Acid Rain Program: Permits; Final Rule

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 72

[FRL-5109-6]

RIN 2060-AF55

Acid Rain Program: Permits

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: Title IV of the Clean Air Act, as amended by Public Law 101-

549, the Clean Air Act Amendments of 1990 (the Act), authorizes the

Environmental Protection Agency (EPA or Agency) to establish the Acid

Rain Program. On January 11, 1993, the Agency promulgated final rules

under title IV. Several parties filed petitions for review of the

rules. On August 10, 1994, EPA and other parties signed a settlement

agreement addressing certain substitution plan issues.

Based on a review of the record, the Agency concludes that the

January 11, 1993 regulations concerning the eligibility of units to be

designated as substitution units should be revised. Under sections

404(b) and (c) of the Act, a unit that is not listed in Table A of

section 404 as being subject to Phase I of the Acid Rain Program (i.e.,

a non-Table A unit) and that is under the control of the owner or

operator of a unit listed in Table A of section 404 (i.e., a Table A

unit) may be designated as a substitution unit. The January 11, 1993

regulations state that the Table A unit and each non-Table A unit that

the Table A unit designates as a substitution unit must have ``the same

owner or operator.'' The Agency is revising the regulations in order to

specify more clearly the circumstances under which the statutory

``control'' requirement for substitution plans is met. The rule

revision is being issued as a direct final rule because it is

consistent with the August 10, 1994 settlement and no adverse comment

is expected.

EFFECTIVE DATE: This direct final rule will be effective on January 3,

1995 unless significant, adverse comments are received by December 22,

1994. If significant, adverse comments are timely received on any

provision of the direct final rule, that provision of the direct final

rule will be withdrawn through a document in the Federal Register.

ADDRESSES: Docket No. A-93-40, containing supporting information used

to develop the proposal, copies of all comments received, and responses

to comments, is available for public inspection and copying from 8:30

a.m. to 12 p.m. and 1 p.m. to 3:30 p.m., Monday through Friday,

excluding legal holidays, at EPA's Air Docket Section (LE-131),

Waterside Mall, room 1500, 1st floor, 401 M Street, SW., Washington DC

20460. A reasonable fee may be charged for copying.

FOR FURTHER INFORMATION CONTACT: Dwight C. Alpern, Attorney-advisor, at

(202) 233-9151, Acid Rain Division (6204J), U.S. Environmental

Protection Agency, 401 M Street, SW., Washington, DC 20460, or the Acid

Rain Hotline at (202) 233-9620.

SUPPLEMENTARY INFORMATION: All public comment received on any provision

of this direct final rule on which significant, adverse comments are

timely received will be addressed in a subsequent final rule based on

the relevant portions of the rule revision that is noticed as a

proposed rule in the Proposed Rules Section of this Federal Register

and that is identical to this direct final rule.

The contents of the preamble to the final rule are as follows:

I. Control Requirement for Designating Substitution Units

II. Modifications of the January 11, 1993 Regulation Concerning the

Control Requirement for Substitution Units

A. Control by Common Owner or Operator

B. Control by Contract

C. Plan Termination if Control Requirement is no Longer Met

III. Administrative Requirements

A. Docket

B. Executive Order 12866

C. Paperwork Reduction Act

D. Regulatory Flexibility Act

E. Miscellaneous

I. Control Requirement for Designating Substitution Units

Sections 404(b) and (c) of the Act set forth the requirements for

submission and approval of substitution plans, under which a unit

listed on Table A of section 404 designates one or more non-Table A

units as substitution units and brings them into Phase I of the Acid

Rain Program. Congress established substitution plans as a compliance

option to increase units' compliance flexibility and reduce their

overall costs of compliance in Phase I while still achieving the

emissions reductions intended by Congress under title IV. See 58 FR

60950-60951 (Nov. 18, 1993).

A substitution plan allows the owner or operator of a Table A unit

to reassign the unit's emissions reduction obligations to a designated

non-Table A unit ``under the control of'' that owner or operator. 42

U.S.C. 7651c(b). Upon approval of the reassignment, the non-Table A

unit becomes subject to all requirements for Phase I units with regard

to sulfur dioxide and is allocated allowances. Emissions reductions by

the non-Table A unit may therefore free up allowances, which may be

used by the Table A unit (or any other unit) in lieu of making

emissions reductions.

Section 71.41 of the January 11, 1993 regulations provided that the

statutory requirement of control by the Table A unit's owner or

operator over the non-Table A unit is satisfied where such units have

``the same owner or operator.'' 40 CFR 72.41(b)(1)(i) (1993). The

regulation also provided that having the same designated representative

would be treated as having the same operator and would thus meet the

control requirement. Id.; see also 58 FR 3600. On March 12, 1993,

petitions for review of the January 11, 1993 regulations were filed

with the U.S. Court of Appeals for the District of Columbia Circuit.

