
[Federal Register: August 31, 2007 (Volume 72, Number 169)]
[Proposed Rules]               
[Page 50305-50311]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31au07-29]                         

=======================================================================
-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R01-OAR-2007-0399; FRL-8462-3]

 
Approval and Promulgation of Air Quality Implementation Plans; 
Connecticut; State Implementation Plan Revision To Implement the Clean 
Air Interstate Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: EPA is proposing to approve a revision to the Connecticut 
State Implementation Plan (SIP) submitted on April 26, 2007. This 
revision addresses the requirements of EPA's Clean Air Interstate Rule 
(CAIR), promulgated on May 12, 2005 and subsequently revised on April 
28, 2006 and December 13, 2006. EPA is proposing to determine that the 
SIP revision fully implements the CAIR requirements for Connecticut. 
Therefore, as a consequence of the SIP approval, EPA will also withdraw 
the CAIR Federal Implementation Plan (CAIR FIP) concerning 
NOX ozone-season emissions for Connecticut. The CAIR FIPs 
for all States in the CAIR region were promulgated on April 28, 2006 
and subsequently revised on December 13, 2006.

DATES: Comments must be received on or before October 1, 2007.

ADDRESSES: Submit your comments, identified by FDMS Docket ID No. EPA-
R01-OAR-2007-0399, by one of the following methods:
    1. http://www.regulations.gov: Follow the on-line instructions for 
submitting comments.
    2. E-mail: arnold.anne@epa.gov.
    3. Fax: (617) 918-0047.
    4. Mail: ``FDMS Docket ID No. EPA-R01-OAR-2007-0399'', Anne Arnold, 
U.S. Environmental Protection Agency, EPA New England Regional Office, 
One Congress Street, Suite 1100 (mail code CAQ), Boston, MA 02114-2023.
    5. Hand Delivery or Courier: Deliver your comments to: Anne Arnold, 
Manager, Air Quality Planning Unit, Office of Ecosystem Protection, 
U.S. Environmental Protection Agency, EPA New England Regional Office, 
One Congress Street, 11th floor, (CAQ), Boston, MA 02114-2023. Such 
deliveries are only accepted during the Regional Office's normal hours 
of operation. The Regional Office's official hours of business are 
Monday through Friday, 8:30 a.m. to 4:30 p.m., excluding federal 
holidays.
    Instructions: Direct your comments to Docket ID No. ``FDMS Docket 
ID No. EPA-R01-OAR-2007-0399''. 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.regulations.gov, 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 
through http://www.regulations.gov or e-mail, information that you 
consider to be CBI or otherwise protected. The http://
www.regulations.gov Web site is an ``anonymous access'' system, 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 http://www.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 and any form of 
encryption and should be free of any defects or viruses. For additional 
information about EPA's public docket visit the EPA Docket Center 
homepage at http://www.epa.gov/epahome/dockets.htm.
    Docket: All documents in the electronic docket are listed in the 
http://www.regulations.gov index. 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. In addition to publicly 
available docket materials available electronically in http://
www.regulations.gov, the hard copy of these materials, including the 
state submittal, is available at the Office of Ecosystem Protection, 
U.S. Environmental Protection Agency, EPA New England Regional Office, 
One Congress Street, Suite 1100, Boston, MA. EPA requests that if at 
all possible, you contact the person listed in the FOR FURTHER 
INFORMATION CONTACT section to schedule your inspection. The Regional 
Office's official hours of business are Monday through Friday, 8:30 
a.m. to 4:30 p.m., excluding federal holidays.

FOR FURTHER INFORMATION CONTACT: If you have questions concerning 
today's proposal, please contact Alison C. Simcox, Air Quality Planning 
Unit, U.S. Environmental Protection Agency, EPA New England Regional 
Office, One Congress Street, Suite 1100 (CAQ), Boston, MA 02114-2023, 
telephone number (617) 918-1684, fax number (617) 918-0684, e-mail 
simcox.alison@epa.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. What Action Is EPA Proposing To Take?

[[Page 50306]]

II. What Is the Regulatory History of CAIR and the CAIR FIPs?
III. What Are the General Requirements of CAIR and the CAIR FIPs?
IV. What Are the Types of CAIR SIP Submittals?
V. Analysis of Connecticut's CAIR SIP Submittal
    A. State Budgets for Allowance Allocations
    B. CAIR Cap-and-Trade Programs
    C. Applicability Provisions for non-EGU NOX SIP Call 
Sources
    D. NOX Allowance Allocations
    E. Individual Opt-in Units
VI. Proposed Action
VII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing To Take?

