Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS

Federal RegisterDec 3, 2015

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52, 78, and 97

[EPA-HQ-OAR-2015-0500; FRL-9935-25-OAR]

RIN 2060-AS05

Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Proposed rule.

SUMMARY:

The primary purpose of this proposal is to address interstate air quality impacts with respect to the 2008 ozone National Ambient Air Quality Standards (NAAQS). The EPA promulgated the Cross-State Air Pollution Rule (CSAPR) on July 6, 2011, to address interstate transport of ozone pollution under the 1997 ozone NAAQS and fine particulate matter (PM

2.5

) under the 1997 and 2006 PM

2.5

NAAQS. The EPA is proposing to update CSAPR to address interstate emission transport with respect to the 2008 ozone NAAQS. This proposal also responds to the July 28, 2015 remand by the Court of Appeals for the District of Columbia Circuit of certain states' ozone-season nitrogen oxides (NO

) emissions budgets established by CSAPR. This proposal also updates the status of certain states' outstanding interstate ozone transport obligations with respect to the 1997 ozone NAAQS, for which CSAPR provided a partial remedy.

This proposal finds that ozone season emissions of NO

in 23 eastern states affect the ability of downwind states to attain and maintain the 2008 ozone NAAQS. These emissions can be transported downwind as NO

or, after transformation in the atmosphere, as ozone. For these 23 eastern states, the EPA proposes to issue Federal Implementation Plans (FIPs) that generally update the existing CSAPR NO

ozone-season emissions budgets for electricity generating units (EGUs) and implement these budgets via the CSAPR NO

ozone-season allowance trading program. The EPA would finalize a FIP for any state that does not have an approved SIP addressing its contribution by the date this rule is finalized. The EPA is proposing implementation starting with the 2017 ozone season. In conjunction with other federal and state actions, these requirements would assist downwind states in the eastern United States in attaining and maintaining the 2008 ozone standard.

DATES:

Comments must be received on or before January 19, 2016. Under the Paperwork Reduction Act (PRA), comments on the information collection provisions are best assured of consideration if the Office of Management and Budget (OMB) receives a copy of your comments on or before January 4, 2016.

Public hearing.

The EPA will be holding one public hearing on the proposed Cross-State Air Pollution Rule Update for the 2008 Ozone National Ambient Air Quality Standards. The hearing will be held to accept oral comments on the proposal. The hearing will be held on December 17, 2015 in Washington, DC. The hearing will begin at 9 a.m. EST and will conclude at 8 p.m. EST. Additional information for this public hearing is available in a separate

Federal Register

notice and at

http://www2.epa.gov/airmarkets/proposed-cross-state-air-pollution-update-rule

ADDRESSES:

Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2015-0500, to the

Federal eRulemaking Portal:

http://www.regulations.gov

. Follow the online instructions for submitting comments. Once submitted, comments cannot be edited or withdrawn. The EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (

i.e.

on the web, cloud, or other file sharing system). For additional submission methods, the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit

http://www2.epa.gov/dockets/commenting-epa-dockets

FOR FURTHER INFORMATION CONTACT:

Mr. David Risley, Clean Air Markets Division, Office of Atmospheric Programs (Mail Code 6204M), Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; telephone number: (202) 343-9177; email address:

Risley.David@epa.gov

SUPPLEMENTARY INFORMATION:

Preamble Glossary of Terms and Abbreviations

The following are abbreviations of terms used in the preamble.

CAA or Act Clean Air Act

CAIR Clean Air Interstate Rule

CAMx Comprehensive Air Quality Model with Extensions

CBI Confidential Business Information

CEMS Continuous Emission Monitoring Systems

CFR Code of Federal Regulations

CSAPR Cross-State Air Pollution Rule

EGU Electric Generating Unit

EPA U.S. Environmental Protection Agency

FIP Federal Implementation Plan

FR Federal Register

GWh Gigawatt hours

ICR Information Collection Request

IPM Integrated Planning Model

Km Kilometer

lb/mmBtu Pounds per Million British Thermal Unit

LNB Low-NO

Burners

mmBtu Pounds per Million British Thermal Unit

MOVES Motor Vehicle Emission Simulator

NAAQS National Ambient Air Quality Standard

NBP NO

Budget Trading Program

NEI National Emission Inventory

Nitrogen Oxides

NODA Notice of Data Availability

NSPS New Source Performance Standard

OFA Overfire Air

2.5

Fine Particulate Matter

PPB Parts Per Billion

RIA Regulatory Impact Analysis

SC-CO

Social Cost of Carbon

SCR Selective Catalytic Reduction

SIP State Implementation Plan

SMOKE Sparse Matrix Operator Kernel Emissions

SNCR Selective Non-catalytic Reduction

Sulfur Dioxide

TSD Technical Support Document

Table of Contents

I. Executive Summary

A. Purpose of Regulatory Action

B. Major Provisions

C. Benefits and Costs

II. General Information

A. To Whom Does the Proposed Action Apply

III. Air Quality Issues Addressed and Overall Approach for the Proposed Rule

A. The Interstate Transport Challenge Under the 2008 Ozone Standard

1. Background on the Overall Nature of the Interstate Ozone Transport Problem

2. Events Affecting Application of the Good Neighbor Provision for the 2008 Ozone NAAQS

B. Proposed Approach To Address Ozone Transport Under the 2008 Ozone NAAQS via FIPS

1. The CSAPR Framework

2. Partial Versus Full Resolution of Transport Obligation

3. Why We Focus on Eastern States

4. Short-Term NO

Emissions

C. Responding to the Remand of CSAPR NO

Ozone-Season Emissions Budgets

D. Addressing the Status of Outstanding Transport Obligations for the 1997 Ozone NAAQS

IV. Legal Authority

A. EPA's Authority for the Proposed Rule

1. Statutory Authority

2. FIP Authority for Each State Covered by the Proposed Rule

V. Analyzing Downwind Air Quality and Upwind-State Contributions

A. Overview of Air Quality Modeling Platform

B. Emission Inventories

1. Foundation Emission Inventory Data Sets

2. Development of Emission Inventories for EGUs

3. Development of Emission Inventories for Non-EGU Point Sources

4. Development of Emission Inventories for Onroad Mobile Sources

5. Development of Emission Inventories for Commercial Marine Category 3 (Vessel)

6. Development of Emission Inventories for Other Nonroad Mobile Sources

7. Development of Emission Inventories for Nonpoint Sources

C. Air Quality Modeling to Identify Nonattainment and Maintenance Receptors

D. Pollutant Transport From Upwind States

1. Air Quality Modeling To Quantify Upwind State Contributions

2. Application of Screening Threshold

VI. Quantifying Upwind-State EGU NO

Reduction Potential to Reduce Interstate Ozone Transport for the 2008 NAAQS

A. Introduction

B. NO

Mitigation Strategies

1. EGU NO

Mitigation Strategies

2. Non-EGU NO

Mitigation Strategies

C. Uniform EGU Cost Thresholds for Assessment

D. Assessing Cost, EGU NO

Reductions, and Air Quality

E. Quantifying State Emissions Budgets

VII. Implementation Using the Existing CSAPR Ozone-Season Allowance Trading Program and Relationship to Other Rules

A. Background

B. FIP Requirements and Key Elements of the CSAPR Trading Programs

1. Applicability

2. State Budgets

3. Allocations of Emission Allowances

4. Variability Limits, Assurance Levels, and Penalties

5. Implementation Approaches for Transitioning the Existing CSAPR NO

Ozone-Season Program to Address Transport for a Newer NAAQS

6. Compliance Deadlines

7. Monitoring and Reporting and the Allowance Management System

8. Recordation of Allowances

C. Submitting a SIP

1. 2018 SIP Option

2. 2019 and Beyond SIP Option

3. SIP Revisions That Do Not Use the CSAPR Trading Program

4. Submitting a SIP to Participate in CSAPR for States Not Included in This Proposal

D. Title V Permitting

E. Relationship to Other Emission Trading and Ozone Transport Programs

1. Interactions With Existing CSAPR Annual Programs, Title IV Acid Rain Program, NO

SIP Call, 176A Petition, and Other State Implementation Plans

2. Other Federal Rulemakings

VIII. Costs, Benefits, and Other Impacts of the Proposed Rule

IX. Summary of Proposed Changes to the Regulatory Text for the CSAPR FIPs and CSAPR Trading Program

X. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review

B. Paperwork Reduction Act (PRA)

C. Regulatory Flexibility Act (RFA)

D. Unfunded Mandates Reform Act (UMRA)

E. Executive Order 13132: Federalism

F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments

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

H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution or Use

I. National Technology Transfer and Advancement Act (NTTAA)

J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations

K. Determinations Under Section 307(b)(1) and (d)

I. Executive Summary

The EPA promulgated the original Cross-State Air Pollution Rule (CSAPR) on July 6, 2011, to address interstate ozone transport under the 1997 ozone National Ambient Air Quality Standards (NAAQS). The EPA is proposing to update CSAPR to address interstate emission transport with respect to the 2008 ozone NAAQS. The 2008 ozone NAAQS is an 8-hour standard that was set at 75 parts per billion (ppb).

See

73 FR 16436 (March 27, 2008).

A. Purpose of Regulatory Action

The purpose of this rulemaking is to reduce interstate emission transport that significantly contributes to nonattainment, or interferes with maintenance, of the 2008 ozone NAAQS in the eastern U.S. To achieve this goal, this proposal would further limit ozone season (May 1 through September 30) NO

emissions from electric generating units (EGUs) in 23 eastern states.

Ozone causes a variety of negative effects on human health, vegetation, and ecosystems. In humans, acute and chronic exposure to ozone is associated with premature mortality and a number of morbidity effects, such as asthma exacerbation. Ozone exposure can also negatively impact ecosystems.

Studies have established that ozone occurs on a regional scale (

i.e.,

thousands of kilometers) over much of the eastern U.S., with elevated concentrations occurring in rural as well as metropolitan areas. To reduce this regional-scale ozone transport, assessments of ozone control approaches have concluded that NO

control strategies are most effective. Further, studies have found that EGU NO

emission reductions can be effective in reducing individual 8-hour peak ozone concentrations and in reducing 8-hour peak ozone concentrations averaged across the ozone season.

Specifically, studies indicate that EGUs' emissions, which are generally released higher in the air column through tall stacks and are significant in quantity, may disproportionately contribute to long-range transport of ozone pollution on a per-ton basis.

Summertime Zero-Out Contributions of regional NO

and VOC emissions to modeled 8-hour ozone concentrations in the Washington, DC; Philadelphia, PA, and New York City MSAs. “Contributions of regional air pollutant emissions to ozone and fine particulate matter-related mortalities in eastern U.S. urban areas”.

Butler, et al., “Response of Ozone and Nitrate to Stationary Source Reductions in the Eastern USA.”

Clean Air Act (CAA or the Act) section 110(a)(2)(D)(i)(I), sometimes called the “good neighbor provision,” requires states

to prohibit emissions that will contribute significantly to nonattainment in, or interfere with maintenance by, any other state with respect to any primary or secondary NAAQS.

The term “state” has the same meaning as provided in CAA section 302(d) which specifically includes the District of Columbia.

The EPA originally finalized CSAPR on July 6, 2011.

See

76 FR 48208 (August 8, 2011). CSAPR addresses the 1997 ozone NAAQS and the 1997 and 2006 fine particulate matter (PM

2.5

) NAAQS.

(See section IV for a discussion of CSAPR litigation and implementation.)

CSAPR did not evaluate the 2008 ozone standard because the 2008 ozone NAAQS was under reconsideration during the analytic work for the rule.

CSAPR provides a 4-step process to address the requirements of the good neighbor provision for ozone or PM

2.5

standards: (1) Identifying downwind receptors that are expected to have problems attaining or maintaining clean air standards (

i.e.,

NAAQS); (2) determining which upwind states contribute to these identified problems in amounts sufficient to “link” them to the downwind air quality problems; (3)

for states linked to downwind air quality problems, identifying upwind emissions that significantly contribute to downwind nonattainment or interfere with downwind maintenance of a standard by quantifying available upwind emission reductions and apportioning upwind responsibility among linked states; and (4) for states that are found to have emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS downwind, reducing the identified upwind emissions via regional emissions allowance trading programs. Each time the ozone or PM

2.5

NAAQS are revised, this process can be applied for the new NAAQS. In this action, the EPA proposes to apply this 4-step process to update CSAPR with respect to the 2008 ozone NAAQS.

Application of this process with respect to the 2008 ozone NAAQS provides the analytic basis for proposing to further limit ozone season EGU NO

emissions in 23 eastern states. However, the EPA seeks comment on this proposal from all states and stakeholders.

The requirements of this proposal are in addition to existing, on-the-books EPA and state environmental regulations, including the Clean Power Plan (CPP), which is included in the base case for this proposal. On August 3, 2015, President Obama and EPA announced the Clean Power Plan—a historic and important action on emissions that contribute to climate change. The CPP reduces carbon pollution from the power sector. Due to the compliance timeframes of the CPP, the EPA does not anticipate significant interactions with the CPP and the near-term ozone season EGU NO

emission reduction requirements under this proposal. However, states and utilities will be able to make their compliance plans with both programs in mind. Further discussion of the CPP is provided later in this proposal.

In addition to reducing interstate ozone transport with respect to the 2008 ozone NAAQS, this proposal also addresses the status of outstanding interstate ozone transport obligations with respect to the 1997 ozone NAAQS. Under CSAPR, the EPA promulgated FIPs for 25 states to address ozone transport under the 1997 NAAQS. For 11 of these states,

in the 2011 final rule, CSAPR quantified ozone season NO

emission reductions that were not necessarily sufficient to eliminate all significant contribution to downwind nonattainment or interference with downwind maintenance of the 1997 ozone NAAQS downwind. Relying on base case modeling completed for this proposed rulemaking, this action proposes to find that the reductions required by those 11 FIPs were in fact sufficient to eliminate such significant contributions to downwind air quality problems for that standard.