Several petitioners challenged the provisions implementing the control

requirement.

On November 18, 1993, the Agency issued proposed revisions to the

January 11, 1993 regulations, including the provisions concerning the

control requirement. The Agency proposed to reverse its interpretation

that having a common designated representative alone meets the

statutory control requirement for substitution plans and to revise the

regulations accordingly. 58 FR 60957-60958. Several commenters

addressed the control requirement in their comments on the November 18,

1993 proposal. Some commenters opposed any change in the January 11,

1993 provisions concerning the control requirement.

Other commenters noted that, although Sec. 72.41(b)(1)(i) requires

that the substitution and Table A units have ``the same owner or

operator'' (40 CFR 72.41(b)(1)(i) (1993)), section 404(b) of the Act

requires that the substitution unit be under the control of the Table A

unit owner or operator. They argued that, in implementing section

404(b) and (c), the Agency should also focus on whether there is such

control. They suggested that common ownership of the units is not

necessarily determinative of whether the control requirement is met.

They alleged that where the units have multiple owners only one of

which is in common, the control requirement may not be met, e.g., where

the common owner owns only a very small percentage of the proposed

substitution unit. On the other hand, where the units lack any common

owner or operator, the control requirement allegedly may be met through

contractual arrangements under which the owner and operator of the

substitution unit commit, inter alia, to make emissions reductions and

deliver allowances to the owner and operator of the Phase I unit.

In a separate final rule in this Federal Register, the Agency

adopted the reasoning, set forth in the November 18, 1993 preamble (58

FR 60957-60958) and in the preamble of the Acid Rain regulations on

nitrogen oxides (59 FR 13554-13555 (Mar. 22, 1994)), that a designated

representative is not, merely by holding that position, also an

operator. In that separate final rule, the Agency revised the January

11, 1993 regulations to use the statutory language requiring control by

the Table A unit owner or operator and to provide that having a common

designated representative does not alone meet the control requirement

for substitution units. However, the Agency did not address in that

separate document comments raising issues concerning: under what

circumstances the existence of one or more common owners satisfies the

control requirement; and whether and, if so, under what circumstances

control can be established by contract if there are no common owners or

common operators. The Agency addresses below those issues and the

comments on those issues.

II. Modifications of the January 11, 1993 Regulation Concerning the

Control Requirement for Substitution Units

A. Control by Common Owner or Operator

Section 404(b) of the Act allows that the ``owner or operator'' of

a Table A unit to designate, as a substitution unit, a non-Table A unit

``under the control of such owner or operator.'' 42 U.S.C. 7651c(b).

The Agency agrees with commenters that, like section 404(b), the

regulation implementing that section should focus on whether such

control exists.

Because many units have multiple owners with varying percentages of

ownership, there is a wide range of possible relationships between a

Table A unit and a non-Table A unit, ranging, for example, from no

common ownership to 100% common ownership and including all the

possible variations in between. In order to avoid burdensome case-by-

case determinations of whether each particular set of facts meets the

control requirement and in order to provide more certainty for

utilities and the public concerning what units qualify for inclusion in

substitution plans, the Agency is establishing generic criteria for

applying the control requirement. Further, the generic criteria are

based on the potential ability of owners and operators to exercise

control, not the actual exercise of such control potential. Determining

what entities actually make decisions governing the operation of a unit

could require the Agency to make lengthy case-by-case inquiries into

the details of utility operations and involve the Agency in matters

beyond its expertise.

In taking this approach, the Agency maintains that section 404(b)

should be interpreted to require that owners or operators of a Table A

unit have the ability to exercise a significant degree of control over

a non-Table A unit. The simplest case for applying this requirement is

where the Table A and non-Table A units have only a single owner or

where, regardless of their ownership, the units have a common operator.

Under these circumstances, it seems clear that the single owner or the

operator of the Table A unit has the ability to control the non-Table A

unit.

For units with multiple owners, the application of the control

requirement becomes somewhat more complex if they do not have a common

operator. If one or more owners and operators of a Table A unit own an

aggregate share of 50% or more of the capacity of a non-Table A unit,

no major decisions concerning the unit can be made without the

concurrence of such Table A unit owners and operators. The Agency

maintains, therefore, that they can control the non-Table A unit to a

significant extent and meet the control requirement.

Even where the aggregate ownership share of the one or more owners

and operators of a Table A unit in a non-Table A unit is less than 50%,

the degree of control may still be significant. Such control is

evidenced by the ability of such non-Table A unit owners to determine

the dispatch of their respective shares of electricity generated by the

non-Table A unit. Decisions by such owners whether or not to take their

shares of generation can significantly affect the overall operation of

the unit. While the Agency recognizes that adopting a minimum level of

ownership in the non-Table A unit for meeting the control requirement

is necessarily somewhat arbitrary, the Agency maintains that, as a

matter of logic, there is some level of ownership below which the

owners lack significant control. Further, establishing such a minimum

level of ownership discourages gaming through the acquisition of minute

ownership shares simply to enable the new owner to qualify the non-

Table A unit as a substitution unit.

