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Page **1** of **96 ENVIRONMENTAL PROTECTION AGENCY** 
**40 CFR Part s**  **52 and 97**
**[ EPA** **- HQ** **- OAR** **- 200**  **9 -**  **0 491**  **; FRL -**  **]**

**RIN 2060**  **- AR22**  **Revisions to Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone** 
**AGENCY:** Environmental Protection Agency (EPA).
**ACTION:** Proposed rule .
**SUMMARY :**  EPA is proposing or seeking comment on revisions to the final Transport Rule promulgated on August 8, 2011 . These revisions address discrepancies in unit specific modeling assumptions that affect the proper calculation of Transport Rule state budgets and assurance levels in Florida, Louisiana, Michigan, Mississippi, Nebraska, New Jersey, New York, Texas , and Wisconsin, as*** E.O. 12866 Review

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Page **2** of **96** well as new unit set - asides in Arkansas and Texas . EPA is also proposing to revise allowance allocation s to specific units covered by certain consent decrees that restrict the use of those allowances . These important technical fixes maintain the Transport Rule’s ability to achieve the eliminati on of significant contribution and interference with maintenance as quantified by the proper application of these methodologies. EPA is also proposing to amend the assurance penalty provisions of the rule to make them effective beginning January 1, 2014 , rather than in 2012, in order to promote the development of allowance market liquidity as these revisions are finalized . EPA be l ieves that deferring the effective date of the assurance provisions would provide additional confidence and would not compromise the air quality goals of the program. In addition, we are proposing to correct typographical errors in the rule. **DATES :**  Comments. Comment s must be received on or before [INSERT DATE 30 DAYS FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER] unless a public hearing is requested in which event comments must be received on or before [INSERT*** E.O. 12866 Review

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Page **3** of **96** DATE 45 DAYS FROM DATE OF PUBLICATION OF NOTICE OF PUBLIC HEARING]. Public Hearing. On [INSERT DATE OF PUBLICATION OF NOTICE OF PUBLIC HEARING IN THE FEDERAL REGISTER], EPA published a notice announcing that if a public hearing on this proposal is requested by [INSERT DATE 7 DAYS AFTER PUBLICATION OF NOTICE OF PUBLIC HEARING IN THE FEDERAL REGISTER], it will be held on October 28, 2011, at 9 a.m. at USEPA . Please refer to the public hearing notice publi shed at [INSERT CITATION TO PUBLICATION OF NOTICE OF PUBLIC HEARING IN THE FEDERAL REGISTER] for additional information on the public hearing. EPA will provide further information about the hearing on its webpage if a hearing is requested. Oral testimony will be limited to the subject matter of the proposal, the scope of which is discussed below. Any member of the public may file a written statement by the close of the comment period. **ADDRESSES:** Submit your comments, identified by Docket ID No. EPA- HQ - OAR- 2009 - 0 491 , by one of the following methods:
 http://www.regulations.gov : Follow the on - line instructions for submitting comments.
 Mail: Air and Radiation Docket and Information Center,*** E.O. 12866 Review

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Page **4** of **96** U.S. Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania Avenue, NW, Washington, D.C. 20460.
 Hand Delivery: Air and Radiation Docket, EPA West Building, Room 3334, 1301 Constitution Avenue, NW, Washington, D.C. 20460 . Such deliveries are only accepted during the Docket’s normal hours of operation, and special arrangements should be made for deliveries of boxed information. Instructions: Direct your comments to Docket ID No. EPAHQ - OAR- 2009 - 0 491 . EPA's policy is that all comments received will be included in the publ ic docket without change and may be made available online at http:// www.regulations.gov , including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or e -mail. The http:// www.regulat ions.gov website is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e -mail comment directly to EPA without going through www.regulations.gov*** E.O. 12866 Review

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Page **5** of **96** your e -mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other conta ct information in the body of your comment and with any disk or CD -ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files shou ld avoid the use of special characters, any form of encryption, and be free of any defects or viruses. For additional information about EPA’s public docket visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm. Docket: All documents in the docket are listed in the http:// www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in http:// www.regulations.gov or in hard copy at the Air and Radiation Docket, EPA West Building,*** E.O. 12866 Review

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Page **6** of **96** Room 3334, 1301 Constitution Avenue, NW, Washington, D.C. 20460 . The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566 - 1744, and the telephone number for the Air and Radiation Docket is (202) 566 - 1742. **FOR FURTHER INFORMATION CONTACT:** Gabrielle Stevens **,** U.S. Environmental Protection Agency, Clean Air Markets Division, MC 6204J, Ariel Rios Building, 1200 Pennsylvania Ave., NW, Washington, D.C. 20460, telephone (202) 343 - 9 2 5 2 , e -mail at stevens.gabrielle @epa.gov. Electronic copies of this document can be accessed through the EPA Website at: http://epa.gov/cro ssstaterule .
I. General I nformation A. Does this action apply to me? Regulated Entities . Entities regulated by this action primarily are fossil fuel - fired boilers, turbines, and combined cycle units that serve generators that produce electricity for sale or cogenerate electricity for sale and steam. Regulated categories and entities include:
**Category NA** **ICS code Examples of potentially**  **regulated industries***** E.O. 12866 Review

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Page **7** of **96** Industry 2211 , 22 12, 2213 Electric service providers This table is not intended to be exhaustive, but rather to provide a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities which EPA is now aware could potentially be regulated by this action. Other types of entities not listed in this table could also be regulated . To determine whether your facility, company, business, organization, etc., is regulated by this action, you should carefully examine the applicability criteria in §§ 97 . 404 , 97 . 504 , and 97 . 604 of title 40 of the Code of Federal Regulations. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding **FOR FURTHER INFORMATION CONTACT** section. B. Where can I get a copy of this document and other related information? In addition to being available in the docket, an electronic copy of this proposal will also be available on the World Wide Web. Following signature by the EPA Administrator, a copy of this action will be posted on the transport rule Web site http://www.epa.gov/airtransport . C. What should I consider as I prepare my comments for EPA?*** E.O. 12866 Review

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Page **8** of **96** 1. Submitting CBI . Do not submit this information to EPA through http://www.regulations.gov or e -mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD

–ROM that you mail to EPA, mark the outside of the disk or CD

–ROM as CBI and then identify electronically within the disk or CD
–ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. Send or deliver information identified as CBI only to the following address: Roberto Morales, OAQPS Document Control Officer (C404
– 02), U.S. EPA, Research Triangle Park, NC 27711, Attention Docket ID No. EPA
–HQ
–OAR
– 2009
– 0491. 2. Tips for prepa ring your comments . When submitting comments, remember to: • Identify the rulemaking by docket number and other identifying information (subject heading, **Federal Register**  date and page number).*** E.O. 12866 Review

