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

Federal RegisterOct 26, 2016

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52, 78, and 97

[EPA-HQ-OAR-2015-0500; FRL-9950-30-OAR]

RIN 2060-AS05

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

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Final rule.

SUMMARY:

The Environmental Protection Agency (EPA) published the original Cross-State Air Pollution Rule (original CSAPR) on August 8, 2011, to address interstate transport of ozone pollution under the 1997 ozone National Ambient Air Quality Standards (NAAQS) and interstate transport of fine particulate matter (PM

2.5

) pollution under the 1997 and 2006 PM

2.5

NAAQS. The EPA is finalizing this Cross-State Air Pollution Rule Update (CSAPR Update) to address interstate transport of ozone pollution with respect to the 2008 ozone NAAQS. This final rule will benefit human health and welfare by reducing ground-level ozone pollution. In particular, it will reduce ozone season emissions of oxides of nitrogen (NO

) in 22 eastern states that can be transported downwind as NO

or, after transformation in the atmosphere, as ozone, and can negatively affect air quality and public health in downwind areas.

For these 22 eastern states, the EPA is issuing Federal Implementation Plans (FIPs) that generally provide updated CSAPR NO

ozone season emission budgets for the electric generating units (EGUs) within these states, and that implement these budgets via modifications to the CSAPR NO

ozone season allowance trading program that was established under the original CSAPR. The EPA is finalizing these new or revised FIP requirements only for certain states that have failed to submit an approvable State Implementation Plan (SIP) addressing interstate emission transport for the 2008 ozone NAAQS. The FIPs require affected EGUs in each covered state to reduce emissions to comply with program requirements beginning with the 2017 ozone season (May 1 through September 30). This final rule partially addresses the EPA's obligation under the Clean Air Act to promulgate FIPs to address interstate emission transport for the 2008 ozone NAAQS. In conjunction with other federal and state actions to reduce ozone pollution, these requirements will assist downwind states in the eastern United States with attaining and maintaining the 2008 ozone NAAQS.

This CSAPR Update also is intended to address the July 28, 2015 remand by the United States Court of Appeals for the District of Columbia Circuit of certain states' original CSAPR phase 2 ozone season NO

emission budgets. In addition, this rule updates the status of certain states' outstanding interstate ozone transport obligations with respect to the 1997 ozone NAAQS, for which the original CSAPR provided a partial remedy.

DATES:

This final rule is effective on December 27, 2016.

ADDRESSES:

The EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2015-0500. All documents in the docket are listed on the

www.regulations.gov

Web site. Although listed in the index, some information is not publicly available,

e.g.,

CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically through

www.regulations.gov

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 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 this final action apply?

III. Legal Authority

A. The EPA's Statutory Authority for the Final Rule

B. FIP Authority for Each State Covered by the Final Rule

IV. Air Quality Issues Addressed and Overall Approach for the Final Rule

A. The Interstate Transport Challenge Under the 2008 Ozone Standard

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

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

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

1. Requiring Emission Reductions From Upwind States

2. Focusing on 2017 for Analysis and Implementation

3. The CSAPR Framework

4. Partial Versus Full Resolution of Transport Obligation

5. Why Focus on Eastern States

6. Short-Term NO

Emissions

C. Responding to the Remand of CSAPR NO

Ozone Season Emission Budgets

D. Addressing Outstanding Transport Obligations for the 1997 Ozone NAAQS

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. Definition of Nonattainment and Maintenance Receptors

D. Air Quality Modeling To Identify Nonattainment and Maintenance Receptors

E. Pollutant Transport From Upwind States

1. Air Quality Modeling To Quantify Upwind State Contributions

2. Application of Screening Threshold

3. Update to EGU Modeling for Quantifying Emission Budgets

VI. Quantifying Upwind State EGU NO

Emission Budgets To Reduce Interstate Ozone Transport for the 2008 NAAQS

A. Introduction

B. Levels of Uniform Control Stringency

1. EGU NO

Mitigation Strategies

2. Non-EGU NO

Mitigation Strategies and Feasibility for the 2017 Ozone Season

3. Summary of EGU Uniform Control Stringency Represented by Marginal Cost of Reduction (Dollar per Ton)

C. EGU NO

Reductions and Corresponding Emission Budgets

1. Evaluating EGU NO

Reduction Potential

2. Quantifying Emission Budgets

D. Multi-Factor Test Considering Costs, EGU NO

Reductions, and Downwind Air Quality Impacts

VII. Implementation Using the Existing CSAPR NO

Ozone Season Allowance Trading Program and Relationship to Other Rules

A. Introduction

B. New and Revised FIPs

C. Updates to CSAPR NO

Ozone Season Trading Program Requirements

1. Relationship of Allowances and Compliance for CSAPR Update States and States With Ongoing Original CSAPR Requirements

2. Use of Banked Vintage 2015 and 2016 CSAPR NO

Ozone Season Trading Program Allowances for Compliance in CSAPR Update States

D. Feasibility of Compliance

E. 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. Compliance Deadlines

6. Monitoring and Reporting and the Allowance Management System

7. Recordation of Allowances

F. 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 Rule

G. Title V Permitting

H. Relationship to Other Emission Trading and Ozone Transport Programs

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

SIP Call, and Other State Implementation Plans

2. Other Federal Rulemakings

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

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

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. Congressional Review Act (CRA)

L. Judicial Review and Determinations Under Section 307(b)(1) and (d)

I. Executive Summary

The EPA published the original Cross-State Air Pollution Rule (original CSAPR)

on August 8, 2011 to address the interstate transport of emissions with respect to the 1997 ozone National Ambient Air Quality Standards (NAAQS) and the 1997 and 2006 fine particulate matter (PM

2.5

) NAAQS.

The EPA is finalizing this Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS (CSAPR Update) to address the interstate transport of emissions 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).

The EPA proposed the CSAPR Update with respect to the 2008 ozone NAAQS on December 3, 2015 (80 FR 75706), and solicited comment on that action. The EPA provided an additional opportunity to comment on the air quality modeling platform and air quality modeling results that were used for the proposed CSAPR Update, through an August 4, 2015 Notice of Data Availability (NODA) (80 FR 46271) requesting comment on these data. This final rule is informed by comments received on the NODA and proposed CSAPR Update. This CSAPR Update also is intended to address the remand by the United States Court of Appeals for the District of Columbia Circuit of certain states' original CSAPR NO

ozone season phase 2 emission budgets. Additionally, this rule updates the status of outstanding interstate ozone transport obligations for states that the original CSAPR provided a partial remedy with respect to the 1997 ozone NAAQS.

See

76 FR 48208 (August 8, 2011).

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

See

73 FR 16436 (March 27, 2008).

A. Purpose of Regulatory Action

The purpose of this rulemaking is to protect public health and welfare by reducing interstate emission transport that significantly contributes to nonattainment, or interferes with maintenance, of the 2008 ozone NAAQS in the eastern U.S. Ground-level 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, for example, by limiting tree growth.

Studies have established that ozone occurs on a regional scale (

i.e.,

hundreds of miles) over much of the eastern U.S., with elevated concentrations occurring in rural as well as metropolitan areas.

4 5

To reduce this regional-scale ozone transport, assessments of ozone control approaches have concluded that NO

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

emission reductions can be effective in reducing ozone pollution—specifically 8-hour peak concentrations, which is the form of the 2008 ozone standard. For example, studies have shown EGU NO

reductions achieved under one of the EPA's prior interstate transport rulemakings known as the NO

SIP Call

were effective in reducing 8-hour peak ozone concentrations during the ozone season.

Bergin, M.S. et al. (2007) Regional air quality: Local and interstate impacts of NO

and SO

emissions on ozone and fine particulate matter in the eastern United States. Environmental Sci & Tech. 41: 4677-4689.

Liao, K. et al. (2013) Impacts of interstate transport of pollutants on high ozone events over the Mid-Atlantic United States. Atmospheric Environment 84, 100-112.

63 FR 57356 (October 27, 1998).

Gégo et al. (2007) Observation-based assessment of the impact of nitrogen oxides emissions reductions on O

air quality over the eastern United States. J. of Applied Meteorology and Climatology 46: 994-1008.

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 or interfere with maintenance in any other state with respect to any primary or secondary NAAQS. The statute vests states with the primary responsibility to address interstate emission transport through the development of 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, the CAA also requires the EPA to fill a backstop role by issuing Federal Implementation Plans (FIPs) where states fail to submit good neighbor SIPs or the EPA disapproves a submitted good neighbor SIP.

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

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). This CSAPR Update finalizes FIPs for 13 of these states (Alabama, Arkansas, Illinois, Iowa, Kansas, Michigan, Mississippi, Missouri, Oklahoma, Pennsylvania, Tennessee, Virginia, and West Virginia). On June 15, 2016 and July 20, 2016, the EPA published additional rules finding that New Jersey and Maryland, respectively, also failed to submit transport SIPs for the 2008 ozone NAAQS.

See

81 FR 38963 (June 15, 2016) (effective July 15, 2016); 81 FR 47040 (July 20, 2016) (Maryland, effective August 19, 2016). This final CSAPR Update also finalizes FIPs addressing the good neighbor provision for these two states. Additionally, the EPA is finalizing FIPs for seven states for which it finalized disapproval of the states' good neighbor SIPs for the 2008 ozone NAAQS: Indiana, Kentucky, Louisiana, New York, Ohio, Texas, and Wisconsin. The FIPs being promulgated partially address the EPA's outstanding CAA obligations to prohibit interstate transport of air pollution which will contribute significantly to nonattainment in, or interfere with maintenance by, any other state with respect to the 2008 ozone NAAQS. The EPA also determines that it has fully satisfied its FIP obligation as to 9 states (Florida, Georgia, Maine, Massachusetts, Minnesota, New Hampshire, North Carolina, South Carolina, and Vermont), which the EPA has determined do not contribute significantly to nonattainment in, or interfere with maintenance by, any other state with respect to the 2008 ozone NAAQS.

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

The EPA is finalizing a FIP for each of the 22 states subject to this rule, having found that they failed to submit a complete good neighbor SIP (15 states) or having issued a final rule disapproving their good neighbor SIP (7 states). However, even after these FIPs take effect, any state included in this 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 provides states with the option to submit abbreviated SIPs to customize the methodology for allocating CSAPR NO

ozone season allowances while participating in the ozone season trading program and the EPA is extending that approach in this rule.

The 22 states for which the EPA is promulgating FIPs to reduce interstate ozone transport as to the 2008 ozone NAAQS are listed in Table I.A-1.

Table I.A-1—List of 22 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

Ohio

Oklahoma

Pennsylvania

Tennessee

Texas

Virginia

West Virginia

Wisconsin

The final CSAPR Update addresses collective contributions of ozone pollution from states in the eastern U.S. and builds on previous eastern-focused efforts to address collective contributions to interstate transport, including the NO

SIP Call, the Clean Air Interstate Rule,

and the original CSAPR rules. The EPA is not finalizing FIPs to address interstate emission transport for western states, where there may be additional factors to consider in the EPA's and state's evaluations.

70 FR 25162 (May 12, 2005).

The EPA finds, in the final air quality modeling on which this rule is based, one state for which the EPA proposed a FIP in the proposed CSAPR Update rule, North Carolina, is not linked to any downwind nonattainment or maintenance receptors. Therefore, the EPA is not finalizing a FIP for North Carolina.

For 14 of the eastern states evaluated in this rule (Connecticut, Florida, Georgia, Maine, Massachusetts, Minnesota, Nebraska, New Hampshire, North Carolina, North Dakota, Rhode Island, South Carolina, South Dakota, and Vermont), the EPA has determined that emissions from those states do not significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS in downwind states. Accordingly, the EPA has determined that it need not require further emission reductions from sources in these states to address the good neighbor provision as to the 2008 ozone NAAQS.

