
each
bubble's
consistency
with
SIP
planning
goals,
by
requiring
states
to
take
a
meaningful
look
at
such
consistency
in
each
bubble
approval,
would
help
assure
that
progress
is
achieved.

Under
circumstances
detailed
in
the
final
Policy
and
Technical
Issues
Document,
today's
notice
therefore
requires
the
appropriate
state
authority
to
provide
the
following
written
assurances
to
accompany
each
bubble
which
is
approved
(
either
directly
by
EPA
as
a
case­
by­
case
SIP
revision,
or
by
states
under
an
EPA­
approved
generic
rule)
in
these
areas:

1.
The
resulting
emission
limits
are
consistent
with
EPA
requirements
for
ambient
air
quality
progress,
as
specified
in
today's
notice.

2.
The
bubble
emission
limits
will
be
included
in
any
new
SIP
and
associated
control
strategy
demonstration.

3.
The
bubble
will
not
constrain
the
state
or
local
agency's
ability
to
obtain
any
traditional
emission
reductions
needed
to
expeditiously
attain
and
maintain
ambient
air
quality
standards.

4.
The
state
or
local
agency
is
making
reasonable
efforts
to
develop
a
complete
approval
SIP
and
intends
to
adhere
to
the
schedule
for
such
development
(
including
dates
for
completion
of
emissions
inventory
and
subsequent
increments
of
progress)
stated
in
the
letter
accompanying
the
bubble
approval
or
in
previous
such
letters.

5.
The
baseline
used
to
calculate
the
bubble
emission
limits
is
consistent
with
the
baseline
requirements
in
the
Emissions
Trading
Policy
Statement
and
Technical
Issues
Document.
Page
14
51
FR
43814
Such
assurances
need
not
be
verified
by,
e.
g.,
detailed
quantifications,
comparison
with
year­
by­
year
progress
projections,
or
showings
that
all
reductions
needed
for
area­
wide
progress
or
attainment
have
been
identified
and
targeted
for
regulation.
They
are,
however,
expected
to
be
based
upon
meaningful
review
by
the
state
and
to
be
consistent
with
the
documentation
supporting
the
bubble.
EPA
will
not
second­
guess
such
state
representations,
provided
they
are
a
substantial
test
applied
by
the
state
to
each
bubble
and
the
state
has
explained
how
the
proposed
bubble
is
consistent
with
the
area's
projected
attainment
strategy.
Nor
will
EPA
examine,
or
expect
states
to
examine
in
making
such
representations,
any
specific
soyrce's
subjective
motivation
in
making
claimed
reductions.
The
combined
effect
of
these
requirements
will
be
(
a)
to
deny
bubble
credit
for
reductions
which
occurred
before
application
for
credit,
in
recognition
of
the
fact
that
reductions
produced
before
any
application
to
bank
or
trade
are
unlikely
to
have
been
elicited
in
any
way
whatsoever
by
the
opportunity
to
trade;
(
b)
to
help
assure
that
only
actual
reductions
in
current
emissions
are
relied
upon
to
satisfy
pending
control
requirements
in
these
areas;
(
c)
to
more
systematically
encourage
efforts
by
soyrces
to
produce
and
permanently
maintain
these
additional
reductions,
by
granting
them
predictable
bubble
credit
where
specified
baseline
and
other
tests
have
been
applied;
and
(
d)
to
assure
that
these
bubbles
will
not
interfere
with
these
areas'
attainment
efforts.
Any
other
approach
would
enmesh
EPA
and
state
agencies
in
lengthy,
resource­
intensive,
and
uncertain
efforts
to
determine
subjective
company
motives
for
making
particular
claimed
reductions
­­
efforts
which
appear
unlikely
to
provide
greater
environmental
protection
than
the
criteria
articulated
here.
Cf,
e.
g.,
48
FR
at
39584
and
n.
15,
39585­
86.

2.
Basic
Rationale
EPA
believes
that
Congress
would
clearly
have
intended
the
Agency
to
approve
bubbles
that,
despite
the
lack
of
a
complete
attainment
demonstration
for
the
affected
areas,
nevertheless
produce
progress
toward
attainment
in
those
areas.
Section
172(
b)
of
the
Clean
Air
Act
does
require
states
to
formulate
complete
control
strategies
to
attain
the
standards
in
these
areas
as
expeditiously
as
practicable
and,
in
the
case
of
primary
standards,
by
certain
fixed
dates.
It
also
requires
these
areas
to
demonstrate
reasonable
further
progress
toward
attainment
in
the
interim.
However,
SIPs
and
attainment
demonstrations
are
composed
of
dozens,
if
not
hundreds,
of
regulations
and
commitments
adopted
at
the
state
or
local
level,
following
proceedings
that
often
are
time­
consuming
and
overlap
in
sequence.
If
EPA
were
to
wait
until
every
such
provision
were
adopted
and
submitted
by
the
state
before
acting
on
any
of
them,
substantial
environmental
benefits
that
would
otherwise
accrue
from
having
each
available
requirement
promptly
incorporated
in
a
binding
manner
into
the
SIP
and
made
federally
enforceable
would
be
forgone.
Such
an
"
all
or
nothing"
approach
would
produce
less
expeditious
progress
toward
attainment
than
a
combination
of
(
a)
EPA
approvals
of
state
provisions
submitted
sequentially
and
(
b)
appropriate
use
of
sanctions
authorized
by
the
statute
to
effect
the
adoption
and
submittal
of
remaining
necessary
provisions.
Given
the
strong
emphases
in
the
statute
as
enacted,
it
is
doubtful
that
Congress
would
have
intended
the
former,
less
progressive
approach.
2
n3
n
2
3
See,
e.
g.,
Chevron
USA
v.
NRDC,
supra
n.
4.

For
these
reasons,
EPA
has
decided
to
approve
in
these
areas
bubbles
which
individually
produce
progress,
both
beyond
preexisting
plan
requirements
and
in
the
air
itself,
and
which
do
not
interfere
with
these
areas'
efforts
to
construct
complete
strategies
that
provide
for
attainment
as
expeditiously
as
practicable.

Today's
notice
accordingly
disallows
use
in
bubbles
of
reductions
made
prior
to
any
application
to
bank
or
trade,
but
allows
appropriate
use
of
reductions
made
after
such
application.
Where
a
source
voluntarily
proposes
to
make
creditable
reductions
as
part
of
and
following
a
banking
or
trading
application,
the
stringent
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
baselines
must
be
applied
if
a
bubble
is
involved,
and
that
bubble
must
meet
appropriate
ambient
tests,
using
emission
levels
that
produce
overall
equivalence
to
the
emissions
baseline.
The
"
net
20%"
discount
in
remaining
emissions
then
applies
to
all
sources
in
the
bubble,
and
provides
an
additional
safety
margin
to
assure
ambient
progress
from
bubbles
in
these
areas.
2
n4
Finally,
the
state
assurances
will
indicate
whether
approval
of
the
bubble
is
likely
to
remove
rather
than
enhance
any
important
opportunities
to
construct
complete
attainment
strategies.
Page
15
51
FR
43814
n
2
4
This
"
net
20%"
requirement
is
also
supported
by
evidence
indicating
that
for
most
extension
area
SIPs
addressing
ozone
pollution
­­
the
most
widespread
remaining
nonattainment
health
problem
­­
a
net
85%
reduction
(
81%
RACT
+
20%
of
remaining
VOC
emissions)
appears
sufficient
to
produce
ambient
attainment,
if
those
areas
could
secure
such
reductions
from
all
controllable
stationary
sources
of
VOC
emissions
which
remain
after
implementation
of
stringent
controls
already
in
place.
See,
e.
g.,
"
o
3
Attainment
Status
of
33
Areas
Under
Different
Degrees
of
Stationary
Source
Control"
(
Feb.
1984));
Letter,
Richard
A.
Liroff,
The
Conservation
Foundation,
to
Hon.
Lee
M.
Thomas,
March
12,
1986
["
The
trial
calculation...
indicates
the
staff's
attentiveness
to
the
limited
control
possibilities
available,
and
appears
to
support
their
conclusion
about
the
contribution
RACT
plus
20
percent
can
make
to
attainment."].

EPA
believes
that
bubbles
meeting
the
special
progress
requirements
described
above
will
produce
both
progress
beyond
preexisting
plan
requirements
and
progress
in
the
air.
First,
with
respect
to
preexisting
plan
requirements,
each
bubble
would
achieve
a
net
tightening
of
at
least
20
percent.
Trades
that
result
in
a
permanent
20
percent
reduction
beyond
actual
emission
levels
(
which
are
already
below
what
the
plan
allows),
would
produce
even
greater
progress
beyond
preexisting
requirements.
Moreover,
state
assurances
that
must
accompany
each
bubble
will
help
ensure
that
approval
does
not
represent
a
step
backward
in
the
process
of
developing
a
plan
providing
for
timely
attainment.

Each
such
bubble
would
also
produce
net
progress
in
the
air,
since
each
increment
of
required
control
forgone
as
a
result
of
the
trade
would
be
more
than
compensated
by
a
greater
reduction
which
was
not
required,
and
which
may
reasonably
be
presumed
to
have
been
elicited
by
the
trading
opportunity.
Neither
EPA
nor
anyone
else
can
prove
that
all
reductions
which
occur
after
filing
of
an
application
for
credit
were
elicited
in
whole
or
in
part
by
the
trading
opportunity.
Decisions
in
the
real
world,
whether
corporate
or
otherwise,
always
arise
from
multiple
motives
which
are
not
easily
disentangled,
any
strand
of
which
may
have
"
tipped"
the
balance
toward
or
precipitated
a
particular
action.
However,
the
Agency
has
concluded
that
this
presumption
is
reasonable.
First,
it
is
plausible
that
such
reductions
were
elicited
at
least
in
part
by
that
opportunity,
especially
where,
as
here,
sources
must
affirmatively
decide
to
surrender
something
of
value
and
constrain
purely
private
decisionmaking
(
e.
g.,
enforceably
commit
to
change
production
processes)
in
order
to
create
a
cognizable
reduction.
Second,
this
presumption
is
the
sole
practical
alternative
to
the
administratively
difficult
and
uncertain
approach
of
attempting
to
determine
the
intent
and
motives
of
source
owners
making
these
reductions.

EPA
has
also
concluded
that
bubbles
meeting
these
new
requirements
will
not
interfere
with
the
statutory
mandate
that
states
attain
standards
as
expeditiously
as
practicable.
Each
such
bubble
would
produce
progress
in
the
air
that,
for
the
reasons
just
described,
would
likely
not
have
been
achieved
absent
the
trading
opportunity.
2
n5
n
2
5
The
Agency
has
determined
that
these
conclusions
also
apply
where
the
post­
application
reduction
on
which
the
applicant
relies
for
credit
happens
to
be
a
shutdown
or
production
curtailment.
Because
multiple
motives
similarly
affect,
and
can
determinatively
"
tip,"
decisions
to
close
a
facility
or
restrict
its
productive
capacity,
shutdowns
that
occur
after
the
source
owner
applies
for
credit,
no
less
than
other
types
of
post­
application
reductions,
may
be
presumed
reasonably
elicited
by
the
opportunity
to
trade.
This
is
particularly
true
because
the
source
operator,
whatever
its
antecedent
motives,
must
make
a
deliberate
decision
to
forgo
an
item
of
substantial
value
­­
either
by
surrendering
its
operating
permit
or
by
accepting
binding
production
limits
­­
in
order
to
create
credit.
Since
it
would
be
administratively
difficult,
if
not
impossible,
to
prove
or
disprove
that
opportunity
to
trade
was
the
driving
force
or
a
subjective
motive
behind
the
shutdown,
such
a
presumption
is
amply
justified.

3.
Additional
Considerations
Regarding
the
Benefits
of
Bubbles
Individual
bubbles
approved
under
today's
special
progress
requirements
for
primary
nonattainment
areas
which
lack
demonstrations
will
produce
progress
in
the
SIP
and
in
the
air.
Moreover,
the
mere
existence
of
the
opportunity
to
trade
has
independent
progressive
effects.

As
some
commenters
suggested,
lack
of
such
demonstrations
usually
results
from
one
of
two
general
causes:
Either
the
state
does
not
know
where
or
how
to
obtain
sufficient
further
emission
reductions,
or
it
Page
16
51
FR
43814
has
identified
sources
of
such
reductions
but
is
unable
to
implement
new
regulatory
requirements
because
of
their
cost.
Moreover,
regulated
firms
may
often
be
reluctant
to
disclose
information
that
may
be
used
to
require
further
retrofits
against
them.
Even
where
such
information
is
obtained,
it
may
not
be
sufficiently
precise
to
allow
EPA
and
the
state
to
resolve
remaining
ambient
problems.
While
a
vigorous
regulatory
response
remains
critical
in
these
areas,
that
response
is
likely
to
be
hampered
by
the
very
information
barriers
that
discouraged
a
demonstration
of
attainment
in
the
first
place.
See,
e.
g.,
48
FR
39582
(
August
31,
1983).

Bubbles
can
help
break
such
deadlocks
over
the
feasibility
of
obtaining
further
reductions,
by
providing
an
incentive
for
plant
managers
to
find
economical
ways
to
go
beyond
current
regulatory
requirements.
The
opportunity
to
trade
may
also
encourage
sources
to
come
forward
in
order
to
establish
the
quantifiable
and
enforceable
emission
limits
on
which
credit
must
be
based.

Bubbles
may
achieve
substantial
reductions
even
without
special
"
progress"
requirements,
since
sources
not
otherwise
subject
to
or
not
yet
meeting
RACT
requirements
with
future
effective
dates
in
such
nonattainment
areas
must
first
reduce
emissions
to
RACT­
allowable
levels
before
they
can
begin
to
accrue
credit.
2
n6
Where
modeled
showings
of
ambient
equivalence
are
required,
bubbles
may
also
help
identify
and
correct
remaining
nonattainment
problems.
In
addition,
bubbles
may
help
produce
(
a)
faster
compliance
with
RACT
limits
already
defined
in
partially­
approved
SIPs,
(
b)
faster
RACT
definitions
for
sources
not
subject
to
currently
approved
portions
of
SIPs,
(
c)
incentives
for
plant
managers
to
disclose
uncontrolled
or
uninventoried
sources,
and
(
d)
incentives
for
such
managers
to
control
emissions
earlier
than
required.
Perhaps
most
important,
because
of
their
potential
to
elicit
better
information
on
sources,
emissions,
control
performance
and
ambient
effects,
bubbles
may
enhance
states'
ability
to
secure
future
reductions,
if
and
when
such
reductions
are
required.
For
example,
EPA
experience
has
documented
cases
in
which
bubble
or
similar
trading
applications
have
improved
federal
and
state
air
quality
management
capabilities
by
improving
data
on
emissions,
ambient
impacts,
and
unregulated
or
uninventoried
sources.
2
n7
Through
all
these
mechanisms,
bubbles
can
achieve
substantial
emission
reductions
and
air
quality
planning
benefits,
even
without
special
"
progress"
requirements.

n
2
6
See,
e.
g.,
47
FR
15077,
15080;
48
FR
39580
and
n.
2,
39582
and
n.
7.

RACT
levels
are
generally
at
least
80%
or
more
below
uncontrolled
emission
levels,
depending
on
the
pollutant.
Where
pre­
trade
actual
emissions
are
higher
than
RACT
baseline
levels
this
requirement
directly
accelerates
air
quality
progress,
since
no
credit
can
be
secured
for
the
difference.

n
2
7
Trade
applications
submitted
over
the
last
several
years
have,
among
other
things,
helped
establish
and
verify
emissions
factors
for
nontraditional
sources,
as
well
as
provide
detailed
emissions
profiles
of
such
sources
(
see,
e.
g.,
application
of
Shenango
Iron
and
Steel
Co.,
approved
46
FR
62894
(
December
29,
1981));
have
provided
current
emissions
data
not
otherwise
available
to
EPA
through
the
Agency's
National
Emissions
Data
System
(
50
FR
25093,
June
17,
1985);
and
have
disclosed
the
existence
of
sources
(
or
in
at
least
one
case
an
entire
plant)
that
had
been
wholly
missed
in
development
of
the
state's
emissions
inventory.
Other
applications
have
identified
and
reduced
previously
unsuspected
threats
to
PSD
increments;
helped
correct
substantial
discrepancies
between
inventoried
and
actual
emissions,
or
between
SIP
emission
limits
and
attainment
demonstrations;
and
helped
improve
enforcement
procedures
in
certain
state
programs.
In
addition
to
such
case­
specific
examples,
opportunity
to
trade
appears
to
reduce
traditional
reasons
for
sources
to
underestimate
their
emissions,
resulting
in
better
inventory
and
planning
data.
For
example,
Massachusetts
requires
firms
to
provide
data
on
their
two
years
of
highest
emissions
since
the
design
year
of
the
SIP,
in
order
to
establish
a
daily
emissions
cap
under
the
state's
VOC
bubble
rule.
This
requirement
has
produced
baseline
data
for
previously
unquantified
emission
years
for
some
sources.

Nowithstanding
these
independent
progressive
effects,
EPA
believes
that
it
may
approve
bubbles
in
these
nonattainment
areas
only
if
they
meet
the
specific
progress
requirements
described
above
and
do
not
interfere
with
the
affected
areas'
efforts
to
develop
and
implement
complete
attainment
strategies.
Such
bubbles
can
help
adjust
existing
inadequate
regulations
on
a
source­
specific
basis,
help
make
progress
Page
17
51
FR
43814
toward
a
full
approved
demonstration,
and
help
improve
air
quality,
without
"
freezing"
inadequate
SIP
requirements
that
are
currently
in
place.

Accordingly,
EPA
has
decided
to
approve
"
progress"
bubbles
which
are
consistent
with
the
attainment
needs
of
these
areas,
which
produce
a
net
air
quality
benefit,
and
which
may
therefore
secure
faster
interim
progress
toward
attainment
and
more
rapid
development
of
complete
attainment
plans.

III.
Additional
Policy
Changes
and
Clarifications
Today's
notice
makes
numerous
additional
changes
in
response
to
comments
on
and
following
the
1982
policy.
The
most
important
of
these
changes
or
clarifications
are
discussed
below.

A.
Generic
Bubble
Rules
Today's
notice
recognizes
the
special
position
of
EPA­
approved
state
generic
bubble
rules.
Such
rules
may
provide
clearer
approval
criteria
and
may
result
in
more
rapid
bubble
approvals
with
reduced
expenditure
of
EPA
and
state
resources,
by
eliminating
the
need
for
case­
by­
case
Federal
rulemaking
on
each
bubble
as
an
individual
SIP
revision.

Today's
policy
affirms
that
states
may
continue
to
use
generic
rules
to
approve
bubbles
within
the
scope
of
such
rules
in
all
areas
of
the
country,
including
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations
of
attainment.
It
also
establishes
specific
procedures
to
ensure
opportunity
for
public
comment
on
individual
generic
actions
and
for
regular
EPA
oversight
of
state
administration
of
all
such
rules.
Finally,
it
spells
out
additional
"
progress"
requirements
that
new
generic
rules
must
satisfy
to
be
approvable
for
primary
nonattainment
areas
needing
but
lacking
demonstrations
of
attainment.

State
generic
bubble
rules
approved
by
EPA
as
SIP
revisions
have
independent
force
of
law
and
further
Congress'
intent
that
"
the
prevention
and
control
of
air
pollution
at
its
source
[
remains]
the
primary
responsibility
of
States
and
local
governments."
Clean
Air
Act,
§
101(
a)(
3).
EPA
has
approved
or
proposed
to
approve
10
such
rules
for
9
different
states,
and
at
least
12
others
are
being
developed.
Few
approved
rules
currently
apply
to
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations.
However,
today's
notice
requires
that
all
generic
rules
meet
certain
additional
procedural
requirements
in
order
to
assure
effective
EPA
oversight
of
their
administration
and
to
identify
any
deficiencies
in
individual
approvals
or
state
implementation
procedures
before
substantial
numbers
of
stateapproved
bubbles
may
be
put
at
risk.
To
the
extent
these
requirements
require
modification
of
existing
generic
rules,
they
may
apply
to
rules
affecting
any
area,
not
just
primary
nonattainment
areas
which
need
but
lack
demonstrations.

Today's
policy
is
meant
to
assure
these
rules'
smooth
continued
operation,
both
now
and
through
any
future
transition
periods,
without
undermining
the
considerable
investment
states
have
already
made
in
generic
approaches.
At
the
same
time,
the
policy
is
designed
to
assure
that
actions
under
generic
rules
will
meet
the
policy's
substantive
and
procedural
objectives.

Basically,
bubbles
approved
by
states
under
existing
EPA­
approved
generic
rules
before
the
effective
date
of
this
policy
will
not
be
affected
or
revisited
due
to
today's
changes.
Because
EPA­
approved
generic
rules
possess
independent
validity
and
may
only
be
changed
upon
completion
of
specific
procedures
for
altering
such
SIP
provisions
(
see,
e.
g.,
Clean
Air
Act
sections
110(
a)(
2)(
H),
110(
i)),
states
may
also
continue
to
approve
bubbles
in
accord
with
such
rules,
unless
and
until
those
rules
are
finally
changed
in
response
to
an
EPA
notice
requesting
and
establishing
a
specific
timetable
for
their
modification.
However,
in
order
to
provide
maximum
assurance
of
SIP
integrity
and
minimize
any
need
for
future
SIP
corrections,
EPA
expects
states
to
assure
so
far
as
feasible
that
generic
bubbles
they
approve
are
consistent
with
applicable
terms
of
today's
policy
as
well
as
their
generic
rules.
New
or
pending
generic
rules
must
all
meet
the
terms
of
today's
notice.

All
existing
generic
rules
which
require
modification
to
conform
to
this
policy
must,
as
requested
by
EPA,
be
promptly
revised.
EPA
will
review
such
rules
to
determine
their
consistency
with
today's
requirements,
and
will
publish
Federal
Register
notices
identifying
generic
rules
requiring
modification.
These
notices
will
identify
specific
deficiencies
and
means
for
correcting
them,
and
set
forth
a
schedule
for
both
submittal
and
EPA
review
of
revised
rules.
Where
states
fail
to
resolve
identified
deficiencies
in
such
Page
18
51
FR
43814
rules
within
the
prescribed
period,
EPA
may
either
rescind
its
previous
approval
of
the
rule,
or
issue
a
notice
of
SIP
deficiency
under
section
110(
a)(
2)(
H)
of
the
Act.

1.
Substantive
"
Progress"
Requirements
Generic
bubble
rules
applicable
to
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations
must
provide
that
all
generic
bubbles
in
these
areas:

(
a)
Use
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
emissions
baselines,
as
described
above,
for
all
sources
involved
in
the
trade;

(
b)
Grant
credit
only
for
those
reductions
occurring
after
an
application
to
bank
or
trade
credit
(
whichever
is
earlier)
has
been
made;

(
c)
Incorporate
replicable
procedures
which
assure
that
all
trades
preapproved
by
EPA
as
meeting
the
rule
will
also
satisfy
applicable
ambient
equivalence
tests
(
see
Technical
Issues
Document,
Section
II.
B.
2.);
and
(
d)
Produce
an
overall
emission
reduction
at
least
equal
to
a
net
20%
reduction
in
emissions
remaining
after
application
of
the
above
baselines,
or
at
least
equal
(
in
percentage
terms)
to
the
overall
emission
reduction
(
in
percentage
terms)
needed
to
attain
in
the
area
(
i.
e.,
at
least
equal
to
the
source­
by­
source
emission
reductions
that
would
be
required
for
a
full
demonstration
of
attainment,
taking
into
account
"
uncontrollable"
stationary
[
e.
g.,
area]
sources
and
expected
emissoin
reductions
from
mobile
sources),
whichever
is
larger.
2
n8
This
last
determination
must
be
submitted
with
the
rule,
and
must
use
the
same
type
and
quality
of
analysis
required
for
an
EPA­
approvable
SIP.
In
no
event
may
the
overall
emission
reduction
required
of
generic
bubbles
in
such
areas
be
less
than
20%
of
the
emissions
remaining
after
application
of
the
baselines
specified
above;
and
n
2
8
For
example,
assume
air
quality
analysis
indicates
the
area
must
decrease
its
base­
year
emissions
by
45%
to
attain
the
relevant
NAAQS.
Further
assume:

Therefore
the
reductions
needed
from
controllable
stationary
sources
are
9,450­
5,500=
3,950
tons/
yr.

And
the
percent
emission
reduction
required
from
controllable
stationary
sources
to
attain
is
Thus
the
net
overall
reduction
required
from
each
generic
bubble
would
be
94%
(
i.
e.,
the
reductions
produced
by
applicable
baselines
[
e.
g.,
application
of
a
RACT
emission
rate]
plus
whatever
percent
reduction
in
emissions
remaining
after
this
RACT
limit
is
sufficient
to
yield
the
94%
total).

States
that
wish
to
avoid
case­
be­
case
SIP
revisions
for
sources
for
which
RACT
has
not
yet
been
defined
in
an
approved
SIP
provison
may
incorporate
"
presumptive
RACT"
values
(
e.
g.,
80%
reduction
for
VOC)
in
their
generic
rules.
Sources
would
than
have
the
option
of
accepting
these
RACT
values
for
generic
bubble
purposes,
or
negotiating
different
RACT
values
through
the
caseby
case
SIP
revison
process.
However,
where
a
source
involved
in
a
trade
is
one
for
which
EPA
has
issued
a
CTG,
but
the
state
has
not
yet
adopted
the
CTG­
specified
emission
rate
as
RACT
and
no
RACT
has
yet
been
specified
by
the
state
for
that
source,
the
presumptive
or
negotiated
RACT
values
for
the
trade
must
be
at
least
as
restrictive
as
the
CTG­
specified
emission
rate
for
that
source.

TPY
(
a)
For
the
base
year:
Uncontrollable
stationary
source
emissions
(
e.
g.,
residential
combustion
sources)
2,500
Controllable
stationary
source
emissions
3,500
Mobile
source
emissions
4,000
Total
10,000
Target
emissions
for
attainment
10,000
X
(
1.0­
0.45)
5,500
Page
19
51
FR
43814
TPY
(
b)
For
the
projected
attainment
year
(
before
additional
controls):
Uncontrollable
stationary
source
emissions
2,500
X
1.1
2,750
Controllable
stationary
source
emissions
3,500
X
1.2
4,200
Mobile
source
emissions
2,500
Total
9,450
(
3950
X
100=
94%
)
(
4200
)

(
e)
provide
assurances,
in
conjunction
with
the
state's
submittal
of
the
generic
rule
to
EPA,
that
the
state
(
i)
is
making
reasonable
efforts
to
develop
a
complete
approvable
SIP
that
will
achieve
the
percent
emission
reduction
from
controllable
sources
described
in
the
previous
paragraph
and
(
ii)
intends
to
adhere
to
the
schedule
for
development
of
such
a
SIP
(
including
dates
for
completion
of
emissions
inventory
and
subsequent
increments
of
progress),
as
stated
in
the
letter
accompanying
the
submittal
or
in
previous
letters.
EPA
believes
that
the
numerical
determination
and
progress
requirement
discussed
in
the
previous
paragraph
is
the
functional
equivalent
of
the
additional
assurances
described
earlier
in
this
notice
(
see
Section
II.
B.
l.
b
above)
for
bubbles
needing
case­
by­
case
EPA
approval,
since
bubbles
meeting
this
requirement
will
produce
attainment­
level
reductions.
For
that
reason,
EPA
does
not
believe
that
it
must
require
the
state
to
make
those
additional
assurances
when
it
submits
the
generic
rule.
However,
to
assure
that
generic
approvals
continue
to
complement
and
do
not
interfere
with
attainment
planning,
EPA
will
require
the
state
to
include
all
of
those
assurances
in
or
with
its
notices
of
proposed
and
final
approval
of
each
bubble
issued
under
the
rule
in
such
a
nonattainment
area.

Generic
rules
meeting
these
requirements
will
assure
that
each
state­
approved
bubble
produces
reductions
at
least
equal
to
those
which
would
be
required
under
an
approved
demonstration
of
attainment.
Their
availability
can
also
encourage
states
and
sources
to
take
significant
further
steps
towards
such
demonstrations.
Since
reductions
sufficient
for
timely
attainment
are
all
EPA
can
require
for
approval
of
State
Implementation
Plans
under
section
110
and
Part
D
of
the
Clean
Air
Act,
Train
v.
NRDC,
supra,
further
Agency
scrutiny
of
individual
bubble
reductions
is
not
required.

2.
Procedural
Requirements
Today's
notice
includes
tightened
requirements
designed
to
assure,
with
minimal
burdens
on
states,
that
EPA's
responsibility
to
monitor
the
implementation
of
all
generic
rules
incorporated
in
SIPs
(
see
section
110(
a)(
2)(
A)(
H))
is
more
efficiently
and
effectively
carried
out.
EPA
will
fulfill
this
responsibility
by
(
a)
examining
and
commenting
on,
together
with
any
other
public
commenter
under
applicable
state
law,
the
information
provided
for
individual
trades
subject
to
proposed
action
under
generic
rules,
(
b)
conducting
reviews
of
individual
trades
approved
under
such
rules;
and
(
c)
periodically
auditing
implementation
of
the
rule
itself
as
part
of
its
National
Air
Audit
System
investigations
of
state
air
pollution
control
programs,
including
indepth
file
audits
of
actions
under
such
generic
rules.
These
activities
will
cover
state
actions
of
disapproval
as
well
as
approval,
and
will
examine
whether
rules
are
being
interpreted
or
applied
within
the
scope
of
their
approval
by
EPA.

To
be
considered
valid
by
EPA,
a
trade
approved
under
a
generic
rule
must
(
1)
be
one
of
a
class
of
trades
authorized
by
the
rule,
(
2)
be
approved
by
the
state
after
the
rule
has
been
approved
by
EPA,
and
(
3)
meet
all
the
provisions
of
the
EPA­
approved
rule.
State
approvals
which
do
not
meet
these
requirements
are
Page
20
51
FR
43814
not
considered
part
of
the
SIP
and
do
not
replace
prior
valid
SIP
limits,
which
remain
enforceable
and
may
make
such
trades
the
subject
of
remedial
action
after
due
notice
by
EPA
to
the
state
and
source.

In
addition
to
requiring
that
generic
rules
or
other
state
provisions
assure
meaningful
notice
to
EPA
by
the
first
day
of
the
public
comment
period
on
proposed
generic
actions,
and
immediately
upon
final
generic
actions,
today's
policy
also
requires
that
state
generic
rules
or
other
state
provisions
provide
the
general
public
adequate
notice
and
opportunity
to
comment,
including
opportunity
for
judicial
review
sufficient
to
make
comment
effective.
Existing
state
generic
rules,
statutes
or
regulations
will
generally
satisfy
this
requirement.
However,
some
jurisdictions,
for
example,
deny
judicial
review
to
commenters
who
do
not
possess
a
direct
financial
stake
in
individual
permits.
Such
jurisdictions
will
have
to
modify
their
generic
rule,
or
other
provisions,
to
meet
this
requirement.

B.
Bubbles
Involving
Hazardous
or
Toxic
Air
Pollutants
EPA
reaffirms
and
extends
its
1982
determination
that
bubbles
in
any
area
must
not
increase
emissions
of
hazardous
or
toxic
air
pollutants.
Bubbles
cannot
be
used
to
meet
or
avoid
National
Emission
Standards
for
Hazardous
Air
Pollutants
(
NESHAPs)
that
have
been
finally
promulgated
under
Section
112
of
the
Act.
Where
NESHAPs
have
been
proposed
but
not
promulgated
for
emitting
sources
which
are
the
subject
of
a
bubble
application,
the
proposed
NESHAP
will
generally
serve
as
the
baseline
for
determining
creditable
bubble
reductions,
and
the
trade
must
produce
reductions
at
least
as
great
as
those
which
the
proposed
NESHAP
would
produce,
if
promulgated.
Moreover,
no
source
emitting
a
pollutant
subject
to
such
a
proposed
NESHAP
may
exceed
emissions
allowed
under
the
proposed
NESHAP
as
a
result
of
the
trade.
Where
a
bubble
involves
a
pollutant
which
is
listed
under
Section
112,
but
no
NESHAP
has
yet
been
proposed
for
the
relevant
source
category,
or
a
pollutant
for
which
EPA
has
issued
a
Notice­
of­
Intent­
to­
List,
there
must
be
no
net
increase
in
actual
emissions
of
the
noticed
or
listed
pollutant.
2
n9
In
general,
all
bubbles
involving
emissions
of
pollutants
described
above
must
use
lower­
of­
actual­
or­
NESHAPsallowable
emissions
baselines,
and
must
take
place
within
a
single
plant
or
contiguous
plants.
3
n0
n
2
9
In
some
limited
circumstances
additional
pollutants
may
be
treated
as
listed
pollutants.
See
Technical
Issues
Document,
Section
I.
B.
1.
d.

n
3
0
The
one
exception
involves
bubbles
in
which
surplus
reductions
in
the
emissions
of
pollutants
subject
to
regulation,
proposed
regulation,
listing,
or
Notice­
of­
Intent­
to­
List
as
hazardous
emissions
compensate
for
increases
in
non­
hazardous
emissions.
(
E.
g.,
where
a
source
decreases
benzene
emissions
below
the
baseline
specified
above,
in
exchange
for
corresponding
increases
elsewhere
in
a
non­
hazardous
VOC.)
As
long
as
such
a
trade
would
not
result
in
an
increase
in
either
actual
or
allowable
emissions
of
a
pollutant
subject
to
the
special
restrictions
discussed
above
at
any
source,
it
would
not
differ
in
nature
of
requirements
from
a
trade
involving
only
non­
hazardous
emissions.

Commenters
who
addressed
this
issue
divided
into
two
general
groups.
One
group
asserted
that
hazardous/
toxic
restrictions
should
extend
beyond
pollutants
currently
regulated,
proposed
to
be
regulated,
or
listed
under
Section
112.
These
comments
generally
maintained
that
restrictions
should
also
apply
to
all
pollutants
the
Agency
is
"
actively
considering"
for
listing.
A
second
group
asserted
that
neither
volatile
organic
compound
(
VOC)
nor
particulate
emissions
should
be
traded
unless
there
is
clear
evidence
that
specific
substances
present
in
such
VOC
or
particulate
emissions
are
"
relatively
innocuous."

EPA
has
determined
that
for
reasons
of
policy
and
administrative
practicality
these
suggestions,
while
laudable
in
intent,
should
not
be
adopted.
Bubbles
are
alternative
means
of
compliance
which
should
generally
be
treated
no
differently
than
other
compliance
strategies,
provided
basic
SIP
requirments
of
consistency
with
ambient
needs,
PSD
increments,
and
interim
progress
are
met.
EPA's
statutory
authority
to
further
restrict
trades
on
the
basis
of
hazardous
substances
which
may
be
present
in
a
particular
criteria
pollutant
stream
(
e.
g.,
VOCs)
and
which
may
be
subject
to
a
listing,
notice­
of­
intent­
to­
list
or
proposed
NESHAP,
but
are
not
as
yet
regulated
under
§
112,
is
limited.
Generalized
attempts
to
exercise
such
authority
based
on
the
presence
of
substances
on
which
the
Agency
has
taken
no
formal
action
whatever
would
be
still
more
tenuous.
Moreover,
the
inherent
ambiguity
of
such
terms
as
"
actively
considering"
or
"
relatively
innocuous"
militates
against
such
tests.
States
remain
free
to
adopt
further
restrictions
consistent
Page
21
51
FR
43814
with
local
laws
and
needs.
However,
with
respect
to
national
requirements
EPA
has
concluded
that
clear
decision
points
based
on
actions
pursuant
to
the
deliberative
process
and
record
evidence
underlying
section
112
determinations
are
to
be
preferred.

Interested
parties
should
be
aware,
however,
that
under
today's
policy
the
Administrator
reserves
discretion
to
consider
on
a
case­
by­
case
basis
whether
bubble
proposals
involve
pollutants
which,
while
not
regulated,
listed
or
otherwise
noticed
under
section
112,
are
regulated
as
toxic
under
other
federal
healthbased
statutes,
and
to
require
further
analysis
before
approving
such
proposals.

One
commenter
expressed
concern
over
the
1982
policy's
use
of
the
term
"
reasonably
close"
to
indicate
the
distance
which
may
be
covered
by
bubbles
involving
pollutants
listed
or
proposed
to
be
regulated
under
section
112.
EPA
agrees
this
term
is
ambiguous,
and
with
the
exception
of
bubbles
which
affirmatively
decrease
such
pollutants
below
the
lower­
of­
actual­
or­
NESHAPs­
allowable
baseline,
has
substituted
the
more
protective
and
certain
requirement
that
such
trades
occur
within
a
single
plant
or
contiguous
plants.
In
order
to
assure
that
such
trades
do
not
produce
adverse
health
or
environemental
effects,
today's
notice
also
requires
that
they
rely
only
on
reductions
below
current
actual
or
section
112
allowable
emissions
as
of
the
trading
application,
whichever
is
lower,
in
pollutant
streams
containing
a
substance
which
has
been
noticed,
listed,
or
proposed
to
be
regulated
under
section
112.
­
12/
2/
86­%
118.0­
Fol.
281/
4­
J.
094­
999­
F.
A04DE3.066­

Several
of
these
provisions
­­
notably
the
proposed
NESHAPs
baseline
and
source­
specific
proposed­
NESHAPs
emissions
cap,
the
inclusion
of
pollutants
subject
to
Notices­
of­
Intent­
to­
List,
and
the
general
limitation
to
contiguous
plants
and
lower­
of­
actuals­
or­
§
112­
allowables
baselines
­­
represent
substantial
tightenings
over
the
1982
policy.

C.
Banking
Emission
Reduction
Credits
(
ERCs)

EPA­
approvable
emission
reduction
banks
may
allow
sources
to
store
ERCs
for
their
own
future
use
or
use
by
others.
Today's
notice
reiterates
that
states
are
by
no
means
required
to
adopt
banking
procedures,
but
notes
that
banks
may
help
states
and
communities
realize
important
planning
and
environmental
benefits.
n31
Banks
may
encourage
firms
to
create
inexpensive
extra
reductions
at
earlier,
optimal
times
(
e.
g.,
when
replacing
outworn
control
equipment
or
deciding
how
to
meet
new
requirements)
and
disclose
such
information
to
state
agencies.
They
may
help
create
a
central
pool
of
identifiable,
readily­
available
reductions
which
can
ease
plant
modernizations
or
expansions,
new
source
siting,
or
existing­
source
compliance.
Properly­
structured
banks
may
reduce
incentives
for
sources
to
delay,
conceal
or
hoard
actual
or
potential
reductions
until
an
immediate
use
arises.
Banks
may
also
produce
other,
interim
environmental
benefits,
since
banked
ERCs
remain
out
of
the
air
(
although
they
must
be
treated
for
SIP
planning
purposes
as
"
in
the
air")
until
used.
In
addition,
banks
can
help
state
agencies
manage
their
permit
workloads
more
efficiently,
because
portions
of
new
source
or
existing­
source
compliance
transactions
may
be
prepermitted
or
reviewed
in
advance.
Banks
may
also
help
states
systematically
assure
that
all
unused
surplus
reductions
are
treated
as
"
in
the
air"
for
SIP
planning
purposes,
avoiding
potential
inconsistencies
which
might
cause
those
reductions
to
be
lost.

n
31
See
e.
g.,
47
FR
15083­
84
(
April
7,
1982).

Comments
indicated
some
confusion
over
whether,
in
addition
to
meeting
other
ERC
requirements,
reductions
must
be
made
federally
enforceable
to
be
formally
credited
for
banking.
The
answer
is
no.
However,
in
order
to
qualify
as
emission
reduction
credits
and
be
deposited
in
EPA­
approvable
banks,
emission
reductions
must
be
made
enforceable
by
the
state.
Reductions
must
be
made
enforceable
by
the
state
by
their
time
of
deposit
in
order,
e.
g.,
to
better
ensure
the
integrity
of
the
state's
air
quality
planning
process
by
preventing
sources
from
banking
reductions
of
emissions
which
their
permits
do
not
preclude
them
from
continuing
to
emit.
This
requirement
will
also
prevent
undue
reliance
by
parties
or
potential
parties
on
emission
reductions
which
have
not
actually
occurred.
n32
However,
because
these
actions
merely
create
extra
reductions
in
actual
or
allowable
emissions
which
cannot
by
themselves
produce
any
adverse
effects
on
air
quality,
they
need
not
be
made
federally
enforceable
until
used.
n33
Where
states
wish
to
make
banked
emission
reductions
federally
enforceable
at
the
time
they
are
banked,
several
mechanisms
may
be
available
for
doing
so
without
case­
by­
case
SIP
revisions.
States
with
EPA­
approved
Page
22
51
FR
43814
PSD,
NSR,
visibility
and
preconstruction
review
programs
can
issue
permits
to
credit
reductions
from
emission
units
currently
subject
to
these
preconstruction
permits.
n34
States
with
EPA­
approved
generic
rules
may
also
be
able
to
use
those
rules'
procedures
to
make
reductions
at
existing
sources
federally
enforceable.
Since
only
reductions
in
applicable
emission
limits
are
involved
at
the
banking
stage,
modeling
should
not
be
required.
Moreover,
these
reductions
should
automatically
meet
the
requirement
that
changes
in
emission
limits
under
generic
rules
not
jeopardize
ambient
standards
or
PSD
increments.

n
32
In
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations,
emission
reductions
made
prior
to
application
to
bank
or
trade
(
whichever
is
earlier)
will
not
be
credited
for
use
in
bubbles
(
see
Section
I.
A.
1.
c.(
1)
of
today's
Technical
Issues
Document).
Following
publication
of
today's
notice,
the
"
date
of
application
to
bank"
will
be
the
date
the
source
submits
an
application
to
the
state
to
make
a
reduction
state­
enforceable
through
or
concurrent
with
use
of
a
formal
bank
or
informal
banking
mechanism
(
see
section
I.
A.
1.
b.(
1)
of
today's
Technical
Issues
Document).