    EPA is proposing to approve a revision to Connecticut's SIP, 
submitted on April 26, 2007. This SIP revision includes a new 
regulation, Regulations of Connecticut State Agencies (RCSA) section 
22a-174-22c, ``The Clean Air Interstate Rule (CAIR) Nitrogen Oxides 
(NOX) Ozone Season Trading Program'' (herein called 
``Connecticut's proposed CAIR program''), repeal of RCSA section 22a-
174-22a (``The Connecticut NOX Budget Program''), as of May 
1, 2009, and repeal of RCSA section 22a-174-22b, ``The Connecticut 
Post-2002 NOX Budget Program'' (herein called the 
``Connecticut NOX SIP Call trading program''), as of May 1, 
2010. In its SIP revision, Connecticut would meet CAIR requirements by 
requiring certain electric generating units (EGUs) to participate in 
the EPA-administered State CAIR cap-and-trade program addressing 
NOX ozone-season emissions. EPA is proposing to determine 
that the Connecticut SIP as revised will meet the applicable 
requirements of CAIR. Any final action approving the SIP will be taken 
by the Regional Administrator for Region 1. As a consequence of the SIP 
Approval, the Administrator of EPA will also issue a final rule to 
withdraw the FIP concerning NOX ozone-season emissions for 
Connecticut. This action will delete and reserve 40 CFR 52.386. The 
withdrawal of the CAIR FIP for Connecticut is a conforming amendment 
that must be made once the SIP is approved because EPA's authority to 
issue the FIP was premised on a deficiency in the SIP for Connecticut. 
Once the SIP is fully approved, EPA no longer has authority for the 
FIP. Thus, EPA will not have the option of maintaining the FIP 
following the full SIP approval. Accordingly, EPA does not intend to 
offer an opportunity for a public hearing or an additional opportunity 
for written public comment on the withdrawal of the FIP.
    The Connecticut Department of Environmental Protection (DEP) has 
requested that EPA ``parallel process'' Connecticut's proposed CAIR SIP 
revision. Under this procedure, EPA prepared this action before the 
State's final adoption of the regulations included in the SIP revision. 
The DEP held a public hearing on its proposed CAIR SIP revision on 
October 19, 2006. The DEP has prepared a response to the comments 
received on its proposal and has developed a ``post-hearing final 
draft'' version of the regulations dated April 10, 2007. This is the 
version of the regulations included in Connecticut's April 26, 2007 SIP 
submittal to EPA and the subject of EPA's proposal.
    On June 19, 2007, the Connecticut DEP received adverse comments 
regarding the allocation methodology in its proposed CAIR program. 
Consequently, the DEP may revise its proposed regulations before final 
promulgation. After the DEP submits its final adopted regulations, EPA 
will review these final regulations to determine whether they differ 
from the ``post-hearing final draft'' version that is the subject of 
this proposal. If Connecticut's final regulations do in fact differ 
from the ``post-hearing final draft'' version, then EPA would need to 
determine whether any of the changes are significant. Ordinarily, 
changes that are limited to the allocation methodology would not be 
deemed significant for SIP approval purposes, assuming the methodology 
does not lead to allocations in excess of the total state budget. Based 
on EPA's determination regarding the significance of any changes in the 
final regulations, EPA would then decide whether it is appropriate to 
prepare a final rule and describe the changes in the final rulemaking 
action, or re-propose action based on the state's final adopted 
regulations.

II. What Is the Regulatory History of the CAIR and the CAIR FIPs?

    The Clean Air Interstate Rule (CAIR) was published by EPA on May 
12, 2005 (70 FR 25162). In this rule, EPA determined that 28 States and 
the District of Columbia contribute significantly to nonattainment and 
interfere with maintenance of the national ambient air quality 
standards (NAAQS) for fine particles (PM2.5) and/or 8-hour 
ozone in downwind States in the eastern part of the country. As a 
result, EPA required those upwind States to revise their SIPs to 
include control measures that reduce emissions of SO2, which 
is a precursor to PM2.5 formation, and/or NOX, 
which is a precursor to both ozone and PM2.5 formation. For 
jurisdictions that contribute significantly to downwind 
PM2.5 nonattainment, CAIR sets annual State-wide emission 
reduction requirements (i.e., budgets) for SO2 and annual 
State-wide emission reduction requirements for NOX. 
Similarly, for jurisdictions that contribute significantly to 8-hour 
ozone nonattainment, CAIR sets State-wide emission reduction 
requirements for NOX for the ozone season (May 1st to 
September 30th). Under CAIR, States may implement these reduction 
requirements by participating in the EPA-administered cap-and-trade 
programs or by adopting any other control measures.
    CAIR explains to subject States what must be included in SIPs to 
address the requirements of section 110(a)(2)(D) of the Clean Air Act 
(CAA) with regard to interstate transport with respect to the 8-hour 
ozone and PM2.5 NAAQS. EPA made national findings, effective 
on May 25, 2005, that the States had failed to submit SIPs meeting the 
requirements of section 110(a)(2)(D). The SIPs were due in July 2000, 3 
years after the promulgation of the 8-hour ozone and PM2.5 
NAAQS. These 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 CAA section 110(c)(1), EPA may issue a FIP 
anytime after such findings are made and must do so within two years 
unless a SIP revision correcting the deficiency is approved by EPA 
before the FIP is promulgated.
    On April 28, 2006, EPA promulgated FIPs for all States covered by 
CAIR in order to ensure the emissions reductions required by CAIR are 
achieved on schedule. Each CAIR State is subject to the FIPs until the 
State fully adopts, and EPA approves, a SIP revision meeting the 
requirements of CAIR. The CAIR FIPs require EGUs to participate in the 
EPA-administered CAIR SO2, NOX annual, and 
NOX ozone season trading programs, as appropriate. The CAIR 
FIP SO2, NOX annual, and NOX ozone 
season trading programs impose essentially the same requirements as, 
and are integrated with, the respective CAIR SIP trading programs. The 
integration of the FIP and SIP trading programs means that these 
trading programs will work together to create effectively a single 
trading program for each regulated pollutant (SO2, 
NOX annual, and NOX ozone-season) in all States 
covered by the CAIR FIP or SIP trading program for that pollutant. The 
CAIR FIPs also allow States to submit abbreviated SIP revisions that, 
if approved by EPA, will automatically

