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

Federal RegisterApr 30, 2021

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 78, and 97

[EPA-HQ-OAR-2020-0272; FRL-10021-34-OAR]

RIN 2060-AU84

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

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Final rule.

SUMMARY:

The U.S. Environmental Protection Agency (EPA) is taking this action to address interstate transport of ozone pollution under the “good neighbor provision” of the Clean Air Act (CAA). This final action is taken in response to the United States Court of Appeals for the District of Columbia Circuit's (D.C. Circuit) remand of the Cross-State Air Pollution Rule (CSAPR) Update in

Wisconsin

EPA

on September 13, 2019. The CSAPR Update finalized Federal Implementation Plans (FIPs) for 22 states to address their good neighbor obligations for the 2008 ozone National Ambient Air Quality Standards (NAAQS). The D.C. Circuit found that the CSAPR Update, which was published on October 26, 2016 as a partial remedy to address upwind states' obligations prior to the 2018 Moderate area attainment date under the 2008 ozone NAAQS, was unlawful to the extent it allowed those states to continue their significant contributions to downwind ozone problems beyond the statutory dates by which downwind states must demonstrate their attainment of the air quality standards. On the same grounds, the D.C. Circuit also vacated the CSAPR Close-Out in

New York

EPA

on October 1, 2019. This final rule resolves 21 states' outstanding interstate ozone transport obligations with respect to the 2008 ozone NAAQS.

This action finds that for 9 of the 21 states for which the CSAPR Update was found to be only a partial remedy (Alabama, Arkansas, Iowa, Kansas, Mississippi, Missouri, Oklahoma, Texas, and Wisconsin), their projected ozone precursor emissions in the 2021 ozone season and thereafter do not significantly contribute to a continuing downwind nonattainment and/or maintenance problem, and therefore the states' CSAPR Update FIPs (or the SIPs subsequently approved to replace certain states' CSAPR Update FIPs) fully address their interstate ozone transport obligations with respect to the 2008 ozone NAAQS. This action also finds that for the 12 remaining states (Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, Virginia, and West Virginia), their projected 2021 ozone season nitrogen oxides (NO

) emissions significantly contribute to downwind states' nonattainment and/or maintenance problems for the 2008 ozone NAAQS. In this final action, EPA is issuing new or amended FIPs for these 12 states to replace their existing CSAPR NO

Ozone Season Group 2 emissions budgets for electricity generating units (EGUs) with revised budgets via a new CSAPR NO

Ozone Season Group 3 Trading Program. EPA is requiring implementation of the revised emission budgets beginning with the 2021 ozone season. Based on EPA's assessment of remaining air quality issues and additional emission control strategies for EGUs and other emissions sources in other industry sectors (non-EGUs), EPA is further determining that these NO

emission reductions fully eliminate these states' significant contributions to downwind air quality problems for the 2008 ozone NAAQS. In this action, EPA is also finalizing an error correction of its June 2018 approval of Kentucky's good neighbor SIP.

DATES:

This final rule is effective on June 29, 2021.

ADDRESSES:

EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2020-0272. All documents in the docket are listed on the

www.regulations.gov

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

e.g.,

Confidential Business Information 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 electronically through

www.regulations.gov

FOR FURTHER INFORMATION CONTACT:

Mr. Daniel Hooper, Clean Air Markets Division, Office of Atmospheric Programs (Mail Code 6204M), Environmental Protection Agency, 1200 Pennsylvania Avenue NW, Washington, DC 20460; telephone number: (202) 343-9167; email address:

Hooper.Daniel@epa.gov

SUPPLEMENTARY INFORMATION:

Preamble Glossary of Terms and Abbreviations

The following are abbreviations of terms used in the preamble.

4-step good neighbor framework 4-step framework

AEO Annual Energy Outlook

AQAT Air Quality Assessment Tool

AQM TSD Air Quality Modeling Technical Support Document

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 System(s)

CFR Code of Federal Regulations

CMDb Control Measures Database

CMV Commercial Marine Vehicle

CoST Control Strategy Tool

CRA Congressional Review Act

CSAPR Cross-State Air Pollution Rule

EGU Electric Generating Unit

EISA Energy Independence and Security Act

EPA U.S. Environmental Protection Agency

FIP Federal Implementation Plan

FR Federal Register

HDGHG Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles

IC Internal Combustion

ICI Industrial, Commercial, and Institutional

ICR Information Collection Request

IPM Integrated Planning Model

iSIP Infrastructure State Implementation Plan

km Kilometer

lb/mmBtu Pounds per Million British Thermal Units

LEC Low Emission Combustion

LNB Low-NO

Burners

MJO Multi-Jurisdictional Organizations

mmBtu Million British Thermal Units

MOVES Motor Vehicle Emission Simulator

MSAT2 Mobile Source Air Toxic Rule

NAAQS National Ambient Air Quality Standard

NEI National Emission Inventory

NESHAP National Emission Standards for Hazardous Air Pollutants

Nitrogen Oxides

NODA Notice of Data Availability

Non-EGU Non-electric Generating Unit

NSPS New Source Performance Standard

NUSA New Unit Set-Aside

OSAT/APCA Ozone Source Apportionment Technology/Anthropogenic Precursor Culpability Analysis

OMB Office of Management and Budget

OTC Ozone Transport Commission

OTR Ozone Transport Region

PEMS Predictive Emissions Monitoring System

2.5

Fine Particulate Matter

ppb Parts Per Billion

RACT Reasonably Available Control Technology

RIA Regulatory Impact Analysis

RICE Reciprocating Internal Combustion Engines

RRF Relative Response Factor

RTC Document Response to Comment Document

SCR Selective Catalytic Reduction

SIP State Implementation Plan

SMOKE Sparse Matrix Operator Kernel Emissions

SNCR Selective Non-catalytic Reduction

Sulfur Dioxide

TIP Tribal Implementation Plan

TSD Technical Support Document

tpy Ton Per Year

ULNB Ultra-low NO

Burner

VOC Volatile Organic Compound

WRF Weather Research and Forecasting Model

Table of Contents

I. Executive Summary

A. Purpose of Regulatory Action

B. Summary of the Major Provisions of the Regulatory Action

C. Costs and Benefits

II. General Information

A. Does this action apply to me?

III. EPA's Legal Authority for the Final Rule

A. Statutory Authority

B. Prior Good Neighbor Rulemakings Addressing Regional Ozone

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

A. The Interstate Ozone Transport Challenge

1. Nature of Ozone and the Ozone NAAQS

2. Ozone Transport

3. Health and Environmental Effects

B. Relationship Between This Regulatory Action and the 2015 Ozone NAAQS

C. Approach To Address the Remanded Transport Obligations for the 2008 Ozone NAAQS

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

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

3. The 4-Step Good Neighbor Framework

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 Vessels

6. Development of Emission Inventories for Other Nonroad Mobile Sources

7. Development of Emission Inventories for Nonpoint Sources

C. Air Quality Modeling To Identify Nonattainment and Maintenance Receptors

D. Pollutant Transport From Upwind States

1. Air Quality Modeling To Quantify Upwind State Contributions

2. Application of Screening Threshold

VI. Quantifying Upwind-State NO

Reduction Potential To Reduce Interstate Ozone Transport for the 2008 NAAQS

A. The Multi-Factor Test

B. Identifying Levels of Control Stringency

1. EGU NO

Mitigation Strategies

2. Non-EGU NO

Mitigation Strategies

3. Mobile Source NO

Mitigation Strategies

C. Emission Reduction Potential of Control Stringencies

1. EGU Emission Reduction Potential

2. Non-EGU Emission Reduction Potential

D. Assessing Cost, EGU and Non-EGU NO

Reductions, and Air Quality

1. EGU Assessment

2. Non-EGU Assessment

3. Overcontrol Analysis

VII. Implementation of Emission Reductions

A. Regulatory Requirements for EGUs

B. Quantifying State Emissions Budgets

C. Elements of New Trading Program

1. Applicability

2. State Budgets, Variability Limits, Assurance Levels, and Penalties

3. Unit-Level Allocations of Emission Allowances

4. Transitioning From Existing CSAPR NO

Ozone Season Group 2 Trading Program

5. Compliance Deadlines

6. Monitoring and Reporting

7. Recordation of Allowances

8. Conforming Revisions to Regulations for Existing Trading Programs

D. Submitting a SIP

1. SIP Option To Modify 2022 Allocations

2. SIP Option To Modify Allocations in 2023 and Beyond

3. SIP Revisions That Do Not Use the New Group 3 Trading Program

4. No SIP Option for Additional States To Participate in the New Trading Program

E. Title V Permitting

F. Relationship to Other Emission Trading and Ozone Transport Programs

1. Existing Trading Programs

2. Title IV Interactions

3. NO

SIP Call Interactions

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

IX. Summary of Changes to the Regulatory Text for the Federal Implementation Plans and Trading Programs

A. Amended CSAPR Update FIP Provisions

B. New CSAPR NO

Ozone Season Group 3 Trading Program Provisions

C. Transitional Provisions

D. Conforming Revisions, Corrections, and Clarifications to Existing Regulations

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

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

I. Executive Summary

This final rule resolves the interstate transport obligations of 21 states under the good neighbor provision of the Clean Air Act (CAA or the Act), CAA section 110(a)(2)(D)(i)(I), for the 2008 ozone National Ambient Air Quality Standards (NAAQS). The 2008 ozone NAAQS is an 8-hour standard that was set at 75 parts per billion (ppb).

The U.S. Environmental Protection Agency (EPA or the Agency) published the Cross-State Air Pollution Rule (CSAPR) Update on October 26, 2016, which, among other things, partially addressed the interstate transport of emissions from 21 states with respect to the 2008 ozone NAAQS.

See

81 FR 74504. On December 21, 2018, EPA published the CSAPR Close-Out Rule, which found that the CSAPR Update was a complete remedy for 20 of those states based on air quality analysis of the year 2023.

See

73 FR 16436 (March 27, 2008).

In the CSAPR Update, EPA found that the finalized Tennessee emission budget fully addressed Tennessee's good neighbor obligation with respect to the 2008 ozone NAAQS.

See

81 FR 74504, 74508 n. 19 (Oct. 26, 2016).

See

83 FR 65878 (Dec. 21, 2018).

On September 13, 2019, the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) remanded the CSAPR Update, concluding that it was invalid in one respect because it unlawfully allowed upwind states to continue their significant contributions to downwind air quality problems beyond the statutory dates by which downwind States must demonstrate their attainment of ozone air quality standards.

Wisconsin

EPA,

938 F.3d 303, 318-20 (D.C. Cir. 2019) (

Wisconsin

) (per curiam);

see also Wisconsin,

938 F.3d at 322. Consequently, in this action EPA uses the analytic year 2021.

To apply the second step of the framework, EPA used an air quality modeling-based technique to quantify the contributions in 2021 from upwind states to ozone concentrations at individual monitoring sites, as described in section V. Once quantified, EPA then evaluated these contributions relative to a screening threshold of 1 percent of the NAAQS (

i.e.,

0.75 ppb) for those monitoring sites identified as nonattainment and/or maintenance receptors in step 1. States with contributions that equal or exceed 1 percent of the NAAQS were identified as warranting further analysis for significant contribution to nonattainment or interference with maintenance. States with contributions below 1 percent of the NAAQS were considered to not significantly contribute to nonattainment or interfere with maintenance of the NAAQS in downwind states. Based on EPA's updated air quality and contribution analysis using 2021 as the analytic year, EPA is determining that the following 12 states have contributions that equal or exceed 1 percent of the 2008 ozone NAAQS, and thereby warrant further analysis for significant contribution to nonattainment or interference with maintenance: Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, Virginia, and West Virginia. EPA received comments on its approach to quantify interstate contributions and the use of a 1 percent of the NAAQS screening threshold. A summary of these comments, as well as EPA's responses, can be found in section V and in the RTC document for this final rule.

At the third step of the 4-step framework, EPA applied the multi-factor test used in the CSAPR Update, which evaluates cost, available emission reductions, and downwind air quality impacts to determine the amount of linked upwind states' emissions that “significantly” contribute to downwind nonattainment or maintenance receptors. In this action, EPA applied the multi-factor test to both EGU and non-EGU source categories and assessed potential emission reductions in all years for which there is a potential remaining interstate ozone transport problem (

i.e.,

through 2025), in order to ensure a full remedy in accordance with the

Wisconsin

decision.

In the proposed rule, EPA identified a control stringency that reflects the optimization of existing selective catalytic reduction (SCR) controls and installation of state-of-the-art NO

combustion controls at EGUs, represented by a cost of $1,600 per ton of NO

reduced. In this final rule, EPA is determining that optimization of existing selective non-catalytic reduction (SNCR) controls should also be included in EPA's identified EGU control stringency. As discussed in further detail in Section VI, EPA adjusted its representative cost for optimizing existing SNCR controls to $1,800 per ton in response to comments received on the proposed rule, as well as further EPA review of available information. EPA views $1,600 per ton for optimization of existing SCR controls and installation of state-of-the-art NO

combustion controls and $1,800 per ton for optimization of existing SNCRs as comparable for policy purposes. In addition, other considerations beyond marginal cost and air quality improvement, as outlined in the section VI.D discussion of the multi-factor test, support inclusion of emission reduction potential from optimization of existing SNCR controls in EPA's identified EGU control stringency in this rule.

At the selected control stringency in this final rule, downwind ozone air quality improvements continue to be maximized relative to a representative 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 control stringency levels evaluated. EPA finds that these cost-effective EGU NO

reductions will make meaningful and timely improvements in downwind ozone air quality to address interstate ozone transport for the 2008 ozone NAAQS, as discussed in section VI.D.1 below. Further, this evaluation shows that emission budgets reflecting the optimization of existing SCRs and SNCRs, and installation of state-of-the-art NO

combustion controls at EGUs do not over-control upwind states' emissions relative to either the downwind air quality problems to which they are linked at step 1 or the 1 percent contribution threshold that triggers further evaluation at step 2 of the 4-step framework.

