[Federal Register: November 12, 2002 (Volume 67, Number 218)]
[Proposed Rules]
[Page 68542-68545]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12no02-21]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[VA127-5059; FRL-7406-5]
Approval and Promulgation of Air Quality Implementation Plans;
Virginia; Nitrogen Oxides Budget Trading Program
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: EPA is proposing to approve the NOX Budget Trading
Program submitted as a revision to the Virginia State Implementation
Plan (SIP), with the exception of its NOX allowance banking
provisions, which EPA proposes to conditionally approve. The revision
was submitted in response to EPA's regulation entitled, ``Finding of
Significant Contribution and Rulemaking for Certain States in the Ozone
Transport Assessment Group Region for Purposes of Reducing Regional
Transport of Ozone,'' otherwise known as the ``NOX SIP
Call.'' The revision establishes and requires a nitrogen oxides
(NOX) allowance trading program for large electric
generating and industrial units, beginning in 2004. The intended effect
of this action is to propose approval of Virginia's NOX
Budget Trading Program because it substantively addresses the
requirements of the NOX SIP Call, with the following
exception: Its NOX allowance banking provision is proposed
to be conditionally approved because it must be revised to require that
flow control begin in 2005, in accordance with the revised model rule.
EPA is proposing approval of this revision, with the exception noted,
in accordance with the requirements of the Clean Air Act.
DATES: Written comments must be received on or before December 12,
2002.
ADDRESSES: Written comments should be mailed to Walter Wilkie, Acting
Chief, Air Quality Planning and Information Services Branch, Mailcode
3AP21, U.S. Environmental Protection Agency, Region III, 1650 Arch
Street, Philadelphia, Pennsylvania 19103. Copies of the documents
relevant to this action are available for public inspection during
normal business hours at the Air Protection Division, U.S.
Environmental Protection Agency, Region III, 1650 Arch Street,
Philadelphia, Pennsylvania 19103 and Virginia Department of
Environmental Quality (VADEQ), 629 East Main Street, Richmond,
Virginia, 23219.
FOR FURTHER INFORMATION CONTACT: Marilyn Powers, (215) 814-2308, or by
e-mail at powers.marilyn@epa.gov. Please note that any comments on this
rule must be submitted in writing, as provided in the ADDRESSES section
of this document.
SUPPLEMENTARY INFORMATION: On June 25, 2002, VADEQ submitted a revision
to its SIP to address the requirements of the NOX SIP Call.
The revision consists of the adoption of Regulation for Emissions
Trading, 9 VAC Chapter 140, part I--NOX Budget Trading
Program. The information in this section of this document is organized
as follow:
I. EPA's Action
A. What Action Is EPA Taking in This Proposed Rulemaking?
B. What Are the General NOX SIP Call Requirements?
C. What Is EPA's NOX Budget Trading Program?
D. What standards did EPA use to evaluate Virginia's submittal?
II. Virginia's NOX Budget Trading Program
A. When Did Virginia Submit the SIP Revision to EPA in Response
to the NOX SIP Call?
B. What Is Virginia's NOX Budget Trading Program?
C. What Is the Result of EPA's Evaluation of Virginia's Program?
III. Proposed Action
IV. Administrative Requirements
I. EPA's Action
A. What Action Is EPA Taking in This Proposed Rulemaking?
EPA is proposing to approve the Virginia NOX Budget
Trading Program submitted as a SIP revision on June 25, 2002, with the
exception of its NOX allowance banking provisions, which EPA
proposes to conditionally approve.
B. What Are the General NOX SIP Call Requirements?
On October 27, 1998 (63 FR 57356), EPA published a final rule
entitled, ``Finding of Significant Contribution and Rulemaking for
Certain States in the Ozone Transport Assessment Group Region for
Purposes of Reducing Regional Transport of Ozone,'' otherwise known as
the ``NOX SIP Call.'' The NOX SIP Call requires
the District of Columbia and 22 States, including Virginia, to meet
statewide NOX emission budgets during the May 1 through
September 30 ozone season. By meeting these budgets the States will
reduce the amount of ground level ozone that is transported across the
eastern United States. EPA has previously determined statewide
NOX emission budgets for each affected jurisdiction to be
met by the year 2007. EPA identified NOX emission
reductions, by source category, that could be achieved by using cost-
effective measures. The source categories included were electric
generating units (EGUs), non-electric generating units (non-EGUs), area
sources, nonroad mobile sources and highway sources. However, the
NOX SIP Call allowed States the flexibility to decide which
source categories to regulate in order to meet the statewide budgets.
