
[Federal Register Volume 81, Number 124 (Tuesday, June 28, 2016)]
[Proposed Rules]
[Pages 41914-41923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15146]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R04-OAR-2016-0294; FRL-9948-41-Region 4]


Air Plan Approval; Alabama; Cross-State Air Pollution Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to 
approve portions of the October 26, 2015, State Implementation Plan 
(SIP) submittal from Alabama concerning the Cross-State Air Pollution 
Rule (CSAPR). Under CSAPR, large electricity generating units (EGUs) in 
Alabama are subject to Federal Implementation Plans (FIPs) requiring 
the units to participate in CSAPR's federal trading program for annual 
emissions of nitrogen oxides (NOX) and one of CSAPR's two 
federal trading programs for annual emissions of sulfur dioxide 
(SO2). This action would approve into Alabama's SIP the 
state's regulations requiring Alabama EGUs to participate in new CSAPR 
state trading programs for annual NOX and SO2 
emissions integrated with the CSAPR federal trading programs, replacing 
the corresponding FIP requirements. These CSAPR state trading programs 
are substantively identical to the CSAPR federal trading programs 
except with regard to the provisions allocating emission allowances 
among Alabama units. EPA is proposing to approve the portions of the 
SIP revision concerning these CSAPR state trading programs because 
these portions of the SIP revision meet the requirements of the Clean 
Air Act (CAA or Act) and EPA's regulations for approval of a CSAPR full 
SIP revision replacing the requirements of a CSAPR FIP. Under the CSAPR 
regulations, approval of these portions of the SIP revision would 
automatically eliminate Alabama units' obligations to participate in 
CSAPR's federal trading programs for annual NOX and 
SO2 emissions under the corresponding CSAPR FIPs addressing 
interstate transport requirements for the 1997 and 2006 Fine 
Particulate Matter (PM2.5) national ambient air quality 
standards (NAAQS). Approval of these portions of the SIP

[[Page 41915]]

revision would satisfy Alabama's good neighbor obligation under the CAA 
to prohibit emissions which will significantly contribute to 
nonattainment or interfere with maintenance of the 1997 and 2006 
PM2.5 NAAQS in any other state. EPA is not proposing to act 
at this time on the portion of Alabama's SIP submittal intended to 
replace Alabama units' obligations to participate in CSAPR's federal 
trading program for ozone-season NOX emissions under a 
separate CSAPR FIP.

DATES: Comments must be received on or before July 28, 2016.

ADDRESSES: Submit your comments, identified by Docket ID No EPA-R04-
OAR-2016-0294 at http://www.regulations.gov. Follow the online 
instructions for submitting comments. Once submitted, comments cannot 
be edited or removed from Regulations.gov. EPA may publish any comment 
received to its public docket. Do not submit electronically any 
information you consider to be Confidential Business Information (CBI) 
or other information whose disclosure is restricted by statute. 
Multimedia submissions (audio, video, etc.) must be accompanied by a 
written comment. The written comment is considered the official comment 
and should include discussion of all points you wish to make. EPA will 
generally not consider comments or comment contents located outside of 
the primary submission (i.e., on the Web, cloud, or other file sharing 
system). For additional submission methods, the full EPA public comment 
policy, information about CBI or multimedia submissions, and general 
guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Steven Scofield, Air Regulatory 
Management Section, Air, Pesticides and Toxics Management Division, 
U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW., 
Atlanta, Georgia 30303-8960. Mr. Scofield can be reached by telephone 
at (404) 562-9034 or via electronic mail at scofield.steve@epa.gov.

SUPPLEMENTARY INFORMATION: 
    This section provides additional information by addressing the 
following:

I. Summary
II. Background on CSAPR and CSAPR-Related SIP Revisions
III. Conditions for Approval of CSAPR-Related SIP Revisions
IV. Alabama's SIP Submittal and EPA's Analysis
    A. Alabama's SIP Submittal
    B. EPA's Analysis of Alabama's Submittal
    1. Timeliness and Completeness of SIP Submittal
    2. Methodology Covering All Allowances Potentially Requiring 
Allocation
    3. Assurance That Total Allocations Will Not Exceed the State 
Budget
    4. Timely Submission of State-Determined Allocations to EPA
    5. No Changes to Allocations Already Submitted to EPA or 
Recorded
    6. No Other Substantive Changes to Federal Trading Program 
Provisions
    7. Complete, Substantively Identical Trading Program Provisions
    8. Only Non-Substantive Substitutions for the Term ``State''
    9. Exclusion of Provisions Addressing Units in Indian Country
V. EPA's Proposed Action on Alabama's Submittal
VI. Statutory and Executive Order Reviews

I. Summary

    EPA is proposing to approve the portions of the October 26, 2015, 
SIP submittal from Alabama concerning CSAPR \1\ trading programs for 
annual emissions of NOX and SO2. Large EGUs in 
Alabama are subject to CSAPR FIPs that require the units to participate 
in the federal CSAPR NOX Annual Trading Program and the 
federal CSAPR SO2 Group 2 Trading Program.\2\ CSAPR also 
provides a process for the submission and approval of SIP revisions to 
replace the requirements of CSAPR FIPs with SIP requirements under 
which a state's units participate in CSAPR state trading programs that 
are integrated with and, with certain permissible exceptions, 
substantively identical to the CSAPR federal trading programs.
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    \1\ Federal Implementation Plans; Interstate Transport of Fine 
Particulate Matter and Ozone and Correction of SIP Approvals, 76 FR 
48208 (August 8, 2011) (codified as amended at 40 CFR 52.38 and 
52.39 and subparts AAAAA through DDDDD of 40 CFR part 97).
    \2\ EPA has proposed to replace the terms ``Transport Rule'' and 
``TR'' in the text of the Code of Federal Regulations with the 
updated terms ``Cross-State Air Pollution Rule'' and ``CSAPR.'' 80 
FR 75706 and 75759 (December 3, 2015). Except where otherwise noted, 
EPA uses the updated terms here.
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    The portions of the SIP revision proposed for approval would 
incorporate into Alabama's SIP state trading program regulations for 
annual NOX and SO2 emissions that would replace 
EPA's federal trading program regulations for those emissions for 
Alabama units for control periods in 2017 and later years. EPA is 
proposing to approve these portions of the SIP revision because they 
meet the requirements of the CAA and EPA's regulations for approval of 
a CSAPR full SIP revision replacing a federal trading program with a 
state trading program that is integrated with and substantively 
identical to the federal trading program except for permissible 
differences with respect to emission allowance allocation provisions. 
Under the CSAPR regulations, approval of these portions of the SIP 
revision would automatically eliminate the obligations of units in 
Alabama (but not any units in Indian country within Alabama's borders) 
to participate in CSAPR's federal trading programs for annual 
NOX and SO2 emissions under the corresponding 
CSAPR FIPs. EPA proposes to find that approval of these portions of the 
SIP revision would satisfy Alabama's obligation pursuant to CAA section 
110(a)(2)(D)(i)(I) to prohibit emissions which will significantly 
contribute to nonattainment or interfere with maintenance of the 1997 
and 2006 PM2.5 NAAQS in any other state.
    The Phase 2 SO2 budget established for Alabama in the 
CSAPR rulemaking has been remanded to EPA for reconsideration.\3\ If 
EPA finalizes approval of these portions of the SIP revision as 
proposed, Alabama will have fulfilled its obligations to provide a SIP 
that address the interstate transport provisions of CAA section 
110(a)(2)(D)(i)(I) with respect to the 1997 and 2006 PM2.5 
NAAQS. Thus, EPA would no longer be under an obligation to (nor would 
EPA have the authority to) address those interstate transport 
requirements through implementation of a FIP, and approval of these 
portions of the SIP revision would eliminate Alabama units' obligations 
to participate in the federal CSAPR NOX Annual Trading 
Program and the federal CSAPR SO2 Group 2 Trading Program. 
Elimination of Alabama units' obligations to participate in the federal 
trading programs would include elimination of the federally-established 
Phase 2 budgets capping allocations of CSAPR NOX Annual 
allowances and CSAPR SO2 Group 2 allowances to Alabama units 
under those federal trading programs. As approval of these portions of 
the SIP revision would eliminate Alabama's remanded federally-
established Phase 2 SO2 budget and eliminate EPA's authority 
to subject units in Alabama to a FIP, it is EPA's opinion that 
finalization of approval of this SIP action would address the judicial 
remand of Alabama's federally-established Phase 2 SO2 
budget.\4\
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    \3\ EME Homer City Generation, L.P. v. EPA, 795 F.3d 118, 138 
(D.C. Cir. 2015).
    \4\ Although the court in EME Homer City Generation remanded 
Alabama's Phase 2 SO2 budget because it determined that 
the budget was too stringent, nothing in the court's decision 
affects Alabama's authority to seek incorporation into its SIP of a 
state-established budget as stringent as the remanded federally-
established budget or limits EPA's authority to approve such a SIP 
revision. See 42 U.S.C. 7416, 7410(k)(3).