EPA notes that two of these EGU emission controls (optimization of existing SCR controls and installation of state-of-the-art NO

combustion controls) were also selected in the CSAPR Update for the 2017 ozone season, and which at that time EPA characterized as only a partial remedy. For this rule, EPA extends its evaluation of the reduction potential from these emission controls to years beyond 2017 in order to assess a full remedy. EPA's updated analysis, as discussed in more detail in section VI, leads the Agency to find that these emission controls can provide additional cost-effective emission reductions for the 2021 through 2024 ozone seasons. While EPA's analysis indicates that the majority of EGUs implemented these emission controls in response to the CSAPR Update, changes in the power sector since the 2017 ozone season and updated air quality and contribution analysis show that there is a demonstrated need to update the emission budgets for these 12 states to incentivize ongoing operation of identified emission controls to fully eliminate significant contribution and interference with maintenance. Likewise, EPA finds that many EGUs are already operating their existing SNCR controls to some extent but that additional cost-effective emission reductions for the 2021 through 2024 ozone seasons are available. Taken together, the emission budgets established in this final rule reflect EPA's identified EGU control stringency of optimization of all existing post-combustion controls (SCRs and SNCRs) by the 2021 ozone season, and the installation of state-of-the-art NO

combustion controls by the 2022 ozone season.

For non-EGU industry sectors and emissions sources, EPA applied the step 3 multi-factor test to determine whether any emission reductions should be required from non-EGU sources to address significant contribution under the 2008 ozone NAAQS. EPA acknowledged in the proposed rule that its current datasets with information on emissions, existing controls on

emissions sources, emission-reduction potential, and air quality impacts for these sources are not as well developed as the datasets it has for EGUs. Nonetheless, using the best information currently available to the Agency, including some additional analysis conducted between the proposed rule and this final action, EPA is concluding that there are relatively fewer emission reductions available at a cost threshold comparable to the cost threshold selected for EGUs. In EPA's reasoned judgment, the Agency concludes such reductions are estimated to have a much smaller effect on any downwind receptor in the year by which EPA finds such controls could be installed. For these reasons, EPA is finding that limits on ozone season NO

emissions from non-EGU sources are not required to eliminate significant contribution or interference with maintenance under the 2008 ozone NAAQS (see section VI.D.2).

Based on EPA's analysis at step 3, the Agency is promulgating EGU NO

ozone season emission budgets developed using a uniform control stringency of optimization of existing SCRs and SNCRs, and installation of state-of-the-art NO

combustion controls. EPA is determining that with implementation of this control stringency, the 12 states in Table I.A-2 will have fully addressed significant contribution under the good neighbor provision for the 2008 ozone NAAQS. EPA is aligning implementation of emission budgets with relevant attainment dates for the 2008 ozone NAAQS, consistent with CAA requirements and the D.C. Circuit's decision in

Wisconsin

EPA.

As EPA's final 2008 Ozone NAAQS SIP Requirements Rule

established the attainment date of July 20, 2021, for ozone nonattainment areas currently designated as Serious, EPA is establishing emission budgets and implementation of these emission budgets starting with the 2021 ozone season as shown in Table I.B-1.

See

938 F.3d 303, 320 (D.C. Cir. 2019) (holding that EPA must align interstate transport compliance deadlines with downwind attainment deadlines unless EPA can demonstrate an impossibility or other necessity).

80 FR 12264, 12268; 40 CFR 51.1103.

Table I.B-1—EGU NO

Ozone Season Emission Budgets

[Ozone Season NO

Tons] *

State

2021 Budget

2022 Budget

2023 Budget

2024 Budget

Illinois

9,102

8,179

8,059

Indiana

13,051

12,582

12,553

9,564

Kentucky

15,300

14,051

Louisiana

14,818

Maryland

1,499

1,266

1,348

Michigan

12,727

12,290

9,975

9,786

New Jersey

1,253

New York

3,416

3,421

3,403

Ohio

9,690

9,773

Pennsylvania

8,379

8,373

Virginia

4,516

3,897

3,980

3,663

West Virginia

13,334

12,884

Total

107,085

103,705

100,526

96,975

* Note

—The 2022 and beyond budgets incorporate the installation of state-of-the-art NO

combustion controls, whereas the 2021 budgets do not. Additionally, the 2024 emissions budget applies to 2024 and each year thereafter.

EPA further determined which emission reductions are impossible to achieve by the 2021 attainment date and whether any such additional emission reductions should be required beyond that date.

See Wisconsin,

938 F.3d at 320. EPA estimates that one part of the selected control stringency—installation of state-of-the-art NO

combustion controls—requires approximately one to six months depending on the unit. Recognizing that the final rule will become effective slightly after the start of the 2021 ozone season, EPA determined it is not possible to install state-of-the-art NO

combustion controls on a regional scale by the 2021 ozone season. Therefore, the 2021 ozone season emission budgets reflect only the optimization of existing SCR and SNCR controls at the affected EGUs, but the emission budgets for the 2022 ozone season and beyond reflect both the continued optimization of existing SCR and SNCR controls and installation of state-of-the-art NO

combustion controls. Detailed installation-timing information for this technology is available in section VI.B and the EGU NO

Mitigation Strategies Final Rule TSD.

As described in detail in sections VI.B and VI.C, some mitigation efforts that require the installation of significant new plant hardware (

e.g.,

combustion control upgrade, selective catalytic reduction, and non-selective catalytic reduction) are not possible by the 2021 attainment date. However, EPA factored some of these measures (

i.e.,

combustion controls) into its quantification of significant contribution starting at the later date of the start of the 2022 ozone season.

As discussed in section VI.D.1, EPA's air quality projections anticipate that with the implementation of the identified control stringency for EGUs, downwind nonattainment and maintenance problems for the 2008 ozone NAAQS will persist through the 2024 ozone season. Therefore, EPA is adjusting emission budgets for upwind states that remain linked to downwind nonattainment and maintenance problems through the 2024 ozone season to incentivize the continued optimization of existing SCR and SNCR controls, and installation of state-of-the-art NO

combustion controls. The 2024 emission budgets will then continue to apply in each year thereafter.

To apply the fourth step of the 4-step framework (

i.e.,

implementation), EPA is including enforceable measures in the promulgated FIPs to achieve the required emission reductions in each of the 12 states. Specifically, the FIPs require power plants in the 12 states to participate in a new CSAPR NO

Ozone Season Group 3 Trading Program that largely replicates the existing CSAPR NO

Ozone Season Group 2 Trading

Program with the main differences being the geography and budget stringency. This final rule leaves unchanged the budget stringency of the existing CSAPR NO

Ozone Season Group 1 and Group 2 trading programs for the states that remain covered by those programs.

EPA is finalizing the proposed feature of the budget-setting process in which budgets are adjusted in 2022, 2023, and 2024 to account for future unit retirements and construction of new units that are known with sufficient certainty as of this final action. As discussed in section VII.C.3.b, in response to comments, EPA has made the methodology for allocating allowances to existing units in this final rule more consistent with the budget-setting process by eliminating allocations to units following their retirements in instances where the future retirements were scheduled in advance with sufficient certainty to be taken into account in the budget-setting process.

As proposed, to promote compliance flexibility without relaxing the program stringency identified as appropriate to address states' obligations under CAA section 110(a)(2)(D)(i)(I), EPA is creating a limited initial bank of allowances for use in the new Group 3 trading program by converting allowances banked in 2017-2020 under the existing Group 2 trading program at a formula-based conversion ratio. The target bank amount is based on the sum of the states' “variability limits”—that is, the amounts by which emissions from a given state's units can exceed the state's emission budget before incurring a penalty surrender ratio. As discussed in section VII.C.4.b, in response to comments requesting greater certainty, in the final rule EPA has modified the proposed conversion ratio formula so as to yield an expected fixed conversion ratio of 8:1 (

i.e.,

eight Group 2 allowances must be exchanged for each Group 3 allowance). Participation in the conversion process is mandatory for the sources in states covered by the Group 3 trading program and, if the Group 3 sources' accounts collectively do not hold enough Group 2 allowances to exchange for the entire target bank amount, for holders of Group 2 allowances in non-source accounts as well.

Compliance accounts of sources in states that continue to be covered by the existing Group 2 trading program will not be included in the conversion process.

As discussed in section VII.C.4.c, the final rule also provides a second opportunity for sources to create an additional limited number of Group 3 allowances through the voluntary conversion of additional Group 2 allowances at an 18:1 conversion ratio (known as a “safety valve”). Any 2017-2020 Group 2 allowances that have not already been exchanged for Group 3 allowances through the process of creating the initial bank may be used to obtain additional Group 3 allowances through the safety valve mechanism. The availability of the starting bank and any additional allowances converted using this “safety valve” ensures that compliance with the rule is feasible and addresses any market liquidity concerns raised by commenters.

The remainder of this preamble is organized as follows: section III describes EPA's legal authority for this final action; section IV describes the human health and environmental context, as well as EPA's approach for addressing interstate transport for the 2008 ozone NAAQS; section V describes EPA's assessment of downwind receptors of concern and upwind state ozone contributions to those receptors, including the air quality modeling platform and emission inventories that EPA used; section VI describes EPA's application of the multifactor test at step 3 of the 4-step framework to EGU and non-EGU sources, quantification of upwind state obligations in the form of final EGU NO

emission budgets, and assessment of overcontrol; section VII details the implementation requirements including key elements of the CSAPR NO

Ozone Season Group 3 Trading Program and deadlines for compliance; section VIII describes the expected costs, benefits, and other impacts of this final rule; section IX discusses changes to the existing regulatory text; and section X discusses the statutes and executive orders affecting this final rule. Each section includes a summary of the principal comments received with respect to that topic, as well as EPA's responses. The Revised Cross State Air Pollution Update Rule—Response to Comment document (RTC), which includes a compilation of all comments received and EPA's responses, has been included in the docket for this action.

C. Costs and Benefits

A summary of the key results of the cost-benefit analysis that was prepared for this final rule is presented in Table I.C-1. Table I.C-1 presents estimates of the present values (PV) and equivalent annualized values (EAV), calculated using discount rates of 3 and 7 percent as directed by OMB's Circular A-4, of the health benefits, climate benefits, compliance costs, and net benefits of the final rule, in 2016 dollars, discounted to 2021. The estimated net benefits are the estimated benefits minus the estimated costs of the final rule.

Table I.C-1—Estimated Health Benefits, Climte Benefits, Compliance Costs, and Net Benefits of the Final Rule, 2021 Through 2040

[Millions 2016$, discounted to 2021]

3% Discount rate

7% Discount rate

Present Value:

Health Benefits

$4,800 and $37,000

$3,200 and $25,000.

Climate Benefits

$4,400

$4,400.

Compliance Costs

$370

$260.

Net Benefits

$8,800 and $41,000

$7,300 and $29,000.

Equivalent Annualized Value:

Health Benefits

$320 and $2,500

$300 and $2,400.

Climate Benefits

$290

$290.

Compliance Costs

$25

$25.

Net Benefits

$590 and $2,800

$570 and $2,700.

Numbers may not sum due to independent rounding.

The health benefits are associated with several point estimates and are presented at real discount rates of 3 and 7 percent. The two benefits estimates are separated by the word “and” to signify that they are two separate estimates. The estimates do not represent lower- and upper-bound estimates and should not be summed. Climate benefits are based on changes (reductions) in CO

emissions and are calculated using four different estimates of the social cost of carbon (SC-CO

) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate). For the presentational purposes of this table, we show the climate benefits associated with the average SC-CO

at a 3 percent discount rate, but the Agency does not have a single central SC-CO

point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-CO

estimates; the additional benefit estimates are presented in Table VIII.5 in Section VIII. As discussed in Chapter 5 of the Regulatory Impact Analysis for the Final Revised Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and lower, are also warranted when discounting intergenerational impacts.

To estimate these annualized costs, EPA uses a conventional and widely accepted approach that applies a capital recovery factor (CRF) multiplier to capital investments and adds that to the annual incremental operating expenses. Annual costs were calculated using a 4.25% real discount rate consistent with the rate used in IPM's objective function for cost-minimization.

As shown in Table I.C-1, the PV of the health benefits of this final rule, discounted at a 3-percent discount rate, is estimated to be about $4,800 million and $37,000 million, with an EAV of about $320 million and $2,500 million. At a 7-percent discount rate, the PV of the health benefits is estimated to be $3,200 million and $25,000 million, with an EAV of about $300 million and $2,400 million. The two health benefits estimates for each discount rate reflect alternative ozone and PM

2.5

mortality risk estimates. The PV of the climate benefits of this final rule, discounted at a 3-percent rate, is estimated to be about $4,400 million, with an EAV of about $290 million. The PV of the compliance costs, discounted at a 3-percent rate, is estimated to be about $370 million, with an EAV of about $25 million. At a 7-percent discount rate, the PV of the compliance costs is estimated to be about $260 million, with an EAV of about $25 million.

II. General Information

A. Does this action apply to me?

This final rule affects EGUs, and regulates the groups identified in Table II.A-1:

Table II.A-1—Regulated 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 EPA is now aware are regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your EGU entity is regulated by this action, you should carefully examine the applicability criteria found in 40 CFR 97.1004, as promulgated in this final action. 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. EPA's Legal Authority for the Final Rule

A. Statutory Authority

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 action. The most relevant portions of CAA section 110 are subsections 110(a)(1), 110(a)(2) (including 110(a)(2)(D)(i)(I)), 110(c)(1), and 110(k)(6).