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Page **9** of **96** • Follow directions

— The agency may ask you t o respond to spe cific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number. • Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes. • Describe any assumptions and provide any technical information and/ or data that you used. • If you estimate potential costs or burdens, explain how you arrived at your e stimate in sufficient detail to allow for it to be reproduced. • Provide specific examples to illust rate your concerns , and suggest alternatives. • Explain your views as clearly as possible, avoiding the use of profanity or personal threats. • Make sure to submit your comments by the comment period deadline identified. D . How is this Preamble Organized? I . General Information A. Does this action apply to me? B. Where can I get a copy of this document and other related information? C. What should I consider as I prepare my comments for EPA? D . How is the preamble organized?*** E.O. 12866 Review

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Page **10** of **96** II . Summary of Proposed Rule and Background III . Specific Revisions A. Budgets/New Unit S et - aside Revis ions B. Allowance Allocation Revisions to Units Covered by Existing Utility Consent Decrees C. Amend the Assurance Penalty P rovisions to Make Them E ffective S tarting in 2014 D. Correct Typographical Errors IV . Recordation of Transport Rule Allowances V . 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 C. Regulatory Fl exibility Act (RFA) D. Unfunded Mandates Reform Act 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 and S afety Risks H. Executive Order 13211: Actions that Sign ificantly Affect Energy Supply, Distribution, or Use*** E.O. 12866 Review

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Page **11** of **96** I. National Technology Transfer Advancement Act J. Executive Order 12898: Federal Actions t o Address Environmental Justice in Mino rity Populations and LowIncome Populations II . Summary of Proposed Rule and Background EPA has identified errors or potential errors in unit specific modeling assumptions that affect the proper calculation of Transport Rule state budgets in Florida, Louisiana, Michigan, Mississippi, Nebraska, New Jersey, New York, Texas , and Wisconsin, as well as new unit set - asides in Arkansas and Texas . EPA is proposing to take the following distinct actions to revise individual state budgets and new- unit set asides: (1) revise Michigan’s annual NOX budget to account for an erroneously assumed selective catalytic reduction (SCR) emission control device at one unit ; (2) revise Nebraska’s annual NOX budget to account for an erroneously assumed SCR emission control device at one unit ; (3) revise the Texas SO 2 budget to account for erroneously assumed flue gas desulphurization (FGD, or scrubber) emission control devices at three units and revised assumptions regarding flue gas treatment in existing scrubbers at seven units ; ( 4 ) revise the Arkansas ozone - season new unit set - aside to account for erroneously*** E.O. 12866 Review

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Page **12** of **96** omitted projected emissions from one new unit; ( 5 ) revise the Texas new unit set - aside to account for erroneously omitted projected emissions for SO 2 , ozone - season NOX , and annual NOX ; ( 6 ) revise New Jersey ’s ozone season NOX , annual NOX , and SO 2 budgets to account for an erroneously assumed FGD and SCR emission control devices at one unit , and taking into account operational constraints likely to necessitate non - economic generation at six facilities ; ( 7 ) revise Wisconsin’s SO 2 and annual NOX budget s to account for erroneously assumed FGD and SCR device s at two unit s ; ( 8 ) revise New York’s SO 2 , annual NOX , and ozone season NOX budgets taking into account operational const raints likely to necessitat e non - economic generation at ten units ; ( 9 ) revise Louisiana’s ozone season NOX budget taking into account operational constraints likely to necessitate non economic generation at twelve units; (1 0 ) revise Mississippi’s ozone sea son NOX budget taking into account operational constraints likely to necessitate non - economic generation at four units; (1 1 ) revise the Texas annual NOX and ozone season NOX budgets taking into account operational constraints likely to necessitate non - economic generation at seven units ; and (12) revise Florida’s ozone - season NOX budget taking into account the unavailability of a*** E.O. 12866 Review

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Page **13** of **96** previously operating nuclear unit . S ee section III .A of this preamble for further explanation of these revisions. These propose d revisions to state budgets also entail revisions to the affected states' assurance levels, as the variability limits for each state are calculated as a percentage of the applicable budget . See the final Transport Rule, 76 FR 48208, 48267 - 68, August 8, 2 011 ( explaining variability limit derivation ) . The purpose of these revisions is to establish state budgets and new unit set - asides that are consistent with the proper application of methodologies established in the final Transport Rule. The resulting budget s maintain significant emission reductions from historic levels and are consistent with the final Transport Rule’s methodology for defining significant contribution and interference with maintenance . The changes represent the proper application of the methodology established in the final Transport Rule. No changes to that methodology are being proposed , and EPA is not reopening the methodology established in the final Transport Rule for public comment. EPA is also not proposing any change to the levels of stringency (i.e., cost per ton) selected in the final Transport Rule’s determination of significant contribution and interference*** E.O. 12866 Review

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Page **14** of **96** with maintenance and is not reopening that issue for public comment. S ee “ Significant Contribution Assessment TS D ” in the docket for this rulemaking for a demonstration of how the revisions in this rulemaking represent the proper application of and are consistent with the methodology developed in the final Transport Rule . It is EPA ’s intent, in conducting this rulemaking, to make the revisions in this proposal as well as to conduct a clearly defined, time - limited process by which any similarly justified revisions to the final Transport Rule state budgets are identified and effectuated in a timely and expeditious manner. T o that end, EPA is seeking that all relevant information that may support similar revisions be submitted in full by the comment deadline on this rulemaking, such that the Agency may consider whether a subsequent and timely rulemaking should address any further revisions to the final Transport Rule state budgets. EPA believes that the likelihood of additional substantive revisions merited to the Transport Rule state budgets is limited, considering that EPA has already conducted several notice - and- comment processes through initial proposal of the Transport Rule and multiple notices of data availability (NODAs) to prompt the public to provide the*** E.O. 12866 Review

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Page **15** of **96** relevant input information that informs the calculation of the Transport Rule state budgets . Please see section II I .A of this preamble for a more detailed description of the type of information EPA is requesting in comments on this rulemaking for this purpose. EPA is also proposing revisions to allowance allocations at certain units in six states that are affected by existing utility consent decrees. EPA has identified provisions in certain utility consent decrees which the Agency believes would restrict the use of Transport Rule allowances allocated to certain units and effectively make certain Transport Rule reducti on requirements marginally more stringent than intended by making certain allowances intended for compliance purposes unavailable . When establishing the state budgets under the final Transport Rule, EPA successfully accounted for the emission reduction re quirements of these consent decrees ; therefore, the Transport Rule state budgets sustain the environmental protection secured by those existing utility consent decrees . However, when dividing those state budgets into individual unit - level allowance allocations, EPA included allowance allocations to certain units that exceed those units’ allowable emissions under the terms of*** E.O. 12866 Review

