7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
1
6560­
50­
P
ENVIRONMENTAL
PROTECTION
AGENCY
40
CFR
Parts
51,
52,
72,
73,
74,
78,
96,
and
97
[
OAR­
2004­
0076;
FRL­
]

RIN
2060­
AM99
Rulemaking
on
Section
126
Petition
from
North
Carolina
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone;
Federal
Implementation
Plans
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone;
Revisions
to
the
Clean
Air
Interstate
Rule;
Revisions
to
the
Acid
Rain
Program
AGENCY:
Environmental
Protection
Agency
(
EPA).

ACTION:
Notice
of
Proposed
Rulemaking
(
NPR).

SUMMARY:
Today,
EPA
is
proposing
actions
to
address
the
interstate
transport
of
emissions
of
nitrogen
oxides
(
NOx)

and
sulfur
dioxide
(
SO2)
that
contribute
significantly
to
nonattainment
and
maintenance
problems
with
respect
to
the
national
ambient
air
quality
standards
(
NAAQS)
for
fine
particulate
matter
(
PM2.5)
and
8­
hour
ozone.
As
one
part
of
today's
action,
EPA
is
proposing
its
response
to
a
petition
submitted
to
EPA
by
the
State
of
North
Carolina
under
section
126
of
the
Clean
Air
Act
(
CAA).
The
petition
requests
that
EPA
find
that
SO2
and/
or
NOx
emissions
from
electric
generating
units
(
EGUs)
in
13
States
are
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
2
significantly
contributing
to
PM2.5
and/
or
8­
hour
ozone
nonattainment
and
maintenance
problems
in
North
Carolina,

and
requests
that
EPA
establish
control
requirements
to
prohibit
such
significant
contribution.
The
EPA's
proposed
response
is
based
on
extensive
analyses
conducted
for
the
recently
issued
Clean
Air
Interstate
Rule
(
CAIR).
The
EPA
is
proposing
to
deny
the
petition
for
sources
in
States
not
shown
to
be
linked
to
nonattainment
and
maintenance
problems
in
North
Carolina
under
the
CAIR.
For
sources
in
States
that
are
linked
to
North
Carolina
under
the
CAIR,
EPA
is
proposing
in
the
alternative
to
deny
the
petition
if
EPA
promulgates
Federal
implementation
plans
(
FIPs)
to
address
the
interstate
transport
no
later
than
the
final
section
126
response
or
to
grant
the
petition
if
EPA
does
not
promulgate
the
FIPs
prior
to
or
concurrently
with
the
section
126
response.
The
EPA's
preferred
option
is
to
promulgate
the
FIP
concurrently
with
the
final
section
126
response.

In
today's
action,
EPA
is
also
proposing
FIPs
for
all
jurisdictions
that
are
covered
by
the
CAIR.
The
FIPs
would
regulate
EGUs
in
the
affected
States
and
achieve
the
emissions
reductions
requirements
established
by
the
CAIR
until
States
have
approved
State
implementation
plans
(
SIPs)

to
achieve
the
reductions.
The
EPA
intends
the
FIP
to
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
3
satisfy
the
concerns
cited
in
the
section
126
petition
and
provide
a
Federal
backstop
for
the
CAIR.
In
no
way
should
the
FIP
for
CAIR
be
viewed
as
a
sign
of
any
concern
about
States
meeting
the
SIP
responsibilities
under
CAIR.

As
the
control
requirements
for
both
the
section
126
action
and
the
FIP,
EPA
is
proposing
Federal
NOx
and
SO2
trading
programs
that
provide
emissions
reductions
equal
to
those
required
under
the
CAIR
in
affected
States.

The
Section
126
and
FIP
actions
would
not
constrain
States
in
their
selection
of
control
strategies
to
meet
the
CAIR.
The
EPA
intends
to
withdraw
section
126
or
FIP
requirements
in
a
State
if
that
State
submits
and
EPA
approves
a
SIP
meeting
the
requirements
of
CAIR.

Today's
action
also
proposes
revisions
to
the
CAIR
in
order
to
address
the
interaction
between
the
EPAadministered
Federal
CAIR
trading
programs
proposed
today
and
the
EPA­
administered
State
CAIR
trading
programs
that
will
be
created
by
any
State
that
elects
to
submit
a
SIP
establishing
such
a
trading
program
to
meet
the
requirements
of
the
CAIR.
In
addition,
EPA
is
proposing
revisions
to
the
CAIR
to
correct
certain
minor
errors.

Today's
action
also
proposes
revisions
to
the
Acid
Rain
Program
in
order
to
make
the
administrative
appeals
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
4
procedures,
which
currently
apply
to
final
determinations
by
the
Administrator
under
the
EPA­
administered
State
CAIR
trading
programs,
also
apply
to
the
EPA­
administered
trading
programs
under
the
section
126
and
FIP
actions.
In
addition,
we
are
proposing
certain
minor
revisions
to
the
Acid
Rain
Program
that
would
apply
to
all
affected
units.

DATES:
Comments
must
be
received
on
or
before
[
INSERT
60
DAYS
AFTER
PUBLICATION
IN
THE
FEDERAL
REGISTER].
Public
hearings
will
be
held
on
September
15,
2005
in
Washington,

D.
C.
and
on
September
14,
2005
in
Research
Triangle
Park,

North
Carolina.
Please
refer
to
SUPPLEMENTARY
INFORMATION
for
additional
information
on
the
comment
period
and
the
public
hearings.

ADDRESSES:
Submit
your
comments,
identified
by
Docket
ID
No.
OAR­
2004­
0076,
by
one
of
the
following
methods:


Federal
eRulemaking
Portal:
http://
www.
regulations.
gov.

Follow
the
on­
line
instructions
for
submitting
comments.


Agency
Website:
http://
www.
epa.
gov/
edocket.
EDOCKET,

EPA's
electronic
public
docket
and
comment
system,
is
EPA's
preferred
method
for
receiving
comments.
Follow
the
on­
line
instructions
for
submitting
comments.


E­
mail:
A­
and­
R­
Docket@
epa.
gov
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
5

Mail:
Air
Docket,
Attention:
Docket
No.
OAR­
2004­
0076,

Environmental
Protection
Agency,
Mailcode:
6102T,
1200
Pennsylvania
Ave.,
NW,
Washington,
DC
20460.


Hand
Delivery:
EPA
Docket
Center,
1301
Constitution
Avenue,
NW,
Room
B102,
Washington,
DC.
Such
deliveries
are
only
accepted
during
the
Docket's
normal
hours
of
operation,
and
special
arrangements
should
be
made
for
deliveries
of
boxed
information.

Instructions:
Direct
your
comments
to
Docket
ID
No.:
OAR­

2004­
0076.
The
EPA's
policy
is
that
all
comments
received
will
be
included
in
the
public
docket
without
change
and
may
be
made
available
online
at
http://
www.
epa.
gov/
edocket,

including
any
personal
information
provided,
unless
the
comment
includes
information
claimed
to
be
Confidential
Business
Information
(
CBI)
or
other
information
whose
disclosure
is
restricted
by
statute.
Do
not
submit
information
that
you
consider
to
be
CBI
or
otherwise
protected
through
EDOCKET,
regulations.
gov,
or
e­
mail.
The
EPA
EDOCKET
and
the
Federal
regulations.
gov
websites
are
"
anonymous
access"
systems,
which
means
EPA
will
not
know
your
identity
or
contact
information
unless
you
provide
it
in
the
body
of
your
comment.
If
you
send
an
e­
mail
comment
directly
to
EPA
without
going
through
EDOCKET
or
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
6
regulations.
gov,
your
e­
mail
address
will
be
automatically
captured
and
included
as
part
of
the
comment
that
is
placed
in
the
public
docket
and
made
available
on
the
Internet.
If
you
submit
an
electronic
comment,
EPA
recommends
that
you
include
your
name
and
other
contact
information
in
the
body
of
your
comment
and
with
any
disk
or
CD­
ROM
you
submit.
If
EPA
cannot
read
your
comment
due
to
technical
difficulties
and
cannot
contact
you
for
clarification,
EPA
may
not
be
able
to
consider
your
comment.
Electronic
files
should
avoid
the
use
of
special
characters,
any
form
of
encryption,

and
be
free
of
any
defects
or
viruses.
For
additional
information
about
EPA's
public
docket
visit
EDOCKET
on­
line
or
see
the
Federal
Register
of
May
31,
2002
(
67
FR
38102).

For
additional
instructions
on
submitting
comments,
go
to
the
SUPPLEMENTARY
INFORMATION
section
of
this
document.

Docket:
All
documents
in
the
docket
are
listed
in
the
EDOCKET
index
at
http://
www.
epa.
gov/
edocket.
Although
listed
in
the
index,
some
information
is
not
publicly
available,
i.
e.,
CBI
or
other
information
whose
disclosure
is
restricted
by
statute.
Certain
other
material,
such
as
copyrighted
material,
is
not
placed
on
the
Internet
and
will
be
publicly
available
only
in
hard
copy
form.
Publicly
available
docket
materials
are
available
either
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
7
electronically
in
EDOCKET
or
in
hard
copy
at
the
EPA
Docket
Center,
EPA
West,
Room
B102,
1301
Constitution
Avenue,
NW,

Washington,
DC.
The
Public
Reading
Room
is
open
from
8:
30
a.
m.
to
4:
30
p.
m.,
Monday
through
Friday,
excluding
legal
holidays.
The
telephone
number
for
the
Public
Reading
Room
is
(
202)
566­
1744,
and
the
telephone
number
for
the
Air
Docket
is
(
202)
566­
1742.

FOR
FURTHER
INFORMATION
CONTACT:
For
general
questions
concerning
today's
section
126
action,
please
contact
Carla
Oldham,
U.
S.
EPA,
Office
of
Air
Quality
Planning
and
Standards,
Air
Quality
Strategies
and
Standards
Division,

C539­
02,
Research
Triangle
Park,
NC,
27711,
telephone
(
919)

541­
3347,
e­
mail
at
oldham.
carla@
epa.
gov.
For
general
questions
concerning
today's
FIP
action,
please
contact
Tom
Coda,
U.
S.
EPA,
Office
of
Air
Quality
Planning
and
Standards,
Air
Quality
Strategies
and
Standards
Division,

C539­
02,
Research
Triangle
Park,
NC,
27711,
telephone
(
919)

541­
3037,
e­
mail
at
coda.
tom@
epa.
gov.
For
legal
questions
concerning
the
section
126
action,
please
contact
Steven
Silverman,
U.
S.
EPA,
Office
of
General
Counsel,
Mail
Code
2344A,
1200
Pennsylvania
Avenue,
NW,
Washington,
DC,
20460,

telephone
(
202)
564­
5523,
e­
mail
at
silverman.
steven@
epa.
gov.
For
legal
questions
concerning
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
8
the
FIP
action,
please
contact
Sonja
Petersen,
U.
S.
EPA,

Office
of
General
Counsel,
Mail
Code
2344A,
1200
Pennsylvania
Avenue,
NW,
Washington,
DC,
20460,
telephone
(
202)
564­
4097,
e­
mail
at
petersen.
sonja@
epa.
gov.
For
questions
regarding
the
cap
and
trade
programs
and
emissions
budgets,
please
contact
Meg
Victor,
U.
S.
EPA,
Office
of
Atmospheric
Programs,
Clean
Air
Markets
Division,
Mail
Code
6204J,
1200
Pennsylvania
Avenue,
NW,
Washington,
DC,
20460,

telephone
(
202)
343­
9193,
e­
mail
at
victor.
meg@
epa.
gov.
For
questions
regarding
the
revisions
to
the
CAIR
and
Acid
Rain
Programs,
please
contact
Dwight
Alpern,
U.
S.
EPA,
Office
of
Atmospheric
Programs,
Clean
Air
Markets
Division,
Mail
Code
6204J,
1200
Pennsylvania
Avenue,
NW,
Washington,
DC,
20460,

telephone
(
202)
343­
9151,
e­
mail
at
alpern.
dwight@
epa.
gov.

For
questions
regarding
analyses
required
by
statutes
and
executive
orders,
please
contact
Ron
Evans,
U.
S.
EPA,
Office
of
Air
Quality
Planning
and
Standards,
Air
Quality
Strategies
and
Standards
Division,
Mail
Code
C339­
01,

Research
Triangle
Park,
NC,
27711,
telephone
(
919)
541­
5488,

e­
mail
at
evans.
ron@
epa.
gov.

SUPPLEMENTARY
INFORMATION:

I.
Does
this
Action
Apply
to
Me?

Categories
and
entities
potentially
regulated
by
this
action
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
9
include
the
following:

Category
NAICS
code1
Examples
of
potentially
regulated
entities
Industry
221112
Fossil
fuel­
fired
electric
utility
steam
generating
units.

Federal
government
2
221122
Fossil
fuel­
fired
electric
utility
steam
generating
units
owned
by
the
Federal
government.

State/
local/
Tribal
government
2
221122
921150
Fossil
fuel­
fired
electric
utility
steam
generating
units
owned
by
municipalities.
Fossil
fuel­
fired
electric
utility
steam
generating
units
in
Indian
Country.

1
North
American
Industry
Classification
System.
2
Federal,
State,
or
local
government­
owned
and
operated
establishments
are
classified
according
to
the
activity
in
which
they
are
engaged.

This
table
is
not
intended
to
be
exhaustive,
but
rather
provides
a
guide
for
readers
regarding
entities
likely
to
be
regulated
by
this
action.
To
determine
whether
your
facility
could
potentially
be
affected
by
this
action,
you
should
examine
the
definitions
and
applicability
criteria
in
§
§
72.2,
72.6,
72.7,
72.8,
and
74.2
for
purposes
of
the
Acid
Rain
Program
revisions
and
proposed
§
§
97.102,
97.104,

97.105,
97.202,
97.204,
97.205,
97.302,
97.304,
and
97.305
for
purposes
of
the
section
126
and
FIP
actions.
If
you
have
any
questions
regarding
the
applicability
of
this
action
to
a
particular
entity,
consult
the
person
listed
in
the
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
10
preceding
section
under
FOR
FURTHER
INFORMATION
CONTACT.

II.
What
Should
I
Consider
as
I
Prepare
My
Comments
for
EPA?

1.
Submitting
CBI.
Do
not
submit
comments
that
include
CBI
to
EPA
through
EDOCKET,
regulations.
gov
or
e­
mail.
Clearly
mark
the
part
or
all
of
the
information
that
you
claim
to
be
CBI.
For
CBI
information
in
a
disk
or
CD
ROM
that
you
mail
to
EPA,
mark
the
outside
of
the
disk
or
CD
ROM
as
CBI
and
then
identify
electronically
within
the
disk
or
CD
ROM
the
specific
information
that
is
claimed
as
CBI.
In
addition
to
one
complete
version
of
the
comment
that
includes
information
claimed
as
CBI,
a
copy
of
the
comment
that
does
not
contain
the
information
claimed
as
CBI
must
be
submitted
for
inclusion
in
the
public
docket.
Information
so
marked
will
not
be
disclosed
except
in
accordance
with
procedures
set
forth
in
40
CFR
part
2.
Send
or
deliver
information
identified
as
CBI
only
to
the
following
address:
Roberto
Morales,
U.
S.
EPA,
Office
of
Air
Quality
Planning
and
Standards,
Mail
Code
C404­
02,
Research
Triangle
Park,
NC
27711,
telephone
(
919)
541­
0880,
e­
mail
at
morales.
roberto@
epa.
gov,
Attention
Docket
ID
No.
OAR­
2004­

0076.

2.
Tips
for
Preparing
Your
Comments.
When
submitting
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
11
comments,
remember
to:

vi.
Identify
the
rulemaking
by
docket
number
and
other
identifying
information
(
subject
heading,
Federal
Register
date
and
page
number).

vii.
Follow
directions
­
The
agency
may
ask
you
to
respond
to
specific
questions
or
organize
comments
by
referencing
a
Code
of
Federal
Regulations
(
CFR)
part
or
section
number.

viii.
Explain
why
you
agree
or
disagree;
suggest
alternatives
and
substitute
language
for
your
requested
changes.

ix.
Describe
any
assumptions
and
provide
any
technical
information
and/
or
data
that
you
used.

x.
If
you
estimate
potential
costs
or
burdens,
explain
how
you
arrived
at
your
estimate
in
sufficient
detail
to
allow
for
it
to
be
reproduced.

xi.
Provide
specific
examples
to
illustrate
your
concerns,

and
suggest
alternatives.

xii.
Explain
your
views
as
clearly
as
possible,
avoiding
the
use
of
profanity
or
personal
threats.

xiii.
Make
sure
to
submit
your
comments
by
the
comment
period
deadline
identified.

III.
Availability
of
Related
Information
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
12
The
EPA
has
conducted
a
separate
rulemaking
that
contains
actions
and
information
related
to
this
proposal,

"
Rule
to
Reduce
Interstate
Transport
of
Fine
Particulate
Matter
and
Ozone
(
Clean
Air
Interstate
Rule)"
(
see
proposal
at
69
FR
4566,
January
30,
2004;
supplemental
proposal
at
69
FR
32684,
June
10,
2004;
notice
of
data
availability
at
69
FR
47828,
August
6,
2004;
and
final
rule
at
70
FR
25162;
May
12,
2005).
Documents
related
to
the
CAIR
are
available
for
inspection
in
docket
OAR­
2003­
0053
at
the
address
and
times
given
above.
The
EPA
has
established
a
website
for
the
CAIR
at
http://
www.
epa.
gov/
cleanairinterstaterule
or
more
simply
http://
www.
epa.
gov/
cair/
which
will
also
include
information
on
the
section
126
rulemaking
actions.
The
rulemaking
docket
for
the
CAIR
contains
information
and
analyses
that
are
relied
upon
in
today's
proposed
actions.
Therefore,
EPA
is
including
by
reference
the
entire
CAIR
record
for
purposes
of
the
section
126
and
FIP
rulemakings.
The
EPA
is
not
accepting
comment
on
the
CAIR
or
otherwise
reopening
any
issue
decided
in
the
CAIR
for
reconsideration
or
comment,

except
that
we
are
taking
comment
specifically
on
the
revisions
to
CAIR
that
EPA
is
proposing
in
today's
action.

Section
VII
in
this
preamble
discusses
the
proposed
changes
to
CAIR.
7/
29/
05
Draft
­
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Not
Quote
or
Cite
13
IV.
Public
Hearing
The
EPA
will
be
holding
two
public
hearings
on
today's
proposal.
On
September
14,
2005,
a
public
hearing
will
be
held
at
the
EPA,
Building
C,
Room
C111A­
B,
109
T.
W.

Alexander
Drive,
Research
Triangle
Park,
North
Carolina,

27709.
On
September
15,
2005,
a
public
hearing
will
be
held
at
EPA
Headquarters,
1200
Pennsylvania
Ave,
NW,
Room
1117
(
EPA
East),
Washington,
D.
C.
The
metro
stop
is
Federal
Triangle.
Because
these
hearings
are
being
held
at
U.
S.

government
facilities,
everyone
planning
to
attend
one
of
the
hearings
should
be
prepared
to
show
valid
picture
identification
to
the
security
staff
in
order
to
gain
access
to
the
meeting
room.

The
public
hearings
will
begin
at
9
a.
m.
and
continue
until
5
p.
m.,
if
necessary,
depending
on
the
number
of
speakers.
The
EPA
may
end
the
hearing
early
if
all
registered
speakers
have
had
an
opportunity
to
speak,
but
no
earlier
than
2:
00
p.
m.
Persons
wishing
to
present
oral
testimony
that
have
not
made
arrangements
in
advance
should
register
by
2:
00
p.
m.
the
day
of
the
hearing.
Oral
testimony
will
be
limited
to
5
minutes
per
commenter.
The
EPA
encourages
commenters
to
provide
written
versions
of
their
oral
testimonies
either
electronically
(
on
computer
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
14
disk
or
CD­
ROM)
or
in
paper
copy.
Verbatim
transcripts
and
written
statements
will
be
included
in
the
rulemaking
docket.
If
you
would
like
to
present
oral
testimony
at
the
hearing,
please
notify
Joann
Allman,
U.
S.
EPA,
Office
of
Air
Quality
Planning
and
Standards,
C539­
02,
Research
Triangle
Park,
NC
27711,
telephone
(
919)
541­
1815,
e­
mail
allman.
joann@
epa.
gov,
by
September
8,
2005.
For
updates
and
additional
information
on
the
public
hearings,
please
check
EPA's
website
for
this
rulemaking
at
http://
www.
epa.
gov/
cair.

The
public
hearings
will
provide
interested
parties
the
opportunity
to
present
data,
views,
or
arguments
concerning
the
proposed
rules.
The
EPA
may
ask
clarifying
questions
during
the
oral
presentations,
but
will
not
respond
to
the
presentations
or
comments
at
that
time.
Written
statements
and
supporting
information
submitted
during
the
comment
period
will
be
considered
with
the
same
weight
as
any
oral
comments
and
supporting
information
presented
at
a
public
hearing.

Outline
I.
Background
and
Summary
of
Proposal
A.
Summary
of
Proposal
B.
General
Background
on
PM2.5
and
Ozone
1.
The
PM2.5
Problem
7/
29/
05
Draft
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Not
Quote
or
Cite
15
2.
The
8­
Hour
Ozone
Problem
3.
Other
Environmental
Effects
Associated
with
SO2
and
NOx
Emissions
C.
What
Is
the
Statutory
and
Regulatory
Background
for
Today's
Action?
1.
What
Is
the
"
Good
Neighbor"
Provision?
2.
What
Is
the
CAA
Section
126
Provision?
3.
What
Is
EPA's
Previous
Section
126
Rulemaking?
4.
What
Is
the
Clean
Air
Interstate
Rule?
5.
What
Are
the
Findings
of
Failure
to
Submit
for
the
Section
110(
a)(
2)(
D)
Plans?
D.
Summary
of
North
Carolina
Section
126
Petition
1.
What
Sources
Does
the
Petition
Target?
2.
What
Control
Remedy
Does
the
Petition
Request?
3.
What
Is
the
Technical
Support
for
the
Petition?
E.
What
Is
the
Litigation
on
Section
126
Rulemaking
Schedule?
F.
How
Is
EPA
Addressing
the
Section
126­
Related
Comments
Received
During
the
CAIR
Rulemaking?
II.
What
Is
EPA's
Legal
and
Analytical
Approach
for
the
Section
126
Petition?
III.
What
Is
EPA's
Proposed
Action
on
the
Section
126
Petition?
A.
What
Is
EPA's
Proposed
Action
With
Respect
to
the
8­
Hour
Ozone
NAAQS?
B.
What
Is
EPA's
Proposed
Action
With
Respect
to
the
PM2.5
NAAQS?
C.
What
Are
the
Proposed
Requirements
for
Sources
for
Which
EPA
Makes
a
Section
126(
b)
Finding?
D.
When
and
How
Would
EPA
Withdraw
Section
126
Findings
and
Control
Requirements
in
a
State
if
EPA
Approves
a
SIP
to
Meet
the
CAIR?
IV.
What
Is
the
Proposed
Federal
Implementation
Plan
for
the
CAIR?
A.
What
Is
the
Legal
Framework
for
the
Proposed
FIP?
B.
What
Is
the
Timing
and
Scope
of
the
CAIR
FIP
Action?
C.
What
Are
the
FIP
Control
Measures?
D.
When
and
How
Would
EPA
Remove
the
FIP
Requirements
if
EPA
Approves
a
SIP
to
Meet
the
CAIR?
V.
Emission
Reduction
Requirements
for
the
Proposed
CAIR
FIP
and
Proposed
Section
126
Response
A.
Overview
of
Emission
Reduction
Requirements
B.
What
Is
EPA's
Approach
for
Determining
Regionwide
NOx
and
SO2
Emissions
Caps
and
State
Emissions
Budgets?
1.
Determination
of
Regionwide
Caps
for
SO2
and
NOx
2.
Determination
of
State
by
State
Emissions
Budgets
for
SO2
and
NOx
7/
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05
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or
Cite
16
a.
Determination
of
State
SO2
Emissions
Budgets
b.
Determination
of
State
Annual
and
Ozone
Season
NOx
Emissions
Budgets
C.
What
Are
the
State
EGU
Emission
Budgets
for
the
CAIR
FIP
and
the
Section
126
Response?
1.
What
Are
the
Annual
State
EGU
SO2
Emissions
Budgets?
2.
What
Are
the
Annual
State
EGU
NOx
Emissions
Budgets?
a.
For
States
Affected
by
the
CAIR
FIP
b.
For
States
Affected
by
the
Section
126
Response
3.
What
Are
the
Ozone
Season
EGU
NOx
Emissions
Budgets?
a.
For
States
Affected
by
the
CAIR
FIP
b.
For
States
Affected
by
the
Section
126
Response
4.
What
Are
the
Amounts
of
Allowances
Available
in
the
State
Annual
NOx
Compliance
Supplement
Pools?
VI.
Proposed
Federal
CAIR
NOx
and
SO2
Cap
and
Trade
Programs
for
EGUs
A.
Purpose
of
Federal
CAIR
NOx
and
SO2
Cap
and
Trade
Programs
and
Relationship
to
the
Section
126
Petition
and
the
CAIR
B.
Overall
Structure
of
the
Proposed
Federal
CAIR
Cap
and
Trade
Programs
1.
SO2
Program
2.
NOx
Program
3.
Ozone
Season
NOx
Program
C.
Sources
Affected
Under
the
Proposed
Federal
CAIR
Cap
and
Trade
Programs
D.
Allocation
of
NOx
Emission
Allowances
to
Sources
E.
Allocation
of
SO2
Emission
Allowances
to
Sources
F.
Allowance
Banking
G.
Incentives
for
Early
Reductions
1.
SO2
Program
2.
NOx
Program
3.
Ozone
Season
NOx
Program
H.
Monitoring
and
Reporting
Requirements
I.
Differences
Between
the
Proposed
Federal
CAIR
Cap
and
Trade
Programs
and
the
CAIR
SIP
Rules
J.
Coordination
Between
the
Proposed
Federal
CAIR
Cap
and
Trade
Programs
and
CAIR
SIPs
K.
Relationship
of
Emissions
Trading
Programs
to
Section
126
Relief
L.
Interactions
with
Other
CAA
Programs
VII.
What
Are
the
Revisions
to
the
CAIR?
VIII.
What
Are
the
Revisions
to
the
Acid
Rain
Program?
IX.
Statutory
and
Executive
Order
Reviews
7/
29/
05
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­
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Not
Quote
or
Cite
17
A.
Executive
Order
12866:
Regulatory
Planning
and
Review
B.
Paperwork
Reduction
Act
C.
Regulatory
Flexibility
Act
D.
Unfunded
Mandates
Reform
Act
E.
Executive
Order
13132:
Federalism
F.
Executive
Order
13175:
Consultation
and
Coordination
with
Indian
Tribal
Governments
G.
Executive
Order
13045:
Protection
of
Children
from
Environmental
Health
and
Safety
Risks
H.
Executive
Order
13211:
Actions
that
Significantly
Affect
Energy
Supply,
Distribution,
or
Use
I.
National
Technology
Transfer
Advancement
Act
J.
Executive
Order
12898:
Federal
Actions
to
Address
Environmental
Justice
in
Minority
Populations
and
Low­
Income
Populations
CFR
Amendments
and
Additions
(
Regulatory
Text)

51
52
72
73
74
78
96
97
I.
Background
and
Summary
of
Proposal
A.
Summary
of
Proposal
Today,
EPA
is
proposing
two
actions
to
address
the
interstate
transport
of
emissions
of
NOx
and
SO2
that
contribute
significantly
to
nonattainment
and
maintenance
problems
with
respect
to
the
NAAQS
for
PM2.5
and
8­
hour
ozone.
First,
EPA
is
proposing
its
response
to
a
petition
submitted
to
EPA
by
the
State
of
North
Carolina
under
section
126
of
the
CAA.
The
petition
requests
that
EPA
7/
29/
05
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­
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Not
Quote
or
Cite
18
establish
control
requirements
for
EGUs
in
13
States
based
on
findings
that
these
sources
are
significantly
contributing
to
PM2.5
and/
or
8­
hour
ozone
nonattainment
and
maintenance
problems
in
North
Carolina.
(
See
Petition,

Docket
No.
OAR­
2004­
0076­
0002.)

The
EPA's
proposed
response
is
based
on
extensive
analyses
conducted
for
the
CAIR
(
70
FR
25162;
May
12,
2005).

The
EPA
is
proposing
to
deny
the
petition
for
sources
in
States
not
shown
in
the
CAIR
to
be
linked
to
(
that
is,
to
significantly
contribute
to)
nonattainment
and
maintenance
problems
in
North
Carolina.
For
sources
in
States
that
are
linked
to
North
Carolina
under
the
CAIR
for
the
PM2.5
NAAQS,

EPA
is
proposing
in
the
alternative
(
1)
to
deny
the
petition
in
the
event
that
EPA
promulgates
FIPs
no
later
than
the
final
section
126
response
to
address
the
interstate
transport
or
(
2)
to
grant
the
petition
if
EPA
does
not
promulgate
a
FIP
prior
to
or
concurrently
with
the
section
126
response.
The
EPA's
preferred
approach
is
to
promulgate
the
FIP
concurrently
with
the
final
section
126
response
and
deny
the
petition.
The
FIP
would
control
the
significant
transport
from
sources
in
States
named
in
the
petition
as
well
as
from
sources
in
the
other
CAIR
States,
in
the
event
that
the
States
do
not
have
approved
SIPs
meeting
the
CAIR
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
19
requirements.
The
States
named
in
the
petition
with
respect
to
the
PM2.5
NAAQS
are:
Alabama,
Georgia,
Illinois,

Indiana,
Kentucky,
Michigan,
Ohio,
Pennsylvania,
South
Carolina,
Tennessee,
Virginia,
and
West
Virginia.
Of
these,

Illinois
and
Michigan
are
not
linked
to
North
Carolina
in
the
final
CAIR.
The
EPA
is
proposing
to
deny
the
petition
with
respect
to
the
8­
hour
ozone
NAAQS,
because
there
are
no
States
linked
to
North
Carolina
under
the
CAIR
for
that
NAAQS.
The
States
named
in
the
petition
with
respect
to
the
8­
hour
ozone
NAAQS
are:
Georgia,
Maryland,
South
Carolina,
Tennessee,
and
Virginia.

In
today's
action,
EPA
is
also
proposing
FIPs
to
address
interstate
transport
of
NOx
and
SO2
under
section
110(
a)(
2)(
D)
for
all
jurisdictions
that
are
covered
by
the
CAIR.
In
the
CAIR,
EPA
determined
that
28
States
and
the
District
of
Columbia
contribute
significantly
to
nonattainment
of
the
NAAQS
for
PM2.5
and/
or
8­
hour
ozone
in
downwind
States.
The
CAIR
explains
EPA's
basis
for
determining
significant
contribution
to
downwind
nonattainment
and
maintenance
problems.
In
that
rule,
the
EPA
required
the
affected
upwind
States
to
revise
their
SIPs
to
include
control
measures
to
reduce
emissions
of
SO2
and/
or
NOx.
Sulfur
dioxide
is
a
precursor
to
PM2.5
7/
29/
05
Draft
­
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Not
Quote
or
Cite
20
formation,
and
NOx
is
a
precursor
to
both
ozone
and
PM2.5
formation.

In
an
action
published
on
the
same
day
as
the
final
CAIR,
EPA
proposed
to
find
that
Delaware
and
New
Jersey
contribute
significantly
to
PM2.5
nonattainment
and
maintenance
problems
in
downwind
States
considering
these
States
as
a
single
entity
(
70
FR
25408;
May
12,
2005).

These
States
were
included
in
the
final
CAIR
only
with
respect
to
their
impacts
on
downwind
8­
hour
ozone
problems.

Today's
FIP
proposal
includes
emissions
reductions
requirements
for
Delaware
and
New
Jersey
that
would
address
their
significant
contribution
to
nonattainment
or
maintenance
problems
for
the
PM2.5
NAAQS
if
EPA
ultimately
finds
that
these
States
significantly
contribute
to
PM2.5
problems
in
downwind
States
based
on
the
approach
in
the
proposed
rule
cited
above.

The
FIPs
would
regulate
EGUs
in
the
affected
States
and
achieve
the
emissions
reductions
required
by
the
CAIR
until
States
have
approved
SIPs
to
achieve
the
reductions.
The
CAIR
emissions
budgets
were
based
on
control
requirements
that
are
highly
cost
effective
for
EGUs.

The
EPA
intends
the
CAIR
FIPs
to
satisfy
the
concerns
cited
in
the
section
126
petition
and
to
provide
a
Federal
7/
29/
05
Draft
­
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Not
Quote
or
Cite
21
backstop
for
CAIR.
In
no
way
should
the
FIPs
for
CAIR
be
viewed
as
a
sign
of
any
concern
about
States
meeting
the
SIP
responsibilities
under
CAIR.
There
are
no
sanctions
associated
with
these
FIPs
and
EPA
does
not
intend
CAIR
FIPs
to
have
any
other
negative
consequences
for
the
affected
States.
The
EPA
is
proposing
FIP
approaches
that
are
flexible
and
intended
to
provide
States
options
for
getting
their
SIPs
in
place.

As
the
control
remedy
for
both
the
section
126
action
(
should
EPA
make
positive
findings
under
section
126(
b))
and
the
FIP,
EPA
is
proposing
Federal
NOx
and
SO2
cap
and
trade
programs
that
provide
the
emissions
reductions
required
by
the
CAIR.
The
trading
programs
are
designed
after
the
model
cap
and
trade
programs
that
EPA
provided
as
a
control
option
for
States
to
meet
the
CAIR.
The
EPA
intends
to
integrate
the
Federal
trading
programs
with
the
EPA­
administered
State
CAIR
trading
programs
that
are
based
on
the
model
rules
so
that
sources
could
trade
with
one
another
under
the
respective
emissions
caps.

The
EPA
emphasizes
that
the
section
126
response
and
FIP
would
not
limit
the
options
available
to
States
to
meet
the
requirements
of
the
CAIR.
We
do
not
intend
to
record
NOx
allocations
in
sources'
allowance
accounts
(
or
take
any
7/
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or
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1
The
CAIR
requires
affected
sources
to
begin
monitoring
one
year
before
the
initial
control
periods
(
i.
e.,
sources
begin
monitoring
in
2008
for
the
NOx
programs
and
begin
monitoring
in
2009
for
the
SO2
program).
Note
that
EPA
would
take
any
necessary
actions
to
implement
the
monitoring
provisions
of
the
proposed
Federal
trading
rules
in
time
for
monitoring
to
begin
in
2008.
To
the
extent
that
a
State
chooses
to
control
EGUs
to
meet
its
CAIR
obligations,
the
monitoring
requirements
would
be
identical
whether
EPA
regulated
EGUs
through
the
proposed
Federal
trading
programs
or
the
State
regulated
EGUs
through
their
SIP.

22
other
steps
to
implement
the
section
126
or
FIP
requirements
that
could
impact
a
State's
ability
to
regulate
their
sources
in
a
different
manner)
until
more
than
a
year
after
the
CAIR
SIP
submission
deadline.
1
This
would
allow
EPA
time
to
take
rulemaking
action
to
approve
timely
SIPs
and,

thus,
the
FIP
or
section
126
requirements
would
not
go
into
place.
In
addition,
States
could
replace
the
FIP
or
section
126
requirements
at
a
later
time.

In
today's
action,
EPA
is
also
proposing
revisions
to
the
CAIR
in
order
to
address
the
interaction
of
EPAadministered
NOx
and
SO2
trading
programs
under
the
CAIR
and
under
the
section
126
and
FIP
actions.
In
addition,
EPA
is
proposing
some
revisions
to
the
CAIR
in
order
to
correct
certain
minor
errors.

The
EPA
is
also
proposing
revisions
to
the
Acid
Rain
Program
in
order
to
make
the
administrative
appeals
procedures
(
in
40
CFR
part
78),
which
currently
apply
to
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or
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23
final
determinations
by
the
Administrator
under
the
EPAadministered
States
CAIR
trading
programs,
also
apply
to
the
EPA­
administered
trading
programs
under
the
section
126
and
FIP
actions.
In
addition,
EPA
is
proposing
some
minor
revisions
that
would
apply
to
all
affected
units
under
the
Acid
Rain
Program.

For
purposes
of
the
section
126
and
FIP
rulemakings,

the
EPA
is
not
accepting
comment
on
the
CAIR
or
otherwise
reopening
any
issue
decided
in
the
CAIR
for
reconsideration
or
comment,
except
that
we
are
taking
comment
specifically
on
revisions
to
the
CAIR
that
EPA
is
proposing
in
today's
action.
Section
VII
of
this
preamble
discusses
the
proposed
changes
to
the
CAIR.

B.
General
Background
on
PM2.5
and
Ozone
1.
The
PM2.5
Problem
In
an
action
published
on
July
18,
1997,
we
revised
the
NAAQS
for
particulate
matter
(
PM)
to
add
new
standards
for
fine
particles,
using
as
the
indicator
particles
with
aerodynamic
diameters
smaller
than
a
nominal
2.5
micrometers,
termed
PM2.5
(
62
FR
38652).
We
established
health­
and
welfare­
based
(
primary
and
secondary)
annual
and
24­
hour
standards
for
PM2.5.
The
annual
standard
is
15
micrograms
per
cubic
meter,
based
on
the
3­
year
average
of
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or
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24
annual
mean
PM2.5
concentrations.
The
24­
hour
standard
is
65
micrograms
per
cubic
meter,
based
on
the
3­
year
average
of
the
annual
98th
percentile
of
24­
hour
concentrations.

The
annual
standard
is
generally
considered
the
more
limiting.

Fine
particles
are
associated
with
a
number
of
serious
health
effects
including
premature
mortality,
aggravation
of
respiratory
and
cardiovascular
disease
(
as
indicated
by
increased
hospital
admissions,
emergency
room
visits,

absences
from
school
or
work,
and
restricted
activity
days),

lung
disease,
decreased
lung
function,
asthma
attacks,
and
certain
cardiovascular
problems.
(
See
EPA,
Air
Quality
Criteria
for
Particulate
Matter
(
EPA/
600/
P­
99/
002bF,
October
2004)
at
9.2.2.3).
The
EPA
has
estimated
that
attainment
of
the
PM2.5
standards
would
prolong
tens
of
thousands
of
lives
and
would
prevent,
each
year,
tens
of
thousands
of
hospital
admissions
as
well
as
hundreds
of
thousands
of
doctor
visits,
absences
from
work
and
school,
and
respiratory
illnesses
in
children.

Individuals
particularly
sensitive
to
fine
particle
exposure
include
older
adults,
people
with
heart
and
lung
disease,
and
children.
More
detailed
information
on
health
effects
of
fine
particles
can
be
found
on
EPA's
website
at:
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or
Cite
25
http://
www.
epa.
gov/
ttn/
naaqs/
standards/
pm/
s_
pm_
index.
html.

The
secondary
or
welfare­
based
PM2.5
standards
are
designed
to
protect
against
major
environmental
effects
caused
by
PM
such
as
visibility
impairment
 
including
in
Class
I
areas
which
include
national
parks
and
wilderness
areas
across
the
country
 
soiling,
and
materials
damage.

As
discussed
in
other
sections
of
this
preamble,
SO2
and
NOx
emissions
both
contribute
to
fine
particle
concentrations.
In
addition,
NOx
emissions
contribute
to
ozone
concentrations,
described
in
the
next
section.

The
PM2.5
ambient
air
quality
monitoring
for
the
2001­

2003
period
shows
that
areas
violating
the
standards
are
located
across
much
of
the
eastern
half
of
the
United
States
and
in
parts
of
California
and
Montana.
The
EPA
published
the
PM2.5
attainment
and
nonattainment
designations
on
January
5,
2005
(
70
FR
944).

