Findings of Significant Contribution and Rulemaking on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport

Federal RegisterJan 18, 2000

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52 and 97

[FRL-6515-5]

RIN 2060-AH88

Findings of Significant Contribution and Rulemaking on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Final rule.

SUMMARY:

In accordance with section 126 of the Clean Air Act (CAA), EPA is taking final action on petitions filed by eight Northeastern States seeking to mitigate interstate transport of nitrogen oxides (NO

), one of the precursors of ground-level ozone. In an action published on May 25, 1999, EPA determined that portions of the petitions are approvable under the 1-hour and/or 8-hour ozone national ambient air quality standards (NAAQS) based on their technical merit. However, EPA deferred making section 126 findings as long as States and EPA stayed on track to meet the requirements of the NO

State implementation plan call (NO

SIP call). Subsequently, two court rulings affected the May 25 final rule. In one ruling, the court remanded the 8-hour ozone NAAQS. In a separate action, the court granted a motion to stay the SIP submission deadline for the NO

SIP call. In light of the court rulings, EPA is modifying two aspects of the May 25 rule.

Based on affirmative technical determinations for the 1-hour ozone NAAQS made in the May 25 rule, today, EPA is making section 126 findings that a number of large electric generating units (EGUs) and large industrial boilers and turbines named in the petitions emit in violation of the CAA prohibition against significantly contributing to nonattainment or maintenance problems in the petitioning States. The EPA is staying indefinitely the affirmative technical determinations based on the 8-hour ozone NAAQS, pending further developments in the NAAQS litigation.

The EPA is also finalizing the Federal NO

Budget Trading Program as the control remedy for sources affected by today's rule. This requirement replaces the default remedy in the May 25 final rule.

DATES:

The final rule is effective February 17, 2000.

ADDRESSES:

Documents relevant to this action are available for inspection at the Air and Radiation Docket and Information Center (6102), Attention: Docket No. A-97-43, U.S. Environmental Protection Agency, 401 M Street SW, room M-1500, Washington, DC 20460, telephone (202) 260-7548 between 8:00 a.m. and 5:30 p.m., Monday though Friday, excluding legal holidays. A reasonable fee may be charged for copying.

FOR FURTHER INFORMATION CONTACT:

General questions concerning today's action should be addressed to Carla Oldham, Office of Air Quality Planning and Standards, Air Quality Strategies and Standards Division, MD-15, Research Triangle Park, NC 27711, telephone (919) 541-3347, email at oldham.carla@epa.gov. Please refer to

SUPPLEMENTARY INFORMATION

below for a list of contacts for specific subjects discussed in today's action.

SUPPLEMENTARY INFORMATION:

Availability of Related Information

The official record for this rulemaking, as well as the public version, has been established under docket number A-97-43 (including comments and data submitted electronically as described below). A public version of this record, including printed, paper versions of electronic comments, which does not include any information claimed as confidential business information, is available for inspection from 8:00 a.m. to 5:30 p.m., Monday through Friday, excluding legal holidays. The official rulemaking record is located at the address in

ADDRESSES

at the beginning of this document. In addition, the

Federal Register

rulemaking actions and associated documents are located at http://www.epa.gov/ttn/rto/126. Documents containing the historical heat input data used to calculate the NO

allowance allocations, listed in appendices A and B to part 97, are available at this website and have been placed in the rulemaking docket.

The EPA has issued a separate rule on NO

transport entitled, “Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone.” The rulemaking docket for that rule (Docket No. A-96-56), hereafter referred to as the NO

SIP call, contains information and analyses that EPA has relied upon in the section 126 rulemaking, and hence documents in that docket are part of the rulemaking record for this rule. Documents related to the NO

SIP call rulemaking are available for inspection in docket number A-96-56 at the address and times given above.

For Additional Information

For additional information related to air quality analysis, please contact Carey Jang, Office of Air Quality Planning and Standards; Emissions, Monitoring, and Analysis Division, MD-14, Research Triangle Park, NC 27711, telephone (919) 541-5638. For questions regarding the NO

cap-and-trade program, please contact Sarah Dunham, Office of Atmospheric Programs, Clean Air Markets Division, MC-6204J, 401 M Street SW, Washington, DC 20460, telephone (202) 564-9087. For questions regarding regulatory cost analyses for electricity generating sources, please contact Mary Jo Krolewski, Office of Atmospheric Programs, Clean Air Markets Division, MC-6204J, 401 M Street SW, Washington, DC 20460, telephone (202) 564-9847. For questions regarding regulatory cost analyses for other stationary sources, please contact Larry Sorrels, Office of Air Quality Planning and Standards, Air Quality Strategies and Standards Division, MD-15, Research Triangle Park, NC 27711, telephone (919) 541-5041.

Outline

I. Background and Summary of Rulemaking

A. Summary of Rulemaking and Affected Sources

1. Summary of Action to Date

2. Summary of Today's Rule

3. Extension of Stay of May 25, 1999 Final Rule

B. Cost Effectiveness of Emissions Reductions

1. Large EGUs

2. Large Non-EGUs

C. Interfere With Maintenance

D. New Petitions Submitted in 1999

II. EPA's Final Action on Granting or Denying the Eight Petitions

A. Technical Determinations in the May 25 Final Rule

B. Findings Under Section 126 and Removal of Trigger Mechanism Based on NO

SIP Call Compliance Deadlines

C. Section 126(b) Findings Under the 1-Hour Ozone Standard

D. Stay of Affirmative Technical Determinations Under the 8-Hour Ozone Standard

1. Affirmative Technical Determinations Under the 8-Hour Ozone Standard

2. Stay of the 8-Hour Affirmative Technical Determinations

E. Requirements for Sources for Which EPA Is Making a Section 126(b) Finding

III. Section 126 Control Remedy: The Federal NO

Budget Trading Program

A. Program Overview

1. Relationship between Today's Action and the May 25, 1999 Section 126 Final Rule

2. Elements of the Federal NO

Budget Trading Program That Are Essentially the Same as the State NO

Budget Trading Program and the October 21, 1999 Section 126 Proposed Rule

a. General Provisions

b. NO

Authorized Account Representative

c. Permits

d. Compliance Certification

e. NO

Allowance Tracking System

f. NO

Allowance Transfers

g. Opt-ins

h. Audits

3. Elements of the Federal NO

Budget Trading Program That Differ From the State NO

Budget Trading Program and the Section 126 Proposed Rule

a. General Provisions

b. Allowance Allocations

c. Emissions Monitoring and Reporting

d. Program Administration

4. Implications for Trading Between States Affected by a Finding Under Section 126, and States Not Affected by a Finding

B. Provisions of the Federal NO

Budget Trading Program

1. Applicability

a. EGU/Non-EGU Classification

b. Fossil Fuel-Fired Definition

c. 25-ton Exemption

d. Opt-in Units

2. Trading Program Budget

3. NO

Allowance Allocations

a. NO

Allowance Allocation Methodology for Electric Generating Units

b. NO

Allowance Allocation Methodology for Non-Electric Generating Units

4. The Compliance Supplement Pool

a. Size of the Compliance Supplement Pool

b. Distribution of the Compliance Supplement Pool to Sources

5. Banking

6. Emissions Monitoring and Reporting

IV. Administrative Requirements

A. Executive Order 12866: Regulatory Planning and Review

B. Regulatory Flexibility Act

C. Unfunded Mandates Reform Act

D. Paperwork Reduction Act

E. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks

F. Executive Order 12898: Environmental Justice

G. Executive Order 13132: Federalism

H. Executive Order 13084: Consultation and Coordination with Indian Tribal Governments

I. National Technology Transfer and Advancement Act

J. Judicial Review

K. Congressional Review Act

I. Background and Summary of Rulemaking

A. Summary of Rulemaking and Affected Sources

1. Summary of Action to Date

In a notice of final rulemaking (NFR) signed on April 30, 1999 and published on May 25, 1999 (May 25 NFR or May 25, 1999 final rule), EPA took action on eight ozone-related petitions submitted individually by eight northeastern States under section 126 of the CAA(64 FR 28250; May 25, 1999). As discussed in Section II.A. of the May 25 NFR, section 126 of the CAA authorizes a downwind State to petition EPA for a finding that any new (or modified) or existing major stationary source or group of stationary sources upwind of the State emits or would emit in violation of the prohibition of section 110(a)(2)(D)(i) because their emissions contribute significantly to nonattainment, or interfere with maintenance, of a NAAQS in the State. Sections 110(a)(2)(D)(i), 126(b)-(c). If EPA makes the requested finding, the sources must shut down within 3 months from the finding unless EPA directly regulates the sources by establishing emissions limitations and a compliance schedule, extending no later than 3 years from the date of the finding, to eliminate the prohibited interstate transport of pollutants as expeditiously as possible. See sections 110(a)(2)(D)(i) and 126(c).

The States that petitioned EPA under section 126 (addressed by today's final rule) are Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, Pennsylvania, and Vermont. Each petition requests that EPA make a finding that certain major stationary sources or groups of sources in upwind States emit NO

emissions in violation of the CAA's prohibition on amounts of emissions that contribute significantly to ozone nonattainment or maintenance problems in the petitioning State. The petitions vary in geographic scope covered, types of sources identified, and recommended control remedies. All of the eight petitioning States requested section 126 findings under the 1-hour ozone standard. Five of the petitioning States (Maine, Massachusetts, New Hampshire, Pennsylvania, and Vermont) also requested section 126 findings under the 8-hour ozone standard. Section 126 provides that if EPA finds that identified stationary sources emit in violation of the section 110(a)(2)(D) prohibition on emissions that significantly contribute to ozone nonattainment or maintenance problems in a petitioning State, EPA is authorized to establish Federal emissions limits for the sources. Section I of the May 25 NFR describes the petitions and Section II sets forth EPA's interpretation of section 126 and the analytical test EPA used to evaluate the petitions. Familiarity with the May 25 NFR is assumed for the purposes of today's final rule.

In the May 25 NFR, EPA made final determinations that six of the eight petitions have technical merit. The EPA made affirmative determinations that existing and new large electric generating units (EGUs) and large industrial boilers and turbines (non-EGUs) located in certain States identified in the section 126 petitions are significantly contributing to nonattainment in, or interfering with maintenance by, one or more of the petitioning States with respect to the 1-hour and/or 8-hour ozone standards. Under the 1-hour standard, EPA made affirmative technical determinations of significant contribution for sources located in the District of Columbia and 12 States. Under the 8-hour standard, EPA made affirmative technical determinations of significant contribution for sources located in the same States and the District of Columbia as under the 1-hour standard plus seven additional States.

In the May 25 NFR, EPA also denied the portions of the petitions that did not have technical merit. Under the 1-hour standard, EPA fully denied the petitions from Rhode Island, Maine, New Hampshire, and Vermont because the States had clean air quality. The EPA fully denied the Vermont petition under the 8-hour standard because that State did not have any current or projected 8-hour air quality problems.

The EPA also provided that the portions of the petitions for which EPA made affirmative technical determinations would be automatically deemed granted (the section 126 findings made) or denied at certain later dates pending certain actions by the States and EPA regarding State submittals in response to the final NO

SIP call. Interpreting the interplay between sections 110 and 126, EPA explained in the May 25 NFR that a State's compliance with the NO

SIP call would eliminate the basis for a finding under section 126 based on these petitions for sources located in that State. The EPA concluded it was appropriate to structure its action on the section 126 petitions to account for the existence of the NO

SIP call, given that the NO

SIP call had an explicit and expeditious schedule for compliance (see 64 FR 28274-28277). Accordingly, EPA made technical determinations on the section 126 petitions, but deferred making final findings. The schedule and conditions under which the applicable final findings on the petitions would have been deemed made are discussed in Section I.E. of the May 25 NFR.

As discussed in Section IV of the May 25 NFR, EPA was required under a consent decree to take final action on the eight petitions by April 30, 1999, including promulgating a control remedy for sources that would be subject to an affirmative finding under section 126. In a proposal published on October 21, 1998 (63 FR 56292), EPA proposed a NO

cap-and-trade program as the section 126 control requirements.

However, EPA was not able to finalize the trading program by April 30, 1999, because the Agency needed additional time to evaluate the numerous comments it received on the trading program proposal and the source-specific emissions inventory data. In the May 25 NFR, EPA finalized the general parameters of the trading program control remedy including, among others, the decision to implement a NO

cap-and-trade program as the control remedy, the control levels the trading program would be based on, the definition of the types of sources that would be subject to the trading program, and the compliance date. The EPA indicated it would finalize the complete Federal NO

Budget Trading Program and allowance allocations for the section 126 sources later.

On January 13, 1999 (64 FR 2416), EPA reopened the comment period on the section 126 proposal, to take further comment on source-specific emission inventory data. This comment period was established in conjunction with the extended period for the public to submit emissions inventory revisions for the purpose of the NO

SIP call. The EPA indicated that the revised inventory would be used to identify the individual sources that would be subject to section 126 findings and for assigning their NO

allowance allocations for purposes of the Federal NO

Budget Trading Program. The EPA's process for evaluating the inventory data and EPA's response to the emissions inventory comments is given in the document, “Responses to the 2007 Baseline Sub-Inventory Information and Significant Comments for the Final NO

SIP Call and Proposed Rulemakings for Section 126 Petitions and Federal Implementation Plans—Technical Amendment Version, December 1999,” and contained in the docket for this rule.

The EPA finalized a default remedy in the May 25 NFR that would apply to affected sources in the event that EPA failed to finalize the trading program prior to any section 126 findings being triggered. The EPA emphasized that it did not expect that the default remedy would ever be applied, because EPA fully intended to complete the trading program and delete the default remedy by the time any findings were made.

After EPA signed the section 126 final rule on April 30, 1999 (published on May 25, 1999), the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) issued two rulings related to the 8-hour ozone standard and the NO

SIP call that affected the section 126 action. In one decision, the court remanded the 8-hour National Ambient Air Quality Standard (NAAQS) for ozone, which formed part of the underlying technical basis for certain of EPA's determinations under section 126.

See American Trucking Ass'n

EPA,

175 F.3d 1027 (D.C. Cir., 1999),

reh'g granted in part and denied in part,

No. 97-1440 and consolidated cases (D.C. Cir., October 29, 1999). On October 29, 1999, the D.C. Circuit granted in part EPA's Petition for Rehearing and Rehearing En Banc (filed on June 28, 1999) in

American Trucking,

and modified portions of its opinion addressing EPA's ability to implement the eight-hour standard. See

American Trucking,

1999 WL 979463 (Oct. 29, 1999). The court denied the remainder of EPA's rehearing petition.

Id.

In a separate action, the D.C. Circuit granted a motion to stay the State implementation plan (SIP) submission deadlines established in the NO

SIP call.

See Michigan

EPA,

No. 98-1497 (D.C. Cir., May 25, 1999) (order granting stay in part). In the May 25 NFR, EPA had deferred making final findings under section 126 as long as States and EPA stayed on schedule to meet the requirements of the NO

SIP call.

In response to these rulings, EPA stayed the effectiveness of the May 25 NFR until November 30, 1999 while it conducted a parallel rulemaking to address issues raised by the court rulings (64 FR 33956; June 24, 1999).

On June 24, 1999 (64 FR 33962), EPA proposed to amend two aspects of the May 25 NFR. The EPA proposed to stay indefinitely the affirmative technical determinations based on the 8-hour standard pending further developments in the NAAQS litigation. The EPA also proposed to remove the trigger mechanism for making section 126 findings that was based on the NO

SIP call deadlines and instead make the findings in a final rule to be issued in November 1999. In the June 24 proposal, EPA explained why it originally made sense to link the section 126 action to the NO

SIP call and why EPA believes it is no longer appropriate to do so in the absence of a compliance schedule for the NO

SIP call.

