1
Proposal
for
CAIR
FIP
&
Section
126
Response
Briefing
for
OMB
7­
12­
05
°
This
presentation
includes:

 
General
overview
of
Section
126
and
FIP
proposals
 
Explanation
of
proposed
Federal
CAIR
trading
programs
 
Discussion
of
proposed
minor
changes
to
CAIR
&
to
Acid
Rain
Program
regulations
2
Overview
of
FIP
and
Section
126
Proposal
°
Combined
Proposal
 
Response
to
North
Carolina
Section
126
petition
 
Federal
Implementation
Plans
(
FIPs)
for
CAIR
 
Minor
revisions
to
CAIR
 
Minor
revisions
to
Acid
Rain
Program
3
Overview
of
FIP
and
Section
126
Proposal
°
Rulemaking
Schedule
 
Schedule
established
in
consent
decree
related
to
the
section
126
petition
 
Proposal
signature
by
August
1,
2005
 
Public
hearings
week
of
September
12,
2005
in
North
Carolina
and
DC
area
 
Final
rule
signature
by
March
15,
2006
4
Overview
of
FIP
and
Section
126
Proposal
°
Summary
of
Section
126
Petition
 
Requests
that
EPA
require
EGUs
in
13
States
to
reduce
emissions
of
NOx
and/
or
SO2
that
are
significantly
contributing
to
PM2.5
and/
or
8­
hour
ozone
nonattainment
and
maintenance
problems
in
North
Carolina
°
PM2.5:
12
States:
AL,
GA,
IL,
IN,
KY,
MI,
OH,

PA,
SC,
TN,
VA,
WV
°
8­
hour
ozone:
5
States:
GA,
MD,
SC,
TN,
VA
 
Based
primarily
on
technical
analyses
for
proposed
CAIR
5
Overview
of
FIP
and
Section
126
Proposal
°
Section
126
Approach
 
EPA's
proposed
response
to
NC
section
126
petition
is
based
on
upwind
State
to
downwind
State
linkages
established
in
final
CAIR
and
taking
into
consideration
FIP
proposal
 
For
EGUs
in
States
that
are
linked
to
North
Carolina
under
the
CAIR,
EPA
is
proposing
2
alternative
options:

°
(
1)
to
deny
the
petition
if
EPA
promulgates
FIPs
to
address
the
interstate
transport
no
later
than
the
final
section
126
response,
or
°
(
2)
to
grant
the
petition
if
EPA
does
not
promulgate
the
FIPs
prior
to
or
concurrently
with
the
section
126
response.

 
EPA's
preferred
option
is
to
promulgate
the
FIP
and
deny
the
petition.
FIP
would
provide
the
relief
requested
in
the
petition.
6
Overview
of
FIP
and
Section
126
Proposal
°
Section
126
Proposal
 
PM2.5
portion
(
EGUs
in
12
States):

°
Proposing
to
deny
for
MI
&
IL
since
not
linked
to
NC
in
final
CAIR
°
For
sources
in
10
States
linked
to
NC
in
final
CAIR,
proposing
in
alternative:

 
(
1)
to
deny
petition
based
on
promulgation
of
FIP
prior
to
or
concurrently
with
the
section
126
response,
or
 
(
2)
to
grant
the
petition.

 
8­
hour
ozone
portion
(
EGUs
in
5
States):

°
proposing
to
deny
because
no
States
linked
to
NC
7
Overview
of
FIP
and
Section
126
Proposal
°
FIP
Requirement
 
Findings
of
Failure
to
Submit
 
On
3/
10/
05,
EPA
issued
national
findings
that
States
failed
to
submit
SIPs
to
address
interstate
transport
that
were
due
in
July
2000
 
Findings
triggered
2­
year
clock
for
EPA
to
promulgate
FIPs
to
address
the
interstate
transport
 
CAIR
FIP
would
address
EPA
responsibility
to
issue
FIPs
for
CAIR­
affected
States
8
Overview
of
FIP
and
Section
126
Proposal
°
FIP
Approach
 
Covers
whole
CAIR
region
(
28
States
+
DC)

 
Also
covers
DE
and
NJ
for
PM2.5
based
on
outstanding
proposal
to
include
these
States
in
CAIR
for
PM2.5
 
Requires
reductions
from
EGUs
 
Same
budgets
and
timelines
as
CAIR
9
Overview
of
FIP
and
Section
126
Proposal
°
Control
Strategy
for
FIP
and
Section
126
Response
 
Proposes
Federal
NOx
and
SO2
cap
and
trade
programs
for
EGUs
as
the
control
remedy
for
both
the
FIP
and
section
126
response
10
Overview
of
FIP
and
Section
126
Proposal
°
Withdrawal
of
FIP
or
Section
126
Requirements
 
Gives
States
opportunity
to
submit
SIPs,
and
EPA
to
approve
the
SIPs,
before
we
would
begin
implementing
FIP
or
section
126
requirements
 
NPR
states
our
intention
to
withdraw
FIP
or
section
126
requirements
in
a
State
in
coordination
with
approval
of
SIP
meeting
CAIR
requirements
 