In
other
areas,
although
emission
reductions
cannot
qualify
as
ERCs
or
be
deposited
in
EPAapprovable
banks
until
they
are
made
enforceable
by
the
state,
emission
reductions
banked
through
other
formal
or
informal
banking
mechanisms
which
do
not
make
reductions
state­
enforceable
by
the
time
of
deposit
will
still
be
eligible
for
use
in
future
trades,
so
long
as
those
reductions
are
made
federally
enforceable
at
time
of
use
and
all
applicable
requirements
of
the
regulatory
program
under
which
they
will
be
used
are
met.

Since
states
may
have
to
revise
their
regulations
or
permit
procedures
in
order
to
implement
this
new
state­
enforceability
requirement,
full
implementation
will
not
be
expected
until
one
year
after
publication
of
today's
notice.
However,
all
credits
not
made
enforceable
when
banked
during
this
interim
period,
together
with
all
credits
deposited
prior
to
today's
notice,
should
be
made
stateenforceable
within
eighteen
months
from
the
date
of
this
policy.

n
33
Cf.
47
FR
15076,
15081
at
col.
2.

n
34
Some
jurisdictions
may
also
use
general
state
preconstruction
review
programs
that
have
received
EPA
approval
to
credit
reductions
at
existing
sources
if
such
reductions
are
covered
under
the
program,
since
requirements
under
these
programs
are
federally
enforceable.

Since
some
trades
have
special
requirements,
banks
do
not
guarantee
the
validity
of
particular
banked
ERCs
for
all
potential
uses
or
for
all
time.
For
example,
because
only
actual
reductions
occurring
at
the
same
major
stationary
source
are
eligible
for
netting,
banked
reductions
created
at
other
stationary
sources
cannot
be
used
for
netting
transactions.
However,
banked
credits
resulting
from
reductions
at
other
stationary
sources
may
be
used
as
offsets
or
in
bubbles,
so
long
as
this
notice's
other
requirements
for
appropriate
use
of
credits
are
observed
and
applicable
offset
requirements
are
satisfied.

Because
of
differing
regulatory
requirements,
the
amount
of
credit
actually
derived
from
particular
emission
reductions
may
also
differ
from
one
regulatory
program
to
another.
For
example,
in
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations,
the
amount
of
credit
available
from
a
given
reduction
for
bubble
purposes
may
be
less
than
that
available
from
the
same
reduction
for
netting
or
offset
purposes,
since
special
progress
requirements
apply
to
bubbles
in
these
areas.

Because
the
use
of
credits
will
change
(
rather
than
merely
reduce)
emission
levels
if
approved,
such
proposals
should
be
carefully
evaluated
to
assure
they
meet
all
of
today's
criteria
for
appropriate
use.
For
similar
reasons
proposals
to
use
banked
credits
will
usually
require
additional
approval
procedures
(
e.
g.,
additional
modeling
for
certain
TSP
or
SO
2
trades),
whether
such
proposals
are
evaluated
as
case­
by­
case
SIP
revisions,
under
EPA­
approved
generic
rules,
or
under
EPA­
approved
new
source
review
programs.

One
commenter
asked
how
banked
ERCs
would
be
treated
if
a
nonattainment
area
is
being
redesignated
to
attainment.
Redesignation
will
have
no
effect
on
the
banked
ERCs,
so
long
as
state
planning
considered
those
ERCs
to
be
in
the
air
(
i.
e.,
in
the
inventory)
at
the
site
of
their
creation.
Because
local
recessions
or
shifts
in
industrial
patterns
can
temporarily
affect
air
quality
without
regard
to
the
adequacy
of
state
emission­
control
efforts,
EPA
guidance
requires
that
redesignation
not
be
based
solely
on
monitored
air
quality.
In
addition
to
considering
factors
such
as
the
state
of
the
particular
economy
and
its
Page
23
51
FR
43814
effect
on
emissions,
EPA
may
consider
the
number,
type,
and
state
inventory
treatment
of
banked
credits.
Such
procedures
will
help
assure
that
reliably
banked
reductions
are
not
reduced
or
otherwise
adversely
affected
by
shifts
in
an
area's
designated
attainment
status.

Some
commenters
asserted
it
is
overly
cautious
to
require
that
all
banked
emissions
be
considered
as
"
in
the
air."
One
commenter
asked
that
state
planning
be
required
to
include
as
"
in
the
air"
only
a
portion
of
banked
emissions
analogous
to
a
"
reserve
requirement."
This
comment
drew
parallels
with
financial
banking
to
assume
that,
given
withdrawals
and
deposits,
a
certain
"
float"
quantity
of
ERCs
would
always
remain
in
the
bank
and
out
of
the
air.
EPA
recognizes
that
reductions
placed
in
banks
may
tend
to
keep
the
air
cleaner
through
a
relatively
constant
level
of
deposits.
However,
EPA
cannot
allow
states
to
consider
less
than
their
full
amount
of
banked
deposits
as
"
in
the
air."
To
do
so
could
jeopardize
air
quality
planning
and
attainment.
n35
n
35
In
order
not
to
defeat
banking's
purpose
of
encouraging
the
earliest
possible
disclosure
and
production
of
potential
extra
emission
reductions,
use
of
banked
credits
for
bubble
purposes
in
primary
nonattainment
areas
which
lack
approved
demonstrations
will
continue
to
be
allowed,
provided
these
credits
meet
all
baseline
and
other
applicable
requirements
of
today's
notice
for
these
areas.
This
generally
includes
the
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
emissions
baseline,
applied
as
of
the
date
of
written
application
to
the
state
to
bank
such
reductions
through
a
formal
bank
or
informal
banking
mechanism
for
use
in
future
trades.
It
also
includes
that
20%
net
reduction
requirement
and
state
assurances
specified
above,
at
the
time
such
credits
are
approved
for
use
in
bubbles.
Banked
credits
resulting
from
plant
shutdown
or
production
curtailments
may
be
used
for
bubbles
in
these
areas
on
the
same
terms
as
use
of
other
banked
credits,
provided
their
use
is
subject
to
stringent
qualitative
review
to
assure
legal,
technical
and
programmatic
consistency
with
SIP
planning
goals
(
e.
g.,
avoidance
of
"
shifting
demand").
See
today's
Policy
at
n.
24
and
Section
I.
A.
1.
c(
3)
of
the
Technical
Issues
Document.
(
Banked
credits
resulting
from
certain
shutdowns
or
production
curtailments
may,
however,
be
subject
to
special
restrictions
for
offset
purposes.
See
today's
Technical
Issues
Document
at
n.
14).

The
special
restrictions
discussed
above
do
not
apply
under
today's
notice
to
use
of
banked
credit
for
bubble
purposes
in
other
areas.

D.
OBERS
Projections
and
Double­
Counting
In
its
August
1983
notice
EPA
asked
for
further
comment
on
whether
some
SIPs'
translation
of
general
economic
growth
projections
provided
by
OBERS
(
Department
of
Commerce)
directly
into
projected
emissions
growth,
left
"
no
straightforward
way
to
disaggregate
the
projections
into
shutdowns
and
new
plant
openings."
Whether
such
SIP
demonstrations
were
fully
or
only
partly
approved,
the
notice
continued,
such
use
of
OBERS
might
make
it
impossible
to
distinguish
which
shutdowns
were
already
relied
on
in
the
demonstration.
Therefore,
it
might
be
"
difficult
or
impossible
for
states
whose
SIPs
rest
on
OBERS
projections
to
grant
credit
from
shutdowns
for
use
in
existing
source
bubble
trades,
consistent
with
the
Clean
Air
Act."
48
FR
39581.

Most
industry
and
several
state
commenters
asserted
that
where
OBERS
data
were
used
to
project
needed
SIP
reductions,
use
of
shutdown
credits
in
bubbles
was
not
a
problem,
since
OBERS
figures
substantially
overestimate
the
total
amount
of
emission
reduction
needed
to
attain.
For
example,
one
industry
commenter
noted
that
"
emissions
growth
will
not
be
directly
proportional
to
economic
growth
because
of
the
installation
of
new
environmentally
efficient
technologies.
Therefore,
SIPs
which
used
"
OBERS"
projections
already
have
an
inherent
growth
potential
built
into
them,
and
allowing
ERCs
for
shutdowns
in
these
areas
will
not
jeopardize
a
state's
ability
to
demonstrate
attainment."
A
local
agency
agreed
that
"
demonstrations
.
.
.
based
on
such
emission
projections
would
over­
estimate
attainment
because
some
growth
will
occur
from
[
wholly]
new
sources,
new
sources
replacing
existing
sources,
or
modified
existing
sources,
[
all
of]
which
would
be
subject
to
.
.
.
New
Source
Review
rules,
rather
than
the
less
stringent
[
SIP]
requirements
assumed
in
the
emission
projections."

Several
state
commenters
also
stressed
that
while
use
of
OBERS
projections
is
not
widespread,
the
underlying
question
is
whether
the
area's
SIP
process
incorporates
conditions
sufficient
to
prevent
double­
Page
24
51
FR
43814
counting
of
shutdown
credits.
One
local
agency
recommended
that
shutdown
credits
be
prohibited
where
the
source
involved
is
within
an
industrial
category
projected
to
go
through
an
economic
downturn,
asserting
that
in
such
cases
the
SIP
implicitly
relies
on
the
expected
shutdowns.
An
environmental
group
went
a
step
further,
and
urged
that
all
shutdown
credits
for
bubbles
in
areas
using
OBERS
projections
be
completely
prohibited.

EPA
has
concluded
that
the
requirements
of
the
1982
policy
are
sufficient
to
prevent
double­
counting
of
shutdown
credits,
and
should
be
retained
without
further
special
restrictions.
First,
use
of
OBERS
or
any
other
projection
is
relevant
only
where
an
area
has
an
approved
attainment
demonstration.
Today's
notice
generally
disallows
bubble
credit
for
pre­
application
reductions
(
including
reductions
from
shutdowns
or
curtailments)
in
primary
nonattainment
areas
which
require
but
lack
such
demonstrations.
Thus
today's
notice
largely
moots
any
issue
of
double­
counting
for
past
shutdowns,
in
the
areas
for
which
this
issue
has
been
raised
with
the
greatest
concern.
Second,
use
of
OBERS
projections
in
areas
with
approved
demonstrations
does
not
appear
nearly
so
common
as
was
assumed
in
EPA's
1983
request
for
further
comment.
Even
where
such
projections
were
used
in
approved
demonstrations,
they
generally
overestimate
the
amount
of
emissions
forecast
to
exist
in
the
year
of
projected
attainment.
They
therefore
tend
to
assume
substantially
less
overall
reductions
from
source
turnover
than
will
actually
occur.
n36
n
36
This
is
so
because
OBERS­
based
SIP
projections
assume
that
units
of
production
(
and
hence
emissions)
in
particular
SIC
Codes
will
keep
pace
with
projected
trends
in
earnings
and/
or
employment
in
those
SIC
codes,
without
regard
to
changing
distributions
between
new
and
existing
sources.
See,
e.
g.,
1980
OBERS:
BEA
Regional
Projections,
Volume
1:
Methodology,
Concepts
and
State
Data,
p.
(
xi),
U.
S.
Department
of
Commerce
(
July
1981).

Finally,
even
if
such
projections
did
not
overestimate
emissions,
under
today's
notice
the
state
must
show
that
use
in
bubbles
of
any
reductions
created
by
shutdowns
is
consistent
with
its
attainment
demonstration
and
that
those
reductions
were
not
already
assumed
in
its
SIP.
For
example,
the
state
must
show
that
it
did
not
implicitly
or
explicitly
rely
on
a
"
turnover
rate"
from
the
difference
in
emissions
between
existing
sources
and
better­
controlled
new
sources
for
part
of
the
reductions
required
in
its
SIP
from
that
industrial
category.
Alternatively,
it
must
show
that
if
a
"
turnover
rate"
was
assumed,
the
shutdown
credits
used
in
an
individual
trade
result
from
reductions
in
excess
of
that
turnover
rate.
Where
a
state
regulated
the
sources
in
a
standard
industrial
classification
(
SIC)
without
explicitly
relying
on
turnovers,
then
bubble
credit
for
a
shutdown
within
that
SCI
category
would
not
in
general
be
doublecounted
n37
n
37
Such
credits
must
of
course
meet
all
other
requirements
of
today's
notice,
including
application
of
appropriate
baselines
and
other
criteria
defining
surplus
reductions,
before
they
may
be
used
in
a
bubble
trade.

States
which
expressly
relied
on
OBERS
projections
may
also
show
that
no
double­
counting
occurred
by
demonstrating
that
they
did
not
implicitly
rely
on
any
turnover
credits.
This
showing
should
not
be
difficult
to
make
because
OBERS
assume
that
emissions
will
evenly
increase
at
each
plant
and
production
line,
proportionate
to
growth
in
earnings
and
employment
potential
for
that
SIC
code.
Cf.
n.
36
above.
This
assumption
neither
anticipates
nor
relies
on
the
fact
that
any
shutdown
will
occur.

The
one
exception
to
these
general
principles
could
occur
where
a
SIP
relied
on
OBERS
projections
for
an
SIC
category
predicted
to
undergo
a
quantified
future
economic
downturn,
without
taking
explicit
affirmative
steps
to
preclude
reliance
on
that
downturn.
In
these
circumstances
the
state
would
either
have
to
show
that
a
proposed
shutdown
credit
from
a
source
within
that
SIC
category
was
not
double­
counted
(
e.
g.,
by
showing
that
more
shutdown
reductions
than
projected
for
the
SIC
category
had
already
occurred),
or
deny
credit.

These
requirements
should
fully
protect
states
and
sources
against
adverse
environmental
or
SIP
effects.
Page
25
51
FR
43814
E.
Improved
Modeling
and
de
Minimis
Requirements
Bubble
applicants
must
show
that
their
proposed
trades
are
at
least
equivalent
in
ambient
effect
to
the
SIP
(
or
other)
emission
limits
the
bubble
would
replace.
For
some
criteria
pollutants
(
e.
g.,
VOC
or
NO
X
)
this
test
may
generally
be
met
by
showing
equal
reductions
in
emissions.
n38
For
other
pollutants
(
e.
g.,
SO
2
,
TSP
or
CO)
it
was
traditionally
met,
prior
to
the
1982
policy,
through
ambient
dispersion
modeling.

n
38
Interested
parties
should,
however,
be
aware
that
ambient
equivalence
considerations
which
apply
to
SO
2
,
TSP
and
CO,
as
described
below,
also
apply
to
NO
X
trades
involving
visibility
impacts
from
elevated
plumes.
See
Section
I.
B.
1.
b.
of
today's
Technical
Issues
document.

The
1982
policy
made
available
several
alternatives
to
the
use
of
full­
scale
dispersion
modeling
where
such
modeling
was
not
needed
to
protect
air
quality.
These
alternatives
could,
in
appropriate,
carefullylimited
circumstances,
be
used
to
demonstrate
ambient
equivalence
for
bubbles
involving
particulate
matter
or
other
pollutants
whose
ambient
effects
were
not
linearly
related
to
emissions.
They
included
de
minimis
levels
and
the
use
of
other
screening
criteria
to
identify
circumstances
in
which
full­
scale
modeling
was
unnecessary,
either
for
bubbles
processed
as
SIP
revisions
or
those
approved
under
generic
rules.

Today's
notice
both
tightens
some
of
these
screening
criteria
and
expands
the
circumstances
in
which
such
criteria
can
be
used.

Today's
notice
also
specifies
certain
conditions
and
types
of
case­
by­
case
SIP­
revision
bubbles
for
which
EPA
Regional
Offices
may
require
additional
technical
support,
beyond
basic
modeling
requirements,
deemed
necessary
to
protect
NAAQS,
PSD
increments
or
visibility
where
allowable
values
used
to
calculate
baseline
emissions
are
not
clearly
used
or
reflected
in
an
approved
demonstration,
or
may
not
reasonably
be
assumed
consistent
with
the
need
to
protect
PSD
increments
or
visibility.
See
Technical
Issues
Document,
Section
I.
A.
1.
a.

1.
De
Minimis
Levels
Under
the
1982
policy,
trades
in
which
net
baseline
emissions
did
not
increase
and
in
which
the
sum
of
emission
increases,
looking
only
at
the
increasing
sources,
totaled
less
than
100
tons
per
year
(
TPY)
after
applicable
control
requirements,
could
be
exempted
from
SIP
revisions
under
an
approved
generic
rule.
The
rationale
for
this
approach
was
that
EPA
regulations
implementing
the
Clean
Air
Act
already
allow
some
exemptions
from
NSR
requirements
for
new
sources
which
are
not
defined
as
"
major"
­­
i.
e.,
which
do
not
have
potential
emissions
greater
than
100
TPY.
See
e.
g.,
CAA
section
302(
j)
and
40
CFR
52.21(
b)(
1)
and
51.18(
j)(
1)(
v).
Thus
trades
which
merely
shift
lesser
amounts
of
emissions,
and
which
are
accompanied
by
compensating
decreases,
should
not
be
subject
to
more
stringent
requirements.
As
the
1982
notice
put
it,
"
Such
trades
will
have
at
most
a
de
minimis
impact
on
local
air
quality
because
only
minor
quantities
of
emissions
are
involved
.
.
.
the
Federal
resources
required
to
evaluate
these
trades
could
best
be
used
to
evaluate
actions
that
have
a
potential
impact
on
air
quality."
47
FR
at
15085.
n39
n
39
The
1982
document
did,
however,
note
that
such
"[
generic]
trades
are
still
subject
to
ambient
tests
[
at
the
state
level,
and]
.
.
.
should
accordingly
be
evaluated
by
the
state
under
the
modeling
screen
.
.
.
or
an
equivalent
approach."
47
FR
15085
at
n.
7.

One
commenter
asserted
that
this
100
TPY
limitation
was
unnecessary,
since
the
trades
to
which
it
applied
were
already
required
to
produce
no
net
increase
in
emissions.
However,
four
state
and
environmental
commenters
urged
that
de
minimis
levels
for
such
trades
be
the
same
as
those
triggering
federally­
mandated
review
of
emissions
increases
in
PSD
areas.
These
comments
primarily
noted
that
EPA
had
already
defined
more
relevant
"
cutoff"
levels
in
its
regulations
for
PSD,
for
NSR
preconstruction
permits
in
nonattainment
areas,
and
in
visibility
permit
regulations,
and
that
emission
shifts
of
100
TPY
from
one
source
to
another
might
still
be
too
large
to
go
unexamined
for
certain
types
of
emissions
and
situations.

In
order
to
ensure
prosecution
of
ambient
air
quality,
today's
notice
adopts
more
protective
de
minimis
levels
­­
derived
from
those
for
PSD;
NSR
permits
in
nonattainment
areas;
and
the
visibility
permit
regulations
­­
of
100
TPY
for
CO,
40
TPY
for
SO
2
,
25
TPY
for
particulate
matter,
and
0.6
TPY
for
lead.
Page
26
51
FR
43814
Because
of
this
action,
state
ambient
evaluation
of
de
minimis
trades
will
no
longer
be
required
for
generic
bubble
rules
to
be
approvable
by
EPA.
n40
Trades
involving
sources
of
substantial
size
may
still
be
implemented
as
de
minimis
under
today's
provisions,
as
long
as
the
quality
of
ERCs
traded
by
these
sources
is
below
the
levels
specified
above.

n
40
This
should
not
be
construed
to
imply
that
new
sources
and
modifications
need
not
meet
all
applicable
requirements,
including
those
specified
under
40
CFR
51.18
or
parallel
EPAapproved
state
rules.

2.
Modeling
Requirements
n41
n
41
The
following
discussion
summarizes
both
interim
improvements
made
in
the
1982
modeling
screen
(
see
Technical
Issues
Document,
Appendix
C)
and
EPA's
responses
to
major
comments
on
modeling
issues.

Numerous
comments
were
received
on
the
1982
policy's
three­
level
approach
to
demonstrating
ambient
equivalence.
The
vast
majority
sought
added
clarification,
stating,
for
example,
that
the
1982
policy
did
"
not
adequately
delineate
the
level
of
modeling
necessary
in
each
instance."
Today's
notice
tightens
and
clarifies
the
conditions
under
which
ambient
equivalence
may
be
demonstrated
with
less
than
full­
scale
modeling.

a.
Level
I
Criteria.
Under
the
1982
document
no
modeling
was
generally
required
of
SO
2
,
TSP,
or
similar
trades
where
applicable
net
baseline
emissions
did
not
increase,
sources
were
located
in
the
same
immediate
vicinity
(
generally
within
250
meters
of
each
other),
and
the
taller
stack
was
the
one
which
increased
its
emissions.
These
conditions
were
believed
sufficient
to
assure
that
local
ambient
concentrations
of
the
relevant
criteria
pollutants
would
not
increase
as
a
result
of
the
trade.

EPA
has
added
two
criteria
to
those
specified
in
1982,
in
order
to
provide
additional
assurance
that
trades
approved
under
Level
I
will
have
no
adverse
ambient
effect.
First,
there
must
be
no
complex
(
e.
g.,
mountainous)
terrain
within
50
kilometers
of
the
trading
sources
or
within
the
trade's
area
of
significant
impact,
whichever
is
less.
(
For
simplified
methods
of
determining
"
area
of
significant
impact,"
see
today's
Technical
Issues
Document,
Appendix
E).
Second,
stacks
with
increasing
baseline
emissions
must
be
sufficiently
tall
to
avoid
downwash.

Some
industry
commenters
objected
to
the
250­
meter
limitation,
advocating
use
of
either
trade
ratios
for
sources
beyond
that
distance,
or
an
800­
meter
limit
extrapolated
from
unrelated
EPA
regulations.
n42
EPA
has
retained
the
250­
meter
limit
as
substantially
more
consistent
with
the
modeling
screen's
original
intent
of
simplifying
modeling
requirements
for
trades
which
could
not
jeopardize
ambient
equivalence.
n43
n
42
See
e.
g.,
47
FR
5864,
5865
(
February
8,
1982).

n
4
3
Trade
ratios
may
already
be
used
under
general
provisions
inviting
states
to
design
other
equivalent
approaches
which
adequately
address
ambient
concerns.
See.,
e.
g.,
47
FR
at
15077
and
n.
2,
15078.
However,
to
be
approved
by
EPA
such
ratios
would
generally
have
to
be
defined
through
area­
wide
advance
modeling
of
all
sources,
as
well
as
those
likely
to
trade.

Several
comments
also
objected
to
the
requirement
that
Level
I
trades
not
increase
emissions
from
the
source
with
the
lower
effective
plume
height.
These
comments
noted
that
under
various
conditions
similar
stacks
could
so
vary
in
effective
plume
height
that
neither
would
consistently
be
"
higher"
or
"
lower."
One
also
suggested
this
limitation
might
encourage
use
of
tall
stacks
to
cure
local
exceedances.

Today's
notice
retains
this
Level
I
requirement
unchanged.
That
two
sources
may
be
virtually
indistinguishable
in
effective
stack
height
should
not
delay
approval
of
Level
I
trades,
since
the
limitation's
purpose
­­
preventing
potentially
significant
increases
in
ground­
level
ambient
concentrations
due
to
shifts
of
emissions
from
"
higher"
to
"
lower"
stacks
­­
will
still
be
satisfied.
Page
27
51
FR
43814
Moreover,
since
such
trades
cannot
increase
net
baseline
emissions,
this
limitation
merely
ensures
they
will
not
create
new
ambient
violations.
Because
other
EPA
regulations
address
the
use
of
excessively
tall
stacks
to
cure
existing
ambient
violations,
no
further
restriction
in
this
Level
I
requirement
appears
required.

b.
Level
II
Criteria.
Trades
of
SO
2
,
TSP,
CO,
Pb
and
NO
X
(
for
visibility
purposes)
may
also
be
approved
through
limited
Level
II
modeling
of
the
ambient
effects
solely
of
sources
involved
in
the
trade,
where
applicable
net
baseline
emissions
do
not
increase
and
designated
ambient
significance
levels
are
not
exceeded.

Today's
notice
confirms,
clarifies,
and
in
certain
cases
extends
various
1983
improvements
made
to
increase
certainty
and
better
assure
that
such
Level
II
trades
result
in
ambient
equivalence.
In
particular,
"
significant
ambient
impact"
may
no
longer
be
measured
solely
by
changes
at
the
"
receptor
of
maximum
predicted
impact"
before
and
after
the
trade.
Instead
such
changes
must
be
measured
at
every
affected
receptor
for
every
averaging
period
relevant
to
the
particular
pollutant,
throughout
the
year.
Under
this
approach
no
Level
II
trades
will
be
approved
without
further
scrutiny,
involving
full
or
limited
Level
III
modeling,
if
they
result
in
a
significant
net
ambient
effect
at
any
modeling
point
for
any
such
averaging
period
during
a
modeled
year.

Today's
notice
also
specifies
Level
II
significance
levels
for
all
averaging
periods
consistent
with
all
current
national
ambient
air
quality
standards,
not
just
the
24­
hour
averaging
periods
for
SO
2
and
PM
or
the
8­
hour
averaging
period
for
CO.
4
n4
Refined
models
such
as
MPTER
and
ISC
must
generally
be
used
to
measure
changes
resulting
from
the
trade
at
each
receptor,
using
the
most
recent
full
year
of
meteorological
data.
4
n5
n
4
4
For
further
discussion
of
these
significance
levels
and
the
increased
assurance
of
environmental
equivalence
they
provide
in
conjunction
with
today's
more
sophisticated
Level
II
modeling
approach,
see
Fleckenstein,
"
Modeling
Criteria;
The
Key
to
Major
Reforms
for
Emissions
Trades,"
APCA
Paper
84­
65.2
(
San
Francisco,
California,
June
28,
1984).

n
4
5
Under
some
limited
conditions,
conservative
screening
models
may
be
substituted
for
these
refined
models,
and
in
these
cases
a
full
year
of
meteorological
data
may
not
be
necessary.
See
Technical
Issues
Document,
Section
I.
B.
l.
b.(
3).

These
modeling
requirements
assure
that
bubbles
which
pass
applicable
Level
II
tests
and
meet
all
other
requirements
of
today's
policy
will
result
in
air
quality
equal
to
or
better
than
that
produced
by
pretrade
emission
limits,
and
may
be
approved.
Because
refined
models
have
now
been
approved
by
EPA
and
their
parameters
may
be
specified
with
greater
certainty
and
confidence,
these
requirements
also
provide
a
firmer
basis
for
approving
state
generic
rules
incorporating
Level
II.
4
n6
n
4
6
Interested
parties
should,
however,
be
aware
that
because
of
replicability
concerns
related
to
application
of
any
approach
requiring
use
of
case­
specific
ambient
dispersion
modeling,
such
Level
II
generic
rules
may
be
more
difficult
to
draft
and
implement
than
rules
incorporating
only
de
minimis
and
Level
I
approaches
for
SO
2
,
TSP,
CO
or
Pb.
During
and
after
issuance
of
the
1982
interim
policy
EPA
staff
drafted
and
informally
circulated,
at
the
request
of
state
and
local
air
agency
directors,
model
generic
rules
which
provided
more
detail
to
help
interested
states
acceptably
address
these
concerns.
The
Agency
plans
to
update
and
recirculate
those
model
rules
as
quickly
as
possible
after
publication
of
today's
notice.
EPA
encourages
parties
wishing
to
develop
generic
rules
to
use
these
new
models
and
work
closely
with
relevant
Regional
staff,
so
that
potential
problems
may
be
promptly
identified
and
resolved.

c.
Level
III
Criteria.
Trades
which
are
not
de
minimis
and
do
not
satisfy
Level
I
or
Level
II
above
must
generally
be
evaluated
by
full­
scale
ambient
dispersion
modeling.
Two
air
pollution
control
agencies
recommended
fixed
trading
ratios
in
lieu
of
such
modeling,
asserting
this
would
reduce
cost
and
uncertainty
while
continuing
to
meet
the
goals
of
the
Clean
Air
Act.
EPA
recognizes
the
legitimacy
of
these
concerns
but
has
concluded
that
trades
which
do
not
satisfy
Level
I
or
II
raise
the
kinds
of
air
quality
Page
28
51
FR
43814
issues
which
appropriately
require
full­
scale
modeling,
unless
such
trading
ratios
have
been
justified
by
similar
area­
wide
modeling
conducted
in
advance
of
the
trade.

Today's
notice
does,
however,
modify
Level
III
to
provide
states
and
sources
more
flexibility
in
this
regard.
Where
a
trade
meets
all
other
criteria
of
Level
II,
but
Level
II
modeling
has
shown
significant
potential
increases
at
particular
receptors,
modeling
analyses
under
Level
III
may
under
appropriate
circumstances
be
limited
to
a
receptor
area
smaller
than
the
trade's
entire
area
of
impact,
so
long
as
it
includes
emissions
from
all
sources
which
contribute
to
ambient
concentrations
in
that
limited
geographic
area.
Because
of
the
unique
nature
of
each
situation,
the
appropriate
limited
geographic
area
must
be
determined
in
accord
with
EPA
guidelines
on
modeling
and
case­
by­
case
evaluation.
This
"
limited
Level
III"
approach
may
conserve
significant
resources,
while
allowing
states
and
sources
to
focus
on
specific
geographic
areas
of
concern.
n47
n
47
Today's
notice
also
requires
bubble
trades
in
certain
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations
to
produce
a
"
net
air
quality
benefit,"
which
shall
consist
at
minimum
of
a
20%
reduction
in
emissions
remaining
after
application
of
the
lower­
of­
actual­
SIPallowable
or­
RACT­
allowable
emissions
baselines
to
all
sources
involved
in
the
bubble.
See,
e.
g.,
Section
II.
B
above.
This
requirement
does
not
entail
any
modeling
different
than
or
in
addition
to
the
modeling
approaches
discussed
above.
It
is
merely
intended
to
ensure
that
where
appropriate
levels
of
modeling
indicate
that
prescribed
baseline
values
are
not
sufficient
to
produce
ambient
equivalence,
additional
reductions
which
assure
such
equivalence,
prior
to
the
20%
net
discount
in
baseline
emissions,
will
be
required.

F.
Enforcement
Issues
Several
commenters
noted
that
while
sources
should,
as
provided
in
the
1982
policy,
be
allowed
to
use
bubbles
to
come
into
compliance,
bubble
applications
might
also
be
used
to
delay
compliance
or
enforcement
without
compensating
environmental
benefits.
Some
of
these
commenters
alluded
to
language
in
the
1982
notice
which,
while
not
authorizing
or
intended
to
authorize
such
results,
could
have
been
interpreted
to
allow
them.
Such
unacceptable
delay
might,
for
example,
arise
where
a
source
facing
an
imminent
compliance
deadline
suddenly
advances
a
bubble
application
and
asserts
that
more
time
is
needed
to
develop
and
evaluate
that
application
before
compliance
with
original
SIP
limits
should
be
required.

Both
bubbles
and
generic
rules
can
be
important
means
of
allowing
environmentally­
sound
compliance.
Generic
rules
may
be
more
expeditious
than
case­
by­
case
SIP
revision
bubbles.
They
may
also
preserve
the
very
opportunity
to
bubble
when
the
time
needed
to
process
a
case­
by­
case
SIP
revision
might
extend
beyond
the
source's
original
SIP
compliance
date.
At
the
same
time,
bubble
applications
should
not
become
a
shield
against
enforcement
actions
for
sources
which
have
failed
to
take
necessary
steps
to
meet
required
control
obligations
on
time.
Bubbles
are
simply
alternative
means
of
complying
at
less
cost.
They
should
be
treated
neither
more
nor
less
stringently
than
other,
more
traditional
methods
of
compliance.
Bubbles
offer
innovative
ways
to
meet
emission
reduction
obligations.
They
should
not
become
devices
to
avoid
such
obligations.

Today's
notice
substantially
clarifies
and
tightens
the
1982
policy
to
better
implement
these
principles.
Among
other
steps,
compliance
extensions
will
no
longer
be
granted
under
generic
rules
in
any
nonattainment
area,
and
may
be
granted
generically
in
attainment
areas
only
where
EPA
has
approved
the
time­
extension
portion
of
the
rule
as
consistent
with
relevant
Clean
Air
Act
requirements,
including
expeditious
attainment
and
maintenance
of
ambient
standards.
Cf.
47
FR
at
15078
col.
2.
This
will
generally
mean
that
requests
for
time
extensions
as
part
of
bubble
applications
must
be
separately
reviewed
as
individual
SIP
revisions,
subject
to
criteria
EPA
normally
applies
to
such
requests.

Today's
notice
also
re­
emphasizes
that
as
a
matter
of
law
and
sound
policy,
sources
seeking
bubbles
remain
subject
to
enforcement
of
existing
(
pre­
trade)
SIP
limits
until
the
bubble
is
finally
approved.
Sources
which
possess
approved
bubbles
with
future
effective
dates
remain
subject
to
similar
enforcement
of
pre­
trade
limits
until
either
those
limits
or
the
new
ones
are
met,
and
may
wish
to
take
steps
identified
in
the
notice,
including
accelerated
compliance
with
bubble
limits,
to
minimize
that
possibility.
See
Technical
Issues
Document,
section
I.
B.
2.
a.
Page
29
51
FR
43814
Under
today's
notice,
EPA
will
not
specifically
select
such
sources
for
enforcement
action.
Nor
will
EPA
withhold
or
defer
enforcement
simply
because
a
source
is
seeking
alternative
emission
limits
through
a
bubble.
In
exercising
its
inherent
enforcement
discretion,
EPA
will
apply
the
same
considerations
to
noncompliant
sources
which
seek
to
comply
through
bubbles,
as
to
those
which
do
not.
n48
n
48
States
and
sources
should,
however,
be
aware
that
under
current
EPA
guidance,
such
discretion
is
most
likely
to
be
exercised
where
a
SIP­
revision
bubble
has
been
formally
proposed
for
approval
at
the
state
level
and
EPA
staff
have
concluded
that
it
appears
approvable
under
current
EPA
policy.
In
these
circumstances
initiation
of
action
to
enforce
pre­
trade
limits
that
would
soon
be
replaced
by
a
valid
bubble
reconfiguration
would
likely
consume
limited
EPA
enforcement
resources
to
little
environmental
end.

Emissions
Trading
Policy
Statement
Table
of
Contents:
Policy
Statement
I.
Introduction:
Basic
Elements
of
Emissions
Trading
A.
What
is
Emissions
Trading?

B.
The
Bubble
C.
Netting
D.
Emission
Offsets
E.
Emission
Reduction
Banking
F.
Generic
Trading
Rules
G.
Effect
of
This
Policy
Statement
II.
Requirements
for
Creating,
Using,
or
Banking
Emission
Reduction
Credits
A.
Creating
Emission
Reduction
Credits
1.
Surplus
2.
Enforceable
3.
Permanent
4.
Quantifiable
B.
Using
Emission
Reduction
Credits
1.
Emissions
Trades
Must
Involve
the
Same
Criteria
Pollutant
2.
All
Uses
of
ERCs
Must
Satisfy
Applicable
Ambient
Tests
3.
Bubbles
Must
Not
Increase
Hazardous
Pollutants
4.
ERCs
From
Existing
Sources
Cannot
Be
Used
to
Meet
Technology­
Based
Requirements
Applicable
to
New
Sources
5.
States
May
Approve
Bubbles
in
Primary
Nonattainment
Areas
Which
Require
But
Lack
Approved
Demonstrations
of
Attainment
6.
Sources
Need
Not
Be
Subject
to
Binding
Compliance
Schedules
Based
on
Current
SIP
Requirements
7.
States
May
Extend
Certain
Compliance
Schedules
8.
States
May
Approve
Bubbles
Involving
Open
Dust
Sources
of
Particulate
Emissions
Page
30
51
FR
43814
9.
Trades
Involving
Lead
10.
Trades
Involving
ERCs
From
Mobile
Source
Measures
11.
Interstate
Trades
12.
Bubbles
Must
Not
Impede
Enforcement
C.
Banking
Emission
Reduction
Credits
III.
State
Generic
Trading
Rules
IV.
Bubbles
Which
Require
Case­
by­
Case
SIP
Revisions
V.
Conclusion
EMISSIONS
TRADING
POLICY
STATEMENT
I.
Introduction:
Basic
Elements
of
Emissions
Trading
This
statement
details
EPA
policy
on
emissions
trading.
It
sets
out
conditions
EPA
considers
necessary
for
emissions
trades
to
satisfy
the
Clean
Air
Act.
It
also
clarifies
and
otherwise
makes
final
the
Interim
Policy
proposed
on
April
7,
1982
(
47
FR
15076).
It
is
accompanied
by
a
Technical
Issues
Document
which
elaborates
and
provides
greater
detail
on
principles
set
forth
below.
Finally,
it
addresses
new
issues,
and
incorporates
certain
additional
safeguards
as
a
result
of
past
trading
experience,
to
better
assure
the
environmental
integrity
of
future
trades.

A.
What
is
Emissions
Trading?

Emissions
trading
consists
of
bubbles,
netting,
emission
offsets,
and
emission
reduction
banking.
These
steps
involve
creation
of
surplus
emission
reductions
at
certain
stacks,
vents
or
similar
sources
of
emissions
and
use
of
these
emission
reductions
to
meet
or
redefine
pollution
control
requirements
applicable
to
other
emission
sources.
Such
emissions
trades
can
provide
more
flexibility
to
meet
environmental
requirements,
and
may
therefore
be
used
to
reduce
control
costs
and
encourage
faster
compliance.
Moreover,
by
developing
"
generic"
trading
rules
(
see
Section
III
below)
states
n1
may
be
able
to
expedite
bubble
approvals
by
eliminating
the
need
for
case­
by­
case
SIP
revisions
n2
and
by
providing
more
predictable
approval
criteria.

n
1
"
States"
includes
any
entity
properly
delegated
authority
to
administer
relevant
parts
of
a
State
Implementation
Plan
(
SIP)
under
the
Clean
Air
Act.

n
2
"
Case­
by­
case
SIP
revision"
means
case­
by­
case
approval
by
EPA
as
a
SIP
revision.
This
is
the
traditional
mechanism
by
which
bubbles
and
other
SIP
changes
have
been
approved
by
EPA.

B.
The
Bubble
EPA's
bubble
lets
existing
plants
(
or
groups
of
plants)
increase
emissions
at
one
or
more
emission
sources
in
exchange
for
compensating
extra
decreases
in
emissions
at
other
emission
sources.
Approved
bubbles
give
plant
managers
the
ability
to
implement
less
costly
ways
of
meeting
air
quality
requirements.
To
be
approvable,
each
bubble
must
produce
results
which
are
equivalent
to
or
better
than
the
baseline
emission
levels
in
terms
of
ambient
impact
and
enforceability.
Thus,
bubbles
should
jeopardize
neither
ambient
standards
nor
applicable
PSD
increments
and
visibility
requirements.
Under
EPA's
bubble,
emission
reductions
from
existing
sources
can
not
be
used
to
meet
technology­
based
requirements
applicable
to
new
or
modified
stationary
sources.
Page
31
51
FR
43814
This
Policy
Statement
replaces
EPA's
original
bubble
policy
(
December
11,
1979;
44
FR
71779)
and
Interim
Emissions
Trading
Policy
(
47
FR
15076).
It
tightens
general
bubble
principles
as
well
as
requirements
for
bubbles
in
primary
nonattainment
areas
which
require
but
lack
demonstrations
of
attainment,
and
requires
bubbles
in
these
areas
to
produce
progress
towards
attainment,
beyond
equivalence
to
stringent
emission
limits.
By
specifying
EPA's
requirements
for
bubbles
in
all
areas,
this
Policy
Statement
should
make
the
development,
review
and
approval
of
environmentally­
sound
bubbles
more
rapid
and
predictable.