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[[Page 41916]]

    Large electricity generating units in Alabama are also subject to 
an additional CSAPR FIP requiring them to participate in the federal 
CSAPR NOX Ozone Season Trading Program. While Alabama's SIP 
submittal also seeks to replace the requirements of the CSAPR FIP 
concerning Alabama units' ozone-season NOX emissions, EPA is 
not proposing to act on that portion of the SIP submittal at this time. 
Approval of this SIP revision concerning other CSAPR trading programs 
would have no effect on the CSAPR NOX Ozone Season Trading 
Program as applied to Alabama units, and the FIP requiring the units to 
participate in that program would remain in place.
    Section II of this document summarizes relevant aspects of the 
CSAPR federal trading programs and FIPs as well as the range of 
opportunities states have to submit SIP revisions to modify or replace 
the FIP requirements while continuing to rely on CSAPR's trading 
programs to address the states' obligations to mitigate interstate air 
pollution. Section III describes the specific conditions for approval 
of such SIP revisions. Section IV contains EPA's analysis of Alabama's 
SIP submittal, and Section V sets forth EPA's proposed action on the 
submittal. Section VI addresses required statutory and Executive Order 
reviews.

II. Background on CSAPR and CSAPR-Related SIP Revisions

    EPA issued CSAPR in July 2011 to address the requirements of CAA 
section 110(a)(2)(D)(i)(I) concerning interstate transport of air 
pollution. As amended, CSAPR requires 28 Eastern states to limit their 
statewide emissions of SO2 and/or NOX in order to 
mitigate transported air pollution unlawfully impacting other states' 
ability to attain or maintain three NAAQS: The 1997 ozone NAAQS, the 
1997 annual PM2.5 NAAQS, and the 2006 24-hour 
PM2.5 NAAQS. The CSAPR emissions limitations are defined in 
terms of maximum statewide ``budgets'' for emissions of annual 
SO2, annual NOX, and/or ozone-season 
NOX by each covered state's large EGUs. The CSAPR state 
budgets are implemented in two phases of generally increasing 
stringency, with the Phase 1 budgets applying to emissions in 2015 and 
2016 and the Phase 2 budgets applying to emissions in 2017 and later 
years. As a mechanism for achieving compliance with the emissions 
limitations, CSAPR established four federal emissions trading programs: 
A program for annual NOX emissions, a program for ozone-
season NOX emissions, and two geographically separate 
programs for annual SO2 emissions. CSAPR also established up 
to three FIPs applicable to the large electricity generating units in 
each covered state. Each CSAPR FIP requires a state's units to 
participate in one of the four CSAPR trading programs.
    CSAPR includes provisions under which states may submit and EPA 
will approve SIP revisions to modify or replace the CSAPR FIP 
requirements while allowing states to continue to meet their transport-
related obligations using either CSAPR's federal emissions trading 
programs or state emissions trading programs integrated with the 
federal programs.\5\ Through such a SIP revision, a state may replace 
EPA's default provisions for allocating emission allowances among the 
state's units, employing any state-selected methodology to allocate or 
auction the allowances, subject to timing conditions and limits on 
overall allowance quantities. In the case of CSAPR's federal trading 
program for ozone-season NOX emissions (or an integrated 
state trading program), a state may also expand trading program 
applicability to include certain smaller electricity generating units. 
If a state wants to replace CSAPR FIP requirements with SIP 
requirements under which the state's units participate in a state 
trading program that is integrated with and identical to the federal 
trading program even as to the allocation and applicability provisions, 
the state may submit a SIP revision for that purpose as well. However, 
no emissions budget increases or other substantive changes to the 
trading program provisions are allowed. A state whose units are subject 
to multiple CSAPR FIPs and federal trading programs may submit SIP 
revisions to modify or replace the requirements under either some or 
all of those FIPs.
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    \5\ See 40 CFR 52.38, 52.39. States also retain the ability to 
submit SIP revisions to meet their transport-related obligations 
using mechanisms other than the CSAPR federal trading programs or 
integrated state trading programs.
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    States can submit two basic forms of CSAPR-related SIP revisions 
effective for emissions control periods in 2017 or later years.\6\ 
Specific conditions for approval of each form of SIP revision are set 
forth in the CSAPR regulations, as described in section III below. 
Under the first alternative--an ``abbreviated'' SIP revision--a state 
may submit a SIP revision that upon approval replaces the default 
allowance allocation and/or applicability provisions of a CSAPR federal 
trading program for the state.\7\ Approval of an abbreviated SIP 
revision leaves the corresponding CSAPR FIP and all other provisions of 
the relevant federal trading program in place for the state's units.
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    \6\ CSAPR also provides for a third, more streamlined form of 
SIP revision that is effective only for control periods in 2016 and 
is not relevant here. See Sec.  52.38(a)(3), (b)(3); Sec.  52.39(d), 
(g).
    \7\ Sec.  52.38(a)(4), (b)(4); Sec.  52.39(e), (h).
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    Under the second alternative--a ``full'' SIP revision--a state may 
submit a SIP revision that upon approval replaces a CSAPR federal 
trading program for the state with a state trading program integrated 
with the federal trading program, so long as the state trading program 
is substantively identical to the federal trading program or does not 
substantively differ from the federal trading program except as 
discussed above with regard to the allowance allocation and/or 
applicability provisions.\8\ For purposes of a full SIP revision, a 
state may either adopt state rules with complete trading program 
language, incorporate the federal trading program language into its 
state rules by reference (with appropriate conforming changes), or 
employ a combination of these approaches.
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    \8\ Sec.  52.38(a)(5), (b)(5); Sec.  52.39(f), (i).
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    The CSAPR regulations identify several important consequences and 
limitations associated with approval of a full SIP revision. First, 
upon EPA's approval of a full SIP revision as correcting the deficiency 
in the state's SIP that was the basis for a particular CSAPR FIP, the 
obligation to participate in the corresponding CSAPR federal trading 
program is automatically eliminated for units subject to the state's 
jurisdiction without the need for a separate EPA withdrawal action, so 
long as EPA's approval of the SIP is full and unconditional.\9\ Second, 
approval of a full SIP revision does not terminate the obligation to 
participate in the corresponding CSAPR federal trading program for any 
units located in any Indian country within the borders of the state, 
and if and when a unit is located in Indian country within a state's 
borders, EPA may modify the SIP approval to exclude from the SIP, and 
include in the surviving CSAPR FIP instead, certain trading program 
provisions that apply jointly to units in the state and to units in 
Indian country within the state's borders.\10\ Finally, if at the time 
a full SIP revision is approved

[[Page 41917]]