In the NOX SIP Call rule's preamble, EPA suggested that
imposing statewide NOX emission caps on large fossil-fuel
fired industrial boilers and EGUs would provide a highly cost effective
means for States to meet their NOX budgets. In fact, the
State-specific budgets were set assuming an emission rate of 0.15
pounds NOX per million British thermal units (lbs.
NOX/MMBtu)
[[Page 68543]]
at EGUs, multiplied by the projected heat input (MMBtu) from burning
the quantity of fuel needed to meet the 2007 forecast for electricity
demand. See 63 FR 57407, October 27, 1998. The calculation of the 2007
EGU emissions assumed that an emissions trading program would be part
of an EGU control program. The NOX SIP Call State budgets
also assumed, on average, a 30 percent NOX reduction from
cement kilns, a 60 percent reduction from industrial boilers and
combustion turbines, and a 90 percent reduction from internal
combustion engines. The non-EGU control assumptions were applied at
units where the heat input capacities were greater than 250 MMBtu per
hour, or in cases where heat input data were not available or
appropriate, at units with actual emissions greater than one ton per
day.
To assist the States in their efforts to meet the SIP Call, the
NOX SIP Call final rule included a model NOX
allowance trading regulation, called ``NOX Budget Trading
Program for State Implementation Plans'' (40 CFR part 96), that could
be used by States to develop their regulations. The NOX SIP
Call rulemaking explained that if States developed an allowance trading
regulation consistent with the EPA model rule, they could participate
in a regional allowance trading program that would be administered by
EPA. See 63 FR 57458--57459, October 27, 1998.
EPA conducted several comment periods on various aspects of the
NOX SIP Call emissions inventories. On March 2, 2000 (65 FR
11222), EPA published additional technical amendments to the
NOX SIP Call. The March 2, 2000 final rulemaking established
the inventories upon which Virginia's final budget is based.
A number of parties, including certain States as well as industry
and labor groups, challenged the October 27, 1998 (63 FR 57356)
NOX SIP Call Rule. On March 3, 2000, the D.C. Circuit issued
its decision on the NOX SIP Call ruling in favor of EPA on
all of the major issues. Michigan v. EPA, 213 F.3d 663 (D.C. Cir.
2000). However, the Court remanded certain matters for further
rulemaking by EPA. EPA recently published a final notice that addresses
one of the remanded issues and expects to publish this year another
final notice that addresses the remaining remanded issues. Any
additional emissions reductions required as a result of the final
rulemaking will be reflected in the second phase portion (Phase II) of
the NOX SIP Call rule. Virginia will be required to submit
SIP revisions to address Phase II of the NOX SIP Call Rule.
C. What Is EPA's NOX Budget Trading Program?
EPA's model NOX budget and allowance trading rule, 40
CFR part 96, sets forth a NOX emissions trading program for
large EGUs and non-EGUs. A State can voluntarily choose to adopt EPA's
model rule in order to allow sources within its borders to participate
in regional allowance trading. The October 27, 1998 final rulemaking
contains a full description of the EPA's model NOX budget
trading program. See 63 FR 57514-57538 and 40 CFR part 96. In general,
air emissions trading uses market forces to reduce the overall cost of
compliance for pollution sources, such as power plants, while
maintaining emission reductions and environmental benefits. One type of
market-based program is an emissions budget and allowance trading
program, commonly referred to as a ``cap and trade'' program.
In a cap and trade program, the State or EPA sets a regulatory
limit, or emissions budget, of mass emissions from a specific group of
sources. The budget limits the total number of allocated allowances
during a particular control period. When the budget is set at a level
lower than the current emissions, the effect is to reduce the total
amount of emissions during the control period. After setting the
budget, the State or EPA then assigns, or allocates, allowances to the
participating entities up to the level of the budget. Each allowance
authorizes the emission of a quantity of pollutant, e.g., one ton of
airborne NOX. At the end of the control period, each source
must demonstrate that its actual emissions during the control period
were less than or equal to the number of available allowances it holds.
Sources that reduce their emissions below their allocated allowance
level may sell their extra allowances. Sources that emit more than the
amount of their allocated allowance level may buy allowances from the
sources with extra reductions. In this way, the budget is met in the
most cost-effective manner.
D. What Standards Did EPA Use To Evaluate Virginia's Submittal?
The final NOX SIP Call rule included a model
NOX budget trading program regulation at 40 CFR part 96. EPA
used the model rule and 40 CFR 51.121 and 51.122 to evaluate Virginia's
NOX Budget Trading Program.