C.
Netting
Netting
may
exempt
"
modifications"
of
existing
major
sources
from
certain
preconstruction
permit
requirements
under
New
Source
Review
(
NSR),
so
long
as
there
is
no
net
emissions
increase
within
the
major
source
or
any
such
increase
falls
below
significance
levels.
n3
By
"
netting
out,"
the
modification
is
not
considered
"
major"
and
is
therefore
not
subject
to
associated
preconstruction
permit
requirements
for
major
modifications
under
40
CFR
51.18,
51.24,
52.21,
52.24,
52.27,
or
52.28.
The
modification
must
nevertheless
meet
applicable
new
source
performance
standards
(
NSPS),
national
emissions
standards
for
hazardous
air
pollutants
(
NESHAPs),
preconstruction
applicability
review
requirements
under
40
CFR
51.18(
a)­(
h)
and
(
l),
and
SIP
requirements.

n
3
See,
e.
g.,
40
CFR
51.18(
j)(
1)(
x),
51.24(
b)(
23),
52.21(
b)(
23).
See
also
today's
Technical
Issues
Document,
n.
47
and
accompanying
text.

On
November
7,
1986,
EPA
restructured
CFR
Part
51
and
renumbered
many
of
that
Part's
sections
(
51
FR
40656).
Because
most
readers
will
be
more
familiar
with
prior
designations,
today's
notice
contains
citations
based
on
the
organization
of
Part
51
as
it
existed
before
this
restructuring.
Interested
parties
may
use
Appendix
F
of
today's
Technical
issues
Document
to
convert
today's
Part
51
citations
to
the
corresponding
new
ones.

Netting's
scope
is
determined
by
the
definition
of
"
source"
for
review
of
major
modifications.
In
general,
PSD
areas
use
a
single,
plantwide
definition,
allowing
actual
emission
reductions
anywhere
in
a
contiguous
plant
to
compensate
for
potential
emission
increases
at
individual
emitting
units
within
the
plant.
Nonattainment
areas
can
choose
either
this
single,
plantwide
definition
or
a
dual
definition,
so
long
as
the
definition
selected
does
not
interfere
with
attainment
and
maintenance
of
NAAQS
and
is
consistent
with
progress
towards
attainment.
Under
the
plantwide
definition,
significant
net
actual
increases
at
the
plant
as
a
whole
will
trigger
new
source
review.
Under
the
dual
definition,
significant
increases
at
either
the
plant
as
a
whole
or
individual
emitting
units
will
trigger
new
source
review.

In
addition
to
these
federal
definitions
for
major
new
sources
and
modifications,
state
preconstruction
permits
for
major
or
minor
new
sources
and
modifications
may
be
required
under
40
CFR
51.18(
a),
and
some
states
preclude
netting.

D.
Emission
Offsets
In
nonattainment
areas,
major
new
stationary
sources
and
major
modifications
are
subject
to
a
presconstruction
permit
requirement
that
they
secure
sufficient
surplus
emission
reductions
to
more
than
"
offset"
their
emissions.
This
requirement
is
designed
to
allow
industrial
growth
in
nonattainment
areas
without
interfering
with
attainment
and
maintenance
of
ambient
air
quality
standards.
It
is
currently
implemented
through
SIP
regulations
adopted
by
states
to
meet
the
requirements
of
40
CFR
51.18(
j).

In
attainment
areas,
some
new
sources
and
modifications
might
not
otherwise
be
able
to
be
constructed
because
their
emissions
would
result
in
an
exceedance
of
the
applicable
PSD
increment
or
ambient
air
quality
standard,
would
significantly
contribute
to
a
violation
of
an
ambient
air
quality
standard
in
a
designated
primary
nonattainment
area,
or
would
significantly
contribute
to
visibility
impairment
in
a
Federal
Class
I
area.
These
sources
may
use
emissions
offsets
to
allow
desired
growth
while
protecting
that
increment,
standard,
or
visibility.
Page
32
51
FR
43814
E.
Emission
Reduction
Banking
Firms
may
store
qualified
emission
reduction
credits
(
ERCs)
in
EPA­
approvable
banks
for
later
use
in
bubble,
offset
or
netting
transactions.
Depending
on
the
bank's
rules,
banked
ERCs
may
also
be
sold
or
transferred
to
other
firms
which
seek
to
meet
certain
regulatory
requirements
by
use
of
emissions
trades.

EPA's
revised
Offset
Ruling
(
40
CFR
Part
51,
Appendix
S)
allows
states
to
establish
banking
rules
as
part
of
their
SIPs.
This
Policy
Statement
and
accompanying
Technical
Issues
Document
detail
the
necessary
components
of
a
complete
state
banking
rule
approvable
under
the
Clean
Air
Act.
While
many
areas
also
allow
banking
of
emission
reductions
for
various
purposes
through
various
formal
or
informal
banking
mechanisms,
banks
which
do
not
meet
today's
criteria
(
e.
g.,
by
not
making
banked
emission
reductions
enforceable
by
the
state
by
the
time
the
reductions
are
actually
banked,
or
by
not
assuring
that
deposits
are
taken
explicitly
into
account
for
SIP
planning
purposes)
cannot
qualify
emission
reductions
as
ERCs,
and
may
offer
substantially
less
protection
in
the
event
of
future
SIP
corrections
or
changes
in
ambient
attainment
status.

F.
Generic
Trading
Rules
Generic
rules
adopted
as
part
of
the
SIP
can
authorize
states
to
approve
certain
types
of
individual
transactions
without
the
need
for
case­
by­
case
SIP
revisions
or
associated
federal
review
prior
to
approval.
The
first
state
generic
bubble
rule
was
approved
by
EPA
April
6,
1981
(
46
FR
20551).
For
the
current
scope
of
permissible
rules,
see
Section
III
below.

G.
Effect
of
This
Policy
Statement
Emissions
trading
is
largely
voluntary:
no
source
is
required
to
trade,
and
no
state
is
required
by
EPA
to
approve
a
particular
trade
or
to
adopt
a
generic
rule.
Trading
merely
offers
states
and
stationary
sources
alternative
ways
to
meet
regulatory
requirements.
For
example,
states
are
free
to
adopt
generic
rules
or
continue
to
implement
trades
as
individual
SIP
revisions.
They
may
adopt
rules
which
incorporate
all
or
any
combination
of
the
above
trading
approaches.
n4
n
4
Some
requirements
underlying
emissions
trading
are
not
voluntary.
For
example,
construction
of
a
major
new
source
or
major
modification
in
a
nonattainment
area
requires
sufficient
existing­
source
reductions
to
constitute
"
reasonable
progress
toward
attainment"
despite
the
new
emissions
(
40
CFR
51.18(
j);
Part
51,
Appendix
S).
However,
where
the
area
has
an
established
"
growth
margin"
of
extra
reductions
in
a
SIP
which
is
currently
approved
by
EPA,
the
state
may
provide
the
offsets
from
that
growth
margin
rather
than
require
them
from
the
source,
so
long
as
it
reduces
the
margin
accordingly.
See
Clean
Air
Act
section
173(
1)(
A)
and
(
B)

This
Policy
Statement
is
accompanied
by
a
Technical
Issues
Document
for
use
by
states
and
industry
in
further
understanding
emissions
trading.
The
Document
offers
elaboration
and
important
detail
on
requirements
and
available
options
under
the
Clean
Air
Act.

This
notice
reflects
the
current
Clean
Air
Act
and
existing
EPA
regulations.
A
policy
statement
cannot
legally
alter
such
requirements.
However,
this
notice
establishes
EPA
policy
in
areas
not
governed
by
applicable
regulations
and
sets
out
general
principles
which
may
help
states
and
industry
apply
those
regulations
in
individual
cases.
Federal
or
state
rulemaking
in
response
to,
e.
g.,
future
litigation
or
changes
in
ambient
standards,
attainment
status,
or
SIP
validity,
may
affect
states
or
firms
that
plan
to
engage
or
have
engaged
in
emissions
trading
activities.

Nothing
in
today's
notice
alters
EPA
new
source
review
requirements
or
exempts
owners
or
operators
of
stationary
sources
from
compliance
with
applicable
preconstruction
permit
regulations
in
accord
with
40
CFR
51.18,
51.24,
51.307,
52.21,
52.24,
52.27,
and
52.28.
Interested
parties
should,
however,
be
aware
that
bubble
trades
are
not
subject
to
preconstruction
review
or
regulations
where
these
trades
do
not
involve
construction,
reconstruction,
or
modification
of
a
source.

EPA
intends
to
apply
changes
made
by
today's
policy
prospectively
(
e.
g.,
not
to
actions
which
have
already
been
approved
as
case­
by­
case
SIP
revisions
or
under
generic
rules).
If,
however,
ambient
Page
33
51
FR
43814
violations
are
discovered
in
an
area
where
EPA
has
approved
a
trade,
or
if
other
violations
of
Clean
Air
Act
requirements
are
discovered
in
that
area,
sources
involved
in
the
trade
should
be
aware
that
they
are
potentially
subject
to
requirements
for
additional
emission
reductions,
just
as
are
all
other
sources
in
the
area.

This
policy
requires
that
substantial
additional
reductions
(
at
least
20%)
in
emissions
remaining
beyond
applicable
baselines
be
produced
by
future
bubbles
in
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations
of
attainment.
However,
applications
for
bubbles
in
such
areas
which
are
still
pending
at
EPA
without
formal
action
under
the
1982
policy,
or
which
were
previously
submitted
to
EPA
Regions
under
the
1982
policy
but
not
accepted
for
evaluation,
will
be
reexamined
and
processed
for
approval
if
they
meet
the
requirements
of
the
1982
policy
and
contribute
to
progress
towards
attainment.
"
Progress
towards
attainment"
means
some
extra
reduction
beyond
equivalence
to
a
lowest­
of­
actual­
SIPallowable
or­
RACT­
allowable
emissions
baseline,
with
this
baseline
applied
as
of
the
time
applicants
originally
sought
credit.
Pending
bubbles
in
attainment
areas
and
nonattainment
areas
with
approved
demonstrations
of
attainment
will
be
processed
for
approval
if
they
meet
the
requirements
of
the
1982
policy
and
show
that
ambient
standards,
PSD
increments
and
visibility
will
not
be
jeopardized.

For
further
discussion
on
pending
bubbles
see
Section
I.
A.
1.
b.(
4)
of
the
Technical
Issues
Document.
n5
n
5
EPA
encourages
states
or
sources
which
submitted
bubbles
that
were
returned
without
evaluation
by
EPA
to
resubmit
them
under
these
criteria,
provided
they
can
document
(
a)
formal,
timely
submittal
of
an
application
to
EPA
in
accord
with
normal
EPA
procedures
and
(
b)
that
the
application
was
returned
without
evaluation,
rather
than
rejected
for
failure
to
meet
the
terms
of
the
1982
policy.
Bubble
applications
which
were
accepted
for
evaluation
but
rejected
for
failure
to
meet
the
1982
policy
will
be
treated
as
new
applications
under
today's
notice.

II.
Requirements
for
Creating,
Using,
or
Banking
Emission
Reduction
Credits
n6
n
6
Because
this
Policy
Statement
and
accompanying
Technical
Issues
Document
reflect
general
Clean
Air
Act
principles,
states,
individual
sources,
or
commenters
on
specific
rulemaking
actions
are
free
to
show
that
a
general
principle
does
not
apply
to
particular
circumstances
or
could
be
satisfied
using
approaches
other
than
those
described.
States,
sources
and
commenters
have
this
option
under
current
law,
and
nothing
in
this
Policy
Statement
or
the
Technical
Issues
Document
restricts
their
opportunity
to
make
such
showings.

A.
Creating
Emission
Reduction
Credits
Emission
reduction
credits
(
ERC's)
are
the
common
currency
of
all
trading
activity.
ERCs
may
be
created
by
reductions
from
either
stationary,
area,
or
mobile
sources.
To
assure
that
emissions
trades
do
not
contravene
relevant
requirements
of
the
Clean
Air
Act,
only
reductions
which
are
surplus,
enforceable,
permanent,
and
quantifiable
can
qualify
as
ERCs
and
be
banked
or
used
in
an
emissions
trade.

1.
Surplus.
At
minimum,
only
emission
reductions
not
required
by
current
regulations
in
the
SIP,
not
already
relied
on
for
SIP
planning
purposes,
and
not
used
by
the
source
to
meet
any
other
regulatory
requirement,
can
be
considered
surplus.
To
determine
the
quantity
of
emission
reductions
that
are
surplus,
the
state
must
first
establish
an
appropriate
emissions
baseline
from
which
surplus
reductions
can
be
calculated.
Baseline
emissions
for
any
source
are
the
product
of
three
factors
­­
emission
rate,
capacity
utilization,
and
hours
of
operation.
n7
n
7
For
further
discussion
of
these
factors
as
they
relate
to
baseline
calculations,
see
Appendix
B
of
the
Technical
Issues
Document.
Page
34
51
FR
43814
In
attainment
areas,
the
lower
of
actual
or
allowable
values
must
generally
be
used
for
each
of
these
baseline
factors.
However,
allowable
values
for
one
or
more
of
these
factors,
when
higher
than
actual
values,
may
be
used
in
calculating
the
baseline
emissions,
provided
those
values
are
shown
to
be
used
or
reflected
in
an
approved
demonstration.
n8
The
burden
of
meeting
this
test
by
written
evidence
rests
with
the
state
or
applicant
which
seeks
to
use
an
allowable
value.

n
8
This
statement
does
not
apply
to
netting,
where
"
contemporaneous"
actual
emissions
are
always
the
baseline.
See,
e.
g.,
40
CFR
51.24(
b)(
3).

Bubbles
in
areas
with
demonstrations
based
only
on
qualitative
judgments
(
e.
g.,
the
"
example
region"
approach
or
no
technical
support)
ordinarily
may
not
rely,
without
appropriate
modeling,
on
allowable
values
in
calculating
baseline
emissions.
However,
bubbles
in
areas
with
demonstrations
based
on
rollback
or
dispersion
modeling
may
use
allowable
values
that
are
reflected
in
the
demonstration.
In
certain
circumstances
an
allowable
baseline
value
specified
in
a
preconstruction
permit
may
be
deemed
equivalent
to
one
used
or
reflected
in
an
approved
demonstration.
See
Technical
Issues
Document,
n.
7.

For
further
definition
of
"
actual"
and
"
allowable"
see
today's
Technical
Issues
Document,
Section
I.
A.
I.
a.
and
Appendix
B.

When
allowable
values
for
one
or
more
baseline
factors
are
not
used
or
reflected
in
an
approved
demonstration,
such
values
may
still
be
used
in
calculating
baseline
emissions.
However,
in
such
cases
applicants
must
perform
appropriate
modeling
to
demonstrate
that
allowable
values
which
are
higher
than
actual
values
will
not
delay
or
jeopardize
attainment
and
maintenance
of
ambient
standards.
n9
n
9
This
demonstration
would
require
a
Level
II
modeling
analysis,
in
accord
with
the
modeling
screen
discussed
below,
using
actual
emissions
for
the
pre­
bubble
case,
unless,
for
bubbles
processed
as
case­
by­
case
SIP
revisions,
the
Region
determines
that
additional
technical
support
is
needed
to
protect
applicable
standards
or
increments.
For
discussion
of
Level
II
modeling,
see
Technical
Issues
Document,
section
I.
B.
1.
b.(
3).
For
further
discussion
of
additional
technical
support
which
Regions
may
require
in
these
circumstances,
see
Technical
Issues
Document,
Section
I.
A.
1.
a.
For
a
discussion
of
parallel
modeling
requirements
for
use
of
such
higher
allowable
values
in
attainment
areas
under
generic
rules,
see
Technical
Issues
Document,
n.
31.

In
attainment
areas
where
the
PSD
baseline
has
been
triggered,
credit
may
be
granted
consistent
with
the
PSD
baseline
concentration
as
specified
in
40
CFR
51.24(
b)(
13)
and
52.21(
b)(
13).
This
will
generally
require
use
of
actual
values
for
each
of
the
baseline
factors.
However,
states
may
use
allowable
values
if
they
show
through
appropriate
modeling
n10
that
attainment
and
maintenance
of
neither
the
ambient
standards
nor
applicable
PSD
increments
will
be
jeopardized,
and
quantify
the
amount
of
increment
consumed.

n
10
See
n.
9
above.

In
nonattainment
areas
with
approved
demonstrations
of
attainment,
the
baseline
must
be
consistent
with
assumptions
used
to
develop
the
area's
demonstration.
This
generally
means
that
actual
values
must
be
used
for
each
baseline
factor
where
actual
values
were
used
for
such
demonstrations,
and
that
higher
allowable
values
for
these
factors
may
be
used
where
allowable
values
were
used
for
such
demonstrations.
n11
The
burden
of
showing
that
an
allowable
value
was
used
or
reflected
in
the
approved
demonstration
rests
with
the
state
or
applicant
which
seeks
to
use
an
allowable
value.
In
the
absence
of
written
evidence
to
that
effect,
full
Level
III
modeling
would
be
required
to
make
use
of
an
allowable
value
in
baseline
calculations.
n12
n
11
For
netting,
"
contemporaneous"
actual
emissions
are
always
the
baseline.
See,
e.
g.,
40
CFR
51.18(
j)(
l)(
vi).
Page
35
51
FR
43814
n
12
For
further
discussion
of
Level
III
modeling,
see
Technical
Issues
Document,
section
I.
B.
1.
b(
4).

In
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations
of
attainment,
states
must
show
that
bubbles
meet
special
"
progress"
requirements
designed
to
produce
a
net
air
quality
benefit.
This
must
be
demonstrated
by
(
1)
using
the
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
emissions
baseline
for
each
source
involved
in
the
trade;
n13
(
2)
meeting
the
ambient
equivalence
tests
outlined
in
sections
II.
B.
2
of
this
Policy
and
I.
B.
1.
b.
of
the
Technical
Issues
Document;
and
then
(
3)
producing
a
substantial
net
reduction
in
actual
emissions
(
i.
e.,
a
reduction
of
at
least
20%
in
the
emissions
remaining
after
application
of
the
baseline
specified
above).
The
state
must
also
provide
assurances
that
the
bubble
is
consistent
with
ambient
progress
and
future
air
quality
planning
goals.
n14
n
13
For
purposes
of
today's
notice,
the
"
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable"
emissions
baseline
means
the
product
of
(
1)
the
lowest
of
the
actual
emission
rate,
the
SIP
or
other
federally
enforceable
emission
limit,
or
a
RACT
emission
limit,
and
(
2)
the
lower
of
actual
or
allowable
capacity
utilization
and
hours
of
operation.
For
further
discussion
of
this
baseline,
see
Appendix
B
of
today's
Technical
Issues
Document.

n
14
The
specific
assurances
may
be
found
in
the
Technical
Issues
Document
at
I.
A.
1.
b.(
3).
EPA
will
not
second­
guess
such
state
assurances,
provided
they
are:
(
1)
A
substantial
test
applied
by
the
state
to
each
bubble,
and
(
2)
the
state
has
explained
how
the
proposed
bubble
is
consistent
with
the
area's
projected
attainment
strategy.
This
authority
has
not
been
delegated
with
EPA.
See
Clean
Air
Act
section
301(
a)(
1),
42
U.
S.
C.
7601(
a)(
1).

2.
Enforceable.
To
assure
that
Clean
Air
Act
requirements
are
met,
each
transaction
which
revises
any
emission
limit
upward
must
be
approved
by
the
state
and
be
federally
enforceable.
Means
of
making
emission
limits
federally
enforceable
include
SIP
revisions
(
see
section
IV
below),
EPA­
approved
generic
bubble
rules
(
see
Section
III
below),
and
new
source
preconstruction
permits
issued
by
states
under
EPAapproved
SIP
regulations
pursuant
to
provisions
of
40
CFR
51.18,
51.24,
or
51.307,
as
well
as
construction
permits
issued
by
EPA
or
delegated
states
under
52.21.
n15
Bubbles
should
be
incorporated
in
an
enforceable
compliance
instrument
which
requires
recordkeeping
based
on
the
averaging
period
over
which
the
bubble
is
operating,
so
it
may
easily
be
determined
over
any
single
averaging
period
that
bubble
limits
are
being
met.

n
15
EPA
is
also
considering
generic
steps
which
would
make
state
operating
permits
federally
enforceable.
Prior
to
use,
banked
credits
need
not
be
made
federally
enforceable.
See
Section
II.
C.
below.

3.
Permanent.
Only
permanent
reductions
in
emissions
can
qualify
for
credit.
Permanence
may
generally
be
assured
by
requiring
federally
enforceable
changes
in
source
permits
or
applicable
state
regulations
to
reflect
a
reduced
level
of
allowable
emissions.

4.
Quantifiable.
Emission
reductions
must
be
quantifiable
both
in
terms
of
estimating
the
amount
of
the
reduction
and
characterizing
that
reduction
for
future
use.
Quantification
may
be
based
on
emission
factors,
stack
tests,
monitored
values,
operating
rates
and
averaging
times,
process
or
production
inputs,
modeling,
or
other
reasonable
measurement
practices.
The
same
method
of
calculating
emissions
should
generally
be
used
to
quantify
emission
levels
both
before
and
after
the
reduction.

B.
Using
Emission
Reduction
Credits
ERCs
may
be
used
by
sources
in
bubble,
offset
or
netting
transactions.
The
general
principles
below
will
assure
that
all
uses
of
ERCs
are
consistent
with
ambient
attainment
and
maintenance
considerations
under
the
Clean
Air
Act.
They
are
further
articulated
in
the
accompanying
Technical
Issues
Document.

1.
Emissions
trades
must
involve
the
same
criteria
pollutant.
An
emission
reduction
may
only
be
traded
against
an
increase
in
the
same
criteria
pollutant.
For
example,
only
reductions
of
SO
2
can
be
substituted
for
increases
of
SO
2
.
Page
36
51
FR
43814
2.
All
uses
of
ERCs
must
satisfy
applicable
ambient
tests.
The
Clean
Air
Act
requires
that
all
areas
throughout
the
country
attain
and
maintain
national
ambient
air
quality
standards
and
meet
applicable
ambient
requirements
relating
to
PSD
increments
and
Class
I
protection,
including
visibility.
The
ambient
effect
of
a
trade
depends
on
the
dispersion
characteristics
of
the
pollutant
involved.
With
the
exception
of
visibility
for
NO
X
,
dispersion
considerations
will
generally
not
affect
trades
involving
VOC
or
NO
X
,
whose
impacts
occur
across
broad
geographic
areas.
For
these
pollutants
"
pound
for
pound"
trades
may
be
treated
as
equal
in
ambient
effect
where
all
sources
involved
in
the
trade
are
located
in
the
same
control
strategy
demonstration
area,
or
where
the
state
otherwise
shows
such
sources
to
be
sufficiently
close
that
a
"
pound
for
pound"
trade
can
be
justified.
However,
dispersion
characteristics
are
important
for
bubble
and
offset
trades
of
SO
2
,
particulates,
CO,
or
lead,
whose
ambient
impact
may
vary
with
where
the
emission
increases
and
decreases
occur.
To
assure
ambient
equivalence,
such
trades
of
these
pollutants
must
satisfy
ambient
tests
under
the
modeling
screen
discussed
in
the
Technical
Issues
Document
or
under
a
similar,
equally
effective
approach.
1
n6
n
1
6
For
similar
reasons,
bubbles
of
these
pollutants
must
involve
sources
which
are
in
the
same
or
adjacent
control
strategy
demonstration
areas
within
the
same
general
air
basin.

See
section
II.
A.
1.
above
and
Technical
Issues
Document,
Section
I.
A.
1.
a
regarding
additional
technical
support
required
for
certain
trades
in
attainment
areas.

While
bubbles
in
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations
of
attainment
must
produce
a
net
air
quality
benefit,
this
does
not
entail
additional
ambient
tests.
Such
bubbles
must
first
meet
the
general
tests
under
the
modeling
screen
showing
ambient
equivalence
for
bubbles,
prior
to
producing
the
required
additional
reductions.
They
must
then
produce
additional
reductions
of
at
least
20%
beyond
the
applicable
baseline
emissions
used
to
demonstrate
ambient
equivalence.
Since
these
additional
reductions
will
necessarily
reduce
ambient
concentrations
below
equivalence
at
some
receptors,
while
continuing
to
meet
the
tests
for
ambient
equivalence
at
all
others,
a
net
air
quality
benefit
should
occur
and
no
additional
ambient
showings,
beyond
those
generally
required
for
all
bubbles,
are
required.

3.
Bubbles
must
not
increase
hazardous
pollutants.
Bubbles
may
not
be
used
to
meet
applicable
requirements
of
National
Emissions
Standards
for
Hazardous
Air
Pollutants
(
NESHAPs)
promulgated
under
section
112
of
the
Clean
Air
Act,
to
increase
emissions
at
any
source
beyond
the
levels
applicable
NESHAPs
prescribe,
or
to
create
any
net
increase
in
baseline
emissions
of
a
pollutant
regulated
under
section
112.
The
applicable
baseline
for
regulated
sources
is
the
lower
of
actual
or
NESHAPs­
allowable
emissions
of
the
hazardous
pollutant.

Where
a
NESHAP
has
been
proposed
but
not
yet
promulgated
for
a
source
category
which
emits
a
pollutant
listed
under
section
112,
the
proposal
will
serve
as
an
interim
guideline
for
evaluating
the
effects
of
any
proposed
emissions
trade
involving
a
source
that
would
be
subject
to
the
proposed
standard.
In
general,
such
trades
will
be
approvable
with
respect
to
the
emissions
component
of
the
trade
subject
to
the
proposal,
so
long
as
they
result
in
emission
limits
at
each
source
emitting
the
relevant
pollutant
which
are
equivalent
to
or
lower
than
those
the
proposed
NESHAP
would
have
required
if
already
promulgated.
1
n7
n
1
7
The
allowable
emission
rate
for
a
source
subject
to
a
proposed
NESHAP
is
the
limit
stipulated
in
the
proposal.

Where
a
pollutant
has
been
listed
under
section
112
or
where
EPA
has
published
a
Notice­
of­
Intent­
to­
List,
but
no
regulations
for
the
source
category
involved
in
the
trade
have
yet
been
proposed
or
promulgated,
the
trade
will
generally
be
acceptable
with
respect
to
the
emissions
component
of
the
trade
subject
to
notice
or
listing,
if
there
is
no
net
increase
in
actual
emissions
of
that
pollutant
as
a
result
of
the
trade.
1
n8
n
1
8
Where
EPA
has
issued
a
"
Notice­
of­
Intent­
Not­
to­
Regulate"
one
or
more
source
categories
for
a
listed
pollutant,
emissions
of
that
pollutant
from
the
unregulated
source
category
Page
37
51
FR
43814
will
nevertheless
be
treated
the
same
as
emissions
of
any
other
listed
pollutant.
Under
limited
circumstances,
similar
treatment
will
be
given
to
pollutants
for
which
a
"
Notice­
of­
Intent­
Not­
to­
List"
has
been
published.
See
the
Technical
Issues
Document,
section
I.
B.
1.
d.

Any
trade
involving
sources
or
source
categories
subject
to
the
preceding
subparagraphs
must
take
place
within
a
single
plant
or
contiguous
plants,
and
must
credit
only
reductions
below
current
actual
or
NESHAPs
­­
allowable
emissions,
whichever
is
lower.
But
cf.
generally
n.
6
above
and
today's
Technical
Issues
Document,
section
I.
B.
l.
d.

Trades
which
do
not
meet
the
special
restrictions
discussed
in
this
section
may
also
be
approved
where
surplus
reductions
in
the
pollutants
addressed
above
compensate
for
increases
in
non­
hazardous
emissions
of
the
same
criteria
pollutant
(
e.
g.,
benzene,
a
hazardous
VOC,
is
reduced
to
create
credits
for
an
increase
in
non­
hazardous
VOC
emissions.)
As
long
as
such
a
trade
would
not
result
in
an
increase
in
either
actual
or
allowable
emissions
of
a
pollutant
subject
to
the
preceding
paragraphs
at
any
source,
it
would
not
differ
in
nature
or
requirements
from
a
trade
involving
only
nonhazardous
VOC
emissions.

4.
ERCs
from
existing
sources
cannot
be
used
to
meet
technology­
based
requirements
applicable
to
new
sources.
Under
Clean
Air
Act
section
111
and
EPA
implementing
regulations,
new
affected
facilities
must
satisfy
technology­
based
New
Source
Performance
Standards
(
NSPS),
regardless
of
the
attainment
status
of
the
area
in
which
they
are
located.
Under
sections
165
and
173
and
EPA
implementing
regulations,
new
or
modified
major
stationary
sources
must
also
satisfy
technology­
based
control
obligations
associated
with
pre­
construction
permits.
These
requirements
prohibit
use
of
credits
from
existing
sources
to
meet
or
avoid
applicable
NSPS,
and
bar
use
of
such
credits
to
meet
applicable
new
source
review
requirements
for
best
available
control
technology
(
BACT)
in
PSD
areas,
or
lowest
achievable
emission
rate
control
technology
(
LAER)
in
nonattainment
areas.
1
n9
n
1
9
But
cf.
sections
I.
C.
and
I.
D.
above.

Today's
notice
does
not
address
whether
or
under
what
circumstances
facilities
subject
to
NSPS,
BACT
or
LAER
may
surpass
applicable
permit
limits
reflecting
such
requirements
in
order
to
create
credits
for
existing­
source
trades.

5.
States
may
approve
bubbles
in
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations
of
attainment,
provided
such
trades
meet
requirements
designed
to
produce
a
net
air
quality
benefit
and
the
state
provides
certain
assurances.
See
section
II.
A.
1.
above
and
the
Technical
Issues
Document,
section
I.
A.
1.
b.
Bubbles
which
meet
these
objective
requirements
will
be
processed
for
approval
by
EPA.

6.
Sources
need
not
be
subject
to
binding
compliance
schedules
based
on
current
SIP
requirements
before
they
can
apply
for
a
bubble
which
would
supersede
those
requirements.
Sources
that
are
already
subject
to
binding
compliance
schedules
should
be
aware,
however,
that
such
schedules
remain
fully
enforceable
until
a
bubble
affecting
the
schedule
has
been
approved
by
EPA
or
under
a
state
generic
rule
and
the
schedule
has
been
modified
accordingly.
Sources
subject
to
compliance
schedules
in
administrative
orders
or
judicial
decrees
must
obtain
prior
approval
from
EPA
or
the
relevant
court,
as
appropriate,
to
be
relieved
from
the
schedule
contained
in
the
order
or
decree.
Sources
that
are
subject
to
SIP
requirements
remain
responsible
for
meeting
those
requirements
unless
and
until
a
bubble
has
become
effective
under
Federal
law.
See
section
II.
B.
12
below.

7.
States
may
extend
certain
compliance
schedules.
States
may
no
longer
grant
compliance
extensions
under
new
or
revised
generic
rules
in
nonattainment
areas,
whether
or
not
such
areas
have
demonstrations.
n20
However,
states
may
continue
to
grant
compliance
date
extensions
under
generic
rules
in
attainment
areas,
provided
EPA
has
approved
the
extension
provisions
of
the
generic
rule
as
being
adequate
to
comply
with
the
Clean
Air
Act,
including
requirements
for
attainment
and
maintenance
of
ambient
air
quality
standards.

n
20
Existing
generic
rules
applicable
to
these
areas
must
be
revised
to
comport
with
this
principle
where
they
contain
such
generic
extension
provisions.
EPA
will
publish
Federal
Register
Page
38
51
FR
43814
notices
identifying
any
generic
rules
which
require
formal
modification.
Failure
to
resolve
deficiencies
identified
in
such
a
notice
within
the
prescribed
time
period
may
result
in
EPA
rescinding
approval
of
the
existing
generic
rule
or
issuing
a
notice
of
SIP
deficiency.
EPA
expects
states
to
ensure
in
the
interim,
so
far
as
feasible,
that
compliance
date
extensions
under
existing
generic
rules
are
not
granted
to
sources
located
in
nonattainment
areas.
See
section
III
below
and
section
II.
E.
4.
of
the
Technical
Issues
Document.

States
that
wish
to
give
sources
in
nonattainment
areas,
and
sources
in
attainment
areas
for
which
there
is
no
applicable
generic
SIP
provision,
more
time
to
implement
bubbles
by
granting
compliance
extensions,
must
receive
EPA
approval
of
the
extensions
through
case­
by­
case
SIP
revisions.
Requests
for
such
compliance
date
extensions,
whether
in
attainment
or
nonattainment
areas,
may
be
submitted
to
EPA
together
with
bubbles,
as
part
of
a
single
SIP
revision
package.
EPA
will
separately
evaluate
the
time
extension
portion
of
these
SIP
revision
packages
in
accord
with
the
Agency's
normal
criteria
for
review
of
time
extensions,
including
consistency
with
the
Act's
requirements
for
expeditiousness,
reasonable
further
progress,
and
attainment
and
maintenance.
Sources
should
be
aware
that
disapproval
of
such
time
extension
requests
may
result
in
disapproval
of
the
entire
package
(
i.
e.,
both
post­
trade
limits
and
the
time
extension)
or
only
part
of
it,
depending
on
whether
the
state
views
these
components
of
the
proposed
SIP
revision
as
separable.

8.
States
may
approve
bubbles
involving
open
dust
sources
of
particulate
emissions,
based
on
modeling
demonstrations.
Open
dust
trades
may
be
approved
through
individual
SIP
revisions
based
on
acceptable
modeling
and/
or
monitoring
demonstrations,
provided
sources
agree
to
post­
approval
monitoring
to
determine
if
predicted
air
quality
results
have
been
realized
and
make
an
enforceable
commitment
to
achieve
necessary
additional
reductions
if
predicted
results
do
not
materialize.

9.
Trade
involving
lead.
Unlike
other
criteria
pollutants,
EPA
does
not
designate
nonattainment
areas
for
lead.
However,
the
Regional
Administrator
will
review
lead
trades,
as
all
other
trades,
to
assure
that
they
do
not
interfere
with
attainment
and
maintenance
of
NAAQS.

10.
Trades
involving
ERCs
from
mobile
source
measures.
ERCs
from
mobile
source
measures
may
be
used
to
meet
SIP
requirements
applicable
to
existing
stationary
sources,
so
long
as
such
reductions
are
surplus,
permanent,
quantifiable,
and
enforceable.
Reductions
from
certain
types
of
mobile­
source
measures
(
e.
g.,
mechanical
conversion
of
existing
vehicle
fleets
to
cleaner
fuels
such
as
methanol)
may
satisfy
these
criteria
more
readily
than
those
from
other
transport­
related
measures.
However,
due
to
possible
difficulties
in
determining
whether
specific
mobile­
source
reductions
fully
meet
these
criteria,
all
such
trades
must
be
implemented
as
case­
by­
case
SIP
revisions.

11.
Interstate
trades.
Trades
involving
sources
located
in
neighboring
states
may
be
approved,
provided
they
meet
all
other
requirements
of
today's
notice.
However,
in
order
to
avoid
complex
SIP
accounting
issues,
where
state
trading
requirements
differ
EPA
will
require
that
such
trades
meet
the
substantive
requirements
of
the
more
stringent
state.
In
general,
EPA
will
deem
ERCs
created
in
one
state
to
contribute
to
progress
in
the
state
where
used
to
the
extent
of
that
use,
provided
that
applicable
ambient
tests
(
section
II.
B.
2
above)
are
met.
Interstate
trades
must
be
implemented
through
case­
by­
case
SIP
revisions.

12.
Bubbles
must
not
impede
enforcement.
In
general,
bubbles
are
a
form
of
SIP
revision
which
should
be
treated
neither
more
nor
less
stringently
than
other
SIP
revisions.
Bubbles
should
not
become
a
shield
against
enforcement
actions
for
sources
which
have
failed
to
take
necessary
steps
to
meet
required
control
obligations
on
time.

Sources
seeking
trades
should
note
that
they
remain
subject
to
enforcement
of
existing
(
pre­
trade)
SIP
limits
until
the
bubble
is
approved.
EPA
will
use
the
same
principles
and
procedures
for
deciding
whether
to
initiate
enforcement
actions
in
these
circumstances
as
the
Agency
applies
to
any
other
source
which
is
subject
to
a
proposed
or
final
SIP
revision.

Under
established
EPA
policy,
regulated
sources
must
be
subject
to
an
applicable,
enforceable
emission
limit
at
all
times.
Accordingly,
sources
which
have
approved
bubbles
with
emission
limits
effective
at
a
future
date,
and
which
are
not
in
compliance
with
their
pre­
trade
limits
prior
to
that
effective
date,
may
be
subject
to
enforcement
action,
which
could
include
penalties
based
on
a
failure
to
meet
the
pre­
trade
limits.
Sources
in
these
situations
may
wish
to
minimize
the
chance
that
capital
expenditures
may
Page
39
51
FR
43814
be
required
to
meet
pre­
trade
limits,
either
by
(
a)
agreeing
to
post­
trade
compliance
dates
which
are
substantially
similar
to
their
pre­
trade
compliance
dates,
or
(
b)
accelerating
their
compliance
with
posttrade
limits.

In
accord
with
the
general
principle
that
bubbles
should
be
treated
neither
more
nor
less
stringently
than
other
SIP
actions,
implementation
of
this
Policy
Statement
will
be
neutral
with
respect
to
EPA
enforcement
of
pre­
trade
emission
limits.
This
means
that
EPA
will
not
specifically
select
for
enforcement
action
noncompliant
sources
seeking
to
use
a
bubble
either
to
come
into
compliance
or
to
restructure
traditional
compliance.
However,
it
also
means
that
EPA
will
not
withhold
or
defer
enforcement
simply
because
a
source
is
seeking
alternative
emission
limits
through
a
bubble.
In
exercising
its
enforcement
discretion,
EPA
will
apply
the
same
considerations
to
noncompliant
sources
which
seek
to
comply
through
bubbles
as
to
those
which
do
not.

C.
Banking
Emission
Reduction
Credits
Only
emission
reductions
that
are
surplus,
permanent,
quantifiable,
and
enforceable
can
qualify
as
ERCs
and
be
deposited
in
EPA­
approvable
banks.
n21
Such
banks
offer
sources
legal
recognition
that
qualifying
reductions
meet
these
ERC
requirements.
However,
the
fact
that
an
ERC
has
been
banked
does
not
relieve
it
from
the
need
to
meet
all
criteria
of
the
specific
regulatory
program
under
which
it
is
to
be
used.
n22
Because
some
trades
have
special
limitations
(
e.
g.,
only
reductions
occurring
at
the
same
major
stationary
source
can
be
used
for
netting),
banks
do
not
guarantee
the
validity
or
specific
amount
of
particular
banked
ERCs
for
all
potential
uses
or
for
all
time.
To
provide
maximun
protection
for
the
environment
and
sources
and
to
avoid
potential
legal
problems,
state
banking
rules
may
specify
the
types
of
sources
eligible
to
bank
ERCs
and
any
additional
conditions
placed
on
certifying,
holding
or
using
banked
ERCs.

n
21
Under
today's
notice
emission
reductions
must
be
made
enforceable
by
the
state
in
order
to
qualify
as
ERCs
and
be
deposited
in
EPA­
approvable
banks.
However,
because
mere
deposit
of
a
reduction
cannot
result
in
emissions
increases
elsewhere,
banked
reductions
need
not
be
made
federally
enforceable
until
used.

n
22
States
may,
however,
expand
opportunities
for
use
of
banked
credits
beyond
those
of
current
SIP
programs
(
e.
g.,
extend
the
"
contemporaneous"
period
for
netting),
by
submitting
revised
regulations
addressing
the
banking
and
use
of
such
credits,
for
approval
as
SIP
revisions.

State
banking
rules
may
establish
ownership
rights.
However,
any
such
rights
must
be
consistent
with
Clean
Air
Act
requirements,
including
the
requirement
that
SIPs
provide
for
expenditious
attainment
and
maintenance
of
ambient
air
quality
standards
and
protect
PSD
increments
and
visibility.
To
be
approvable
by
EPA,
such
banking
rules
must
also
treat
banked
reductions
as
current
actual
emissions
"
in
the
air"
at
the
source
of
their
creation,
in
order
to
protect
the
integrity
of
future
air
quality
planning.
Failure
to
track
the
ambient
effects
of
such
banked
reductions
(
e.
g.
by
not
including
them
in
a
new
or
updated
inventory
used
for
SIP
planning
purposes,
or
by
relying
on
those
reductions
to
secure
attainment
redesignations)
would
ordinarily
preclude
their
use
as
ERCs,
due
to
double­
counting.
Nevertheless,
states
have
considerable
latitude
in
meeting
these
requirements,
and
may
guarantee
banked
ERCs
against
full
or
partial
reduction
in
quantity,
so
long
as
that
guarantee
does
not
undermine
attainment
redesignations
or
interfere
with
progress
and
attainment
should
ambient
standards
change
or
additional
emission
reductions
be
required.
The
Technical
Issues
Document,
section
I.
C.
9,
outlines
ways
such
guarantees
may
be
made
effective
consistent
with
these
requirements.