The EPA notes it received several comments on the June 24, 1999 proposal that the Agency considers to be outside the scope of that proposal. These comments relate primarily to issues that have been addressed previously either in the NO

SIP call final rule, the NO

SIP call response to comments document, the May 25, 1999 final rule for the section 126 petitions, or the April 1999 response to comments document for the section 126 petitions. The EPA may respond separately to these comments, which the Agency believes should be considered to be, in effect, petitions for reconsideration of the May 25, 1999 final rule. A notice will be published in the

Federal Register

to announce the availability of these responses in the rulemaking docket.

On August 9, 1999 (64 FR 43124), EPA issued a notice of data availability and request for comment on three sets of data related to the proposed Federal NO

Budget Trading Program. The data were made available to ensure that EPA would have accurate information for developing the NO

allowance allocations for the Federal NO

Budget Trading Program.

2. Summary of Today's Rule

In today's rule, EPA is finalizing the modifications to the May 25 NFR that were proposed on June 24, 1999. The EPA is also finalizing the Federal NO

Budget Trading Program that was proposed on October 21, 1998 and deleting the default remedy that was finalized in the May 25 NFR. The EPA is finalizing the list of existing sources that are subject to this rule based on the revised inventories.

In Section II, EPA discusses the delinking of the section 126 rule from the NO

SIP call and the making of the section 126(b) findings for the petitions for which EPA made affirmative technical determinations based on the 1-hour NAAQS in the May 25 NFR. The findings apply to large EGUs and large non-EGUs located in 12 States (Delaware, Indiana, Kentucky, Maryland, Michigan, North Carolina, New Jersey, New York, Ohio, Pennsylvania, Virginia, and West Virginia) and the District of Columbia. The EPA is indefinitely staying the affirmative technical determinations based on the 8-hour NAAQS, which cover large EGUs and large non-EGUs located in all the States covered by the 1-hour findings plus seven additional States (Alabama, Connecticut, Illinois, Massachusetts, Missouri, Rhode Island, and Tennessee).

The sources for which EPA is making section 126 findings must comply with the control requirements of the Federal NO

Budget Trading Program promulgated in today's rule. Section III provides an overview of the trading program and explains the various provisions. The combined list of existing sources affected by a section 126 finding with respect to at least one 1-hour petition, along with the more specific emissions limitations in the form of tradable allowance allocations, is provided in Appendices A and B to part 97. As discussed in the May 25 rule (see Section I.D.), the 1-hour petitions

from New York, Connecticut, and Pennsylvania petitions cover both new and existing sources. The 1-hour petition from Massachusetts does not cover new sources. As discussed in Section III below, the Federal NO

Budget Trading Program includes a mechanism for updating allocations which can incorporate new sources affected by findings relative to the petitions from New York, Connecticut, and Pennsylvania. Prior to the update, new sources can receive allocations from a new source set-aside. The compliance deadline is May 1, 2003. The EPA is creating a compliance supplement pool which will provide additional allowances during the 2003 and 2004 ozone seasons to increase compliance flexibility (see Section III.B.4).

3. Extension of Stay of May 25, 1999 Final Rule

In a separate action, EPA extended the stay of the May 25, 1999 rule until January 10, 2000. (See 64 FR 67781; December 3, 1999.) EPA will publish a further stay to ensure that the May 25, 1999 rule remains stayed until today's rule becomes effective.

B. Cost Effectiveness of Emissions Reductions

One factor of the significant-contribution analysis that EPA applied in the May 25, 1999 final rule is the extent to which “highly cost-effective” NO

control measures are available for the types of stationary sources named in the petitions (64 FR at 28281). In the May 25, 1999 final rule, EPA selected the highly cost-effective measures by examining the technological feasibility, administrative feasibility and cost-per-ton-reduced of various regionwide ozone season NO

control measures (64 FR at 28298).

For purposes of the May 25, 1999 final rule, EPA used cost-effectiveness values developed for the final NO

SIP call. In the May 25, 1999 final rule, EPA indicated that it would revise the cost estimates for the section 126 rule based on revised emission inventories in conjunction with promulgation of the trading portion of the section 126 rulemaking (64 FR at 28300). (The EPA solicited comment on source-specific emission inventory data as part of the proposal on the section 126 petition.) Therefore, EPA has developed cost-effectiveness numbers for the source categories located in the 13 jurisdictions affected by today's final rule using the cost-effectiveness methodology finalized in the May 25, 1999 rule.

Some commenters have argued that EPA must redo its analysis of the cost-effectiveness of controls to reflect the modified scope of the section 126 rule due to the stay of the 8-hour affirmative technical determinations. Commenters argued that EPA has underestimated the costs for utility NO

controls since several States and portions of States have been removed as a result of the stay of the 8-hour affirmative technical determinations. In addition, one commenter stated that EPA should provide an opportunity to comment on a revised cost-effectiveness analysis that incorporates only the affected sources under the section 126 petitions based on the 1-hour standard.

As discussed below, EPA has now revised the cost-effectiveness numbers based on the revised inventories to reflect the 13 jurisdictions covered by today's section 126 final action under the 1-hour standard. Even with the reduced scope of the section 126 rule, the cost-effectiveness numbers are similar to those presented in the May 25, 1999 final rule and support the technical determinations EPA made in that rule. In addition, EPA continues to use the same cost-effectiveness methodology for today's rule as it used in the May 25, 1999 final rule, the October 21, 1998 section 126 proposed rule, and the NO

SIP call rule. Therefore, commenters have had opportunities to comment on the cost-effectiveness methodology used in today's rule.

In determining what, if any, highly cost-effective mix of controls is available for each subcategory named by the petitioning Sates (

i.e.,

large EGUs, large non-EGUs, large process heaters, and small sources) the Agency considered the average cost effectiveness of alternative levels of controls for each subcategory as described in the final NO

SIP call (see 63 FR at 57400) and the May 25, 1999 final rule (64 FR at 28300).

The average cost effectiveness of the controls was calculated from a baseline level that included all currently applicable Federal or State NO

control measures for each subcategory. The baseline did not include Phase II and Phase III of the OTC NO

MOU since those measures are not Federally required and they have not yet been fully adopted by all the involved States; if the OTC NO

MOU were included in the baseline, the overall costs would be lower. Based on the analyses, EPA determined that highly cost-effective measures are available for large EGUs and large non-EGUs.

The petitions also named process heaters and small sources. In the May 25 final rule (64 FR at 28301), EPA determined that highly cost-effectiveness controls are not available for these source categories. Therefore, EPA denied the portions of the petitions that named these source categories.

Table I-1 summarizes the control options investigated for the subcategories covered by today's rule and the resulting average, regionwide cost effectiveness estimates based on the revised inventories. Additionally, the cost-effectiveness analysis includes a consideration of each subcategory's growth, including new sources. The cost-effectiveness numbers are similar to those presented in the May 25, 1999 final rule (64 FR at 28300). Therefore, based on this component of the significant contribution test, there is no reason to revise any of the significant contribution determinations.

Table I.-1. Revised Average Cost Effectiveness of Options Analyzed for Sources Affected by 1-Hour Findings

(1997 dollars and (1990) dollars in 2007)

Source Category

Average Cost Effectiveness ($/ozone season ton) for each Control Option

Large EGUs

0.20 lb/mmBtu

0.15 lb/mmBtu

0.12 lb/mmBtu

$1,425 ($1,187)

$1,720 ($1,432)

$2,043 ($1,701)

Large Non-EGUs

50% reduction

60% reduction

70% reduction

$1,613 ($1,370)

$1,908 ($1,589)

$2,903 ($2,418)

The cost-effectiveness values in Table I-1 are regionwide averages for the 13 affected jurisdictions. The cost-effectiveness values represent reductions beyond those required by title IV or title I RACT, where applicable.

In order to compare with other rulemakings presented in 1997 dollars, cost-effectiveness is presented in both 1997 and (1990) dollars. In 1997 dollars, highly cost-effective is defined as $2,400 per ton, which is $2,000 per ton in 1990 dollars inflated using a GDP price inflator of 1.20.

The following discussion explains the control levels determined by EPA to be highly cost effective for each subcategory.

1. Large EGUs

As discussed in the May 25, 1999 final rule (64 FR at 28300), in determining the cost of NO

reductions from large EGUs, EPA assumed a multistate cap-and-trade program. For large EGUs, the control level was determined by applying a uniform NO

emissions rate across all jurisdictions potentially subject to section 126 findings. EPA determined that a trading program based on a 0.15 lb/mmBtu control level is highly cost effective. For the cost-effectiveness analysis for today's final action, a uniform NO

emissions rate is applied to the 13 jurisdictions subject to the section 126 findings. The cost effectiveness for each control level was determined using the Integrated Planning Model (IPM).

Details regarding the methodologies used can be found in the Regulatory Impact Analysis. Table I-1 summarizes the control levels and resulting cost effectiveness of three levels analyzed based on the revised inventories for sources covered by the 1-hour findings. Again, EPA notes that the cost-effectiveness numbers are similar to those presented in the May 25, 1999 final rule (

e.g.,

the cost-effectiveness for the 0.15 lb/mmBtu option decreased by $44/ton, from $1,764/ton to $1,720/ton in 1997 dollars (from $1,468/ton to $1,432/ton in 1990 dollars)).

IPM is an economic model used by industry and government. EPA used this model to estimate the costs and emissions reductions from EGU's that would result from controlling NO

emissions under the NO

SIP call and this section 126 action.

The cost-effectiveness numbers presented assumes trading across the entire 13 jurisdictions. EPA has examined the effects of excluding the portions of the four States (NY, IN, MI, KY) not covered in today's final rule and concluded that it does not impact the average cost effectiveness. That analysis is presented in an Appendix to the RIA.

In the May 25, 1999 final rule (64 FR at 28300-1), EPA discussed the reasons the Agency has decided to base the emission reduction requirements for EGUs on a 0.15 lb/mmBtu trading level of control. Because the average cost-effectiveness for the three levels analyzed has not changed significantly, EPA maintains that a 0.15 lb/mmBtu trading level of control is appropriate for the reasons identified in the May 25, 1999 rule. This control level has an average cost effectiveness of $1,720 per ozone season ton removed in 1997 dollars ($1,432 per ozone season ton removed in 1990 dollars). This amount is consistent with the range for cost effectiveness that EPA has derived from recently adopted (or proposed to be adopted) control measures. See 64 FR at 28299.

2. Large Non-EGUs

As discussed in the May 25, 1999 final rule (64 FR at 28301), EPA determined a highly cost-effective control level for large non-EGUs by evaluating a uniform percent reduction in increments of 10 percent. Details regarding the methodologies used are in the Regulatory Impact Analysis. Table I-1 summarizes the control levels and resulting cost effectiveness for these non-EGUs based on the revised inventories for sources covered by the 1-hour findings.

For non-EGU sources, EPA used a least-cost method which is equivalent to an assumption of an interstate trading program. Under this method, the least costly controls, in terms of total annual cost per ozone season ton removed, across the entire set of feasible source-control measure combinations are selected in order of increasing annual compliance costs per ton, consistent with the above-described range for cost effectiveness.

For large non-EGUs, the cost-effectiveness analysis includes estimates of the additional emissions monitoring costs that sources would incur in order to participate in a trading program. Some non-EGUs already monitor their emissions. These costs are defined in terms of dollars per ton of NO

removed so that they can be combined with the cost-effectiveness figures related to control costs. Monitoring costs for large non-EGU boilers and turbines are about $160 per ton of NO

removed.

The average cost effectiveness for the three levels analyzed has not changed significantly from the May 25, 1999 final rule (64 FR at 28301). Therefore, based on this component of the significant contribution test, there is no reason to revise any of the significant contribution determinations. As determined in the May 25, 1999 final rule, a control level corresponding to 60 percent reduction from baseline levels is highly cost effective. This percent reduction corresponds to a regionwide average control level of about 0.17 lb/mmBtu.

C. Interfere With Maintenance

As noted above, section 110(a)(2)(D) prohibits sources from emitting air pollutants in amounts that will, “contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to [any] national * * * ambient air quality standard” [emphasis added]. Each of the petitions requested that EPA make findings with respect to both nonattainment and maintenance of the 1-hour and/or 8-hour ozone standards in the petitioning State. In the May 25 final rule, EPA determined that a State may petition under section 126 for both the 1-hour standard, to the extent that it still applied in the petitioning State, and the 8-hour standard. The EPA indicated that in areas for which EPA had determined that the 1-hour standard no longer applies, there would no longer be a basis for EPA to make section 126(b) findings with respect to nonattainment or maintenance of that standard. In light of recent court action discussed below, EPA has proposed to reinstate the 1-hour standard. Thus, if EPA finalizes the rule as proposed, all areas would be subject to that standard along with the requirements to meet and maintain it.

Reinstatement of the 1-Hour Ozone Standard.

The EPA promulgated the 8-hour standard in July 1997 to replace the existing 1-hour standard. To ensure an effective transition to the new 8-hour standard, EPA decided that the 1-hour standard would continue to apply in an area for an interim period until the area achieved attainment of that standard. Under that policy, once EPA made a final determination that an area had attained the 1-hour standard, that standard no longer would apply and States would be expected to focus their planning efforts on developing strategies for attaining the 8-hour standard. The effectiveness of the 8-hour standard served as the underlying basis for EPA's finding that the 1-hour standard no longer applied in areas that EPA determined were attaining the 1-hour standard. The recent ruling of the D.C. Circuit in

American Trucking

has undermined the basis for EPA's previous determinations on applicability of the 1-hour ozone standard by remanding the 8-hour NAAQS. Therefore, in a separate rulemaking (64 FR 57424; October 25, 1999), EPA has proposed to: (i) Rescind the findings that the 1-hour standard no longer applies, and (ii) reinstate the applicability of the 1-hour standard in all areas, notwithstanding promulgation of the 8-hour standard.

Once EPA finalizes its action to reinstate the 1-hour standard, the “interfere with maintenance” test could be applied under both the 1-hour and 8-hour standards. The areas in the petitioning States that are currently subject to and violating the 1-hour standard need not only achieve the 1-hour standard, but would also need to maintain it. Upwind NO

reductions resulting from today's rule will assist these areas in both achieving and maintaining the 1-hour standard. In

addition, there are areas in the petitioning States that are not currently subject to the 1-hour standard, and therefore, cannot be considered as a basis for this rule. For some of these areas that have attained the standard, their ability to maintain the standard may be jeopardized due to transported pollution. (In addition, some areas where the standard was revoked may now have air quality that exceeds the 1-hour standard.) These areas in the petitioning States will also benefit from the emissions reductions from this rule as they focus planning efforts on the 1-hour standard again. Reinstatement of the 1-hour standard underscores the need for the emissions reductions required by this rule. In the future, EPA may take further action to consider maintenance of the 1-hour standard under section 126.

D. New Petitions Submitted in 1999

In April through June of 1999, EPA received four new ozone-related section 126 petitions submitted individually by the District of Columbia, Delaware, Maryland, and New Jersey (see docket number A-99-21). All four of the petitions requested that EPA make findings that NO

emissions from sources located in upwind States are significantly contributing to nonattainment and maintenance problems in the petitioning State under the 1-hour and 8-hour standards. The four petitions identified sources in a total of 13 States and the District of Columbia. Each State based its petition on EPA's technical analyses and significant contribution determinations in the NO

SIP call. The petitions recommend that EPA establish an interstate trading program for sources that would receive a section 126 finding. The control levels sought are: an overall control level of 0.15 lb/mmBtu for EGUs and a 60 percent reduction in NO

emissions from non-EGUs calculated from the baseline EPA used in the NO

SIP call. The EPA will be proposing action on the 4 petitions in the future.