Of the 22 states covered in this CSAPR Update, 21 states

have original CSAPR NO

ozone season FIP requirements with respect to the 1997 ozone NAAQS. One state, Kansas, has newly added CSAPR NO

ozone season FIP requirements in this action. For the 22 states affected by one of the FIPs finalized in this action, the EPA is promulgating new FIPs with EGU NO

ozone season emission budgets to reduce interstate transport for the 2008 ozone NAAQS.

Alabama, Arkansas, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.

One state, Georgia, has an ongoing original CSAPR NO

ozone season FIP requirement with respect to the 1997 ozone NAAQS, but the EPA has found that is does not contribute to interstate transport with respect to the 2008 ozone NAAQS. The EPA did not reopen comment on Georgia's interstate transport obligation with respect to the 1997 ozone NAAQS in this rulemaking, so Georgia's original CSAPR NO

ozone season requirements (including its emission budget) continue unchanged.

In addition to reducing interstate ozone transport with respect to the 2008 ozone NAAQS, this rule also addresses the status of outstanding interstate ozone transport obligations with respect

to the 1997 ozone NAAQS. In the original CSAPR, the EPA promulgated FIPs for 25 states to address ozone transport with respect to the 1997 NAAQS. For 11 of these states,

the original CSAPR rulemakings 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. Relying on modeling completed for this final rule, this action finds that, with implementation of the original CSAPR NO

ozone season emission budgets, emissions from ten of these states no longer significantly contribute to downwind nonattainment or interference with maintenance for the 1997 ozone NAAQS. The EPA further finds that, with implementation of the CSAPR Update NO

ozone season emission budgets, emissions from these ten states also no longer significantly contribute to downwind nonattainment or interference with maintenance for the 1997 ozone NAAQS. With respect to Texas, the modeling shows that emissions from within the state no longer significantly contribute to downwind nonattainment or interference with maintenance for the 1997 ozone NAAQS even without implementation of the original CSAPR NO

ozone season emission budget. Accordingly, sources in Texas will no longer be subject to the emissions budget calculated to address the 1997 ozone NAAQS. However, as described earlier, this rule finalizes a new emissions budget for Texas designed to address interstate transport with respect to the 2008 ozone NAAQS.

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 is also intended to address the portion of the July 28, 2015 opinion of the United States Court of Appeals for the District of Columbia (D.C. Circuit) remanding without vacatur 11 states' CSAPR phase 2 NO

ozone season emission budgets.

EME Homer City Generation, L.P.,

EPA,

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

EME Homer City II

). This action promulgates new NO

ozone season budgets addressing interstate transport with respect to the 2008 ozone NAAQS that take effect in 2017, which replace the invalidated phase 2 budgets for 8 states, and also removes the remaining three states from the CSAPR NO

ozone season trading program as a result of the EPA's finding that these three states do not significantly contribute to downwind nonattainment or interference with maintenance for the 2008 standard.

The EPA is promulgating new emission budgets that would replace the invalidated CSAPR phase 2 NO

ozone season budgets for Iowa, Maryland, Michigan, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Texas, Virginia, West Virginia, and Wisconsin. The EPA is removing Florida, North Carolina, and South Carolina from the CSAPR ozone season NO

trading program.

The EPA acknowledges that, in

EME Homer City II,

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

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

annual emission budgets. On June 27, 2016, the EPA released a memorandum outlining the agency's approach for responding to the D.C. Circuit's July 2015 remand of the CSAPR phase 2 SO

annual emission budgets for Alabama, Georgia, South Carolina and Texas. The memorandum can be found at

https://www3.epa.gov/airtransport/CSAPR/pdfs/CSAPR_SO2_Remand_Memo.pdf

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.

While reductions achieved by this final rule will aid in attainment and maintenance of the 2015 standard, the CSAPR Update rule 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.

80 FR 65291 (October 26, 2015).

The EPA notes that the level of the annual PM

2.5

NAAQS was also revised after CSAPR was promulgated (78 FR 3086, January 15, 2013). However, this final rule does not address the 2012 PM

2.5

standard.

The EPA issued a memo addressing CAA section 110(a)(2)(D)(i)(I) requirements for the 2012 PM

2.5

NAAQS, see “Information on the Interstate Transport `Good Neighbor' Provision for the 2012 Fine Particulate Matter National Ambient Air Quality Standards under Clean Air Act section 110(a)(2)(D)(i)(I),” March 17, 2016.

B. Major Provisions

To reduce interstate emission transport under the authority provided in CAA section 110(a)(2)(D)(i)(I), this rule further limits ozone season (May 1 through September 30) NO

emissions from electric generating units (EGUs) in 22 eastern states using the same framework used by the EPA in developing the original CSAPR. The CSAPR framework provides a 4-step process to address the requirements of the good neighbor provision for ambient 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; 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 emission allowance trading programs. Each time the relevant NAAQS are revised, this process can be applied for the new NAAQS. In this final action, the EPA applies this 4-step CSAPR framework to update CSAPR with respect to the 2008 ozone NAAQS.

The EPA is aligning implementation of this rule with relevant attainment dates for the 2008 ozone NAAQS, as required by the D.C. Circuit's decision in

North Carolina

EPA.

The EPA's final 2008 Ozone NAAQS SIP Requirements Rule

established the attainment deadline of July 20, 2018 for ozone nonattainment areas currently designated as Moderate. Because the attainment date 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 20, 2018 attainment date. Therefore, consistent with the court's instruction in

North Carolina,

the EPA establishes emission budgets and implementation of these emission budgets starting with the 2017 ozone season.

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

80 FR 12264, 12268; 40 CFR 51.1103.

In order to apply the first and second steps of the CSAPR 4-step framework 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 updated this modeling for the final rule, using the most current complete dataset available, taking into account comments submitted on the August 2015 Air Quality Modeling NODA and on the CSAPR Update rule proposal. For the final rule, the EPA evaluated modeling

projections for 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 uses air quality modeling to assess contributions from upwind states to these downwind receptors and evaluates these contributions relative to a screening threshold of 1 percent of the NAAQS. States with contributions that equal or exceed 1 percent of the NAAQS are identified as warranting further analysis for significant contribution to nonattainment or interference with maintenance. States with contributions below 1 percent of the NAAQS are considered to not significantly contribute to nonattainment or interfere with maintenance of the NAAQS in downwind states.

As discussed further in section V, EPA's modeling showed that the following eastern states contribute below the 1 percent contribution threshold to downwind nonattainment or maintenance receptors: Connecticut, Florida, Georgia, Maine, Massachusetts, Minnesota, Nebraska, New Hampshire, North Carolina, North Dakota, Rhode Island, South Carolina, South Dakota, and Vermont.

To apply the third step of the 4-step CSAPR framework, the EPA quantified emission budgets that limit allowable emissions and represent the emission levels that remain after each state makes EGU NO

emission reductions that are necessary to reduce interstate ozone transport for the 2008 NAAQS. To establish the CSAPR Update emission budgets, the EPA evaluated levels of uniform NO

control stringency, represented by an estimated marginal cost per ton of NO

reduced. The EPA applied the CSAPR multi-factor test to evaluate cost, available emission reductions, and downwind air quality impacts to determine the appropriate level of uniform NO

control stringency that addresses the impacts of interstate transport on downwind nonattainment or maintenance receptors. The EPA used this multi-factor assessment to gauge the extent to which emission reductions are needed, and to ensure those reductions do not represent over-control.

The multi-factor test generates a “knee in the curve” at a point where emission budgets reflect a control stringency with an estimated marginal cost of $1,400 per ton. This level of stringency in emission budgets represents the level at which incremental EGU NO

reduction potential and corresponding downwind ozone air quality improvements are maximized with respect to marginal cost. That is, the ratio of emission reductions to marginal cost and the ratio of ozone improvements to marginal cost are maximized relative to the other emission budget levels evaluated. The EPA finds that very cost-effective EGU NO

reductions can make meaningful and timely improvements in downwind ozone air quality to address interstate ozone transport for the 2008 ozone NAAQS for the 2017 ozone season. Further, this evaluation shows that emission budgets reflecting the $1,400 per ton cost threshold do not over-control upwind states' emissions relative to either the downwind air quality problems to which they are linked or the 1 percent contribution threshold that triggered further evaluation. As a result, the EPA is finalizing EGU NO

ozone season emission budgets developed using uniform control stringency represented by $1,400 per ton. The emission budgets that the EPA is finalizing in FIPs for the CSAPR Update rule are summarized in table I.B-1.

Table I.B-1—Final 2017 EGU NO

Ozone Season Emission Budgets for the CSAPR Update Rule

[Ozone season NO

tons]

State

CSAPR update rule 2017 *

emission budgets

Alabama

13,211

Arkansas

12,048/9,210

Illinois

14,601

Indiana

23,303

Iowa

11,272

Kansas

8,027

Kentucky

21,115

Louisiana

18,639

Maryland

3,828

Michigan

17,023

Mississippi

6,315

Missouri

15,780

New Jersey

2,062

New York

5,135

Ohio

19,522

Oklahoma

11,641

Pennsylvania

17,952

Tennessee

7,736

Texas

52,301

Virginia

9,223

West Virginia

17,815

Wisconsin

7,915

22 State Region

316,464/313,626

* The EPA is finalizing CSAPR EGU NO

ozone season emission budgets for Arkansas of 12,048 tons for 2017 and 9,210 tons for 2018 and subsequent control periods.

Our analysis shows that there is uncertainty regarding whether or not meaningful, cost-effective non-EGU emission reductions are achievable for the 2017 ozone season. Therefore, non-EGU reductions are not included in the final rule.

For most states, the EGU NO

ozone season emission budgets finalized in this action represent a partial remedy to address interstate emission transport for the 2008 ozone NAAQS.

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

reductions that are achievable in the near term, particularly before the Moderate area attainment date of 2018. Generally, notwithstanding that additional reductions may be required to fully address the states' interstate transport obligations, the EGU NO

emission reductions implemented by this final rule are needed for upwind states to eliminate their significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS and for downwind states with ozone nonattainment areas that are required to attain the standard by July 20, 2018.

The requirements for one state, Tennessee, will fully eliminate that state's significant contribution to downwind nonattainment and interference with maintenance of the 2008 ozone NAAQS.

To meet the fourth step of the four-step CSAPR framework (

i.e.,

implementation), the FIPs contain enforceable measures necessary to achieve the emission reductions in each state. The FIPs contained in this CSAPR Update require power plants in covered states (

i.e.,

states that significantly contribute to ozone nonattainment or interfere with maintenance of the ozone standard in the east) to participate in a CSAPR NO

ozone season Group 2 allowance trading program. CSAPR's trading programs and the EPA's prior emission trading programs (

e.g.,

CAIR and the NO

SIP Call) 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 CSAPR allowance trading programs, the EPA is applying 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 and practical experience gained by states, industry and the EPA. Further, this program is familiar to the EGUs that will be regulated under this rule, which means that monitoring, reporting, and compliance will continue as they are already conducted under CSAPR's current ozone season and annual programs.

One state, Kansas, will have a new CSAPR ozone season requirement. EGUs located in Kansas currently participate 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.