[[Page 50307]]

replace or supplement certain CAIR FIP provisions (e.g., the 
methodology for allocating NOX allowances to sources in the 
State), while the CAIR FIP remains in place for all other provisions.
    On April 28, 2006, EPA published two additional CAIR-related final 
rules that added the States of Delaware and New Jersey to the list of 
States subject to CAIR for PM2.5 and announced EPA's final 
decisions on reconsideration of five issues, without making any 
substantive changes to the CAIR requirements.

III. What Are the General Requirements of CAIR and the CAIR FIPs?

    CAIR establishes State-wide emission budgets for SO2 and 
NOX and is to be implemented in two phases. The first phase 
of NOX reductions starts in 2009 and continues through 2014, 
while the first phase of SO2 reductions starts in 2010 and 
continues through 2014. The second phase of reductions for both 
NOX and SO2 starts in 2015 and continues 
thereafter. CAIR requires States to implement the budgets by either: 
(1) Requiring EGUs to participate in the EPA-administered cap-and-trade 
programs; or (2) adopting other control measures of the State's 
choosing and demonstrating that such control measures will result in 
compliance with the applicable State SO2 and NOX 
budgets.
    The May 12, 2005 and April 28, 2006 CAIR rules provide model rules 
that States must adopt (with certain limited changes, if desired) if 
they want to participate in the EPA-administered trading programs.
    With two exceptions, only States that choose to meet the 
requirements of CAIR through methods that exclusively regulate EGUs are 
allowed to participate in the EPA-administered trading programs. One 
exception is for States that adopt the opt-in provisions of the model 
rules to allow non-EGUs individually to opt into the EPA-administered 
trading programs. The other exception is for States that include all 
units from their NOX SIP Call trading programs in their CAIR 
NOX ozone season trading programs.

IV. What Are the Types of CAIR SIP Submittals?

    States have the flexibility to choose the type of control measures 
they will use to meet the requirements of CAIR. EPA anticipates that 
most States will choose to meet the CAIR requirements by selecting an 
option that requires EGUs to participate in the EPA-administered CAIR 
cap-and-trade programs. For such States, EPA has provided two 
approaches for submitting and obtaining approval for CAIR SIP 
revisions. States may submit full SIP revisions that adopt the model 
CAIR cap-and-trade rules. If approved, these SIP revisions will fully 
replace the CAIR FIPs. Alternatively, States may submit abbreviated SIP 
revisions. These SIP revisions will not replace the CAIR FIPs; however, 
the CAIR FIPs provide that, when approved, the provisions in these 
abbreviated SIP revisions will be used instead of or in conjunction 
with, as appropriate, the corresponding provisions of the CAIR FIPs 
(e.g., the NOX allowance allocation methodology).
    A State submitting a full SIP revision may either adopt regulations 
that are substantively identical to the model rules or incorporate by 
reference the model rules. CAIR provides that States may only make 
limited changes to the model rules if the States want to participate in 
the EPA-administered trading programs. A full SIP revision may change 
the model rules only by altering their applicability and allowance 
allocation provisions to:
    1. Include NOX SIP Call trading sources that are not 
EGUs under CAIR in the CAIR NOX ozone season trading 
program;
    2. Provide for State allocation of NOX annual or ozone 
season allowances using a methodology chosen by the State;
    3. Provide for State allocation of NOX annual allowances 
from the compliance supplement pool (CSP) using the State's choice of 
allowed, alternative methodologies; or
    4. Allow units that are not otherwise CAIR units to opt 
individually into the CAIR SO2, NOX annual, or 
NOX ozone season trading programs under the opt-in 
provisions in the model rules.
    An approved CAIR full SIP revision addressing EGUs' SO2, 
NOX annual, or NOX ozone-season emissions will 
replace the CAIR FIP for that State for the respective EGU emissions.