II. EPA's Final Action on Granting or Denying the Eight Petitions

The EPA is making final section 126 findings on the eight petitions under the 1-hour standard based on the affirmative technical determinations made in the May 25 NFR. The EPA is removing the automatic trigger mechanism for making the findings that was established in the May 25 NFR, and instead is simply making the findings in today's rule. EPA evaluated the petitions independently under the 1-hour and 8-hour standards where a State requested a finding under both standards. The EPA is staying the affirmative technical determinations with respect to the 8-hour standard in light of the recent court decision on that standard. Sources subject to findings under the 1-hour standard will be required to implement controls beginning in May 2003. Each of these actions is described below.

Because it is no longer appropriate to link the section 126 action to the NO

SIP call deadlines and EPA is removing the automatic trigger mechanisms that were tied to those deadlines, as discussed below in Section II.B., the affirmative technical determinations under the 1-hour standard effectively constitute findings in the context of section 126. There is no longer a subsequent condition that must first be fulfilled, before EPA makes final findings. Thus, the affirmative technical determinations under the 1-hour standard are a sufficient basis for EPA to find that the affected sources are emitting in violation of the prohibition of section 110(a)(2)(D)(i). The EPA is revising the part 52 regulatory text to reflect this change.

A. Technical Determinations in the May 25 Final Rule

In the May 25 NFR, EPA made affirmative technical determinations as to which of the new (or modified

) or existing major sources or groups of stationary sources named in each petition emit or would emit NO

in amounts that contribute significantly to nonattainment of the 1-hour or 8-hour standard in (or interfere with maintenance of the 8-hour standard by) each petitioning State. All eight of the petitioning States requested that EPA evaluate their petitions with respect to the 1-hour standard. Five of the petitions also requested that EPA evaluate their petitions under the 8-hour standard. The EPA made independent technical determinations for each standard with respect to the individual petitions (see the part 52 regulatory text in the May 25 NFR). The EPA determined that the large EGUs and large non-EGUs in at least some upwind States named in every petition except Vermont's and Rhode Island's contribute significantly to nonattainment of at least one of the standards (or interfere with maintenance of the 8-hour standard) in the petitioning State. In aggregate for all the petitions and both ozone standards, EPA made affirmative technical determinations for sources located in 19 States and the District of Columbia. The majority of the sources received affirmative technical determinations under both the 1-hour and 8-hour standards. However, as discussed in Section II.D, sources located in several States received affirmative technical determinations only under the 8-hour standard. As discussed below in Section II.B., EPA had deferred granting the petitions pending certain actions by States and EPA with regard to the NO

SIP call. The EPA's analytical approach and evaluation of each petition is described in Section II of the May 25 NFR (64 FR 28250; May 25, 1999).

Whenever the word “new” is used in relation to sources affected by this rule, it includes both new and modified sources.

B. Findings Under Section 126 and Removal of Trigger Mechanism Based on NO

SIP Call Compliance Deadlines

In the May 25 final rule, EPA had linked its findings under section 126 to the compliance schedule for the NO

SIP call. EPA made affirmative technical determinations regarding the technical merits of the petitions but deferred making findings under section 126 as long as States and EPA were meeting deadlines for action based on the schedule for the NO

SIP call. The findings under section 126 would be automatically triggered only if States or EPA missed one of those deadlines. Specifically, the May 25 NFR provided that EPA would have made a finding that sources were emitting in violation of section 110(a)(2)(D)(i)(I) as of November 30, 1999 if EPA had not proposed approval of SIP revisions complying with the NO

SIP call (or promulgated a Federal implementation plan (FIP)) by that date, or as of May 1, 2000, if EPA had not taken final action to approve SIP revisions (or promulgated a FIP) by that date.

In the June 24 proposal, EPA proposed to delete this automatic trigger mechanism for making findings and instead simply take final action making findings and granting or denying the petitions. For those sources for which it had made affirmative technical determinations, EPA proposed to find that the sources are emitting in violation of section 110(a)(2)(D)(i) and to grant those portions of the petitions. Consistent with these proposed findings, EPA also proposed to remove the automatic trigger mechanism.

In today's action, EPA is finalizing this portion of the rule largely as proposed. However, under this final rule, instead of making the findings based on the 8-hour standard, EPA is indefinitely staying the affirmative technical determinations based on the 8-hour standard, as discussed below. The affirmative technical determinations under the 1-hour standard were based

on a record independent of the record for the affirmative technical determinations under the 8-hour standard. Thus, sources in the seven States for which the determinations were based solely on the 8-hour standard would not at this time be subject to the section 126 remedy.

The EPA believes that the circumstances under which the linkage between action on the section 126 petitions and the NO

SIP call was appropriate are no longer present. Specifically, with no explicit and expeditious deadlines for compliance with the NO

SIP call, it does not make sense for the section 126 findings to depend upon a State's failure to act under the NO

SIP call. It also would be contrary to the language and purposes of section 126 to delay the section 126 findings pending State action under the NO

SIP call, absent a schedule with explicit and expeditious deadlines for compliance with the NO

SIP call. Nor is retention of the linkage between the two rules required by the language of section 110, the cooperative federalism structure of title I of the CAA, or the court's decision to stay the deadlines for States to submit SIP revisions under the NO

SIP call.

EPA's actions in the May 25 NFR and today's rule are driven by a consistent interpretation and application of the relevant statutory provisions. Section 110(a)(2)(D)(i) (combined with EPA's SIP call authority under section 110(k)(5)) and section 126 are two independent statutory tools to address the problem of interstate pollution transport (64 FR 28263-28267). The purpose of each provision is to control upwind emissions that contribute significantly to downwind States' nonattainment or maintenance problems (64 FR 28263-28267). The two provisions differ in that one relies, in the first instance, on State regulation and the other relies on Federal regulation, but Congress provided both provisions without indicating any preference for one over the other. Thus, Congress must have viewed either approach as a legitimate means to produce the desired result. This drives the conclusion that EPA should use, in a particular situation, whichever of these provisions will achieve the purpose of both of them—to reduce interstate pollutant transport.

Promulgation of the NO

SIP call with explicit and expeditious deadlines for SIP submissions and emissions reductions afforded EPA a reasonable expectation that the needed emissions reductions would be expeditiously required through SIP revisions. In those circumstances it made sense for EPA to briefly defer findings under section 126, as long as the States stayed on track to control the emissions. Further, it made sense for EPA to approve findings under section 126 once a State fell off track (as indicated by a lack of EPA proposed or final approval of the required SIP submission by specified dates) because under those circumstances, EPA could no longer reasonably expect that the needed emissions reductions would be timely achieved through a SIP revision. Similarly, under the present circumstances with the stay of the SIP call submission deadlines, EPA is no longer assured that the emissions reductions will be achieved in accordance with the SIP call deadlines. Hence, EPA now must obtain the emissions reductions under section 126 and has no basis for further deferring making the findings under section 126 pending State action under the NO

SIP call.

Throughout the section 126 rulemaking, EPA has been confronted with an unusual factual situation. EPA had previously proposed and then promulgated a SIP call to address interstate transport through State action, and in roughly the same time frame, EPA was required to act on petitions from downwind States to address the same problem under section 126. Because section 126 refers to the prohibition of section 110(a)(2)(D)(i),

and the NO

SIP call was based on State violation of the same provision, in the May 25 NFR EPA recognized that the interstate transport problem at issue could be addressed under either provision.

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). 64 FR 28267.

Under section 126, a State may petition EPA to find that any major source or group of stationary sources emits “in violation of the prohibition” of section 110(a)(2)(D)(i). In the May 25 NFR, EPA stated:

EPA interprets section 126 to provide that a source is emitting in violation of the prohibition of section 110(a)(2)(D)(i) where the applicable SIP fails to prohibit (and EPA has not remedied this failure through a FIP) a quantity of emissions from that source that EPA has determined contributes significantly to nonattainment or interferes with maintenance in a downwind [S]tate * * *.In essence, it is a prohibition on excessive interstate transport of air pollutants * * *. Thus, EPA believes a reasonable interpretation is that where the state has failed to implement the prohibition, the SIP allows excessive transport of pollutants, the prohibition is violated, and a source emitting such quantities of pollutants is emitting in violation of the prohibition (64 FR 28272).

An upwind State and EPA may remedy this excessive interstate transport of air pollutants through adoption and approval of a SIP revision barring the emission of such pollutants. Alternatively, a downwind State and EPA may remedy this excessive interstate transport of air pollutants through the State petitioning EPA under section 126 and EPA regulating the sources directly. (See 64 FR 28274.)

Thus, in the May 25 NFR, EPA found that the upwind States could remedy the problem targeted by the section 126 petitions through timely submission of SIP revisions required by the NO

SIP call. This was true because the upwind States were already required to revise their SIPs within explicit and expeditious deadlines under the NO

SIP call, and the deadline for controls to be in place under the NO

SIP call was no later than May 2003 (64 FR 28275). Under these circumstances, EPA believed it made sense to briefly defer final action on the section 126 petitions so that States would have the option of addressing the problem through the imminently required SIP revisions. EPA also provided in the May 25 NFR for State regulation required under the NO

SIP call to substitute for the Federal section 126 remedy in certain circumstances. If EPA had made a finding under section 126 for sources in a State, but EPA subsequently approved the State's SIP revision complying with the NO

SIP call, including the May 2003 date for emissions reductions, the section 126 finding would automatically be withdrawn and sources in that State would no longer be subject to the section 126 remedy.

The statute did not explicitly contemplate EPA's approach in the May 25 NFR. However, EPA believed its approach was based on a reasonable interpretation of the statutory provisions at issue and provided a reasonable way to give meaning to both statutory provisions, without sacrificing the purpose of either. EPA did not suggest that section 126 is subordinate to section 110(a)(2)(D) or that the statute required EPA to provide States time to revise their SIPs before taking action under section 126. As explained at length in May 25 NFR, EPA believes these are two independent provisions under the CAA. EPA stated that its coordinated approach was a “practical” and “reasonable” way “to implement both of these provisions in the same time period, as the timing of the SIP call and the consent decree *** required EPA to do” (64 FR 28275). EPA believes

it was appropriate for EPA to consider the general statutory preference for State action under title I of the CAA, in interpreting how sections 110(a)(2)(D)(i) and 126 related to each other. Yet such a general statutory concept, without any explicit directive, could be no more than a secondary consideration in interpreting the relevant provisions. EPA's primary consideration throughout the section 126 rulemaking has been, as is required by the statute and principles of statutory interpretation, implementation of the explicit directive in both provisions to address interstate pollution transport problems as required under each provision. Section 126 requires EPA to direct sources to reduce emissions “as expeditiously as practicable, but in no case later than 3 years after the date of [the] finding.” Making affirmative technical determinations rather than findings and providing for subsequent automatic findings upon a State failure to act still ensured that under either the NO

SIP call or section 126, the necessary emissions reductions would occur by the 2003 ozone season, which allowed the maximum permissible 3-year lead time and which EPA determined was as expeditiously as practicable.

Certain commenters assert that the CAA required EPA to defer action under section 126 until States had failed to act under the NO

SIP call, and hence, that EPA now must continue and extend the linkage between the two rules by deferring any action under section 126 until after the NO

SIP call litigation has been resolved. The commenters further argue that action now on the section 126 petitions circumvents the court's stay of the NO

SIP call by pressuring States to comply with the NO

SIP call, and if they fail to do so, impermissibly dictating their future compliance options. The commenters are, in effect, arguing that EPA must subordinate section 126 to section 110(a)(2)(D)(i) (implemented through a SIP call under section 110(k)(5)), and that EPA must exhaust the remedies available through its SIP call authority before the Agency can act under section 126.

EPA disagrees with these comments. First, there is simply no statutory basis for EPA to indefinitely deny relief to downwind States harmed by pollution transported from upwind States. Congress provided section 126 to downwind States as a critical remedy to address pollution problems affecting their citizens that are otherwise beyond their control, and EPA has no authority to refuse to act under this section. To the contrary, section 126 provides explicit tight deadlines for EPA to act on a petition and for sources to achieve the reductions. EPA must make a finding or deny a petition within 60 days of its receipt. Section 126(b). Further, sources must shut down within 3 months of a finding, unless EPA allows them more time, but no longer than 3 years, to reduce emissions as expeditiously as practicable. (Section 126(c)). Moreover, commenters point to no statutory provisions supporting their argument that EPA may disregard the plain language of section 126 in favor of proceeding first under section 110(k)(5), and the lack of statutory support for their position is particularly troublesome where there is no certain or near-term date for compliance with a SIP call that would satisfy the timing requirements of section 126. The statutory language, structure and legislative history indicate far more Congressional concern for protecting downwind States' interest in ensuring clean air for their citizens than for protecting upwind States' interest in controlling their own sources of emissions. (See 64 FR 28258-28267, 28271-28277.) In particular, the structure of section 126, including the relatively short time frame for implementing the remedy it provides, strongly supports EPA's view of Congressional intent.

In the May 25 NFR, EPA explicitly rejected the suggestion that the Agency has discretionary authority to grant petitions under section 126 only after EPA has promulgated a SIP call under section 110(k)(5) to require States to comply with section 110(a)(2)(D)(i) and States have failed to comply with that SIP call. First, such an interpretation would make section 126 redundant with section 110(c), which already allows EPA to control sources directly through FIPs when a State has been required to submit an adequate SIP and fails to do so. Second, such an interpretation negates the purpose of section 126, “which is designed to provide recourse to downwind states” (64 FR 28274). EPA continued:

As discussed [earlier in the May 25 Rule], no progress had been made on interstate transport problems at the time of enactment of both the 1977 and 1990 Amendments. Section 126 provides a tool for downwind states, the entities with most at stake, to force EPA to confront the issue directly. It also sets up an abbreviated, and hence potentially faster, process to achieve emission reductions. Under the SIP process, EPA must direct a state to revise its SIP to comply with 110(a)(2)(D), and then perhaps find that the state has failed to comply, impose sanctions, and finally promulgate a Federal implementation plan, all of which could potentially stretch out for many years. In contrast Congress required very expeditious EPA action on a petition and from 3 months up to three years for sources to comply. It is perfectly reasonable for Congress to have established section 126 as an alternative mechanism under the Clean Air Act to address the interstate pollution problem, just as it did again in adopting sections 176A and 184. To provide alternatives, the various interstate transport provisions are necessarily different from each other and from other provisions of the Act, but that does not make them inconsistent with other provisions of the Act.

Id.

Just as there is no requirement for EPA to issue a SIP call before acting under section 126, the mere existence of a SIP call for States to address the problem cannot bar EPA from acting under section 126. This is even more clearly the case where there are no deadlines for States to act under the SIP call, or the deadlines do not satisfy the schedule contemplated by section 126.

The cooperative federalism principles in the CAA also do not support a different reading of these provisions, as certain commenters suggest. Title I of the CAA, which contains the provisions for EPA air quality standards and State implementation provisions, is primarily based on a cooperative federalism approach. Under this approach, air pollution planning and control at the State level is complemented by Federal regulation and enforcement to achieve clean air goals. Congress has demonstrated no reluctance to mandate Federal action wherever it is useful in addressing air pollution problems. See,

e.g.,

title I (sections 111, 112, 183(e)), title II (section 201

et seq.

), title IV (section 401

et seq.

), and title VI (section 601

et seq.