The CSAPR Update establishes two trading groups within the CSAPR NO

ozone season allowance trading program—Group 1 for Georgia and Group 2 for the 22 CSAPR Update states. At this time, Georgia is the only state included in the CSAPR NO

ozone season Group 1 trading program. The EPA will issue distinct allowances for these trading groups; CSAPR NO

ozone season Group 1 allowances and CSAPR NO

ozone season Group 2 allowances. Covered entities demonstrate compliance by holding and surrendering one allowance for each ton of NO

emitted during the ozone season. In order to ensure that the CSAPR NO

ozone season trading program implements emission reductions needed to meet the Clean Air Act's good neighbor requirements for the CSAPR Update states, the EPA finalizes a prohibition on allowance usage between Georgia and the CSAPR Update states. However, the EPA provides an option for Georgia to voluntarily adopt via SIP an emission budget that is commensurate with CSAPR Update emission budgets that could include Georgia in the Group 2 trading program with the CSAPR Update states. Implementation of Group 1 and Group 2 trading programs is substantially the same as the original CSAPR NO

ozone season trading program. For states with continuing obligations to address interstate transport with respect to the 1997 ozone NAAQS as well as obligations under this rule with respect to the 2008 ozone NAAQS,

the EPA is coordinating the FIP requirements for the two NAAQS by providing that compliance with the 2008 ozone NAAQS FIP requirements simultaneously satisfies the state's transport obligations with respect to the less stringent 1997 ozone NAAQS. These states will therefore only be required to comply with the CSAPR NO

ozone season Group 2 requirements.

Alabama, Arkansas, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, and Tennessee.

For this CSAPR Update, the EPA considered whether, and to what extent, banked

2015 and 2016 CSAPR NO

ozone season allowances should be eligible for compliance in the CSAPR Update rule states. As proposed, the CSAPR Update finalizes a limit on the number of banked allowances carried over based on the need to assure that the CAA objective of the CSAPR Update is achieved. This approach transitions some allowances for compliance to further ensure feasibility of implementing the CSAPR Update rule. The EPA proposed to use turn-in ratios calculated using a formula—essentially the same formula that the EPA is finalizing in this rule. Specifically, the final rule establishes a one-time allowance conversion that transitions a limited number of banked vintage 2015 and 2016 allowances for compliance use in CSAPR Update states. This allowance conversion limits the number of banked allowances to 1.5 years of states' aggregated CSAPR variability limits (approximately 99,700 allowances) in order to ensure that implementation of the trading program will result in NO

emission reductions sufficient to address significant contribution to nonattainment or interference with maintenance of downwind pollution with respect to the 2008 ozone NAAQS.

Allowances that were not used for compliance and were saved for use in a later compliance period.

The compliance requirements of this final rule are in addition to existing, on-the-books EPA and state environmental regulations. To the extent that new, unplanned actions may also reduce EGU NO

emissions within a state included in the CSAPR Update, whether for compliance with other environmental requirements or for other reasons, such actions would help the state comply with its good neighbor requirements. The final FIP compliance requirements begin with the 2017 ozone season and will continue for subsequent ozone seasons to ensure that upwind states included in this rule meet their Clean Air Act obligation to address interstate emission transport with respect to the 2008 ozone NAAQS for 2017 and future years. Even after the attainment deadline has passed, areas are required to continue to attain and maintain the NAAQS, and these good neighbor emission limits will ensure that future emissions are consistent with states' ongoing good neighbor obligations.

The EPA is finalizing revisions to the Code of Federal Regulations (CFR), specifically: 40 CFR part 97, subparts BBBBB and EEEEE (federal CSAPR NO

ozone season trading programs); 40 CFR 52.38(b) (CSAPR NO

ozone season FIP requirements and rules on replacing or modifying the FIP requirements through a SIP revision); state-specific subparts of 40 CFR part 52 for 25 states (descriptions for these states of FIP requirements and consequences of SIP revisions related to ozone season NO

emissions); and 40 CFR part 78 (provisions addressing the scope of coverage of the administrative appeal procedures) to address interstate transport for the 2008 ozone NAAQS. In addition, as proposed, various minor corrections are being finalized to these CFR sections and other sections of parts 52, 78, and 97 relating to the CSAPR ozone season and annual trading programs.

The remainder of this preamble is organized as follows: Section III describes the EPA's legal authority for this action; section IV describes the human health and environmental context, the EPA's overall approach for addressing interstate transport through use of the CSAPR framework, and the EPA's response to the remand of certain CSAPR NO

ozone season emission budgets; section V describes the air quality modeling platform and emission inventories that the EPA used in its assessment of downwind receptors of concern and upwind state ozone contributions to those receptors for the final rule; section VI describes the EPA's approach to quantify upwind state obligations in the form of final EGU NO

emission 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 rule; section IX discusses 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 preamble sections include certain significant comments and responses to comments as they pertain to the topic covered in each section.

C. Benefits and Costs

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

in 2017 by 61,000 tons, compared to 2017 projections without the rule.

Consistent with Executive Order 13563, “Improving Regulation and Regulatory Review,” the EPA has estimated the costs and benefits of the rule. Estimates here are subject to uncertainties discussed further in the Regulatory Impact Analysis (RIA) in the docket. The estimated net benefits of the rule at 3 percent and 7 percent discount rates are $460 million to $810 million and $450 million to $790 million (2011$), respectively. The non-monetized benefits include reduced ecosystem impacts and improved visibility. Discussion of the rule's costs and benefits is provided in preamble section VIII and in the RIA, which is found in the docket for this final rule. The EPA's estimate of the rule's costs

and quantified benefits is summarized in Table I.C-1.

Table I.C-1—Summary of Compliance Costs, Monetized Benefits, and Monetized Net Benefits of the Final Rule for 2017

[2011$]

Description

Impacts

(benefits at 3% discount rate)

($ millions)

Impacts

(benefits at 7% discount rate)

($ millions)

Annualized Compliance Costs

Monetized benefits

530 to 880

520 to 860

Monetized Net benefits (benefits-costs)

460 to 810

450 to 790

The annualized compliance costs estimate is used as a proxy for the total annualized social costs. These costs are determined using the 4.77% percent discount rate from the electricity sector model used for this analysis and are rounded to two significant figures. The annualized compliance costs presented here reflect the cost to the electricity sector of complying with the FIPs. These costs do not include monitoring, recordkeeping, and reporting costs, which are reported separately. See Chapter 4 of the RIA for this final rule for details and explanation.

Total monetized health benefits are estimated at 3 percent and 7 percent discount rates and are rounded to two significant figures. 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 final action apply?

This 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 will 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 and 97.804. 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. Legal Authority

A. The EPA's Statutory Authority for the Final Rule

The statutory authority for this final 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 underpinnings for this rule. 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 later and that are the focus of this rule.

The 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 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 covered state, essentially a cap on ozone season NO

emissions in the state. Sources in the covered 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 the 1997 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 PM

2.5

and the 1997 ozone NAAQS. Those states were required by the CAA to have submitted good neighbor SIPs for those standards by July 2000.

These findings 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 the 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 original 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 the original 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 emission 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 later, CSAPR was the subject of decisions by both the D.C. Circuit and the Supreme Court, which largely upheld the rule.

76 FR 48208.

Alabama has submitted, and EPA has approved, a SIP revision that replaces the CSAPR FIPs for the annual trading programs in Alabama. 81 FR 59869 (Aug. 31, 2016).

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 the CSAPR FIPs as a result of states' failure to submit or the EPA's disapproval of good neighbor SIPs. The D.C. Circuit also held that the EPA erred in apportioning upwind emission reduction obligations using uniform cost thresholds, and that such approach may result in unnecessary over-control.

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 I

Id.

at 23-27.

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

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 interstate transport for the 2008 ozone NAAQS. The Court also reversed the D.C. Circuit's holding that the EPA's use of cost to apportion upwind states' emission reduction obligations was impermissible, finding that the EPA's approach was a “permissible construction of the statute.”

The Supreme Court remanded the litigation to the D.C. Circuit for further proceedings.

EPA

EME Homer City Generation, L.P.,

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

Id.

at 1606-07.

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 the EPA's approach to addressing interstate transport in CSAPR, leaving the rule in place and affirming the EPA's interpretation of various statutory provisions and the EPA's technical decisions. The decision also remanded the rule without vacatur for reconsideration of the EPA's emission budgets for certain states. In particular and as discussed in section IV, the court declared invalid the CSAPR phase 2 NO

ozone season emission 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 CSAPR phase 2 SO

annual emission 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.

In 2011, EPA finalized a supplemental rule that added five states to the CSAPR NO

ozone season trading program, 76 FR 80760 (Dec. 27, 2011). 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.

See Public Service Company of Oklahoma

EPA,

No. 12-1023 (D.C. Cir., filed Jan. 13, 2012);

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). These cases were held in abeyance during the pendency of the litigation in

EME Homer City,

and remain pending in the D.C. Circuit as of the date of signature of this rule.

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 2008 ozone NAAQS.

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

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

ozone season emission budgets for 22 eastern states to mitigate their significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS in another state.

The EPA is also responding to the court's remand in

EME Homer City II

with respect to the remanded NO

ozone season emission budgets.

One state, Kansas, will have a new CSAPR ozone season requirement under this final rule. The remaining 21 states were included in the original CSAPR ozone season program as to the 1997 ozone NAAQS.

B. FIP Authority for Each State Covered by the Final Rule

As discussed previously, all states have an obligation to submit SIPs that address the applicable 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 the 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 no later than 2 years after 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, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Mexico, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Vermont, Virginia, and West Virginia.

Several additional eastern states—Connecticut, Delaware, Indiana, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Dakota, Ohio, Rhode Island, South Dakota, Texas, Wisconsin, and the District of Columbia—had previously submitted SIPs to address the requirements of section 110(a)(2)(D)(i)(I) for the 2008 ozone NAAQS. Since the EPA issued the findings notice, the agency has also received a SIP submission addressing the good neighbor provision for the 2008 ozone NAAQS from the states of Maine, New Hampshire, North Carolina, and Vermont. Maryland and New Jersey subsequently withdrew their good neighbor SIP submittals addressing the 2008 ozone standard. The EPA issued separate notices finding that Maryland and New Jersey 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

81 FR 47040 (July 20, 2016) (Maryland, effective August 19, 2016); 81 FR 38963 (June 15, 2016) (New Jersey, effective July 15, 2016). The finding actions triggered a 2-year deadline for the EPA to issue FIPs to address the good neighbor provision for Maryland by August 19, 2018 and New Jersey by July 15, 2018.

To the extent that the EPA had not finalized action on these SIPs at proposal, the states were encouraged to evaluate their submissions in light of the information provided in the proposal with respect to interstate ozone transport for the 2008 ozone NAAQS. The EPA has finalized disapproval or partial disapproval of the good neighbor SIPs from Indiana, Kentucky, Louisiana, New York, Ohio, Texas and Wisconsin,

triggering the EPA's authority and obligation to promulgate FIPs that implement the requirements of the good neighbor provision for those states. The EPA has approved good neighbor SIPs addressing the 2008 ozone standard submitted by Nebraska, North Dakota, and South Dakota. The EPA has not yet taken final action to approve or disapprove the SIPs submitted by Connecticut, Delaware, the District of Columbia, Maine, New Hampshire, North Carolina, Rhode Island, and Vermont. However, the EPA is not finalizing FIPs as to these states in this action. The EPA will review and act upon these states' SIPs in separate, future actions.

The EPA has finalized a partial disapproval of the good neighbor SIP from the state of Wisconsin. The EPA partially approved Wisconsin's SIP as to the state's significant contribution to nonattainment and partially disapproved as to the state's interference with maintenance of the 2008 ozone NAAQS.

See

81 FR 53309 (August 12, 2013).

Comment:

Some commenters have questioned the EPA's authority to propose FIPs for certain states before the EPA has either issued findings of failure to submit good neighbor SIPs or taken final action to approve or disapprove pending good neighbor SIPs submitted by those states. Commenters state that the EPA's development of FIPs prior to taking those actions upsets the balance of state and federal authority. Some commenters state that this approach is inconsistent with the sequencing of events envisioned by Congress in CAA section 110(c). Another commenter contends that the CAA contemplates that states should have an opportunity to correct any problems with its SIP in a timely fashion and avoid imposition of a FIP. The commenter states that, until the EPA proposes to disapprove a state's SIP, the state does not know what corrections would be necessary.