In
many
states,
banking
could
be
an
extension
of
ongoing
preconstruction
permit
activities.
The
state
or
its
designee
could
accept
and
evaluate
requests
to
certify
an
ERC,
maintain
a
publicly­
available
ERC
registry
or
similar
instrument
describing
the
quantity
and
types
of
banked
credits,
and
track
transfers
and
withdrawals
of
ERCs.

Because
banked
reductions
do
not
increase
emissions
at
any
source,
they
need
not
be
made
federally
enforceable
until
used.
For
administrative
or
other
reasons
states
may,
however,
choose
to
make
them
federally
enforceable
upon
deposit.
How
the
state
makes
a
reduction
federally
enforceable
for
banking
will
Page
40
51
FR
43814
depend
on
the
type
of
source
at
which
the
reduction
occurs.
In
some
states,
reductions
associated
with
other
modifications
at
a
source
can
be
included
in
federally­
enforceable
preconstruction
permits
issued
under
rules
approved
pursuant
to
40
CFR
51.18,
51.24
or
51.307.
States
with
EPA­
approved
generic
rules
can
use
their
rules'
procedures
to
make
reductions
occurring
at
existing
sources
federally
enforceable.
See
Section
III
below.
Since
these
transactions
involve
only
reductions,
air
quality
modeling
is
generally
not
required
to
assure
that
new
emission
limits
do
not
interfere
with
attainment
and
maintenance
of
ambient
standards,
protection
of
applicable
PSD
increments,
or
impairment
of
visibility
in
mandatory
federal
class
I
areas.
Such
reductions
will
automatically
meet
the
generic
rule's
test
of
whether
a
particular
limit
is
within
EPA's
preapproved
array
of
acceptable
emission
limits.
n23
n
23
Modeling
will
be
necessary
when
a
banked
ERC
is
later
evaluated
for
use
in
a
trade,
to
the
extent
modeling
is
generally
required
for
that
particular
type
of
emissions
trade.

States
without
EPA­
approved
generic
rules
can
adopt
rules
limited
to
banking
transactions,
or
can
use
the
standard
SIP
revision
process
to
make
reductions
federally
enforceable
at
existing
sources.
General
state
preconstruction
permit
or
review
programs
that
have
received
EPA
approval
may
also
be
used
for
this
purpose,
since
permits
issued
through
such
programs
are
federally
enforceable.
See
40
CFR
51.18;
51.24;
51.307.
n24
n
24
In
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations,
use
for
bubble
purposes
of
banked
credits
produced
by
shutdowns
or
curtailments
will
continue
to
be
allowed
on
the
same
terms
as
use
of
other
banked
credits,
provided
their
use
is
subject
to
stringent
qualitative
review
to
assure
technical,
legal
and
programmatic
consistency
with
SIP
planning
goals
(
e.
g.,
avoidance
of
doublecounting
or
"
shifting
demand").
However,
sources
which
seek
to
use
banked
credits
from
shutdowns
or
curtailments
for
bubble
purposes
after
publication
of
today's
notice
must
show
that
a
written
application
was
submitted
to
make
the
shutdown/
curtailment
stateenforceable
through
or
concurrent
with
use
of
a
formal
bank
or
informal
banking
mechanism,
prior
to
the
time
the
shutdown/
curtailment
occurred.
For
sources
which
banked
or
sought
to
bank
credits
from
shutdowns
or
curtailments
in
these
nonattainment
areas
prior
to
publication
of
today's
notice,
written
evidence
must
be
provided
showing
either
that
an
application
to
deposit
the
credits
in
a
formal
bank
was
submitted
to
the
state
prior
to
the
time
the
shutdown/
curtailment
occurred,
or
that
the
state
acknowledged,
before
or
at
the
time
the
shutdown/
curtailment
occurred,
both
the
existence
of
that
shutdown/
curtailment,
and
the
source's
intent
to
use
the
resulting
credits
in
a
future
trade.
For
additional
detail
on
banking
and
use
of
credits
resulting
from
shutdowns
or
curtailments
in
these
or
other
areas,
see
Technical
Issues
Document,
Sections
I.
A.
I.
c.(
3)
and
I.
C.

III.
State
Generic
Trading
Rules
Use
of
emission
reduction
credits
under
state
regulations
approved
by
EPA
as
generic
for
identified
classes
of
trades
will
not
require
individual
SIP
revisions
for
those
trades.
The
Technical
Issues
Document
explains
acceptable
generic
procedures
which
states
may
adopt
to
reduce
the
need
for
individual
SIP
revisions.

Emissions
trades
can
be
approved
without
case­
by­
case
SIP
revisions
if
evaluated
by
the
state
under
EPA­
approved
procedures
which
assure
that
no
trade
which
meets
their
terms
will
interfere
with
timely
attainment
and
maintenance
of
ambient
standards,
protection
of
applicable
PSD
increments,
or
visibility
provisions.
State
generic
rules
are
approvable
only
if
their
procedures
are
sufficiently
replicable
in
operation
to
meet
this
test.
By
approving
the
generic
rule,
EPA
approves
in
advance
an
array
of
SIPcompatible
emission
limits,
and
no
further
case­
by­
case
Federal
review
or
approval
is
required
for
individual
trades
which
meet
the
terms
of
the
rule.

In
order
to
ensure
that
generic
rules
are
properly
implemented,
EPA
intends
to
(
a)
examine
and
comment
on,
together
with
any
other
public
commenter,
the
information
which
must
be
provided
for
individual
trades
proposed
by
states
under
a
generic
rule,
(
b)
conduct
reviews
of
individual
bubbles
Page
41
51
FR
43814
approved
under
a
generic
rule,
and
(
c)
periodically
audit
the
general
implementation
of
generic
rules,
as
part
of
its
National
Air
Audit
System
reviews
of
state
air
programs.
n25
n
25
See,
e.
g.,
National
Air
Audit
System
Guidelines
for
FY
1984,
Office
of
Air
Quality
Planning
and
Standards,
EPA­
450/
2­
83­
007
(
November
1983).
State­
approved
generic
trades
that
do
not
meet
the
terms
of
the
relevant
generic
rule
do
not
alter
underlying
SIP
requirements,
which
remain
fully
enforceable.
Generic
rules
found
to
be
generally
deficient
in
substance
or
implementation
could
ultimately
result
in
notices
of
SIP
deficiency
or
in
rulemaking
to
rescind
EPA's
approval
of
the
rule.
For
more
detail
on
EPA
oversight
of
generic
rules,
see
Technical
Issues
Document,
Section
II.
E.

Any
trade
under
a
generic
rule
will
involve
emission
increases
at
some
sources
and
extra
emission
decreases
at
others.
For
trades
to
be
approvable
under
a
generic
rule,
the
sum
of
these
increases
and
decreases
(
beyond
applicable
net
baseline
emissions)
must
be
zero
or
less.
Subject
to
this
requirement,
states
may
adopt
generic
rules
which
exempt
from
individual
SIP
revisions:
(
1)
De
minimis
trades
where
total
increases
in
emissions
from
all
increasing
sources
(
which
must
be
balanced
by
equal
or
greater
emissions
decreases
from
other
sources)
are
less
than
25
tons
per
year
(
TPY)
of
particulates,
40
TPY
of
SO
2
,
100
TPY
of
CO,
or
0.6
TPY
of
lead,
after
applicable
control
requirements;
(
2)
large
classes
of
trades
involving
VOC
or
NO
X
emissions;
n26
(
3)
trades
between
certain
types
of
SO
2
sources,
between
certain
types
of
CO
sources,
between
certain
types
of
stationary
lead
sources,
or
between
certain
types
of
particulate
sources,
for
which
it
can
reasonably
be
assumed
that
"
pound
for
pound"
trades
will
produce
ambient
effects
equivalent
to
those
which
approved
air
quality
models
would
predict;
and
(
4)
other
SO
2
,
CO,
Pb
or
particulate
trades
which
do
not
increase
baseline
emissions
and
for
which
carefully
defined
modeling
predicts
no
significant
increase
in
ambient
concentrations.

n
26
Where
visibility
impairment
due
to
elevated
NO
X
emissions
is
a
concern,
generic
trades
involving
NO
X
must
ordinarily
be
subject
to
ambient
requirements
similar
to
those
applicable
to
generic
trades
involving
TSP,
SO
2
,
CO
or
Pb.

States
and
sources
should,
however,
be
aware
that
because
of
replicability
problems
inherent
in
modeling,
generic
rules
which
rely
on
preapproved
procedures
for
modeled
demonstrations
of
ambient
equivalence
may
be
difficult
to
draft
or
implement,
and
many
trades
may
not
be
approvable
under
such
rules.
For
these
reasons
generic
rules
covering
only
the
first
three
classes
of
trades
above
will
often
prove
easiest
to
secure.
EPA
encourages
states
to
work
closely
with
EPA
Regional
Offices
to
formulate
and
adopt
approvable
rules
or
develop
alternative
approaches
that
equally
assure
attainment
and
maintenance
of
ambient
standards
and
protection
of
PSD
increments
and
visibility.
See
Section
II
of
the
Technical
Issues
Document,
which
details
criteria
under
which
such
generic
rules
may
be
approved.

To
the
extent
general
state
procedures
for
rulemaking
or
permit
changes
do
not
assure
reasonable
public
notice
of
proposed
and
final
limits
or
effective
opportunity
for
comment
on
proposed
trades,
states
must
incorporate
such
provisions
in
their
generic
rules.

In
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations,
new
generic
rules
must
require,
and
existing
generic
rules
must,
as
requested
by
EPA,
be
revised
to
require
bubbles
to
use
lowestof
actual­
SIP­
allowable­
or­
RACT­
allowable
emissions
baselines,
and
produce
a
net
air
quality
benefit
(
as
described
below).
New
or
revised
generic
rules
in
these
nonattainment
areas
must
be
accompanied
by
certain
assurances
of
consistency
with
air
quality
planning
goals
as
well
as
a
commitment
to
make
certain
additional
assurances
when
the
state
approves
individual
bubbles
under
the
rule.
Bubbles
approved
under
existing
generic
bubble
rules
before
the
effective
date
of
this
policy
will
not
be
affected
by
these
requirements.
Because
EPA­
approved
state
regulations
have
independent
legal
force,
future
bubbles
submitted
under
existing
generic
rules
may
also
be
approved
by
states
in
accord
with
those
rules,
until
such
rules
are
modified
to
meet
the
criteria
below.
n27
n
27
In
the
interim,
EPA
expects
states
to
ensure,
so
far
as
feasible,
that
future
bubbles
approved
under
existing
generic
rules
are
consistent
with
this
policy
as
well
as
the
terms
of
their
Page
42
51
FR
43814
EPA­
approved
rules.
States
should
be
aware
that
without
this
or
similar
precautions,
continued
approval
of
bubbles
under
existing
generic
rules
containing
identified
deficiencies
may
create
or
accentuate
plan
deficiencies
that
may
have
to
be
corrected
at
a
later
date
or
compensated
for
by
other
means.
See
section
II.
E.
4.
of
the
Technical
Issues
Document.

Existing
generic
rules
in
these
areas
must
be
modified
to
assure
that
bubbles
produce
an
overall
emission
reduction
at
least
equal
(
in
percentage
terms)
to
the
overall
emission
reduction
from
controllable
sources
(
in
percentage
terms)
needed
to
attain
in
the
area.
Criteria
for
modifying
generic
rules
are
set
forth
in
Section
II.
D.
of
the
Technical
Issues
Document,
including
a
requirement
for
a
reduction
equal
to
the
greater
of
either
the
percentage
reduction
required
for
attainment,
or
a
20%
reduction
in
emissions
remaining
after
application
of
appropriate
baselines.
New
and
pending
applications
for
generic
bubble
rules
which
meet
these
criteria
will
be
processed
for
approval.

EPA
will
publish
Federal
Register
notices
identifying
any
generic
rules
applicable
to
these
areas
which
require
formal
modification
in
order
to
meet
the
progress
requirements
above
or
other
requirements
of
EPA's
current
Emissions
Trading
Policy.
These
notices
will
identify
specific
deficiences
and
means
for
correcting
them,
and
will
specify
a
schedule
for
submittal
and
review
or
modified
rules.
Failure
to
resolve
deficiencies
identified
in
these
notices
within
the
prescribed
time
period
may
result
in
EPA
rescinding
its
previous
approval
or
issuing
a
notice
of
SIP
deficiency.
n28
n
28
Such
notices
may
also
be
issued
for
existing
generic
rules
in
attainment
areas
and
nonattainment
areas
with
approved
demonstrations,
if
these
generic
rules
are
found
to
require
procedural
revision
in
order
to
make
them
consistent
with
the
current
Emissions
Trading
Policy.
See
Technical
Issues
Document,
section
II.
E.
4.

EPA
recognizes
the
additional
timing
burden
which
may
be
imposed
on
bubble
applicants
in
areas
where
new
generic
rules
cannot
be
or
have
not
been
developed
to
meet
the
specific
air
quality
benefit
requirements
described
above,
and
will
attempt,
so
far
as
feasible,
to
ameliorate
that
burden
in
implementing
this
policy.
See,
e.
g.,
n.
6
and
section
II­
B­
12.
above
and
related
Preamble
discussion,
at
n.
48
and
accompanying
text.

IV.
Bubbles
Which
Require
Case­
By­
Case
SIP
Revisions
States
and
sources
must
use
the
case­
by­
case
SIP
revision
process
to
implement
bubbles
which
are
not
covered
by
a
generic
rule.
Because
the
case­
by­
case
SIP
revision
process
can
take
account
of
many
more
individual
variations,
numerous
trades
which
could
not
be
accomplished
through
generic
rules
or
similar
means
may
still
be
approvable
as
case­
by­
case
SIP
revisions.

EPA
will
take
action
on
generic
rules
and
individual
trades
submitted
as
SIP
revisions
as
quickly
as
circumstances
permit
after
a
state
has
adopted
a
SIP
revision
and
submitted
the
action
to
EPA.
EPA
encourages
"
parallel
processing"
of
such
SIP
revisions,
with
EPA
and
the
state
conducting
concurrent
review
so
that
both
agencies
can
propose
and
take
final
action
at
roughly
the
same
time.
EPA
will
also
publish
noncontroversial
SIP
revisions
as
immediate
final
actions,
converting
them
to
proposals
only
if
requests
to
submit
adverse
comments
are
received
within
30
days
(
see
46
FR
44477,
September
4,
1981).
In
all
bubble
actions
EPA
will
clearly
identify
(
or
require
states
to
identify,
as
appropriate)
both
pre­
and
post­
trade
actual
and
allowable
emissions
for
each
source
involved
in
the
trade,
so
that
the
ambient
effects
of
each
bubble
may
be
known.

V.
Conclusion
This
Policy
Statement
sets
out
basic
principles
for
approving
individual
trades
and
generic
trading
rules.
It
tightens
many
requirements
in
order
to
better
ensure
SIP
integrity
and
environmental
progress,
while
offering
ample
opportunities
for
use
of
approvable,
environmentally­
sound
trades.
EPA
encourages
states
and
sources
to
use
these
principles
as
a
framework
and
refer
to
the
accompanying
Technical
Issues
Document
for
further
discussion
and
examples.
EPA
also
encourages
states
to
develop
other
approaches
which
satisfy
these
principles
while
meeting
their
specific
needs.
Page
43
51
FR
43814
As
a
policy
statement,
this
notice
does
not
establish
conclusively
how
EPA
will
resolve
issues
in
individual
cases.
EPA
will
accept
public
comment
on
specific
SIP
changes
submitted
under
it,
and
will
review
individually
each
generic
rule
and
those
emissions
trades
submitted
as
SIP
revisions
to
determine
their
acceptability
under
the
Clean
Air
Act.
Interested
parties
will
have
full
opportunity
to
scrutinize
application
of
these
principles
in
specific
cases,
and
to
seek
subsequent
judicial
review
of
such
cases
after
EPA
has
taken
final
action
on
particular
trades
or
generic
rules.

Dated:
November
18,
1986.

Lee
M.
Thomas,

Administrator.

Emissions,
Trading:
Technical
Issues
Document
Table
of
Contents
I.
Elements
of
Emissions
Trading
A.
Creating
Emission
Reduction
Credits
1.
All
Reductions
Must
Be
Surplus
a.
Use
of
Actual
or
Allowable
Emissions
as
the
Baseline:
Attainment
Areas
and
Nonattainment
Areas
with
Approved
Demonstrations
of
Attainment
(
including
Rural
Ozone
Nonattainment
Areas)

b.
Special
Progress
Requirements
for
Bubbles
in
Primary
Nonattainment
Areas
Which
Need
But
Lack
Approved
Demonstrations
of
Attainment
(
1)
Objective
Tests
For
All
Applications
(
2)
Where
These
Special
Progress
Requirements
Will
Apply
(
3)
State
Assurances
(
4)
Treatment
of
Pending
Bubble
Applications
c.
No
Double­
Counting
of
Reductions
(
1)
Crediting
Pre­
Existing
Emission
Reductions
(
2)
Crediting
Reductions
From
Shutdowns
(
3)
Use
of
Banked
Credits
from
Shutdowns
or
Other
Actions
for
Bubble
Purposes
d.
Multiple
Use
of
ERCs
e.
Reductions
from
Uninventoried
Sources
2.
Alternative
Emission
Limits
Must
Be
Enforceable
3.
All
Reductions
Must
Be
Permanent
4.
All
Reductions
Must
Be
Quantifiable
a.
Calculating
the
Reduction
b.
Describing
the
Reduction
B.
Using
Emission
Reduction
Credits
1.
Substantive
Principles
for
Using
ERCs
a.
Emissions
Trades
Must
Involve
the
Same
Pollutant
b.
All
Uses
of
ERCs
Must
Satisfy
Ambient
Tests
Page
44
51
FR
43814
(
1)
De
Minimis
(
2)
Level
I
(
3)
Level
II
(
4)
Level
III
c.
Bubbles
Should
Not
Increase
Applicable
Net
Baseline
Emissions
d.
Bubbles
Should
Not
Increase
Emissions
of
Hazardous
or
Toxic
Air
Pollutants
e.
Existing­
Source
Credits
Cannot
Be
Used
to
Meet
Applicable
Technology­
Based
Requirements
for
New
Sources
f.
Trades
Involving
Open
Dust
Emissions
g.
Interstate
Trades
h.
Trades
near
PSD
Class
I
Areas
i.
Effect
on
Trades
of
Subsequently­
Discovered
Clean
Air
Act
Problems:
Revisitation
Considerations
2.
Procedural
Steps
for
Using
ERCs
a.
Effect
of
Existing
Compliance
Schedules
b.
Extensions
of
Compliance
Deadlines
c.
Pending
Enforcement
Actions
C.
Banking
Emission
Reduction
Credits
1.
Banking
Rules
Must
Designate
an
Administering
Agency
2.
Only
ERCs
May
be
Banked
3.
Possible
Limitations
on
Use
of
ERCs
for
New
Source
Permitting
4.
Sources
Should
Apply
to
Bank
Surplus
Reductions
As
Soon
As
They
Decide
to
Make
Them
5.
Procedures
for
Banking
Surplus
Emission
Reductions
Should
Be
Defined
6.
Banking
Rules
May
Establish
Ownership
Rights
7.
Banking
Rules
Must
Establish
an
ERC
Registry
or
Its
Equivalent
8.
Possible
Adjustments
to
ERCs
Based
on
Enforcement
Considerations
9.
Possible
Adjustments
to
ERCs
Based
on
Ambient
Attainment
Considerations
a.
ERCs
Generated
Prior
to
the
Design
or
Baseline
Year
Could
Be
Eliminated
b.
ERCs
Could
Be
Guaranteed
Against
Adjustment
c.
Use
or
Deposit
of
ERCs
Could
Be
Temporarily
Suspended
d.
Across­
the­
Board
Discounting
II.
Trades
Covered
by
State
Generic
Rules
A.
General
Principles
for
Evaluating
Generic
Rules
B.
Scope
of
Generic
Rules
1.
VOC
or
NO
X
,
Trades
2.
Particulate,
SO
3
,
CO
or
Pb
Trades
3.
Limits
on
Trades
Exempt
From
SIP
Revisions
Under
Generic
Rules
Page
45
51
FR
43814
4.
Other
Generic
Mechanisms
for
Exempting
Particulate,
SO
2
,
CO
or
Pb
Trades
From
Case­
by­
Case
SIP
Revisions
C.
Enforcing
Emission
Limits
Under
Generic
Rules
D.
Generic
Bubble
Rules
in
Primary
Nonattainment
Areas
Which
Lack
Approved
Demonstrations
of
Attainment
E.
EPA
Oversight
of
Generic
Rules
1.
EPA
Comment
on
Trades
Proposed
Under
Generic
Rules
2.
Reviews
of
Individual
Bubbles
Approved
Under
Generic
Rules
3.
EPA
Audits
of
the
Implementation
of
Generic
Rules
4.
Deficient
Generic
Trades
5.
Deficient
Generic
Rules
F.
Public
Comment
G.
EPA
Notification
H.
Rulemaking
on
Generic
Rules
III.
Trades
Not
Covered
by
State
Generic
Rules
Appendix
A:
Regional
EPA
Emissions
Trading
Coordinators
Appendix
B:
Definitions
of
"
Actual,"
"
Allowable"
and
"
Baseline"
Emissions
For
Purposes
of
Emissions
Trading
Appendix
C:
Approvable
Modeling
Approaches
Appendix
D:
Approvable
Averaging
Times
for
VOC
Trades
Appendix
E:
Radii
of
Significant
Impact
for
Approving
"
Complex
Terrain"
PM,
SO
2
and
CO
Trades
Under
Level
I
Modeling
Approaches
Appendix
F:
CFR
Part
51
Conversion
Table
EMISSIONS
TRADING:
TECHNICAL
ISSUES
DOCUMENT
This
Document
offers
more
detail
on
technical
issues
for
firms
and
pollution
control
agencies
seeking
to
implement
individual
emissions
trades
or
generic
trading
rules
that
meet
the
principles
in
EPA's
final
Emissions
Trading
Policy
Statement.
It
describes
both
the
legal
requirements
for
emissions
trades
under
the
Clean
Air
Act,
and
a
range
of
legal
options
which
states
n1
and
sources
may
consider.
States
and
firms
may
pursue
other
approaches
consistent
with
those
discussed
here.

n
1
"
States"
includes
any
entity
properly
delegated
authority
to
administer
relevant
parts
of
a
State
Implementation
Plan
(
SIP)
under
the
Clean
Air
Act.

Section
I
of
this
Document
explains
general
principles
governing
all
emissions
trading.
Section
II
explains
principles
governing
state
generic
rules.
Section
III
discusses
special
considerations
for
emissions
trades
which
must
be
implemented
as
case­
by­
case
SIP
revisions.

Because
these
sections
reflect
general
Clean
Air
Act
principles,
states,
individual
sources
or
public
commenters
remain
free
to
show
that
a
general
principle
does
not
apply
to
particular
circumstances
or
can
be
satisfied
using
another
approach.
States,
sources
and
commenters
have
this
option
under
current
law,
and
nothing
in
the
Policy
Statement
or
this
Document
restricts
their
opportunity
to
make
such
showings.

Nothing
in
today's
notice
alters
EPA
new
source
review
requirements
or
exempts
owners
or
operators
of
stationary
sources
from
compliance
with
applicable
preconstruction
permit
regulations
in
accordance
Page
46
51
FR
43814
with
40
CFR
51.18,
51.24,
51.307,
52.21,
52.24,
52.27,
and
52.28.
Interested
parties
should,
however,
be
aware
that
bubble
trades
are
not
subject
to
preconstruction
review
or
regulations
where
these
trades
do
not
involve
construction,
reconstruction
or
modification
of
a
source
within
the
meaning
of
those
terms
in
the
regulations
listed
above.

I.
Elements
Of
Emissions
Trading
The
basic
elements
of
any
emissions
trade
are
the
creation
of
an
emission
reduction
credit
(
ERC),
its
use
in
a
trade
and
its
possible
storage
in
a
bank
prior
to
use.

A.
Creating
Emission
Reduction
Credits
States
may
grant
credit
only
for
those
emission
reductions
that
are
surplus,
enforceable,
permanent,
and
quantifiable.
Otherwise
use
of
ERCs
might
degrade
air
quality,
threaten
the
viability
of
the
area's
SIP,
and
make
more
stringent
control
requirements
necessary.

1.
All
Reductions
Must
Be
Surplus
At
minimum,
only
emission
reductions
not
required
by
current
regulations
in
the
SIP,
not
already
relied
on
for
SIP
planning
purposes,
and
not
used
by
the
source
to
meet
any
other
regulatory
requirement
can
be
considered
surplus
and
substituted
for
required
reductions
as
part
of
an
emissions
trade.

The
first
step
in
qualifying
a
reduction
as
"
surplus"
is
to
establish
a
level
of
baseline
emissions.
This
baseline
represents
the
level
of
required
emissions
beyond
which
reductions
must
occur
for
a
source
to
be
eligible
for
credit.
Three
baseline
factors
­­
emission
rate,
capacity
utilization,
and
hours
of
operation
­­
must
be
used
to
compute
and
compare
pre­
trade
and
post­
trade
emission
levels.
n2
n
2
For
further
discussion
of
these
factors
as
they
relate
to
the
calculation
of
baseline
emissions,
see
Appendix
B.

The
baseline
for
each
source
must
be
established
both
on
an
annual
basis
and
for
all
other
averaging
periods
consistent
with
the
relevant
NAAQS
and
PSD
increments.
This
approach
is
necessary
to
protect
the
ambient
standards
and
PSD
increments
on
a
short
term
as
well
as
an
annual
basis.
The
baseline
will
generally
be
determined
by
the
attainment
status
of
the
area,
n3
by
the
way
the
state
developed
its
SIP,
and
by
whether
the
area
is
subject
to
PSD
requirements.

n
3
Unclassified
areas
are
treated
as
attainment
areas
for
permitting
and
emissions
trading
purposes.

Unlike
other
criteria
pollutants,
EPA
does
not
designate
nonattainment
areas
for
lead.
However,
the
Regional
Administrator
will
review
lead
trades,
as
all
other
trades,
to
assure
that
they
do
not
interfere
with
attainment
and
maintenance
of
the
NAAQS.

a.
Use
of
Actual
or
Allowable
Emissions
as
the
Baseline:
Attainment
Areas
and
Nonattainment
Areas
With
Approved
Demonstrations
of
Attainment
(
including
rural
ozone
nonattainment
areas).
In
attainment
areas,
baseline
emissions
must
generally
be
calculated
using
the
lower
of
actual
or
allowable
values
n4
for
all
three
baseline
factors.
However,
allowable
values
corresponding
to
one
or
more
of
these
factors,
when
higher
than
corresponding
actual
values,
may
be
used
in
calculating
baseline
emissions,
provided
those
values
are
shown
to
be
used
or
reflected
in
an
approved
demonstration.
n5
The
burden
of
meeting
this
test
rests
with
the
state
or
applicant.
Where
the
State
or
applicant
cannot
show
by
written
evidence
n6
that
the
demonstration
assumed
an
allowable
value
for
a
given
baseline
factor,
appropriate
modeling
would
be
required
in
order
to
use
an
allowable
value
for
that
factor
in
calculating
baseline
emissions
for
the
source.
n7
This
will
require
a
Level
II
modeling
analysis
as
specified
in
the
modeling
screen
described
below,
using
actual
emissions
for
the
pre­
trade
case,
unless
the
appropriate
EPA
Regional
Office
("
the
Region")
determines
that
additional
technical
support
is
necessary
to
protect
the
NAAQS,
PSD
increments
or
visibility.
Additional
technical
support
may
be
necessary
because
crediting
the
difference
between
actual
Page
47
51
FR
43814
and
allowable
values
for
even
one
of
these
factors
may
produce
a
post­
trade
increase
in
actual
emissions
sufficient
to
jeopardize
applicable
standards,
increments
or
visibility.

n
4
For
the
definition
of
"
actual"
and
"
allowable"
values,
and
further
discussion
on
calculation
of
baseline
emissions,
see
Appendix
B.

n
5
This
statement
does
not
apply
to
netting,
where
"
contemporaneous"
actual
emissions
are
always
the
baseline.
See,
e.
g.,
40
CFR
51.24(
b)(
3).

Bubbles
in
areas
with
demonstrations
based
solely
on
qualitative
judgements
(
e.
g.,
the
"
example
region"
approach
or
no
technical
support)
ordinarily
may
not
rely,
without
appropriate
modeling,
on
allowable
values
in
calculating
baseline
emissions.
However,
bubbles
in
areas
with
demonstrations
based
on
rollbacks
or
dispersion
modeling
may
use
allowable
values
that
are
reflected
in
the
demonstration.

n
6
For
example,
the
demonstration
calculations
themselves,
accompanying
materials,
or
affidavits
from
those
who
constructed
the
demonstration.

n
7
In
certain
circumstances
an
allowable
baseline
value
specified
in
a
preconstruction
permit
will
be
deemed
equivalent
to
one
used
or
reflected
in
an
approved
demonstration.
For
example,
a
source
in
an
attainment
area
where
a
PSD
baseline
has
been
triggered
may
use
allowable
values
consistent
with
its
preconstruction
permit,
if
that
source's
emissions
are
not
reflected
in
the
PSD
ambient
baseline
concentration.
(
However,
if
modeling
using
allowable
emissions
predicts
a
PSD
increment
violation,
then
additional
analyses
must
be
done
to
assure
that
the
PSD
increment
is
protected.)
A
source
in
a
nonattainment
area
may
use
allowable
values
consistent
with
its
preconstruction
permit
to
calculate
its
baseline,
provided
that
permit
post­
dates
the
nonattainment
designation,
SIP
call,
design
year,
or
baeline
inventory
year,
whichever
is
applicable.

Additional
technical
support
is
not
necessarily
limited
to
determining
the
impact
of
the
increases
from
the
trade.
The
Region
may
require
such
additional
technical
support,
up
to
and
including
full
Level
III
modeling,
as
is
necessary
to
assure
that
applicable
NAAQS,
PSD
increments
and
visibility
requirements
will
be
protected.
It
may
require
the
determination
of
background
concentrations
to
which
the
impacts
of
possible
emissions
increases
that
would
otherwise
fall
below
Level
II
significance
values
must
be
added.
Background
concentrations
should
be
determined
in
a
manner
consistent
with
EPA's
Guidelines
on
Air
Quality
Models.

In
attainment
areas
where
the
PSD
baseline
has
been
triggered,
the
trading
baseline
for
a
source
must
generally
be
computed
using
actual
values
for
all
three
baseline
factors
(
i.
e.,
only
reductions
below
a
source's
actual
emissions
can
be
considered
surplus).
Because
40
CFR
51.24
and
52.21
specify
that
increses
in
actual
emissions
occurring
after
the
PSD
baseline
date
consume
PSD
increment,
any
trades
based
on
allowable
emissions
which
would
potentially
crease
actual
emissions
must
perform
at
least
a
Level
II
modeling
analysis
using
actual
emissions
for
the
pre­
trade
case,
and
provide
additional
technical
support
if
deemed
necessary
by
the
Region,
to
demonstrate
that
they
protect
the
relevant
increment
ceiling,
NAAQS,
and
visibility.

In
nonattainment
areas
with
approved
demonstrations,
baseline
emissions
for
a
source
may
be
calculated
using
either
allowable
values
or
actual
values
for
the
three
baseline
factors,
depending
on
the
assumptions
used
in
developing
the
area's
demonstration.
n8
n
8
This
statement
does
not
apply
to
netting,
where
"
contemporaneous"
actual
emissions
are
always
the
baseline.
See,
e.
g.,
40
CFR
51.18(
j)(
1)(
vi).
See
also
Appendix
B
for
detailed
discussion
of
"
actual"
and
"
allowable"
emissions.

Some
states
relied
on
allowable
values
for
certain
sources
in
developing
their
SO
2
and
TSP
attainment
plans.
In
these
nonattainment
areas,
sources
may
use
allowable
values
in
calculating
baseline
emissions,
to
the
extent
the
state
used
or
assumed
those
allowable
values
as
the
basis
for
its
demonstration.
The
burden
of
showing
that
an
allowable
value
was
used
or
reflected
in
an
approved
demonstration
rests
with
the
state
or
applicant
which
seeks
to
use
an
allowable
value.
n9
Page
48
51
FR
43814
n
9
See
n.
6
and
7
above.

Other
nonattainment
areas
either
used
inventories
based
on
actual
emissions,
or
relied
on
measured
(
and
therefore
"
actual")
ambient
air
quality
values,
as
the
primary
basis
for
determining
SIP
emission
limits
needed
to
demonstrate
attainment.
In
some
areas,
SIP
demonstrations
were
based
merely
on
qualitative
judgments
(
e.
g.,
"
example
region"
approaches).
Baseline
emissions
for
sources
in
all
these
other
areas
must
generally
be
calculated
using
the
lower
of
actual
or
allowable
values
for
each
baseline
factor.
However,
states
may
approve,
on
a
case­
by­
case
basis,
use
of
allowable
values
in
calculating
baseline
emissions,
where
they
explicitly
demonstrate
that
such
use
comports
with
reasonable
further
progress
and
will
neither
create
a
new
ambient
violation
nor
delay
the
planned
removal
of
an
existing
violation.
Such
demonstrations
require
full
Level
III
modeling
and
must
be
submitted
to
EPA
as
case­
by­
case
SIP
revisions.

EPA
deems
designated
Rural
Ozone
Nonattainment
Areas
to
possess
acceptable
demonstrations
of
attainment
provided
they
have
an
approved
new
source
review
rule
and
require
RACT
controls
for
all
major
VOC
sources
for
which
EPA
has
issued
Control
Technique
Guidance
(
CTG)
documents.
(
See,
e.
g.,
43
FR
21673
(
May
19,
1978)).
Because
these
areas'
nonattainment
is
generally
caused
by
emissions
from
sources
in
a
nearby
urban
area,
control
of
emissions
from
that
area
is
expected
to
bring
the
rural
area
into
attainment.
Put
differently,
EPA
does
not
require
rural
areas
to
cure
problems
due
to
transport
from
pollution­
generating
areas
which
rural
areas
cannot
control.
However,
EPA
believes
that
further
clarifications
are
required
for
bubbles
in
these
areas.

Sources
involved
in
such
bubbles
must
use
RACT
emission
limits
in
calculating
baseline
emissions,
if
subject
to
Group
I
or
II
CTGs
under
the
EPA
approved
SIP
for
these
areas.
Sources
subject
to
other
SIP
emission
limits
must
use
those
limits
in
calculating
baseline
emissions.
Other
baseline
factors
must
also
be
consistent
with
the
applicable
SIP
requirements,
and
will
generally
be
actual
historical
values.
Where
a
source
is
not
regulated
by
the
EPA­
approved
SIP
its
baseline
will
be
actual
emissions
in
the
year
EPA
approved
the
Part
D
plan
for
the
affected
rural
area.
In
those
approvals,
EPA
presumed
that
controls
for
sources
in
the
upwind
urban
areas,
as
well
as
RACT
on
GTC
sources
in
the
rural
area,
would
bring
about
attainment
in
the
rural
area,
and
that
non­
CTG
sources
in
the
area,
unless
regulated
by
the
SIP,
could
continue
to
emit
at
actual,
non­
RACT
levels
without
interfering
with
attainment
in
those
areas.
See
also
43
FR
21673
(
May
19,
1978).

b.
Special
Progress
Requirements
for
Bubbles
In
Primary
Nonattainment
Areas
Which
Need
But
Lack
Approved
Demonstrations
of
Attainment.
EPA
will
approve
bubbles
which
are
consistent
with
the
attainment
needs
of
these
areas,
which
produce
a
net
air
quality
benefit,
and
which
therefore
secure
interim
progress
towards
attainment.
1
n0
n
10
While
not
all
of
today's
new
requirements
for
bubbles
in
these
areas
are
strictly
"
baseline"
matters,
all
basic
requirements
for
these
bubbles
are
set
out
here
for
simplicity.
New
requirements
also
apply
to
generic
bubble
rules
in
these
areas.
See
Section
II.
D
below.

(
1)
Objective
Tests
For
All
Applications.
Bubble
applications
in
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations
of
attainment
will
be
deemed
to
produce
a
net
air
quality
benefit
and
will
be
processed
for
approval
if
they:

(
a)
Use
lowest­
of­
actual­
SIP­
allowable
or
RACT­
allowable
emissions
baselines.
Such
baselines
are
calculated
using
either:

(
i)
The
actual
emission
rate,
the
SIP
or
other
federally
enforceable
emission
limit,
or
the
applicable
RACT
emission
limit,
1
n1
whichever
is
lower,
to
compute
the
baseline
for
each
source
involved
in
the
trade.
This
baseline
factor
shall
be
determined
as
of
the
date
of
the
source's
application
to
bank
or
trade,
whichever
is
earlier.

n
1
1
Where
an
emission
limit
for
a
source
involved
in
the
trade
has
not
previously
been
approved
by
EPA
as
RACT,
a
baseline
reflecting
a
negotiated
RACT
emission
rate
must
be
agreed
upon
by
the
source,
state
and
EPA
for
the
source
in
question.
Page
49
51
FR
43814
(
ii)
The
lower
of
actual
or
allowable
capacity
utilization
and
hours
of
operation
to
compute
the
baseline
for
each
source
involved
in
the
trade.
Actual
values
shall
generally
be
based
on
the
two
years
of
operation
preceding
the
application
to
bank
or
trade,
unless
another
two
year
period
is
shown
to
be
more
representative
of
actual
operations.
Sources
which
shut
down
prior
to
the
application
to
bank
or
trade
have
zero
emissions,
and
therefore
no
credit
is
available.

For
sources
which
banked
or
sought
to
bank
credit
in
these
nonattainment
areas
prior
to
publication
of
today's
notice,
the
"
date
of
application
to
bank"
is
the
date
of
written
application
to
the
states
to
bank
credit
through
a
formal
bank
or
informal
banking
mechanism
for
use
in
future
trades.
For
sources
which
seek
to
bank
credit
in
these
areas
following
publication
of
today's
notice,
the
date
of
application
to
bank
will
be
the
date
of
written
application
to
the
state
to
make
a
reduction
state­
enforceable
through
or
concurrent
with
use
of
a
formal
bank
or
informal
banking
mechanism.

(
b)
Using
baseline
emissions
defined
above,
meet
applicable
de
minimis,
Level
I,
Level
II
or
Level
III
modeling
tests
for
ambient
equivalence,
as
appropriate.

(
c)
Produce
a
substantial
net
reduction
in
actual
emissions
(
i.
e.,
a
reduction
of
at
least
20%
in
the
emissions
remaining
after
application
of
the
baselines
specified
above).

(
d)
Are
accompanied
by
the
assurances
of
consistency
with
ambient
progress
and
air
quality
planning
goals
specified
in
section
I.
A.
1.
b.(
3)
below.

(
2)
Where
These
Special
Progress
Requirements
Will
Apply.
The
following
primary
nonattainment
areas
need
but
lack
approved
demonstrations,
and
bubbles
within
them
are
therefore
subject
to
the
special
progress
requirements
in
section
I.
A.
1.
b.(
1)
above:

(
a)
Areas
that
are
designated
primary
non­
attainment
areas
under
section
107
for
the
pollutant
involved
in
the
trade
and
which
failed
to
submit
a
1979
Part
D
attainment
demonstration
or
which
submitted
one
that
has
not
yet
received
full
EPA
approval.
This
includes
primary
total
suspended
particulate
(
TSP)
nonattainment
areas
which
submitted
a
SIP
that
did
not
include
an
actual
demonstration
of
attainment
but
still
received
EPA
approval
(
i.
e.,
a
"
RACT
plus
studies"
SIP).

(
b)
Extension
nonattainment
areas
which
failed
to
submit
a
1982
SIP
demonstration,
or
which
submitted
one
that
has
not
yet
received
EPA
approval.
Also
included
are
those
ozone
nonattainment
areas
that
are
unable
to
demonstrate
attainment
by
1987,
unless
a
demonstration
of
attainment
for
the
area
is
subsequently
approved
by
EPA.

(
c)
Areas
that
have
received
either:
(
1)
A
section
110(
a)(
2)(
H)
notice
of
deficiency
based
on
failure
to
attain
or
maintain
the
National
Ambient
Air
Quality
Standards
(
NAAQS),
in
the
form
of
a
SIP
call
or
a
new
section
107
or
171(
2)
nonattainment
designation;
or
(
2)
a
notice
of
failure
to
implement
an
approved
SIP.