Alabama, Arkansas, Georgia, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Tennessee, and Texas. (See CSAPR Final Rule, 76 FR at 48220, and the CSAPR Supplemental Rule, 76 FR at 80760, December 27, 2011).

This action also responds to the July 28, 2015 opinion of the Court of Appeals for the District of Columbia (D.C. Circuit) remanding without vacatur 11 states' CSAPR phase 2 NO

ozone-season emissions budgets.

EME Homer City Generation, L.P.

EPA,

No. 795 F.3d 118, 129-30, 138 (

EME Homer City II

). This action proposes to respond to that remand by replacing the budgets invalidated by the D.C. Circuit for nine states and by removing two states from the CSAPR NO

ozone-season trading program.

The EPA proposes to replace emissions budgets for Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Texas, Virginia, and West Virginia. The EPA proposes to remove Florida and South Carolina from the CSAPR ozone-season NO

trading program.

On October 1, 2015, the EPA strengthened the ground-level ozone NAAQS, based on extensive scientific evidence about ozone's effects on public health and welfare. This proposal to reduce interstate emission transport with respect to the 2008 ozone NAAQS is a separate and distinct regulatory action and is not meant to address the CAA's good neighbor provision with respect to the 2015 ozone NAAQS final rule.

The Clean Air Act gives states the responsibility to address interstate pollution transport through good neighbor State Implementation Plans (SIPs). The EPA supports state efforts to submit good neighbor SIPs for the 2008 ozone NAAQS and has shared information with states to facilitate such SIP submittals. However, in the event that good neighbor SIPs are not submitted or cannot be approved, this rulemaking proposes Federal Implementation Plans (FIPs), as required under section 110(c)(1) of the CAA, to establish and implement EGU NO

reductions identified in this rule.

On July 13, 2015, the EPA published a rule finding that 24 states

failed to make complete submissions that address the requirements of section 110(a)(2)(D)(i)(I) related to the interstate transport of pollution as to the 2008 ozone NAAQS. See 80 FR 39961 (July 13, 2015) (effective August 12, 2015). The finding action triggered a 2-year deadline for the EPA to issue FIPs to address the good neighbor provision for these states by August 12, 2017.

The states included in this finding of failure to submit are: Alabama, Arkansas, California, Florida, Georgia, Iowa, Illinois, Kansas, Massachusetts, Maine, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Mexico, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Vermont, Virginia, and West Virginia.

The EPA would finalize a FIP for a state that we find has failed to submit a complete good neighbor SIP or for which we issue a final rule disapproving its good neighbor SIP.

The EPA proposes to align implementation of this proposed rule with relevant attainment dates for the 2008 ozone NAAQS, as required by the D.C. Circuit's decision

North Carolina

EPA.

The EPA's final 2008 Ozone NAAQS SIP Requirements Rule

revised the attainment deadline for ozone nonattainment areas currently designated as moderate from December 2018 to July 2018 in accordance with the D.C. Circuit's decision in

NRDC

EPA.

Because July 2018 falls during the 2018 ozone season, the 2017 ozone season will be the last full season from which data can be used to determine attainment of the NAAQS by the July 2018 attainment date. We believe that

North Carolina

compels the EPA to identify upwind reductions and implementation programs to achieve these reductions, to the extent possible, for the 2017 ozone season.

531 F.3d 896, 911-12 (D.C. Cir. 2008) (holding that EPA must coordinate interstate transport compliance deadlines with downwind attainment deadlines).

80 FR 12264, 12268; 40 CFR 51.1103.

777 F.3d 456, 469 (D.C. Cir. 2014).

In order to apply the first and second steps of the CSAPR 4-step process to interstate transport for the 2008 ozone NAAQS, the EPA used air quality modeling to project ozone concentrations at air quality monitoring sites to 2017. The EPA evaluated these modeling projections for the air quality monitoring sites and considered current ozone monitoring data at these sites to identify receptors that are anticipated to have problems attaining or maintaining the 2008 ozone NAAQS. The EPA then used air quality modeling to evaluate contributions from upwind states to these downwind receptors.

CSAPR and previous federal transport rules, such as the NO

SIP Call and the Clean Air Interstate Rule (CAIR)—discussed in detail below—addressed collective contributions of ozone pollution from states in the eastern U.S. These rules did not address contributions in the 11 western

contiguous United States.

There may be additional criteria to evaluate regarding collective contribution of transported air pollution in the West, such as those raised in EPA-state meetings to discuss approaches for determining how emissions in upwind states impact air quality in downwind states.

Given that the near-term 2017 implementation timeframe constrains the opportunity to conduct evaluations of additional criteria, the EPA proposes to focus this rulemaking on eastern states. This focus would not relieve western states of obligations to address interstate transport under the Act. The EPA and western states, working together, would continue to evaluate interstate transport on a case-by-case basis. While the EPA proposes to focus this rulemaking on eastern states, we seek comment on whether to include western states in this rule.

For the purpose of this action, the western U.S. (or the West) consists of the 11 western contiguous states of Arizona, California, Colorado, Idaho, Montana, New Mexico, Nevada, Oregon, Utah, Washington, and Wyoming.

For example, EPA-State meetings held in Research Triangle Park, NC on April 8, 2013 and Denver, Colorado on April 17, 2013.

To apply the third step of the 4-step process, the EPA assessed ozone season NO

reductions that are achievable for the 2017 ozone season. This assessment reveals that there is significant EGU NO

reduction potential that can be achieved for 2017 at reasonable cost, which would make meaningful and timely improvements in ozone air quality. The EPA applied a multi-factor test to evaluate EGU NO

reduction potential for 2017 and proposes to quantify EGU NO

ozone-season emissions budgets reflecting emission reductions from cost-effective pollution control measures achievable for the 2017 ozone season (estimated to obtain NO

reductions at a uniform cost of approximately $1,300 per ton).

The EPA is not proposing to quantify non-EGU emission reductions to reduce interstate ozone transport for the 2008 ozone NAAQS at this time because we are uncertain that significant NO

mitigation is achievable from non-EGUs for the 2017 ozone season. The EPA will continue to evaluate whether non-EGU emission reductions can be achieved on a longer time-frame at a future date. However, as explained later in this document, this proposal seeks comment on a preliminary evaluation of stationary non-EGU NO

mitigation potential and on allowing a state to include legacy NO

SIP Call non-EGUs in the CSAPR trading program by adopting a SIP revision that the EPA would approve as modifying the CSAPR trading program provisions with regard to that state.

To evaluate full elimination of a state's significant contribution to nonattainment and interference with maintenance, EGU and non-EGU ozone season NO

reductions should both be evaluated. To the extent air quality impacts persist after implementation of the NO

reductions identified in this rulemaking, a final judgment on whether the proposed EGU NO

reductions represent a full or partial elimination of a state's good neighbor obligation for the 2008 NAAQS is therefore subject to an evaluation of the contribution to interstate transport from additional non-EGU emission sectors.

However, the EPA believes that it is beneficial to implement, without further delay, EGU NO

reductions since they are achievable in the near term. Generally, notwithstanding that additional reductions may be required to fully address the states' interstate transport obligations, the proposed NO

emission reductions are needed for these states to eliminate their significant contribution to nonattainment and interference with maintenance of the 2008 ozone NAAQS and needed for downwind states with ozone nonattainment areas that are required to attain the standard by 2018.

The proposed requirements for one state, North Carolina, would fully eliminate that state's significant contribution to downwind air quality problems.

At the same time, the EPA also notes that section 110(a)(2)(D)(i)(I) of the CAA only requires upwind states to prohibit emissions that will significantly contribute to nonattainment or interfere with maintenance of the NAAQS in other states. It does not shift to upwind states the full responsibility for ensuring that all areas in other states attain and maintain the NAAQS. Downwind states also have control responsibilities because, among other things, the Act requires each state to adopt enforceable plans to attain and maintain air quality standards. The requirements established for upwind states through this proposed rule will supplement downwind states' local emission control strategies that, in conjunction with the certainty on maximum allowable upwind state EGU emissions that this proposed rule would provide, promote attainment and maintenance of the 2008 ozone NAAQS.

To meet the fourth step of the 4-step process (

i.e.,

implementation) the proposed FIPs contain enforceable measures necessary to achieve the emission reductions in each state. The proposed FIPs would require power plants in affected states (

i.e.,

states that significantly contribute to ozone transport in the east) to participate in the CSAPR NO

ozone-season allowance trading program (as modified by the proposed changes described elsewhere in this notice). CSAPR's trading programs and EPA's prior emissions trading programs provide a proven implementation framework for achieving emission reductions. In addition to providing environmental certainty (

i.e.,

a cap on emissions), these programs also provide regulated sources with flexibility in choosing compliance strategies. By using the existing CSAPR NO

ozone-season allowance trading program, the EPA is proposing to use an implementation framework that was shaped by notice and comment in previous rulemakings and reflects the evolution of these programs in response to court decisions. Further, this program is familiar to the EGUs that will be regulated under this rule, which means that monitoring, reporting, and compliance will be done as it already is under CSAPR's current ozone-season and annual programs.

One state, Kansas, would have a new CSAPR ozone season requirement under this proposal. Kansas currently participates in the CSAPR NO

and SO

annual programs. The remaining 22 states were included in the original CSAPR ozone-season program as to the 1997 ozone NAAQS.

These FIP requirements, if finalized, would begin with the 2017 ozone season and would continue for subsequent ozone seasons to ensure that upwind states included in this proposed rule meet their Clean Air Act obligation to address interstate emissions transport with respect to the 2008 ozone NAAQS for 2017 and future years. To the extent that emissions in an included state would otherwise exceed the promulgated emission level, these good neighbor EGU emissions limits will ensure that future emissions are consistent with states' ongoing good neighbor obligations. To the extent that emissions in an included state would be reduced for other reasons, for example planned lower-NO

emitting generation coming online, then those actions will help the state comply with its good neighbor requirements.

Generally, for states that would be affected by one of the FIPs proposed in this action and that are already included in the CSAPR NO

ozone-season trading program to address interstate ozone transport for the 1997 NAAQS, this action proposes to revise the existing part 97 regulations that define that program to incorporate lower EGU NO

ozone-season emissions budgets for each of the affected states in order to reduce ozone transport for the 2008

ozone NAAQS.

If finalized, compliance with these lower emissions budgets for the 2008 ozone NAAQS would also satisfy compliance with the existing higher emissions budgets for the 1997 ozone NAAQS. Therefore, the EPA proposes to replace the existing CSAPR emissions budgets (

i.e.

for the 1997 ozone NAAQS) for the affected states with the lower emissions budgets proposed to reduce ozone transport for the 2008 ozone NAAQS. Compliance with the final lower emissions budgets for the 2008 ozone NAAQS would supersede compliance with the CSAPR NO

ozone-season budgets for the 1997 ozone NAAQS. This action would therefore respond to the remand of

EME Homer City II

with respect to the NO

ozone-season emissions budgets for nine states

by replacing the budgets declared invalid by the court with revised budgets designed to address the 2008 ozone NAAQS.

One state, Kansas, would have a new CSAPR ozone season requirement under this proposal. The remaining 22 states were included in the original CSAPR ozone-season program as to the 1997 ozone NAAQS.

The EPA proposes to replace emissions budgets for Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Texas, Virginia, and West Virginia.

The proposed FIPs, if finalized, would not limit states' flexibility in meeting their CAA requirements, as any state included in this proposed rule can submit a good neighbor SIP at any time that, if approved by the EPA, could replace the FIP for that state. Additionally, CSAPR already provides states with the option to submit abbreviated SIPs to customize the methodology for allocating NO

ozone-season allowances while participating in the ozone-season trading program and we propose to continue that approach in this rule.

The EPA therefore proposes revisions to the Code of Federal Regulations, specifically 40 CFR part 97, subpart BBBBB (federal CSAPR NO

ozone-season trading program); 40 CFR 52.38(b) (rules on replacing or modifying the federal CSAPR NO

ozone-season trading program with a SIP); 40 CFR 52.540, 52.882, and 52.2140 (adding or limiting requirements for EGUs in certain individual states to participate in the CSAPR NO

ozone-season trading program); and 40 CFR 78.1 (modifying the list of decisions subject to administrative appeal procedures under part 78) to address interstate transport for the 2008 ozone NAAQS. In addition, various minor corrections are proposed to these CFR and other sections of parts 52, 78, and 97 relating to the CSAPR ozone-season and annual trading programs.

The 23 eastern states for which the EPA proposes to promulgate FIPs to reduce interstate ozone transport as to the 2008 ozone NAAQS are listed in Table I-1.

Table I-A-1—Proposed List of Covered States for the 2008 8-Hour Ozone NAAQS

State name

Alabama

Arkansas

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maryland

Michigan

Mississippi

Missouri

New Jersey

New York

North Carolina

Ohio

Oklahoma

Pennsylvania

Tennessee

Texas

Virginia

West Virginia

Wisconsin

For eastern states for which the EPA is not proposing FIPs in this action, the EPA notes that updates to the modeling for the final rule, made based on comments received on the proposal, could change the analysis as to which states significantly contribute to nonattainment or interfere with maintenance. In this regard, the final modeling could result in additional states being included in the final rule. Therefore, the EPA provides all data and methods necessary for all eastern states to comment on all aspects of this proposal in the Ozone Transport Policy Analysis TSD. This information includes EGU NO

ozone-season emissions budgets for all eastern states, in the event that final rule modeling demonstrates that additional states significantly contribute to downwind air quality problems.

