	ENVIRONMENTAL PROTECTION AGENCY

	40 CFR Part 52

	[EPA-R03-OAR-2007-0381]; FRL-        ] 

Approval and Promulgation of Air Quality Implementation Plans; Virginia;
Clean Air Interstate Rule Budget Trading Programs

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Proposed rule.

SUMMARY:  EPA is proposing to approve a revision to the Virginia State
Implementation Plan (SIP) submitted on March 30, 2007 and supplemented
on April 30, 2007 and June 11, 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 Virginia.  Therefore, as a
consequence of the SIP approval, EPA will also withdraw the CAIR Federal
Implementation Plans (FIP) that address sulfur dioxide (SO2), nitrogen
oxides (NOx ) annual, and NOX ozone season emissions in Virginia.  The
CAIR FIPs for all States in the CAIR region were promulgated on April
28, 2006 and subsequently revised on December 13, 2006.  The CAIR
requires affected States to reduce emissions of SO2 and NOX that
significantly contribute to, and interfere with maintenance of, the
national ambient air quality standards (NAAQS) for fine particulates
and/or ozone in any downwind state.  The CAIR establishes State budgets
for SO2 and NOX and requires States to submit SIP revisions that
implement these budgets in States that EPA determined contribute to
nonattainment in downwind states.  States have the flexibility to choose
which control measures to adopt to achieve the budgets, and may choose
whether or not to participate in the EPA-administered cap-and-trade
programs.  In the SIP revision that EPA is proposing to approve,
Virginia would meet CAIR requirements by participating in the
EPA-administered cap-and-trade programs addressing SO2, NOX annual, and
NOX ozone season emissions.

DATES: Written comments must be received on or before [insert date 30
days from date of publication].  

ADDRESSES:  Submit your comments, identified by Docket ID Number
EPA-R03-OAR-2007-0381 by one of the following methods:

 www.regulations.gov.  Follow the on-line instructions for submitting
comments.

B.    E-mail:  powers.marilyn@epa.gov.

C.    Mail:   EPA-R03-OAR-2007-0381, Marilyn Powers, Acting Chief, Air
Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection
Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.

 D.   Hand Delivery: At the previously-listed EPA Region III address. 
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.
EPA-R03-OAR-2007-0381.  EPA's policy is that all comments received will
be included in the public docket without change, and may be made
available online at 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 information that you
consider to be CBI or otherwise protected through www.regulations.gov or
e-mail.  The www.regulations.gov website 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 
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, any form of encryption, and be free of any defects or
viruses.

Docket:  All documents in the electronic docket are listed in the
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.  Publicly available docket
materials are available either electronically in www.regulations.gov or
in hard copy during normal business hours at the Air Protection
Division, U.S. Environmental Protection Agency, Region III, 1650 Arch
Street, Philadelphia, Pennsylvania 19103. Copies of the State submittal
are available at the Virginia Department of Environmental Quality, 629
East Main Street, Richmond, Virginia, 23219.

FOR FURTHER INFORMATION CONTACT: Marilyn Powers, (215) 814-2308, or by
e-mail at powers.marilyn@epa.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

What Action Is EPA Proposing to Take?

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

What are the General Requirements of CAIR and the CAIR FIPs?

What are the Types of CAIR SIP Submittals?

Analysis of Virginia’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.  Allocation of NOX Allowances from Compliance Supplement Pool

F.  Individual Opt-in Units

VI. 	Proposed Actions

VII.  	Statutory and Executive Order Reviews

  What Action Is EPA Proposing to Take?  

