[Federal Register: August 24, 2005 (Volume 70, Number 163)]
[Proposed Rules]
[Page 49707-49833]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24au05-21]
[[Page 49707]]
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Part II
Environmental Protection Agency
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40 CFR Part 51, et al.
Rulemaking on Section 126 Petition From North Carolina To Reduce
Interstate Transport of Fine Particulate Matter and Ozone; Federal
Implementation Plans To Reduce Interstate Transport of Fine Particulate
Matter and Ozone; Revisions to the Clean Air Interstate Rule; Revisions
to the Acid Rain Program; Proposed Rule
[[Page 49708]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 51, 52, 72, 73, 74, 78, 96, and 97
[OAR-2004-0076; FRL-7948-3]
RIN 2060-AM99
Rulemaking on Section 126 Petition From North Carolina To Reduce
Interstate Transport of Fine Particulate Matter and Ozone; Federal
Implementation Plans To Reduce Interstate Transport of Fine Particulate
Matter and Ozone; Revisions to the Clean Air Interstate Rule; Revisions
to the Acid Rain Program
AGENCY: Environmental Protection Agency (EPA).
ACTION: Notice of proposed rulemaking (NPR).
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SUMMARY: Today, EPA is proposing actions to address the interstate
transport of emissions of nitrogen oxides (NOX) and sulfur
dioxide (SO2) that contribute significantly to nonattainment
and maintenance problems with respect to the national ambient air
quality standards (NAAQS) for fine particulate matter
(PM2.5) and 8-hour ozone. As one part of today's action, EPA
is proposing its response to a petition submitted to EPA by the State
of North Carolina under section 126 of the Clean Air Act (CAA). The
petition requests that EPA find that SO2 and/or
NOX emissions from electric generating units (EGUs) in 13
States are significantly contributing to PM2.5 and/or 8-hour
ozone nonattainment and maintenance problems in North Carolina, and
requests that EPA establish control requirements to prohibit such
significant contribution. The EPA's proposed response is based on
extensive analyses conducted for the recently issued Clean Air
Interstate Rule (CAIR). The EPA is proposing to deny the petition for
sources in States not shown to be linked to nonattainment and
maintenance problems in North Carolina under the CAIR. For sources in
States that are linked to North Carolina under the CAIR, EPA is
proposing in the alternative to deny the petition if EPA promulgates
Federal implementation plans (FIPs) to address the interstate transport
no later than the final section 126 response or to grant the petition
if EPA does not promulgate the FIPs prior to or concurrently with the
section 126 response. The EPA's preferred option is to promulgate the
FIP concurrently with the final section 126 response.
In today's action, EPA is also proposing FIPs for all jurisdictions
that are covered by the CAIR. The FIPs would regulate EGUs in the
affected States and achieve the emissions reductions requirements
established by the CAIR until States have approved State implementation
plans (SIPs) to achieve the reductions. The EPA intends the FIP to
satisfy the concerns cited in the section 126 petition and provide a
Federal backstop for the CAIR. In no way should the FIP for CAIR be
viewed as a sign of any concern about States meeting the SIP
responsibilities under CAIR.
As the control requirements for both the section 126 action and the
FIP, EPA is proposing Federal NOX and SO2 trading
programs that provide emissions reductions equal to those required
under the CAIR in affected States.
The Section 126 and FIP actions would not constrain States in their
selection of control strategies to meet the CAIR. The EPA intends to
withdraw section 126 or FIP requirements in a State if that State
submits and EPA approves a SIP meeting the requirements of CAIR.
Today's action also proposes revisions to the CAIR in order to
address the interaction between the EPA-administered Federal CAIR
trading programs proposed today and the EPA-administered State CAIR
trading programs that will be created by any State that elects to
submit a SIP establishing such a trading program to meet the
requirements of the CAIR. In addition, EPA is proposing revisions to
the CAIR to correct certain minor errors.
Today's action also proposes revisions to the Acid Rain Program in
order to make the administrative appeals procedures, which currently
apply to final determinations by the Administrator under the EPA-
administered State CAIR trading programs, also apply to the EPA-
administered trading programs under the section 126 and FIP actions. In
addition, we are proposing certain minor revisions to the Acid Rain
Program that would apply to all affected units.
DATES: Comments must be received on or before October 24, 2005. Public
hearings will be held on September 15, 2005 in Washington, DC and on
September 14, 2005 in Research Triangle Park, North Carolina. Please
refer to SUPPLEMENTARY INFORMATION for additional information on the
comment period and the public hearings.
ADDRESSES: Submit your comments, identified by Docket ID No. OAR-2004-
0076, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the on-line instructions for submitting comments.
Agency Web site: http://www.epa.gov/edocket. EDOCKET,
EPA's electronic public docket and comment system, is EPA's preferred
method for receiving comments. Follow the on-line instructions for
submitting comments.
E-mail: A-and-R-Docket@epa.gov.
Mail: Air Docket, Attention: Docket No. OAR-2004-0076,
Environmental Protection Agency, Mailcode: 6102T, 1200 Pennsylvania
Ave., NW., Washington, DC 20460.
Hand Delivery: EPA Docket Center, 1301 Constitution
Avenue, NW., Room B102, Washington, DC. Such deliveries are only
accepted during the Docket's normal hours of operation, and special
arrangements should be made for deliveries of boxed information
Instructions: Direct your comments to Docket ID No.: OAR-2004-0076.
The EPA's policy is that all comments received will be included in the
public docket without change and may be made available online at http://www.epa.gov/edocket
, including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Do not submit information that you consider to
be CBI or otherwise protected through EDOCKET, regulations.gov, or e-
mail. The EPA EDOCKET and the Federal regulations.gov Web sites are
``anonymous access'' systems, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an e-mail comment directly to EPA without
going through EDOCKET or regulations.gov, your e-mail address will be
automatically captured and included as part of the comment that is
placed in the public docket and made available on the Internet. If you
submit an electronic comment, EPA recommends that you include your name
and other contact information in the body of your comment and with any
disk or CD-ROM you submit. If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA
may not be able to consider your comment. Electronic files should avoid
the use of special characters, any form of encryption, and be free of
any defects or viruses. For additional information about EPA's public
docket visit EDOCKET on-line or see the Federal Register of May 31,
2002 (67 FR 38102). For additional instructions on submitting comments,
go to the
[[Page 49709]]
SUPPLEMENTARY INFORMATION section of this document.
Docket: All documents in the docket are listed in the EDOCKET index
at http://www.epa.gov/edocket. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically in EDOCKET or in hard
copy at the EPA Docket Center, EPA West, Room B102, 1301 Constitution
Avenue, NW., Washington, DC. The Public Reading Room is open from 8:30
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The
telephone number for the Public Reading Room is (202) 566-1744, and the
telephone number for the Air Docket is (202) 566-1742.
FOR FURTHER INFORMATION CONTACT: For general questions concerning
today's section 126 action, please contact Carla Oldham, U.S. EPA,
Office of Air Quality Planning and Standards, Air Quality Strategies
and Standards Division, C539-02, Research Triangle Park, NC 27711,
telephone (919) 541-3347, e-mail at oldham.carla@epa.gov. For general
questions concerning today's FIP action, please contact Tom Coda, U.S.
EPA, Office of Air Quality Planning and Standards, Air Quality
Strategies and Standards Division, C539-02, Research Triangle Park, NC
27711, telephone (919) 541-3037, e-mail at coda.tom@epa.gov. For legal
questions concerning the section 126 action, please contact Steven
Silverman, U.S. EPA, Office of General Counsel, Mail Code 2344A, 1200
Pennsylvania Avenue, NW., Washington, DC 20460, telephone (202) 564-
5523, e-mail at silverman.steven@epa.gov. For legal questions
concerning the FIP action, please contact Sonja Petersen, U.S. EPA,
Office of General Counsel, Mail Code 2344A, 1200 Pennsylvania Avenue,
NW., Washington, DC, 20460, telephone (202) 564-4097, e-mail at
petersen.sonja@epa.gov. For questions regarding the cap and trade
programs and emissions budgets, please contact Meg Victor, U.S. EPA,
Office of Atmospheric Programs, Clean Air Markets Division, Mail Code
6204J, 1200 Pennsylvania Avenue, NW., Washington, DC, 20460, telephone
(202) 343-9193, e-mail at victor.meg@epa.gov. For questions regarding
the revisions to the CAIR and Acid Rain Programs, please contact Dwight
Alpern, U.S. EPA, Office of Atmospheric Programs, Clean Air Markets
Division, Mail Code 6204J, 1200 Pennsylvania Avenue, NW., Washington,
DC, 20460, telephone (202) 343-9151, e-mail at alpern.dwight@epa.gov.
For questions regarding analyses required by statutes and executive
orders, please contact Ron Evans, U.S. EPA, Office of Air Quality
Planning and Standards, Air Quality Strategies and Standards Division,
Mail Code C339-01, Research Triangle Park, NC, 27711, telephone (919)
541-5488, e-mail at evans.ron@epa.gov.
SUPPLEMENTARY INFORMATION:
I. Does This Action Apply to Me?
Categories and entities potentially regulated by this action
include the following:
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NAICS Examples of potentially
Category code \1\ regulated entities
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Industry.......................... 221112 Fossil fuel-fired
electric utility steam
generating units.
Federal government................ \2\ Fossil fuel-fired
221122 electric utility steam
generating units owned
by the Federal
government.
State/local/Tribal government..... \2\ Fossil fuel-fired
221122 electric utility steam
generating units owned
by municipalities.
921150 Fossil fuel-fired
electric utility steam
generating units in
Indian Country.
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\1\ North American Industry Classification System.
\2\ Federal, State, or local government-owned and operated
establishments are classified according to the activity in which they
are engaged.
This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be regulated by this
action. To determine whether your facility could potentially be
affected by this action, you should examine the definitions and
applicability criteria in Sec. Sec. 72.2, 72.6, 72.7, 72.8, and 74.2
for purposes of the Acid Rain Program revisions and proposed Sec. Sec.
97.102, 97.104, 97.105, 97.202, 97.204, 97.205, 97.302, 97.304, and
97.305 for purposes of the section 126 and FIP actions. If you have any
questions regarding the applicability of this action to a particular
entity, consult the person listed in the preceding section under FOR
FURTHER INFORMATION CONTACT.
II. What Should I Consider as I Prepare My Comments for EPA?
1. Submitting CBI. Do not submit comments that include CBI to EPA
through EDOCKET, regulations.gov or e-mail. Clearly mark the part or
all of the information that you claim to be CBI. For CBI information in
a disk or CD-ROM that you mail to EPA, mark the outside of the disk or
CD-ROM as CBI and then identify electronically within the disk or CD-
ROM the specific information that is claimed as CBI. In addition to one
complete version of the comment that includes information claimed as
CBI, a copy of the comment that does not contain the information
claimed as CBI must be submitted for inclusion in the public docket.
Information so marked will not be disclosed except in accordance with
procedures set forth in 40 CFR part 2. Send or deliver information
identified as CBI only to the following address: Roberto Morales, U.S.
EPA, Office of Air Quality Planning and Standards, Mail Code C404-02,
Research Triangle Park, NC 27711, telephone (919) 541-0880, e-mail at
morales.roberto@epa.gov, Attention Docket ID No. OAR-2004-0076.
2. Tips for Preparing Your Comments. When submitting comments,
remember to:
i. Identify the rulemaking by docket number and other identifying
information (subject heading, Federal Register date and page number).
ii. Follow directions--The agency may ask you to respond to
specific questions or organize comments by referencing a Code of
Federal Regulations (CFR) part or section number.
iii. Explain why you agree or disagree; suggest alternatives and
substitute language for your requested changes.
iv. Describe any assumptions and provide any technical information
and/or data that you used.
v. If you estimate potential costs or burdens, explain how you
arrived at your estimate in sufficient detail to allow for it to be
reproduced.
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vi. Provide specific examples to illustrate your concerns, and
suggest alternatives.
vii. Explain your views as clearly as possible, avoiding the use of
profanity or personal threats.
viii. Make sure to submit your comments by the comment period
deadline identified.
III. Availability of Related Information
The EPA has conducted a separate rulemaking that contains actions
and information related to this proposal, ``Rule to Reduce Interstate
Transport of Fine Particulate Matter and Ozone (Clean Air Interstate
Rule)'' (see proposal at 69 FR 4566, January 30, 2004; supplemental
proposal at 69 FR 32684, June 10, 2004; notice of data availability at
69 FR 47828, August 6, 2004; and final rule at 70 FR 25162; May 12,
2005). Documents related to the CAIR are available for inspection in
docket OAR-2003-0053 at the address and times given above. The EPA has
established a Web site for the CAIR at http://www.epa.gov/cleanairinterstaterule or more simply http://www.epa.gov/cair/ which
will also include information on the section 126 rulemaking actions.