EPA has already started recording allocations of allowances for a given 
control period to a state's units, the federal trading program 
provisions authorizing EPA to complete the process of allocating and 
recording allowances for that control period to those units will 
continue to apply, unless EPA's approval of the SIP revision provides 
otherwise.\11\
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    \9\ Sec.  52.38(a)(6), (b)(6); Sec.  52.39(j).
    \10\ Sec.  52.38(a)(5)(iv) and (v), (a)(6), (b)(5)(v) and (vi), 
(b)(6); Sec.  52.39(f)(4) and (5), (i)(4) and (5), (j).
    \11\ Sec.  52.38(a)(7), (b)(7); Sec.  52.39(k).
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    Certain CSAPR Phase 2 emissions budgets have been remanded to EPA 
for reconsideration.\12\ However, the CSAPR trading programs remain in 
effect and all CSAPR emissions budgets likewise remain in effect 
pending EPA final action to address the remands. The remanded budgets 
include the CSAPR Phase 2 SO2 emissions budget applicable to 
Alabama units under the federal CSAPR SO2 Group 2 Trading 
Program.
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    \12\ EME Homer City Generation, L.P. v. EPA, 795 F.3d 118, 138 
(D.C. Cir. 2015).
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    In 2015, EPA proposed to update CSAPR to address Eastern states' 
interstate air pollution mitigation obligations with regard to the 2008 
ozone NAAQS. Among other things, the proposed rule would amend the 
Phase 2 emissions budget applicable to Alabama units under the CSAPR 
NOX Ozone Season Trading Program and would make technical 
corrections and nomenclature changes that would apply throughout the 
CSAPR regulations, including the CSAPR FIPs at 40 CFR part 52 and the 
CSAPR federal trading program regulations for annual NOX, 
ozone-season NOX, and SO2 emissions at 40 CFR 
part 97.\13\
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    \13\ 80 FR 75706, 75710, 75757 (December 3, 2015).
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III. Conditions for Approval of CSAPR-Related SIP Revisions

    Each CSAPR-related abbreviated or full SIP revision must meet the 
following general submittal conditions:
     Timeliness and completeness of SIP submittal. If a state 
wants to replace the default allowance allocation or applicability 
provisions of a CSAPR federal trading program, the complete SIP 
revision must be submitted to EPA by December 1 of the year before the 
deadlines described below for submitting allocation or auction amounts 
to EPA for the first control period for which the state wants to 
replace the default allocation and/or applicability provisions.\14\ 
This SIP submission deadline is inoperative in the case of a SIP 
revision that seeks only to replace a CSAPR FIP and federal trading 
program with a SIP and a substantively identical state trading program 
integrated with the federal trading program. The SIP submittal 
completeness criteria in section 2.1 of appendix V to 40 CFR part 51 
also apply.
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    \14\ 40 CFR 52.38(a)(4)(ii), (a)(5)(vi), (b)(4)(iii), 
(b)(5)(vii); Sec.  52.39(e)(2), (f)(6), (h)(2), (i)(6).
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    In addition to the general submittal conditions, a CSAPR-related 
abbreviated or full SIP seeking to address the allocation or auction of 
emission allowances must meet the following further conditions:
     Methodology covering all allowances potentially requiring 
allocation. For each federal trading program addressed by a SIP 
revision, the SIP revision's allowance allocation or auction 
methodology must replace both the federal program's default allocations 
to existing units \15\ at 40 CFR 97.411(a), 97.511(a), 97.611(a), or 
97.711(a), as applicable, and the federal trading program's provisions 
for allocating allowances from the new unit set-aside (NUSA) for the 
state at 40 CFR 97.411(b)(1) and 97.412(a), 97.511(b)(1) and 97.512(a), 
97.611(b)(1) and 97.612(a), or 97.711(b)(1) and 97.712(a), as 
applicable.\16\ In the case of a state with Indian country within its 
borders, while the SIP revision may neither alter nor assume the 
federal program's provisions for administering the Indian country NUSA 
for the state, the SIP revision must include procedures addressing the 
disposition of any otherwise unallocated allowances from an Indian 
country NUSA that may be made available for allocation by the state 
after EPA has carried out the Indian country NUSA allocation 
procedures.\17\
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    \15\ In the context of the approval conditions for CSAPR-related 
SIP revisions, an ``existing unit'' is a unit for which EPA has 
determined default allowance allocations (which could be allocations 
of zero allowances) in the rulemakings establishing and amending 
CSAPR. A spreadsheet showing EPA's default allocations to existing 
units is posted at www.epa.gov/crossstaterule/techinfo.html.
    \16\ Sec.  52.38(a)(4)(i), (a)(5)(i), (b)(4)(ii), (b)(5)(ii); 
Sec.  52.39(e)(1), (f)(1), (h)(1), (i)(1).
    \17\ See Sec. Sec.  97.412(b)(10)(ii), 97.512(b)(10)(ii), 
97.612(b)(10)(ii), 97.712(b)(10)(ii).
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     Assurance that total allocations will not exceed the state 
budget. For each federal trading program addressed by a SIP revision, 
the total amount of allowances auctioned or allocated for each control 
period under the SIP revision (prior to the addition by EPA of any 
unallocated allowances from any Indian country NUSA for the state) may 
not exceed the state's emissions budget for the control period less the 
sum of the amount of any Indian country NUSA for the state for the 
control period and any allowances already allocated to the state's 
units for the control period and recorded by EPA.\18\ Under its SIP 
revision, a state is free to not allocate allowances to some or all 
potentially affected units, to allocate or auction allowances to 
entities other than potentially affected units, or to allocate or 
auction fewer than the maximum permissible quantity of allowances and 
retire the remainder.
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    \18\ Sec.  52.38(a)(4)(i)(A), (a)(5)(i)(A), (b)(4)(ii)(A), 
(b)(5)(ii)(A); Sec.  52.39(e)(1)(i), (f)(1)(i), (h)(1)(i), 
(i)(1)(i).
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     Timely submission of state-determined allocations to EPA. 
The SIP revision must require the state to submit to EPA the amounts of 
any allowances allocated or auctioned to each unit for each control 
period (other than allowances initially set aside in the state's 
allocation or auction process and later allocated or auctioned to such 
units from the set-aside amount) by the following deadlines.\19\ Note 
that the submission deadlines differ for amounts allocated or auctioned 
to units considered existing units for CSAPR purposes and amounts 
allocated or auctioned to other units.
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    \19\ Sec.  52.38(a)(4)(i)(B) and (C), (a)(5)(i)(B) and (C), 
(b)(4)(ii)(B) and (C), (b)(5)(ii)(B) and (C); Sec.  52.39(e)(1)(ii) 
and (iii), (f)(1)(ii) and (iii), (h)(1)(ii) and (iii), (i)(1)(ii) 
and (iii).

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                                                 Deadline for submission
          Units            Year of the control  to EPA of allocations or
                                  period             auction results
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Existing.................  2017 and 2018......  June 1, 2016.
                           2019 and 2020......  June 1, 2017.
                           2021 and 2022......  June 1, 2018.
                           2023 and later       June 1 of the fourth
                            years.               year before the year of
                                                 the control period.
Other....................  All years..........  July 1 of the year of
                                                 the control period.
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     No changes to allocations already submitted to EPA or 
recorded. The SIP revision must not provide for any change to the 
amounts of allowances allocated or auctioned to any unit after those 
amounts are submitted to EPA or

[[Page 41918]]