V. Analysis of Connecticut's CAIR SIP Submittal

A. State Budgets for Allowance Allocations

    The CAIR NOX annual and ozone-season budgets were 
developed from historical heat input data for EGUs. Using these data, 
EPA calculated annual and ozone season regional heat input values, 
which were multiplied by 0.15 pounds per million British thermal units 
(lb/mmBtu), for phase 1 of the CAIR program (2009-2014) and by 0.125 
lb/mmBtu, for phase 2 of the CAIR program (2015 and thereafter) to 
obtain regional NOX budgets for 2009-2014 and for 2015 and 
thereafter, respectively. EPA derived the State NOX annual 
and ozone-season budgets from the regional budgets using State heat 
input data adjusted by fuel factors. Connecticut, however, is only 
required to participate in the CAIR NOX ozone season program 
and not the CAIR NOX annual or SO2 trading 
programs. Therefore, only CAIR NOX ozone-season budgets 
apply to the Connecticut CAIR program.
    In today's action, EPA is proposing approval of Connecticut's SIP 
revision, which will be codified at RCSA section 22a-174-22c. This SIP 
revision adopts the budget established for the State in CAIR, i.e., 
2,559 tons of NOX ozone-season emissions for CAIR phases 1 
and 2, plus an additional 132 tons of NOX ozone-season 
emissions for both phases 1 and 2 to account for NOX 
emissions from ``non-EGUs'' from the Connecticut NOX SIP 
Call trading program (see section V.B. below). The total NOX 
ozone-season budget is therefore 2,691 tons of NOX ozone-
season emissions for CAIR phases 1 and 2. Connecticut's SIP revision 
sets this budget as the total number of allowances (with each allowance 
authorizing one ton of NOX ozone-season emissions) available 
for allocation for each year under the EPA-administered CAIR cap-and-
trade program.

B. CAIR Cap-and-Trade Programs

    The CAIR NOX annual and ozone-season model trading rules 
both largely mirror the structure of the NOX SIP Call model 
trading rule in 40 CFR part 96, subparts A through I. While the 
provisions of the NOX annual and ozone-season model rules 
are similar, there are some differences. For example, the 
NOX ozone-season model rule reflects the fact that the CAIR 
NOX ozone season trading program replaces the NOX 
SIP Call trading program after the 2008 ozone season and is coordinated 
with the NOX SIP Call program. The NOX ozone-
season model rule provides incentives for early emissions reductions by 
allowing banked, pre-2009 NOX SIP Call allowances to be used 
for compliance in the CAIR NOX ozone season trading program. 
In addition, States have the option of continuing to meet their 
NOX SIP Call requirement by participating in the CAIR 
NOX ozone season trading program and including all their 
NOX SIP Call trading sources in that program. Connecticut 
has decided to exercise the option of including all its NOX 
SIP Call units in its State CAIR program. Therefore, the Connecticut 
CAIR SIP revision includes amendments to the Connecticut NOX 
SIP Call trading

[[Page 50308]]

program (RCSA section 22a-174-22b) such that the NOX SIP 
Call trading program applies for the control periods from 2003 through 
2008, but is then superseded by the Connecticut CAIR program beginning 
with the control period in 2009.
    EPA also used the CAIR model trading rules as the basis for the 
trading programs in the CAIR FIPs. The CAIR FIP trading rules are 
virtually identical to the CAIR model trading rules, with changes made 
to account for federal rather than state implementation. The CAIR model 
SO2, NOX annual, and NOX ozone season 
trading rules and the respective CAIR FIP trading rules are designed to 
work together as integrated SO2, NOX annual, and 
NOX ozone season trading programs.
    In the SIP revision, Connecticut proposes to implement its CAIR 
budgets by requiring EGUs (as well as ``non-EGUs'' from its 
NOX SIP Call trading program, as discussed below) to 
participate in EPA-administered cap-and-trade programs for 
NOX ozone-season emissions. Connecticut is proposing a full 
SIP revision that adopts, with certain allowed changes discussed below, 
the CAIR model cap-and-trade rules for NOX ozone season 
emissions.