The rulemaking docket for the CAIR contains information and analyses
that are relied upon in today's proposed actions. Therefore, EPA is
including by reference the entire CAIR record for purposes of the
section 126 and FIP rulemakings. The EPA is not accepting comment on
the CAIR or otherwise reopening any issue decided in the CAIR for
reconsideration or comment, except that we are taking comment
specifically on the revisions to CAIR that EPA is proposing in today's
action. Section VII in this preamble discusses the proposed changes to
CAIR.
IV. Public Hearing
The EPA will be holding two public hearings on today's proposal. On
September 14, 2005, a public hearing will be held at the EPA, Building
C, Room C111A-B, 109 T.W. Alexander Drive, Research Triangle Park,
North Carolina 27709. On September 15, 2005, a public hearing will be
held at EPA Headquarters, 1200 Pennsylvania Ave, NW., Room 1117 (EPA
East), Washington, DC. The metro stop is Federal Triangle. Because
these hearings are being held at U.S. government facilities, everyone
planning to attend one of the hearings should be prepared to show valid
picture identification to the security staff in order to gain access to
the meeting room.
The public hearings will begin at 9 a.m. and continue until 5 p.m.,
if necessary, depending on the number of speakers. The EPA may end the
hearing early if all registered speakers have had an opportunity to
speak, but no earlier than 2 p.m. Persons wishing to present oral
testimony that have not made arrangements in advance should register by
2 p.m. the day of the hearing. Oral testimony will be limited to 5
minutes per commenter. The EPA encourages commenters to provide written
versions of their oral testimonies either electronically (on computer
disk or CD-ROM) or in paper copy. Verbatim transcripts and written
statements will be included in the rulemaking docket. If you would like
to present oral testimony at the hearing, please notify Joann Allman,
U.S. EPA, Office of Air Quality Planning and Standards, C539-02,
Research Triangle Park, NC 27711, telephone (919) 541-1815, e-mail
allman.joann@epa.gov, by September 8, 2005. For updates and additional
information on the public hearings, please check EPA's Web site for
this rulemaking at http://www.epa.gov/cair.
The public hearings will provide interested parties the opportunity
to present data, views, or arguments concerning the proposed rules. The
EPA may ask clarifying questions during the oral presentations, but
will not respond to the presentations or comments at that time. Written
statements and supporting information submitted during the comment
period will be considered with the same weight as any oral comments and
supporting information presented at a public hearing.
Outline
I. Background and Summary of Proposal
A. Summary of Proposal
B. General Background on PM2.5 and Ozone
1. The PM2.5 Problem
2. The 8-Hour Ozone Problem
3. Other Environmental Effects Associated with SO2
and NOX Emissions
C. What Is the Statutory and Regulatory Background for Today's
Action?
1. What Is the ``Good Neighbor'' Provision?
2. What Is the CAA Section 126 Provision?
3. What Is EPA's Previous Section 126 Rulemaking?
4. What Is the Clean Air Interstate Rule?
5. What Are the Findings of Failure to Submit for the Section
110(a)(2)(D) Plans?
D. Summary of North Carolina Section 126 Petition
1. What Sources Does the Petition Target?
2. What Control Remedy Does the Petition Request?
3. What Is the Technical Support for the Petition?
E. What Is the Litigation on Section 126 Rulemaking Schedule?
F. How Is EPA Addressing the Section 126-Related Comments
Received During the CAIR Rulemaking?
II. What Is EPA's Legal and Analytical Approach for the Section 126
Petition?
III. What Is EPA's Proposed Action on the Section 126 Petition?
A. What Is EPA's Proposed Action With Respect to the 8-Hour
Ozone NAAQS?
B. What Is EPA's Proposed Action With Respect to the
PM2.5 NAAQS?
C. What Are the Proposed Requirements for Sources for Which EPA
Makes a Section 126(b) Finding?
D. When and How Would EPA Withdraw Section 126 Findings and
Control Requirements in a State if EPA Approves a SIP to Meet the
CAIR?
IV. What Is the Proposed Federal Implementation Plan for the CAIR?
A. What Is the Legal Framework for the Proposed FIP?
B. What Is the Timing and Scope of the CAIR FIP Action?
C. What Are the FIP Control Measures?
D. When and How Would EPA Remove the FIP Requirements if EPA
Approves a SIP to Meet the CAIR?
V. Emission Reduction Requirements for the Proposed CAIR FIP and
Proposed Section 126 Response
A. Overview of Emission Reduction Requirements
B. What Is EPA's Approach for Determining Regionwide
NOX and SO2 Emissions Caps and State Emissions
Budgets?
1. Determination of Regionwide Caps for SO2 and
NOX
2. Determination of State by State Emissions Budgets for
SO2 and NOX
a. Determination of State SO2 Emissions Budgets
b. Determination of State Annual and Ozone Season NOX
Emissions Budgets
C. What Are the State EGU Emission Budgets for the CAIR FIP and
the Section 126 Response?
1. What Are the Annual State EGU SO2 Emissions
Budgets?
2. What Are the Annual State EGU NOX Emissions
Budgets?
a. For States Affected by the CAIR FIP
b. For States Affected by the Section 126 Response
3. What Are the Ozone Season EGU NOX Emissions
Budgets?
a. For States Affected by the CAIR FIP
b. For States Affected by the Section 126 Response
4. What Are the Amounts of Allowances Available in the State
Annual NOX Compliance Supplement Pools?
VI. Proposed Federal CAIR NOX and SO2 Cap and
Trade Programs for EGUs
A. Purpose of Federal CAIR NOX and SO2 Cap
and Trade Programs and Relationship to the Section 126 Petition and
the CAIR
B. Overall Structure of the Proposed Federal CAIR Cap and Trade
Programs
1. SO2 Program
2. NOX Program
3. Ozone Season NOX Program
C. Sources Affected Under the Proposed Federal CAIR Cap and
Trade Programs
D. Allocation of NOX Emission Allowances to Sources
E. Allocation of SO2 Emission Allowances to Sources
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F. Allowance Banking
G. Incentives for Early Reductions
1. SO2 Program
2. NOX Program
3. Ozone Season NOX Program
H. Monitoring and Reporting Requirements
I. Differences Between the Proposed Federal CAIR Cap and Trade
Programs and the CAIR SIP Rules
J. Coordination Between the Proposed Federal CAIR Cap and Trade
Programs and CAIR SIPs
K. Relationship of Emissions Trading Programs to Section 126
Relief
L. Interactions with Other CAA Programs
VII. What Are the Revisions to the CAIR?
VIII. What Are the Revisions to the Acid Rain Program?
IX. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review
B. Paperwork Reduction Act
C. Regulatory Flexibility Act
D. Unfunded Mandates Reform Act
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation and Coordination with
Indian Tribal Governments
G. Executive Order 13045: Protection of Children from
Environmental Health and Safety Risks
H. Executive Order 13211: Actions that Significantly Affect
Energy Supply, Distribution, or Use
I. National Technology Transfer Advancement Act
J. Executive Order 12898: Federal Actions to Address
Environmental Justice in Minority Populations and Low-Income
Populations
I. Background and Summary of Proposal
A. Summary of Proposal
Today, EPA is proposing two actions to address the interstate
transport of emissions of NOX and SO2 that
contribute significantly to nonattainment and maintenance problems with
respect to the NAAQS for PM2.5 and 8-hour ozone. First, EPA
is proposing its response to a petition submitted to EPA by the State
of North Carolina under section 126 of the CAA. The petition requests
that EPA establish control requirements for EGUs in 13 States based on
findings that these sources are significantly contributing to
PM2.5 and/or 8-hour ozone nonattainment and maintenance
problems in North Carolina. (See Petition, Docket No. OAR-2004-0076-
0002.)
The EPA's proposed response is based on extensive analyses
conducted for the CAIR (70 FR 25162; May 12, 2005). The EPA is
proposing to deny the petition for sources in States not shown in the
CAIR to be linked to (that is, to significantly contribute to)
nonattainment and maintenance problems in North Carolina. For sources
in States that are linked to North Carolina under the CAIR for the
PM2.5 NAAQS, EPA is proposing in the alternative (1) to deny
the petition in the event that EPA promulgates FIPs no later than the
final section 126 response to address the interstate transport or (2)
to grant the petition if EPA does not promulgate a FIP prior to or
concurrently with the section 126 response. The EPA's preferred
approach is to promulgate the FIP concurrently with the final section
126 response and deny the petition. The FIP would control the
significant transport from sources in States named in the petition as
well as from sources in the other CAIR States, in the event that the
States do not have approved SIPs meeting the CAIR requirements. The
States named in the petition with respect to the PM2.5 NAAQS
are: Alabama, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio,
Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia.
Of these, Illinois and Michigan are not linked to North Carolina in the
final CAIR. The EPA is proposing to deny the petition with respect to
the 8-hour ozone NAAQS, because there are no States linked to North
Carolina under the CAIR for that NAAQS. The States named in the
petition with respect to the 8-hour ozone NAAQS are: Georgia, Maryland,
South Carolina, Tennessee, and Virginia.
In today's action, EPA is also proposing FIPs to address interstate
transport of NOX and SO2 under section
110(a)(2)(D) for all jurisdictions that are covered by the CAIR. In the
CAIR, EPA determined that 28 States and the District of Columbia
contribute significantly to nonattainment of the NAAQS for
PM2.5 and/or 8-hour ozone in downwind States. The CAIR
explains EPA's basis for determining significant contribution to
downwind nonattainment and maintenance problems. In that rule, the EPA
required the affected upwind States to revise their SIPs to include
control measures to reduce emissions of SO2 and/or
NOX. Sulfur dioxide is a precursor to PM2.5
formation, and NOX is a precursor to both ozone and
PM2.5 formation.
In an action published on the same day as the final CAIR, EPA
proposed to find that Delaware and New Jersey contribute significantly
to PM2.5 nonattainment and maintenance problems in downwind
States considering these States as a single entity (70 FR 25408; May
12, 2005). These States were included in the final CAIR only with
respect to their impacts on downwind 8-hour ozone problems. Today's FIP
proposal includes emissions reductions requirements for Delaware and
New Jersey that would address their significant contribution to
nonattainment or maintenance problems for the PM2.5 NAAQS if
EPA ultimately finds that these States significantly contribute to
PM2.5 problems in downwind States based on the approach in
the proposed rule cited above.
The FIPs would regulate EGUs in the affected States and achieve the
emissions reductions required by the CAIR until States have approved
SIPs to achieve the reductions. The CAIR emissions budgets were based
on control requirements that are highly cost effective for EGUs.
The EPA intends the CAIR FIPs to satisfy the concerns cited in the
section 126 petition and to provide a Federal backstop for CAIR. In no
way should the FIPs for CAIR be viewed as a sign of any concern about
States meeting the SIP responsibilities under CAIR. There are no
sanctions associated with these FIPs and EPA does not intend CAIR FIPs
to have any other negative consequences for the affected States. The
EPA is proposing FIP approaches that are flexible and intended to
provide States options for getting their SIPs in place.
As the control remedy for both the section 126 action (should EPA
make positive findings under section 126(b)) and the FIP, EPA is
proposing Federal NOX and SO2 cap and trade
programs that provide the emissions reductions required by the CAIR.
The trading programs are designed after the model cap and trade
programs that EPA provided as a control option for States to meet the
CAIR. The EPA intends to integrate the Federal trading programs with
the EPA-administered State CAIR trading programs that are based on the
model rules so that sources could trade with one another under the
respective emissions caps.
The EPA emphasizes that the section 126 response and FIP would not
limit the options available to States to meet the requirements of the
CAIR. We do not intend to record NOX allocations in sources'
allowance accounts (or take any other steps to implement the section
126 or FIP requirements that could impact a State's ability to regulate
their sources in a different manner) until more than a year after the
CAIR SIP submission deadline.\1\ This would allow EPA time
[[Page 49712]]
to take rulemaking action to approve timely SIPs and, thus, the FIP or
section 126 requirements would not go into place. In addition, States
could replace the FIP or section 126 requirements at a later time.
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\1\ The CAIR requires affected sources to begin monitoring one
year before the initial control periods (i.e., sources begin
monitoring in 2008 for the NOX programs and begin
monitoring in 2009 for the SO2 program). Note that EPA
would take any necessary actions to implement the monitoring
provisions of the proposed Federal trading rules in time for
monitoring to begin in 2008. To the extent that a State chooses to
control EGUs to meet its CAIR obligations, the monitoring
requirements would be identical whether EPA regulated EGUs through
the proposed Federal trading programs or the State regulated EGUs
through their SIP.
