ENVIRONMENTAL PROTECTION AGENCY

	40 CFR Part 52

	[EPA-R03-OAR-2009-0033; FRL-       ]

	Approval and Promulgation of Air Quality Implementation Plans;

	West Virginia; Clean Air Interstate Rule

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Proposed rule.

SUMMARY:  EPA is proposing to approve a revision to the West Virginia
State Implementation Plan (SIP).  This revision addresses the
requirements of EPA’s Clean Air Interstate Rule (CAIR), and recodifies
and revises provisions pertaining to internal combustion engines and
cement kilns that are subject to the nitrogen oxides (NOx) SIP Call. 
Although the D.C. Circuit found CAIR to be flawed, the rule was remanded
without vacatur and thus remains in place.  Thus, EPA is continuing to
take action on CAIR SIPs as appropriate.  CAIR, as promulgated, requires
States to reduce emissions of sulfur dioxide (SO2) and nitrogen oxides
(NOx) that significantly contribute to, or interfere with maintenance
of, the national ambient air quality standards (NAAQS) for fine
particulates and/or ozone in any downwind state.  CAIR establishes
budgets for SO2 and NOX for States that contribute significantly to
nonattainment in downwind States and requires the significantly
contributing States to submit SIP revisions that implement these
budgets.  States have the flexibility to choose which control measures
to adopt to achieve the budgets, including participation in
EPA-administered cap-and-trade programs addressing SO2, NOX annual, and
NOX ozone season emissions.  In the SIP revision that EPA is proposing
to approve, West Virginia will meet CAIR requirements by participating
in these cap-and-trade programs.  EPA is proposing to approve the SIP
revision, as interpreted and clarified herein, as fully implementing the
CAIR requirements for West Virginia.  

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-2009-0033 by one of the following methods:

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

B.    E-mail:    HYPERLINK "mailto:fernandez.cristina@epa.gov" 
fernandez.cristina@epa.gov  

C.    Mail:   EPA-R03-OAR-2009-0033, Cristina Fernandez, 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-2009-0033.  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 West Virginia Department of Environmental
Protection, Division of Air Quality, 601 57th Street SE, Charleston,
West Virginia 25304.

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?

What Is the Regulatory History of CAIR and the CAIR Federal
Implementation Plans (FIPs)?

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

What are the Types of CAIR SIP Submittals?

Analysis of West Virginia’s CAIR SIP Submittal

	A.  State Budgets for Allowance Allocations

	B.  CAIR Cap-and-Trade Programs

	C.  Applicability Provisions 

	D.  NOX Allowance Allocations

	E.  Allocation of NOX Allowances from Compliance Supplement Pool

 	F.  Individual Opt-in Units

	G.  Additional Interpretations

VI.   		Proposed Action

VII.  		Statutory and Executive Order Reviews

     What Action Is EPA Proposing?  

EPA is proposing to approve the SIP revision submitted by West Virginia
on April 22, 2008, as interpreted and clarified herein, as meeting the
applicable 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 also proposing to approve recodification and revision of
provisions that address NOX ozone season emission reduction requirements
for internal combustion engines and cement kilns, updated only to revise
NOx SIP Call references to CAIR references.  These provisions for
internal combustion engines and cement kilns were previously approved as
part of West Virginia regulation 45CSR1.  45CSR1 set forth the
requirements for both: non-EGUs that were part of the NOx Budget Trading
Program, and non-EGUs that were not part of the trading program but
instead had specific emission requirements.  EPA will no longer
administer the NOx Budget Trading program after 2008, therefore West
Virginia chose to sunset its NOx Budget Trading Program rules by
repealing 45CSR1 and 45CSR26 (which applied to EGUs) in their entirety. 
The units that participated in the NOx Budget Trading Program in 45CSR1
and 45CSR26 will now be subject to the requirements of the CAIR trading
program, as proposed in this action.  The provisions for internal
combustion engines and cement kilns have been recodified into separate
sections of 45CSR40 (sections 45-40-90 and 45-40-100, respectively).    