Timing
of
withdrawal
to
be
addressed
on
case­

bycase
basis
taking
into
consideration
whether
we
have
already
allocated
allowances
under
FIP
or
section
126
response
11
Overview
of
FIP
and
Section
126
Proposal
°
FIP
As
Compliance
Option
 
Also
discusses
option
for
States
of
keeping
FIP
in
place
rather
than
developing
SIP
as
means
to
save
State
resources
 
Provides
abbreviated
SIP
mechanism
for
States
to
control
certain
aspects
such
as
allocations
 
(
friendly
FIP)
12
Proposal
for
Federal
CAIR
Trading
Programs
°
General
Approach
 
CAIR
FIP
(
and
response
to
NC
section
126
petition)

would
rely
on
Federal
trading
programs
that
are
largely
identical
to
the
CAIR
SIP
model
rules
°
Annual
SO2
program
°
Annual
NOx
program
°
Ozone
season
NOx
program
 
Trading
programs
for
the
CAIR
FIP,
response
to
NC
section
126
petition,
and
CAIR
SIPs
would
be
integrated:
Sources
located
in
States
governed
by
any
of
these
programs
could
trade
with
each
other
 
Federal
trading
programs
would
include
relatively
minor
differences
from
CAIR
SIP
rules
(
see
slides
13­

­
16)

 
Federal
programs
are
designed
to
provide
States
with
flexibilities
similar
to
those
available
under
CAIR
13
Proposal
for
Federal
CAIR
Trading
Programs
°
Differences
from
CAIR
SIP
model
rules
 
Non­
EGU
opt­
ins
°
CAIR
SIP
rules
give
States
option
to
include
opt­
in
provisions
°
Federal
CAIR
programs
would
retain
flexibility
for
States
to
choose
whether
or
not
to
include
opt­
ins:

 
Federal
CAIR
would
not
directly
include
opt­
ins:
Instead,
would
allow
States
to
choose
to
submit
abbreviated
SIP
revisions
that
would
provide
for
units
to
opt­
in
to
the
Federal
programs
(
see
slide
14)

 
By
not
including
opt­
ins
directly
in
the
Federal
CAIR
programs
­­
but
allowing
States
to
bring
opt­
ins
into
those
programs
­­
we
provide
the
maximum
flexibility
for
States
»
If
Federal
CAIR
programs
included
opt­
ins
directly
then
some
units
might
opt­
in
»
Then
if
EPA
subsequently
approved
a
SIP
that
didn't
include
opt­
ins,
units
that
had
already
opted­
in
would
be
stranded
or
else
the
State
would
be
compelled
to
implement
an
opt­
in
program
against
its
preference
14
Proposal
for
Federal
CAIR
Trading
Programs
°
Differences
from
CAIR
SIP
model
rules
(
cont'd)

 
Abbreviated
SIP
revisions
°
States
that
want
to
participate
in
the
EPA­
administered
CAIR
trading
programs
could
choose
to
submit
narrow
SIP
revisions
covering
specific
critical
elements
of
the
Federal
CAIR
trading
programs
 
to
meet
their
CAIR
obligations
without
the
need
to
submit
full
SIP
revisions
°
This
provides
each
State
an
option
by
which
it
can
retain
control
over
trading
program
elements
that
are
most
important
to
it
while
letting
the
EPA
implement
remaining
elements
("
friendly
FIP"

concept)
or
while
awaiting
EPA
approval
of
a
State's
full
SIP
trading
programs
°
Abbreviated
SIP
revisions
could
include
any
of
the
following:

 
Non­
EGU
opt­
in
provisions
 
Allocating
NOx
allowances
(
annual
and/
or
ozone
season)
to
units
 
Distributing
compliance
supplement
pool
allowances
to
units
 
Bringing
NOx
SIP
Call
budget
trading
sources
that
are
not
subject
to
CAIR
into
the
CAIR
ozone
season
trading
program
15
Proposal
for
Federal
CAIR
Trading
Programs
°
Differences
from
CAIR
SIP
model
rules
(
cont'd)

 
Method
for
determining
credit
for
early
reductions
°
CAIR
SIP
rules
provide
that
States
distribute
allowances
from
the
annual
NOx
compliance
supplement
pool
(
CSP)
to
sources
for
early
NOx
reductions
in
2007­
2008
as
well
as
for
need
°
For
the
Federal
CAIR
we
would
distribute
CSP
allowances
for
early
reductions
and
for
need
(
same
as
SIP
rules)
but
would
use
a
more
specific
criteria
for
determining
early
reductions
than
the
criteria
specified
in
the
SIP
rules
 
For
the
Federal
CAIR
trading
program,
units
would
need
to
operate
below
a
specified
NOx
emission
rate
in
order
to
be
awarded
credit
for
early
reduction
(
SIP
rules
do
not
specify
a
maximum
NOx
rate)

 
This
method
is
similar
to
the
approach
taken
in
the
NOx
SIP
Call
FIP
and
section
126
actions
16
Proposal
for
Federal
CAIR
Trading
Programs
°
Differences
from
CAIR
SIP
model
rules
(
cont'd)