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In today's action, EPA is also proposing revisions to the CAIR in
order to address the interaction of EPA-administered NOX and
SO2 trading programs under the CAIR and under the section
126 and FIP actions. In addition, EPA is proposing some revisions to
the CAIR in order to correct certain minor errors.
The EPA is also proposing revisions to the Acid Rain Program in
order to make the administrative appeals procedures (in 40 CFR part
78), which currently apply to final determinations by the Administrator
under the EPA-administered States CAIR trading programs, also apply to
the EPA-administered trading programs under the section 126 and FIP
actions. In addition, EPA is proposing some minor revisions that would
apply to all affected units under the Acid Rain Program.
For purposes of the section 126 and FIP rulemakings, the EPA is not
accepting comment on the CAIR or otherwise reopening any issue decided
in the CAIR for reconsideration or comment, except that we are taking
comment specifically on revisions to the CAIR that EPA is proposing in
today's action. Section VII of this preamble discusses the proposed
changes to the CAIR.
B. General Background on PM2.5 and Ozone
1. The PM2.5 Problem
In an action published on July 18, 1997, we revised the NAAQS for
particulate matter (PM) to add new standards for fine particles, using
as the indicator particles with aerodynamic diameters smaller than a
nominal 2.5 micrometers, termed PM2.5 (62 FR 38652). We
established health- and welfare-based (primary and secondary) annual
and 24-hour standards for PM2.5. The annual standard is 15
micrograms per cubic meter, based on the 3-year average of annual mean
PM2.5 concentrations. The 24-hour standard is 65 micrograms
per cubic meter, based on the 3-year average of the annual 98th
percentile of 24-hour concentrations. The annual standard is generally
considered the more limiting.
Fine particles are associated with a number of serious health
effects including premature mortality, aggravation of respiratory and
cardiovascular disease (as indicated by increased hospital admissions,
emergency room visits, absences from school or work, and restricted
activity days), lung disease, decreased lung function, asthma attacks,
and certain cardiovascular problems. (See EPA, Air Quality Criteria for
Particulate Matter (EPA/600/P-99/002bF, October 2004) at 9.2.2.3). The
EPA has estimated that attainment of the PM2.5 standards
would prolong tens of thousands of lives and would prevent, each year,
tens of thousands of hospital admissions as well as hundreds of
thousands of doctor visits, absences from work and school, and
respiratory illnesses in children.
Individuals particularly sensitive to fine particle exposure
include older adults, people with heart and lung disease, and children.
More detailed information on health effects of fine particles can be
found on EPA's Web site at: http://www.epa.gov/ttn/naaqs/standards/pm/s_pm_index.htm1
.
The secondary or welfare-based PM2.5 standards are
designed to protect against major environmental effects caused by PM
such as visibility impairment--including in Class I areas which include
national parks and wilderness areas across the country--soiling, and
materials damage.
As discussed in other sections of this preamble, SO2 and
NOX emissions both contribute to fine particle
concentrations. In addition, NOX emissions contribute to
ozone concentrations, described in the next section.
The PM2.5 ambient air quality monitoring for the 2001-
2003 period shows that areas violating the standards are located across
much of the eastern half of the United States and in parts of
California and Montana. The EPA published the PM2.5
attainment and nonattainment designations on January 5, 2005 (70 FR
944).
2. The 8-Hour Ozone Problem
In an action published on July 18, 1997, we promulgated identical
revised primary and secondary ozone standards that specified an 8-hour
ozone standard of 0.08 parts per million (ppm). Specifically, under the
standards, the 3-year average of the fourth highest daily maximum 8-
hour average ozone concentration may not exceed 0.08 ppm. In general,
the revised 8-hour standards are more protective of public health and
the environment and more stringent than the pre-existing 1-hour ozone
standards.
Short-term (1- to 3-hour) and prolonged (6- to 8-hour) exposures to
ambient ozone have been linked to a number of adverse health effects.
Short-term exposure to ozone can irritate the respiratory system,
causing coughing, throat irritation, and chest pain. Ozone can reduce
lung function and make it more difficult to breathe deeply. Breathing
may become more rapid and shallow than normal, thereby limiting a
person's normal activity. Ozone also can aggravate asthma, leading to
more asthma attacks that require a doctor's attention and the use of
additional medication. Increased hospital admissions and emergency room
visits for respiratory problems have been associated with ambient ozone
exposures. Longer-term ozone exposure can inflame and damage the lining
of the lungs, which may lead to permanent changes in lung tissue and
irreversible reductions in lung function. A lower quality of life may
result if the inflammation occurs repeatedly over a long time period
(such as months, years, a lifetime). Recent epidemiological studies
have shown a correlation between acute ozone exposures and increased
risk of premature death.
People who are particularly susceptible to the effects of ozone
include people with respiratory diseases, such as asthma, and people
with unusual sensitivity to ozone. Those who are exposed to higher
levels of ozone include adults and children who are active outdoors.
In addition to causing adverse health effects, ozone affects
vegetation and ecosystems, leading to reductions in agricultural crop
and commercial forest yields; reduced growth and survivability of tree
seedlings; and increased plant susceptibility to disease, pests, and
other environmental stresses (e.g., harsh weather). In long-lived
species, these effects may become evident only after several years or
even decades and have the potential for long-term adverse impacts on
forest ecosystems. Ozone damage to the foliage of trees and other
plants can also decrease the aesthetic value of ornamental species used
in residential landscaping, as well as the natural beauty of our
national parks and recreation areas. The economic value of some welfare
losses due to ozone can be calculated, such as crop yield loss from
both reduced seed production (e.g., soybean) and visible injury to some
leaf crops (e.g., lettuce, spinach, tobacco), as well as visible injury
to ornamental plants (i.e., grass, flowers, shrubs). Other types of
welfare loss may not be quantifiable (e.g., reduced aesthetic value of
trees growing in heavily visited national parks). More detailed
information on health effects of ozone can be found at the following
EPA Web
[[Page 49713]]
site: http://www.epa.gov/ttn/naaqs/standards/ozone/s_o3_index.html.
Presently, wide geographic areas, including most of the nation's
major population centers, experience ozone levels that violate the
NAAQS for 8-hour ozone. These areas include much of the eastern part of
the United States and large areas of California. The EPA published the
8-hour ozone attainment and nonattainment designations in the Federal
Register on April 30, 2004 (69 FR 23858).
3. Other Environmental Effects Associated With SO2 and
NOX Emissions
In addition to the enumerated human health and welfare benefits
resulting from reductions in ambient levels of PM2.5 and
ozone, reductions in NOX and SO2 will contribute
to substantial visibility improvements in many parts of the eastern
United States. Reductions in these pollutants will also reduce
acidification and eutrophication of water bodies in the region. In
addition, reducing emissions of NOX and SO2 from
EGUs can be expected to reduce emissions of mercury. Reduced mercury
emissions in turn may reduce mercury loadings in lakes and thereby
potentially decrease both human and wildlife exposure to fish
containing mercury.
C. What Is the Statutory and Regulatory Background for Today's Action?
1. What Is the ``Good Neighbor'' Provision?
Following promulgation of new or revised NAAQS, the CAA requires
all areas, regardless of their designation as attainment,
nonattainment, or unclassifiable, to submit SIPs containing provisions
specified under section 110(a)(2). Among these requirements are those
specified by the so-called ``good neighbor'' provision section
110(a)(2)(D) which addresses interstate transport of air pollution.
Section 110(a)(2)(D) requires that a SIP contain adequate
provisions--
(i) Prohibiting, consistent with the provisions of this title,
any source or other type of emissions activity within the State from
emitting any air pollutant in amounts which will--
(I) Contribute significantly to nonattainment in, or interfere
with maintenance by, any other State with respect to [any] national
primary or secondary ambient air quality standard, or
(II) Interfere with measures required to be included in the
applicable implementation plan for any other State under part C to
prevent significant deterioration of air quality or to protect
visibility.
(ii) Insuring compliance with the applicable requirements of
sections 126 and 115 (relating to interstate and international
pollution abatement);
Section 110(a)(2)(D) is the underlying provision for EPA's CAIR and
today's proposed section 126 and FIP actions. Under the CAIR, EPA
established the amount of SO2 and NOX emissions
that each CAIR-affected State must prohibit through SIP revisions to
address interstate transport with respect to the PM2.5 and
8-hour ozone NAAQS.
2. What Is the CAA Section 126 Provision?
Subsection (a) of section 126 requires, among other things, that
SIPs require major proposed new (or modified) stationary sources to
notify nearby States for which the air pollution levels may be affected
by the fact that such sources have been permitted to commence
construction. Subsection (b) provides:
Any State or political subdivision may petition the
Administrator for a finding that any major source or group of
stationary sources emits or would emit any air pollutant in
violation of the prohibition of section 110(a)(2)(D)(ii) * * * or
this section.* * *
Subsection (c) of section 126 states that--
[I]t shall be a violation of this section and the applicable
implementation plan in such State [in which the source is located or
intends to locate]--
(1) For any major proposed new (or modified) source with respect
to which a finding has been made under subsection (b) to be
constructed or to operate in violation of this section and the
prohibition of section 110(a)(2)(D)(ii) \2\ or this section, or
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\2\ While the text of section 126 refers to section
110(a)(2)(D)(ii), EPA believes that this cross-reference is a
scrivener's error that occurred during the 1990 Amendments to the
CAA and that Congress intended to refer to section 110(a)(2)(D)(i).
(See 64 FR 28267.) The EPA's interpretation was upheld in
Appalachian Power Co. v. EPA, 249 F. 3d 1032, 1040-44 (DC Cir.
2001).
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(2) For any major existing source to operate more than three
months after such finding has been made with respect to it.
However, subsection (c) further provides that EPA may permit the
continued operation of such major existing sources beyond the 3-month
period, if such sources comply with EPA-promulgated emissions limits
within 3 years of the date of the finding.
3. What Is EPA's Previous Section 126 Rulemaking?
The EPA has previously taken action under section 126 to address
interstate ozone transport (64 FR 28250; May 25, 1999) and (65 FR 2674;
January 18, 2000). Because there are many parallels between that
earlier action and today's proposal, we briefly discuss our earlier
action here.
Like the present rulemaking, EPA's previous section 126 rulemaking,
dealing with interstate transport of NOX, occurred
essentially in conjunction with an EPA rulemaking dealing with
interstate transport of the same pollutants, the NOX SIP
Call (62 FR 60318; November 7, 1997). As in today's rule, EPA concluded
that section 126 and section 110(a)(2)(D)(i) are integrally connected
(due to the reference to the section 110(a)(2)(D) prohibition found in
section 126(b)). Thus, the interstate transport problem at issue could
be addressed under either provision, and once the underlying section
110(a)(2)(D) SIP deficiency is eliminated, there no longer is a basis
for EPA to make a positive finding under section 126. (See sections II
and III below for a more detailed discussion.) In the earlier
rulemaking, we therefore concluded that emissions reductions sufficient
to eliminate a section 110(a)(2)(D) SIP deficiency would also be
sufficient to satisfy section 126. The NOX SIP Call required
SIP revisions eliminating the amount of emissions that contribute
significantly to nonattainment in downwind States, the amount of
emissions reductions corresponding to the quantity of emissions that
could be eliminated by the application of highly cost-effective
controls on specified sources in each upwind State. The section 126
remedy consequently called for the same set of highly cost-effective
controls for the section 126 source categories, based on the record of
the NOX SIP Call. We are adopting this same conceptual
approach in today's rulemaking.
There are also parallels between our earlier section 126 action and
this action with regard to timing of actions in the section 126
proceeding and in the closely-related interstate transport proceeding
under section 110(a)(2)(D). Because a section 126 finding turns on the
existence of a section 110(a)(2)(D) deficiency, in the May 1999 Section
126 Rule, we determined which petitions had technical merit, but we
stopped short of granting the findings for the petitions. Instead, we
stated that because we had promulgated the NOX SIP Call, as
long as an upwind State remained on track to comply with that rule, EPA
would defer making the section 126 findings. Thus, the Section 126 Rule
included a provision under which the rule would be automatically
withdrawn for sources in a State once that State submitted and EPA
fully approved a SIP that complied with the NOX SIP Call or
if EPA promulgated a FIP to achieve the emissions reductions. (See 64
FR 28271-28274.) The reason
[[Page 49714]]
for this withdrawal would be the fact that the affected State's SIP
revision or EPA's promulgated FIP would fulfill the section
110(a)(2)(D) requirements, so that there would no longer be any basis
for the section 126 finding with respect to that State. Later judicial
action staying the NOX SIP Call rule resulted in EPA
granting the section 126 petitions at issue, but the new rule retained
the basic linkage between section 126 and section 110(a)(2)(D) by
providing that EPA would withdraw the section 126 findings upon EPA
approval of a SIP satisfying the emission reduction requirements of the
NOX SIP Call rule or upon EPA's promulgation of a FIP that
achieved the emissions reductions. (See 65 FR at 2683 and Appalachian
Power v. EPA, 249 F. 3d 1032, 1039 (DC Cir. 2001).) Similarly, in
today's rulemaking, we are proposing to deny the section 126 petition
if we approve SIPs which satisfy the emission reduction requirements of
the CAIR, or if we promulgate a FIP which includes the emission
reduction requirements of the CAIR.