The EPA notes that the annual PM

2.5

NAAQS was updated after CSAPR was promulgated (78 FR 306, January 15, 2013). However, this rulemaking does not address the 2012 PM

2.5

standard. The EPA acknowledges that, in

EME Homer City II,

the D.C. Circuit also remanded without vacatur the CSAPR phase 2 SO

emissions budgets as to four states. 795 F.3d at 129, 138. This proposal does not address the remand of these CSAPR phase 2 SO

annual emissions budgets. The EPA intends to address the remand of the phase 2 SO

annual emissions budgets separately. The existing CSAPR emissions budgets and implementation programs (CSAPR SO

annual and NO

annual requirements), which address interstate transport for the 1997 and 2006 PM

2.5

NAAQS, continue to apply at this time.

B. Major Provisions

The major provision of this action are described in the remainder of this preamble and organized as follows: Section III describes the human health and environmental context, the EPA's overall approach for addressing interstate transport, and the EPA's response to the remand of certain CSAPR NO

ozone-season emissions budgets; section IV describes the EPA's legal authority for this action; section V describes the air quality modeling platform and emission inventories that the EPA used to identify downwind receptors of concern and upwind state ozone contributions to those receptors; section VI describes the EPA's proposed approach to quantify upwind state obligations in the form of EGU NO

emissions budgets; section VII details the implementation requirements including key elements of the CSAPR allowance trading program and deadlines for compliance; section VIII describes the expected costs, benefits, and other impacts of this proposed rule; section IX discusses proposed changes to the existing regulatory text for the CSAPR FIPs and the CSAPR trading programs; and section X discusses the statutes and executive orders affecting this rulemaking. The EPA invites comment on this proposed rulemaking.

C. Benefits and Costs

The proposed rule would achieve near-term emission reductions from the power sector, lowering ozone season NO

in 2017 by 85,000 tons, compared to baseline 2017 projections without the rule.

Consistent with Executive Order 13563, “Improving Regulation and Regulatory Review,” we have estimated the costs and benefits of the proposed rule. Estimates here are subject to uncertainties discussed further in the Regulatory Impact Analysis (RIA) in the docket. The estimated net benefits of the proposed rule at a 3 percent discount rate are $700 million to $1.2 billion (2011$). The non-monetized benefits include reduced ecosystem effects and reduced visibility impairment. Discussion of the costs and benefits of the proposal is provided in preamble section VIII, below, and in the RIA,

which is found in the docket for this proposed rulemaking. The EPA's estimate of the proposed rule's costs and quantified benefits is summarized in Table I.C-1, below.

Table I.C-1—Summary of Compliance Costs, Monetized Benefits, and Monetized Net Benefits of the Proposed Rule for 2017 (2011$)

Description

Impacts at 3 percent discount rate ($ millions)

Annualized Compliance Costs

$93.

Monetized benefits

700 to 1,200.

Net benefits (benefits-costs)

620 to 1,200.

Total annualized social costs are estimated at a 3 percent discount rate. The social costs presented here reflect the EGU ozone season costs of complying with the proposed FIPs.

Total monetized benefits are estimated at a 3 percent discount rate. The total monetized benefits reflect the human health benefits associated with reducing exposure to ozone and PM

2.5

. It is important to note that the monetized benefits and co-benefits include many but not all health effects associated with pollution exposure. Benefits are shown as a range reflecting studies from Krewski

et al.

(2009) with Smith

et al.

(2009) to Lepeule

et al.

(2012) with Zanobetti and Schwartz (2008).

II. General Information

A. To whom does this action apply?

This proposed rule affects EGUs, and regulates the following groups:

Industry group

NAICS *

Fossil fuel-fired electric power generation

221112

* North American Industry Classification System.

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that the EPA is now aware could potentially be regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your entity is regulated by this action, you should carefully examine the applicability criteria found in 40 CFR 97.504. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the

FOR FURTHER INFORMATION CONTACT

section.

III. Air Quality Issues Addressed and Overall Approach for the Proposed Rule

A. The Interstate Transport Challenge Under the 2008 Ozone Standard

1. Background on the Overall Nature of the Interstate Ozone Transport Problem

Interstate transport of NO

emissions poses significant challenges with respect to the 2008 ozone NAAQS in the eastern U.S. and thus presents a threat to public health and welfare.

a. Nature of Ozone and the Ozone NAAQS

Ground-level ozone is not emitted directly into the air, but is created by chemical reactions between NO

and volatile organic compounds (VOC) in the presence of sunlight. Emissions from electric utilities and industrial facilities, motor vehicles, gasoline vapors, and chemical solvents are some of the major sources of NO

and VOC.

Because ground-level ozone formation increases with temperature and sunlight, ozone levels are generally higher during the summer. Increased temperature also increases emissions of volatile man-made and biogenic organics and can indirectly increase NO

emissions as well (

e.g.,

increased electricity generation for air conditioning).

The 2008 primary and secondary ozone standards are both 75 parts per billion (ppb) as an 8-hour level. Specifically, the standards require that the 3-year average of the fourth highest 24-hour maximum 8-hour average ozone concentration may not exceed 75 ppb.

b. Ozone Transport

Studies have established that ozone formation, atmospheric residence, and transport occurs on a regional scale (

i.e.,

thousands of kilometers) over much of the eastern U.S., with elevated concentrations occurring in rural as well as metropolitan areas. While substantial progress has been made in reducing ozone in many urban areas, regional-scale ozone transport is still an important component of peak ozone concentrations during the summer ozone season.

The EPA has previously concluded in the NO

SIP Call, CAIR, and CSAPR that, for reducing regional-scale ozone transport, a NO

control strategy would be most effective. NO

emissions can be transported downwind as NO

or, after transformation in the atmosphere, as ozone. As a result of ozone transport, in any given location, ozone pollution levels are impacted by a combination of local emissions and emissions from upwind sources. The transport of ozone pollution across state borders compounds the difficulty for downwind states in meeting health-based air quality standards (

i.e.,

NAAQS).

Recent assessments of ozone, for example those conducted for the October 2015 Regulatory Impact Analysis of the Final Revisions to the National Ambient Air Quality Standards for Ground-Level Ozone (EPA-452/R-15-007) continue to show the importance of NO

emissions on ozone transport. This analysis is in the docket for this proposal and can be also found at the EPA's Web site at:

http://www3.epa.gov/ozonepollution/pdfs/20151001ria.pdf.

There are five general categories of NO

emission sources: EGUs, non-EGU point, onroad mobile, non-road mobile, and area. Studies have found that EGU NO

emission reductions can be

effective in reducing individual 8-hour peak ozone concentrations and in reducing 8-hour peak ozone concentrations averaged across the ozone season. For example, a study that evaluates the effectiveness on ozone concentrations of EGU NO

reductions achieved under the NO

Budget Trading Program shows that regulating NO

emissions has been highly effective in reducing both ozone and dry-NO

concentrations during the ozone season. Further, this study indicates that EGU emissions, which are generally released higher in the air column through tall stacks and are significant in quantity, may disproportionately contribute to long-range transport of ozone pollution on a per-ton basis.

Another study shows that EGU NO

emissions can contribute between 5 ppb and 25 ppb to average 8-hour peak ozone concentrations in mid-Atlantic metropolitan statistical areas.

Butler,

et al.,

“Response of Ozone and Nitrate to Stationary Source Reductions in the Eastern USA”.

Summertime Zero-Out Contributions of regional NO

Previous regional ozone transport efforts, including the NO

SIP Call, CAIR, and CSAPR, required ozone season NO

reductions from EGUs to address interstate transport of ozone. The EPA has taken comment on regulating EGU NO

emissions to address interstate ozone transport in the notice-and-comment process for these rulemakings. The EPA received no significant adverse comments in any of these proposals regarding the rules' focus on ozone season EGU NO

reductions to address interstate ozone transport.

As described later in this notice, the EPA's analysis finds that the power sector continues to be capable of making NO

reductions at reasonable cost that reduce interstate transport with respect to ground-level ozone. EGU NO

emission reductions can be made in the near-term under this proposal by fully operating existing EGU NO

post-combustion controls (

i.e.,

Selective Catalytic Reduction and Selective Non-Catalytic Reduction)—including optimizing NO

removal by existing, operational controls and turning on and optimizing existing idled controls; installation of (or upgrading to) state-of-the-art NO

combustion controls; and shifting generation to units with lower NO

emission rates. Further, additional assessment reveals that these available EGU NO

reductions would make meaningful and timely improvements in ozone air quality.

The Clean Air Act's good neighbor provision requires states and the EPA to address interstate transport of air pollution that affects downwind states' ability to attain and maintain NAAQS. Other provisions of the CAA, namely sections 179B and 319(b), are available to deal with NAAQS exceedances not attributable to the interstate transport of pollution covered by the good neighbor provisions but caused by emission sources outside the control of a downwind state. These provisions address international transport and exceptional events, respectively.

19 20

The EPA recognizes that both in-state and upwind wildfires may contribute to monitored ozone concentrations. The EPA encourages all states to consider how the appropriate use of prescribed fire may benefit of public safety and health by resulting in fewer ozone exceedances for both the affected state and their neighboring states.

The CAA and the EPA's implementing regulations, specifically the Exceptional Events Rule at 40 CFR 50.14, allow for the exclusion of air quality monitoring data from regulatory determinations when events, including wildland fires, contribute to NAAQS exceedances or violations if they meet certain requirements, including the criterion that the event be not reasonably controllable or preventable. Wildland fires can be of two types: Wildfire (unplanned) and prescribed fire (planned). Under the Exceptional Events Rule, wildfires are considered, by their nature, to be not reasonably controllable or preventable. Because prescribed fires on wildland are intentionally ignited for resource management purposes, to meet the not reasonably controllable or preventable criterion, they must be conducted under a certified Smoke Management Program or employ basic smoke management practices. Both types of wildland fire must also satisfy the other rule criteria. The EPA will soon propose revisions to the Exceptional Events Rule and release a draft guidance document, which applies the proposed rule revisions to wildfire events that could influence ozone concentrations. These actions, which the EPA intends to finalize in the summer of 2016, further clarify the treatment of wildland fires under the Exceptional Events Rule.

c. Health and Environmental Effects

Exposure to ambient ozone causes a variety of negative effects on human health, vegetation, and ecosystems. In humans, acute and chronic exposure to ozone is associated with premature mortality and a number of morbidity effects, such as asthma exacerbation. In ecosystems, ozone exposure causes visible foliar injury, decreases plant growth, and affects ecosystem community composition. See the EPA's November 2014 Regulatory Impact Analysis of the Proposed Revisions to the National Ambient Air Quality Standards for Ground-Level Ozone (EPA-452/P-14-006), in the docket for this proposal and available on the EPA's Web site at:

http://www.epa.gov/ttn/ecas/regdata/RIAs/20141125ria.pdf

, for more information on the human health and welfare and ecosystem effects associated with ambient ozone exposure.

2. Events Affecting Application of the Good Neighbor Provision for the 2008 Ozone NAAQS

The 2008 revisions to the ozone NAAQS were promulgated on March 12, 2008.

See

National Ambient Air Quality Standards for Ozone, Final Rule, 73 FR 16436 (March 27, 2008). The revision of the NAAQS, in turn, triggered a 3-year deadline of March 12, 2011, for states to submit SIP revisions addressing infrastructure requirements under CAA sections 110(a)(1) and 110(a)(2), including the good neighbor provision. During this 3-year SIP development period, on September 16, 2009, the EPA announced

that it would reconsider the 2008 ozone NAAQS. To reduce the workload for states during the interim period of reconsideration, the EPA also announced its intention to propose staying implementation of the 2008 standards for a number of the requirements. On January 6, 2010, the EPA proposed to revise the 2008 NAAQS for ozone from 75 ppb to a level within the range of 60 to 70 ppb.

See

75 FR 2938 (January 19, 2010). The EPA indicated its intent to issue final standards based upon the reconsideration by summer 2011.

Fact Sheet. The EPA to reconsider Ozone Pollution Standards.

http://www.epa.gov/groundlevelozone/pdfs/O3_Reconsideration_FACT%20SHEET_091609.pdf.

On July 6, 2011, the EPA finalized CSAPR, in response to the DC Circuit's remand of the EPA's prior federal transport rule, CAIR.

See

76 FR 48208 (August 8, 2011). CSAPR addresses ozone transport under the 1997 ozone NAAQS, but does not address the 2008 ozone standard, because the 2008 ozone NAAQS was under reconsideration during the analytic work for the rule.

On September 2, 2011, consistent with the direction of the President, the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget returned the draft final 2008 ozone rule EPA had developed upon reconsideration to the Agency for further consideration.

In view of this direction and the timing of the agency's ongoing periodic review of the ozone NAAQS required under CAA section 109 (as announced on September 29, 2008), the EPA decided to coordinate further proceedings on its voluntary reconsideration rulemaking of the 2008

ozone standard with that of its ongoing periodic review of the ozone NAAQS.

Implementation for the original 2008 ozone standard was renewed. However, during this time period, a number of legal developments pertaining to the EPA's promulgation of CSAPR created uncertainty surrounding the EPA's statutory interpretation and implementation of the good neighbor provision.

See

Policy Assessment for the Review of the Ozone National Ambient Air Quality Standards, August 2014,

http://www.epa.gov/ttn/naaqs/standards/ozone/data/20140829pa.pdf,

at 1-9.

Id.

On August 21, 2012, the D.C. Circuit issued a decision in

EME Homer City Generation, L.P.

EPA

addressing several legal challenges to CSAPR and holding, among other things, that states had no obligation to submit good neighbor SIPs until the EPA had first quantified each state's good neighbor obligation.