CAA 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 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.,

572 U.S. 489, 509-10 (2014).

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” or “iSIP” submissions. CAA section 110(a)(1) addresses the timing and general requirements for iSIP submissions, and CAA 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.

42 U.S.C. 7410(a)(2).

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.,

Memorandum from Stephen D. Page on Guidance on Infrastructure State Implementation Plan (SIP) Elements under Clean Air Act Sections 110(a)(1) and 110(a)(2) (Sept. 13, 2013).

CAA section 110(c)(1) requires the Administrator to promulgate a FIP at any time within two 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. This obligation applies 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).

CAA section 110(a)(2)(D)(i)(I), also known as the “good neighbor” provision, provides the primary basis for this final action.

It requires that each state SIP include provisions sufficient to “prohibit[ ], consistent with the provisions of this subchapter, any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will—(I) contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any [NAAQS].”

EPA often refers to the emission reduction requirements under this provision as “good neighbor obligations” and submissions addressing these requirements as “good neighbor SIPs.”

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

Id.

Once EPA promulgates a NAAQS, EPA must designate areas as being in “attainment” or “nonattainment” of the NAAQS, or “unclassifiable.” CAA section 107(d).

For ozone, nonattainment is further split into five classifications based on the severity of the violation—Marginal, Moderate, Serious, Severe, or Extreme. Higher classifications provide states with progressively more time to attain while imposing progressively more stringent control requirements.

See

CAA sections 181, 182.

In general, states with nonattainment areas classified as Moderate or higher must submit plans to EPA to bring these areas into

attainment according to the statutory schedule. CAA section 182.

If an area fails to attain the NAAQS by the attainment date associated with its classification, it is “bumped up” to the next classification. CAA section 181(b).

42 U.S.C. 7407(d).

42 U.S.C. 7511, 7511a.

42 U.S.C. 7511a.

42 U.S.C. 7511(b).

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

Pursuant to this section, EPA has authority to clarify the applicability of CAA requirements and undertake other rulemaking action as necessary to implement CAA requirements. In this final rule, among other things, EPA is clarifying the applicability of CAA section 110(a)(2)(D)(i)(I) with respect to the 2008 ozone NAAQS. In particular, EPA is using its authority under CAA sections 110 and 301 to issue new or amended FIPs to revise NO

ozone season emission budgets for 12 states to eliminate their significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS in another state, and EPA is making findings as to 9 additional states that the CSAPR Update FIPs (or SIP revisions later approved to replace those FIPs) are a complete remedy and need no further revision.

In addition, EPA is addressing its obligation to respond to the D.C. Circuit's remand of the CSAPR Update in

Wisconsin

EPA,

938 F.3d 303, with respect to the 21 states for which the FIPs created by that rule were found to be only a partial remedy. This final rule wholly resolves the Agency's obligations on remand. Finally, CAA section 301

affords the Agency any additional authority that may be needed in order to make certain other changes to its regulations under 40 CFR parts 51, 52, 78, and 97, in order to effectuate the purposes of the Act. Such changes are discussed in section VII of this preamble.

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

42 U.S.C. 7410, 7601.

42 U.S.C. 7601.

B. Prior Good Neighbor Rulemakings Addressing Regional Ozone

EPA has issued several rules interpreting and clarifying the requirements of CAA section 110(a)(2)(D)(i)(I) with respect to the regional transport of ozone for states in the eastern United States. These rules, and the associated court decisions addressing these rules, summarized here, provide important direction regarding the requirements of CAA 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.

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

emissions that contribute to ozone nonattainment in downwind states. EPA set ozone season NO

budgets for each state, and the states were given the option to participate in a regional trading program, known as the NO

Budget Trading Program.

The D.C. Circuit largely upheld the NO

SIP Call in

Michigan

EPA,

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

cert. denied,

532 U.S. 904 (2001).

63 FR 57356 (Oct. 27, 1998). As originally promulgated, the NO

SIP Call also addressed good neighbor obligations under the 1997 8-hour ozone NAAQS, but EPA subsequently stayed and later rescinded the rule's provisions with respect to that standard.

See

84 FR 8422 (March 8, 2019).

“Allowance Trading,” sometimes referred to as “cap and trade,” is an approach to reducing pollution that has been used successfully to protect human health and the environment. Trading programs have two key components: Emissions budgets (the sum of which provide a cap on emissions), and tradable allowances equal to the budgets that authorize allowance holders to emit a specific quantity (

e.g.,

one ton) of the pollutant. This approach ensures that the environmental goal is met while the tradable allowances provide flexibility for individual participants to establish and follow their own compliance path. Because allowances can be bought and sold in an allowance market, these programs are often referred to as “market-based.”

EPA's next rule addressing the good neighbor provision, the Clean Air Interstate Rule (CAIR), was promulgated in 2005 and addressed both the 1997 fine particulate matter (PM

2.5

) NAAQS and 1997 ozone NAAQS.

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

) and/or NO

—important precursors of regionally transported PM

2.5

(SO

and annual NO

) and ozone (summer-time NO

). As in the NO

SIP Call, states were given the option to participate in regional trading programs to achieve the reductions. When EPA promulgated the final CAIR in 2005, EPA also issued findings that states nationwide 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 1997 ozone NAAQS.

On March 15, 2006, EPA promulgated FIPs to implement the emission reductions required by CAIR.

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

North Carolina

EPA,

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

modified on reh'g,

550 F.3d 1176. For more information on the legal issues underlying CAIR and the D.C. Circuit's holding in

North Carolina,

refer to the preamble of the CSAPR rule.

70 FR 25162 (May 12, 2005).

70 FR 21147 (April 25, 2005).

71 FR 25328 (April 28, 2006).

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

In 2011, EPA promulgated the CSAPR to address the issues raised by the remand of CAIR. The CSAPR addressed the two NAAQS at issue in CAIR and additionally addressed the good neighbor provision for the 2006 PM

2.5

NAAQS.

The CSAPR required 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 align implementation with the applicable attainment deadlines, EPA promulgated FIPs for each of the 28 states covered by the CSAPR. The FIPs require EGUs in the covered states to participate in regional trading programs to achieve the necessary emission reductions. Each state can submit a good neighbor SIP at any time that, if approved by EPA, would replace the CSAPR FIP for that state.

76 FR 48208.

The CSAPR was revised by several rulemakings after its initial promulgation in order to revise certain states' budgets and to promulgate FIPs for five additional states addressing the good neighbor obligation for the 1997 ozone NAAQS.

See

76 FR 80760 (Dec. 27, 2011); 77 FR 10324 (Feb. 21, 2012); 77 FR 34830 (June 12, 2012).

The CSAPR was the subject of an adverse decision by the D.C. Circuit in August 2012.

However, this decision was reversed in April 2014 by the Supreme Court, which largely upheld the rule, including EPA's approach to addressing interstate transport in the CSAPR.

EPA

EME Homer City Generation, L.P.,

572 U.S. 489 (2014) (

EME Homer City I

). The rule was remanded to the D.C. Circuit to consider claims not addressed by the Supreme Court.

Id.

In July 2015 the D.C. Circuit generally affirmed EPA's interpretation of various statutory provisions and EPA's technical decisions.

EME Homer City Generation, L.P.

EPA,

795 F.3d 118 (2015) (

EME Homer City II

). However, the court remanded the rule without vacatur for reconsideration of EPA's emissions budgets for certain states, which the court found may have over-controlled those states' emissions with respect to the downwind air quality problems to which the states

were linked.

Id.

at 129-30, 138. For more information on the legal issues associated with the CSAPR and the Supreme Court's and D.C. Circuit's decisions in the

EME Homer City

litigation, refer to the preamble of the CSAPR Update.

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 the CSAPR. EPA sought review with the D.C. Circuit

en banc

and the D.C. Circuit declined to consider EPA's appeal

en banc. EME Homer City Generation, L.P.

EPA,

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

81 FR 74504, 74511 (Oct. 26, 2016).

In 2016, EPA promulgated the CSAPR Update to address interstate transport of ozone pollution with respect to the 2008 ozone NAAQS.

The final rule updated the CSAPR ozone season NO

emissions budgets for 22 states to achieve cost-effective and immediately feasible NO

emission reductions from EGUs within those states.

EPA aligned the analysis and implementation of the CSAPR Update with the 2017 ozone season in order to assist downwind states with timely attainment of the 2008 ozone NAAQS.

The CSAPR Update implemented the budgets through FIPs requiring sources to participate in a revised CSAPR NO

ozone season trading program beginning with the 2017 ozone season. As under the CSAPR, each state could submit a good neighbor SIP at any time that, if approved by EPA, would replace the CSAPR Update FIP for that state. The final CSAPR Update also addressed the remand by the D.C. Circuit of certain states' CSAPR phase 2 ozone season NO

emissions budgets in

EME Homer City II.

Further details regarding the CSAPR Update are discussed in sections IV.C.1.a and IV.C.1.b below.

81 FR 74504.

One state, Kansas, was made newly subject to the CSAPR ozone season NO

requirement by the CSAPR Update. All other CSAPR Update states were already subject to ozone season NO

requirements under the CSAPR.

81 FR 74516. EPA's final 2008 Ozone NAAQS SIP Requirements Rule, 80 FR 12264, 12268 (Mar. 6, 2015), revised the attainment deadline for ozone nonattainment areas designated as Moderate to July 20, 2018.

See

40 CFR 51.1103. In order to demonstrate attainment by this deadline, states were required to rely on design values calculated using ozone season data from 2015 through 2017, since the July 20, 2018, deadline did not afford enough time for measured data of the full 2018 ozone season.

In December 2018, EPA promulgated the CSAPR “Close-Out,” which determined that no further enforceable reductions in emissions of NO

were required with respect to the 2008 ozone NAAQS for 20 of the 22 eastern states covered by the CSAPR Update, and reflected that determination in revisions to the existing state-specific sections of the CSAPR Update regulations for those states.

Further details on the CSAPR Close-Out are discussed in section IV.C.1.c below.

83 FR 65878, 65882 (Dec. 21, 2018). After promulgating the CSAPR Update and before promulgating the CSAPR Close-Out, EPA approved a SIP from Kentucky resolving the Commonwealth's good neighbor obligations for the 2008 ozone NAAQS. 83 FR 33730 (July 17, 2018). In this action, EPA is making an error correction under CAA section 110(k)(6) to convert this approval to a disapproval, because the Kentucky approval relied on the same analysis which the D.C. Circuit determined to be unlawful in the CSAPR Close-Out. Our action with respect to Kentucky is discussed in section IV.C.2.b. below.

The CSAPR Update and the CSAPR Close-Out were both subject to legal challenges in the D.C. Circuit.

Wisconsin

EPA,

938 F.3d 303 (D.C. Cir. 2019) (

Wisconsin

);

New York

EPA,

781 Fed. App'x 4 (D.C. Cir. 2019) (

New York

). As discussed in greater detail in section IV.C.1.d below, in September 2019, the D.C. Circuit upheld the CSAPR Update in virtually all respects, but remanded the rule because it was partial in nature and did not fully eliminate upwind states' significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS by “the relevant downwind attainment deadlines” in the CAA.

Wisconsin,

938 F.3d at 313-15. In October 2019, the D.C. Circuit vacated the CSAPR Close-Out on the same grounds that it remanded the CSAPR Update in

Wisconsin,

specifically that the Close-Out rule did not address good neighbor obligations by “the next applicable attainment date” of downwind states.

New York,

781 Fed. App'x at 7.

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

A. The Interstate Ozone Transport Challenge

Interstate transport of NO

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

1. Nature of Ozone and the Ozone NAAQS

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

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

and VOC.

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

emissions as well (

e.g.,

increased electricity generation for air conditioning).

The 2008 primary and secondary ozone standards are both 75 ppb as an 8-hour level.

Specifically, the standards require that the 3-year average of the fourth highest 24-hour maximum 8-hour average ozone concentration may not exceed 75 ppb as a truncated value (

i.e.,

digits to right of decimal removed).

In general, areas that exceed the ozone standard are designated as nonattainment areas, pursuant to the designations process under CAA section 107 and are subject to heightened planning requirements depending on the degree of severity of their nonattainment classification,

see

CAA sections 181, 182.

73 FR 16436 (Mar. 27, 2008).

40 CFR part 50, Appendix P to part 50.

2. Ozone Transport

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

i.e.,

thousands of kilometers) over much of the eastern U.S.

While substantial progress has been made in reducing ozone in many areas, interstate ozone transport is still an important component of peak ozone concentrations during the summer 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.

EPA has previously concluded in the NO

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

control strategy would be most effective. NO

emissions can be transported downwind as NO

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

i.e.,

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

emissions for ozone transport. This analysis is in the docket for this final rule and can be also found at EPA's website at:

https://www.epa.gov/ttnecas1/docs/20151001ria.pdf.

Further, studies have found that EGU NO

emission reductions can be effective in reducing individual 8-hour peak ozone concentrations and in

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

reductions achieved under the NO

Budget Trading Program (

i.e.,

the NO

SIP Call) shows that regulating NO

emissions in that program was highly effective in reducing both ozone and dry-NO

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

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

Atmospheric Environment,

2011.

Previous regional ozone transport efforts, including the NO

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

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

emissions to address interstate ozone transport in the notice-and-comment process for these rulemakings. EPA received some comments suggesting it modify its pollutant focus to either include VOCs in addition to NO

, or apply a more granular time scale. However, EPA did not modify its proposed approach in this final rule. These comments, as well as EPA's responses, are addressed in section VI.A and VII.B.