One commenter states that the Supreme Court's decision in

EPA

EME Homer City Generation

means that the EPA may issue a FIP if more than two years have elapsed since the EPA found the state's SIP was inadequate. The commenter suggests that states should be given the opportunity to submit a SIP after the EPA establishes a state budget before a FIP is implemented. The commenter states that the EPA adhered to the CAA in prior transport rulemakings like the NO

SIP Call and CAIR by allowing states to decide how to meet budgets quantified by the EPA.

Response:

The EPA disagrees with commenters' contention that we cannot propose a FIP for a state prior to taking final action on the state's SIP. CAA section 110(c) provides that the EPA “shall promulgate a [FIP]

at any time

within two years after” the EPA either finds that a state has failed to make a required submission or disapproves a SIP, in whole or in part. As the Supreme Court confirmed in

EPA

EME Homer City Generation,

“EPA is not obliged to wait two years or postpone its action even a single day: The Act empowers the Agency to promulgate a FIP `at any time' within the two-year limit.” 134 S. Ct. at 1601.

The EPA's proposal was not the “promulgation” of a FIP. Rather, the EPA is only finalizing FIPs for those states for which the EPA has either made a finding of failure to submit a SIP addressing the state's good neighbor obligation as to the 2008 ozone NAAQS or for which the EPA disapproved the state's good neighbor SIP. Accordingly, consistent with section 110(c), the EPA is only promulgating FIPs for those states that the EPA found have failed to address the statutory SIP obligation.

The EPA also disagrees that it was required to provide states with an opportunity to submit a SIP addressing the budgets calculated in this rule

before promulgating a FIP. The Supreme Court clearly held that the Act does not “condition the duty to promulgate a FIP on EPA's having first quantified an upwind State's good neighbor obligations.” 134 S. Ct. at 1601. Nor does the Act “require EPA to furnish upwind States with information of any kind about their good neighbor obligations before a FIP issues.”

Id.

While the EPA has taken a different approach in some prior rulemakings by providing states with an opportunity to submit a SIP after the EPA quantified the states' budgets, the circumstances of this rule require a different approach. As discussed in more detail earlier, it is important for the EPA to assure that emission reductions are achieved, to the extent feasible, by the 2017 ozone season in order to assist downwind areas with meeting the July 20, 2018 attainment deadline for Moderate nonattainment areas. If the EPA were to permit states an opportunity to develop and submit state plans to address the emission reductions required by this rule before imposing a federal plan, the EPA could not ensure that these emission reductions would be achieved in a timely manner. However, states may submit SIPs to replace the FIPs promulgated in this final rule at any time. Some types of SIPs that a state might consider are outlined in more detail later in section VII.

In addition to the agency's general FIP authority and the comments received on that issue, there is a unique issue related to the EPA's FIP obligation for Kentucky. 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 I,

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 in the United States Court of Appeals for the Sixth Circuit based on the agency's conclusion that the FIP clock was not triggered by the disapproval of Kentucky's good neighbor SIP.

Subsequently, 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 Sixth Circuit granted, vacatur and remand of the portion of the EPA's final action on Kentucky's good neighbor SIP 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 document, the EPA is correcting the portion of the Kentucky 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 Generation,

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 I,

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 finds that the FIP obligation was triggered as of June 2, 2014, and that the EPA was obligated to promulgate a FIP that corrects the deficiency by June 2, 2016.

IV. Air Quality Issues Addressed and Overall Approach for the Final Rule

A. The Interstate Transport Challenge Under the 2008 Ozone Standard

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

Interstate transport of NO

emissions poses significant challenges with respect to attaining the 2008 ozone NAAQS in the eastern U.S. and thus presents a threat to public health and welfare. The following sections discuss the nature and sources of ozone, how ozone is transported in the atmosphere and across state boundaries, and ozone's impacts on human health and the environment.

Nature of ozone and the Ozone NAAQS.

Ground-level ozone is not emitted directly into the air, but is a secondary air pollutant created by chemical reactions between oxides of nitrogen (NO

), carbon monoxide (CO), methane (CH

), and non-methane volatile organic compounds (VOCs) in the presence of sunlight. Emissions from electric utilities, industrial facilities, motor vehicles, gasoline vapors, and chemical solvents are some of the major anthropogenic sources of ozone precursors. The potential for ground-level ozone formation increases during periods with warmer temperatures and stagnant air masses; therefore ozone levels are generally higher during the summer months.

Ground-level ozone concentrations and temperature are highly correlated in the eastern U.S. with observed ozone increases of 2-3 ppb per degree Celsius reported.

Increased temperatures may also increase emissions of volatile man-made and biogenic organics and can indirectly increase anthropogenic NO

emissions as well (

e.g.,

increased electricity generation to power air conditioning).

Rasmussen, D.J.

et al.

(2011) Ground-level ozone-temperature relationships in the eastern US: A monthly climatology for evaluating chemistry-climate models. Atmospheric Environment 47: 142-153.

Bloomer, B.J., J.W. Stehr, C.A. Piety, R.J. Salawitch,

and

R.R. Dickerson (2009), Observed relationships of ozone air pollution with temperature and emissions, Geophys. Res. Lett., 36,

L09803

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

Ozone transport.

Precursor emissions can be transported downwind directly or, after transformation in the atmosphere, as ozone. Studies have

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

i.e.,

hundreds of miles) over much of the eastern U.S., with elevated concentrations occurring in rural as well as metropolitan areas. 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). Numerous observational studies have demonstrated the transport of ozone and its precursors and the impact of upwind emissions on high concentrations of ozone pollution. Bergin et al., for example, examined the impacts of statewide emissions of NO

, SO

, and VOCs on concentrations of ozone and fine particulate matter in the eastern U.S. They found on average 77 percent of each state's ground-level ozone is produced by precursor emissions from upwind states.

Liao et al., showed the impacts of interstate transport of anthropogenic NO

and VOC emissions on peak ozone formation in 2007 in the Mid-Atlantic U.S. Results suggest reductions in anthropogenic NO

emissions from EGU and non-EGU sources from the Great Lakes region as well as northeastern and southeastern U.S. would be effective for decreasing area-mean peak ozone concentrations in the Mid-Atlantic.

Bergin, M.S.

et al.

(2007) Regional air quality: local and interstate impacts of NO

and SO

emissions on ozone and fine particulate matter in the eastern United States. Environmental Sci & Tech. 41: 4677-4689.

Liao, K.

et al.

(2013) Impacts of interstate transport of pollutants on high ozone events over the Mid-Atlantic United States. Atmospheric Environment 84, 100-112.

The EPA has previously concluded in the NO

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

control strategy is effective. 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. Model assessments have looked at impacts on peak ozone concentrations after potential emission reduction scenarios for NO

and VOCs for NO

-limited and VOC-limited areas. For example, Jiang and Fast concluded that NO

emission reductions strategies would be effective in lowering ozone mixing ratios in urban areas and Liao et al. showed NO

reductions would reduce peak ozone concentrations in non-attainment areas in the Mid-Atlantic (

i.e.

a 10 percent reduction in EGU and non-EGU NO

emissions would result in approximately a 6 ppb reduction in peak ozone concentrations in Washington, DC).

Assessments of ozone 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) also show the importance of NO

emissions on ozone transport. This analysis is in the docket for this rule and also can be found in the docket for the 2015 ozone NAAQS, Docket No. EPA-HQ-OAR-2013-0169-0057.

Jiang, G.; Fast, J.D. (2004) Modeling the effects of VOC and NO

emission sources on ozone formation in Houston during the TexAQS 2000 field campaign. Atmospheric Environment 38: 5071-5085.

Further, studies have found that EGU NO

emission reductions, particularly, can be effective in reducing ozone pollution as quantified by the form of the 2008 ozone standard, 8-hour peak concentrations. Specifically, studies have found that EGU NO

emission reductions can be effective in reducing the upper end of the cumulative ozone distribution in the summer on a regional scale.

Analysis of air quality monitoring data trends shows reductions in summertime ozone concurrent with implementation of EGU NO

reduction programs.

Gilliland et al. presented reductions in observed versus modeled ozone concentrations in the eastern U.S. downwind from major NO

sources. The results showed significant reductions in ozone concentrations (10-25 percent) from observed measurements (CASTNET and AQS)

between 2002 and 2005, linking reductions in EGU NO

emissions from upwind states with ozone reductions downwind of the major source areas.

Another study shows that EGU NO

emissions can contribute between 5 ppb and 25 ppb to average 8-hour peak

Hidy, G.M. and Blanchard C.L. (2015) Precursor reductions and ground-level ozone in the Continental United States. J. of Air & Waste Management Assn. 65, 10.

Simon, H.

et al.

(2015) Ozone trends across the United States over a period of decreasing NO

and VOC emissions. Environmental Science & Technology 49, 186-195.

CASTNET is the EPA's Clean Air Status and Trends Network. AQS is the EPA's Air Quality System.

Gilliland, A.B.

et al.

(2008) Dynamic evaluation of regional air quality models: Assessing changes in O

stemming from changes in emissions and meteorology. Atmospheric Environment 42: 5110-5123.

ozone concentrations in Mid-Atlantic metropolitan statistical areas.

Additionally, Gégo et al. showed that ground-level ozone concentrations were significantly reduced after the NO

SIP Call in regions downwind of major EGUs in the Ohio River Valley.

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.

Gégo

et al.

(2007) Observation-based assessment of the impact of nitrogen oxides emissions reductions on O

air quality over the eastern United States. J. of Applied Meteorology and Climatology 46: 994-1008.

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 earlier proposals regarding the rules' focus on ozone season EGU NO

reductions to address interstate ozone transport. Further, many comments received on the proposed CSAPR Update encouraged the EPA to seek further EGU NO

reductions to address interstate transport for the 2008 ozone NAAQS. As described later in this document, the EPA's analysis finds that the power sector continues to be capable of making NO

reductions that reduce interstate transport with respect to ground-level ozone.

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. For more information on the human health and welfare and ecosystem effects associated with ambient ozone exposure, see the EPA's 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) in the docket for this rule and can be also found in the docket for the 2015 ozone NAAQS, Docket No. EPA-HQ-OAR-2013-0169-0057.

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

On March 12, 2008, the EPA promulgated a revision to the NAAQS, lowering both the primary and secondary standards to 75 ppb.

See

National Ambient Air Quality Standards for Ozone, Final Rule, 73 FR 16436 (March 27, 2008). These revisions 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 with respect to 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 August 8, 2011, the EPA published the original CSAPR, in response to the D.C. Circuit's remand of the EPA's prior federal transport rule, CAIR.

See

76 FR 48208 (August 8, 2011). The original CSAPR addressed ozone transport under the 1997 ozone NAAQS, but did not address the 2008 ozone standard, because the 2008 ozone NAAQS was under reconsideration when CSAPR was finalized.

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 the EPA had developed upon reconsideration to the agency for further consideration.

In view of that action 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 of the 2008 ozone standards with its ongoing periodic review of the ozone NAAQS.

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

See

Letter from Cass R. Sunstein, Administrator, Office of Information and Regulatory Affairs, to Lisa Jackson, Administrator, U.S. Environmental Protection Agency (Sept. 2, 2011), available at

http://www.reginfo.gov/public/return/EPA_Return_Letter_9-2-2011.pdf

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 good neighbor SIPs for the 2008 ozone NAAQS.

EME Homer City I,

696 F.3d at 31.

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.