According to that decision, the submission deadline for good neighbor SIPs under the CAA would not necessarily be tied to the promulgation of a new or revised NAAQS. While the EPA disagreed with this interpretation of the statute and sought review of the decision in the D.C. Circuit and the U.S. Supreme Court, the EPA complied with the D.C. Circuit's ruling during the pendency of its appeal. In particular, the EPA indicated that, consistent with the D.C. Circuit's opinion, it would not at that time issue findings that states had failed to submit SIPs addressing the good neighbor provision.

EME Homer City Generation, L.P.

EPA,

696 F.3d 7, 31 (D.C. Cir. 2012).

See, e.g.,

Memorandum from the Office of Air and Radiation former Assistant Administrator Gina McCarthy to the EPA Regions, “Next Steps for Pending Redesignation Requests and State Implementation Plan Actions Affected by the Recent Court Decision Vacating the 2011 Cross-State Air Pollution Rule,” November 19, 2012; 78 FR 65559 (November 1, 2013) (final action on Florida infrastructure SIP submission for 2008 8-hour ozone NAAQS); 78 FR 14450 (March 6, 2013) (final action on Tennessee infrastructure SIP submissions for 2008 8-hour ozone NAAQS); Final Rule, Findings of Failure To Submit a Complete State Implementation Plan for Section 110(a) Pertaining to the 2008 Ozone National Ambient Air Quality Standard, 78 FR 2884 (January 15, 2013).

On January 23, 2013, the Supreme Court granted the EPA's petition for certiorari.

During 2013 and early 2014, as the EPA awaited a decision from the Supreme Court, the EPA initiated efforts and technical analyses aimed at identifying and quantifying state good neighbor obligations for the 2008 ozone NAAQS. As part of this effort, the EPA solicited stakeholder input and also provided states with, and requested input on, emissions inventories for 2011 (78 FR 70935, November 27, 2013) and inventory projections for 2018 (79 FR 2437, January 14, 2014).

EPA

EME Homer City Generation, L.P.,

133 S. Ct. 2857 (2013) (granting the EPA's and other parties' petitions for certiorari).

On April 29, 2014, the Supreme Court reversed the D.C. Circuit's

EME Homer City

opinion on CSAPR and held, among other things, that under the plain language of the CAA, states must submit SIPs addressing the good neighbor provision within 3 years of promulgation of a new or revised NAAQS, regardless of whether the EPA first provides guidance, technical data, or rulemaking to quantify the state's obligation.

Thus, the Supreme Court affirmed that states have an obligation in the first instance to address the good neighbor provision after promulgation of a new or revised NAAQS, a holding that also applies to states' obligation to address transport for the 2008 ozone NAAQS.

EPA

EME Homer City Generation, L.P.,

134 S. Ct. 1584, 1600-01 (2014).

The Supreme Court holding affirmed that states were required to submit SIPs addressing the good neighbor provision with respect to the 2008 ozone NAAQS by March 12, 2011. To the extent that states have failed to submit SIPs to meet this statutory obligation, then the EPA has not only the authority, but the obligation, to promulgate FIPs to address the CAA requirement.

Following the remand of the case to the D.C. Circuit, the EPA requested that the court lift the CSAPR stay and toll the CSAPR compliance deadlines by three years. On October 23, 2014, the D.C. Circuit granted the EPA's request. The EPA issued an interim final rule to revise the regulatory deadlines in CSAPR to reflect the three-year delay in implementation. Accordingly, CSAPR phase 1 implementation began in 2015 and phase 2 will begin in 2017.

79 FR 71663 (December 3, 2014).

On March 6, 2015, the EPA's final 2008 Ozone NAAQS SIP Requirements Rule

revised the attainment deadline for ozone nonattainment areas currently designated as moderate to July 2018. In order to demonstrate attainment by the deadline, the demonstration would have to be based on design values calculated using 2015 through 2017 ozone season data, since the July 2018 deadline does not afford a full ozone season of measured data. The EPA established this deadline in the 2015 Ozone SIP Requirements Rule after previously establishing a deadline of December 31, 2018, that was vacated by the D.C. Circuit Court in

Natural Resources Defense Council

EPA

80 FR 12264, 12268 (Mar. 6, 2015); 40 CFR 51.1103.

777 F.3d 456 (D.C. Cir. 2014).

On July 28, 2015, the D.C. Circuit issued its opinion regarding CSAPR on remand from the Supreme Court,

EME Homer City II,

795 F.3d 118. The court largely upheld CSAPR, but remanded to EPA without vacatur certain states' emissions budgets for reconsideration. This proposal responds to the remand of certain CSAPR NO

ozone-season emissions budgets to the EPA for reconsideration; see section C below. Regarding the remand of CSAPR phase 2 SO

annual emissions budgets as to four states, this proposal does not address that particular aspect of the D.C. Circuit opinion. The EPA intends to address the remand of the phase 2 SO

annual emissions budgets separately.

B. Proposed Approach To Address Ozone Transport Under the 2008 Ozone NAAQS via FIPs

1. The CSAPR Framework

CSAPR establishes a 4-step process to address the requirements of the good neighbor provision.

The EPA proposes to follow the same steps for this rulemaking with respect to the 2008 ozone NAAQS. These steps are: (1) Identifying downwind receptors that are expected to have problems attaining or maintaining clean air standards (

i.e.,

NAAQS); (2) determining which upwind states contribute to these identified problems in amounts sufficient to “link” them to the downwind air quality problems; (3) for states linked to downwind air quality problems, identifying upwind emissions that significantly contribute to nonattainment or interfere with maintenance of a standard by quantifying available upwind emission reductions and apportioning upwind responsibility among linked states; and (4) for states that are found to have emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS downwind, reducing the identified upwind emissions via regional emissions allowance trading programs.

See

CSAPR, Final Rule, 76 FR 48208 (August 8, 2011).

Step 1—In the original CSAPR, downwind air quality problems were assessed using modeled future air quality concentrations for a year aligned with attainment deadlines for the NAAQS considered in that rulemaking. The assessment of future air quality conditions generally accounts for on-the-books emission reductions

and the most up-to-date forecast of future emissions in the absence of the transport policy being evaluated (

i.e.,

base case conditions). The locations of

downwind air quality problems are identified as those with receptors that are projected to be unable to attain (

i.e.,

nonattainment receptor) or maintain (

i.e.,

maintenance receptor) the standard. This proposal follows this same general approach. However, the EPA also proposes to consider current monitored air quality data to further inform the projected identification of downwind air quality problems for this proposal. Further details and application of step one for this proposal are described in section V of this notice.

Since CSAPR was designed to replace CAIR, CAIR emissions reductions were not considered “on-the-books.”

Step 2—The original CSAPR used a screening threshold of one percent of the NAAQS to identify upwind states that were “linked” to downwind air pollution problems. States were identified as needing further evaluation for actions to address transport if their air quality impact

was greater than or equal to the threshold for at least one downwind problem receptor (

i.e.,

nonattainment or maintenance receptor identified in step 1). We evaluated a given state's contribution based on the average relative downwind impact calculated over multiple days. States whose air quality impacts to all downwind problem receptors were below this threshold did not require further evaluation for actions to address transport—that is, these states were determined to make insignificant contributions to downwind air quality problems and therefore have no emission reduction obligations under the good neighbor provision. The EPA used this threshold because much of the ozone nonattainment problem in the eastern half of the United States results from relatively small contributions from a number of upwind states. Use of the one percent threshold for CSAPR is discussed in the preambles to the proposed and final CSAPR rules.

See

75 FR 45237 (Aug. 2, 2010); 76 FR 48238, (Aug. 8, 2011). The EPA proposes to use this same approach for this rule. Application of step two for this proposal is described in section V of this notice.

For ozone the impacts would include those from volatile organic compounds (VOC) and NO

and from all sectors.

Step 3—For states that are linked in step 2 to downwind air quality problems, the original CSAPR used a multi-factor test to evaluate emission reductions available in upwind states by application of uniform cost thresholds. The EPA evaluated NO

reductions that were available in upwind states by applying a marginal cost of NO

emissions to entities in these states. This approach, in essence, simulated placing an economic value on NO

emissions and evaluated emission reduction potential that was cost-effective under this constraint. The EPA evaluated NO

reduction potential, cost, and downwind air quality improvements available at several cost thresholds in the multi-factor test. This evaluation quantified the magnitude of emissions that significantly contribute to nonattainment or interfere with maintenance of a NAAQS downwind and apportioned upwind responsibility among linked states, an approach upheld by the U.S. Supreme Court in

EPA

EME Homer City

The EPA proposes to apply this approach to identify NO

emission reductions necessary to reduce interstate transport for the 2008 ozone NAAQS, updated to also explicitly consider over-control. For this proposal, the multi-factor test is also used to evaluate possible over-control by evaluating if an upwind state is linked solely to downwind air quality problems that are resolved at a given cost threshold, or if upwind states would reduce their emissions at a given cost threshold to the extent that they would no longer meet or exceed the 1% air quality contribution threshold. This evaluation of cost, NO

reductions, and air quality improvements, including its consideration of potential over-control, results in the EPA's determination of upwind emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS downwind. Next, emissions budgets are determined. Emissions budgets are remaining allowable emissions after the elimination of emissions identified as significantly contributing to nonattainment or interfering with maintenance of the standard downwind. The EPA's assessment of significant contribution to nonattainment and interference with maintenance and development of EGU NO

ozone-season emissions budgets is described in section VI of this notice.

EPA

EME Homer City Generation, L.P.,

134 S. Ct. 1584, 1606-07 (2014).

Step 4—Finally, the original CSAPR used allowance trading programs to implement the necessary emission reductions. Specifically, the emissions budgets identified in step 3 were implemented via a tradable allowance program. Emissions allowances were issued to units covered by the trading program and the allowances can be turned in at the close of each compliance period to account for a specified amount of ozone season EGU NO

emissions. Additionally, the original CSAPR included variability limits, which define the amount by which collective emissions within a state may exceed the level of the budgets in a given year to account for variability in EGU operations. CSAPR set assurance levels equal to the sum of each state's emissions budget plus its variability limit. The original CSAPR included assurance provisions that help to assure that state emissions remain below the assurance levels in each state by requiring additional allowance surrenders in the instance that emissions in the state exceed the state's assurance level. This limited interstate trading approach is responsive to previous court decisions (see discussion in section IV of this preamble) and has been upheld in subsequent litigation regarding CSAPR. The EPA proposes to apply this approach to reduce interstate transport for the 2008 ozone NAAQS. Implementation using the CSAPR allowance trading program is described in section VII of this notice.

2. Partial Versus Full Resolution of Transport Obligation

Given the unique circumstances surrounding the implementation of the 2008 ozone standard that have delayed state and EPA efforts to address interstate transport, at this time the EPA is focusing its efforts on the immediately available and cost-effective emission reductions that are achievable by the 2017 ozone season.

a. Partial Remedy Under Proposed FIPs

This rulemaking proposes to establish (or revise currently established) FIPs for 23 eastern states under the good neighbor provision of the CAA. These FIPs contain requirements for EGUs in these states to reduce ozone season NO

emissions for the 2017 ozone season. As noted in section VI, the EPA has identified important EGU emission reductions that are achievable starting for the 2017 ozone season in each of the covered states through actions such as turning on and operating existing pollution controls. These readily available emission reductions will assist downwind states to attain and maintain the 2008 ozone NAAQS and will provide human health and welfare benefits through reduced exposure to ozone pollution.

While these reductions are necessary to assist downwind states attain and maintain the 2008 ozone NAAQS and are necessary to address good neighbor obligations for these states, the EPA acknowledges that they may not be sufficient to fully address these states' good neighbor obligations.

With respect to the 2008 ozone standard, the

EPA has generally not attempted to quantify the ozone season NO

reductions that may be necessary to eliminate all significant contribution to nonattainment and interference with maintenance in other states. Given the time constraints for implementing NO

reduction strategies, the EPA believes that implementation of a full remedy may not be achievable for 2017, even though a partial remedy is achievable.

The proposed requirements for one state, North Carolina, would fully eliminate that state's significant contribution to downwind air quality problems.

To evaluate full elimination of a state's significant contribution to nonattainment and interference with maintenance, EGU and non-EGU ozone season NO

reductions should both be evaluated. However, the EPA is not proposing to quantify non-EGU emissions reductions to address interstate ozone transport for the 2008 ozone NAAQS at this time because: (1) There is greater uncertainty in the non-EGU emission inventory estimates than for EGUs; and (2) there appear to be few non-EGU reductions that could be accomplished by the beginning of the 2017 ozone season. This is discussed further in section VI of this proposal and in the Non-EGU NO

Mitigation Strategies TSD. We intend to continue to collect information and undertake analysis for potential future emissions reductions at non-EGUs that may be necessary to fully quantify states' significant contributions in a future action.

Because the reductions proposed in this action are EGU-only and because EPA has focused the policy analysis for this proposal on reductions available by 2017, for most states they represent a first, partial step to addressing a given upwind state's significant contribution to downwind air quality impacts for the 2008 ozone NAAQS. Generally, a final determination of whether the proposed EGU NO

reductions represent a full or partial elimination of a state's good neighbor obligation for the 2008 NAAQS is subject to an evaluation of the contribution to interstate transport from additional emission sectors, such as non-EGUs. However, the EPA believes that it is beneficial to implement, without further delay, EGU NO

reductions that are achievable in the near term. The proposed NO

emission reductions are needed (although they may not be all that is needed) for these states to eliminate their significant contribution to nonattainment and interference with maintenance of the 2008 ozone NAAQS. The EPA's current statutory deadlines to promulgate FIPs extend until 2017 for most states, and the EPA will remain mindful of those deadlines as it evaluates what further steps may be necessary to address interstate transport for the 2008 ozone NAAQS. The EPA seeks comment on possible future steps that may be necessary to resolve the remainder of the good neighbor obligation for the 2008 ozone standard.

The EPA has shared information with states to facilitate the development of the ozone transport SIPs.