). In addition to the strong oversight role that EPA plays under title I in requiring States to submit SIPs and ruling on their adequacy, Congress directed EPA to regulate sources directly under several provisions of title I where State action was inadequate or where Federal action was preferable. In particular, Congress mandated Federal action under sections 110(c) (FIP provisions), 126, and 183 (Federal ozone measures). The language of section 126 is unambiguous in directing EPA to act on petitions from downwind States within a specified time frame, without any prerequisite of a State's failure to comply with a SIP call. Such clear language should not be construed to be overridden by a general principle, such as cooperative federalism, embedded in the overall statutory approach. Moreover, such a construction would be even less defensible here, where relying on cooperative federalism to delay action under section 126 for an undefined and lengthy period would run directly counter to a far more pervasive and powerful general

principle embedded in the CAA “Congress” overarching goal that the American public should breathe clean air.

In addition, deferring action on the section 126 petitions until resolution of the NO

SIP call litigation would almost certainly mean that the emissions would not be controlled in time for the 2003 ozone season if EPA retained the 3-year lead time for sources to comply. In the May 25 Rule, EPA was able to give upwind States an opportunity to address the ozone transport problem themselves, but without delaying implementation of the remedy beyond May 1, 2003. This was the date by which sources could reduce emissions as expeditiously as practicable, and it was no later than 3 years from the date of the finding.

In the NO

SIP call and the section 126 rule, EPA conducted extensive analyses and determined that sources could implement highly cost-effective controls on NO

emissions within a three year period. See 63 FR 57447-57449; Feasibility of Installing NO

Control Technologies By May 2003, EPA, Office of Atmospheric Programs, September 1998 (Docket No. A-97-43, Document No. II-C-10). Section 126 requires that sources reduce emissions “as expeditiously as practicable, but in no case later than 3 years after the date” of EPA's finding under section 126. Under the May 25 rule, EPA's finding would have been made under the automatic trigger provisions by November 30, 1999 or May 1, 2000. Thus, the May 1, 2003 deadline for reductions would require sources emitting in violation of the prohibition of section 110 to reduce emissions “as expeditiously as practicable” and no later than the three year limit, as required by section 126. Similarly, as today's final findings will become effective on February 17, 2000, the May 1, 2003 deadline for emissions reductions meets the timing requirements of section 126.

While the period from November 30, 1999 to May 1, 2003 is longer than 3 years, under the remedy that EPA has promulgated under section 126, sources need only control emissions during the ozone season, which runs from May 1 to September 30 each year. Thus, although sources legally would be subject to the section 126 requirements within 3 years from the effective date of EPA's finding, those requirements would not require any reductions until the beginning of the first ozone season following the date of EPA's finding, here, May 1, 2003.

As there are now no explicit and expeditious deadlines for State action to address this interstate transport problem under the NO

SIP call, there is now no basis for EPA to defer taking final action on the section 126 petitions. The language of section 126 does not explicitly provide for any deferral of EPA action. To the contrary, the very tight deadlines for EPA to act on the petitions and for sources to comply strongly indicate Congress' intent to provide downwind States a remedy for transported pollution and to force action under this provision. Here, without deadlines for SIP submissions, deferring final action on the section 126 petitions pending eventual State action under the NO

SIP call would run directly counter to the language and purpose of section 126 and the CAA. The statutory language provides no support for such an approach, much less mandates it, as some commenters suggest.

Commenters also claim that EPA may not now move forward under section 126 because such action would improperly pressure upwind States in at least two ways. Specifically, these commenters claim that EPA's action under section 126 forces upwind States to select control measures identical to those on the section 126 sources, which they claim is contrary to the court's decision in

Virginia

EPA.

108 F.3d 1397 (D.C. Cir.),

modified on other grounds,

116 F.3d 499 (D.C. Cir., 1997). They also argue that EPA is coercing these States into complying with the NO

SIP call now, thereby circumventing the court's stay of the compliance deadline.

Applying section 126 independent of an upwind State's failure to act under section 110(a)(2)(D) does not impermissibly pressure upwind States to select certain control measures. EPA acknowledges that because the section 126 findings precede any required State action under the NO

SIP call, if and when States are eventually required to submit SIPs to control interstate transport, one of the largest sources of emissions will already be subject to emission control requirements, and, depending upon the timing, may have already invested in controls. Yet this is not a legal constraint on States' choices—it is the reality that over time, conditions change, and different policy choices become more or less attractive for a variety of reasons. States would still be able to choose to regulate other sources, but depending upon the timing, the option of obtaining emission reductions from sources that have already invested in emission control or have already reduced emissions may be more attractive on policy and economic grounds than regulating those sources otherwise would have been. There is a vast difference between, on one hand, EPA prescribing a particular emissions control choice that States must adopt, and on the other, taking action required under the CAA, to regulate sources directly, with the possible effect of making certain future emissions control choices by some States more or less appealing.

Such an effect on the regulatory environment cannot override the requirement that EPA act on State petitions under section 126. It is simply unreasonable to argue that EPA can take no action under an independent provision of the statute to respond to petitions submitted by downwind States facing their own time constraints and pressures to meet air quality standards, just to preserve the relative attractiveness of a variety of options for control of NO

in the upwind States required under another provision of the CAA. The cooperative federalism principles of the CAA do not require EPA to withhold Federal action under section 126 until States have been required to and failed to submit SIPs.

The commenters are essentially arguing that not only the clock for SIP revisions, but the entire regulatory setting, must stop for the duration of the litigation on the NO

SIP call. Their position would require EPA to freeze the current situation in place to preserve for the future in their present form all options available now. Yet inhabitants of downwind States continue to breathe significant pollution contributed by upwind sources, the CAA calls for attainment as expeditiously as practicable, and there are highly cost-effective remedies available now (as discussed in detail in the May 25 NFR). (See 64 FR 28298-28304.) In these circumstances, EPA does not believe it should, let alone must, refrain from requiring those upwind sources to implement those remedies now.

In addition, a State will still have the option of preempting the section 126 remedy and selecting a different set of controls to address the interstate pollution transported from the State. The May 25 NFR provided that if a State submits and EPA approves a SIP revision meeting the requirements of the NO

SIP call, the section 126 finding will automatically be revoked for sources in that State. EPA does not expect most of the upwind States subject to the NO

SIP call to submit SIP revisions under the NO

SIP call while the litigation is ongoing. There is no currently effective requirement to submit such a SIP revision, and the litigation has produced uncertainty regarding the content and timing of future requirements on States under the NO

SIP call. Nevertheless, the option is available if a State chooses to use it, and several of the Northeastern States have informed EPA that they still plan to submit SIP revisions complying with

the NO

SIP call in the fall of 1999 for the benefit of the region as a whole.

To date, Rhode Island and Connecticut have voluntarily submitted SIP revisions under the NO

SIP call.

In support of their assertion that EPA may not proceed with action under section 126 before States have failed to comply with the NO

SIP call, commenters also misstate and misconstrue EPA's discussion in the May 25 NFR of a particular approach that might be viewed as impermissibly pressuring upwind States to adopt specific control measures. However, EPA rejected that approach in the May 25 NFR, and the situation that EPA viewed with concern in the May 25 NFR would not arise from today's action under section 126.

Other commenters on the section 126 proposal of October 21, 1998 had opposed EPA's proposal to deny petitions under section 126 where a State had complied with the NO

SIP call. Rather, they suggested, EPA should keep both the section 126 requirements and the NO

SIP call in place simultaneously. This would establish section 126 as a backstop to the NO

SIP call in case sources failed to comply with State regulatory requirements.

EPA rejected this suggestion on several grounds, some of which were the practical problems raised by subjecting sources in the same State to two contemporaneous, but potentially different, sets of control requirements. The commenters had suggested that if the sources controlled by the State failed to implement the reductions by May 1, 2003, the section 126 remedy should apply to the sources covered by EPA's rule. However, as EPA noted in the May 25 rule, if the State chose to obtain the reductions in a manner different from the section 126 remedy (imposing looser or no controls on the section 126 sources), the commenters' suggested approach could increase the overall control burden because in practice, the sources controlled by the State and the section 126 sources might both reduce emissions. Only the State-controlled sources would initially be under a legal obligation to control. But if those sources did not meet the May 1, 2003 control deadline, under the commenters' suggested approach, the section 126 sources would suddenly become liable for violations of the CAA. To avoid such a risk, the section 126 sources would also implement controls. Yet full implementation of the set of controls either mandated by the State and approved by EPA under section 110, or mandated by EPA under section 126, would be sufficient to eliminate the emissions that contribute significantly to downwind nonattainment or maintenance problems. Thus, the overall burden of achieving the emission reductions could be higher than necessary, depending upon the degree to which the two sets of control requirements were non-identical. (64 FR 28275-28276.)

Thus, in the May 25 NFR, EPA rejected the suggestion that the section 126 remedy should apply as a backstop to sources in a State even after that State had complied with the NO

SIP call and EPA had approved the revised SIP. EPA was concerned about the potential inefficiency of having sources simultaneously complying with two different sets of controls, and thereby actually controlling more emissions than required to correct the interstate transport problem. In the May 25 rule, EPA noted that setting up the rule to retain the section 126 remedy as a backstop in addition to an approved SIP revision might be viewed as effectively impermissibly pressuring States to adopt in their SIPs controls identical to the section 126 controls, as States might conclude that identical controls would minimize the overall compliance burden. (64 FR 28276.)

Today's rule would not create the situation discussed in the May 25 NFR. EPA is implementing the requirements of section 126 of the CAA in the absence of any currently effective requirement for upwind States to address the interstate pollution transport problem themselves. EPA is not making sources potentially subject to two contemporaneous, potentially conflicting, regulatory regimes. Depending upon the timing of a State's eventual compliance with the NO

SIP call, the section 126 requirements may affect the regulatory context, such that it may be more attractive than might otherwise have been the case for States in their SIPs to obtain emissions reductions from the section 126 sources. As discussed above, however, this does not impermissibly pressure the States to adopt any particular control remedy. There will always be numerous factors affecting complex policy decisions regarding pollution control, and EPA's actions under the CAA will often affect some of those factors. That cannot mean that EPA must refrain from implementing the CAA for fear of producing real world effects that may indirectly influence State policy choices.

EPA has not included in today's rule a provision to automatically withdraw the section 126 findings upon EPA approval of a later SIP revision that complies with the NO

SIP call, as ultimately modified after the litigation is concluded. Assuming EPA prevails in the NO

SIP call litigation, the court or EPA would need to establish a new deadline for SIP submissions, and the delay from the original September 1999 deadline may require a shift in the date for achieving emissions reductions beyond May 2003. If and when such a situation arises, EPA will address through rulemaking the effects of such later NO

SIP call SIP submissions on the section 126 findings. A number of reasons supported structuring the May 25 NFR to provide for an automatic withdrawal of the section 126 finding upon approval of a SIP revision complying with the NO

SIP call as promulgated. As discussed above, EPA believes it is appropriate, when consistent with the relevant statutory provisions, to structure the section 126 rule to allow for State rather than Federal regulation when either would equally effectively implement the statutory goal of producing timely reductions. The withdrawal provision also explicitly removes any possibility of an overlap between the Federal requirements under section 126 and State measures required by the NO

SIP call. For the situation where States are again subject to the NO

SIP call requirements, a State has adequately addressed the section 110(a)(2)(D)(i) requirement, EPA has approved the SIP revision, and the State requirements are in effect, the same considerations are likely to support withdrawal of the section 126 findings at that time. At this point, however, there are several key unknown variables, such as the final substance and timing of the requirements of the NO

SIP call. As a consequence, EPA does not believe it would be useful to try to establish a rule now that would address all future contingencies. EPA expects to revisit this issue upon resolution of the NO

SIP call litigation.

EPA's regulation of sources under section 126 also does not practically or legally coerce upwind States to comply with the NO

SIP call, as certain commenters claim. The commenters argue that States are forced to comply with the NO

SIP call to protect their sources from Federal regulation. They further argue that since the court has stayed the deadlines for States to submit SIP revisions under the NO

SIP call, such pressure on States circumvents the court's grant of the stay of the NO

SIP call requirements.

EPA disagrees that taking action under section 126 pressures States to comply with the NO

SIP call now. EPA is directly regulating certain sources that emit in violation of section

110(a)(2)(D) and contribute significantly to downwind nonattainment. EPA's regulation of these sources imposes no direct or indirect burden on the States in which these sources are located. In the likely event that many or most of the upwind States take no action on SIP revisions unless and until there are new deadlines for SIP submissions under the NO

SIP call, there will be no sanctions or any other penalties for their inaction.

Nor will such States need to make larger or different emissions reductions if they later impose State regulations to control NO

emissions. The only effect on States, as discussed above, is that EPA's action may make certain control options relatively more or less attractive than they are now, as section 126 sources will begin to invest in controls. The degree of such effects may depend in part on the timing of the State action and sources' compliance plans. The fact that upwind States have not yet chosen to control their emissions sources should not on policy grounds, and does not on legal grounds, bar downwind States from seeking to obtain emissions reductions directly from the contributing sources; nor does it bar EPA from acting to obtain those reductions in response to the States' request.

Given the particular remedy that EPA is requiring under section 126, the absence of any economic penalty or burden on a State that chooses to allow Federal regulation of sources in the State, rather than preempting the section 126 remedy by complying with the NO

SIP call, is especially evident here. The sources subject to the section 126 remedy are the bulk of those that EPA identified in the NO

SIP call as having the most highly cost-effective emissions reductions available.

Commenters also argue that the similarity between the remedy under section 126 and the proposed FIP for failure to comply with the NO

SIP call suggests that EPA is using section 126 in lieu of a FIP either to force States to comply with the SIP call regardless of the court's stay or to impose a Federal remedy. This, they assert, is contrary to the court's decision to impose a stay and removes the benefit that the stay provided for upwind States.

EPA is using section 126 to reduce interstate transport, as required by section 126, not to pressure States to comply with the NO

SIP call. The federal remedies under section 126 and the proposed FIPs are similar because they both are intended to correct a violation of the same provision, section 110(a)(2)(D), which prohibits emissions that contribute significantly to nonattainment or interfere with maintenance in downwind States. However, the statutory authorities for the two actions are distinct, and the actions have very different effects on States. EPA action under section 126 effectively relieves States of the necessity of regulating their sources that contribute to downwind nonattainment, and there are no penalties associated with EPA's assumption of responsibility. In contrast, if EPA promulgates a FIP under section 110(c) of the CAA following a State's failure to comply with a SIP call, after eighteen months, the State will become subject to sanctions until it corrects the deficiency. (See sections 110(m), 179; 63 FR 57452-57453.) These sanctions may take the form of reductions in or restrictions on the use of highway funds and/or requirements for new sources to increase the emission offset already required for their emissions. (See sections 110(m), 179; 63 FR 57452-57453.) The stay of the NO

SIP call deadline indefinitely stayed the requirement for upwind States to submit SIP revisions to comply with the NO

SIP call, which means that a State would not be subject to a FIP or sanctions, and EPA's action under section 126 in no way reimposes the SIP submission requirement or the penalty for inaction.

