UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

REGION III

	1650 Arch Street

	Philadelphia, Pennsylvania  19103

DATE:	

SUBJECT:	Technical Support Document for Notice of Proposed Rulemaking
–Pennsylvania -Clean Air Interstate Rule NOx and SO2 Trading Programs;
NOx SIP Call Rule; and Amendments to NOx Control Rules

FROM:	Marilyn Powers, Environmental Engineer   /s/   9/1/2009

Air Quality Planning Branch 

TO:		File

THRU:	Cristina Fernandez  /s/   9/1/2009

		Chief, Air Quality Planning Branch

A.  BACKGROUND

EPA promulgated new, more protective national ambient air quality
standards (NAAQS) for 8-hour ozone and fine particulate matter (PM2.5)
in July 1997.  States were required to submit SIP revisions for the new
standards three years after promulgation.  In June 2004, EPA designated
the areas that are not attaining the new ozone standard, and in December
2004 designated the areas that are not attaining the new PM2.5 standard.
 However, EPA determined that transported emissions from upwind states
constitute a major fraction of the 8-hour ozone and PM2.5 problem in the
eastern portion of the United States.  Section 110(a)(2)(D) of the Clean
Air Act requires that States eliminate transported emissions that are
significantly contributing to or interfering with maintenance of
nonattainment areas in downwind states.  As in the NOx SIP Call (63 FR
57356 dated October 27, 1998), eliminating significant contribution is
not designed to eliminate all contributions to transport, but rather to
balance the burden for achieving attainment between regional-scale and
local-scale control programs.

The Clean Air Interstate Rule (CAIR) was published by EPA on May 12,
2005 (70 FR 25162).  In this rule, EPA, based on air quality modeling
analyses and cost analyses, determined that 28 States, including
Pennsylvania and the District of Columbia contribute significantly to
nonattainment and interfere with maintenance of the NAAQS for 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 State
Implementation Plans (SIPs) to include control measures that reduce
emissions of sulfur dioxide (SO2) which is a precursor to PM2.5
formation, and/or nitrogen oxides (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 for SO2 and annual State-wide
emission reduction requirements for NOx, from which State budgets are
calculated.  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).
These emission reductions were established using an approach based on
application of controls that EPA has determined to be highly cost
effective.   For CAIR, EPA has determined that highly cost effective
controls are available on electric generating units (EGUs).  This
approach for determining the state budgets was used in the NOx SIP Call,
a program that has proven to be a successful program for addressing
regional emissions.  

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 lays out 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 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.

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 both CAIR and the associated CAIR
FIP in their entirety. North Carolina v. EPA, 531 F.3d 836 (D.C. Cir.
2008).  In response to EPA's petition for rehearing, the Court issued an
order remanding CAIR to EPA without vacating either CAIR or the CAIR
FIP.  North Carolina v. EPA, 531 F.3d 836, 2008 WL 533481 (D.C. Cir.
Dec. 23, 2008). The Court thereby left CAIR provisions 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.
 The Court directed EPA to "remedy the CAIR flaws" consistent with its
July 11, 2008 opinion, but declined to impose a schedule on EPA for
completing that action.  Therefore, CAIR and the CAIR FIP are currently
in effect in Pennsylvania. 

B.  EPA REQUIREMENTS

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.  The model
rules apply to stationary fossil fuel-fired boilers or stationary fossil
fuel-fired turbines serving at any time, since the start-up of the
unit’s combustion chamber, a generator with a nameplate capacity of
more than 25 megawatt (MWe) producing electricity for sale.  They also
apply to units that qualify as cogeneration units that serve at any time
a generator with a 25 MWe capacity and supplying more than one-third of
the unit’s potential electric output capacity or 219,000 MWe,
whichever is greater, to any utility power distribution system.

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.

States have the flexibility to choose the type of control measures they
will use to meet the requirements of CAIR.  All States are meeting  the
CAIR requirements through 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 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; and

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.  EPA’s approval, without any
conditions, of a CAIR full SIP revision causes the CAIR FIP to be
automatically withdrawn.

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.