2.
The
8­
hour
Ozone
Problem
In
an
action
published
on
July
18,
1997,
we
promulgated
identical
revised
primary
and
secondary
ozone
standards
that
specified
an
8­
hour
ozone
standard
of
0.08
parts
per
million
(
ppm).
Specifically,
under
the
standards,
the
3­
year
average
of
the
fourth
highest
daily
maximum
8­
hour
average
ozone
concentration
may
not
exceed
0.08
ppm.
In
general,
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26
the
revised
8­
hour
standards
are
more
protective
of
public
health
and
the
environment
and
more
stringent
than
the
preexisting
1­
hour
ozone
standards.

Short­
term
(
1­
to
3­
hour)
and
prolonged
(
6­
to
8­
hour)

exposures
to
ambient
ozone
have
been
linked
to
a
number
of
adverse
health
effects.
Short­
term
exposure
to
ozone
can
irritate
the
respiratory
system,
causing
coughing,
throat
irritation,
and
chest
pain.
Ozone
can
reduce
lung
function
and
make
it
more
difficult
to
breathe
deeply.
Breathing
may
become
more
rapid
and
shallow
than
normal,
thereby
limiting
a
person's
normal
activity.
Ozone
also
can
aggravate
asthma,
leading
to
more
asthma
attacks
that
require
a
doctor's
attention
and
the
use
of
additional
medication.

Increased
hospital
admissions
and
emergency
room
visits
for
respiratory
problems
have
been
associated
with
ambient
ozone
exposures.
Longer­
term
ozone
exposure
can
inflame
and
damage
the
lining
of
the
lungs,
which
may
lead
to
permanent
changes
in
lung
tissue
and
irreversible
reductions
in
lung
function.
A
lower
quality
of
life
may
result
if
the
inflammation
occurs
repeatedly
over
a
long
time
period
(
such
as
months,
years,
a
lifetime).
Recent
epidemiological
studies
have
shown
a
correlation
between
acute
ozone
exposures
and
increased
risk
of
premature
death.
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27
People
who
are
particularly
susceptible
to
the
effects
of
ozone
include
people
with
respiratory
diseases,
such
as
asthma,
and
people
with
unusual
sensitivity
to
ozone.
Those
who
are
exposed
to
higher
levels
of
ozone
include
adults
and
children
who
are
active
outdoors.

In
addition
to
causing
adverse
health
effects,
ozone
affects
vegetation
and
ecosystems,
leading
to
reductions
in
agricultural
crop
and
commercial
forest
yields;
reduced
growth
and
survivability
of
tree
seedlings;
and
increased
plant
susceptibility
to
disease,
pests,
and
other
environmental
stresses
(
e.
g.,
harsh
weather).
In
long­
lived
species,
these
effects
may
become
evident
only
after
several
years
or
even
decades
and
have
the
potential
for
long­
term
adverse
impacts
on
forest
ecosystems.
Ozone
damage
to
the
foliage
of
trees
and
other
plants
can
also
decrease
the
aesthetic
value
of
ornamental
species
used
in
residential
landscaping,
as
well
as
the
natural
beauty
of
our
national
parks
and
recreation
areas.
The
economic
value
of
some
welfare
losses
due
to
ozone
can
be
calculated,
such
as
crop
yield
loss
from
both
reduced
seed
production
(
e.
g.,
soybean)

and
visible
injury
to
some
leaf
crops
(
e.
g.,
lettuce,

spinach,
tobacco),
as
well
as
visible
injury
to
ornamental
plants
(
i.
e.,
grass,
flowers,
shrubs).
Other
types
of
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or
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28
welfare
loss
may
not
be
quantifiable
(
e.
g.,
reduced
aesthetic
value
of
trees
growing
in
heavily
visited
national
parks).
More
detailed
information
on
health
effects
of
ozone
can
be
found
at
the
following
EPA
website:

http://
www.
epa.
gov/
ttn/
naaqs/
standards/
ozone/
s_
o3_
index.
html
.

Presently,
wide
geographic
areas,
including
most
of
the
nation's
major
population
centers,
experience
ozone
levels
that
violate
the
NAAQS
for
8­
hour
ozone.
These
areas
include
much
of
the
eastern
part
of
the
United
States
and
large
areas
of
California.
The
EPA
published
the
8­
hour
ozone
attainment
and
nonattainment
designations
in
the
Federal
Register
on
April
30,
2004
(
69
FR
23858).

3.
Other
Environmental
Effects
Associated
with
SO2
and
NOx
Emissions
In
addition
to
the
enumerated
human
health
and
welfare
benefits
resulting
from
reductions
in
ambient
levels
of
PM2.5
and
ozone,
reductions
in
NOx
and
SO2
will
contribute
to
substantial
visibility
improvements
in
many
parts
of
the
eastern
United
States.
Reductions
in
these
pollutants
will
also
reduce
acidification
and
eutrophication
of
water
bodies
in
the
region.
In
addition,
reducing
emissions
of
NOx
and
SO2
from
EGUs
can
be
expected
to
reduce
emissions
of
7/
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or
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29
mercury.
Reduced
mercury
emissions
in
turn
may
reduce
mercury
loadings
in
lakes
and
thereby
potentially
decrease
both
human
and
wildlife
exposure
to
fish
containing
mercury.

C.
What
Is
the
Statutory
and
Regulatory
Background
for
Today's
Action?

1.
What
Is
the
"
Good
Neighbor"
Provision?

Following
promulgation
of
new
or
revised
NAAQS,
the
CAA
requires
all
areas,
regardless
of
their
designation
as
attainment,
nonattainment,
or
unclassifiable,
to
submit
SIPs
containing
provisions
specified
under
section
110(
a)(
2).

Among
these
requirements
are
those
specified
by
the
socalled
"
good
neighbor"
provision
section
110(
a)(
2)(
D)
which
addresses
interstate
transport
of
air
pollution.

Section
110(
a)(
2)(
D)
requires
that
a
SIP
contain
adequate
provisions
­­

(
i)
prohibiting,
consistent
with
the
provisions
of
this
title,
any
source
or
other
type
of
emissions
activity
within
the
State
from
emitting
any
air
pollutant
in
amounts
which
will­­

(
I)
contribute
significantly
to
nonattainment
in,
or
interfere
with
maintenance
by,
any
other
State
with
respect
to
[
any]
national
primary
or
secondary
ambient
air
quality
standard,
or
(
II)
interfere
with
measures
required
to
be
included
in
the
applicable
implementation
plan
for
any
other
State
under
part
C
to
prevent
significant
deterioration
of
air
quality
or
to
protect
visibility.
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or
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30
(
ii)
insuring
compliance
with
the
applicable
requirements
of
sections
126
and
115
(
relating
to
interstate
and
international
pollution
abatement);

Section
110(
a)(
2)(
D)
is
the
underlying
provision
for
EPA's
CAIR
and
today's
proposed
section
126
and
FIP
actions.

Under
the
CAIR,
EPA
established
the
amount
of
SO2
and
NOx
emissions
that
each
CAIR­
affected
State
must
prohibit
through
SIP
revisions
to
address
interstate
transport
with
respect
to
the
PM2.5
and
8­
hour
ozone
NAAQS.

2.
What
Is
the
CAA
Section
126
Provision?

Subsection
(
a)
of
section
126
requires,
among
other
things,
that
SIPs
require
major
proposed
new
(
or
modified)

stationary
sources
to
notify
nearby
States
for
which
the
air
pollution
levels
may
be
affected
by
the
fact
that
such
sources
have
been
permitted
to
commence
construction.

Subsection
(
b)
provides:

Any
State
or
political
subdivision
may
petition
the
Administrator
for
a
finding
that
any
major
source
or
group
of
stationary
sources
emits
or
would
emit
any
air
pollutant
in
violation
of
the
prohibition
of
section
110(
a)(
2)(
D)(
ii)
.
.
.
or
this
section....

Subsection
(
c)
of
section
126
states
that
­­

[
I]
t
shall
be
a
violation
of
this
section
and
the
applicable
implementation
plan
in
such
State
[
in
which
the
source
is
located
or
intends
to
locate]­
­

(
1)
for
any
major
proposed
new
(
or
modified)
7/
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or
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2While
the
text
of
section
126
refers
to
section
110(
a)(
2)(
D)(
ii),
EPA
believes
that
this
cross­
reference
is
a
scrivener's
error
that
occurred
during
the
1990
Amendments
to
the
CAA
and
that
Congress
intended
to
refer
to
section
110(
a)(
2)(
D)(
i).
(
See
64
FR
28267.)
The
EPA's
interpretation
was
upheld
in
Appalachian
Power
Co.
v.
EPA,
249
F.
3d
1032,
1040­
44
(
D.
C.
Cir.
2001).

31
source
with
respect
to
which
a
finding
has
been
made
under
subsection
(
b)
to
be
constructed
or
to
operate
in
violation
of
this
section
and
the
prohibition
of
section
110(
a)(
2)(
D)(
ii)
2
or
this
section,
or
(
2)
for
any
major
existing
source
to
operate
more
than
three
months
after
such
finding
has
been
made
with
respect
to
it.

However,
subsection
(
c)
further
provides
that
EPA
may
permit
the
continued
operation
of
such
major
existing
sources
beyond
the
3­
month
period,
if
such
sources
comply
with
EPApromulgated
emissions
limits
within
3
years
of
the
date
of
the
finding.

3.
What
Is
EPA's
Previous
Section
126
Rulemaking?

The
EPA
has
previously
taken
action
under
section
126
to
address
interstate
ozone
transport
(
64
FR
28250;
May
25,

1999)
and
(
65
FR
2674;
January
18,
2000).
Because
there
are
many
parallels
between
that
earlier
action
and
today's
proposal,
we
briefly
discuss
our
earlier
action
here.

Like
the
present
rulemaking,
EPA's
previous
section
126
rulemaking,
dealing
with
interstate
transport
of
NOx,

occurred
essentially
in
conjunction
with
an
EPA
rulemaking
7/
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or
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32
dealing
with
interstate
transport
of
the
same
pollutants,

the
NOx
SIP
Call
(
62
FR
60318;
November
7,
1997).
As
in
today's
rule,
EPA
concluded
that
section
126
and
section
110(
a)(
2)(
D)(
i)
are
integrally
connected
(
due
to
the
reference
to
the
section
110(
a)(
2)(
D)
prohibition
found
in
section
126
(
b)).
Thus,
the
interstate
transport
problem
at
issue
could
be
addressed
under
either
provision,
and
once
the
underlying
section
110(
a)(
2)(
D)
SIP
deficiency
is
eliminated,
there
no
longer
is
a
basis
for
EPA
to
make
a
positive
finding
under
section
126.
(
See
sections
II
and
III
below
for
a
more
detailed
discussion.)
In
the
earlier
rulemaking,
we
therefore
concluded
that
emissions
reductions
sufficient
to
eliminate
a
section
110(
a)(
2)(
D)
SIP
deficiency
would
also
be
sufficient
to
satisfy
section
126.

The
NOx
SIP
Call
required
SIP
revisions
eliminating
the
amount
of
emissions
that
contribute
significantly
to
nonattainment
in
downwind
States,
the
amount
of
emissions
reductions
corresponding
to
the
quantity
of
emissions
that
could
be
eliminated
by
the
application
of
highly
costeffective
controls
on
specified
sources
in
each
upwind
State.
The
section
126
remedy
consequently
called
for
the
same
set
of
highly
cost­
effective
controls
for
the
section
126
source
categories,
based
on
the
record
of
the
NOx
SIP
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
33
Call.
We
are
adopting
this
same
conceptual
approach
in
today's
rulemaking.

There
are
also
parallels
between
our
earlier
section
126
action
and
this
action
with
regard
to
timing
of
actions
in
the
section
126
proceeding
and
in
the
closely­
related
interstate
transport
proceeding
under
section
110(
a)(
2)(
D).

Because
a
section
126
finding
turns
on
the
existence
of
a
section
110(
a)(
2)(
D)
deficiency,
in
the
May
1999
Section
126
Rule,
we
determined
which
petitions
had
technical
merit,
but
we
stopped
short
of
granting
the
findings
for
the
petitions.

Instead,
we
stated
that
because
we
had
promulgated
the
NOx
SIP
Call,
as
long
as
an
upwind
State
remained
on
track
to
comply
with
that
rule,
EPA
would
defer
making
the
section
126
findings.
Thus,
the
Section
126
Rule
included
a
provision
under
which
the
rule
would
be
automatically
withdrawn
for
sources
in
a
State
once
that
State
submitted
and
EPA
fully
approved
a
SIP
that
complied
with
the
NOx
SIP
Call
or
if
EPA
promulgated
a
FIP
to
achieve
the
emissions
reductions.
(
See
64
FR
28271­
28274.)
The
reason
for
this
withdrawal
would
be
the
fact
that
the
affected
State's
SIP
revision
or
EPA's
promulgated
FIP
would
fulfill
the
section
110(
a)(
2)(
D)
requirements,
so
that
there
would
no
longer
be
any
basis
for
the
section
126
finding
with
respect
to
that
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
34
State.
Later
judicial
action
staying
the
NOx
SIP
Call
rule
resulted
in
EPA
granting
the
section
126
petitions
at
issue,

but
the
new
rule
retained
the
basic
linkage
between
section
126
and
section
110(
a)(
2)(
D)
by
providing
that
EPA
would
withdraw
the
section
126
findings
upon
EPA
approval
of
a
SIP
satisfying
the
emission
reduction
requirements
of
the
NOx
SIP
Call
rule
or
upon
EPA's
promulgation
of
a
FIP
that
achieved
the
emissions
reductions.
(
See
65
FR
at
2683
and
Appalachian
Power
v.
EPA,
249
F.
3d
1032,
1039
(
D.
C.
Cir.

2001).)
Similarly,
in
today's
rulemaking,
we
are
proposing
to
deny
the
section
126
petition
if
we
approve
SIPs
which
satisfy
the
emission
reduction
requirements
of
the
CAIR,
or
if
we
promulgate
a
FIP
which
includes
the
emission
reduction
requirements
of
the
CAIR.

Finally,
in
the
earlier
section
126
rule,
EPA
adopted
as
a
remedy
for
section
126
a
Federal
NOx
cap
and
trade
program
patterned
after
the
model
NOx
cap
and
trade
program
that
EPA
developed
for
States
as
an
option
to
meet
their
NOx
SIP
Call
requirements.
The
EPA
is
proposing
the
same
approach
here
in
the
event
that
it
grants
North
Carolina's
section
126
petition.

4.
What
is
the
Clean
Air
Interstate
Rule?

The
EPA
developed
the
Clean
Air
Interstate
Rule
(
CAIR)
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
3When
we
use
the
term
"
transport"
we
mean
to
include
the
transport
of
both
fine
particles
(
PM2.5)
and
their
precursor
emissions
and/
or
transport
of
both
ozone
and
its
precursor
emissions.

35
to
address
interstate
pollution
transport
with
respect
to
the
newly
adopted
PM2.5
and
8­
hour
ozone
NAAQS.
The
EPA
published
the
proposals
for
CAIR
(
previously
referred
to
as
the
Interstate
Air
Quality
Rule)
on
January
30,
2004
(
69
FR
4566)
and
June
10,
2004
(
69
FR
32684),
a
notice
of
data
availability
on
August
6,
2004
(
69
FR
47828),
and
the
final
rule
on
May
12,
2005
(
70
FR
25162).
The
EPA
is
providing
this
description
of
the
CAIR
to
help
place
today's
proposal
in
context.
As
stated
above,
EPA
is
not
accepting
comment
on
the
CAIR
or
otherwise
reopening
any
issue
decided
in
the
CAIR
for
reconsideration
or
comment,
except
that
EPA
is
taking
comment
specifically
on
the
revisions
to
CAIR
that
EPA
is
proposing
in
today's
action
(
Section
VII
in
this
preamble
discusses
the
proposed
changes
to
CAIR).

In
the
CAIR,
based
on
air
quality
modeling
analyses
and
cost
analyses,
EPA
concluded
that
SO2
and
NOx
emissions
in
certain
States
in
the
eastern
part
of
the
country,
through
the
phenomenon
of
air
pollution
transport,
3
contribute
significantly
to
PM2.5
and/
or
8­
hour
ozone
nonattainment
and
maintenance
problems
in
downwind
States.
The
CAIR
establishes
emission
reduction
requirements
for
the
affected
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
36
upwind
States
under
CAA
section
110(
a)(
2)(
D).
The
affected
States
and
the
District
of
Columbia
have
until
September
11,

2006
to
adopt
and
submit
SIP
revisions
to
achieve
these
required
reductions.
The
SIP
revision
must
contain
measures
that
will
assure
that
sources
in
the
State
reduce
their
SO2
and/
or
NOx
emissions
sufficiently
to
eliminate
the
amounts
of
SO2
and
NOx
that
contribute
significantly
to
nonattainment
downwind.
Reducing
upwind
precursor
emissions
will
assist
the
downwind
PM2.5
and
8­
hour
ozone
areas
in
achieving
and
maintaining
the
NAAQS.
Moreover,
attainment
will
be
achieved
in
a
more
equitable,
cost­
effective
manner
than
if
each
nonattainment
area
attempted
to
achieve
attainment
by
implementing
local
emissions
reductions
alone.

The
EPA
specified
that
the
CAIR
emissions
reductions
be
implemented
in
two
phases.
The
first
phase
of
NOx
reductions
starts
in
2009
(
covering
2009­
2014)
and
the
first
phase
of
SO2
reductions
starts
in
2010
(
covering
2010­
2014);

the
second
phase
of
reductions
for
both
NOx
and
SO2
starts
in
2015
(
covering
2015
and
thereafter).
The
emissions
reduction
requirements
are
based
on
controls
that
are
known
to
be
highly
cost
effective
for
EGUs,
however
States
have
the
flexibility
to
determine
what
measures
to
adopt
to
achieve
the
necessary
reductions.
In
the
CAIR,
EPA
provided
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
4It
should
be
noted
that
the
banking
provisions
of
the
cap
and
trade
program
which
encourage
sources
to
make
significant
reductions
before
2010
also
allow
sources
to
operate
above
these
cap
levels
until
all
of
the
banked
allowances
are
used,
therefore
EPA
does
not
project
that
these
caps
will
be
met
in
2010
or
2015.

37
model
SO2
and
NOx
trading
programs
for
EGUs
that
States
can
choose
to
adopt
to
meet
the
emissions
reduction
requirements
in
a
flexible
and
highly
cost­
effective
manner.

If
EPA
ultimately
includes
Delaware
and
New
Jersey
in
the
CAIR
with
respect
to
the
PM2.5
NAAQS
(
see
proposal
at
70
FR
25408),
EPA
estimates
that
the
CAIR
would
reduce
SO2
emissions
by
3.6
million
tons
in
2010
and
by
3.9
million
tons
in
2015;
and
would
reduce
annual
NOx
emissions
by
1.2
million
tons
in
2009
and
by
1.5
million
tons
in
2015.

(
These
numbers
reflect
the
annual
SO2
and
NOx
requirements.)

If
all
these
States
(
including
Delaware
and
New
Jersey
for
the
PM2.5
NAAQS)
choose
to
achieve
these
reductions
through
EGU
controls,
then
EGU
SO2
emissions
in
the
affected
States
would
be
capped
at
3.7
million
tons
in
2010
and
2.6
million
tons
in
2015;
4
and
EGU
annual
NOx
emissions
would
be
capped
at
1.5
million
tons
in
2009
and
1.3
million
tons
in
2015.

Based
on
the
promulgated
CAIR
(
70
FR
25162),
EPA
estimates
that
the
required
SO2
and
NOx
emissions
reductions
would,
by
themselves,
bring
into
attainment
52
of
the
79
counties
that
are
otherwise
projected
to
be
in
nonattainment
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
38
for
PM2.5
in
2010,
and
57
of
the
74
counties
that
are
otherwise
projected
to
be
in
nonattainment
for
PM2.5
in
2015.
The
EPA
further
estimates
that
the
required
NOx
emissions
reductions
would,
by
themselves,
bring
into
attainment
3
of
the
40
counties
that
are
otherwise
projected
to
be
in
nonattainment
for
8­
hour
ozone
in
2010,
and
6
of
the
22
counties
that
are
projected
to
be
in
nonattainment
for
8­
hour
ozone
in
2015.
In
addition,
the
CAIR
will
improve
PM2.5
and
8­
hour
ozone
air
quality
in
the
areas
that
would
remain
nonattainment
for
those
two
NAAQS
after
implementation
of
the
CAIR.
Because
of
CAIR,
the
States
with
those
remaining
nonattainment
areas
will
find
it
less
burdensome
and
less
expensive
to
reach
attainment
by
adopting
additional
controls.
The
CAIR
will
also
reduce
PM2.5
and
8­
hour
ozone
levels
in
attainment
areas,
providing
significant
health
and
environmental
benefits
in
all
areas
of
the
eastern
United
States.

For
a
more
complete
description
of
the
CAIR
and
its
impacts,
the
reader
is
encouraged
to
review
the
preamble
to
the
CAIR.

5.
What
Are
the
Findings
of
Failure
to
Submit
for
the
Section
110(
a)(
2)(
D)
Plans?

In
a
final
rule
published
on
April
25,
2005
(
70
FR
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
39
21147),
we
made
national
findings
that
States
have
failed
to
submit
SIPs
required
under
section
110(
a)(
2)(
D)
to
address
interstate
transport
with
respect
to
the
8­
hour
ozone
and
PM2.5
NAAQS.

The
April
25,
2005
findings
started
a
2­
year
clock
for
EPA
to
promulgate
a
Federal
implementation
plan
(
FIP)
to
address
the
requirements
of
section
110(
a)(
2)(
D).
Under
section
110(
c)(
1),
EPA
may
issue
a
FIP
any
time
after
such
findings
are
made
and
must
do
so
unless
a
SIP
revision
correcting
the
deficiency
is
approved
by
EPA
before
the
FIP
is
promulgated.
The
EPA
intends
to
issue
guidance
regarding
how
States
outside
the
CAIR
region
could
satisfy
the
section
110(
a)(
2)(
D)
requirement.
For
States
affected
by
CAIR,
an
approved
SIP
meeting
the
CAIR
requirements
would
satisfy
the
requirement
and
turn
off
the
FIP
clock.
As
discussed
below
in
section
IV,
EPA
is
today
proposing
a
FIP
for
States
affected
by
the
CAIR.
The
EPA
intends
to
promulgate
the
CAIR
FIP
by
March
15,
2006
along
with
the
final
section
126
response.
However,
EPA
intends
to
withdraw
the
FIP
in
a
State
in
coordination
with
approval
of
a
SIP
for
the
State
that
meets
the
CAIR
requirements.

The
findings
do
not
start
a
sanctions
clock
pursuant
to
section
179
because
the
findings
do
not
pertain
to
a
part
D
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
40
plan
for
nonattainment
areas
required
under
section
110(
a)(
2)(
I)
and
because
the
action
is
not
a
SIP
Call
pursuant
to
section
110(
k)(
5).

D.
Summary
of
North
Carolina's
Section
126
Petition
1.
What
Sources
Does
the
Petition
Target?

The
North
Carolina
petition
requests
relief
from
certain
emissions
from
large
EGUs
located
in
13
States.

With
respect
to
the
PM2.5
NAAQS,
the
petition
requests
that
EPA
find
that
NOx
and
SO2
emissions
from
large
EGUs
in
12
States
(
Alabama,
Georgia,
Illinois,
Indiana,
Kentucky,

Michigan,
Ohio,
Pennsylvania,
South
Carolina,
Tennessee,

Virginia,
and
West
Virginia)
are
significantly
contributing
to
nonattainment
in,
or
interfering
with
maintenance
by,

North
Carolina.
With
respect
to
the
8­
hour
ozone
NAAQS,
the
petition
requests
that
EPA
find
that
NOx
emissions
from
large
EGUs
in
5
States
(
Georgia,
Maryland,
South
Carolina,

Tennessee,
and
Virginia)
are
significantly
contributing
to
nonattainment
in,
or
interfering
with
maintenance
by,
North
Carolina
(
Petition,
p.
1.)

The
petition
defines
the
term
"
EGUs"
as
all
facilities
meeting
the
criteria
described
in
the
proposal
for
the
CAIR.

(
See
69
FR
4566,
4610;
January
30,
2004.)
In
the
proposal
for
the
CAIR,
we
defined
EGUs
as
"
fossil­
fuel
fired
boilers
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
5
As
noted
in
section
VII
below,
EPA
is
proposing
to
amend
the
definition
of
EGU
to
remove
certain
ambiguities
regarding
the
definition's
application
to
solid
waste
incinerators
and
to
existing
units
that
formerly
generated
electricity
for
sale
but
have
not
done
so
since
before
November
15,
1990.
We
understand
the
North
Carolina
section
126
petition
as
applying
only
to
the
sources
included
in
the
clarified
definition
and
not
to
sources
we
are
proposing
to
exclude
from
the
definition
of
EGU.

41
and
turbines
serving
an
electric
generator
with
a
nameplate
capacity
of
greater
than
25
megawatts
(
MW)
producing
electricity
for
sale."
(
Id.)
(
See
section
VII
of
today's
preamble
for
clarification
of
the
EGU
definition.
5)

2.
What
Control
Remedy
Does
the
Petition
Request?

In
its
petition,
North
Carolina
states
that
compliance
with
the
NOx
and
SO2
emissions
budgets
in
the
proposal
for
the
CAIR
would
satisfy
the
requirements
of
the
petition.

These
emissions
budgets
were
based
on
controls
that
are
highly
cost
effective
for
EGUs.
North
Carolina
also
states
that
it
does
not
oppose
the
flexibility
discussed
by
EPA
(
69
FR
at
4622)
to
allow
equivalent
reductions
from
other
source
categories
in
given
States,
so
long
as
those
reductions
are
real
and
enforceable
(
Petition,
p.
24).

In
the
CAIR,
EPA
provided
model
NOx
and
SO2
cap
and
trade
programs
for
EGUs
as
control
options
for
States
to
choose
to
meet
the
CAIR
emissions
reductions
requirements.

The
trading
programs
allow
interstate
trading
among
sources
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
42
in
all
States
subject
to
the
CAIR
that
adopt
the
programs.

In
its
petition,
North
Carolina
said
it
recognizes
the
value
of
allowing
sources
flexibility
to
reduce
their
emissions
in
the
most
cost­
effective
manner
consistent
with
the
statute.

However,
North
Carolina
expressed
concerns
about
a
regional
trading
program
that
could
operate
to
deprive
North
Carolina
of
the
benefits
of
the
control
remedy
in
the
subset
of
States
that
affect
North
Carolina
(
Petition,
pp.
25­
28).
We
address
this
issue
below
in
section
VI.

3.
What
Is
the
Technical
Support
for
the
Petition?

To
support
its
claim
that
EGUs
outside
North
Carolina
are
contributing
significantly
to
nonattainment
and
maintenance
problems
in
the
State,
North
Carolina
relies
largely
on
EPA's
technical
analyses
for
the
proposed
CAIR.

Therefore,
as
discussed
above,
the
petition
targets
sources
in
the
same
States
that
EPA
linked
to
North
Carolina
in
the
proposed
CAIR.
As
additional
support,
North
Carolina
cites
analyses
conducted
by
the
Southern
Appalachian
Mountains
Initiative
(
SAMI)
on
PM2.5
transport,
North
Carolina's
further
evaluation
of
the
SAMI's
analyses,
as
well
as
back
trajectory
analyses
performed
by
the
North
Carolina
Division
of
Air
Quality
from
PM2.5
monitors
in
two
counties.
(
See
Petition,
pp.
13­
17.)
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
43
E.
What
Is
the
Litigation
on
the
Section
126
Rulemaking
Schedule?

On
March
19,
2004,
EPA
received
a
petition
from
the
State
of
North
Carolina
filed
under
CAA
section
126.

Section
126(
b)
requires
EPA
to
make
the
requested
finding,

or
to
deny
the
petition,
within
60
days
of
receipt.
It
also
requires
EPA
to
provide
a
public
hearing
before
acting
on
the
petition.
In
addition,
EPA's
action
under
section
126
is
subject
to
the
procedural
requirements
of
section
307(
d)

of
the
CAA.
(
See
section
307(
d)(
2)­(
5).)
One
of
these
requirements
is
that
EPA
conduct
notice­
and­
comment
rulemaking.
Section
307(
d)(
10)
provides
for
a
time
extension,
under
certain
circumstances,
for
rulemakings
subject
to
that
provision.
Specifically,
it
allows
statutory
deadlines
that
require
promulgation
in
less
than
6
months
from
proposal
to
be
extended
to
not
more
than
6
months
from
proposal
to
afford
the
public
and
the
Agency
adequate
opportunity
to
carry
out
the
purposes
of
section
307(
d).
In
an
action
published
on
May
26,
2004
(
69
FR
30038),
EPA
extended
the
deadline
for
EPA
to
take
action
on
the
North
Carolina
petition
by
the
full
6
months,
to
November
18,
2004.

On
February
17,
2005,
the
State
of
North
Carolina
and
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
44
the
citizen
group
Environmental
Defense
filed
complaints
against
EPA
seeking
to
compel
EPA
to
take
action
on
the
State's
section
126
petition:
State
of
North
Carolina
v.

Johnson,
No.
5:
05
 
CV
 
112
(
E.
D.
N.
C.)
and
Environmental
Defense
v.
Johnson,
No.
5:
05
 
CV
 
113
(
E.
D.
N.
C.).
The
EPA,

North
Carolina,
and
Environmental
Defense
filed
a
proposed
consent
decree
that
would
establish
a
schedule
for
EPA
to
act
on
the
petitions.
Pursuant
to
CAA
section
113(
g),
the
EPA
solicited
comments
on
the
proposed
consent
decree,
by
notice
dated
March
2,
2005
(
70
FR
10089).
The
comment
period
closed
April
1,
2005
without
EPA
receiving
negative
comment.
On
May
9,
2005,
the
court
entered
a
slightly
modified
version
of
the
consent
decree.

The
schedule
in
the
consent
decree
requires
that
no
later
than
August
1,
2005,
EPA
must
sign
for
publication
the
proposed
action
to
grant
or
deny
the
petition.
If
EPA
proposes
to
approve
any
part
of
the
petition,
the
proposal
must
include
the
proposed
remedy.
No
later
than
March
15,

2006,
EPA
must
take
final
action
to
grant
or
deny
the
petition.
If
EPA
grants
any
part
of
the
petition
(
i.
e.,

makes
a
section
126(
b)
finding),
the
final
action
must
include
the
remedy.
The
consent
decree
also
requires
EPA
to
hold
a
public
hearing
on
the
proposal
during
the
week
of
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
45
September
12,
2005
in
North
Carolina.
Today's
proposal
meets
the
first
deadline
set
forth
in
the
consent
decree.

The
EPA
has
scheduled
two
public
hearings
during
the
week
of
September
12,
2005,
one
to
be
held
in
North
Carolina
and
the
other
in
Virginia
(
see
DATES
above
for
further
information
on
the
hearings).

F.
How
Is
EPA
Addressing
the
Section
126­
Related
Comments
Received
During
the
CAIR
Rulemaking?

In
the
January
30,
2004
CAIR
proposal,
EPA
set
forth
its
general
view
of
the
approach
it
expected
to
take
in
responding
to
any
section
126
petition
that
might
be
submitted
that
relies
on
essentially
the
same
record
as
the
CAIR
(
69
FR
at
4580).
That
approach
is
the
one
EPA
used
in
addressing
section
126
petitions
that
were
submitted
to
EPA
in
1997
while
EPA
was
developing
the
NOx
SIP
Call
to
control
ozone
transport
(
as
discussed
in
section
I.
C.
3.
above).

The
EPA
received
comments
on
the
CAIR
proposal
regarding
its
intended
approach
for
acting
on
any
future
section
126
petitions
that
might
be
filed.
Many
commenters
expressed
support
for
the
approach
that
EPA
had
outlined.

Other
commenters
raised
issues
regarding
the
timing
of
emissions
reductions
under
a
new
section
126
action.
Some
pointed
out
that
the
CAIR
compliance
date
would
be
later
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
46
than
the
3
years
allowed
for
compliance
under
section
126.

Some
were
concerned
that
the
proposed
CAIR
compliance
date
was
later
than
many
attainment
dates
and,
therefore,
States
may
need
section
126
petitions
in
order
to
get
earlier
upwind
reductions
in
order
to
meet
their
attainment
dates.

Some
questioned
the
legal
basis
for
linking
the
two
rules.

Several
commenters
expressed
concern
that
EPA
would
be
restricting
the
use
of
or
weakening
the
section
126
authority.
A
number
of
commenters
urged
EPA
not
to
prejudge
any
petition,
but
to
evaluate
each
on
its
own
merit.
Some
thought
that
any
petitions
submitted
prior
to
designations
or
before
States
had
had
the
opportunity
to
prepare
SIPs
would
be
premature
and
should
be
denied.
Others
suggested
that
the
CAIR
might
not
solve
all
the
transport
problems
and
that
States
would
need
to
retain
the
section
126
tool
to
seek
further
reductions.

As
discussed
above,
after
issuing
the
CAIR
proposal,

EPA
received,
on
March
19,
2004,
the
section
126
petition
from
North
Carolina.
In
the
final
CAIR,
we
stated
that
when
we
propose
action
on
the
North
Carolina
petition,
we
would
set
forth
our
view
of
the
interaction
between
section
110(
a)(
2)(
D)
and
section
126
.
Section
II
below
explains
EPA's
view
of
this
interaction.
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
47
In
addition,
we
said
we
would
take
into
consideration
and
respond
to
the
section
126­
related
comments
we
received
on
the
CAIR.
The
EPA
has
reviewed
all
the
comments
and
will
be
providing
responses
to
the
relevant
ones
in
the
docket
for
this
rulemaking
action.

II.
What
Is
EPA's
Legal
and
Analytical
Approach
for
the
Section
126
Petition?

As
described
in
section
I.
C.
2
above,
section
126
of
the
CAA
is
integrally
related
to
the
CAA's
"
good
neighbor"

provision,
section
110(
a)(
2)(
D),
which
requires
States
to
adopt
implementation
plans
to
prohibit
emissions
from
sources
within
the
State
that
significantly
contribute
to
other
States'
nonattainment
of
a
NAAQS,
or
which
interfere
with
other
States'
ability
to
maintain
a
NAAQS.
Under
section
126,
a
downwind
State
"
may
petition
the
Administrator
for
a
finding
that
any
major
source
or
group
of
stationary
sources
emits
or
would
emit
any
air
pollutant
in
violation
of
CAA
section
110(
a)(
2)(
D)."
Should
EPA
make
a
finding
that
a
source
or
group
of
sources
is
emitting
in
violation
of
the
section
110(
a)(
2)(
D)
prohibition,
existing
sources
in
violation
may
operate
no
longer
than
3
months
unless
the
sources
comply
with
emission
limitations
and
compliance
schedules
provided
by
the
Administrator
which
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
48
bring
about
compliance
"
as
expeditiously
as
practicable,
but
in
no
case
later
than
three
years
after
the
date
of
such
finding."
See
section
126(
c).

The
EPA's
determination
whether
or
not
to
grant
a
section
126
petition
consequently
turns
on
whether
SIPs
are
in
violation
of
section
110(
a)(
2)(
D).
See
Appalachian
Power
v.
EPA,
249
F.
3d
1032,
1045­
46
(
D.
C.
Cir.,
2001),
holding
that
the
determination
of
whether
the
"
prohibition"
on
excessive
interstate
transport
of
air
pollutants
is
being
violated
is
the
same
under
section
110(
a)(
2)(
D)
and
section
126;
see
also
North
Carolina
Petition
p.
22
("
the
operative
legal
standard
under
sections
110
and
126
is
identical").

Moreover,
because
of
this
interrelation
and
identity,
EPA
has
construed
section
126
as
applying
on
a
statewide
contribution
basis
when
dealing
with
issues
of
interstate
transport
of
ozone
precursors.
This
means
that
a
finding
by
EPA
that
a
SIP
is
in
violation
of
section
110(
a)(
2)(
D)(
i)
is
a
sufficient
basis
for
a
finding
that
sources
within
that
State
are
in
violation
of
that
prohibition
for
purposes
of
section
126(
b)
(
64
FR
at
28282).
No
more
individualized
determination
for
a
source
or
group
of
sources
is
necessary.

Id.
This
is
because
sources'
contribution
to
nonattainment
is
collective,
so
that
even
relatively
small
individual
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
49
contributions
are
significant
in
the
aggregate.
Id.
Thus,

"[
i]
f
State­
wide
emissions
contribute
significantly
to
nonattainment
downwind,
then
the
State's
section
126
sources
may
be
subject
to
SIP
controls;
if
State­
wide
emissions
do
not
contribute
significantly,
then
the
State's
section
126
sources
would
not
be
subject
to
SIP
control."
Id.;
see
Appalachian
Power,
249
F.
3d
1049­
50
(
upholding
this
determination).
Under
this
approach,
therefore,
if
EPA
determines
that
a
State's
SIP
fails
to
meet
the
requirements
of
section
110(
a)(
2)(
D)(
i)
with
respect
to
a
downwind
State,

it
follows
that
the
prohibition
in
section
126
is
also
violated
with
respect
to
that
downwind
State.

In
the
CAIR,
EPA
defined
"
significant
contribution"
as
consisting
of
an
air
quality
factor
reflecting
an
upwind
State's
ambient
impact
on
downwind
nonattainment
areas,
and
the
cost­
factor
of
availability
of
highly
cost­
effective
controls
(
70
FR
at
25174).
The
reductions
required
are
expressed
as
Statewide
budgets
of
PM2.5
and
ozone
precursors
(
SO2
and
NOx
for
PM2.5,
and
NOx
for
ozone)
susceptible
to
reduction
by
highly
cost
effective
controls.
For
PM2.5,
an
upwind
State
must
contribute
at
least
0.2

g/
m3
PM2.5
to
at
least
one
downwind
nonattainment
area
(
the
"
link")
to
satisfy
the
air
quality
part
of
the
test.
Id.
at
25191.
7/
29/
05
Draft
­
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Not
Quote
or
Cite
50
For
ozone,
the
air
quality
component
is
satisfied
if
the
maximum
contribution
by
an
upwind
State
is
at
least
2
parts
per
billion,
the
average
contribution
is
greater
than
one
percent,
and
certain
other
numerical
criteria
are
met.
Id.

at
25175.
The
CAIR
rule
also
stated
that
an
upwind
State's
emissions
can
interfere
significantly
with
a
downwind
State's
maintenance
of
a
NAAQS
when
EPA,
or
a
State,
can
reasonably
project
based
on
available
data
that
in
the
absence
of
CAIR
controls,
a
current
or
projected
nonattainment
area
will
revert
to
nonattainment,
after
having
achieved
attainment,
due
to
continued
emissions
growth
or
to
other
relevant
factors.
Id.
at
25193;
see
also
the
response
to
comments
document
for
the
CAIR,
section
III.
C.
17,
docket
number
OAR­
2003­
0053­
2165.

The
EPA
is
adopting
this
same
approach
in
the
present
rulemaking.
This,
of
course,
is
a
consequence
of
EPA's
interpretation
(
just
explained)
that
a
violation
of
110(
a)(
2)(
D)(
i)
also
indicates
that
sources
are
emitting
in
violation
of
the
section
110(
a)(
2)(
D)
prohibition
for
purposes
of
section
126(
b).
For
the
same
reason,
EPA
is
adopting
the
highly
cost­
effective
component
of
the
test
from
the
CAIR
rule,
with
the
consequent
emission
budgets.