Certain commenters also point to EPA's retention of the provision for automatic withdrawal of the section 126 findings upon approval of a SIP revision complying with the NO

SIP call as an indicator of EPA pressure. They argue that because this provision allows States to preempt the section 126 remedy if they comply with the NO

SIP call, EPA retained the provision to induce States to comply with the NO

SIP call despite the judicial stay. The fact is, however, that under EPA's interpretation of the requirements of sections 110(a)(2)(D) and 126, a State's compliance with the NO

SIP call, as promulgated (including the May 1, 2003 deadline for sources to implement controls), would eliminate the violation of section 110(a)(2)(D) by sources in such State, and hence remove the basis for granting a section 126 petition with respect to such sources. This provision ensures that potentially nonidentical Federal and State remedies do not apply simultaneously to sources in a State. Also, where State and Federal remedies would be equally effective in reducing emissions, this provision allows State regulation required under the NO

SIP call to substitute for the Federal remedy under section 126, consistent with EPA's approach to implementing both provisions, as described above. Thus, this provision made sense at the time EPA issued the May 25 NFR, and nothing in the current circumstances suggests that EPA should now remove this option for States. Although the court has stayed the deadline for States to comply with the NO

SIP call, the court's action had no effect on a State's authority to revise its SIP if it so chooses. The court's decision also has no effect on EPA's authority to withdraw a section 126 finding. Since both of those authorities may still be exercised, there is no reason EPA should now remove the pre-existing provision.

As EPA has done no more than retain a pre-existing regulatory provision where there was no reason to remove it, this should not be misconstrued as demonstrating an intent to pressure States into complying with the NO

SIP call. EPA's retention of this element of the rule gives States an option. It is neither intended to force, nor has an impermissible practical effect of forcing (as discussed above), States to take that option.

C. Section 126(b) Findings Under the 1-Hour Ozone Standard

In the May 25 NFR, EPA determined that the petitions from Connecticut, Massachusetts, New York, and Pennsylvania are partially approvable under the 1-hour standard based on technical considerations. In aggregate for these four petitions, EPA made affirmative technical determinations of significant contribution under the 1-hour standard for large EGUs and large non-EGUs located in the District of Columbia and the following 12 States: Delaware, Indiana, Kentucky, Maryland, Michigan, North Carolina, New Jersey, New York, Ohio, Pennsylvania, Virginia, and West Virginia. In today's rule, EPA is making findings under section 126(b) that each of the new or existing sources, for which EPA made an affirmative technical determination, emits or would emit NO

in violation of the prohibition of CAA section 110(a)(2)(D)(i)(I) with respect to nonattainment of the 1-hour standard in the relevant petitioning State. The regulatory text of today's rule sets forth the findings with respect to each petition.

For the District of Columbia and eight of the affected States, the combined findings apply throughout the entire jurisdiction. However, the findings cover only parts of Indiana, Kentucky, Michigan, and New York. The findings for sources located in these States are being made with respect to the petitions from Connecticut and/or New York. In the NO

SIP call, EPA determined that the States of Indiana, Kentucky, and Michigan wholly significantly contribute to New York, and those three States plus New York wholly significantly contribute to Connecticut.

However, only parts of these upwind States were named in the petitions from Connecticut and New York and EPA must limit any section 126 findings to the geographic scope of the relevant petition. New York described the geographic scope of its petition as Ozone Transport Assessment Group (OTAG) Subregions 2, 6, and 7 and the portion of Ozone Transport Region extending west and south of New York. Connecticut described the geographic scope of its petition as OTAG Subregions 2, 6, and 7 and the portion of the Ozone Transport Region extending west and south of Connecticut. Maps showing the geographic scopes of these two petitions are shown in Figures F-2 and F-6 of Appendix F to part 52. Based on the geographic limits given in the petitions, the portions of the four partial States covered by today's 1-hour findings are as follows. For Indiana and Kentucky, the 1-hour findings affect sources located east of 86.0 degrees longitude. For Michigan, the 1-hour findings affect sources located in the area east of 86.0 degrees longitude and south of 45.0 degrees latitude. For New York, the 1-hour findings affect sources located in the area west of 71.8 longitude and south of 42.03 degrees latitude. The existing sources located in these States that are subject to the 1-hour findings are listed in Appendix A to part 97. The EPA notes the combined affirmative technical determinations under the 1-hour and 8-hour standards would cover the States of Indiana, Kentucky, Michigan, and New York in their entireties. However, as discussed below, EPA is indefinitely staying the 8-hour affirmative technical determinations.

D. Stay of Affirmative Technical Determinations Under the 8-Hour Ozone Standard

1. Affirmative Technical Determinations Under the 8-Hour Ozone Standard

Five of the eight petitioning States (Maine, Massachusetts, New Hampshire, Pennsylvania, and Vermont) requested that EPA evaluate their petitions under the 8-hour standard. In the May 25 NFR, EPA determined that all but the Vermont petition are partially approvable under the 8-hour standard based on technical considerations. In aggregate for the four approvable petitions, EPA made affirmative technical determinations of significant contribution under the 8-hour standard for large EGUs and large non-EGUs located in the District of Columbia and the following 19 States: Alabama, Connecticut, Delaware, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee, Virginia, and West Virginia. There are seven whole States and portions of four other States that are covered only under the 8-hour standard.

2. Stay of the 8-Hour Affirmative Technical Determinations

EPA continues to evaluate the effect of the D.C. Circuit's decision on the 8-hour NAAQS in

American Trucking,

as modified by the D.C. Circuit's October 29, 1999 opinion and order.

See American Trucking Ass'n

EPA,

175 F.3d 1027 (D.C. Cir. 1999),

reh'g granted in part and denied in part,

No. 97-1440 and consolidated cases (D.C. Cir. October 29, 1999). In addition, the Agency has recommended that the Department of Justice seek certiorari in the NAAQS litigation. Thus, EPA expects that the status of the eight-hour standard will be uncertain for some time to come.

In light of this uncertainty, EPA believes that EPA should not continue implementation efforts under section 126 under the 8-hour standard that could be construed as inconsistent with the court's ruling. Therefore, EPA is staying indefinitely the section 126 affirmative technical determinations based on the 8-hour standard, pending further developments in the NAAQS litigation. This stay affects the affirmative technical determinations under the 8-hour petitions filed by the States of Maine, Massachusetts, Pennsylvania, and New Hampshire. The State of Vermont also submitted an 8-hour petition; however, EPA fully denied that petition in the May 25 NFR. In aggregate for the 8-hour petitions, the stay affects the 8-hour affirmative technical determinations made for sources located in District of Columbia and the 19 States listed above in Section II.D.1. However, EPA is making findings under the 1-hour standard for sources located in the District of Columbia and at least portions of 12 of these States. The 1-hour findings are not affected by the 8-hour stay and therefore sources in these States (or portions thereof) are still subject to the control requirements in today's rule. The EPA made section 126 affirmative technical determinations only under the 8-hour NAAQS, and not under the 1-hour NAAQS, for sources located in the following seven States: Alabama, Connecticut, Illinois, Massachusetts, Missouri, Rhode Island, and Tennessee. In addition, EPA made section 126 affirmative technical determinations under the 8-hour standard, and not under the 1-hour NAAQS for sources located in portions of Indiana, Kentucky, Michigan, and New York. Sources located in the seven States and portions of the four other States listed above are not required to implement section 126 controls under this rule for so long as the 8-hour stay is in place. (See Section II.C. for a description of the portions of the four States that are covered by the 1-hour findings.)

Commenters generally supported the indefinite stay of the affirmative technical determinations based on the 8-hour NAAQS pending further developments in the NAAQS litigation. However, a number of commenters suggested that it would be better for EPA to deny the portions of the petitions based on the 8-hour standard, rather than just staying the affirmative technical determinations. EPA promulgated the affirmative technical determinations based on the 8-hour standard in a final rule. EPA has neither moved forward based on the 8-hour standard, nor revisited the May 25 rule, but has simply stayed this portion of the May 25 rule for the interim. As discussed above, the status of the 8-hour standard is still uncertain and the litigation may well continue. Given this uncertainty, EPA believes that it would not be appropriate for the Agency at this time to address the question of whether to grant or deny the portions of the section 126 petitions based on the 8-hour standard. Staying the affirmative technical determinations based on the 8-hour standard assures that the section 126 rule will impose no compliance burdens based on the 8-hour standard. Also, EPA would engage in a rulemaking to lift the stay and make findings based on the 8-hour standard, and in that rulemaking any issues on using the 8-hour standard as a basis for action under section 126 would be open for public comment.

E. Requirements for Sources for Which EPA Is Making a Section 126(b) Finding

The control requirements for sources for which EPA is making effective section 126(b) findings are discussed in Section III below. As discussed above, currently the control requirements would only apply to sources for which a finding is being made under the 1-hour standard.

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 3-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 in no case later than 3 years after the date of such finding.

The remedial requirements that EPA is finalizing in today's action for sources for which a section 126(b) finding is ultimately made would satisfy the requirements just quoted. First, EPA is requiring that sources for which a section 126(b) finding is ultimately made must comply with the requirements described in Section III to ensure that they do not emit in violation of the section 110(a)(2)(D)(i) prohibition. Second, the program EPA is finalizing serves 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.

III. Section 126 Control Remedy: The Federal NO

Budget Trading Program

A. Program Overview

1. Relationship Between Today's Action and the May 25, 1999 Section 126 Final Rule

In the October 21, 1998 section 126 proposal, EPA proposed a cap-and-trade program as a highly cost-effective approach to achieving necessary emissions reductions from large stationary sources. This remedy would apply to any new or existing major source or group of stationary sources for which a finding is made under section 126.

The cap-and-trade program is a proven method for achieving air quality objectives, while simultaneously providing compliance flexibility to sources. The freedom to pursue various compliance strategies (

i.e.,

switching fuels, installing pollution control technologies, or buying authorizations to emit from other firms) reduces the cost of compliance in a market-based program relative to costs under a command-and-control approach. Since emitting fewer tons than the allocation results in surplus allowances that may be sold on the market, pollution prevention becomes increasingly cost effective and innovation in control technology is encouraged. The appropriateness of trading as a section 126 remedy is comprehensively discussed in Section IV.A. of the preamble to the May 25, 1999 final rule (64 FR 28307-28309).

As explained in the October 21, 1998 section 126 proposal (63 FR 56309-56320), under a cap-and-trade system the Administrator sets both an emission limitation and compliance schedule for each unit subject to the program. The emission limitation for each unit is the requirement that the quantity of the unit's emissions during a specified period (here, the tonnage of NO

emissions during the ozone season) cannot exceed the amount authorized by the allowances (here, NO

allowances, each generally authorizing one ton of emissions) that the unit holds. Allowances are allocated to units subject to the program, and the total number of allowances allocated to all such units for each control period is fixed, or “capped”, at a specified level. The compliance schedule is set by establishing a deadline by which units must begin to comply with the requirement to hold allowances sufficient to cover emissions.

For purposes of complying with section 126, EPA translates emission limits into allowance requirements. Since EPA has the authority to establish emission limits under section 126, and since allowance requirements are equivalent to emission limits, EPA has the authority to promulgate allowance requirements and allocate allowances for purposes of section 126. The cap-and-trade program is a compliance mechanism that enables sources to make cost-effective decisions to meet their allowance requirements (which are their emission limits). Therefore, EPA adopted such a program as a cost-effective means of implementing the requirements of section 126.

Section 52.34(j) of the May 25, 1999 final rule established the cap-and-trade program as the general remedy for sources that will be subject to any future finding under section 126. In § 52.34(j), the EPA promulgated general parameters for the remedy, including the identification of the categories of sources that would be subject to the trading program, the specification of basic emission limitations for covered sources, total emissions reductions to be achieved by the program, and the compliance schedule. Section 52.34(j) also identified the methodology used to determine the NO

emissions budget (

i.e.,

the total amount of NO

allowances allocated to all units subject to the Federal NO

Budget Trading Program) and created a compliance supplement pool.

The regulatory language finalized in the May 25, 1999 section 126 final rule delineated the following general elements of the trading program, listed here:

• All large EGUs and large non-EGUs for which EPA makes a final finding under section 126(b) will be covered by and subject to the Federal NO

Budget Trading Program.

• Beginning May 1, 2003, the owner or operator of each source subject to the Federal NO

Budget Trading Program must hold NO

allowances available to that source in the ozone season that are not less than the total NO

emissions emitted by the source during that ozone season.

• The total tons of NO

allowances allocated under the trading program (other than any compliance supplement pool credits) will be equivalent to the sum of two tonnage limits:

(a) The total tons of NO

that large EGUs in the program would emit in an ozone season after achieving a 0.15 lb/mmBtu NO

emissions rate, assuming historic ozone season heat input adjusted for growth to the year 2007; plus

(b) The total tons of NO

that large non-EGUs in the program would emit in an ozone season after achieving a 60 percent reduction in ozone season NO

emissions compared to uncontrolled levels adjusted for growth to the year 2007.

• Compliance supplement pool credits will be available for distribution to affected sources, subject to specific State-by-State tonnage limits as established in the NO

SIP call.

In the May 25, 1999 section 126 final rule, EPA did not promulgate either the part 97 rule provisions providing the specific details of the trading program for the section 126 remedy or the unit-specific allocations (as explained in Section IV.C.2. of the preamble to the May 25, 1999 final rule). Under § 52.34(k), EPA specified the interim final emissions limitations that would be imposed in the event that the Administrator made a finding under section 126 pursuant to provisions of § 52.34(h), without first promulgating regulations setting forth the details of the NO

Budget Trading Program. The default emissions limitations were finalized under the “good cause” exemption to the Administrative Procedure Act's notice and comment requirements for rulemaking (see 5 U.S.C. 553(b)(B)). In the May 25, 1999 section 126 final rule, EPA emphasized that this default remedy would be superseded as a matter of law when EPA

promulgates the details of the Federal NO

Budget Trading Program (64 FR 28311). The final rule specified that EPA would issue these detailed elements by July 15, 1999.

In light of the two court decisions by the U.S. Court of Appeals detailed in Section I.A.1., EPA subsequently proposed to amend certain aspects of the section 126 final rule. In the June 24, 1999 “Proposal to Amend Two Respects of May 25, 1999 Final Rule”, the Agency proposed to remove the link between the NO

SIP call's submission deadline and the final action granting or denying the 126 petitions, and indefinitely stay the 8-hour portion of the rule pending further developments in the ongoing NAAQS litigation. In a separate but related action, EPA voluntarily stayed the effectiveness of the May 25, 1999 section 126 final rule on an interim basis until November 30, 1999, in order to respond to the Court's decisions. Together, these actions affected the July 15, 1999 objective for finalization of the trading program provisions. The Agency decided to issue the elements of the Federal NO

Budget Trading Program with the final section 126 findings.

Today's section 126 final rule amends the regulatory language that established the elements of the control remedy promulgated in the May 25, 1999 section 126 final rule (listed above). Specifically, today's rule replaces four of the elements from the May 25, 1999 final rule with related provisions under part 97, while one of the elements remains essentially unchanged. The replacements are substitutions, that are essentially equivalent to the May 25, 1999 section 126 regulations. First, the allowance-holding requirements in part 97 (

i.e.

, § 97.6(c)) replace the element in the May 25, 1999 final rule (§ 52.34(j)(1)) that required the owner or operator of each source to hold a number of NO

allowances not less than the total tons of NO

emitted by the source during the ozone season. Second, the default control provisions (§ 52.34(k)), mandated in the event that EPA failed to promulgate the trading program regulations, are replaced by part 97, and by the unit-specific allocations and compliance supplement pool provisions in particular. Third, the element that specified the methodology for calculating the total tons of NO

allowances allocated under the trading program (§ 52.34(j)) is replaced by the trading program budget provisions in part 97 (

i.e.