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

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

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

post-combustion controls (

i.e.,

SCRs and SNCRs)—including optimizing NO

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

combustion controls; and shifting generation to units with lower NO

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

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

EPA also observes that significant emission reduction potential from EGUs is available through post-combustion control retrofits (

e.g.,

new SCRs and new SNCRs). These controls reduce emissions and can have a meaningful air quality impact, but, in contrast to the controls discussed above, they are only available on a longer time frame (reflecting the time required to develop, construct, and install the technology) that exceeds the expected downwind nonattainment and maintenance problems for the 2008 ozone NAAQS and are estimated to have a higher cost.

3. Health and Environmental Effects

Exposure to ambient ozone causes a variety of negative effects on human health, vegetation, and ecosystems. In humans, acute and chronic exposure to ozone is associated with premature mortality and a number of morbidity effects, such as asthma exacerbation. In ecosystems, ozone exposure causes visible foliar injury, decreases plant growth, and affects ecosystem community composition.

See

EPA's October 2020 Regulatory Impact Analysis for the Proposed Revised Cross-State Air Pollution Rule (CSAPR) Update for the 2008 Ozone NAAQS (EPA-452/P-20-003), in the docket for this rule and available on EPA's website at:

https://www.epa.gov/sites/production/files/2020-10/documents/revised_csapr_update_ria_proposal.pdf

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

B. Relationship Between This Regulatory Action and the 2015 Ozone NAAQS

On October 1, 2015, EPA strengthened the ground-level ozone NAAQS to 70 ppb on an eight-hour averaging time.

While reductions achieved by this rule may have the effect of aiding in attainment and maintenance of the 2015 standard, this action is taken solely with respect to EPA's authority to address remaining CAA good neighbor obligations under the 2008 ozone NAAQS. EPA and states are working outside of this final action to address the CAA good neighbor provision for the 2015 ozone NAAQS, including consideration of any necessary control requirements for EGU and non-EGU sources.

80 FR 65291 (Oct. 26, 2015). On December 20, 2020, EPA published its decision, based on the air quality criteria, to retain the existing 8-hour NAAQS for ozone.

See

https://www.epa.gov/ground-level-ozone-pollution/ozone-national-ambient-air-quality-standards-naaqs

EPA received several comments regarding the relationship of this rule to the 2015 ozone NAAQS and the schedule for implementation of good neighbor obligations related to that NAAQS. These comments are out of the scope of this action, which considers states' obligations under 2008 ozone NAAQS in response to the

Wisconsin

remand and the

New York

vacatur.

Wisconsin

EPA,

938 F.3d 303 (D.C. Cir. 2019).

New York

EPA,

781 F. App'x 4 (D.C. Cir. 2019). This action does not address any state's obligations under the 2015 ozone NAAQS. Nonetheless, the emission reductions and associated improvement in ozone levels achieved by this action are beneficial toward reducing ozone for purposes of the 2015 ozone NAAQS and its associated attainment planning and good neighbor requirements. In some cases, the reductions necessary to address significant contribution or interference with maintenance at receptors identified in this action for purposes of the 2008 ozone NAAQS will have the effect of incidentally improving ozone levels at potential receptors under the 2015 ozone NAAQS.

C. Approach To Address the Remanded Transport Obligations for the 2008 Ozone NAAQS

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

EPA is taking this action to address the remand of the CSAPR Update in

Wisconsin

EPA,

938 F.3d 303 (D.C. Cir. 2019). This section will discuss the key, relevant aspects of the CSAPR Update, the related CSAPR Close-Out, and the D.C. Circuit's decisions in

Wisconsin

and

New York

EPA,

781 Fed. App'x 4 (D.C. Cir. 2019) (the latter of which vacated the Close-out Rule based on the same reasoning as the

Wisconsin

decision remanding the Update). The basis for EPA's authority under CAA section 110(c) (42 U.S.C. 7410(c)) to promulgate good neighbor FIPs for the 21 states subject to this action on remand is discussed in sections III and IV.C.2.

a. The CSAPR Update

On October 26, 2016, the CSAPR Update was published in the

Federal Register

. 81 FR 74504. The purpose of the CSAPR Update was to address the good neighbor provision for the 2008 ozone NAAQS, as well as address the remanded CSAPR obligations for the 1997 ozone NAAQS. The CSAPR Update required EGUs in 22 states to reduce ozone season NO

emissions that significantly contribute to other states' nonattainment or interfere with other states' abilities to maintain the 2008 ozone NAAQS.

To establish and implement the CSAPR Update emissions budgets, EPA followed the same 4-step analytic process that it used in the CSAPR, an

approach which reflects the evolution of the Agency's prior regional interstate transport rulemakings related to ozone NAAQS. The 4-step framework is described in more detail in sections IV.C.3 and VI.A.

In the CSAPR Update, to evaluate the scope of the interstate ozone transport problem at step 1, EPA identified downwind areas that were expected to have problems attaining and maintaining the 2008 ozone NAAQS using modeling that projected air quality to a future compliance year.

See

81 FR 74517. EPA aligned the analysis and implementation of the CSAPR Update with the 2017 ozone season (May 1-September 30) in order to assist downwind states with attainment of the 2008 ozone NAAQS by the 2018 Moderate area attainment date.

Id.

at 74516. (EPA's final 2008 Ozone NAAQS SIP Requirements Rule established the attainment deadline of July 20, 2018, for ozone nonattainment areas classified as Moderate.

) Because the attainment date fell during the 2018 ozone season, the 2017 ozone season was the last full season from which data could be used to determine attainment of the NAAQS by that date.

See

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

At step 2, EPA identified upwind states that collectively contribute to these identified downwind areas. In the CSAPR Update, EPA used a screening threshold of 1 percent of the NAAQS to identify states “linked” to downwind ozone problems sufficient for further evaluation for significant contribution to nonattainment or interference with maintenance of the NAAQS under the good neighbor provision. 81 FR 74518. This same threshold for analysis was used in the CSAPR as to the 1997 ozone NAAQS.

See

76 FR at 48237-38.

At step 3, EPA quantified emissions from upwind states that would significantly contribute to nonattainment or interfere with maintenance by first evaluating various levels of uniform NO

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

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

control stringency that addressed the impacts of interstate transport on downwind nonattainment or maintenance receptors. EPA used this multi-factor assessment to gauge the extent to which emission reductions could be implemented in the future compliance year (

i.e.,

2017) and to evaluate the potential for over- and under-control of upwind state emissions.

Within the multi-factor test, EPA identified a “knee in the curve,”

i.e.,

a point at which the cost-effectiveness of the emission reductions was maximized, so named for the discernable turning point observable in a multi-factor (

i.e.,

multi-variable) curve.

See

81 FR 74550. EPA concluded that this was at the point where emissions budgets reflected a uniform NO

control stringency represented by an estimated marginal cost of $1,400 per ton (2011$) of NO

reduced. This cost threshold in turn represented a control strategy of installing or upgrading combustion controls and optimizing existing SCR controls. In light of this multi-factor test, EPA determined this level of stringency in emissions budgets represented the level at which incremental EGU NO

reduction potential and corresponding downwind ozone air quality improvements were maximized—relative to other control stringencies evaluated—with respect to marginal cost. That is, the ratio of emission reductions to marginal cost and the ratio of ozone improvements to marginal cost were maximized relative to the other levels of control stringency evaluated. EPA found that feasible and cost-effective EGU NO

reductions were available to 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.

Id.

at 74508. Further, the Agency's evaluation showed that emissions budgets reflecting the $1,400 per ton cost threshold did not over-control upwind states' emissions relative to either the downwind air quality problems to which they were linked or the 1 percent contribution threshold in step 2 that triggered their further evaluation in step 3.

Id.

at 74551-52.

At step 4, EPA finalized EGU ozone season NO

emissions budgets developed using uniform control stringency represented by $1,400 per ton. These budgets represented emissions remaining in each state after elimination of the amounts of emissions that EPA identified would significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS in downwind states. EPA promulgated FIPs requiring the covered power plants in the 22 covered states to participate in the CSAPR NO

Ozone Season Group 2 Trading Program starting in 2017.

The NO

ozone season trading program created under the CSAPR was renamed the CSAPR NO

Ozone Season Group 1 Trading Program and now applies only to sources in Georgia. In the CSAPR Update, EPA found that Georgia did not contribute to interstate transport with respect to the 2008 ozone NAAQS, but the state has an ongoing ozone season NO

requirement under the CSAPR with respect to the 1997 ozone NAAQS.

b. Partial Nature of the CSAPR Update

At the time it promulgated the CSAPR Update, EPA considered the FIPs to be “partial” and that the rule “may not be sufficient to fully address these states' good neighbor obligations” for the 2008 ozone NAAQS for 21 of the 22 states included in that rule. 81 FR 74508, 74521 (Oct. 26, 2016). Based on information available at the time of the rule's promulgation, EPA was unable to conclude that the CSAPR Update fully addressed most of the covered states' good neighbor obligations for the 2008 ozone NAAQS.

Id.

at 74521. Information available at the time indicated that, even with the CSAPR Update implementation, several downwind receptors were expected to continue having problems attaining and maintaining this NAAQS and that emissions from upwind states were expected to continue to contribute greater than or equal to 1 percent of the NAAQS to these areas during the 2017 ozone season.

Id.

at 74551-52. Further, EPA could not conclude at that time whether additional EGU and non-EGU reductions implemented on a longer timeframe than 2017 would be needed to address states' good neighbor obligations for this NAAQS.

Additionally, EPA determined it was not feasible to complete an emissions control analysis that may otherwise have been necessary to evaluate full elimination of each state's significant contribution to nonattainment or interference with maintenance and also ensure that emission reductions already quantified in the rule would be achieved by 2017.

Id.

at 74522. EPA was unable to fully consider both non-EGU ozone season NO

reductions and further EGU reductions that may have been achievable after 2017.

Id.

at 74521.

See

section IV.D.3 below.

Thus, EPA also could not make an emission reduction-based conclusion that the CSAPR Update would fully resolve states' good neighbor obligations with respect to the 2008 ozone NAAQS because the reductions evaluated and required by the CSAPR Update were limited in scope (both by technology and sector). As a result of the remaining air quality problems and the limitations

on EPA's analysis, for all but one of the 22 affected states, EPA did not determine in the CSAPR Update that the rule fully addressed those states' downwind air quality impacts under the good neighbor provision for the 2008 ozone NAAQS.

Id.

at 74521. For one state, Tennessee, EPA determined in the final CSAPR Update that Tennessee's emissions budget fully eliminated the state's significant contribution to downwind nonattainment and interference with maintenance of the 2008 ozone NAAQS because the downwind air quality problems to which the state was linked were projected to be resolved with implementation of the CSAPR Update.

Id.

at 74552.

c. The CSAPR Close-Out

Following implementation of the CSAPR Update and the approval of Kentucky's SIP (under a court-ordered deadline),

on December 21, 2018, EPA issued the CSAPR “Close-Out” to address any good neighbor obligations that remained for the 2008 ozone NAAQS for the 20 remaining states in the CSAPR Update region.

See

83 FR 65878 (Dec. 21, 2018). The CSAPR Close-Out made a determination that, based on additional information and analysis, the CSAPR Update fully addressed the remaining 20 affected states' good neighbor obligations for the 2008 ozone NAAQS. In particular, EPA determined that 2023 was an appropriate future analytic year considering relevant attainment dates and the time EPA estimated to be necessary to implement new NO

control technologies at EGUs. Based on EPA's analysis of projected air quality in that year, EPA determined that, for the purposes of addressing good neighbor obligations for the 2008 ozone NAAQS, there would be no remaining nonattainment or maintenance receptors in the eastern U.S. As a result of this determination, EPA found that, with continued implementation of the CSAPR Update, these 20 states would no longer contribute significantly to nonattainment in, or interfere with maintenance by, any other state with respect to the 2008 ozone NAAQS.

Id.

See

83 FR 33730 (July 17, 2018) (approval of Kentucky's SIP for the 2008 ozone NAAQS).

See

section IV.C.2.b. for discussion of the final action regarding Kentucky in this notice.

d. D.C. Circuit Decisions in

Wisconsin

EPA

and

New York

EPA

The CSAPR Update was subject to petitions for judicial review, and the D.C. Circuit issued its opinion in

Wisconsin

EPA

on September 13, 2019. 938 F.3d 303. The D.C. Circuit upheld the CSAPR Update in all respects save one: The court concluded that the CSAPR Update was inconsistent with the CAA to the extent that it was partial in nature and did not fully eliminate upwind states' significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS by the downwind states' 2018 Moderate attainment date.

Id.

at 313.

The court identified three bases for this holding: (1) The D.C. Circuit's prior opinion in

North Carolina

EPA,

531 F.3d 896 (2008), which held, in the context of CAIR, that the good neighbor provision requires states to eliminate significant contribution “consistent with the provisions” of Title I of the CAA, including the attainment dates applicable in downwind areas, 938 F.3d at 314 (citing 531 F.3d at 912); (2) the unreasonableness of EPA's interpretation of the phrase “consistent with the provisions [of Title I]” in the good neighbor provision as allowing for variation from the attainment schedule in CAA section 181 because it would enable significant contribution from upwind states to continue beyond that statutory timeframe, 938 F.3d at 315-18; and (3) the court's finding that the practical obstacles EPA identified regarding why it needed more time to implement a full remedy did not rise to the level of an “impossibility,”

id.

at 318-20. With respect to the third basis, the court also found EPA must make a higher showing of uncertainty regarding non-EGU point-source NO

mitigation potential before declining to regulate such sources.

Id.

at 318-20.