The Agency believes that an aggregate ownership interest of 10% or

more, and less than 50%, of the capacity of the non-Table A unit meets

the control requirement, provided that such owners have the ability to

determine how their respective shares of the non-Table A unit's

generation are dispatched. The Agency notes that, in some regions of

the country, utilities have entered into power pool agreements under

which the utilities agree to centralize in the power pool the dispatch

of their units. Power pools with central economic dispatch enable

member utilities to minimize operating costs through the use of the

units in the pool that have the lowest generation costs. In light of

the important benefits of such power pools, the Agency maintains that

utilities in power pools should not be disadvantaged under section

404(b). Consequently, the determination of whether owners of a non-

Table A unit have, by right of contract, the ability to dispatch their

respective shares of the unit's generation should be made without

regard to whether owners that had contractual dispatch authority have

surrendered that authority to a power pool.

In sum, the Agency is establishing generic criteria for determining

whether the control requirement under section 404(b) is met. The first

category that meets this requirement is where one or more owners or

operators of a Table A unit have an aggregate ownership interest of 50%

or more in the non-Table A unit or where the two units have a common

operator.1 The second category that meets the control requirement

is where: a Table A and non-Table A unit lack a common operator; one or

more owners or operators of a Table A unit have an aggregate ownership

interest of 10% or more and less than 50% in the non-Table A unit; and

such owners or operators have the contractual ability to determine the

dispatch of their respective shares of the non-Table A unit's

generation. The final regulation requires the designated

representatives submitting substitution plans to state in the

submission what category is applicable to the units in the plan and to

provide, upon request, documentation supporting such statements. These

statements, like all information included in submissions by the

designated representative, are covered by the certification required

under Sec. 72.21(b) concerning the truth, accuracy, and completeness of

the statements.

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\1\In summing the ownership shares of individual Table A unit

owners and operators in the capacity of a non-Table unit, a given

share, and the generation associated with such share, obviously

cannot be double-counted. Otherwise, the sum of the ownership shares

of all persons owning a non-Table A unit could exceed 100%.

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B. Control by Contract

The Agency agrees that, under certain circumstances, control over a

substitution unit by the owners and operators of the Table A unit may

be established by contract where the above-described criteria based on

a common operator or the level of common ownership are not met. The

contract must be a binding agreement between the owners and operators

of a Table A unit and the owners and operators of the non-Table A unit

that is designated as the Table A unit's substitution unit. Several

commenters supported an interpretation of section 404(b) that would

allow the control requirement to be met through a contract. The final

regulation specifies the circumstances under which the Administator

will find that control is established by contract.

Several determinations have guided the Agency's development of the

regulation concerning control by contract. First, the Agency believes

that the regulation should set forth detailed, generic requirements for

establishing control by contract. Leaving the specification of detailed

requirements to case-by-case development would increase the burden both

on the owners and operators interested in submitting contract-based

substitution plans and on the Agency, which must review such

submissions. A commenter supporting the approval of contract-based

substitution plans suggested that the Agency develop generic criteria.

Second, the Agency believes that the control requirement of section

404(b) of the Act should be interpreted in light of the emissions

reduction goals of title IV. The Agency maintains that a determination

of whether control is established by contract should focus on whether

the owners and operators of the Table A unit have the ability, under

the contract, to require emissions reductions by the non-Table A unit

and thereby to affect the overall operation of the unit. It is not

necessary in this context for the Table A unit's owners and operators

to have contractual authority over all facets of the non-Table A unit's

day-to-day operations.

Third, if the control requirement is to be met by simply showing

that Table A unit owners and operators have the ability, by contract,

to require emissions reductions by the non-Table A unit, the Agency

maintains that the contract must require emissions reductions that are

significant, new reductions that would not otherwise have been

implemented by the non-Table A unit. It is difficult to see how control

could be demonstrated if a contract with a Table A unit merely required

a non-Table A unit to ``make'' reductions that the non-Table A unit had

already implemented, was already in the process of implementing, or

would have implemented even in the absence of the contract. Further,

because a unit might be able to realize relatively minor reductions

while making little change in its operations, the scale of the

reductions required by contract should be significant in order to

demonstrate control of the non-Table A unit by owners and operators

that otherwise lack any operational responsibilities for that unit. A

commenter suggested that the contract between the Table A and non-Table

A units should specify a percentage emissions rate reduction that the

non-Table A unit is required to achieve.