any change to any allowance allocation determined and recorded by EPA 
under the federal trading program regulations.\20\
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    \20\ Sec.  52.38(a)(4)(i)(D), (a)(5)(i)(D), (b)(4)(ii)(D), 
(b)(5)(ii)(D); Sec.  52.39(e)(1)(iv), (f)(1)(iv), (h)(1)(iv), 
(i)(1)(iv).
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     No other substantive changes to federal trading program 
provisions. The SIP revision may not substantively change any other 
trading program provisions, except in the case of a SIP revision that 
also expands program applicability as described below.\21\ Any new 
definitions adopted in the SIP revision (in addition to the federal 
trading program's definitions) may apply only for purposes of the SIP 
revision's allocation or auction provisions.\22\
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    \21\ Sec.  52.38(a)(4), (a)(5), (b)(4), (b)(5); Sec.  52.39(e), 
(f), (h), (i).
    \22\ Sec.  52.38(a)(4)(i), (a)(5)(ii), (b)(4)(ii), (b)(5)(iii); 
Sec.  52.39(e)(1), (f)(2), (h)(1), (i)(2).
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    In addition to the general submittal conditions, a CSAPR-related 
abbreviated or full SIP revision seeking to expand applicability under 
the CSAPR NOx Ozone Season Trading Program (or an integrated state 
trading program) must meet the following further conditions:
     Only electricity generating units with nameplate capacity 
of at least 15 MWe. The SIP revision may expand applicability only to 
additional fossil fuel-fired boilers or combustion turbines serving 
generators producing electricity for sale, and only by lowering the 
generator nameplate capacity threshold used to determine whether a 
particular boiler or combustion turbine serving a particular generator 
is a potentially affected unit. The nameplate capacity threshold 
adopted in the SIP revision may not be less than 15 MWe.\23\
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    \23\ Sec.  52.38(b)(4)(i), (b)(5)(i).
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     No other substantive changes to federal trading program 
provisions. The SIP revision may not substantively change any other 
trading program provisions, except in the case of a SIP revision that 
also addresses the allocation or auction of emission allowances as 
described above.\24\
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    \24\ Sec.  52.38(b)(4), (b)(5).
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    In addition to the general submittal conditions and the other 
applicable conditions described above, a CSAPR-related full SIP 
revision must meet the following further conditions:
     Complete, substantively identical trading program 
provisions. The SIP revision must adopt complete state trading program 
regulations substantively identical to the complete federal trading 
program regulations at 40 CFR 97.402 through 97.435, 97.502 through 
97.535, 97.602 through 97.635, or 97.702 through 97.735, as applicable, 
except as described above in the case of a SIP revision that seeks to 
replace the default allowance allocation and/or applicability 
provisions.
     Only non-substantive substitutions for the term ``State.'' 
The SIP revision may substitute the name of the state for the term 
``State'' as used in the federal trading program regulations, but only 
to the extent that EPA determines that the substitutions do not 
substantively change the trading program regulations.\25\
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    \25\ Sec. Sec.  52.38(a)(5)(iii), (b)(5)(iv); 52.39(f)(3), 
(i)(3).
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     Exclusion of provisions addressing units in Indian 
country. The SIP revision may not include references to or impose 
requirements on any unit in any Indian country within the state's 
borders and must not include the federal trading program provisions 
governing allocation of allowances from any Indian country NUSA for the 
state.\26\
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    \26\ Sec. Sec.  52.38(a)(5)(iv), (b)(5)(v); 52.39(f)(4), (i)(4).
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IV. Alabama's SIP Submittal and EPA's Analysis

A. Alabama's SIP Submittal

    In the CSAPR rulemaking, EPA determined that air pollution 
transported from Alabama would unlawfully affect other states' ability 
to attain or maintain the 1997 ozone NAAQS, the 1997 annual 
PM2.5 NAAQS, and the 2006 24-hour PM2.5 
NAAQS.\27\ Alabama units meeting the CSAPR applicability criteria are 
consequently subject to CSAPR FIPs that require participation in the 
CSAPR NOX Annual Trading Program, the CSAPR NOX 
Ozone Season Trading Program, and the CSAPR SO2 Group 2 
Trading Program.\28\
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    \27\ 76 FR 48208, 48213 (August 8, 2011).
    \28\ 40 CFR 52.38(a)(2), (b)(2); Sec.  52.39(c); Sec.  52.54(a), 
(b); Sec.  52.55.
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    On October 26, 2015, Alabama submitted to EPA a SIP revision 
including provisions that, if all portions were approved, would 
incorporate into Alabama's SIP CSAPR state trading program regulations 
that would replace the CSAPR federal trading program regulations with 
regard to Alabama units' SO2, annual NOX, and 
ozone-season NOX emissions for control periods in 2017 and 
later years. The SIP submittal includes three sets of duly adopted 
state rules: ADEM Administrative Code rules 335-3-5-.06 through 335-3-
5-.36, which establish Alabama's ``TR SO2 Group 2 Trading 
Program''; rules 335-3-8-.07 through 335-3-8-.38, which establish 
Alabama's ``TR NOX Annual Trading Program''; and rules 335-
3-8-.39 through 335-3-8-.70, which establish Alabama's ``TR 
NOX Ozone Season Trading Program''.\29\ In general, each 
individual rule in Alabama's three sets of CSAPR state trading program 
rules is designed to replace one individual section (or in a few cases 
two or three sections) of the corresponding federal trading program 
regulations, and each set of rules is designed to collectively replace 
all sections of the corresponding federal trading program regulations. 
For example, Alabama rule 335-3-5-.06 is designed to replace 40 CFR 
97.401 through 97.403, while Alabama rules 335-3-5-.06 through 335-3-
5-.36 are designed to collectively replace all of subpart AAAAA of 40 
CFR part 97 (i.e., 40 CFR 97.401 through 97.435).
---------------------------------------------------------------------------

    \29\ Consistent with the current CSAPR regulatory text, 
Alabama's rules use the terms ``Transport Rule'' and ``TR'' instead 
of the updated terms ``Cross-State Air Pollution Rule'' and 
``CSAPR''. For simplicity, EPA uses the updated terms here except 
where otherwise noted.
---------------------------------------------------------------------------

    With regard to form, some of the individual rules for each Alabama 
CSAPR state trading program are set forth as full regulatory text--
notably the rules addressing program applicability, emissions budgets 
and variability limits, and allowance allocations--but most of the 
rules incorporate the corresponding federal trading program section or 
sections by reference. Several of the Alabama rules adopt cross-
references to other Alabama rules in place of cross-references to 
specific federal trading program sections that would be replaced by 
those other Alabama rules.
    With regard to substance, the rules for each Alabama CSAPR state 
trading program differ from the corresponding CSAPR federal trading 
program regulations in three main ways. First, the applicability 
provisions in the Alabama rules require participation in Alabama's 
CSAPR state trading programs only for units in Alabama, not for units 
in any other state or in Indian country within the borders of Alabama 
or any other state. Second, the Alabama rules set forth a methodology 
for allocating emission allowances among Alabama units that differs 
from the default allowance allocation provisions in the federal trading 
program regulations. Finally, the Alabama rules omit a number of 
federal trading program provisions not applicable to Alabama's state 
trading programs, including provisions setting forth the amounts of 
emissions budgets, NUSAs, Indian country NUSAs, and variability limits 
for other states; provisions addressing EPA's procedures for allocating 
allowances from Indian country NUSAs; and provisions addressing EPA's 
recordation of certain allowance allocations.

[[Page 41919]]

    The Alabama SIP adopts the Phase 2 annual NOX and 
SO2 budgets found at 40 CFR 97.410(a)(1)(iv) and 
97.710(a)(1)(iv), respectively. Although the court in EME Homer City 
remanded Alabama's Phase 2 SO2 budget because it determined 
that EPA required more emissions reductions than necessary to address 
the downwind air quality problems to which Alabama contributes, Alabama 
is voluntarily adopting a Phase 2 SO2 budget that is 
equivalent to the federally-developed budget remanded by the court. 
Nothing in the court's decision affects Alabama's authority to seek 
incorporation into its SIP of a state-established budget as stringent 
as the remanded federally-established budget or limits EPA's authority 
to approve such a SIP revision. See 42 U.S.C. 7416, 7410(k)(3). 
Accordingly, EPA will evaluate the approvability of the Alabama SIP 
submission consistent with this budget.
    The SIP revision was submitted to EPA by a letter from the Director 
of the Alabama Department of Environmental Management. The letter and 
its enclosures describe steps taken by Alabama to provide public notice 
prior to adoption of the state rules.
    At this time, EPA is proposing to take action on the portions of 
Alabama's SIP submittal designed to replace the federal CSAPR 
NOX Annual Trading Program and the federal CSAPR 
SO2 Group 2 Trading Program with regard to Alabama units. 
EPA is not proposing to take action at this time on the portion of the 
SIP submittal designed to replace the federal CSAPR NOX 
Ozone Season Trading Program with regard to Alabama units. As noted in 
section II above, EPA has proposed to update CSAPR to address Eastern 
states' interstate air pollution mitigation obligations with regard to 
the 2008 ozone NAAQS. The proposal would further reduce the ozone-
season NOX emissions budgets for control periods in 2017 and 
later years for a number of states, including Alabama.\30\ Action on 
the portion of Alabama's SIP submittal related to ozone-season 
NOX emissions would be premature while the proposed update 
is pending because there is a foreseeable potential conflict between 
the total amount of allowances that would be allocated to Alabama units 
under Alabama's state trading program, which reflects Alabama's current 
ozone-season NOX budget, and the total amount of allowances 
that could permissibly be allocated to the units under a final updated 
budget.
---------------------------------------------------------------------------