C.  STATE’S SUBMITTAL

On May 23, 2008, the Pennsylvania Department of Environmental Protection
(PADEP) submitted a SIP revision comprised of amendments to Pennsylvania
regulations codified at 25 Pa. Code Chapters 121, 129, and 145.  These
amendments were adopted by the Commonwealth primarily to implement the
requirements of CAIR, sunset the Commonwealth’s NOx Budget Trading
Program after 2008, to require NOx emission limits for the non-EGUs that
were trading sources in the NOx Budget Trading Program, to revise
provisions relating to the use of allowances by non-CAIR sources and
emission reduction credits.  The revisions, established in
Pennsylvania’s CAIR NOx Ozone Season trading program, supersede the
Commonwealth’s existing NOx Budget Trading Program. The non-EGU NOx
Budget Trading Program budget serves as a Statewide ozone season
emissions cap for new and existing non-EGUs as well as for EGUs that
were subject to the NOx Budget Trading Program, but not subject to CAIR.
 The Pennsylvania SIP revisions related to the State’s CAIR
regulations notably include provisions for the allocation of NOx
allowances to certain CAIR units that did not receive SO2 allowances
under the Acid Rain Program and provides for the allocation of CAIR NOx
annual allowances and CAIR NOx ozone season allowances to qualifying
renewable energy and energy efficiency units.   Additional these SIP
revisions extend existing NOx emission limits for certain boilers,
stationary combustion turbines and stationary internal combustion
engines, and transition existing programs that allowed limited use of
NOx SIP Call allowances to instead allow limited use of CAIR allowances.
 The revision also addresses the interaction between emission reduction
credits and CAIR allowances.  The revisions are made to the following
sections of Chapters 121, 129, and Subchapters A, B, and C of Chapter
145.  Subchapter D of Chapter 145 was added to establish the
requirements for the Commonwealth’s CAIR trading programs.  

Chapter 121 – General Provisions

§ 121.1. Definitions – Revision of definition for vintage or vintage
year, as used in the trading program.

Chapter 129 – Standards for Sources, Additional NOx Requirements

§ 129.201 – Boilers

§ 129.202 – Stationary combustion turbines

§ 129.204 – Emission accountability

Chapter 145 – Interstate Pollution Transport Reduction

Subchapter A - NOx Budget Trading Program

§145.8 – Transition to CAIR NOx Trading Programs

Subchapter B - Emissions of NOx From Stationary Internal Combustion
Engines

§145.113 – Standard Requirements

Subchapter C - Emissions of NOx From Cement Manufacturing 

§145.143 – Standard Requirements

Subchapter D - CAIR NOx and SO2 Trading Programs

Pennsylvania CAIR Trading Programs established by 25 Pa. Code Chapter
145, Subchapter D 

Pennsylvania’s CAIR trading programs for NOx annual, NOx ozone season,
and SO2 emissions set forth by 25 Pa. Code Chapter 145 largely
incorporates by reference (IBR) the CAIR model rules established by EPA
in 40 CFR 96.101 – 188, 40 CFR 96.201 – 288, and 40 CFR 96.301 -
388.  The IBR includes appendices, amendments, and supplements to the
CAIR regulations.  Subchapter D also includes definitions associated
with its CAIR trading programs that pertain to allocations for renewable
energy sources, which are not part of the CAIR model rules and
provisions for the interaction of emission reduction credits with CAIR. 


Pennsylvania’s CAIR rules differ from the model rules in only one of
the four areas for which states have flexibility to deviate, while still
participating in the EPA-administered CAIR trading program. 
Pennsylvania has chosen to replace the model rule provisions of 40 CFR
96.141 and  96.341, pertaining to the timing of allocations for the 
CAIR NOx annual trading program and the CAIR NOx ozone season trading
program, with modified requirements.  In addition, the provisions of 40
CFR 96.142 and 96.342 that pertain to the allocation process and new
unit set aside are modified. The Commonwealth’s allocation methodology
and timing, as set forth in the SIP revision, meet the minimum
requirements and flexibilities of the CAIR trading program.   

25 Pa. Code §145.211 (Timing Requirements for NOx Annual Trading
Program) and §145.221 (Timing Requirements for NOx Ozone Season Trading
Program) sets forth the timing requirements for issuance of allocations
to existing CAIR sources.  In both of these trading programs, allowances
for 2010 through 2012 will be submitted to the Administrator by April
30, 2008, allowances for 2013 will be submitted by April 30, 2009, and
allowances for each subsequent year will be submitted on April 30 of the
year four years prior to the respective control period.  CAIR timing
requirements for issuance of allowances are found in 40 CFR
51.123(o)(2)(ii)(B) for the NOx annual trading program and 40 CFR
51.123(aa)(2)(ii)(C) for the NOx ozone season trading program. The
requirement that allocations be made by the Commonwealth four years in
advance of the control period for which allowances are issued meets
these CAIR requirements. 