Finally, in the earlier section 126 rule, EPA adopted as a remedy
for section 126 a Federal NOX cap and trade program
patterned after the model NOX cap and trade program that EPA
developed for States as an option to meet their NOX SIP Call
requirements. The EPA is proposing the same approach here in the event
that it grants North Carolina's section 126 petition.
4. What Is the Clean Air Interstate Rule?
The EPA developed the Clean Air Interstate Rule (CAIR) to address
interstate pollution transport with respect to the newly adopted
PM2.5 and 8-hour ozone NAAQS. The EPA published the
proposals for CAIR (previously referred to as the Interstate Air
Quality Rule) on January 30, 2004 (69 FR 4566) and June 10, 2004 (69 FR
32684), a notice of data availability on August 6, 2004 (69 FR 47828),
and the final rule on May 12, 2005 (70 FR 25162). The EPA is providing
this description of the CAIR to help place today's proposal in context.
As stated above, EPA is not accepting comment on the CAIR or otherwise
reopening any issue decided in the CAIR for reconsideration or comment,
except that EPA is taking comment specifically on the revisions to CAIR
that EPA is proposing in today's action (Section VII in this preamble
discusses the proposed changes to CAIR).
In the CAIR, based on air quality modeling analyses and cost
analyses, EPA concluded that SO2 and NOX
emissions in certain States in the eastern part of the country, through
the phenomenon of air pollution transport,\3\ contribute significantly
to PM2.5 and/or 8-hour ozone nonattainment and maintenance
problems in downwind States. The CAIR establishes emission reduction
requirements for the affected upwind States under CAA section
110(a)(2)(D). The affected States and the District of Columbia have
until September 11, 2006 to adopt and submit SIP revisions to achieve
these required reductions. The SIP revision must contain measures that
will assure that sources in the State reduce their SO2 and/
or NOX emissions sufficiently to eliminate the amounts of
SO2 and NOX that contribute significantly to
nonattainment downwind. Reducing upwind precursor emissions will assist
the downwind PM2.5 and 8-hour ozone areas in achieving and
maintaining the NAAQS. Moreover, attainment will be achieved in a more
equitable, cost-effective manner than if each nonattainment area
attempted to achieve attainment by implementing local emissions
reductions alone.
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\3\ When we use the term ``transport'' we mean to include the
transport of both fine particles (PM2.5) and their
precursor emissions and/or transport of both ozone and its precursor
emissions.
---------------------------------------------------------------------------
The EPA specified that the CAIR emissions reductions be implemented
in two phases. The first phase of NOX reductions starts in
2009 (covering 2009-2014) and the first phase of SO2
reductions starts in 2010 (covering 2010-2014); the second phase of
reductions for both NOX and SO2 starts in 2015
(covering 2015 and thereafter). The emissions reduction requirements
are based on controls that are known to be highly cost effective for
EGUs, however States have the flexibility to determine what measures to
adopt to achieve the necessary reductions. In the CAIR, EPA provided
model SO2 and NOX trading programs for EGUs that
States can choose to adopt to meet the emissions reduction requirements
in a flexible and highly cost-effective manner.
If EPA ultimately includes Delaware and New Jersey in the CAIR with
respect to the PM2.5 NAAQS (see proposal at 70 FR 25408),
EPA estimates that the CAIR would reduce SO2 emissions by
3.6 million tons in 2010 and by 3.9 million tons in 2015; and would
reduce annual NOX emissions by 1.2 million tons in 2009 and
by 1.5 million tons in 2015. (These numbers reflect the annual
SO2 and NOX requirements.) If all these States
(including Delaware and New Jersey for the PM2.5 NAAQS)
choose to achieve these reductions through EGU controls, then EGU
SO2 emissions in the affected States would be capped at 3.7
million tons in 2010 and 2.6 million tons in 2015; \4\ and EGU annual
NOX emissions would be capped at 1.5 million tons in 2009
and 1.3 million tons in 2015.
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\4\ It should be noted that the banking provisions of the cap
and trade program which encourage sources to make significant
reductions before 2010 also allow sources to operate above these cap
levels until all of the banked allowances are used, therefore EPA
does not project that these caps will be met in 2010 or 2015.
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Based on the promulgated CAIR (70 FR 25162), EPA estimates that the
required SO2 and NOX emissions reductions would,
by themselves, bring into attainment 52 of the 79 counties that are
otherwise projected to be in nonattainment for PM2.5 in
2010, and 57 of the 74 counties that are otherwise projected to be in
nonattainment for PM2.5 in 2015. The EPA further estimates
that the required NOX emissions reductions would, by
themselves, bring into attainment 3 of the 40 counties that are
otherwise projected to be in nonattainment for 8-hour ozone in 2010,
and 6 of the 22 counties that are projected to be in nonattainment for
8-hour ozone in 2015. In addition, the CAIR will improve
PM2.5 and 8-hour ozone air quality in the areas that would
remain nonattainment for those two NAAQS after implementation of the
CAIR. Because of CAIR, the States with those remaining nonattainment
areas will find it less burdensome and less expensive to reach
attainment by adopting additional controls. The CAIR will also reduce
PM2.5 and 8-hour ozone levels in attainment areas, providing
significant health and environmental benefits in all areas of the
eastern United States.
For a more complete description of the CAIR and its impacts, the
reader is encouraged to review the preamble to the CAIR.
5. What Are the Findings of Failure To Submit for the Section
110(a)(2)(D) Plans?
In a final rule published on April 25, 2005 (70 FR 21147), we made
national findings that States have failed to submit SIPs required under
section 110(a)(2)(D) to address interstate transport with respect to
the 8-hour ozone and PM2.5 NAAQS.
The April 25, 2005 findings started a 2-year clock for EPA to
promulgate a Federal implementation plan (FIP) to address the
requirements of section 110(a)(2)(D). Under section 110(c)(1), EPA may
issue a FIP any time after such findings are made and must do so unless
a SIP revision correcting the deficiency is approved by EPA before the
FIP is promulgated. The EPA
[[Page 49715]]
intends to issue guidance regarding how States outside the CAIR region
could satisfy the section 110(a)(2)(D) requirement. For States affected
by CAIR, an approved SIP meeting the CAIR requirements would satisfy
the requirement and turn off the FIP clock. As discussed below in
section IV, EPA is today proposing a FIP for States affected by the
CAIR. The EPA intends to promulgate the CAIR FIP by March 15, 2006
along with the final section 126 response. However, EPA intends to
withdraw the FIP in a State in coordination with approval of a SIP for
the State that meets the CAIR requirements.
The findings do not start a sanctions clock pursuant to section 179
because the findings do not pertain to a part D plan for nonattainment
areas required under section 110(a)(2)(I) and because the action is not
a SIP Call pursuant to section 110(k)(5).
D. Summary of North Carolina's Section 126 Petition
1. What Sources Does the Petition Target?
The North Carolina petition requests relief from certain emissions
from large EGUs located in 13 States. With respect to the
PM2.5 NAAQS, the petition requests that EPA find that
NOX and SO2 emissions from large EGUs in 12
States (Alabama, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio,
Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia)
are significantly contributing to nonattainment in, or interfering with
maintenance by, North Carolina. With respect to the 8-hour ozone NAAQS,
the petition requests that EPA find that NOX emissions from
large EGUs in 5 States (Georgia, Maryland, South Carolina, Tennessee,
and Virginia) are significantly contributing to nonattainment in, or
interfering with maintenance by, North Carolina (Petition, p.1.)
The petition defines the term ``EGUs'' as all facilities meeting
the criteria described in the proposal for the CAIR. (See 69 FR 4566,
4610; January 30, 2004.) In the proposal for the CAIR, we defined EGUs
as ``fossil-fuel fired boilers and turbines serving an electric
generator with a nameplate capacity of greater than 25 megawatts (MW)
producing electricity for sale.'' (Id.) (See section VII of today's
preamble for clarification of the EGU definition.\5\)
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\5\ As noted in section VII below, EPA is proposing to amend the
definition of EGU to remove certain ambiguities regarding the
definition's application to solid waste incinerators and to existing
units that formerly generated electricity for sale but have not done
so since before November 15, 1990. We understand the North Carolina
section 126 petition as applying only to the sources included in the
clarified definition and not to sources we are proposing to exclude
from the definition of EGU.
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2. What Control Remedy Does the Petition Request?
In its petition, North Carolina states that compliance with the
NOX and SO2 emissions budgets in the proposal for
the CAIR would satisfy the requirements of the petition. These
emissions budgets were based on controls that are highly cost effective
for EGUs. North Carolina also states that it does not oppose the
flexibility discussed by EPA (69 FR at 4622) to allow equivalent
reductions from other source categories in given States, so long as
those reductions are real and enforceable (Petition, p. 24).
In the CAIR, EPA provided model NOX and SO2
cap and trade programs for EGUs as control options for States to choose
to meet the CAIR emissions reductions requirements. The trading
programs allow interstate trading among sources in all States subject
to the CAIR that adopt the programs. In its petition, North Carolina
said it recognizes the value of allowing sources flexibility to reduce
their emissions in the most cost-effective manner consistent with the
statute. However, North Carolina expressed concerns about a regional
trading program that could operate to deprive North Carolina of the
benefits of the control remedy in the subset of States that affect
North Carolina (Petition, pp. 25-28). We address this issue below in
section VI.
3. What Is the Technical Support for the Petition?
To support its claim that EGUs outside North Carolina are
contributing significantly to nonattainment and maintenance problems in
the State, North Carolina relies largely on EPA's technical analyses
for the proposed CAIR. Therefore, as discussed above, the petition
targets sources in the same States that EPA linked to North Carolina in
the proposed CAIR. As additional support, North Carolina cites analyses
conducted by the Southern Appalachian Mountains Initiative (SAMI) on
PM2.5 transport, North Carolina's further evaluation of the
SAMI's analyses, as well as back trajectory analyses performed by the
North Carolina Division of Air Quality from PM2.5 monitors
in two counties. (See Petition, pp. 13-17.)
E. What Is the Litigation on the Section 126 Rulemaking Schedule?
On March 19, 2004, EPA received a petition from the State of North
Carolina filed under CAA section 126. Section 126(b) requires EPA to
make the requested finding, or to deny the petition, within 60 days of
receipt. It also requires EPA to provide a public hearing before acting
on the petition. In addition, EPA's action under section 126 is subject
to the procedural requirements of section 307(d) of the CAA. (See
section 307(d)(2)-(5).) One of these requirements is that EPA conduct
notice-and-comment rulemaking. Section 307(d)(10) provides for a time
extension, under certain circumstances, for rulemakings subject to that
provision. Specifically, it allows statutory deadlines that require
promulgation in less than 6 months from proposal to be extended to not
more than 6 months from proposal to afford the public and the Agency
adequate opportunity to carry out the purposes of section 307(d). In an
action published on May 26, 2004 (69 FR 30038), EPA extended the
deadline for EPA to take action on the North Carolina petition by the
full 6 months, to November 18, 2004.
On February 17, 2005, the State of North Carolina and the citizen
group Environmental Defense filed complaints against EPA seeking to
compel EPA to take action on the State's section 126 petition: State of
North Carolina v. Johnson, No. 5:05-CV-112 (E.D. N.C.) and
Environmental Defense v. Johnson, No. 5:05-CV-113 (E.D.N.C.). The EPA,
North Carolina, and Environmental Defense filed a proposed consent
decree that would establish a schedule for EPA to act on the petitions.
Pursuant to CAA section 113(g), the EPA solicited comments on the
proposed consent decree, by notice dated March 2, 2005 (70 FR 10089).
The comment period closed April 1, 2005 without EPA receiving negative
comment. On May 9, 2005, the court entered a slightly modified version
of the consent decree.
The schedule in the consent decree requires that no later than
August 1, 2005, EPA must sign for publication the proposed action to
grant or deny the petition. If EPA proposes to approve any part of the
petition, the proposal must include the proposed remedy. No later than
March 15, 2006, EPA must take final action to grant or deny the
petition. If EPA grants any part of the petition (i.e., makes a section
126(b) finding), the final action must include the remedy. The consent
decree also requires EPA to hold a public hearing on the proposal
during the week of September 12, 2005 in North Carolina. Today's
proposal meets the first deadline set forth in the consent decree. The
EPA has scheduled two public hearings during the week of September 12,
2005, one to be held in
[[Page 49716]]
North Carolina and the other in Virginia (see DATES above for further
information on the hearings).