Once
EPA
finds
under
section
126(
b)
that
a
source
(
or
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
51
sources)
is
operating
in
violation
of
the
section
110(
a)(
2)(
D)(
i)
prohibition,
the
violation
would
be
eliminated
(
assuming
that
sources
continue
to
operate)
by
EPA
approving
a
SIP
containing
provisions
eliminating
the
significant
contribution,
or
by
EPA
itself
adopting
a
FIP
which
contains
provisions
eliminating
that
contribution,
by
the
deadline
for
the
section
126
sources.
This
means
that
a
section
126(
b)
violation
no
longer
exists
once
EPA
approves
a
timely
SIP,
or
adopts
a
timely
FIP,
requiring
each
State
contributing
significantly
(
in
this
case,
to
North
Carolina)

to
reduce
emissions
to
the
levels
reflecting
elimination
of
the
State's
significant
contribution,
as
specified
in
the
CAIR.
This
result
is
again
a
consequence
of
the
integral
relationship
of
section
126(
b)
and
section
110(
a)(
2)(
D).

The
EPA
intends
to
apply
these
same
principles
in
responding
to
future
section
126
petitions
from
States
in
the
CAIR
region
addressing
CAIR
pollutants.
Thus,
we
would
deny
these
petitions
with
respect
to
any
State
having
an
approved
SIP
meeting
the
CAIR
emissions
reductions
requirements
and
with
respect
to
States
for
which
EPA
has
promulgated
a
CAIR
FIP.
In
such
a
case
there
would
be
no
underlying
section
110(
a)(
2)(
D)
violation,
and
such
a
violation
is
the
predicate
for
granting
a
section
126
7/
29/
05
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­
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Not
Quote
or
Cite
52
petition.

III.
What
Is
EPA's
Proposed
Action
on
the
Section
126
Petition?

As
discussed
in
the
preceding
section,
EPA
is
proposing
to
rely
on
the
conclusions
drawn
in
the
final
CAIR
in
determining
whether
emissions
from
sources
in
the
States
named
in
the
petition
contribute
significantly
to
8­
hour
ozone
and/
or
PM2.5
nonattainment
and
maintenance
problems
in
North
Carolina.
As
discussed
in
section
I
above,
North
Carolina
based
its
petition
in
large
part
on
the
analyses
for
the
proposed
CAIR­­
identifying
EGUs
in
the
same
upwind
States
that
EPA
proposed
to
link
to
North
Carolina.
The
EPA
conducted
new
modeling
analyses
using
updated
emissions
inventories
for
the
final
CAIR.
The
EPA
also
applied
a
different
value
for
the
threshold
contribution
level
for
the
air
quality
portion
of
the
significant
contribution
determination
for
PM2.5
in
the
final
CAIR.
Therefore,
the
upwind
State­
to­
downwind
State
linkages
differed
in
the
final
CAIR
from
the
proposal.

A.
What
Is
EPA's
Proposed
Action
with
Respect
to
the
8­

Hour
Ozone
NAAQS?

In
its
petition,
North
Carolina
requested
that
EPA
make
findings
that
large
EGUs
in
Georgia,
Maryland,
South
7/
29/
05
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Quote
or
Cite
53
Carolina,
Tennessee,
and
Virginia
contribute
significantly
to
nonattainment
in,
or
interfere
with
maintenance
by,
North
Carolina
with
respect
to
the
8­
hour
ozone
NAAQS.
In
the
proposed
CAIR,
EPA
linked
these
States
to
8­
hour
ozone
air
quality
problems
in
Mecklenburg
County,
North
Carolina.
In
the
final
CAIR,
EPA's
updated
analyses
project
all
of
North
Carolina
to
be
in
attainment
for
8­
hour
ozone
in
the
CAIR
2010
base
case.
Therefore,
EPA
did
not
link
any
upwind
States
to
North
Carolina
with
respect
to
the
8­
hour
ozone
NAAQS
in
the
final
CAIR
(
See
preamble
Table
VI­
9;
70
FR
at
25249).
Consequently,
EPA
is
proposing
to
deny
the
section
126
petition
with
respect
to
the
8­
hour
ozone
NAAQS.

B.
What
Is
EPA's
Proposed
Action
with
Respect
to
the
PM2.5
NAAQS?

In
its
petition,
North
Carolina
also
requested
that
EPA
make
findings
that
large
EGUs
in
Alabama,
Georgia,
Illinois,

Indiana,
Kentucky,
Michigan,
Ohio,
Pennsylvania,
South
Carolina,
Tennessee,
Virginia
and
West
Virginia
contribute
significantly
to
nonattainment
in,
or
interfere
with
maintenance
by,
North
Carolina
with
respect
to
the
PM2.5
NAAQS.
In
the
proposed
CAIR,
these
12
States
were
linked
to
PM2.5
nonattainment
problems
in
North
Carolina.
In
the
final
CAIR,
as
noted,
EPA
used
different,
updated
modeling
7/
29/
05
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Quote
or
Cite
54
and
also
applied
a
0.2

g/
m3
contribution
threshold
level
rather
than
the
proposed
0.15

g/
m3
for
the
air
quality
portion
of
the
significant
contribution
determination
(
70
FR
25190­
25191).
Based
on
the
updated
modeling
and
the
0.2

g/
m3
contribution
threshold
level,
EPA
determined
in
CAIR
that
the
following
10
States
are
significantly
contributing
to
PM2.5
air
quality
problems
in
North
Carolina:
Alabama,

Georgia,
Indiana,
Kentucky,
Ohio,
Pennsylvania,
South
Carolina,
Tennessee,
Virginia,
and
West
Virginia
(
see
preamble
Table
VI­
8;
70
FR
at
25248­
25249).
As
explained
in
section
II
above,
under
the
collective
contribution
approach,
this
means
for
purposes
of
section
126(
b)
that
sources
within
these
States
for
which
EPA
determined
highly
cost­
effective
controls
are
available
are
also
contributing
significantly
to
PM2.5
nonattainment
problems
in
North
Carolina.

In
determining
what
action
to
propose
in
response
to
the
PM2.5
portion
of
the
section
126
petition,
EPA
is
taking
into
consideration
the
FIP
that
is
being
proposed
today
in
conjunction
with
this
section
126
action
(
see
section
IV
below).
The
FIP
proposes
control
requirements
for
each
of
the
States
affected
by
the
CAIR
in
order
to
achieve
the
emissions
reductions
required
to
address
interstate
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or
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55
transport.
The
EPA
plans
to
issue
the
final
FIP
at
the
same
time
as
the
final
section
126
action.
Therefore,
for
EGUs
in
States
linked
to
North
Carolina
in
CAIR
(
and
therefore,

for
which
EPA
is
proposing
a
FIP),
EPA
is
proposing
in
the
alternative
(
1)
to
deny
the
petition
if
EPA
issues
the
final
FIP
to
address
the
interstate
transport
no
later
than
the
final
section
126
response
or
(
2)
to
grant
the
petition
and
make
section
126
findings
if
EPA
does
not
promulgate
the
FIP
prior
to
or
concurrently
with
the
final
section
126
response.
Because
the
FIP
would
fully
address
the
PM2.5­

related
interstate
transport
problem
identified
in
CAIR
and
thus
eliminate
the
section
110(
a)(
2)(
D)
violation,
there
would
no
longer
be
a
basis
for
the
section
126
findings.
As
discussed
in
section
VI,
we
are
proposing
the
Federal
CAIR
NOx
and
SO2
cap
and
trade
programs
as
the
control
remedy
for
both
the
section
126
action
and
the
FIP.
Therefore,
whether
the
upwind
sources
in
these
10
States
are
regulated
under
the
section
126
action
or
the
FIP,
the
emissions
reductions
requirements
and
compliance
deadlines
would
be
the
same.

For
EGUs
located
in
Illinois
and
Michigan,
which
are
not
linked
to
North
Carolina
in
the
final
CAIR
with
respect
to
the
PM2.5
NAAQS
(
70
FR
25247­
48),
EPA
is
proposing
to
deny
the
petition.
7/
29/
05
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or
Cite
56
The
EPA
notes
that
it
is
not
including
any
regulatory
text
for
the
proposed
findings
because
EPA's
preferred
alternative
is
to
promulgate
the
CAIR
FIP
and
fully
deny
the
North
Carolina
section
126
petition.

C.
What
Are
the
Proposed
Requirements
for
Sources
for
Which
EPA
Makes
a
Section
126(
b)
Finding?

The
EPA
is
proposing,
in
sections
V
and
VI
below,
NOx
and
SO2
Federal
cap
and
trade
programs
that
would
apply
to
any
new
or
existing
EGU
for
which
EPA
ultimately
makes
a
section
126(
b)
finding
in
response
to
the
North
Carolina
petition.
The
proposed
Federal
cap
and
trade
programs
are
largely
the
same
as
the
model
trading
rules
for
EGUs
that
EPA
provided
in
the
CAIR
as
control
options
for
States,

although
EPA
is
proposing
certain
differences
that
are
primarily
intended
to
account
for
Federal
implementation
and
to
facilitate
transfer
from
the
proposed
Federal
programs
to
State
programs.
(
See
section
VI
for
a
description
of
the
differences).
The
same
EGU
budgets
and
compliance
dates
would
apply.

As
in
the
CAIR,
the
NOx
and
SO2
reductions
would
occur
in
two
phases.
The
first
phase
of
NOx
reductions
would
start
in
2009
(
covering
2009­
2014)
and
the
first
phase
of
SO2
reductions
would
start
in
2010
(
covering
2010­
2014);
the
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or
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57
second
phase
of
reductions
for
both
NOx
and
SO2
would
start
in
2015
(
covering
2015
and
thereafter).

Section
126(
c)
states,
in
relevant
part,
that:

it
shall
be
a
violation
of
this
section
and
the
applicable
implementation
plan
in
such
State
(
1)
for
any
major
proposed
new
(
or
modified)

source
with
respect
to
which
a
finding
has
been
made
under
subsection
(
b)
to
be
constructed
or
to
operate
in
violation
of
this
section
and
the
prohibition
of
section
110(
a)(
2)(
D)([
i])
or
this
section,
or
(
2)
for
any
major
existing
source
to
operate
more
than
three
months
after
such
finding
has
been
made
with
respect
to
it.

The
Administrator
may
permit
the
continued
operation
of
a
source
referred
to
in
paragraph
(
2)
beyond
the
expiration
of
such
three­
month
period
if
such
source
complies
with
such
emission
limitations
and
compliance
schedules
(
containing
increments
of
progress)
as
may
be
provided
by
the
Administrator
to
bring
about
compliance
7/
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05
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or
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58
with
the
requirements
contained
in
section
110(
a)(
2)(
D)([
i])
as
expeditiously
as
practicable,
but
not
later
than
three
years
after
the
date
of
such
finding.

The
Federal
cap
and
trade
programs
that
EPA
is
proposing
would
satisfy
the
section
126
requirements.
The
control
requirements
would
ensure
that
the
sources
do
not
emit
in
violation
of
the
section
110(
a)(
2)(
D)(
i)
prohibition
and
would
serve
as
the
alternative
set
of
requirements
that
the
Administrator
may
apply
for
the
purpose
of
allowing
existing
sources
subject
to
a
section
126(
b)
finding
to
operate
for
more
than
3
months
after
the
finding
is
made.

Under
the
consent
decree,
described
in
section
I
above,

EPA
must
sign
the
final
action
on
the
petition
by
March
15,

2006.
If
EPA
makes
any
findings
at
that
time,
and
they
become
effective
60
days
later,
consistent
with
section
126(
c),
compliance
with
the
control
remedy
must
be
required
no
later
than
May
14,
2009.
The
control
remedy
that
EPA
is
proposing
would
satisfy
the
3­
year
compliance
period
in
section
126(
c).
First,
the
remedy
would
commence
within
the
3­
year
maximum
timeframe
set
out
in
section
126(
c),
since
as
just
explained,
the
phase
I
NOx
control
requirements
would
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or
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59
take
effect
on
January
1,
2009.
Further
controls
on
SO2
and
NOx
would
be
required
as
soon
as
technically
feasible.
The
EPA
views
the
proposed
NOx
and
SO2
emissions
reduction
requirements
as
a
single
action,
but
one
that
cannot
be
fully
implemented
in
2009
and
instead
must
be
implemented
in
phases
solely
for
reasons
of
feasibility.
In
analyses
conducted
for
the
CAIR,
EPA
determined
that
part
of
the
NOx
and
SO2
emissions
reductions
cannot
feasibly
be
implemented
until
2015
and
the
first
phase
of
SO2
emission
reductions
cannot
feasibly
be
implemented
until
2010.
In
this
regard,

we
note
that
section
126(
c)
on
its
face
contemplates
that
control
measures
satisfying
both
section
126
and
section
110(
a)(
2)(
D)
may
stretch
out
beyond
a
3­
year
period.

Section
126(
c)
states
that
sources
that
are
subject
to
a
section
126(
b)
finding
may
continue
to
operate
if
they
comply
with
"
emissions
limitations
and
compliance
schedules
(
containing
increments
of
progress)
provided
by
[
EPA]"

(
emphasis
added);
the
reference
to
increments
of
progress
can
describe
a
situation
where
compliance
is
stretched
out
over
periods
exceeding
3
years
provided
initial
action
(
i.
e.,
an
initial
increment
of
progress)
occurs
within
3
years.
See
also
North
Carolina
Petition
at
pp.
28­
29
supporting
a
phased
approach
to
compliance
and
noting
that
a
7/
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05
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or
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60
stepwise
approach
to
regional
emissions
reductions
is
"
consistent
with
the
requirement
that
a
section
126
remedy
`
contain[]
increments
of
progress...'"
Section
VII
of
this
preamble
describes
the
proposed
section
126
control
requirements
in
greater
detail.

D.
When
and
How
Would
EPA
Withdraw
Section
126
Findings
and
Control
Requirements
in
a
State
if
EPA
approves
a
SIP
to
the
Meet
the
CAIR?

Under
today's
proposal,
by
March
15,
2006,
EPA
would
take
final
action
to
either
make
section
126
findings
for
sources
in
10
States
contributing
significantly
to
North
Carolina's
nonattainment
and
maintenance
problems
for
the
PM2.5
NAAQS
or
promulgate
a
FIP
for
all
CAIR
States
for
the
PM2.5
and/
or
8­
hour
ozone
NAAQS.
The
CAIR
requires
States
to
submit
SIP
revisions
by
September
11,
2006.
Therefore,

the
Federal
CAIR
trading
programs
would
be
promulgated
in
advance
of
the
SIP
submission
deadline.
As
stated
previously,
the
section
126
response
and
FIP
would
not
limit
the
options
available
to
States
to
meet
the
requirements
of
CAIR.
The
EPA
intends
to
withdraw
the
section
126
or
the
FIP
requirements
in
a
State
in
coordination
with
approval
of
a
implementation
plan
for
the
State
that
meets
the
CAIR
requirements.
In
the
timing
of
the
SIP
approval,
EPA
would
7/
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05
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or
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6The
CAIR
requires
affected
sources
to
begin
monitoring
1
year
before
the
initial
control
periods
(
i.
e.,
sources
begin
monitoring
in
2008
for
the
NOx
programs
and
begin
monitoring
in
2009
for
the
SO2
program).
Note
that
EPA
would
take
any
necessary
actions
to
implement
the
monitoring
provisions
of
the
proposed
Federal
trading
rules
in
time
for
monitoring
to
begin
in
2008.
To
the
extent
that
a
State
chooses
to
control
EGUs
to
meet
its
CAIR
obligations,
the
monitoring
requirements
would
be
identical
whether
EPA
regulated
EGUs
through
the
proposed
Federal
trading
programs
or
the
State
regulated
EGUs
through
their
SIP.

61
take
into
consideration
whether
the
SIP
approval
would
occur
before
or
after
EPA
has
begun
recording
allowances
in
source
accounts
under
Federal
CAIR
trading
programs.

It
is
EPA's
preference
that
States
regulate
sources
to
control
the
interstate
transport,
including
making
decisions
regarding
NOx
allocations,
should
a
State
choose
to
participate
in
the
State
CAIR
trading
programs.

Consequently,
EPA
does
not
intend
to
record
NOx
allocations
in
sources'
allowance
accounts
(
or
take
any
other
steps
to
implement
the
section
126
or
FIP
requirements
that
could
impact
a
State's
ability
to
regulate
their
sources
in
a
different
manner)
until
December
1,
2007,
more
than
a
year
after
the
CAIR
SIP
submission
deadline.
6
This
would
allow
EPA
time
to
take
rulemaking
action
to
approve
timely,

compliant
SIPs
and
withdraw
the
section
126
or
FIP
requirements.

If
a
SIP
is
approved
that
includes
the
EPA­
administered
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62
State
CAIR
trading
programs
after
EPA
has
recorded
allowances
for
the
Federal
CAIR
trading
programs,
EPA
would
work
with
the
State
to
ensure
a
smooth
transition
from
the
Federal
trading
programs
to
the
State
trading
programs.
To
preserve
the
integrity
of
the
trading
program
budgets,
once
Federal
allocations
are
recorded
in
source
accounts
for
a
particular
control
period,
EPA
does
not
intend
to
approve
overlapping
State
allocations
for
the
same
control
period.

Rather,
EPA
will
work
with
the
States
to
approve
State
allocations
for
control
periods
that
begin
upon
the
expiration
of
a
control
period
for
which
Federal
allocations
have
been
recorded
in
source
accounts.

In
section
VI
below,
EPA
proposes
the
schedule
for
recording
Federal
NOx
allocations
in
source
accounts.
Under
this
schedule,
EPA
seeks
to
balance
two
goals:
(
1)
to
provide
adequate
time
for
States
to
submit
and
for
EPA
to
approve
SIPs
containing
the
NOx
allocations,
and
(
2)
to
provide
certainty
to
sources
regarding
their
CAIR
NOx
allocations
in
adequate
time
for
sources
to
make
compliance
decisions.
Under
this
schedule,
EPA
would
record
the
allowances
1
year
at
a
time
for
the
first
two
control
periods.
Thus,
for
SIPs
approved
after
EPA
has
recorded
the
2009
allocations
on
December
1,
2007,
but
before
EPA
has
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05
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63
recorded
the
2010
allocations
on
December
1,
2008,
EPA
would
time
the
withdrawal
of
the
FIP
or
section
126
requirements
such
that
allocations
would
be
made
under
the
State
CAIR
trading
program
for
the
2010
control
period.
There
would
be
another
opportunity
for
transitioning
from
the
Federal
to
State
trading
programs
for
the
2011
control
period.
As
discussed
in
section
VI
below,
EPA
is
proposing
to
record
NOx
allowances
in
source
accounts
by
December
1,
2009
for
the
2011­
2013
control
periods.
Therefore,
for
SIPs
approved
after
December
1,
2009,
the
transition
from
the
Federal
to
State
program
would
not
occur
until
the
2014
control
period.

The
EPA
believes
it
is
unlikely
that
there
would
be
any
outstanding
SIPs
to
be
approved
after
December
1,
2009.

The
EPA
intends
to
work
with
States
to
help
ensure
that
NOx
allowances
can
be
allocated
under
the
State
CAIR
trading
programs
beginning
with
the
initial
2009
control
period.
In
order
to
expedite
the
approval
of
the
SIP
allowance
allocation
methodology
and
provide
additional
flexibility
to
States,
EPA
is
proposing
an
abbreviated
SIP
option
as
discussed
in
section
VI.
See
section
VI
for
a
detailed
discussion
of
EPA's
proposed
schedule
for
recording
Federal
NOx
allocations
in
source
allowance
accounts.

For
States
that
choose
to
implement
the
CAIR
7/
29/
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Not
Quote
or
Cite
64
requirements
using
a
method
other
than
the
EPA­
administered
State
CAIR
trading
programs,
the
EPA
would
also
carefully
consider
the
timing
of
the
transition
from
the
Federal
trading
programs
to
the
State­
implemented
programs
to
avoid
disruption
of
the
Federal
trading
programs
within
any
annual
or
ozone
season
control
period.

IV.
What
Is
the
Proposed
Federal
Implementation
Plan
for
the
CAIR?

A.
What
Is
the
Legal
Framework
for
the
Proposed
Federal
Implementation
Plan?

Section
110(
c)(
1)
of
the
CAA
requires
the
Administrator
to
promulgate
a
Federal
Implementation
Plan
(
FIP)
within
2
years
of:
(
1)
finding
that
a
State
has
failed
to
make
a
required
submittal,
(
2)
finding
that
a
submittal
received
does
not
satisfy
the
minimum
completeness
criteria
established
under
section
110(
k)(
1)(
A),
or
(
3)
disapproving
a
SIP
submittal
in
whole
or
in
part.
The
EPA
may
issue
a
FIP
any
time
after
making
one
of
these
findings
or
issuing
a
SIP
disapproval
and
it
must
do
so
within
2
years.
However,

EPA
is
relieved
of
this
obligation
if
a
SIP
revision
correcting
the
deficiency
identified
is
approved
by
EPA
before
such
a
FIP
is
promulgated.

As
discussed
in
paragraph
I.
D.
5,
in
a
final
rule
signed
7/
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or
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65
the
same
day
as
CAIR,
EPA
found
that
States
have
failed
to
submit
SIPs
to
satisfy
the
interstate
transport
requirement
under
section
110(
a)(
2)(
D)(
i)
of
the
CAA
for
the
PM2.5
and
8­
hour
ozone
NAAQS
(
70
FR
21147).
These
findings
started
the
2­
year
clock
for
the
promulgation
of
a
FIP.
They
did
not
start
a
"
sanctions
clock"
as
there
are
no
mandatory
sanctions
associated
with
the
FIP
or
the
finding
of
State
failure
to
submit
SIPs
to
satisfy
110(
a)(
2)(
D)(
i).

The
EPA
has
broad
authority
to
act
when
it
has
identified
deficiencies
in
SIPs.
This
authority
is
of
three
general
types.
First,
EPA
may
promulgate
any
measure
which
it
is
permitted
to
issue
pursuant
to
pre­
existing
independent
statutory
authority­­
for
example,
the
provisions
of
title
II.
That
is,
EPA
may
promulgate
any
measure
which
it
has
authority
to
issue
in
a
non­
FIP
context,
without
reliance
on
section
110(
c).
Second,
EPA
may
invoke
section
110(
c)'
s
general
FIP
authority
and
act
to
cure
a
SIP
deficiency
in
any
way
not
clearly
prohibited
by
statute.

Third,
under
section
110(
c),
the
courts
have
held
that
EPA
may
exercise
all
authority
that
the
State
may
exercise
under
the
CAA.

The
first
type
of
authority,
EPA's
general
authority
is
independent
of
section
110(
c).
It
is
not
dependent
on
or
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or
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66
altered
by
finding
a
deficiency
in
a
SIP.

The
second
type
of
authority,
EPA's
general
authority
under
section
110(
c),
is
essentially
remedial.
The
EPA
has
broad
power
under
that
section
to
cure
a
defective
State
plan.
Thus,
in
promulgating
a
FIP,
EPA
may
exercise
its
own,
independent
regulatory
authority
under
the
CAA
in
any
way
not
clearly
prohibited
by
an
explicit
provision
of
the
CAA.
When
EPA
has
promulgated
a
FIP,
courts
have
not
required
explicit
authority
for
specific
measures:
"
We
are
inclined
to
construe
Congress'
broad
grant
of
power
to
the
EPA
as
including
all
enforcement
devices
reasonably
necessary
to
the
achievement
and
maintenance
of
the
goals
established
by
the
legislation."
(
South
Terminal
Corp.
v.

EPA,
504
F.
2d
646,
669.
(
1st
Cir.,
1974)).
See
also
City
of
Santa
Rosa
v.
EPA,
534
F.
2d
150,
153­
154
(
9th
Cir.,
1976)

(
upholding
the
Administrator's
authority
to
promulgate
a
FIP
imposing
gas­
rationing
in
Los
Angeles
on
a
massive
scale).

"
The
authority
to
regulate
pollution
carries
with
it
the
power
to
do
so
in
a
manner
reasonably
calculated
to
reach
that
end."
Id.
at
155.

In
addition,
when
EPA
has
determined
that
a
State
has
not
completely
discharged
its
primary
responsibility
to
protect
its
air
quality,
EPA
is
compelled
to
assume
this
7/
29/
05
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or
Cite
67
task
and
thus
the
powers
of
the
defaulting
State
accrue
to
EPA.
As
the
Ninth
Circuit
has
held,
when
EPA
acts
in
place
of
the
State
pursuant
to
a
FIP
under
section
ll0(
c),
EPA
"
stands
in
the
shoes
of
the
defaulting
State,
and
all
of
the
rights
and
duties
that
would
otherwise
fall
to
the
State
accrue
instead
to
EPA,"
Central
Arizona
Water
Conservation
District
v.
EPA,
990
F.
2d
1531,
at
1541
9th
Cir.,
1993).

The
First
Circuit,
in
an
early
FIP
case,
agreed:

the
Administrator
must
promulgate
promptly
regulations
setting
forth
an
implementation
plan
for
a
State
should
the
State
itself
fail
to
propose
a
satisfactory
one.
The
statutory
scheme
would
be
unworkable
were
it
read
as
giving
to
EPA
when
promulgating
an
implementation
plan
for
a
State,
less
than
those
necessary
measures
allowed
by
Congress
to
a
State
to
accomplish
Federal
clean
air
goals.
We
do
not
adopt
any
such
crippling
interpretation.

South
Terminal
Corporation
v.
EPA,
504
F.
2d
668
(
1st
Cir.,

1974).

In
the
case
of
Federally­
recognized
Indian
Tribes,
as
we
explained
in
the
CAIR,(
70
FR
25167­
68)
Tribes
are
subject
to
section
110(
a)(
2)(
D),
but
are
not
required
to
submit
implementation
plans.
The
EPA
is
required
to
promulgate
FIPs
for
Indian
country
as
necessary
or
appropriate
to
protect
air
quality.
See
40
CFR
49.11(
a).
Presently,
there
are
no
emissions
sources
in
Indian
country
within
the
region
7/
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or
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68
affected
by
CAIR
which
would
make
a
FIP
necessary
or
appropriate.
In
the
event
of
the
planned
construction
of
such
a
source
within
Indian
country
in
the
28­
State
region
subject
to
CAIR,
EPA
will
work
with
the
relevant
Tribal
government
to
regulate
the
source
through
a
Tribal
or
Federal
implementation
plan.
In
the
case
of
an
EGU,
the
EPA
anticipates
that
the
Tribal
implementation
plan
(
TIP)
or
FIP
would
involve
the
participation
of
the
EGU
in
the
EPA
administered
cap
and
trade
program.
The
EPA
will
also
work
with
the
Tribe
and
affected
States
to
determine
how
allowances
allocated
to
the
Indian
country
source
will
affect
State
allowance
allocations.
Because
any
FIPs
for
Indian
country
will
necessarily
be
tailored
to
the
specific
circumstances,
today's
proposal
contains
no
such
FIP.
The
reader
is
referred
to
the
CAIR
for
a
more
detailed
discussion
of
the
interaction
of
the
CAIR
with
Indian
country
(
70
FR
25167­
68,
25315).

B.
What
Is
the
Timing
and
Scope
of
the
CAIR
FIP
Action?

As
described
in
the
CAIR,
EPA
views
seriously
its
responsibility
to
address
the
issue
of
regional
transport
of
ozone
and
ozone
precursor
emissions.
Decreases
in
NOx
and
SO2
emissions
are
needed
in
the
States
identified
in
the
CAIR
to
enable
downwind
States
to
develop
and
implement
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or
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69
plans
to
achieve
and
maintain
the
PM2.5
and
8­
hour
ozone
NAAQS.
The
CAIR
identified
the
specific
amount
of
emissions
reductions
necessary
for
each
State
identified
in
the
CAIR
to
meet
their
section
110(
a)(
2)(
D)
interstate
transport
obligations.
Implementation
of
these
reductions
is
necessary
to
enable
downwind
States
to
achieve
the
NAAQS
in
order
to
provide
clean
air
for
their
residents.

Therefore,
EPA
is
proposing
FIPs
today
in
conjunction
with
the
proposed
action
regarding
North
Carolina's
section
126
petition
concerning
transport
of
PM2.5
and
8­
hour
ozone
precursors
as
discussed
in
section
III
of
this
proposal.

The
EPA
intends
to
promulgate
these
FIPs
at
the
same
time
as
its
response
to
North
Carolina's
section
126
petition,
which
must
be
finalized
no
later
than
March
15,
2006
in
accordance
with
a
judicially­
enforceable
consent
decree.
The
EPA
believes
it
is
appropriate
to
coordinate
these
two
rulemakings
because
they
both
address
interstate
transport,

both
will
apply
to
EGUs,
and
because
the
States
covered
by
the
response
to
the
section
126
petition
are
a
geographical
subset
of
the
States
covered
by
CAIR.
In
today's
action,

EPA
is
not
proposing
to
promulgate
FIPs
for
any
States
not
covered
by
CAIR.

The
EPA
believes
it
is
appropriate
to
finalize
the
FIP
7/
29/
05
Draft
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or
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70
in
March
2006
on
the
same
schedule
as
EPA's
response
to
the
section
126
petition.
Moving
quickly
to
promulgate
a
FIP
is
consistent
with
Congress'
intent
that
attainment
occur
in
these
downwind
nonattainment
areas
"
as
expeditiously
as
practicable"
(
sections
181(
a),
172(
a)).
The
FIP
will
help
ensure
that
all
emissions
reductions
required
by
CAIR,
and
the
associated
environmental
benefits,
will
be
achieved
by
the
CAIR
deadlines.
In
addition,
the
FIP
will
ensure
that
sources
in
all
States
covered
by
CAIR,
regardless
of
whether
they
are
affected
by
the
North
Carolina
section
126
petition,
will
be
required
to
achieve
emissions
reductions
at
the
same
time.

By
proposing
and
finalizing
the
FIP
well
before
the
deadline
for
States
to
submit
their
CAIR
SIPs,
EPA
is
providing
States
an
additional
option
for
complying
with
the
requirements
of
CAIR.
States
planning
to
adopt
the
model
trading
programs
contained
in
the
CAIR
rule,
could
accept
the
FIP
and
significantly
reduce
the
State
resources
needed
to
establish
a
program
to
implement
the
CAIR.
Since
there
are
no
punitive
consequences
for
States
associated
with
the
FIP
or
the
finding
of
failure
to
submit
SIPs
to
satisfy
section
110(
a)(
2)(
D)(
i),
some
States
could
avoid
much
of
the
time
and
expense
of
revising
their
SIPs
to
comply
with
CAIR.
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Some
States,
particularly
those
subject
to
the
NOx
SIP
Call,

may
need
to
prepare
minor
SIP
revisions
regardless
of
whether
they
accept
the
FIP
implementing
the
requirements
of
CAIR;
yet
the
time
and
expense
involved
would
be
significantly
reduced.

The
Agency
proposes
to
provide
States
that
are
subject
to
today's
proposed
Federal
requirements
with
the
option
to
submit
abbreviated
SIP
revisions
covering
specific
elements
of
the
Federal
trading
programs
without
submitting
full
SIP
revisions
to
meet
the
requirements
of
CAIR.
By
proposing
to
accept
such
abbreviated
SIP
revisions,
the
Agency
intends
to
increase
the
options
available
for
States
to
comply
with
CAIR.
A
State
could
choose
to
retain
control
of
these
specific
elements
of
the
trading
programs,
without
submitting
a
full
SIP
revision
to
meet
the
requirements
of
CAIR.
As
there
are
no
sanctions
associated
with
the
proposed
FIP,
EPA
anticipates
that
some
States
may
prefer
to
avoid
spending
the
time
and
money
necessary
to
submit
a
full
SIP
revision.

The
Agency
would
accept
abbreviated
SIP
revisions
for
any
or
all
of
the
following
4
specific
elements
of
the
Federal
trading
programs:
(
1)
provisions
for
non­
EGUs
to
opt­
in
to
the
Federal
trading
programs,
(
2)
allocating
annual
and/
or
ozone
season
NOx
allowances
to
individual
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or
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72
sources
in
the
State,
(
3)
allocating
allowances
from
the
annual
NOx
Compliance
Supplement
Pool
(
CSP)
to
individual
sources
in
the
State,
and
(
4)
including
NOx
SIP
Call
trading
sources
that
are
not
EGUs
under
CAIR
in
the
Federal
CAIR
ozone
season
NOx
cap
and
trade
program.
Upon
approval
of
any
such
SIP
revisions,
EPA
anticipates
that
the
corresponding
portions
of
the
FIP
for
that
State
would
be
replaced
or
their
application
to
sources
would
be
modified.

In
offering
a
framework
for
abbreviated
SIP
revisions
the
Agency
anticipates
that
many
States
will
wish
to
retain
control
over
the
allocation
of
allowances
to
sources
in
their
State
and
may
wish
to
meet
their
NOx
SIP
Call
obligations
by
allowing
NOx
budget
units
(
that
is,
units
in
the
NOx
SIP
Call
trading
program)
that
are
not
EGUs
under
CAIR
to
participate
in
the
CAIR
ozone
season
trading
program.

The
EPA
requests
comment
on
the
proposed
option
for
States
to
submit
abbreviated
SIPs
covering
specific
elements
of
the
Federal
trading
programs.
A
more
complete
discussion
of
the
proposed
abbreviated
SIP
provisions
is
found
in
Section
VI.

Thus,
the
FIP
will
increase
the
options
available
for
a
State
to
comply
with
CAIR.
Through
the
CAIR
rulemaking
actions,
EPA
has
provided
States
with
a
great
deal
of
data
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or
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73
and
analyses
concerning
air
quality
and
control
costs,
as
well
as
a
determination
whether
upwind
sources
contribute
significantly
to
downwind
nonattainment
under
section
110(
a)(
2)(
D).
The
EPA
recognizes
that
States
would
face
great
difficulties
in
developing
transport
SIPs
to
meet
the
requirements
of
section
110(
a)(
2)(
D)
without
these
data
and
policies.
Indeed,
EPA
acknowledged
in
the
CAIR
that
the
Agency's
extensive
analyses
and
data,
including
the
multiyear
operation
of
a
federally­
funded
monitoring
system
(
and
the
considerable
information
generated
through
that
system)

was
a
necessary
element
in
the
Agency's
conclusion
that
is
was
appropriate
to
impose
such
stringent
requirements
on
States
(
70
FR
25267).

States
have
18
months
from
the
signature
date
of
the
CAIR,
or
until
September
11,
2006,
to
develop,
adopt,
and
submit
revisions
to
their
SIPs
that
meet
the
requirements
of
CAIR.
We
remain
ready
to
work
with
the
States
to
develop
fully
approvable
SIPs.
The
FIP
will
not
be
promulgated
for
any
State
that
has
an
approved
SIP
implementing
the
CAIR
requirements
in
place
prior
to
promulgation
of
the
FIP.
In
addition,
EPA
will
withdraw
the
FIP
for
any
State
once
EPA
approves
a
SIP
that
meets
the
CAIR
requirements
in
that
State.
7/
29/
05
Draft
­
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Not
Quote
or
Cite
74
Having
the
FIP
in
place
early
will
provide
for
a
transition
to
a
CAIR
trading
program
with
the
greatest
continuity,
administrative
ease,
and
cost
savings
for
States
that
would
otherwise
develop
a
program
identical
to
the
model
trading
program.
The
EPA's
goal
is
to
have
approvable
programs
in
place
that
meet
the
requirements
of
the
CAIR
whether
they
are
in
the
form
of
a
SIP
or
a
FIP.
By
finalizing
a
FIP,
EPA
would
in
no
way
preclude
a
State
from
developing
its
own
SIP
to
either
adopt
the
trading
rule
with
any
discretionary
elements
allowed
by
the
CAIR,
or
to
meeting
the
State
emissions
budget
through
different
measures
of
the
State's
choosing.
The
EPA
will
carefully
consider
the
timing
of
each
element
of
the
FIP
process
to
make
sure
to
preserve
each
State's
freedom
to
develop
and
implement
SIPs.
In
this
way,
EPA
will
enhance
each
State's
options
for
complying
with
the
requirements
of
the
CAIR
while
ensuring
that
all
the
emissions
reductions
and
environmental
benefits
of
the
CAIR
are
realized.

C.
What
Are
the
FIP
Control
Measures?

In
contrast
to
the
SIP
process­­
where
selection
and
implementation
of
control
measures
is
the
primary
responsibility
of
the
State­­
in
the
case
of
a
FIP,
it
is
EPA's
responsibility
to
select
the
control
measures
for
7/
29/
05
Draft
­
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Not
Quote
or
Cite
75
sources
and
assure
compliance
with
those
measures.
Thus,

while
the
FIP
would
be
designed
by
EPA
to
achieve
the
same
total
emissions
reductions
described
in
the
CAIR,
the
specific
control
measures
assigned
in
the
FIP
could
be
different
from
what
a
State
might
choose.

In
selecting
the
control
measures
for
the
FIP,
EPA
is
proposing
the
same
measures
used
in
the
CAIR
for
calculating
the
required
emissions
reductions.
In
the
CAIR,
EPA
is
requiring
States
to
achieve
specified
levels
of
emissions
reductions
based
on
levels
that
are
achievable
through
implementation
of
highly
cost­
effective
controls
on
EGUs.

See
the
discussion
in
section
IV
of
the
CAIR,
"
What
Amounts
of
SO2
and
NOx
Emissions
Did
EPA
Determine
Should
Be
Reduced?"
The
EPA
is
including
by
reference
the
technical
basis
and
supporting
rationale
for
EPA's
conclusions
as
to
the
highly
cost­
effective
strategy
developed
for
the
CAIR.

The
SO2
and
NOx
cap
and
trade
programs
for
the
FIP
are
discussed
below
in
section
VI.
The
unit
allocations
will
be
provided
in
a
later
action
and
will
meet
the
State
EGU
budgets
that
are
established
in
the
CAIR
for
States
that
choose
to
meet
the
required
emissions
reductions
by
controlling
EGUs
only.

D.
When
and
How
Would
EPA
Remove
the
FIP
Requirements
if
7/
29/
05
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or
Cite
76
EPA
Approves
a
SIP
to
Meet
the
CAIR?

As
discussed
previously,
EPA
intends
to
finalize
the
FIP
by
March
15,
2006,
concurrently
with
EPA's
response
to
the
section
126
petition
from
North
Carolina.
The
EPA
intends
to
withdraw
the
FIP
in
a
State
in
coordination
with
EPA's
approval
of
a
SIP
for
that
State
that
meets
the
CAIR
requirements.
It
is
EPA's
preference
that
States
regulate
sources
to
control
the
interstate
transport,
therefore
EPA
will
work
with
States
to
help
ensure
that
the
FIP
would
not
need
to
be
implemented.
The
EPA's
intended
process
for
withdrawing
the
FIP
or
section
126
requirements
is
discussed
above
under
section
III.
D.

V.
Emission
Reduction
Requirements
for
the
Proposed
CAIR
FIP
and
Proposed
Section
126
Response
A.
Overview
of
Emission
Reduction
Requirements
In
the
CAIR
(
70
FR
25162),
EPA
determined
that
SO2
and
NOx
emissions
from
sources
in
the
District
of
Columbia
and
the
following
23
States
contribute
significantly
to
downwind
PM2.5
nonattainment:
Alabama,
Florida,
Georgia,
Illinois,

Indiana,
Iowa,
Kentucky,
Louisiana,
Maryland,
Michigan,

Minnesota,
Mississippi,
Missouri,
New
York,
North
Carolina,

Ohio,
Pennsylvania,
South
Carolina,
Tennessee,
Texas,

Virginia,
West
Virginia,
and
Wisconsin.

In
the
CAIR,
the
Agency
also
determined
that
the
7/
29/
05
Draft
­
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Not
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or
Cite
77
District
of
Columbia
and
the
following
25
States
contribute
significantly
to
downwind
8­
hour
ozone
nonattainment:

Alabama,
Arkansas,
Connecticut,
Delaware,
Florida,
Illinois,

Indiana,
Iowa,
Kentucky,
Louisiana,
Maryland,
Massachusetts,

Michigan,
Mississippi,
Missouri,
New
Jersey,
New
York,
North
Carolina,
Ohio,
Pennsylvania,
South
Carolina,
Tennessee,

Virginia,
West
Virginia,
and
Wisconsin.