    \30\ Alabama's current Phase 2 emissions budget under the CSAPR 
NOX Ozone Season Trading Program is 31,499 tons. 40 CFR 
97.510(a)(1)(iv). Alabama's proposed updated CSAPR emissions budget 
for ozone season NOX emissions is 9,979 tons. 80 FR at 
75770.
---------------------------------------------------------------------------

    EPA has previously approved a separate Alabama SIP revision 
replacing the default allowance allocation provisions of the CSAPR 
NOX Annual Trading Program, the CSAPR NOX Ozone 
Season Trading Program, and the CSAPR SO2 Group 2 Trading 
Program for Alabama existing units for the control period in 2016.\31\
---------------------------------------------------------------------------

    \31\ 80 FR 52272 (September 22, 2015).
---------------------------------------------------------------------------

B. EPA's Analysis of Alabama's Submittal

    As described in section IV.A above, at this time EPA is taking 
action on the portions of Alabama's SIP submittal designed to replace 
the federal CSAPR NOX Annual Trading Program and the federal 
CSAPR SO2 Group 2 Trading Program for Alabama units but not 
the portion of the SIP submittal designed to replace the federal CSAPR 
NOX Ozone Season Trading Program. The analysis discussed in 
this section addresses only the portions of Alabama's SIP submittal on 
which EPA is taking action at this time. For simplicity, throughout 
this section EPA refers to the portions of the submittal on which EPA 
is proposing to take action as ``the submittal'' or ``the SIP 
revision'' without repeating the qualification that at this time EPA is 
analyzing and proposing to act on only portions of the SIP submittal.
1. Timeliness and Completeness of SIP Submittal
    Alabama's SIP revision seeks in part to replace the default 
allowance allocation provisions in the CSAPR federal trading program 
regulations for annual NOX and SO2 emissions as 
applied to Alabama units with state regulations establishing a 
different state-determined methodology, starting with the control 
periods in 2017. Under 40 CFR 52.38(a)(5)(i)(B) and 52.39(h)(1)(ii), 
the deadline for submission of state-determined allowance allocations 
for the 2017 and 2018 control periods is June 1, 2016, which under 
Sec. Sec.  52.38(a)(5)(vi) and 52.39(i)(6) makes December 1, 2015, the 
deadline for submission to EPA of a complete SIP revision establishing 
state-determined allocations for those control periods. Alabama 
submitted its SIP revision to EPA on October 26, 2015, and EPA has 
determined that the submittal complies with the applicable minimum 
completeness criteria in section 2.1 of appendix V to 40 CFR part 51. 
Because Alabama's SIP revision was timely submitted and meets the 
applicable completeness criteria, it meets the conditions under 40 CFR 
52.38(a)(5)(vi) and 52.39(i)(6) for timely submission of a complete SIP 
revision.
2. Methodology Covering All Allowances Potentially Requiring Allocation
    Paragraphs 335-3-8-.14(1) and 335-3-5-.13(1) of the Alabama rules 
set forth total amounts of 71,962 CSAPR Annual NOX 
allowances and 213,258 CSAPR SO2 Group 2 allowances, 
respectively, that would be allocated to Alabama units for each control 
period in 2017 and later years according to the allocation procedures 
set forth under the remaining paragraphs of Alabama rules 335-3-8-.14 
and 335-3-5-.13 (Paragraphs 335-3-8-.13(1) and 335-3-5-.12(1) set forth 
the same amounts as the respective state emissions budgets, in 
conjunction with the corresponding variability limits). These totals 
match the amounts of the respective Phase 2 emissions budgets for 
Alabama established under the federal trading program regulations for 
annual NOX and SO2 emissions, thereby addressing 
the full quantities of allowances that could be allocated to Alabama 
units under the default allocation provisions for the federal trading 
programs.\32\ As noted earlier, although the Phase 2 SO2 
emissions budget was remanded because the court in EME Homer City 
determined that the budget was too stringent, nothing in the court's 
decision affects Alabama's authority to seek incorporation into its SIP 
of a state-established budget as stringent as the remanded federally-
established budget or limits EPA's authority to approve such a SIP 
revision. See 42 U.S.C. 7416, 7410(k)(3). Because the current CSAPR 
federal trading program regulations for annual NOX and 
SO2 emissions do not provide for portions of Alabama's 
overall emissions budgets to be allocated pursuant to the Indian 
country NUSA allocation procedures, there is no current need for the 
Alabama rules establishing CSAPR state trading programs for annual 
NOX and SO2 emissions to include provisions 
addressing the disposition of otherwise unallocated allowances from an 
Indian country NUSA that might be made available by EPA for state 
allocation.\33\ The allocation provisions in the Alabama rules 
therefore enable Alabama's SIP revision to meet the

[[Page 41920]]

condition under 40 CFR 52.38(a)(5)(i) and 52.39(i)(1) that the state's 
allocation or auction methodology must cover all allowances potentially 
requiring allocation by the state.
---------------------------------------------------------------------------

    \32\ 40 CFR 97.410(a)(1)(iv); Sec.  97.710(a)(1)(iv).
    \33\ Since promulgating the current CSAPR regulations, EPA has 
learned of Indian country within Alabama's borders. If any units 
were to locate in that area of Indian country in the future, EPA 
would determine at that time what actions, if any, should be taken 
to make CSAPR NOX Annual allowances and CSAPR 
SO2 Group 2 allowances available for allocation to those 
units.
---------------------------------------------------------------------------

3. Assurance That Total Allocations Will Not Exceed the State Budget
    As discussed in section IV.B.2 above, paragraphs 335-3-8-.14(1) and 
335-3-5-.13(1) of the Alabama rules set forth the total amounts of 
CSAPR Annual NOX allowances and CSAPR SO2 Group 2 
allowances to be allocated to Alabama units for each control period 
under the state trading programs; these total amounts equal the amounts 
of the respective annual NOX and SO2 emissions 
budgets established for Alabama units under the CSAPR federal trading 
program regulations; and under the current CSAPR federal trading 
program regulations for annual NOX and SO2 there 
is no possibility of additional allowances from an Indian country NUSA 
being allocated to Alabama units. EPA has not yet allocated or recorded 
CSAPR allowances for the control periods in 2017 or later years. The 
allocation methodology in Alabama's SIP revision therefore meets the 
condition under 40 CFR 52.38(a)(5)(i)(A) and 52.39(i)(1)(i) that, for 
each trading program, the total amount of allowances allocated under 
the SIP revision (before the addition of any otherwise unallocated 
allowances from an Indian country NUSA) may not exceed the state's 
budget for the control period less the amount of the Indian country 
NUSA for the state and any allowances already allocated and recorded by 
EPA.
4. Timely Submission of State-Determined Allocations to EPA
    Paragraphs 335-3-8-.14(2)(a) through (d) and 335-3-5-.13(2)(a) 
through (d) of the Alabama rules provide for all allowance allocations 
to Alabama units established under the Alabama rules to be submitted to 
EPA by the following deadlines: allocations for the control periods in 
2017 and 2018, by June 1, 2016; allocations for the control periods in 
2019 and 2020, by June 1, 2017; allocations for the control periods in 
2021 and 2022, by June 1, 2018; and allocations for later control 
periods, by June 1 of the fourth or fifth year before the year of the 
control period. These submission deadlines match or precede the 
submission deadlines discussed in section III above (specifically, the 
deadlines under 40 CFR 52.38(a)(5)(i)(B) and 52.39(i)(1)(ii) for 
allocations to units considered existing units for CSAPR purposes and 
the submission deadlines under Sec. Sec.  52.38(a)(5)(i)(C) and 
52.39(i)(1)(iii) for allocations to other units). Alabama's SIP 
revision therefore meets the conditions under 40 CFR 52.38(a)(5)(i)(B) 
and (C) and 52.39(i)(1)(ii) and (iii) requiring that the SIP revision 
provide for submission of state-determined allowance allocations to EPA 
by the deadlines specified in those provisions.
5. No Changes to Allocations Already Submitted to EPA or Recorded
    The Alabama rules include no provisions allowing alteration of 
allocations after the allocation amounts have been provided to EPA and 
no provisions allowing alteration of any allocations made and recorded 
by EPA under the federal trading program regulations, thereby meeting 
the condition under 40 CFR 52.38(a)(5)(i)(D) and 52.39(i)(1)(iv).
6. No Other Substantive Changes to Federal Trading Program Provisions
    With the exception of the provisions addressing allowance 
allocations discussed above, the Alabama state trading program rules 
generally incorporate sections of the corresponding federal trading 
program regulations by reference or set forth full text that is very 
similar to the text in the corresponding federal trading program 
regulations.\34\ Some of the differences between the Alabama rules and 
the corresponding federal trading program regulations are clearly non-
substantive. For example, in instances where an Alabama rule contains 
full text substituting for the text of a section of the federal trading 
program regulations, the remaining Alabama rules adopt cross-references 
to the full-text Alabama rule in place of cross-references to the 
section of the federal trading program regulations that would be 
replaced by the full-text Alabama rule. The Alabama rules also contain 
definitions for certain terms used in the state trading programs' 
allocation provisions that are not used in the federal trading program 
regulations, as expressly permitted under the CSAPR regulations.\35\ 
Most of the remaining differences between the Alabama rules and the 
corresponding sections of the federal trading program regulations 
consist of non-substantive renumbering of the provisions.\36\
---------------------------------------------------------------------------