F. How Is EPA Addressing the Section 126-Related Comments Received
During the CAIR Rulemaking?
In the January 30, 2004 CAIR proposal, EPA set forth its general
view of the approach it expected to take in responding to any section
126 petition that might be submitted that relies on essentially the
same record as the CAIR (69 FR at 4580). That approach is the one EPA
used in addressing section 126 petitions that were submitted to EPA in
1997 while EPA was developing the NOX SIP Call to control
ozone transport (as discussed in section I.C.3. above).
The EPA received comments on the CAIR proposal regarding its
intended approach for acting on any future section 126 petitions that
might be filed. Many commenters expressed support for the approach that
EPA had outlined. Other commenters raised issues regarding the timing
of emissions reductions under a new section 126 action. Some pointed
out that the CAIR compliance date would be later than the 3 years
allowed for compliance under section 126. Some were concerned that the
proposed CAIR compliance date was later than many attainment dates and,
therefore, States may need section 126 petitions in order to get
earlier upwind reductions in order to meet their attainment dates. Some
questioned the legal basis for linking the two rules. Several
commenters expressed concern that EPA would be restricting the use of
or weakening the section 126 authority. A number of commenters urged
EPA not to prejudge any petition, but to evaluate each on its own
merit. Some thought that any petitions submitted prior to designations
or before States had had the opportunity to prepare SIPs would be
premature and should be denied. Others suggested that the CAIR might
not solve all the transport problems and that States would need to
retain the section 126 tool to seek further reductions.
As discussed above, after issuing the CAIR proposal, EPA received,
on March 19, 2004, the section 126 petition from North Carolina. In the
final CAIR, we stated that when we propose action on the North Carolina
petition, we would set forth our view of the interaction between
section 110(a)(2)(D) and section 126 . Section II below explains EPA's
view of this interaction.
In addition, we said we would take into consideration and respond
to the section 126-related comments we received on the CAIR. The EPA
has reviewed all the comments and will be providing responses to the
relevant ones in the docket for this rulemaking action.
II. What Is EPA's Legal and Analytical Approach for the Section 126
Petition?
As described in section I.C.2 above, section 126 of the CAA is
integrally related to the CAA's ``good neighbor'' provision, section
110(a)(2)(D), which requires States to adopt implementation plans to
prohibit emissions from sources within the State that significantly
contribute to other States' nonattainment of a NAAQS, or which
interfere with other States' ability to maintain a NAAQS. Under section
126, a downwind State ``may petition the Administrator for a finding
that any major source or group of stationary sources emits or would
emit any air pollutant in violation of CAA section 110(a)(2)(D).''
Should EPA make a finding that a source or group of sources is emitting
in violation of the section 110(a)(2)(D) prohibition, existing sources
in violation may operate no longer than 3 months unless the sources
comply with emission limitations and compliance schedules provided by
the Administrator which bring about compliance ``as expeditiously as
practicable, but in no case later than three years after the date of
such finding.'' See section 126(c).
The EPA's determination whether or not to grant a section 126
petition consequently turns on whether SIPs are in violation of section
110(a)(2)(D). See Appalachian Power v. EPA, 249 F. 3d 1032, 1045-46 (DC
Cir., 2001), holding that the determination of whether the
``prohibition'' on excessive interstate transport of air pollutants is
being violated is the same under section 110(a)(2)(D) and section 126;
see also North Carolina Petition p. 22 (``the operative legal standard
under sections 110 and 126 is identical''). Moreover, because of this
interrelation and identity, EPA has construed section 126 as applying
on a statewide contribution basis when dealing with issues of
interstate transport of ozone precursors. This means that a finding by
EPA that a SIP is in violation of section 110(a)(2)(D)(i) is a
sufficient basis for a finding that sources within that State are in
violation of that prohibition for purposes of section 126(b) (64 FR at
28282). No more individualized determination for a source or group of
sources is necessary. Id. This is because sources' contribution to
nonattainment is collective, so that even relatively small individual
contributions are significant in the aggregate. Id. Thus, ``[i]f State-
wide emissions contribute significantly to nonattainment downwind, then
the State's section 126 sources may be subject to SIP controls; if
State-wide emissions do not contribute significantly, then the State's
section 126 sources would not be subject to SIP control.'' Id.; see
Appalachian Power, 249 F. 3d 1049-50 (upholding this determination).
Under this approach, therefore, if EPA determines that a State's SIP
fails to meet the requirements of section 110(a)(2)(D)(i) with respect
to a downwind State, it follows that the prohibition in section 126 is
also violated with respect to that downwind State.
In the CAIR, EPA defined ``significant contribution'' as consisting
of an air quality factor reflecting an upwind State's ambient impact on
downwind nonattainment areas, and the cost-factor of availability of
highly cost-effective controls (70 FR at 25174). The reductions
required are expressed as Statewide budgets of PM2.5 and
ozone precursors (SO2 and NOX for
PM2.5, and NOX for ozone) susceptible to
reduction by highly cost effective controls. For PM2.5, an
upwind State must contribute at least 0.2 [mu]g/m3
PM2.5 to at least one downwind nonattainment area (the
``link'') to satisfy the air quality part of the test. Id. at 25191.
For ozone, the air quality component is satisfied if the maximum
contribution by an upwind State is at least 2 parts per billion, the
average contribution is greater than one percent, and certain other
numerical criteria are met. Id. at 25175. The CAIR rule also stated
that an upwind State's emissions can interfere significantly with a
downwind State's maintenance of a NAAQS when EPA, or a State, can
reasonably project based on available data that in the absence of CAIR
controls, a current or projected nonattainment area will revert to
nonattainment, after having achieved attainment, due to continued
emissions growth or to other relevant factors. Id. at 25193; see also
the response to comments document for the CAIR, section III.C.17,
docket number OAR-2003-0053-2165.
The EPA is adopting this same approach in the present rulemaking.
This, of course, is a consequence of EPA's interpretation (just
explained) that a violation of 110(a)(2)(D)(i) also indicates that
sources are emitting in violation of the section 110(a)(2)(D)
prohibition for purposes of section 126(b). For the same reason, EPA is
adopting the highly cost-effective component of the test from the CAIR
rule, with the consequent emission budgets.
Once EPA finds under section 126(b) that a source (or sources) is
operating in violation of the section 110(a)(2)(D)(i)
[[Page 49717]]
prohibition, the violation would be eliminated (assuming that sources
continue to operate) by EPA approving a SIP containing provisions
eliminating the significant contribution, or by EPA itself adopting a
FIP which contains provisions eliminating that contribution, by the
deadline for the section 126 sources. This means that a section 126(b)
violation no longer exists once EPA approves a timely SIP, or adopts a
timely FIP, requiring each State contributing significantly (in this
case, to North Carolina) to reduce emissions to the levels reflecting
elimination of the State's significant contribution, as specified in
the CAIR. This result is again a consequence of the integral
relationship of section 126(b) and section 110(a)(2)(D).
The EPA intends to apply these same principles in responding to
future section 126 petitions from States in the CAIR region addressing
CAIR pollutants. Thus, we would deny these petitions with respect to
any State having an approved SIP meeting the CAIR emissions reductions
requirements and with respect to States for which EPA has promulgated a
CAIR FIP. In such a case there would be no underlying section
110(a)(2)(D) violation, and such a violation is the predicate for
granting a section 126 petition.
III. What Is EPA's Proposed Action on the Section 126 Petition?
As discussed in the preceding section, EPA is proposing to rely on
the conclusions drawn in the final CAIR in determining whether
emissions from sources in the States named in the petition contribute
significantly to 8-hour ozone and/or PM2.5 nonattainment and
maintenance problems in North Carolina. As discussed in section I
above, North Carolina based its petition in large part on the analyses
for the proposed CAIR--identifying EGUs in the same upwind States that
EPA proposed to link to North Carolina. The EPA conducted new modeling
analyses using updated emissions inventories for the final CAIR. The
EPA also applied a different value for the threshold contribution level
for the air quality portion of the significant contribution
determination for PM2.5 in the final CAIR. Therefore, the
upwind State-to-downwind State linkages differed in the final CAIR from
the proposal.
A. What Is EPA's Proposed Action With Respect to the 8-Hour Ozone
NAAQS?
In its petition, North Carolina requested that EPA make findings
that large EGUs in Georgia, Maryland, South Carolina, Tennessee, and
Virginia contribute significantly to nonattainment in, or interfere
with maintenance by, North Carolina with respect to the 8-hour ozone
NAAQS. In the proposed CAIR, EPA linked these States to 8-hour ozone
air quality problems in Mecklenburg County, North Carolina. In the
final CAIR, EPA's updated analyses project all of North Carolina to be
in attainment for 8-hour ozone in the CAIR 2010 base case. Therefore,
EPA did not link any upwind States to North Carolina with respect to
the 8-hour ozone NAAQS in the final CAIR (See preamble Table VI-9; 70
FR at 25249). Consequently, EPA is proposing to deny the section 126
petition with respect to the 8-hour ozone NAAQS.
B. What Is EPA's Proposed Action With Respect to the PM2.5 NAAQS?
In its petition, North Carolina also requested that EPA make
findings that large EGUs in Alabama, Georgia, Illinois, Indiana,
Kentucky, Michigan, Ohio, Pennsylvania, South Carolina, Tennessee,
Virginia and West Virginia contribute significantly to nonattainment
in, or interfere with maintenance by, North Carolina with respect to
the PM2.5 NAAQS. In the proposed CAIR, these 12 States were
linked to PM2.5 nonattainment problems in North Carolina. In
the final CAIR, as noted, EPA used different, updated modeling and also
applied a 0.2 [mu]g/m3 contribution threshold level rather
than the proposed 0.15 [mu]g/m3 for the air quality portion
of the significant contribution determination (70 FR 25190-25191).
Based on the updated modeling and the 0.2 [mu]g/m3
contribution threshold level, EPA determined in CAIR that the following
10 States are significantly contributing to PM2.5 air
quality problems in North Carolina: Alabama, Georgia, Indiana,
Kentucky, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and
West Virginia (see preamble Table VI-8; 70 FR at 25248-25249). As
explained in section II above, under the collective contribution
approach, this means for purposes of section 126(b) that sources within
these States for which EPA determined highly cost-effective controls
are available are also contributing significantly to PM2.5
nonattainment problems in North Carolina.
In determining what action to propose in response to the
PM2.5 portion of the section 126 petition, EPA is taking
into consideration the FIP that is being proposed today in conjunction
with this section 126 action (see section IV below). The FIP proposes
control requirements for each of the States affected by the CAIR in
order to achieve the emissions reductions required to address
interstate transport. The EPA plans to issue the final FIP at the same
time as the final section 126 action. Therefore, for EGUs in States
linked to North Carolina in CAIR (and therefore, for which EPA is
proposing a FIP), EPA is proposing in the alternative (1) to deny the
petition if EPA issues the final FIP to address the interstate
transport no later than the final section 126 response or (2) to grant
the petition and make section 126 findings if EPA does not promulgate
the FIP prior to or concurrently with the final section 126 response.
Because the FIP would fully address the PM2.5-related
interstate transport problem identified in CAIR and thus eliminate the
section 110(a)(2)(D) violation, there would no longer be a basis for
the section 126 findings. As discussed in section VI, we are proposing
the Federal CAIR NOX and SO2 cap and trade
programs as the control remedy for both the section 126 action and the
FIP. Therefore, whether the upwind sources in these 10 States are
regulated under the section 126 action or the FIP, the emissions
reductions requirements and compliance deadlines would be the same.
For EGUs located in Illinois and Michigan, which are not linked to
North Carolina in the final CAIR with respect to the PM2.5
NAAQS (70 FR 25247-48), EPA is proposing to deny the petition.
The EPA notes that it is not including any regulatory text for the
proposed findings because EPA's preferred alternative is to promulgate
the CAIR FIP and fully deny the North Carolina section 126 petition.
C. What Are the Proposed Requirements for Sources for Which EPA Makes a
Section 126(b) Finding?
The EPA is proposing, in sections V and VI below, NOX
and SO2 Federal cap and trade programs that would apply to
any new or existing EGU for which EPA ultimately makes a section 126(b)
finding in response to the North Carolina petition. The proposed
Federal cap and trade programs are largely the same as the model
trading rules for EGUs that EPA provided in the CAIR as control options
for States, although EPA is proposing certain differences that are
primarily intended to account for Federal implementation and to
facilitate transfer from the proposed Federal programs to State
programs. (See section VI for a description of the differences). The
same EGU budgets and compliance dates would apply.
As in the CAIR, the NOX and SO2 reductions
would occur in two phases.