The
EPA
established
CAIR
annual
SO2
and
NOx
emission
reduction
requirements
for
States
that
contribute
significantly
to
downwind
PM2.5
nonattainment
and
established
ozone
season
NOx
emission
reduction
requirements
for
States
that
contribute
significantly
to
downwind
8­
hour
ozone
nonattainment.
The
CAIR
requires
upwind
States
to
revise
their
State
implementation
plans
(
SIP)
to
include
control
measures
to
reduce
emissions
of
SO2
and/
or
NOx
to
meet
the
requirements
in
CAIR
(
SO2
is
a
precursor
to
PM2.5
formation,
and
NOx
is
a
precursor
to
both
ozone
and
PM2.5
formation).

The
CAIR
requires
that
the
emission
reductions
be
implemented
in
two
phases.
The
first
phase
of
CAIR
NOx
reductions
starts
in
2009
(
covering
2009­
2014)
and
the
first
phase
of
CAIR
SO2
reductions
starts
in
2010
(
covering
2010­

2014);
the
second
phase
of
CAIR
reductions
for
both
NOx
and
SO2
starts
in
2015,
covering
2015
and
thereafter.

The
EPA
determined
the
required
amounts
of
CAIR
7/
29/
05
Draft
­
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Not
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or
Cite
7
The
amounts
of
State­
by­
State
emission
reductions
required
by
CAIR
are
determined
based
on
State
EGU
emission
budgets.
Determination
of
a
State's
emission
reduction
requirements
depends
on
the
source
categories
that
the
State
chooses
to
control
and,
if
the
State
controls
only
EGUs,
on
whether
it
chooses
to
participate
in
the
EPA­
administered
EGU
emissions
cap
and
trade
programs.
See
section
V
in
the
CAIR
NFR
preamble
(
70
FR
25229)
as
well
as
the
technical
support
document
entitled
"
Regional
and
State
SO2
and
NOx
Emissions
Budgets,"
March
2005,
for
detailed
discussion
of
the
relationship
between
CAIR
EGU
emissions
budgets
and
the
State
emission
reduction
requirements.
Also
see
§
51.123
and
§
51.124
(
70
FR
25319­
25333).

78
emission
reductions
based
on
the
application
of
highly
costeffective
controls
on
electric
generating
units
(
EGUs).
The
States
have
flexibility
in
how
to
achieve
the
CAIR
emission
reductions.
7
The
CAIR
includes
model
rules
for
regionwide
EGU
emission
cap
and
trade
programs,
which
States
can
choose
to
adopt
to
obtain
the
required
reductions
in
a
flexible
and
cost­
effective
manner
(
the
CAIR
SIP
model
trading
rules).

Today,
EPA
is
proposing
FIPs
that
are
substantively
the
same
as
the
CAIR
SIP
model
cap
and
trade
programs.
The
proposed
FIPs
would
achieve
the
NOx
and
SO2
emission
reductions
required
under
the
CAIR,
by
requiring
EGUs
in
the
affected
States
to
reduce
emissions
through
participation
in
Federal
CAIR
NOx
and
SO2
cap
and
trade
programs.
The
EPA
intends
to
integrate
these
Federal
trading
programs
with
the
model
trading
programs
that
States
may
choose
to
adopt
to
meet
the
CAIR
(
see
section
VI.
J
in
this
preamble
for
a
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
79
discussion
of
coordination
between
today's
proposed
Federal
cap
and
trade
programs
and
CAIR
SIP
cap
and
trade
programs).

The
proposed
Federal
CAIR
cap
and
trade
programs
would
achieve
the
emission
reductions
required
by
CAIR
by
the
deadlines
established
in
that
rule,
with
the
same
highly
cost­
effective
EGU
control
measures
forming
the
basis
for
the
emission
budgets.

For
States
affected
by
the
proposed
section
126
remedy
(
see
section
III
for
affected
States),
the
Federal
CAIR
cap
and
trade
programs
would
achieve
the
required
emission
reductions.
As
explained
in
section
I
of
this
preamble,
for
sources
in
States
that
the
Agency
found
to
be
contributing
significantly
to
nonattainment
or
maintenance
in
North
Carolina
under
CAIR,
the
Agency
is
proposing
to
deny
the
petition
for
sources
in
any
such
State
if,
prior
to
or
concurrently
with
the
final
section
126
response,
EPA
promulgates
a
FIP
to
address
the
interstate
transport
from
that
State.
The
Agency
is
proposing,
in
the
alternative,
to
grant
the
petition.
The
Agency
intends
to
promulgate
FIPs
concurrently
with
the
final
section
126
response.

The
regionwide
emission
reduction
requirements
and
State
emission
budgets
that
are
the
basis
for
today's
proposal
were
established
in
the
CAIR
rulemaking.
The
EPA
is
not
requesting
comment
on
its
determination
of
the
CAIR
7/
29/
05
Draft
­
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Not
Quote
or
Cite
80
regionwide
emission
reduction
requirements
or
State
emission
budgets,
nor
is
the
EPA
requesting
comment
on
the
CAIR
regionwide
requirements
or
State
budgets
themselves.

On
May
12,
2005,
the
Agency
proposed
to
find
that
Delaware
and
New
Jersey
contribute
significantly
to
downwind
PM2.5
nonattainment
and
thus
proposed
to
require
annual
SO2
and
NOx
controls
in
these
two
States
(
70
FR
25408).
(
In
the
CAIR
NFR,
the
Agency
found
Delaware
and
New
Jersey
to
contribute
to
downwind
8­
hour
ozone
nonattainment
but
not
to
downwind
PM2.5
nonattainment).
Based
on
the
proposal
to
require
annual
SO2
and
NOx
controls
in
Delaware
and
New
Jersey,
today's
FIP
proposal
includes
requirements
for
annual
SO2
and
NOx
control
in
these
two
States.
The
EPA
determined
these
required
amounts
of
emission
reductions
based
on
the
application
of
highly
cost­
effective
controls
on
EGUs,
and
the
proposed
FIP
would
achieve
these
reductions
by
requiring
EGUs
to
participate
in
the
Federal
CAIR
cap
and
trade
programs.

The
proposed
CAIR
FIP
would
require
annual
SO2
and
NOx
and
ozone
season
NOx
emission
reductions
(
and
the
proposed
section
126
remedy
would
require
annual
SO2
and
NOx
reductions)
from
EGUs
in
affected
States,
through
participation
in
regionwide
Federal
cap
and
trade
programs.

The
Agency
intends
the
applicability
provisions
in
today's
proposal
to
be
identical
to
the
applicability
provisions
in
7/
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05
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­
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Not
Quote
or
Cite
81
the
CAIR
model
cap
and
trade
programs.
As
discussed
elsewhere
in
today's
preamble,
the
Agency
is
proposing
two
revisions
to
the
applicability
provisions
in
the
CAIR
model
cap
and
trade
programs.
The
applicability
provisions
that
EPA
is
proposing
in
today's
action
for
the
FIP
and
section
126
remedy
would
be
identical
to
the
applicability
provisions
in
the
CAIR
model
programs
if
the
two
proposed
revisions
to
the
applicability
provisions
in
the
CAIR
model
programs
are
finalized.
(
See
section
VI.
C
in
today's
preamble
for
a
discussion
of
the
proposed
applicability
provisions
for
today's
action,
and
see
section
VII
for
the
proposed
revisions
to
the
applicability
provisions
in
the
CAIR
model
programs.)

In
this
section,
EPA
describes
the
approaches
for
determining
regionwide
emission
caps
and
State
emission
budgets
taken
in
the
CAIR
rulemaking.
In
section
VI
in
this
preamble,
the
Agency
explains
in
detail
the
proposed
Federal
CAIR
cap
and
trade
programs
for
the
CAIR
FIP
and
section
126
response.

In
today's
action,
the
Agency
is
proposing
a
federallyadministered
program
to
meet
the
CAIR
emission
reduction
requirements
on
the
timeline
established
in
CAIR.
Today's
proposal
does
not
establish
those
emission
reduction
requirements
or
schedule,
which
were
established
by
the
CAIR
rulemaking.
Thus,
the
Agency
is
not
requesting
comment
on
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
82
the
emission
reduction
requirements
or
the
schedule
for
implementing
the
emissions
reductions.

The
Agency
is
taking
this
action
to
satisfy
the
concerns
of
North
Carolina
cited
in
its
section
126
petition
and
to
provide
a
Federal
backstop
for
CAIR
where
all
States
may
not
be
able
to
develop
and
submit
timely,
approvable
SIP
revisions.
In
no
way
should
the
FIP
for
CAIR
be
viewed
as
a
sign
of
any
concern
about
States
ultimately
making
the
emission
reductions
required
under
CAIR.
There
are
no
sanctions
associated
with
these
FIPs,
and
EPA
does
not
intend
CAIR
FIPs
to
have
any
other
negative
consequences
for
the
affected
States.
To
the
contrary,
EPA
is
proposing
FIP
approaches
that
are
flexible
and
allow
States
a
full
opportunity
to
get
their
SIP
revisions
in
place,
with
minimal
disruption
in
transitioning
from
Federal
to
State
implementation.

B.
What
Is
EPA's
Approach
for
Determining
Regionwide
NOx
and
SO2
Emissions
Caps
and
State
Emissions
Budgets?

1.
Determination
of
Regionwide
Caps
for
SO2
and
NOx
In
the
preamble
to
the
CAIR
NFR,
the
Agency
explained
how
it
determined
regionwide
SO2
and
NOx
emissions
caps.

See
section
IV
in
the
CAIR
NFR
preamble
(
70
FR
25195­
25229).

In
determining
the
amounts
of
SO2
and
NOx
emissions
that
must
be
eliminated
for
compliance
with
CAIR,
EPA
evaluated
the
amounts
of
SO2
and
NOx
emissions
in
upwind
States
that
7/
29/
05
Draft
­
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Not
Quote
or
Cite
8
The
IPM
is
a
multiregional,
dynamic,
deterministic
linear
programming
model
of
the
U.
S.
electric
power
sector.
The
Agency
uses
IPM
to
examine
costs
and,
more
broadly,
analyze
the
projected
impact
of
environmental
polices
on
the
electric
power
sector
in
the
48
contiguous
States
and
the
District
of
Columbia.

83
contribute
significantly
to
downwind
PM2.5
nonattainment
and
the
amounts
of
NOx
emissions
in
upwind
states
that
contribute
significantly
to
downwind
8­
hour
ozone
non­
attainment.
The
EPA
determined
the
amounts
of
emissions
that
must
be
reduced
to
eliminate
significant
contributions
from
upwind
States,
by
applying
highly
cost­
effective
control
measures
to
EGUs
and
determining
the
emissions
reductions
that
would
result
(
70
FR
25195­
25229).

EPA
used
the
Integrated
Planning
Model
(
IPM)
to
analyze
the
cost
effectiveness
of
the
CAIR
emission
reduction
requirements.
8
The
EPA
modeled
the
cost
effectiveness
of
CAIR
assuming
interstate
emissions
trading.
While
the
Agency
does
not
require
States
to
participate
in
the
CAIR
SIP
regionwide
interstate
EGU
cap
and
trade
programs,
we
believe
it
is
reasonable
to
evaluate
control
costs
assuming
States
choose
to
participate
in
such
programs
since
participation
will
result
in
less
expensive
emission
reductions.
The
Agency
modeled
the
CAIR
requirements
as
three
regionwide
EGU
cap
and
trade
programs
(
an
annual
SO2
program,
an
annual
NOx
program,
and
an
ozone
season
NOx
7/
29/
05
Draft
­
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Not
Quote
or
Cite
84
program).
Section
IV.
A.
1
in
the
CAIR
NFR
preamble
provides
more
discussion
of
EPA's
cost
modeling
methodology
for
the
CAIR
rulemaking
(
70
FR
25196­
25197).
The
Agency
also
evaluated
the
feasibility
of
achieving
the
CAIR
emission
reduction
requirements
in
the
CAIR
time­
frame,
as
discussed
in
section
IV.
C.
in
the
CAIR
NFR
preamble
(
70
FR
25215­
25225).

For
SO2,
the
regionwide
annual
cap
for
2015
and
later
(
the
second
CAIR
phase)
is
based
on
a
65
percent
reduction
of
title
IV
Phase
II
allowances
allocated
to
units
in
the
23
States
and
the
District
of
Columbia
that
are
required
by
CAIR
to
implement
annual
SO2
controls.
The
regionwide
annual
SO2
cap
for
the
years
2010­
2014
(
the
first
CAIR
phase)
is
based
on
a
50
percent
reduction
from
those
same
title
IV
allocation
amounts.
The
EPA
determined
these
regionwide
caps
to
be
highly
cost
effective
by
analyzing
the
cost
of
controlling
emissions
from
EGUs.
Details
of
EPA's
analysis
are
in
section
IV
in
the
CAIR
NFR
preamble
(
70
FR
25195­
25229).

Both
the
annual
and
the
ozone
season
NOx
regionwide
caps
were
determined
by
applying
uniform
NOx
emission
rates
to
recent
historic
heat
input
for
EGUs
in
the
affected
States
(
23
States
and
the
District
of
Columbia
for
annual
NOx,
25
States
and
the
District
of
Columbia
for
ozone
season
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
85
NOx).
For
2015
and
later
(
the
second
CAIR
phase),
the
Agency
applied
an
emission
rate
of
0.125
lb/
mmBtu
to
recent
historic
heat
input.
For
the
years
2009­
2014
(
the
first
CAIR
phase)
the
Agency
applied
an
emission
rate
of
0.15
lb/
mmBtu.
The
heat
input
amounts
used
in
these
calculations
were
the
highest
annual
heat
input
(
or
ozone
season
heat
input
for
the
ozone
season
caps)
from
Acid
Rain
Program
units
for
any
year
from
1999
to
2002
for
each
State.
The
EPA
determined
the
resulting
regionwide
caps
to
be
highly
cost
effective
by
analyzing
the
cost
of
controlling
emissions
from
EGUs.
Details
of
EPA's
analysis
are
in
section
IV
in
the
CAIR
NFR
preamble
(
70
FR
25195­
25229).

2.
Determination
of
State
by
State
Emissions
Budgets
for
SO2
and
NOx
a.
Determination
of
State
SO2
Emissions
Budgets
In
CAIR,
the
EPA
determined
State
annual
SO2
emissions
budgets
for
2015
and
later
based
on
a
65
percent
reduction
from
title
IV
Phase
II
allowances
allocated
to
units
in
the
affected
States
and
the
District
of
Columbia,
and
for
the
years
2010­
2014
based
on
a
50
percent
reduction
from
the
title
IV
allocation
amounts.
Section
V.
A.
1.
a
of
the
CAIR
NFR
preamble,
70
FR
25229­
25230,
describes
the
approach
for
determining
State
budgets.
The
Agency
is
not
inviting
comment
on
the
CAIR
State
SO2
budgets.
The
EPA
employed
the
same
approach
to
determining
proposed
State
SO2
budgets
for
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
9
See
section
V
in
the
CAIR
NFR
preamble
(
70
FR
25229­
25233)
as
well
as
the
technical
support
document
entitled
86
Delaware
and
New
Jersey
in
its
proposal
to
include
these
two
States
in
CAIR
for
annual
SO2
controls
(
70
FR
25416).

Today's
proposed
FIP
and
section
126
remedy
would
achieve
the
required
SO2
emission
reductions
through
a
regionwide
Federal
SO2
cap
and
trade
program
for
EGUs.
As
discussed
further
in
section
VI,
below,
the
Federal
CAIR
SO2
cap
and
trade
program
would
rely
on
title
IV
allowances,

which
sources
would
retire
at
specified
ratios
greater
than
1­
to­
1
for
compliance
with
the
proposed
Federal
CAIR
program.
Congress
has
already
allocated
title
IV
SO2
allowances
to
sources
in
perpetuity.
State
SO2
emissions
budgets
would
not
affect
the
distribution
of
SO2
allowances
and
are
not
directly
relevant
for
today's
proposal.

The
CAIR
State
SO2
budgets
were
established
to
provide
States
flexibility
in
selecting
a
control
remedy
to
meet
the
requirements
of
CAIR.
States
can
choose
to
participate
in
the
EPA­
administered
CAIR
SO2
trading
program,
in
which
case
sources
would
comply
by
retiring
title
IV
allowances
at
the
specified
retirement
ratios,
and
the
CAIR
State
SO2
budgets
would
not
be
directly
relevant.
For
States
that
do
not
choose
to
participate
in
the
EPA­
administered
SO2
trading
program,
however,
the
CAIR
State
SO2
budgets
are
used
to
determine
the
State's
emission
reduction
requirements.
9
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
"
Regional
and
State
SO2
and
NOx
Emissions
Budgets,"
March
2005,
for
detailed
discussion
of
the
relationship
between
CAIR
EGU
emissions
budgets
and
the
State
emission
reduction
requirements.
Also
see
§
51.123
and
§
51.124
(
70
FR
25319­
25333).

87
The
EPA
determined
title
IV
allowance
retirement
ratios
for
the
CAIR
SIP
model
SO2
trading
program
based
on
the
ratio
of
the
total
of
all
States'
CAIR
SO2
budgets
(
for
2010
and
2015)
to
the
total
of
such
States'
title
IV
Phase
II
allowance
levels.

In
the
CAIR
FIP
and
126
remedy,
the
EPA
is
proposing
to
use
a
Federal
SO2
trading
program
approach
that
is
substantively
identical
to
the
CAIR
SIP
SO2
model
trading
rule
and
relies
on
retirement
of
title
IV
allowances
at
the
same
specified
ratios.
Thus,
State
SO2
emission
budgets
would
not
affect
the
distribution
of
SO2
allowances
and
are
not
directly
relevant
for
today's
proposal.

For
further
discussion
regarding
achieving
the
required
SO2
reductions
in
today's
proposed
Federal
program
through
retirement
ratios
for
title
IV
allowances,
see
section
VI
in
today's
preamble.
Also
see
the
CAIR
NFR
preamble
in
section
V.
A.
1.
c
(
70
FR
25230)
as
well
as
section
VII
(
70
FR
25255­

25273).

b.
Determination
of
State
Annual
and
Ozone
Season
NOx
Emissions
Budgets
In
CAIR,
EPA
determined
State
annual
and
ozone
season
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
88
NOx
emissions
budgets
by
apportioning
the
CAIR
regionwide
annual
and
ozone
season
NOx
caps
to
States
based
on
each
State's
share
of
fuel­
adjusted
average
recent
historic
heat
input.
For
each
CAIR
State,
for
each
year
(
1999
through
2002),
the
Agency
summed
heat
input
by
fuel
type,
adjusted
the
heat
input
using
fuel
adjustment
factors,
and
determined
the
average
fuel­
adjusted
heat
input
for
each
State.
The
fuel
adjustment
factors
that
the
Agency
used
to
adjust
heat
input
are
1.0
for
coal,
0.4
for
gas,
and
0.6
for
oil.

The
EPA
summed
the
average
adjusted
heat
inputs
for
each
State
in
the
CAIR
region
(
either
the
annual
NOx
region
or
the
ozone
season
NOx
region,
as
appropriate),
and
divided
each
State's
average
adjusted
heat
input
by
the
regionwide
total
average
adjusted
heat
input,
to
determine
each
State's
proportion
of
the
total.
The
Agency
multiplied
each
State's
proportion
by
the
regionwide
caps,
to
determine
each
State's
proportional
share
of
the
regionwide
caps.
The
EPA
used
the
same
methodology
to
determine
both
annual
and
ozone
season
NOx
State
budgets,
except
that
for
annual
budgets
the
annual
heat
input
was
used,
whereas
for
ozone
season
budgets
the
ozone
season
heat
input
was
used.
(
See
section
V
of
the
CAIR
NFR
preamble
for
discussion
of
the
Agency's
determination
of
CAIR
State
emissions
budgets,
70
FR
25229­
25233.)
The
Agency
is
not
inviting
comment
on
the
CAIR
State
annual
and
ozone
season
NOx
budgets.
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
10
As
in
CAIR,
an
annual
NOx
allowance
would
authorize
the
emission
of
a
ton
of
NOx
during
a
calendar
year
and
an
ozone
season
NOx
allowance
would
authorize
the
emission
of
a
ton
of
NOx
during
an
ozone
season.
See
section
VI
in
this
89
For
its
proposal
to
include
Delaware
and
New
Jersey
in
CAIR
for
annual
NOx
controls,
the
Agency
proposed
to
determine
annual
State
NOx
budgets
for
these
two
States
by
first
calculating
a
total
"
regional"
cap
for
the
two
States,

using
the
same
methodology
used
in
CAIR
to
develop
regionwide
NOx
caps
(
the
regionwide
NOx
cap
methodology
is
described
above).
The
EPA
proposed
to
determine
State
annual
NOx
budgets
for
these
two
States
by
apportioning
the
regional
Delaware
and
New
Jersey
cap
back
to
the
two
States
using
the
same
fuel­
adjusted
heat
input
basis
as
was
used
in
the
CAIR
NFR,
as
described
above
(
also
see
section
IV.
B.
in
the
proposal
to
include
Delaware
and
New
Jersey
in
CAIR
for
PM2.5
purposes,
70
FR
25416).

In
today's
proposed
Federal
CAIR
NOx
cap
and
trade
programs
for
EGUs,
the
State
annual
and
ozone
season
EGU
NOx
budgets
are
the
same
as
the
budgets
in
the
CAIR
NFR
(
annual
NOx
budgets
for
Delaware
and
New
Jersey
in
today's
proposal
are
the
same
as
the
annual
NOx
budgets
for
these
two
States
in
the
proposal
to
include
them
in
CAIR
for
PM2.5
purposes).

For
each
State
affected
by
the
proposed
Federal
CAIR
NOx
trading
programs,
the
State
NOx
budgets
are
the
total
amount
of
allowances10
that
the
Agency
will
allocate
to
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
preamble
for
further
discussion
and
see
the
proposed
regulatory
text
for
definitions.

90
sources
in
the
State.
See
section
VI
in
this
preamble
for
EPA's
proposed
methodology
for
allocating
NOx
allowances
to
affected
sources.
The
EPA's
proposed
allocation
methodology
for
NOx
allowances
in
the
annual
NOx
and
the
ozone
season
NOx
cap
and
trade
programs
is
in
contrast
with
the
approach
taken
in
the
case
of
SO2
allowances,
which
are
already
allocated
under
title
IV
of
the
Clean
Air
Act
to
sources
in
perpetuity,
as
explained
above.

C.
What
Are
the
State
EGU
Emission
Budgets
for
the
CAIR
FIP
and
the
Section
126
Response?

1.
What
Are
the
Annual
State
EGU
SO2
Emissions
Budgets?

As
explained
above,
the
required
SO2
emission
reductions
would
be
achieved
solely
based
on
the
requirement
that
sources
retire
title
IV
SO2
allowances
(
which
were
already
allocated
to
sources
by
Congress)
at
specified
ratios
greater
than
1­
to­
1.
Because
State
SO2
emission
budgets
do
not
affect
the
distribution
of
SO2
allowances
and
are
not
directly
relevant
for
today's
proposal,
the
Agency
is
not
including
State
SO2
budgets
in
today's
proposal.
See
section
VI
in
this
preamble
for
discussion
of
the
proposed
Federal
CAIR
SO2
trading
program.

2.
What
Are
the
Annual
State
EGU
NOx
Emissions
Budgets?
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
91
a.
For
States
Affected
by
the
CAIR
FIP
For
the
proposed
Federal
CAIR
annual
NOx
cap
and
trade
program,
State
NOx
emissions
budgets
B
for
the
23
States
and
the
District
of
Columbia
that
are
required
by
CAIR
to
control
annual
NOx
B
are
provided
in
Table
V­
1,
below.

These
annual
NOx
budgets
are
the
same
as
the
budgets
shown
in
Table
V­
2
of
the
CAIR
NFR
preamble
(
70
FR
25231).
Table
V­
1,
below,
also
includes
annual
NOx
budgets
that
EPA
proposed
for
Delaware
and
New
Jersey
(
these
are
the
same
budgets
that
were
included
in
Table
IV­
1
in
"
Inclusion
of
Delaware
and
New
Jersey
in
the
Clean
Air
Interstate
Rule:

Proposed
Rule"
(
70
FR
25416)).
See
section
VI
in
this
preamble
for
EPA's
proposed
methodology
for
allocating
annual
NOx
allowances
to
sources
in
the
Federal
CAIR
cap
and
trade
programs.

Table
V­
1.
CAIR
Annual
Electric
Generating
Units
NOx
Budgets
(
tons)

State
State
NOx
Annual
Budget
2009­
2014
State
NOx
Annual
Budget
2015
and
thereafter
Alabama
69,020
57,517
Delaware
4,166
3,472
District
of
Columbia
144
120
Florida
99,445
82,871
Georgia
66,321
55,268
Illinois
76,230
63,525
Indiana
108,935
90,779
Iowa
32,692
27,243
Kentucky
83,205
69,337
Louisiana
35,512
29,593
Maryland
27,724
23,104
Michigan
65,304
54,420
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
92
Minnesota
31,443
26,203
Mississippi
17,807
14,839
Missouri
59,871
49,892
New
Jersey
12,670
10,558
New
York
45,617
38,014
North
Carolina
62,183
51,819
Ohio
108,667
90,556
Pennsylvania
99,049
82,541
South
Carolina
32,662
27,219
Tennessee
50,973
42,478
Texas
181,014
150,845
Virginia
36,074
30,062
West
Virginia
74,220
61,850
Wisconsin
40,759
33,966
Total
1,521,707
1,268,091
b.
For
States
Affected
by
the
Section
126
Response
For
the
proposed
Federal
CAIR
annual
NOx
cap
and
trade
program
B
for
the
ten
States
affected
by
the
proposed
section
126
remedy
(
see
section
III
in
this
preamble
for
affected
States)
B
the
annual
State
NOx
emissions
budgets
are
the
same
as
the
budgets
shown
in
Table
V­
1,
above.
See
section
VI
in
this
preamble
for
EPA's
proposed
methodology
for
allocating
annual
NOx
allowances
to
sources
in
the
Federal
CAIR
cap
and
trade
programs.

3.
What
Are
the
Ozone
Season
EGU
NOx
Emissions
Budgets?

a.
For
States
Affected
by
the
CAIR
FIP
For
the
proposed
Federal
CAIR
ozone
season
NOx
cap
and
trade
program,
State
EGU
NOx
emissions
budgets
B
for
the
25
States
and
the
District
of
Columbia
that
are
required
to
control
ozone
season
NOx
B
are
shown
by
State
in
Table
V­
2,

below.
These
ozone
season
budgets
are
identical
to
the
budgets
in
Table
V­
4
in
the
CAIR
NFR
preamble
(
70
FR
25233).
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
93
See
section
VI
in
this
preamble
for
EPA's
proposed
methodology
for
allocating
ozone
season
NOx
allowances
to
individual
sources
for
the
Federal
CAIR
ozone
season
NOx
cap
and
trade
program.

Table
V­
2.
CAIR
Ozone
Season
Electricity
Generating
Unit
NOx
Budgets
(
tons)

State*
State
NOx
Ozone
Season
Budget
2009­
2014
State
NOx
Ozone
Season
Budget
2015
and
thereafter
Alabama
32,182
26,818
Arkansas
11,515
9,596
Connecticut
2,559
2,559
Delaware
2,226
1,855
District
of
Columbia
112
94
Florida
47,912
39,926
Illinois
30,701
28,981
Indiana
45,952
39,273
Iowa
14,263
11,886
Kentucky
36,045
30,587
Louisiana
17,085
14,238
Maryland
12,834
10,695
Massachusetts
7,551
6,293
Michigan
28,971
24,142
Mississippi
8,714
7,262
Missouri
26,678
22,231
New
Jersey
6,654
5,545
New
York
20,632
17,193
North
Carolina
28,392
23,660
Ohio
45,664
39,945
Pennsylvania
42,171
35,143
South
Carolina
15,249
12,707
Tennessee
22,842
19,035
Virginia
15,994
13,328
West
Virginia
26,859
26,525
Wisconsin
17,987
14,989
CAIR
Region
Total
567,744
484,506
*
For
States
that
have
lower
EGU
budgets
under
the
NOx
SIP
Call
than
their
2009
CAIR
budget,
table
V­
2
includes
their
SIP
Call
budget.
For
Connecticut,
the
NOx
SIP
Call
budget
is
also
used
for
2015
and
beyond.

b.
For
States
Affected
by
the
Section
126
Response
As
explained
in
section
III
in
this
preamble,
the
EPA
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
94
is
proposing
to
deny
the
ozone
portion
of
the
section
126
petition.
Therefore,
the
Agency
is
not
proposing
ozone
season
NOx
State
budgets
for
purposes
of
the
section
126
remedy.

4.
What
Are
the
Amounts
of
Allowances
Available
in
the
State
Annual
NOx
Compliance
Supplement
Pools?

The
CAIR
established
State
Compliance
Supplement
Pools
(
CSP)
of
annual
NOx
allowances
of
vintage
2009.
Under
CAIR,

a
State
that
elects
to
achieve
its
CAIR
annual
NOx
reduction
requirements
by
creating
an
annual
NOx
cap
and
trade
program
can
allocate
CSP
allowances
(
using
mechanisms
specified
in
CAIR)
to
its
sources
for
use
in
complying
with
such
an
annual
NOx
program
(
see
section
VII
in
the
CAIR
NFR
preamble
for
discussion,
70
FR
25255­
25273).

Today's
proposed
Federal
CAIR
annual
NOx
cap
and
trade
program
includes
the
same
State
CSP
amounts
as
were
established
in
CAIR.
See
section
V
in
the
CAIR
NFR
preamble
(
70
FR
25231­
25232),
as
well
as
the
technical
support
document
entitled
"
Regional
and
State
SO2
and
NOx
Emissions
Budgets,"
March
2005
(
in
the
CAIR
docket)
for
discussion
of
the
Agency's
process
for
determining
the
annual
NOx
CSP
amounts
for
each
CAIR
State.
The
Agency
is
not
inviting
comment
on
the
CSPs
established
in
CAIR.

For
the
proposed
Federal
CAIR
annual
NOx
cap
and
trade
program,
the
CSP
amount
for
each
State
is
provided
in
Table
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
95
V­
3,
below.
These
are
the
same
CSP
amounts
as
shown
in
the
CAIR
NFR
preamble,
Table
V­
3
(
70
FR
25232).
The
CSP
amounts
for
Delaware
and
New
Jersey
B
if
these
two
States
are
part
of
the
final
CAIR
annual
NOx
requirements
as
the
Agency
has
proposed
B
are
also
shown
in
Table
V­
3
below,
as
well
as
in
Table
V­
3
in
the
CAIR
NFR
preamble
(
70
FR
25232)
and
in
Table
IV­
3
in
"
Inclusion
of
Delaware
and
New
Jersey
in
the
Clean
Air
Interstate
Rule:
Proposed
Rule"
(
70
FR
25417).

See
section
VI
in
this
preamble
for
EPA's
proposed
methodology
for
allocating
CSP
allowances
to
sources
for
the
Federal
CAIR
annual
NOx
cap
and
trade
program.

Table
V­
3.
CAIR
Annual
NOx
Compliance
Supplement
Pools
(
tons)

State
Compliance
Supplement
Pool
Alabama
10,166
Delaware
843
District
Of
Columbia
0
Florida
8,335
Georgia
12,397
Illinois
11,299
Indiana
20,155
Iowa
6,978
Kentucky
14,935
Louisiana
2,251
Maryland
4,670
Michigan
8,347
Minnesota
6,528
Mississippi
3,066
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
96
Missouri
9,044
New
Jersey
660
New
York
0
North
Carolina
0
Ohio
25,037
Pennsylvania
16,009
South
Carolina
2,600
Tennessee
8,944
Texas
772
Virginia
5,134
West
Virginia
16,929
Wisconsin
4,898
TOTAL
199,997
VI.
Proposed
Federal
CAIR
NOx
and
SO2
Cap
and
Trade
Programs
for
EGUs
A.
Purpose
of
Federal
CAIR
NOx
and
SO2
Cap
and
Trade
Programs
and
Relationship
to
the
Section
126
Petition
and
the
CAIR
In
today's
action,
EPA
is
proposing
Federal
CAIR
NOx
and
SO2
cap
and
trade
programs
for
EGUs
as
the
control
remedy
for
both
the
CAIR
FIP
and
the
section
126
response,

should
EPA
make
any
section
126(
b)
findings
(
see
section
VI.
C.,
below,
for
applicability
provisions).

The
Agency
is
proposing
regulatory
text
for
the
CAIR
FIP
rules
in
today's
action.
Regulatory
text
for
the
section
126
remedy
would
be
largely
the
same.
The
proposed
new
Federal
NOx
and
SO2
cap
and
trade
programs
will
be
located
in
part
97
in
title
40
of
the
CFR.

The
Agency
proposes
three
separate
Federal
CAIR
cap
and
trade
programs:
(
1)
SO2;
(
2)
NOx;
and
(
3)
ozone
season
NOx.
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
97
Emissions
cap
and
trade
programs
are
a
proven
method
for
achieving
highly
cost­
effective
emissions
reductions
while
providing
regulated
sources
of
emissions
with
flexibility
in
adopting
compliance
strategies.

Participation
in
the
proposed
Federal
CAIR
NOx
and
SO2
cap
and
trade
programs
would
be
mandatory
for
all
sources
covered
by
the
final
CAIR
FIP
or
by
a
final
section
126(
b)

finding
in
response
to
the
North
Carolina
petition.
Note
that,
as
discussed
in
section
I
in
today's
preamble,
EPA
is
proposing
to
deny
the
section
126
petition
with
respect
to
the
8­
hour
ozone
NAAQS,
therefore
the
section
126
remedy
would
not
include
an
ozone
season
NOx
program.

The
emission
sources
that
the
Agency
is
proposing
to
include
in
the
Federal
CAIR
NOx
and
SO2
cap
and
trade
programs
B
EGUs
fitting
the
applicability
requirements
described
in
section
VI.
C,
below
B
are
the
same
types
of
sources
included
in
the
CAIR
NOx
Annual
Trading
Program,

CAIR
NOx
Ozone
Season
Trading
Program,
and
CAIR
SO2
Trading
Program
(
contained
in
part
96)
that
EPA
promulgated
as
model
trading
rules
that
States
may
elect
to
use
in
responding
to
the
CAIR.
The
emission
sources
identified
in
today's
proposal
are
the
sources
for
which
EPA
assumed
emission
reductions
in
determining
the
regionwide
emission
reduction
requirements
and
calculating
the
State
emission
budgets
in
CAIR.
(
As
discussed
in
section
VII,
below,
EPA
is
proposing
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
98
certain
revisions
clarifying
the
EGU
definition
in
CAIR,
and
the
proposed
applicability
provisions
in
the
Federal
CAIR
trading
programs
are
consistent
with
those
proposed
revisions.)

The
CAIR
established
State
EGU
emissions
budgets
that
each
State
would
use
to
determine
its
required
emissions
reductions.
The
proposed
Federal
CAIR
cap
and
trade
programs
set
specific
rules
for
EGUs
to
decrease
NOx
and
SO2
emissions
sufficiently
to
achieve
emission
reductions
that
are
required
under
CAIR.
The
proposed
section
126
remedy
is
limited
to
the
set
of
States
that
North
Carolina
named
in
its
petition
and
for
which
EPA
makes
a
positive
determination
(
see
section
III,
above).
The
named
States
are
a
geographic
subset
of
the
CAIR
States.
Each
of
the
three
actions
B
the
CAIR,
the
proposed
CAIR
FIP,
and
the
proposed
section
126
remedy
B
aim
to
reduce
the
transport
of
PM2.5
precursors
by
controlling
emissions
from
sources
in
a
given
State
that
are
found
to
be
contributing
significantly
to
nonattainment
and
maintenance
in
another
State.
The
CAIR
and
the
proposed
CAIR
FIP
also
aim
to
reduce
transport
of
ozone
precursors
by
controlling
emissions
from
sources
in
a
given
State
that
are
found
to
be
contributing
significantly
to
nonattainment
and
maintenance
in
another
State.

The
EPA
intends
that
if
States
choose
to
meet
their
emission
reduction
obligations
under
CAIR
by
adopting
the
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
99
SIP
model
cap
and
trade
rules
and
participating
in
the
EPA
administered
trading
programs,
such
participation
will
be
fully
integrated
with
Federal
CAIR
NOx
and
SO2
cap
and
programs
that
EPA
may
promulgate
in
a
final
FIP
or
in
a
final
section
126
response.
Integration
is
possible
because,
as
noted
above,
the
CAIR,
a
corresponding
FIP,
and
the
section
126
remedy
all
seek
to
mitigate
transport
of
emissions
from
upwind
sources
that
significantly
contribute
to
downwind
nonattainment
of
the
PM2.5
NAAQS,
and
the
CAIR
and
a
corresponding
FIP
both
seek
to
mitigate
such
transport
with
regard
to
the
8­
hour
ozone
NAAQS.
Further,
the
sources
covered
in
the
CAIR
SIP
model
cap
and
trade
programs
are
the
same
types
of
sources
named
in
the
section
126
petition
(
except
that
the
petition
names
a
subset
of
the
States
affected
by
CAIR),
and
are
the
same
as
the
sources
that
EPA
proposes
to
regulate
in
the
proposed
FIP
and
section
126
remedy.

In
order
to
be
eligible
to
participate
in
an
emissions
cap
and
trade
program,
the
Agency
believes
that
there
are
two
principal
criteria
that
sources
must
meet,
as
stated
in
the
supplemental
proposal
for
the
NOx
SIP
Call
(
62
FR
25923).
The
first
criterion
requires
that
sources
be
able
to
account
accurately
and
consistently
for
all
of
their
emissions
to
ensure
the
trading
program
goal
of
maintaining
emissions
within
a
cap.
Emissions
monitoring
must
be
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
100
accurate
and
consistent
among
all
sources
so
that
each
allowance
represents
the
same
amount
of
emissions.
The
second
criterion
for
participation
in
a
trading
program
is
the
ability
to
identify
a
responsible
party
for
each
regulated
source
who
would
be
accountable
for
demonstrating
and
ensuring
compliance
with
the
program's
provisions.
The
EPA
believes
that
today's
proposed
rule
meets
those
criteria.
The
Agency
also
believes
that,
because
today's
proposal
contains
the
same
mandatory
program
elements
as
are
in
the
part
96
CAIR
SIP
model
trading
programs,
and
is
designed
to
meet
the
same
environmental
goals
and
caps
sources
at
the
same
levels
as
those
model
trading
programs,

it
is
appropriate
to
design
CAIR
FIP
and
section
126
trading
programs
that
are
integrated
with
the
CAIR
SIP
trading
programs.

Under
this
scenario
of
common
trading
programs
(
i.
e.,

integrated
FIP­
section
126­
SIP
for
NOx
annual,
NOx
ozone
season,
and
SO2
trading
programs),
sources
subject
to
Federal
CAIR
trading
programs
under
the
FIP
or
the
section
126
remedy,
and
sources
in
States
choosing
to
participate
in
the
EPA­
administered
CAIR
SIP
trading
programs
could
trade
allowances
with
one
another
under
common
emissions
caps
across
participating
States.
Integration
of
the
trading
programs
reduces
the
possibility
of
inconsistent
or
conflicting
deadlines
or
requirements,
increases
the
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
101
potential
cost
savings
for
sources,
and
streamlines
program
administration.
Unnecessary
inconsistency
in
trading
programs
could
hamper
sources'
ability
to
plan
and
achieve
the
needed
reductions
as
cost
effectively
as
possible.
In
addition,
if
a
State
submitted
a
SIP
including
CAIR
EPAadministered
emissions
trading
programs
after
EPA
had
established
Federal
programs
under
a
FIP
or
section
126
response,
disruptions
to
sources
that
would
shift
from
regulation
under
a
FIP
or
section
126
remedy
to
regulation
under
a
SIP
would
be
minimized.