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Page **16** of **96** the applicable consent decree . Under these conditions, the consent decree provisions of concern identified in this proposal would de termine the quantity of allocated allowances in excess of allowable emissions at the unit in question and prevent them from being available for compliance use by any source under the Transport Rule programs . Because EPA has already secured the environmental improvements required by the consent decrees by incorporating their emission reductions into the Transport Rule state budgets, there is no environmental need to prevent the allowances from being used for compliance by sources subject to the Transport Rule aside from those sources whose emissions are restricted by the terms of the consent decrees to which they are subject . Therefore, EPA is proposing to revise Transport Rule unit level allowance allocations to the specific units affected by these consent decrees to reflect the ir maximum allowable emissions , such that none of the allowances affected by the provisions of concern are unnecessarily removed from use for compliance by other units . While EPA intends to perform this revision to benefit program implementation, EPA does not believe resolution of this issue is a necessary precondition for successful implementation of and*** E.O. 12866 Review

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Page **17** of **96** compliance with the Transport Rule programs in 2012, because as described in section IV of this preamble, notwithst anding these proposed revisions, EPA will still be able to distribute 99.7 percent of all existing unit allowances under the state budgets established in the final Transport Rule by that rule’s November 7 deadline . S ee section III .B of this preamble for further explanation of this revision. EPA is also proposing in this action to amend the assurance penalt y provisions of the Transport Rule to make them effective January 1, 2014 . This change takes account of the fact that the revisions described above are being proposed, and any information described above concerning requested additional revisions may be submitted, close to the commencement of the Transport Rule programs. The proposed amendment to the assurance provisions is intended to promote the development of allowance market liquidity as these revisions are finalized, thereby smoothing the transition from the Clean Air Interstate Rule (CAIR) programs to the Transport Rule programs in 2012. S ee section III .C of this preamble for further explanation of this revision.*** E.O. 12866 Review

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Page **18** of **96** EPA is also proposing to correct typographical errors in certain sections of rule text in part s 52 and 97 in the final Transport Rule. S ee section III .D of this preamble for further explanation of these corrections. III . Specific Revision s A. Budget and New Unit Set -Aside Revisions After the final Transport Rule was published, EPA identified discrepancies in certain data assumptions that substantially affected the calculation of a few states' budgets in the final rule. Therefore, EPA is p roposing the following revis ions : (1) I ncrease Michigan’s 2012 and 2014 annual NOX budget s in accordance with a revision to the final Transport Rule analysis that erroneously assumed that an SCR exist s at Monroe Unit 2 . EPA is proposing to revise Michigan’s 2012 and 2014 annual NOX budget s in accordance with a revision to the final Transport Rule analysis that erroneously assumed an SCR exist s at Monroe Unit 2. This SCR is planned, but is not expected to be online in 2012 or 2014. Therefore, EPA is proposing to adjust its 2012 and 2014 projections to reflect projected emissions without an SCR at this unit . This would result in a 5,228 ton increase in the state’s*** E.O. 12866 Review

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Page **19** of **96** annual NOX budget . S ee “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level , new unit set - aside , and Indian country new unit set - aside, and “ Revisions to Unit Level All ocations under the FIP ” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. This revised assumption about Monroe Unit 2 would also affect the calculation of Michigan’s potential ozone - season NOX budget (as well as the state’s assurance level , new unit set - aside , Indian country new unit set - aside, and unit level allocations under the FIP) if that state is included in the Transport Rule ozone - season NOX program as previously proposed (76 FR 40 662, July 11, 2011 ). EPA will address this issue, along with other public comments submitted on that rulemaking, when the Agency finalizes that rulemaking later this year. (2) I ncrease Nebraska’s 2012 and 2014 annual NOX budget s in accordance with a revis ion to the final Transport Rule analysis that erroneously assumed that an SCR exist s at Nebraska City Unit 1 .*** E.O. 12866 Review

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Page **20** of **96** EPA is proposing to increas e Nebraska’s 2012 and 2014 annual NOX budget s in accordance with a revision to the final Transport Rule analysis that e rroneously assumed that an SCR exist s at Nebraska City Unit 1. There is no SCR that is present, planned, or under construction at the unit. Therefore, EPA is proposing to adjust its baseline emission projection s for the state to reflect projected emissions without an SCR at this unit . This adjustment results in an increase of 3,599 tons to the state’s annual NOX budget. S ee “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of th is proposed revision, as well as for the impacts this revision would have on the state’s assurance level, new unit set - aside, and Indian country new unit set - aside , and “ Revisions to Unit Level Allocations under the FIP ” in the docket to this rulemaking fo r a quantitative demonstration of the effect of this proposed revision on unit - level allocations under the FIP. (3) I ncrease the Texas 2012 and 2014 SO 2 budget s in accordance with a revision to the final Transport Rule analysis that erroneously assumed that scrubbers exist at W. A. Parish Unit 6, J.T. Deely Unit 1, and J.T. Deely Unit 2 , and that assumed full flue gas treatment in*** E.O. 12866 Review

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Page **21** of **96** existing scrubbers at Martin Lake, Monticello, Sandow, W . A . Parish, and Oklaunion facilities . EPA is proposing to address severa l revisions to the modeling assumptions affecting the calculation of the Texas SO 2 budget. In particular, EPA is proposing to increas e the Texas SO 2 budget in accordance with a revision to the final Transport Rule analysis that erroneously assumed f lue - ga s desulfurization (FGD) technology is installed on J . T . Deely Units 1 and 2 and W . A . Parish Unit 6 by 2012 . At the time that EPA conducted its final Transport Rule analysis to determine state budgets, EPA had information (both from public sources, as cite d below, as well as from a private subscription - only power sector pollution control database) showing that FGD retrofits for the se sources were originally planned or announced to be installed by 2012 1 , 2 . However, newer information shows that these FGDs are no longer scheduled to be installed in 2012. A number of facilities in Texas currently face limitations regarding the amount of flue gas that can be

1 Corporate Sustainability Report”, CPS Energy, 2010. P.57. Retrieved from http://www.cpsenergy.com/files/Sustainability_Report.pdf 2 Business Wire, (2006). NRG Announces Comprehensive Repowering Initiative [Press release]. Retrieve d from http://phx.corporate
ir.net/phoenix.zhtml?c=121544&p=irol
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Page **22** of **96** treated in their existing FGD s . In the final Transport Rule analysis, EPA relied on the SO 2 removal efficiency that these facilitie s reported at their scrubbers to the Energy Information Administration (EIA). However, EPA has now determined that the facilities ’ reports only intended to address the removal efficiency for the portion of the flue gas treated in the scrubber . For this reason, that removal efficiency should not be applied to the total amount of sulfur combusted in the coal consumed (as some of the flue gas at these units must be vented without being treated in the scrubber as originally constructed). When the SO 2 removal rates are decreased to reflect the reported operational constraint of each affected scrubber’s flue gas treatment, the projected emission level for Texas , after all significant contribution identified in the final Transport Rule is addressed , correspondingly rises. Therefore, in accordance with the revised unit - level input assumptions regarding existing scrubbers and flue gas treatment at the Texas units described above, EPA is proposing to increas e the state’s 2012 and 2014 SO 2 budget s each by 70,067 tons . S ee “Technical Revision s and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of how each of*** E.O. 12866 Review