The EPA encourages state SIP development and will continue to assist states in developing transport SIPs regardless of whether they are covered by this proposed FIP. Where a state would be covered by this proposed FIP, the EPA may be able to partially approve SIPs that include controls on EGU emissions that achieve ozone season NO

emission reductions and/or that establish EGU NO

ozone emissions budgets approximately equivalent to those identified in this proposal as achievable by 2017. (This is discussed in more detail in Section VII.) In these SIPS, states could also demonstrate that they are achieving the same level of emissions reductions through non-EGU source measures as they would achieve under the EGU budgets established in the FIP. For example, a SIP could set EGU budgets, but allow emission reductions from non-EGU sources as a compliance option. EPA also seeks comment on methods it can use to ensure that any non-EGU reductions are incremental to the base case, permanent, and enforceable.

On January 22, 2015, the EPA issued a memo with preliminary air quality modeling data that characterized interstate ozone transport projected to 2018. On April 8, 2015, the EPA held a workshop that continued a discussion with states on the path forward for addressing interstate transport for the 2008 8-hour ozone NAAQS. On August 4, 2015, we published a NODA with updated modeling that states could use to support development of transport SIPs.

b. Potential for Full Remedy Under SIPs

The EPA also notes that many states have already submitted, or are currently developing, SIP submittals to address the good neighbor provision of the CAA for the 2008 ozone standard, and expects that some may assert that the state plan fully addresses the state's good neighbor obligation.

The EPA anticipates that those SIPs intending to fully address the state's good neighbor obligations and for which the state is seeking approval may fall into one of two categories:

(1) The SIP concludes that the state is meeting its good neighbor obligation without need for additional NO

reductions. This SIP could include an adequate demonstration, using EPA or state-generated analytical results, which supports the state's conclusion that the state contributes insignificant amounts to downwind nonattainment or maintenance problems in other states. The EPA would generally expect to propose full approval of these SIPs.

(2) The SIP demonstrates that the state will timely achieve reductions that fully address its significant contribution to nonattainment or interference with maintenance in downwind states. This demonstration could include an assessment of how all emissions source sectors contribute to the state's contribution and how these sectors are controlled in that state. States wishing to seek full approval of good neighbor SIPs should contact their appropriate regional office. Guidance on developing such SIPs is outside the scope of this action, but the EPA intends to work closely with any state that is interested in pursuing this option.

3. Why We Focus on Eastern States

CSAPR and previous federal transport rules, such as the NO

SIP Call and CAIR, were designed to address collective contributions of ozone pollution from states in the eastern U.S. These rules did not address contributions in the 11 western contiguous United States.

The EPA's air quality modeling that supports this proposed rule includes data for the western states. This assessment shows that there are problem receptors in the West to which western states contribute amounts greater than or equal to the screening threshold used to evaluate transport across eastern states (

i.e.,

1 percent of the NAAQS). However, there may be additional criteria to evaluate regarding transported air pollution in the West when evaluating upwind states' contributions to downwind air quality impacts, such as those discussed in EPA-state meetings to discuss approaches for determining how emissions in upwind states impact air quality in downwind states.

Given that the near-term 2017 implementation timeframe constrains the opportunity to conduct a further evaluation of western states, the EPA proposes to focus this rulemaking on eastern states. This focus would not relieve western states of obligations to address interstate transport under the Act. The EPA and states working together would continue to evaluate interstate transport in the western states on a case-by-case basis. The EPA would also continue to engage

with western states on air quality modeling analyses and the implications of those analyses for interstate transport.

For example, EPA-State meetings held in Research Triangle Park, NC on April 8, 2013 and Denver, Colorado on April 17, 2013.

While the EPA proposes to focus this rulemaking on eastern states, we seek comment on whether to include western states in this rule. The EPA notes that analyses developed to support this proposal, including air quality modeling and the EPA's assessment of EGU NO

mitigation potential, contain data that could be useful for states in developing SIPs or could be used to develop FIPs, where necessary.

The EPA seeks comment on the data provided for western states, including emissions inventories, ozone concentration modeling, contribution modeling, and EPA's assessment of EGU NO

reduction potential.

These data are available in the docket for this proposal. The EPA also solicits comment on whether to promulgate FIPs to address interstate ozone transport for the 2008 ozone NAAQS for western states, either in this rulemaking or in a subsequent rulemaking.

On August 4, 2015, the EPA published a Notice of Data Availability (80 FR 46271) requesting comment on the air quality modeling platform and air quality modeling results that are being used for this proposed rule. Specifically, in the NODA, the EPA requested comment on the data and methodologies related to the 2011 and 2017 emissions and the air quality modeling to project 2017 concentrations and contributions. Comments received on that data via the NODA will be considered for the final rule.

4. Short-Term NO

Emissions

In eastern states, the highest measured ozone days tend to occur within the hottest days, weeks, or months of the summer. On many high ozone days, there is higher demand for electricity (for instance, to run air conditioners). In general and technical discussions with representatives and officials of eastern states in April 2013 and April 2015, and in several letters to the EPA, officials from the Ozone Transport Region (OTR)

states suggested that EGU emissions transported from upwind states may disproportionally affect downwind ozone concentrations on peak ozone days in the eastern U.S. These representatives asked that the EPA consider additional “peak day” limits on EGU NO

emissions.

The OTR was established by the CAA amendments of 1990 to facilitate addressing the ozone problem on a regional basis and consists of the following states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, the District of Columbia and northern Virginia. 42 U.S.C. 7511c, CAA section 184.

Some states have also asked the EPA to consider whether existing emission controls are being turned off for short periods (

e.g.,

multiple days) within the ozone season, for example during hot weeks. These states assert that emissions from short-term idling of controls may contribute to downwind ozone NAAQS exceedances in the eastern U.S. These states suggest that sub-seasonal limits on EGU NO

emissions would reduce ozone formation that might be attributable to short-term idling of NO

controls.

The EPA seeks comment on whether or not short-term (

e.g.,

peak-day) EGU NO

emissions disproportionately impact downwind ozone concentrations, and if they do, then what EGU emission limits (

e.g.,

daily or monthly emission rates or differential allowance surrender ratios on high ozone days) would be reasonable complements to the proposed seasonal CSAPR requirement to mitigate this impact.

C. Responding to the Remand of CSAPR NO

Ozone-Season Emissions Budgets

As noted above, in

EME Homer City II,

the D.C. Circuit declared invalid the CSAPR phase 2 NO

ozone-season emissions budgets of 11 states, holding that those budgets over-control with respect to the downwind air quality problems to which those states were linked for the 1997 ozone NAAQS. 795 F.3d at 129-30, 138. As to ten of these states, the court held that EPA's 2014 modeling conducted to support the RIA for CSAPR demonstrated that air quality problems at the downwind locations to which those states were linked would resolve by phase 2 of the CSAPR program without further transport regulation (either CAIR or CSAPR).

Id.

at 129-30. With respect to Texas, the court held that the record reflected that the ozone air quality problems to which the state was linked could be resolved at a lower cost threshold.

Id.

The court therefore remanded those budgets to EPA for reconsideration consistent with the court's opinion.

Id.

at 138. The court instructed the EPA to act “promptly” in addressing these issues on remand.

Id.

at 132.

The court's decision explicitly applies to 11 state budgets involved in that litigation: Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia.

Id.

at 129-30, 138. EPA is proposing in this rulemaking to promulgate FIPs for nine of those states to address interstate transport with respect to the 2008 ozone NAAQS: Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Texas, Virginia, and West Virginia. The proposed FIPs incorporate revised emissions budgets that would supplant and replace the budgets promulgated in the CSAPR rule to address the 1997 ozone NAAQS, the same budgets remanded by the D.C. Circuit for reconsideration. Further, as proposed in this rule, these proposed budgets would be effective for the 2017 ozone season, the same period in which the phase 2 budgets that were invalidated by the court are currently scheduled to become effective. Therefore, this proposed action provides an appropriate and timely response to the court's remand by replacing the budgets promulgated in the CSAPR to address the 1997 ozone NAAQS, which were declared invalid by the D.C. Circuit, with budgets developed to address the revised and more stringent 2008 ozone NAAQS.

The methodology for developing the proposed budgets to address the 2008 ozone NAAQS is described in more detail in Sections VI and VII below. Section VI also includes an evaluation, as instructed by the court in

EME Homer City II,

to affirm that the proposed budgets do not over-control with respect to downwind air quality problems identified in this rule. 795 F.3d at 127-28.

The EPA notes that it is able to propose addressing the D.C. Circuit's remand of CSAPR NO

ozone-season emissions budgets because the agency was already performing analysis and policy development for this proposal, which is directly applicable to this aspect of the D.C. Circuit opinion.

Separately, various petitioners filed legal challenges in the D.C. Circuit to a supplemental rule that added five states to the CSAPR ozone-season trading program, 76 FR 80760 (Dec. 27, 2011).

See Public Service Company of Oklahoma

EPA,

No. 12-1023 (D.C. Cir., filed Jan. 13, 2012). The case was held in abeyance during the pendency of the litigation in

EME Homer City.

The case remains pending in the D.C. Circuit as of the date of signature of this proposed rule.

The EPA notes that this rulemaking also proposes to promulgate FIPs for all five states added to CSAPR in the supplemental rule: Iowa, Michigan, Missouri, Oklahoma, and Wisconsin. The proposed FIPs incorporate revised emissions budgets that would supplant and replace the budgets promulgated in the supplemental CSAPR rule to address the 1997 ozone NAAQS for these five states

and would be effective for the 2017 ozone season.

In 2012, the EPA also finalized two rules making certain revisions to CSAPR. 77 FR 10324 (Feb. 21, 2012); 77 FR 34830 (June 12, 2012). Various petitioners filed legal challenges to these rules in the D.C. Circuit, and the cases were also held in abeyance pending the litigation in

EME Homer City. See Wisconsin Public Service Corp.

EPA,

No. 12-1163 (D.C. Cir., filed Apr. 6, 2012);

Utility Air Regulatory Group

EPA,

No. 12-1346 (D.C. Cir., filed Aug. 9, 2012). The cases currently remain pending in the D.C. Circuit.

For the two remaining ozone-season states affected by this portion of the

EME Homer City II

decision, Florida and South Carolina, the EPA is not proposing in this action to promulgate FIPs because the air quality modeling performed to support the proposal does not indicate that these states are linked to any identified downwind nonattainment or maintenance receptors with respect to the 2008 ozone standard. Inherently then, because the 2008 ozone NAAQS is more stringent than the 1997 ozone NAAQS, this modeling also does not indicate that Florida or South Carolina are linked to any remaining air quality concerns with respect to the 1997 ozone standard for which the states were regulated in CSAPR.

Accordingly, in order to address the Court's remand with respect to these two states' interstate transport responsibility under the 1997 ozone standard, the EPA proposes to remove these states from the CSAPR ozone-season trading program beginning in 2017 when the phase 2 ozone-season emissions budgets were scheduled to be implemented.

The EPA notes that because the proposed rule modeling was performed prior to the D.C. Circuit's issuance of

EME Homer City II,

that modeling assumed in its baseline for all states the emission reductions associated with the CSAPR phase 2 ozone-season budgets. In the final rule modeling, the EPA will make any additional changes to the emissions inventories or modeling platform as may be justified based on comments received on the modeling performed for the proposed rule. In the event that air quality modeling conducted for the final rule demonstrates that either Florida or South Carolina are projected to significantly (

e.g.,

greater than or equal to 1% of the NAAQS) contribute to an air quality problem with respect to the 2008 ozone standard in the absence of a CSAPR-related emissions budget in place for those states, the EPA instead proposes to finalize revised budgets (presented with this rulemaking for comment) for whichever of those states may be identified as linked to such air quality problems rather than remove those states from the CSAPR ozone-season trading program. The EPA has calculated emissions budgets for Florida and South Carolina that we are proposing to apply to those states if, and only if, the final rule air quality modeling identifies a linkage as just described. These proposed budgets are developed using the same methods applied to the 23 states that the EPA proposed to regulate in this action. These methods are described in section VI of this proposal and the methods and resulting emissions budgets are provided in the Ozone Transport Policy Analysis TSD.

The EPA seeks comment on this approach with respect to addressing the remand as to Florida and South Carolina, including the proposed budgets that would apply to those states if a linkage is identified, which are available in the docket.

Additionally, the EPA notes Florida and South Carolina may be relying upon emissions reductions that result from now-remanded emissions budgets in Florida and South Carolina to satisfy statutory obligations other than the interstate transport requirements. However, Florida and South Carolina may have an interest in submitting SIPs to continue their participation in the CSAPR NO

ozone-season trading program in order to meet other Clean Air Act requirements. Likewise, to the extent that the final modeling indicates that other states included in the remand of the CSAPR phase 2 NO

ozone-season emissions budgets are not linked to any identified downwind nonattainment or maintenance receptors with respect to the 2008 ozone standard, they would not be included in the final FIPs but they may be interested in continuing to participate in the CSAPR NO

ozone-season trading program in order to meet other Clean Air Act requirements. The EPA seeks comment on whether to allow Florida, South Carolina, and other similarly situated states (if any) to continue their participation in the CSAPR NO

ozone-season program through voluntary SIPs that would retain the CSAPR NO

ozone-season emissions budgets, contingent upon review and approval by the EPA.

The D.C. Circuit also remanded without vacatur the CSAPR SO

annual emissions budgets for four states (Alabama, Georgia, South Carolina, and Texas) for reconsideration. 795 F.3d at 129, 138. This proposal does not address the remand of these CSAPR phase 2 SO

annual emissions budgets. The EPA intends to address the remand of the phase 2 SO

annual emissions budgets separately. The existing CSAPR annual emissions budgets and implementation programs (CSAPR SO

annual and NO

annual requirements), which address interstate transport for the 1997 and 2006 PM

2.5

NAAQS, continue to apply at this time.