The allocations for new units will be based on actual emissions in the
calendar year preceding the year the application for allowances is
submitted.  These new units may also receive an allocation based on
qualifying converted baseline heat input.  The allowances allocated to
the new units, will be issued for the fifth year after the year of the
new unit’s NOx emissions.  CAIR timing requirements for issuance of
new unit allowances are found in 40 CFR 51.123(o)(2)(ii)(C) for the NOx
annual trading program and 40 CFR 51.123(aa)(2)(ii)(D) for the NOx ozone
season trading program.  These require that the EPA be notified of the
amount of allowances to be allocated to new units by October 31 and July
31 of the year of the allocation for the NOx annual trading program and
the NOx ozone season trading program, respectively.  The new unit
allocation requirements in §145.211 and §145.221 meet the timing
requirements of CAIR.  

Additionally, Pennsylvania has chosen not to use a “set-aside” for
allocations to new units.  Instead, as set forth in 145.212(c), existing
units, new units, and qualifying resources will be allocated from the
same allowance pool.  Allocation priority is given to new units, after
which existing units and qualifying resources will receive allocations.
A unit may receive a new unit allocation in the same year it receives an
allocation based on qualifying converted baseline heat input,with
concurrent allocations continuing each year until the new unit no longer
qualifies for new unit allocations.  The new unit will no longer qualify
as a new unit five years after the unit’s first NOx emissions.  Such a
methodology avoids oversubscription of a set-aside (in which case
allowances are prorated and new units do not receive all of its
requested allowances), allows new sources to be integrated into the
allowance pool, and allows qualifying resources a more equitable share
of allowances.

“Qualifying resources” is a term used by the Commonwealth that
refers to energy efficiency or renewable energy sources that meet the
Commonwealth’s requirements for allocation of allowances. 
§145.212(f) stipulates that the number of allocations will be
determined by converting the certified quantity of electric energy
production, useful thermal energy and energy equivalent value of the
measures approved under the Pennsylvania Alternative Energy Portfolio
Standard to equivalent thermal energy. 

Pennsylvania has also chosen to allocate up to 1.3 percent of its CAIR
NOx annual trading budget in each control period to certain facilities
that were exempted from the Acid Rain Program.  Because they were exempt
from the Acid Rain Program, they did not receive SO2 allowances under
that program.  These facilities are now subject to CAIR and would
receive NOx annual and NOx ozone season allowances..  §145.212(f) sets
forth the requirements for a source to qualify to receive additional
CAIR NOx allowances  Sources that qualify will receive additional NOx
allowances at a ratio of one CAIR NOx allowance for every eight tons of
SO2 emitted.  This ratio is derived from historical price data for NOx
and SO2 allowances.  These sources may also choose to opt in to the Acid
Rain Program to receive SO2 allowances in that program, in which case
the number of additional NOx allowances received under this provision
would be adjusted downward to reflect the difference between its Acid
Rain Program SO2 allowances and its SO2 emissions.

Sunset of Pennsylvania NOx Budget Trading Program and Transition of
Non-EGUs that were formerly trading sources

	This SIP revision terminates Pennsylvania’s NOx Budget Trading
Program after the 2008 control period.  §145.8 specifically retires
allowances for both EGUs and non-EGUs allocated for 2009 and beyond that
were issued under the NOx Budget Trading Program, and requires the EGUs
that were trading sources in this program to comply with the
requirements of Subchapter D, for CAIR NOx and SO2 Trading Programs.  

	Pennsylvania has opted not to include in its CAIR ozone season trading
program the non-EGUs that participated in the NOx Budget Trading
Program.  Pennsylvania is therefore required to meet the requirements of
40 CFR 51.121(f)(2) and (i)(4) for these non-EGUs, which require that a
State impose a NOx mass emissions cap on each source, impose a NOx
emissions rate limit on each source and assume maximum operating
capacity for purposes of estimating mass NOx emissions, or impose any
other regulatory requirement which can be demonstrated to provide
emission reductions that for the source to comply with its 2007 ozone
season NOx budget.  A State must also impose enforceable mechanisms to
assure that collectively all such sources, including new or modified
units, will not exceed the total NOx emissions projected for its 2007
budget.  40 CFR 51.121(i)(4) requires that these sources must also
comply with the monitoring provisions of 40 CFR 75, subpart H.  