EPA is proposing to approve a revision to Virginia’s SIP, submitted on
March 30, 2007 and supplemented on April 30, 2007 and June 11, 2007.  
In its SIP revision, Virginia would meet CAIR requirements by requiring
certain electric generating units (EGUs) to participate in the
EPA-administered CAIR cap-and-trade programs addressing SO2, NOX annual,
and NOX ozone season emissions.  EPA is proposing to determine that the
Virginia SIP, as revised, will meet the applicable requirements of CAIR.
 Any final action approving Virginia’s SIP revision will be taken by
the Regional Administrator for Region 3.  As a consequence of the SIP
approval, the EPA Administrator will issue a final rule to withdraw the
FIPs addressing SO2, NOX annual, and NOX ozone season emissions for
Virginia, which will delete and reserve 40 CFR 52.2440 and 2441.  The
withdrawal of the CAIR FIPs for Virginia is a conforming amendment that
must be made once the SIP is approved because EPA’s authority to issue
the FIPs was premised on a deficiency in the SIP for Virginia.  Once the
SIP to implement CAIR is fully approved, EPA no longer has authority for
the FIPs.  Thus, EPA will not have the option of maintaining the FIPs
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 FIPs.

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

The 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 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. 

Section 110(a)(2)(D) of the CAA requires states to reduce emissions that
significantly contribute to nonattainment or interfere with maintenance
of the NAAQS in downwind states.  CAIR explains to subject States what
must be included in their SIPs to address the requirements of section
110(a)(2)(D) 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, three 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 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 (71 FR 25328), 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 SO2, NOX annual, and NOX ozone season
trading programs of the CAIR FIPs 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 FIP also allows
States to submit abbreviated SIP revisions that, if approved by EPA,
will automatically 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 (71 FR 25287 and 71 FR 25303), 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?

The 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.  The 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 non-EGUs 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.  The 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:

Include  NOX SIP Call trading sources that are not EGUs under CAIR in
the CAIR NOX ozone season trading program;

Provide for State allocation of  NOX annual or ozone season allowances
using a methodology chosen by the State;

Provide for State allocation of  NOX annual allowances from the
compliance supplement pool (CSP) using the State’s choice of  allowed,
alternative methodologies; or

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 Virginia’s CAIR SIP Submittal 

EPA believes that Virginia clearly intends, by this SIP submittal, to
replace the CAIR FIP with a State plan that is based on the CAIR model
rule and allow subject sources, non-EGUs from its NOx SIP Call budget
trading program, and opt-in units meeting the CAIR opt-in criteria to
participate in the EPA-administered regional CAIR trading program. 
However, EPA also believes that there are some provisions of the
amendments to Virginia regulations (9 VAC 5-140) that could be
interpreted in a way that might be inconsistent with the
Commonwealth’s intent.  These specific provisions pertain to
definitions associated with Virginia’s participation in the regional
CAIR trading program, definitions associated with the State’s decision
to bring its non-EGUs from its NOx SIP Call budget trading program into
the CAIR trading program, and a definition of the term “most stringent
state of federal NOx emissions limitation” that is based upon the
model rule but has been expanded to include the situation where more
than one fuel is allowed by a permit.  

On September 12, 2007, EPA sent a letter to the Virginia Department of
Environmental Quality (VADEQ) asking the Commonwealth to confirm that
EPA correctly understood how Virginia intended to interpret and
implement these regulatory definitions.  In response to EPA’s letter,
VADEQ sent a letter dated September 17, 2007, confirming in writing its
interpretations of these regulatory provisions.  EPA has reviewed
VADEQ’s interpretations and has determined that they clarify the
language of the Virginia regulations and are also consistent with having
the EPA-administered CAIR trading program become effective in Virginia. 
In addition, the letter accepts EPA’s recommendation that the
Commonwealth promulgate and codify clarifying amendments to these
provisions of its regulations at the earliest opportunity.   

A.  State Budgets for Allowance Allocations

The CAIR NOX annual and NOx 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 lb/MMBtu, for phase 1, and 0.125 lb/MMBtu, for phase
2, to obtain regional NOX budgets for 2009-2014 and for 2015 and
thereafter, respectively.  EPA derived the State NOX annual and NOx
ozone season budgets from the regional budgets using State heat input
data adjusted by fuel factors.