The
EPA
proposes,
in
part
97,
to
establish
the
geographic
boundaries
of
the
common
trading
programs
as
those
States
submitting
SIPs
in
response
to
the
CAIR,
or
subject
to
FIPs,
and/
or
the
sources
in
States
for
which
EPA
makes
a
positive
finding
for
the
section
126
petition.
The
EPA
would
administer
these
common
trading
programs
in
collaboration
with
affected
States.

Today,
the
Agency
proposes
Federal
CAIR
NOx
and
SO2
cap
and
trade
programs
for
the
FIP
or
section
126
remedy
that
are
virtually
the
same
as
the
CAIR
SIP
model
trading
programs
(
which
are
the
model
trading
programs
that
States
may
choose
to
adopt
in
response
to
CAIR).
Although
EPA
intends
the
proposed
Federal
CAIR
cap
and
trade
programs
to
be
as
similar
as
possible
to
the
CAIR
SIP
model
trading
rules,
the
Agency
is
proposing
certain
differences
as
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
102
described
below.
The
differences
arise
primarily
from
the
need
for
Federal
implementation
of
the
programs
rather
than
State
implementation
and
to
facilitate
transfer
from
Federal
to
State­
implemented
programs.
For
example,
under
today's
proposal,
the
Agency
determines
NOx
allowance
allocations
for
each
unit
in
the
Federal
CAIR
annual
and
ozone
season
NOx
cap
and
trade
programs,
rather
than
EPA
simply
providing
a
recommended
methodology
for
States
to
use
to
determine
allocations
in
CAIR
SIP
NOx
trading
programs.
Note
that
today's
proposed
Federal
CAIR
cap
and
trade
programs
include
all
of
the
mandatory
elements
that
States
are
required
to
include
in
their
SIPs
in
order
to
participate
in
the
EPAadministered
cap
and
trade
programs
for
CAIR.

As
noted
in
section
IV
in
this
preamble,
the
Agency
proposes
to
provide
States
that
are
subject
to
today's
proposed
Federal
requirements
with
the
option
to
submit
abbreviated
SIP
revisions
covering
specific
elements
of
the
Federal
trading
programs
without
submitting
full
SIP
revisions
to
meet
the
requirements
of
CAIR.
The
Agency
would
accept
abbreviated
SIP
revisions
for
the
following
4
specific
elements
of
the
Federal
trading
programs:
(
1)

provisions
for
non­
EGUs
to
opt­
in
to
the
Federal
trading
programs,
(
2)
allocating
annual
and/
or
ozone
season
NOx
allowances
to
individual
sources
in
the
State,
(
3)

allocating
allowances
from
the
annual
NOx
Compliance
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
103
Supplement
Pool
(
CSP)
to
individual
sources
in
the
State,

and
(
4)
including
NOx
SIP
Call
trading
sources
that
are
not
EGUs
under
CAIR
in
the
Federal
CAIR
ozone
season
NOx
cap
and
trade
program.
The
Agency
discusses
each
of
these
elements
further
below.

By
proposing
to
accept
such
abbreviated
SIP
revisions,

the
Agency
intends
to
increase
the
options
available
for
States
to
comply
with
CAIR.
A
State
could
choose
to
retain
control
of
these
specific
elements
of
the
trading
programs,

without
submitting
a
full
SIP
revision
to
meet
the
requirements
of
CAIR.

As
explained
in
the
CAIR
NFR,
States
have
until
September
11,
2006
to
submit
to
the
Agency
revisions
to
their
SIPs
that
meet
the
requirements
of
CAIR.
The
Agency
proposes
that,
for
abbreviated
SIP
revisions
addressing
the
specific
elements
identified
in
today's
proposal,
States
have
until
March
31,
2007
to
make
their
submissions.
The
EPA
proposes
to
allow
States
to
submit
abbreviated
SIP
revisions
later
than
full
revisions
because
the
Agency
anticipates
that
we
will
be
able
to
complete
the
approval
process
more
quickly
for
abbreviated
SIP
revisions
due
to
their
narrower
scope.
If
States
submit
approvable
full
or
abbreviated
SIP
revisions
by
these
dates,
the
Agency
believes
it
will
be
able
to
approve
the
revisions
in
time
to
record
State
NOx
allocations
in
source
accounts
by
December
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
104
2007
for
the
first
NOx
control
period
for
any
State
submitting
revisions
that
include
NOx
allocations.
See
section
VI.
D.
in
this
preamble
for
a
detailed
discussion
of
timing
considerations
with
respect
to
NOx
allocations.

The
Agency
proposes
to
include
appendices
in
part
97
that
will
list
any
States
with
approved
abbreviated
SIP
revisions
covering
non­
EGUs
opt­
ins,
allocating
NOx
allowances,
distributing
CSP
allowances,
or
including
non­

CAIR
NOx
SIP
Call
trading
sources
in
the
Federal
CAIR
ozone
season
NOx
trading
program.

The
EPA
requests
comment
on
the
proposed
option
for
States
to
submit
abbreviated
SIPs
covering
specific
elements
of
the
Federal
trading
programs.

B.
Overall
Structure
of
the
Proposed
Federal
CAIR
Cap
and
Trade
Programs
In
the
CAIR
NFR,
the
Agency
provided
model
rules
for
the
CAIR
NOx,
CAIR
ozone
season
NOx,
and
CAIR
SO2
trading
programs
that
States
can
use
to
meet
the
emission
reduction
requirements
in
the
CAIR
(
in
part
96).
The
proposed
Federal
CAIR
cap
and
trade
programs
are
based
on
these
model
rules.

The
EPA
designed
these
rules
to
be
similar
to
the
NOx
SIP
Call
model
trading
rules
(
also
in
part
96)
and
to
coordinate
with
the
Acid
Rain
Program.

The
Agency
proposes
in
today's
action
that
the
mandated
emission
reductions
will
be
achieved
from
EGUs
(
see
section
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
105
VI.
C,
below,
for
discussion
of
proposed
applicability
provisions).
Descriptions
of
each
of
the
proposed
Federal
CAIR
cap
and
trade
programs
(
i.
e.,
the
SO2
program,
NOx
annual
program,
and
NOx
ozone
season
program)
are
presented
below.

The
proposed
Federal
CAIR
cap
and
trade
programs
rely
on
the
detailed
unit­
level
emissions
monitoring
and
reporting
procedures
of
part
75
and
consistent
allowance
management
practices.
All
affected
sources
would
be
required
to
monitor
and
report
their
emissions
using
part
75.
Source
information
management,
emissions
data
reporting,
and
allowance
trading
would
be
accomplished
using
on­
line
systems
similar
to
those
currently
used
for
the
Acid
Rain
SO2
and
NOx
SIP
Call
Programs.

Penalty
provisions
for
excess
emissions
under
the
CAIR
SIP
model
trading
programs
are
described
in
the
CAIR
NFR
preamble
(
70
FR
25274).
The
Agency
intends
the
penalty
provisions
for
excess
emissions
in
today's
proposal
to
be
identical
to
the
provisions
in
the
CAIR.
As
discussed
in
section
VII
in
today's
preamble,
the
Agency
is
proposing
revisions
to
the
excess
emission
penalties
in
the
CAIR
SO2
trading
program
to
clarify
the
penalties
for
units
that
have
excess
emissions
under
both
the
Acid
Rain
Program
and
the
CAIR
SO2
trading
program.
The
excess
emissions
penalty
provisions
in
today's
proposed
Federal
NOx
and
SO2
cap
and
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
106
trade
programs
would
be
identical
to
the
penalty
provisions
in
the
CAIR
if
the
proposed
revisions
to
the
CAIR
SO2
trading
program
penalties
are
finalized.

1.
SO2
Program
The
proposed
Federal
CAIR
SO2
cap
and
trade
program
would
require
affected
sources
to
hold
SO2
allowances
sufficient
to
cover
their
emissions
for
each
control
period.

This
proposed
program
is
based
on
the
existing
Acid
Rain
Program
and
would
rely
on
title
IV
SO2
allowances,
in
the
same
way
that
the
CAIR
SO2
model
trading
rule
relies
on
title
IV
allowances.

As
in
the
CAIR
SIP
SO2
model
trading
program,
SO2
reductions
for
the
Federal
CAIR
SO2
cap
and
trade
program
would
be
achieved
by
requiring
sources
to
retire,
in
most
cases,
more
than
one
title
IV
allowance
for
each
ton
of
SO2
emissions.
Sources
could
use
pre­
2010
title
IV
SO2
allowances
for
compliance
with
the
Federal
CAIR
SO2
cap
and
trade
program
at
a
1­
to­
1
ratio
(
i.
e.,
SO2
allowances
of
vintage
2009
and
earlier
would
offset
one
ton
of
SO2
emissions).
Allowances
of
vintages
2010
through
2014
would
offset
0.5
tons
of
emissions
(
i.
e.,
such
allowances
would
need
to
be
retired
at
a
ratio
of
2­
to­
1
for
CAIR
compliance,

in
other
words
2
allowances
for
every
ton
of
emissions).

Allowances
of
vintages
2015
and
beyond
would
offset
0.35
tons
of
emissions
(
i.
e.,
such
allowances
would
need
to
be
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
11
A
CAIR
SO2
allowance
is
a
title
IV
SO2
allowance.
For
purposes
of
compliance
with
the
EPA­
administered
SIP
SO2
trading
program
or
with
the
Federal
SO2
trading
program
in
today's
proposal,
the
value
of
such
SO2
allowances
are
discounted
based
on
the
allowance
vintage
year,
as
explained
above.

107
retired
at
a
ratio
of
2.86­
to­
1,
in
other
words
2.86
allowances
for
every
ton
of
emissions).
Thus,
the
emission
value
of
an
SO2
allowance
would
be
independent
of
the
year
in
which
it
is
used,
but
rather
would
be
based
on
its
vintage
(
i.
e.,
the
year
in
which
the
allowance
is
issued).

These
SO2
allowance
retirement
ratios
are
identical
to
the
retirement
ratios
in
the
CAIR
NFR
(
see
discussion
in
section
VII
in
the
CAIR
NFR
preamble
at
70
FR
25255­
25273,
as
well
as
in
section
IX
at
70
FR
25290­
25291).

The
Agency
proposes
to
use
the
single
term,
"
CAIR
SO2
allowance"
to
refer
to
an
SO2
allowance
under
a
CAIR
SIP,

CAIR
FIP,
or
section
126
response.
11
A
CAIR
SO2
allowance
could
be
used
for
compliance
with
the
SO2
allowance­
holding
requirement
in
a
CAIR
SIP,
CAIR
FIP,
or
section
126
SO2
trading
program.
Sources
in
States
governed
by
any
of
these
three
SO2
trading
programs
could
trade
CAIR
SO2
allowances
with
each
other.
The
CAIR
SIP
SO2
model
trading
rule
(
upon
which
the
proposed
Federal
CAIR
SO2
program
is
based)

is
included
in
subparts
AAA
through
III
of
part
96
(
70
FR
25362­
25382).
Section
VIII
in
the
CAIR
NFR
preamble
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
108
describes
the
CAIR
model
cap
and
trade
programs
(
70
FR
25273­
25289).

2.
NOx
Program
The
proposed
Federal
CAIR
annual
NOx
cap
and
trade
program
would
require
affected
sources
to
hold
annual
NOx
allowances
sufficient
to
cover
their
emissions
for
each
control
period.
The
proposed
program
would
rely
on
CAIR
annual
NOx
allowances
that
would
be
allocated
to
affected
sources
by
the
EPA
(
see
section
VI.
D.
for
the
Agency's
proposed
NOx
allocation
methodology).
As
in
CAIR,
an
annual
NOx
allowance
would
authorize
the
emission
of
one
ton
of
NOx
(
see
the
proposed
regulatory
text
for
definitions).

As
in
the
CAIR
annual
NOx
program,
the
Agency
is
proposing
a
Compliance
Supplement
Pool
(
CSP)
of
allowances
that
would
be
allocated
to
sources
and
could
then
be
used
for
compliance
with
the
Federal
CAIR
annual
NOx
cap
and
trade
program.
As
explained
in
the
CAIR
NFR,
the
Agency
apportioned
a
regionwide
pool
of
about
200,000
CSP
allowances
to
the
CAIR
States
(
see
70
FR
25231­
25232).

Those
State
CSP
amounts
are
provided
in
Table
V­
3
in
this
preamble.
The
Agency
is
not
inviting
comment
on
the
apportionment
of
CSP
allowances
as
determined
in
CAIR.

For
the
Federal
annual
NOx
cap
and
trade
program
in
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
109
today's
action,
the
Agency
proposes
that,
for
each
affected
State,
we
would
allocate
to
sources
in
that
State
an
amount
of
CSP
allowances
up
to
the
amount
that
was
apportioned
to
the
State
in
CAIR.
The
Agency's
proposed
methodology
to
allocate
CSP
allowances
to
sources
is
described
below,
in
section
VI.
D.

The
Agency
proposes
that
ozone
season
NOx
allowances
issued
under
the
NOx
SIP
Call
or
under
the
Federal
CAIR
ozone
season
cap
and
trade
program
could
not
be
used
for
compliance
with
the
Federal
CAIR
annual
NOx
reduction
requirement
(
which
is
the
same
restriction
as
in
the
CAIR
SIP
model
trading
rules).

The
Agency
proposes
to
use
the
single
term,
"
CAIR
NOx
allowance"
to
refer
to
a
NOx
allowance
issued
under
a
CAIR
SIP,
CAIR
FIP,
or
section
126
response.
A
CAIR
NOx
allowance
could
be
used
for
compliance
in
a
CAIR
SIP,
CAIR
FIP,
or
section
126
NOx
trading
program.
Sources
in
States
governed
by
any
of
these
three
annual
NOx
trading
programs
could
trade
CAIR
NOx
allowances
with
each
other.

The
CAIR
SIP
NOx
annual
model
trading
rule
(
upon
which
the
proposed
Federal
CAIR
NOx
annual
program
is
based)
is
included
in
subparts
AA
through
II
of
part
96
(
70
FR
25339­

25362).
Section
VIII
in
the
CAIR
NFR
preamble
describes
the
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
110
CAIR
model
cap
and
trade
programs
(
70
FR
25273­
25289).

3.
Ozone
Season
NOx
Program
The
proposed
Federal
CAIR
ozone
season
NOx
cap
and
trade
program
would
require
affected
sources
to
hold
CAIR
ozone
season
NOx
allowances
sufficient
to
cover
their
emissions
for
each
control
period.
For
the
proposed
ozone
season
program,
the
control
period
would
extend
from
May
1
through
September
30
for
each
year
of
the
program.
As
in
CAIR,
a
NOx
ozone
season
allowance
would
authorize
the
emission
of
one
ton
of
NOx
during
the
ozone
season
(
see
the
proposed
regulatory
text
for
definitions).

The
proposed
program
would
rely
on
CAIR
ozone
season
NOx
allowances
that
would
be
allocated
to
affected
sources
by
the
EPA
(
see
section
VI.
D.
for
the
Agency's
proposed
NOx
allocation
methodology).
In
addition,
pre­
2009
NOx
SIP
Call
allowances
could
be
banked
into
the
proposed
Federal
CAIR
ozone
season
NOx
program
and
used
by
affected
sources
for
compliance
with
that
program.
The
Agency
proposes
that
NOx
allowances
issued
under
the
Federal
CAIR
annual
NOx
program
could
not
be
used
for
compliance
with
the
Federal
CAIR
ozone
season
NOx
reduction
requirement
(
which
is
the
same
restriction
as
in
the
CAIR
SIP
model
trading
rules).

As
discussed
in
the
CAIR
NFR,
certain
emissions
sources
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
111
that
do
not
fit
the
applicability
requirements
of
CAIR
are
included
in
the
existing
EPA­
administered
NOx
Budget
Trading
Program
under
the
NOx
SIP
Call.
(
The
types
of
NOx
Budget
Trading
Program
units
that
are
not
EGUs
under
CAIR
include
industrial
boilers
and
turbines,
cement
kilns,
and
small
EGUs.)
As
explained
in
the
CAIR
NFR,
EPA
will
no
longer
administer
the
NOx
SIP
Call
ozone
season
cap
and
trade
program
after
the
2008
ozone
season
(
see
70
FR
25290).
The
CAIR
NFR
provides
that
States
that
choose
to
participate
in
the
CAIR
EPA­
administered
ozone
season
NOx
cap
and
trade
program
may
choose
whether
or
not
to
bring
their
non­
CAIR
NOx
SIP
Call
trading
sources
into
the
CAIR
ozone
season
trading
program,
through
their
SIP
revision.
See
section
VII
in
the
CAIR
NFR
(
70
FR
25255­
25273)
and
section
IX.
A.

(
70
FR
25289­
25290).

As
discussed
above,
the
Agency
is
proposing
that
States
may
choose
to
submit
an
abbreviated
SIP
revision
to
bring
their
non­
CAIR
NOx
SIP
Call
trading
sources
into
the
proposed
Federal
CAIR
ozone
season
NOx
cap
and
trade
program.
The
abbreviated
SIP
revision
would
increase
a
State's
ozone
season
NOx
trading
budget
under
the
proposed
Federal
CAIR
ozone
season
NOx
cap
and
trade
program
by
an
amount
equal
to
the
portion
of
the
State's
NOx
SIP
Call
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
112
State
trading
budget
that
is
attributed
to
such
units.

The
Agency
proposes
to
use
the
single
term,
"
CAIR
Ozone
Season
NOx
allowance"
to
refer
to
an
ozone
season
NOx
allowance
issued
under
a
CAIR
SIP
or
CAIR
FIP.
A
CAIR
ozone
season
NOx
allowance
could
be
used
for
compliance
in
a
CAIR
SIP
or
CAIR
FIP
ozone
season
NOx
trading
program.
Sources
in
States
governed
by
either
of
these
ozone
season
NOx
trading
programs
could
trade
CAIR
Ozone
Season
NOx
allowances
with
each
other.

The
CAIR
SIP
NOx
ozone
season
model
trading
rule,

upon
which
the
proposed
Federal
CAIR
NOx
ozone
season
program
is
based,
is
included
in
subparts
AAAA
through
IIII
of
part
96
(
70
FR
25382­
25405).
Section
VIII
in
the
CAIR
NFR
preamble
describes
the
CAIR
model
cap
and
trade
programs
(
70
FR
25273­
25289).

C.
Sources
Affected
under
the
Proposed
Federal
CAIR
Cap
and
Trade
Programs
Under
the
proposed
Federal
CAIR
cap
and
trade
programs,

only
EGUs
are
subject
to
the
proposed
rules.
The
Agency
intends
the
applicability
provisions
for
the
proposed
Federal
CAIR
trading
programs
to
be
identical
to
the
applicability
provisions
for
the
CAIR
SIP
model
trading
programs.

In
today's
action,
the
Agency
is
proposing
two
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
113
revisions
to
the
applicability
provisions
that
were
finalized
in
the
CAIR
SIP
model
trading
rules
(
see
section
VIII.
C.
in
the
CAIR
NFR
preamble
for
applicability
discussion
at
70
FR
25276­
25278
and
see
section
VII
in
today's
preamble
for
proposed
changes
to
the
CAIR
EGU
definition).
The
applicability
provisions
in
today's
proposed
Federal
CAIR
trading
programs
are
identical
to
the
applicability
provisions
that
would
apply
for
CAIR
if
the
Agency
finalizes
its
proposed
revisions
to
the
CAIR
model
trading
rules.

The
proposed
revisions
to
the
applicability
provisions
in
CAIR
are
intended
to
provide
clarity
and
also
to
align
the
provisions
more
closely
with
the
provisions
in
the
title
IV
Acid
Rain
Program.
The
proposed
revisions
include
adding
an
exemption
for
certain
solid
waste
incinerators
and
exempting
existing
units
that
have
not
served
a
generator
since
before
November
15,
1990.
Each
of
these
revisions
is
discussed
below.

The
status
of
solid
waste
incinerators
under
the
CAIR
as
finalized
is
unclear.
The
Agency
proposes
a
revision
to
the
applicability
provisions
that
would
establish
a
specific
exemption
for
certain
solid
waste
incinerators.
In
the
CAIR
NFR,
the
Agency
applied
the
CAIR
model
trading
programs
to
any
stationary,
fossil­
fuel­
fired
boiler
or
stationary,
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
12
"
Corrected
Response
to
Significant
Public
Comments
on
the
Proposed
Clean
Air
Interstate
Rule,"
April
2005,
Docket
#
OAR­
2003­
0053­
2172.

114
fossil­
fuel­
fired
combustion
turbine
serving
at
any
time,

since
the
start­
up
of
the
unit's
combustion
chamber,
a
generator
with
nameplate
capacity
of
more
than
25
MWe
producing
electricity
for
sale
(
with
exclusions
for
certain
cogeneration
units).
Under
the
current
definition,
units
would
be
considered
fossil­
fuel­
fired
if
they
burned
any
fossil
fuel.
Because
solid
waste
incinerators
usually
use
fossil
fuel,
at
least
to
start
up,
and
because
they
may
burn
fossil­
fuel
derived
products
(
such
as
tires),
they
are
often
considered
fossil­
fuel­
fired.
Therefore,
to
the
extent
that
such
incinerators
are
connected
to
a
generator
of
capacity
greater
than
25
MWe
that
generated
electricity
for
sale,

they
would
be
considered
affected
units
under
CAIR.

However,
in
the
record
for
the
CAIR,
EPA
stated
that
the
CAIR
requirements
do
not
reflect
any
emission
reductions
from
solid
waste
incinerators12.
Therefore,
the
EPA
is
proposing
an
exemption
for
certain
solid
waste
incinerators.

The
proposed
exemption
is
analogous
to
an
exemption
for
such
units
under
the
Acid
Rain
Program.
The
Agency
proposes
this
exemption
as
a
revision
to
the
applicability
provisions
in
the
CAIR
and
proposes
the
identical
exemption
for
the
7/
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or
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115
Federal
CAIR
trading
programs.

In
addition,
the
status,
under
CAIR,
of
units
that
formerly
generated
electricity
for
sale
but
stopped
doing
so
many
years
ago
warrants
further
clarification.
As
finalized
in
CAIR,
the
applicability
provisions
include
units
serving
"...
at
any
time,
since
the
start­
up
of
the
unit's
combustion
chamber,
a
generator..."
The
Agency
is
proposing
to
revise
the
applicability
provisions
to
exempt
existing
units
that
have
not
served
a
generator
since
before
November
15,
1990.

This
proposed
exemption
is
analogous
to
the
approach
under
the
Acid
Rain
Program.
The
Agency
proposes
this
exemption
as
a
revision
to
the
applicability
provisions
in
the
CAIR
and
proposes
the
identical
exemption
for
the
Federal
CAIR
trading
programs.

The
Agency
proposes
that,
in
any
jurisdiction
for
which
a
final
CAIR
FIP
or
section
126
response
is
promulgated,
the
following
units
will
be
subject
to
the
Federal
CAIR
trading
programs
(
i.
e.,
to
the
Federal
CAIR
SO2,
NOx
annual,
or
NOx
ozone
season
programs,
as
appropriate).

Except
for
a
unit
that
qualifies
as
a
cogeneration
unit
or
a
solid
waste
incinerator
(
see
below),
an
affected
unit
is
any
stationary,
fossil­
fuel­
fired
boiler
or
stationary,

fossil­
fuel­
fired
combustion
turbine
serving
at
any
time,

since
the
later
of
November
15,
1990
or
the
start­
up
of
the
7/
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05
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or
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116
unit's
combustion
chamber,
a
generator
with
nameplate
capacity
of
more
than
25
MWe
producing
electricity
for
sale.

Cogeneration
Unit
Exemption
As
in
the
CAIR
NFR,
certain
cogeneration
units
would
be
exempt
from
the
proposed
Federal
CAIR
cap
and
trade
programs.
Cogeneration
units
include
units
having
equipment
used
to
produce
electricity
and
useful
thermal
energy
for
industrial,
commercial,
heating,
or
cooling
purposes
through
sequential
use
of
energy
and
meeting
certain
operating
and
efficiency
standards.
The
program
has
different
applicability
provisions
for
non­
cogeneration
units
and
cogeneration
units.
Any
cogeneration
unit,
serving
(
since
the
later
of
November
15,
1990
or
the
start­
up
of
the
unit),

a
generator
with
a
nameplate
capacity
of
greater
than
25
MW
and
supplying
more
than
1/
3
potential
electric
output
capacity
and
more
than
219,000
MW­
hrs
annually
to
any
utility
power
distribution
system
for
sale,
would
be
subject
to
the
requirements
of
the
proposed
Federal
CAIR
trading
rules.
Otherwise,
the
unit
would
qualify
for
an
exemption
under
the
Federal
rules.
This
cogeneration
unit
exemption
is
identical
to
the
exemption
in
the
CAIR
NFR.
(
Note
that
some
language
to
clarify
application
of
the
exemption
is
proposed
for
the
CAIR
SIP
trading
programs
and
the
same
language
is
also
included
in
the
proposed
Federal
trading
7/
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05
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or
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117
programs.)
Section
VIII.
C.
3.
of
the
CAIR
NFR
preamble
describes
the
cogeneration
unit
exemption
and
discusses
the
specific
elements
of
how
units
would
qualify
and
remain
qualified
for
the
exemption
(
70
FR
25276­
25278).

Solid
Waste
Incinerator
Exemption
As
explained
above,
the
Agency
is
proposing
today
to
provide
an
exemption
for
certain
solid
waste
incinerators
in
the
Federal
CAIR
cap
and
trade
programs
and
to
revise
the
provisions
in
the
CAIR
to
exempt
certain
solid
waste
incinerators.

Specifically,
the
Agency
proposes
that,
for
a
solid
waste
incineration
unit
commencing
operation
before
January
1,
1985,
for
which
the
average
annual
fuel
consumption
of
non­
fossil
fuels
during
1985­
1987
exceeded
80
percent
and
during
any
3
consecutive
calendar
years
after
1990
the
average
annual
fuel
consumption
of
non­
fossil
fuels
exceeds
80
percent,
the
unit
is
not
subject
to
the
Federal
CAIR
cap
and
trade
programs.

The
Agency
also
proposes
that,
for
a
solid
waste
incineration
unit
commencing
operation
on
or
after
January
1,
1985,
for
which
the
average
annual
fuel
consumption
of
non­
fossil
fuels
for
the
first
3
calendar
years
of
operation
exceeds
80
percent
and
during
any
3
consecutive
calendar
years
after
1990
the
average
annual
fuel
consumption
of
7/
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or
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118
non­
fossil
fuels
exceeds
80
percent,
the
unit
is
not
subject
to
the
Federal
CAIR
cap
and
trade
programs.

Individual
unit
opt­
ins
Today's
proposal
includes
provisions
for
individual
units
to
opt­
in
to
the
Federal
CAIR
trading
programs.

However,
EPA
proposes
that
those
provisions
would
become
applicable
to
sources
in
a
given
State
only
if
the
State
chooses
to
submit
an
abbreviated
SIP
revision
that
would
provide
for
the
inclusion
of
non­
EGU
opt­
ins
in
the
Federal
CAIR
trading
programs.

The
CAIR
final
rule
includes
provisions
for
individual
unit
opt­
ins
in
the
CAIR
SIP
model
trading
programs.
As
discussed
in
CAIR,
States
choosing
to
participate
in
the
EPA­
administered
CAIR
trading
programs
can
choose
whether
or
not
to
include
opt­
in
provisions
in
their
CAIR
SIP
revisions.
If
States
choose
to
include
opt­
in
provisions,

they
must
include
the
provisions
provided
in
the
CAIR
SIP
model
trading
rules.

The
Agency
generally
believes
that
States
should
have
the
option
of
including
provisions
for
individual
unit
optins
in
the
CAIR
SIP
trading
programs.
The
EPA
considered
requiring
all
States
to
have
opt­
in
provision
in
the
proposed
Federal
CAIR
trading
programs.
By
not
requiring
opt­
in
provisions
in
all
States
covered
by
the
proposed
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05
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­
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or
Cite
119
Federal
trading
programs,
the
Agency
seeks
to
preserve
the
States'
flexibility
to
decide
whether
to
allow
opt­
in
units.

If
EPA
were
to
implement
Federal
CAIR
trading
programs
with
required
provisions
allowing
individual
units
to
optin
then
some
units
may
opt­
in
to
the
Federal
programs.
If
the
Agency
subsequently
approved
a
CAIR
SIP
revision
that
did
not
include
opt­
in
provisions,
then
any
units
in
the
affected
State
that
had
opted­
in
under
the
Federal
programs
would
be
stranded.
Such
units
would
likely
have
made
decisions
 
such
as
to
install
emission
control
equipment
 
based
on
participation
in
a
trading
program
in
which
they
would
no
longer
be
able
to
participate.
The
alternative
to
stranding
such
units
would
be
for
a
State
that
would
not
otherwise
choose
to
implement
the
opt­
in
provisions
to
implement
such
provisions
at
least
for
the
past
opt­
in
units.
Thus,
in
order
to
preserve
States'
flexibility
with
regard
to
opt­
ins
the
Agency
does
not
propose
to
require
the
opt­
in
provisions
to
apply
in
all
States
under
the
Federal
CAIR
trading
programs,
but
proposes
that
each
State
have
the
option
of
activating
the
opt­
in
provisions
in
the
Federal
CAIR
programs
through
an
abbreviated
SIP
revision.

The
Agency
proposes
that
if
States
choose
to
submit
abbreviated
SIP
revisions
to
provide
for
the
inclusion
of
non­
EGU
opt­
ins
in
the
Federal
CAIR
trading
programs,
the
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or
Cite
120
SIP
revisions
must
include
the
opt­
in
provisions
that
are
provided
in
the
CAIR
final
rule.
See
section
VIII.
G.
in
the
CAIR
NFR
preamble
for
discussion
of
opt­
in
provisions
(
70
FR
25286­
25288).

D.
Allocation
of
NOx
Emission
Allowances
to
Sources
For
States
that
choose
under
CAIR
to
participate
in
the
EPA­
administered
annual
and/
or
ozone
season
NOx
cap
and
trade
programs
(
adopting
the
CAIR
SIP
model
trading
rules),

the
EPA
provided
in
the
CAIR
NFR
an
example
methodology
for
allocating
NOx
allowances
to
individual
sources.
See
section
VIII.
D.
of
the
CAIR
NFR
preamble
(
70
FR
25278­
25282).

For
the
Federal
CAIR
NOx
cap
and
trade
programs,
the
Agency
is
proposing
to
use
a
NOx
allocation
methodology
that
is
consistent
with
the
CAIR
SIP
model
trading
rules.
Within
each
affected
State,
the
Agency
would
allocate
(
i.
e.,

distribute)
to
sources
a
total
amount
of
allowances
authorizing
an
emissions
tonnage
that
equals
the
State's
NOx
budget.
The
Agency's
proposed
NOx
allocation
methodology
is
described
below.

Timing
of
NOx
Allocations
For
the
reasons
discussed
in
section
IV
in
today's
preamble,
the
EPA
intends
to
finalize
a
CAIR
FIP
in
March
2006.
By
finalizing
a
FIP,
the
EPA
would
in
no
way
preclude
7/
29/
05
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or
Cite
121
a
State
from
developing
its
own
SIP
either
to
adopt
the
CAIR
model
trading
rules
(
with
any
discretionary
elements
allowed
by
the
CAIR
rule,
including
allocation
of
unit­
by­
unit
NOx
allowances)
or
to
meet
the
CAIR
emission
reduction
requirements
through
different
measures
of
the
State's
choosing.

The
Agency's
preference
is
for
States
to
make
decisions
about
NOx
allocations
for
their
sources.
The
EPA
intends
to
determine
Federal
unit­
by­
unit
NOx
allocations
(
with
opportunity
for
public
comment).
However,
we
intend
to
only
record
those
Federal
allocations
in
allowance
accounts
for
sources
located
in
a
State
without
a
timely,
approved
CAIR
SIP
(
or
timely,
approved
abbreviated
CAIR
SIP
revision
providing
for
State
allocations).

In
considering
when
to
record
Federal
NOx
allocations
in
source
accounts,
the
Agency
seeks
to
balance
the
following
two
goals:
(
1)
to
provide
certainty
to
sources
regarding
their
CAIR
NOx
allocations
and
time
for
sources
to
make
compliance
decisions,
and
(
2)
to
provide
States
choosing
to
allocate
CAIR
NOx
allowances
with
time
to
do
so
and
EPA
with
time
to
approve
SIP
revisions
that
include
State
allocations.
Taking
into
consideration
the
CAIR
SIP
submittal
dates
(
for
full
or
abbreviated
revisions),
the
amount
of
time
needed
by
the
Agency
to
approve
SIP
7/
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05
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or
Cite
13
As
discussed
in
the
CAIR
NFR
preamble
(
70
FR
25278),
each
State
has
the
flexibility
to
allocate
its
allowances
however
they
choose
(
within
their
State
budgets)
so
long
as
certain
timing
requirements
are
met.
Today's
preamble
discusses
the
approval
of
State
allocations
within
the
context
of
coordinating
timing
for
recording
Federal
allocations
B
note
that
this
discussion
is
not
intended
to
imply
any
less
flexibility
for
States
in
their
choice
of
allocation
methodology
than
the
flexibility
provided
in
CAIR.

122
revisions,
and
the
amount
of
time
remaining
before
the
initial
CAIR
control
period,
the
EPA
developed
a
proposed
schedule
for
recording
NOx
allocations
in
source
accounts.

The
Agency's
proposed
NOx
allocation
schedule
is
presented
below.
The
EPA
seeks
comment
on
this
proposed
schedule.

The
Agency
will
endeavor
to
work
with
States
to
ensure
that
we
can
approve
SIP
revisions
and
record
State
NOx
allocations
in
source
accounts.
The
EPA
intends
to
act
in
such
a
way
that,
once
Federal
NOx
allocations
are
recorded
for
a
particular
control
period
(
which
would
only
occur
in
the
absence
of
a
timely,
approved
full
CAIR
SIP
revision,
or
timely,
approved
abbreviated
CAIR
SIP
revision
containing
allocations),
we
would
not
approve
overlapping
State
allocations
for
that
same
control
period.
13
Rather,
EPA
will
work
with
the
States
to
approve
SIP
revisions
with
State
allocations
for
control
periods
that
begin
upon
the
expiration
of
a
control
period
for
which
Federal
allocations
have
been
recorded
in
source
accounts.
It
would
be
highly
7/
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05
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or
Cite
123
disruptive
to
the
allowance
market
if
Federal
allocations
that
had
been
recorded
and
traded
on
the
market
could
subsequently
be
rendered
invalid
due
to
approval
of
overlapping
State
allocations
for
the
same
control
period.

The
discussion
in
this
section
is
focused
on
the
timing
for
recordation
of
Federal
allocations
in
coordination
with
approval
of
SIP
revisions
and
recordation
of
State
allocations
 
assuming
States
choose
to
participate
in
the
EPA­
administered
CAIR
NOx
trading
programs.
The
Agency
would
also
carefully
consider
the
timing
of
a
transition
from
Federal
to
State­
implemented
programs
for
any
State
choosing
to
use
a
method
other
than
the
EPA­
administered
State
CAIR
trading
programs
to
meet
their
CAIR
obligations.

As
discussed
further
below,
the
EPA
intends
to
record
Federal
allocations
1
year
at
a
time
for
the
initial
control
periods.
In
this
manner,
even
if
a
State
does
not
have
an
approved
CAIR
SIP
revision
in
time
for
the
Agency
to
record
State
allocations
for
the
first
control
period,
it
would
be
possible
to
record
State
allocations
for
future
control
periods.
The
Agency
strongly
urges
States
to
submit
CAIR
SIP
revisions
(
full
or
abbreviated
revisions)
to
the
Agency
in
a
timely
manner,
and
we
intend
to
work
with
States
and
ensure
that
we
would
not
have
overlapping
allocations
for
any
control
period.
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05
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or
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124
As
explained
in
the
CAIR
NFR,
the
States
have
until
September
11,
2006
to
submit
full
CAIR
SIP
revisions
to
the
Agency.
For
a
State
that
chooses
to
participate
in
the
EPAadministered
CAIR
SIP
NOx
trading
programs
this
SIP
revision
would
be
required
to
include
the
State's
NOx
allocation
methodology.
The
EPA
anticipates
that
it
may
require
about
a
year
to
approve
a
full
SIP
submission.
The
CAIR
SIP
rules
require
States
to
submit
their
first
set
of
CAIR
NOx
allocations
to
EPA
by
October
31,
2006.

As
discussed
above,
the
Agency
is
proposing
that
States
may
choose
to
submit
an
abbreviated
SIP
revision
to
allocate
NOx
allowances
to
individual
sources
in
their
State
(
for
the
annual
and/
or
ozone
season
Federal
CAIR
NOx
trading
programs).
In
this
way,
a
State
could
choose
to
allocate
NOx
allowances
to
its
sources
while
letting
the
FIP
(
or
section
126
remedy)
control
all
other
aspects
of
the
trading
programs.
Through
an
abbreviated
SIP
revision,
a
State
can
also
ensure
that
its
allocations
will
apply
even
though
its
full
SIP
revision
is
still
undergoing
EPA
review.
Note
that
States
could
also
choose
to
address
non­
EGU
opt­
ins,

allocation
of
CSP
allowances,
and/
or
inclusion
of
non­
CAIR
NOx
SIP
Call
trading
sources
in
an
abbreviated
SIP
revision.

The
Agency
proposes
that
States
would
have
until
March
31,

2007
to
submit
their
allocation
methodology
in
an
7/
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or
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125
abbreviated
SIP
revision.
The
EPA
proposes
to
allow
States
to
submit
abbreviated
SIP
revisions
later
than
full
revisions
because
we
anticipate
that
we
will
be
able
to
complete
the
approval
process
more
quickly
for
abbreviated
SIP
revisions
due
to
their
narrower
scope.
The
Agency
proposes
that
the
State
would
have
until
October
31,
2007
to
submit
their
first
set
of
CAIR
NOx
allocations
pursuant
to
an
abbreviated
SIP
revision.
The
proposed
dates
for
recording
NOx
allocations,
discussed
below,
would
be
the
same
whether
the
allocations
are
approved
in
a
full
SIP
revision
or
in
an
abbreviated
revision.

Assuming
that
States
submit
full
CAIR
SIP
revisions
by
the
September
2006
deadline
and
that
EPA
can
approve
the
revisions
in
about
a
year,
and
assuming
some
additional
time
may
be
required
for
coordination
between
States
and
EPA
before
State
allocations
can
be
recorded
in
source
accounts,

it
is
reasonable
to
assume
that
EPA
could
record
such
State
allocations
by
December
1,
2007.
Likewise,
assuming
that
States
submit
abbreviated
SIP
revisions
that
address
allocations
by
the
March
2007
deadline
and
that
EPA
can
approve
the
abbreviated
revisions
in
about
6
months,
it
is
reasonable
to
assume
that
EPA
could
record
such
allocations
by
December
1,
2007.

Therefore,
the
EPA
proposes
to
record
NOx
allocations
7/
29/
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­
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or
Cite
126
in
source
accounts
for
the
2009
control
period
by
December
1,
2007.
If
a
State's
timely
NOx
allocations
are
approved
then
the
Agency
would
record
State
allocations
for
the
2009
control
period.
However,
for
any
CAIR
State
for
which
a
SIP
is
not
approved
by
December
1,
2007,
the
EPA
would
record
Federal
NOx
allocations
for
2009.
Recording
NOx
allocations
by
December
2007
for
the
2009
control
period
provides
affected
sources
with
certainty
of
their
allocations
1
year
in
advance
of
the
beginning
of
the
control
period.