To ensure that the contract requires significant, new reductions by

the non-Table A unit, the final regulation requires that the contract

establish a maximum annual average SO2 emissions rate for the

unit. The maximum emissions rate must be less than or equal to 70% of

the lesser of the following emissions rates for the non-Table A unit:

the 1985 actual SO2 emissions rate; the 1985 allowable SO2

emissions rate; the greater of the 1989 or 1990 actual SO2 emissions

rate; the most stringent federally enforceable or State enforceable

SO2 emissions limitation, as of November 15, 1990, applicable in

Phase I; and the lesser of the average actual SO2 emissions rate

or the most stringent federally enforceable or State enforceable

SO2 emissions limitation for the four-quarter period immediately

preceding the submission of the contract-based substitution plan.2

The latter set of emissions rates (i.e., the current actual and

allowable rates) are included to ensure that the required reduction in

the unit's emissions rate is at least 30% of the emissions rate

achieved, or required to be achieved, by the non-Table A unit around

the time of the submission of the substitution plan. The other

emissions rates (i.e., those for 1985, 1989, 1990, and Phase I) are

used to ensure that the current actual or allowable rate does not

represent a spike in the emissions rate achieved by or required for the

unit since 1985.3 A commenter supported using all of these

emissions rates to set a maximum emissions rate for the non-Table A

unit.

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\2\Some units are subject to a non-unit-specific emissions limit

(e.g., a utility-wide emissions tonnage or rate limit). The final

regulation provides that if such a unit is designated as a

substitution unit in a contract-based substitution plan, the

Administrator will determine on a case-by-case basis how to apply

the non-unit-specific limit in setting the maximum annual SO2

emissions rate. If a non-unit-specific Federal limit was in effect

and applicable to the unit in 1985, that limit is already reflected

in the 1985 allowable SO2 emissions rate (in the National

Allowance Data Base), which will be treated as representing the non-

unit- specific Federal limit.

\3\For the reasons set forth in a separate final rule in this

Federal Register, these other emissions rates are also used to

allocate allowances for any substitution unit and to ensure that

allowances are not allocated for emissions reductions that would

have been made without a substitution plan.

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The Agency maintains that a 30% reduction in the emissions rate

that the non-Table A unit would otherwise achieve represents a

significant reduction. A commenter supporting approval of contract-

based substitution plans asserted that it has identified about 30 Phase

II units that lack a common owner or operator with a Table A unit and

for which such plans would be economically feasible. The commenter

stated that this group of units could reduce their current emissions

rates by 50 to 70% and indicated that a 30% reduction might be an

acceptable requirement for approval of this type of substitution plan.

As a further means of ensuring that the non-Table A unit's

reductions are new, the final regulation requires that the contract-

based substitution plan include a description of the actions that will

be undertaken so that the non-Table A unit will comply with the maximum

emissions rate. Such actions may include, for example, the addition or

modification of a scrubber or fuel switching. The owners and operators

of the Table A and non-Table A units must show that the described

actions will not be implemented in Phase I unless the non-Table A unit

is approved as a substitution unit. The description of the actions that

will be taken must be sufficiently detailed so that the Agency can

determine whether the showing has been made. Information relevant to

the showing includes, inter alia, whether contracts implementing these

actions were entered into before submission of the substitution plan.

Under the regulation, the owners and operators must implement the

described actions but may seek to amend the substitution plan to change

the required actions.

In general, the Agency maintains that it is difficult to make

determinations, particularly in a large number of cases, of whether

owners and operators will take certain future actions in the absence of

a substitution plan. However, the Agency must make a determination of

this type in reviewing the actions described in each contract-based

substitution plan in order to make sure that the non-Table A unit is

really obligated to make new reductions. This will be a one-time

determination made when the plan is approved (or disapproved) unless

the designated representative subsequently seeks to modify the

description of actions in the plan. Further, the Agency does not expect

a large number of contract-based substitution plans to be submitted. As

noted above, commenters have identified only about 30 units for which

such a plan would be economic.

Fourth, it is important to ensure that the contract imposes an

effective emissions reduction requirement--i.e., a requirement that is

likely to be enforced by Table A unit owners and operators claiming

control of the non-Table A unit. Consequently, the contract should

include a meaningful remedy in the event that the required emissions

reductions are not achieved. The concept of requiring a meaningful

remedy in the event of default was supported by a commenter.

If the Table A unit owners and operators must surrender allowances

to the Administrator to the extent that the non-Table A unit fails to

make the required emissions reductions, then the Table A owners and

operators will bear responsibility for the reductions that they claim

to control and will have the incentive to take actions to ensure

achievement of the reductions. This puts the Table A owners and

operators in a position similar to that of owners and operators that

control a unit directly by owning or operating the unit. If, instead of

such allowance surrender by the Table A unit, the non-Table A unit had

to give allowances to the Table A unit (or to the Agency), then the

Table A unit owners and operators would bear no responsibility for the

non-Table A unit that they claim to control. Further, without elaborate

limitations on the transfer of allowances between the Table A and non-

Table A units, there would be no way of preventing the units from

arranging a future return to the non-Table A unit of any allowances

surrendered by the non-Table A unit to the Table A unit.