[[Page 49718]]
The first phase of NOX reductions would start in 2009
(covering 2009-2014) and the first phase of SO2 reductions
would start in 2010 (covering 2010-2014); the second phase of
reductions for both NOX and SO2 would start in
2015 (covering 2015 and thereafter).
Section 126(c) states, in relevant part, that: it shall be a
violation of this section and the applicable implementation plan in
such State
(1) For any major proposed new (or modified) source with respect
to which a finding has been made under subsection (b) to be
constructed or to operate in violation of this section and the
prohibition of section 110(a)(2)(D)([i]) or this section, or
(2) For any major existing source to operate more than three
months after such finding has been made with respect to it.
The Administrator may permit the continued operation of a source
referred to in paragraph (2) beyond the expiration of such three-month
period if such source complies with such emission limitations and
compliance schedules (containing increments of progress) as may be
provided by the Administrator to bring about compliance with the
requirements contained in section 110(a)(2)(D)([i]) as expeditiously as
practicable, but not later than three years after the date of such
finding.
The Federal cap and trade programs that EPA is proposing would
satisfy the section 126 requirements. The control requirements would
ensure that the sources do not emit in violation of the section
110(a)(2)(D)(i) prohibition and would serve as the alternative set of
requirements that the Administrator may apply for the purpose of
allowing existing sources subject to a section 126(b) finding to
operate for more than 3 months after the finding is made.
Under the consent decree, described in section I above, EPA must
sign the final action on the petition by March 15, 2006. If EPA makes
any findings at that time, and they become effective 60 days later,
consistent with section 126(c), compliance with the control remedy must
be required no later than May 14, 2009. The control remedy that EPA is
proposing would satisfy the 3-year compliance period in section 126(c).
First, the remedy would commence within the 3-year maximum timeframe
set out in section 126(c), since as just explained, the phase I
NOX control requirements would take effect on January 1,
2009. Further controls on SO2 and NOX would be
required as soon as technically feasible. The EPA views the proposed
NOX and SO2 emissions reduction requirements as a
single action, but one that cannot be fully implemented in 2009 and
instead must be implemented in phases solely for reasons of
feasibility. In analyses conducted for the CAIR, EPA determined that
part of the NOX and SO2 emissions reductions
cannot feasibly be implemented until 2015 and the first phase of
SO2 emission reductions cannot feasibly be implemented until
2010. In this regard, we note that section 126(c) on its face
contemplates that control measures satisfying both section 126 and
section 110(a)(2)(D) may stretch out beyond a 3-year period. Section
126(c) states that sources that are subject to a section 126(b) finding
may continue to operate if they comply with ``emissions limitations and
compliance schedules (containing increments of progress) provided by
[EPA]'' (emphasis added); the reference to increments of progress can
describe a situation where compliance is stretched out over periods
exceeding 3 years provided initial action (i.e., an initial increment
of progress) occurs within 3 years. See also North Carolina Petition at
pp. 28-29 supporting a phased approach to compliance and noting that a
stepwise approach to regional emissions reductions is ``consistent with
the requirement that a section 126 remedy `contain[] increments of
progress * * *' '' Section VII of this preamble describes the proposed
section 126 control requirements in greater detail.
D. When and How Would EPA Withdraw Section 126 Findings and Control
Requirements in a State if EPA Approves a SIP To Meet the CAIR?
Under today's proposal, by March 15, 2006, EPA would take final
action to either make section 126 findings for sources in 10 States
contributing significantly to North Carolina's nonattainment and
maintenance problems for the PM2.5 NAAQS or promulgate a FIP
for all CAIR States for the PM2.5 and/or 8-hour ozone NAAQS.
The CAIR requires States to submit SIP revisions by September 11, 2006.
Therefore, the Federal CAIR trading programs would be promulgated in
advance of the SIP submission deadline. As stated previously, the
section 126 response and FIP would not limit the options available to
States to meet the requirements of CAIR. The EPA intends to withdraw
the section 126 or the FIP requirements in a State in coordination with
approval of an implementation plan for the State that meets the CAIR
requirements. In the timing of the SIP approval, EPA would take into
consideration whether the SIP approval would occur before or after EPA
has begun recording allowances in source accounts under Federal CAIR
trading programs.
It is EPA's preference that States regulate sources to control the
interstate transport, including making decisions regarding
NOX allocations, should a State choose to participate in the
State CAIR trading programs. Consequently, EPA does not intend to
record NOX allocations in sources' allowance accounts (or
take any other steps to implement the section 126 or FIP requirements
that could impact a State's ability to regulate their sources in a
different manner) until December 1, 2007, more than a year after the
CAIR SIP submission deadline.\6\ This would allow EPA time to take
rulemaking action to approve timely, compliant SIPs and withdraw the
section 126 or FIP requirements.
---------------------------------------------------------------------------
\6\ The CAIR requires affected sources to begin monitoring 1
year before the initial control periods (i.e., sources begin
monitoring in 2008 for the NOX programs and begin
monitoring in 2009 for the SO2 program). Note that EPA
would take any necessary actions to implement the monitoring
provisions of the proposed Federal trading rules in time for
monitoring to begin in 2008. To the extent that a State chooses to
control EGUs to meet its CAIR obligations, the monitoring
requirements would be identical whether EPA regulated EGUs through
the proposed Federal trading programs or the State regulated EGUs
through their SIP.
---------------------------------------------------------------------------
If a SIP is approved that includes the EPA-administered State CAIR
trading programs after EPA has recorded allowances for the Federal CAIR
trading programs, EPA would work with the State to ensure a smooth
transition from the Federal trading programs to the State trading
programs. To preserve the integrity of the trading program budgets,
once Federal allocations are recorded in source accounts for a
particular control period, EPA does not intend to approve overlapping
State allocations for the same control period. Rather, EPA will work
with the States to approve State allocations for control periods that
begin upon the expiration of a control period for which Federal
allocations have been recorded in source accounts.
In section VI below, EPA proposes the schedule for recording
Federal NOX allocations in source accounts. Under this
schedule, EPA seeks to balance two goals: (1) To provide adequate time
for States to submit and for EPA to approve SIPs containing the
NOX allocations, and (2) to provide certainty to sources
regarding their CAIR NOX allocations in adequate time for
sources to make compliance decisions. Under this schedule, EPA would
record the allowances 1 year at a time for the first two control
periods. Thus, for SIPs approved after EPA has recorded the 2009
allocations on December 1, 2007, but before EPA has recorded the 2010
[[Page 49719]]
allocations on December 1, 2008, EPA would time the withdrawal of the
FIP or section 126 requirements such that allocations would be made
under the State CAIR trading program for the 2010 control period. There
would be another opportunity for transitioning from the Federal to
State trading programs for the 2011 control period. As discussed in
section VI below, EPA is proposing to record NOX allowances
in source accounts by December 1, 2009 for the 2011-2013 control
periods. Therefore, for SIPs approved after December 1, 2009, the
transition from the Federal to State program would not occur until the
2014 control period. The EPA believes it is unlikely that there would
be any outstanding SIPs to be approved after December 1, 2009. The EPA
intends to work with States to help ensure that NOX
allowances can be allocated under the State CAIR trading programs
beginning with the initial 2009 control period. In order to expedite
the approval of the SIP allowance allocation methodology and provide
additional flexibility to States, EPA is proposing an abbreviated SIP
option as discussed in section VI. See section VI for a detailed
discussion of EPA's proposed schedule for recording Federal
NOX allocations in source allowance accounts.
For States that choose to implement the CAIR requirements using a
method other than the EPA-administered State CAIR trading programs, the
EPA would also carefully consider the timing of the transition from the
Federal trading programs to the State-implemented programs to avoid
disruption of the Federal trading programs within any annual or ozone
season control period.
IV. What Is the Proposed Federal Implementation Plan for the CAIR?
A. What Is the Legal Framework for the Proposed FIP?
Section 110(c)(1) of the CAA requires the Administrator to
promulgate a Federal Implementation Plan (FIP) within 2 years of: (1)
Finding that a State has failed to make a required submittal, (2)
finding that a submittal received does not satisfy the minimum
completeness criteria established under section 110(k)(1)(A), or (3)
disapproving a SIP submittal in whole or in part. The EPA may issue a
FIP any time after making one of these findings or issuing a SIP
disapproval and it must do so within 2 years. However, EPA is relieved
of this obligation if a SIP revision correcting the deficiency
identified is approved by EPA before such a FIP is promulgated.
As discussed in paragraph I.D.5, in a final rule signed the same
day as CAIR, EPA found that States have failed to submit SIPs to
satisfy the interstate transport requirement under section
110(a)(2)(D)(i) of the CAA for the PM2.5 and 8-hour ozone
NAAQS (70 FR 21147). These findings started the 2-year clock for the
promulgation of a FIP. They did not start a ``sanctions clock'' as
there are no mandatory sanctions associated with the FIP or the finding
of State failure to submit SIPs to satisfy 110(a)(2)(D)(i).
The EPA has broad authority to act when it has identified
deficiencies in SIPs. This authority is of three general types. First,
EPA may promulgate any measure which it is permitted to issue pursuant
to pre-existing independent statutory authority--for example, the
provisions of title II. That is, EPA may promulgate any measure which
it has authority to issue in a non-FIP context, without reliance on
section 110(c). Second, EPA may invoke section 110(c)'s general FIP
authority and act to cure a SIP deficiency in any way not clearly
prohibited by statute. Third, under section 110(c), the courts have
held that EPA may exercise all authority that the State may exercise
under the CAA.
The first type of authority, EPA's general authority is independent
of section 110(c). It is not dependent on or altered by finding a
deficiency in a SIP.
The second type of authority, EPA's general authority under section
110(c), is essentially remedial. The EPA has broad power under that
section to cure a defective State plan. Thus, in promulgating a FIP,
EPA may exercise its own, independent regulatory authority under the
CAA in any way not clearly prohibited by an explicit provision of the
CAA. When EPA has promulgated a FIP, courts have not required explicit
authority for specific measures: ``We are inclined to construe
Congress' broad grant of power to the EPA as including all enforcement
devices reasonably necessary to the achievement and maintenance of the
goals established by the legislation.'' (South Terminal Corp. v. EPA,
504 F.2d 646, 669. (1st Cir., 1974)). See also City of Santa Rosa v.
EPA, 534 F.2d 150, 153-154 (9th Cir., 1976) (upholding the
Administrator's authority to promulgate a FIP imposing gas-rationing in
Los Angeles on a massive scale). ``The authority to regulate pollution
carries with it the power to do so in a manner reasonably calculated to
reach that end.'' Id. at 155.
In addition, when EPA has determined that a State has not
completely discharged its primary responsibility to protect its air
quality, EPA is compelled to assume this task and thus the powers of
the defaulting State accrue to EPA. As the Ninth Circuit has held, when
EPA acts in place of the State pursuant to a FIP under section 110(c),
EPA ``stands in the shoes of the defaulting State, and all of the
rights and duties that would otherwise fall to the State accrue instead
to EPA,'' Central Arizona Water Conservation District v. EPA, 990 F.2d
1531, at 1541 9th Cir., 1993). The First Circuit, in an early FIP case,
agreed:
The Administrator must promulgate promptly regulations setting
forth an implementation plan for a State should the State itself
fail to propose a satisfactory one. The statutory scheme would be
unworkable were it read as giving to EPA when promulgating an
implementation plan for a State, less than those necessary measures
allowed by Congress to a State to accomplish Federal clean air
goals. We do not adopt any such crippling interpretation.
South Terminal Corporation v. EPA, 504 F.2d 668 (1st Cir., 1974).
In the case of federally-recognized Indian Tribes, as we explained
in the CAIR, (70 FR 25167-68) Tribes are subject to section
110(a)(2)(D), but are not required to submit implementation plans. The
EPA is required to promulgate FIPs for Indian country as necessary or
appropriate to protect air quality. See 40 CFR 49.11(a). Presently,
there are no emissions sources in Indian country within the region
affected by CAIR which would make a FIP necessary or appropriate. In
the event of the planned construction of such a source within Indian
country in the 28-State region subject to CAIR, EPA will work with the
relevant Tribal government to regulate the source through a Tribal or
Federal implementation plan. In the case of an EGU, the EPA anticipates
that the Tribal implementation plan (TIP) or FIP would involve the
participation of the EGU in the EPA administered cap and trade program.
The EPA will also work with the Tribe and affected States to determine
how allowances allocated to the Indian country source will affect State
allowance allocations. Because any FIPs for Indian country will
necessarily be tailored to the specific circumstances, today's proposal
contains no such FIP. The reader is referred to the CAIR for a more
detailed discussion of the interaction of the CAIR with Indian country
(70 FR 25167-68, 25315).
B. What Is the Timing and Scope of the CAIR FIP Action?
As described in the CAIR, EPA views seriously its responsibility to
address the issue of regional transport of ozone and ozone precursor
emissions.