    \34\ EPA has proposed to make certain technical corrections to 
the CSAPR FIP and federal trading program regulations in order to 
more accurately reflect EPA's intent as described in the CSAPR 
rulemaking and has also proposed to replace ``TR'' with ``CSAPR'' 
throughout the regulations (for example, ``TR NOX Annual 
unit'' would become ``CSAPR NOX Annual unit''). See 80 FR 
75706, 75758. Because the proposed technical corrections merely 
clarify and do not change EPA's interpretations, where the proposed 
corrections would apply to a provision incorporated by reference in 
the Alabama rules, EPA would interpret the Alabama rules as 
reflecting the corrections. Further, EPA anticipates that if the 
proposed nomenclature updates are finalized, the final CSAPR federal 
regulations would explicitly provide that terms that include 
``CSAPR'' encompass otherwise identical terms in approved SIP 
revisions that include ``TR''.
    \35\ 40 CFR 52.38(a)(5)(ii); Sec.  52.39(i)(2).
    \36\ Instances where Alabama's CSAPR state trading program rules 
omit provisions of the CSAPR federal trading program regulations are 
discussed in sections IV.B.7 and 9 below.
---------------------------------------------------------------------------

    In addition to the clearly non-substantive or expressly authorized 
differences summarized above, a few of Alabama's rules contain other 
differences from the federal trading program regulations. In each case, 
EPA has determined that the changes do not represent substantive 
changes to the federal trading program regulations. First, paragraphs 
335-3-8-.08(1)(c), 335-3-8-.09(1)(a), 335-3-8-.34(2)(a), 335-3-
5-.07(1)(c), 335-3-5-.08(1)(a), and 335-3-5-.32(2)(a) of the Alabama 
rules require Alabama units to submit certain petitions, statements, 
and notices not only to EPA but also to the Alabama Department of 
Environmental Management. Because the additional notification 
requirements do not alter the respective authorities or 
responsibilities of EPA and the Department, EPA considers the 
requirements to be non-substantive changes.
    Second, paragraphs 335-3-8-.20(2)(a), 335-3-8-.23(2)(a), 335-3-
5-.18(2)(a), and 335-3-5-.21(2)(a) of the Alabama rules provide that, 
like EPA, the Department will not adjudicate certain private legal 
disputes. Because the Department is not required to adjudicate such 
disputes under the federal trading program regulations in any event, 
these additions to the text of the state trading program rules merely 
clarify that the Department is not undertaking a new adjudication 
responsibility under the state trading programs. EPA therefore 
considers these additions to be non-substantive changes.
    Third, paragraph 335-3-8-.07(2)(b)8. of the Alabama CSAPR state 
trading program rules for annual NOX emissions substitutes a 
reference to Alabama rule 335-3-16-.01 (an Alabama air permit program 
rule) for a reference to 40 CFR 70.2 (the definitions section of the 
federal regulations governing state operating permit programs under CAA 
title V) in the corresponding CSAPR federal trading program definition 
of ``permitting authority.'' \37\ Although substitutions to definitions 
in the CSAPR federal trading program regulations generally are not 
permissible

[[Page 41921]]

in a CSAPR-related SIP revision, in this case the substitution has no 
substantive effect, for two reasons. First, the state trading program 
rule, like the CSAPR federal trading program definition, includes a 
reference to the definition of ``permitting authority'' in 40 CFR 71.2 
(the definitions section of the federal operating permit program under 
CAA title V) which encompasses the definition of ``permitting 
authority'' in Sec.  70.2, so all the intended possible meanings of 
``permitting authority'' are captured in the state trading program 
rules despite the loss of the reference to 40 CFR 70.2. Second, Alabama 
rule 335-3-16-.01 contains no definition of ``permitting authority,'' 
so the substitution does not introduce any new, unintended meanings of 
``permitting authority'' in the state trading program rules. EPA 
therefore considers the substitution to be a non-substantive change.
---------------------------------------------------------------------------

    \37\ Alabama's CSAPR state trading program rules for 
SO2 emissions do not contain a comparable substitution 
provision.
---------------------------------------------------------------------------

    Finally, paragraphs 335-3-8-.10(2)(a) and (b) and 335-3-5-.09(2)(a) 
and (b) of the Alabama rules substitute references to Alabama rule 
335.3.16-.13(3) (the Alabama rule addressing minor permit modification 
procedures) for references to 40 CFR 70.7(e)(2) (the minor permit 
modification procedures section of the federal regulations governing 
state operating permit programs under CAA title V) in the federal 
trading program regulations regarding title V permit requirements. As 
applied to Alabama units only, the substituted Alabama rule provisions 
are substantively identical to the provisions in 40 CFR 70.7(e)(2) that 
would be replaced. Because in the context of Alabama's CSAPR state 
trading programs these particular provisions need to address only 
Alabama units and not units from other states participating in the 
CSAPR trading programs, EPA determines that these substitutions have no 
substantive effect.
    For the reasons discussed above, EPA has determined that none of 
the textual additions or substitutions made to the CSAPR federal 
trading program regulations in Alabama's corresponding CSAPR state 
trading program rules are substantive, and that Alabama's SIP revision 
therefore meets the conditions under 40 CFR 52.38(a)(5) and 52.39(i) of 
making no substantive changes to the provisions of the federal trading 
program regulations beyond the provisions addressing allowance 
allocations.
7. Complete, Substantively Identical Trading Program Provisions
    With the following exceptions, the Alabama rules comprising 
Alabama's CSAPR state trading program for annual NOX 
emissions either incorporate by reference or adopt full-text 
replacements for all of the provisions of 40 CFR 97.402 through 97.435, 
and the Alabama rules comprising Alabama's CSAPR state trading program 
for SO2 emissions either incorporate by reference or adopt 
full-text replacements for all of the provisions of 40 CFR 97.702 
through 97.735. The first exception is that Alabama rules 335-3-8-.13 
and 335-3-5-.12, which generally address the amounts of emissions 
budgets and related quantities, omit the provisions of 40 CFR 97.410 
and 97.710 setting forth the amounts of the Phase 1 emissions budgets, 
NUSAs, and variability limits for Alabama; the amounts of the Phase 2 
NUSAs for Alabama; and the amounts of all emissions budgets, NUSAs, 
Indian country NUSAs, and variability limits for other states. Omission 
of the Alabama Phase 1 emissions budget and NUSA amounts is appropriate 
because Alabama's state trading programs do not apply to emissions 
occurring in Phase 1 of CSAPR. Omission of the default Alabama NUSA 
amounts under the federal trading program regulations is appropriate 
because the allocation procedures under Alabama's state trading 
programs establish NUSA amounts differently. Omission of the budget, 
NUSA, Indian country NUSA, and variability limit provisions for other 
states from state trading programs in which only Alabama units 
participate does not undermine the completeness of the state trading 
programs.
    The second exception is that Alabama rules 335-3-8-.14 and 335-3-
5-.13, generally addressing allowance allocations, omit 40 CFR 
97.411(b)(2) and 97.412(b) and 97.711(b)(2) and 97.712(b), concerning 
EPA's administration of Indian country NUSAs. Omission of these 
provisions from Alabama's state trading program rules is required, as 
discussed in section IV.B.9 below.
    The third exception is that Alabama rules 335-3-8-.24 and 335-3-
5-.22, which generally incorporate by reference the federal trading 
programs' recordation schedule provisions, exclude from incorporation 
by reference 40 CFR 97.421(a), (b), (h), and (i) and 97.721(a), (b), 
(h), and (i), respectively, concerning EPA's schedule for recording 
certain allowance allocations. The federal trading program provisions 
at Sec. Sec.  97.421(a) and (b) and 97.721(a) and (b), which address 
recordation of allocations to units considered existing units for CSAPR 
purposes of allowances for the compliance periods in 2015 and 2016, do 
not need to be included in Alabama's state trading program rules 
because those allocations have already been recorded. The federal 
trading program provisions at Sec. Sec.  97.421(h) and 97.721(h), which 
address recordation of allocations from Indian country NUSAs, are 
appropriately excluded from state trading programs because a state may 
not administer an Indian country NUSA. The federal trading program 
provisions at Sec. Sec.  97.421(i) and 97.721(i), which address 
recordation of second-round NUSA allocations, are not needed in 
Alabama's state trading program rules because Alabama would provide EPA 
the amounts of its NUSA allocations on the earlier schedule applicable 
to allocations to units considered existing units for CSAPR 
purposes.\38\ Omission of these provisions from Alabama's state trading 
programs therefore does not undermine the completeness of the state 
trading programs.
---------------------------------------------------------------------------