, § 97.40). The methodology for calculating the allocations was followed, so there is consequently no reason to retain the original language. Fourth, the element providing for the compliance supplement pool (§ 52.34(j)(4)) is embodied in and replaced by § 97.43, which addresses in detail the procedures for distributing the pool of allowances. Fifth, the element that requires those sources for which EPA makes a final finding under section 126(b) to be subject to a Federal NO

Budget Trading Program (§ 52.34(j)) remains essentially unchanged and is not replaced.

By specifying the details of the Federal NO

Budget Trading Program for the section 126 sources, today's action fulfills the regulatory obligations deferred under the May 25, 1999 section 126 final rule. As noted above, the May 25, 1999 final rule established general parameters for the cap-and-trade remedy, while today's final rule finalizes the specific elements of the trading program. In particular, the trading program's unit allocation methodology is described, and the procedure for distributing NO

allowances from the compliance supplement pool is provided. This final rule also specifies the combined list of existing sources affected by one or more petitions, along with finalized emissions limitations in the form of tradable unit-by-unit allowance allocations for 2003 to 2007. Also included in this final rule are new sources in the source categories that are significantly contributing with respect to the petitions from Connecticut, New York, and Pennsylvania. By specifying the unit-by-unit allowance allocations, today's action supersedes as a matter of law the interim emissions limitations established by the May 25, 1999 final rule in § 52.34(k). Because the interim emissions limitations are superseded, today's rule expressly removes § 52.34(k).

As noted earlier in this section, two decisions by the U.S. Court of Appeals in the District of Columbia have led the EPA to amend certain provisions of the May 25, 1999 section 126 final rule. The Court decision on the 8-hour ozone non-attainment standard has reduced the total number of States subject to the Federal NO

Budget Trading Program. Further, as described in Section III.B., certain portions of Michigan, Indiana, Kentucky, and New York have been removed from the scope of the original petitions, leaving only certain sources within these States subject to the trading program. Section III.B. of this preamble contains some discussion of the provisions of part 97 that have been modified to reflect removal of portions of these States.

2. Elements of the Federal NO

Budget Trading Program That Are Essentially the Same as the State NO

Budget Trading Program and the October 21, 1999 Section 126 Proposed Rule

As in the October 21, 1998 section 126 proposal, today's Federal NO

Budget Trading Program (40 CFR part 97) mirrors, to a large extent, the NO

Budget Trading Program for States (40 CFR part 96), which is the model trading program made available for States to adopt under the NO

SIP call. Today's promulgation of the final regulations for the Federal NO

Budget Trading Program moots § 52.34(j)(2), which is removed. The EPA notes that discussion of the evolution of the NO

Budget Trading Program is set forth in the proposed supplemental rule to the NO

SIP call at 63 FR 25921-25923, in the final NO

SIP call rule at 63 FR 57456-57457, and in the preamble to the May 25, 1999 section 126 final rule at 64 FR 28307-28308. While EPA has sought to keep the two trading programs similar, there are a number of differences which are more fully described in Section III.A.3., below. These differences arise from the need for Federal implementation of the section 126 program, rather than State implementation, and from the need to clarify or simplify certain provisions.

Under part 97, the program elements described below are essentially the same as the corresponding sections in part 96, which set forth the State NO

Budget Trading Program. Since EPA retains or relies upon many of the analyses and considerations undertaken in the NO

SIP call process to determine these program elements, many of these part 97 provisions are being used for the reasons set forth in the proposed NO

SIP call and the final NO

SIP call. Detailed information on the rationale for the part 96 provisions can be found in the preamble accompanying the proposed part 96 (63 FR 25917-25943) and the final part 96 (63 FR 57356-57491). Moreover, the provisions in part 97 are, for the most part, numbered in the same sequence as the corresponding provisions in part 96, so that, for example, § 97.2 and § 96.2 address the same subject matter. Cross references in these provisions and other provisions of part 97, of course, reflect the numbering for the appropriate regulatory provisions in part 97, rather than the numbering for provisions in part 96.

The following list identifies the sections of part 97 that are essentially the same as the corresponding sections in part 96 and in the October 21, 1998 section 126 proposed rule. Additional information on the following subparts

can be found in the preamble accompanying the proposed part 97 (63 FR 56310-56313).

Subpart A—NO

Budget Trading Program General Provisions

Sec.

97.3

Measurements, abbreviations, and acronyms.

97.5

Retired unit exemption.

97.6

Standard requirements.

97.7

Computation of time.

Subpart B—NO

Authorized Account Representative for NO

Budget Sources

97.10

Authorization and responsibilities of NO

authorized account representative.

97.11

Alternate NO

authorized account representative.

97.12

Changing NO

authorized account representative and alternate NO

authorized account representative; changes in owners and operators.

97.13

Account certificate of representation.

97.14

Objections concerning NO

authorized account representative.

Subpart C—Permits

97.20

General NO

Budget Trading Program permit requirements.

97.21

Submission of NO

Budget permit applications.

97.22

Information requirements for NO

Budget permit applications.

97.23

Budget permit contents.

97.24

Budget permit revisions.

Subpart D—Compliance Certification

97.30

Compliance certification report.

97.31

Administrator's action on compliance certifications.

Subpart F—NO

Allowance Tracking System

97.50

Allowance Tracking System accounts.

97.51

Establishment of accounts.

97.52

Allowance Tracking System responsibilities of NO

authorized account representative.

97.53

Recordation of NO

allowance allocations.

97.54

Compliance.

97.55

Banking.

97.56

Account error.

97.57

Closing of general accounts.

Subpart G—NO

Allowance Transfers

97.60

Submission of NO

allowance transfers.

97.61

EPA recordation.

97.62

Notification.

Subpart I—Individual Unit Opt-Ins

97.80

Applicability.

97.81

General.

97.82

authorized account representative.

97.83

Applying for NO

Budget opt-in permit.

97.84

Opt-in process.

97.85

Budget opt-in permit contents.

97.86

Withdrawal from NO

Budget Trading Program.

97.87

Change in regulatory status.

97.88

allowance allocations to opt-in units.

a. General Provisions.

For subpart A of part 97, EPA is using essentially the same measurements, abbreviations, and acronyms, retired unit exemption, standard requirements, and provisions for computation of time as those that apply in both part 96 and in the section 126 proposed rule. As noted above, the EPA has included these part 97 provisions for the reasons set forth in the proposed NO

SIP call (63 FR 25923-25927), the final NO

SIP call, and in the preamble to the October 21, 1998 section 126 proposal (63 FR 56312).

Section 97.5 sets forth the retired unit exemption and includes a few minor changes from part 96 and the section 126 proposed rule. First, § 97.5(c) is revised concerning NO

allowance allocations to a retired unit. New § 97.5(c)(2) provides (like the proposed § 97.5(c)(1)) that such a unit is allocated NO

allowances under subpart E but adds that the allocation will be recorded in a general account specified by the unit's owners and operators. This means that the Administrator will not need to maintain a unit account for a retired unit. This is reasonable since, under subpart E, allocations are updated and a retired unit's allocation will eventually become zero allowances. The paragraphs of § 97.5(c) are also reordered and then renumbered to reflect the new paragraph and the reordering. Second, § 97.5(c) contains minor word changes that clarify, but do not alter the substance of, the provisions. For example, minor word changes in § 97.5(c)(5)(i) and (ii) make it clear that a permitting authority may reduce the period, before a re-started retired unit resumes operation, by which an application for a title V or non-title V permit must be submitted for the unit.

Under the Federal NO

Budget Trading Program, the NO

Budget units and their owners, operators, and NO

Authorized Account Representatives (NO

AARs) must meet certain standard requirements set forth in § 97.6 of today's rule. The standard requirements incorporate the full range of program requirements by referencing other sections of the NO

Budget Trading Rule. The provisions of § 97.6 are essentially the same as in part 96 and the section 126 proposed rule. Section 97.6(c)(1) is revised to use the same language as the definition of “NO

Budget emission limitation” in § 97.2 since both provisions describe the requirement for NO

Budget units to hold allowances. Under § 97.6(c)(6) the Administrator, rather than the permitting authority, allocates NO

allowances under the Federal NO

Budget Trading Program. In addition, a few non-substantive clarifying revisions are made. For example, in § 97.6(c)(8), language is revised to mirror the language in § 97.23(b). Further, the reference in this and other sections to recordation of NO

allowances under subpart I is removed since recordation is addressed in subparts F and G, but not in subpart I.

b. NO

Authorized Account Representative.

The NO

AAR is the individual who is authorized to represent the owners and operators of each NO

Budget unit at a NO

Budget source in matters pertaining to the NO

Budget Trading Program. Subpart B of part 97 addresses the process for designating and changing the NO

AAR and the responsibilities of the NO

AAR and alternate NO

AAR, and is essentially the same as in part 96 and in the section 126 proposed rule. The EPA has included these part 97 provisions for the reasons set forth in the proposed NO

SIP call (63 FR 25927), the final NO

SIP call, and the October 21, 1998 section 126 proposal (63 FR 56312).

c. Permits.

Subpart C of part 97, which is essentially the same as in part 96 and in the section 126 proposed rule, addresses the administration of a permit, permit applications, permit contents, and permit revisions. As described in the preamble to the May 25, 1999 section 126 final rule, the regulations governing State permitting under title V define an “applicable requirement”, which must be reflected in a title V operating permit, as including “[a]ny standard or other requirement provided for in the applicable implementation plan approved or promulgated by EPA through rulemaking under title I of the Clean Air Act that implements the relevant requirements of the Clean Air Act, including any revisions to that plan promulgated in part 52 of this chapter.” (40 CFR 70.2).

Since today's rule is being promulgated under title I (

i.e.,

under section 126), the requirements of this rule are applicable requirements under § 70.2 and must be reflected in the title V operating permit of NO

Budget sources required to have such a permit. The EPA believes that the majority of NO

Budget sources will be required to have a title V permit. State and local air permitting authorities have EPA-approved title V operating permits programs and will be the permitting authorities for NO

Budget sources with title V permits, for which the trading program requirements will be applicable requirements. For any source that does not have a title V permit, such a permit is not required by subpart C. If a source

has a federally enforceable non-title V permit, the trading program requirements must also be incorporated into this permit. If a source does not have a federally enforceable permit, the requirements of the Federal NO

Budget Trading Rule will be federally enforceable without the federally enforceable permit. The EPA has included these part 97 provisions for the reasons set forth in the proposed NO

SIP call (63 FR 25927-25929), the final NO

SIP call, and the October 21, 1998 section 126 proposal (63 FR 56312).

Sections 97.20(a), 97.21(b), and 97.23(a) include a few minor word changes from part 96 and the October 21, 1998 section 126 proposal that clarify, but do not alter the substance of, the provisions. For example, minor word changes in § 97.20(a)(1) and (2) remove superfluous language listing the subjects that title V and non-title V regulations may address. By further example, in § 97.20(b), the phrase “including any draft or proposed NO

Budget permit, if applicable” is removed as superfluous and confusing. A permitting authority's title V or non-title V regulations may or may not use terms “draft” or “proposed” permits. This same revision is made in § 97.23(a) and § 97.85(a). As a further example, minor word changes in § 97.21(b)(1)(i) and (ii) make it clear that a permitting authority may reduce the period, before a new unit's commencement of operation, by which an application for a title V or non-title V permit must be submitted for the new unit. In addition, the phrase “as approved or adjusted by the permitting authority” is removed in § 97.23(a) because it is superfluous and confusing. The provision simply requires that a permit include the type of information,

i.e.,

the elements, listed in § 97.22.

One section, proposed § 97.24 addressing the effective date of the initial NO

Budget permit, is removed entirely, and proposed § 97.25 is renumbered (without any other changes) as § 97.24. Other provisions in part 97 already state the deadlines for compliance with the various requirements of the NO

Budget Trading Program. For example, § 97.6(c) states the date on which a unit's NO

emissions begin to be subject to the requirement to hold NO

allowances covering emissions, and § 97.21(b) explains the deadlines for submission of NO

Budget permit applications. Similarly, § 97.70 sets forth the dates on which the owner or operator of a unit must begin complying with the monitoring requirements. The “effective date” of the initial NO

Budget permit does not determine the compliance date for any program requirements and is therefore superfluous and somewhat confusing. In fact, for some permitting authorities, the issuance date of any permit is automatically the permit's effective date.

d. Compliance Certification.

Under subpart D, the NO

AAR must certify at the end of each control period that the unit was in compliance with the emissions limitation and other requirements of the Federal NO

Budget Trading Program. Sections 97.30 and 97.31 set forth essentially the same provisions for compliance certification reports as those in part 96 and the section 126 proposed rule. The EPA has included these part 97 provisions for the reasons set forth in the proposed NO

SIP call (63 FR 25929), the final NO

SIP call, and the October 21, 1998 section 126 proposal (63 FR 56312).

e. NO

Allowance Tracking System.

The NO

Allowance Tracking System is an automated system used to track NO

allowances held by NO

Budget units under the NO

Budget Trading Program, as well as those NO

allowances held by other organizations and individuals. Subpart F of part 97 addresses NO

allowance tracking system accounts, the account responsibilities of the NO

AAR, the recordation of NO

allowance allocations, the compliance process, banking, account error, and account closing, and is essentially the same as in both part 96 and the section 126 proposed rule. The EPA has included these part 97 provisions for the reasons set forth in the proposed NO

SIP call (63 FR 25933-25937), the final NO

SIP call, and the October 21, 1998 section 126 proposal (63 FR 56312). The banking, flow control, and compliance supplement pool provisions are described in Section III.B.3. of today's preamble.

With regard to accounts, the NO

AAR, and recordation, §§ 97.50(b), 97.51(b), and 97.53(b) include a few minor changes from part 96 and the October 21, 1998 section 126 proposed rule. Section 97.50(b) is revised to reflect the fact that for unit exemptions under § 97.4(a) (permit limit exemption) or § 97.5 (retired unit exemption), allocations can be recorded in general accounts. For example, the unclear language—stating that allocations are recorded each year for the control period after the last period for which allowances were allocated—is removed in a few places in § 97.53(b) and replaced by language stating that NO

allocations are recorded for the third control period after the last period from which compliance deductions were made. This is consistent with the Agency's expressed intent in the proposal and in today's final rule, that allowances be available to owners and operators three years in advance of the control period which allowances are allocated. However, proposed § 97.53(b) addresses only years when compliance deductions are made,

i.e.,

years starting after 2003. In order to ensure that allowances are also recorded in 2001, 2002, and 2003 three years ahead of the control period for which they were allocated, new § 97.53(b), (c), and (d) are added and proposed § 97.53(b) is renumbered as § 97.53(e). The new § 97.53(e) is reorganized to separately address recordation of allocations in compliance accounts or general accounts and of allocations to opt-in units, which are governed by § 97.88. Language in another section (§ 97.61(b)) that references § 97.53 is revised to reflect the changes in the latter section and is also simplified without changing its substance. The other changes clarify, but do not alter the substance of, the provisions. For example, in § 97.51(b) the provisions of proposed paragraph (b)(3) are moved to other paragraphs in the section, the paragraphs are renumbered, and descriptive titles are added at the beginning of some paragraphs in order to make it easier to identify the various requirements concerning general accounts.

The compliance provisions in §§ 97.54(a) through (e) are essentially the same as the provisions under the part 96 and the October 21, 1998 section 126 proposed rule. The procedure for deducting NO

allowances after the deadline for transferring allowances for compliance remains the same: NO

allowances available for compliance are deducted first from the compliance account of the unit involved and then, if necessary, from the overdraft account of the source at which the unit is located. The provision in § 97.54(e) allows the NO

AAR for units with a common stack to identify the percentage of emissions to attribute to each unit. This provision is reworded to clarify that the identified percentage applies to deductions for NO

emissions, and not to deductions for new units based on their actual heat input. For emissions in excess of allowances held and available for compliance as of the NO

allowance transfer deadline, the Administrator will deduct a number of NO

allowances equal to three times the number of the unit's excess emissions from the unit's compliance account or the overdraft account. This deduction will occur in the control period immediately following the period of excess emissions. The EPA believes that this automatic offset deduction ensures that

non-compliance with the NO

emission limitations of part 97 is a more expensive option than controlling emissions. The automatic offset provisions do not limit the ability of the permitting authority or EPA to take enforcement action under State law or the CAA.