	Pennsylvania has added new subsection §145.8(d) to transition these
units from the NOx Budget trading program, and to meet the requirements
of 40 CFR 51.121(f)(2) and (i)(4).  These units will be required to
comply with an emissions cap to meet their continuing requirements under
the NOx SIP Call.  The non-EGU emissions trading budget under the NOx
SIP Call totals 3,619 tons of NOx.  Pennsylvania uses 3,438 tons as a
State-wide ozone season emission limitation for these units. Each unit
has an allowable emission rate, calculated by January 31 of each year,
that is equivalent to its share of the previous ozone season’s total
heat input for all non-EGUs subject to these requirements multiplied by
3,438 tons.  Continuous emissions monitoring (CEMS) in accordance with
40 CFR Part 75 is required for these units.  

	Also, this subsection sets forth a requirement that if the statewide
cap is exceeded, those units that exceed their individual caps must
surrender to the Commonwealth one CAIR NOx ozone season allowance and
one CAIR NOx annual allowance for each ton of emissions over its cap. 
This provision is discussed in more detail in item 4 below.  
Pennsylvania has set aside five percent (181 tons) of the NOx SIP Call
non-EGU budget, 76 tons of which will be retired each year to compensate
for sources that were exempted under the “twenty-five ton exemption”
 in §145.4(b).  The balance of tons remaining in the set aside is
available to Pennsylvania Department of Environmental Protection
annually for accounting purposes.  

3)  Other Provisions Related to CAIR allowances

Chapter 129 applies to owners and operators of small sources of NOx in
the five counties that comprise the Pennsylvania portion of the
Philadelphia non-attainment area.  The affected sources - boilers,
stationary combustion turbines and stationary internal combustion
engines - are subject to emission limits set forth in §129.201 through
§129.203.   §129.204 requires that these sources surrender NOx SIP
Call allowances to the Commonwealth if they exceed their NOx emission
limits.  These provisions were approved by EPA into the Pennsylvania SIP
on September 29, 2006 (71 FR 57428).  Because the NOx SIP Call trading
program has been discontinued, this SIP revision transitions the
allowances from NOx SIP Call allowances to CAIR NOx allowances.

25 Pa. Code §145.113 and §145.143 set forth the emission limitations
for large stationary internal combustion engines and large cement kilns
that are subject to the NOx SIP Call.  These requirements were approved
into the Pennsylvania SIP by the September 29, 2006 rulemaking. Like the
small sources of NOx above, these sources are required to surrender NOx
SIP Call allowances to the Commonwealth if they exceed their NOx
emission limits.  Similarly, this SIP revision transitions the
allowances from NOx SIP Call allowances to CAIR NOx allowances.

25 Pa. Code §145.205 includes additional requirements related to
Chapter 127 - Emission Reduction Credit (ERC) Provisions.  This section
requires a CAIR unit that generates ERCs to surrender CAIR allowances
equal to the amount of ERC credits relied upon by the trade authorized
under Chapter 127.  A similar provision was approved into
Pennsylvania’s SIP on August 21, 2001 (66 FR 43795) as part of the
Commonwealth’s NOx Budget Trading Program.  This provision updates the
requirements for EGUs that generate ERCs from NOx SIP Call allowances to
CAIR NOx allowances.  

4)  EPA analysis of use of CAIR allowances

EPA reviewed the requirement for non-EGUs under §129.204 and §145.113
and §145.143, discussed above, to surrender CAIR allowances to assure
that its use in the Commonwealth is very limited and will not
significantly impact the CAIR trading market.  The number of allowances
surrendered has varied from 1 allowance to 325.   These amounts would
constitute a fraction of one percent of the Commonwealth’s total CAIR
NOx budget in 2009.  (For example, 325 allowances are 0.33 percent and
0.77 percent of the CAIR annual budget and ozone season budget,
respectively.  A summary of the allowances actually surrendered under
the existing provisions are shown below. 