(
d)
Areas
which
received
notice
from
EPA
that
they
have
failed
to
meet
conditions
in
their
EPAapproved
SIPs,
including
commitments
to
adopt
particular
regulations
by
specified
dates.
The
one
exception
would
occur
where
the
only
portion
of
the
SIP
(
including
the
attainment
demonstration)
lacking
full
approval
is
the
inspection/
maintenance
provision
for
mobile
sources.
In
these
circumstances,
stationary­
source
bubbles
will
be
treated
as
if
the
area
had
a
fully
approved
SIP.

(
e)
Any
area
that
does
not
have
an
EPA­
approved
or
EPA­
promulgated
plan
for
lead.

(
3)
State
Assurances.
EPA
will
not
approve
a
bubble
in
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations
unless
the
state
provides
assurances
that
the
proposed
trade
will
be
consistent
with
its
efforts
to
attain
the
ambient
standard.
The
state
must
make
the
following
representations
to
the
EPA
Regional
Office
in
or
with
the
letter
formally
submitting
the
bubble
as
a
revision
to
the
SIP:

(
a)
The
resulting
emission
limits
are
consistent
with
EPA
requirements
for
ambient
air
quality
progress,
as
specified
in
Section
I.
A.
l.
b.(
1)
above.

(
b)
The
bubble
emission
limits
will
be
included
in
any
new
SIP
and
associated
control
strategy
demonstration.

(
c)
The
bubble
will
not
constrain
the
state
or
local
agency's
ability
to
obtain
any
additional
emission
reductions
needed
to
expeditiously
attain
and
maintain
ambient
air
quality
standards.
Page
50
51
FR
43814
(
d)
The
state
or
local
agency
is
making
reasonable
efforts
to
develop
a
complete
approvable
SIP
and
intends
to
adhere
to
the
schedule
for
such
development
(
including
dates
for
completion
of
emissions
inventory
and
subsequent
increments
of
progress)
stated
in
or
with
the
letter
formally
submitting
the
bubble
or
previous
such
letters.

(
e)
The
baseline
used
to
calculate
the
bubble
emission
limits
is
consistent
with
the
baseline
requirements
in
section
I.
A.
l.
b.(
1)
above.

These
state
assurances
must
be
made
in
writing
by
the
appropriate
state
or
local
authority
(
e.
q.,
State
Air
Director,
Air
Pollution
Control
Board,
or
Legislative
Committee).
EPA
will
not
second­
guess
such
state
representations,
provided:
(
1)
They
are
a
substantial
test
applied
by
the
state
to
each
bubble,
and
(
2)
the
state
has
explained
how
the
proposed
bubble
is
consistent
with
the
area's
projected
attainment
strategy.
Nor
will
EPA
examine,
or
expect
states
to
examine
in
making
such
representations,
any
specific
source's
subjective
motivation
in
making
claimed
reductions.

(
4)
Treatment
of
Pending
Bubble
Applications.
"
Pending
bubbles"
means
those
which
are
currently
pending
at
EPA
Regions
or
Headquarters,
as
well
as
any
bubble
applications
which
were
formally
submitted
to
EPA
Regions
under
the
1982
policy
but
returned
without
action
because
final
bubble
criteria
had
not
yet
been
issued.
In
primary
nonattainment
areas
needing
but
lacking
demonstrations,
these
bubbles
should
contribute
to
progress
towards
attainment.
"
Progress
towards
attainment"
means
some
extra
reduction
beyond
equivalence,
with
the
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
emissions
baseline
applied
as
of
the
time
applicants
originally
sought
credit.
In
other
areas
these
bubbles
must
show
that
applicable
standards,
increments,
and
visibility
requirements
will
not
be
jeopardized.
Pending
bubbles
which
meet
these
tests
and
all
other
applicable
requirements
of
the
1982
policy
will
be
processed
for
approval.

Pending
bubbles
may
undergo
limited
modification
by
the
states
or
sources
which
submitted
them
in
order
to
meet
the
new
requirements
outlined
above
(
e.
g.,
it
may
be
necessary
to
recalculate
the
applicable
baseline
emissions
of
certain
bubbles
in
nonattainment
areas
needing
but
lacking
demonstrations
and
to
reconfigure
those
bubbles
in
response
to
the
reduced
credit
which
may
be
allowed
under
the
new
more
stringent
requirements).
However,
pending
bubbles
which
prior
to
final
EPA
approval
are
changed
to
the
extent
that
they
no
longer
reasonably
resemble
the
original
proposal
qualifying
for
pending
bubble
status
(
e.
g.,
those
which
are
substantially
expanded
in
scope
or
changed
to
involve
primarily
different
sources
of
emission
reduction
credit)
will
be
considered
new
bubbles
subject
to
all
of
the
requirements
of
today's
notice.

Bubble
applications
which
were
submitted
to
EPA
Regions
by
states,
but
which
were
withdrawn
(
or
rejected)
as
inadequate
under
the
1982
policy,
are
not
"
pending."
These
bubbles,
if
reformulated
and
resubmitted,
must
meet
all
requirements
of
today's
notice
applicable
to
new
bubble
applications.

(
c.)
No
Double­
Counting
of
Reductions.
At
minimum,
to
be
considered
surplus
an
emission
reduction
cannot
already
have
been
claimed
as
part
of
a
demonstration
or
updated
emission
inventory
by
any
state
air
quality
plan
or
have
been
used
by
the
source
to
meet
any
other
regulatory
requirement.
Double­
counting
of
reductions
­­
granting
credit
for
the
same
emission
reduction,
e.
g.,
once
to
the
state
as
part
of
its
nonattainment
SIP
demonstration
or
PSD
baseline,
and
a
second
time
to
a
source
for
use
in
an
emissions
trade,
must
be
addressed
in
the
following
situations.

(
1)
Crediting
Pre­
Existing
Emission
Reductions.
In
nonattainment
areas
credit
generally
cannot
be
granted
for
emission
reductions
made
before
monitoring
data
is
or
was
collected
for
use
in
current
SIP
planning.
Because
monitored
ambient
levels
already
reflect
these
emission
decreases,
such
decreases
may
have
been
assumed
in
calculating
the
further
reductions
needed
to
attain
ambient
standards.
States
must
clearly
show
that
the
existence
of
these
reductions
has
been
accounted
for
in
their
calculations
in
order
to
gain
credit
for
these
reductions.

States
should
also
clearly
identify
the
inventory
baseline
date
before
which
reductions
will
not
qualify
for
credit.
The
earliest
acceptable
baseline
date
would
normally
be
the
year
of
the
most
recent
emissions
inventory
used
in
planning
Part
D
SIP
revisions
under
the
Clean
Air
Act
Amendments
of
1977.
n12
Where
emissions
inventories
or
other
data
are
updated
for
tracking
RFP
and
correction
of
Part
D
SIPs,
the
new
inventories
must
treat
banked
emissions
reductions
as
current
actual
emissions
"
in
the
air"
at
the
source
where
created,
so
that
corrected
SIPs
do
not
inadvertently
rely
on
these
prior
reductions
and
cause
them
to
Page
51
51
FR
43814
be
lost
for
use.
If
inventories
do
not
treat
these
banked
emissions
as
"
in
the
air,"
or
if
they
are
otherwise
relied
upon
for
SIP
planning
purposes,
such
reductions
can
no
longer
be
credited
for
trading.
n13
n
12
For
baselines
and
base
year
dates
in
rural
ozone
nonattainment
areas,
see
section
I.
A.
l.
a.
above.

n
13
In
order
to
help
avoid
such
results,
states
may
wish
to
make
sources
responsible
to
report
banked
emission
reductions
when
responding
to
the
states'
inventory
reporting
requirements.

In
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations
of
attainment,
emission
reductions
achieved
prior
to
application
to
bank
or
trade
(
whichever
is
earlier)
will
not
be
credited
for
use
in
bubbles.
See
section
I.
A.
1.
b.(
1)
above.
Regardless
of
whether
they
meet
other
baseline
tests,
such
reductions
were
not
reasonably
elicited
by
the
opportunity
to
trade
in
a
practical,
objective
sense
determined
by
timing,
and
cannot
be
used
to
meet
existing­
source
SIP
requirements
absent
a
demonstration.
n14
n
1
4
In
all
nonattainment
areas,
emission
reductions
achieved
by
shutting
down
or
permanently
curtailing
an
existing
source
prior
to
application
for
a
new
source
permit
cannot
generally
be
used
as
offsets.
See
40
CFR
51.18(
j)(
3)(
ii)(
c).
EPA
proposed
on
August
25,
1983
to
remove
this
restriction.
See
48
FR
38742,
38751.
However,
it
remains
in
effect
unless
and
until
EPA
takes
final
action
on
that
proposal.

In
attainment
areas,
reductions
at
major
stationary
sources
which
commenced
construction
after
January
1,
1975
may
be
able
to
qualify
for
credit
whether
such
reductions
occurred
before
or
after
the
PSD
baseline
triggering
date.
See
40
CFR
51.24(
b)(
13)(
ii)
(
45
FR
52719­
20;
August
7,
1980).
Other
emission
reductions
(
e.
g.,
at
minor
sources)
cannot
qualify
for
credit
where
the
PSD
baseline
date
is
or
has
been
triggered
and
such
reductions
occurred
prior
to
the
trigger
date,
unless
these
reductions
are
not
assumed
in
the
PSD
baselines.
Since
banked
emission
reduction
credits
must
be
considered
to
be
"
in
the
air"
for
all
planning
purposes,
if
the
baseline
date
is
triggered
before
banked
credits
are
actually
used,
such
banked
credits
will
be
considered
as
part
of
the
baseline
and
will
not
consume
increment
when
used
in
an
emissions
trade.

In
attainment
areas
where
the
PSD
baseline
has
not
been
triggered
as
of
the
date
EPA
or
the
permitting
authority
takes
relevant
final
action
on
the
trading
transaction,
reductions
below
current
SIP
or
permit
limits
generally
may
be
used
without
special
restrictions
in
bubble
or
banking
transactions,
provided
they
are
otherwise
creditable
and
there
is
assurance
that
NAAOS
will
not
be
violated
due
to
any
potential
increase
in
actual
emissions.
1
n5
n
1
5
However,
reductions
at
sources
other
than
major
stationary
sources
on
which
construction
commenced
before
January
1,
1975
may
not
be
used
to
balance
increases
at
such
pre­
1975
major
sources.

(
2)
Crediting
Reductions
From
Shutdowns.
Shutdowns
are
generally
treated
for
purposes
of
emissions
trading
like
any
other
type
of
emissions
reduction.
1
n6
For
example,
the
same
limitations
on
pre­
existing
reductions
(
section
I.
A.
1.
c.(
1),
above)
apply
to
shutdowns
where
they
apply
to
any
other
type
of
emissions
reduction.
However,
under
current
federal
New
Source
Review
requirements
for
major
sources,
shutdowns
that
occur
prior
to
application
for
a
new
source
permit
can
be
used
as
offsets
only
for
equipment
replacing
on­
site
productive
capacity
which
was
shut
down.
1
n7
n
1
6
For
use
of
banked
shutdown
credits
for
bubbles
in
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations,
see
section
I.
A.
1.
c(
3)
below.

n
1
7
See
n.
14
above.
Page
52
51
FR
43814
Shutdowns
are
of
general
concern
with
respect
to
double­
counting
where
a
state
may
have
relied
directly
or
indirectly
on
shutdowns
in
a
SIP
demonstration
of
attainment.
(
Where
a
primary
nonattainment
area
needs
but
lacks
an
approved
demonstration
of
attainment,
the
progress
requirements
of
subsection
I.
A.
1.
b.
above
apply
to
bubbles
involving
shutdowns
as
well
as
to
bubbles
involving
other
types
of
emission
reductions.
These
requirements
generally
bar
use
of
reductions
from
shutdowns
which
occurred
before
application
to
bank
or
trade.)

In
general,
a
state
may
credit
reductions
from
shutdowns
if
the
SIP
has
not
already
assumed
credit
for
these
reductions
in
its
attainment
strategy.
So
long
as
reductions
from
shutdowns
have
not
already
been
counted
in
developing
an
area's
attainment
strategy,
they
are
a
potential
source
of
surplus
reductions.

Some
SIPs
assumed
a
set
quantity
of
reductions
from
the
overall
difference
in
emissions
due
to
new
plant
openings
and
existing
plant
shutdowns.
These
SIPs
incorporated
into
their
attainment
strategy
a
net
"
turnover"
reduction
in
emissions
because
new
sources
are
generally
cleaner
than
those
that
shut
down.
Double­
counting
would
occur
if
a
specific
source
received
credit
for
reductions
from
such
a
shutdown,
since
that
reduction
was
already
assumed
in
the
SIP's
demonstration
of
attainment.

These
states
have
at
least
two
options
for
granting
sources
credit
for
shutdowns
without
this
kind
of
double­
counting.
First,
they
may
reexamine
any
"
turnover"
reductions
relied
on
in
their
SIP
and
decide
not
to
take
credit
for
these
reductions.
This
approach
would
require
EPA
approval
of
a
revised
demonstration
of
attainment
or
a
SIP
revision
showing
consistency
with
the
existing
demonstration.
Such
an
action
can
be
processed
by
EPA
concurrently
with
a
bubble
or
generic
rule.
Alternatively,
these
states
may
allow
credit
only
after
the
total
quantity
of
shutdown
reductions
relied
on
in
the
SIP
has
occurred.

In
all
cases
where
net
turnover
reductions
have
been
quantified
and
relied
on
as
part
of
attainment
demonstrations,
states
which
seek
to
grant
shutdown
credit
for
use
in
trading
must
be
prepared
to
show
clearly
and
unequivocally
on
the
basis
of
SIP
documents
or
tracking
that
the
credit
has
not
been
doublecounted
or
otherwise
relied
on
for
SIP
planning
purposes.

(
3)
Use
of
Banked
Credits
From
Shutdowns
or
Other
Actions
for
Bubble
Purposes.
1
n8
In
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations,
ERCs
intended
for
bubble
purposes
may
generally
be
banked
and
used
with
the
same
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
baseline
used
for
other
bubble
transactions.
1
n9
This
baseline
should
be
applied
as
of
the
time
banked
credit
is
or
was
initially
sought,
with
the
20%
reduction
applied
to
both
sources
in
the
trade
if
these
credits
are
later
used
for
bubbles.
The
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
baseline
plus
the
20%
discount
will
also
apply
to
the
source
using
that
credit
in
a
bubble,
as
of
the
time
of
such
subsequent
bubble
application.

n
1
8
ERCs
used
for
netting
and
offset
purposes
(
including
those
derived
from
banks)
must
comply
with
relevant
NSR
and
PSD
requirements.

n
1
9
For
further
discussion
related
to
the
use
of
banked
credits
in
these
nonattainment
areas,
see
section
I.
C.
9.
below.

Banked
credits
produced
by
shutdowns
and
curtailments
may
be
used
for
bubbles
in
these
areas
on
the
same
terms
as
use
of
other
banked
credits,
provided
their
use
is
subject
to
stringent
qualitative
review
to
assure
technical,
legal,
and
programmatic
consistency
with
SIP
planning
goals
(
e.
g.,
avoidance
of
doublecounting
and
"
shifting
demand").
This
review
will
not
examine
any
source's
motivation
in
shutting
down
a
facility
or
curtailing
production.
However,
the
source
must
show
that
a
written
application
was
submitted
to
make
the
shutdown/
curtailment
state­
enforceable
through
or
concurrent
with
use
of
a
formal
bank
or
informal
banking
mechanism,
prior
to
the
time
the
shutdown/
curtailment
occurred.
Submittal
of
such
an
application
to
make
proposed
reductions
from
a
shutdown
or
curtailment
state­
enforceable
will
constitute
the
relevant
definition
of
"
application
to
bank"
for
timing
purposes
related
to
the
evaluation
of
bubble
credits
in
these
nonattainment
areas
(
see
section
I.
A.
1.
b(
1)
above).
2
n0
The
shutdown/
curtailment
must
be
made
federally
enforcement
when
it
is
used
in
a
bubble.
Page
53
51
FR
43814
n
2
0
For
sources
which
banked
or
sought
to
bank
credits
from
shutdowns
or
curtailments
in
these
nonattainment
areas
prior
to
publication
of
today's
notice,
written
evidence
must
be
provided
showing
either
that
an
application
to
deposit
the
credits
in
a
formal
bank
was
submitted
to
the
state
prior
to
the
time
the
shutdown/
curtailment
occurred,
or
that
the
state
acknowledged,
before
or
at
the
time
the
shutdown/
curtailment
occurred,
both
the
existence
of
that
shutdown/
curtailment,
and
the
source's
intent
to
use
the
resulting
credits
in
a
future
trade.

Use
for
bubble
purposes
of
nonbanked
credits
resulting
from
current
shutdowns
or
curtailments
will
be
allowed
in
these
areas
if
the
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
baseline
plus
the
20%
additional
reduction
are
applied
to
determine
the
amount
of
credit.

No
special
baseline
or
additional
reduction
requirements
will
apply
to
these
credits
in
other
areas.

d.
Multiple
Use
of
ERCs.
Once
surplus
reductions
are
credited,
states
must
prohibit
their
multiple
use.
The
same
pound
of
reduction
must
not
be
simultaneously
banked
by
two
different
entities
or
used
to
satisfy
two
different
regulatory
requirements
at
the
same
time.
To
prevent
these
results,
states
must
adopt
an
ERC
registry
or
equivalent
means
of
accounting
for
the
creation,
banking,
transfer,
or
use
of
ERCs.
See
Section
I.
C.
6
below.
States
must
also
ensure
that
past
reductions
used
in
bubble,
netting
or
offset
transactions
are
not
later
credited
in
newly­
established
banks.

e.
Reductions
from
Uninventoried
Sources.
Sources
not
included
in
an
area's
SIP
emission
inventory
may
apply
for
emission
reduction
credit.
Such
applications
may
enhance
state
air
quality
planning
capabilities.
Where
such
sources
are
already
subject
to
SIP
emission
limits,
those
emission
limits
must
be
used
as
the
basis
for
determining
emission
reduction
credit,
unless
a
more
stringent
baseline
would
normally
be
required
(
see
sections
I.
A.
1.
a.
and
I.
A.
1.
b.
above).
2
n1
n
2
1
Where
a
given
source
was
not
subject
to
mandatory
RACT
regulation
due
to
the
fact
that
it
was
not
included
in
the
inventory
(
e.
g.,
where
no
RACT
regulation
for
a
source
category
was
adopted
because
the
state,
unaware
of
the
source,
issued
a
declaration
that
no
source
existed
in
that
source
category,
or
where
an
uninventoried,
non­
CTG
source
of
greater
than
100
TPY
emissions
is
located
in
an
ozone
extension
area),
a
baseline
reflecting
a
negotiated
RACT
emission
rate
must
be
agreed
upon
between
the
source,
the
state
and
EPA
for
the
uninventoried
source
in
question.

In
attainment
areas
states
may
grant
bubble
credit
to
sources
regardless
of
whether
they
have
been
included
in
an
inventory,
based
on
use
of
actual
values
for
each
of
the
three
baseline
factors,
so
long
as
those
sources
are
not
subject
to
lower
allowable
values
for
those
factors.
Allowable
values,
when
higher
than
actual
values,
may
alternatively
be
used
in
calculating
the
baseline,
provided
sources
show
that
any
resulting
potential
increase
in
actual
emissions
does
not
jeopardize
applicable
ambient
standards,
PSD
increments,
or
visibility.
(
See
40
CFR
51.24
and
52.21
for
specific
requirements
concerning
PSD
increments
and
visibility.)

In
nonattainment
areas
with
approved
demonstrations
of
attainment,
whether
sources
not
on
the
inventory
can
create
bubble
credit
will
turn
on
how
the
approved
demonstration
of
attainment
was
designed.
Some
states
first
monitored
ambient
values
to
determine
required
reductions
for
the
SIP,
then
required
a
proportionate
reduction
in
emissions
from
certain
general
source
categories
(
i.
e.,
a
"
rollback")
in
order
to
attain.
States
may
grant
credit
for
reductions
from
uninventoried
sources
in
these
areas
in
at
least
two
ways.

(
1)
They
could
require
the
average
of
percentage
reductions
imposed
on
all
inventoried
sources,
and
grant
credit
only
for
reductions
in
excess
of
that
amount.
In
this
case,
baseline
emissions
should
be
based
on
the
percentage
reduction
in
actual
emissions
for
the
year
in
which
the
baseline
data
for
the
rollback
was
gathered.
Where
such
sources
are
already
subject
to
lower
SIP
emisssion
limits,
those
limits
must
be
used
to
determine
credit.

(
2)
They
could
require
the
source
to
use
a
RACT
emission
rate
and
the
lower
of
actual
or
allowable
capacity
utilization
and
hours
of
operation
to
calculate
the
baseline,
and
grant
credit
only
for
reductions
below
that
baseline.
This
RACT
baseline
would
have
to
result
in
a
reduction
at
least
as
great
as
the
percentage
reduction
assumed
in
the
rollback.
As
discussed
above,
where
sources
are
already
subject
to
lower
SIP
emission
limits,
those
limits
must
be
used
as
the
basis
for
determining
credit.
Page
54
51
FR
43814
Other
areas
developed
SIP
demonstrations
based
on
dispersion
models
rather
than
area­
wide
proportionate
reductions.
To
the
extent
these
SIPs
demonstrated
ambient
attainment
through
reductions
required
from
specific
inventoried
sources,
incorporated
emissions
from
uninventoried
sources
in
the
background
or
area
source
totals,
and
projected
attainment
by
modeling
the
effects
of
those
reductions,
reductions
from
sources
not
on
the
inventory
can
be
credited
using
the
lower
of
actual
or
allowable
values
for
each
of
the
baseline
factors.

In
primary
nonattainment
areas
which
need
but
lack
an
approved
demonstration
of
attainment,
the
progress
requirements
of
Section
I.
A.
1.
b.
above
apply
to
bubbles
which
seek
to
use
credit
from
uninventoried
sources.
These
include
a
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
emissions
baseline.
Where
a
RACT
emission
limit
has
not
already
been
adopted
for
an
uninventoried
source,
such
a
limit
must
be
agreed
upon
between
the
source,
the
state
and
EPA
before
the
baseline
can
be
determined.

States
which
grant
credit
from
uninventoried
sources
not
subject
to
permits,
offset
requirements,
or
enforceable
production
constraints
should
address
the
possibility
that
reductions
from
one
such
source
may
be
followed
by
equal
or
greater
increases
from
similar
nearby
sources
due
to
shifting
demand.
These
states
must
clearly
demonstrate
that
ERCs
from
the
uninventoried
source
are
surplus
and
permanent.
Interested
parties
should
be
aware
that
some
uninventoried
sources
may
not
readily
meet
these
tests.
For
example,
reductions
resulting
from
shutdown
of
a
dry
cleaner
will
generally
not
be
creditable,
unless
the
state
subjects
such
sources
to
offset
requirements
or
other
measures
addressing
this
problem.
However,
reductions
due
to
improved
control
at
such
a
dry
cleaner
would
generally
be
creditable,
since
shifting
demand
is
not
implicated.

Baselines
for
Open
Dust
Trades.
Fugitive
dust
regulations
generally
consist
of
generic
work
practices
and
operating
procedures.
The
specifics
of
a
fugitive
dust
program
are
generally
contained
in
an
operating
permit
or
fugitive
dust
program.
It
is
generally
not
possible
to
identify
the
appropriate
emissions
baseline
from
a
general
state
open
dust
regulation.
Therefore,
for
any
open
dust
trade
a
negotiated
RACT
baseline
must
generally
be
agreed
upon
between
the
source,
state
and
USEPA
for
the
open
dust
source
in
question.

2.
Alternative
Emission
Limits
Must
Be
Enforceable
Each
bubble,
netting,
offset
or
banking
transaction
must
be
approved
by
the
state
and
must
be
federally
enforceable
at
the
time
an
ERC
is
used.
Reviewing
authorities
may
be
able
to
use
existing
procedures
(
including
preconstruction
permits
issued
by
states
pursuant
to
40
CFR
51.18,
51.24,
51.307
or
52.21)
or
EPA­
approved
generic
rules
to
make
reductions
federally
enforceable.
The
former
possibility
exists
because
permits
issued
under
a
federally­
approved
new
source
review
program
are
federally
enforceable.
However,
many
preconstruction
permit
programs
have
been
federally
approved
strictly
for
sources
subject
to
NSR,
and
therefore
may
not
be
capable
of
use
for
transactions
that
do
not
trigger
NSR
requirements,
or
that
involve
sources
not
already
subject
to
preconstruction
permits.

With
respect
to
the
latter
possibility,
any
enforceable
compliance
instrument
imposing
emission
limits
within
the
scope
of
an
EPA­
approved
generic
rule
is
deemed
federally
enforceable
as
part
of
the
SIP.

Emission
limits
established
by
a
trade
must
be
incorporated
in
a
compliance
instrument
which
is
legally
binding
and
practicably
enforceable
by
EPA.

Trades
involving
individual
SIP
revisions
automatically
satisfy
this
requirement.
For
trades
under
generic
rules
a
compliance
instrument
culd
take
the
form
of
an
agreement
between
the
source
and
state,
a
preconstruction
permit
(
if
one
is
applicable),
a
consent
decree,
a
state
operating
permit,
or
any
other
compliance
instrument
judicially
enforceable
by
the
state.
To
assure
state
enforceability,
the
generic
rule
should
state
that
sources
subject
to
these
instruments
are
required
to
meet
the
emission
limits
contained
therein.
Such
instruments
would
then
automatically
become
federally
enforceable
via
an
EPA­
approved
generic
rule,
provided
they
are
issued
as,
or
part
of,
the
compliance
instrument
specifically
required
by
the
generic
rule.

Compliance
instruments
must
ensure
that
enforcement
personnel
do
not
have
to
test
simultaneously
every
emission
source
involved
in
a
trade.
This
generally
requires
source­
specific
emission
limits.
However,
states
may
use
pre­
specified
combinations
of
source­
specific
emission
limits
which
are
enforceable.
States
may
also
use
an
overall
limit
that
applies
to
a
group
of
emission
sources
which
can
be
evaluated
simultaneously,
where
there
is
a
reliable
and
enforceable
method
of
determining
compliance
(
e.
g.,
through
Page
55
51
FR
43814
production
records,
input
factors,
or
other
indirect
means,
or
through
use
of
a
continuous
emissions
monitor.)
See,
e.
g.,
45
FR
80824,
December
8,
1980.

The
compliance
instrument
should
also
specify
applicable
restrictions
on
hours
of
operation,
production
rates
or
input
rates;
enforceable
test
methods
for
determining
compliance;
and
necessary
recordkeeping
or
reporting
requirements.
To
be
enforceable,
these
limits
must
state
the
minimum
time
period
over
which
they
will
be
averaged
(
e.
g.,
lbs/
hour,
lbs/
MBtu
averaged
over
24
hours,
production
rate/
day).
n22
Unless
such
enforceable
restrictions
are
or
have
been
placed
on
capacity
utilization
and
hours
of
operation,
or
on
overall
emissions,
maximum
values
for
capacity
utilization
and
hours
of
operation
must
generally
be
used
in
calculating
post­
trade
emission
limits
and
in
ambient
modeling
of
the
post­
trade
case.

n
22
Many
state
permits
or
permit
procedures
may
need
revisions
to
assure
that
they
provide
adequate
compliance
information.
However,
such
revisions
need
only
occur
on
a
case­
by­
case
basis
as
individual
trades
are
approved.

3.
All
Reductions
Must
Be
Permanent
All
emission
increases
in
a
trade
must
be
compensated
by
emission
reductions
that
are
permanent
(
i.
e.,
assured
for
the
life
of
the
corresponding
increase,
whether
unlimited
or
limitied
in
duration).
n23
This
requirement
may
generally
be
met
by
enforceable
permit
limitations
confirming
the
amount
and
duration
of
the
decrease.
If
reductions
with
a
limited
life
are
used,
the
life
of
the
trade
must
be
limited
accordingly,
so
that
the
trade
will
automatically
terminate
with
expiration
of
those
reductions.
The
date
of
termination
may
be
specified
in
the
notice
of
approval.
Alternatively,
source(
s)
may
agree
to
provide
formal
written
notification
to
EPA
and
the
state
before
such
reductions
may
be
discontinued
and
the
trade
terminated.

n
23
Permits
or
other
compliance
instruments
for
limited­
duration
trades
must
clearly
state
such
limits.

Permanence
may
present
special
but
resolvable
"
shifting
demand"
problems
for
reductions
from
small
sources
not
subject
to
permits,
offset
requirements,
or
enforceable
production
constraints.
States
which
grant
credit
from
these
source
categories
must
address
the
possibility
that
reductions
from
one
source
may
result
in
equal
or
greater
increases
from
similar
nearby
sources.
n24
n
24
States
can
address
such
potentially
"
shifting
demand"
among
such
sources
as
dry
cleaners,
paint
shops
and
gas
stations
by,
for
example
(
1)
prohibiting
creation
of
ERCs
due
to
shutdown
or
curtailment
of
such
small
sources;
(
2)
limiting
ERCs
from
small
sources
to
categories
determined
not
to
be
subject
to
shifting
demand;
or
(
3)
requiring
offsets
for
increases
in
emissions
from
such
small
sources.
Cf.
section
I.
A.
1.
e.
above.

In
order
to
use,
in
a
bubble
trade,
emission
reduction
credits
derived
from
reductions
in
operations
beyond
those
consistent
with
the
baseline
(
e.
g.,
a
reduction
from
3
to
2
workshifts),
a
source
must
have
its
preconstruction
permit
or
other
federally
enforceable
compliance
instrument
altered
to
reflect
the
curtailment
in
production
records
reflecting
such
curtailment
(
see
section
I.
A.
2
above).
n25
Future
increases
in
production
beyond
the
permit
amount
may
trigger
new
source
review
or
require
approval
of
a
new
emissions
trading
application
which
includes
compensating
emission
reductions.
As
with
other
types
of
noncompliance,
any
source
which
exceeds
permitted
production
limits
would
be
subject
to
potential
noncompliance
penalties.

n
25
Under
EPA's
NSR
regulations,
prior
curtailments
are
subject
to
the
same
restrictions
for
offset
purposes
as
prior
shutdowns.
See
n.
14
above.

4.
All
Reductions
Must
be
Quantifiable
Page
56
51
FR
43814
Before
an
emission
reduction
can
be
credited
it
must
be
quantified.
This
generally
means
the
state
must
establish
a
reliable
basis
for
calculating
the
amount
and
rate
of
the
reduction
and
describing
its
characteristics.

a.
Calculating
the
Reduction.
To
quantify
the
amount
of
emission
reductions
eligible
as
ERCs,
emissions
must
be
calculated
both
before
and
after
the
reduction
(
i.
e.,
assuming
the
post­
reduction
limits).
Although
many
different
methods
of
calculation
are
available
(
e.
g.,
emission
factors,
stack
tests,
monitored
values,
production
or
process
inputs),
the
same
method
and
averaging
time
should
generally
be
used
to
quantify
emissions
both
before
and
after
the
reduction.
n26
n
26
In
general,
states
may
not
approve
VOC
trades
in
ozone
nonattainment
areas
where
such
trades
would
incorporate
averaging
times
longer
than
one
day.
However,
where
VOC
sources
show
that
daily
VOC
emissions
cannot
be
determined
or
application
of
RACT
is
not
technically
or
economically
feasible
on
a
daily
basis,
longer
averaging
times
may
be
permitted.
See
Appendix
D.

b.
Describing
the
Reduction.
If
an
ERC
will
be
used
at
the
time
of
creation,
only
characteristics
necessary
to
evaluate
that
proposed
use
need
be
described.
Where
the
ERC
will
be
banked
and
its
eventual
use
is
not
yet
known,
a
more
detailed
description
should
be
provided
in
order
to
facilitate
its
later
evaluation
for
a
particular
use.

B.
Using
Emission
Reduction
Credits
This
section
explains
the
substantive
and
procedural
principles
applicable
to
use
of
ERCs,
primarily
for
existing­
source
bubbles.
Many
of
these
principles
also
apply
to
use
of
ERCs
in
netting
or
offset
transactions.
However,
those
transactions
are
governed
by
EPA's
New
Source
Review
regulations
(
40
CFR
Parts
51
and
52)
or
state
rules
reflecting
them.

1.
Substantive
Principles
for
Using
ERCs
a.
Emissions
Trades
Must
Involve
the
Same
Pollutant.
The
Clean
Air
Act
requires
states
to
develop
separate
plans
to
attain
and
maintain
the
national
ambient
air
quality
standard
for
each
criteria
pollutant.
Thus,
all
individual
bubble,
netting
or
offset
transactions
must
involve
the
same
pollutant.
Only
reductions
of
particulates
can
substitute
for
increases
of
particulates,
reductions
of
SO
2
for
increases
in
SO
2
,
etc.

b.
All
Uses
of
ERCs
Must
Satisfy
Ambient
Tests.
Because
the
Clean
Air
Act
requires
that
all
areas
throughout
the
country
attain
and
maintain
ambient
standards,
protect
applicable
PSD
increments,
and
protect
visibility
in
mandatory
Federal
Class
I
(
PSD)
areas,
bubbles
must
generally
be
equivalent
in
ambient
effects
to
the
baseline
emission
levels
which
they
replace.
n27
In
nonattainment
areas,
use
of
ERCs
cannot
create
a
new
violation
of
an
ambient
standard
or
delay
the
planned
removal
of
an
existing
violation.
In
attainment
areas,
use
of
ERCs
cannot
violate
an
increment
or
ambient
standard.
Use
of
ERCs
in
either
type
or
area
cannot
adversely
affect
visibility
in
any
mandatory
Federal
Class
I
area.

n
27
In
primary
nonattainment
areas
needing
but
lacking
an
approved
demonstration
of
attainment,
bubbles
must
achieve
a
net
air
quality
benefit.
See
Section
I.
A.
1.
b.
above.

The
ambient
effect
of
a
trade
generally
depends
on
the
dispersion
characteristics
of
the
pollutant
involved.

VOC
or
NO
X
Trades.
Trades
involving
VOC
or
NO
X
need
consider
only
emissions.
Since
the
ambient
impact
of
these
pollutants
is
areawide
rather
than
localized,
one
pound
of
increased
emissions
will
be
balanced
in
ambient
effect
by
one
pound
of
decreased
emissions
within
the
same
broad
geographic
area,
and
the
precise
location
of
those
increases
and
decreases
ordinarily
does
not
matter.
For
VOC
and
NO
X
such
"
pound­
for­
pound"
trades
may
therefore
be
treated
as
equal
in
ambient
effect
where
all
sources
involved
in
the
trade
are
located
in
the
same
control
strategy
demonstration
area
or
the
state
otherwise
shows
such
source
to
be
sufficiently
close
that
a
"
pound­
for­
pound"
trade
can
be
justified.
n28
Page
57
51
FR
43814
n
28
The
discussion
in
this
paragraph
does
not
apply
to
NO
X
trades
involving
visibility
impacts
of
elevated
plumes.

Particulate
Matter,
SO
2
,
CO
or
Lead
Trades.
Ambient
considerations
are
critical
for
trades
involving
emissions
of
sulfur
dioxide,
particulates,
carbon
monoxide,
or
lead,
whose
air
quality
impacts
may
vary
with
where
the
emission
increases
and
decreases
occur.
For
example,
one
hundred
pounds
of
ERCs
for
such
a
pollutant
created
at
one
source
may
balance
the
ambient
impact
of
a
100­
pound
increase
at
a
source
nearby,
but
may
only
balance
the
effect
of
an
80­
pound
increase
at
a
source
further
away.
In
addition
to
distance
between
sources,
plume
parameters,
pollutant
characteristics,
meteorology,
and
topography
will
also
affect
the
ambient
impact
of
such
trades.
n29
n
29
The
ambient
equivalence
considerations
elaborated
in
this
and
following
paragraphs
also
apply
to
NO
X
trades
involving
visibility
impacts
of
elevated
plumes.
See
n.
28
above.

This
Document
authorizes
the
use
of
four
alternative
methods
of
determining
ambient
equivalence,
with
the
degree
of
required
modeling
linked
to
the
likely
ambient
impact
of
the
proposed
trade.
The
following
sections
describe
use
of
these
alternatives
to
evaluate
for
approval
many
bubble
or
offset
trades
without
full
scale
ambient
dispersion
modeling.
n30
Use
of
these
alternatives
under
generic
rules
is
discussed
in
section
II
below.

n
30
Modeling
is
generally
not
required
for
new
source
netting,
whose
purpose
is
to
avoid
expending
resources
where
adverse
emission
or
ambient
impacts
from
changes
at
a
source
are
extremely
unlikely.
See,
e.
g.,
45
FR
52677­
78
(
August
7,
1980).

(
1)
De
Minimis.
In
general
no
modeling
is
needed
to
determine
the
ambient
equivalence
of
trades
in
which
applicable
net
baseline
emissions
do
not
increase
n31
and
in
which
the
sum
of
the
emissions
increases,
looking
only
at
the
increasing
sources,
totals
less
than
25
tons
per
year
(
TPY)
for
particulate
matter,
40
TPY
for
sulfur
dioxide,
100
TPY
for
carbon
monoxide,
40
TPY
for
NO
X
(
where
visibility
impacts
are
of
concern),
or
0.6
TPY
for
lead,
after
applicable
control
requirements.
Such
trades
will
have
at
most
a
de
minimis
impacts
on
local
air
quality
because
no
net
increase
in
emissions
will
be
produced
and
the
amount
of
emissions
being
shifted
is
less
than
designated
significance
levels
in
associated
EPA
regulations
(
see,
e.
g.,
40
CFR
51.18(
j)(
1)(
x)
and
51.24(
b)(
23)(
i)).
n32
n
31
Interested
parties
should,
however,
be
aware
that
in
some
circumstances
modeling
may
be
required
to
justify
using
certain
emissions
baselines,
prior
to
the
trade.
Where
a
bubble
in
a
nonattainment
area
seeks
to
employ
allowable
values
greater
than
corresponding
actual
values
in
the
calculation
of
baseline
emissions,
and
where
such
allowable
values
are
not
shown
to
be
used
or
reflected
in
an
approved
demonstration,
a
full
Level
III
modeling
analysis
will
be
required.
Where
a
bubble
in
an
attainment
area
seeks
to
employ
allowable
values
greater
than
corresponding
actual
values
in
the
calculation
of
baseline
emissions,
and
where
such
allowable
values
are
not
shown
to
be
used
or
reflected
in
an
approved
demonstration,
a
Level
II
modeling
analysis
(
see
below)
using
actual
emissions
for
the
pre­
bubble
case
will
be
required
unless,
for
bubbles
processed
as
case­
bycase
SIP
revisions,
the
Region
determines
that
additional
technical
support
is
necessary
to
protect
applicable
standards
or
increments.
Where
allowable
values
are
used
to
calculate
baseline
emissions
for
such
a
case­
by­
case­
SIP
revision
bubble
in
an
attainment
area
where
the
PSD
baseline
has
been
triggered,
the
Region
will
require
the
technical
support
necessary
to
protect
PSD
increments.

Where
allowable
values
higher
than
actual
values
are
not
shown
to
be
used
or
reflected
in
an
approved
demonstration,
states
that
wish
to
authorize
their
use
in
attainment
areas
under
generic
bubble
rules
must
either
state,
or
develop
replicable
procedures
addressing,
background
values
and
how
they
will
be
evaluated
in
conjunction
with
the
actual
changes
in
ambient
concentration
predicted
by
the
Level
II
analysis.
These
steps
must
be
sufficient
to
protect
standards
and
increments
and
must
be
approved
by
EPA
as
part
of
a
generic
rule.
Page
58
51
FR
43814
For
further
discussion
regarding
calculation
of
baseline
emissions
and
related
modeling
requirements,
see
Section
I.
A.
1.
above
and
Appendix
B
below.

n
32
This
paragraph
should
not
be
construed
to
imply
that
new
sources
and
modifications
need
not
meet
all
applicable
requirements,
including
those
specified
under
40
CFR
51.18
or
parallel
EPA­
approved
state
rules.

(
2)
Level
I.
In
general
no
modeling
to
determine
ambient
equivalence
is
needed
if:

(
a)
The
trade
does
not
result
in
an
increase
in
applicable
net
baseline
emissions;
n33
n
33
See
n.
31
above.