Under the final regulation, if the non-Table A unit fails to comply

with the maximum emissions rate during the year, the Table A unit

owners and operators must surrender a number of allowances equal to the

non-Table A unit's baseline multiplied by the difference between the

actual emissions rate for the year and the maximum emissions rate. This

approach segregates out the effect of utilization changes and leaves

such changes to be handled under the reduced utilization and allowance

surrender provisions (e.g., Sec. Sec. 72.43, 72.91, and 72.92)

applicable to all Phase I units. The surrendered allowances must have

the same or an earlier compliance use date as the allowances allocated

to the non-Table A unit for the year, and the surrender must be made on

or before the allowance transfer deadline. In order to encourage early

reductions at non-Table A units and innovative approaches to achieving

such reductions, the surrender and deduction of allowances will be the

only remedy under the Act for failure to meet the maximum emissions

rate. Of course, the deduction of allowances for failure to achieve the

maximum emissions rate may result in a unit having insufficient

allowances to cover its annual emissions, and the full panoply of

remedies for excess emissions will then apply.

Finally, in order to facilitate the Table A unit owners' and

operators' exercise of control and the Agency's review and enforcement,

where necessary, of the substitution plan, the units involved should

have a common designated representative. A commenter supported the need

for a common designated representative for this type of substitution

plan.4 The final regulation provides that the requirement to have

a common designated representative is not met by simply having a common

alternate designated representative. This is because, as explained in

the preamble of the November 18, 1993 proposed rule, an alternate

designated representative does not carry the same level of

responsibilities as, and thus is not equivalent to, a designated

representative. 58 FR 60958.

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\4\The commenter also suggested that the non-Table A owners and

operators be required to submit quarterly and annual reports to the

Table A unit owners and operators and to indemnify such owners and

operators for any violations at the non-Table A unit. These

requirements are not in the final rule because the Agency believes

that these matters are not central to the issue of control and are

better left to the owners and operators of the two units.

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C. Plan Termination if Control Requirement is no Longer met

The January 11, 1993 regulations provide that where, as a result of

ownership or other changes, the units in a substitution plan no longer

meet the common owner or operator requirement in those regulations, the

substitution plan must be terminated. The final regulation adopted here

takes a similar approach. If there are changes that result in the

control requirement no longer being met, the designated representative

must terminate the plan, whether the plan is based on common owners or

operators or on a contract. The Administrator may, on his or her own

motion, terminate the plan under such circumstances.

The only exception to this requirement is for substitution plans

approved, and included in final permits issued, under the January 11,

1993 regulations and the Partial Settlement in Environmental Defense

Fund v. Carol M. Browner, No. 93-1203 (D.C. Cir. 1993) (signed May 4,

1994). So long as the Table A and non-Table A units under each plan

continue to meet the common owner, operator, or designated

representative requirement in the January 11, 1993 regulations, such

plans will not be terminated for the first year (and, in some cases,

for the second year) for which the substitution unit received a total

number of allowances equal to the number provided in those regulations.

This exception is consistent with both the May 4, 1993 settlement and

the Second Partial Settlement in Environmental Defense Fund v. Carol M.

Browner, No. 93-1203 (D.C. Cir. 1993) (signed August 10, 1994). The

Agency maintains that both settlements reasonably resolve the

substitution plan issues raised in the litigation, including the issues

relating to the control requirement.

III. Administrative Requirements

A. Docket

The docket is the organized and complete file of all the

information considered by EPA in the development of this rulemaking.

Along with the preamble of the direct final rule, the contents of the

docket--except for interagency review materials--will constitute the

record in case of judicial review. See 42 U.S.C. 7607(d)(7)(A).

B. Executive Order 12866

Under Executive Order 12866, 58 FR 51735 (Oct. 4, 1993), the

Administrator must determine whether the regulatory action is

``significant'' and therefore subject to Office of Management and

Budget (OMB) review and the requirements of the Executive Order. The

Order defines ``significant regulatory action'' as one that is likely

to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or

adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments or

communities;

(2) Create a serious inconsistency or otherwise interfere with an

action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants,

user fees, or loan programs or the rights and obligations of recipients

thereof; or

(4) Raise novel legal or policy issues arising out of legal

mandates, the President's priorities, or the principles set forth in

the Executive Order.

Pursuant to the terms of Executive Order 12866, it has been

determined that this rule is a ``significant regulatory action''

because the rule seems to raise novel legal or policy issues. As such,

this action was submitted to OMB for review. Any changes made in

response to OMB suggestions or recommendations are documented in the

public record. Any written comments from OMB to EPA and any written EPA

response to those comments are included in the docket. The docket is

available for public inspection at the EPA's Air Docket Section, which

is listed in the ADDRESSES section of this preamble.