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

EME Homer City

EPA

EME Homer City Generation, L.P.,

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

EPA

EME Homer City Generation, L.P.,

134 S. Ct. at 1600-01.

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

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

1. Requiring Emission Reductions From Upwind States

As described in section IV.A.1.b, the EPA finds that upwind EGU emission reductions are generally effective at reducing interstate transport of ozone pollution. And as described in section VI, with respect to this rule, the EPA finds that upwind emission reductions are achievable and will result in important and meaningful decreases in harmful downwind ozone pollution.

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 downwind 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 (

i.e.,

State Implementation Plans) to attain and maintain air quality standards. The requirements established for upwind states through this final rule will supplement downwind states' local emission control strategies. The downwind states' local control strategies, in conjunction with the emission reductions from upwind states that this rule will provide, promote attainment and maintenance of the 2008 ozone NAAQS.

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.

69 70

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 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, unless there is evidence to the contrary, 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 for influenced air quality monitoring data to be excluded under the Exceptional Events Rule. In November 2015, the EPA proposed revisions to the Exceptional Events Rule and released 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.

Comment:

Some commenters claimed that local measures should be evaluated first, before requiring upwind emission reductions, in terms of efforts to attain and maintain the 2008 ozone NAAQS. Commenters also claimed that the EPA failed to adequately evaluate local measures to reduce ozone concentrations at identified nonattainment and maintenance receptors.

Response:

The EPA disagrees with these comments. First, the Clean Air Act makes no reference to considering local measures before upwind measures in planning for attainment and maintenance of a NAAQS. In fact, the EPA notes that commenters' local-first argument is at opposition with the NAAQS implementation schedule provided in the CAA. Specifically, the Clean Air Act requires upwind states to submit infrastructure SIPs, including requirements to address interstate transport, within three years of promulgation of a new or revised NAAQS. Submission of interstate transport SIP requirements is one of the first chronological actions in NAAQS implementation. States are required to submit attainment plans for Moderate ozone nonattainment areas within 3 years of nonattainment designation, which normally comes two to three years after promulgation of a new or revised NAAQS. Marginal ozone nonattainment areas that fail to meet their attainment deadlines and are reclassified as Moderate areas may be provided a new deadline upon reclassification to submit Moderate area plans.

See

CAA section 182(i). Depending on the designations schedule, Moderate area attainment plans would be due approximately 5 years after promulgation of a new or revised standards,

i.e.,

2 years after interstate transport SIPs, and plans for reclassified areas would follow even later. Commenters' request that the EPA not evaluate upwind obligations until downwind controls have been evaluated is therefore unavailing under the statutory structure. If states or the EPA waited until Moderate area attainment plans were due before requiring upwind reductions, then these upwind reductions would be delayed several years beyond the mandatory CAA schedule. Further, the CAA implementation timeline implies that requiring local reductions first would place an inequitable burden on downwind areas by requiring them to plan for attainment and maintenance without any upwind actions. Adhering to the CAA schedule provides that downwind areas are able to plan for attainment and maintenance while accounting for previously determined and quantified upwind actions.

Further, the commenters are incorrect in asserting that the EPA has not considered any local controls obligations at downwind receptors when quantifying upwind state emission reductions. As described further in section VI, when evaluating air quality improvements at each level of control stringency, the EPA assumed that the downwind state home to an identified receptor would make emission reductions at an equivalent level of control stringency. While this final rule does not mandate any particular level of reductions in downwind states, the analysis to quantify upwind state reductions assumes that downwind states share responsibility for addressing identified air quality problems with the upwind states.

2. Focusing on 2017 for Analysis and Implementation

The EPA is aligning the analysis and implementation of this final rulemaking with the 2017 ozone season (May 1-September 30) in order to assist downwind states with timely attainment of the 2008 ozone NAAQS. 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 20, 2018. The EPA established this deadline in the 2015 Ozone SIP Requirements Rule after previously establishing a deadline of December 31, 2018, which was vacated by the D.C. Circuit Court in

Natural Resources Defense Council

EPA.

In order to demonstrate attainment by this deadline, states will need to rely on design values calculated using ozone season data from 2015 through 2017, since the July 20, 2018 deadline does not afford enough time for measured data of the full 2018 ozone season. Therefore, consistent with the court's instruction in

North Carolina,

the EPA has identified achievable upwind emissions reductions and aligned implementation of these reductions, to the extent possible, for the 2017 ozone season. These 2017 reductions can positively influence air quality that would be used to demonstrate attainment. To the extent that ozone improvements in 2017 yield the 4th highest daily maximum 8-hour average concentrations for all monitors in the area that are below the level of the 2008 ozone NAAQS, states can request a 1-year attainment date extension under CAA section 181(a)(5), as interpreted in 40 CFR 51.1107.

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

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

The EPA has therefore conducted its analyses of downwind air quality problems and upwind state contributions based on projections to the 2017 ozone season. The EPA also limits its assessment of NO

mitigation potential to those strategies that are feasible for the 2017 ozone season. This rulemaking also finalizes the 2017 ozone season as the initial control period for the finalized FIPs.

Comment:

Several comments claimed that requiring reductions beginning with the 2017 ozone season does not provide sufficient time to implement emission reductions for compliance with this rulemaking's limitations on emissions.

Response:

The EPA disagrees with these comments. In establishing its limitations on emissions (

i.e.,

emission budgets and corresponding assurance levels), under the CSAPR Update rule the EPA explicitly took into account the fact that only certain emission reduction strategies can be implemented for the 2017 ozone season. Specifically, the

agency considered activities that may be implemented quickly, such as turning on and optimizing existing SCR at power plants. The emission budgets are thus calculated to reflect only those activities that can be implemented by the 2017 ozone season.

Further, the CSAPR Update rule provides regulated entities the ability to comply by means of the CSAPR limited interstate trading program, which gives flexibility in compliance and does not require any specific action for compliance at any specific facility, other than holding allowances to cover emitted tons of pollution. Within this allowance trading program, the EPA also facilitates compliance by carrying over some banked allowances that can be used for compliance with the CSAPR Update, starting in 2017. More information about compliance feasibility is provided in section VII. Additionally, the EPA provides an EGU NO

Mitigation Strategies Final Rule TSD, which is found in the docket for this final rule that further discusses the feasibility of complying with this rule's emissions requirements.

This is true with one exception. The EPA finds that for Arkansas it is reasonable to delay EGU NO

reduction potential for certain new combustion controls until 2018 and therefore gives Arkansas a 2017 budget that does not reflect these controls and a 2018 budget that does reflect these controls. This issue is discussed further in Section VI.

3. The CSAPR Framework

The original CSAPR used a four-step framework to address the requirements of the good neighbor provision for the 1997 ozone NAAQS and the 1997 and 2006 PM

2.5

NAAQS.

The EPA is following the same CSAPR framework in this CSAPR Update to identify and address the requirements of the good neighbor provision with respect to the newer 2008 ozone NAAQS. By applying the CSAPR framework with respect to the newer 2008 ozone NAAQS, the EPA is using an approach that is informed by public comment on the original CSAPR rulemaking and has been reviewed in litigation by the D.C. Circuit Court of Appeals and the Supreme Court. The four 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; 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 through regional emission allowance trading programs. The following subsections include summaries of the four steps and comments and responses on the application of the CSAPR framework from the proposal.

See

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

As noted in section IV, the term maintenance used under the CSAPR framework is distinct from the term as applied the plan required of nonattainment areas redesignated to attainment.

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 monitors that are projected to be unable to attain (

i.e.,

nonattainment receptor) or maintain (

i.e.,

maintenance receptor) the standard. This final rule follows this same general approach. However, in this rule, the EPA also considers current monitored air quality data to further inform the projected identification of downwind air quality problems for this final rule. The proposed CSAPR Update put forward this change from the original CSAPR approach and commenters generally supported consideration of monitoring data. Further details and application of step one are described in section V of this rulemaking.

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

Comment:

Some commenters challenged the methodology proposed by the EPA to identify maintenance receptors in the step 1 analysis. Commenters contend that maintenance receptors for purposes of the CSAPR Update analysis should only be identified as those areas that were previously designated nonattainment. The commenters explain that the proposed methodology for identifying maintenance receptors is inconsistent with how the statute defines maintenance areas in section 175A of the CAA. Other commenters contend that the EPA should not identify an area as a maintenance receptor where the area currently measures clean data. The commenters are concerned that it is arbitrary and capricious to treat clean data differently with respect to identifying nonattainment receptors and maintenance receptors.

Response:

The EPA does not agree with the commenters' contention that it may only identify maintenance receptors as those areas that were once designated nonattainment. Such an interpretation would be contrary to the statutory process for SIP development. Area designations occur two to three years after promulgation of a new or revised NAAQS pursuant to CAA section 107(d)(1)(B)(i). State SIP submissions pursuant to CAA section 110(a)(1) and (2), including good neighbor SIPs, are also due three years after promulgation of a new or revised NAAQS. Attainment plans for those areas designated nonattainment are due between 18 months and 4 years after designation, depending on the pollutant, pursuant to the requirements of subpart D of title I of the CAA. Re-designations, including application of the requirements of CAA section 175A to develop a maintenance plan, by definition, occur after the initial designation and frequently well after the development and submission of the state's attainment plan.

Given that the statutory timeframe for development of the good neighbor SIP requires submission before the downwind state's development of an attainment plan, before an area is likely to be re-designated from nonattainment to attainment (with the attendant maintenance plan obligations), and in some cases before or at the same time designations for a new or revised standard might be finalized, the EPA does not believe it is reasonable to interpret the good neighbor provision to make states' emission reduction obligations dependent on either current or prior designations of downwind areas with potential air quality problems in other states. While circumstances related to implementation of the 2008 ozone NAAQS (described in more detail earlier) led many states to delay submission of good neighbor SIPs addressing that standard and while the EPA is, in this case, addressing its FIP obligation many years after designations were finalized, these circumstantial factors do not revise the Congressional intent inherent in the statutory structure just described.

Moreover, section 110(a)(1) instructs states to submit plans that provide for the “implementation, maintenance, and enforcement” of the NAAQS. Nothing in the provision indicates that states need only address maintenance of air quality

in those areas that were once formally designated nonattainment as to a particular NAAQS. Therefore, where CAA section 110(a)(2)(D)(i)(I) instructs state plans to prohibit emissions activity within the state which will “interfere with maintenance” of the NAAQS in any other state, this provision is logically read consistent with section 110(a)(1) to require upwind states to address the maintenance of the NAAQS in all areas downwind. In this respect, the EPA does not agree with commenters that its identification of maintenance receptors for purposes of the good neighbor provision is constrained by the applicability of the provisions in CAA section 175A. Although the statute invokes the word “maintenance” in that provision to describe the requirements for maintenance plans that apply in areas that have been re-designated from nonattainment to attainment, the good neighbor provision neither implicitly nor explicitly indicates that a state's evaluation of whether it interferes with maintenance in another state should be limited to evaluation of areas subject to the requirements of section 175A.

Regardless of designation, any area may violate the NAAQS if emissions affecting air quality in that area are not adequately controlled. The court in

North Carolina

was specifically concerned with such areas when it rejected the view that “a state can never `interfere with maintenance' unless the EPA determines that at one point it `contribute[d] significantly to nonattainment.' ” 531 F.3d at 910. The court pointed out that areas barely attaining the standard due in part to emissions from upwind sources would have “no recourse” pursuant to such an interpretation.

Id.

Accordingly, the court instructed the EPA to give “independent significance” to the maintenance prong of CAA section 110(a)(2)(D)(i)(I) by separately identifying such downwind areas for purposes of defining states' obligations pursuant to the good neighbor provision.

In areas that are currently measuring clean data with respect to the 2008 ozone NAAQS, these measurements can be driven by a number of factors, including recent meteorology that is not conducive to ozone formation. Due to the variable nature of meteorology, the fact that such areas are currently attaining the standard does not address whether the areas might struggle to maintain the standard in the future, which was precisely the issue raised in

North Carolina.