C. Applicability Provisions for Non-EGU NOX SIP Call Sources

    In general, the CAIR model trading rules apply to 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 unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe producing electricity for sale.
    States have the option of bringing in, for the CAIR NOX 
ozone season program only, those units in the State's NOX 
SIP Call trading program that are not EGUs as defined under CAIR 
(herein called ``non-EGUs''). EPA advises States exercising this option 
to add the applicability provisions in the State's NOX SIP 
Call trading rule for ``non-EGUs'' to the applicability provisions in 
40 CFR 96.304 in order to include in the CAIR NOX ozone 
season trading program all units required to be in the State's 
NOX SIP Call trading program that are not already included 
under 40 CFR 96.304. Under this option, the CAIR NOX ozone 
season program must cover all large industrial boilers and combustion 
turbines, as well as any small EGUs (i.e. units serving a generator 
with a nameplate capacity of 25 MWe or less) that the State currently 
requires to be in the NOX SIP Call trading program.
    In the SIP revision, Connecticut proposes to expand the 
applicability provisions of the CAIR NOX ozone season 
trading program to include all units in the State's NOX SIP 
Call trading program, plus Exeter Energy, which is a waste-tire-fired 
unit that EPA has determined meets the definition of a NOX 
SIP Call unit and a CAIR unit. Units in the Connecticut NOX 
SIP Call trading program include EGUs of 15 MW or more and non-EGUs 
(such as industrial boilers and combustion turbines) with a maximum 
design heat input of 250 MMBtu/hr or more. These units will be included 
in the Connecticut CAIR program beginning with the control period in 
2009.
    EPA has determined that Connecticut's proposed SIP revision 
includes the allowable CAIR applicability provisions relating to adding 
all NOX SIP Call trading-program units to the Connecticut 
CAIR NOX ozone season program.

D. NOX Allowance Allocations

    Deadlines: There is one technical flaw in the SIP revision, but EPA 
is proposing to approve the SIP revision despite this flaw. CAIR 
requires states to submit to EPA the initial allocations for EGUs that 
started operation before 2001 by October 31, 2006. Connecticut's 
proposed SIP revision does not meet this requirement, nor did the state 
in fact submit those allocations by this date. However, the purpose of 
this date was to allow EPA sufficient time to process the allocations 
data. EPA now has the allocations, and no outside party was prejudiced 
by Connecticut's failure to meet this date.
    Specifically, according to 40 CFR 51.123(aa)(2)(iii)(C), for a full 
SIP revision, ``[t]he State's methodology must require that, for EGUs 
commencing operation before January 1, 2001, the State will determine, 
and notify the Administrator of, each unit's allocation of CAIR 
NOX allowances by October 31, 2006 for the ozone seasons 
2009, 2010, and 2011.'' Connecticut's proposed SIP revision does not 
meet this requirement because it does not require that the State submit 
the 2009-2011 allocations for pre-2001 EGUs by October 31, 2006. 
Instead, Connecticut's SIP revision requires that it submit, and in 
fact it did submit, these allocations by April 30, 2007, the deadline 
that is applicable to abbreviated SIP revisions under 40 CFR 
51.123(ee)(2)(ii)(C).
    Since Connecticut has submitted a full SIP revision, not an 
abbreviated SIP revision, this failure to require that the State will 
submit allocations by October 31, 2006 is technically a deficiency in 
the SIP. However, this does not render the SIP unapprovable. The 
purpose of the October 31, 2006 deadline, as mentioned above, was to 
allow EPA's Clean Air Markets Division sufficient time to process the 
allocations. At this point, the deadline has elapsed; Connecticut has, 
in fact, submitted its allocations; and the Clean Air Markets Division 
is fully able to process the allocations despite having received them 
later than CAIR envisions. Potentially regulated entities received 
ample notice of Connecticut's plan for allocations when the State's 
program was submitted for public comment on the state level. 
Furthermore, in the context of this action, it makes no difference 
whether EPA would have received the 2009-2011 allocations in April of 
this year or October of last year, since EPA has, in fact, received 
them well before the date of this document. No party is prejudiced by 
the deficiency, since the deadline has passed, and any interested party 
has a full opportunity to comment on any aspect of this proposed 
action. Moreover, with Connecticut's April 2007 submission of the 
allocations, EPA will still be able--after final approval of the SIP 
revision--to record them in 2007 and, thereby, provide the allowances 
to owners and operators sufficiently in advance of the 2009-2011 
control periods. In sum, EPA has determined that the interests of the 
public, potentially regulated entities, and EPA itself, including those 
interests which 40 CFR 51.123(aa)(2)(iii)(C) sought to protect, have 
been adequately met by the proposed SIP revision's adoption and, more 
importantly, actual submission of 2009-2011 allocation data by April 
30, 2007. Consequently, EPA proposes to approve this SIP revision 
despite Connecticut's failure to meet the requirements of 40 CFR 
51.123(aa)(2)(iii)(C).
    NOX allowance-allocation methodology: Under the NOX 
allowance-allocation methodology in the CAIR model trading rules and in 
the CAIR FIP, NOX annual and ozone-season allowances are 
allocated to units that have operated for five years (i.e., ``existing 
units''), based on heat input data from a three-year period that are 
adjusted for fuel type by using fuel factors of 1.0 for coal, 0.6 for 
oil, and 0.4 for other fuels. The CAIR model trading rules and the CAIR 
FIP also provide a new unit set-aside from which units without five 
years of operation are allocated allowances based on the units' prior 
year emissions.
    States may establish in their SIP submissions a different 
NOX allowance-allocation methodology that will be used to 
allocate allowances to sources in