(
b)
The
relevant
sources
are
located
in
the
same
immediate
vicinity
(
within
250
meters
of
each
other);

(
c)
No
increase
in
baseline
emissions
occurs
at
the
source
with
the
lower
effective
plume
height
as
determined
under
EPA's
Guidelines
on
Air
Quality
Modeling;

(
d)
No
complex
terrain
n34
is
within
the
area
of
significant
impact
of
the
trade
n35
or
50
kilometers,
whichever
is
less;
n36
n
34
Complex
terrain
is
broadly
defined
by
EPA
as
terrain
greater
in
height
than
the
physical
stack
height
of
a
source.
For
bubble
purposes,
this
definition
is
applicable
only
to
sources
with
increasing
baseline
emissions.

n
35
For
guidance
on
determining
"
area
of
significant
impact,"
see
Appendix
E
below.
The
graph
in
Appendix
E,
or
EPA­
approved
alternative
approaches,
may
be
incorporated
in
generic
rules
to
make
this
aspect
of
Level
I
analysis
replicable
and
operational.
See
Section
II
below.

n
36
Generally,
trades
involving
complex
terrain
as
defined
above
may
not
be
exempt
from
modeling
under
a
Level
I
analysis.
However,
EPA
will
consider
on
a
case­
by­
case
basis
additional
criteria
for
determining
whether
a
particular
trade
involving
complex
terrain,
but
otherwise
meeting
the
requirements
specified
above,
does
not
present
a
problem
of
potential
plume
impaction
and
may
be
approved
under
a
Level
I
analysis.
These
additional
criteria
would
include
such
factors
as
source
height
and
emission
rates,
distance
between
stacks
and
elevated
features,
rate
of
topographical
rise,
and
other
considerations
which
may
be
appropriate
for
the
particular
geographic
area.
States
are
encouraged
to
work
with
EPA
to
determine
where
and
how
such
additional
criteria
can
be
developed
and
applied
to
individual
trades.

(
e)
Stacks
with
increasing
baseline
emissions
are
sufficiently
tall
to
avoid
possible
downwash
situations,
as
determined
by
the
formula
described
at
50
FR
27892
(
July
8,
1985)
(
to
be
codified
at
40
CFR
Part
51);
and
(
f)
The
trade
does
not
involve
open
dust
sources.

For
such
Level
I
trades
it
can
reasonably
be
assumed
that
"
pound­
for­
pound"
trades
will
produce
ambient
effects
equivalent
to
those
which
EPA­
approved
air
quality
models
would
predict.
Therefore
modeling
to
determine
ambient
equivalence
is
not
required.

Trades
between
fugitive
process
sources
and
stack
sources
(
i.
e.,
process­
for­
process
or
process­
forstack
can
acceptably
be
evaluated
and
approved
under
Level
I
as
long
as
the
maximum
distance
between
any
emitting
sources
in
the
trade
is
less
than
250
meters
and
all
other
Level
I
criteria
are
met.

(
3)
Level
II.
Bubble
trades
which
are
neither
de
minimis
nor
Level
I
may
nevertheless
be
evaluated
for
approval
based
on
modeling
to
determine
ambient
equivalence
limited
solely
to
the
impacts
of
the
specific
emission
sources
involved
in
the
trade,
if
there
is
no
increase
in
applicable
net
baseline
emissions,
3
n7
if
the
potential
change
in
emissions
before
and
after
the
trade
will
not
cause
a
significant
increase
in
pollutant
concentrations
at
any
receptor
for
any
averaging
time
specified
in
an
applicable
ambient
air
quality
standard,
3
n8
and
if
such
an
analysis
does
not
predict
any
increase
in
ambient
concentrations
in
a
mandatory
Federal
Class
I
area.
3
n9
The
change
in
concentration
from
the
before­
trade
case
to
the
after­
Page
59
51
FR
43814
trade
case
must
in
general
be
modeled
using
refined
models
such
as
MPTER
and
ISC
for
each
appropriate
averaging
time
for
the
relevant
national
ambient
air
quality
standards
for
each
receptor,
using
the
most
recent
full
year
of
meteorological
data.
4
n0
n
3
7
See
n.
31
above.

n
3
8
In
determining
"
significant"
impact
for
Level
II
bubble
trades,
states
may
use
the
following
significance
values
to
identify
trades
whose
potential
ambient
impact
need
not
be
further
evaluated
before
approval:

10
mu
g/
m
3
for
any
24­
hour
period
for
particulate
matter;

5
mu
g/
m
3
for
any
annual
period
for
particulate
matter;

13
mu
g/
m
3
for
any
24­
hour
period
for
SO
2
;

46
mu
g/
m
3
for
any
3­
hour
period
for
SO
2
;

3
mu
g/
m
3
for
an
annual
period
for
SO
2
;

575
mu
g/
m
3
for
any
8­
hour
period
for
CO;

2300
mu
g/
m
3
for
any
1­
hour
period
for
CO;

0.1
mu
g/
m
3
for
any
3­
month
period
for
Pb.

See
45
FR
52709
(
August
7,
1980).
For
offset
transactions,
any
required
modeling
must
follow
procedures
consistent
with
EPA's
new
Source
Review
regulations
in
40
CFR
51.18
or
Part
51,
Appendix
S,
or
parallel
EPA­
approved
state
regulations.
"
Significant"
impact
under
40
CFR
Part
51,
Appendix
S
is
defined
as
1
mu
g/
m
3
annual
average
for
particulates,
SO
2
or
NO
2
;
5
mu
g/
m
3
24­
hour
average
for
particulates
and
SO
2
;
25
mu
g/
m
3
3­
hour
average
for
SO
2
;
and
0.5
mg/
m
3
8­
hour
average
and
2
mg/
m
3
one­
hour
average
for
CO.

n
3
9
However,
a
bubble
ordinarily
may
not
be
approved
under
Level
II
where
other
evidence
related
to
background
­­
i.
e.,
formally
validated
ambient
air
quality
monitoring
data
or
previously
established
background
values
­­
clearly
indicates
that
the
bubble
would
create
a
new
violation
of
an
ambient
standard
or
PSD
increment,
or
would
delay
the
planned
removal
of
an
existing
violation.

n
40
Other
techniques
may
be
approved
where
sources
show
they
equally
well
protect
NAAQS,
applicable
PSD
increments,
and
visibility.
For
example,
in
limited
circumstances
conservative
screening
models
may
be
acceptable
in
lieu
of
MPTER
and
ISC.
In
such
cases,
use
of
a
full
year
of
meteorological
data
may
not
be
necessary.
Such
screening
models
may
be
acceptable
where:
(
a)
The
screening
model
shows
that
all
the
emissions
from
the
stack(
s)
with
increasing
emissions
would
not
produce
exceedances
of
the
Level
II
significance
values
described
in
n.
38
above,
or
(
b)
the
stack
parameters
at
the
stack(
s)
with
increasing
emissions
do
not
change
and
the
screening
model
shows
that
the
increase
in
emissions
at
the
increasing
stack(
s)
would
not
produce
exceedances
of
these
significance
values.

(
4)
Level
III.
Full
dispersion
modeling
considering
all
sources
affecting
the
trade's
area
of
impact
is
required
to
determine
ambient
equivalence
if
applicable
net
baseline
emissions
will
increase
as
a
result
of
the
trade,
4
n1
or
if
the
trade
cannot
meet
criteria
for
approval
under
de
minimis,
Level
I
or
Level
II.

n
41
See
discussion
in
I.
B.
1.
c.
below.

However,
a
geographically
limited
Level
III
analysis
may
be
used
in
some
cases
where
a
Level
II
analysis
predicts
one
or
more
exceedances
of
the
Level
II
significance
values.
While
this
analysis
will
be
limited
in
terms
of
geographic
scope,
it
must
otherwise
meet
the
modeling
requirements
for
a
full
Level
III
analysis,
including
consideration
of
all
sources
affecting
the
limited
geographical
area.
In
many
situations
this
approach
may
permit
the
receptor
area
to
be
smaller
than
the
trade's
entire
area
of
impact.
Because
of
Page
60
51
FR
43814
the
unique
nature
of
each
situation,
the
appropriate
limited
geographic
area
must
be
determined
in
accord
with
EPA
guidelines
on
modeling,
and
through
case­
by­
case
evaluation.

Bubble
trades
are
approvable
under
either
type
of
Level
III
analysis
if
they
do
not
cause
a
new
violation
of
NAAQS
or
PSD
increments,
significantly
contribute
to
or
delay
the
planned
removal
of
an
existing
violation,
or
adversely
affect
visibility
in
mandatory
Federal
Class
I
areas.
n42
n
42
Where
a
Level
III
modeling
analysis
submitted
to
support
a
voluntary
trading
application
indicates
an
exceedance
of
an
ambient
requirement,
EPA
will
review
such
applications
on
a
common­
sense
case­
by­
case
basis,
seeking
to
encourage
disclosure
of
such
exceedances
and
avoid
undue
delay
of
decisions
on
the
trade,
while
adequately
ensuring
protection
of
public
health,
the
integrity
of
the
SIP
process
(
including
the
state's
prerogatives
in
determining
how
to
remedy
nonattainment),
and
the
prompt
and
effective
remedy
of
any
condition
of
nonattainment.
In
its
review,
the
Agency
will
take
into
account
such
factors
as
the
degree
of
exceedance,
the
contribution
of
the
trading
sources
and
the
trade
itself
to
the
exceedance,
and
the
degree
to
which
such
sources
would
be
part
of
any
solution
remedying
the
exceedance.

This
three­
tiered
modeling
approach
is
both
reasonable
and
conservative.
It
will
assure
that
the
ambient
impact
of
trades
is
at
least
equivalent
in
effect
to
original
SIP
emission
limits,
while
conserving
government
resources
and
shortening
approval
times
for
many
individual
trades.

c.
Bubbles
Should
Not
Increase
Applicable
Net
Baseline
Emissions.
Ordinarily,
bubbles
may
not
result
in
an
increase
in
applicable
net
baseline
emissions.
Such
a
bubble
would
require
a
case­
by­
case
SIP
revision,
and
may
only
be
approved
based
upon
a
combined
Level
III
and
Level
II
modeling
analysis
(
i.
e.,
an
analysis
sufficient
to
show
that
all
applicable
requirements
of
a
full
Level
III
analysis
(
as
described
above)
are
met,
and
that
the
bubble
would
not
result
in
any
exceedance
of
significance
values
specified
for
a
Level
II
analysis
at
any
receptor
for
any
averaging
time
specified
in
an
applicable
ambient
air
quality
standard.
n43
n
43
Where
a
proposed
bubble
increasing
net
baseline
emissions
cannot
meet
this
test
of
ambient
equivalence,
it
may
not
be
approved
as
a
bubble
under
the
Emissions
Trading
Policy.
However,
sources
may
still
submit
such
revised
limits
for
approval
under
the
general
requirements
applicable
to
SIP
revisions.

Where
such
a
bubble
is
proposed
in
a
nonattainment
area,
the
state
must
demonstrate
that
the
trade
is
consistent
with
the
progress
demonstration
under
an
approved
demonstration
of
attainment,
revise
its
EPAapproved
progress
demonstration
as
part
of
the
proposed
SIP
revision,
or
otherwise
show
(
e.
g.,
by
modeling
and
any
necessary
compensating
emission
reductions)
that
the
proposed
trade
comports
with
the
EPA­
approved
emissions
and
ambient
progress
demonstration.

d.
Bubbles
Should
Not
Increase
Emissions
of
Hazardous
or
Toxic
Air
Pollutants.
Under
the
Clean
Air
Act
all
sources
must
meet
applicable
section
112
(
NESHAPs)
requirements
for
control
of
hazardous
air
pollutants.
Sources
may
neither
use
a
bubble
to
meet
these
requirements,
nor
increase
emissions
beyond
the
levels
they
prescribe.
Where
a
source
wishes
to
generate
or
use
emission
reduction
credit
for
a
criteria
pollutant,
and
where
a
NESHAPs
pollutant
is
part
of
the
criteria
pollutant
stream,
the
emissions
baseline
for
emissions
of
the
hazardous
pollutant
from
that
source
would
be
the
lower­
of­
actual­
or­
NESHAPsallowable
emissions
of
that
pollutant,
applied
as
of
the
time
of
application
for
credit.
Where
EPA
has
proposed
to
regulate
a
source
category
for
emissions
of
a
pollutant
under
section
112,
but
has
not
yet
promulgated
a
NESHAP
for
that
source
category,
the
proposal
will
serve
as
the
interim
guideline
for
evaluating
the
potential
effects
of
any
proposed
emissions
trade
involving
sources
to
which
the
proposed
standard
would
apply.
The
emissions
baseline
for
such
a
pollutant
emitted
by
a
source
subject
to
the
proposed
NESHAP
would
be
lower­
of­
actual­
or­
proposed­
NESHAPs­
allowable
emissions
for
that
pollutant.

In
general,
such
trading
proposals
will
be
approved
so
long
as
they
(
1)
result
in
emission
limits
for
each
source
emitting
the
relevant
pollutant
which
are
equivalent
to
or
less
than
those
that
the
approved
NESHAP
requires
or
the
proposed
NESHAP
would
require
if
promulgated,
(
2)
rely
only
on
reductions
Page
61
51
FR
43814
below
actual
or
allowable
levels
(
whichever
is
less)
of
that
pollutant,
and
(
3)
take
place
within
a
single
plant
or
contiguous
plants.

Where
a
pollutant
has
been
listed
under
section
112
or
EPA
has
published
a
Notice­
of­
Intent­
to­
List,
but
no
NESHAP
has
been
promulgated
or
proposed
for
a
source
which
emits
that
pollutant,
states
may
generally
allow
trades
consisting
of
equivalent
increases
and
decreases
of
actual
emissions
of
that
pollutant
within
a
single
plant
or
contiguous
plants.
Once
the
relevant
NESHAP
is
promulgated,
every
source,
regardless
of
any
previously
approved
trade
involving
emissions
of
that
pollutant,
must
meet
the
requirements
of
that
promulgation.

Where
EPA
has
decided
that
one
or
more
source
categories
which
emit
a
listed
pollutant
do
not
require
regulation
solely
because
of
limited
national
exposure,
emissions
of
that
pollutant
will
continue
to
be
treated
the
same
as
emissions
of
any
other
pollutant
listed
under
section
112.

Where
EPA
has
issued
a
formal
Notice­
of­
Intent­
Not­
to­
List
a
pollutant
under
section
112,
that
pollutant
will
ordinarily
be
treated
as
non­
hazardous.
However,
where
the
decision
not
to
list
or
not
to
regulate
was
based
on
limited
national
exposure,
but
the
individual
risk
was
sufficiently
high
that
EPA
committed
in
the
announcement
of
its
decision
to
support
(
through
some
formal
mechanism
such
as
a
Memorandum
of
Understanding
(
MOU))
state­
level
efforts
to
develop
regulations,
the
pollutant
will
be
treated
as
listed
for
trading
purposes
in
order
to
assure
that
such
state
efforts
are
not
compromised.
The
model
for
the
intended
scope
of
this
classification
is
EPA's
acrylonitrile
decision.
(
50
FR
24319;
June
10,
1985).

If
a
substance
is
neither
listed
nor
regulated
as
hazardous
under
section
112,
nor
meets
any
of
the
other
conditions
specified
above,
but
has
been
formally
listed
or
regulated
as
toxic
under
any
comparable
healthbased
federal
statute,
the
Administrator
may
consider
this
fact
in
evaluating
trades
which
may
increase
emissions
of
that
substance.
This
authority
has
not
been
delegated
within
EPA
by
the
Administrator.
See
Clean
Air
Act
section
301(
a)(
1),
42
U.
S.
C.
7601(
a)(
1).
n44
n
44
Trades
involving
emission
streams
partially
or
wholly
composed
of
any
pollutants
subject
to
special
considerations
under
this
section
must
meet
two
separate
and
distinct
tests
to
be
approved.
First,
such
trades
must
be
approvable
under
the
criteria
and
principles
which
apply
to
all
trades,
as
discussed
throughout
this
policy
(
i.
e.,
such
trades
must
meet
baseline
and
other
requirements
for
the
relevant
criteria
pollutant).
Second,
such
trades
must
be
approvable
with
respect
to
the
hazardous
pollutant
fraction
of
the
criteria
pollutant
emission
stream.
This
means
that
there
must
be
no
net
increase
in
emissions
of
the
pollutants
addressed
in
this
section,
as
a
result
of
such
trades.
Where
a
NESHAP
has
been
promulgated
or
proposed,
the
baseline
for
determining
whether
such
an
increase
has
occurred
is
the
lower­
of­
actual­
or­
NESHAPs­
allowable
emissions
for
the
hazardous
component
of
the
trade,
for
the
source
which
emits
that
component.
The
promulgated
or
proposed
NESHAP
limit
not
only
is
used
to
define
the
allowable
emissions
for
that
source,
but
serves
as
an
absolute
ceiling
on
the
source
as
well.
Where
a
NESHAP
has
not
yet
been
promulgated
or
proposed,
the
baseline
for
determining
whether
such
an
increase
has
occurred
is
generally
actual
emissions
for
the
hazardous
pollutant
component
of
the
trade.
But
cf.
today's
Policy
Statement
at
n.
6.

Exception.
Trades
which
involve
the
pollutants
addressed
in
this
section
but
do
not
meet
the
special
restrictions
discussed
above,
may
also
be
approved
where
surplus
reductions
in
those
pollutants
compensate
for
increases
in
non­
hazardous
emissions
of
the
same
criteria
pollutant.
For
example,
a
source
emitting
benzene
may
trade
with
a
source
emitting
a
non­
hazardous
VOC
without
meeting
these
special
restrictions,
if
the
benzene
emissions
are
reduced
as
a
result
of
the
trade
(
i.
e.,
"
traded
down").
As
long
as
such
a
trade
would
not
result
in
an
increase
in
either
actual
or
allowable
emissions
of
a
pollutant
subject
to
the
preceding
paragraphs
at
any
source,
it
would
not
differ
in
nature
or
requirements
from
a
trade
involving
only
non­
hazardous
VOC
emissions.

e.
Existing­
Source
Credits
Cannot
Be
Used
to
Meet
Applicable
Technology­
Based
Requirements
for
New
Sources.
Under
Clean
Air
Act
section
111
and
EPA
implementing
regulations,
new
affected
facilities
must
satisfy
technology­
based
New
Source
Performance
Standards
(
NSPS),
regardless
of
the
attainment
status
of
the
area
in
which
they
are
located.
Under
sections
165
and
173
and
EPA
implementing
regulations,
new
or
modified
major
sources
must
also
satisfy
technology­
based
control
requirements
associated
with
Page
62
51
FR
43814
preconstruction
permits.
These
requirements
prohibit
use
of
credits
from
existing
sources
to
meet
or
avoid
applicable
NSPS,
and
bar
use
of
such
credits
to
meet
applicable
new
source
review
requirements
for
best
available
control
technology
(
BACT)
in
PSD
areas,
or
lowest
achievable
emission
rate
control
technology
(
LAER)
in
nonattainment
areas.
4
n5
n
4
5
Today's
notice
does
not
address
whether
or
under
what
circumstances
facilities
subject
to
NSPS,
BACT
or
LAER
may
surpass
applicable
permit
limits
reflecting
such
requirements
in
order
to
create
credits
for
existing­
source
trades.

However,
modifications
of
existing
major
sources
in
PSD
and
nonattainment
areas
with
an
EPAapproved
"
plantwide"
definition
of
source
can
use
"
contemporaneous"
reductions
in
actual
emissions
from
within
the
same
source
to
"
net
out
of"
New
Source
Review.
4
n6
Under
such
"
netting,"
sourcewide
increases
in
potential
emissions
that
do
not
exceed
designated
levels
of
significance
(
see
40
CFR
51.18(
j)(
1)(
x),
51.24(
b)(
23),
and
52.21(
b)(
23))
will
not
be
considered
"
major
modifications"
of
the
source
under
40
CFR
51.18,
51.24,
51.22,
51.307,
52.26,
or
52.27.
Thus,
while
these
source
changes
must
still
meet
applicable
NSPS,
NESHAPs,
preconstruction
applicability
review
requirements
under
40
CFR
51.18
(
a)­(
h)
and
(
l),
and
SIP
requirements,
they
are
not
subject
to
new
source
review
requirements
for
major
modification
because
they
are
not
considered
"
major."
4
n7
n
4
6
"
Contemporaneous"
means
a
reasonable
period
for
accumulating
increases
and
decreases
in
emissions,
as
specified
by
the
state.
See
40
CFR
51.18(
j)(
1)(
vi)
and
51.24(
b)(
3)(
b)
(
ii).

n
4
7
Netting
also
applies
under
the
narrower
"
dual
definition"
of
"
source"
in
certain
circumstances.
For
example,
firms
may
use
reductions
within
the
plant
to
compensate
for
increases
at
several
emitting
units
which,
while
not
individually
significant,
might
otherwise
add
up
to
a
significant
increase
plantwide.

Under
current
EPA
regulations,
if
a
nonattainment
area
is
subject
to
a
moratorium
on
new
preconstruction
permits
for
major
sources
or
modifications
and
the
area
does
not
have
an
approved
New
Source
Review
program,
then
the
area
automatically
uses
a
plantwide
definition.
See
40
CFR
52.24.

EPA's
general
expansion
of
opportunities
for
states
to
use
the
plantwide
source
definition
for
certain
nonattainment
areas
(
49
FR
50766,
October
14,
1984)
was
affirmed
by
the
U.
S.
Supreme
Court
on
June
25,
1984.
Chevron
U.
S.
A.,
Inc.
v.
Natural
Resources
Defense
Council,
104
S.
Ct.
2778,
14
ELR
20507,
overruling
Natural
Resources
Defense
Council,
Inc.
v.
Gorsuch,
685
F.
2d
718,
12
ELR
20942
(
D.
C.
Cir.
1982).

f.
Trades
Involving
Open
Dust
Emissions.
Trades
involving
open
dust
sources
of
particulate
emissions
may
be
approved
through
case­
by­
case
SIP
revisions
based
on
modeled
demonstrations
of
ambient
equivalence.
Sources
proposing
such
trades
must
commit,
as
part
of
the
trade's
approval,
to
(
i)
undertake
a
post­
approval
monitoring
program
to
evaluate
the
impact
of
their
control
efforts,
and
(
ii)
make
further
enforceable
reductions
if
post­
trade
monitoring
indicates
initial
open
dust
controls
do
not
produce
the
prediccted
air
quality
results.

g.
Interstate
Trades.
EPA
will
approve
trades
which
involve
sources
located
in
neighboring
states
where
such
trades
meet
the
criteria
below
and
all
other
approval
criteria
applicable
under
today's
notice.
Where
state
trading
requirements
differ,
EPA
will
require
that
trades
with
increasing
and
decreasing
sources
in
different
states
meet
the
substantive
requirements
of
the
more
stringent
state.
In
general,
in
order
to
avoid
complex
accounting
problems,
EPA
will
deem
ERCs
created
in
another
state
to
contribute
to
progress
in
the
state
where
used,
to
the
extent
of
that
use.
Such
trades
must
be
accomplished
through
caseby
case
SIP
revisions.

h.
Trades
Near
PSD
Class
I
Areas.
EPA
or
a
state
operating
under
a
generic
rule
must
notify
the
Federal
Land
Manager
if
an
emissions
trade
will
take
place
within
100
kilometers
of
a
PSD
Class
I
area.
Notification
must
occur
early
enough
in
the
review
process
to
allow
at
least
30
days
for
the
submittal
of
comments
before
the
trade
will
be
approved
by
the
reviewing
authority.
Page
63
51
FR
43814
Where
a
bubble
within
50
kilometers
of
a
PSD
Class
I
area
is
submitted
to
EPA
as
a
case­
by­
case
SIP
revision,
the
Region
may
call
for
additional
technical
support,
beyond
the
applicable
requirements
of
the
modeling
screen
described
in
section
I.
B.
l.
b.
above,
if
deemed
necessary
to
protect
air
quality
in
the
Class
I
area.

i.
Effect
on
Trades
of
Subsequently­
Discovered
Clean
Air
Act
Problems:
Revisitation
Considerations.
If
ambient
violations
are
discovered
in
an
area
where
EPA
has
approved
a
trade,
or
if
other
violations
of
Clean
Air
Act
requirements
are
discovered
in
that
area,
sources
in
the
trade
should
be
aware
that
they
are
potentially
subject
to
requirements
for
additional
emission
reductions,
just
as
are
all
other
sources
in
the
area.
n48
n
48
While
sources
involved
in
a
trade,
like
all
other
sources,
may
be
subject
to
requirements
for
additional
emission
reductions,
neither
previous
trades
approved
by
EPA
or
by
states
under
EPA­
approved
generic
rules,
nor
emission
reduction
credits
used
as
part
of
a
bubble,
offset
or
netting
action,
should
be
terminated.

Such
termination
could
occur,
for
example,
where
two
sources
in
a
given
source
category
were
subject
to
pre­
bubble
mass
emission
limits
of
100
TPY
each
and
post­
bubble
limits
of
50
TPY
and
150
TPY
respectively.
Assume
the
state
imposes
a
new
category­
wide
regulation
which
would
normally
limit
those
sources
to
40
TPY
each.
In
this
case,
the
first
source
should
be
required
to
meet
the
new
40
TPY
limit
(
i.
e.,
it
should
be
required
to
produce
additional
reductions
of
10
TPY),
while
the
second
source
should
be
subject
to
a
new
limit
of
90
TPY
(
i.
e.,
a
level
reflecting
the
continued
existence
of
the
50
TPY
emission
reduction
credit).
Termination
of
the
emission
reduction
credit
would
occur
either
by
requiring
the
first
source
to
produce
additional
emission
reductions
of
60
TPY
(
i.
e.,
more
than
its
current
level
of
emissions),
or
the
second
source
to
meet
the
40
TPY
limit.
Either
of
these
results
would
undermine
the
purpose
of
today's
notice
by
eliminating
the
predictability
required
for
generation
or
use
of
ERC's.
They
could
also
penalize
trading
sources
for
taking
environmentally
beneficial
measures
sooner
than
required,
since
it
would
often
be
more
difficult
to
achieve
the
new
reductions
than
had
earlier
voluntary
steps
not
been
taken.

For
these
reasons,
EPA
urges
states
not
to
take
such
credit­
terminating
actions
unless
there
is
no
other
practical
way
to
satisfy
the
requirements
of
the
Clean
Air
Act.

Today's
procedures
for
deposit
and
use
of
banked
credits
already
address
additional
state
emission
reduction
needs
in
the
context
of
banking
(
see
section
I.
C.
9.
below).
States
should,
however,
account
for
all
previous
trades
and
previously
granted
emission
reduction
credits
in
estimating
emission
reductions
resulting
from
new
control
strategies,
in
order
to
avoid
problems
due
to
double­
counting.

2.
Procedural
Steps
for
Using
ERCs
Bubble
trades
may
be
implemented
through
individual
SIP
revisions
or
state
generic
rules.
This
section
describes
principles
applicable
to
either
procedure.
General
principles
for
generic
rules
are
addressed
in
Section
II
below.
Special
considerations
for
trades
which
require
individual
SIP
revisions
are
addressed
in
Section
III.

a.
Effect
of
Existing
Compliance
Schedules.
EPA's
1979
bubble
policy
required
that
sources
be
subject
to
binding
compliance
schedules
based
on
original
SIP
emission
limits
before
being
eligible
to
apply
for
bubbles.
Because
of
the
time
required
to
process
bubble
applications
as
case­
by­
case
SIP
revisions,
this
requirement
tended
either
(
a)
to
discourage
sources
faced
with
tight
milestones
for
the
installation
of
conventional
control
equipment
from
pursuing
bubble
applications,
where
they
had
agreed
in
good
faith
to
SIP
compliance
schedules
before
discovering
bubble
opportunities,
or
(
b)
to
discourage
sources
from
agreeing
to
any
compliance
schedule
until
they
had
fully
examined
bubble
opportunities.

Today's
policy
allows
an
application
to
be
filed
though
the
applicant
is
not
subject
to
compliance
schedules
based
on
original
SIP
emission
limits,
so
long
as
that
applicant
agrees
to
emission
limits
established
as
part
of
a
complete
bubble
application.
Sources
which
are
already
subject
to
binding
compliance
schedules
should,
however,
be
aware
that
submittal
or
proposed
approval
of
a
bubble
application
does
not
suspend
their
obligation
to
comply
with
such
schedules.
Such
schedules
and
existing
Page
64
51
FR
43814
SIP
requirements
remain
applicable
and
enforceable
until
the
bubble
is
finally
approved
and
the
schedule
has
been
modified
accordingly.

Sources
seeking
trades
should
note
that
they
remain
subject
to
enforcement
of
existing
(
pre­
trade)
SIP
limits
until
the
bubble
is
approved.
EPA
will
use
the
same
principles
and
procedures
for
deciding
whether
to
initiate
enforcements
actions
in
these
circumstances
as
the
Agency
applies
to
any
other
source
which
is
subject
to
a
proposed
SIP
revision.

Under
established
EPA
policy,
regulated
sources
must
be
subject
to
an
applicable
enforceable
emission
limit
at
all
times.
Accordingly,
sources
which
have
approved
bubbles
with
emission
limits
effective
at
future
date
and
which
are
not
in
compliance
with
their
pre­
trade
limits,
may
be
subject
to
enforcement
action,
which
could
include
penalties
based
on
a
failure
to
meet
the
pre­
trade
limits.
Sources
in
such
situations
may
wish
to
minimize
the
chance
that
capital
expenditures
will
be
required
to
meet
pre­
trade
limits,
either
by
(
a)
agreeing
to
post­
trade
compliance
dates
which
are
substantially
similar
to
their
pretrade
compliance
dates,
or
(
b)
accelerating
their
compliance
with
post­
trade
limits.

In
accord
with
the
general
principle
that
bubbles
should
be
treated
neither
more
nor
less
stringently
than
other
SIP
actions,
implementation
of
today's
policy
will
be
neutral
with
respect
to
EPA
enforcement
of
pre­
trade
emission
limits.
This
means
that
EPA
will
not
specifically
target
for
enforcement
action
noncompliant
sources
seeking
to
use
a
bubble
either
to
come
into
compliance
or
to
restructure
traditional
compliance.
However,
it
also
means
that
EPA
will
not
withhold
or
defer
enforcement
simply
because
a
source
is
seeking
alternative
emission
limits
through
a
bubble.
In
exercising
its
enforcement
discretion,
EPA
will
apply
the
same
considerations
to
noncompliant
sources
which
seek
to
comply
through
bubbles
as
to
those
which
do
not.
n49
n
49
Parties
contemplating
bubbles
involving
the
trade
of
emission
reduction
credits
from
one
firm
to
another
should
be
aware
that
when
the
credits
being
provided
by
the
first
firm
are
the
result
of
emission
limits
with
a
future
compliance
date,
the
obligation
to
meet
pre­
trade
limits
remains
with
the
second
firm
(
which
may
face
enforcement
action,
including
cash
penalties,
for
failure
to
comply
with
those
pre­
trade
limits)
until
the
time
specified
for
the
first
firm
to
achieve
the
reductions
necessary
for
compliance
under
the
bubble.
The
first
firm's
failure
to
achieve
required
bubble
reductions
on
schedule
may
thereafter
result
in
enforcement
action
(
including
cash
penalties)
against
that
firm.
However,
this
paragraph
should
be
read
in
conjunction
with
the
general
principle
articulated
above
that
EPA
implementation
of
today's
policy
will
be
neutral
with
respect
to
enforcement
of
pretrade
limits.

b.
Extensions
of
Compliance
Deadlines.
States
may
modify
or
extend
compliance
schedules
or
deadlines
for
individual
sources
on
a
case­
by­
case
basis
in
conjunction
with
bubble
approvals.
Such
modifications
or
extensions
must
be
consistent
with
the
requirements
of
40
CFR
51.15.
Compliance
schedules
for
sources
in
nonattainment
areas
cannot
be
extended
beyond
the
statutory
date
for
attainment,
and
applicable
compliance
milestones
must
be
specified
and
met
for
each
year
of
the
revised
or
extended
compliance
schedule.
Because
an
extension
will
usually
require
a
revision
of
the
state's
progress
demonstration,
such
approvals
must
ordinarily
be
submitted
as
SIP
revisions.

In
nonattainment
areas,
states
which
wish
to
give
sources
more
time
to
implement
bubbles
by
granting
compliance
extensions
must
receive
EPA
approval
of
the
extension
through
case­
by­
case
SIP
revisions.
EPA
will
evaluate
the
time
extension
portions
of
these
SIP
revision
packages
in
accordance
with
the
Agency's
normal
procedures
for
review
of
time
extensions,
including
consistency
with
the
Act's
requirements
of
expeditiousness,
reasonable
further
progress,
and
attainment
and
maintenance
of
ambient
air
quality
standards.
Sources
should
be
aware
that
disapproval
of
the
time
extension
portion
may
result
in
disapproval
of
the
entire
package
(
i.
e.,
both
post­
trade
limits
and
the
time
extension)
or
only
part
of
it,
depending
on
whether
the
state
views
these
components
of
the
proposed
SIP
revision
as
separable.

In
attainment
areas,
states
may
continue
to
grant
compliance
extensions
without
case­
by­
case
SIP
revisions,
as
part
of
bubble
approvals
under
a
generic
rule.
Such
generic
compliance
date
extensions
may
be
granted
in
these
areas
only
if
EPA
has
approved
the
extension
provision
of
the
generic
rule
as
adequate
to
comply
with
the
Clean
Air
Act,
including
requirements
for
attainment
and
maintenance
of
ambient
air
quality
standards.
Page
65
51
FR
43814
c.
Pending
Enforcement
Actions.
A
bubble
cannot
be
approved
for
an
individual
emission
source
which
is
presently
the
subject
of
a
federal
enforcement
action
or
outstanding
enforcement
order
unless
EPA
(
and
where
necessary
the
appropriate
court)
approves
the
proposal
and
any
compliance
schedule
it
may
contain.
"
Federal
enforcement
action
or
outstanding
order"
includes
notices
of
violation,
civil
actions
filed
under
Clean
Air
Act
section
113(
b),
criminal
actions
filed
under
section
113(
c),
notices
imposing
noncompliance
penalties
issued
under
section
120,
administrative
orders
issued
under
section
113(
a),
or
citizen
suits
filed
under
section
304
in
which
EPA
has
intervened
if
the
source
is
subject
to
an
administrative
or
judicial
order.

This
requirement
need
not
preclude
bubble
approvals
under
generic
rules,
provided
the
rule
specifies
an
appropriate
mechanism
for
securing
and
recording
EPA
or
court
approval.
n50
Sources
should,
however,
be
aware
that
such
approvals
cannot
be
finally
effective
until
approved
by
the
appropriate
agency
or
court,
and
that
they
remain
subject
to
original
emission
limits
until
such
approval.

n
50
See
section
II.
B.
3
below.

C.
Banking
Emission
Reduction
Credits
Emission
reductions
that
are
surplus,
permanent,
quantifiable
and
enforceable
can
qualify
as
emission
reduction
credits
(
ERCs)
and
be
deposited
in
EPA­
approvable
banks.
States
may
establish
such
banks
by
adopting
appropriate
rules
to
govern
whether
and
how
sources
may
own
and
hold
surplus
emission
reduction
credits
for
future
use
in
bubble,
offset
or
netting
transactions.
n51
Such
banking
rules
may
encourage
sources
to
take
measures
to
reduce
emissions
in
advance
of
specific
need
for
ERCs,
resulting
in
lower
transaction
costs
for
those
seeking
offsets,
bubbles,
or
partners
for
these
transactions.
States
should,
however,
be
aware
that
because
an
area's
air
quality
situation
or
the
status
of
its
SIP
may
change
in
the
future,
failure
to
account
for
banked
credits
in
emission
inventories
used
for
planning
purposes
may
result
in
loss
of
those
ERCs
not
treated
as
"
in
the
air"
(
e.
g.,
not
included
in
any
future
SIP
inventory
or
accounted
for
in
any
redesignation
of
the
area
to
attainment),
due
to
double­
counting.
Banking
rules
may
protect
such
reductions
in
whole
or
in
part
as
long
as
such
protection
is
consistent
with
the
Act's
mandate
to
attain
and
maintain
ambient
standards
while
protecting
PSD
increments
and
visibility.

n
51
States
may
incorporate
EPA­
approvable
banking
rules
in
the
SIP
by
submitting
them
for
approval
as
SIP
revisions.

Emission
reductions
banked
through
a
formal
or
informal
banking
mechanism
prior
to
a
state's
adoption
of
EPA­
approvable
banking
rules
may
qualify
for
deposit
in
the
EPA­
approvable
bank
so
long
as
(
1)
the
source
shows
that
its
reductions
are
surplus,
permanent,
quantifiable
and
enforceable;
and
(
2)
the
state
shows
that
these
reductions
have
not
already
been
assumed
or
otherwise
doublecounted
in
the
SIP.

EPA­
approvable
banks
can
accept
and
evaluate
requests
to
certify
an
ERC,
serve
as
a
clearinghouse
for
credits
on
deposit,
and
account
for
transfers
and
withdrawals
of
ERCs.
n52
Banks
can
also:
Register
ERCs
to
ensure
they
are
considered
as
current
actual
emissions
in
future
planning
(
thus
providing
the
greatest
technical
measure
of
protection
to
those
ERCs);
notify
prospective
purchasers
of
the
existence
of
ERCs;
and
account
for
transfers
and
withdrawals.
These
roles
will
generally
be
performed
by
the
state
as
part
of
its
normal
permitting
activities.
Use
of
banked
credits
must
meet
all
the
criteria
of
the
particular
SIP
regulatory
program
under
which
they
are
to
be
used.
n53
n
52
States
and
sources
should
be
aware
that
because
of
differing
regulatory
requirements,
the
amount
of
credit
actually
derived
from
particular
emission
reductions
may
differ
from
one
regulatory
program
to
another.
For
example,
in
primary
nonattainment
areas
needing
but
lacking
approved
demonstrations,
the
amount
of
credit
from
a
given
reduction
which
is
available
for
bubble
purposes
may
be
less
than
that
available
from
the
same
reduction
for
offset
or
netting
purposes,
since
special
progress
requirements
apply
to
bubbles
in
these
areas.
Page
66
51
FR
43814
n
53
States
may,
however,
expand
opportunities
for
use
of
banked
credits
beyond
those
of
current
SIP
programs
(
e.
g.,
extend
the
"
contemporaneous"
period
for
netting),
by
submitting
revised
regulations
addressing
the
banking
and
use
of
such
credits,
for
approval
as
SIP
revisions.

The
following
sections
address
both
minimum
requirements
for
state
banking
rules
which
are
approvable
by
EPA,
and
issues
states
should
consider.
States
may
adopt
other
approaches
which
produce
equivalent
results.

1.
Banking
Rules
Must
Designate
an
Administering
Agency
Banking
rules
must
identify
the
entity
responsible
for
specific
functions.
While
the
state
will
ordinarily
be
responsible
for
verifying
and
processing
ERC
requests,
all
or
part
of
this
responsibility
may
be
delegated
to
other
organizations.
Such
organization(
s)
must
possess
the
resources
and
legal
authority
to
implement
delegated
activities.

2.
Only
ERCs
May
Be
Banked
Banked
emission
reduction
credits
must
be
surplus,
permanent,
quantifiable,
and
enforceable
by
the
state
by
the
time
they
are
banked.
n54
However,
if
a
source
commits
to
produce
a
specific
reduction
at
a
specific
time
in
the
future,
a
state
may
allow
a
conditional
deposit
to
be
made.
Procedures
for
such
conditional
deposits
must
ensure
that
they
do
not
compromise
the
state's
ability
to
secure
through
further
regulation
any
future
reductions
which
may
be
needed.
n55
In
all
cases
the
reduction
must
be
made
federally
enforceable
by
the
time
the
emissions
trade
which
relies
upon
it
is
finally
approved.

n
54
In
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations,
emission
reductions
made
prior
to
application
to
bank
or
trade
(
whichever
is
earlier)
will
not
be
credited
for
use
in
bubbles
(
see
section
I.
A.
l.
c.(
1)
above).
Following
publication
of
today's
notice,
the
"
date
of
application
to
bank"
will
be
the
date
the
source
submits
an
application
to
the
state
to
make
a
reduction
state­
enforceable
through
or
concurrent
with
use
of
a
formal
bank
or
informal
banking
mechanism
(
see
section
I.
A.
1.
b.(
1)
above).

In
other
areas,
although
emission
reductions
cannot
qualify
as
ERCs
or
be
deposited
in
EPAapprovable
banks
until
they
are
made
enforceable
by
the
state,
emission
reductions
banked
through
other
formal
or
informal
banking
mechanisms
will
still
be
eligible
for
use
in
future
trades,
so
long
as
those
reductions
are
made
federally
enforceable
at
their
time
of
use
and
all
applicable
requirements
of
the
regulatory
program
under
which
they
will
be
used
are
met.
Since
states
may
have
to
revise
their
regulations
or
permit
procedures
in
order
to
implement
this
new
definition,
full
implementation
will
not
be
expected
until
one
year
after
publication
of
today's
notice.
However,
all
credits
not
made
enforceable
when
banked
during
this
interim
period
should
ultimately
be
made
enforceable
within
eighteen
months
from
today's
notice.
Emission
reductions
currently
deposited
in
banks
should
also
be
made
enforceable
by
the
state
within
eighteen
months
from
the
date
of
this
policy.

n
55
States
have
several
available
options
to
provide
such
assurance.
They
may,
for
example,
bar
conditional
deposits
from
source
categories
which
are
subject
to
pending
regulation.
Alternatively,
they
may
allow
unrestricted
conditional
deposits
but
write
future
regulations
in
terms
of
RACT­
equivalent
reductions
(
e.
g.,
an
80%
reduction
in
current
actual
emissions)
rather
than
in
terms
of
specific
control
strategies
or
emission
levels.
The
latter
approach
can
avoid
possible
claims
by
some
sources
that
no
further
control
is
required,
while
strengthening
the
state's
ability
to
encourage
further
voluntary
reductions
as
well
as
mandate
needed
ones.
See
section
I.
C.
9.
b
below.
States
may
adopt
whichever
alternative
satisfies
these
concerns
in
their
particular
situation.