The CAIR State SO2 budgets were derived by discounting the tonnage of
emissions authorized by annual allowance allocations under the Acid Rain
Program under title IV of the CAA.  Under CAIR, each allowance allocated
in the Acid Rain Program for the years in phase 1 of CAIR (2010 through
2014) authorizes 0.5 ton of SO2 emissions in the CAIR trading program,
and each Acid Rain Program allowance allocated for the years in phase 2
of CAIR (2015 and thereafter) authorizes 0.35 ton of SO2 emissions in
the CAIR trading program.

In today’s action, EPA is proposing approval of Virginia’s SIP
revision that adopts the budgets established for the Commonwealth in
CAIR.  These budgets are: 36,074  tons for NOX annual emissions from
2009 though 2014, and 30,062 tons from 2015 and thereafter; 20,098 tons
for NOX ozone season emissions from 2009 through 2014, and 17,432 tons
from 2015 and thereafter; and 63,478 tons for SO2 emissions from 2010
through 2014, and 44,435 tons from 2015 and thereafter.   Virginia’s
SIP revision sets these budgets as the total amounts of allowances
available for allocation for each year under the EPA-administered
cap-and-trade programs.  The NOx ozone season budget properly reflects
the inclusion of NOx SIP Call trading program units in the CAIR NOx
ozone season 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 NOx ozone-season model rules are similar, there are some
differences.  For example, the NOX annual model rule (but not the NOX
ozone season model rule) provides for a CSP under which allowances may
be awarded for early reductions of NOX annual emissions.  As a further
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.

The provisions of the CAIR SO2 model rule are also similar to the
provisions of the NOX annual and NOx ozone season model rules.  However,
the SO2 model rule is coordinated with the ongoing Acid Rain SO2
cap-and-trade program under title IV of the CAA.  The SO2 model rule
uses the title IV allowances for compliance, with each title IV
allowance allocated for 2010-2014 authorizing only 0.50 ton of emissions
and each allowance allocated for 2015 and thereafter authorizing only
0.35 ton of emissions.  Banked title IV allowances allocated for years
before 2010 can be used at any time in the CAIR SO2 cap-and-trade
program, with each such allowance authorizing 1 ton of emissions.  Title
IV allowances are to be freely transferable among sources covered by the
Acid Rain Program and sources covered by the CAIR SO2 cap-and-trade
program.

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 its SIP revision, Virginia chooses to implement its CAIR budgets by
requiring EGUs to participate in the EPA-administered cap-and-trade
programs for SO2, NOX annual, and NOX ozone season emissions. 
Virginia’s full CAIR SIP revision adopts, with certain allowed
changes, the CAIR model cap-and-trade rules for SO2, NOX annual, and 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.  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.

Virginia has chosen to expand the applicability provisions of the CAIR
NOX ozone season trading program to include all non-EGUs in the
Commonwealth’s NOX SIP Call trading program, and has incorporated into
CAIR the definitions from its NOx SIP Call trading program that are
required in order to cover all the large industrial boilers and
combustion turbines that are currently or may become subject to the
rule.

D.  NOX Allowance Allocations

Under the NOX allowance allocation methodology in the CAIR model trading
rules and in the CAIR FIP, NOX annual and NOx ozone season allowances
are allocated to units that have operated for five years, 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 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:

The cost to recipients of the allowances, which may be distributed for
free or auctioned;

The frequency of allocations;

The basis for allocating allowances, which may be distributed, for
example, based on historical heat input or electric and thermal output;
and

The use of allowance set-asides and, if used, their size. 

Virginia has retained most aspects of the NOx annual and NOx ozone
season model trading rules pertaining to allowance allocations, but has
changed the basis for allocating allowances, and the use and size of the
allowance set-asides, within the flexibilities described.  The
Commonwealth uses a commencement of operation date of January 1, 2006
for purposes of calculating the average baseline heat input. The CAIR
NOx units that commenced operation prior to this date receive allowance
allocations in accordance with the model rule. The CAIR NOx units that
commence operation after this date receive allocations in accordance
with expanded provisions that allow for computation of an average heat
input for units operating from between one to five years.  Virginia
chose not to adjust for fuel type in its computation of average heat
input. 