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

EPA published CAIR 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 or budgets 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 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.  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.  Further, as provided in  a rule published by EPA on
November 7, 2007, a State’s CAIR FIPs are automatically withdrawn when
EPA approves a SIP revision, in its entirely and without any conditions,
as fully meeting the requirements of CAIR.  Where only portions of the
SIP revision are approved, the corresponding portions of the FIPs are
automatically withdrawn and the remaining portions of the FIP stay in
place.  Finally, the CAIR FIPs also allow 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, 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. 

On October 19, 2007, EPA amended CAIR and the CAIR FIPs to clarify the
definition of “cogeneration unit” and thus the applicability of the
CAIR trading program to cogeneration units. There are no sources in West
Virginia that are affected by the clarification of this definition,
however, West Virginia must still revise their rules to address this
clarification and submit the revised rule as a SIP revision.

EPA was sued by a number of parties on various aspects of CAIR, and on
July 11, 2008, the U.S. Court of Appeals for the District of Columbia
Circuit issued its decision to vacate and remand both CAIR and the
associated CAIR FIPs in their entirety.  North Carolina v. EPA, 531 F.3d
836 (D.C. Cir. Jul. 11, 2008).  However, in response to EPA's petition
for rehearing, the Court issued an order remanding CAIR to EPA without
vacating either CAIR or the CAIR FIPs.   North Carolina v. EPA, 550 F.3d
1176 (D.C. Cir. Dec. 23, 2008).  The Court thereby left CAIR in place in
order to “temporarily preserve the environmental values covered by
CAIR” until EPA replaces it with a rule consistent with the Court’s
opinion.  Id. at 1178.  The Court directed EPA to "remedy CAIR’s
flaws" consistent with its July 11, 2008 opinion, but declined to impose
a schedule on EPA for completing that action.  Id.  Therefore, CAIR and
the CAIR FIP are currently in effect in West Virginia. 

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 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.  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 all 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.  As discussed above, EPA approval in
full, without any conditions, of a CAIR full SIP revision causes the
CAIR FIPs to be automatically withdrawn. 

V.	Analysis of West Virginia’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 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 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 to approve West Virginia’s SIP
revision that adopts the budgets established for the State in CAIR. 
These budgets are: 74,220 tons for NOX annual emissions from 2009
through 2014 and 61,850 tons from 2015 and thereafter; 26,859 tons for
NOX ozone season emissions from 2009 through 2014 and 26,525 tons from
2015 and thereafter; and 215,881 tons for SO2 annual emissions from 2009
through 2014 and 151,117 tons from 2015 and thereafter.  Additionally,
the CAIR NOX ozone season budget would be increased annually by 2,184
tons to account for NOX SIP Call trading sources that are not EGUs under
CAIR, but are included in the CAIR NOX ozone season trading program. 
West 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.

EPA notes that, in North Carolina, id. at 916-21, the Court determined,
among other things, that the State SO2 and NOX budgets established in
CAIR were arbitrary and capricious.  However, as discussed above, the
Court also decided to remand CAIR but to leave the rule in place in
order to “temporarily preserve the environmental values covered by
CAIR” pending EPA’s development and promulgation of a replacement
rule that remedies CAIR’s flaws.  Id. at 1178.  EPA had indicated to
the Court that development and promulgation of a replacement rule would
take about two years.  Reply in Support of Petition for Rehearing or
Rehearing en Banc at 5 (filed Nov. 17, 2008 in North Carolina v. EPA,
Case No. 05-1224, D.C. Cir.).  The process at EPA of developing a
proposal that will undergo notice and comment and result in a final
replacement rule is ongoing.  In the meantime, consistent with the
Court’s orders, EPA is implementing CAIR by approving State SIP
revisions that are consistent with CAIR (such as the provisions setting
State SO2 and NOX budgets for the CAIR trading programs) in order to
“temporarily preserve” the environmental benefits achievable under
the CAIR trading programs.  North Carolina, 550 F.3d  at 1178.

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 annual model rule (but not the NOX ozone season
model rule) provides for a CSP, which is discussed below, and 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 ozone season model rules.  However, the
SO2 model rule is coordinated with the ongoing Acid Rain SO2
cap-and-trade program under CAA title IV.  The SO2 model rule uses the
title IV allowances for compliance, with each 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 the SIP revision, West Virginia chooses to implement its CAIR budgets
by requiring EGUs to participate in EPA-administered cap-and-trade
programs for SO2, NOX annual, and NOX ozone season emissions.  West
Virginia has adopted a full SIP revision that adopts, with certain
allowed changes discussed below, the CAIR model cap-and-trade rules for
SO2, NOX annual, and NOX ozone season emissions.