II. Virginia's NOX Budget Trading Program
A. When Did Virginia Submit the SIP Revision to EPA in Response to the
NOX SIP Call?
On June 25, 2002, the VADEQ submitted a revision to its SIP to
address the requirements of the NOX SIP Call.
B. What Is Virginia's NOX Budget Trading Program?
Virginia's SIP revision to address the requirements of the
NOX SIP Call consists of the adoption and submittal of
Regulation for Emissions Trading, 9 VAC Chapter 140, part I--
NOX Budget Trading Program.
Regulation for Emissions Trading, 9 VAC Chapter 140, part I--
NOX Budget Trading Program establishes and requires a
NOX allowance trading program for large EGUs and large non-
EGUs.
The Virginia NOX Budget Trading Program regulation which
comprises Virginia's SIP revision is as follows:
ARTICLE 1.--NOX Budget Trading Program General
Provisions consists of sections 9 VAC 5-140-10 through 9 VAC 5-140-70;
ARTICLE 2.--Authorized Account Representative for NOX
Budget Sources consists of sections 9 VAC 5-140-100 through 9 VAC 5-
140-140;
ARTICLE 3.--Permits consist of sections 9 VAC 5-140-200 through 9
VAC 5-140-250;
ARTICLE 4.--Compliance Certification consists of sections 9 VAC 5-
140-300 through 9 VAC 5-140-310;
ARTICLE 5.--NOX Allowance Allocations consists of
sections 9 VAC 5-140-400 through 9 VAC 5-140-430;
ARTICLE 6.--NOX Allowance Tracking System consists of
sections 9 VAC 5-140-500 through 9 VAC 5-140-570;
ARTICLE 7.--NOX Allowance Transfers consists of sections
9 VAC 5-140-600 through 9 VAC 5-140-620;
ARTICLE 8.--Monitoring and Reporting consists of sections 9 VAC 5-
140-700 through 9 VAC 5-140-760;
ARTICLE 9.--Individual Unit Opt-ins consists of sections 9 VAC 5-
140-800 through 9 VAC 5-140-880; and
ARTICLE 10.--State Trading Budget and Compliance Supplement Pool
consists of sections 9 VAC 5-140-900 through 9 VAC 5-140-930.
Regulation for Emissions Trading, 9 VAC Chapter 140, part I--
NOX Budget Trading Program establishes a NOX cap
and allowance trading program with a budget of 21,195 tons of
NOX for the ozone seasons of 2004 and beyond. The
NOX budgets for large EGUs and large
[[Page 68544]]
non-EGUs are 17,091 and 4,104 tons of NOX per ozone season,
respectively. Virginia voluntarily chose to follow EPA's model
NOX budget and allowance trading rule, 40 CFR part 96, that
sets forth a NOX emissions trading program for large EGUs
and non-EGUs. Because Virginia's NOX Budget Trading Program
is based upon EPA's model rule, Virginia sources are allowed to
participate in the interstate NOX allowance trading program
that EPA will administer for the participating States. Virginia has
adopted regulations that are substantively identical to 40 CFR part 96,
with one exception: Virginia's regulation at 9 VAC 5-140-550 for
banking of NOX allowances must be revised to require flow
control to begin in 2005 in lieu of 2006 as currently required. Thus,
EPA proposes approval of Virginia's regulations for its NOX
Budget Trading Program, with the exception of 9 VAC 5-140-550, which
EPA proposes to conditionally approve.
Under the NOX Budget Trading Program, Virginia allocates
NOX allowances to the EGUs and non-EGUs that are affected by
these requirements. The NOX trading program generally
applies to fossil-fuel-fired EGUs with a nameplate capacity greater
than 25 MW that sell any amount of electricity as well as to non-EGUs
that have a heat input capacity greater than 250 MMBtu per hour. Each
NOX allowance permits a unit to emit one ton of
NOX during the seasonal control period. NOX
allowances may be bought or sold. Unused NOX allowances may
also be banked for future use, with certain limitations. Owners will
monitor their unit's NOX emissions by using systems that
meet the requirements of 40 CFR part 75, subpart H and will report
resulting data to EPA electronically. Each budget unit complies with
the program by demonstrating at the end of each control period that
actual emissions do not exceed the amount of allowances held for that
period. However, regardless of the number of allowances a unit holds,
it cannot emit at levels that would violate other Federal or State
limits, for example, reasonably available control technology (RACT),
new source performance standards, or title IV (the Federal Acid Rain
program).