[[Page 49720]]
Decreases in NOX and SO2 emissions are needed in
the States identified in the CAIR to enable downwind States to develop
and implement plans to achieve and maintain the PM2.5 and 8-
hour ozone NAAQS. The CAIR identified the specific amount of emissions
reductions necessary for each State identified in the CAIR to meet
their section 110(a)(2)(D) interstate transport obligations.
Implementation of these reductions is necessary to enable downwind
States to achieve the NAAQS in order to provide clean air for their
residents.
Therefore, EPA is proposing FIPs today in conjunction with the
proposed action regarding North Carolina's section 126 petition
concerning transport of PM2.5 and 8-hour ozone precursors as
discussed in section III of this proposal. The EPA intends to
promulgate these FIPs at the same time as its response to North
Carolina's section 126 petition, which must be finalized no later than
March 15, 2006 in accordance with a judicially enforceable consent
decree. The EPA believes it is appropriate to coordinate these two
rulemakings because they both address interstate transport, both will
apply to EGUs, and because the States covered by the response to the
section 126 petition are a geographical subset of the States covered by
CAIR. In today's action, EPA is not proposing to promulgate FIPs for
any States not covered by CAIR.
The EPA believes it is appropriate to finalize the FIP in March
2006 on the same schedule as EPA's response to the section 126
petition. Moving quickly to promulgate a FIP is consistent with
Congress' intent that attainment occur in these downwind nonattainment
areas ``as expeditiously as practicable'' (sections 181(a), 172(a)).
The FIP will help ensure that all emissions reductions required by
CAIR, and the associated environmental benefits, will be achieved by
the CAIR deadlines. In addition, the FIP will ensure that sources in
all States covered by CAIR, regardless of whether they are affected by
the North Carolina section 126 petition, will be required to achieve
emissions reductions at the same time.
By proposing and finalizing the FIP well before the deadline for
States to submit their CAIR SIPs, EPA is providing States an additional
option for complying with the requirements of CAIR. States planning to
adopt the model trading programs contained in the CAIR rule, could
accept the FIP and significantly reduce the State resources needed to
establish a program to implement the CAIR. Since there are no punitive
consequences for States associated with the FIP or the finding of
failure to submit SIPs to satisfy section 110(a)(2)(D)(i), some States
could avoid much of the time and expense of revising their SIPs to
comply with CAIR. Some States, particularly those subject to the
NOX SIP Call, may need to prepare minor SIP revisions
regardless of whether they accept the FIP implementing the requirements
of CAIR; yet the time and expense involved would be significantly
reduced.
The Agency proposes to provide States that are subject to today's
proposed Federal requirements with the option to submit abbreviated SIP
revisions covering specific elements of the Federal trading programs
without submitting full SIP revisions to meet the requirements of CAIR.
By proposing to accept such abbreviated SIP revisions, the Agency
intends to increase the options available for States to comply with
CAIR. A State could choose to retain control of these specific elements
of the trading programs, without submitting a full SIP revision to meet
the requirements of CAIR. As there are no sanctions associated with the
proposed FIP, EPA anticipates that some States may prefer to avoid
spending the time and money necessary to submit a full SIP revision.
The Agency would accept abbreviated SIP revisions for any or all of
the following 4 specific elements of the Federal trading programs: (1)
Provisions for non-EGUs to opt-in to the Federal trading programs, (2)
allocating annual and/or ozone season NOX allowances to
individual sources in the State, (3) allocating allowances from the
annual NOX Compliance Supplement Pool (CSP) to individual
sources in the State, and (4) including NOX SIP Call trading
sources that are not EGUs under CAIR in the Federal CAIR ozone season
NOX cap and trade program. Upon approval of any such SIP
revisions, EPA anticipates that the corresponding portions of the FIP
for that State would be replaced or their application to sources would
be modified.
In offering a framework for abbreviated SIP revisions the Agency
anticipates that many States will wish to retain control over the
allocation of allowances to sources in their State and may wish to meet
their NOX SIP Call obligations by allowing NOX
budget units (that is, units in the NOX SIP Call trading
program) that are not EGUs under CAIR to participate in the CAIR ozone
season trading program.
The EPA requests comment on the proposed option for States to
submit abbreviated SIPs covering specific elements of the Federal
trading programs. A more complete discussion of the proposed
abbreviated SIP provisions is found in Section VI.
Thus, the FIP will increase the options available for a State to
comply with CAIR. Through the CAIR rulemaking actions, EPA has provided
States with a great deal of data and analyses concerning air quality
and control costs, as well as a determination whether upwind sources
contribute significantly to downwind nonattainment under section
110(a)(2)(D). The EPA recognizes that States would face great
difficulties in developing transport SIPs to meet the requirements of
section 110(a)(2)(D) without these data and policies. Indeed, EPA
acknowledged in the CAIR that the Agency's extensive analyses and data,
including the multi-year operation of a federally-funded monitoring
system (and the considerable information generated through that system)
was a necessary element in the Agency's conclusion that it was
appropriate to impose such requirements on States (70 FR 25267).
States have 18 months from the signature date of the CAIR, or until
September 11, 2006, to develop, adopt, and submit revisions to their
SIPs that meet the requirements of CAIR. We remain ready to work with
the States to develop fully approvable SIPs. The FIP will not be
promulgated for any State that has an approved SIP implementing the
CAIR requirements in place prior to promulgation of the FIP. In
addition, EPA will withdraw the FIP for any State once EPA approves a
SIP that meets the CAIR requirements in that State.
Having the FIP in place early will provide for a transition to a
CAIR trading program with the greatest continuity, administrative ease,
and cost savings for States that would otherwise develop a program
identical to the model trading program. The EPA's goal is to have
approvable programs in place that meet the requirements of the CAIR
whether they are in the form of a SIP or a FIP. By finalizing a FIP,
EPA would in no way preclude a State from developing its own SIP to
either adopt the trading rule with any discretionary elements allowed
by the CAIR, or to meeting the State emissions budget through different
measures of the State's choosing. The EPA will carefully consider the
timing of each element of the FIP process to make sure to preserve each
State's freedom to develop and implement SIPs. In this way, EPA will
enhance each State's options for complying with the requirements of the
CAIR while ensuring that all the emissions reductions and environmental
benefits of the CAIR are realized.
[[Page 49721]]
C. What Are the FIP Control Measures?
In contrast to the SIP process--where selection and implementation
of control measures is the primary responsibility of the State--in the
case of a FIP, it is EPA's responsibility to select the control
measures for sources and assure compliance with those measures. Thus,
while the FIP would be designed by EPA to achieve the same total
emissions reductions described in the CAIR, the specific control
measures assigned in the FIP could be different from what a State might
choose.
In selecting the control measures for the FIP, EPA is proposing the
same measures used in the CAIR for calculating the required emissions
reductions. In the CAIR, EPA is requiring States to achieve specified
levels of emissions reductions based on levels that are achievable
through implementation of highly cost-effective controls on EGUs. See
the discussion in section IV of the CAIR, ``What Amounts of
SO2 and NOX Emissions Did EPA Determine Should Be
Reduced?'' The EPA is including by reference the technical basis and
supporting rationale for EPA's conclusions as to the highly cost-
effective strategy developed for the CAIR.
The SO2 and NOX cap and trade programs for
the FIP are discussed below in section VI. The unit allocations will be
provided in a later action and will meet the State EGU budgets that are
established in the CAIR for States that choose to meet the required
emissions reductions by controlling EGUs only.
D. When and How Would EPA Remove the FIP Requirements if EPA Approves a
SIP To Meet the CAIR?
As discussed previously, EPA intends to finalize the FIP by March
15, 2006, concurrently with EPA's response to the section 126 petition
from North Carolina. The EPA intends to withdraw the FIP in a State in
coordination with EPA's approval of a SIP for that State that meets the
CAIR requirements. It is EPA's preference that States regulate sources
to control the interstate transport, therefore EPA will work with
States to help ensure that the FIP would not need to be implemented.
The EPA's intended process for withdrawing the FIP or section 126
requirements is discussed above under section III.D.
V. Emission Reduction Requirements for the Proposed CAIR FIP and
Proposed Section 126 Response
A. Overview of Emission Reduction Requirements
In the CAIR (70 FR 25162), EPA determined that SO2 and
NOX emissions from sources in the District of Columbia and
the following 23 States contribute significantly to downwind
PM2.5 nonattainment: Alabama, Florida, Georgia, Illinois,
Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota,
Mississippi, Missouri, New York, North Carolina, Ohio, Pennsylvania,
South Carolina, Tennessee, Texas, Virginia, West Virginia, and
Wisconsin.
In the CAIR, the Agency also determined that the District of
Columbia and the following 25 States contribute significantly to
downwind 8-hour ozone nonattainment: Alabama, Arkansas, Connecticut,
Delaware, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana,
Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey,
New York, North Carolina, Ohio, Pennsylvania, South Carolina,
Tennessee, Virginia, West Virginia, and Wisconsin.
The EPA established CAIR annual SO2 and NOX
emission reduction requirements for States that contribute
significantly to downwind PM2.5 nonattainment and
established ozone season NOX emission reduction requirements
for States that contribute significantly to downwind 8-hour ozone
nonattainment. The CAIR requires upwind States to revise their State
implementation plans (SIP) to include control measures to reduce
emissions of SO2 and/or NOX to meet the
requirements in CAIR (SO2 is a precursor to PM2.5
formation, and NOX is a precursor to both ozone and
PM2.5 formation).
The CAIR requires that the emission reductions be implemented in
two phases. The first phase of CAIR NOX reductions starts in
2009 (covering 2009-2014) and the first phase of CAIR SO2
reductions starts in 2010 (covering 2010-2014); the second phase of
CAIR reductions for both NOX and SO2 starts in
2015, covering 2015 and thereafter.
The EPA determined the required amounts of CAIR emission reductions
based on the application of highly cost-effective controls on electric
generating units (EGUs). The States have flexibility in how to achieve
the CAIR emission reductions.\7\ The CAIR includes model rules for
regionwide EGU emission cap and trade programs, which States can choose
to adopt to obtain the required reductions in a flexible and cost-
effective manner (the CAIR SIP model trading rules).
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\7\ The amounts of State-by-State emission reductions required
by CAIR are determined based on State EGU emission budgets.
Determination of a State's emission reduction requirements depends
on the source categories that the State chooses to control and, if
the State controls only EGUs, on whether it chooses to participate
in the EPA-administered EGU emissions cap and trade programs. See
section V in the CAIR NFR preamble (70 FR 25229) as well as the
technical support document entitled ``Regional and State
SO2 and NOX Emissions Budgets,'' March 2005,
for detailed discussion of the relationship between CAIR EGU
emissions budgets and the State emission reduction requirements.
Also see Sec. 51.123 and Sec. 51.124 (70 FR 25319-25333).
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Today, EPA is proposing FIPs that are substantively the same as the
CAIR SIP model cap and trade programs. The proposed FIPs would achieve
the NOX and SO2 emission reductions required
under the CAIR, by requiring EGUs in the affected States to reduce
emissions through participation in Federal CAIR NOX and
SO2 cap and trade programs. The EPA intends to integrate
these Federal trading programs with the model trading programs that
States may choose to adopt to meet the CAIR (see section VI.J in this
preamble for a discussion of coordination between today's proposed
Federal cap and trade programs and CAIR SIP cap and trade programs).
The proposed Federal CAIR cap and trade programs would achieve the
emission reductions required by CAIR by the deadlines established in
that rule, with the same highly cost-effective EGU control measures
forming the basis for the emission budgets.
For States affected by the proposed section 126 remedy (see section
III for affected States), the Federal CAIR cap and trade programs would
achieve the required emission reductions. As explained in section I of
this preamble, for sources in States that the Agency found to be
contributing significantly to nonattainment or maintenance in North
Carolina under CAIR, the Agency is proposing to deny the petition for
sources in any such State if, prior to or concurrently with the final
section 126 response, EPA promulgates a FIP to address the interstate
transport from that State. The Agency is proposing, in the alternative,
to grant the petition. The Agency intends to promulgate FIPs
concurrently with the final section 126 response.
The regionwide emission reduction requirements and State emission
budgets that are the basis for today's proposal were established in the
CAIR rulemaking. The EPA is not requesting comment on its determination
of the CAIR regionwide emission reduction requirements or State
emission budgets, nor is the EPA requesting comment on the CAIR
regionwide requirements or State budgets themselves.