C.  Applicability Provisions 

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.  Under the
CAIR model trading rules, exemptions are provided for a unit otherwise
covered by these general applicability criteria that is a cogeneration
unit meeting a specified limit on its electricity sales or that is a
solid waste incineration unit meeting a specified limit on combustion of
fossil fuel.  In the applicability section of each of West Virginia’s
CAIR trading rules, these exemptions are set forth in subsection 4.2,
which begins with the phrase “[w]ith limited exception” and then
goes on to state that units meeting the exemption criteria that are set
forth are not CAIR units.  EPA interprets this phrase to mean, in each
of West Virginia’s CAIR trading rules, that the provisions in
subsection 4.2 that set forth the exemptions for cogeneration units and
solid waste incineration units are the “limited exceptions” to the
general applicability criteria in subsection 4.1 and that these
provisions are not altered by the reference to “limited exception”
and are intended to be the same as the exemptions set forth in the CAIR
model trading rules.  In other words, there are no exceptions to the
general applicability criteria other than those listed in subsection
4.2, and all units meeting the exemption criteria in subsection 4.2 are
not CAIR units.  In a letter submitted to EPA on April 30, 2008, the
West Virginia Department of Environmental Protection adopted this
interpretation.  

	

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.

West Virginia has chosen to expand the applicability provisions of the
CAIR NOX ozone season trading program to include all non-EGUs in the
State’s NOX SIP Call trading program, including the only unit (PPG
Natrium Plant Unit 002) that opted into the State’s NOX SIP Call
trading program.  Under 40 CFR 51.123(aa)(2)(i), a State may include
“all non-EGUs subject to” the State’s NOX SIP Call trading
program.   EPA believes that, although the unit voluntarily entered the
State’s NOX SIP Call trading program, West Virginia properly included
this unit in the CAIR NOX ozone season trading program because the unit
became subject to that trading program in 2003, installed emission
controls for compliance with program requirements, and has continued to
participate in the program through 2008.   Consistent with the fact
(discussed below) that West Virginia’s SIP revision does not allow for
opt-in units in the CAIR NOX ozone season trading program, the SIP
revision treats this unit like any other CAIR unit and does not give
this unit the option of leaving the CAIR NOX ozone season trading
program.    

Further, in connection with the inclusion, as CAIR units in the CAIR NOX
ozone season trading program, of non-EGUs in the State’s NOX SIP Call
trading program, West Virginia’s SIP revision includes (in subsection
2.37.b) a special definition of “commence operation” for such
non-EGUs that become CAIR units after they have commenced operation. 
Section 45-2.37.b incorrectly references “subsections 4.2 or 4.3,”
which were renumbered in the latest version of West Virginia’s SIP
revision as “subsections 4.3 or 4.4.”  Because this appears to be a
scrivener’s error, EPA interprets the references to be to
“subsections 4.3 or 4.4.”   In a letter submitted to EPA on April
30, 2008, the West Virginia Department of Environmental Protection
adopted this interpretation.  

D.  NOX Allowance Allocations

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, 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. 

West Virginia has chosen to distribute NOX annual and NOX ozone season
allowances in a manner substantively identical to that in the Part 96
model rule.  The State’s NOX ozone season allocation provisions have
been modified only to the extent necessary to add requirements
associated with West Virginia’s option to bring its non-EGUs into the
CAIR NOX ozone season trading program.

E.  Allocation of NOX Allowances from Compliance Supplement Pool 

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 annual NOX 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. 

West Virginia’s compliance supplement pool is comprised of 4,898
allowances.  West Virginia has chosen to modify the provisions of the
CAIR NOX annual model trading rule concerning the allocation of
allowances from the CSP.  West Virginia has chosen to distribute CSP
allowances to any CAIR NOX Annual unit in the State whose average annual
NOX emission rate for 2007 or 2008 is less than 0.25 lb/mmBtu and whose
NOX averaging plan (if the unit is included in an Acid Rain Program NOX
averaging plan under 40 CFR 76.11) for that year has an actual weighted
average NOX emission rate that is equal to or less than the actual
weighted average NOX emission rate for the year before the unit achieves
NOX emission reductions in 2007 or 2008. 