C. Paperwork Reduction Act

The information collection requirements in this rule have been

approved by OMB under the Paperwork Reduction Act, 44 U.S.C. 3501, et

seq., and have been assigned control number 2060-0258.

This collection of information has an estimated burden averaging

17.5 to 28 hours per response for about 43 responses. These estimates

include time for reviewing instructions, searching existing data

sources, gathering and maintaining the data needed, and completing and

reviewing the collection of information.

An Information Collection Request document and estimates of the

public reporting burden were prepared in connection with the January

11, 1993 regulations. 56 FR 63098; 58 FR 3650. The regulation

modifications contained in this document will not significantly change

the reporting burden that was previously estimated.

Send comments regarding this burden analysis or any other aspect of

this collection of information, including suggestions for reducing the

burden, to Chief, Information Policy Branch, EPA, 401 M Street, SW.,

(Mail Code 2136), Washington, DC 20460; and to the Office of

Information and Regulatory Affairs, Office of Management and Budget,

Washington, DC 20503, marked ``Attention: Desk Officer for EPA.''

D. Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires

each Federal agency to consider potential impacts of its regulations on

small business ``entities.'' Under 5 U.S.C. 604(a), an agency issuing a

notice of proposed rulemaking must prepare and make available for

public comment a regulatory flexibility analysis. Such an analysis is

not required if the head of an agency certifies that a rule will not

have a significant economic impact on a substantial number of small

entities, pursuant to 5 U.S.C. 605(b).

In the preamble of the January 11, 1993 regulations, the

Administrator certified that those regulations, including the

provisions revised by today's final rule, would not have a significant

impact. 58 FR 3649. The final rule revisions adopted today are not

significant enough to change the economic impact addressed in the

preamble of the January 11, 1993 regulations, which were certified as

not having a significant impact. Pursuant to the provisions of 5 U.S.C.

605(b), I hereby certify that the revised rule will not have a

significant, adverse impact on a substantial number of small entities.

E. Miscellaneous

In accordance with section 117 of the Act, publication of this rule

was preceded by consultation with any appropriate advisory committees,

independent experts, and Federal departments and agencies.

List of Subjects in 40 CFR Part 72

Environmental protection, Acid rain, Air pollution control,

Electric utilities, Permits, Reporting and recordkeeping requirements,

Sulfur dioxide.

Dated: November 14, 1994.

Carol M. Browner,

Administrator.

For the reasons set forth in the preamble, chapter I of title 40 of

the Code of Federal Regulations is amended as follows:

PART 72--[AMENDED]

1. The authority citation for part 72 continues to read as follows:

Authority: 42 U.S.C. 7601 and 7651 et seq.

2. Section 72.41 is amended by revising paragraphs (c)(5) and

(e)(3)(iv) and adding paragraphs (c)(6), (c)(7), and (e)(1)(iii) to

read as follows:

Sec. 72.41 Phase I substitution plans.

* * * * *

(c) * * *

(5) A demonstration that the substitution plan meets the

requirement that each unit under paragraph (a)(2) of this section is

under the control of the owner or operator of each unit under paragraph

(a)(1) of this section that designates the unit under paragraph (a)(2)

of this section as a substitution unit. The demonstration shall be one

of the following:

(i) If the unit under paragraph (a)(1) of this section has one or

more owners or operators that have an aggregate percentage ownership

interest of 50 percent or more in the capacity of the unit under

paragraph (a)(2) of this section or the units have a common operator, a

statement identifying such owners or operators and their aggregate

percentage ownership interest in the capacity of the unit under

paragraph (a)(2) of this section or identifying the units' common

operator. The designated representative shall submit supporting

documentation upon request by the Administrator.

(ii) If the unit under paragraph (a)(1) of this section has one or

more owners or operators that have an aggregate percentage ownership

interest of at least 10 percent and less than 50 percent in the

capacity of the unit under paragraph (a)(2) of this section and the

units do not have a common operator, a statement identifying such

owners or operators and their aggregate percentage ownership interest

in the capacity of the unit under paragraph (a)(2) of this seciton and

stating that each such owner or operator has the contractual right to

direct the dispatch of the electricity that, because of its ownership

interest, it has the right to receive from the unit under paragraph

(a)(2) of this section. The fact that the electricity that such owner

or operator has the right to receive is centrally dispatched through a

power pool will not be the basis for determining that the owner or

operator does not have the contractual right to direct the dispatch of

such electricity. The designated representative shall submit supporting

documentation upon request by the Administrator.