C. What Is the Result of EPA's Evaluation of Virginia's Program?
EPA has evaluated Virginia's June 25, 2002 SIP submittal and has
found that the Virginia NOX Budget Trading Program is
consistent with EPA's guidance and addresses the requirements of the
NOX SIP Call, with one exception: Virginia's regulation at 9
VAC 5-140-550 for banking of NOX allowances requires flow
control to begin in 2006. The 2006 date is inconsistent with the model
rule in part 96 (which required flow control in the NOX SIP
Call to start in 2004) and the subsequent timing change effected by the
ruling of the U.S. Court of Appeals for the D.C. related to its
decision in Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000). Although
the court's action affected only the compliance deadline, other dates
in the rule for related requirements (such as flow control) were also
extended because they were established relative to the original
compliance deadline. The compliance deadline was extended by 1 year
(from 2003 to 2004), thereby necessitating an extension of the date for
flow control to begin by 1 year (from 2004 to 2005). Virginia must
revise its regulation at 9 VAC 5-140-550 to establish the start of flow
control to be 2005. Thus, EPA proposes approval of Virginia's
regulations for its NOX Budget Trading Program, with the
exception of 9 VAC 5-140-550, which EPA proposes to conditionally
approve. The June 25, 2002 submittal will strengthen Virginia's SIP for
reducing ground level ozone by providing NOX reductions
beginning in 2004.
Virginia's SIP revision does not establish requirements for cement
manufacturing kilns and stationary internal combustion engines.
Virginia will be required to submit SIP revisions to address any
additional emission reductions required to meet the State's overall
emissions budget. In addition, Virginia's submittal does not rely on
any additional reductions beyond the anticipated Federal measures in
the mobile and area source categories.
On December 26, 2000 (65 FR 81366), EPA made a finding that
Virginia had failed to submit a SIP response to the NOX SIP
Call, thus starting 18 and 24 month clocks for the mandatory imposition
of sanctions and the obligation for EPA to promulgate a Federal
Implementation Plan (FIP) within 24 months. The effective date of that
finding was January 25, 2001. On June 25, 2002, Virginia submitted a
SIP revision to satisfy the NOX SIP Call. On July 16, 2002,
EPA found Virginia's SIP submission to be complete. On July 23, 2002,
EPA published a notice halting the sanctions clocks for the
Commonwealth of Virginia. Upon approval of this SIP revision, with the
exception noted, the EPA's FIP obligation is terminated.
In 1995, Virginia adopted legislation that provides, subject to
certain conditions, for an environmental assessment (audit)
``privilege'' for voluntary compliance evaluations performed by a
regulated entity. The legislation further addresses the relative burden
of proof for parties either asserting the privilege or seeking
disclosure of documents for which the privilege is claimed. Virginia's
legislation also provides, subject to certain conditions, for a penalty
waiver for violations of environmental laws when a regulated entity
discovers such violations pursuant to a voluntary compliance evaluation
and voluntarily discloses such violations to the Commonwealth and takes
prompt and appropriate measures to remedy the violations. Virginia's
Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-
1198, provides a privilege that protects from disclosure documents and
information about the content of those documents that are the product
of a voluntary environmental assessment. The Privilege Law does not
extend to documents or information: (1) That are generated or developed
before the commencement of a voluntary environmental assessment; (2)
that are prepared independently of the assessment process; (3) that
demonstrate a clear, imminent and substantial danger to the public
health or environment; or (4) that are required by law.
On January 12, 1997, the Commonwealth of Virginia Office of the
Attorney General provided a legal opinion that states that the
Privilege Law, Va. Code Sec. 10.1-1198, precludes granting a privilege
to documents and information ``required by law,'' including documents
and information ``required by Federal law to maintain program
delegation, authorization or approval,'' since Virginia must ``enforce
Federally authorized environmental programs in a manner that is no less
stringent than their Federal counterparts * * *.'' The opinion
concludes that ``[r]egarding Sec. 10.1-1198, therefore, documents or
other information needed for civil or criminal enforcement under one of
these programs could not be privileged because such documents and
information are essential to pursuing enforcement in a manner required
by Federal law to maintain program delegation, authorization or
approval.''
Virginia's Immunity Law, Va. Code Sec. 10.1-1199, provides that
``[t]o the extent consistent with requirements imposed by Federal
law,'' any person making a voluntary disclosure of information to a
State agency regarding a violation of an environmental statute,
regulation, permit, or administrative order is granted immunity from
administrative or civil penalty. The
[[Page 68545]]
Attorney General's January 12, 1997 opinion states that the quoted
language renders this statute inapplicable to enforcement of any
Federally authorized programs, since ``no immunity could be afforded
from administrative, civil, or criminal penalties because granting such
immunity would not be consistent with Federal law, which is one of the
criteria for immunity.''