Virginia has also chosen to modify the NOx annual and NOx ozone season
model rule provisions pertaining to the set aside.  It has established a
new unit set aside that consists of four percent of the total
Commonwealth budget from 2009 through 2013 and one percent from 2014 and
after.  It has also established an annual, voluntary public health
set-aside that will be retired, and a one percent energy
efficiency/renewable energy set-aside for each control period.

E.  Allocation of NOX Allowances from Compliance Supplement Pool (CSP)

The CAIR establishes a CSP to provide an incentive for early reductions
in NOX annual emissions.   The CSP consists of 200,000 CAIR NOX annual
allowances of vintage 2009 for the entire CAIR region, and a State’s
share of the CSP is based upon the projected magnitude of the emission
reductions required by CAIR in that State.  States may distribute CSP
allowances, one allowance for each ton of early reduction, to sources
that make NOX reductions during 2007 or 2008 beyond what is required by
any applicable State or Federal emission limitation.  States also may
distribute CSP allowances based upon a demonstration of need for an
extension of the 2009 deadline for implementing emission controls.  

The CAIR NOX annual model trading rule establishes specific
methodologies for allocations of CSP allowances.  States may choose an
allowed, alternative CSP allocation methodology to be used to allocate
CSP allowances to sources in the States. 

The CSP for Virginia is comprised of 5,134 tons of NOx.  Virginia has
chosen to distribute the CSP, but has modified the provisions of the
CAIR NOX annual model trading rule concerning the allocation of
allowances from the CSP.  Virginia requires that CAIR NOx units that are
part of a group of units under single ownership, with combined emissions
of NOx that exceeded 40,000 tons in 2004, collectively reduce emissions
in 2007 and/or 2008 by an amount equal in number to the CSP, and
establishes a methodology for allocating to such units from the CSP. 
This change is within the flexibility of the CAIR NOx annual model rule.
 

F.  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.

For the CAIR NOx annual trading program, the CAIR NOx ozone season
trading program, and the CAIR SO2 trading program, Virginia has chosen
to allow non-EGUs meeting certain requirements to opt into the CAIR NOX
annual trading program.  Virginia has adopted both of the methodologies
for allocating allowances that are in the model rule.

VI.  Information Pertaining to SIP Submittals from the Commonwealth of
Virginia 

In 1995, Virginia adopted legislation that provides, subject to certain
conditions, for an environmental assessment (audit) (privilege(' for
voluntary compliance evaluations performed by a regulated entity.  The
legislation further addresses the relative burden of proof for parties
either asserting the privilege or seeking disclosure of documents for
which the privilege is claimed.  Virginia's legislation also provides,
subject to certain conditions, for a penalty waiver for violations of
environmental laws when a regulated entity discovers such violations
pursuant to a voluntary compliance evaluation and voluntarily discloses
such violations to the Commonwealth and takes prompt and appropriate
measures to remedy the violations.  Virginia's Voluntary Environmental
Assessment Privilege Law, Va. Code Sec. 10.1-1198, provides a privilege
that protects from disclosure documents and information about the
content of those documents that are the product of a voluntary
environmental assessment. The Privilege Law does not extend to documents
or information (1) that are generated or developed before the
commencement of a voluntary environmental assessment; (2) that are
prepared independently of the assessment process; (3) that demonstrate a
clear, imminent and substantial danger to the public health or
environment; or (4) that are required by law.