However, the court identified flexibilities that EPA retains in administering the good neighbor provision, acknowledging that EPA has latitude in defining which upwind contribution “amounts” count as significant and thus must be abated, permitting EPA to consider, among other things, the magnitude of upwind states' contributions and the cost associated with eliminating them. 938 F.3d at 320. The court further noted that, in certain circumstances, EPA can grant extensions of the attainment deadlines under the Act; for instance, the court cited CAA section 181(a)(5), which allows EPA to grant one-year extensions from attainment dates under certain circumstances.

Id.

Finally, the court noted that EPA can attempt to show “impossibility.”

Id.

The court also recognized that the statutory command that compliance with the good neighbor provision must be achieved consistent with Title I might be read, upon a sufficient showing of necessity, to allow some deviation from downwind deadlines, so long as it is rooted in Title I's framework and provides a sufficient level of protection to downwind States.

Id.

The court in

Wisconsin

remanded but did not vacate the CSAPR Update, finding that vacatur of the rule could cause harm to public health and the environment or disrupt the trading program EPA had established and that the obligations imposed by the rule may be appropriate and sustained on remand.

Id.

at 336. The court also rejected petitioners' request to place EPA on a six-month schedule to address the remand, noting the availability of “mandamus” relief before the D.C. Circuit should EPA fail to “modify the rule in a manner consistent with our opinion.”

Id.

at 336-37.

On October 1, 2019, in a judgment order, the D.C. Circuit vacated the CSAPR Close-Out on the same grounds that it remanded the Update in

Wisconsin. New York

EPA,

781 Fed. App'x 4 (D.C. Cir. 2019). Because the Close-Out analyzed the year 2023 rather than 2021 (“the next applicable attainment date”) and failed to demonstrate that it was impossible to address significant contribution by the 2021 attainment date, the court found the rule ran afoul of the

Wisconsin

holding.

Id.

at 7. “As the EPA acknowledges, the Close-Out Rule `relied upon the same statutory interpretation of the Good Neighbor Provision' that we rejected in

Wisconsin.

Thus, the Agency's defense of the Close-Out Rule in these cases is foreclosed.”

Id.

at 6-7 (internal citation omitted). The court left open the possibility that the flexibilities identified in

Wisconsin,

938 F.3d at 320, and outlined above, may be available to EPA on remand.

Id.

Following

Wisconsin

and

New York,

EPA on remand must address good neighbor obligations for the 21 states within the CSAPR Update region for which the Update was only a partial remedy. As explained in the following section, EPA already retains FIP authority as to 20 of these states. In addition, EPA is taking action pursuant to CAA section 110(k)(6) (42 U.S.C. 7410(k)(6)) to find that Kentucky's SIP was approved in error and is thus promulgating a FIP for Kentucky consistent with the obligations for the other remaining CSAPR Update region states.

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

On March 12, 2008, EPA promulgated a revision to the ozone 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). Specifically, the standards require that an area may not exceed 0.075 parts per million (75 ppb) using the 3-year average of the fourth highest 24-hour maximum 8-hour rolling average ozone concentration. These revisions of the NAAQS, in turn, triggered a 3-year deadline for states to submit SIP revisions addressing infrastructure requirements under CAA sections 110(a)(1) and 110(a)(2), including the good neighbor provision. Several events affected the timely application of the good neighbor provision for the 2008 ozone NAAQS, including reconsideration of the 2008 ozone NAAQS and legal developments pertaining to the CSAPR, which created uncertainty surrounding EPA's statutory interpretation and implementation of the good neighbor provision.

Notwithstanding these events, EPA ultimately affirmed that states' good neighbor SIPs were due on March 12, 2011.

These events are described in detail in section IV.A.2 of the CSAPR Update.

See

81 FR 74515.

a. FIP Authority for the CSAPR Update States

EPA subsequently took several actions that triggered EPA's obligation under CAA section 110(c) to promulgate FIPs addressing the good neighbor provision for several states.

First, on July 13, 2015, 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 (effective August 12, 2015). This finding triggered a two-year deadline for EPA to issue FIPs to address the good neighbor provision for these states by August 12, 2017. The CSAPR Update finalized FIPs for 13 of these states (Alabama, Arkansas, Illinois, Iowa, Kansas, Michigan, Mississippi, Missouri, Oklahoma, Pennsylvania, Tennessee, Virginia, and West Virginia), requiring their participation in a NO

trading program. EPA also determined in the CSAPR Update that the Agency had no further FIP obligation as to nine additional states identified in the finding of failure to submit because these states did not contribute significantly to nonattainment in, or interfere with maintenance by, any other state with respect to the 2008 ozone NAAQS.

See

81 FR 74506.

On June 15, 2016, and July 20, 2016, EPA published additional rules finding that Maryland and New Jersey, respectively, also failed to submit transport SIPs for the 2008 ozone NAAQS.

See

81 FR 38963 (June 15, 2016) (New Jersey, effective July 15, 2016); 81 FR 47040 (July 20, 2016) (Maryland, effective August 19, 2016). The finding actions triggered two-year deadlines for EPA to issue FIPs to address the good neighbor provision for Maryland by August 19, 2018, and for New Jersey by July 15, 2018. The CSAPR Update also finalized FIPs for these two states.

This section of the preamble focuses on SIP and FIP actions for those states addressed in the CSAPR Update. EPA has also acted on SIPs for other states not mentioned in this action. The memorandum, “Proposed Action, Status of 110(a)(2)(D)(i)(I) SIPs for the 2008 Ozone NAAQS,” more fully describes the good neighbor SIP status for the 2008 ozone NAAQS and is available in the docket for this rule.

The nine states were Florida, Georgia, Maine, Massachusetts, Minnesota, New Hampshire, North Carolina, South Carolina, and Vermont. These determinations were not challenged in

Wisconsin,

and EPA is not reopening these determinations in this rule.

The two remaining states addressed in the findings of failure to submit (California and New Mexico) were not part of the CSAPR Update or the CSAPR Close-Out analysis and are not addressed in this rule.

In addition to these findings, EPA finalized disapproval or partial disapproval actions for good neighbor SIPs submitted by Indiana, Kentucky, Louisiana, New York, Ohio, Texas, and Wisconsin.

These disapprovals triggered EPA's obligation to promulgate FIPs to implement the requirements of the good neighbor provision for those states within two years of the effective date of each disapproval or, in the case of Kentucky, within two years of the issuance of the judgment in a subsequent Supreme Court decision.

EPA promulgated FIPs in the CSAPR Update for each of these states.

See

the following actions: Indiana (81 FR 38957, June 15, 2016); Kentucky (78 FR 14681, March 7, 2013); Louisiana (81 FR 53308, August 12, 2016); New York (81 FR 58849, August 26, 2016); Ohio (81 FR 38957, June 15, 2016); Texas (81 FR 53284, August 12, 2016); and Wisconsin (81 FR 53309, August 12, 2016).

In the 2013 disapproval action for Kentucky, EPA stated that it had no mandatory duty to issue a FIP because of the D.C. Circuit's holding in

EME Homer City Generation, L.P.

EPA,

696 F.3d 7 (D.C. Cir. 2012), that EPA cannot impose good neighbor FIPs without first quantifying states' obligations.

See

78 FR 14681. In 2014, the Supreme Court reversed the D.C. Circuit's holding.

EPA

EME Homer City Generation, L.P.,

572 U.S. 489, 509-10 (2014). In light of the Supreme Court's decision, on review of our 2013 disapproval action for Kentucky in the Sixth Circuit, EPA requested, and the court granted, a vacatur and remand of the portion of EPA's final action that determined that a FIP obligation was not triggered.

See

Order,

Sierra Club

EPA,

No. 13-3546, ECF No. 74-1 (6th Cir. Mar. 13, 2015). On remand, EPA determined that its FIP obligation as to Kentucky was triggered as of June 2, 2014, the date of issuance of the Supreme Court's judgment.

See

81 FR 74513.

As discussed in more detail above in section IV.C.1, in issuing the CSAPR Update, EPA could not determine that it had entirely addressed EPA's outstanding CAA obligations to implement the good neighbor provision with respect to the 2008 ozone NAAQS for 21 of 22 states covered by that rule. Accordingly, the CSAPR Update did not fully satisfy EPA's obligation under CAA section 110(c) to address the good neighbor provision requirements for those states by approving SIPs, issuing FIPs, or some combination of those two actions. EPA found that the CSAPR Update FIPs fully addressed the good neighbor provision for the 2008 ozone NAAQS only with respect to Tennessee.

b. Correction of EPA's Determination Regarding Kentucky's SIP Revision and Its Impact on EPA's FIP Authority for Kentucky

After promulgating the CSAPR Update and before promulgating the CSAPR Close-Out, EPA approved a SIP submission from Kentucky resolving the Commonwealth's good neighbor obligations for the 2008 ozone NAAQS based on a demonstration that no further emission reductions were needed from Kentucky with the CSAPR Update FIP for Kentucky in place.

See

83 FR 33730 (July 17, 2018). The action was separate from the CSAPR Close-Out because it was taken in response to a May 23, 2017 order from the U.S. District Court for the Northern District of California requiring EPA to take a final action fully addressing the good neighbor obligation for the 2008 ozone NAAQS for Kentucky by June 30, 2018.

EPA was obligated to address the outstanding obligation by either approving a SIP revision submitted by Kentucky or promulgating a FIP to address any remaining obligation.

See

Order,

Sierra Club

Pruitt,

No. 3:15-cv-04328 (N.D. Cal. May 23, 2017).

The obligation ultimately derives from EPA's 2013 action disapproving Kentucky's SIP addressing the 2008 ozone NAAQS on the basis that Kentucky relied on the CAIR program for the 2008 ozone NAAQS good neighbor obligation. However, as previously discussed, the trigger for the timing of the obligation was the 2014 issuance of the Supreme Court's judgment in

EPA

EME Homer City Generation, L.P.,

572 U.S. 489 (2014).

See supra

note 63.

On May 10, 2018, Kentucky submitted a final SIP revision to EPA, on which the Agency finalized approval consistent with the court-ordered deadline.

See

83 FR 33730. The Kentucky SIP revision that EPA approved relied on the reductions from the CSAPR Update FIP for Kentucky and provided a technical analysis, including emission projections and air quality modeling for 2023, showing that

with the CSAPR Update level of reductions, the receptors to which Kentucky was linked were attaining and maintaining the 2008 ozone NAAQS in 2023. This allowed EPA to conclude that Kentucky did not have any further obligation for the 2008 ozone NAAQS, and EPA approved the SIP revision. The SIP revision from Kentucky was an analytical demonstration only, and it did not replace the CSAPR Update FIP; rather, the CSAPR Update FIP was left in place for Kentucky and was relied on in the state's demonstration.

The approval relied on the same rationale and technical analysis—including the use of a 2023 analytic year—that was eventually used for the other CSAPR Update FIP states in the CSAPR Close-Out. EPA's approval stated:

“no additional emission reductions are necessary to address the good neighbor provision for the 2008 ozone NAAQS beyond those required by the Cross-State Air Pollution Rule Update (CSAPR Update) federal implementation plan (FIP). Accordingly, EPA is approving Kentucky's submission because it partially addresses the requirements of the good neighbor provision for the 2008 ozone NAAQS, and it resolves any obligation remaining under the good neighbor provision after promulgation of the CSAPR Update FIP. The approval of Kentucky's SIP submission and the CSAPR Update FIP, together, fully address the requirements of the good neighbor provision for the 2008 ozone NAAQS for Kentucky.”

83 FR 33730.

Subsequent to EPA's approval of the Kentucky SIP submission, EPA issued the CSAPR Close-Out, which concluded that, based on essentially the same analysis used for Kentucky, none of the other 20 CSAPR Update states had further good neighbor obligations to address the 2008 8-hour ozone NAAQS. In the Fall of 2019, the D.C. Circuit issued the

Wisconsin

and

New York

decisions remanding the CSAPR Update Rule and vacating the CSAPR Close-Out (see section IV.C.1.d.).

Kentucky's CSAPR Update FIP, which Kentucky relied on (and did not replace) in its SIP revision, is part of the CSAPR Update remand, and EPA must address it in this action. Further, the D.C. Circuit's review of the CSAPR Close-Out found fault with, and vacated, the same rationale for other states that EPA had used to approve Kentucky's SIP submission in June 2018.

Therefore, in light of the remand of Kentucky's CSAPR Update FIP in

Wisconsin

and vacatur of the CSAPR Close-Out in

New York,

EPA is determining in this final action that its approval of Kentucky's SIP revision as fully resolving the state's 2008 ozone NAAQS good neighbor obligations was in error. Section 110(k)(6) of the CAA (42 U.S.C. 7410(k)(6)) gives the Administrator authority, without any further submission from a state, to revise certain prior actions, including actions to approve SIPs, upon determining that those actions were in error. The court's remand of the partial FIP for Kentucky in

Wisconsin

and the vacatur of EPA's conclusions for states identically situated to Kentucky in the CSAPR Close-Out means that EPA's approval of Kentucky's SIP was in error. EPA is compelled on remand to act consistently with the court's opinion and has reassessed Kentucky's good neighbor obligations under the 2008 ozone NAAQS here. In doing so, EPA's analysis identifies an additional emission reduction obligation for Kentucky. Therefore, EPA is correcting the error in Kentucky's SIP approval through this final rulemaking, as allowed by the CAA when a prior SIP approval was in error. This error correction under CAA section 110(k)(6) revises the approval of Kentucky's SIP to a disapproval and rescinds any statements that the SIP submission fully addresses the requirements of the good neighbor provision for the 2008 ozone NAAQS for Kentucky. The Kentucky approval relied on the same analysis that the D.C. Circuit determined to be unlawful in the CSAPR Close-Out: It only addressed conditions in 2023, ignoring the 2021 attainment date without a showing of impossibility or necessity in doing so. Kentucky's remanded partial FIP has been reassessed in this action, consistent with EPA's methodology to address the other 20 states with remanded CSAPR Update FIPs, and consistent with the D.C. Circuit's direction in

Wisconsin

and

New York.