EPA has included banking as a feature in the Federal NO

Budget Trading Program, with § 97.55 setting forth essentially the same provisions for banking and the management of banked allowances as specified in part 96 (in § 96.55(a)) and proposed § 97.55(a). Language in the newly numbered § 97.55(b) is revised to make it clear that banked allowances are those remaining in the account after completion of compliance deductions (except excess emission deductions under § 97.54(d)(2), which can be made at any time) and allocated for the control period for which the compliance deductions were made or an earlier control period. Banked allowances do not include allowances that are in the account but were allocated for future control periods. Banking may result in more NO

allowances being used, and therefore more NO

emissions, in one year than in another. Consequently, as in part 96 and the October 21, 1998 section 126 proposed rule, today's rule also contains a flow control mechanism to limit the variability in the timing of emissions. While the mechanism for flow control remains unchanged from part 96 and the section 126 proposal, the timing for implementation has been delayed by two years. Flow control cannot be triggered under today's rulemaking until 2005 (

i.e.

, after reconciliation in the 2004 compliance year).

Today's rule relocates the flow control provisions from proposed § 97.55(b) to final § 97.54(f), and the references in the flow control provisions to other provisions in § 97.54 are corrected to reflect this relocation. The proposed § 97.55(b) stated explicitly that the flow control provisions modify the provisions for compliance deductions under § 97.54. However, the relocation in § 97.54 and the accompanying minor wording changes make it clearer that flow control is part of the compliance process and that, for example, the 2-for-1 deductions under flow control can result in excess emissions under § 97.54(e). The wording changes also clarify that the 2-for-1 deduction requirement does not apply to the 3-for-1 deduction for excess emissions in § 97.54(e). As part of this clarification, parallel changes are made to the definitions of “NO

allowances” and “NO

Budget emissions limitation” in § 97.2, to reference § 97.54(f). Similarly, references elsewhere in part 97 to compliance deductions under § 97.54(b) or (e) are expanded to reference § 97.54(b), (e) or (f) as appropriate. See,

e.g.

, §§ 97.42(e) and (f). In addition, language is added to § 97.54(f)(3)(ii) stating expressly what is implied in proposed § 97.56(b),

i.e.

, that for allowances for which flow control is triggered, two such allowances (rather than one) authorize one ton of NO

emissions. Section § 97.54(f) also includes some minor revisions that clarify, but do not change the substance of, the proposal. For example § 97.55(b)(3)(iii) provided for multiplying the number of banked allowances, but failed to state that the multiplier was a ratio determined in § 97.55(b)(3)(i). The final rule corrects this omission.

Further, as described in the preamble to the May 25, 1999 final rule, commenters expressed concern that some sources may encounter unexpected problems installing controls by the May 1, 2003 deadline and that this could cause unacceptable risk for a source and its associated industry. While EPA continues to believe that this is not a valid concern, the Agency finalized the creation of a compliance supplement pool in the May 25, 1999 section 126 final rule. The pool increases compliance flexibility by providing additional allowances for compliance during the 2003 and 2004 ozone seasons. As described in section III.B.3.c., today's rule establishes the specific methodology for the distribution of NO

allowances from the compliance supplement pool (

i.e.,

distribution only for early reduction credits). This methodology is similar to the early reduction credit methodology for distribution in part 96 and the October 21, 1998 section 126 proposed rule, but the rule provision is relocated from proposed § 97.55(c) in subpart F to a new final § 97.43 in subpart E. Because the early reduction credit provisions involve the allocation of NO

allowances from the compliance supplement pool, the provisions are relocated to subpart E, which contains all the other provisions concerning allocation of NO

allowances. Section 97.43 includes minor changes from part 96 and the October 21, 1998 section 126 proposed rule. For example, the compliance supplement pool and early reduction credits are administered by the Administrator, rather than by the permitting authorities. Further, the section makes it clear that certain banked allowances for the Ozone Transport Commission (OTC) program qualify as early reduction credits. In addition, the section is reorganized so that the procedures for requesting early reduction credits other than for OTC banked allowances are in § 97.43(a), the procedures for requesting credits for OTC banked allowances are in § 97.43(b), and the procedures for reviewing requests and allocating pool allowances are in § 97.43(c). The deadline for submitting any request for early reduction credits is February 1, 2003 (rather than October 31 of the year of the early reduction). This deadline is made later in order to provide more time for quality assurance of emissions data for the control periods of the early reductions. The data is used to determine whether a unit qualifies for early reduction credits, and, if so, what amount of credits. The banking, flow control, and compliance supplement pool provisions are described in Section III.B.3. of today's preamble.

f. NO

Allowance Transfers.

Subpart G of part 97 addresses the submission, recordation, and notification of transfers of NO

allowances under the NO

Budget Trading Program. These provisions are essentially the same as those in part 96 and in the section 126 proposed rule. The EPA has included these part 97 provisions for the reasons set forth in the proposed NO

SIP call (63 FR 25937-25938), the final NO

SIP call, and the October 21, 1998 section 126 proposal (63 FR 56312).

Sections 97.61(a) and 97.62(a) and (b) include a few minor word changes from part 96 and the October 21, 1998 section 126 proposed rule that clarify, but do not alter the substance of, the provisions. For example, paragraph (a)(3) in § 97.61 requiring that NO

allowance transfers meet “all other requirements of this part” is eliminated. Because paragraphs (a)(1) and (2) already specifically reference all the requirements for NO

allowance transfers, paragraph (a)(3) is superfluous.

g. Opt-ins.

In subpart I of the final rule, EPA allows certain individual units that are located in a State for which a section 126 remedy is promulgated the opportunity to opt into the Federal program for purposes of the section 126 remedy. Subpart I of today's rule addresses the applicability requirements for opt-ins, allocations to opt-ins, procedures for applying for a NO

Budget opt-in permit, the process of reviewing and either approving or denying the permit, contents of the permit, procedures for withdrawing as an opt-in, and changes in regulatory status. The opt-in provisions under part 97 are essentially the same as in part 96 and in the section 126 proposed rule.

The provisions are described in section III.B.1.d. of today's preamble, and included for the reasons set forth in the supplemental proposed NO

SIP call (63 FR 25940-25942), the final NO

SIP call, and the October 21, 1998 section 126 proposal (63 FR 56320).

Subpart I of today's rule includes a few minor changes from part 96 and the October 21, 1998 section 126 proposal that reflect the Federal (rather than State) administration of the part 97 trading program, or that either clarify or streamline the opt-in provisions. Also, under §§ 97.84(a) through (c) of today's rule, NO

Budget opt-in permit applications are submitted to both the Administrator and the permitting authority, but the Administrator determines the sufficiency of the monitoring plan and allocates NO

allowances. Other examples of minor changes are: changes to § 97.84(g) and § 97.85(a) and (b) that parallel changes discussed above concerning proposed § 97.24 and proposed § 97.23(a) and (b); removal of proposed § 97.84(e) and (f) as unnecessarily duplicative of the comment period already provided under proposed § 97.84(d); and renumbering of the rest of the § 97.84 paragraphs. In addition, proposed § 97.87(b)(1)(iii) states that an opt-in that becomes a NO

Budget Unit under § 97.4 is treated as “commencing operation” when it becomes a NO

Budget Unit solely for purposes of allowance allocation. This implies that the unit's commence operation date does not change for other purposes,

i.e.,

for purposes of setting the deadline for monitoring and reporting emissions under subpart H. Clarifying language is added to § 97.87(b)(1)(iii) to make it explicit that the deadline for monitoring (which was one control season before the unit becomes an opt-in) is not changed. The unit must continue to monitor under subpart H. Further, the date for the Administrator's allocation of allowances to opt-in units is revised in § 97.88 from December 1 to April 1 in order to ensure that final emissions data from the preceding control period is available for calculating the allocations. The December 1 deadline is too soon after the control period for the Administrator to have completed review of the emissions data. April 1 is the same date by which the Administrator must allocate allowances for NO

Budget Units under § 97.4(a). Section 97.88(a) states that the Administrator will determine by order the allowance allocations. Finally, with regard to the term “operating”, used in subpart I, the definition of the term in § 97.2 is revised to clarify what type of information should be used to document whether a unit is “operating”. The type of information is the same as that used in making input-based NO

allowance allocations to existing units under § 97.42(a)(2).

Subpart I also includes a number of minor word changes from part 96 and the October 21, 1998 section 126 proposed rule that clarify, but do not alter the substance of, the provisions. For example, the statements in proposed § 97.80 that a “NO

Budget unit under § 97.4” cannot become an opt-in is revised. Final § 97.80 states that an opt-in cannot be a “NO

Budget unit under § 97.4(a)” or a unit exempt under § 97.4(b). Parallel changes are included in § 97.22(d)(1), § 97.4(b)(4)(viii), and § 97.5(c)(8). This provides clearer references to the two distinct parts of § 97.4, and, as discussed below in section III.B.3.d. of this preamble, is consistent with the requirement in the proposed rule that the unit cannot be exempt under § 97.5. As another example, § 97.84 is revised for clarity to refer consistently to “initial NO

Budget opt-in permits” (

i.e.

, opt-in permits that are not renewals of existing opt-in permits) and “draft NO

Budget opt-in permits for public comment.” A confusing reference to “final” opt-in permits is removed. (For clarity, references in part 97 to “§ 97.4” are generally changed to refer specifically to “§ 97.4(a)”). See,

i.e.

, § 97.2. By further example, the reference in proposed § 97.84(b) to “monitoring system availability” for monitoring under subpart H of part 97 (and part 75) is corrected to refer to “percent monitoring data availability”. The latter term is a more accurate description since a backup monitor can be used to make data available even if the primary monitor is unavailable. The same change is made in § 97.43(a)(1). Although part 75 (§ 75.32(a)(2)) has a formula for determining “percent monitor data availability”, that formula addresses availability for an entire year. For clarity, today's rule includes an analogous definition of the term, but is geared to a control period, rather than a year. The erroneous reference to “baseline heat rate” in § 97.84(c) is corrected to refer to “baseline heat input”. In addition, the phrase “NO

Budget opt-in source” is replaced, throughout subpart I and the other provisions of part 97, by the phrase “NO

Budget opt-in unit”. This reflects the fact that subpart I in part 96, the section 126 proposed rule, and today's rule each limit opt-ins to “units”,

i.e.

, fossil-fuel fired stationary boilers, combustion turbines, or combined cycle systems. Further, referring to “unit”, rather than “source”, when addressing opt-ins, establishes the same distinction between “unit” and “source” for opt-ins as already exists for non-opt-ins. This approach thereby removes the potential confusion in the section 126 proposed rule between a “NO

Budget source”, which is a facility that includes one or more NO

Budget units, and a “NO

Budget opt-in source”, one or more of which may be located at a single “NO

Budget source”. Finally, the final rule clarifies the provisions in § 97.87 requiring NO

authorized account representatives to ensure that the NATS account “contains” the allowances “necessary” to cover certain deductions,

i.e.,

enough allowances allocated for the appropriate years.

h. Audits.

While program audits are not explicitly required by part 97, EPA intends to perform the same types of audits discussed in the proposed NO

SIP call (63 FR 25942), the final NO

SIP call, and the October 21, 1998 section 126 proposal (63 FR 56313).

3. Elements of the Federal NO

Budget Trading Program That Differ From the State NO

Budget Trading Program and the Section 126 Proposed Rule

The following sections in part 97 incorporate certain differences from the corresponding sections in part 96 and in the October 21, 1998 section 126 proposed rule. Additional information on the following subparts can be found in the preamble accompanying the proposed part 97 (63 FR 56313-56321).

Subpart A—NO

Budget Trading Program General Provisions

Sec.

97.1

Purpose.

97.2

Definitions.

97.4

Applicability.

Subpart E—NO

Allowance Allocations

97.40

Trading program budget.

97.41

Timing requirements for NO

allowance allocations.

97.42

allowance allocations.

97.43

Compliance supplement pool.

Subpart H—Monitoring and Reporting

97.70

General requirements.

97.71

Initial certification and recertification procedures.

97.72

Out of control periods.

97.73

Notifications.

97.74

Recordkeeping and reporting.

97.75

Petitions.

97.76

Additional requirements to provide heat input data.

a. General Provisions.

Section 97.1 explains that part 97 sets forth the provisions for the Federal NO

Budget Trading Program, which addresses interstate transport of ozone and NO

. Section 96.1, of course, discusses the

State NO

Budget trading programs, which also address interstate transport of ozone and NO

. Section 96.1 also contains provisions that make part 96 applicable only if a State adopts the part 96 provisions and the Administrator approves the SIP containing the adoptions. These provisions are not necessary where EPA is adopting and administering the NO

Budget Trading Program under section 126.

EPA uses essentially the same definitions for part 97 as those that apply in part 96 and the section 126 proposed rule, with several exceptions. The definitions for the terms “allocate”, “NO

allowance”, “NO

Budget Trading Program”, and “State” are revised, and thus differ from those in part 96 and the October 21, 1998 section 126 proposed rule (63 FR 56313), in order to reflect the fact that the Federal NO

Budget Trading Program is a federally administered program under part 52 (rather than a State-administered program under part 51). For example, allocations are made by the Administrator, rather than the permitting authority. By further example, the section 126 rule covers certain States or portions of States, and this is reflected in the definition of State.

Some definitions (“electricity for sale under firm contract”, “fossil-fuel fired”, “potential electric output capacity”) are revised or added, and thus differ from those in both part 96 and the section 126 proposed rule, in order to be consistent with the inventories used in the NO

SIP call and the section 126 action. These definitions are discussed in section III.B.1. of this preamble. Some definitions (“commence commercial operation”, “commence operation”, “heat input rate”, “ NO

allowance”, “NO

allowance deduction”, “NO

Budget emissions limitation”, “NO

Budget opt-in source”, “percent monitor data availability”, “operating”, “trading program budget”) contain revisions, are added, or are replaced in order to reflect changes involving other sections of the rule, and are discussed elsewhere in this preamble. Also, for clarification, references to existing provisions in subpart I of part 97 are added to the first two of these definitions (“commence commercial operation” and “commence operation”). Subpart I includes provisions that address the substance of these definitions. Some definitions (“continuous emission monitoring system” or “CEMS”, “maximum potential NO

emission rate”) include minor word changes from part 96 and the section 126 proposed rule that clarify, but do not alter the substance of, the definitions. For example, the phrase “when such monitoring is required by subpart H of this part” is unnecessary and is removed from paragraphs (3) and (4) of “CEMS” definition since the definition states that all the listed items (including those in these paragraphs) are components of a CEMS “to the extent consistent with subpart H of this part”. As an additional example, the “NO

allowance” definition is amplified by language already in § 97.6(c), stating that allowances are a limited authorization and not a property right. The language clarifies that this applies to all NO

allowances, including those allocated to units under § 97.4(b) or § 97.5. By further example, the “NO

allowance transfer deadline” definition clarifies that this is the deadline by which transfers “must” be submitted for compliance. Finally, a few definitions (“account certificate of representation”, “compliance certification”, “unit load”, “utilization”, “trading program budget”) are removed as unnecessary. The first two terms and the last term are defined sufficiently in the rule provisions in which they are described (§§ 97.13, 97.30, and 97.40), and those provisions are then referenced when the terms are used elsewhere in part 97. The third and fourth terms are not used in part 97. In particular, since the term “utilization” in proposed part 97 is analogous to the term “heat input”, only “heat input” is used in today's rule. The term “utilization” is replaced by the term “heat input” throughout the rule, and the definition of “heat input” is revised to make clear the units of measure used in calculating heat input.