Vintage Year		Allowances Surrendered

2003			17

2004			1

2005			278

2006			244

2007			221

2008			325

These units have to comply with either a cap or an emission rate, but
have the option to surrender allowances when the cap or rate is
exceeded.  Pennsylvania believes that the majority of sources’
preference will be to control rather than to purchase allowances. 
Through 2007, the sources having the surrender option have controlled
about 10,000 tons of NOx per ozone season, and have surrendered an
average of 247 tons per ozone season, or about 2.5% of the amount
controlled.

As described in (2) above, Pennsylvania has added the new subsection
§145.8(d) to address requirements for units subject to the NOx Budget
Trading Program, but not subject to the CAIR NOx Ozone Season trading
Program.  Beginning with the 2009 ozone season, these units will be
required to meet a State-wide ozone season emissions cap.  Each unit
also has an allowable emission rate.  If the combined NOx ozone season
emissions from all the units subject to subsection §145.8(d) exceed the
statewide ozone season emissions cap, the units that exceed their
individual allowable emissions for that ozone season must surrender one
CAIR NOx ozone season allowance and one CAIR NOx annual allowance for
each ton of emissions over the individual unit’s allowable emission
limit. The following list shows the total number of emissions from all
non-EGUs in Pennsylvania for the control periods in 2003 through 2007
under the NOx SIP Call, taken from the Clean Air Markets Division (CAMD)
website that posts data related to trading programs.  This data shows
emissions ranging from 65.4% of the NOx SIP Call emissions budget in
2006 to 80.5% in 2004.  

Ozone Season       Total non-EGU emissions

2003 		 2,768.3

2004		 2,912.0

2005		 2,723.7

2006 		 2, 367.5

2007 		 2,512.4

Because the surrender provision is only triggered if the statewide cap
is exceeded, this data suggests that the impact to the CAIR trading
program and allowance market would be minimal. Thus, the impact from
these sources will likely be insignificant.

5.  Additional Analysis/Clarifications Pertaining to the NOx SIP Call
Non-EGUs 

	25 Pa. Code 145.8(c) establishes that the requirements that pertain to
units subject to the NOx SIP Call trading program, as set forth in
Subchapter A, are replaced with the new requirements for the CAIR ozone
season trading program set forth in Subchapter D, starting with the 2010
control period.  Although this provision is a blanket reference to the
NOx Budget Trading Program (which includes both EGUs and non-EGUs), it
applies only to the EGUs that are trading sources under the Pennsylvania
CAIR provisions found in Subchapter D.  The remaining NOx SIP Call
trading program units not subject to CAIR (non-EGUs) are regulated under
§145.8(d).  The Commonwealth’s NOx SIP Call requirements are fully
addressed by the combination of these two rules.

	Section 145.8(d)(12) sets aside 181 tons of the non-EGU NOx budget for
“accounting corrections.”  If unused, this NOx tonnage will be
retired by Pennsylvania annually.  It provides a buffer for assuring
that the non-EGU budget is met (e.g., units meeting the 25 ton exemption
in the NOx Budget Trading Program).

	

D.  CONCLUSIONS AND RECOMMENDED AGENCY ACTION

Pennsylvania has adopted amendments to its existing rules that establish
NOx annual, NOx ozone season, and SO2 annual trading programs meeting
the requirements of CAIR.  Pennsylvania has largely incorporated by
reference the EPA model rules and includes modifications to the model
rules that are consistent with the limited changes allowed by CAIR in
order for a State to participate in the EPA-administered CAIR trading
program. The SIP revision, which meets the requirements of CAIR and
strengthens the SIP, is recommended for approval.

 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 approving
the provisions of Pennsylvania’s SIP revision that use the SO2 and NOX
budgets set in CAIR, EPA is also approving, Pennsylvania’s SIP
revision, including the provisions addressing applicability, allowance
allocations, and use of title IV allowances.

 Pennsylvania anticipated that its CAIR SIP would be in effect by April
30, 2008 in time to issue the allocations for 2010 through 2012. 
Because the Pennsylvania CAIR SIP was not in effect at that time, the
2009 allocations for sources in Pennsylvania were issued under the FIP. 
Allocations for 2010 will be issued in accordance with the
Commonwealth’s CAIR SIP when finally approved.

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