3.
Possible
Limitations
on
Use
of
ERCs
for
New
Source
Permitting
Use
of
banked
ERCs
for
new
source
permitting
must
be
consistent
with
applicable
regulations
approved
by
EPA
under
40
CFR
Parts
51
and
52.
For
example,
under
40
CFR
51.18(
j)(
3)(
ii)(
c)
shutdowns
that
occur
prior
to
applications
for
a
new
source
permit
may
ordinarily
be
used
only
as
offsets
for
replacement
facilities,
and
then
only
if
the
permit
application
was
filed
within
one
year
after
the
shutdown
occurred
or
if
the
reduction
occurred
after
August
7,
1977.
n56
Page
67
51
FR
43814
n
56
See
n.
14
above.

4.
Sources
Should
Apply
to
Bank
Surplus
Reductions
As
Soon
As
They
Decide
To
Make
Them
For
administrative
simplicity
and
accurate
quantification,
sources
should
apply
to
bank
reductions
as
soon
as
possible
after
they
decide
to
make
them.
The
administering
agency
should
formally
note
the
source's
intent
to
make
a
surplus
reduction,
as
expressed
in
the
application.
The
state
must
then
verify
whether
and
to
what
extent
the
reduction
actually
occurred,
and
must
make
the
reduction
enforceable
by
the
time
it
is
accepted
for
deposit.

5.
Procedures
for
Banking
Surplus
Emission
Reductions
Should
Be
Defined
To
speed
approval
of
trades
and
provide
greater
certainty
for
potential
ERC
creators
and
users,
state
banking
rules
should
clearly
specify
which
proposed
emission
reductions
can
qualify
to
be
credited
and
banked,
the
information
required
of
sources
to
substantiate
their
claim
for
credit,
and
any
required
application
forms.
At
minimum,
such
rules
must
require
firms
to
maintain
records
(
e.
g.,
production
records
and
records
of
previous
emission
tests)
adequate
to
determine
the
pre­
and
post­
reduction
actual
and
allowable
values
for
emission
rate,
capacity
utilization,
and
hours
of
operation
for
the
source
generating
the
ERC.

6.
Banking
Rules
May
Establish
Ownership
Rights
To
prevent
two
entities
from
claiming
or
attempting
to
use
the
same
ERCs
at
the
same
time,
state
banking
rules
may
specify
who
can
own
ERCs.
For
example,
while
the
source
creating
the
ERC
will
generally
be
its
owner,
the
state
could,
as
part
of
its
rule,
reserve
ownership
of
certain
classes
of
ERCs
to
itself
or
local
governments.
States
considering
the
latter
course
should
carefully
weigh
whether
such
reservations
are
likely
to
increase
or
diminish
future
reductions
and
air
quality
management
capabilities.

7.
Banking
Rules
Must
Establish
an
ERC
Registry
or
Its
Equivalent
An
ERC
registry
or
equivalent
instrument
allows
states
to
track
ownership,
use,
and
transfer
of
all
banked
ERCs.
Banking
rules
may
provide
that
no
transfer
of
title
to
a
banked
ERC
will
take
effect
until
the
transaction
is
reflected
in
the
registry.
This
tracking
system
can
minimize
potential
disputes
and
provide
a
central
list
of
certified
ERCs
which
may
be
available
to
potential
purchasers.
It
can
also
provide
useful
information
for
quickly
evaluating
any
proposed
use
of
a
banked
ERC.

Information
which
may
help
evaluate
future
proposed
uses
of
a
banked
ERC
should
be
recorded
at
the
time
of
its
creation
and
entered
as
part
of
its
banking
record.
This
information
should
include
the
location
of
the
source
creating
the
ERCs;
whether
the
reduction
is
due
to
a
shutdown
or
curtailment;
the
date
the
reduction
occurred
or
will
occur
(
to
allow
future
determination
of
the
timing
of
the
reduction
with
respect
to
the
application
for
credit
or
its
contemporaneity
for
use
in
netting
or,
if
a
shutdown,
as
an
offset);
the
source's
stack
parameters;
the
temperature
and
velocity
of
its
plume;
particle
size;
the
existence
of
any
hazardous
pollutants;
daily
and
seasonal
emission
rates;
and
other
data
which
might
reasonably
be
deemed
necessary
under
the
requirements
described
in
sections
I.
A.
and
I.
B.
above
to
evaluate
future
use.

To
perform
these
tracking
and
clearinghouse
functions
the
ERC
registry
must
be
accessible
to
the
public.
Subject
to
confidentiality
considerations,
states
should
make
copies
of
the
ERC
registry
available
at
convenient
locations
and
times,
and
may
want
to
publish
or
otherwise
issue
a
periodic
summary
of
banked
ERCs.

8.
Possible
Adjustments
to
ERCs
Based
on
Enforcement
Considerations
Banking
rules
should
state
what,
if
any,
changes
may
occur
to
ERCs
after
they
have
been
banked.
Once
an
ERC
has
been
used
by
another
source
to
meet
a
permit
or
other
regulatory
requirement,
any
violation
of
the
conditions
under
which
that
ERC
was
created
should
result
in
enforcement
against
the
source
producing
that
ERC
and
not
the
source
using
it.
If
a
state
attempted
to
enforce
against
the
source
using
purchased
ERCs,
a
complex
set
of
third­
party
lawsuits
would
likely
ensue.
n57
Page
68
51
FR
43814
n
57
Moreover,
conflicting
private­
party
attempts
to
assess
ultimate
responsibility
for
required
reductions
could
make
the
purchased
ERCs
unenforceable
and
result
in
restoration
of
the
creating
source's
original
(
higher)
emission
limits,
due
to
claims
that
surplus
reductions
were
produced
in
reliance
on
government
rules
implying
their
reasonable
merchantibility
and
use.
For
these
reasons
emission
limits
altered
as
a
result
of
the
creation
and
use
of
ERCs
must
remain
final
and
enforceable
against
the
creator
of
those
ERCs,
so
far
as
EPA
is
concerned.

9.
Possible
Adjustments
to
ERCs
Based
on
Ambient
Attainment
Considerations
To
assure
the
validity
of
its
demonstration(
s)
of
progress
or
attainment,
a
state
with
a
banking
rule
must
assume
that
all
banked
emissions
will
ultimately
be
used.
In
evaluating
their
ability
to
attain
national
standards,
such
states
must
add
to
their
emissions
inventory
or
measured
ambient
values
all
unused
banked
reductions
at
the
site
at
which
they
were
created.
This
is
especially
important
for
areas
requesting
reclassification
from
nonattainment
to
attainment.
Failure
to
account
for
banked
reductions
as
"
in
the
air"
for
SIP
planning
purposes
would
ordinarily
eliminate
their
use
as
ERCs
following
a
new
SIP
design
or
inventory
year,
due
to
double­
counting.

Additional
emission
reductions
may
be
required
from
sources
because
of
their
area's
failure
to
attain
ambient
standards,
because
of
an
increment
violation,
because
of
existing
visibility
impairment,
or
because
new
RACT
requirements
are
being
imposed
under
a
SIP
schedule.
The
existence
of
banked
ERCs
must
not
interfere
with
states'
ability
to
obtain
these
additional
reductions,
and
a
state's
rules
on
treatment
of
banked
ERCs
must
provide
it
the
necessary
flexibility
to
meet
future
requirements.
However,
state
banking
rules
may
address,
within
this
criterion,
how
banked
ERCs
will
be
treated
if
additional
reductions
are
required
to
attain
and
maintain
NAAQS,
protect
PSD
increments,
or
improve
visibility.
Available
options
include:

a.
ERCs
Generated
Prior
to
the
Design
or
Baseline
Year
Could
be
Eliminated.
The
use
of
ERCs
generated
prior
to
the
design
or
baseline
year
is
unlikely
to
be
consistent
with
the
state's
demonstration,
unless
the
state
included
such
ERCs
as
"
in
the
air"
for
planning
purposes
at
that
time.

b.
ERCs
Could
be
Guaranteed
Against
Adjustment.
The
state
would
determine
the
necessary
quantity
of
reductions
from
individual
sources
and
source
categories
and
require
these
reductions
from
actively
emitting
sources.
Banked
credits
previously
created
by
sources
would
be
fully
preserved.
Emitting
sources
could
then
satisfy
new
requirements
for
reductions
either
by
reducing
emissions
directly
or
by
using
or
purchasing
equivalent
ERCs.

In
implementing
this
option,
it
would
be
particularly
important
for
states
to
adjust
downward
the
estimated
total
reductions
due
to
these
new
regulatory
requirements,
in
order
to
reflect
reductions
previously
achieved
as
a
result
of
banking
actions.
Alternatively,
states
could
phrase
new
control
requirements
in
terms
of
equivalent
reduction
results
(
e.
g.,
"
RACT­
equivalent"
reductions
in
nonattainment
areas)
as
well
as
specified
control
techniques
or
emission
levels.
Under
this
approach
necessary
additional
control
requirements
would
be
expressly
stated
in
terms
of
additional
reduction
responsibilities,
to
be
met
without
regard
to
prior
trades.
n58
n
58
See
footnote
55
above.

c.
Use
or
Deposit
of
ERCs
Could
be
Temporarily
Suspended.
States
may
suspend
either
ERC
use
or
future
ERC
deposits
until
the
state
has
committed
in
its
SIP
to
secure
reductions
sufficient
to
reestablish
progress
or
cure
an
increment
violation.
Use
of
either
type
of
moratorium
would
be
consistent
with
air
quality
objectives
while
allowing
sources
to
retain
and
eventually
use
their
entire
quantity
of
banked
ERCs.
However,
these
options
may
be
undesirable
because
of
uncertainty
regarding
the
moratorium's
start,
duration,
or
potential
interference
with
user
planning.
This
may
be
especially
true
where
a
moratorium
on
use
(
rather
than
deposit)
is
imposed
after
ERCs
have
been
banked.

d.
Across­
the­
Board
Discounting.
Under
this
option,
the
state
could
discount
all
ERCs
in
the
bank
by
the
same
factor.
For
example,
if
a
10%
additional
reduction
is
required
from
a
particular
category
of
sources
for
the
SIP's
new
demonstration,
the
state
would
discount
all
currently
banked
ERCs
from
those
types
of
sources
by
10%.
Although
the
quantity
of
ERCs
held
by
a
firm
will
be
reduced,
the
overall
supply
of
ERCs
will
decrease,
while
demand
will
increase.
Indeed,
other
sources
may
seek
to
purchase
banked
Page
69
51
FR
43814
ERCs
from
creating
sources,
in
order
to
meet
the
10%
reductions
required
of
them.
Thus,
the
price
per
unit
of
remaining
ERCs
is
likely
in
many
cases
to
increase.

This
option
is
relatively
straightforward
for
VOC
or
NO
X
.
For
SO
X
or
particulate
matter
more
detailed,
source­
specific
modeling
would
generally
be
required
to
allocate
the
discount
necessary
to
demonstrate
attainment.

States
may
adopt
any
of
these
methods
of
accommodating
possible
additional
reductions.
They
may
also
adopt
any
equivalent
method
which
achieves
the
same
objectives.
n59
n
59
The
preceding
discussion
generally
assumes
the
bank
is
lcoated
in
an
attainment
area
or
nonattainment
area
with
an
approved
demonstration.
In
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations,
use
for
bubble
purposes
of
banked
shutdown
or
other
credits
which
meet
relevant
requirements
of
today's
notice
will
similarly
be
allowed.
See
section
I.
A.
1.
c.(
3)
above.
Bubbles
in
these
areas
will
already
be
subject
to
special
progress
requirements.
However,
in
order
to
accommodate
possible
additional
reduction
requirements
in
other
areas
in
a
manner
consistent
with
banks,
states
may
voluntarily
adopt
such
an
approach
for
bubbles
prior
to
the
issuance
by
EPA
of
any
formal
notice
of
SIP
deficiency
mandating
such
requirements.
States
may
also
choose
(
as
some
have
already
done)
to
specify
greater
than
1:
1
trading
ratios
for
bubbles,
offsets
or
netting.
While
this
approach
would
not
adjust
the
total
amount
of
credit
available
in
a
bank,
it
can
substantially
enhance
SIP
planning
efforts
and
provide
a
net
air
quality
benefit
by
reducing
the
amount
of
emissions
that
can
ultimately
be
returned
from
the
bank
to
the
air.

II.
Trades
Covered
by
State
Generic
Rules
This
section
explains
how
states
may
develop
EPA­
approvable
generic
rules
under
which
classes
of
emissions
trades
may
be
exempt
from
the
general
requirement
for
subsequent
EPA
approval
as
case­
bycase
SIP
revisions.

A.
General
Principles
for
Evaluating
Generic
Rules
A
generic
rule
is
approvable
if
it
assures
that
emissions
trades
otherwise
requiring
case­
by­
case
SIP
revisions
under
sections
110(
i)
and
110
(
a)(
3)
of
the
Clean
Air
Act
will
be
evaluated
under
state
procedures
that
are
sufficiently
replicable
in
operation
to
guarantee
that
emission
limits
produced
under
the
rule
will
not
interfere
with
timely
ambient
attainment
and
maintenance
or
jeopardize
PSD
increments
or
visibility.
Replicability
generally
means
a
high
likelihood­
that
two
decision­
makers
applying
the
rule
to
a
given
trade
would
reach
the
same
conclusion.
For
one
example
of
a
generic
rule
incorporating
a
very
simple
formula
that
meets
tests
of
replicability,
see
46
FR
20551
(
April
8,
1981).
In
relation
to
generic
bubble
rules,
this
means
that
specific
modeling
procedures
or
surrogates
are
prescribed
and
that
states
have
appropriately
defined
their
choice
of
models,
model
inputs,
and
modeling
techniques
in
applying
these
procedures
to
specific
trades.
Thus
these
trades
should
not
create
new
ambient
violations
of
standards
or
increments,
delay
the
planned
removal
of
existing
violations,
or
degrade
visibility
in
Class
I
areas.
By
approving
such
generic
rules,
EPA
approves
in
advance
an
array
of
acceptable
SIP
emission
limits,
and
no
further
SIP
revision
is
required
for
trades
which
meet
the
terms
of
the
state's
approved
rule.

EPA
will
comment
on
trades
proposed
under
generic
rules,
conduct
reviews
of
trades
approved
under
those
rules,
and
audit
the
implementation
of
these
rules
as
part
of
its
routine
audits
of
other
state
air
programs.
See
Section
E
below.

B.
Scope
of
Generic
Rules
States
may
use
a
range
of
mechanisms
to
exempt
bubble
trades
from
individual
SIP
revisions.
While
several
general
mechanisms
are
explained
below,
states
may
submit
other
generic
rules
that
satisfy
these
basic
principles.
See
section
II.
D
below
for
specific
requirements
for
generic
rules
in
primary
nonattainment
areas
which
need
but
lack
approved
demonstrations.

1.
VOC
or
NO
X
Trades
Page
70
51
FR
43814
VOC
or
NO
X
trades
approved
by
states
under
a
generic
rule
that
assures
no
net
increase
in
applicable
baseline
emissions
may
occur
without
case­
by­
case
SIP
revisions.

The
ambient
impacts
of
VOC
and
NO
X
emissions
are
areawide
rather
than
source­
specific.
All
such
emissions
within
a
broad
area
are
considered
comparable,
regardless
of
plume
height,
topography
or
related
factors.
Thus,
the
ambient
impact
of
trades
involving
emissions
of
VOC
or
NO
X
from
different
sources
within
such
an
area
will
by
definition
be
equivalent
to
that
of
the
sum
of
applicable
baseline
emission
limits
for
the
sources
involved
in
the
trade.

For
VOC
and
NO
X
such
pound­
for­
pound
trades
may
therefore
be
treated
under
generic
rules
as
equal
in
ambient
effect
where
all
sources
involved
in
the
trade
are
located
in
the
same
control
strategy
demonstration
area,
or
where
replicable
procedures
have
been
approved
by
EPA
as
part
of
the
generic
rule
for
determining
when
sources
outside
the
demonstration
area
are
sufficiently
close
that
a
pound­
for­
pound
trade
can
be
justified.
n60
n
60
The
discussion
in
this
paragraph
does
not
apply
to
certain
NO
X
trades
involving
visibility
impaction
due
to
elevated
plumes.

In
general,
generic
VOC
trading
rules
must
require
that
surface
coating
emissions
be
calculated
on
a
solids­
applied
basis.
The
rule
should
also
specify
the
maximum
time
period
over
which
emissions
may
be
averaged
in
an
acceptable
compliance
demonstration.
For
VOC
that
averaging
time
should
not
exceed
24
hours
unless
the
rule
contains
language
approved
by
EPA
that
expressly
allows
a
longer
averaging
period.
See
Appendix
D
below.

2.
Particulate,
SO
X
CO
or
Pb
Trades
Classes
of
particulate,
SO
2
,
CO
and
lead
(
Pb)
trades
may
also
be
exempt
from
SIP
revisions
if
they
are
approved
under
a
state
generic
rule
which
assures
that
valid
ERC
uses
cannot
reasonably
interfere
with
attainment
and
maintenance
of
air
quality
standards
or
jeopardize
PSD
increments
or
visibility.
n61
n
61
The
ambient
equivalence
considerations
elaborated
in
this
and
following
paragraphs
also
apply
to
NO
X
trades
involving
visibility
impaction
due
to
elevated
plumes.
See
n.
60
above.

Unlike
other
critical
pollutants,
EPA
does
not
designate
nonattainment
areas
for
lead.
However,
states
must
review
lead
trades,
as
all
other
trades,
to
assure
that
they
do
not
interfere
with
attainment
and
maintenance
of
the
NAAOS.

Generic
state
approvals
of
trades
involving
pollutants
addressed
in
this
subsection
must
be
limited
to
sources
which
are
located
in
the
same
or
adjacent
control
strategy
demonstration
areas
and
the
same
general
air
basin.

De
Minimis
Trades.
Trades
of
particulates,
SO
2
CO
or
lead
(
Pb)
in
which
applicable
net
baseline
emissions
6
n2
do
not
increase
and
in
which
the
sum
of
the
emission
increases,
looking
only
at
the
increasing
sources,
totals
less
than
25
tons
per
year
(
TPY)
for
particulates,
40
TPY
for
sulfur
dioxide,
100
TPY
for
carbon
monoxide,
or
0.6
TPY
for
lead
(
Pb),
after
applicable
control
requirements,
may
proceed
without
modeling
and
case­
by­
case
SIP
revisions.
6
n3
Such
trades
will
have
at
most
a
de
minimis
impact
on
local
air
quality
because
they
will
produce
no
net
increase
in
emissions
and
the
amount
of
emissions
being
shifted
is
not
significant
in
ambient
effect
under
associated
EPA
regulations.
See
45
FR
52745
(
August
7,
1980).
6
n4
n
62
See
n.
31
above.

n
63
The
de
minimis
level
is
40
TPY
for
NO
X
trades
where
visibility
impaction
due
to
elevated
plumes
is
a
consideration.

n
64
This
paragraph
should
not
be
construed
to
imply
that
new
sources
and
modifications
need
not
meet
all
applicable
requirements,
including
those
specified
under
40
CFR
51.18
or
parallel
EPA­
approved
state
rules.
Page
71
51
FR
43814
Level
I
Trades.
The
ambient
impact
of
particulate,
SO
2
,
CO
or
Pb
emissions
depends
on
site­
specific
factors
such
as
topography
and
plume
height
which
are
ordinarily
evaluated
by
ambient
dispersion
modeling.
However,
if
applicable
baseline
emissions
do
not
increase,
sources
are
located
in
the
same
immediate
vicinity,
and
all
other
Level
I
requirements
discussed
in
section
I.
B.
1.
b.(
2)
above
are
met,
it
can
reasonably
be
assumed
that
"
pound­
for­
pound"
trades
will
produce
ambient
effects
equivalent
to
those
which
currently
approved
air
quality
models
would
predict.
As
a
result,
trades
meeting
the
criteria
in
section
I.
B.
1.
b.(
2)
above
may
be
treated
in
the
same
manner
as
generic
VOC
and
NO
X
trades,
and
exempted
from
modeling
and
case­
by­
case
SIP
revisions.

EPA
will
normally
approve
generic
rules
that
define
"
same
immediate
vicinity"
as
up
to
250
meters
between
individual
emission
sources
involved
in
a
trade.

Level
II
Trades.
Other
particulate,
SO
2,
CO
and
Pb
trades
may
also
be
exempted
from
case­
by­
case
SIP
revisions
if
they
meet
the
Level
II
criteria
in
section
I.
B.
1.
b.(
3)
above
and
can
routinely
be
modeled
in
a
prescribed
manner.
The
state's
generic
trading
rule
must
specify
the
particular
refined
model
that
will
be
employed
in
a
given
situation,
or
criteria
for
selecting
models
in
specified
circumstances.
To
limit
variability
in
modeling
results
the
rule
must
also
require
at
least
a
full
year
of
meteorological
data,
identify
the
sites
for
that
data,
and
specify
procedures
for
selecting
input
data
(
e.
g.,
wind
speed,
stability
class,
source
emission
rate)
which
are
sufficiently
defined
to
satisfy
replicability
concerns.
6
n5
In
some
limited
circumstances,
a
sufficiently
conservative
screening
model
could
be
specified
as
part
of
the
generic
rule.
See
section
I.
B.
1.
b(
3)
above.

n
65
Because
today's
notice
confirms
the
authority
of
states
to
use
such
EPA­
approved
refined
models
as
MPTER,
CRSTER
or
ISC
to
conduct
the
"
daily,
temporal,
spatial
analysis"
of
post­
trade
ambient
impacts
required
under
Level
II,
approval
of
generic
rules
incorporating
Level
II
approaches
should
be
less
uncertain
and
burdensome
than
under
the
previous
1982
approach.
See,
e.
g.,
Appendix
C
below.

Level
III
Trades.
Because
of
the
wide
variability
in
data
input
and
use
inherent
in
full­
scale
dispersion
modeling,
Level
III
trades
must
be
processed
as
individual
SIP
revisions.
But
cf.
sections
II.
B.
4
and
III
below.

3.
Limits
on
Trades
Exempt
From
SIP
Revisions
Under
Generic
Rules
Because
some
trades
cannot
readily
be
addressed
in
a
replicable
manner,
the
following
may
not
in
general
be
exempted
under
generic
rules
from
the
requirement
for
case­
by­
case
SIP
revisions:

a.
Particulate,
SO
2
CO
or
Pb
trades
requiring
full­
scale
dispersion
modeling
under
Level
III
(
see
section
I.
B.
1.
b.(
4)
above);

b.
Particulate,
SO
2,
CO
or
Pb
trades
where
complex
terrain
66
n
is
within
the
area
of
the
source's
significant
impact
or
50
km.,
whichever
is
less,
unless
the
trade
does
not
result
in
a
modification
of
effective
stack
heights
and
the
trade
otherwise
qualifies
as
de
minimis
or
Level
I.
The
area
of
significant
impact
can
be
determined
as
noted
in
footnote
21
above
and
in
Appendix
E;
6
n7
n
66
Complex
terrain
is
broadly
defined
by
EPA
as
terrain
greater
in
height
than
the
physical
stack
height
of
a
source.
For
bubble
purposes,
this
definition
is
applicable
only
to
sources
with
an
increase
over
baseline
emissions.

n
67
Generally,
aside
from
the
exception
stated
above,
trades
involving
complex
terrain
as
defined
above
may
not
be
processed
under
generic
rules.
However,
states
may
wish
to
develop
and
submit
for
EPA
approval
additional
area­
specific
criteria
for
determining
when
trades
involving
complex
terrain
do
not
present
problems
of
potential
plume
impaction,
and
therefore
may
be
approved
under
generic
rules
as
de
minimis,
Level
I
or
Level
II
trades
using
a
flat
terrain
model.
These
additional
criteria
would
include
such
factors
as
source
height
and
emission
rate,
distance
between
stack
and
elevated
features,
rate
of
topographical
rise,
and
other
considerations
which
may
be
appropriate
for
a
particular
geographic
area.
States
are
encouraged
to
work
with
EPA
to
Page
72
51
FR
43814
determine
whether,
where
and
how
much
additional
criteria
can
be
developed
and
applied
within
their
state.
Unless
EPA
has
formally
approved
such
additional
criteria
for
a
given
geographic
area
as
part
of
a
generic
rule,
states
must
apply
the
general
restrictions
stated
above
when
processing
trades
in
that
area
under
the
rule.

c.
Open
dust
trades;
and
d.
Level
II
trades
involving
process
fugitive
particulate,
SO
2,
CO
or
Pb
emissions
not
discharged
through
stacks.
6
n8
n
6
8
See
Appendix
C.

In
addition
to
the
above,
in
order
to
protect
the
integrity
of
various
SIP
processes,
the
following
types
of
trades
may
not,
in
general,
be
exempted
under
generic
rules
from
the
requirement
for
case­
by­
case
SIP
revisions:
(
1)
Trades
involving
ERCs
from
mobile
source
measures,
(
2)
trades
involving
emission
sources
which
are
the
subject
of
an
enforcement
action
manifested
by
issuance
of
a
notice
of
violation,
an
administrative
order
or
section
120
action,
or
the
filing
of
a
judicial
complaint,
unless
the
rule
specifies
an
appropriate
mechanism
for
notifying
EPA
of
the
source's
bubble
application
prior
to
formal
state
proposal
and
for
securing
and
recording
written
EPA
concurrence
that
the
bubble
meets
all
pertinent
requirements
of
the
generic
rule,
(
3)
interstate
trades,
(
4)
VOC
trades
with
averaging
times
longer
than
24
hours,
unless
a
state
generic
rule
expressly
providing
for
longer
averaging
times
has
been
approved
by
EPA,
(
5)
trades
involving
work
practice
and
equipment
standards,
unless
a
state
generic
rule
containing
a
provision
expressly
providing
for
state
evaluation
of
such
trades
in
a
replicable
manner
has
been
approved
by
EPA,
and
(
6)
trades
involving
negotiated
RACT
baselines.
However,
a
state
generic
trading
rule
could
specify
"
presumptive
RACT"
limits
which
acceptably
define
generic
trading
baselines
where
RACT
has
not
otherwise
been
defined
in
the
SIP.
While
RACT
baselines
different
from
this
presumptive
limit
could
still
be
used
for
specific
trades,
they
would
need
to
be
approved
as
case­
by­
case
SIP
revisions.
Where
there
is
no
RACT
in
the
SIP,
but
EPA
has
issued
a
CTG
for
sources
of
the
type
involved
in
the
trade,
the
CTG
should
be
used
as
the
presumptive
RACT­
component
of
the
generic
trading
baseline.

To
the
extent
necessary,
EPA
will
issue
notices
requiring
that
existing
generic
rules
be
revised
to
reflect
these
restrictions.
See
section
II.
E.
4.
below.

4.
Other
Generic
Mechanisms
for
Exempting
Particulate,
SO
2
,
CO
or
Pb
Trades
From
Case­
by­
Case
SIP
Revisions
EPA
will
approve
other
generic
techniques
which
are
demonstrated
to
equally
protect
ambient
standards,
PSD
increments,
Class
I
areas,
and
visibility.
For
example,
a
state
could
approve
a
modeled
formula
for
two
or
more
specific
emission
sources
which
would
satisfy
ambient
concerns
while
allowing
firms
to
define
specific
permit
limits
at
each
covered
emission
source.
Like
other
generic
provisions,
such
a
formula
would
have
to
be
approved
as
part
of
the
SIP.
EPA
encourages
states
to
work
with
EPA
Regional
Offices
where
they
seek
to
develop
other
generic
mechanisms
which
meet
the
tests
of
replicability
and
ambient
equivalence
described
above.

C.
Enforcing
Emission
Limits
Under
Generic
Rules
Alternative
emission
limits
approved
under
generic
rules
are
considered
by
EPA
to
be
federally
enforceable
so
long
as
the
generic
rule
specifies
the
compliance
instrument
(
permit
limits,
etc.)
under
which
the
conditions
of
the
trade
will
be
implemented
and
all
substantive
and
procedural
requirements
of
the
approved
rule
are
met.
Generic
rules
must
specify
that
such
alternative
limits
become
applicable
requirements
of
the
SIP
under
§
110
for
purposes
of
sections
113,
120,
and
304
of
the
Clean
Air
Act
and
are
enforceable
in
the
same
manner
as
other
SIP
requirements.
To
assure
that
EPA
and
citizens
know
what
emission
limits
apply,
generic
rules
must
also
specify
that,
and
in
what
manner,
EPA
will
be
informed
of
emission
limits
applicable
before
and
after
the
trade.
(
For
additional
issues
related
to
enforceability,
see
section
I.
A.
2
above.
For
requirements
related
to
opportunity
for
public
comment,
see
section
II.
F.
below).
Page
73
51
FR
43814
D.
Generic
Bubble
Rules
in
Primary
Nonattainment
Areas
Which
Lack
Approved
Demonstrations
of
Attainment
Generic
rules
will
continue
to
operate
in
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations
of
attainment,
under
the
following
conditions:

1.
Bubbles
approved
under
existing
generic
bubble
rules
prior
to
the
effective
date
of
today's
policy
will
not
be
affected
by
today's
requirements.

2.
Bubbles
submitted
to
states
under
existing
generic
rules
may
continue
to
be
approved
by
states
in
accord
with
those
rules,
until
such
rules
are
finally
changed,
pursuant
to
specific
formal
EPA
request,
to
meet
the
criteria
listed
below.
Such
rules
must,
however,
as
requested
by
EPA,
be
modified
to
meet
the
criteria
below.
n69
n
69
In
the
interim,
EPA
expects
states
to
ensure,
so
far
as
feasible,
that
bubbles
approved
under
existing
generic
rules
are
consistent
with
this
policy
as
well
as
with
the
terms
of
their
EPAapproved
rules.
States
should
be
aware
that
without
this
or
similar
precautions,
continued
approval
of
bubbles
under
existing
generic
rules
containing
identified
deficiencies
may
create
or
accentuate
plan
deficiencies
which
may
have
to
be
corrected
at
a
later
date
or
compensated
for
by
other
means.
See
section
E.
4.
below.

3.
Applications
for
new
generic
bubble
rules
applicable
to
these
areas,
and
applications
for
generic
rules
now
pending
before
EPA,
will
be
approved
provided
they
meet
the
criteria
below
and
all
other
applicable
requirements
of
today's
policy.
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Criteria
for
Approvable
Generic
Bubble
Rules.
New
and
revised
generic
bubble
rules
applicable
to
primary
nonattainment
areas
which
require
but
lack
approved
demonstrations
of
attainment
must,
for
bubbles
in
those
areas:

a.
Use
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable
emissions
baselines
for
all
sources
involved
in
the
trade;
n70
n
70
For
detailed
discussion
of
these
baselines,
see
section
I.
A.
1.
b.
above
and
Appendix
B.

b.
Using
baseline
emissions
defined
above,
meet
applicable
de
minimis
Level
I
or
Level
II
modeling
tests
for
ambient
equivalence,
as
appropriate;

c.
Produce
an
overall
emission
reduction
from
each
bubble
equal
(
in
percentage
terms)
to
the
larger
of
a
20%
reduction
in
emissions
remaining
after
applicable
baselines,
or
to
the
overall
emission
reduction
from
controllable
stationary
sources
(
in
percentage
terms)
needed
to
attain
in
the
area
(
i.
e.,
at
least
equal
to
the
source­
by­
source
emission
reductions
that
would
be
required
for
a
full
demonstration
of
attainment,
taking
into
account
"
uncontrollable"
area
or
other
stationary
sources
and
expected
emission
reductions
from
mobil
sources).
n71
This
determination
must
be
submitted
with
the
rule,
and
must
use
the
same
type
and
quality
of
analysis
as
that
required
for
an
EPA­
approvable
SIP;
and
n
71
For
example,
assume
air
quality
analysis
indicates
the
area
must
decrease
its
base­
year
emissions
by
45%
to
attain
the
relevant
NAAQS.
Further
assume
Therefore
the
reductions
needed
from
controllable
stationary
sources
are
9,450­
5,500=
3,950
TPY
And
the
percent
emission
reduction
required
from
controllable
stationary
sources
to
attain
is
Thus
the
net
overall
reduction
required
from
each
generic
bubble
would
be
94%
(
i.
e.,
the
reductions
produced
by
applicable
baselines
(
e.
g.,
application
of
a
RACT
emission
rate)
plus
whatever
percent
reduction
in
emissions
remaining
after
this
RACT
limit
is
sufficient
to
yield
the
94%
total).
Page
74
51
FR
43814
States
that
wish
to
avoid
SIP
revisions
for
sources
for
which
RACT
has
not
yet
been
defined
in
an
approved
SIP
provision
may
incorporate
"
presumptive
RACT"
limits
(
e.
g.,
80%
reduction
for
VOC)
in
their
generic
rules.
Sources
would
then
have
the
option
of
accepting
these
RACT
limits
for
generic
bubble
purposes,
or
negotiating
different
RACT
limits
through
the
SIP
revisions
process.
However,
where
a
source
involved
in
a
trade
is
one
for
which
EPA
has
issued
a
CTG,
but
the
state
has
not
yet
adopted
the
CTG­
specified
limit
as
RACT
and
no
RACT
has
yet
been
specified
by
the
state
for
that
source,
the
presumptive
or
negotiated
RACT
limit
for
the
trade
must
be
at
least
as
protective
as
the
CTG
for
that
source.

TPY
(
a)
For
the
base
year:
Uncontrollable
stationary
source
emissions
(
e.
g.,
residential
combustion
sources)
2,500
Controllable
stationary
source
emissions
3,500
Mobile
source
emissions
4,000
Total
10,000
Target
emissions
for
attainment
10,000
x
(
1.0­
0.45)
5,500
TPY
(
b)
For
the
projected
attainment
year
(
before
additional
controls):
Uncontrollable
stationary
source
emissions
2,500
x
1.1
2,750
Controllable
stationary
source
emissions
3,500
x
1.2
4,200
Mobile
source
emissions
2,500
Total
9,450
(
3950
x
100=
94%
)
(
4200
)

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J.
094­
999­
F.
A04DE3.109­

d.
Provide
assurances,
in
conjunction
with
the
State's
submittal
of
the
generic
rule
to
EPA,
that
the
state
(
i)
is
making
reasonable
efforts
to
develop
a
complete
approvable
SIP
that
will
achieve
the
percent
emission
reduction
from
controllable
sources
described
in
the
previous
paragraph
and
(
ii)
intends
to
adhere
to
the
schedule
for
development
of
such
a
SIP
(
including
dates
for
completion
of
emissions
inventory
and
subsequent
increments
of
progress),
as
stated
in
the
letter
accompanying
the
submittal
or
in
previous
letters.
In
addition,
to
ensure
that
generic
approvals
continue
to
complement
and
do
not
interfere
with
attainment
planning,
EPA
will
require
the
state
to
include
the
specific
assurances
listed
at
section
I.
A.
1.
b.(
3)
above
in
or
with
its
notices
of
proposed
and
final
approval
of
each
bubble
issued
under
the
generic
rule
in
such
a
nonattainment
area.
n72
n
72
These
four
requirements
must
be
included
as
a
contingent
provision
in
all
future
generic
rules,
with
the
contingency
triggered
to
apply
to
bubbles
in
primary
nonattainment
areas
which
become
subject
to
a
SIP
call
questioning
their
approved
demonstration,
after
the
generic
rule
was
approved.

E.
EPA
Oversight
of
Generic
Rules
Page
75
51
FR
43814
In
order
to
ensure
proper
implementation
of
EPA­
approved
generic
trading
rules,
EPA
intends
to
(
a)
examine
and
comment
on,
together
with
any
other
public
commenter,
the
information
provided
for
individual
trades
proposed
under
a
generic
rule,
(
b)
conduct
reviews
of
individual
trades
approved
under
such
a
rule,
and
(
c)
periodically
audit
the
implementation
of
the
generic
rule
itself.

1.
EPA
Comment
on
Trades
Proposed
Under
Generic
Rules
When
processing
emissions
trades
under
generic
rules,
states
are
required
to
provide
EPA
and
the
public
with
adequate
notice
and
opportunity
to
comment.
See
sections
II.
F.
and
II.
G.
below.
EPA
will
use
state
procedures
for
notice
and
comment
to
oversee
the
implementation
of
generic
rules
without
delaying
state
processing
of
trading
applications.

The
information
which
a
state
must
provide
to
EPA
by
the
first
day
of
the
comment
period
(
see
section
II.
G.
below)
is
generally
sufficient
for
EPA
to
determine
that
a
trading
application
is
being
processed
properly.
Where
this
information
is
not
sufficient,
EPA
may
request
the
appllication
itself,
and
the
state
must
provide
it
promptly.

Where
EPA
elects
to
provide
any
comments
on
the
proposed
approval,
it
will
do
so
in
writing,
by
the
close
of
the
comment
period
specified
in
the
state's
notice.
EPA
may
also
testify
at
any
public
hearing
held
pursuant
to
the
approval
of
a
trading
application
under
a
generic
rule.
Trading
applicants
and
state
officials
are
strongly
advised
to
address
EPA's
comments,
and
where
necessary
to
incorporate
an
appropriate
response
to
those
comments
in
the
final
approval
document.
n73
n
73
Lack
of
EPA
comment
during
the
comment
period
will
not
bar
future
appropriate
EPA
enforcement
or
rulemaking
actions
if
the
bubble
is
found
to
be
inconsistent
with
the
generic
rule.

2.
Reviews
of
Individual
Bubbles
Approved
Under
Generic
Rules
Reviews
of
Individual
generic
bubble
approvals,
apart
from
the
regularly
scheduled
reviews
associated
with
activities
under
EPA's
National
Air
Audit
System
(
see
section
II.
E.
3.
below),
may
be
conducted
at
any
time
by
EPA
in
order
to
promptly
address
identified
or
suspected
problems
and
to
avoid
patterns
of
improper
approval
or
other
adverse
effects
which
might
accumulate
before
the
next
biannual
audit
is
conducted.

3.
EPA
Audits
of
the
General
Implementation
of
Generic
Rules
Under
the
National
Air
Audit
System,
EPA
conducts
a
program
audit
of
each
state
agency
responsible
for
implementing
the
SIP
and
delegated
federal
programs.
7
n4
These
audits
are
currently
carried
out
on
a
biannual
basis.
As
part
of
the
National
Air
Audit
System,
EPA
will
conduct
an
in­
depth
file
audit
of
a
representative
sample
of
generic
trading
approvals
issued
by
the
relevant
state.

n
7
4
See,
e.
g.,
National
Air
Audit
Guidelines
for
FY
84,
Office
of
Air
Quality
Planning
and
Standards,
EPA­
450/
2­
83­
007
(
November
1983).

4.
Deficient
Generic
Trades
As
discussed
above,
generic
rules
can
expedite
the
approval
process
for
certain
classes
of
emissions
trades
because
they
allow
such
trades
to
be
approved
by
states
without
undergoing
a
subsequent
federal
rulemaking
process.
However,
to
be
considered
valid
by
EPA,
a
trade
approved
under
a
generic
rule
must:

(
1)
Be
one
of
a
class
of
trades
which
is
within
the
scope
of
the
generic
rule,

(
2)
Be
approved
after
the
generic
rule
has
been
approved
by
EPA,
and
(
3)
Meet
all
the
provisions
of
the
generic
rule
as
approved
by
EPA.

If
a
state­
approved
emissions
trade
does
not
meet
all
these
requirements
it
cannot
be
considered
part
of
the
SIP
and
by
definition
cannot
replace
prior
valid
emission
limits
in
the
SIP.
See
46
FR
20554­
55
(
April
6,
1981).
Should
EPA
determine,
as
a
result
of
its
oversight
activities,
that
a
state­
approved
trade
is
inconsistent
with
the
above
requirements,
it
will
notifiy
the
state
and
source
in
writing
and
specify
any
Page
76
51
FR
43814
necessary
remedial
measures.
In
such
circumstances,
EPA
may
take
appropriate
remedial
action
to
assure
attainment
and
maintenance,
including
direct
enforcement
of
the
original
SIP
limits.
7
n5
n
7
5
In
some
cases
EPA
may
have
approved
state
SIP
provisions
which
meet
the
functional
criteria
for
generic
rules,
without
indicating
whether
or
not
those
provisions
were
approved
for
generic
operation.
Today's
notice
does
not
address
the
effect
of
generic
validity
of
such
provisions.