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.  West Virginia has
declined to adopt the opt-in provisions.

G.  Additional Interpretations

1.  References to NOX Emitting Equipment in Section 45-40-9.  

West Virginia’s SIP revision includes provisions (in sections 45-40-90
and 45-40-100) addressing NOX ozone season emission reduction
requirements for internal combustion engines and cement kilns, none of
which sources are included in the CAIR NOX ozone season trading program.
 The NOX ozone season emission reduction requirements in these sections
-- which have been moved from the portion of West Virginia’s rules
addressing the NOX SIP Call to the portion addressing CAIR -- are
identical to those previously approved in West Virginia’s SIP for
purposes of meeting requirements under the NOX SIP Call, except that
references to the NOX SIP Call trading program are replaced by
references to the CAIR NOX ozone season trading program.  EPA is
therefore proposing to approve the recodification and revision of
sections 45-40-90 and 45-40-100, as interpreted and clarified below.

Some of the language in section 45-40-90 could be interpreted as being
inconsistent with the above-discussed CAIR trading program applicability
provisions in section 45-40-4 in West Virginia’s SIP revision. 
Specifically, subsections 90.1, 90.4.d, 90.4.g, and 90.4.i refer to
stationary internal combustion engines and “other significant NOX
emitting equipment” located at facilities controlled by the same owner
or operator.  Section 90.1 states that both of these categories of
equipment “will not be…subject to the CAIR NOX Ozone Season Trading
Program requirements under sections 4 through 88.”   Subsections
90.4.g and 90.4.i include similar language stating the “other
significant NOX emitting equipment” will not be subject to trading
program requirements; however, these sections clarify that the “other
significant NOX emitting equipment” that is not subject to the trading
program requirements is only to equipment “that is not a CAIR NOX
Ozone Season unit under section 4” (i.e., section 45-40-4). 
Subsections 90.1 and 90.4.d lack this clarifying language.  Section
45-40-4 does not exempt from the CAIR NOX ozone season trading program
“other significant NOX emitting equipment” covered by section
45-40-90.  Therefore, if subsections 90.1 and 90.4.d. were interpreted
to exempt “other significant NOX emitting equipment” regardless of
whether it is covered by the CAIR trading programs, these subsections
would be inconsistent with section 45-40-4.  In order for West Virginia
to participate in the CAIR trading program as the State clearly intends,
the applicability of the CAIR trading program to “significant NOX
emitting equipment” must be determined by section 45-40-4 (not section
45-40-90).  EPA interprets all references to “other significant NOX
emitting equipment” in section 45-40-90 to be limited to such
equipment that is not a CAIR NOX Ozone Season unit under section
45-40-4.  In a letter submitted to EPA on April 30, 2008, the West
Virginia Department of Environmental Protection adopted this
interpretation.

 2.  Treatment of CAIR Allowances Allocated to Opt-in Units 

Having chosen not to allow units to opt into the CAIR trading programs,
West Virginia properly removed from its CAIR trading rules most of the
provisions that are in the CAIR model trading rules and address CAIR
opt-in units.  However, while, as discussed above, West Virginia has the
option of participating in the CAIR trading programs with or without
allowing units in its jurisdiction to opt into the trading programs,
other States also have that option, and some States have chosen to allow
units in their respective jurisdictions to opt in.  Consequently, any
CAIR SO2 unit, including those in West Virginia, may obtain CAIR SO2
allowances allocated to a CAIR opt-in unit and use them to comply with
the allowance-holding requirements in the CAIR SO2 trading program. 
Under the CAIR SO2 model trading rule, compliance with these
requirements is determined in two steps:  first, CAIR units that are
also Acid Rain units must show compliance consistent with the Acid Rain
Program allowance-holding requirement and so can use only title IV
allowances;  and second, all CAIR units must then show compliance with
the CAIR trading program allowance-holding requirement using either
title IV allowances or CAIR SO2 allowances allocated to CAIR opt-in
units.  Language in the compliance provisions of the CAIR SO2 model
trading rule states explicitly when CAIR SO2 allowances allocated to
CAIR opt-in units can and cannot be used.  West Virginia’s SIP
inadvertently omitted this language from section 45-41-54, apparently
because the language refers to the CAIR opt-in unit provisions. 
However, West Virginia’s rule still requires compliance initially with
the Acid Rain Program requirement set forth in sections 73.35 and 77.5
of the Acid Rain Program rules, which themselves require the use of only
title IV allowances.  Consequently, EPA interprets subsections 54.2.a.1
and 54.2.a.2 to allow only for the use of title IV allowances. 
Moreover, since West Virginia’s rule defines “CAIR SO2 allowance”
as including allowances allocated to CAIR opt-in units, EPA interprets
subsections 54.2.a.3, 54.2.b, 54.2.b.2, and 54.4.a to allow for the use
of title IV allowances and allowances allocated to CAIR opt-in units. 
In a letter submitted to EPA on April 30, 2008, the West Virginia
Department of Environmental Protection adopted this interpretation.  