D. Addressing Outstanding Transport Obligations for the 1997 Ozone NAAQS

In the original CSAPR, the EPA noted that the reductions for 11 states may not be sufficient to fully eliminate all significant contribution to nonattainment or interference with maintenance for certain downwind areas with respect to the 1997 ozone NAAQS.

The 11 states are: Alabama, Arkansas, Georgia, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Tennessee, and Texas.

In the original CSAPR, the EPA's analysis projected continued nonattainment and maintenance problems at downwind receptors to which these upwind states were linked after implementation of the CSAPR trading programs. Specifically, the persistent ozone problems were expected in Baton Rouge, Louisiana; Houston, Texas; and Allegan, Michigan according to the remedy case modeling conducted for the final rule. At that time the EPA did not address whether additional ozone season NO

emission reductions would be needed in these states to fully resolve the good neighbor obligation under the CAA with respect to the 1997 ozone NAAQS beyond the EGU requirements promulgated in CSAPR.

See

CSAPR Final Rule, 76 FR at 48220, and the CSAPR Supplemental Rule, 76 FR at 80760, December 27, 2011.

The EPA acknowledges that, despite its conclusion in CSAPR that the air quality problems to which Texas was linked in the original CSAPR were not fully resolved, the court concluded in

EME Homer City II

that the NO

ozone-season emissions budget finalized for Texas resulted in over-control as to the ozone air quality problems to which the state was linked. 795 F.3d at 129-30. As discussed below in section V, this rule proposes to respond to the remand of Texas's NO

ozone-season emissions budget by promulgating a new budget to address the 2008 ozone NAAQS. The EPA has also evaluated Texas's contribution to any remaining air quality problems with respect to the 1997 ozone NAAQS. [Text may be revised to reflect ongoing litigation.]

To evaluate whether additional emission reductions would be needed in these 11 states to address the states' full good neighbor obligation for the 1997 ozone NAAQS, the EPA reviewed the 2017 baseline air quality modeling conducted for this proposal, which includes emission reductions associated with the CSAPR phase 2 ozone-season budgets.

The updated 2017 air quality modeling shows that the predicted average DVs and maximum DVs for 2017 are below the level of the 1997 ozone NAAQS for the downwind receptors of concern that the 11 states were linked to in the original CSAPR for the 1997 ozone NAAQS. Further, the 2017 air quality modeling shows that there are no other nonattainment or

maintenance receptors to which these areas would be linked with respect to the 1997 ozone NAAQS. This conclusion demonstrates that no further emission reductions are required to address the interstate transport obligations of these states with respect to the 1997 ozone NAAQS, and therefore EPA finds that the original CSAPR emissions budgets satisfy these states' full obligation to address interstate ozone transport under the good neighbor provision of the CAA as to that NAAQS. Therefore, we propose to find that the original CSAPR FIPs fully satisfy those 11 states' good neighbor CAA obligations regarding the emissions that contribute significantly to nonattainment or interfere with maintenance of the 1997 ozone NAAQS in other states.

IV. Legal Authority

A. EPA's Authority for the Proposed Rule

1. Statutory Authority

The statutory authority for this proposed action is provided by the CAA as amended (42 U.S.C. 7401

et seq.

). Specifically, sections 110 and 301 of the CAA provide the primary statutory bases for this proposal. The most relevant portions of section 110 are subsections 110(a)(1), 110(a)(2), and 110(a)(2)(D)(i)(I), and 110(c)(1).

Section 110(a)(1) provides that states must make SIP submissions “within 3 years (or such shorter period as the Administrator may prescribe) after the promulgation of a national primary ambient air quality standard (or any revision thereof),” and that these SIP submissions are to provide for the “implementation, maintenance, and enforcement” of such NAAQS.

The statute directly imposes on states the duty to make these SIP submissions, and the requirement to make the submissions is not conditioned upon the EPA taking any action other than promulgating a new or revised NAAQS.

42 U.S.C. 7410(a)(1).

See EPA

EME Homer City Generation, L.P.,

134 S. Ct. 1584, 1601 (2014).

The EPA has historically referred to SIP submissions made for the purpose of satisfying the applicable requirements of CAA sections 110(a)(1) and 110(a)(2) as “infrastructure SIP” submissions. Section 110(a)(1) addresses the timing and general requirements for infrastructure SIP submissions, and section 110(a)(2) provides more details concerning the required content of these submissions. It includes a list of specific elements that “[e]ach such plan” submission must address.

All states, regardless of whether the state includes areas designated as nonattainment for the relevant NAAQS, must have SIPs that meet the applicable requirements of section 110(a)(2), including provisions of section 110(a)(2)(D)(i)(I) described further below and which are the focus of this proposal.

EPA's general approach to infrastructure SIP submissions is explained in greater detail in individual notices acting or proposing to act on state infrastructure SIP submissions and in guidance.

See, e.g.,

Guidance on Infrastructure State Implementation Plan (SIP) Elements under Clean Air Act Sections 110(a)(1) and 110(a)(2) (Sept. 2013).

Section 110(c)(1) requires the Administrator to promulgate a FIP at any time within 2 years after the Administrator: (1) Finds that a state has failed to make a required SIP submission, (2) finds a SIP submission to be incomplete pursuant to CAA section 110(k)(1)(C), or (3) disapproves a SIP submission, unless the state corrects the deficiency through a SIP revision that the Administrator approves before the FIP is promulgated.

42 U.S.C. 7410(c)(1).

Section 110(a)(2)(D)(i)(I), also known as the “good neighbor provision,” provides the basis for this proposed action. It requires that each state SIP shall include provisions sufficient to “prohibit[] . . . any source or other type of emissions activity within the State from emitting any air pollutants in amounts which will—(I) contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any [NAAQS].”

42 U.S.C. 7410(a)(2)(D)(i)(I).

The EPA has previously issued three rules interpreting and clarifying the requirements of section 110(a)(2)(D)(i)(I) for states in the eastern half of the United States. These rules, and the associated court decisions addressing these rules, provide important guidance regarding the requirements of section 110(a)(2)(D)(i)(I).

The NO

SIP Call, promulgated in 1998, addressed the good neighbor provision for the 1979 1-hour ozone NAAQS and the 1997 8-hour ozone NAAQS.

The rule required 22 states and the District of Columbia to amend their SIPs and limit NO

emissions that contribute to ozone nonattainment. The EPA set a NO

ozone-season budget for each affected state, essentially a cap on ozone season NO

emissions in the state. Sources in the affected states were given the option to participate in a regional cap-and-trade program, known as the NO

Budget Trading Program (NBP). The NO

SIP Call was largely upheld by the D.C. Circuit in

Michigan

EPA,

213 F.3d 663 (D.C. Cir. 2000),

cert. denied,

532 U.S. 904 (2001).

63 FR 57356 (Oct. 27, 1998).

The Clean Air Interstate Rule (CAIR), promulgated in 2005, addressed both the 1997 PM

2.5

and ozone standards under the good neighbor provision.

CAIR required SIP revisions in 28 states and the District of Columbia to ensure that certain emissions of sulfur dioxide (SO

) and/or NO

—important precursors of regionally transported PM

2.5

(SO

and NO

) and ozone (NO

)—were prohibited. Like the NO

SIP Call, states were given the option to participate in a regional cap-and-trade program to satisfy their SIP obligations. When the EPA promulgated the final CAIR in May 2005, the EPA also issued a national rule finding that states had failed to submit SIPs to address the requirements of CAA section 110(a)(2)(D)(i) with respect to the 1997 ozone and PM

2.5

NAAQS, given that states were required by the CAA to have submitted section 110(a)(2)(D)(i)(I) SIPs for those standards by July 2000.

This finding of failure to submit triggered a 2-year clock for the EPA to issue FIPs to address interstate transport, and on March 15, 2006, the EPA promulgated FIPs to ensure that the emission reductions required by CAIR would be achieved on schedule.

CAIR was remanded to EPA by the D.C. Circuit in

North Carolina,

531 F.3d 896 (D.C. Cir. 2008),

modified on reh'g,

550 F.3d 1176. For more information on the legal considerations of CAIR and the D.C. Circuit holding in

North Carolina,

refer to the preamble of the final CSAPR rule.

70 FR 25162 (May 12, 2005).

70 FR 21147 (May 12, 2005).

71 FR 25328 (April 28, 2006).

76 FR 48208, 48217 (Aug. 8, 2011).

In 2011, the EPA promulgated CSAPR to address the issues raised by the remand of CAIR and additionally to address the good neighbor provision for the 2006 PM

2.5

NAAQS.

CSAPR requires 28 states to reduce SO

emissions, annual NO

emissions, and/or ozone season NO

emissions that significantly contribute to other states' nonattainment or interfere with other states' abilities to maintain these air quality standards. To accomplish implementation aligned with the applicable attainment deadlines, the EPA promulgated FIPs for each of the 28 states covered by CSAPR. The FIPs implement regional cap-and-trade programs to achieve the necessary reductions. States can submit good

neighbor SIPs at any time that, if approved by the EPA, would replace the CSAPR FIP for that state. As discussed below, CSAPR was the subject of decisions by both the D.C. Circuit and the Supreme Court, which largely upheld the rule.

76 FR 48208.

On August 21, 2012, the D.C. Circuit issued a decision in

EME Homer City Generation, L.P.

EPA,

696 F.3d 7 (D.C. Cir. 2012), vacating CSAPR and holding, among other things, that states had no obligation to submit good neighbor SIPs until the EPA had first quantified each state's good neighbor obligation.

The implication of this decision was that the EPA did not have authority to promulgate FIPs as a result of states' failure to submit or EPA's disapproval of such SIPs. The EPA sought review, first with the D.C. Circuit

en banc

and then with the Supreme Court. While the D.C. Circuit declined to consider the EPA's appeal

en banc,

on January 23, 2013, the Supreme Court granted the EPA's petition for certiorari.

EME Homer City Generation, L.P.

EPA,

696 F.3d 7, 31 (D.C. Cir. 2012).

EME Homer City Generation, L.P.

EPA,

No. 11-1302 (D.C. Cir. January 24, 2013), ECF No. 1417012 (denying the EPA's motion for rehearing en banc).

EPA

EME Homer City Generation, L.P.,

133 S. Ct. 2857 (2013) (granting the EPA's and other parties' petitions for certiorari).

On April 29, 2014, the Supreme Court issued a decision reversing the D.C. Circuit's

EME Homer City

EPA

EME Homer City Generation, L.P.,

134 S. Ct. 1584, 1600-01 (2014).

Finally, on July 28, 2015, the D.C. Circuit issued its opinion on CSAPR regarding the remaining legal issues raised by the Petitioners on remand from the Supreme Court,

EME Homer City II,

795 F.3d 118. This decision largely upheld EPA's approach to addressing interstate transport in CSAPR, leaving the rule in place and affirming EPA's interpretation of various statutory provisions and EPA's technical decisions. The decision also remands the rule without vacatur for reconsideration of EPA's emissions budgets for certain states. In particular and as discussed in more detail in section III, the court declared invalid the CSAPR phase 2 NO

ozone-season emissions budgets of 11 states, holding that those budgets over-control with respect to the downwind air quality problems to which those states were linked for the 1997 ozone NAAQS. The court's decision explicitly applies to 11 states: Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia.

Id.

at 129-30, 138. The court also remanded without vacatur the SO

annual emissions budgets for four states (Alabama, Georgia, South Carolina, and Texas) for reconsideration.

Id.

at 129, 138. The court instructed the EPA to act “promptly” in addressing these issues on remand.

Id.

at 132.

Section 301(a)(1) of the CAA also gives the Administrator of the EPA general authority to prescribe such regulations as are necessary to carry out her functions under the Act.

Pursuant to this section, the EPA has authority to clarify the applicability of CAA requirements. In this action, among other things, the EPA is clarifying the applicability of section 110(a)(2)(D)(i)(I) by identifying NO

emissions in certain states that must be prohibited pursuant to this section with respect to the 8-hour ozone NAAQS promulgated in 2008.

42 U.S.C. 7601(a)(1).

In particular, the EPA is proposing to use its authority under sections 110 and 301 to promulgate FIPs that establish or revise EGU NO

ozone-season emissions budgets for 23 eastern states to mitigate their significant contribution to nonattainment or interference with maintenance in another state. As described in more detail later in this notice, generally the EPA is proposing to update each affected state's FIP, including revising the existing CSAPR budgets.

The EPA is also proposing to respond to the court's remand in

EME Homer City II

with respect to the remanded NO

ozone-season emissions budgets.

One state, Kansas, would have a new CSAPR ozone season requirement under this proposal. The remaining 22 states were included in the original CSAPR ozone-season program as to the 1997 ozone NAAQS.

2. FIP Authority for Each State Covered by the Proposed Rule

a. Status of State Good Neighbor SIPs for the 2008 Ozone NAAQS

As discussed above, all states have an obligation to submit SIPs that address the requirements of CAA section 110(a)(2) within 3 years of promulgation of a new or revised NAAQS. With respect to the 2008 ozone NAAQS, states were required to submit SIPs addressing the good neighbor provision by March 12, 2011. If the EPA finds that a state has failed to submit a SIP to meet its statutory obligation to address section 110(a)(2)(D)(i)(I) or if EPA disapproves a good neighbor SIP, then the EPA has not only the authority but the obligation, pursuant to section 110(c)(1), to promulgate a FIP to address the CAA requirement within 2 years of the finding or disapproval.