    \38\ For the same reason, Alabama's state rules could 
permissibly omit 40 CFR 97.421(g) and 97.721(g), which address 
recordation of first-round NUSA allocations. Note that 
notwithstanding the lack of provisions addressing recordation of 
NUSA allocations in Alabama's state trading program rules, EPA would 
retain authority to complete the recordation of 2016 NUSA 
allocations to Alabama units because EPA has already started 
recording allocations to Alabama units of allowances for the 
compliance periods in 2016. See 40 CFR 52.38(a)(7); Sec.  52.39(k).
---------------------------------------------------------------------------

    Because none of the omissions undermines the completeness of the 
Alabama's state trading programs and because, as discussed in section 
IV.B.6 above, EPA has determined that Alabama's SIP revision makes no 
other substantive changes to the provisions of the federal trading 
program regulations beyond the provisions addressing allowance 
allocations, Alabama's SIP revision meets the condition under 40 CFR 
52.38(a)(5) and 52.39(i) that the SIP revision must adopt complete 
state trading program regulations substantively identical to the 
complete federal trading program regulations at 40 CFR 97.402 through 
97.435, 97.502 through 97.535, 97.602 through 97.635, or 97.702 through 
97.735, as applicable, except for permissible differences in allowance 
allocation and/or applicability provisions.
8. Only Non-Substantive Substitutions for the Term ``State''
    Paragraphs 335-3-8-.08(1)(a)1. and 335-3-5-.07(1)(a)1. of the 
Alabama rules substitute the term ``the State of Alabama'', and 
paragraphs 335-3-8-.08(1)(b) and 335-3-5-.07(1)(b) of the Alabama rules 
similarly substitute the term ``the State'' (meaning Alabama), for the 
phrase ``a State (or Indian country within the borders of such State)'' 
in the corresponding federal trading program regulations at 40 CFR 
97.410(a)(1) and 97.710(a)(1) and at Sec. Sec.  97.410(b) and

[[Page 41922]]

97.710(b), respectively. These provisions of the Alabama rules define 
the units that are required to participate in Alabama's CSAPR state 
trading programs. The substitutions appropriately exclude units located 
in other states and units located in Indian country with the borders of 
Alabama or any other state, thereby limiting the applicability of 
Alabama's state trading programs to units that are subject to Alabama's 
jurisdiction. These substitutions do not substantively change the 
provisions of CSAPR's federal trading program regulations. The 
remaining Alabama rules do not substitute for the term ``State'' as 
used in the federal trading program regulations. Alabama's SIP revision 
therefore meets the condition under 40 CFR 52.38(a)(5)(iii) and 
52.39(i)(3) that the SIP revision may substitute the name of the state 
for the term ``State'' as used in the federal trading program 
regulations, but only to the extent that EPA determines that the 
substitutions do not substantively change the provisions of the federal 
trading program regulations.
9. Exclusion of Provisions Addressing Units in Indian Country
    The Alabama rules do not set forth any full text provisions 
directly addressing units in Indian country within the state's borders. 
As discussed in section IV.B.8 above, paragraphs 335-3-8-.08(1)(a)1. 
and 335-3-5-.07(1)(a)1. of the Alabama rules define the units required 
to participate in Alabama's state trading programs in a manner that 
appropriately excludes units located in Indian country within Alabama's 
borders from coverage under Alabama's CSAPR state trading programs. 
Although various other provisions of the CSAPR federal trading program 
regulations incorporated by reference into the Alabama rules without 
modification refer to units in Indian country, the clear exclusion of 
any such units from coverage under the state trading program 
applicability provisions--in other words, the fact that such units are 
not ``TR NOX Annual units'' or ``TR SO2 Group 2 
units'' for purposes of the state trading programs--renders the 
remaining provisions of Alabama's state trading program rules 
inoperative as to the units. EPA therefore interprets the Alabama rules 
as not imposing any requirements on units located in Indian country 
within the state's borders.
    As discussed in section IV.B.7 above, Alabama rules 335-3-8-.14 and 
335-3-5-.13, which address allowance allocations under the state 
trading programs, contain no provisions replacing 40 CFR 97.411(b)(2), 
97.412(b), 97.711(b)(2), or 97.712(b), the portions of the 
corresponding federal trading program regulations governing allocations 
of allowances from Indian country NUSAs Thus, the Alabama rules do not 
include any express state rule provisions concerning administration of 
Indian country NUSAs. Further, Alabama rules 335-3-8-.24 and 335-3-
5-.22, which generally incorporate by reference the federal trading 
programs' recordation schedule provisions, exclude 40 CFR 97.421(h) and 
97.721(h), respectively, provisions addressing recordation of Indian 
country NUSA allocations. EPA notes that paragraphs 335-3-8-.14(3)(i) 
and 335-3-5-.13(3)(i) of the Alabama rules, which incorporate by 
reference the federal trading program regulations generally addressing 
corrections of incorrect allocations, fail to exclude 40 CFR 
97.411(c)(5)(iii) and 97.711(c)(5)(iii), addressing corrections of 
certain incorrect Indian country NUSA allocations. However, the 
regulations governing approval of CSAPR-related SIP revisions do not 
expressly require exclusion of these federal trading program provisions 
(unlike the Indian country NUSA allocation provisions) and, further, 
the provisions are inoperative as to Alabama because the CSAPR federal 
trading program regulations do not currently establish Indian country 
NUSAs for Alabama.\39\ EPA therefore interprets the Alabama state rules 
as sufficiently excluding provisions addressing administration of the 
Indian country NUSA provisions under the federal trading programs.
---------------------------------------------------------------------------

    \39\ Since promulgating the current CSAPR regulations, EPA has 
learned of Indian country within Alabama's borders. If any units 
were to locate in that area of Indian country in the future, EPA 
would determine at that time what actions, if any, should be taken 
to make CSAPR NOX Annual allowances and CSAPR 
SO2 Group 2 allowances available for allocation to those 
units.
---------------------------------------------------------------------------

    In summary, EPA has determined that Alabama's SIP revision 
adequately meets the condition under 40 CFR 52.38(a)(5)(iv) and 
52.39(i)(4) of not including references to or imposing requirements on 
any unit in any Indian country within the state's borders and not 
including the federal trading program provisions governing allocation 
of allowances from any Indian country NUSA for the state.