The
Agency
proposes
to
record
Federal
NOx
allocations
in
source
accounts
1
year
at
a
time
for
the
2009
and
2010
control
periods
in
order
to
provide
flexibility
to
States.

If
EPA
records
Federal
allocations
for
the
2009
control
period
and
subsequently
approves
a
State's
timely
SIP
revision
including
NOx
allocations
(
a
full
or
abbreviated
revision),
the
Agency
would
record
the
State's
allocations
for
future
years.
The
Agency
does
not
intend
to
approve
State
NOx
allocations
for
a
particular
control
period
that
would
overlap
with
Federal
allocations
already
recorded
in
source
accounts.
Provisions
for
withdrawal
of
CAIR
FIPs
and
section
126
remedies
are
discussed
elsewhere
in
this
preamble.

The
EPA
proposes
to
record
NOx
allocations
in
source
accounts
by
December
1,
2008
for
the
2010
control
period.
7/
29/
05
Draft
­
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or
Cite
127
If
a
State's
NOx
allocations
are
approved
by
then,
the
Agency
may
record
State
allocations
for
the
2010
control
period.
However,
for
any
CAIR
State
for
which
a
SIP
is
not
approved
by
December
1,
2008,
the
EPA
would
record
Federal
NOx
allocations
for
2010.
Therefore,
if
a
State
obtained
SIP
approval
after
December
1,
2007
but
before
December
1,

2008,
the
State's
NOx
allocations
may
be
recorded
in
source
accounts
for
the
2010
control
period.

The
Agency
proposes
to
record
NOx
allocations
in
source
accounts
by
December
1,
2009
for
the
2011­
2013
control
periods.
Therefore,
if
a
State
obtained
SIP
approval
after
December
1,
2008
but
before
December
1,
2009,
the
State's
NOx
allocations
may
be
recorded
in
source
accounts
for
the
2011­
2013
control
periods.
However,
for
any
CAIR
State
for
which
a
SIP
is
not
approved
by
December
1,
2009,
the
EPA
would
record
Federal
NOx
allocations
for
2011­
2013.

Beginning
with
the
2014
control
period
and
for
each
control
period
thereafter,
EPA
proposes
to
record
Federal
NOx
allocations
in
source
accounts
by
December
1
of
each
year
for
the
control
period
in
the
fourth
year
after
the
recordation
year,
thereby
providing
allowances
about
3
years
in
advance
for
sources
to
plan
their
compliance
strategies.

For
example,
EPA
would
record
allocations
for
the
2014
control
period
by
December
1,
2010.
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
14
As
discussed
in
the
CAIR
NFR
(
70
FR
25278),
based
on
a
SIP
submission
deadline
in
September
2006
there
would
be
less
than
3
years
notice
of
allocations
for
the
first
control
period.

128
The
CAIR
requires
States
to
submit
to
the
Agency
their
unit­
by­
unit
NOx
allocations
for
a
given
year
no
less
than
3
years
prior
to
the
applicable
control
year
to
ensure
sources
have
time
to
plan
for
compliance
(
see
CAIR
NFR
preamble
at
70
FR
25278­
25279)
14.
In
today's
proposal,
EPA
would
record
Federal
NOx
allocations
in
source
accounts
(
in
absence
of
approved
timely
SIP
revisions)
with
less
than
3
years
lead
time
for
the
first
4
control
periods,
i.
e.,
for
2009
through
2012.
Beginning
with
the
2013
control
period,
however,
we
propose
to
record
Federal
allocations
with
about
3
years'

lead
time.
This
proposed
schedule
is
intended
to
balance
the
need
to
provide
sources
their
allocations
in
advance
to
facilitate
planning
for
compliance,
with
the
need
to
preserve
opportunities
for
States
to
allocate
allowances
to
sources
if
they
choose.
The
EPA
acknowledges
that
it
is
preferable
for
sources
to
have
at
least
3
years
lead
time
to
the
extent
feasible.
We
strongly
urge
States
to
submit
timely
CAIR
SIP
revisions
so
that
we
can
approve
revisions
and
record
State
allocations
in
source
accounts
according
to
the
schedule
in
CAIR,
which
would
provide
at
least
3
years
notice
for
all
but
the
first
control
period.
7/
29/
05
Draft
­
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or
Cite
15
The
Agency
does
not
intend
to
wait
until
December
1,
2007
to
record
State
NOx
allocations
for
the
2009
control
period
but
rather
would
record
approved
allocations
as
soon
as
feasible
and
according
to
the
schedule
in
the
CAIR
SIP
rules.
The
EPA
proposes
that
we
would
not
record
Federal
NOx
allocations
for
any
State
until
December
1,
2007
for
the
2009
control
period
in
order
to
provide
the
opportunity
for
State
allocations
to
be
submitted
and
approved.
The
Agency
proposes
the
same
process
for
future
years
as
well
(
i.
e.,
we
would
record
State
allocations
for
the
2010
control
period
as
soon
as
is
feasible
and
according
to
the
schedule
in
the
CAIR
SIP
rules,
but
would
wait
until
December
1,
2008
to
record
Federal
allocations
for
2010
in
order
to
provide
opportunity
for
States
to
allocate).

129
Table
VI­
1,
below,
summarizes
the
Agency's
proposed
timing
for
recording
Federal
NOx
allocations
in
source
accounts.
The
table
shows
the
timing
scheme
through
the
2016
control
period.
Timing
for
subsequent
control
periods
would
follow
the
same
pattern
as
is
shown
for
2014­
2016,

i.
e.,
allocations
would
by
recorded
by
3
years
in
advance
of
the
control
period.

Table
VI­
1.
Proposed
Timing
for
NOx
Allocations15
CAIR
Control
Period
Date
Federal
NOx
Allocations
Are
Recorded
Time
Between
Recordation
Date
and
Beginning
of
Control
Period
2009
December
1,
2007
1
year
2010
December
1,
2008
1
year
2011
December
1,
2009
1
year
2012
December
1,
2009
2
years
2013
December
1,
2009
3
years
2014
December
1,
2010
3
years
2015
December
1,
2011
3
years
2016
December
1,
2012
3
years
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or
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130
The
Agency
intends
to
publish
its
determination
of
Federal
NOx
allocations
for
2009­
2014
in
a
single
notice
(
with
opportunity
for
comment)
prior
to
December
1,
2007.

The
Agency
would
publish
its
determination
of
Federal
NOx
allocations
(
with
opportunity
for
comment)
prior
to
December
1
of
each
year
for
future
years.
For
example,
we
would
publish
Federal
NOx
allocations
for
the
2015
control
period
during
2011.

The
Agency
intends
to
work
with
the
States
to
ensure
that
for
any
State
that
chooses
to
allocate
NOx
allocations
 
either
through
a
full
SIP
revision
or
an
abbreviated
revision
 
the
Agency
will
record
the
State's
allocations
(
contained
in
an
approved
SIP
revision)
in
source
accounts
rather
than
record
Federal
allocations,
as
soon
as
it
is
feasible.
The
proposed
timing
scheme
for
recording
Federal
NOx
allocations
is
intended
to
provide
States
with
as
much
flexibility
as
is
feasible
given
the
available
time,
while
also
providing
sources
time
to
plan
compliance
strategies.

For
States
choosing
to
submit
full
SIP
revisions
for
CAIR,
the
Agency
suggests
they
could
consider
designating
any
of
the
four
specific
elements
that
we
propose
to
accept
in
abbreviated
SIP
revisions
(
e.
g.,
NOx
allocations)
as
being
submitted
for
purposes
of
both
a
full
SIP
revision
and
7/
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05
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­
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or
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16
The
Agency
will
determine
Federal
NOx
allocations
based
on
the
best
available
data.
When
EPA
publishes
its
NOx
allocations,
the
unit­
by­
unit
list
of
allocations
would
not
constitute
a
list
of
affected
sources
and
should
not
be
131
an
abbreviated
revision.
Because
the
Agency
anticipates
that
we
would
be
able
to
approve
abbreviated
SIP
revisions
more
quickly
than
full
revisions,
a
State
could,
by
designating
its
NOx
allocations
as
an
abbreviated
SIP
revision
(
as
well
as
being
part
of
a
full
SIP
revision),

potentially
allow
for
the
allocations
portion
to
be
approved
more
quickly.
This
might
have
benefit,
for
example,
in
a
situation
in
which
it
was
not
feasible
to
approve
a
State's
full
SIP
revision
before
December
1,
2007.
If
the
NOx
allocations
portion
of
the
revision
could
be
approved
by
December
1,
2007,
then
the
State's
allocations
may
be
recorded
in
source
accounts.
Until
the
full
SIP
were
subsequently
approved,
the
other
elements
of
the
trading
programs
would
be
controlled
by
the
Federal
CAIR
programs.

Provisions
for
withdrawal
of
CAIR
FIPs
and
section
126
responses
are
discussed
elsewhere
in
this
preamble.

Today
the
Agency
is
proposing
its
NOx
allocation
methodology
for
the
Federal
CAIR
NOx
cap
and
trade
programs.

The
EPA
intends
to
publish
its
initial
determination
of
unit­
by­
unit
Federal
CAIR
NOx
allocations
in
a
subsequent
notice
of
data
availability
(
NODA).
16
The
public
will
have
7/
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­
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Not
Quote
or
Cite
interpreted
as
such.

132
opportunity
to
comment
on
those
initial
allocations.

In
the
NODA,
the
Agency
intends
to
publish
its
initial
NOx
allocation
determinations
for
the
control
periods
2009
through
2014.
After
public
comment,
the
EPA
would
publish
its
final
determinations
of
allocations
for
2009
through
2014.
Although
EPA
intends
to
publish
its
allocations
for
2009
through
2014
in
a
single
notice,
the
Agency
intends
to
record
allocations
in
source
accounts
one
year
at
a
time
for
2009
and
2010
in
order
to
provide
flexibility
to
States.

Proposed
NOx
Allocation
Methodology
Today's
proposed
NOx
allocation
approach
for
both
annual
and
ozone
season
allowances
is
consistent
with
the
example
methodology
presented
in
the
CAIR
SIP
model
trading
rules.
The
proposed
methodology
is
the
same
for
annual
NOx
allowances
and
for
ozone
season
NOx
allowances,
except
that
the
ozone
season
method
uses
ozone
season
heat
input
not
annual
heat
input.

For
existing
units,
the
proposed
NOx
allocation
methodology
uses
input­
based
allocations,
adjusting
the
heat
input
by
factors
based
on
fuel
type,
as
described
below.
As
in
the
example
allocation
methodology
in
the
CAIR
model
rules,
for
existing
units
the
Agency
proposes
to
use
heat
7/
29/
05
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­
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Not
Quote
or
Cite
133
input
based
on
the
average
of
the
3
highest
amounts
of
a
unit's
adjusted
heat
input
for
5
years
(
2000
through
2004).

The
EPA
also
asks
for
comment
on
using
heat
input
based
on
3
or
4
years
of
data
rather
than
5
years.

For
new
units
that
have
established
baselines,

allocations
would
be
based
on
generation
using
a
modified
output
approach
to
convert
output
to
heat
input
(
described
below),
and
allocations
to
existing
units
would
be
updated
to
take
into
account
new
generation
as
new
units
would
be
allocated
from
the
pool
of
allowances
shared
with
existing
sources.
New
units
that
have
not
yet
established
baseline
data
would
be
allocated
from
a
new
unit
set­
aside.

The
Agency
would
allocate
from
the
State's
EGU
NOx
budget
for
the
first
6
control
periods
(
2009
through
2014)

for
existing
sources
on
the
basis
of
historic
baseline
heat
input.
Consistent
with
CAIR,
January
1,
2001
is
the
proposed
cut­
off
on­
line
date
for
considering
units
as
existing
units.
Allowances
for
2015
and
later
would
be
allocated
from
the
State's
EGU
NOx
budget
annually,
3
years
in
advance.
These
allocations
would
take
into
account
output
data
from
new
units
with
established
baselines
(
modified
by
heat
input
conversion
factors
to
yield
heat
input
numbers,
as
described
below).
As
new
units
enter
into
service
and
establish
a
baseline,
they
would
be
allocated
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or
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134
allowances
in
proportion
to
their
share
of
the
total
calculated
heat
input.
Allowances
allocated
to
existing
units
would
slowly
decline
as
their
share
of
total
calculated
heat
input
decreases
with
the
entry
of
new
units
(
note
that
once
a
baseline
heat
input
is
established
for
existing
units,
this
baseline
heat
input
would
not
change).

New
units
that
have
entered
service
but
have
not
yet
started
receiving
allowances
through
the
updating
of
allocations
would
receive
allowances
each
year
from
a
new
unit
set­
aside.
The
allowances
from
the
set­
aside
would
be
distributed
based
on
a
unit's
actual
emissions
from
the
previous
year,
which
would
provide
allowances
for
use
in
meeting
the
allowance­
holding
requirement
during
the
interim
period
before
the
unit
is
allocated
allowances
on
the
same
basis
as
existing
units.
Consistent
with
the
CAIR
SIP
example
allocation
methodology,
the
new
unit
set­
aside
would
be
equal
to
5
percent
of
a
State's
emission
budget
for
the
years
2009­
2013
and
3
percent
of
a
State's
emission
budget
for
subsequent
years.
New
units
would
begin
receiving
allowances
from
the
set­
aside
for
the
control
period
immediately
following
the
control
period
in
which
the
new
unit
commences
commercial
operation,
based
on
the
unit's
emissions
from
the
preceding
control
period.
Under
the
proposed
CAIR
Federal
cap
and
trade
programs,
EPA
would
7/
29/
05
Draft
­
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Quote
or
Cite
135
allocate
allowances
from
the
set­
aside
to
all
new
units
in
any
given
year
as
a
group.
If
there
are
more
allowances
requested
than
in
the
set­
aside,
allowances
would
be
distributed
on
a
pro­
rata
basis.

As
in
the
CAIR
SIP
example
methodology,
after
5
years
of
operation,
a
new
unit
would
have
an
adequate
operating
baseline
of
output
data
to
be
incorporated
into
the
calculations
for
NOx
allocations
to
all
affected
units.
The
average
of
the
highest
3
years
from
these
5
years
would
be
multiplied
by
the
applicable
heat­
input
conversion
factors
to
calculate
the
heat
input
value
used
to
determine
the
new
unit's
allocation
from
the
pool
of
allowances
for
all
sources.
New
units
would
update
the
heat
input
numbers
only
once
 
for
the
initial
5
year
baseline
period
after
they
start
operating.
As
in
the
CAIR
SIP
example
methodology,

existing
units
as
a
group
would
not
update
their
heat
input,

which
would
eliminate
the
potential
for
a
generation
subsidy.
Retired
units
would
continue
to
receive
allowances
indefinitely,
thereby
creating
an
incentive
to
retire
less
efficient
units.

The
Agency
seeks
comment
on
its
proposed
NOx
allocation
methodology.

Sources
of
Data
for
NOx
Allocations
To
determine
NOx
allocations
for
purposes
of
the
7/
29/
05
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­
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Quote
or
Cite
136
Federal
CAIR
cap
and
trade
programs,
the
Agency
proposes
to
use
heat
input
and
fuel
type
data
reported
to
EPA's
Electronic
Data
Reporting
(
EDR)
system,
where
available,
and
to
use
best
available
heat
input
and
fuel
type
data
(
e.
g.,

data
from
the
Energy
Information
Administration
(
EIA))
where
EDR
data
is
not
available.
The
Agency
proposes
to
use
output
data
reported
to
EPA's
EDR
system.

Adjustments
to
Heat
Input
Data
by
Fuel
Factors
As
in
the
example
allocation
methodology
in
the
CAIR
SIP
model
rules,
today's
proposed
approach
would
include
adjustments
to
heat
input
by
fuel
type,
using
fuel
adjustment
factors
that
are
based
on
average
historic
NOx
emissions
rates
by
three
fuel
types
(
coal,
natural
gas,
and
oil)
for
the
years
1999
­
2002.
These
adjustment
factors
are
1.0
for
coal­
fired
units,
0.6
for
oil­
fired
units,
and
0.4
for
units
fired
with
all
other
fuels
(
e.
g.,
gas).
The
factors
reflect
the
inherently
different
emissions
rates
of
different
fossil
fuel­
fired
units.

Modified
Output
Approach
for
New
Units
As
in
the
CAIR
example
allocation
approach,
the
Agency
proposes
to
allocate
to
new
units
that
have
established
baselines
on
a
"
modified
output"
basis,
by
multiplying
the
unit's
gross
output
by
a
heat
rate
conversion
factor
of
7,900
Btu/
kWh
for
coal
units
and
6,675
Btu/
kWh
for
oil
and
7/
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05
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or
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137
gas
units.
A
conversion
rate
for
each
fuel
type
will
create
consistent
and
level
incentives
for
efficient
generation,

rather
than
favoring
new
units
that
may
have
higher
heat
rates.
The
conversion
factors
are
based
on
assumptions
in
EIA's
Annual
Energy
Outlook
(
AEO)
2004.

Cogeneration
Units
As
in
the
CAIR
SIP
example
methodology,
for
new
cogeneration
units,
allowances
would
be
calculated
by
converting
the
available
thermal
output
(
Btu)
of
useable
steam
from
a
boiler
to
an
equivalent
heat
input
by
dividing
the
total
thermal
output
(
Btu)
by
a
general
boiler/
heat
exchanger
efficiency
of
80
percent.

For
new
combustion
turbine
cogeneration
units,

allowances
would
be
calculated
by
converting
the
available
thermal
output
of
useable
steam
from
a
heat
recovery
steam
generator
(
HRSG)
to
an
equivalent
heat
input
by
dividing
the
total
thermal
output
(
Btu)
by
the
same
efficiency
rate,
then
adding
the
electrical
generation
from
the
combustion
turbine
converted
to
an
equivalent
heat
input
by
multiplying
by
the
conversion
factor
of
3,413
Btu/
kWh.
This
sum
will
yield
the
total
equivalent
heat
input
for
the
cogeneration
unit.
This
approach
focuses
on
the
efficiency
of
a
cogeneration
unit
in
capturing
energy
in
the
form
of
steam
or
heat
from
the
fuel
input.
7/
29/
05
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­
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Not
Quote
or
Cite
138
For
additional
discussion
of
the
example
NOx
allocation
methodology
in
the
CAIR
SIP
model
trading
rules,
see
section
VIII.
D.
in
the
CAIR
NFR
preamble
(
70
FR
25278­
25282).

Alternative
allocation
approach
on
which
the
Agency
seeks
comment:
Providing
sources
owned
by
small
entities
with
a
greater
share
of
allowances
The
EPA
also
seeks
comment
on
allocating
in
such
a
way
as
to
provide
sources
owned
by
small
entities
with
a
greater
share
of
allowances.
The
Agency
convened
a
Small
Business
Advocacy
Review
Panel
that
discussed
options
to
provide
additional
flexibility
to
small
entities.
Specifically,
the
Agency
is
taking
comment
on
an
option
(
proposed
by
one
member
of
the
Panel)
that
would
set
aside
some
percentage
of
States'
annual
NOx
budgets
and
provide
these
allowances
to
certain
small
entity
sources
that
can
demonstrate
economic
hardship
as
a
result
of
the
rule.
Such
an
option
would
necessitate
adjusting
the
number
of
NOx
allowances
available
to
other
affected
sources
in
order
to
ensure
that
the
overall
reduction
requirements
of
CAIR
are
achieved.

Because
EPA
does
not
allocate
SO2
allowances,
the
Agency
could
only
provide
relief
through
NOx
allowance
allocations.

However,
because
allowances
are
fungible,
it
would
be
possible
for
the
burden
on
small
entity
sources
that
would
experience
hardship
as
a
result
of
the
SO2
trading
program
7/
29/
05
Draft
­
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Not
Quote
or
Cite
139
to
be
reduced
through
the
distribution
of
additional
NOx
allowances.
The
EPA
solicits
comments
on
appropriate
criteria
for
establishing
hardship.
See
section
9.4
of
the
Panel
report
(
www.
epa.
gov/
sbrefa)
and
section
IX.
C.
in
this
preamble
for
further
description
of
the
Panel
discussions.

Alternative
allocation
approach
on
which
the
Agency
seeks
comment:
Use
of
an
auction
to
distribute
NOx
allowances
Allowances
can
be
distributed
by
allocating
them
directly
to
sources,
offering
them
for
sale
to
bidders
(
i.
e.,
an
"
auction")
or
a
combination
of
the
two.
Today's
notice
proposes
to
allocate
NOx
allowances
directly
to
emissions
sources.
However,
the
Agency
also
seeks
comment
on
the
desirability
of
using
a
combination
of
direct
allocations
and
auctions
for
distributing
allowances
in
the
proposed
Federal
CAIR
trading
programs.
The
primary
benefit
of
allowance
auctions
is
that
they
are
the
most
economically
efficient
way
to
distribute
allowances.
This
approach
can
ensure
that
all
parties,
including
the
general
public,
have
access
to
allowances.
With
an
auction,
existing
and
new
sources
have
equal
access
to
allowances.
Under
a
combination
approach,
such
as
the
one
we
are
taking
comment
on,
the
affect
of
these
benefits
is
dependent
upon
the
percentage
of
allowances
that
are
auctioned.
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
140
The
EPA
discussed
allowance
auctions
and
took
comment
on
using
auctions
in
the
CAIR
proposal
(
69
FR
4566,
January
30,
2004)
and
supplemental
proposal
(
69
FR
32684,
June
10,

2004).
The
title
IV
Acid
Rain
Program
uses
a
combination
approach
to
distributing
allowances,
reserving
2.8
percent
of
available
allowances
for
an
auction
and
directly
allocating
the
remainder.

The
Agency
seeks
comment
on
using
a
combination
approach
for
distributing
NOx
allowances
in
the
proposed
Federal
CAIR
trading
programs.
The
proposed
approach
is
analogous
to
the
auction
approach
in
the
Administration's
proposed
Clear
Skies
legislation,
and
is
defined
as
follows:

For
the
first
CAIR
NOx
control
period
(
2009)
the
Agency
would
allocate
100
percent
of
the
allowances
using
the
fuel­
factor
adjusted
heat
input
approach
described
above.

For
the
second
control
period
(
2010)
the
Agency
would
allocate
99
percent
of
allowances
to
units
and
auction
the
remaining
1
percent.
The
percentage
of
allowances
distributed
via
auction
would
increase
over
time,
with
the
Agency
distributing
via
auction
an
additional
1
percent
of
allowances
every
year
for
twenty
years,
and
then
an
additional
2.5
percent
of
allowances
every
year
thereafter,

until
eventually
100
percent
of
allowances
would
be
distributed
via
auction.

If
EPA
implemented
allowance
auctions
for
the
Federal
7/
29/
05
Draft
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Quote
or
Cite
141
CAIR
trading
programs,
the
Agency
would
establish
procedures
for
the
frequency
and
timing
of
auctions,
bidding
schedules
and
bidding
mechanisms,
requirements
for
financial
guarantees,
and
other
administrative
requirements
and
procedures
as
necessary
to
implement
allowance
auctions.

The
Agency
seeks
comment
on
appropriate
auction
procedures
for
the
proposed
Federal
CAIR
trading
programs.
Allowance
auctions
are
typically
(
but
are
not
required
to
be)
open
to
any
person,
including
sources
or
third­
party
entities,
that
can
comply
with
the
auction
protocols.
Proceeds
from
any
auction
conducted
for
Federal
CAIR
trading
programs
would
be
deposited
in
the
United
States
Treasury.

Regardless
of
whether
or
not
the
allowance
distribution
approach
taken
by
the
Agency
in
its
Federal
trading
programs
includes
the
use
of
auctions,
the
States
have
full
flexibility
in
determining
the
allocation
method
to
use
in
their
State
CAIR
implementation
plans.
As
discussed
above,

the
EPA
would
allocate
NOx
allowances
to
sources
only
in
a
CAIR­
State
that
does
not
have
a
timely,
approved
full
CAIR
SIP
revision
or
timely,
approved
abbreviated
CAIR
SIP
revision
that
includes
allocations.
A
State
choosing
to
submit
a
full
SIP
revision
or
an
abbreviated
SIP
revision
that
covers
allowance
allocations
could
elect
to
distribute
allowances
using
auctions,
direct
allocations
to
sources,
or
other
methodologies
(
or
combinations
of
methodologies).
The
7/
29/
05
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­
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Not
Quote
or
Cite
142
Agency
intends
to
withdraw
Federal
CAIR
trading
programs
in
coordination
with
approval
of
full
CAIR
SIP
revisions
(
provisions
for
withdrawal
of
CAIR
FIPs
and
section
126
responses
are
discussed
elsewhere
in
this
preamble).

Allocation
of
CSP
Annual
NOx
Allowances
to
Sources
As
discussed
in
section
V,
above,
the
Agency
proposes
that
we
will
distribute
annual
NOx
allowances
from
the
Compliance
Supplement
Pools
(
CSP)
to
sources
for
use
in
complying
with
the
Federal
annual
NOx
cap
and
trade
program.

The
proposed
CSP
amounts
for
each
State
are
the
same
as
in
the
CAIR
NFR,
and
are
shown
in
Table
V­
3
in
today's
action.

The
Agency
is
not
inviting
comment
on
the
State
CSP
amounts.

In
the
CAIR
NFR,
the
Agency
provided
that
a
State
participating
in
the
EPA­
administered
CAIR
SIP
NOx
annual
trading
program
would
distribute
its
CSP
allowances
by
two
mechanisms:
(
1)
to
sources
that
implement
NOx
control
measures
resulting
in
reductions
in
2007
or
2008
that
are
beyond
what
is
required
by
any
applicable
State
or
Federal
emissions
limitation
(
early
reductions);
and,
(
2)
based
on
demonstration
of
need
for
an
extension
of
the
2009
deadline
for
implementing
emission
controls.
See
section
VII.
A.
in
the
CAIR
NFR
preamble
(
70
FR
25256­
25263).

Today,
the
Agency
proposes
to
allocate
CSP
allowances
to
sources
for
use
in
the
Federal
CAIR
annual
NOx
cap
and
trade
program
based
on
the
same
two
mechanisms
as
we
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
143
provided
in
the
CAIR
NFR
for
States
to
use.
However,
we
propose
to
use
a
more
specific
methodology
for
determining
early
reductions
than
the
mechanism
provided
in
the
CAIR
NFR.

The
Agency
proposes
to
award
CSP
allowances
for
early
reductions
to
units
that
B
for
the
years
for
which
they
apply
for
early
reduction
credits
B
are
operating
at
an
annual
NOx
emission
rate
below
0.25
lb/
mmBtu.
In
addition,

the
Agency
proposes
that
if
a
unit
applying
for
early
reduction
credit
is
included
in
a
title
IV
NOx
averaging
plan,
then
the
source
must
demonstrate
that
the
plan­
wide
weighted­
average
NOx
emission
rate
for
the
year
for
which
early
reduction
credit
is
sought
must
be
equal
to
or
lower
than
the
plan­
wide
rate
for
the
year
prior
to
the
year
for
which
credit
is
sought.
Provided
a
unit
met
these
proposed
criteria,
it
could
request
early
reduction
credit
equal
to
the
difference
between
0.25
lb/
mmBtu
and
the
unit's
actual
emission
rate
multiplied
by
the
unit's
actual
heat
input
for
the
applicable
control
period.
In
proposing
these
criteria,

for
early
reductions,
EPA
believes
that
the
criteria
ensure
that
the
award
of
CSP
allowances
will
be
aimed
at
early
reductions
and
that
owners
and
operators
will
be
able
to
make
reasonable
projections
about
how
many
allowances
they
may
receive
for
their
early
reductions.
This
early
reduction
method
is
similar
to
the
method
used
in
the
NOx
7/
29/
05
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­
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Quote
or
Cite
144
SIP
Call
section
126
action
(
65
FR
2674,
January
18,
2000).

The
Agency
seeks
comment
on
this
proposed
method
for
determining
early
reductions.

Under
the
abbreviated
SIP
revision
option
that
the
Agency
proposes
today,
States
could
choose
to
submit
abbreviated
revisions
addressing
distribution
of
CSP
allowances
to
individual
sources.
Such
revisions
would
need
to
include
mechanisms
based
on
early
reductions
as
well
as
based
on
demonstration
of
need.
States
could
choose
to
include
the
early
reduction
mechanism
set
forth
in
the
CAIR
SIP
model
trading
rules
or
could
choose
to
use
the
more
specific
early
reduction
criteria
proposed
in
today's
Federal
trading
rules,
in
addition
to
the
criterion
based
on
demonstration
of
need.

E.
Allocation
of
SO2
Emission
Allowances
to
Sources
The
proposed
Federal
CAIR
SO2
cap
and
trade
program
would
rely
on
title
IV
allowances,
as
does
the
CAIR
SIP
model
SO2
trading
rule.
Title
IV
allowances
have
already
been
allocated
in
perpetuity
to
individual
units
by
title
IV
of
the
CAA
(
70
FR
25278).
Thus,
today's
proposal
does
not
include
an
allocation
methodology
for
SO2
allowances,
except
with
regard
to
opt­
in
units.

F.
Allowance
Banking
Allowance
banking
is
the
retention
of
unused
emissions
allowances
from
1
calendar
year
for
use
in
a
later
calendar
7/
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05
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­
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Quote
or
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145
year.
Banking
allows
sources
to
make
reductions
beyond
required
levels
and
"
bank"
the
unused
allowances
for
use
later.
Generally
speaking,
banking
has
several
advantages.

Allowance
banking
can
encourage
earlier
or
greater
reductions
than
are
required
from
sources,
stimulate
the
market
and
encourage
efficiency,
and
provide
flexibility
in
achieving
emissions
reductions
goals.

The
Agency
proposes
to
allow
unrestricted
banking
under
the
Federal
CAIR
cap
and
trade
programs,
the
same
as
in
the
CAIR
SIP
model
cap
and
trade
programs.
For
additional
discussion
on
allowance
banking
provisions
in
CAIR,
see
section
VIII.
E.
1
in
the
CAIR
NFR
preamble
(
70
FR
25282­
25283).

G.
Incentives
for
Early
Reductions
When
sources
reduce
their
SO2
and
NOx
emissions
prior
to
the
first
phase
of
a
multi­
phase
cap
and
trade
program,

it
creates
a
slope
of
emissions
that
gradually
declines
over
time,
an
emission
reduction
"
glide
path"
that
provides
early
environmental
benefit
and
lowers
the
costs
of
compliance.

Early
reduction
credits
(
ERCs)
can
provide
an
incentive
for
sources
to
install
and/
or
operate
controls
before
the
implementation
dates.
Allowing
emission
allowances
from
existing
programs
to
be
used
for
compliance
in
new
programs
is
another
mechanism
to
encourage
early
reductions
prior
to
the
start
of
cap
and
trade
programs.
See
further
discussion
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
146
of
this
topic
in
section
VIII.
F.
of
the
CAIR
NFR
preamble
(
70
FR
25284­
25286).

As
in
the
CAIR
SIP
model
trading
rules,
the
proposed
Federal
CAIR
cap
and
trade
programs
would
provide
incentives
for
early
reductions
in
each
of
the
three
programs
(
the
SO2
program,
NOx
program,
and
ozone
season
NOx
program),
as
described
below.

1.
SO2
Program
The
proposed
Federal
CAIR
SO2
cap
and
trade
program
would
allow
for
affected
sources
to
use
title
IV
SO2
allowances
of
vintage
2009
and
earlier
for
compliance
with
the
Federal
CAIR
program
at
a
1­
to­
1
ratio.
This
approach
was
part
of
the
CAIR
policy
case
assumptions
used
in
the
rulemaking
modeling
and
the
EPA
has
shown
that
the
SO2
cap
and
trade
program,
with
this
early
incentive
mechanism,
will
achieve
the
level
of
SO2
reductions
needed
to
meet
the
CAIR
goals.
This
proposed
early
reduction
incentive
is
identical
to
the
SO2
incentive
in
the
CAIR
SIP
model
cap
and
trade
programs.

2.
NOx
Program
The
proposed
Federal
CAIR
NOx
cap
and
trade
program
would
provide
incentives
for
early
annual
NOx
reductions
by
creating
a
Compliance
Supplement
Pool
(
CSP)
for
each
affected
State,
from
which
EPA
could
distribute
allowances
for
early,
surplus
NOx
emissions
reductions
occurring
in
the
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
147
years
2007
and
2008,
as
described
above.
The
Agency's
proposed
method
for
allocating
CSP
allowances
to
States
is
explained
above.
As
in
the
CAIR
SIP
rule,
the
CSP
for
today's
proposal
would
provide
a
total
of
about
200,000
annual
NOx
allowances
of
vintage
2009
for
the
CAIR
region,

apportioned
to
each
State,
which
would
be
in
addition
to
each
State's
annual
NOx
budgets.
Table
V­
3
in
this
preamble
provides
the
CSP
amounts
by
State.
The
Agency
is
not
inviting
comment
on
the
CSP
amounts
that
were
determined
in
CAIR.
This
proposed
early
reduction
incentive
is
identical
to
the
annual
NOx
incentive
in
the
CAIR
SIP
rule,
except
that
we
are
proposing
a
more
specific
methodology
for
determining
early
reductions
than
the
criteria
in
the
CAIR
SIP
rule.

3.
Ozone
Season
NOx
Program
The
proposed
Federal
CAIR
ozone
season
NOx
cap
and
trade
program
would
allow
the
use
of
NOx
SIP
Call
allowances
of
vintage
years
2008
and
earlier
for
compliance
with
the
Federal
CAIR
ozone
season
program.
This
mechanism
would
provide
an
incentive
for
sources
in
NOx
SIP
Call
States
to
reduce
their
ozone
season
NOx
emissions
early
and
bank
additional
allowances
into
the
Federal
CAIR
ozone
season
program.
This
proposed
early
reduction
incentive
is
identical
to
the
ozone
season
NOx
incentive
in
the
CAIR
SIP
cap
and
trade
programs.
7/
29/
05
Draft
­
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Not
Quote
or
Cite
148
H.
Monitoring
and
Reporting
Requirements
Under
the
CAIR
SIP
model
cap
and
trade
rules,
sources
are
required
to
monitor
and
report
NOx
and
SO2
mass
emissions
in
accordance
with
40
CFR
part
75.
(
See
Section
VIII.
H.
of
the
CAIR
NFR
preamble,
70
FR
25288.)
Many
CAIR
sources
are
measuring
and
reporting
SO2
mass
emissions
and
NOx
emission
rate
year
round
under
the
Acid
Rain
Program.

Many
additional
sources
are
also
reporting
NOx
mass
emissions
at
least
during
the
ozone
season
and
often
year
round
under
the
NOx
SIP
Call.
The
CAIR
SIP
model
rules
require
continuous
measurement
of
NOx
mass
emissions
by
all
affected
sources
by
January
1,
2008
using
part
75
certified
monitoring
methodologies
for
the
NOx
annual
program
and
May
1,
2008
for
the
NOx
ozone
season
program.
SO2
emissions
must
be
monitored
by
those
same
sources
beginning
January
1,

2009.

Today's
proposal
requires
Part
75
monitoring
and
reporting
for
all
sources
subject
to
the
Federal
CAIR
cap
and
trade
programs.
This
is
consistent
with
the
CAIR
SIP
model
cap
and
trade
programs.
For
additional
discussion
on
monitoring
and
reporting
requirements,
see
Section
VIII.
H.

in
the
CAIR
NFR
preamble
(
70
FR
25288).

I.
Differences
Between
the
Proposed
Federal
CAIR
Cap
and
Trade
Programs
and
the
CAIR
SIP
Rules
The
proposed
Federal
CAIR
NOx
and
SO2
cap
and
trade
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
149
programs
are
largely
the
same
as
the
CAIR
SIP
model
trading
programs.
The
EPA
intends
the
proposed
Federal
CAIR
cap
and
trade
rules
to
be
as
similar
as
possible
to
the
CAIR
SIP
model
cap
and
trade
rules
so
that
the
two
sets
of
rules
will
operate
as
single
integrated
cap
and
trade
programs,
one
for
annual
NOx,
one
for
SO2,
and
one
for
ozone
season
NOx.

However,
the
Agency
is
proposing
certain
limited
differences
as
described
below.
These
differences
arise
primarily
from
the
need
for
Federal
implementation
of
the
programs
rather
than
State
implementation
and
to
facilitate
the
transition
from
Federal
implementation
to
State
implementation.
Note
that
the
proposed
Federal
CAIR
cap
and
trade
programs
include
all
of
the
mandatory
elements
that
States
must
include
in
order
to
participate
in
the
EPA­
administered
cap
and
trade
programs
for
CAIR
(
the
SIP
model
trading
rules).

This
section
describes
the
main
differences
between
the
proposed
Federal
CAIR
trading
rules
and
the
CAIR
SIP
rules.

This
is
not
an
exhaustive
list
of
differences.

NOx
Allocations
As
discussed
above,
the
proposed
NOx
allocation
methodology
for
the
Federal
CAIR
annual
and
ozone
season
NOx
trading
programs
is
consistent
with
the
sample
NOx
allocation
methodology
in
the
CAIR
SIP
model
trading
rules.

However,
timing
for
recordation
of
NOx
allowances
in
source
accounts
differs
in
the
proposed
Federal
CAIR
rules
compared
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
150
to
the
SIP
model
rules
(
see
timing
discussion,
above).

Additionally,
when
the
Agency
allocates
NOx
allocations,
we
follow
notice
and
comment
procedures
consistent
with
Federal
law
(
the
Administrative
Procedures
Act),
whereas
under
a
SIP,
a
State
follows
its
own
administrative
procedures
(
e.
g.,
for
notice
and
comment).
Further,
the
proposed
Federal
CAIR
rules
include
criteria
for
"
best
available
data"
for
purposes
of
NOx
allocations
(
in
absence
of
continuous
emission
monitoring
systems
(
CEMS)
data),
which
are
not
included
in
the
SIP
model
rules.

Criteria
for
allocating
CSP
allowances
to
sources
As
discussed
above,
the
proposed
Federal
CAIR
rules
include
a
more
specific
methodology
for
determining
early
reductions
for
purposes
of
allocating
CSP
allowances
than
the
mechanism
in
the
CAIR
SIP
model
rules.

Abbreviated
SIP
revisions
As
discussed
above,
the
Agency
proposes
to
give
States
the
option
to
retain
control
of
certain
elements
of
the
Federal
CAIR
trading
programs
without
submitting
full
SIP
revisions.
States
could
submit
abbreviated
SIP
revisions
that
cover
any
of
the
following
four
specific
elements:
(
1)

non­
EGU
opt­
ins,
(
2)
allocation
of
NOx
allowances
to
individual
sources,
(
3)
allocation
of
annual
NOx
Compliance
Supplement
Pool
(
CSP)
allowances
to
individual
sources,
and
(
4)
inclusion
of
non­
CAIR
NOx
SIP
Call
trading
sources
in
7/
29/
05
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­
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Not
Quote
or
Cite
151
the
Federal
CAIR
ozone
season
NOx
trading
program.

Applicability
The
EPA
intends
the
applicability
provisions
specifying
units
covered
by
the
CAIR
Federal
trading
programs
to
be
identical
to
those
provisions
in
the
CAIR
SIP
rules.
As
discussed
elsewhere
in
today's
preamble,
the
Agency
is
proposing
certain
changes
to
the
applicability
provisions
in
the
CAIR
SIP
rules.
The
proposed
applicability
provisions
for
the
Federal
CAIR
trading
programs
are
the
same
as
those
for
the
CAIR
SIP
rules
if
today's
proposed
changes
to
the
CAIR
SIP
rules
are
finalized.

Definitions
The
EPA
is
proposing
to
use
the
same
definitions
as
those
that
apply
in
the
CAIR
SIP
rules
with
a
few
exceptions
that
are
necessary
to
reflect
Federal
implementation
rather
than
State
implementation.