On January 12, 1998, the Commonwealth of Virginia Office of the Attorney
General provided a legal opinion that states that the Privilege law,Va.
Code Sec. 10.1-1198,  precludes granting a privilege to documents and
information (required by law,( including documents and information
(required by Federal law to maintain program delegation, authorization
or approval,( since Virginia must (enforce Federally authorized
environmental programs in a manner that is no less stringent than their
Federal counterparts. . . .(   The opinion concludes that ([r]egarding (
10.1-1198, therefore, documents or other information needed for civil or
criminal enforcement under one of these programs could not be privileged
because such documents and information are  essential to pursuing
enforcement in a manner required by Federal law to maintain program
delegation, authorization or approval.(   

Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides that ([t]o
the extent consistent with requirements imposed by Federal law,(  any
person making a voluntary disclosure of information to a state agency
regarding a violation of an environmental statute, regulation, permit,
or administrative order is granted immunity from administrative or civil
penalty.  The Attorney General's January 12, 1998 opinion states that
the quoted language renders this statute inapplicable to enforcement of
any Federally authorized programs, since (no immunity could be afforded
from administrative, civil, or criminal penalties because granting such
immunity would not be consistent with Federal law, which is one of the
criteria for immunity.(   

Therefore, EPA has determined that Virginia's Privilege and Immunity
statutes will not preclude the Commonwealth from enforcing its program
consistent with the Federal requirements.  In any event, because EPA has
also determined that a state audit privilege and immunity law can affect
only state enforcement and cannot have any impact on Federal enforcement
authorities, EPA may at any time invoke its authority under the CAA,
including, for example, sections 113, 167, 205, 211 or 213, to enforce
the requirements or prohibitions of the state plan, independently of any
state enforcement effort.  In addition, citizen enforcement under
section 304 of the CAA is likewise unaffected by this, or any, state
audit privilege or immunity law.

VII.  Proposed Action

EPA is proposing to approve Virginia’s full CAIR SIP revision
submitted on March 30, 2007, and supplemented on April 30, 2007 and June
11, 2007 .  Under the SIP revision, Virginia is choosing to participate
in the EPA-administered cap-and-trade programs for SO2, NOX annual, and
NOX ozone season emissions.  The SIP revision meets the applicable
requirements in 40 CFR 51.123(o) and (aa), with regard to NOX annual and
NOX ozone season emissions, and 40 CFR 51.124(o), with regard to SO2
emissions.  EPA is proposing to determine that the SIP revision will
meet the requirements of CAIR.  As a consequence of the SIP approval,
the Administrator of EPA will issue, without providing an opportunity
for a public hearing or an additional opportunity for written public
comment, a final rule to withdraw the CAIR FIPs for SO2, NOx annual, and
NOx ozone season emissions for Virginia.  EPA is soliciting public
comments on the issues discussed in this document.  These comments will
be considered before taking final action. 

VII.  Statutory and Executive Order Reviews   

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
proposed 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 Fed. Reg. 28355 (May 22, 2001)).  This action
merely proposes to approve state law as meeting Federal requirements and
imposes no additional requirements beyond those imposed by state law. 
Accordingly, the Administrator certifies that this proposed rule will
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 rule proposes to approve pre-existing requirements under
state law and does 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 proposed
rule also does 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), nor will it 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),
because it merely proposes to approve a state rule implementing a
Federal requirement, and does not alter the relationship or the
distribution of power and responsibilities established in the CAA.  This
proposed rule also is not subject to Executive Order 13045 (62 FR 19885,
April 23, 1997), because it approves 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 CAA.  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
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) do not apply.  As required by section 3 of Executive Order 12988
(61 FR 4729, February 7, 1996), in issuing this proposed rule, EPA has
taken the necessary steps to eliminate drafting errors and ambiguity,
minimize potential litigation, and provide a clear legal standard for
affected conduct.  EPA has complied with Executive Order 12630 (53 FR
8859, March 15, 1988) by examining the takings implications of the rule
in accordance with the (Attorney General(s Supplemental Guidelines for
the Evaluation of Risk and Avoidance of Unanticipated Takings( issued
under the executive order.  This action proposing approval of
Virginia’s CAIR budget trading program does 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,  Nitrogen dioxide,
Ozone, Reporting and recordkeeping requirements, Sulfur oxides.



Authority: 42 U.S.C. 7401 et seq.

_September 19, 2007__________                            
______/s/______________________

Dated:                                                                  
     William T. Wisniewski, Acting

                                                                        
          Regional Administrator,

                                                                        
          Region III.

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