On July 13, 2015, the EPA published a rule finding that 24 states failed to make complete submissions that address the requirements of section 110(a)(2)(D)(i)(I) related to the interstate transport of pollution as to the 2008 ozone NAAQS. See 80 FR 39961 (July 13, 2015) (effective August 12, 2015). The finding action triggered a 2-year deadline for the EPA to issue FIPs to address the good neighbor provision for these states by August 12, 2017. The states included in this finding of failure to submit are: Alabama, Arkansas, California, Florida, Georgia, Iowa, Illinois, Kansas, Massachusetts, Maine, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Mexico, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Vermont, Virginia, and West Virginia.

Since the EPA issued the findings notice, EPA has received a SIP submission addressing the good neighbor provision for the 2008 ozone NAAQS from the state of Maine on which the EPA has not yet proposed action.

Several additional states—Connecticut, Nebraska, North Dakota, Rhode Island, South Dakota, New York, Delaware, Maryland, Indiana, Kentucky, Louisiana, New Jersey, Ohio, Texas, Wisconsin, and the District of Columbia—have previously submitted SIPs to address the requirements of section 110(a)(2)(D)(i)(I) for the 2008 ozone NAAQS. To the extent that the EPA has not finalized action on these submitted SIPs, these states can evaluate their submissions in light of this proposal and the actions we are taking to reduce interstate ozone transport for the 2008 ozone NAAQS. Pursuant to a judgment issued on May 15, 2015, the

EPA is required to take final action on the interstate transport SIPs for Nebraska and North Dakota by January 29, 2016, and for Maryland, Texas, Ohio and Indiana by June 7, 2016.

In the event that the EPA finalizes disapproval or partial disapproval of any of these SIPs, that action would trigger the EPA's FIP authority to implement the requirements of the good neighbor provision for those states. Alternatively, if any of these states withdraws its 2008 ozone interstate transport SIP submittal, the EPA plans to issue a separate notice of finding of failure to submit for these states and will finalize FIPs as appropriate.

See

Judgment,

Sierra Club

McCarthy

, Case 4:14-cv-05091-YGR (N.D. Cal. May 15, 2015).

On March 7, 2013, the EPA finalized action on the State of Kentucky's SIP submission addressing, among other things, the good neighbor provision requirements for the 2008 ozone NAAQS.

The EPA disapproved the submission as to the good neighbor requirements. In the notice, the EPA explained that the disapproval of the good neighbor portion of the state's infrastructure SIP submission did not trigger a mandatory duty for the EPA to promulgate a FIP to address these requirements.

Citing the D.C. Circuit's decision

EME Homer City Generation

EPA,

696 F.3d 7 (2012), the EPA explained that the court concluded states have no obligation to make a SIP submission to address the good neighbor provision for a new or revised NAAQS until the EPA first defines a state's obligations pursuant to that section.

Therefore, because a good neighbor SIP addressing the 2008 ozone standard was not at that time required, the EPA indicated that its disapproval action would not trigger an obligation for the EPA to promulgate a FIP to address the interstate transport requirements.

78 FR 14681 (March 7, 2013).

Id.

at 14683.

Id.

On April 30, 2013, the Sierra Club filed a petition for review of the EPA's action based on the Agency's conclusion that the FIP clock was not triggered by the disapproval of Kentucky's good neighbor SIP.

As described above, on April 29, 2014, the Supreme Court issued a decision reversing and vacating the D.C. Circuit's decision in

EME Homer City.

Following the Supreme Court decision, the EPA requested, and the court granted, vacatur and remand of the portion of the EPA's final action that determined that the FIP obligation was not triggered by the disapproval.

Sierra Club

EPA,

Case No. 13-3546 (6th Cir., filed Apr. 30, 2013).

Order,

Sierra Club

EPA,

Case No. 13-3546, Document No. 74-1 (Mar. 13, 2015).

In this notice, the EPA is proposing to correct the portion of the disapproval notice indicating that the FIP clock would not be triggered by the SIP disapproval. The EPA believes that the EPA's obligation to develop a FIP was triggered on the date of the judgment issued by the Supreme Court in

EPA

EME Homer City,

June 2, 2014, and the EPA is obligated to issue a FIP at any time within two years of that date. The EPA does not believe that the FIP obligation was triggered as of the date of the SIP disapproval because the controlling law as of that date was the D.C. Circuit decision in

EME Homer City,

which held that states had no obligation to submit a SIP and the EPA had no authority to issue a FIP until the EPA first quantified each state's emission reduction obligation under the good neighbor provision. Accordingly, the most reasonable conclusion is that the EPA's FIP obligation was triggered when the Supreme Court clarified the state and federal obligations with respect to the good neighbor provision. Thus, the EPA proposes to find that the FIP obligation was triggered as of June 2, 2014, and that the EPA is obligated to promulgate a FIP that corrects the deficiency by June 2, 2016.

b. States Submitting Transport SIPs Before FIP Is Finalized

The EPA recognizes that some states are currently developing SIP submissions or revising their submitted SIPs to address the good neighbor provision of the CAA for the 2008 ozone standard. The EPA encourages SIP development and will continue to assist states in developing transport SIPs. As noted above, the EPA is subject to a court order requiring final action on certain state SIPs by January 29, and June 7, 2016.

The fact that the EPA is proposing a FIP for any state does not suggest that the EPA has determined that the state's submittal is not approvable. If EPA finalizes approval of a state's good neighbor SIP before the FIP is applied, the FIP that is now being proposed for that state would no longer be necessary.

Further, the EPA notes that the remedy being proposed in this notice are not the only means a state has to mitigate interstate ozone transport under the good neighbor provision. States could submit measures that strengthen their current SIPs and achieve reductions that are similar to, or more efficacious in eliminating significant transport than, those that would be achieved by the FIPs proposed in this action. The EPA strongly encourages such strengthening actions. If a state submits a SIP that is approved (in whole or in part) by the EPA via notice-and-comment rulemaking and that achieves ozone season NO

emission reductions and/or establishes EGU NO

ozone emissions budgets approximately equivalent to those identified by EPA as achievable by 2017, the EPA does not anticipate subjecting the state to the EPA's partial remedy in this FIP action.

V. Analyzing Downwind Air Quality and Upwind-State Contributions

In this section, we describe the air quality modeling performed to (1) identify locations where we expect there to be nonattainment or maintenance problems for 8-hour ozone for the 2017 analytic year chosen for this proposal, and (2) quantify the contributions from anthropogenic emissions from upwind states to downwind ozone concentrations at monitoring sites projected to be in nonattainment or have maintenance problems in 2017 for the 2008 ozone NAAQS. Air quality modeling to assess the health and welfare benefits of the emissions reductions expected to result from this proposal is described in section VIII.

This section includes information on the air quality modeling platform used in support of the proposed rule with a focus on the base year and future base case emission inventories. We also provide the projection of 2017 ozone concentrations and the interstate contributions for 8-hour ozone. The Air Quality Modeling Technical Support Document (AQM TSD) in the docket for this proposed rule contains more detailed information on the air quality modeling aspects of this rulemaking.

A. Overview of Air Quality Modeling Platform

The EPA performed air quality modeling for three emissions scenarios: A 2011 base year, a 2017 baseline, and a 2017 illustrative control case that

reflects the emission reductions expected from the proposed rule.

We selected 2011 as the base year to reflect the most recent National Emissions Inventory (NEI). In addition, the meteorological conditions during the summer of 2011 were generally conducive for ozone formation across much of the U.S., particularly the eastern U.S. For example, as described in the AQM TSD, an analysis of meteorological-adjusted trends in seasonal mean ozone for the period 2000 through 2012 indicates that, on a regional basis, the summer of 2011 was typical, in terms of the presence of conditions conducive to ozone formation, of high ozone years in the eastern U.S. Additional analyses of meteorological conditions during the summer of 2011 in comparison to conditions during several other recent years can be found in the AQM TSD. The use of meteorological data representing conditions that are conducive for ozone formation is consistent with the EPA's modeling guidance for attainment demonstrations.

As noted above, we selected 2017 as the projected analysis year to coincide with the attainment date for moderate areas under the 2008 ozone NAAQS. We used the 2017 baseline emissions in our air quality modeling to identify future nonattainment and maintenance locations and to quantify the contributions of emissions from upwind states to 8-hour ozone concentrations at downwind locations. We used the air quality modeling of the 2017 baseline and 2017 illustrative control case emissions to estimate the air quality impacts and health benefits of this proposal.

The 2017 illustrative control case is relevant to the EPA's policy analysis discussed in section VI and to the benefits and costs assessment discussed in section VIII of this preamble. It is not used to identify nonattainment or maintenance receptors or quantify the contributions from upwind states to these receptors.

“Modeling Guidance for Demonstrating Attainment of Air Quality Goals for Ozone, PM

2.5

, and Regional Haze” U.S. Environmental Protection Agency, Research Triangle Park, NC. December 2014.

http://www.epa.gov/ttn/scram/guidance/guide/Draft_O3-PM-RH_Modeling_Guidance-2014.pdf.

The EPA used the Comprehensive Air Quality Model with Extensions (CAMx) version 6.11

to simulate pollutant concentrations for the 2011 base year and the 2017 future year scenarios. CAMx is a grid cell-based, multi-pollutant photochemical model that simulates the formation and fate of ozone and fine particles in the atmosphere. The CAMx model contains certain probing tools including source apportionment techniques that are designed to quantify the contribution of emissions from various sources and areas to ozone in other downwind locations. The CAMx model applications were performed for a modeling region (

i.e.,

modeling domain) that covers the contiguous 48 states, the District of Columbia, and adjacent portions of Canada and Mexico using a horizontal resolution of 12 x 12 km. A map of the air quality modeling domain is provided in the AQM TSD.

Comprehensive Air Quality Model with Extensions Version 6.11 User's Guide. Environ International Corporation. Novato, CA. December, 2014.

The 2011-based air quality modeling platform includes 2011 base year emissions and future year projections of these emissions and 2011 meteorology for air quality modeling with CAMx. In the remainder of this section, we provide an overview of (1) the 2011 and 2017 emissions inventories, (2) the methods for projecting future nonattainment and maintenance along with a list of 2017 baseline nonattainment and maintenance receptors in the eastern U.S., (3) the approach to developing metrics to measure interstate contributions to 8-hour ozone, and (4) the predicted interstate contributions to downwind nonattainment and maintenance in the eastern U.S. We also identify which predicted interstate contributions are at or above the CSAPR screening threshold, which we are proposing to apply for regulation of interstate transport of ozone for purposes of the 2008 ozone standard.

B. Emission Inventories

The EPA developed emission inventories for this proposal including emission estimates for EGUs, non-EGU point sources, stationary nonpoint sources, onroad mobile sources, nonroad mobile sources, wild fires, prescribed fires, and for biogenic emissions that are not the result of human activities. The EPA's air quality modeling relies on this comprehensive set of emission inventories because emissions from multiple source categories are needed to model ambient air quality and to facilitate comparison of model outputs with ambient measurements.

To prepare the emission inventories for air quality modeling, the EPA processed the emission inventories using the Sparse Matrix Operator Kernel Emissions (SMOKE) Modeling System version 3.6.5 to produce the gridded, hourly, speciated, model-ready emissions for input to the CAMx air quality model. Additional information on the development of the emission inventories and on data sets used during the emissions modeling process are provided in the TSD “Preparation of Emissions Inventories for the Version 6.2, 2011 Emissions Modeling Platform,” hereafter known as the “Emissions Modeling TSD.” This TSD is available in the docket for this proposed rule and at

http://www.epa.gov/ttn/chief/emch/index.html#2011

The EPA published

Federal Register

notices on November 27, 2013 (78 FR 70935), and January 14, 2014 (79 FR 2437), to take comment on the 2011 and 2018

emission modeling platforms, including data and documentation on the methods used to prepare the emission inventories for air quality modeling. Comments were collected for the 2011 and 2018 emissions modeling platforms under the dockets EPA-HQ-OAR-2013-0743 and EPA-HQ-OAR-2013-0809, respectively. Comments from those notices that were accepted by the EPA have been incorporated into the emission modeling data and procedures for this proposal as documented in the Emissions Modeling TSD. As indicated above, the updated emission inventories, methodologies, and data were provided in a Notice of Data Availability published in the

Federal Register

on August 4, 2015 (80 FR 46271). Comments received on the proposal data will be considered for the final rule.

During the 2013 and 2014 pre-proposal comment periods for the modeling platforms, the attainment deadline for the downwind areas was established by regulation as December 2018. The 2008 Ozone NAAQS SIP Requirements Rule revised the attainment deadline for ozone nonattainment areas currently designated as Moderate from December 2018 to July 2018, which means attainment determinations have to be based on design values calculated using 2015 through 2017 ozone season data. Therefore, in its July 2015 NODA and in this proposal, the EPA has adjusted the future year modeling to be for the year 2017 rather than 2018.

1. Foundation Emission Inventory Data Sets

The EPA developed emission data representing the year 2011 to support air quality modeling of a base year from which future air quality could be forecasted. The EPA used the 2011 National Emission Inventory (NEI) version 2 (2011NEIv2), released in March 2015, as the primary basis for the U.S. inventories supporting the 2011 air quality modeling. Documentation on the 2011NEIv2 is available in the 2011 National Emissions Inventory, version 2 TSD available in the docket for this proposed rule and at

http://www.epa.gov/ttn/chief/net/2011inventory.html#inventorydoc

. The future base case scenario modeled for

2017 includes a representation of changes in activity data and of predicted emission reductions from on-the-books actions, including planned emission control installations and promulgated federal measures that affect anthropogenic emissions.

Biogenic emissions and emissions from wild fires and prescribed fires were held constant between 2011 and 2017 since (1) these emissions are tied to the 2011 meteorological conditions and (2) the focus of this rule is on the contribution from anthropogenic emissions to projected ozone nonattainment and maintenance.