[[Page 50309]]

the States if certain requirements are met concerning the timing of 
submission of units' allocations to the Administrator for recordation 
and the total amount of allowances allocated for each control period. 
In adopting alternative NOX allowance-allocation 
methodologies, States have flexibility with regard to:
    1. The cost to recipients of the allowances, which may be 
distributed for free or auctioned;
    2. The frequency of allocations;
    3. The basis for allocating allowances, which may be distributed, 
for example, based on historical heat input or electric and thermal 
output; and
    4. The use of allowance set-asides and, if used, their size.
    In the SIP revision, Connecticut proposes to replace the provisions 
of the CAIR NOX ozone-season model trading rule concerning 
allowance allocations with its own methodology. For most fossil-fuel-
fired units, Connecticut proposes to allocate NOX ozone-
season allowances largely based on electric and thermal output, rather 
than heat input. For cogeneration units, certain industrial boilers or 
indirect heat exchangers, and waste-tire-fired units, Connecticut 
proposes to allocate allowances based on the unit's actual or permitted 
NOX emission rate. Connecticut also provides a percentage of 
allowances for an energy efficiency/renewable energy set-aside and a 
new unit set-aside.
(1) What Types of Set-Asides Are Included in Connecticut CAIR?
    In the SIP revision, Connecticut proposes to include in its CAIR 
program both an energy efficiency/renewable energy set-aside (EERESA) 
to encourage Energy Efficiency Projects (EEPs), Renewable Energy 
Projects (REPs), and Qualifying Other Project (QOPs), and a new unit 
set-aside to allow for addition of new units.
    Connecticut defines a new unit as any fossil-fuel-fired unit that 
began operating on or after January 1, 2006 and that serves a generator 
that produces electricity at an output of 15 MWe or more. A unit is 
considered to be a new unit for 6 ozone-season control periods (or 
portion thereof) following the date of initial operation. This change 
in status means that a Connecticut CAIR ``new unit'' will then become a 
Connecticut CAIR ``existing unit.''
    Connecticut proposes to establish a new unit set-aside at 7 percent 
of the State's CAIR budget during CAIR phase 1 (2009-2014), and at 5 
percent of the State's CAIR budget during CAIR phase 2 (2015 and 
thereafter). Therefore, the new unit set-aside would include 200 CAIR 
NOX ozone-season allowances during CAIR phase 1, and 134 
allowances during CAIR phase 2.
    Connecticut proposes to establish an EERESA at 10 percent of the 
State's CAIR budget for both phases of the CAIR program. Therefore, the 
EERESA would include 268 CAIR NOX allowances for the 2009 
and subsequent ozone-season control periods.
(2) Methodology for Allocating CAIR Allowances
    Connecticut is proposing to replace the provisions of the CAIR 
NOX ozone-season model trading rule concerning allowance 
allocations with a largely output-based methodology. Under 
Connecticut's proposed SIP revision, most fossil-fuel-fired units would 
receive allocations based on their average net electricity output, 
without adjustments for fuel type. For cogeneration, industrial, and 
waste-tire-fired units, Connecticut proposes to allocate allowances 
based on the units' actual or permitted NOX emission rates 
and average heat input.
    EPA has identified two potential ambiguities in the allocation 
provisions of Connecticut's proposed CAIR program, and asked the 
Connecticut DEP for its interpretations. The Connecticut DEP (Wendy 
Jacobs, Bureau of Air Management) responded by electronic mail on June 