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Page **23** of **96** these unit - level adjustments affects the calculation of this proposed revision , as well as for the impacts this revision would have on the state’s assurance levels , new unit set - aside , and Indian country new unit set - aside . ( 4 ) Increase Arkansas’ ozone - season NOX new unit set aside in accordance with a revision to the final Transport Rule’s calculation of the new unit set - aside that erroneously omitted Plum Point Unit 1’s projected emissions . EPA is not proposing to adjust Arkansas’ ozone season NOX budget in this rulemaking. However, EPA is proposing to adjust the portion of that budget dedicated to the new unit set - aside account. In the final Transport Rule , EPA had determined a 2 percent new unit set - aside for ozone season NOX in the state. That value would be changed to 5 percent in this rulemaking. The revision is consistent with the new unit set - aside methodology described in the final rule. The updated value simply reflects the revised classification of one unit to be treated as a new unit for purposes of unit - level allowance allocation . This unit , Plum Point Unit 1, commenced commercial operation on or after January 1, 2010 , and therefore should be considered a new unit under the final Transport Rule’s unit - level*** E.O. 12866 Review

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Page **24** of **96** allocation methodology (76 FR 48290) ; however, the final Transport Rule erroneously omitted this unit’s projected emissions from the calcul ation of Arkansas’ ozone - season NOX new unit set - aside . I ncluding this unit’s projected emissions in the calculation would yield a revised new unit set - aside of 5 percent of the state’s budget instead of the previous 2 percent value . S ee the “ Technical Revision s and Adjustments to State Budgets TSD ” in the docket for this rulemaking for a quantitative demonstration of this proposed revision. This proposed revision to Arkansas’ new unit set - aside would necessarily result in changes to allowance allocations to existing units. S ee “ Revisions to Unit Level Allocations under the FIP ” tables in the docket to this rulemaking for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. ( 5 ) Increase Texas’ ozone - season NOX , annual NOX , and

SO 2 new unit set - asides in accordance with a revision to the final Transport Rule’s calculations of the new unit set - asides that erroneously omitted Oak Grove Unit 2 ’s projected emissions.*** E.O. 12866 Review

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Page **25** of **96** EPA is also proposing a revision to the calculation of the new unit set - asides for ozone - season NOX , annual NOX , and SO 2 in Texas. The updated value s would simply reflect the revised classification of one unit to be treated as a new unit for purposes of unit - level allowance allocation . This unit , Oak Grove Unit 2, commenced commercial operation on or after January 1, 2010 , and therefore should be considered a new unit under the final Transport Rule’s unit - level allocation methodology; however, the final Transport Rule erroneously omitted this unit’s p rojected emissions from the calculation of Texas’s ozone - season NOX , annual NOX , and SO 2 new unit set - asides . I ncluding this unit’s projected emissions in the calculation would yield revised new unit set - asides of 4 percent of the state’s ozone - season NOX budget , 4 percent of the state’s annual NOX budget , and 5 percent of the state’s SO 2 budget . S ee the “Technical Revision s and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision. ( 6 ) Increase New Jersey’s 2012 and 2014 ozone - season NOX , annual NOX , and SO 2 budgets in accordance with revision s to the final Transport Rule analysis that erroneously assumed that an SCR and scrubber exist at*** E.O. 12866 Review

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Page **26** of **96** BL England Unit 1 and to reflect operational constraints likely to necessitat e non - economic dispatch at six other facilities in 2012 . EPA is proposing to revise New Jersey ’s ozone - season NOX , annual NOX , and SO 2 budgets in accordance with revision s to assumed control technologies at BL England Uni t 1 as well as operational constraints affecting units at six other facilities . The SCR and scrubber that had been planned to be installed at BL England Unit 1 , and which EPA assumed would be in place in 2012, are not actually required by a New Jersey administrative order until December 2013 . Furthermore, the agreement limits operation of the unit to the ozone season . Therefore, EPA is proposing to adjust New Jersey’s 2012 state budgets to reflect projected emissions without an SCR or scrubber at this un it and its operation only during the ozone season . EPA is also proposing revisions to New Jersey’s state budgets based on information demonstrating that northern New Jersey is an out - of -merit - order dispatch area , meaning that units in that area are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local electricity demand with generation from outside the area. Conditions in this*** E.O. 12866 Review

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Page **27** of **96** out - of -merit - order dispatch area are likely to necessitate what would otherwise be non - economic generation at six New Jersey plants (Bergen, Edison, Essex, Kearny, Linden, and Sewa ren Generating Stations) in the immediate future . EPA did not consider these immediate - term conditions in its calculation of the New Jersey emission budgets in the final Transport Rule. EPA is proposing to adjust New Jersey’s emission budgets based on analysis of the frequency these units have recently been called to run for non - economic purposes , according to data provided by the utility ope rating those units . For this proposal, EPA has calculated the net change in the state's 2012 and 2014 total emissions (that inform the state budgets) to account for increased generation (and related emissions) from the specific units affected by the immedi ate - term non - economic constraints described above, as well as for a corresponding reduction in generation (and related emissions) at other units within the state, to maintain the electricity supply and demand equilibrium modeled in the final Transport Rule . EPA re - calculated the emissions from BL England Unit 1 and the six plants with non - economic generation to account for the input assumption changes described above. These*** E.O. 12866 Review

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Page **28** of **96** calculations yield increase s to the New Jersey 2012 state budget s for SO 2 of 2,09 6 tons, annual NOX of 420 tons, and ozone - season NOX of 592 tons ; and 2014 state budget increase s for annual NOX of 112 tons, and ozone - season NOX of 195 tons . See “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this ru lemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level and new unit set - aside , and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. ( 7 ) Increase Wisconsin’s 2014 SO 2 budget and 2012 and 2014 annual NOX budget in accordance with a revision to the final Transport Rule analysis that erroneously assumed that an FGD exists at Weston Unit 3 , wet FGDs (instead of dry FGDs) exist at Columbia Units 1 and 2, and a SCR exists at John P. Madgett Unit 1 . EPA is proposing to increase Wisconsin’s SO 2 budget in accordance with revision s to the Weston Unit 3 and Columbia Units 1 and 2 FGD status in 2014. EPA had assumed that a scrubber would be available at Weston Unit 3 in 2014 in its base case modeling. There is no FGD expected to be online*** E.O. 12866 Review