 
Timing
for
recording
NOx
allocations
in
source
accounts
°
Federal
NOx
allocations
would
be
recorded
in
source
accounts
on
a
different
schedule
than
the
schedule
for
recording
State
allocations
in
the
CAIR
SIP
model
allocation
methodology
°
The
schedule
in
the
Federal
CAIR
programs
is
intended
to
balance
the
need
to
provide
sources
their
allocations
in
sufficient
time
to
plan
compliance
with
the
need
to
provide
time
for
States
to
submit
and
EPA
to
approve
SIP
revisions
°
Proposed
schedule
for
recording
Federal
NOx
allocations:

 
record
in
Dec
2007
for
2009
(
1­
year
in
advance)

 
record
in
Dec
2008
for
2010
(
1­
year
in
advance)

 
record
in
Dec
2009
for
2011
(
1­
year
in
advance)

 
record
in
Dec
2009
for
2012
(
2­
years
in
advance)

 
record
in
Dec
2009
for
2013
(
3­
years
in
advance)

 
record
in
Dec
2010
for
2014
(
3­
years
in
advance)

°
In
comparison,
the
schedule
in
CAIR
SIP
model
methodology
is:

 
record
in
Dec
2006
for
2009
through
2014
*

 
record
in
Dec
2009
for
2015
(
5­
years
in
advance)

 
record
in
Dec
2010
for
2016
(
5­
years
in
advance)

*
We'd
propose
changing
the
date
for
initial
allocations
in
the
CAIR
SIP
model
methodology,
as
discussed
later
in
this
presentation
17
Proposed
Changes
to
CAIR
Regulations
°
The
package
includes
proposed
revisions
to
the
CAIR
regulations
to
facilitate
interaction
between
Federal
CAIR
trading
programs
and
State
CAIR
trading
programs,
to
correct
minor
errors,
and
to
provide
clarification
°
The
proposed
Federal
CAIR
programs
are
designed
to
match
the
CAIR
regulations
including
these
proposed
changes
18
Proposed
Changes
to
CAIR
Rules
(
cont'd)

 
Applicability:
Revisions
to
clarify
the
definition
of
EGU
under
CAIR
°
Propose
to
establish
exemption
for
certain
solid
waste
incinerators
(
analogous
to
exemption
for
such
units
under
the
Acid
Rain
Program)

°
Propose
to
exempt
units
that
have
not
served
a
generator
producing
electricity
for
sale
since
before
November
15,
1990
(
analogous
to
the
approach
under
the
Acid
Rain
Program)

°
The
EGU
definition
in
the
proposed
Federal
CAIR
trading
programs
includes
these
same
exemptions
 
Penalty
provisions
for
excess
SO2
emissions
°
Propose
to
revise
penalty
provisions
for
units
that
have
excess
emissions
under
both
the
ARP
and
CAIR
SO2
trading
programs
 
so
that
a
given
ton
of
excess
emissions
would
not
trigger
application
of
the
automatic
penalties
under
both
the
Acid
Rain
and
CAIR
trading
programs
19
Proposed
Changes
to
CAIR
Rules
(
cont'd)

 
Minor
corrections
of
the
CAIR
model
trading
rules
°
For
example:

 
Propose
to
remove
provisions
in
the
CAIR
SO2
model
trading
rule
that
reference
non­
existent
provisions
about
SO2
allowance
allocations
 
Propose
to
remove
the
deadline
(
Dec
2006)
for
recordation
of
allocations
for
the
first
set
of
years
submitted
in
SIP
revisions
because
that
date
would
provide
inadequate
time
for
EPA
to
approve
revisions
(
which
are
due
Sept
2006)
 
we
would
retain
recordation
deadlines
for
allocations
for
subsequent
years
 
Abbreviated
SIP
revisions
°
We
would
add
provisions
in
the
Part
51
CAIR
regulations
to
accommodate
abbreviated
SIP
revisions
20
Proposed
Changes
to
Acid
Rain
Program
Rules
°
The
package
includes
proposed
minor
changes
to
the
ARP
regulations
to
provide
clarity
and
streamline
requirements,

including:

 
Changes
to
administrative
appeals
procedures
to
cover
CAIR
Federal
trading
programs
(
analogous
to
procedures
covering
CAIR
SIP
trading
programs)

 
Changes
in
language
regarding
some
certifications,
making
the
language
the
same
as
that
in
the
State
and
Federal
CAIR
trading
programs
(
in
order
to
streamline
the
requirements
for
units
affected
by
both
CAIR
and
ARP)

 
Revisions
to
reflect
the
change
­­
finalized
in
the
CAIR
rulemaking
­­

from
unit­
level
to
source­
level
compliance
with
the
ARP
trading
program
(
e.
g.,
to
remove
a
provision
that
allows
two
designated
representatives
for
the
same
source
under
certain
circumstances
 
this
is
no
longer
workable
since
one
individual
must
be
responsible
for
compliance
by
all
units
at
the
source)