As discussed in greater detail in the sections that follow, EPA is determining that there are additional emission reductions that are required for Kentucky to fully satisfy its good neighbor obligations for the 2008 ozone NAAQS. The analysis on which EPA reaches this conclusion for Kentucky is the same, regionally consistent analytical framework on which the Agency is taking action for all of the other CSAPR Update states with remanded FIPs.

Comment:

The Agency received several comments regarding its error correction for Kentucky from the state and from sources in Kentucky. The commenters generally disagreed with EPA's use of CAA section 110(k)(6) to correct the error in the SIP approval based on the

Wisconsin

and

New York

decisions. Commenters did not agree that the court decisions are applicable to the Kentucky action or that EPA had any other basis to determine that Kentucky has outstanding good neighbor obligations under the 2008 ozone NAAQS. Two commenters also argued that EPA overestimated emissions from Kentucky in the modeling released with the proposed rule of this action.

Response:

EPA disagrees that there is no basis to correct its error in approving Kentucky's SIP revision or to find that Kentucky has outstanding good neighbor obligations under the 2008 ozone NAAQS.

Wisconsin

and

New York

require the state or EPA to analyze the interstate impacts of Kentucky's emissions by the 2021 Serious attainment date. The Kentucky SIP approval is based on analysis of the 2023 ozone season. Further, the Kentucky SIP approval relies on reductions achieved from Kentucky's CSAPR Update FIP, which was remanded by

Wisconsin.

The information provided by commenters on emissions from Kentucky was already reflected in EPA's modeling and did not present information with regard to Kentucky that changed EPA's 2021 analysis, which shows Kentucky has further good neighbor obligations under the 2008 ozone NAAQS. Comments related to EPA's technical basis for concluding that Kentucky has further obligations, including comments regarding alleged additional emission reductions achieved by Kentucky sources, are addressed in the RTC document.

c. CSAPR Update SIP Revisions That Do Not Affect FIP Authority

Subsequent to the promulgation of the CSAPR Update, EPA approved SIPs fully replacing the CSAPR Update FIPs for Alabama, Indiana, and Missouri.

In those SIP approvals and consistent with the conclusions of the CSAPR Update, EPA found that the SIPs partially satisfy Alabama's, Indiana's, and Missouri's good neighbor obligations for the 2008 ozone NAAQS. Thus, EPA continues to have an obligation to fully address good neighbor requirements for the 2008 ozone NAAQS with respect to Alabama and Missouri, stemming from the July 13, 2015, findings of failure to submit, and Indiana, due to the June 15, 2016, disapproval of the state's good neighbor SIP.

See

80 FR 39961; 81 FR 38957. Other states have also submitted 2008 ozone NAAQS good neighbor SIPs or SIPs to replace their CSAPR FIPs, some of which EPA has approved and some

of which still remain pending. These circumstances do not affect the scope or basis for this rulemaking.

See

82 FR 46674 (Oct. 6, 2017) (Alabama); 83 FR 64472 (Dec. 17, 2018) (Indiana); 84 FR 66316 (Dec. 4, 2019) (Missouri).

d. Summary of Authority for FIPs for This Action

Table IV.C-1 summarizes the statutory deadline for EPA to address its FIP obligation under CAA section 110(c) and the event that activated EPA's obligation for each of the 21 CSAPR Update states that are the subject of this final action. For more information regarding the actions triggering EPA's FIP obligation and EPA's action on SIPs addressing the good neighbor provision for the 2008 ozone NAAQS, see the memorandum, “Final Action, Status of 110(a)(2)(D)(i)(I) SIPs for the 2008 Ozone NAAQS,” in the docket for this action.

Table IV.C-1—Actions That Activated EPA's Statutory FIP Deadlines

State

Type of action

(

Federal Register

citation, publication date)

Statutory FIP

deadline

†

Alabama

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Arkansas

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Illinois

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Indiana

SIP disapproval (81 FR 38957, 6/15/2016)

7/15/2018

Iowa

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Kansas

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Kentucky

SIP disapproval (78 FR 14681, 3/7/2013)

6/2/2016

Louisiana

SIP disapproval (81 FR 53308, 8/12/2016)

9/12/2018

Maryland

Finding of Failure to Submit (81 FR 47040, 7/20/2016)

8/19/2018

Michigan

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Mississippi

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Missouri

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

New Jersey

Finding of Failure to Submit (81 FR 38963, 6/15/2016)

7/15/2018

New York

SIP disapproval (81 FR 58849, 8/26/2016)

9/26/2018

Ohio

SIP disapproval (81 FR 38957, 6/15/2016)

7/15/2018

Oklahoma

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Pennsylvania

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Texas

SIP disapproval (81 FR 53284, 8/12/2016)

9/12/2018

Virginia

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

West Virginia

Finding of Failure to Submit (80 FR 39961, 7/13/2015)

8/12/2017

Wisconsin

Partial SIP disapproval as to prong 2 (81 FR 53309, 8/12/2016)

9/12/2018

†

For states other than Kentucky, the FIP deadline is two years from the effective date of the SIP disapproval or Finding of Failure to Submit, which generally trails the publication date by 30 days. For Kentucky, the FIP deadline is two years after the issuance of the Supreme Court's judgment in

EPA

EME Homer City Generation, L.P.,

572 U.S. 489 (2014).

See supra

note 63.

3. The 4-Step Good Neighbor Framework

The CSAPR and the subsequent CSAPR Update, building on EPA's prior methodologies in the NO

SIP Call and CAIR, established a 4-step process to address the requirements of the good neighbor provision.

In this final action to address the remand of the CSAPR Update, EPA follows the same steps. These steps are: (1) Identifying downwind receptors that are expected to have problems attaining or maintaining the 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 the NAAQS; and (4) for states that are found to have emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS downwind, implementing the necessary emission reductions through enforceable measures.

See

CSAPR, Final Rule, 76 FR 48208, 48248-48249 (Aug. 8, 2011); CSAPR Update, Final Rule, 81 FR 74504, 74517-74521 (Oct. 26, 2016).

Step 1—In the CSAPR, downwind air quality problems were assessed using modeled future air quality concentrations for a year aligned with attainment deadlines for the NAAQS considered in that rulemaking. The assessment of future air quality conditions generally accounts for on-the-books emission reductions and the most up-to-date forecast of future emissions in the absence of the transport policy being evaluated (

i.e.,

base case conditions). The locations of downwind air quality problems are identified as those with receptors that are projected to be unable to attain (

i.e.,

nonattainment receptor) or maintain (

i.e.,

maintenance receptor) the NAAQS. In the CSAPR Update, EPA also considered current monitored air quality data to further inform the projected identification of downwind air quality problems. These same considerations are included for this final rule. EPA is not reopening the definition of nonattainment and maintenance receptors promulgated in the CSAPR Update. Further details and application of step 1 for this rule are described in section V.

Step 2—The CSAPR and the CSAPR Update used a screening threshold of 1 percent of the NAAQS to identify upwind states that were “linked” to downwind air pollution problems. States with contributions greater than or equal to the threshold for at least one downwind problem receptor (

i.e.,

nonattainment or maintenance receptor identified in step 1) were identified as needing further evaluation for actions to address transport if their air quality was impacted.

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 not contribute to downwind air quality problems and therefore had no emission reduction obligations under the good neighbor provision. EPA has used this threshold because a notable portion of the transport problem in the eastern half of the United States can result from relatively small contributions from a number of upwind states. Use of the 1 percent threshold for the CSAPR is discussed in the preambles to the proposed and final CSAPR rules.

See

75 FR 45237 (Aug. 2, 2010); 76 FR 48238 (Aug. 8, 2011). The same metric is discussed in the CSAPR Update Rule.

See

81 FR 74538. While EPA has updated its air quality data for determining contributions, the Agency is not reopening the use of the 1 percent threshold in this action to address the remand of the CSAPR Update. Application of step 2 for this rule is described in section V.

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

and from all sectors.

The number of days used in calculating the average contribution metric has historically been determined in a manner that is generally consistent with EPA's recommendations for projecting future year ozone design values. Our ozone attainment demonstration modeling guidance at the time of CSAPR recommended using all model-predicted days above the NAAQS to calculate future year design values (

https://www3.epa.gov/ttn/scram/guidance/guide/final-03-pm-rh-guidance.pdf

). In 2014 EPA issued draft revised guidance that changed the recommended number of days to the

top-10 model predicted days (

https://www3.epa.gov/ttn/scram/guidance/guide/Draft-O3-PM-RH-Modeling_Guidance-2014.pdf

). For the CSAPR Update EPA transitioned to calculating design values based on this draft revised approach. The revised modeling guidance was finalized in 2019 and, in this regard, EPA is calculating both the ozone design values and the contributions based on a top-10 day approach. U.S. Environmental Protection Agency, 2018. Modeling Guidance for Demonstrating Attainment of Air Quality Goals for Ozone, PM

2.5

, and Regional Haze, Research Triangle Park, NC. (

https://www3.epa.gov/ttn/scram/guidance/guide/O3-PM-RH-Modeling_Guidance-2018.pdf

Step 3—For states that are linked in step 2 to downwind air quality problems, the CSAPR and the CSAPR Update evaluated NO

reductions that were available in upwind states by applying a uniform control stringency (represented by a cost per ton of NO

reduced) to entities in these states. EPA evaluated multiple factors, including NO

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

EPA

EME Homer City.

In this action, EPA applies this same approach to identify NO

emission reductions necessary to address significant contribution for the 2008 ozone NAAQS.

EPA

EME Homer City Generation, L.P.,

572 U.S. 489 (2014).

EME Homer City,

the Supreme Court held that “EPA cannot require a State to reduce its output of pollution by more than is necessary to achieve attainment in every downwind State or at odds with the one-percent threshold the Agency has set.” 572 U.S. at 521. The Court acknowledged that “instances of `over-control' in particular downwind locations may be incidental to reductions necessary to ensure attainment elsewhere.”

Id.

at 492.

“Because individual upwind States often `contribute significantly' to nonattainment in multiple downwind locations, the emissions reductions required to bring one linked downwind State into attainment may well be large enough to push other linked downwind States over the attainment line. As the Good Neighbor Provision seeks attainment in

every

downwind State, however, exceeding attainment in one State cannot rank as `over-control' unless unnecessary to achieving attainment in

any

downwind State. Only reductions unnecessary to downwind attainment

anywhere

fall outside the Agency's statutory authority.”

Id.

at 522 (footnotes excluded).

The Court further explained that “while EPA has a statutory duty to avoid over-control, the Agency also has a statutory obligation to avoid `under-control,'

i.e.,

to maximize achievement of attainment downwind.”

Id.

at 523. Therefore, in the CSAPR Update, EPA evaluated possible over-control by considering whether an upwind state is linked solely to downwind air quality problems that can be resolved at a lower cost threshold, or if upwind states would reduce their emissions at a lower cost threshold to the extent that they would no longer meet or exceed the 1 percent air quality contribution threshold.

See

81 FR at 74551-52. This evaluation of cost, NO

reductions, and air quality improvements, including consideration of potential over-control, results in EPA's determination of upwind emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS downwind and should therefore be eliminated. This allows EPA to then determine an enforceable emissions limit (often embodied in the form of an emissions budget) for the covered sources. Emissions budgets are the remaining allowable emissions after the elimination of emissions identified as significantly contributing to nonattainment or interfering with maintenance of the standard downwind.

In both the CSAPR and the CSAPR Update, EPA focused its step 3 analysis on EGUs. In the CSAPR Update, EPA did not quantify non-EGU stationary source emission reductions to address interstate ozone transport for the 2008 ozone NAAQS for two reasons. First, EPA explained that there was greater uncertainty in EPA's assessment of non-EGU NO

mitigation potential, and that more time would be required for states and EPA to improve non-EGU point source data and pollution control assumptions before it could develop emission reduction obligations based on that data.

See

81 FR 74542. Second, EPA explained that it did not believe that significant, certain, and meaningful non-EGU NO

reduction was in fact feasible for the 2017 ozone season.

Id.

Wisconsin,

the D.C. Circuit found that the practical obstacles EPA identified with respect to its evaluation of non-EGUs did not rise to the level of an “impossibility,” 938 F.3d at 318-20. The court also found that EPA must make a higher showing of uncertainty regarding non-EGU point-source NO

mitigation potential before declining to regulate such sources on such a basis,

id.

Therefore, as discussed in more detail in section VI, in this final action on remand from

Wisconsin,

EPA has included all major stationary source sectors in the linked upwind states in its “significant contribution” analysis at step 3 of the 4-step framework.

Step 4—the CSAPR and the CSAPR Update established interstate trading programs to implement the necessary emission reductions. Each state subject to the program is assigned an emissions budget for the covered sources. Emissions allowances are allocated to units covered by the trading program, and the covered units then surrender allowances after the close of each control period in an amount equal to their ozone season EGU NO

emissions. Emissions allowances are allocated to units covered by the respective trading program, and the covered units then surrender allowances after the close of each control period in an amount equal to their ozone season EGU NO

emissions.

All of EPA's trading programs established under the good neighbor provision allow for interstate trading. However, in order to ensure that each state achieves reductions proportional to the level of their significant contribution, beginning with the CSAPR, EPA established “assurance levels” set as percentage of each state's budget (

e.g.,

121 percent) above which emissions from sources in that state become subject to a higher “penalty” surrender ratio. These assurance levels are designed to allow for a certain level of year-to-year variability within power sector emissions to account for fluctuations in demand and EGU

operations. The levels are therefore set by determining a “variability limit,” calculated based on an analysis of the historical level of variability in EGU operations.