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Page **29** of **96** at the facility in 2014. The final Transport Rule did not assume an operating scrubber at Weston Unit 3 in 2012, but did assume the FGD would be in place and operating by 2014. Therefore, EPA is proposing to adjust Wisconsin's 2014 SO 2 budget to reflect the unit’s operation without an FGD in 2014. EPA had also assumed that the two scrubbers being installed at Columbia Units 1 and 2 were wet scrubbers. Instead, dry scrubbers have been planned and approved at these units . In EPA’s modeling, the assumed removal rate of a new wet scrubber is 96 percent and a new dry scrubber is 92 percent . Therefore, the 2014 modeled remedy emissions from these units would be twice their current amount , if the assumption of wet scrubber s was changed to dry scrubber s for the facility. No change is needed for 2012 since EPA did not model any scrubber s operating at those units in that year. To account for these adjustments, EPA is proposing to increase the Wisconsin S O 2 budget by a total of 7,757 tons in 2014. EPA is also proposing to increase Wisconsin’s annual NOX budget in 2012 and 2014 . EPA had assumed a SCR would be installed at John P. Madgett Unit 1 in 2012 in its budget*** E.O. 12866 Review

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Page **30** of **96** determination and remedy modeling. There is no SCR expected to be online in 2012 or 2014 at the unit. Therefore, EPA is proposing to adjust Wisconsin’s annual NOX budget s to reflect the uni t’s operation without a SCR. This would result in a 2,473 ton increase to the state’s annual NOX budget. The revised assumptions about John P. Madgett Unit 1 would also affect the calculation of Wisconsin’s potential ozone - season NOX budget (as well as the state’s assurance level, new unit set - aside, Indian country new unit set aside, and unit - level allocations under the FIP) if that state is included in the Transport Rule ozone - season NOX program as previously proposed (76 FR 40662, July 11, 2011 ). EPA will address this issue, along with other public comments submitted on that rulemaking, when the Agency finalizes that rulemaking later this year. See the “Technical Revisions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level , new unit set - aside , and Indian country new unit set - aside, and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative*** E.O. 12866 Review

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Page **31** of **96** demonstration of the effect of this revision on unit - level allocations under the FIP. ( 8 ) Increase New York’s 2012 and 2014 ozone - season NOX , annual NOX , and SO 2 budgets in accordance with a revision to the final Transport Rule analysis that did not reflect operational constraints likely to necessitat e non - economic dispatch at certain units. EPA is proposing to increase the New York s tate ozone season NOX , annual NOX , and SO 2 budgets in accordance with revisions to the assumed operation of several specific units in 2012, to satisfy three specific immediate - term operational constraints documented by the New York Independent System Operator (NYISO) . These three constraints are referred to here as the N- 1 - 1 Contingency , the Minimum Oil Burn Rule s , and out - of -merit - order dispatch conditions, which collectively affect the likely 2012 and 2014 operations of specific units in the New York City and Long Island areas . The N- 1 - 1 Contingency requires that certain units be available to deliver generation with advance notice of only 30 seconds at certain times during the year. These specific units require several hours to reach the necessary level of generation under these contingency circumstances;*** E.O. 12866 Review

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Page **32** of **96** therefore, the contingency requirement fre quently necessitates their ongoing operation whether or not the contingency is actually triggered at any given time. Based on information published by NYISO, EPA identified Arthur Kill Generating Station, Ravenswood, and Astoria Generating Station as needing to maintain minimum generation levels at two units in each facility to meet the N- 1 - 1 Contingency constraint . The Minimum Oil Burn Rule s require that certain units be able to immediately burn oil in the event of a natural gas supply disruption to the New York City and Long Island area infrastructure . Some units are incapable of immediately switching fuel , so they must burn a minimum amount of oil on an ongoing basis when operating to comply with this requirement . EPA determined that the Minimum Oil Burn Rule s would require residual fuel oil consumption at the Arthur Kill Generati ng Station, Ravenswood, Astoria Generating Station, and Northport facilities . Based on information published by the NYISO, EPA determined that these units would burn oil in 2 012 and 2014 at the same proportion of total projected heat input as shown for the share of historic heat input reported as residual fuel oil at those facilities .*** E.O. 12866 Review

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Page **33** of **96** Data presented in the NYISO 2010 Comprehensive Area Transmission Review Study and the NYISO Operating Study, Summer 2011 , demonstrate that Long Island is an out - of merit - order dispatch area, meaning that units in that area are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local el ectricity demand with generation from outside the area. Conditions in this out - of -merit - order dispatch area are likely to necessitate in the immediate future what would otherwise be non - economic generation at 3 units at the Northport facility . For this proposal, EPA has calculated the net change in the state's total emissions (that inform the state budgets) to account for increased generation (and related emissions) from the specific units affected by the immediate - term non - economic constraints described above , as well as for a corresponding reduction in generation (and related emissions) at other units within the state, to maintain the electricity supply and demand equilibrium modeled in the final Transport Rule . These calculations yield increase s to the New York 2012 and 2014 state budget s for SO 2 of 3,527 tons, annual NOX of 3,485 tons, and ozone season NOX of 1,911 tons. See “Technical Revisions and*** E.O. 12866 Review

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Page **34** of **96** Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision , as well as for the impacts this revision would have on the state’s assurance levels , new unit set aside , and Indian country new unit set - aside . ( 9 ) Increase Louisiana’s 2012 and 2014 ozone - season NOX budget s in accordance with a revision to the final Transport Rule analysis to reflect operational constraints likely to necessitate non - economic dispatch at twelve units. EPA is proposing revisions to Louisiana’s 2012 and 2014 state ozone season NOX budget s based on information demonstrating that the West of the Atchafalaya Basin (WOTAB), Downstream of Gypsy (DSG), and Amite South regions of Louisiana are out - of -merit - order dispatch areas, meaning that units in those areas are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local electricity demand with generation from outside the area . Conditions in these out - of -merit - order dispatch areas are likely to necessitate what would otherwise be non - economic generation at five Louisiana plants (R.S. Nelson, Nine Mile Point, Michoud, Little Gypsy, and Waterford) in the immediate future. EPA*** E.O. 12866 Review

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Page **35** of **96** did not consider these immediate - term conditions in its calculation of the Louisiana emission budget in the final Transport Rule. EPA is proposing to adjust Louisiana’s ozone season NOX emission budget based on analysis projecting the minimum frequency these units will have to run in the immediate term for non - economic purposes , according to data provided by the utility operating those units . For this proposal, EPA has calculated the net change in the state's total emissions (that inform the state budgets) to account for increased generation (and related emissions) from the specific units affected by the immediate - term non - economic const raints described above, as well as for a corresponding reduction in generation (and related emissions) at other units within the state, to maintain the electricity supply and demand equilibrium modeled in the final Transport Rule . EPA re - calculated the emissions from the five plants with non - economic generation to account for the input assumption changes described above. These calculations yield increase s to Louisiana’s 2012 and 2014 state budget s for ozone - season NOX of 4, 231 tons . See “Technical Revis ions and Adjustments to State Budgets TSD” in the*** E.O. 12866 Review