On May 12, 2005, the Agency proposed to find that Delaware and New
Jersey contribute significantly to downwind PM2.5
nonattainment and
[[Page 49722]]
thus proposed to require annual SO2 and NOX
controls in these two States (70 FR 25408). (In the CAIR NFR, the
Agency found Delaware and New Jersey to contribute to downwind 8-hour
ozone nonattainment but not to downwind PM2.5
nonattainment). Based on the proposal to require annual SO2
and NOX controls in Delaware and New Jersey, today's FIP
proposal includes requirements for annual SO2 and
NOX control in these two States. The EPA determined these
required amounts of emission reductions based on the application of
highly cost-effective controls on EGUs, and the proposed FIP would
achieve these reductions by requiring EGUs to participate in the
Federal CAIR cap and trade programs.
The proposed CAIR FIP would require annual SO2 and
NOX and ozone season NOX emission reductions (and
the proposed section 126 remedy would require annual SO2 and
NOX reductions) from EGUs in affected States, through
participation in regionwide Federal cap and trade programs. The Agency
intends the applicability provisions in today's proposal to be
identical to the applicability provisions in the CAIR model cap and
trade programs. As discussed elsewhere in today's preamble, the Agency
is proposing two revisions to the applicability provisions in the CAIR
model cap and trade programs. The applicability provisions that EPA is
proposing in today's action for the FIP and section 126 remedy would be
identical to the applicability provisions in the CAIR model programs if
the two proposed revisions to the applicability provisions in the CAIR
model programs are finalized. (See section VI.C in today's preamble for
a discussion of the proposed applicability provisions for today's
action, and see section VII for the proposed revisions to the
applicability provisions in the CAIR model programs.)
In this section, EPA describes the approaches for determining
regionwide emission caps and State emission budgets taken in the CAIR
rulemaking. In section VI in this preamble, the Agency explains in
detail the proposed Federal CAIR cap and trade programs for the CAIR
FIP and section 126 response.
In today's action, the Agency is proposing a federally-administered
program to meet the CAIR emission reduction requirements on the
timeline established in CAIR. Today's proposal does not establish those
emission reduction requirements or schedule, which were established by
the CAIR rulemaking. Thus, the Agency is not requesting comment on the
emission reduction requirements or the schedule for implementing the
emissions reductions.
The Agency is taking this action to satisfy the concerns of North
Carolina cited in its section 126 petition and to provide a Federal
backstop for CAIR where all States may not be able to develop and
submit timely, approvable SIP revisions. In no way should the FIP for
CAIR be viewed as a sign of any concern about States ultimately making
the emission reductions required under CAIR. There are no sanctions
associated with these FIPs, and EPA does not intend CAIR FIPs to have
any other negative consequences for the affected States. To the
contrary, EPA is proposing FIP approaches that are flexible and allow
States a full opportunity to get their SIP revisions in place, with
minimal disruption in transitioning from Federal to State
implementation.
B. What Is EPA's Approach for Determining Regionwide NOX and SO2
Emissions Caps and State Emissions Budgets?
1. Determination of Regionwide Caps for SO2 and
NOX
In the preamble to the CAIR NFR, the Agency explained how it
determined regionwide SO2 and NOX emissions caps.
See section IV in the CAIR NFR preamble (70 FR 25195-25229). In
determining the amounts of SO2 and NOX emissions
that must be eliminated for compliance with CAIR, EPA evaluated the
amounts of SO2 and NOX emissions in upwind States
that contribute significantly to downwind PM2.5
nonattainment and the amounts of NOX emissions in upwind
states that contribute significantly to downwind 8-hour ozone non-
attainment. The EPA determined the amounts of emissions that must be
reduced to eliminate significant contributions from upwind States, by
applying highly cost-effective control measures to EGUs and determining
the emissions reductions that would result (70 FR 25195-25229).
EPA used the Integrated Planning Model (IPM) to analyze the cost
effectiveness of the CAIR emission reduction requirements.\8\ The EPA
modeled the cost effectiveness of CAIR assuming interstate emissions
trading. While the Agency does not require States to participate in the
CAIR SIP regionwide interstate EGU cap and trade programs, we believe
it is reasonable to evaluate control costs assuming States choose to
participate in such programs since participation will result in less
expensive emission reductions. The Agency modeled the CAIR requirements
as three regionwide EGU cap and trade programs (an annual
SO2 program, an annual NOX program, and an ozone
season NOX program). Section IV.A.1 in the CAIR NFR preamble
provides more discussion of EPA's cost modeling methodology for the
CAIR rulemaking (70 FR 25196-25197). The Agency also evaluated the
feasibility of achieving the CAIR emission reduction requirements in
the CAIR time-frame, as discussed in section IV.C. in the CAIR NFR
preamble (70 FR 25215-25225).
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\8\ The IPM is a multiregional, dynamic, deterministic linear
programming model of the U.S. electric power sector. The Agency uses
IPM to examine costs and, more broadly, analyze the projected impact
of environmental policies on the electric power sector in the 48
contiguous States and the District of Columbia.
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For SO2, the regionwide annual cap for 2015 and later
(the second CAIR phase) is based on a 65 percent reduction of title IV
Phase II allowances allocated to units in the 23 States and the
District of Columbia that are required by CAIR to implement annual
SO2 controls. The regionwide annual SO2 cap for
the years 2010-2014 (the first CAIR phase) is based on a 50 percent
reduction from those same title IV allocation amounts. The EPA
determined these regionwide caps to be highly cost effective by
analyzing the cost of controlling emissions from EGUs. Details of EPA's
analysis are in section IV in the CAIR NFR preamble (70 FR 25195-
25229).
Both the annual and the ozone season NOX regionwide caps
were determined by applying uniform NOX emission rates to
recent historic heat input for EGUs in the affected States (23 States
and the District of Columbia for annual NOX, 25 States and
the District of Columbia for ozone season NOX). For 2015 and
later (the second CAIR phase), the Agency applied an emission rate of
0.125 lb/mmBtu to recent historic heat input. For the years 2009-2014
(the first CAIR phase) the Agency applied an emission rate of 0.15 lb/
mmBtu. The heat input amounts used in these calculations were the
highest annual heat input (or ozone season heat input for the ozone
season caps) from Acid Rain Program units for any year from 1999 to
2002 for each State. The EPA determined the resulting regionwide caps
to be highly cost effective by analyzing the cost of controlling
emissions from EGUs. Details of EPA's analysis are in section IV in the
CAIR NFR preamble (70 FR 25195-25229).
[[Page 49723]]
2. Determination of State by State Emissions Budgets for SO2
and NOX
a. Determination of State SO2 Emissions Budgets
In CAIR, the EPA determined State annual SO2 emissions
budgets for 2015 and later based on a 65 percent reduction from title
IV Phase II allowances allocated to units in the affected States and
the District of Columbia, and for the years 2010-2014 based on a 50
percent reduction from the title IV allocation amounts. Section V.A.1.a
of the CAIR NFR preamble, 70 FR 25229-25230, describes the approach for
determining State budgets. The Agency is not inviting comment on the
CAIR State SO2 budgets. The EPA employed the same approach
to determining proposed State SO2 budgets for Delaware and
New Jersey in its proposal to include these two States in CAIR for
annual SO2 controls (70 FR 25416).
Today's proposed FIP and section 126 remedy would achieve the
required SO2 emission reductions through a regionwide
Federal SO2 cap and trade program for EGUs. As discussed
further in section VI, below, the Federal CAIR SO2 cap and
trade program would rely on title IV allowances, which sources would
retire at specified ratios greater than 1-to-1 for compliance with the
proposed Federal CAIR program. Congress has already allocated title IV
SO2 allowances to sources in perpetuity. State
SO2 emissions budgets would not affect the distribution of
SO2 allowances and are not directly relevant for today's
proposal.
The CAIR State SO2 budgets were established to provide
States flexibility in selecting a control remedy to meet the
requirements of CAIR. States can choose to participate in the EPA-
administered CAIR SO2 trading program, in which case sources
would comply by retiring title IV allowances at the specified
retirement ratios, and the CAIR State SO2 budgets would not
be directly relevant. For States that do not choose to participate in
the EPA-administered SO2 trading program, however, the CAIR
State SO2 budgets are used to determine the State's emission
reduction requirements.\9\ The EPA determined title IV allowance
retirement ratios for the CAIR SIP model SO2 trading program
based on the ratio of the total of all States' CAIR SO2
budgets (for 2010 and 2015) to the total of such States' title IV Phase
II allowance levels.
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\9\ See section V in the CAIR NFR preamble (70 FR 25229-25233)
as well as the technical support document entitled ``Regional and
State SO2 and NOX Emissions Budgets,'' March
2005, for detailed discussion of the relationship between CAIR EGU
emissions budgets and the State emission reduction requirements.
Also see Sec. 51.123 and Sec. 51.124 (70 FR 25319-25333).
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In the CAIR FIP and 126 remedy, the EPA is proposing to use a
Federal SO2 trading program approach that is substantively
identical to the CAIR SIP SO2 model trading rule and relies
on retirement of title IV allowances at the same specified ratios.
Thus, State SO2 emission budgets would not affect the
distribution of SO2 allowances and are not directly relevant
for today's proposal.
For further discussion regarding achieving the required
SO2 reductions in today's proposed Federal program through
retirement ratios for title IV allowances, see section VI in today's
preamble. Also see the CAIR NFR preamble in section V.A.1.c (70 FR
25230) as well as section VII (70 FR 25255-25273).
b. Determination of State Annual and Ozone Season NOX
Emissions Budgets
In CAIR, EPA determined State annual and ozone season
NOX emissions budgets by apportioning the CAIR regionwide
annual and ozone season NOX caps to States based on each
State's share of fuel-adjusted average recent historic heat input. For
each CAIR State, for each year (1999 through 2002), the Agency summed
heat input by fuel type, adjusted the heat input using fuel adjustment
factors, and determined the average fuel-adjusted heat input for each
State. The fuel adjustment factors that the Agency used to adjust heat
input are 1.0 for coal, 0.4 for gas, and 0.6 for oil.
The EPA summed the average adjusted heat inputs for each State in
the CAIR region (either the annual NOX region or the ozone
season NOX region, as appropriate), and divided each State's
average adjusted heat input by the regionwide total average adjusted
heat input, to determine each State's proportion of the total. The
Agency multiplied each State's proportion by the regionwide caps, to
determine each State's proportional share of the regionwide caps. The
EPA used the same methodology to determine both annual and ozone season
NOX State budgets, except that for annual budgets the annual
heat input was used, whereas for ozone season budgets the ozone season
heat input was used. (See section V of the CAIR NFR preamble for
discussion of the Agency's determination of CAIR State emissions
budgets, 70 FR 25229-25233.) The Agency is not inviting comment on the
CAIR State annual and ozone season NOX budgets.
For its proposal to include Delaware and New Jersey in CAIR for
annual NOX controls, the Agency proposed to determine annual
State NOX budgets for these two States by first calculating
a total ``regional'' cap for the two States, using the same methodology
used in CAIR to develop regionwide NOX caps (the regionwide
NOX cap methodology is described above). The EPA proposed to
determine State annual NOX budgets for these two States by
apportioning the regional Delaware and New Jersey cap back to the two
States using the same fuel-adjusted heat input basis as was used in the
CAIR NFR, as described above (also see section IV.B. in the proposal to
include Delaware and New Jersey in CAIR for PM2.5 purposes,
70 FR 25416).
In today's proposed Federal CAIR NOX cap and trade
programs for EGUs, the State annual and ozone season EGU NOX
budgets are the same as the budgets in the CAIR NFR (annual
NOX budgets for Delaware and New Jersey in today's proposal
are the same as the annual NOX budgets for these two States
in the proposal to include them in CAIR for PM2.5 purposes).
For each State affected by the proposed Federal CAIR NOX
trading programs, the State NOX budgets are the total amount
of allowances \10\ that the Agency will allocate to sources in the
State. See section VI in this preamble for EPA's proposed methodology
for allocating NOX allowances to affected sources. The EPA's
proposed allocation methodology for NOX allowances in the
annual NOX and the ozone season NOX cap and trade
programs is in contrast with the approach taken in the case of
SO2 allowances, which are already allocated under title IV
of the Clean Air Act to sources in perpetuity, as explained above.
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\10\ As in CAIR, an annual NOX allowance would
authorize the emission of a ton of NOX during a calendar
year and an ozone season NOX allowance would authorize
the emission of a ton of NOX during an ozone season. See
section VI in this preamble for further discussion and see the
proposed regulatory text for definitions.
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C. What Are the State EGU Emission Budgets for the CAIR FIP and the
Section 126 Response?
1. What Are the Annual State EGU SO2 Emissions Budgets?
As explained above, the required SO2 emission reductions
would be achieved solely based on the requirement that sources retire
title IV SO2 allowances (which were already allocated to
sources by Congress) at specified ratios greater than 1-to-1. Because
State SO2 emission budgets do not affect the distribution of
SO2 allowances and are
[[Page 49724]]
not directly relevant for today's proposal, the Agency is not including
State SO2