2. Development of Emission Inventories for EGUs

Annual NO

and SO

emissions for EGUs in the 2011NEIv2 are based primarily on data from continuous emission monitoring systems (CEMS), with other EGU pollutants estimated using emission factors and annual heat input data reported to the EPA. For EGUs without CEMS, the EPA used data submitted to the NEI by the states. For more information on the details of how the 2011 EGU emissions were developed and prepared for air quality modeling, see the Emissions Modeling TSD.

The EPA projected future 2017 baseline EGU emissions using version 5.14 of the Integrated Planning Model (IPM) (

http://www.epa.gov/powersectormodeling

). IPM, developed by ICF Consulting, is a state-of-the-art, peer-reviewed, multi-regional, dynamic, deterministic linear programming model of the contiguous U.S. electric power sector. It provides forecasts of least cost capacity expansion, electricity dispatch, and emission control strategies while meeting energy demand and environmental, transmission, dispatch, and reliability constraints. EPA has used IPM for over two decades to better understand power sector behavior under future business-as-usual conditions and to evaluate the economic and emission impacts of prospective environmental policies. The model is designed to reflect electricity markets as accurately as possible. The EPA uses the best available information from utilities, industry experts, gas and coal market experts, financial institutions, and government statistics as the basis for the detailed power sector modeling in IPM. The model documentation provides additional information on the assumptions discussed here as well as all other model assumptions and inputs.

Detailed information and documentation of EPA's Base Case, including all the underlying assumptions, data sources, and architecture parameters can be found on EPA's Web site at:

www.epa.gov/airmarkets/powersectormodeling

The IPM version 5.14 base case accounts for comments received as a result of the NODAs released in 2013 and 2014 (including control configuration) as well as updated environmental regulations. This projected base case accounts for the effects of the finalized MATS

and CSAPR rules, New Source Review settlements, and on-the-books state rules through 2014

impacting SO

, NO

, directly emitted particulate matter, and CO

, and final actions the EPA has taken to implement the Regional Haze Rule. The EPA's IPM base case also includes two federal non-air rules affecting EGUs: The Cooling Water Intake Structure (Clean Water Act section 316(b)) rule and the Coal Combustion Residuals (CCR) rule. Documentation of IPM version 5.14 is in the docket and available online at

www.epa.gov/powersectormodeling

Michigan

EPA,

the Supreme Court reversed on narrow grounds a portion of the D.C. Circuit decision upholding the MATS rule, finding that EPA erred by not considering cost when determining that regulation of EGUs was “appropriate” pursuant to CAA section 112(n)(1). 135 S.Ct. 192 (2015). The case was remanded to the D.C. Circuit for further proceedings, and the MATS rule currently remains in place.

For any specific version of IPM there is a cutoff date after which it is no longer possible to incorporate updates into the input databases. For version 5.14, that cutoff date was November 2014.

After the receptor and contribution analyses for this proposal were underway, the EPA released an updated IPM base case, version 5.15, and the final Clean Power Plan (CPP).

In order to reflect all on-the-books policies as well as the most current power sector modeling data, the EPA performed an assessment, described in section V-D below, to reflect inclusion of IPM 5.15 with the CPP in the base case for this proposal. The EPA plans to use this base case, including the final CPP, for its modeling analysis for the final rule. However, EPA's analysis for the final rule may include updated or different assumptions about the inclusion of the CPP and the CSAPR phase 2 NO

ozone-season or SO

annual emissions budgets for those states with budgets that were declared invalid and remanded to the EPA by the D.C. Circuit's decision in

EME Homer City II.

Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 80 FR 64662 (Oct. 23, 2015).

In projecting future 2017 baseline EGU emissions, the EPA adjusted the 2018 IPM version 5.14 base case results to account for three categories of differences between 2017 and 2018. The categories are: (1) Adjusting NO

emissions for units with SCRs in 2018 but that are assumed not to operate or be installed in 2017; (2) adding NO

emissions for units that are retiring in 2018 but are projected to operate in 2017; and (3) adjusting NO

emissions for coal-fired units that are projected to convert to natural gas (

i.e.,

“coal-to-gas”) in 2018, but are still projected to burn coal in 2017. These adjustments were only made to the air quality flat file outputs of IPM and are discussed in greater detail in the IPM documentation found in the docket for this proposed rule.

3. Development of Emission Inventories for Non-EGU Point Sources

The 2011 non-EGU point sources in the 2011 base case inventory match those in the 2011NEIv2. Details on the development of the 2011 emission inventories can be found in the 2011NEIv2 TSD. Prior to air quality modeling, the emission inventories must be processed into a format that is appropriate for the air quality model to use. Details on the processing of the emissions for 2011 and on the development of the 2017 non-EGU emission inventories are available in the Emissions Modeling TSD. Projection factors and percent reductions in this proposal reflect comments received as a result of the NODAs in 2013 and 2014, along with emission reductions due to national and local rules, control programs, plant closures, consent decrees and settlements. Reductions from several Maximum Achievable Control Technology (MACT) and National Emission Standards for Hazardous Air Pollutants (NESHAP) standards are included. Projection approaches for corn ethanol and biodiesel plants, refineries and upstream impacts represent requirements pursuant to the Energy Independence and Security Act of 2007 (EISA).

For aircraft emissions at airports, the EPA developed projection factors based on activity growth projected by the Federal Aviation Administration Terminal Area Forecast (TAF) system, published in March 2013.

Point source and nonpoint oil and gas emissions are projected to 2018 using regional projection factors by product type using Annual Energy Outlook (AEO) 2014 projections to year 2017. NO

and VOC reductions that are co-benefits to the NESHAP and New Source Performance Standards (NSPS) for Stationary Reciprocating Internal Combustion Engines (RICE) are reflected for select source categories. In addition, Natural Gas Turbines and Process Heaters NSPS NO

controls and NSPS Oil and Gas VOC controls are reflected for select source categories.

4. Development of Emission Inventories for Onroad Mobile Sources

The EPA developed the onroad mobile source emissions for states other than California using the EPA's Motor Vehicle Emissions Simulator (MOVES) 2014. We computed the emissions within SMOKE by multiplying emission factors developed using MOVES with the appropriate activity data. We also used MOVES emission factors to estimate emissions from refueling. The 2011 onroad mobile source emissions used in the inventory for this rule are similar but not identical to the 2011NEIv2 emissions due to a more detailed treatment of E-85 emissions in the 2011 emission modeling platform used for this rule. Additional information on the approach for generating the onroad mobile source emissions is available in the Emissions Modeling TSD. Onroad mobile source emissions for California are consistent with the emissions submitted by the state as reflected in the 2011NEIv2.

In the future-year modeling for mobile sources, we included all national measures known at the time of modeling. The future scenarios for mobile sources reflect projected changes to fuel usage and onroad mobile control programs finalized as of the date of the model run. Finalized rules that are incorporated into the mobile source emissions include: Tier 3 Standards (March 2014), the Light-Duty Greenhouse Gas Rule (March 2013), Heavy (and Medium)-Duty Greenhouse Gas Rule (August 2011), the Renewable Fuel Standard (February 2010), the Light Duty Greenhouse Gas Rule (April 2010), the Corporate-Average Fuel Economy standards for 2008-2011 (April 2010), the 2007 Onroad Heavy-Duty Rule (February 2009), and the Final Mobile Source Air Toxics Rule (MSAT2) (February 2007). Impacts of rules that were in effect in 2011 are reflected in the 2011 base year emissions at a level that corresponds to the extent to which each rule had penetrated into the fleet and fuel supply by the year 2011. Local control programs such as the California LEV III program are included in the onroad mobile source emissions. Activity data for onroad mobile sources was projected using AEO 2014. Because EPA changed the model year from 2018 to 2017 between its pre-proposal modeling and the modeling conducted for this proposal (see footnote 64), and due to the substantial amount of lead time required to generate emission factors with MOVES, the EPA was unable to directly generate emission factors for 2017 prior to the modeling used to support this proposed rule. Therefore, for this proposal, future year onroad mobile source emissions were computed for 2018 and adjusted to 2017 levels using adjustment factors derived from national MOVES runs for 2017 and 2018. Emission factors will be generated directly for 2017 prior to air quality modeling for the final rule.

5. Development of Emission Inventories for Commercial Marine Category 3 (Vessel)

The commercial marine category 3 vessel (“C3 marine”) emissions in the 2011 base case emission inventory for this proposed rule are consistent with those in the 2011NEIv2. These emissions reflect reductions associated with the Emissions Control Area proposal to the International Maritime Organization control strategy (EPA-420-F-10-041, August 2010); reductions of NO

, VOC, and CO emissions for new C3 engines that went into effect in 2011; and fuel sulfur limits that went into effect as early as 2010. The cumulative impacts of these rules through 2017 are incorporated in the 2017 projected emissions for C3 marine sources.

6. Development of Emission Inventories for Other Nonroad Mobile Sources

To develop the nonroad mobile source emission inventories other than C3 marine for the modeling platform, the EPA used monthly, county, and process level emissions output from the National Mobile Inventory Model (NMIM) (see

http://www.epa.gov/otaq/nmim.htm

). State-submitted emissions data for nonroad sources were used for Texas and California. These emissions are consistent with those in the 2011NEIv2.

The EPA also used NMIM to project nonroad mobile emissions for future years. Development of the future year nonroad emissions require a substantial amount of lead time and the emissions were prepared for the year 2018 before the model year was changed to 2017 when the attainment date was revised in the 2008 Ozone NAAQS SIP Requirements Rule. To develop a 2017 nonroad emissions inventory for this proposal that accounted for the difference between 2017 and 2018 emissions levels, we calculated the nonroad emissions for 2018, and then adjusted those emissions to 2017 levels using national adjustment factors derived from national NMIM runs for 2017 and 2018. Emissions specific to 2017 will be developed for the modeling that will support the final rule. The nonroad mobile emission control programs include reductions to locomotives, diesel engines and marine engines, along with standards for fuel sulfur content and evaporative emissions. A comprehensive list of control programs included for mobile sources is available in the Emissions Modeling TSD.

7. Development of Emission Inventories for Nonpoint Sources

The emissions for stationary nonpoint sources in our 2011 base case emission inventory are largely consistent with those in the 2011NEIv2. For more information on the nonpoint sources in the 2011 base case inventory, see the Emissions Modeling TSD and the 2011NEIv2 TSD.

Where states provided EPA with information about projected control measures or changes in nonpoint source emissions, the EPA incorporated those inputs in its projections. We included adjustments for state fuel sulfur content rules for fuel oil in the Northeast. Projected emissions for portable fuel containers reflect the impact of projection factors required by the final Mobile Source Air Toxics (MSAT2) rule and the EISA, including updates to cellulosic ethanol plants, ethanol transport working losses, and ethanol distribution vapor losses.

The EPA developed regional projection factors for nonpoint oil and gas sources by product type based on Annual Energy Outlook (AEO) 2014 projections to year 2018. We reflected criteria air pollutant (CAP) co-benefit reductions resulting from the National Emission Standards for Hazardous Air Pollutants (NESHAP) for Reciprocating Internal Combustion Engines (RICE) and NSPS rules and Oil and Gas NSPS VOC controls for select source categories. Additional details on the projections are available in the Emissions Modeling TSD.

C. Air Quality Modeling To Identify Nonattainment and Maintenance Receptors

In this section, we describe the air quality modeling performed to identify locations where we expect there to be nonattainment or maintenance problems for the 2008 8-hour ozone NAAQS in the 2017 analytic future year chosen for this proposal. We then describe how we factored current monitored data into the identification of sites as having either nonattainment or maintenance concerns for the purposes of this rulemaking. These sites are used as the “receptors” for quantifying the contributions of emissions in upwind states to nonattainment and maintenance concerns in downwind locations.

In this proposed rule, the EPA is relying on CSAPR's approach to identify separate nonattainment and maintenance receptors in order to give independent effect to both the “contribute significantly to nonattainment” and the “interfere with maintenance” prongs of section 110(a)(2)(D)(i)(I), consistent with the D.C. Circuit's direction in

North Carolina

In its decision on remand from the Supreme Court, the D.C. Circuit confirmed that EPA's approach to identifying maintenance receptors in CSAPR comported with the court's prior instruction to give independent meaning to the “interfere with maintenance” prong in the good neighbor provision.

EME Homer City II,

795 F.3d at 136.

531 F.3d at 910-911 (holding that the EPA must give “independent significance” to each prong of CAA section 110(a)(2)(D)(i)(I)).

In CSAPR, the EPA identified nonattainment receptors as those monitoring sites that are projected to have average design values that exceed the NAAQS. The EPA separately identified maintenance receptors as those receptors that would have difficulty maintaining the relevant NAAQS in a scenario that takes into account historical variability in air quality at that receptor. The CSAPR approach for identifying nonattainment and maintenance receptors relied only upon air quality model projections of measured design values. In CSAPR, if the average design value in the analysis year was projected to exceed the NAAQS, then the monitoring site is identified as a nonattainment receptor without consideration of whether the monitoring site is currently measuring “clean data” (

i.e.,

design values below the NAAQS based on the most recent three years of measured data). In prior transport rulemakings, such as the NO

SIP Call and CAIR, the EPA defined nonattainment receptors as those areas that both currently monitor nonattainment and that the EPA projects will be in nonattainment in the future compliance year.

We explained that we had the most confidence in our projections of nonattainment for those counties that also measure nonattainment for the most recent period of available ambient data. In CSAPR, we were compelled to deviate from this practice of incorporating monitored data into EPA's evaluation of projected nonattainment receptors because the most recent monitoring data then available reflected large emission reductions from CAIR, which CSAPR was designed to replace. As recently affirmed by the D.C. Circuit, it was therefore reasonable for the EPA to decide not to compare monitored data reflecting CAIR emissions reductions to its modeling projections that instead excluded CAIR from its baseline.

63 FR at 57375, 57377 (Oct. 27, 1998); 70 FR at 25241 (May 12, 2005).