Therefore, EPA has determined that Virginia's Privilege and
Immunity statutes will not preclude the Commonwealth from enforcing its
program consistent with the Federal requirements. In any event, because
EPA has also determined that a State audit privilege and immunity law
can affect only State enforcement and cannot have any impact on Federal
enforcement authorities, EPA may at any time invoke its authority under
the Clean Air Act, including, for example, section 113, 167, 205, 211
or 213, to enforce the requirements or prohibitions of the State plan,
independently of any State enforcement effort. In addition, citizen
enforcement under section 304 of the Clean Air Act is likewise
unaffected by this, or any, State audit privilege or immunity law.
III. Proposed Action
EPA is proposing to approve Virginia's Regulation for Emissions
Trading, 9 VAC Chapter 140, part I--NOX Budget Trading
Program submitted as a SIP revision on June 25, 2002, with the
following exception: Virginia's NOX allowance banking
requirement for flow control is proposed to be conditionally approved.
EPA proposes approval for Virginia's NOX Budget Trading
Program because it substantively satisfies the requirements of the
NOX SIP Call. For Virginia's NOX banking
requirements to become fully approvable, Virginia must correct the
deficiency identified in this action and submit the change as a SIP
revision, by a date within one year from the final conditional
approval, after which EPA will conduct rulemaking to fully approve the
revision. If the condition is not met within the specified timeframe,
EPA is proposing that the rulemaking will convert to a final
disapproval.
IV. Administrative Requirements
Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
proposed action is not a ``significant regulatory action'' and
therefore is not subject to review by the Office of Management and
Budget. For this reason, this action is also not subject to Executive
Order 13211, ``Actions Concerning Regulations that Significantly Affect
Energy Supply, Distribution, or Use'' (66 FR 28355 (May 22, 2001)).
This action merely proposes to approve State law as meeting Federal
requirements and imposes no additional requirements beyond those
imposed by State law. Accordingly, the Administrator certifies that
this proposed rule will not have a significant economic impact on a
substantial number of small entities under the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.). Because this rule proposes to approve pre-
existing requirements under State law and does not impose any
additional enforceable duty beyond that required by State law, it does
not contain any unfunded mandate or significantly or uniquely affect
small governments, as described in the Unfunded Mandates Reform Act of
1995 (Public Law 104-4). This proposed rule also does not have a
substantial direct effect on one or more Indian tribes, on the
relationship between the Federal Government and Indian tribes, or on
the distribution of power and responsibilities between the Federal
Government and Indian tribes, as specified by Executive Order 13175 (65
FR 67249, November 9, 2000), nor will it have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government, as specified
in Executive Order 13132 (64 FR 43255, August 10, 1999), because it
merely proposes to approve a State rule implementing a Federal
standard, and does not alter the relationship or the distribution of
power and responsibilities established in the Clean Air Act. This
proposed rule also is not subject to Executive Order 13045 (62 FR
19885, April 23, 1997), because it is not economically significant.
In reviewing SIP submissions, EPA's role is to approve State
choices, provided that they meet the criteria of the Clean Air Act. In
this context, in the absence of a prior existing requirement for the
State to use voluntary consensus standards (VCS), EPA has no authority
to disapprove a SIP submission for failure to use VCS. It would thus be
inconsistent with applicable law for EPA, when it reviews a SIP
submission, to use VCS in place of a SIP submission that otherwise
satisfies the provisions of the Clean Air Act. Thus, the requirements
of section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3
of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing
this proposed rule, EPA has taken the necessary steps to eliminate
drafting errors and ambiguity, minimize potential litigation, and
provide a clear legal standard for affected conduct. EPA has complied
with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining
the implications of the rule in accordance with the ``Attorney
General's Supplemental Guidelines for the Evaluation of Risk and
Avoidance of Unanticipated Takings'' issued under the executive order.
This proposed rule that pertains to Virginia's NOX
Budget Trading Program does not impose an information collection burden
under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C.
3501 et seq.).
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Nitrogen dioxide,
Ozone, Reporting and recordkeeping requirements.
Authority: 42 U.S.C. 7401 et seq.
Dated: October 31, 2002.
Donald S. Welsh,
Regional Administrator, Region III.
[FR Doc. 02-28695 Filed 11-8-02; 8:45 am]
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