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Page **36** of **96** docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level , new unit set - aside , and Indian country new unit set - aside , and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. (1 0 ) Increase Mississippi’s 2012 and 2014 ozone - season NOX budget s in accordance with a revision to the final Transport Rule analysis to reflect operational constraints likely to necessitate non - economic dispatch at certain units. EPA is proposing revisions to Mississippi’s state ozone season NOX budget based on information demonstrating that the Mississippi Region is an out - of -merit - order dispatch area, meaning that units in that area are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local electr icity demand with generation from outside the area . Conditions in this out - of -merit - order dispatch area are likely to necessitate what would otherwise be non economic generation at three Mississippi plants (Rex Brown, Gerald Andrus, and Baxter Wilson) in the immediate future.*** E.O. 12866 Review

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Page **37** of **96** EPA did not consider these immediate - term conditions in its calculation of the Mississippi emission budget in the final Transport Rule. EPA is proposing to adjust Mississippi’s 2012 and 2014 ozone season NOX emission budget s based on analysis projecting the minimum frequency these units will have to run in the immediate - term for non - economic purposes , according to data provided by the utility operating those units . For this proposal, EPA has calculated the net change in the state's t otal emissions (that inform the state budgets) to account for increased generation (and related emissions) from the specific units affected by the immediate - term non - economic constraints described above, as well as for a corresponding reduction in generati on (and related emissions) at other units within the state, to maintain the electricity supply and demand equilibrium modeled in the final Transport Rule . EPA re - calculated the emissions from the three plants with non - economic generation to account for the input assumption changes described above. These calculations yield increase s to Mississippi’s 2012 and 2014 state budget s for ozone - season NOX of 2, 136 tons . See “Technical Revis ions and Adjustments to State Budgets TSD” in the*** E.O. 12866 Review

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Page **38** of **96** docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level , new unit set - aside, and Indian country new unit set - aside, and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. ( 1 1 ) Increase Texas’s 2012 and 2014 annual and ozone season NOX budget s in accordance with a revision to the final Transport Rule analysis to reflect operational constraints likely to necessitate non - economic dispatch at certain units. EPA is proposing revisions to Texas’s 2012 and 2014 state annual and ozone season NOX budget s based on information demonstrating that the West of the Atchafalaya Basin (WOTAB) and Western Regions are out - of -merit - order dispatch areas, meaning that units in those areas are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local electricity demand with generation from outside the area . Conditions in these out - of -merit - order dispatch areas are likely to necessitate what would otherwise be non - economic generation at two Texas plants (Lewis Creek*** E.O. 12866 Review

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Page **39** of **96** and Sabine) in the immediate future. EPA did not consider these immediate - term conditions in its calculation of the Texas emission budget s in the final Transport Rule. EPA is proposing to adjust Texas’s emission budgets based on analysis projecting the minimum frequency these units will have to run in the immediate - term for non - economic purposes , according to data provided by the utility operating those units . For this proposal, EPA has calculated the net change in the state's total emissions (that inform the state budgets) to account for increased generation (and related emissions) from the specific units affected by the immediate - term non - economic constraints described above, as well as for a corresponding reduction in generation (and related emissions) at other units within the state, to maintain the e lectricity supply and demand equilibrium modeled in the final Transport Rule . EPA re - calculated the emissions from the two plants with non - economic generation to account for the input assumption changes described above. These calculations yield increase s to Texas’s 2012 and 2014 state budget s for annual NOX of 1, 375 tons and ozone - season NOX of 1, 375 tons . See “Technical Revis ions and Adjustments to State Budgets*** E.O. 12866 Review

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Page **40** of **96** TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level, new unit set - aside, and Indian country new unit set aside , and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. (12 ) Increase Florida’s 2012 ozone - season NOX budget in accordance with a revision to the final Transport Rule analysis to reflect the unavailability of Crystal River Unit 3, a nuclear unit. EPA’s power sector analysis in the final Transport Rule that informed its calculation of Florida’s state ozone - season budget included generation from Crystal River Unit 3, a nuclear unit that has operated historically. However, utilities in Florida have notified EPA that this unit will be offline for repairs throughout 2012 and is expected to return to service in 2013. As such, EPA expects that the generation previously projected in the Transport Rule analysis from this unit in 2012 will necessarily have a different origin with different emission consequences that should be considered in the calculation*** E.O. 12866 Review

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Page **41** of **96** of Florida’s ozone - season NOX state budget. EPA has calculated that this replacement generation would yield an increase of 819 tons of ozone - season NOX in 2012 and is proposing to increase Florida’s 2012 ozone - season NOX budget by 819 tons, accordingly. See “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level , new unit set aside, and Indian country new unit set - aside, and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. EPA has also received and is making available in the public docket for this proposal additional unit - level information provided by Florida utilities addressing assumptions of each unit's ability to control ozone - season NOX . EPA requests comment on all aspects of the data in the docket, including whether the emission data provided in this information is a more accurate representation of achievable NOX emission rates in 2012, and whether us ing this data would be consistent with the methodology used in the Transport Rule. EPA specifically requests comment on*** E.O. 12866 Review

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Page **42** of **96** whether this information could support a further revision to the state's ozone - season NOX budget, and if so, how such a revision should be calculated. See “Information Submitted by Florida Utilities” in the docket for this rulemaking. Further Explanation on Revisions and Request for Comments . All of the proposed revisions to state budgets and new unit set - asides described above would co rrespondingly affect unit - level allowance allocations in the states involved. Specifically, any changes to the levels of new unit set - asides or state budgets would be carried through to unit - level allocations based on the final Transport Rule allocation methodology for existing units (including any amendments made to specific unit - level allocation s in this rulemaking , described below ). For example, if a state budget would increase, then the share of that increase going to existing units would be apportioned based on the final Transport Rule’s allocation methodology to existing units (aside from specific unit level allocation adjustments included in this proposal pertinent to utility consent decrees , discussed below in section III .B of this preamble ) . Unit - level allocations to potential covered sources under the Transport Rule have*** E.O. 12866 Review

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Page **43** of **96** been updated to reflect all of the proposed revisions described in this proposal and are set forth in the