20, 2007. After reviewing the Connecticut DEP's interpretations as 
stated in that electronic mail message, EPA interprets the provisions 
involved as follows.
    First, the proposed regulation uses the term ``NOX 
allowance'' in three places. See RCSA sections 22a-174-22c(c)(2), 22a-
174-22c(c)(3)(B), 22a-174-22c(g)(4). However, this term is defined 
neither in the proposed SIP revision nor in the CAIR model rule. 
According to the Connecticut DEP, the term ``NOX allowance'' 
when used in RCSA section 22a-174-22c is identical to the term ``CAIR 
NOX Ozone Season allowance'' as defined at 40 CFR 96.302. 
EPA adopts this interpretation.
    Second, under RCSA sections 22a-174-22c(e)(7)(A) and (B) and 22a-
174-22c(e)(8)(A), there is no limit to the number of allowances that 
can be allocated to cogeneration units, industrial units, waste-tire-
fired units, or Phase I units in any control period. In theory, these 
provisions could operate to allocate more allowances to cogeneration 
units, industrial units, waste-tire-fired units, or Phase I units than 
are available in Connecticut's CAIR NOX ozone-season budget. 
That said, RCSA sections 22a-174-22c(e)(2) and 22a-174-22c(e)(3), which 
authorize the Connecticut DEP to allocate CAIR NOX ozone 
season allowances, state the maximum number of allowances available for 
allocation for all units other than new units.
    According to the Connecticut DEP, RCSA sections 22a-174-
22c(e)(7)(A) and 22a-174-22c(e)(8)(A) are modeled after analogous 
provisions in the Connecticut NOX Budget Program and the 
Connecticut NOX SIP Call trading program, and under those 
programs, the allocations for cogeneration units and industrial units 
have never resulted in a shortage of allowances for units in other 
categories. The DEP suggests that if the data support allocating 
allowances to cogeneration units, industrial units and waste-tire-fired 
units on an output basis, or if there are a significant number of new 
entrants into these categories, DEP may revise its CAIR program to 
allocate to these categories on an output basis.
    For purposes of construing Connecticut's proposed SIP revision, EPA 
interprets RCSA sections 22a-174-22c(e)(2) and 22a-174-22c(e)(3) to 
prohibit the Connecticut DEP from allocating allowances in excess of 
the total state budget, and to control in any conflict with RCSA 
sections 22a-174-22c(e)(7)(A) and (B) and 22a-174-22c(e)(8)(A). Thus, 
if the operation of RCSA sections 22a-174-22c(e)(7)(A)-(B) and/or 22a-
174-22c(e)(8)(A) were to yield allowances for cogeneration units, 
industrial units, waste-tire-fired units, or Phase I units in excess of 
the state budget, either by themselves or in combination with 
allocations to other categories, then RCSA sections 22a-174-22c(e)(2) 
and 22a-174-22c(e)(3) would require the Connecticut DEP to recalculate 
or reallocate allowances so as not to exceed the state budget.
    EPA is relying on this interpretation of Connecticut's proposed SIP 
revision for the purposes of approving it as meeting the requirements 
of the Act and the CAIR program. If EPA does not receive comments to 
the contrary from the Connecticut DEP or any other party during the 
public comment period, the interpretations stated above will represent 
EPA's formal interpretations of the SIP provisions at issue for 
purposes of federal law.
(3) NOX Reporting Requirements
    Under the CAIR model rule, facilities that are subject to the Acid 
Rain Program or the CAIR NOX and SO2 annual 
trading programs must report emissions data year-round, but facilities 
that are only subject to the NOX ozone season trading 
program need only submit NOX emission data to the State 
during the ozone season. As noted above, Connecticut is only required 
to