As described in the preamble to the May 25, 1999 section 126 final rule and the October 21, 1998 section 126 proposal, the Federal NO

Budget Trading Program applies to certain sources (

i.e.,

large electric generating units and large non-electric generating units) in those States for which EPA has made a finding granting a section 126 petition. For purposes of the section 126, this remedy applies to each large EGU or non-EGU located in any of the following nine jurisdictions: Delaware, District of Columbia, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, and West Virginia. As discussed in section II of this preamble, sources in certain portions of Michigan, Indiana, Kentucky, and New York are also affected by this remedy. Reflecting the types of units and the scope of jurisdictions to which today's section 126 action applies, the applicability provisions and accompanying definitions differ from those in part 96 and the October 21, 1998 section 126 proposed rule. The specific applicability provisions for the Federal NO

Budget Trading Program are discussed in section III.B.1. of this preamble.

In the NO

SIP call, EPA offered States the option of allowing units with a very low, federally enforceable permit limitation (

i.e.,

25 tons per season) to be exempt from the trading program, even though they were above the applicability threshold (63 FR 57463). The October 21, 1998 section 126 proposed rule also included this provision as § 97.4(b) in the Federal NO

Budget Trading Program. In today's final rule, § 97.4(b) is revised by reorganizing to resemble the order of provisions in the retired unit exemption (§ 97.8) and by adding some provisions to make it complete. In addition, provisions are added to § 97.4(b) and other sections to clarify the allocation of NO

allowances to, and the deduction of NO

allowances to account for, these units. Section 97.4(b) is more fully described in section III.B.1.c. of this preamble.

b. Allowance Allocations.

Section III.B.2. of today's preamble and subpart E of today's Federal NO

Budget Trading Program rule address the allocation of NO

allowances to NO

budget units for purposes of the section 126 remedy. As in the allocation-related provisions in part 96, part 97 includes provisions for the timing of allocation issuance, the methodology for issuing allocations, and the NO

allocations for new sources. However, in part 97 the Administrator, rather than the States, determines allocations, and while allocations are made initially based on a unit's heat input, some future allocations will be based on a unit's output. The Administrator will determine by order the allocations that are not specifically set forth in today's rule (in Appendices A and B). The significant differences between NO

allocations in part 96 and the section 126 proposal, on one hand, and today's rule, on the other hand, are discussed in section III.B.2. of this preamble. Some of the differences are minor word changes that clarify, but do not alter the substance of, the provisions. For example, in provisions where emission rates (in lbs/mmBtu) are used to calculate allowance allocations, language is added to show explicitly the conversion from pounds to tons since an allowance authorizes a ton of emissions. By further example, in provisions where allowances are adjusted so that their total will not exceed a fixed pool of allowances (

i.e.,

the State's allocation set-aside for new units), language is added to make it clear that rounding

will be used to ensure that the pool amount will not be exceeded. Appendices A and B of today's final rule contains specific unit-by-unit allocations, including allocations to units in the partial States for which a finding is being made. Finally, as discussed above, the compliance supplement pool and early reduction credit provisions are revised and relocated to the new § 97.43 in subpart E.

c. Emissions Monitoring and Reporting.

Subpart H of part 97 addresses monitoring and reporting requirements including general requirements, initial certification and recertification procedures, out of control periods, notifications, record keeping and reporting, and petitions. As described in the October 21, 1998 section 126 proposal, these provisions are similar to the monitoring-related provisions of part 96. Some of the differences among the subpart H provisions reflect the fact that administration of the monitoring requirements in the Federal NO

Budget Trading Program is overseen by EPA, rather than by EPA and the permitting authority as is the case in the State NO

Budget Trading Program. Some of the differences reflect changes made to simplify or clarify certain monitoring provisions, or to make them conform with part 75. Some of the differences reflect minor word changes from part 96 and the October 21, 1998 section 126 proposed rule that clarify, but do not alter the substance of, the provisions. Provisions for emissions monitoring and reporting are discussed in section III.B.4. of this preamble.

d. Program Administration.

The Federal NO

Budget Trading Program is administered by the EPA. The Agency identifies the units covered by the program and determines the NO

allowance allocations. The EPA receives and reviews monitoring plans and monitoring certification applications. As discussed above, States will still be responsible for permitting under title V.

4. Implications for Trading Between States Affected by a Finding Under Section 126, and States not Affected by a Finding

As noted in the May 25, 1999 section 126 final rule, the sources or groups of sources identified in the section 126 petitions are also sources for which EPA recommended that States adopt emission limitations and control strategies in response to the NO

SIP call (64 FR 28308). The NO

SIP call established an emissions budget for all sources of NO

emissions in all States determined by EPA to significantly contribute to non-attainment of the ozone NAAQS in any other jurisdiction. The section 126 rule, in contrast, is limited to major stationary sources or groups of stationary sources that are named in the section 126 petitions and found to be significantly contributing to non-attainment downwind. Despite this difference in the scope of the section 126 action and the final NO

SIP call, both actions have the same objective: to reduce the transport of ozone from sources in a given State that are found to be contributing significantly to non-attainment problems in another State.

In the NO

SIP call, EPA finalized a specific interpretation of the section 110(a)(2)(D)(i)(I) provisions concerning the test for significant contribution. Under this interpretation, the Agency determined to make any finding of significant contribution with respect to a specified amount of emissions by examining various factors, including the ambient impacts and the costs of mitigation. This weight-of-evidence approach to the designation of significant contribution determined which States include sources that emit NO

in amounts of concern. After EPA made findings based on consideration of these factors, the Agency required the States' SIPs to eliminate that specified amount (see 63 FR 57365). As proposed in the October 21, 1998 section 126 proposed rule and finalized in the May 25, 1999 section 126 final rule, EPA uses the same linkages it found in the NO

SIP call between specific upwind States and non-attainment problems in specific downwind States. The test of significant contribution, which includes both air quality modeling and cost-effectiveness demonstrations, consequently underlies both the NO

SIP call and the section 126 petitions as a threshold for source inclusion.

Based on the view that the SIP call and section 126 petitions rely on the same threshold criteria and are both designed to achieve the same goal, the EPA has sought to coordinate the two actions to the maximum extent possible (see the preamble to the final NO

SIP Call (63 FR 57362), and the October 21, 1999 section 126 proposal (63 FR 56310)). This coordination was designed to facilitate trading among sources in SIP call States that choose to participate in the NO

trading program and any section 126 sources that would be subject to a Federal NO

trading program. The Agency's analyses in conjunction with the NO

SIP call demonstrate that implementation of a single trading program with a uniform control level results in no significant changes in the location of emissions reductions, as compared to a non-trading scenario (see chapter six of the Regulatory Impact Analysis for the NO

SIP call). While the NO

SIP call analysis compared trading and non-trading scenarios involving 23 jurisdictions, the integration of a section 126 action (involving at most only 12 of these jurisdictions) and trading programs adopted voluntarily by States under the NO

SIP call may ultimately involve only a subset of the 23 jurisdictions. Nevertheless, like the NO

SIP call RIA, EPA's analyses in conjunction with the section 126 provide a strong indication that trading will not significantly change the location of reductions in the 12 affected jurisdictions, relative to the non-trading scenario (see chapter six of the Regulatory Impact Analysis for the section 126 rulemaking). Given that the location of emission reductions is essentially the same for both programs (

i.e.,

for the 23 jurisdictions under the NO

SIP call and the 12 jurisdictions under the section 126) compared to the two respective non-trading scenarios, the Agency is confident that trading will not significantly change the location of emissions reductions for the subset of the 23-jurisdictional area discussed above.

Therefore, trading among sources in States with a State NO

Budget Trading Program and sources in States with a Federal program will achieve the intended emissions reductions, while simultaneously providing both flexibility and cost savings to the covered sources. In addition, as noted in the May 25, 1999 section 126 final rule, if a State elects to submit a SIP that includes a trading program after EPA has already established a Federal NO

Budget Trading Program under a section 126 remedy, disruptions to sources that would shift from regulation under a section 126 remedy to regulation under a SIP will be minimized if the two programs are already integrated.

For the reasons stated above, today's rule allows sources in States or portions of States that are not subject to a finding under the section 126 to participate in trading with sources in States or portions of States covered by the rule, provided that the States or portions of States not covered by the rule meet the following conditions. Any State or portion of a State that voluntarily chooses to enter the section 126 trading system must be subject to the NO

SIP call and have an EPA-approved and administered State NO

Budget Trading Program generally modeled on part 96. This criteria includes the requirement that States revise their State Implementation Plans to meet the above provision. It also includes the

requirement that States meet the emissions control level under the final rule for the NO

SIP call (63 FR 57405-57418). In addition to ensuring that trading will not significantly change the location of emissions reductions, this condition ensures that all sources that could trade allowances will be meeting essentially the same program requirements (

i.e.,

allowance holding and trading, monitoring, and permitting requirements).

In order to allow trading between sources in States or portions of States subject to the section 126 and sources in States or portions of States subject to EPA-approved and administered State NO

Budget Trading Programs, the definition of “NO

allowance” is revised. The definition is different than in part 96 and the section 126 proposed rule. Under the revised definition, the term “NO

allowance” used in most provisions of part 97 includes NO

allowances issued “under a NO

Budget Trading Program established, and approved and administered by the Administrator, pursuant to § 51.121” (the rule under which State NO

Budget Trading Programs are approved for the NO

SIP call), as well as NO

allowances issued under part 97. For example, the account compliance and transfer provisions in subparts F and G of part 97 cover allowances issued under such State programs. The only part 97 provisions to which this expanded definition of “NO

allowance” does not apply are the provisions for allocation of NO

allowances to NO

Budget units and NO

Budget opt-in units (

i.e.,

§§ 97.41, 97.43, and 97.88). This is because NO

allowance allocations must be made from allowances available under the Federal NO

Budget Trading Program, not from allowances available under the State NO

Budget Trading Programs. In light of the more detailed definition of “NO

allowance” adopted in part 97, the definition of “NO

allowance” in § 52.34(a) is superceded and unnecessary. Part 52 uses the term “NO

allowance” only in provisions in § 52.34(j) and (k) that, as discussed herein, are themselves superceded by part 97. Consequently, the part 52 definition is removed.

B. Provisions of the Federal NO

Budget Trading Program

1. Applicability

Sources subject to the emission limitations and compliance schedule in the Federal NO

Budget Trading Program for the purposes of the section 126 petitions are those sources named by petitioning States and found by EPA to be emitting in violation of the prohibition of contributing significantly to non-attainment in a petitioning State. The section 126 remedy will apply to these sources in States for which a finding is triggered by today's final rule. These sources include any large electric generating unit (EGU) and any large non-electric generating unit (non-EGU) located in any of the following 13 jurisdictions: Delaware, District of Columbia, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, and West Virginia and certain portions of Indiana, Kentucky, Michigan, and New York.

a. EGU/Non-EGU Classification.

In §§ 52.34(a)(2) and (3) of the May 25, 1999 section 126 final rule, EPA provided definitions for the types of units covered by the Federal NO

Budget Trading Program (Part 97),

i.e.,

large EGU and non-EGU, and explained the basis for these definitions (63 FR 28295-8). Today's final rule adopts that part 52 language in the applicability criteria in § 97.4(a). The following provides a summary of the types of units covered by the Federal NO

Budget Trading Program under section 126.

Section 97.4(a)(1) describes a category of units, corresponding to “large electric generating units” under § 52.34(a)(2), that is covered by the Federal NO

Budget Trading Program. A large electric generating unit is, for units that commenced operation before January 1, 1997, a unit serving during 1995 or 1996 a generator that had a nameplate capacity greater than 25 MWe and produced electricity for sale under a firm contract to the electric grid. For units that commenced operation on or after January 1, 1997 and before January 1, 1999, a large EGU is a unit serving during 1997 or 1998 a generator that had a nameplate capacity greater than 25 MWe and produced electricity for sale under a firm contract to the electric grid. For units that commence operation on or after January 1, 1999, a large EGU is a unit serving at any time a generator that has a nameplate capacity greater than 25 MWe and produces electricity for sale.

Section 97.4(a)(2) describes a second category of units, corresponding to “large non-electric generating units” under § 52.34(a)(3), that are covered by the Federal NO

Budget Trading Program. A large non-electric generating unit is, for units that commenced operation before January 1, 1997, a unit that has a maximum design heat input greater than 250 mmBtu/hr and that did not serve during 1995 or 1996 a generator producing electricity for sale under a firm contract to the electric grid. For units that commenced operation on or after January 1, 1997 and before January 1, 1999, a large non-EGU is a unit that has a maximum design heat input greater than 250 mmBtu/hr and that did not serve during 1997 or 1998 a generator producing electricity for sale under a firm contract to the electric grid. For units that commence operation on or after January 1, 1999, a large non-EGU is a unit with a maximum design heat input greater than 250 mmBtu/hr that: At no time serves a generator producing electricity for sale; or at any time serves a generator producing electricity for sale, if any such generator has a nameplate capacity of 25 MWe or less and has the potential to use no more than 50 percent of the potential electrical output capacity of the unit.

In order to clarify which units are covered by the categories in § 97.4(a) and so are subject to the trading program, today's rule includes two new definitions. First, “electricity for sale under firm contract to the electric grid” is defined as where “the capacity involved is intended to be available at all times during the period covered by the guaranteed commitment to deliver, even under adverse conditions.” This definition is based on language from the

Glossary of Electric Utility Terms,

Edison Electric Institute, Publication No. 70-40 (definition of “firm” power). Generally, capacity “under firm contract to the electricity grid” is reported as capacity projected for summer or winter peak periods on EIA form 411 (Item 2.1 or 2.2, line 10). EPA has previously explained that it generally used EIA data to determine which non-utility units should be treated as non-electric utility generating units (63 FR 71223 and 64 FR 28298).

Second, “potential electrical output capacity” is defined as 33 percent of a unit's maximum design heat input capacity. This definition is the same as the definition in § 52.34(a) and is based on longstanding definitions of this same phrase in part 72 of the Acid Rain Program regulations (40 CFR 72.2 and 40 CFR part 72, Appendix D) and in the subpart D of the New Source Performance Standards (40 CFR 60.41a).

EPA notes that the EGU and non-EGU categories in § 97.4 differ from the corresponding categories in § 96.4 in part 96 of the model trading rule. In future guidance, EPA intends to clarify that it will accept the use in State trading program rules of the EGU and non-EGU categories in § 97.4 and that EPA will administer such a State program.

b. Fossil Fuel-fired Definition.

Today's final rule, like part 96 and the section 126 proposal, defines the term “unit” as

a stationary, fossil fuel-fired boiler, combustion turbine, or combined cycle system. However, today's rule adopts a definition of “fossil fuel-fired” that is different than the definition in part 96 and in proposed part 97.

Under the proposed definitions in § 97.2, boilers, combustion turbines, and combined cycle systems that operated but did not combust more than 50 percent fossil fuel in 1995 were generally not considered “fossil fuel-fired”, and thus were not “NO

budget units”. However, such facilities would subsequently become “fossil fuel-fired”, and “NO

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