Thus, both the CSAPR and the CSAPR Update set assurance levels equal to the sum of each state's emissions budget plus its variability limit. The CSAPR and the CSAPR Update included assurance provisions to limit state emissions to levels below 121 percent of the state's ozone season NOx emissions budget by requiring additional allowance surrenders in the instance that emissions in the state exceed this level. This limit on the degree to which a state's emissions can exceed its budget is responsive to previous court decisions (see discussion in section VII.C.2 of this preamble) and was not part of the CSAPR Update aspects remanded to EPA in

Wisconsin.

EPA is applying the same variability limits and assurance provisions in this rule.

Implementation using a trading program is further described in section VII.

Historical heat input and NO

emissions in states covered by the CSAPR programs may be found in the “Historical CSAPR Update Emissions and Heat Input 2000 to 2019.xlsx” file.

EPA received several comments related to its overall approach in this rulemaking. These comments related to the following topics: (1) Whether this rule remains only a partial remedy in terms of both the amount of emission reductions achieved and the timing of implementation; (2) whether any additional EGU emission reductions relative to the CSAPR Update are permissible in light of the CSAPR Update record and the scope of the D.C. Circuit's decision in

Wisconsin;

and (3) EPA's use of cost to define significant contribution. Other comments on EPA's overall approach in this action are addressed in the RTC document.

Comment:

Numerous commenters asserted that despite EPA purporting to fully address the covered states' good neighbor obligations, the rule remains only a partial solution, and allows upwind states' significant contribution to nonattainment and interference with maintenance of the 2008 ozone NAAQS to continue past the next attainment date. One commenter asserts that this rule will “hinder” attainment of the 2015 ozone NAAQS in downwind states. Many commenters claim that the rule is insufficient to ensure downwind attainment of the NAAQS. The commenters question EPA's application of the 4-step framework and disagree with the Agency's conclusions drawn from that analysis, particularly with respect to the EPA's determinations at step 3 and the emissions controls adopted at step 4. Some commenters also challenge the legal basis for the selection of the 2021 analytic year, as opposed to 2020, and whether EPA has met the requirement to obtain reductions “as expeditiously as practicable” or otherwise complied with the holdings in

Wisconsin

and

New York

to eliminate significant contribution on par with the relevant downwind attainment deadlines.

See, e.g. Wisconsin,

938 F.3d at 315. Some argue that EPA depends on claims of technical infeasibility or scientific uncertainty and flawed cost effectiveness considerations in not requiring more emission reductions on a shorter timeframe. Others believe the implementation timeframe of this rule to be a phased plan in direct conflict with

Wisconsin

and

New York.

One commenter concludes there is a “mismatch” between EPA's 4-step framework's multi-factor test at step 3 and the implementation timeframes in this rule. They also argue that EPA should consider the cost of RACT in downwind states when analyzing the maximized cost effectiveness of controls in upwind states. Several commenters also brought attention to the length of time between when 2008 ozone NAAQS good neighbor SIPs were initially due and the proposed rule in October 2020.

Response:

This rule is a full remedy for the good neighbor provision for the covered upwind states for the 2008 ozone NAAQS based on EPA's analysis. The good neighbor provision does not obligate upwind states to fully resolve a downwind nonattainment or maintenance problem. CAA section 110(a)(2)(D)(i)(I) only requires that upwind states prohibit those emissions that “contribute significantly to nonattainment” or “interfere with maintenance of the NAAQS.” As such, the objective of the good neighbor provision is the elimination of upwind significant contribution or interference with maintenance. It does not require that the upwind states bear the full burden of bringing downwind states into attainment. Ultimate achievement of the NAAQS downwind is accomplished through the larger framework of the CAA, including under sections 110, 181, 182 and other provisions to attain the NAAQS. Thus, in this action, EPA must determine what amount of upwind contribution is significant (or interferes with maintenance) and require elimination of that significant contribution while avoiding overcontrol or undercontrol.

EPA

EME Homer City Generation, L.P.,

572 U.S. 489, 521-23 (2014).

Further, it is not correct to say that good neighbor obligations can only be found to be fully addressed when there is no longer any remaining air quality problem at the downwind receptors. Indeed, the Supreme Court recognized in

EME Homer City,

572 U.S. at 521-22, that under the framework EPA has adopted, EPA could not require a state to further reduce its emissions once it is at or below the 1 percent contribution threshold at all receptors. The aim of the good neighbor provision is to eliminate significant contribution to nonattainment and interference with maintenance, not to achieve final attainment at the downwind receptor. Further, in upholding EPA's approach to defining and allocating upwind responsibility in the CSAPR, the Court in

EME Homer City

recognized the discretion EPA has in defining what constitutes “significant” contribution, and did not hold that obligations on upwind states must be imposed to “maximize” downwind attainment without consideration of any other factors.

Accord Wisconsin,

938 F.3d at 320 (recognizing EPA's discretion to interpret “significant contribution”).

The comments do not establish a basis for asserting that EPA's approach to defining significant contribution or interference with maintenance is unlawful or unreasonable. They do not explain what is meant by “excessive amounts of ozone pollution,” “excessive upwind contributions,” “sufficient emission reductions,” or “sufficient upwind reductions.” These comments do not inform how EPA should define significant contribution nor do they recognize that EPA has discretion to define significant contribution. The D.C. Circuit first upheld the validity of using cost as part of the method for determining “significance” in

Michigan

EPA,

213 F.3d 663, 675-79 (D.C. Cir. 2000). The Supreme Court upheld that same approach in

EPA

EME Homer City Generation, L.P.,

572 U.S. 489, 512-20 (2014) (“Eliminating those amounts that can cost‐effectively be reduced is an efficient and equitable solution to the allocation problem the Good Neighbor Provision requires the Agency to address.”). EPA applied this approach again in the CSAPR Update, its first action to address good neighbor obligations under the 2008 ozone NAAQS. And while that action only provided a partial remedy, no party in

Wisconsin

challenged as a general matter EPA's ability to use cost-effectiveness in determining and allocating upwind responsibility.

Wisconsin

and

New York

recognized EPA's discretion to define significant

contribution.

Wisconsin

EPA,

938 F.3d 303, 319-20 (D.C. Cir. 2019) (“EPA, though, possesses a measure of latitude in defining which upwind contribution `amounts' count as `significant[ ]' and thus must be abated.”);

New York

Envtl. Prot. Agency,

781 F. App'x 4, 7 (D.C. Cir. 2019) (“[I]n determining what constitutes a significant contribution to downwind nonattainment, the agency can consider the amount of upwind states' contributions and the cost of abating them.”).

With respect to the timing of when such reductions must be achieved, EPA agrees that “as expeditiously as practicable” is the first-order statutory directive.

See

CAA section 181(a)(1);

Wisconsin,

938 F.3d at 313. EPA's approach in this rule, after determining significant contribution, implements all reductions that EPA identified as possible by the 2021 attainment date, and requires additional reductions of EGUs in later ozone seasons to the extent not possible by that date to fully eliminate significant contribution. In this case, implementing reductions any faster than the 2021 ozone season is impossible because 2020 is in the past. Commenters are incorrect to assert that EPA has unlawfully failed to require all necessary reductions by the 2021 attainment date. EPA has required those reductions that it has determined are possible by that date; EPA has also made a determination that additional reductions that are only possible after that date are nonetheless necessary to eliminate significant contribution or interference with maintenance, as EPA has interpreted those terms, and is requiring those later reductions as expeditiously as practicable. Achieving necessary reductions past the next attainment date when EPA finds it is impossible to do so beforehand is consistent with the statute and prior caselaw.

Wisconsin

and

New York

recognized these flexibilities available to EPA in acknowledging that for reasons of necessity or impossibility, EPA may deviate from the attainment schedule for downwind areas established in the Act.

Wisconsin

EPA,

938 F.3d 303, 320 (D.C. Cir. 2019).

New York

EPA,

781 F. App'x 4, 7 (D.C. Cir. 2019). Indeed, these commenters are not asserting that EPA lacks authority to require reductions beyond the attainment date, only that EPA should have required the reductions by that date. But these comments fail to establish a technical or evidentiary basis to overturn EPA's judgment that such additional reductions are not in fact possible by the 2021 attainment date.

EPA disagrees that

Wisconsin

held that it must address good neighbor obligations by the full ozone season prior to the attainment date (

i.e.,

here, 2020). The decision recognized that the agency must fully address good neighbor obligations (to the extent EPA determines possible) by the attainment date itself. 938 F.3d at 315. EPA's practice of addressing obligations by the full ozone season prior to the attainment date, while not mandated by statute or caselaw, continues to make good policy sense, because it assists downwind areas with improved three-year design values

used in determining whether attainment has been achieved. However, in this instance, as one commenter correctly notes, reductions in 2020 are not possible since this rule was not proposed until after the 2020 ozone season. EPA nonetheless can still meet the legal mandate to achieve those reductions that are possible by the 2021 attainment date.

The ozone design value at a particular monitoring site is the 3-year average of the annual fourth highest daily maximum 8-hour ozone concentration at that site.

Further, EPA is not relying on “scientific uncertainty” as a justification for not requiring reductions earlier. As explained elsewhere in this record, EPA has determined the amount of time needed for installation and operation of various control strategies. With respect to the optimization of existing SNCR controls, EPA notes that it is requiring that strategy as reflected in the final budgets by the 2021 attainment date, as explained in sections VI.B.1, C.1, and D.1.

EPA defined significant contribution in this rule based on an assessment of control alternatives under the 4-step good neighbor framework's step 3 multi-factor test. EPA's determination of what controls to require and when they can first be implemented are based on EPA's technical evaluation and application of the third step multi-factor analysis in the 4-step framework. The only “mismatch” that one commenter identified at the third step is no mismatch at all; it is simply the reality that some of the controls that EPA is requiring in this rule cannot be installed before the 2021 ozone season, and some controls that EPA assessed cannot be installed and operational before air quality problems are projected to resolve under the 2008 ozone NAAQS (

i.e.,

by the 2025 ozone season). These comments have not explained how EPA's evaluation of control options under that test was arbitrary or capricious.

The reasons for alleged past delays in implementing ozone transport obligations is out of the scope of this action on remand. However, EPA notes that the time it has taken to get reductions in place to address interstate ozone transport is due to multiple factors, including past judicial stays of major transport rules such as the NO

SIP Call and the CSAPR. In addition, EPA had made a determination in the CSAPR Close-out that it had fully addressed good neighbor obligations; it was not until the D.C. Circuit ruled in

Wisconsin

that the basis for this conclusion was revealed to be insufficient. The CSAPR Update has and continues to achieve upwind reductions for the 2008 ozone NAAQS. As explained elsewhere in the preamble to this action, EPA now finds it to be a full remedy for nine upwind states.

Comment:

Several commenters said that the CSAPR Update was already a complete remedy with regard to the EGU sector. One commenter described EPA's response to the remand as “unreasonable” and its re-application of the 4-step framework as “erroneous.” Other commenters opined that EPA has no legal basis to require short-term EGU controls under the

Wisconsin

remand. In their opinion,

Wisconsin

found that the CSAPR Update fully eliminated significant contribution from EGUs, which they supported by quoting portions of the decision. They asserted that

Wisconsin

only authorized EPA to search for emission reductions from non-EGUs and to narrowly reconsider the CSAPR Update in terms of the statutory downwind attainment dates.

Response:

The commenters are incorrect that EPA lacks a legal basis to re-assess and fully address good neighbor obligations for the covered states under the

Wisconsin

remand. As an initial matter, the CSAPR Update was, by EPA's own admissions, a partial rule.

See

81 FR at 74521-22. The court's analysis upholding the portions of the rule in

Wisconsin

cited by these commenters was against a backdrop that the rule was only partial in nature.

See, e.g.,

938 F.3d at 327.

Wisconsin

required EPA to provide a complete remedy by the next applicable attainment date. This was confirmed in the

New York

decision vacating the CSAPR Close-out. The D.C. Circuit found that rule violated the holding in

Wisconsin

by failing to analyze the 2021 analytic year without a sufficient showing of impossibility or necessity. To the extent that EPA had attempted to fully address the relevant obligations in the CSAPR Close-Out Rule, that action has been vacated. Therefore, on remand, EPA not only needs to use a different analytic year to

inform its analysis under the 4-step framework, but it also needs to apply that framework in order to determine what, if any, obligations must be addressed, and what emission reductions must be required.

EPA disagrees that

Wisconsin

prevents requiring additional necessary controls on EGUs. As stated in the preamble to the CSAPR Update, EPA did not view the CSAPR Update as necessarily fully eliminating significant contribution from EGUs.

See

81 FR 74522.

Wisconsin

recognized that EPA anticipated “further EGU reductions that are achievable after 2017” may be necessary to completely eliminate significant contribution or interference with maintenance for the 2008 ozone NAAQS.

Wisconsin

EPA,

938 F.3d 303 (D.C. Cir. 2019) (quoting 81 FR 74522). In the present action, evaluation of a full remedy in accordance with

Wisconsin

under the 4-step framework, and particularly the step 3 multi-factor test, establishes that additional reductions from EGUs should be required in 12 of the states currently subject to the CSAPR Update. For nine other states, their continued obligations under the CSAPR Update satisfy their good neighbor obligations for the 2008 ozone NAAQS. That same analysis shows that reductions from non-EGUs are not justified under the same test.