(iii) A copy of an agreement that is binding on the owners and

operators of the unit under paragraph (a)(2) of this section and the

owners and operators of the unit under paragraph (a)(1) of this

section, provides each of the following elements, and is supported by

documentation meeting the requirements of paragraph (c)(6) of this

section:

(A) The owners and operators of the unit under paragraph (a)(2) of

this section must not allow the unit to emit sulfur dioxide in excess

of a maximum annual average SO2 emissions rate (in lbs/mmBtu),

specified in the agreement, for each year during the period that the

substitution plan is in effect.

(B) The maximum annual average SO2 emissions rate for the unit

under paragraph (a)(2) of this section shall not exceed 70 percent of

the lesser of: the unit's 1985 actual SO2 emissions rate; the

unit's 1985 allowable SO2 emissions rate; the greater of the

unit's 1989 or 1990 actual SO2 emissions rate; the most stringent

federally enforceable or State enforceable SO2 emissions

limitation, as of November 15, 1990, applicable to the unit in Phase I;

or the lesser of the average actual SO2 emissions rate or the most

stringent federally enforceable or State enforceable SO2 emissions

limitation for the unit for four consecutive quarters that immediately

precede the 30-day period ending on the date the substitution plan is

submitted to the Administrator. If the unit is covered by a non-unit-

specific federally enforceable or State enforceable SO2 emissions

limitation in the four consecutive quarters or, as of November 15,

1990, in Phase I, the Administrator will determine, on a case-by-case

basis, how to apply the non-unit-specific emissions limitation for

purposes of determining whether the maximum annual average SO2

emissions rate meets the requirement of the prior sentence. If a non-

unit-specific federally enforceable SO2 emissions limitation is

not different from a non-unit-specific federally enforceable SO2

emissions limitation that was effective and applicable to the unit in

1985, the Administrator will apply the non-unit-specific SO2

emissions limitation by using the 1985 allowable SO2 emissions

rate.

(C) For each year that the actual SO2 emissions rate of the

unit under paragraph (a)(2) of this section exceeds the maximum annual

average SO2 emissions rate, the designated representative of the

unit under paragraph (a)(1) of this section must surrender allowances

for deduction from the Allowance Tracking System account of the unit

under paragraph (a)(1) of this section. The designated representative

shall surrender allowances authorizing emissions equal to the baseline

of the unit under paragraph (a)(2) of this section multiplied by the

difference between the actual SO2 emissions rate of the unit under

paragraph (a)(2) of this section and the maximum annual average

SO2 emissions rate and divided by 2000 lbs/ton. The surrender

shall be made by the allowance transfer deadline of the year of the

exceedance, and the surrendered allowances shall have the same or an

earlier compliance use date as the allowances allocated to the unit

under paragraph (a)(2) of this section for that year. The designated

representative may identify the serial numbers of the allowances to be

deducted. In the absence of such identification, allowances will be

deducted on a first-in, first-out basis under Sec. 73.35(c)(2) of this

chapter.

(D) The unit under paragraph (a)(2) of this section and the unit

under paragraph (a)(1) of this section shall designate a common

designated representative during the period that the substitution plan

is in effect. Having a common alternate designated representative shall

not satisfy the requirement in the prior sentence.

(E) Except as provided in paragraph (c)(6)(i) of this section, the

actual SO2 emissions rate for any year and the average actual

SO2 emissions rate for any period shall be determined in

accordance with part 75 of this chapter.

(6) A demonstration under paragraph (c)(5)(iii) of this section

shall include the following supporting documentation:

(i) The calculation of the average actual SO2 emissions rate

and the most stringent federally enforceable or State enforceable

SO2 emissions limitation for the unit for the four consecutive

quarters that immediately preceded the 30-day period ending on the date

the substitution plan is submitted to the Administrator. To the extent

that the four consecutive quarters include a quarter prior to January

1, 1995, the SO2 emissions rate for the quarter shall be

determined applying the methodology for calculating SO2 emissions

set forth in appendix C of this part. This methodology shall be applied

using data submitted for the quarter to the Secretary of Energy on

United States Department of Energy Form 767 or, if such data has not

been submitted for the quarter, using the dataprepared for such

submission for the quarter.

(ii) A description of the actions that will be taken in order for

the unit under paragraph (a)(2) of this section to comply with the

maximum annual average SO2 emissions rate under paragraph

(c)(5)(iii) of this section.

(iii) A description of any contract for implementing the actions

described in paragraph (c)(6)(ii) of this section that was executed

before the date on which the agreement under paragraph (c)(5)(iii) of

this section is executed. The designated representative shall state the

execution date of each such contract and state whether the contract is

expressly contingent on the agreement under paragraph (c)(5)(iii) of

this section.

(iv) A showing that the actions described under paragraph

(c)(6)(ii) of this section will not be implemented during Phase I

unless the unit is approved as a substitution unit.

(7) The special provisions in paragraph (e) of this section.

* * * * *

(e) * * *

(1) * * *

(iii) Where an approved substitution plan includes a demonstration

under paragraphs (c)(5)(iii) and (c)(6) of this section.