Issuance
of
NOx
allowances
allocations
The
Administrator,
rather
than
the
permitting
authority,
would
allocate
NOx
allowances
under
the
Federal
CAIR
cap
and
trade
programs,
unless
an
abbreviated
SIP
revision
is
approved
providing
for
State
allocation
of
allowances.

Monitoring
and
reporting
requirements
The
proposed
Federal
CAIR
monitoring
and
reporting
provisions
(
including,
among
other
things,
general
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
152
requirements,
initial
certification
and
recertification
procedures,
out
of
control
periods,
notifications,

recordkeeping
and
reporting,
and
petitions)
are
essentially
the
same
as
the
monitoring­
related
provisions
of
CAIR
SIP
model
trading
rules.
The
differences
between
the
provisions
reflect
the
fact
that
the
Agency
would
oversee
administration
of
the
monitoring
requirements,
rather
than
both
the
Agency
and
the
permitting
authority
overseeing
the
requirements
as
in
the
CAIR
SIP
rules.
As
a
result,
for
example,
monitoring
certification
applications
would
be
submitted
to
the
Administrator,
and
the
Administrator,

rather
than
the
permitting
authority,
would
act
on
the
applications.
By
further
example,
the
Administrator
would
handle
all
audit
decertifications
and
all
petitions
for
alternatives
to
the
monitoring
requirements.

J.
Coordination
Between
the
Proposed
Federal
CAIR
Cap
and
Trade
Programs
and
CAIR
SIPs
The
EPA
intends
that
if
States
choose
to
meet
their
emission
reduction
obligations
under
CAIR
by
participating
in
the
EPA­
administered
CAIR
SIP
NOx
and
SO2
trading
programs,
such
programs
will
be
fully
integrated
with
respective
Federal
CAIR
NOx
and
SO2
trading
programs
that
EPA
may
promulgate
in
a
final
FIP
or
in
a
final
section
126
response.
The
sources
covered
in
the
CAIR
SIP
model
trading
rules
are
the
same
types
of
sources
named
in
the
section
126
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
153
petition
(
except
that
the
petition
names
a
subset
of
the
States
affected
by
CAIR)
and
are
the
same
types
as
the
sources
that
EPA
proposes
to
regulate
in
the
proposed
CAIR
FIP
and
section
126
remedy.

The
SO2
allowances
under
the
CAIR
SIP
SO2
trading
program,
CAIR
FIP
SO2
trading
program,
or
section
126
SO2
trading
program
would
all
be
termed
"
CAIR
SO2
allowances"

and
could
be
used
for
compliance
with
the
allowance­
holding
requirement
in
any
of
these
trading
programs.
The
NOx
annual
allowances
under
the
CAIR
SIP,
CAIR
FIP,
or
section
126
NOx
trading
program
would
all
be
termed
"
CAIR
NOx
allowances"
and
could
be
used
for
compliance
in
any
of
these
trading
programs.
The
NOx
ozone
season
allowances
under
the
CAIR
SIP
or
CAIR
FIP
ozone
season
NOx
trading
program
would
all
be
termed
"
CAIR
Ozone
Season
NOx
allowances"
and
could
be
used
for
compliance
in
either
of
these
programs.

The
proposed
regulatory
text
for
the
CAIR
FIP
provides
that
allowances
issued
under
a
CAIR
FIP
or
CAIR
SIP
trading
program
could
be
used
for
compliance
in
the
CAIR
FIP
trading
program
(
within
each
of
the
respective
trading
programs
B
SO2,
annual
NOx,
or
ozone
season
NOx).
Today's
proposal
also
includes
revisions
to
the
CAIR
SIP
model
trading
rules
that
would
provide
that
allowances
issued
under
a
CAIR
FIP
or
CAIR
SIP
trading
program
could
be
used
for
compliance
in
the
CAIR
SIP
trading
program
(
within
the
respective
SO2,
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
154
annual
NOx,
or
ozone
season
NOx
trading
programs).

As
discussed
above,
today's
proposal
does
not
include
regulatory
text
for
the
proposed
section
126
remedy.
If
the
Agency
promulgates
regulatory
text
for
the
section
126
remedy,
the
text
would
include
a
provision
that
allowances
issued
under
a
CAIR
FIP,
CAIR
SIP,
or
section
126
trading
program
could
be
used
for
compliance
in
any
of
these
programs
(
within
the
respective
emissions
trading
programs).

In
that
case,
the
Agency
would
propose
corresponding
changes
to
the
CAIR
FIP
and
SIP
trading
rules
to
provide
that
allowances
issued
under
a
CAIR
FIP,
CAIR
SIP,
or
section
126
trading
program
could
be
used
for
compliance
in
any
of
these
programs.

K.
Relationship
of
Emissions
Trading
Programs
to
Section
126
Relief
In
its
petition,
North
Carolina
states
that
"
EPA
cannot
allow
interstate
trading
of
emissions
allowances
to
thwart
North
Carolina's
remedy
under
section
126."
Petition
p.
25.

The
State's
concern
is
that
under
a
regionwide
trading
program,
EGUs
in
upwind
States
which
contribute
to
North
Carolina
nonattainment
might
not
in
fact
reduce
their
emissions
(
or
might
not
reduce
emissions
sufficiently
for
North
Carolina's
purposes)
since
they
could
purchase
allowances
from
non­
contributing
(
or
less­
contributing)

EGUs.
Id.
p.
26.
North
Carolina
believes
this
result
to
be
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
155
"
irrational"
because
EPA
"
would
have
made
the
technical
finding
of
contribution
without
requiring
a
real
remedy".

Id.

EPA
disagrees.
As
explained
above
in
section
II.
A.,
a
finding
of
whether
there
is
a
violation
of
section
126
turns
on
whether
there
is
a
violation
of
section
110(
a)(
2)(
D),

i.
e.,
whether
upwind
States
are
contributing
significantly
to
nonattainment
or
interfering
significantly
with
maintenance
in
downwind
receptors.
Upwind
States
contribute
significantly
if
collective
contribution
is
above
a
designated
amount
and
highly
cost­
effective
controls
are
available
to
reduce
emissions.
In
CAIR,
EPA
determined
the
extent
of
reductions
required
to
eliminate
significant
contribution
(
i.
e.,
to
remove
the
section
110(
a)(
2)(
D)

violation)
and
expressed
the
reductions
as
statewide
budgets
of
the
PM2.5
precursors
SO2
and
NOx
susceptible
to
reduction
by
highly
cost­
effective
controls.
Emissions
trading
(
within
the
constraints
of
the
emissions
caps
based
on
these
statewide
emission
budgets)
is
one
means
of
implementing
highly
cost­
effective
controls
and
consequently
is
a
lawful
(
and
CAIR­
authorized)
means
of
eliminating
a
section
110(
a)(
2)(
D)
violation.

It
therefore
follows
that
once
a
section
110(
a)(
2)(
D)

violation
is
eliminated,
there
is
no
section
126
violation
since
the
basis
for
the
section
126
finding
would
not
7/
29/
05
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Not
Quote
or
Cite
17Indeed,
North
Carolina's
petition
itself
essentially
recognizes
this
point,
since
the
petition
notes
(
correctly)
that
section
110(
a)(
2)(
D)
and
section
126
are
co­
extensive
for
purposes
of
what
constitutes
a
violation.
Id.
p.
3.
The
petition
likewise
accepts
the
CAIR
definition
of
"
significant
contribution"
and
agrees
with
the
statewide
emission
budgets
proposed
in
CAIR.
Id.
p.
21.

156
exist.
17
The
violation
can
be
eliminated
through
EPA
adopting
a
FIP
containing
the
CAIR
trading
programs
or
through
EPA
approving
a
SIP
containing
the
CAIR
trading
programs
(
or
approving
a
SIP
containing
the
other
emission
reduction
options
specified
in
CAIR).

For
the
same
reasons,
if
EPA
chooses
to
act
directly
under
section
126
by
making
the
section
126(
b)
findings
and
adopting
a
remedy
pursuant
to
section
126(
c)
(
rather
than
eliminating
the
section
110(
a)(
2)(
D)
violation
by
means
of
a
FIP),
EPA
could
"
bring
about
compliance
with
the
requirements
contained
in
section
[
110(
a)(
2)(
D)]"
(
CAA
section
126(
c))
by
adopting
the
CAIR
FIP
trading
programs,

for
the
States
containing
sources
linked
to
North
Carolina
PM2.5
NAAQS
nonattainment
or
maintenance
problems.
This
result
necessarily
follows
because,
as
just
explained,
these
CAIR
FIP
provisions
eliminate
the
significant
contribution
to
North
Carolina
nonattainment
and
maintenance
of
the
PM2.5
NAAQS.

In
any
event,
the
Agency
believes
that
upwind
sources
in
States
that
were
found
to
contribute
significantly
to
7/
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05
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or
Cite
18
See
discussion
of
EPA's
modeling
using
IPM
in
section
V
in
this
preamble.
For
further
description,
see
section
IV
in
the
CAIR
NFR
preamble
(
70
FR
25196­
25197)
as
well
as
a
technical
support
document
entitled
"
Modeling
of
Control
Costs,
Emissions,
and
Control
Retrofits
for
Cost
Effectiveness
and
Feasibility
Analyses"
in
the
CAIR
docket.

19
The
IPM
projects
plant­
level
SO2
and
NOx
emissions
under
interstate
emissions
cap
and
trade
programs.
Emissions
trading
allows
sources
to
find
the
least
cost
compliance
strategy.

20
The
CAIR
annual
NOx
program
includes
a
compliance
supplement
pool
of
about
200,000
allowances
for
the
entire
CAIR
region,
the
use
of
which
could
lead
to
slightly
higher
NOx
emissions
in
some
CAIR
States
than
the
projections
shown
in
the
CAIR
NFR.

157
North
Carolina
nonattainment
will
in
fact
reduce
emissions
of
PM2.5
precursors
under
the
CAIR
trading
regime.
The
Agency
used
the
Integrated
Planning
Model
(
IPM)
to
project
emission
and
cost
impacts
of
CAIR.
18
The
EPA
modeled
the
CAIR
requirements
assuming
interstate
emissions
trading
programs
for
EGUs.
We
modeled
three
separate
regionwide
EGU
emissions
trading
programs
(
an
annual
SO2
program,
an
annual
NOx
program,
and
an
ozone
season
NOx
program).
The
Agency's
IPM
modeling
for
the
CAIR
NFR
B
which
assumes
interstate
emissions
trading19
 
projects
decreases
in
annual
SO2
and
NOx
emissions
under
CAIR
compared
to
the
Base
Case
(
without
CAIR)
in
both
2010
and
2015
for
each
of
the
States
found
in
the
CAIR
NFR
analysis
to
contribute
significantly
to
nonattainment
of
the
PM2.5
NAAQS
in
North
Carolina.
20
Moreover,
the
emission
reductions
under
CAIR
are
likely
7/
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or
Cite
158
to
be
sufficient
to
eliminate
PM2.5
nonattainment
in
North
Carolina.
In
the
CAIR
NFR,
the
Agency
presented
its
modeling
of
the
Base
Case,
which
projects
that
10
States
would
contribute
significantly
to
PM2.5
nonattainment
in
North
Carolina
in
2010
without
CAIR
(
see
discussion
in
section
III
in
this
preamble).
Under
CAIR,
however,
EPA's
modeling
projects
that
by
2010
there
will
be
no
remaining
PM2.5
nonattainment
counties
in
North
Carolina,
thus
no
States
contributing
to
nonattainment.
These
projected
CAIR
impacts
are
likewise
from
EPA's
CAIR
modeling
with
interstate
emissions
trading.

This
discussion
of
the
Agency's
analysis
of
CAIR
is
informational
and
is
not
intended
to
reopen
or
reconsider
any
issue
related
to
that
analysis.

Air
quality
modeling
results
are
in
the
Air
Quality
Modeling
Technical
Support
Document
for
the
Final
Clean
Air
Interstate
Rule,
March
2005,
Appendix
F.
The
EGU
emissions
modeling
for
the
CAIR
NFR
is
in
the
CAIR
docket.
State­
by­

State
summaries
of
projected
emissions
impacts
of
CAIR
are
on
the
CAIR
website
at
epa.
gov/
cair/
where.
html.

L.
Interactions
with
Other
CAA
Programs
In
the
CAIR
NFR
preamble,
section
IX
discusses
interactions
between
the
NOx
SIP
Call
and
CAIR.
Section
IX
also
discusses
interactions
between
the
title
IV
Acid
Rain
7/
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05
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or
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159
Program
and
CAIR.
Today's
proposal
covers
the
same
States
as
the
CAIR
(
this
proposal
includes
Delaware
and
New
Jersey
for
PM2.5
purposes
which
is
consistent
with
EPA's
proposal
at
70
FR
25408)
and
uses
Federal
trading
programs
that
are
substantively
identical
to
the
CAIR
SIP
model
trading
rules,

thus
the
interactions
would
be
as
described
in
CAIR
(
70
FR
25289­
25299).

VII.
What
Are
the
Revisions
to
the
CAIR?

In
today's
action,
EPA
is
proposing
a
number
of
revisions
of
the
regulations
issued
as
part
of
the
CAIR.

The
proposed
revisions
to
CAIR,
explained
in
greater
detail
below,
are
primarily
intended
to
facilitate
federal
implementation
of
the
CAIR
and
to
facilitate
interaction
between
the
proposed
EPA­
administered
Federal
CAIR
trading
programs
and
any
EPA­
administered
State
CAIR
trading
programs
established
through
an
approved
SIP
revision
to
meet
the
requirements
of
the
CAIR.

One
of
the
proposed
revisions
revisits
the
treatment
of
municipal
waste
combustors
in
the
final
CAIR.
As
part
of
this
action,
therefore,
EPA
is
also
granting
the
petitions
for
reconsideration
submitted
by
the
Integrated
Waste
Service
Association
and
by
the
Commonwealth
of
Massachusetts
Department
of
Environmental
Protection
regarding
CAIR's
treatment
of
MWCs.
In
granting
these
petitions,
EPA
agrees
7/
29/
05
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or
Cite
160
only
to
reconsider
the
treatment
of
MWCs
in
the
final
CAIR
and
is
taking
notice
and
comment
on
the
MWC
issue
it
is
reconsidering
in
this
rulemaking
proceeding.
EPA
is
accepting
comments
on
the
limited
changes
proposed
to
CAIR,

including
those
that
affect
the
treatment
of
MWCs.

With
regard
to
§
51.123
in
the
CAIR,
EPA
is
proposing
to
add
provisions
that
allow
states
to
submit
abbreviated
SIP
revisions
­­
as
discussed
above
in
Sections
IV
and
VI
of
this
preamble
­­
that
would
have
to
meet
certain
requirements
and
that,
if
approved,
would
be
integrated
with
the
FIP
trading
programs
and
replace
portions
of
the
programs
or
modify
application
of
the
programs
to
sources
in
the
State.
In
particular,
a
State
could
submit
an
abbreviated
SIP
revision
providing
for
the
permitting
authority
(
instead
of
the
Administrator)
to
allocate
CAIR
NOx
allowances
in
the
Federal
CAIR
NOx
Annual
Trading
Program.
The
abbreviated
SIP
revision
could
also
provide
for
the
permitting
authority
to
allocate
the
compliance
supplement
pool
in
the
Federal
CAIR
NOx
Annual
Trading
Program.
Similarly,
the
State
could
submit
an
abbreviated
SIP
revision
providing
for
the
expansion
of
the
applicability
provisions
of
the
Federal
CAIR
NOx
Ozone
Season
Trading
Program
to
include
all
units
in
the
State's
NOx
Budget
Trading
Program
that
are
not
already
covered
by
7/
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05
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or
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161
such
applicability
provisions.
The
abbreviated
SIP
revisions
could
also
provide
for
the
permitting
authority
to
allocate
CAIR
NOx
Ozone
Season
allowances
under
the
Federal
CAIR
NOx
Ozone
Season
Trading
Program.
The
abbreviated
SIP
revision
could
also
provide
for
the
inclusion
of
non­
EGU
opt­
ins
in
the
Federal
CAIR
trading
programs.
These
changes
will
facilitate
transfer
from
an
EPA­
administered
Federal
CAIR
trading
program
to
any
EPA­
administered
State
CAIR
trading
program.

Also,
included
in
today's
proposal
are
corresponding
provisions
in
the
Federal
CAIR
trading
program
regulations
that
would
modify
the
allocation
or
applicability
sections
to
be
consistent
with
such
approved
abbreviated
SIP
revisions
under
§
51.123.
For
example,
the
Federal
CAIR
NOx
Annual
Trading
Program
provides
that,
if
an
abbreviated
SIP
revision
setting
forth
procedures
for
allowance
allocations
by
the
permitting
authority
is
approved,
the
provisions
in
that
SIP
revision
would
replace
the
provisions
otherwise
in
effect
in
that
trading
program
for
allowance
allocation
by
the
Administrator.
By
further
example,
the
Federal
CAIR
NOx
Ozone
Season
Trading
Program
provides
that,
if
an
abbreviated
SIP
revision
setting
forth
expanded
applicability
provisions
to
include
NOx
Budget
units
not
already
in
CAIR
is
approved,
the
applicability
provisions
in
7/
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05
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or
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162
the
trading
program
would
be
expanded
to
include
such
units.

These
changes
will
also
facilitate
transfer
from
a
Federal
CAIR
trading
program
to
a
State
CAIR
trading
program.

In
addition
to
the
proposed
revisions
to
§
51.123
providing
for
abbreviated
SIP
revisions,
today's
action
proposes
other
revisions
to
both
§
51.123
and
§
51.124
in
order
to
clarify
the
definition
of
"
EGU"
in
those
rules.
In
particular,
as
discussed
above
in
Section
VI
of
the
preamble,
the
status
of
solid
waste
incinerators
under
the
CAIR
is
unclear.
EPA
did
not
intend
for
the
CAIR
to
require
state's
that
elect
to
participate
in
the
EPA­
administered
CAIR
trading
program
to
regulate
solid
waste
incineration
units.
In
addition,
the
CAIR
FIP
is
not
intended
to
directly
regulate
solid
waste
incineration
units.
The
proposed
revisions
of
the
"
EGU"
definition
address
these
issues.
The
proposed
revisions
would
establish
a
specific
exemption
for
certain
solid
waste
incineration
units,

analogous
to
an
exemption
for
such
units
under
the
Acid
Rain
Program.
In
addition,
the
status,
under
the
CAIR,
of
units
that
formerly
generated
electricity
for
sale
but
stopped
doing
so
many
years
ago
warrants
further
clarification.
The
proposed
revisions
to
the
"
EGU"
definition
state
that,
in
order
to
be
an
EGU,
a
unit
must
serve
a
generator
producing
electricity
for
sale
at
any
time
since
the
later
of
November
7/
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or
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163
15,
1990
or
the
start­
up
of
the
unit's
combustion
chamber.

This
proposed
approach
is
analogous
to
the
approach
under
the
Acid
Rain
Program.
This
proposed
approach
also
makes
consistent
EPA's
position
on
this
issue
in
the
CAIR
and
the
CAIR
FIP
proposed
today.

Today's
action
also
includes
proposed
revisions
to
the
regulations
setting
forth
the
CAIR
model
trading
programs.

There
are
three
categories
of
revisions.
The
first
category
includes
revisions
to
clarify
certain
aspects
of
the
CAIR
model
trading
programs.
This
category
of
changes
primarily
intends
to
ensure
consistency
between
the
CAIR
model
trading
rules
and
the
proposed
Federal
CAIR
trading
programs.
For
example,
revisions,
analogous
to
the
proposed
revisions
to
the
"
EGU"
definition
in
§
§
51.123
and
51.124,
are
proposed
for
the
applicability
provisions
of
the
CAIR
model
trading
programs
to
exclude
certain
solid
waste
incineration
units
and
certain
units
that
stopped
before
November
15,
1990,
and
do
not
resume,
serving
a
greater­
than­
25
MW
generator
producing
electricity
for
sale.
Further,
the
definitions
of
some
terms
in
the
CAIR
model
trading
programs
("
commence
commercial
operation"
and
"
commence
operation")
are
also
revised
consistent
with
the
exclusion
of
units
that,
before
November
15,
1990,
stopped
serving
a
greater­
than­
25MW
generator
producing
electricity
for
sale.
These
revisions
7/
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05
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or
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164
make
the
CAIR
model
trading
rules
consistent
with
the
proposed
applicability
provisions
and
definitions
for
the
Federal
CAIR
trading
programs.

Another
set
of
revisions
are
proposed
to
clarify
the
interaction
of
the
application
of
excess
emission
penalties
for
sources
that
are
subject
to,
and
have
excess
emissions
under,
both
the
Acid
Rain
Program
and
the
CAIR
SO2
trading
program.
Under
the
existing
CAIR
SO2
model
trading
rule,

the
Administrator
first
determines,
for
a
source
in
both
the
Acid
Rain
Program
and
the
CAIR
SO2
trading
program,
whether
the
source
holds
enough
allowances
to
cover
emissions
under
the
Acid
Rain
Program
and
then
whether
the
source
holds
enough
allowances
to
cover
emissions
under
the
CAIR
SO2
trading
program.
To
the
extent
a
source
fails
to
hold
enough
allowances
and
so
has
excess
emissions
under
the
Acid
Rain
Program,
the
owners
and
operators
must
provide
the
Administrator
one
allowance
from
the
next
year
to
offset
each
ton
of
excess
emissions
and
pay
a
$
2,000
inflationadjusted
penalty
per
ton
of
excess
emissions.
To
the
extent
the
source
also
fails
to
hold
enough
allowances
and
so
has
excess
emissions
under
the
CAIR
SO2
trading
program,
the
owners
and
operators
must
provide
a
tonnage
equivalent
of
allowances
equaling
3
times
(
including
a
one­
for­
one
offset)

the
tonnage
of
the
excess
emissions.
As
a
result,
the
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29/
05
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or
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165
owners
and
operators
may
be
liable,
for
a
given
ton
of
excess
emissions,
for
both
the
offset
and
dollar
penalty
under
the
Acid
Rain
Program
and
the
three­
for­
one
allowance
deduction.

Under
the
proposed
revisions,
for
a
given
ton
of
SO2
excess
emissions
at
a
source,
the
owners
and
operators
will
be
liable
for
either
the
offset
and
dollar
penalty
under
the
Acid
Rain
Program
or
the
three­
for­
one
allowance
deduction
under
the
CAIR
trading
program.
EPA
believes
that
the
Acid
Rain
dollar
penalty,
which
is
currently
about
$
3,000
per
ton
of
excess
emissions
(
due
to
the
inflation
adjustment
of
the
original
$
2,000
per
ton
penalty)
is
sufficiently
large
to
provide
a
strong
incentive
for
compliance
with
the
allowance­
holding
requirement
with
regard
to
any
tons
of
excess
emissions
under
the
Acid
Rain
Program.
Under
the
proposal,
any
tons
of
excess
emissions
that
a
source
under
both
the
Acid
Rain
and
CAIR
trading
programs
has
beyond
the
Acid
Rain
Program
excess
emissions
would
be
subject
to
the
three­
for­
one
allowance
deduction
under
the
CAIR
trading
program.
The
EPA
maintains
that
it
is
unnecessary
to
apply
to
a
given
ton
of
excess
emissions
both
the
Acid
Rain
and
CAIR
trading
program
penalties.
The
EPA
also
notes
that
the
proposed
revisions
would
address
only
the
automatic
penalties
under
the
two
programs
and
would
not
affect
in
any
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166
way
the
ability
to
impose,
through
enforcement
actions,

additional
discretionary
civil
or
criminal
penalties.

The
second
category
of
revisions
to
the
CAIR
model
trading
rules
includes
those
necessary
to
integrate
the
State
CAIR
trading
programs
with
the
appropriate
Federal
CAIR
trading
programs.
As
discussed
above
in
Section
VI
of
the
preamble,
EPA's
intention
is
that
the
State
CAIR
trading
programs
for
those
States
with
approved
SIP
revisions
and
the
Federal
CAIR
trading
programs
for
those
States
without
approved
SIP
revisions
(
or
with
only
approved
abbreviated
SIP
revisions)
would
all
operate
together
as
integrated
trading
programs,
one
integrated
program
covering
NOx
annual
emissions,
one
covering
SO2
annual
emissions,
and
one
covering
NOx
ozone
season
emissions.
Certain
revisions
to
the
CAIR
model
trading
programs
(
and
certain
analogous
provisions
in
the
Federal
CAIR
trading
programs)
are
necessary
to
accomplish
this
integration.
For
example,
the
definition
of
"
CAIR
NOx
allowance"
is
revised
in
order
to
ensure
that
NOx
allowances
issued
in
a
Federal
CAIR
NOx
annual
trading
program
are
treated
the
same
in
the
State
CAIR
NOx
annual
trading
program
as
(
and
so
is
interchangeable
with)
NOx
allowances
issued
in
the
latter
program.
The
definitions
of
"
CAIR
SO2
allowance"
and
"
CAIR
NOx
Ozone
Season
allowance"
are
similarly
revised.
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The
third
category
of
revisions
includes
minor
corrections
of
the
CAIR
model
trading
program
regulations.

These
changes
are
intended
to
facilitate
federal
implementation
of
the
CAIR
and
ensure
consistency
between
State
CAIR
trading
programs
and
the
Federal
CAIR
trading
programs
by
removing
ambiguities
in
the
CAIR.
For
example,

certain
provisions
of
the
current
CAIR
SO2
model
trading
rule
reference
non­
existent
provisions
about
SO2
allowance
allocations.
EPA
is
proposing
to
remove
the
provisions
that
include
these
references.

By
further
example,
the
CAIR
NOx
model
trading
rule
requires
the
Administrator
to
record
allocations
submitted
by
the
States
for
2009
by
December
1,
2006.
However,
since
the
SIP
revisions
that
include
such
allocations
are
not
due
until
September
11,
2006,
it
is
highly
unlikely
that
the
SIP
revisions
will
be
approved
by
EPA
in
time
for
the
allocations
to
be
recorded
by
December
1,
2006.
CAIR
NOx
allowance
allocations
should
not
be
recorded,
and
thereby
be
tradable
in
the
allowance
market,
before
the
SIP
revision
on
which
the
allocations
are
based
is
final.
It
would
be
highly
disruptive
to
the
allowance
market
if
allocations
that
could
be
recorded
and
traded
could
subsequently
be
rendered
invalid
due
to
disapproval
of
the
SIP
revision
on
which
the
allocations
are
based.
For
this
reason,
EPA
is
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168
proposing
to
remove
the
deadline
for
recordation
of
the
allocations
for
existing
units
for
the
first
set
of
years
submitted
in
the
SIP
revision,
but
to
retain
the
deadlines
for
recordation
for
the
subsequent
allocations.

VIII.
What
Are
the
Revisions
to
the
Acid
Rain
Program?

EPA
is
also
proposing
in
today's
action
a
few
revisions
to
the
Acid
Rain
Program
regulations.
Most
of
the
proposed
revisions
are
changes
to
the
administrative
appeal
procedures
in
part
78
of
the
Acid
Rain
Program
regulations
in
order
to
make
those
procedures
applicable
to
all
final
decisions
of
the
Administrator
under
the
Federal
CAIR
trading
programs.
In
the
CAIR,
part
78
was
revised
to
make
those
administrative
appeal
procedures
apply
to
the
Administrator's
final
decisions
under
the
State
CAIR
trading
programs.
The
part
78
revisions
in
today's
proposal
are
analogous
to
those
revisions
made
in
the
CAIR
and
are
necessary
to
provide
consistent
appeal
procedures
to
sources
subject
to
the
CAIR
FIP.

The
remaining
provisions
aim
to
facilitate
interaction
between
the
EPA­
administered
Federal
CAIR
trading
programs,

any
EPA­
administered
State
CAIR
trading
programs,
and
the
Acid
Rain
Program.
A
number
of
these
proposed
revisions
involve
minor
changes
to
language
in
some
certifications
included
in
the
certificate
of
representation
for
designated
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representatives
and
in
some
certifications
by
authorized
account
representatives
for
general
accounts.
Analogous
minor
revisions
are
proposed
for
provisions
describing
the
relationship
of
the
designated
representative
to
the
owners
or
operators
of
the
sources
and
units
represented
and
of
the
authorized
account
representative
to
the
owners
of
the
allowances
in
the
general
account
involved.
The
purpose
of
these
proposed
revisions
is
to
make
the
wording
of
these
Acid
Rain
Program
provisions
and
certifications
essentially
the
same
as
the
analogous
provisions
and
certifications
in
the
State
and
Federal
CAIR
trading
programs
in
order
to
streamline
the
requirements
and
the
forms
that
must
be
submitted.
Many
sources
are
likely
to
be
subject
to
both
the
Acid
Rain
Program
and
the
CAIR
trading
programs.

Some
of
the
proposed
revisions
are
related
to
the
change,
finalized
in
the
CAIR
rulemaking,
from
unit­
level
to
source­
level
compliance
with
the
Acid
Rain
Program
SO2
trading
program.
For
example,
EPA
is
proposing
to
remove
a
provision
that
allows
two
designated
representatives
for
the
same
source
under
certain
circumstances.
While
it
was
workable
to
have
one
designated
representative
for
one,

non­
opt­
in
unit
at
the
source
and
a
different
designated
representative
for
another,
opt­
in
unit
at
the
same
source
where
compliance
with
the
allowance­
holding
requirement
was
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achieved
unit­
by­
unit,
this
is
not
workable
where
compliance
is
at
the
source­
level
and
one
individual
must
be
responsible
for
compliance
by
all
units
at
the
source.

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

1993),
the
Agency
must
determine
whether
a
regulatory
action
is
"
significant"
and
therefore
subject
to
Office
of
Management
and
Budget
(
OMB)
review
and
the
requirements
of
the
Executive
Order.
The
Order
defines
"
significant
regulatory
action"
as
one
that
is
likely
to
result
in
a
rule
that
may:

1.
Have
an
annual
effect
on
the
economy
of
$
100
million
or
more
or
adversely
affect
in
a
material
way
the
economy,
a
sector
of
the
economy,
productivity,
competition,
jobs,
the
environment,
public
health
or
safety,
or
State,
local,
or
Tribal
governments
or
communities;

2.
Create
a
serious
inconsistency
or
otherwise
interfere
with
an
action
taken
or
planned
by
another
agency;

3.
Materially
alter
the
budgetary
impact
of
entitlements,

grants,
user
fees,
or
loan
programs
or
the
rights
and
obligations
of
recipients
thereof;
or
4.
Raise
novel
legal
or
policy
issues
arising
out
of
legal
mandates,
the
President's
priorities,
or
the
principles
set
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171
forth
in
the
Executive
Order.

In
view
of
its
important
policy
implications
and
potential
effect
on
the
economy
of
over
$
100
million,
this
action
has
been
judged
to
be
an
economically
"
significant
regulatory
action"
within
the
meaning
of
the
Executive
Order.
As
a
result,
today's
action
was
submitted
to
OMB
for
review.
The
FIP
proposal
represents
a
federal
mandate
to
implement
the
recently
published
CAIR
(
March
2005)
covering
the
same
set
of
air
pollution
emission
reductions
in
the
event
States
fail
to
implement
CAIR.
The
section
126
proposal
would
impose
regulatory
requirements
similar
to
CAIR
in
the
States
that
significantly
contribute
to
downwind
emissions
in
North
Carolina.
For
this
reason,
EPA
is
relying
on
the
economic
analysis
conducted
for
CAIR
entitled
"
Regulatory
Impact
Analysis
of
the
Final
Clean
Air
Interstate
Rule"
(
March
2005)
to
serve
as
the
analysis
for
these
rulemakings.
The
costs
and
benefits
presented
in
this
economic
analysis
are
an
accurate
representation
of
the
benefits
and
costs
of
the
FIP.
The
benefits
and
costs
of
the
section
126
action
would
be
a
subset
of
the
benefits
and
costs
associated
with
CAIR,
because
only
a
subset
of
CAIRaffected
States
would
be
affected.

B.
Paperwork
Reduction
Act
EPA
believes
that
the
Paperwork
Reduction
Act
(
44
7/
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05
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or
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172
U.
S.
C.
3501
et
seq.)
requirements
of
this
rule
are
satisfied
through
the
Information
Collection
Request
(
ICR)
(
EPA
ICR
number
2152.02)
submitted
to
the
OMB
for
review
and
approval
on
May
12,
2005
as
part
of
the
Clean
Air
Interstate
Rule
(
CAIR)
(
70
FR25162­
25405).
The
ICR
describes
the
nature
of
the
information
collection
and
its
estimated
burden
and
cost
associated
with
that
final
rule.
In
cases
where
information
is
already
collected
by
a
related
program,
the
ICR
takes
into
account
only
the
additional
burden.
(
This
situation
arises
in
States
that
are
also
subject
to
requirements
of
the
Consolidated
Emissions
Reporting
Rule
(
EPA
ICR
number
0916.10;
OMB
control
number
2060­
0088)
or
for
sources
that
are
subject
to
the
Acid
Rain
Program
(
EPA
ICR
number
1633.13;
OMB
control
number
2060­
0258)
or
NOx
SIP
Call
(
EPA
ICR
number
1857.03;
OMB
number
2060­
0445)
requirements.)

The
burden
of
today's
proposed
rule
is
essentially
the
same
as
the
burden
estimated
for
the
CAIR.
There
is
a
modest
transfer
of
burden
from
the
States
to
EPA
if
the
federal
plan
is
implemented
rather
than
the
CAIR
State
plan.

The
overall
total
burden
is
essentially
unchanged.

An
agency
may
not
conduct
or
sponsor,
and
a
person
is
not
required
to
respond
to
a
collection
of
information
unless
it
displays
a
currently
valid
OMB
control
number.
The
OMB
control
numbers
for
EPA's
regulations
in
40
CFR,
after
appearing
in
the
preamble
of
the
final
rule,
are
listed
in
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or
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173
40
CFR
part
9.

C.
Regulatory
Flexibility
Act
The
Regulatory
Flexibility
Act
(
RFA),
as
amended
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
(
SBREFA),

generally
requires
an
agency
to
prepare
a
regulatory
flexibility
analysis
for
any
rule
subject
to
notice
and
comment
rulemaking
requirements
under
the
Administrative
Procedure
Act
or
any
other
statute,
unless
the
agency
certifies
that
the
proposed
rule,
if
promulgated,
will
not
have
"
a
significant
economic
impact
on
a
substantial
number
of
small
entities."
Small
entities
include
small
businesses,
small
organizations
and
small
governmental
jurisdictions.

For
the
purposes
of
this
rulemaking,
EPA
defined
small
entities
according
to
the
following
three
criteria:

(
1)
a
small
business
according
to
the
Small
Business
Administration
size
standards
by
the
North
American
Industry
Classification
System
(
NAICS)

category
of
the
owning
entity.
The
range
of
small
business
size
standards
for
electric
utilities
is
4
billion
kilowatt­
hours
of
production
or
less;

(
2)
a
small
government
jurisdiction
that
is
a
government
of
a
city,
county,
town,
district,
or
special
district
with
a
population
of
less
than
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or
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174
50,000;
and
(
3)
a
small
organization
that
is
any
not­
for­
profit
enterprise
that
is
independently
owned
and
operated
and
is
not
dominant
in
its
field.

Table
IX­
1
lists
entities
potentially
affected
by
this
proposed
rule
with
applicable
NAICS
code.

Table
IX­
1.
Potentially
Regulated
Categories
and
Entitiesa
Category
NAICS
Codeb
Examples
of
Potentially
Regulated
Entities
Industry
221112
Fossil
fuel­
fired
electric
utility
steam
generating
units.

Federal
Government
221112c
Fossil
fuel­
fired
electric
utility
steam
generating
units
owned
by
the
federal
government.

State/
Loca
l/

Tribal
Government
221112c
Fossil
fuel­
fired
electric
utility
steam
generating
units
owned
by
municipalities.

921150
Fossil
fuel­
fired
electric
utility
steam
generating
units
in
Indian
Country.

a
Include
NAICS
categories
for
source
categories
that
own
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175
and
operate
electric
generating
units
only.

b
North
American
Industry
Classification
System.

c
Federal,
state,
or
local
government­
owned
and
operated
establishments
are
classified
according
to
the
activity
in
which
they
are
engaged.

1.
Small
Business
Advocacy
Review
Panel
As
required
by
section
609(
b)
of
the
RFA,
as
amended
by
SBREFA,
EPA
convened
a
Small
Business
Advocacy
Review
Panel
(
SBAR
Panel
or
Panel)
and
conducted
outreach
to
small
entities
representatives
(
SERs)
to
obtain
the
advice
and
recommendations
of
small
entities
that
potentially
would
be
subject
to
the
rule's
requirements.

On
April
27,
2005,
EPA's
Small
Business
Advocacy
chairperson
convened
a
SBAR
Panel
under
section
609(
b)
of
the
RFA,
as
amended
by
SBREFA.
For
this
proposal,
in
addition
to
the
EPA
Small
Business
Advocacy
chairperson,
the
Panel
consisted
of
EPA's
Director
of
Air
Quality
Strategies
and
Standards
Division
within
the
Office
of
Air
and
Radiation,
the
Administrator
of
the
Office
of
Information
and
Regulatory
Affairs
within
the
Office
of
Management
and
Budget
(
OMB),
and
the
Chief
Counsel
for
Advocacy
of
Small
Business
Administration
(
SBA).

As
described
below,
this
Panel
conducted
outreach
to
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176
SERs
and
completed
a
report
on
this
proposed
action.
The
Panel
Report
provides
background
information
on
the
proposal
as
it
was
being
developed
and
the
types
of
small
entities
that
may
be
subject
to
the
proposal,
describes
efforts
to
obtain
the
advice
and
recommendations
of
representatives
of
those
small
entities,
summarizes
the
comments
that
have
been
received
to
date
from
those
representatives,
and
presents
the
findings
and
recommendations
of
the
Panel.
The
Panel
Report,
written
comments
from
the
SERs,
the
Initial
Regulatory
Flexibility
Analysis
(
discussed
below),
and
other
information
are
contained
in
the
docket
for
this
rulemaking.

The
Panel
Report
is
also
available
on
the
EPA's
website
at
www.
epa.
gov/
sbrefa.
It
is
important
to
note
that
the
Panel's
findings
and
discussions
are
based
on
the
information
available
at
the
time
the
Panel
Report
was
drafted.

Prior
to
convening
the
SBAR
Panel,
EPA
had
several
discussions
and
a
conference
call
with
small
entities
that
could
be
affected
by
this
rule.
In
consultation
with
SBA,

EPA
invited
16
stakeholders
to
participate
in
its
outreach
efforts
on
this
proposal.
On
April
4,
2005,
EPA
held
conference
call
with
the
potential
SERs
and
invited
representatives
from
the
Office
of
Advocacy
of
the
SBA
and
the
Office
of
Information
and
Regulatory
Affairs
within
the
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05
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or
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177
OMB
to
the
call.
During
this
call,
EPA
presented
an
overview
of
the
SBREFA
process,
an
explanation
of
the
planned
CAIR
FIP
and
Section
126
rulemaking,
and
technical
background
on
such
information
as
control
options
and
costs.

Subsequent
to
the
meeting,
the
stakeholders
submitted
follow­
up
comments
in
writing.

On
May
5,
2005,
the
SBAR
Panel
invited
the
SERs
to
an
outreach
meeting
and
provided
them
with
additional
background
information
for
their
consideration.
These
materials
included
the
previously
provided
background
on
the
potential
action
and
pollutants
of
interest,
as
well
as
information
the
relevant
States
and
further
technical
and
economic
information
about
affected
entities.
The
outreach
meeting
occurred
on
May
24,
2005,
followed
by
written
comments
from
some
of
the
SERs.
Written
comments
were
summarized
in
the
Panel
Report
and
can
be
found
in
the
docket.