Comment:

Some commenters argued that EPA's use of cost in defining significant contribution has no statutory basis and is contrary to NAAQS attainment planning caselaw and the Supreme Court's holding in

EPA

EME Homer City Generation, L.P.,

572 U.S. 489 (2014) (“

EME Homer City”

), because it does not result in sufficient emission reduction for attainment and maintenance of the NAAQS. The commenter also said that even if EPA could use cost as a basis for defining significant contribution for non-attainment, the Agency could not do so for interference with maintenance. Another commenter described EPA's proposed cost threshold of $1,600 per ton as “arbitrary” and inconsistent with the CAA and

EME Homer City,

as this cost threshold is insufficient to enable downwind states reach attainment or maintenance. Further, commenters argued, EPA's use of cost-effectiveness as a metric at step 3 fails to identify what the ultimate goal should be, as cost-effectiveness can only be used to evaluate which way to best achieve a goal. One commenter argued that EPA should require upwind reductions so long as the downwind benefit of such reductions continues to outweigh their cost.

Response:

The approach used here is materially the same approach the Agency applied in the NO

SIP Call, the CSAPR, and in the CSAPR Update. These comments essentially seek to relitigate

EME Homer City,

as well as the D.C. Circuit's prior opinion in

Michigan

EPA,

213 F.3d 663 (D.C. Cir. 2000). Contrary to the commenters' interpretation,

EME Homer City

allowed the use of cost both to define and to allocate upwind state responsibility. 572 U.S. 489, 518-520 (2014) (“The Agency, tasked with choosing which among equal “amounts” to eliminate, has chosen sensibly to reduce the amount easier,

i.e.,

less costly, to eradicate.”). Notably, in the CSAPR rulemaking, EPA used cost as part of a multi-factor effectiveness metric in the multi-factor test to determine the “amount” of upwind contribution that is “significant” in a very similar manner as EPA did in the CSAPR Update and now here in this action on remand.

See

76 FR 48208, 48248-51 (Aug. 8, 2011). In the NO

SIP Call, EPA took a similar approach.

See

213 F.3d at 675 (“Although the dividing line was a very low threshold of contribution, in the end EPA's rule called for termination of only a subset of each state's contribution. EPA decided that the 23 `significant contributors' need only reduce their ozone

by the amount achievable with `highly cost-effective controls.' ”

) (emphasis added) (citing 63 FR at 57403).

Commenters fail to identify why an alternative method for determining “contribution” is compelled by the statute, or that EPA's approach is unlawful, arbitrary, or capricious. Contrary to these commenters' assertion, the good neighbor provision does not contemplate that an upwind state's obligation can only ever be resolved once a downwind receptor is fully in attainment. The Supreme Court recognized in

EME Homer City

that the 1 percent contribution threshold used at step 2 must necessarily be a stopping point in EPA's analysis because a state that contributed less than that would not be assessed for reductions at step 3 in the first place. 572 U.S. at 521. The Supreme Court in

EME Homer City

recognized that the problem of defining “significant contribution” in the context of a regional pollutant like ozone is inherently extremely complex.

Id.

at 514. The Court found that using cost (and specifically, a uniform cost-effectiveness threshold) to allocate the reduction obligation was both equitable and efficient.

Id.

at 519.

Further, the case law on barring use of cost considerations in the attainment planning context cited by one commenter is inapplicable. EPA has discretion to interpret significant contribution, as recognized by

Wisconsin

and

New York. Wisconsin

EPA,

938 F.3d 303, 319-20 (D.C. Cir. 2019) (“EPA, though, possesses a measure of latitude in defining which upwind contribution `amounts' count as `significant[ ]' and thus must be abated.”).

New York

Envtl. Prot. Agency,

The comment that cost effectiveness does not provide an adequate basis for EPA to select the correct level of stringency misapprehends the full scope of the step 3 multi-factor analysis EPA applies in the 4-step framework. EPA's analysis at step 3 additionally considers the total amount of reductions to be achieved by a control stringency as well as the effect on air quality at downwind receptors. EPA also must take into consideration the minimum amount of time needed for controls to be installed and operational, because if an air quality problem is no longer present by the time controls could be operational, then there is no need for those controls to be required.

See

572 U.S. at 521. Thus, it is not just the relative cost effectiveness of a control stringency but its ultimate effect on a downwind problem that informs EPA's determination of “significance.”

To some degree, these commenters may be overstating the relative importance of “cost” in EPA's step 3 analysis. EPA's design of cost thresholds derives from the identification of discrete types of NO

emission control strategies. EPA then identifies a representative cost-effectiveness on a per ton basis for that technology. In the step 3 analysis, it is not the cost per ton value itself that is inherently meaningful, but rather how that cost-effectivess value relates to other control stringencies, how many emission reductions may be obtained, and how air quality is ultimately impacted. Said differently, when EPA determines not to require controls at a higher cost threshold, it is not on grounds that they are simply “too expensive for industry.” Further, there are always inherent uncertainties in identifying a precise cost per ton value for any particular control stringency, but this in itself does not upset EPA's ability to render an overall policy judgment based on the step 3 factors as to the level of emission reductions required. As an example, EPA explains in Section VI.D.1 why its cost thresholds for EGU control stringencies at $1,600 per ton and $1,800 per ton in this action generate essentially the same point on a cost curve for purposes of its step 3 analysis. In any case, EPA notes that the Agency's determination not to require further EGU controls than EPA identified in this action, and to a certain extent non-EGU controls, is based primarily on timing, not a determination of relative cost-effectiveness. Likewise, emission controls included in the emission budgets in this rulemaking would

likely still be included even if their representative cost levels were somewhat higher, so long as they still present a compelling result in the multi-factor test taking timing and downwind air quality impacts into account.

The uniform control stringency selected in this rule for EGUs compares favorably with prior transport rulemakings in terms of cost-effectiveness, overall cost, total reductions, and downwind benefits. By contrast, when EPA analyzed the best available current data on non-EGUs for potential control, EPA's analysis showed that at a comparable cost level ($2,000/ton—on a weighted average basis, rather than the 90th percentile value used as a representative marginal cost used for EGU SCR optimization, far fewer NO

emission reductions were available and their corresponding effect on downwind receptors was much smaller, on the order of a few hundredths of a ppb.

Regarding the comment that EPA has failed to give independent effect to the requirement to prohibit emissions that interfere with maintenance of the NAAQS in other states (

i.e.,

prong 2): EPA gives effect to prong 2 through identifying receptors that may have trouble attaining the NAAQS under varying air quality and meteorological conditions.

EME Homer City

upheld EPA's approach to using cost to determine “amounts” with respect to both prong 1 and 2, and this is settled law.

EPA

EME Homer City Generation,

572 U.S. at 518-520. EPA's use of the term “significant contribution” in its analysis at the third step of the 4-step framework is applied for both prongs 1 and 2. This approach to giving effect to the “interfere with maintenance” prong has been upheld twice by the D.C. Circuit.

See EME Homer City,

795 F.3d at 136;

Wisconsin,

938 F.3d at 325-27. In effect, EPA's determination of what level of upwind contribution constitutes “interference” with a maintenance receptor is the same determination as what constitutes “significant contribution” for a nonattainment receptor. Nonetheless, this continues to give independent effect to prong 2 because EPA applies a broader definition for identifying maintenance receptors, which accounts for the possibility of problems maintaining the NAAQS under realistic potential future conditions. While EPA and others may occasionally use the language of “significance” as a shorthand for determinations at the third step under both prongs 1 and 2, this does not detract from the fact that EPA gives prong 2 independent effect under the 4-step framework.

EPA has explained elsewhere in the record for this action why the selected control stringency selected in this rule is appropriate in light of EPA's application of the step 3 multi-factor test of the 4-step framework. To the extent commenters argue that EPA should have selected a higher cost threshold or required more reductions based on the technical data, those issues are addressed elsewhere in the record.

V. Analyzing Downwind Air Quality and Upwind-State Contributions

In this section, EPA describes the air quality modeling and analyses performed to identify nonattainment and/or maintenance receptors and evaluate interstate contributions to these receptors from individual upwind states for the 2021 analytic year. Although the air quality modeling was performed using an air quality modeling platform that covers the contiguous 48 states, the analysis to identify receptors and evaluate contributions focuses on the 21 upwind states that are the subject of this rule with respect to the 2008 ozone NAAQS. In this action, EPA is not addressing the good neighbor obligations of any other state, nor is it addressing the obligations of any state, including the 21 covered by this action, with respect to the 2015 ozone NAAQS.

The year 2021 was selected as the appropriate future analytic year for this rule because it coincides with the July 20, 2021, Serious area attainment date under the 2008 ozone NAAQS. In the CSAPR Update, EPA had aligned its analysis and implementation of emission reductions with the 2017 ozone season (ozone seasons run each year from May 1-September 30) in order to assist downwind states with timely attainment of the 2008 ozone NAAQS by the Moderate area attainment date of July 20, 2018.

See

81 FR 74516. In order to demonstrate attainment by this deadline, states were required to rely on design values calculated using ozone season data from 2015 through 2017, since the July 20, 2018, deadline did not afford enough time for measured data of the full 2018 ozone season. Similarly, for the Serious area attainment date in 2021, states will rely on design values calculated using ozone season data from 2018 through 2020. However, it is not possible to impose emission reductions on upwind states in the 2020 ozone season, which has already passed. Reductions in the 2021 ozone season will nonetheless occur in time for the 2021 attainment date and therefore assist downwind states in achieving attainment by the July 20, 2021, attainment date, in compliance with the

Wisconsin

holding.

See Wisconsin,

938 F.3d at 309 (the CSAPR Update was unlawful to the extent it allowed upwind states to “continue their significant contributions to downwind air quality problems

beyond the statutory deadlines

by which downwind States must demonstrate their attainment of air quality standards”) (emphasis added). Further, EPA continues to interpret the good neighbor provision as forward-looking, based on Congress's use of the future-tense “will” in section 110(a)(2)(D)(i), an interpretation upheld in

Wisconsin,

938 F.3d at 322. It would be “anomalous,”

id.,

for EPA to impose good neighbor obligations in 2021 and future years based solely on finding that “significant contribution” had existed at some time in the past.

EPA has also conducted additional analysis of remaining air quality receptors and contribution in years beyond 2021, in order to ensure a complete step 3 analysis. EPA has analyzed these later years to determine whether any additional emission reductions that are impossible to obtain by the 2021 attainment date may yet be necessary in order to fully address significant contribution. This comports with the D.C. Circuit's direction in

Wisconsin

that implementing good neighbor obligations beyond the dates established for attainment may be justified on a proper showing of impossibility and/or necessity.

See

938 F.3d at 320. However, for purposes of EPA's initial analysis of air quality at step 1 of the 4-step framework, in accordance with

Wisconsin,

EPA has selected the 2021 ozone season, corresponding with the 2021 Serious area attainment date.

The remainder of this section includes information on: (1) The air quality modeling platform used in support of this final rule with a focus on the base year and future year base case emission inventories, (2) the method for projecting design values in 2021, and (3) the approach for calculating ozone contributions from upwind states.

The Agency also provides the design values for nonattainment and maintenance receptors and the predicted interstate contributions that are at or above the 1 percent of the NAAQS screening threshold. The 2016 base period and 2021, 2023, and 2028 future design values and contributions for all ozone monitoring sites are provided in the docket for this rule. The Air Quality Modeling Technical Support Document

(AQM TSD) in the docket for this rule contains more detailed information on the air quality modeling aspects of this rule.

For the 2023 and 2028 modeling used in the step 3 analysis, EPA followed the same method for projecting design values and approach for calculating contributions as described for the 2021 analytic year.

A. Overview of Air Quality Modeling Platform

EPA used the 2016-based modeling platform for the air quality modeling for this final rule. This modeling platform includes 2016 base year emissions from anthropogenic and natural sources and 2016 meteorology. The platform also includes anthropogenic emission projections for 2023 and 2028. The emissions data contained in this platform were developed by EPA, Multi-Jurisdictional Organizations (MJOs), and state and local air agencies as part of the Emissions Inventory Collaborative Process. This process resulted in a common-use set of emissions data for a 2016 base year and 2023 and 2028 that can be leveraged by EPA and states for regulatory air quality modeling.

The air quality modeling was performed for a modeling region (

i.e.,

modeling domain) that covers the contiguous 48 states using a horizontal resolution of 12 x 12 km. EPA used the CAMx version 7beta6 for air quality modeling for both the proposed rule and this final rule.

Additional information on the 2016-based air quality modeling platform can be found in the AQM TSD.

http://views.cira.colostate.edu/wiki/wiki/9169.

EPA did not receive any comments on the use of CAMx version 7beta6 for the air quality modeling for this rule.

B. Emission Inventories

EPA developed emission inventories for the proposed rule, including emission estimates for EGUs, non-EGU point sources, stationary nonpoint sources, onroad mobile sources, nonroad mobile sources, wildfires, prescribed fires, and biogenic emissions that are not the result of human activities. EPA's air quality modeling relies on this comprehensive set of emission inventories because emissions from multiple source categories are needed to model ambient air quality and to facilitate comparison of model outputs with ambient measurements. To prepare the emission inventories for air quality modeling, EPA processed the emission inventories using the Sparse Matrix Operator Kernel Emissions (SMOKE) Modeling System version 4.7 to produce the gridded, hourly, speciated, model-ready emissions for input to the air quality model. Additional information on the development of the emission inventories and on data sets used during the emissions modeling process are provided in the Technical Support Document (TSD) “Preparation of Emissions Inventories for the 2016v1 North American Emissions Modeling Platform,” hereafter known as the “Emissions Modeling TSD.” This TSD is available in the docket for this rule and at

https://www.epa.gov/air-emissions-modeling/2016v1-platform.

1. Foundation Emission Inventory Data Sets

Emissions data were developed that represented the year 2016 to support air quality modeling of a base year from which future air quality could be forecasted. As noted above, EPA used the Inventory Collaborative 2016 version 1 (2016v1) Emissions Modeling Platform, released in October

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