The EPA's approach to defining maintenance receptors directly responds to these concerns raised by the D.C. Circuit in

North Carolina.

Thus, although the EPA has considered recent monitored data for purposes of identifying nonattainment receptors in this rulemaking, it does not believe the data should inform the agency's identification of maintenance receptors.

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 one percent of the NAAQS for at least one downwind problem receptor (

i.e.,

nonattainment or maintenance receptor identified in step 1). For ozone, the impacts include those from total emissions within the state of anthropogenic volatile organic compounds (VOC) and NO

from all sectors. The EPA 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 it determined that much of the ozone nonattainment problem in the eastern half of the United States results from collective impacts of 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).

See

section IV.B for a discussion of the Supreme Court's consideration of the one percent threshold.

The EPA is using the same approach for identifying states that are linked to downwind nonattainment and maintenance receptors in this final rule because the EPA's analysis shows that much of the ozone nonattainment problem being addressed by this rule is still the result of the collective impacts of relatively small contributions from many upwind states. Therefore, application of a uniform threshold helps the EPA to identify those upwind states that should share responsibility for addressing the downwind nonattainment and maintenance problem to which they collectively contribute. Continuing to use one percent of the NAAQS as the screening metric to evaluate collective contribution from many upwind states also allows the EPA (and states) to apply a consistent framework to evaluate interstate emission transport under the “good neighbor” provision from one NAAQS to the next. Accordingly, the EPA has applied an air quality screening threshold calculated as one percent of the 2008 ozone NAAQS, 0.75 ppb, to identify those states “linked” to downwind nonattainment and maintenance receptors with respect to the 2008 ozone NAAQS which require further analysis to identify potential emission reductions. Consistent with the EPA's findings in the original CSAPR, the agency has determined that states with contributions to all downwind nonattainment and maintenance receptors below this threshold make insignificant contributions to downwind air quality problems and therefore have no emission reduction obligations under the good neighbor provision with respect to the 2008 ozone NAAQS. Application of step 2 is described in section V.

Comment:

Some commenters supported the continued use of an air quality screening threshold of one percent of the NAAQS to identify upwind states requiring further analysis. However, some commenters opposed the use of the proposed one percent threshold because the commenters claim that the EPA had not technically demonstrated that continued use of the one percent screening metric is appropriate for linking an upwind state to a downwind nonattainment or maintenance receptor with respect to the 2008 ozone NAAQS. Some commenters believed that use of the one percent threshold was too stringent given that the proposed rule only focuses on emission reductions from one sector, EGUs. Other commenters believed that one percent (0.75 ppb) was not stringent enough, and they recommended using a lower value such as 0.5 ppb.

Response:

The EPA continues to believe that it is appropriate to use a threshold of one percent of the NAAQS for identifying states which merit further analysis to determine if emission reductions may be warranted. The EPA has consistently determined in past analyses conducted for the NO

SIP Call, CAIR, and CSAPR that ozone nonattainment problems generally result from relatively small contributions from many upwind states, along with contributions from in-state sources and in some cases, substantially larger

contributions from a subset of particular upwind states.

See

SIP Call, 63 FR 57356, 57375-377 (October 27, 1998); CAIR, 70 FR 25162, 25172 & 25186 (May 12, 2005); CSAPR, 76 FR 48208, 48236-237 (August 8, 2011).

The EPA determined that it is appropriate to use a low air quality threshold when analyzing states' collective contributions to downwind nonattainment and maintenance for ozone as well as PM

2.5

To further support the EPA's evaluation of the appropriate screening threshold to use for this purpose, the EPA compiled the contribution modeling results from the air quality modeling conducted for this rule in order to analyze the impact of different possible thresholds. The EPA notes that similar contribution modeling data were available for comment in the docket for the proposed CSAPR Update. This compiled analysis demonstrates the reasonableness of continuing to use one percent as an air quality threshold to account for the combined impact of relatively small contributions from many upwind states.

See

the Air Quality Modeling Technical Support Document for the Final Cross-State Air Pollution Rule Update (AQM TSD). For each of the ozone receptors identified in the final CSAPR Update rule analysis, the EPA identified: (1) The total upwind state contributions, and (2) the amount of the total upwind state contribution that is captured at one percent, five percent, and half (0.5) percent of the NAAQS. The EPA continues to find that the total collective contribution from upwind states' sources represent a significant portion of the ozone concentrations at downwind nonattainment and maintenance receptor locations. This analysis shows that the one percent threshold generally captures a substantial percentage of the total pollution transport affecting downwind states without also implicating states that contribute insignificant amounts.

In response to commenters who advocated for a lower threshold, the EPA observes that the analysis shows that a lower threshold would result in relatively modest increases in the overall percentage of ozone pollution transport captured relative to the amounts captured at the one percent level at a majority of the receptors. A lower percent threshold could lead to emission reduction responsibilities in additional states that individually have a relatively small impact on those receptors, compared to other upwind states — an indicator that emission controls in those states are likely to have a smaller air quality impact at the downwind receptor.

In response to commenters who advocated for a higher threshold, the EPA observes that the analysis of a 5 percent threshold shows that a higher threshold would result in a relatively large reduction in the overall percentage of ozone pollution transport captured relative to the amounts captured at the one percent level at a majority of the receptors. In fact, at a 5 percent threshold there would not be any upwind states linked to the nonattainment and maintenance receptors in Texas.

As a result of our analyses of higher and lower thresholds, as described in the AQM TSD, the agency is not convinced that selecting a threshold below one percent or above one percent is necessary or desirable.

Comment:

Some commenters suggested more specifically that a 0.5 ppb threshold would be more appropriate for upwind states contributing to downwind receptors in Texas. The commenters note that the lower threshold will add more states in the rule and address more of the maximum combined upwind state impacts to Texas' receptors.

Response:

The EPA agrees that a lower threshold of 0.5 ppb would capture more of the upwind states that contribute to Texas receptors. However, the contribution of upwind state interstate transport to receptors in Texas is less than the upwind state interstate transport contribution identified for other downwind nonattainment and maintenance receptors in this rule. Therefore, the potential ozone reductions that would result from including additional upwind states are relatively small. The EPA believes it is therefore reasonable to use a uniform threshold for all states included in this rule.

Step 3.

For states that are linked in step 2 to downwind air quality problems, the original CSAPR evaluated emission reductions available in upwind states by application of uniform levels of control stringency, represented by cost. The EPA evaluated NO

reductions that were available in upwind states by applying uniform levels of control stringency to entities in these states. For each uniform level of control stringency evaluated, the EPA used a multi-factor test to evaluate cost, NO

reduction potential, and downwind air quality impacts. This multi-factor test was used to select a uniform level of control stringency on the remaining allowable emissions—those available after reducing significant contribution to nonattainment or interference with maintenance of a NAAQS downwind. The use of uniform control stringency also reasonably apportions upwind responsibility among linked upwind states. This approach was upheld by the Supreme Court in

EPA

EME Homer City Generation.

EPA

EME Homer City Generation, L.P.,

134 S. Ct. at 1606-07.

In this final rule, the EPA applies this approach to establish EGU NO

emission budgets that reflect NO

reductions necessary to reduce interstate ozone transport for the 2008 NAAQS. In this process, the EPA also explicitly evaluates whether the budget quantified for each state would result in over-control, as required by the Supreme Court and the D.C. Circuit.

Specifically, the multi-factor test is used to evaluate whether an upwind state is linked solely to downwind air quality problems that are resolved at a given uniform control stringency, or if upwind states reduce their emissions at a given uniform control stringency such that contributions from sources in the state no longer meet or exceed the one percent air quality contribution threshold. This evaluation of cost, NO

reductions, and air quality improvements, including consideration of potential over-control, results in the EPA's quantification of upwind emissions that significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS downwind. The EPA's assessment of significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS and our development of EGU NO

ozone season emission budgets is described in section VI of this document.

Id.

at 1608;

EME Homer City II,

795 F.3d at 127.

Comment:

Some commenters claim that the CSAPR framework requires the same remedy for states linked solely to maintenance receptors as it does for states linked to nonattainment receptors and these commenters suggested that states linked solely to maintenance problems should have a different, less stringent requirement. These commenters contend that, as a result, the EPA has failed to given independent significance to the “interfere with maintenance” clause of CAA section 110(a)(2)(D)(i)(I) as compared to the “significant contribution” clause of that provision. The commenters contend that it constitutes over-control to impose budgets based on the same uniform control stringency to address both states that interfere with maintenance of the NAAQS in downwind states and those

that significantly contribute to nonattainment in downwind states. The commenters cite the Supreme Court's opinion in

EPA

EME Homer City Generation,

explaining that the EPA may only limit emissions “by just enough to permit an already-attaining State to maintain satisfactory air quality.” 134 S. Ct. at 1604 n.18.

Response:

The EPA disagrees with these comments. The CSAPR framework gives independent meaning to the “maintenance” prong of CAA section 110(a)(2)(D)(i)(I) as required by D.C. Circuit's decision in

North Carolina.

By identifying those downwind areas that are at risk of exceeding the NAAQS if historical meteorology conducive to ozone formation occurs again, the EPA thereby defines upwind states linked to these areas as having a transport obligation.

In its decision, on remand from the Supreme Court, the D.C. Circuit confirmed that the 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. The EPA's analysis indicates that the maintenance receptors identified in this rulemaking are at risk of NAAQS violations and therefore should be afforded protection.

531 F.3d 896, 910-911 (D.C. Cir. 2008) (noting that the EPA's failure to separately address maintenance problems under CAIR “unlawfully nullifies that aspect of the statute and provides no protection for downwind areas that, despite the EPA's predictions, still find themselves struggling to meet NAAQS due to upwind interference”).

CAA section 110(a)(2)(D)(i)(I) requires that state implementation plans, or the EPA where such plans are insufficient, prohibit emissions which will interfere with maintenance of the NAAQS in downwind states. Once the EPA identifies maintenance receptors, the EPA is compelled by the CAA to prohibit emissions that would jeopardize the ability of these receptors to maintain the standard. Put another way, it would be inconsistent with the CAA for the EPA to identify receptors that are at risk of NAAQS violations given certain conditions due to transported upwind emissions and then not prohibit the emissions that place the receptor at risk.

Moreover, the Supreme Court has acknowledged that the “interfere with maintenance” clause of the good neighbor provision is ambiguous with respect to how the EPA should quantify and allocate the emission reduction obligations for states linked to downwind maintenance concerns. The Supreme Court clearly stated that “[n]othing in

either

clause of the Good Neighbor Provision provides the criteria by which EPA is meant to apportion responsibility.”

EPA

EME Homer City Generation, L.P.,

134 S. Ct. at 1604 n.18 (emphasis in original). Thus, the EPA is afforded deference to develop an appropriate application of this requirement so long as it is a “permissible construction of the statute.”

Chevron, U.S.A., Inc.

NRDC, Inc.,

467 U.S. 837, 843, 104 S. Ct. 2778, 2782 (1984). The Supreme Court held that it was a permissible interpretation of the statute to apportion responsibility for states linked to nonattainment receptors considering “both the magnitude of upwind States' contributions and the cost associated with eliminating them.”

EPA

EME Homer City Generation, L.P.,

134 S. Ct. at 1606. It is equally reasonable and permissible to use these factors to apportion responsibility among upwind states linked to maintenance receptors because the goal in both instances is to prohibit the “amounts” of pollution that will either significantly contribute to nonattainment or interfere with maintenance of the NAAQS downwind. The EPA's contribution analysis demonstrates that the amounts of pollution prohibited through implementation of the budgets finalized in this rule will, under certain projected conditions, otherwise contribute to downwind nonattainment and interfere with maintenance of the 2008 ozone NAAQS in downwind states.