The
SBAR
Panel
considered
the
oral
and
written
comments
of
the
SERs
in
preparing
the
final
Panel
Report
discussed
above.
The
primary
topic
of
the
Panel
discussion
was
the
applicability
of
the
FIP
to
the
various
categories
of
small
entity­
owned
EGUs,
the
costs
the
proposal
could
potentially
impose,
and
the
advantages
and
disadvantages
of
implementing
any
of
four
regulatory
flexibility
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alternatives.
Additional
topics
included
monitoring
and
reporting
provisions
and
overlap
with
existing
federal
rules.

The
SBAR
Panel
process
for
today's
action
was
conducted
before
the
proposed
proposal
was
fully
drafted.
The
Panel
holds
its
discussions
and
makes
its
report
at
a
preliminary
stage
of
the
rule
development.
The
Panel
discussions
and
report
provide
the
Agency
with
an
opportunity
to
identify
and
explore
potential
ways
of
shaping
the
proposal
to
minimize
the
burden
of
the
proposal
on
small
entities
while
achieving
the
purpose
of
the
proposed
action.

The
SBAR
Panel
discussions
for
this
proposal
focused
on
the
objectives
and
general
outline
of
the
CAIR
FIP
and
Section
126
Response.
The
EPA
also
explained
to
the
Panel
that
the
proposal
would
be
very
similar
to
the
CAIR
model
trading
rules
and
provided
the
Panel
with
analyses
that
were
conducted
for
CAIR.
The
Panel
considered
that
the
proposal
would
need
to
obtain
the
same
emission
reductions
as
would
be
achieved
under
CAIR
and
that
the
proposal
would
be
designed
to
work
in
concert
with
the
CAIR
trading
rules.

The
action
proposed
today
includes
certain
revisions
to
the
Acid
Rain
Program
and
the
final
CAIR
proposed
in
conjunction
with
the
CAIR
FIP
and
section
126
response.

These
revisions
are
intended
to
facilitate
federal
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implementation
of
the
CAIR,
and
address
the
interaction
between
the
proposed
EPA­
administered
federal
CAIR
trading
program
and
any
EPA­
administered
State
CAIR
trading
programs.
These
revisions
support
the
CAIR
FIP
and
the
126
response
extensively
discussed
by
the
Panel
and
are
explained
in
greater
detail
in
sections
VII
and
VIII
above.

To
the
extent
that
the
Panel
Report
or
the
initial
regulatory
flexibility
analysis
for
today's
proposal
address
any
proposed
changes
to
the
CAIR,
EPA
notes
that
courts
have
interpreted
the
RFA
to
require
a
regulatory
flexibility
analysis
only
when
small
entities
will
be
subject
to
the
requirements
of
the
rule.
See
Michigan
v.
EPA,
213
F.
3d
663,

668­
69
(
D.
C.
Cir.,
2000),
cert.
den.
121
S.
Ct.
225,
149
L.
Ed.
2d
135
(
2001).
The
proposed
revisions
to
the
CAIR
would
not
establish
requirements
directly
applicable
to
small
entities
and,
like
the
CAIR
(
70
FR
at
25420),
do
not
require
a
regulatory
flexibility
analysis.

2.
Initial
Regulatory
Flexibility
Analysis
Pursuant
to
section
603
of
the
RFA,
EPA
prepared
an
initial
regulatory
flexibility
analysis
(
IRFA)
that
examines
the
impact
of
this
proposal
on
small
entities
along
with
regulatory
alternatives
that
could
reduce
that
impact.
The
IRFA
is
available
for
review
in
the
docket
for
today's
rulemaking
and
is
summarized
in
the
sections
below.
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a.
Background
on
Today's
Proposal
and
the
IRFA
This
action
proposes
Federal
Implementation
Plans
(
FIPs)
for
all
States
affected
by
the
Clean
Air
Interstate
Rule
(
CAIR).
The
FIPs
would
serve
as
a
backstop
measure
to
achieve
the
emission
reductions
requirements
established
by
the
CAIR
until
States
have
approved
State
implementation
plans
(
SIPs)
to
achieve
the
reductions.
The
Agency's
authority
to
promulgate
FIPs
is
contained
in
section
110
of
the
CAA.

This
action
also
proposes
EPA's
response
to
a
petition
submitted
by
the
State
of
North
Carolina
under
section
126
of
the
CAA.
The
EPA
is
proposing
Federal
cap
and
trade
programs
for
electric
generation
units
(
EGUs)
as
the
control
strategy
for
the
FIPs
as
well
as
the
section
126
action.

The
proposed
Federal
cap
and
trade
programs
are
virtually
identical
to
the
CAIR
model
trading
rules.

The
EPA
is
also
proposing
certain
revisions
to
the
CAIR
and
the
Acid
Rain
Program.
Sections
I
through
IV
in
today's
preamble
explain
in
more
detail
the
reasons
the
Agency
is
considering
this
action,
as
well
as
the
Agency's
objectives
and
the
legal
basis
for
the
proposed
action.

The
CAIR
does
not
establish
specific
requirements
applicable
to
small
entities.
Instead,
the
CAIR
requires
states
to
develop,
adopt
and
submit
SIP
revisions
that
will
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achieve
the
necessary
SO2
and
NOx
reductions,
leaving
to
states
the
task
of
determining
how
and
by
which
entities
these
reductions
will
be
obtained.
Although
not
required
by
the
RFA,
EPA
conducted
an
analysis
of
the
impact
of
regulations
implementing
the
CAIR
model
trading
rules
on
small
entities.
The
Federal
cap
and
trade
programs
in
today's
proposal
are
virtually
identical
to
the
CAIR
model
trading
rules.
For
the
small
entity
analysis
conducted
for
CAIR
we
analyzed
the
potential
impacts
that
regulations
implementing
the
model
trading
rules
in
the
CAIR
might
have
on
small
entities.
EPA
expects
the
impacts
of
the
CAIR
FIP
trading
programs
in
today's
proposal
to
be
identical
to
the
impacts
we
analyzed
for
regulations
implementing
the
model
trading
rules
in
the
CAIR.
Therefore,
the
small
entity
analysis
that
the
Agency
conducted
for
CAIR
rulemaking
provides
the
basis
for
the
IRFA
for
today's
proposal.
The
CAIR
small
entity
analysis
is
contained
in
chapter
8
of
the
Regulatory
Impact
Analysis
for
the
Final
Clean
Air
Interstate
Rule,
March
2005,
available
in
the
docket
for
the
CAIR
rulemaking.

b.
Potentially
Affected
Small
Entities
Approximately
140
of
the
estimated
3,000
EGUs
potentially
affected
by
today's
action
are
owned
by
the
58
potentially
affected
small
entities
identified
by
EPA.
Of
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182
the
140,
49
units
are
owned
by
small
entities
that
also
share
ownership
with
large
entities.
Of
these
units,
34
are
believed
to
be
more
than
50
percent
owned
by
a
large
entity.

An
additional
189
units
owned
by
small
entities
in
these
states
could
be
exempted
because
they
have
a
nameplate
capacity
less
than
25
MW.
The
above
estimates
include
a
number
of
units
that
are
owned
jointly
by
small
and
non­
small
entities.
In
addition,
these
estimates
represent
the
maximum
number
of
units
potentially
affected
by
the
CAIR
FIP.
Only
units
in
states
that
fail
to
submit
an
approved
SIP
would
be
directly
regulated
under
the
CAIR
FIP.
The
actual
number
of
affected
units
will
depend
on
the
number
of
states
that
do
not
submit
a
SIP
or
do
not
get
their
SIP
submittal
approved.

c.
Impact
on
Potentially
Affected
Small
Entities
EPA
has
assessed
the
potential
impact
of
today's
action
on
small
entities.
This
analysis
is
based
in
large
part
on
EPA's
prior
analysis
of
the
potential
impact
of
regulations
implementing
the
CAIR
model
trading
programs
in
the
CAIR
region.
The
analysis
of
the
model
trading
programs
was
based
on
the
best
information
available
at
that
time
and
assumed
that
75
small
entities
could
be
affected
by
any
eventual
implementation
of
the
trading
programs.
However,

EPA
subsequently
determined
that
some
of
these
75
entities
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either
did
not
meet
the
definition
of
a
small
entity,
or
had
units
that
were
no
longer
generating.
EPA's
final
analysis
thus
concluded
that
only
58
entities
would
be
affected
by
today's
action.
Because
the
Agency's
analysis
of
small
entity
impacts
was
based
on
the
earlier
estimate
of
affected
small
entities
(
i.
e.,
the
impacts
were
analyzed
based
on
75
affected
entities
not
58
entities),
the
impact
analysis
would
overstate
the
maximum
potential
impact
of
today's
action
on
small
entities.

Overall,
EPA
analysis
suggested
that
about
445
MW
of
total
small
entity
capacity,
or
1.0
percent
of
total
small
entity
capacity
in
the
CAIR
region,
is
projected
to
be
uneconomic
to
maintain
under
regulations
implementing
the
CAIR
trading
programs
relative
to
the
Base
Case.
In
practice,
units
projected
to
be
uneconomic
to
maintain
may
be
"
mothballed",
retired,
or
kept
in
service
to
ensure
transmission
reliability
in
certain
parts
of
the
grid.
Our
IPM
modeling
is
unable
to
distinguish
between
these
potential
outcomes.

Of
the
75
initially
identified
as
potentially
impacted
by
regulations
implementing
the
model
trading
programs,
EPA
determined
that
29
might
experience
compliance
costs
in
excess
of
one
percent
of
revenues
in
2010
and
46
might
in
2015.
Potentially
affected
small
entities
experiencing
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compliance
costs
in
excess
of
1
percent
of
revenues
have
some
potential
for
significant
impact
resulting
from
implementation
of
CAIR.

Moreover,
the
decision
to
include
only
units
greater
than
25
MW
in
size
exempts
185
small
entities
that
would
otherwise
be
potentially
affected
by
today's
actions.
In
the
final
CAIR,
EPA
stated
its
belief
that
it
is
reasonable
to
assume
no
further
control
of
air
emissions
from
these
smaller
EGUs.
Available
air
emissions
data
indicate
that
the
collective
emissions
from
small
EGUs
with
capacity
less
than
or
equal
to
25
MW
are
relatively
small
and
that
further
regulating
their
emissions
would
be
burdensome,
to
both
the
regulated
community
and
regulators,
given
the
relatively
large
number
of
units.
In
addition,
the
use
of
cap
and
trade
in
general
will
limit
impacts
on
small
entities
relative
to
a
less
flexible
command­
and­
control
program.

EPA
considered
several
additional
suggestions
raised
during
the
SBAR
panel
process
that
would
have
changed
the
scope,
and
thus
the
impact,
of
today's
action.
One
SER
suggested
exempting
small
gas
turbines
from
the
rule.
The
Panel
did
not
recommend
exempting
small
gas
turbines
from
the
program.
The
Panel
believed
that
the
reduced
monitoring
requirements
for
this
set
of
sources
under
CAIR
will
provide
a
significant
level
of
relief
to
these
sources,
which
are
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low
emitters
of
both
NOx
and
SO2.
According
to
EPA
analysis,
most
of
these
sources
are
projected
to
be
net
sellers
of
allowances,
and
the
maximum
impact
projected
for
any
one
of
these
sources
in
terms
of
the
ratio
of
costs
to
electricity
generation
revenues
is
approximately
3
percent.

Additionally,
today's
action
does
exempt
a
number
of
small
gas
turbines
as
a
result
of
the
25
MW
and
below
exemption.

The
SBAR
Panel
supported
retaining
this
exemption
in
today's
action.

d.
Potential
Reporting,
Record
Keeping,
and
Compliance
Requirements
EPA
also
considered
suggestions
from
the
SBAR
Panel
regarding
reporting
and
recordkeeping
requirements
of
the
proposed
action.
During
the
outreach
to
the
SERs,
one
SER
noted
that
EPA
should
coordinate
emissions
monitoring
reporting
among
this
and
other
related
rules
as
much
as
possible.
EPA
has
developed
emission
monitoring
and
reporting
provisions
intended
to
minimize
the
burden
of
reporting
requirements
on
sources.
Sources
will
submit
one
quarterly
report
that
will
account
for
emissions
under
any
of
the
following
programs
that
they
are
subject
to:
Title
IV
SO2
and/
or
NOx,
Federal
CAIR
SO2,
annual
NOx
and/
or
ozone
season
NOx.
Finally,
as
part
of
the
FIP
development
process,
EPA
has
coordinated
FIP
and
SIP
requirements
as
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much
as
possible
to
minimize
any
conflicts
in
requirements
that
could
occur
if
a
State
submitted
a
SIP
that
was
approved
by
EPA
and
replaced
the
Federal
CAIR
trading
rules.

e.
Relevant
Federal
Rules
There
are
four
Federal
rules
that
may
cover
the
same
types
of
sources
and
pollutants
as
those
covered
in
this
proposal:
The
Clean
Air
Interstate
Rule
(
CAIR),
Regional
Haze
Rule,
Acid
Rain
Program,
and
the
NOx
SIP
Call.
During
development
of
this
proposal
the
Agency
took
great
care
to
ensure
that
the
proposed
programs
not
conflict
with
other
CAA
programs.
As
discussed
in
detail
elsewhere
in
this
preamble,
the
Agency
designed
each
of
the
elements
of
today's
proposal
 
the
CAIR
FIP,
section
126
response,

revisions
to
CAIR
and
revisions
to
the
Acid
Rain
Program
 
to
work
together.
The
Agency
gave
particular
emphasis
to
the
interaction
between
CAIR
and
the
Acid
Rain
Program,

since
CAIR
relies
on
the
use
of
Acid
Rain
Program
allowances
for
SO2,
and
this
feature
of
the
program
limits
the
flexibility
of
EPA
in
its
design
of
regulatory
flexibility
alternatives
for
the
CAIR
FIP/
126
rules.
The
Panel
did
not
make
specific
recommendations
in
this
area.
EPA's
decision
to
use
the
existing
SO2
allocation
from
the
Acid
Rain
Program
is
explained
in
greater
detail
in
the
preamble
to
the
final
CAIR
(
70
FR
25299).
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f.
Regulatory
Flexibility
Alternatives
The
SBAR
Panel
discussed
four
options
to
provide
additional
flexibility
to
small
entities:

Option
1.
An
alternative
compliance
method
for
units
with
low
emissions,
whereby
facilities
could
adopt
a
voluntary
limit
on
emissions;

Option
2.
An
option
to
buy
allowances
from
EPA
at
a
fixed
price,
which
would
protect
units
from
market
volatility
in
the
price
of
allowances;

Option
3.
Provide
sources
owned
by
small
entities
with
a
greater
share
of
allowances,
and;

Option
4.
Recognize
and
utilize
the
existing
flexibilities
within
the
CAIR
model
trading
rules.

In
considering
the
four
regulatory
alternatives,
the
SBAR
Panel
evaluated
the
feasibility
of
implementing
each
option,
as
well
as
the
extent
to
which
the
analysis
of
each
option
showed
effective
relief
for
financially­
impacted
small
entities.
Implementation
of
Options
1,
2,
or
3
would
require
adjusting
the
number
of
allowances
available
to
nonsmall
entity
sources,
in
order
to
ensure
that
the
overall
reduction
requirements
of
CAIR
are
achieved.
As
is
discussed
in
Section
3
of
the
Panel
Report,
these
adjustments
could
introduce
administrative
complexity
and
uncertainty
in
the
case
of
SO2
as
to
whether
the
reduction
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requirement
is
being
met.
The
Panel
also
discussed
how
to
set
appropriate
exemption
levels,
allowance
adjustments,
or
price
levels
if
EPA
were
to
decide
to
implement
one
of
the
first
three
alternatives.
Additionally,
the
Panel
had
to
consider
how
to
determine
small
entities'
eligibility
for
potential
relief,
as
well
as
treatment
of
sources
that
were
primarily
owned
by
large
entities,
but
had
minority
ownership
by
small
entities.

The
SBAR
Panel
undertook
detailed
analysis
of
the
four
regulatory
flexibility
alternatives
and
of
the
comments
and
discussion
provided
by
the
small
entity
representatives
during
the
SBAR
Panel
process.
Consensus
was
not
reached
as
to
the
final
recommendation
of
the
Panel.
Two
Panel
members
recommended
that
EPA
pursue
Option
4
as
the
means
of
providing
flexibility
to
small
entities
under
the
proposed
CAIR
FIP
and
section
126
action.
In
general,
this
was
due
to
the
ability
of
the
existing
CAIR
rule
to
provide
a
number
of
flexibilities
to
small
entity
sources,
such
as
ability
to
trade
and
bank
allowances,
the
inclusion
of
a
compliance
supplement
pool
for
NOx,
and
reduced
monitoring
requirements
for
some
small
units.
In
making
this
recommendation,
these
two
Panel
members
also
considered
the
possible
trade­
offs
in
terms
of
administrative
ease
and
the
ability
to
target
sources
that
would
need
effective
relief.
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or
Cite
189
All
SBAR
Panel
members
agree
that
for
the
great
majority
of
affected
small
entities,
the
CAIR
model
trading
rules,
or
Option
4,
provides
the
appropriate
mechanism
for
limiting
economic
burdens,
by
allowing
the
purchase
and
sale
of
allowances
in
the
market
by
all
units.
In
the
view
of
one
Panel
member,
the
Option
3
hardship
approach
best
accommodates
the
needs
of
small
entities
with
severe
hardships
and
the
burden
of
administering
this
added
program
element,
while
preserving
the
identical
benefits
of
the
CAIR
program.
Essentially,
this
Panel
member
suggested
that
EPA
could
provide
meaningful
relief
to
entities
expected
to
experience
severe
hardship
by
setting
aside
some
percentage
of
States'
annual
NOx
budgets,
and
providing
these
allowances
to
small
entity
sources
that
demonstrate
the
potential
for
severe
economic
hardship
as
a
result
of
the
proposed
action.
Analysis
conducted
by
this
Panel
member
suggested
that
setting
aside
approximately
15,000
NOx
allowances
annually
could
provide
significant
relief
to
entities
projected
to
experience
severe
hardship
as
a
result
of
the
proposed
CAIR
FIP
and
section
126
action.

The
SBAR
Panel
did
not
recommend
that
EPA
incorporate
Option
1
or
Option
2
into
the
CAIR
FIP
and
section
126
action.
Regarding
Option
1,
the
Panel
generally
agreed
that
this
option
would
not
provide
a
mechanism
for
providing
7/
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or
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190
relief
to
many
small
entity
sources.
Additionally,
EPA
noted
that
this
option
was
made
available
under
the
NOx
SIP
call,
and
was
used
very
sparsely.
The
majority
of
small
entity
representatives
did
not
express
support
for
this
option.
Option
2
could
be
implemented
using
either
a
safety
valve
price
for
small
entity
sources
that
falls
below
the
projected
allowance
prices,
or
above
projected
allowance
prices.
Given
the
implementation
issues
discussed
in
Section
3
of
the
Report,
and
the
uncertainty
about
what
type
of
relief
this
option
might
provide,
the
Panel
did
not
recommend
that
EPA
consider
this
option
further.

The
EPA
invites
comment
on
all
aspects
of
the
proposal
and
its
impacts
on
small
entities.
The
EPA
is
accepting
comment
only
on
today's
proposal.
EPA
is
not
accepting
comment
on
the
CAIR
or
otherwise
reopening
any
issue
decided
in
the
CAIR
for
reconsideration
or
comment,
except
that
we
are
taking
comment
specifically
the
revisions
to
the
CAIR
and
the
Acid
Rain
program
that
EPA
is
proposing
in
today's
action,
as
well
as
on
the
proposed
CAIR
FIP,
the
Section
126
response,
and
the
impacts
of
these
proposals
on
small
entities.

D.
Unfunded
Mandates
Reform
Act
Title
II
of
the
Unfunded
Mandates
Reform
Act
of
1995,

Pub.
L.
104­
4,
establishes
requirements
for
Federal
agencies
7/
29/
05
Draft
­
Do
Not
Quote
or
Cite
191
to
assess
the
effects
of
their
regulatory
actions
on
State,

local,
and
tribal
governments
and
the
private
sector.
Under
section
202
of
the
UMRA,
2
U.
S.
C.
1532,
EPA
generally
must
prepare
a
written
statement,
including
a
cost­
benefit
analysis,
for
any
proposed
or
final
rule
that
"
includes
any
Federal
mandate
that
may
result
in
the
expenditure
by
State,

local,
and
tribal
governments,
in
the
aggregate,
or
by
the
private
sector,
of
$
100,000,000
or
more
...
in
any
one
year."
A
"
Federal
mandate"
is
defined
under
section
421(
6),

2
U.
S.
C.
658(
6),
to
include
a
"
Federal
intergovernmental
mandate"
and
a
"
Federal
private
sector
mandate."
A
"
Federal
intergovernmental
mandate,"
in
turn,
is
defined
to
include
a
regulation
that
"
would
impose
an
enforceable
duty
upon
State,
local,
or
tribal
governments,"
section
421(
5)(
A)(
i),

2
U.
S.
C.
658(
5)(
A)(
i),
except
for,
among
other
things,
a
duty
that
is
"
a
condition
of
Federal
assistance,"
section
421(
5)(
A)(
i)(
I).
A
"
Federal
private
sector
mandate"

includes
a
regulation
that
"
would
impose
an
enforceable
duty
upon
the
private
sector,"
with
certain
exceptions,
section
421(
7)(
A),
2
U.
S.
C.
658(
7)(
A).

The
EPA
is
taking
the
position
that
the
requirements
of
UMRA
apply
because
this
action
could
result
in
the
establishment
of
enforceable
mandates
directly
applicable
to
sources
(
including
sources
owned
by
State
and
local
governments)
that
could
result
in
costs
greater
than
$
100
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or
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192
million
in
any
one
year.
The
UMRA
generally
requires
EPA
to
identify
and
consider
a
reasonable
number
of
regulatory
alternatives
and
adopt
the
least­
costly,
most
cost­
effective
or
least­
burdensome
alternative
that
achieves
the
objectives
of
the
rule.

EPA
is
relying
upon
the
government
entity
analysis
prepared
for
the
final
CAIR.
The
actual
impacts
on
government
entities
of
today's
action
would
likely
be
less
than
those
estimated
in
the
analysis
done
for
the
CAIR
because
fewer
States
and
individual
sources
are
likely
to
be
affected.

According
to
EPA's
analysis,
the
total
net
economic
impact
on
government­
owned
entities
is
expected
to
be
negative
in
both
2010
and
2015.
However,
IPM
modeling
projects
that
about
340
MW
of
municipality­
owned
capacity
(
about
0.4
percent
of
all
subdivision,
State
and
municipality
capacity
in
the
CAIR
region)
would
be
uneconomic
to
maintain
under
CAIR,
beyond
what
is
projected
in
the
Base
Case.
In
practice,
units
projected
to
be
uneconomic
to
maintain
may
be
"
mothballed",
retired,
or
kept
in
service
to
ensure
transmission
reliability
in
certain
parts
of
the
grid.
Our
IPM
modeling
is
unable
to
distinguish
between
these
potential
outcomes.

Of
the
81
potentially
affected
government
entities
considered
in
EPA's
analysis,
and
the
265
government
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05
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or
Cite
193
entities
in
the
CAIR
region
that
are
included
in
EPA
modeling,
19
may
experience
compliance
costs
in
excess
of
one
percent
of
revenues
in
2010,
and
38
may
in
2015,
based
on
our
assumptions
of
how
the
affected
States
implement
control
measures
to
meet
their
emissions
budgets
as
set
forth
in
CAIR.

Government
entities
projected
to
experience
compliance
costs
in
excess
of
1
percent
of
revenues
have
some
potential
for
significant
impact
resulting
from
implementation
of
this
rulemaking.
However,
the
majority
of
entities
facing
potentially
significant
impacts
are
located
in
States
with
regulated
electricity
markets,
where
they
have
the
ability
to
pass
some
or
all
of
their
compliance
cost
on
to
ratepayers.
In
addition,
the
decision
to
include
only
units
greater
than
25
MW
in
size
exempts
179
government
entities
that
would
otherwise
be
potentially
affected
by
regulations
implementing
the
CAIR
trading
programs.
Finally,
the
use
of
cap
and
trade
in
general
will
limit
impacts
on
entities
owned
by
small
governments
relative
to
a
less
flexible
command­
and­
control
program.

Under
section
203
of
UMRA,
2
U.
S.
C.
1533,
before
EPA
establishes
any
regulatory
requirements
"
that
might
significantly
or
uniquely
affect
small
governments,"
EPA
must
have
developed
a
small
government
agency
plan.
The
plan
must
provide
for
notifying
potentially
affected
small
7/
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05
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or
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194
governments;
enabling
officials
of
affected
small
governments
to
have
meaningful
and
timely
input
in
the
development
of
EPA
regulatory
proposals
with
significant
Federal
intergovernmental
mandates;
and
informing,

educating,
and
advising
small
governments
on
compliance
with
the
regulatory
requirements.
The
requirements
do
not
distinguish
EGUs
based
on
ownership,
either
for
those
units
that
are
included
within
the
scope
of
the
rule
or
for
those
units
that
are
exempted
by
the
generating
capacity
cut­
off.

Consequently,
the
rule
has
no
requirements
that
uniquely
affect
small
governments
that
own
or
operate
EGUs
within
the
SIP
call
region.
With
respect
to
the
significance
of
the
rule's
provisions,
EPA's
UMRA
analysis
demonstrates
that
the
economic
impact
of
the
rule
will
not
significantly
affect
State
or
municipal
EGUs
or
non­
EGUs,
either
in
terms
of
total
cost
incurred
and
the
impact
of
the
costs
on
revenue,

or
increased
cost
of
electricity
to
consumers.
Therefore,

development
of
a
small
government
plan
under
section
203
of
the
Act
is
not
required.

During
the
CAIR
rulemaking
process,
EPA
prepared
a
written
statement
consistent
with
the
requirements
of
section
202
of
the
UMRA.
Furthermore,
in
a
manner
consistent
with
the
intergovernmental
consultation
provisions
of
section
204
of
the
UMRA,
EPA
carried
out
consultations
with
the
governmental
entities
potentially
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05
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Quote
or
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195
affected
by
this
rule
during
the
CAIR
rulemaking
process.

E.
Executive
Order
13132:
Federalism
Executive
Order
13132,
entitled
"
Federalism"
(
64
FR
43255,
August
10,
1999),
requires
EPA
to
develop
an
accountable
process
to
ensure
"
meaningful
and
timely
input
by
State
and
local
officials
in
the
development
of
regulatory
policies
that
have
federalism
implications."

"
Policies
that
have
federalism
implications"
is
defined
in
the
Executive
Order
to
include
regulations
that
have
"
substantial
direct
effects
on
the
States,
on
the
relationship
between
the
national
government
and
the
States,

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

This
proposed
rule
does
not
have
federalism
implications.
It
would
not
have
substantial
direct
effects
on
the
States,
on
the
relationship
between
the
national
government
and
the
States,
or
on
the
distribution
of
power
and
responsibilities
among
the
various
levels
of
government,

as
specified
in
Executive
Order
13132.
These
effects
would
not
occur
from
the
final
rule
itself
because
it
is
the
provisions
of
the
CAA
that
require
EPA,
after
a
State
has
failed
to
submit
a
SIP
or
a
complete
SIP,
to
make
a
finding
to
that
effect
and
then
to
promulgate
a
FIP
within
2
years
of
the
finding.
Although
EPA
would
be
exercising
discretion
7/
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05
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or
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196
to
promulgate
the
FIP
within
the
early
part
of
the
2­
year
period,
EPA
would
rescind
the
FIP
for
each
State
that
submits
a
SIP
that
EPA
approves,
and,
if
the
FIP
remains,

sources
are
not
required
to
implement
controls
until
after
the
close
of
the
2­
year
period.
Moreover,
as
emphasized
throughout
the
preamble,
States
are
not
required
to
adopt
the
FIP
provisions,
or
any
particular
portion
thereof,
in
order
for
EPA
to
approve
their
SIPs.
Thus,
Executive
Order
13132
does
not
apply
to
this
proposed
rule.

Even
so,
in
the
spirit
of
Executive
Order
13132,
and
consistent
with
EPA
policy
to
promote
communications
between
EPA
and
State
and
local
governments,
EPA
consulted
with
State
and
local
officials
early
in
the
process
of
developing
the
proposed
regulation
to
permit
them
to
have
meaningful
and
timely
input
into
its
development.
The
EPA
is
including
a
number
of
provisions
for
States
in
the
proposed
rule
so
as
not
to
constrain
States'
abilities
to
complete
approvable
SIP
revisions,
such
as
the
ability
to
submit
abbreviated
SIP
revisions,
and
the
intent
to
withdraw
the
FIP
upon
approval
of
State
SIP
revisions.

F.
Executive
Order
13175:
Consultation
and
Coordination
With
Indian
Tribal
Governments
Executive
Order
13175,
entitled
"
Consultation
and
7/
29/
05
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Not
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or
Cite
197
Coordination
with
Indian
Tribal
Governments"
(
65
FR
67249,

November
9,
2000),
requires
EPA
to
develop
an
accountable
process
to
ensure
"
meaningful
and
timely
input
by
Tribal
officials
in
the
development
of
regulatory
policies
that
have
Tribal
implications."
This
proposal
does
not
have
"
Tribal
implications"
as
specified
in
Executive
Order
13175.

This
proposal
addresses
transport
of
pollution
for
precursors
of
ozone
and
PM2.5.
The
CAA
provides
for
States
and
Tribes
to
develop
plans
to
regulate
emissions
of
air
pollutants
within
their
jurisdictions.
The
regulations
clarify
the
statutory
obligations
of
States
and
Tribes
that
develop
plans
to
implement
these
rules.
The
Tribal
Authority
Rule
(
TAR)
gives
Tribes
the
opportunity
to
develop
and
implement
CAA
programs,
but
it
leaves
to
the
discretion
of
the
Tribe
whether
to
develop
these
programs
and
which
programs,
or
appropriate
elements
of
a
program,
the
Tribe
will
adopt.

This
proposal
does
not
have
Tribal
implications
as
defined
by
Executive
Order
13175.
It
do
not
have
a
substantial
direct
effect
on
one
or
more
Indian
Tribes,

because
no
Tribe
has
implemented
a
federally­
enforceable
air
quality
management
program
under
the
CAA
at
this
time.

Furthermore,
this
proposal
does
not
affect
the
relationship
or
distribution
of
power
and
responsibilities
between
the
7/
29/
05
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Not
Quote
or
Cite
198
Federal
Government
and
Indian
Tribes.
The
CAA
and
the
TAR
establish
the
relationship
of
the
Federal
Government
and
Tribes
in
developing
plans
to
attain
the
NAAQS,
and
this
proposal
does
nothing
to
modify
that
relationship.
Because
this
proposal
does
not
have
Tribal
implications,
Executive
Order
13175
does
not
apply.

If
one
assumes
a
Tribe
is
implementing
a
Tribal
Implementation
Plan,
today's
proposal
could
have
implications
for
that
Tribe,
but
would
not
impose
substantial
direct
costs
upon
the
Tribe,
nor
preempt
Tribal
law.
As
provided
above,
EPA
has
estimated
that
the
total
annual
private
costs
for
the
FIP
for
the
CAIR
region
as
implemented
by
State,
local,
and
Tribal
governments
to
be
approximately
$
2.4
billion
in
2010
and
$
3.6
billion
in
2015
(
1999$).
There
are
currently
very
few
emissions
sources
in
Indian
country
that
could
be
affected
by
these
rules
and
the
percentage
of
Tribal
land
that
will
be
impacted
is
very
small.
For
Tribes
that
choose
to
regulate
sources
in
Indian
country,
the
costs
would
be
attributed
to
inspecting
regulated
facilities
and
enforcing
adopted
regulations.

EPA
consulted
with
Tribal
officials
in
developing
the
final
CAIR
rule.
The
EPA
encouraged
Tribal
input
at
an
early
stage.
Also,
EPA
held
periodic
meetings
with
the
States
and
the
Tribes
during
the
technical
development
of
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199
CAIR.
Three
meetings
were
held
with
the
Crow
Tribe,
where
the
Tribe
expressed
concerns
about
potential
impacts
of
the
rule
on
their
coal
mine
operations.
In
addition,
EPA
held
three
calls
with
Tribal
environmental
professionals
to
address
concerns
specific
to
the
Tribes.
These
discussions
have
given
EPA
valuable
information
about
Tribal
concerns
regarding
the
development
of
CAIR.
During
the
CAIR
rulemaking
process,
the
EPA
provided
briefings
for
Tribal
representatives
and
the
newly
formed
National
Tribal
Air
Association
(
NTAA),
and
other
national
Tribal
forums.
Input
from
Tribal
representatives
was
taken
into
consideration
in
development
of
CAIR.

G.
Executive
Order
13045:
Protection
of
Children
From
Environmental
Health
and
Safety
Risks
Executive
Order
13045,
"
Protection
of
Children
from
Environmental
Health
and
Safety
Risks"
(
62
FR
19885,
April
23,
1997)
applies
to
any
rule
that
(
1)
is
determined
to
be
"
economically
significant"
as
defined
under
Executive
Order
12866,
and
(
2)
concerns
an
environmental
health
or
safety
risk
that
EPA
has
reason
to
believe
may
have
a
disproportionate
effect
on
children.
If
the
regulatory
action
meets
both
criteria,
Section
5
 
501
of
the
Order
directs
the
Agency
to
evaluate
the
environmental
health
or
safety
effects
of
the
planned
rule
on
children,
and
explain
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200
why
the
planned
regulation
is
preferable
to
other
potentially
effective
and
reasonably
feasible
alternatives
considered
by
the
Agency.

These
actions
are
not
subject
to
the
Executive
Order,

because
they
do
not
involve
decisions
on
environmental
health
or
safety
risks
that
may
disproportionately
affect
children.
The
EPA
believes
that
the
emissions
reductions
from
the
strategies
in
these
proposals
would
further
improve
air
quality
and
would
further
improve
children's
health.

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

provides
that
agencies
shall
prepare
and
submit
to
the
Administrator
of
the
Office
of
Regulatory
Affairs,
OMB,
a
Statement
of
Energy
Effects
for
certain
actions
identified
as
"
significant
energy
actions."
Section
4(
b)
of
Executive
Order
13211
defines
"
significant
energy
actions"
as
"
any
action
by
an
agency
(
normally
published
in
the
Federal
Register)
that
promulgates
or
is
expected
to
lead
to
the
promulgation
of
a
final
rule
or
regulation,
including
notices
of
inquiry,
advance
notices
of
final
rulemaking,
and
notices
of
final
rulemaking
(
1)
(
i)
a
significant
regulatory
action
under
Executive
Order
12866
or
any
successor
order,

and
(
ii)
likely
to
have
a
significant
adverse
effect
on
the
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201
supply,
distribution,
or
use
of
energy;
or
(
2)
designated
by
the
Administrator
of
the
Office
of
Information
and
Regulatory
Affairs
as
a
"
significant
energy
action."
This
proposed
rule
is
a
significant
regulatory
action
under
Executive
Order
12866,
and
this
rule
may
have
a
significant
adverse
effect
on
the
supply,
distribution,
or
use
of
energy.
These
impacts
are
detailed
in
the
final
CAIR
(
70
FR
25315).

I.
National
Technology
Transfer
Advancement
Act
Section
12(
d)
of
the
National
Technology
Transfer
and
Advancement
Act
(
NTTAA)
of
1995
(
Public
Law
No.
104­
113;
15
U.
S.
C.
272
note)
directs
EPA
to
use
voluntary
consensus
standards
in
its
regulatory
and
procurement
activities
unless
to
do
so
would
be
inconsistent
with
applicable
law
or
otherwise
impractical.
Voluntary
consensus
standards
are
technical
standards
(
e.
g.,
materials
specifications,
test
methods,
sampling
procedures,
business
practices)
developed
or
adopted
by
one
or
more
voluntary
consensus
bodies.
The
NTTAA
directs
EPA
to
provide
Congress,
through
annual
reports
to
OMB,
with
explanations
when
an
agency
does
not
use
available
and
applicable
voluntary
consensus
standards.

Today's
proposed
rule
would
implement
requirements
largely
identical
to
the
requirements
in
the
CAIR.
This
proposal
would
require
all
sources
that
participate
in
the
trading
programs
under
part
97
(
analogous
to
the
CAIR
SIP
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202
trading
programs
under
part
96)
to
meet
the
applicable
monitoring
requirements
of
part
75.
Part
75
already
incorporates
a
number
of
voluntary
consensus
standards.

Consistent
with
the
Agency's
Performance
Based
Measurement
System
(
PBMS),
part
75
sets
forth
performance
criteria
that
allow
the
use
of
alternative
methods
to
the
ones
set
forth
in
part
75.
The
PBMS
approach
is
intended
to
be
more
flexible
and
cost
effective
for
the
regulated
community;
it
is
also
intended
to
encourage
innovation
in
analytical
technology
and
improved
data
quality.
At
this
time,
EPA
is
not
recommending
any
revisions
to
part
75;
however,
EPA
periodically
revises
the
test
procedures
set
forth
in
part
75.
When
EPA
revises
the
test
procedures
set
forth
in
part
75
in
the
future,
EPA
will
address
the
use
of
any
new
voluntary
consensus
standards
that
are
equivalent.

Currently,
even
if
a
test
procedure
is
not
set
forth
in
part
75,
EPA
is
not
precluding
the
use
of
any
method,
whether
it
constitutes
a
voluntary
consensus
standard
or
not,
as
long
as
it
meets
the
performance
criteria
specified;
however,
any
alternative
methods
must
be
approved
through
the
petition
process
under
Section
75.66
before
they
are
used
under
part
75.

J.
Executive
Order
12898:
Federal
Actions
to
Address
Environmental
Justice
in
Minority
Populations
and
Low­
Income
Populations
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or
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21
U.
S.
Environmental
Protection
Agency,
1998.
Guidance
for
Incorporating
Environmental
Justice
Concerns
in
EPA's
NEPA
Compliance
Analyses.
Office
of
Federal
Activities,
Washington,
D.
C.,
April,
1998.

203
Executive
Order
12898,
"
Federal
Actions
to
Address
Environmental
Justice
in
Minority
Populations
and
Low­
Income
Populations,"
requires
Federal
agencies
to
consider
the
impact
of
programs,
policies,
and
activities
on
minority
populations
and
low­
income
populations.
According
to
EPA
guidance,
21
agencies
are
to
assess
whether
minority
or
lowincome
populations
face
risks
or
a
rate
of
exposure
to
hazards
that
are
significant
and
that
"
appreciably
exceed
or
is
likely
to
appreciably
exceed
the
risk
or
rate
to
the
general
population
or
to
the
appropriate
comparison
group."

(
EPA,
1998)

In
accordance
with
Executive
Order
12898,
the
Agency
has
considered
whether
these
proposals,
if
promulgated,
may
have
disproportionate
negative
impacts
on
minority
or
low
income
populations.
The
Agency
expects
these
proposals
would
lead
to
reductions
in
air
pollution
and
exposures
generally.
For
this
reason,
negative
impacts
to
these
subpopulations
that
appreciably
exceed
similar
impacts
to
the
general
population
are
not
expected.

List
of
Subjects
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or
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204
40
CFR
Parts
51
and
52
Administrative
practice
and
procedure,
Air
pollution
control,
Intergovernmental
relations,
Nitrogen
oxides,

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

40
CFR
Parts
72,
73,
74,
and
78
Acid
rain,
Administrative
practice
and
procedure,
Air
pollution
control,
Electric
utilities,
Intergovernmental
relations,
Nitrogen
oxides,
Reporting
and
recordkeeping
requirements,
Sulfur
dioxide.

40
CFR
Parts
96
and
97
Administrative
practice
and
procedure,
Air
pollution
control,
Electric
utilities,
Nitrogen
oxides,
Reporting
and
recordkeeping
requirements,
Sulfur
dioxide.

______________________________

Dated:
7/
29/
05
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or
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205
______________________________

Stephen
L.
Johnson
Administrator