“ Revisions to Unit Level Allocations under the FIP ” TSD in the docket fo r this rulemaking . EPA evaluated the likely air quality impacts of the revisions presented above u sing the air quality assessment tool, on a state -by- state and case -by- case basis, for the SO 2 budget increases in 2014 for Texas, New York, and Wisconsin , and compared those estimates to the final Transport Rule air quality analysis . The results do not change the conclusions that EPA made about the appropriateness of controlling upwind emissions at the cost - effective thresholds selected in the final Transport Rule to successfully quantify and eliminate significant contribution to nonattainment and interference with maintenance at downwind receptors . For more information, this evaluation can be found in the “ Significant Contribution Assessment Technical Support Document ” in the docket for this rulemaking . For this proposal, EPA also assessed this proposal’s revisions to annual NOX and ozone - season NOX state budgets against each state’s total NOX emission inventories which informed the air quality projections in the final Transport*** E.O. 12866 Review

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Page **44** of **96** Rule analysis . The annual NOX budget increases for Michigan, Nebraska, New Jersey, New York , Texas , and Wisconsin are 5,228, 3,599, 112 , 3,485 , 1,3 75 and 2,473 tons, respectively. Comparing those budget increas es to the total 2014 annual NOX emission inventories in those states under the final Transport Rule’s control scenario analysis, EPA calculates that these revisions represent increases of 1. 2 percent , 2.1 percent , 0.1 percent , 0. 8 percent, 0.1 percent , and 1.0 percent, respectively, of the total annual NOX emission inventories for those states in the final Transport Rule’s 2014 control scenario analysis . See the “Significant Contribution Assessment TSD” in the docket for this rulemaking for more details. These increases represent only a small portion of each state’s total NOX emissions. The ozone - season NOX budget increases in 2014 for Louisiana, Mississippi, New Jersey, New York, and Texas are 4, 231 , 2, 136 , 195 , 1,911, and 1, 375 t ons, respectively. Comparing those budget increases to the total 2014 ozone season NOX emission inventories in those states under the final Transport Rule’s control scenario analysis, EPA calculates that these revisions represent increases of 2. 2 percent , 2. 4 percent, 0. 2 percent , 1.0 percent , and 0. 2*** E.O. 12866 Review

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Page **45** of **96** percent, respectively, of the total ozone - season NOX emission inventories for those states in the final Transport Rule’s 2014 control scenario analysis . See the “Significant Contribution Assessment TSD” in the docket for this rulemaking for more details. These increases represent only a small portion of each state’s total ozone season NOX emissions. EPA requests comment on the revised unit - level and utility- system operational informat ion described above and on the corresponding proposed revisions in state budgets, variability limits, new unit set - asides, Indian country new unit set - asides, and unit - level allocations resulting from the application of such revised information using the methodologies set forth in the final Transport Rule for developing state budgets, variability limits, new unit set asides, Indian country new unit set - asides, and unit - level allocations. EPA is not request ing comment on those methodologies set forth in the final Transport Rule. For example, EPA is not seeking comment on the methodology by which existing unit allocations are determined with regard to any given Transport Rule state budget . 3

3 Further, EPA notes that the proposed rule text includes tables that are complete in that they show, for each Transport Rule trading*** E.O. 12866 Review

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Page **46** of **96** Moreover, E PA recognizes that parties may be aware of other immediate - term unit - specific operational constraints not accounted for in the final Transport Rule whose inclusion may warrant revisions in state budgets, with associated revisions to the state assurance levels and unit - level allocations for existing units. EPA has already provided several opportunities

– - through the proposed Transport Rule and subsequent notices of data availability

-- for the public, including stakeholders, to present unit level information demonstrating constraints on immediate term operations . However, EPA will accept

– - by the deadline for comment on this proposal

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program, both (i) the amounts for certain state budgets, new unit set asides, Indian country set - asides, and state variability limits that reflect proposed revisions discussed in this notice; and (ii) the amounts for other state budgets, new unit set - asides, Indian country s et - asides, and state variability limits amounts that do not reflect any proposed revisions discussed in this notice. Except as discussed below in this section of the notice, EPA is not requesting comment on those budgets, new unit set - asides, Indian count ry set - asides, and variability limits that are shown in the proposed rule text tables but that do not reflect the proposed revisions discussed in this notice. For example, the budget and new unit set - aside revisions discussed in this section of the notice involve only a limited number of states (i.e., Arkansas, Florida, Louisiana, Michigan, Mississippi, Nebraska, New Jersey, New York, Texas, and Wisconsin). Except as discussed below in this section of the notice, EPA is not reopening, or requesting comment on, amounts in the proposed rule text tables for any other states. By further example, this section of the notice discusses a revision of Arkansas’ new unit set - aside, but not of Arkansas’ budget. Except as discussed below in this section of the notice , EPA is not requesting comment on the amount of Arkansas’ budget.*** E.O. 12866 Review

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Page **47** of **96** have a material impact on the calculation of Transport Rule state budgets ( with associated impacts on corresponding assurance levels and unit - level allocations for existing units ) . For this purpose, EPA intends a “material impact” to reflect a corresponding recalculation of the relevant state budget that would be at least 1 percent different from that budget’ s value as calculated in the final Transport Rule (76 FR 48208, August 8, 2011). EPA remains focused on successful implementation of the Transport Rule programs and does not believe that a change of less than 1 percent in a state’s budget would be a meani ngful action to further this goal. As a result, EPA encourages commenters to consider whether or not revisions to a given unit’s or group of units’ input assumptions would yield a material impact of at least a 1 percent difference in the calculation of the relevant state budget before submitting this information to EPA for review. EPA is therefore accept ing for review information provided in comments on this rulemaking specifically addressing the following topics for specific electric generating units : (1) Post - combustion pollution control equipment (such as SCRs and FGDs) assumed in the final Transport Rule*** E.O. 12866 Review

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Page **48** of **96** analyses to be present by 2012 at the unit in question; and/or (2) Immediate - term (i.e., binding on 2012) operational requirements necessitating non - economic generation at the unit in question, including data that demonstrate why the unit in question is required to generate in the immediate term for reasons other than the regional economic sale of electricity , and how often during the ozone season and du ring the calendar year that such non - economic generation is necessitated from that unit . EPA will review information provided in comments addressing the topics described above and will determine if any of the information merits a subsequent proposal of revisions to the Transport Rule programs beyond the actions presented in this proposal.