All of that being said, contrary to the commenters' contention, the CSAPR framework does not necessarily dictate that upwind states linked solely to maintenance receptors be subject to the same level of NO

control stringency as upwind states linked to nonattainment receptors. Rather, the selection of NO

control stringency is in part informed by the difficulty of resolving the identified downwind air quality problem to which each state is linked. (

See

the components, including air quality considerations, of the multi-factor test described in section VI.D.)The data and analysis for the CSAPR Update show that the maintenance-only receptors generally represent less severe air quality problems than the nonattainment receptors. Specifically, in the final CSAPR Update modeling, maintenance-only receptors have an average maximum design value that is 1.9 ppb above the 2008 ozone NAAQS while nonattainment receptors have an average maximum design value that is 3.1 ppb above the NAAQS. As described in section VI.D, the specific emission reduction obligation for each state is limited by the amount of air quality improvement needed to either attain or maintain the NAAQS at the particular receptor to which the state's emissions are linked. These data therefore demonstrate that states linked to maintenance-only receptors would generally have a lesser emission reduction obligation than states linked to nonattainment receptors, but for the partial nature of this rule.

The original CSAPR rulemaking provides an example of this differentiation of control stringency based on the severity of downwind air quality problems. In that rulemaking, some states reduced their significant contribution of SO

for purposes of addressing downwind PM

2.5

nonattainment and maintenance problems at a lower uniform cost control stringency, while other states needed to comply with budgets calculated at a higher uniform control stringency in order to resolve their transport obligations.

76 FR at 48257-259.

In the case of a full solution, which EPA is not promulgating in this action, a similar differentiation in the level of control stringency may emerge between the upwind states linked solely to maintenance and the upwind states linked to nonattainment. However, given the unique circumstances of this rulemaking and the need to obtain emission reductions on a tight timeframe in order to assist downwind states with meeting the downwind 2018 attainment deadline, the EPA is only quantifying a subset of each state's emission reduction obligation pursuant to the good neighbor provision. The EPA's analysis shows that even when all the emission reductions required by this rule are in place, both attainment and maintenance problems at downwind receptors may remain, and the EPA will need to evaluate whether the upwind states' emission reduction obligations should be more stringent considering other factors not addressed by this rule, including control strategies that can be implemented on a longer timeframe or by other source categories. Thus, the commenters are incorrect to state that the EPA is necessarily imposing the same remedy (in the form of the same level of control stringency) for states linked only to maintenance-only receptors as those linked to nonattainment receptors by way of applying the CSAPR framework. It is only due to the partial nature of the remedy provided by this rule that the EPA is finalizing a single uniform level of control stringency for all CSAPR Update states.

Step 4.

Finally, the original CSAPR used allowance trading programs to implement the necessary emission reductions represented by the emission budgets identified in step 3. Emission allowances were issued to units covered by the trading program, and each covered unit can then retain and/or acquire however many allowances are needed to cover its ozone season NO

emissions over the course of each control period; however, because the total number of allowances issued in each period is limited to the sum of the states' emission budgets, total emissions across all affected EGUs are similarly limited such that overall emissions are controlled. Additionally, the original CSAPR included variability limits, which define the amount by which collective emissions within a state may exceed the level of that state's budget in a given control period to account for variability in EGU operations while still ensuring that the necessary emission reductions are achieved in each state. The variability limits for the CSAPR NO

ozone season trading program is 21 percent of each state's budget. CSAPR set assurance levels equal to the sum of each state's emission budget plus its variability limit. The original CSAPR included assurance provisions that would require 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 VII of this preamble. The EPA is applying this same approach to implement reductions in interstate transport for the 2008 ozone NAAQS in the CSAPR Update. Implementation of the CSAPR Update allowance trading program (CSAPR NO

ozone season Group 2) is described in section VII of this final rule. This new program is substantially similar to the existing CSAPR NO

ozone season program.

North Carolina,

531 F.3d at 907-08 (EPA “must include some assurance that it achieves something measurable towards the goal of prohibiting sources `within the State' from contributing to nonattainment or interfering with maintenance in `any other State'.”).

Comment:

Some stakeholders have observed that a subset of existing post-combustion EGU NO

controls (

e.g.,

SCR) may not have operated in recent years because CAIR or CSAPR allowance prices were below the operating costs of the controls. These commenters suggest that, accordingly, CAIR or CSAPR did not achieve optimal environmental protection, as identified by requiring existing controls to operate.

Response:

Regional allowance trading programs set a limit on the overall amount of allowable emissions. This limit reflects a reduction from uncontrolled emission levels and compliance is demonstrated through an allowance trading program that allows regulated entities the flexibility to determine their own compliance path. In states that participated in both CAIR and CSAPR ozone season programs, summer NO

emissions dropped by 20 percent from 2009 to 2015, and compliance was demonstrated nearly 100 percent of the time due to rigorous emissions monitoring and allowance tracking. These outcomes, combined with air quality improvements, demonstrate the environmental achievements of these programs. The EPA notes that the allowance prices were low because of significant emission reductions that took place by other means (

e.g.,

new low-emitting generating capacity coming online that replaced older, higher emitting generation as well as EGU retirements). These other means significantly reduced emissions and helped the power sector meet the CAIR and CSAPR emission budgets without relying on the use of allowances. In light of these and other dramatic reductions in power sector pollution, the supply of CAIR and CSAPR allowances rose and their prices fell. In this case, certain utilities appear to have turned off their emission controls, relying instead on purchased allowances. The EPA notes, however, that in this case, the overall net effect of these activities has been a significant reduction in emissions. The EPA expects that certain aspects of this final rule will alleviate some of these concerns about allowance prices. In particular, this action establishes new emission budgets to address the more stringent 2008 ozone NAAQS that are calculated based on a uniform cost that is reflective of, among other things, operating existing controls.

See

section VI in this preamble on EGU NO

reductions and emission budgets.

4. Partial Versus Full Resolution of Transport Obligation

Given the unique circumstances surrounding the implementation of the 2008 ozone standard that have delayed state and the EPA's 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.

This rulemaking establishes (or revises currently established) FIPs for 22 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 beginning with the 2017 ozone season. As noted in section VI, the EPA has identified important EGU emission reductions that are cost-effective and achievable by the 2017 ozone season in the covered states through actions such as turning on and operating existing pollution controls. These readily available emission reductions will assist downwind states in attaining and maintaining the 2008 ozone NAAQS and will provide human health and welfare benefits through reduced exposure to ground-level ozone pollution.

While these reductions are necessary to assist downwind states in attaining and maintaining 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 or interference with maintenance in other states. Given the time constraints for implementing NO

reduction strategies, the EPA believes that implementation of a full remedy that includes emission reductions from EGUs as well as other sectors may not be achievable for 2017. However, a partial remedy is achievable for 2017 and therefore this rule focuses on these more immediately available reductions.

The requirements for one state, Tennessee, will fully eliminate that state's significant contribution to downwind air quality problems.

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

reductions and further EGU reductions that are achievable after 2017 should be considered. The EPA did not 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) based on current knowledge, 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. Commenters generally agreed with the EPA that non-EGU emission reductions are not readily available for the 2017 ozone season but advocated that such reductions should

be included as appropriate in future mitigation actions.

Because the reductions in this action are EGU-only and because the EPA has focused the policy analysis for this action on reductions available by the beginning of the 2017 ozone season, CSAPR update reductions will represent, for most states, 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 EGU NO

reductions quantified in this rule 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 non-EGUs and further EGU reductions that are achievable after 2017. However, the EPA believes that it is beneficial to implement, without further delay, EGU NO

reductions that are achievable in the near term. The NO

emission reductions in this final rule are needed (although they may not be all that is needed) for these states to eliminate their significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS.

Comment:

Several commenters questioned whether the CAA authorizes the EPA to implement a “partial” remedy, and also suggested that the partial nature of the proposed rule might “circumvent” prior courts' instructions regarding over-control. Those commenters note that the statute does not describe a process for issuing a partial FIP, and suggest that the EPA may only issue a FIP that fully eliminates transported contribution from upwind States. These commenters also imply that the Supreme Court's approval of the EPA's use of costs in defining “significant contribution” in

EME Homer City

does not apply to the agency's approach in this rule because the commenters claim that “CSAPR was a transport rule that developed comprehensive state budgets [and][t]his proposed rule only addresses EGUs.”

Other commenters were concerned that the EPA is not meeting its statutory obligation to develop federal implementation plans that fully resolve downwind transport problems. These commenters argue that the EPA's own delay in preparing a rule to resolve interstate transport with respect to the 2008 ozone NAAQS caused the tight timeline now faced by the agency, and cannot be used as an excuse for failing to promulgate a full remedy by 2017. In the alternative, commenters argue that even if time constraints only allow the EPA to impose a partial remedy by the 2017 ozone season, the agency must provide a plan now for how it will achieve the rest of the necessary reductions in the future, and suggests the agency could do so by implementing a second implementation phase to go into effect after the 2017 ozone season.

Response:

The EPA disagrees with commenters who suggest that the agency lacks authority to promulgate a partial FIP. As described in section III, the EPA's current statutory deadlines to promulgate FIPs extend until 2017 and 2018 for most states, and the EPA will remain mindful of those deadlines as it evaluates what further steps may be necessary to fully address interstate transport for the 2008 ozone NAAQS.

Nothing in section 110(c)(1) of the CAA suggests that the agency is barred from taking a partial step at this time (before its FIP deadline has passed), nor does the statutory text indicate Congress' intent to preclude the EPA from tackling this problem in a step-wise process. The D.C. Circuit has held on numerous occasions that agencies have the authority to tackle problems in an incremental fashion, particularly where a lack of resources or technical expertise make it difficult to immediately achieve the statute's full mandate.

See, e.g., Grand Canyon Air Tour Coal.

FAA,

154 F.3d 455, 478 (D.C. Cir. 1998);

City of Las Vegas

Lujan,

891 F.2d 927, 935 (D.C. Cir. 1989) (“`[A]gencies have great discretion to treat a problem partially . . .' [and a] court will not strike down agency action `if it were a first step toward a complete solution.'”);

Gen'l Am. Transp. Corp.

ICC,

872 F.2d 1048, 1059 (D.C. Cir. 1989);

Nat'l Ass'n of Broadcasters

FCC,

740 F.2d 1190, 1209-14 (D.C. Cir. 1984).

As explained previously, the EPA expects that a full resolution of upwind transport obligations would require emission reductions from sectors besides EGUs, including non-EGUs, and further EGU reductions that are achievable after 2017. Given the approaching July 2018 attainment deadline for the 2008 ozone NAAQS, developing a rule that would have covered additional sectors and emission reductions on longer compliance schedules would have required more of the EPA's resources over a longer rulemaking schedule to fully address. As discussed earlier in this document, the EPA is still in the process of developing information regarding available emission reductions from non-EGUs. Had the EPA waited to promulgate FIPs until that information was fully developed, we could not have assured emission reductions by 2017, in time to assist downwind states to meet the July 2018 attainment deadline. Accordingly, the EPA reasonably concluded that it was most prudent to promulgate a first step to address interstate transport for the 2008 ozone NAAQS that achieves those immediate reductions while addressing any remaining obligation that might be achievable on a longer timeframe in a separate rulemaking. The EPA intends to continue to collect information and undertake analyses for potential future emission reductions at non-EGUs that may be necessary to fully quantify states' interstate transport obligations in a future action.

The EPA further disagrees with commenters that its partial step here runs afoul of the Supreme Court and D.C. Circuit's instructions to avoid unnecessary over-control of upwind state emissions. As acknowledged by these commenters, due to its limited nature, this final action does not generally fully resolve downwind air quality problems, much less result in over-control of upwind state emissions relative to those air quality problems.