5.
Deficient
Generic
Rules
Existing
generic
rules
approved
under
previous
EPA
policy
and
guidance
may
require
revision
in
order
to
make
them
consistent
with
today's
final
policy.
In
addition,
a
generic
rule
approved
by
EPA
under
the
final
policy
may
subsequently
be
found
to
be
deficient
in
some
respect.
Because
EPA­
approved
generic
rules
have
independent
force
of
law,
they
can
only
be
amended
upon
completion
of
a
formal
SIP
revision
process.

In
order
to
ensure
that
generic
rules
are
consistent
with
the
Agency's
current
Emissions
Trading
Policy,
EPA
will
publish
notices
in
the
Federal
Register
which
identify
any
generic
rules
requiring
formal
modification.
7
n6
These
notices
will
identify
specific
deficiencies
and
means
for
correcting
them,
and
will
set
forth
a
schedule
for
submission
and
review
of
revised
rules.
These
notices
will
alert
affected
states
to
the
danger
that
continued
processing
of
trades
under
these
rules
may
create
or
accentuate
plan
deficiencies
which
may
have
to
be
corrected
at
a
later
date
or
compensated
by
other
means.
Where
states
fail
to
remedy
deficiencies
identified
in
the
notice
within
the
prescribed
period,
EPA
may
either
rescind
its
previous
approval
of
the
rule,
or
issue
a
notice
of
SIP
deficiency
under
section
110(
a)(
2)(
H)
of
the
Act.

n
7
6
EPA's
publication
of
such
notices
will
not
trigger
special
progress
requirements
for
caseby
case
SIP
revision
bubbles
in
areas
other
than
primary
nonattainment
areas
which
require
but
lack
demonstration.
Primary
nonattainment
areas
which
require
but
lack
demonstrations
should
already
be
subject
to
special
progress
requirements
of
case­
by­
case
SIP
revision
bubbles.

F.
Public
Comment
For
emissions
trades
processed
under
generic
rules,
existing
state
statutes
or
regulations
will
generally
provide
for
adequate
public
notice
and
opportunity
to
comment,
including
opportunity
for
judicial
review
sufficient
to
make
comment
effective.
Under
such
statutes
or
regulations,
after
the
state
has
reviewed
a
bubble
application
submitted
pursuant
to
an
approved
generic
rule,
a
newspaper
or
similar
notice
is
typically
published
providing
a
comment
period
(
usually
thirty
(
30)
days)
on
the
proposed
decision
to
approve
or
disapprove
the
application.
This
notice
generally
informs
the
public
that
the
proposed
approval
document
(
license,
order,
permit,
consent
agreement,
etc.),
the
application
itself
(
with
the
exception
of
any
portion
entitled
to
confidentiality
under
state
or
federal
law
7
n7,
and
the
technical
analysis
performed
by
the
state
in
making
its
proposed
determination,
are
available
for
review
at
specified
times
and
locations.
The
notice
also
offers
the
opportunity
for
a
public
hearing.

n
7
7
The
specific
pollutants
emitted
by
the
source,
the
amount
of
those
pollutants,
and
their
ambient
air
impact
may
not
be
deemed
confidential.

Under
today's
policy,
the
state
must
also
notify
the
relevant
Federal
Land
Manager
if
an
emissions
trade
will
take
place
within
100
kilometers
of
a
PSD
Class
I
area.
Notification
must
occur
early
enough
in
the
review
process
to
allow
at
least
30
days
for
the
submittal
of
comments
before
the
trade
will
be
approved
by
the
state.

Where
adequate
procedures
for
public
notice
and
comment
are
not
already
provided
in
existing
state
statutes
or
regulations,
such
procedures
must
be
provided
as
part
of
an
EPA­
approved
generic
rules.
In
all
proposed
and
final
generic
bubble
actions,
states
must
clearly
and
publicly
identify
both
the
pre­
and
posttrade
actual
and
allowable
emissions
of
each
source
involved
in
the
trade,
so
that
the
ambient
effects
of
each
bubble
may
be
known.
Page
77
51
FR
43814
To
ensure
adequate
public
awareness
consistent
with
§
304
of
the
Clean
Air
Act,
state
generic
rules
or
other
existing
state
laws
or
regulations
must
also
make
publicly
available
any
changes
to
emission
limits
which
result
from
trades
approved
under
a
generic
rule.

G.
EPA
Notification
In
addition
to
the
above
requirements
for
public
notice
and
comment,
the
generic
rule
or
other
state
provisions
must
require
that
states,
by
the
first
day
of
the
public
comment
period,
provide
the
appropriate
EPA
Regional
Office
(
see
addresses
in
Appendix
A)
with
a
copy
of
the
public
notice,
the
proposed
approval
document,
and
the
technical
analyses
performed
in
evaluating
the
trading
application,
together
with
any
summary
of
those
analyses
which
is
available
for
public
review.

State
provisions
must
also
require
that
immediately
upon
issuance
of
a
final
generic
trading
approval,
the
state
will
forward
two
copies
of
that
document
to
the
relevant
EPA
Regional
Office,
and
will
also
submit
to
EPA
any
additional
documentation
which
is
included
in
comments
or
the
post­
comment
record
and
supports
that
final
state
approval.

Any
notices
issued
by
EPA
to
correct
notice
and
comment
procedures
which
do
not
meet
these
requirements
under
current
or
future
generic
rules
will
not
trigger
special
progress
requirements
or
otherwise
affect
the
operation
of
those
rules.
Because
of
the
importance
of
adequate
public
and
EPA
notice,
affected
states
should,
however,
correct
deficient
notice
procedures
to
the
extent
practicable,
in
the
interim
period
before
formal
rule
revisions
are
submitted
and
approved.

H.
Rulemaking
on
Generic
Rules
EPA
will
process
acceptable
generic
trading
rules
for
approval
as
revisions
to
SIPs
as
expeditiously
as
possible.
In
the
interim,
states
are
encouraged
to
use
parallel­
processing
SIP
revision
procedures
(
see
46
FR
44477;
Sept.
4,
1981)
wherever
practical.
Trades
may
not
be
generically
approved
by
a
state
until
EPA
has
published
a
notice
of
final
approval
of
the
generic
trading
rule
in
the
Federal
Register.

III.
Trades
Not
Covered
by
State
Generic
Rules
In
the
absence
of
a
generic
rule,
states
and
sources
must
use
case­
by­
case
SIP
revisions
to
effect
bubble
or
external
offset
trades.
Individual
trades
may
also
fall
outside
the
scope
of
an
approved
generic
rule
and
still
be
implemented
as
case­
by­
case
SIP
revisions.
The
principles
described
in
the
Policy
Statement
and
this
Document
will
be
used
to
evaluate
these
emission
trades.

Because
of
the
ability
of
the
case­
by­
case
SIP
revision
process
to
take
account
of
greater
individual
variations,
many
trades
which
could
not
be
accomplished
under
a
generic
rule
may
nevertheless
be
approved
as
case­
by­
case
SIP
revisions.
Through
this
SIP
revision
process,
states
and
sources
may
also
demonstrate
that
a
general
principle
discussed
in
Section
I
above
does
not
apply
to
their
particular
circumstances,
or
that
such
a
principle
may
be
satisfied
in
other
ways.

EPA
will
make
reasonable
efforts
to
take
prompt
action
on
SIP
trading
proposals
after
a
state
has
ruled
on
an
individual
application
and
submitted
it
to
the
Agency.
EPA
encourages
"
parallel
processing"
of
such
proposals,
with
EPA
and
state
officials
conducting
concurrent
review
so
that
both
agencies
can
give
public
notice
of
proposed
action
at
roughly
the
same
time.
EPA
can
then
take
final
action
after
the
state
completes
its
proceedings,
provided
the
state
does
not
substantially
alter
the
proposal
after
public
notice.
EPA
will
also
publish
noncontroversial
SIP
revisions
as
direct
final
actions,
converting
them
to
proposals
only
if
requests
to
submit
adverse
comments
are
received
within
30
days
(
see
generally
46
FR
44477,
September
4,
1981).
In
all
bubble
actions
EPA
will
clearly
identify
(
or
require
states
to
identify,
as
appropriate)
both
pre­
and
post­
trade
actual
and
allowable
emissions
for
each
source
involved
in
the
trade,
so
that
the
ambient
effects
of
each
bubble
may
be
known.

Appendix
A
­­
Regional
EPA
Emissions
Trading
Coordinators
Page
78
51
FR
43814
Region
I.
David
Conroy
(
APS­
2310),
State
Air
Programs
Branch,
U.
S.
Environmental
Protection
Agency,
Region
I,
John
F.
Kennedy
Federal
Building,
Boston,
Massachusetts
02203,
(
617)
565­
3252;
FTS
835­
3252
Region
II:
Betty
Martinovich,
Air
Branch,
U.
S.
Environmental
Protection
Agency,
Region
II,
26
Federal
Plaza,
New
York,
New
York
10007,
(
212)
264­
2517;
FTS
264­
2517
Region
III:
Cynthia
Stahl,
Air
Programs
Branch,
U.
S.
Environmental
Protection
Agency,
Region
III,
841
Chestnut
Building,
Philadelphia,
Pennsylvania
19101,
(
215)
597­
9337;
FTS
597­
9337
Region
IV:
Melvin
Russell,
Air
Programs
Branch,
U.
S.
Environmental
Protection
Agency,
Region
IV,
345
Courtland
Street,
N.
E.,
Atlanta,
Georgia
30308,
(
404)
257­
2864;
FTS
257­
2864
Region
V:
Joe
Paisie,
Air
Compliance
Branch,
U.
S.
Environmental
Protection
Agency,
Region
V,
230
South
Dearborn
Street,
Chicago,
Illinois
60604,
(
312)
886­
5777;
FTS
886­
5777
Region
VI:
Bill
Riddle,
Air
Program
Branch,
U.
S.
Environmental
Protections
Agency,
Region
VI,
First
International
Building,
1201
Elm
Street,
Dallas,
Texas
75270,
(
214)
767­
9870;
FTS
729­
9870
Region
VII:
Charles
Whitmore,
Air
Support
Branch,
U.
S.
Environmental
Protection
Agency,
Region
VII,
324
East
11th
Street,
Kansas
City,
Missouri
64106,
(
913)
236­
2896;
FTS
757­
2896
Region
VIII:
Dale
Wells,
Air
Programs
Branch,
U.
S.
Environmental
Protection
Agency,
Region
VIII,
1860
Lincoln
Street,
Denver,
Colorado
80296,
(
303)
293­
1773;
FTS
564­
1773
Region
IX:
Nancy
Harney,
Air
Management
Division,
U.
S.
Environmental
Protection
Agency,
Region
IX,
215
Fremont
Street,
San
Francisco,
California
94105,
(
415)
974­
7658;
FTS
454­
7658
Region
X:
David
Bray,
Air
Programs
Branch,
U.
S.
Environmental
Protection
Agency,
Region
X,
1200
6th
Avenue,
Seattle,
Washington
98101,
(
206)
442­
4253;
FTS
399­
4253
Appendix
B
­­
Definitions
of
"
Actual,"
"
Allowable"
and
"
Baseline"
Emissions
for
Purposes
of
Emissions
Trading
As
used
in
this
document
with
respect
to
bubbles,
a
source's
"
actual"
emissions
equal
its
average
historical
emissions,
in
tons
per
year,
for
the
two­
year
period
preceding
the
source's
application
to
bank
or
trade
emission
reduction
credit.
Another
time
period
may
be
deemed
more
representative
of
typical
operations,
but
the
applicant
or
state
must
show
that
actual
emissions
of
such
other
period
are
consistent
with
air
quality
planning
for
the
area.
The
definition
of
"
actual
emissions"
for
new
source
review
purposes
is
somewhat
different.
n1
See
45
FR
52745
(
August
7,
1980);
40
CFR
51.18(
j)(
1)(
xii),
51.24(
b)(
21),
52.21(
b)(
21)
and
52.24(
f)(
13).

n
1
For
instance,
the
calculation
of
actual
emissions
for
netting
purposes
is
as
of
the
date
of
the
event
that
brings
about
the
reduction.

A
sources's
"
allowable"
emissions
in
tons
per
year
are
calculated
using
the
maximum
rated
capacity
of
the
source
(
unless
the
source
is
subject
to
federally
enforceable
operating
restrictions)
and
the
most
stringent
of:
(
a)
A
standard
applicable
under
40
CFR
Parts
60
or
61;
(
b)
any
applicable
SIP
emissions
limitation,
including
those
with
a
future
compliance
date;
or
(
c)
an
emissions
rate
set
in
a
federally
enforceable
permit
condition.
See
40
CFR
51.18
(
j)(
1)(
xi),
51.24(
b)(
16),
51.21(
b)(
16)
and
52.24(
f)(
11).
The
same
definition
of
"
allowable
emissionis"
appears
at
each
of
these
citations.
See
also
45
FR
52745
(
August
7,
1980).
Page
79
51
FR
43814
For
bubbles,
a
source's
"
baseline"
emissions
are
equal
to
the
product
of
its
(
1)
emission
rate
("
ER"),
specified
in
terms
of
mass
emission
per
unit
of
production
or
throughput
(
e.
g.,
pounds
SO[
2]
per
million
BTU
or
pounds
of
VOC
per
weight
of
solids
applied);
(
2)
average
hourly
capacity
utilization
("
CU")
(
e.
g.,
millions
of
BTU
per
hour
or
weight
of
solids
applied
per
hour);
and
(
3)
number
of
hours
of
operation
("
H")
during
the
relevant
time
period.
I.
e.,
baseline
emissions
=
ER
x
CU
x
H.
Net
baseline
emissions
for
a
bubble
are
the
sum
of
the
baseline
emissions
of
all
sources
involved
in
the
trade.

In
attainment
areas
and
nonattainment
areas
with
approved
demonstrations
of
attainment,
a
source's
baseline
emissions
for
bubble
purposes
must
generally
be
determined
using
the
lower
of
"
actual"
or
"
allowable"
values
for
each
of
the
three
baseline
factors.
Actual
values
for
these
factors
are
determined
based
on
the
source's
average
historical
values
for
the
factors
for
the
two­
year
period
preceding
the
source's
application
to
bank
or
trade
emission
reduction
credits.
As
discussed
above,
another
time
period
may
be
deemed
more
representative
of
typical
operations,
but
the
emissions
for
that
other
period
must
be
shown
to
be
consistent
with
air
quality
planning
for
the
area.
A
source's
allowable
values
for
the
three
baseline
factors
are
determined
based
on
its
lowest
federally
enforceable
limit
for
those
factors
(
i.
e.,
the
lowest
limit
specified
in
an
applicable
SIP,
PSD
or
other
NSR
permit
issued
under
an
EPA­
approved
program,
compliance
order,
or
consent
decree),
including
those
with
a
future
compliance
date.

The
actual
values
for
any
of
the
three
baseline
factors,
when
higher
than
corresponding
allowable
values,
may
not
be
used
by
a
source
in
calculating
baseline
emissions
(
i.
e.,
reductions
down
to
compliance
levels
cannot
qualify
for
emission
reduction
credit).
The
allowable
values
for
one
or
more
of
these
factors,
when
higher
than
the
corresponding
actual
values,
may
be
used
in
calculating
bubble
baseline
emissions
for
a
source
only
in
the
following
circumstances:

­­
Where,
in
a
nonattainment
or
attainment
area
with
an
approved
demonstration,
the
applicant
shows
that
the
demonstration
assumes
allowable
value(
s)
for
the
factor(
s)
in
question.
Such
a
showing
must
be
based
on
written
evidence.

­­
Where,
in
an
attainment
area,
the
approved
demonstration
does
not
assume
allowable
value(
s)
for
the
baseline
factor(
s)
in
question,
but
the
applicant
performs
satisfactory
ambient
tests
to
show
that
the
use
of
such
allowable
value(
s)
will
not
jeopardize
attainment
and
maintenance
of
NAAQS,
PSD
increments
or
visibility.
For
particulate
matter
or
SO
2
,
this
will
require
at
least
a
Level
II
modeling
analysis
using
actual
emissions
for
the
pre­
trade
case.
n2
Where
such
an
analysis
is
submitted
to
justify
allowable
values
for
a
case­
by­
case
SIP
revision
bubble,
the
Region
may
require
additional
technical
support
if
deemed
necessary
to
protect
applicable
standards
or
increments.
See
Section
I.
B.
1.
b
above.

n
2
Where
the
PSD
baseline
has
been
triggered,
and
such
emissions
data
is
available,
the
prebubble
situation
for
sources
which
were
in
existence
or
commenced
construction
prior
to
the
PSD
baseline
date
should
be
modeled
using
emissions
consistent
with
the
PSD
baseline
concentration
as
defined
in
40
CFR
51.24(
b)(
13)
and
52.21(
b)(
13).
However,
emissions
and
associated
parameters
may
be
based
on
more
recent
values
where
past
emissions
data
cannot
readily
be
obtained.
For
related
principles
see
section
I.
A.
1.
c.(
1)
above.

­­
Where,
in
a
non­
attainment
area
with
an
approved
demonstration
of
attainment,
the
demonstration
does
not
assume
allowable
value(
s)
for
the
baseline
factor(
s)
in
question,
but
the
applicant
demonstrates
through
a
Level
III
modeling
analysis
that
the
use
of
such
allowable
value(
s)
will
not
jeopardize
attainment
and
maintenance
of
NAAQS
or
PSD
increments.

­­
Where,
in
an
attainment
area
or
a
nonattainment
area
with
an
approved
demonstration,
a
source
has
a
new
source
preconstruction
permit
issued
after
the
PSD
baseline
date
or
the
base
year
of
the
attainment
demonstration.
In
such
cases,
the
applicant
may
use
the
value(
s)
of
ER,
CU
and
H
upon
which
the
new
source
permit
was
approved.

While
the
Emissions
Trading
Policy
does
permit
sources
to
use
allowable
values
for
ER,
CU
and
H
in
determining
baseline
emissions
for
bubbles
under
certain
carefully
prescribed
conditions,
the
approach
taken
recognizes
that
SIP
demonstrations
are
frequently
based
on
a
"
hybrid"
of
allowable
and
actual
values,
and
that
bubble
baselines
in
these
areas
must
accurately
reflect
SIP
assumptions
for
all
three
baseline
factors,
or
be
justified
by
appropriate
modeling,
to
maintain
SIP
integrity.
Page
80
51
FR
43814
In
nonattainment
areas
needing
but
lacking
approved
demonstrations
of
attainment,
sources
involved
in
a
bubble
must
use
"
lowest­
of­
actual­
SIP­
allowable­
or­
RACT­
allowable"
emissions
baselines.
The
ER
factor
for
such
baselines
is
based
on
the
actual
emission
rate,
the
SIP
or
other
federally
enforceable
emission
limit,
or
a
RACT
emission
limit,
whichever
is
lower,
as
of
the
time
of
the
source's
applicable
to
bank
or
trade,
whichever
is
earlier.
The
CU
and
H
factors
for
such
baselines
are
based
on
the
lower
of
actual
or
allowable
values
for
those
factors.
Actual
values
for
CU
and
H
must
be
determined
using
the
source's
average
historical
values
for
the
two
year
period
preceding
the
source's
application
to
bank
or
trade,
unless
another
two
year
period
is
shown
to
be
more
representative
of
typical
operations.

For
sources
which
banked
or
sought
to
bank
credit
in
these
nonattainment
areas
prior
to
publication
of
today's
notice,
the
"
date
of
application
to
bank"
is
the
date
of
written
application
to
the
state
to
bank
credit
through
a
formal
bank
or
informal
banking
mechanism
for
use
in
future
trades.
For
sources
which
seek
to
bank
credit
in
these
areas
following
publication
of
today's
notice,
the
date
of
application
to
bank
will
be
the
date
of
written
application
to
the
state
to
make
a
reduction
state­
enforceable
through
or
concurrent
with
use
of
a
formal
bank
or
informal
banking
mechanism.

Appendix
C
­­
Approvable
Modeling
Approaches
U.
S.
Environmental
Protection
Agency
Office
of
Air,
Noise,
and
Radiation
February
17,
1983.

Memorandum
Subject:
Emissions
Trading
Policy
­­
Technical
Clarifications
From:
Sheldon
Meyers,
Director,
Office
of
Air
Quality
Planning
and
Standards
(
ANR­
443)

To:
Director,
Air
and
Waste
Management
Division,
Regions
II­
IV,
VI­
VIII,
X;
Director,
Air
Management
Division,
Regions
I,
V,
IX
The
proposed
emission
trading
policy
was
published
on
April
7,
1982,
in
the
Federal
Register.
During
the
initial
implementation
of
the
proposal,
numerous
emissions
trading
issues
have
arisen
including
several
ralating
to
the
technical
requirements
of
dispersion
modeling
and
control
strategy
evaluations.
To
address
these
modeling
issues,
a
special
workshop
was
held
to
solicit
recomendations
from
Regional
meteorologists/
modelers
as
well
as
the
various
Headquarters
technical
staff.
The
Standing
Committee
on
Emissions
Trading
has
also
considered
these
issues
and
the
recommendations
of
the
workshop
group.

This
memo
is
intended
to
outline
the
results
of
these
meetings
and
to
provide
interim
guidance.
It
is
effective
immediately
and
will
be
incorporated
into
the
final
Agency
policy
when
promulgated.
The
following
revisions
or
clarifications
on
modeling
for
TSP,
CO,
and
SO
2
,
are
intended
to
supplement
the
criteria
included
in
the
April
7,
1982,
emissions
trading
policy
statement.

Level
I
Analysis
­­
To
ensure
air
quality
equivalence
under
Level
I
analysis
(
modeling
is
not
required),
trades
cannot
be
approved
where
complex
terrain
(
terrain
greater
than
any
stack
with
increasing
emissions)
is
within
the
area
of
significant
impact
of
the
source
or
50
kilometers,
whichever
is
less.

­­
Stacks
with
increasing
emissions
must
be
at
least
good
engineering
practice
(
GEP)
to
prevent
downwash.

­­
Fugitive
process
and
stack
sources
can
be
traded
under
Level
I
(
i.
e.,
process
for
process,
process
for
stack,
and
stack
for
stack)
as
long
as
the
maximum
distance
between
any
emitting
points
is
less
than
250
Page
81
51
FR
43814
meters.
(
This
is
true
for
trades
under
generic
rules
as
well
as
for
trades
implemented
by
SIP
revisions.
The
effective
stack
height
requirement
in
the
April
policy
remains.)

­­
Since
trades
involving
open
dust
sources
are
very
difficult
to
address
in
a
replicable
manner,
they
cannot
currently
be
approved
under
generic
Level
I
bubble
regulations.
(
Reiteration
of
April
7,
1982
proposed
policy.)

Level
II
Modeling
Analysis
­­
In
order
to
satisfy
the
basic
requirement
of
the
emissions
trading
policy
that
trades
"
must
demonstrate
ambient
equivalence,"
the
maximum
change
in
air
quality
impact
(
delta)
must
be
determined
when
performing
a
Level
II
anaylsis.
Experience
has
shown
that
this
requirement
is
not
necessarily
met
where
the
April
7
policy
says
to
analyze
only
the
"
impact
at
the
receptor
of
maximum
predicted
impact
after
the
trade."
Therefore,
to
assure
that
no
degradation
of
air
quality
greater
than
the
significance
levels
would
occur
at
any
site,
the
method
of
finding
the
maximum
deltas
must
be
determined
on
both
a
spatially
and
temporally
consistent
basis.
This
menas
that
you
look
at
each
receptor
point
and
determine
the
change
in
concentration
from
the
before
trade
case
to
the
after
trade
case
sequentially
for
each
time
period
within
a
full
year
of
meteorological
data
(
time
period
means
the
appropriate
ambient
standard
averaging
time;
e.
g.,
3­
hour,
24­
hour,
etc.).
This
appears
the
most
reasonable
method
of
determining
ambient
equivalence
at
this
time.

Other
techniques
may
be
approved
where
they
can
be
demonstrated
to
be
equally
protective
of
the
standards
and
PSD
increments.
Also,
a
Level
III
analysis
may
be
used
to
supplement
those
cases
where
Level
II
analysis
shows
a
few
receptors
registering
deltas
greater
than
the
significance
values.
This
limited
Level
III
anaysis
would
involve
only
the
geographical
area
containing
the
high
deltas
and
would
include
all
contributing
sources
to
that
area.

­­
Use
of
refined
models
(
e.
g.,
MPTER,
ISC)
with
at
least
one
year
of
meteorological
data
is
acceptable
for
a
Level
II
analysis.

­­
To
ensure
replicability,
only
trades
involving
process
fugitive
emission
sources
vented
through
stacks
can
be
approved
in
generic
Level
II
rules
unless
the
State
rule
specifically
identifies
actual
facilities
between
which
process
fugitive
trades
would
be
permitted.
In
such
cases,
the
State
rule
must
specify
the
emission
points
and
all
associated
and
pertinent
parameters
needed
to
ensure
replicability
of
modeling
results.

­­
Since
trades
involving
open
dust
sources
are
very
difficult
to
address
in
a
replicable
manner,
they
cannot
currently
be
approved
under
generic
Level
II
bubble
regulations.
(
Reiteration
of
April
7,
1982
proposed
policy.)

­­
Trades
involving
complex
terrain
cannot
be
approved
under
Level
II
generic
rules;
however,
approval
of
such
trades
through
individual
SIP
reviews
are
possible
under
Level
II.
EPA's
experience
in
processing
bubbles
for
such
sources
has
shown
that
they
are
exceedingly
difficult
to
address
in
a
replicable
manner.
They
require
a
considerable
number
of
judgments
and
negotiations
among
Agency
personnel
concerning
the
models,
data
bases,
and
proper
source
characterization.

­­
All
national
ambient
air
quality
standards
(
NAAQS)
averaging
periods,
not
just
the
24­
hour,
must
be
considered
when
performing
the
air
quality
equivalence
analysis.
This
is
necessary
to
assure
trades
approved
under
Level
II
will
not
have
any
adverse
health
and
welfare
impacts.
Therefore,
all
Level
II
analyses
must
test
the
delta
for
each
receptor
site
against
the
following
significance
levels:
TSP
­­
10
mu
g/
m
3
(
24­
hour),
5
mu
g/
m
3
(
annual);
SO
2
­­
13
mu
g/
m
3
(
24­
hour),
46
mu
g/
m
3
(
3­
hour),
3
mu
g/
m
3
(
annual);
CO
­­
575
mu
g/
m
3
(
8­
hour),
2300
mu
g/
m
3
(
1­
hour).

Implementation
of
Changes
Implementation
of
these
changes
by
the
Regional
Offices
in
their
negotiations
with
States
and
individual
sources
should
begin
immediately.
If
there
are
any
on­
going
bubble
activities
where
the
Regions
or
States
and
sources
have
reached
firm
agreements
which
do
not
comport
with
these
changes,
please
alert
Tom
Helms
(
FTS
629­
5526)
of
my
staff.
Consideration
will
be
given
to
situations
where
the
source
or
State
Page
82
51
FR
43814
has
already
invested
significant
resources
in
a
good­
faith
analysis
based
on
prior
methods
of
demonstrating
ambient
equivalence.
If
you
have
specific
questions
regarding
implementation
of
these
policy
changes,
please
call
Tom
Helms.

cc:
Chief,
Air
Branch,
Regions
I­
X,
Meteorologist,
Regions
I­
X,
Mike
Levin,
Joe
Tikvart,
Darryl
Tyler
Appendix
D
­­
Approvable
Averaging
Times
For
VOC
Trades
U.
S.
Environmental
Protection
Agency
Office
of
Air
Quality
Planning
and
Standards,
Research
Triangle
Park,
North
Carolina
27711
January
20,
1984.

Memorandum
Subject:
Averaging
Times
for
Compliance
With
VOC
Emission
Limits
­­
SIP
Revision
Policy
From:
John
R.
O'Connor,
Acting
Director,
Office
of
Air
Quality
Planning
and
Standards
(
MD­
10)

To:
Director,
Air
and
Waste
Management
Division,
Regions
II­
IV,
VI­
VIII,
X,
Director,
Air
Management
Division,
Regions
I,
V,
IX.

The
purpose
of
this
memorandum
is
to
clarify
the
Agency's
policy
regarding
emission
time
averaging
for
existing
sources
of
volatile
organic
compounds
(
VOC's).
Numerous
State
implementation
Plan
(
SIP)
revisions,
both
broad
regulations
and
source­
specific
changes,
have
been
submitted
which
provide
for
compliance
determinations
by
"
time
averaging"
emissions
of
VOC
for
periods
exceeding
24
hours.
These
requests
and
the
following
policy
on
this
subject
were
discussed
extensively
at
a
recent
meeting
attended
by
those
Regional
Offices
which
have
the
most
pending
actions
(
Regions
I,
III,
IV,
V);
the
Office
of
Air
Quality
Planning
and
Standards;
and
the
Office
of
General
Counsel.
This
policy
represents
the
consensus
of
the
meeting
attendees.

The
objective
of
EPA's
national
VOC
emissions
control
program
is
the
timely
attainment
and
maintenance
of
the
national
ambient
air
quality
standard
(
NAAQS)
for
ozone.
SIP
revisions
and
other
regulatory
actions
relating
to
VOC
control
must
maintain
the
integrity
of
this
basic
objective.
There
should
be
assurances
that
VOC
emission
control
is
reasonably
consistent
with
protecting
this
short­
term
ozone
standard.
Further,
since
SIP's
and
associated
VOC
control
programs
comtemplate
the
actual
application
of
reasonably
available
control
technology
(
RACT),
regulatory
actions
that
incorporate
longer
term
averages
to
circumvent
the
installation
of
overall
RACT
level
controls
cannot
be
allowed.

Current
Agency
guidance
specifies
the
use
of
a
daily
weighted
average
for
VOC
regulations
as
the
preferred
alternative
where
continuous
compliance
is
not
feasible.
An
example
might
be
where
a
facility
operates
in
a
batch
manner
with
multiple
lines
and
various
products.
Reference
is
made
to
the
December
8,
1980,
Federal
Register
(
copy
attached)
where
can
coating
operators
are
allowed
to
"
bubble"
several
production
lines
and
average
emissions
over
a
24­
hour
time
period.

The
preferred
daily
weighted
average
alternative
may
not
be
feasible
in
all
cases.
Where
the
source
operations
are
such
that
daily
VOC
emissions
cannot
be
determined
or
where
the
application
of
RACT
for
each
emission
point
(
line,
machine,
etc.)
is
not
economically
or
technically
feasible
on
a
daily
basis,
longer
averaging
times
can
be
permitted
under
certain
conditions.
In
determining
feasibility,
consideration
might
be
given,
for
example,
to
the
extent
to
which
modifications
can
be
made
to
testing,
inventory,
or
recordkeeping
practices
in
order
to
quantify
daily
emissions.
Also,
variability
or
lack
of
predictability
in
a
source's
daily
operation
might
be
considered
as
well
as
availability
of
control
technology
or
the
physical
impediment
or
restriction
to
control
equipment
installation.
In
order
to
allow
longer
than
daily
averaging
in
SIP
regulations,
the
following
conditions
or
principles
must
be
honored:
Page
83
51
FR
43814
1.
Real
reductions
in
actual
emissions
must
be
achieved,
consistent
with
the
RACT
control
levels
specified
in
SIP's
or
the
control
technique
guidelines
(
CTG's).
These
limits
are
typically
expressed
in
terms
of
VOC
per
unit
of
production
(
a
qualitative
term
such
as
lbs
VOC/
gal
coating).
Where
it
is
not
feasible
to
specify
emission
limits
in
such
terms,
emission
limits
per
unit
of
time
can
be
approved
provided
that:

a.
The
emission
limits
reflect
typical
(
rather
than
potential
or
allowable)
production
rate
and
operating
hours.
These
emission
limits
must
truly
reflect
emissions
reductions
consistent
with
RACT
and
are
not
simply
an
artificial
constraint
on
potential
emissions.
This
must
be
supported
in
the
SIP
revision
by
historical
production
and
operation
data.

b.
Nonproduction
or
equipment
downtime
credits
are
not
allowed
in
the
emission
limit
calculation
unless
a
Federally
enforceable
document
specifically
restricts
operation
during
these
times.
Such
credit
must
be
based
on
real,
historical
emissions.

2.
Averaging
periods
must
be
as
short
as
practicable
and
in
no
case
longer
than
30
days.

3.
A
demonstration
must
be
made
that
the
use
of
long­
term
averaging
(
greater
than
24­
hour
averaging)
will
not
jeopardize
either
ambient
standards
attainment
or
the
reasonable
further
progress
(
RFP)
plan
for
the
area.
This
must
be
accomplished
by
showing
that
the
maximum
daily
increase
in
emissions
associated
with
long­
term
averaging
is
consistent
with
the
approved
ozone
SIP
for
the
area.

4.
Sources
in
areas
lacking
approved
SIP's,
or
in
areas
with
approved
SIP's
but
showing
measured
violations,
cannot
be
considered
for
longer
term
averages
until
the
SIP
has
been
revised
demonstrating
ambient
standards
attainment
and
maintenance
of
RFP
(
reflecting
the
maximum
daily
emissions
from
the
source
with
long­
term
averaging).

Meaningful
short­
term
(
i.
e.,
daily)
emission
caps
are
desirable
especially
for
sources
subject
to
large
fluctuations
in
emissions.
The
use
of
a
daily
cap
(
equal
to
or
less
than
current
average
emissions
on
a
daily
basis)
that
limits
short­
term
emissions
to
RACT
equivalent
levels
would
meet
the
above
objective
of
ensuring
VOC
control
that
is
consistent
with
attaining
the
NAAQS
for
ozone.

States
have
the
primary
responsibility
to
show
adherence
to
the
above
principles
and,
to
do
so,
must
include
the
following
information
(
in
detail)
in
all
SIP
revision
requests
that
seek
VOC
averaging
times
greater
than
24
hours:

1.
The
VOC
limits
specified
in
an
enforceable
form
with
appropriate
compliance
dates.

2.
A
description
of
the
affected
processes
and
associated
historical
production
and
operating
rates.

3.
A
description
of
the
control
techniques
to
be
applied
to
the
affected
processes
such
as
low
solvent
and
waterborne
coating
technology
and/
or
add­
on
controls.

4.
The
nature
of
the
emission
control
program
whether
a
bubble,
a
regulation
change,
a
compliance
schedule,
or
some
other
form
of
alternative
control
program.

5.
The
method
of
recordkeeping
and
reporting
to
be
employed
to
demonstrate
compliance
with
the
new
emission
limit
requirement
and
to
support
the
showing
that
the
emission
limit
is
consistent
with
RFP
and
the
demonstration
of
attainment.

Each
EPA
Regional
Office
shall
have
the
primary
responsibility
for
determining
the
approvability
of
application
requests.
However,
in
order
to
assure
Regional
consistency,
coordination
with
the
Office
of
Air
Quality
Planning
and
Standards
staff
is
encouraged
during
the
initial
development
of
any
single
"
time
average"
SIP
revision
or
regulation.
Also,
all
SIP
revisions
involving
long­
term
averaging
must
be
proposed
in
the
Federal
Register
with
an
explanation
of
how
the
principles
listed
above
have
been
satisfied.

Should
there
be
any
questions
on
this
policy,
please
call
Tom
Helms
(
FTS
629­
5526)
or
Brock
Nicholson
(
FTS
629­
5516).

Attachment
cc:

Barbara
Bankoff
Page
84
51
FR
43814
Ron
Campbell
Jack
Farmer
Mike
Levin
Ed
Reich
B.
J.
Steigerwald
Darryl
Tyler
Peter
Wyckoff
Chief,
Air
Branch,
Regions
I­
X
Regional
Administrator,
Regions
I­
X.

Appendix
E
­­
Radii
of
Significant
Impact
for
Approving
"
Complex
Terrain"
PM,
SO
2
and
CO
Trades
Under
Level
I
Modeling
Approaches
Appendix
E
indicates
on
its
vertical
axis
the
post­
trade
emission
rate
for
the
stack
with
increasing
emissions
(
E),
and
on
its
horizontal
axis
the
radius
of
significant
impact
(
R)
within
which
level
I
trades
may
be
approved
despite
the
presence
of
complex
terrain
outside
that
radius.

The
curves
in
Appendix
E
have
been
generated
using
a
normally
conservative
screening
model,
VALLEY,
to
estimate
R
for
each
E,
using
the
24­
hour
and
3­
hour
air
quality
impact
significance
level
for
SO
2
and
the
24­
hour
significance
level
for
particulate
matter
(
PM)
which
have
been
established
for
level
II
modeling.
It
was
assumed
that
the
short­
term
standards
would
be
controlling.

The
F­
stability
class
was
assumed,
and
wind
speed
was
presumed
to
be
one
meter
per
second
for
estimating
the
radius
of
significant
impact
for
the
three­
hour
period,
and
2.5
meters
per
second
for
the
24­
hour
cases.
In
developing
the
three­
hour
curve,
it
was
assumed
that
F­
stability
and
a
wind
speed
of
one
meter
per
second
would
persist
for
as
much
as
fourteen
consecutive
hours.
In
developing
the
24­
hour
curves,
it
was
assumed
that
F­
stability
with
a
wind
speed
of
2.5
meters
per
second
would
occur
for
six
hours
of
any
24­
hour
period.
n1
n
1
The
curves
in
Appendix
E
were
derived
using
the
assumptions
described
above
so
that
they
could
be
used
to
determine
radii
of
significant
impact
for
sources
in
any
part
of
the
country.
However,
it
is
possible
that
for
some
areas,
local
meteorological
conditions
will
be
such
that
alternative,
less
conservative
meteorological
assumptions
can
be
employed
in
determining
these
radii.
Where
states
can
show
that
the
use
of
such
alternative
assumptions
is
appropriate
for
a
given
area,
they
develop
alternative
curves
or
formulas
for
determining
radii
of
significant
impact
and
submit
them
for
review
and
approval
by
EPA,
either
in
conjunction
with
an
individual
bubble
submittal
or
as
part
of
a
generic
rule.
States
are
advised
to
work
closely
with
the
appropriate
Regional
Office
in
any
effort
to
develop
such
alternative
approaches.

This
Appendix
provides
different
estimates
for
SO
2
and
PM
because
the
significance
levels
for
these
pollutants
are
different.
For
CO,
the
R
value
for
E
value
may
be
determined
by
multiplying
the
E
for
SO
2
by
twenty
(
20).
This
is
a
conservative
approach
towards
determining
radii
of
significant
impact
for
CO.
Where
the
effective
height
of
the
stack
with
increasing
emissions
is
not
changed
(
e.
g.,
where
the
only
change
is
in
the
sulfur
content
of
fuel
burned),
the
change
in
the
hourly
emission
rate
(
E)
may
be
used
in
lieu
of
E."

BILLING
CODE
6560­
50­
M
[
See
Material
in
original]

BILLING
CODE
6560­
50­
C
Appendix
F
­­
CFR
Part
51
Conversion
Table
Page
85
51
FR
43814
On
November
7,
1986
(
51
FR
40656)
EPA
restructured
CFR
Part
51
and
renumbered
many
of
that
part's
sections.
Because
most
readers
will
be
more
familiar
with
prior
designations,
today's
notice
contains
citations
based
on
Part
51
as
it
existed
before
this
restructuring.
A
detailed
finding
list
of
the
old
versus
new
citations
can
be
found
in
Table
2
of
the
Preamble
of
the
November
7
notice.
Today's
readers
may
also
use
the
following
table
to
convert
today's
Part
51
citations
to
the
corresponding
new
ones.
CFR
Part
51
Conversion
Table
Old
40
CFR
51
Citation
New
40
CFR
51
Citation
51.18
Subpart
I
51.18(
j)

51.165(
a)

51.18(
j)(
1)(
vi)

51.165(
a)(
1)(
vi)

51.18(
j)(
1)(
x)

51.165(
a)(
1)(
x)

51.18(
j)(
1)(
xi)

51.165(
a)(
1)(
xi)

51.18(
j)(
1)(
xii)

51.165(
a)(
1)(
xii)

51.18(
j)(
3)(
ii)(
c)

51.165(
a)(
3)(
ii)(
C)

51.18(
k)

51.165(
b)

51.22
51.281
51.24
51.166
51.24(
b)(
3)(
b)(
ii)

51.166(
b)(
3)(
b)(
ii)

51.24(
b)(
13)
Page
86
51
FR
43814
51.166(
b)(
13)

51.24(
b)(
13)(
ii)

51,166(
b)(
13)(
ii)

51.24(
b)(
16)

51.166(
b)(
16)

51.24(
b)(
21)

51.166(
b)(
21)

51.24(
b)(
23)

51.165(
b)(
23)
[
FR
Doc.
86­
27092
Filed
12­
3­
86;
8:
45
am]

BILLING
CODE
6560­
50­
M