(A) The owners and operators of the substitution unit covered by

the demonstration shall implement the actions described under paragraph

(c)(6)(ii) of this section, as adjusted by the Administrator in

approving the plan or in revising the permit. The designated

representative may submit proposed permit revisions changing the

description of the actions to be taken in order for the substitution

unit to achieve the maximum annual average SO2 emissions rate

under the approved plan and shall include in any such submission a

showing that the actions in the changed description will not be

implemented during Phase I unless the unit remains a substitution unit.

The permit revision will be treated as an administrative amendment,

except where the Administrator determines that the change in the

description alters the fundamental nature of the actions to be taken

and that public notice and comment will contribute to the decision-

making process, in which case the permit revision will be treated as a

permit modification or, at the option of the designated representative,

a fast-track modification.

(B) The designated representative of the unit under paragraph

(a)(1) of this section shall surrender allowances, and theAdministrator

will deduct allowances, in accordance with paragraph (c)(5)(iii)(C) of

this section. The surrender and deduction of allowances as required

under the prior sentence shall be the only remedy under the Act for a

failure to meet the maximum annual average SO2 emissions rate,

provided that, if such deduction of allowance results in excess

emissions, the remedies for excess emissions shall be fully applicable.

* * * * *

(3) * * *

(iv)(A) If there is a change in the ownership interest of the

owners or operators of any unit under a substitution plan approved as

meeting the requirements of paragraph (c)(5)(i) or (ii) of this section

or a change in such owners' or operators' right to direct dispatch of

electricity from a substitution unit under such a plan and the

demonstration under paragraph (c)(5)(i) or (ii) of this section cannot

be made, then the designated representatives of the units governed by

this plan shall submit a notification to terminate the plan so that the

plan will terminate as of January 1 of the calendar year during which

the change is made.

(B) Where a substitution plan is approved as meeting the

requirements of paragraph (c)(5)(iii) of this section, if there is a

change in the agreement under paragraph (c)(5)(iii) of this section and

a demonstration that the agreement, as changed, meets the requirements

of paragraph (c)(5)(iii) cannot be made, then the designated

representative of the units governed by the plan shall submit a

notification to terminate the plan so that the plan will terminate as

of January 1 of the calendar year during which the change is made.

Where a substitution plan is approved as meeting the requirements of

paragraph (c)(5)(iii) of this section, if the requirements of the first

sentence of paragraph (e)(1)(iii)(A) of this section are not met during

a calendar year, then the designated representative of the units

governed by the plan shall submit a notification to terminate the plan

so that the plan will terminate as of January 1 of such calendar year.

(C) If the plan is not terminated in accordance with paragraphs

(e)(3)(iv)(A) or (B) of this section, the Administrator, on his or her

own motion, will terminate the plan and deduct the allowances required

to be surrendered under paragraph (e)(3)(ii) of this section.

(D) Where a substitution unit and the Phase I unit designating the

substitution unit in an approved substitution plan have a common owner,

operator, or designated representative during a year, the plan shall

not be terminated under paragraphs (e)(3)(iv)(A), (B), or (C) of this

section with regard to the substitution unit if the year is as

specified in paragraph (e)(3)(iv)(D)(1) or (2) of this section and the

unit received from the Administrator for the year, under the Partial

Settlement in Environmental Defense Fund v. Carol M. Browner, No. 93-

1203 (D.C. Cir. 1993) (signed May 4, 1993), a total number of

allowances equal to the unit's baseline multiplied by the lesser of the

unit's 1985 actual SO2 emissions rate or 1985 allowable SO2

emissions rate.

(1) Except as provided in paragraph (e)(3)(iv)(D)(2) of this

section, paragraph (e)(3)(iv)(D) of this section shall apply to the

first year in Phase I for which the unit is and remains an active

substitution unit.

(2) If the unit has a Group 1 boiler under part 76 of this chapter

and is and remains an active substitution unit during 1995, paragraph

(e)(3)(iv)(D) of this section shall apply to 1995 and to the second

year in Phase I for which the unit is and remains an active

substitution unit.

(3) If there is a change in the owners, operators, or designated

representative of the substitution unit or the Phase I unit during a

year under paragraph (e)(3)(iv)(D)(1) or (2) of this section and, with

the change, the units do not have a common owner, operator, or

designated representative, then the designated representatives for such

units shall submit a notification to terminate the plan so that the

plan will terminate as of January 1 of the calendar year during which

the change is made. If the plan is not terminated in accordance with

the prior sentence, the Administrator, on his or her own motion, will

terminate the plan and deduct the allowances required to be surrendered

under paragraph (e)(3)(ii) of this section.

[FR Doc. 94-28710 Filed 11-21-94; 8:45 am]

BILLING CODE 6560-50-F