See

section VI for further discussion of the EPA's over-control analysis applied to address these courts' concerns. To the extent the EPA determines that it must require additional emission reductions in a later rulemaking to address interstate transport with respect to the 2008 ozone NAAQS, the EPA will also confirm that such reductions do not result in unnecessary over-control, consistent with the courts' instructions.

The EPA also disagrees that the Supreme Court's affirmation of its use of uniform control stringency to define significant contribution does not apply equally to this action. The commenters are mistaken insofar as they suggest that the original CSAPR regulated sources other than EGUs. This rule is identical to the original CSAPR rule in terms of the form of its remedy—an emission budget issued to each state, with allowances allocated to EGUs within the state. As in the original CSAPR, each state is free to submit a SIP to replace the FIP indicating that it will meet its emission budget via reductions from other sectors.

Furthermore, the EPA took a similar partial approach in quantifying interstate transport obligations with respect to the 1997 ozone NAAQS in the original CSAPR rulemaking. In that rule, the EPA's modeling indicated that there would be persistent nonattainment and maintenance problems at some receptors even after imposition of CSAPR's emission reductions. The EPA stated that, because additional emission reductions may be available at higher cost thresholds and from other sectors, such as non-EGUs, the emission

reductions quantified in the rule did not necessarily fully quantify certain states' interstate transport obligation with respect to the 1997 ozone NAAQS.

Therefore, for states linked to those receptors, the agency concluded that its FIP provided a partial remedy, and that more emission reductions might be required in order to fully satisfy the states' transport obligations. As discussed later, this action now concludes that the EPA has fulfilled its FIP obligation with respect to the 1997 ozone NAAQS.

76 FR 48208, 48256-57 (August 8, 2011).

Finally, the EPA disagrees with commenters who suggest that the agency's “own delay” in implementing a transport rule to address the 2008 ozone NAAQS led to the current circumstances the states and the EPA now face. Until mid-2014 when the Supreme Court reversed the D.C. Circuit's original vacatur of CSAPR, the governing judicial holding was that the EPA lacked legal authority to promulgate any FIP addressing 2008 ozone transport obligations until the agency first quantified each state's emission reduction obligation, allowed states time to submit SIPs, and acted on those SIPs.

In July 2015, the D.C. Circuit issued its final decision generally upholding CSAPR, albeit subject to remand without vacatur of certain state budgets for reconsideration. The agency then proceeded on an expedited basis to issue a proposal to address its FIP obligation with respect to the 2008 ozone NAAQS in the fall of 2015. While commenters and the EPA may agree that it would be best if a full remedy could be possible by the 2017 ozone season such that downwind areas would receive those benefits in time for their Moderate area attainment deadlines, such a remedy simply is not feasible in the existing timeframe.

EME Homer City Generation, L.P.

EPA,

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

As noted previously, CAA section 110(c)(1) directs the EPA to promulgate a FIP “at any time within two years” of its disapproval or finding of failure to submit. For the majority of states affected, that timeframe will not end until 2017 or later, and as mentioned previously,

North Carolina

compels the EPA to identify upwind reductions and implementation programs to achieve these reductions by the 2017 ozone season. As the EPA has explained, it believes that reductions from other sectors besides EGUs should be evaluated in developing a full remedy, and the agency does not have sufficient information at this time to promulgate such a rule. Therefore, given these circumstances, the agency maintains that only requiring at this time necessary and achievable reductions by the 2017 ozone season is reasonable.

5. Why Focus on Eastern States

The final CSAPR Update focuses on collective contributions of ozone pollution from states in the east. In this action, the EPA is not addressing interstate emission transport in this action for the 11 western contiguous United States.

The CSAPR framework builds on previous eastern-focused efforts to address collective contributions to interstate transport, including the NO

Budget Trading Program, CAIR, and the original CSAPR rulemaking. However, for western states, the EPA believes that there may be geographically specific factors to consider in evaluating interstate ozone pollution transport. Accordingly, given the need for near-term 2017 analysis and implementation of the CSAPR Update FIPs, the EPA focused this rulemaking on eastern states where the CSAPR method for assessing collective contribution has proven effective.

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

The EPA did not propose CSAPR Update FIPs to address interstate emission transport for western states and it is not finalizing FIPs for any of these states. However, the EPA notes that western states are not relieved of their statutory obligation to address interstate transport under the section 110(a)(2)(D)(i)(I). The EPA and western states, working together, are continuing to evaluate interstate transport obligations on a case-by-case basis. The EPA will fulfill its backstop role with respect to issuing FIPs for western states if and when that becomes necessary. The EPA notes that a 2-year FIP clock has started for New Mexico and California following the July 13, 2015 finding of failure to submit. The EPA notes that analyses developed to support this rule, including air quality modeling and the EPA's assessment of EGU NO

mitigation potential, contain data that can be useful for western states in developing SIPs. The data from these analyses are available in the docket for this rulemaking.

The proposed CSAPR Update solicited 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. Most commenters generally agreed with the EPA's proposal to exclude western states in this rule given that there may be geographically specific factors to consider in evaluating western states' interstate transport requirements.

6. Short-Term NO

Emissions

In eastern states, the highest measured ozone days tend to occur within the hottest days or weeks of the summer. There tends to be a higher demand for electricity (for instance, to power air conditioners) on hotter days and with this increased power demand, ozone formation can increase causing peak ozone days. In discussions with representatives and officials of eastern states in April 2013 and April 2015, and in several letters to the EPA, officials from states that are part of 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, or portions thereof: 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.

Comment:

The proposed CSAPR Update took comment on whether or not short-term (

e.g.,

peak-day) EGU NO

emissions disproportionately impact downwind ozone concentrations and, if they do, what EGU emission limits would be reasonable complements to the seasonal CSAPR requirement. Most commenters requested that the EPA not impose a short-term limit at this time.

Response:

As noted previously,

the EPA finds that NO

ozone season trading programs are effective at reducing peak ozone concentrations, and the agency is therefore continuing with a seasonal approach in this final rule. The EPA will continue to look at this matter with an eye towards future rulemakings.

See

Section IV.A.1.

C. Responding to the Remand of CSAPR NO

Ozone Season Emission Budgets

As noted previously, in

EME Homer City II,

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

states, the court held that the 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 the 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. The EPA is finalizing FIPs for eight of those states to address interstate transport with respect to the 2008 ozone NAAQS: Maryland, New Jersey, New York, Ohio, Pennsylvania, Texas, Virginia, and West Virginia. The FIPs incorporate revised emission budgets that 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, in this rule, these budgets will 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 action provides an appropriate and timely response to the court's remand by replacing the phase 2 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 budgets to address the 2008 ozone NAAQS is described in more detail in Sections VI and VII in this preamble. Section VI also includes an evaluation, as instructed by the court in

EME Homer City II,

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

For the three remaining original CSAPR ozone season states affected by this portion of the

EME Homer City II

decision, Florida, North Carolina, and South Carolina, the EPA is not finalizing FIPs because the EPA's analysis performed to support the final rule does not indicate that these states are linked to any identified downwind nonattainment or maintenance receptors with respect to the 2008 ozone standard. Because the 2008 ozone NAAQS is more stringent than the 1997 ozone NAAQS, this modeling necessarily indicates that Florida, North Carolina, and South Carolina are also not linked to any remaining air quality concerns with respect to the 1997 ozone standard for which the states were regulated in the original CSAPR. Accordingly, in order to address the Court's remand with respect to these three states' interstate transport responsibility under the 1997 ozone standard, the EPA is removing these states from the CSAPR ozone season trading program beginning in 2017 when the phase 2 ozone season emission budgets were scheduled to be implemented.

One other state from the original CSAPR rulemaking, Georgia, was also not linked to any identified downwind nonattainment or maintenance receptors with respect to the 2008 ozone standard. However, when EPA promulgated the original CSAPR rulemaking, Georgia remained linked to an ongoing air quality problem with respect to the 1997 standard even after implementation of the emissions budget quantified in that rulemaking. Therefore, unlike Florida, North Carolina, and South Carolina, Georgia's budget was not subject to the same record issues identified by the D.C. Circuit related to the EPA's 2014 modeling and was not subject to remand for reconsideration. As Georgia remained linked to a continued air quality problem with respect to the 1997 ozone NAAQS in the original CSAPR analysis, the EPA retained this budget as a constraint in its analysis for this rule. Assuming compliance with that budget, the EPA determined that Georgia does not significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS downwind. The EPA has also concluded, as discussed in section IV.D, that compliance with that budget is sufficient to fully address Georgia's interstate transport obligation with respect to the 1997 NAAQS.

Comment:

Some commenters contend that the D.C. Circuit's remand of the phase 2 ozone season emission budgets in

EME Homer City II

requires the EPA to calculate new budgets to address the states' transport obligations with respect to the 1997 ozone NAAQS. These commenters contend that the EPA has not fully responded to the court's remand until it quantifies new budgets.

Response:

As described earlier, the D.C. Circuit remanded 10 of CSAPR's ozone season NO

budgets because the 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. The court essentially found that, by phase 2 of the CSAPR program, the CSAPR record did not support the EPA's authority to require emission reductions from these 10 states in order to address the 1997 ozone NAAQS. Thus, absent any new analysis demonstrating that these states are linked to downwind air quality problems with respect to the 1997 ozone NAAQS, the EPA does not have the authority to subject these states to the CSAPR NO

ozone season emissions program beginning in 2017 and therefore does not have the authority to calculate new emission budgets for these states to address that standard. For Florida, North Carolina, and South Carolina, the EPA is therefore relieving sources in the states from the obligation to comply with the NO

ozone season trading program in response to the remand. For the remaining seven states, sources located in these states will no longer be subject to the phase 2 NO

ozone season budgets calculated to address the 1997 standard; however, because these states are linked to downwind air quality problems with respect to the 2008 ozone NAAQS, the EPA is promulgating new ozone season NO

emission budgets at 40 CFR 97.810(a).

See

also 40 CFR 52.38(b)(2)(ii) (relieving sources in all ten of these states of the obligation to comply with the remanded phase 2 NO

ozone season emission budgets after 2016).

With respect to Texas, because the court determined that the phase 2 ozone season budget was more stringent than necessary to address Texas' interstate transport obligation with respect to the 1997 ozone NAAQS, the EPA removed Texas's budget as a constraint in the 2017 air quality modeling. Even in the absence of this constraint, the updated 2017 air quality modeling shows that the predicted average DVs and maximum DVs are below the level of the 1997 ozone NAAQS for the downwind receptors of concern to which Texas was linked in the original CSAPR rulemaking with respect the 1997 ozone NAAQS. Accordingly, the EPA has concluded that it need not require additional emission reductions from sources in Texas in order to address the state's interstate transport obligation. Thus, sources in Texas will no longer be subject to the phase 2 NO

ozone season budget calculated to address the 1997 standard; however, because Texas is linked to downwind air quality problems with respect to the 2008 ozone NAAQS, the EPA is promulgating a new ozone season NO

emission budget to address that standard at 40 CFR 97.810(a).

See

also 40 CFR 52.38(b)(2)(ii) (relieving sources in Texas of the obligation to comply with the remanded phase 2 NO

ozone season emission budgets after 2016).

Separately, various petitioners filed legal challenges in the D.C. Circuit to an EPA 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 rule.

The EPA notes that this rulemaking also promulgates FIPs for all five states added to CSAPR in the supplemental rule: Iowa, Michigan, Missouri, Oklahoma, and Wisconsin. These FIPs incorporate revised emission budgets that replace the budgets promulgated in the supplemental CSAPR rule to address the 1997 ozone NAAQS for these five states and will be effective for the 2017 ozone season. In l

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