VI.	Proposed Action

EPA is proposing to approve West Virginia’s full CAIR SIP revision
submitted on April 22, 2008, as interpreted and clarified herein.  EPA
is proposing to approve the recodification and revision of provisions
(in sections 45-40-90 and 45-40-100) addressing NOX ozone season
emission reduction requirements for internal combustion engines and
cement kilns, none of which are included in the CAIR trading programs. 
Under the SIP revision, West Virginia is choosing to participate in the
EPA-administered CAIR cap-and-trade programs for SO2, NOX annual, and
NOX ozone season emissions.  The SIP revision, as interpreted and
clarified herein, meets the applicable requirements of CAIR, set forth
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 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 the Clean Air Act, the Administrator is required to approve a SIP
submission that complies with the provisions of the Act and applicable
Federal regulations.  42 U.S.C. 7410(k); 40 CFR 52.02(a).  Thus, in
reviewing SIP submissions, EPA’s role is to approve state choices,
provided that they meet the criteria of the Clean Air Act.  Accordingly,
this action merely proposes to approve state law as meeting Federal
requirements and does not impose additional requirements beyond those
imposed by state law.  For that reason, this proposed action:

is not a "significant regulatory action” subject to review by the
Office of Management and Budget under Executive Order 12866 (58 FR
51735, October 4, 1993);  

does not impose an information collection burden under the provisions of
the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);

is certified as not having a significant economic impact on a
substantial number of small entities under the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.);  

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);

does not have Federalism implications as specified in Executive Order
13132 (64 FR 43255, August 10, 1999);

is not an economically significant regulatory action based on health or
safety risks subject to Executive Order 13045 (62 FR 19885, April 23,
1997); 

is not a significant regulatory action subject to Executive Order 13211
(66 FR 28355, May 22, 2001); 

is not subject to requirements of Section 12(d) of the National
Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note)
because application of those requirements would be inconsistent with the
Clean Air Act; and 

does not provide EPA with the discretionary authority to address, as
appropriate, disproportionate human health or environmental effects,
using practicable and legally permissible methods, under Executive Order
12898 (59 FR 7629, February 16, 1994).

In addition, this proposed approval of West Virginia’s SIP revision
to meet the requirements of CAIR does not have tribal implications as
specified by Executive Order 13175 (65 FR 67249, November 9, 2000),
because the SIP is not approved to apply in Indian country located in
the state, and EPA notes that it will not impose substantial direct
costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52  

Environmental protection, Air pollution control, Incorporation by
reference, Nitrogen dioxide, Ozone, Particulate matter, Reporting and
recordkeeping requirements, Sulfur oxides.



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

_May 29, 2009_____			     	 ____________/s/________________

Dated						 William C. Early,

                                                              	 Acting
Regional Administrator,

                                                              	 Region
III.

	

1 The Court also determined that the CAIR trading programs were unlawful
(id. at 906-8) and that the treatment of title IV allowances in CAIR was
unlawful (id. at 921-23).  For the same reasons that EPA is proposing
approval of the provisions of West Virginia’s SIP revision that use
the SO2 and NOX budgets set in CAIR, EPA is also proposing approval, as
discussed below, West Virginia’s SIP revision to the extent the SIP
revision adopts the CAIR trading programs, including the provisions
addressing applicability, allowance allocations, and use of title IV
allowances.   

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