V. EPA's Proposed Action on Alabama's Submittal

    EPA is proposing to approve the portions of Alabama's October 26, 
2015, SIP submittal concerning the establishment for Alabama units of 
CSAPR state trading programs for annual NOX and 
SO2 emissions for compliance periods in 2017 and later 
years. The proposed revision would adopt into the SIP the state trading 
program rules codified in ADEM Administrative Code rules 335-3-8-.07 
through 335-3-8-.38 (establishing Alabama's ``TR NOX Annual 
Trading Program'') and 335-3-5-.06 through 335-3-5-.36 (establishing 
Alabama's ``TR SO2 Group 2 Trading Program'').\40\ These 
Alabama CSAPR state trading programs would be integrated with the 
federal CSAPR NOX Annual Trading Program and the federal 
CSAPR SO2 Group 2 Trading Program, respectively, and would 
be substantively identical to the federal trading programs except with 
regard to the allowance allocation provisions. Following approval of 
these portions of the proposed SIP revision, Alabama units therefore 
would generally be required to meet requirements under Alabama's CSAPR 
state trading programs equivalent to the requirements the units 
otherwise would have been required to meet under the corresponding 
CSAPR federal trading programs, but allocations to Alabama units of 
CSAPR NOX Annual allowances for compliance periods in 2017 
and later years would be determined according to the SIP's allocation 
provisions at Alabama rule 335-3-8-.14 instead of EPA's default 
allocation provisions at 40 CFR 97.411(a), 97.411(b)(1), and 97.412(a), 
and allocations to Alabama units of CSAPR SO2 Group 2 
allowances would be determined according to the SIP's allocation 
provisions at Alabama rule 335-3-5-.13 instead of EPA's default 
allocation provisions at 40 CFR 97.711(a), 97.711(b)(1), and 97.712(a). 
EPA is proposing to approve these portions of the SIP revision because 
they meet the requirements of the CAA and EPA's regulations for 
approval of a CSAPR full SIP revision replacing a federal trading 
program with a state trading program that is integrated with and 
substantively identical to the federal trading program except for 
permissible differences with respect to emission allowance allocation 
provisions, as discussed in section IV above.
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    \40\ Consistent with the current CSAPR regulatory text, the 
Alabama rules use the terms ``Transport Rule'' and ``TR'' instead of 
the updated terms ``Cross-State Air Pollution Rule'' and ``CSAPR''.
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    EPA promulgated the FIPs requiring Alabama units to participate in 
the federal CSAPR NOX Annual Trading Program and the federal 
CSAPR SO2 Group 2 Trading Program in order to address 
Alabama's obligations under CAA section 110(a)(2)(D)(i)(I) with

[[Page 41923]]

respect to the 1997 and 2006 PM2.5 NAAQS in the absence of 
SIP provisions addressing those requirements. Approval of the portions 
of Alabama's SIP submittal adopting CSAPR state trading program rules 
for annual NOX and SO2 substantively identical to 
the corresponding CSAPR federal trading program regulations (or 
differing only with respect to the allowance allocation methodology) 
would correct the same deficiency in the SIP that otherwise would be 
corrected by those CSAPR FIPs. Under the CSAPR regulations, upon EPA's 
full and unconditional approval of a SIP revision as correcting the 
SIP's deficiency that is the basis for a particular CSAPR FIP, the 
obligation to participate in the corresponding CSAPR federal trading 
program is automatically eliminated for units subject to the state's 
jurisdiction (but not for any units located in any Indian country 
within the state's borders).\41\ The proposed approval of the portions 
of Alabama's SIP submittal establishing CSAPR state trading program 
rules for annual NOX and SO2 emissions therefore 
would result in automatic termination of the obligations of Alabama 
units to participate in the federal CSAPR NOX Annual Trading 
Program and the federal CSAPR SO2 Group 2 Trading Program. 
Approval of these portions of the SIP revision would therefore satisfy 
Alabama's obligation pursuant to CAA section 110(a)(2)(D)(i)(I) to 
prohibit emissions which will significantly contribute to nonattainment 
or interfere with maintenance of the 1997 and 2006 PM2.5 
NAAQS in any other state.
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    \41\ 40 CFR 52.38(a)(6); Sec.  52.39(j); see also Sec.  
52.54(a)(1); Sec.  52.55(a).
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    As noted in section II above, the Phase 2 SO2 budget 
established for Alabama in the CSAPR rulemaking has been remanded to 
EPA for reconsideration.\42\ If EPA finalizes approval of these 
portions of the SIP revision as proposed, Alabama will have fulfilled 
its obligations to provide a SIP that address the interstate transport 
provisions of CAA section 110(a)(2)(D)(i)(I) with respect to the 1997 
and 2006 PM2.5 NAAQS. Thus, EPA would no longer be under an 
obligation to (nor would EPA have the authority to) address those 
transport requirements through implementation of a FIP, and approval of 
these portions of the SIP revision would eliminate Alabama units' 
obligations to participate in the federal CSAPR NOX Annual 
Trading Program and the federal CSAPR SO2 Group 2 Trading 
Program. Elimination of Alabama units' obligations to participate in 
the federal trading programs would include elimination of the 
federally-established Phase 2 budgets capping allocations of CSAPR 
NOX Annual allowances and CSAPR SO2 Group 2 
allowances to Alabama units under those federal trading programs. As 
approval of these portions of the SIP revision would eliminate 
Alabama's remanded federally-established Phase 2 SO2 budget 
and eliminate EPA's authority to subject units in Alabama to a FIP, it 
is EPA's opinion that finalization of approval of this SIP action would 
address the judicial remand of Alabama's federally-established Phase 2 
SO2 budget.\43\ Large electricity generating units in 
Alabama are subject to an additional CSAPR FIP requiring them to 
participate in the federal CSAPR NOX Ozone Season Trading 
Program. While Alabama's SIP submittal also seeks to replace the CSAPR 
FIP requirements addressing Alabama units' ozone-season NOX 
emissions, EPA is not proposing to act on that portion of the SIP 
submittal at this time. Approval of this SIP revision concerning other 
CSAPR trading programs would have no effect on the CSAPR NOX 
Ozone Season Trading Program as applied to Alabama units, and the FIP 
requiring the units to participate in that program would remain in 
place.
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    \42\ EME Homer City Generation, L.P. v. EPA, 795 F.3d 118, 138 
(D.C. Cir. 2015).
    \43\ Although the court in EME Homer City Generation remanded 
Alabama's Phase 2 SO2 budget because it determined that 
the budget was too stringent, nothing in the court's decision 
affects Alabama's authority to seek incorporation into its SIP of a 
state-established budget as stringent as the remanded federally-
established budget or limits EPA's authority to approve such a SIP 
revision. See 42 U.S.C. 7416, 7410(k)(3).
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VI. Statutory and Executive Order Reviews

    Under the CAA, the Administrator is required to approve a SIP 
submittal that complies with the provisions of the Act and applicable 
federal regulations. See 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in 
reviewing SIP submittals, EPA's role is to approve state choices, 
provided that they meet the criteria of the CAA. Accordingly, this 
proposed action merely approves 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 Orders 12866 (58 
FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
     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 (Pub. L. 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 CAA; 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).
    The SIP is not approved to apply on any Indian reservation land or 
in any other area where EPA or an Indian tribe has demonstrated that a 
tribe has jurisdiction. In those areas of Indian country, the rule does 
not have tribal implications as specified by Executive Order 13175 (65 
FR 67249, November 9, 2000), nor will it impose substantial direct 
costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Incorporation by reference, Intergovernmental 
relations, Nitrogen dioxide, Ozone, Particulate Matter, Reporting and 
recordkeeping requirements, Sulfur oxides.

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

    Dated: June 10, 2016.
Heather McTeer Toney,
Regional Administrator, Region 4.
[FR Doc. 2016-15146 Filed 6-27-16; 8:45 am]
 BILLING CODE 6560-50-P