[[Page 50310]]

participate in the CAIR NOX ozone season program. However, 
Connecticut's proposed CAIR program requires additional data reporting 
beyond that required by the model CAIR NOX ozone season 
rule. Specifically, all units would be required to provide annual 
reports of net electricity output and useful steam output (or an 
estimate of this steam output) for each control period. New CAIR units 
would be required to provide annual estimates of the total number of 
hours of operation for each control period. Units that are not subject 
to an Acid Rain emissions limitation and that are monitoring 
NOX emissions using a CEMS (but not those that are not 
monitoring using a CEMS) would be required to report emissions on a 
year-round basis.
    EPA has determined that these modifications of the CAIR 
NOX ozone season trading rule in regard to reporting of 
output data are acceptable.
(4) Submittal of CAIR Allocations to EPA
    In the SIP revision, Connecticut requires the State to provide EPA 
with existing-unit CAIR allocations for each control period beyond 2011 
by October 31st of each year beginning in 2008. For units starting 
operation after January 1, 2001 that are treated as new units, the 
State would notify EPA of each unit's allocation by July 31st of the 
year for which the CAIR allowances are allocated. EPA has determined 
that these proposed reporting deadlines are acceptable.

E. Individual Opt-In Units

    The opt-in provisions of the CAIR SIP model trading rules allow 
certain non-EGUs (i.e., boilers, combustion turbines, and other 
stationary fossil-fuel-fired devices) that do not meet the 
applicability criteria for a CAIR trading program to participate 
voluntarily in (i.e., opt into) the CAIR trading program. A non-EGU may 
opt into one or more of the CAIR trading programs. In order to qualify 
to opt into a CAIR trading program, a unit must vent all emissions 
through a stack and be able to meet monitoring, recordkeeping, and 
recording requirements of 40 CFR part 75. The owners and operators 
seeking to opt a unit into a CAIR trading program must apply for a CAIR 
opt-in permit. If the unit is issued a CAIR opt-in permit, the unit 
becomes a CAIR unit, is allocated allowances, and must meet the same 
allowance-holding and emissions monitoring and reporting requirements 
as other units subject to the CAIR trading program. The opt-in 
provisions provide for two methodologies for allocating allowances for 
opt-in units, one methodology that applies to opt-in units in general 
and a second methodology that allocates allowances only to opt-in units 
that the owners and operators intend to repower before January 1, 2015.
    States have several options concerning the opt-in provisions. 
States may adopt the CAIR opt-in provisions entirely or may adopt them 
but exclude one of the methodologies for allocating allowances. States 
may also decline to adopt the opt-in provisions at all.
    The Connecticut CAIR SIP does not include opt-in provisions. Under 
the model CAIR NOX ozone season trading rule, the energy-
output methodology that Connecticut proposes to use to allocate 
allowances cannot be used for opt-in sources.

VI. Proposed Action

    EPA is proposing to approve Connecticut's full CAIR SIP revision 
submitted on April 26, 2007, including new RCSA section 22a-174-22c 
(``The Clean Air Interstate Rule (CAIR) Nitrogen Oxides 
(NOX) Ozone Season Trading Program''), repeal of existing 
RCSA section 22a-174-22a (``The Connecticut NOX Budget 
Program''), as of May 1, 2009, and repeal of existing RCSA section 22a-
174-22b (``The Connecticut Post-2002 NOX Budget Program''), 
as of May 1, 2010. Under this SIP revision, Connecticut is choosing to 
participate in the EPA-administered cap-and-trade program for 
NOX ozone-season emissions. Connecticut's proposed SIP 
revision meets the applicable requirements in 40 CFR 51.123(o) and 
(aa), with regard to NOX ozone-season emissions. EPA is 
proposing to determine that the SIP as revised will meet the 
requirements of CAIR. As a consequence of the SIP approval, the 
Administrator of EPA will also issue, without providing an opportunity 
for a public hearing or an additional opportunity for written public 
comment, a final rule to withdraw the CAIR FIP concerning 
NOX ozone-season emissions for Connecticut. This action will 
delete and reserve 40 CFR 52.386.

VII. Statutory and Executive Order Reviews

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
action is not a ``significant regulatory action'' and therefore is not 
subject to review by the Office of Management and Budget. For this 
reason, this action is also not subject to Executive Order 13211, 
``Actions Concerning Regulations That Significantly Affect Energy 
Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001). This action 
merely proposes to approve State law as meeting Federal requirements 
and would impose no additional requirements beyond those imposed by 
State law. Accordingly, the Administrator certifies that this proposed 
rule would not have a significant economic impact on a substantial 
number of small entities under the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.). Because this action proposes to approve pre-existing 
requirements under State law and would not impose any additional 
enforceable duty beyond that required by State law, it does not contain 
any unfunded mandate or significantly or uniquely affect small 
governments, as described in the Unfunded Mandates Reform Act of 1995 
(Public Law 104-4).
    This proposal also does not have tribal implications because it 
would not have a substantial direct effect on one or more Indian 
tribes, on the relationship between the Federal Government and Indian 
tribes, or on the distribution of power and responsibilities between 
the Federal Government and Indian tribes, as specified by Executive 
Order 13175 (65 FR 67249, November 9, 2000). This proposed action also 
does not have Federalism implications because 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 (64 FR 43255, August 10, 1999). This 
action merely proposes to approve a State rule implementing a Federal 
standard and will result, as a consequence of that approval, in the 
Administrator's withdrawal of the CAIR FIP. It does not alter the 
relationship or the distribution of power and responsibilities 
established in the Clean Air Act. This proposed rule also is not 
subject to Executive Order 13045 ``Protection of Children from 
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23, 
1997), because it would approve a State rule implementing a Federal 
Standard.
    In reviewing SIP submissions, EPA's role is to approve State 
choices, provided that they meet the criteria of the Clean Air Act. In 
this context, in the absence of a prior existing requirement for the 
State to use voluntary consensus standards (VCS), EPA has no authority 
to disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the Clean Air Act. Thus, the requirements 
of section 12(d) of the

[[Page 50311]]

National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) do not apply. This proposed rule would not impose an information 
collection burden under the provisions of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Electric 
utilities, Intergovernmental relations, Nitrogen oxides, Ozone, 
Particulate matter, Reporting and recordkeeping requirements, Sulfur 
dioxide.

    Dated: August 22, 2007.
Ira Leighton,
Acting Regional Administrator, EPA New England.
[FR Doc. E7-17196 Filed 8-30-07; 8:45 am]

BILLING CODE 6560-50-P