B. Allowance Allocation Revisions to Units Covered by Existing Utility Consent Decrees After the final Transport Rule was published, EPA determined that while the stat e budgets accurately incorporated the emission reduction requirements of existing utility consent decrees, the unit - level allowance allocations under the Transport Rule FIPs did not properly*** E.O. 12866 Review

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Page **49** of **96** account for provisions in those consent decrees that effectively require the surrender , or restrict the trading, of “excess” Transport Rule allowances . As a result , Transport Rule allowance allocations to certain units may unintentionally reduce the availability of some of those allowances to other sources , given the restrictions on the use of those allowances by the initial recipient unit imposed by the applicable consent decree. In today’s action , EPA is proposing to add a constraint on Transport Rule unit - level allowance allocations designed to reflect the maximum al lowable emissions at the units affected by existing utility consent decrees which contain annual tonnage limits and require the surrender or restrict trading of Transport Rule allowances allocated in excess of annual tonnage limits . S ee “Assessment of Impact of Consent Decree Annual Tonnage Limits on Transport Rule Allocations TSD ” in the docket for this rulemaking for information on the consent decrees covered by the proposed addition of the new constraint for purposes of determining unit - level allocation s . The addition of this constraint would align unit level allocations for units described in several existing federally- enforceable consent decrees with the annual*** E.O. 12866 Review

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Page **50** of **96** tonnage limits in those decrees . This constraint would prevent heat input -based allocations from exceeding the terms of federally- enforceable consent decree s that contain annual tonnage limits for SO 2 and/or NOX . Because existing consent decrees that establish annual tonnage limits for SO 2 and/or NOX do so at the system or facility level, EPA calculated unit - level annual tonnage limit equivalents (unit - level caps) for purposes of allocating allowances to individual units. EPA is not seeking comment on any elements of the allocation methodology finalized in the final Transport Rule (76 FR 482 88 - 90 ). Rather, EPA is seeking comment only on the addition of a unit - level consent decree constraint and unit - level cap apportionment methodology. The proposed additional constraint would affect unit level allocations in six states -- Alabama, Indiana, Kansas, Kentucky, Ohio , and Tennessee -- with units subject to existing federally- enforceable consent decree annual tonnage limits . These consent decree requirements have already been accounted for in the determination of budgets for these states. EPA is p roposing to establish unit - level caps for 82 units covered by annual tonnage limits in federally- enforceable consent decrees in these six states.*** E.O. 12866 Review

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Page **51** of **96** The addition of this constraint would not alter any state budget. This additional constraint also would have no impact on existing unit - level allocations in states that do not contain units covered by a federally- enforceable consent decree with annual tonnage limits. EPA is proposing to revis e the Transport Rule unit level allocations for the specific units subject to these consent decrees, such that allowance allocations would be constrained by both historical emissions (as described in the final Transport Rule ( 76 FR 482 90)) and a unit - level cap derived from the annual tonnage limit in the federallyenforceab le consent decree . Although these revisions would not alter the state budgets, they would have the effect of increasing the number of allowances within the budget that are available for use for compliance purposes and that would not otherwise be available without this proposed change to the allocation of allowances

– - such that the total number of allowances available would equal the state’s emission budget, as intended . These proposed revisions are thus intended to revise the application of the final Transport Rule’s unit - level allowance allocation methodology to enable the proper implementation of state budgets under the programs. While EPA intends to perform*** E.O. 12866 Review

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Page **52** of **96** this revision to benefit program implementation, EPA does not believe resolution of this issue is a necessary precondition for successful implementation of and compliance with the Transport Rule programs in 2012, as notwithstanding these proposed revisions, EPA will still be able to distribute 99.7 percent of all existing unit allowances under the s tate budgets established in the final Transport Rule by that rule’s November 7 deadline . S ee section IV of this preamble for further information about allowance recordation . EPA calculated unit - level caps for each unit subject to an SO 2 and/or NOX annual tonnage limit contained in a federally- enforceable consent decree. A unit - level cap is an apportionment of the applicable system- or facility-wide consent decree annual tonnage limit. The apportionment of a system- or facility-wide consent decree annual tonnage limit to a unit level is solely for the purposes of Transport Rule allocations and does not modify , or create additional , consent decree requirements or limitations. EPA is not proposing to limit allocations to units covered by consent decrees that do not contain SO 2 and or NOX annual tonnage limits. The Agency determined that calculation of unit - level caps where annual tonnage limits*** E.O. 12866 Review

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Page **53** of **96** do not exist would require the use of unit - level projections whose application in setting unit - level allocations would be difficult to support and that, in any event, adjustment of unit

—level allocations using such unit - level caps would not be necessary . Calculating a unit - level cap from other consent decree directives would require projections about future utilization and emissions performance of each unit involved , increasing the complexity and uncertainty of the approach. Further, EPA believes that there are few Transport Rule allowances that might be rendered unavailable for compliance by the consent decrees that contain trading restrictions or allowance surrender requirements but that do not contain annual tonnage limits . EPA is proposing to follow a two - step methodology to identify the specific unit - level allocation constraints that would be associated with this proposed additional constraint. First, EPA would determine if the annual tonnage limit in an existing federally- enforceable consent decree that is already reflected in a state budget is more restrictive than the unit - level allocations under the Transport Rule by comparing the federally- enforceable consent decree annual tonnage limits for calendar year 2012*** E.O. 12866 Review

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Page **54** of **96** and thereafter to aggregate unit - level allocations (as determined using the approach finalized in the final Transport Rule ) for all units affected by the annual tonnage limit. If in 2012 or thereafter the collective unit - level allocations are greater than the federallyenforceable consent decree annual tonnage limit, EPA would apply unit - level caps equal, in aggregate, to the federally- enforce able consent decree annual tonnage limit. I f a unit is shut down by a federally- enforceable consent decree or, in the case of SO 2 , repower s to natural gas or shut s down, the unit - level cap would be calculated as zero in any year following the required s hut down or repower when the unit would otherwise receive allocations using the approach in the final Transport Rule ( 76 FR 48287 and 48289 - 90 ) . Second, EPA would calculate unit - level caps for 2012 and thereafter on Transport Rule allowances for each unit covered by a system- or facility-wide annual tonnage limit in a federally- enforceable consent decree that is more restrictive than current allocations for the units involved . To accomplish this, EPA would first calculate a ratio, expressed as a percentage , comparing the annual tonnage limit in the federally- enforceable consent decree*** E.O. 12866 Review

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Page **55** of **96** to the aggregate allocations listed in the “ Final Transport Rule Unit Level Allocations under the FIP” ( http://www.epa.gov/crossstaterule/actions.html ) for units covered by the federally- enforceable consent decree annual tonnage limit to the annual tonnage limit. EPA would then multiply this ratio by the unit - level allocation listed in the “Final Transport Rule Uni t Level Allocations under the FIP” ( http://www.epa.gov/crossstaterule/actions.html ) for each unit involved . The allocations for a given year would be limited to this unit - level cap. As noted above, i n some situations the unit level cap for a 2012 or thereafter would be zero i f a federally- enforceable consent decree require s the shutdown or repowering of a unit . An example of how EPA would determine unit level caps follows: Step 1
– EPA determines that facility ABC consists of two units subject to both a federally- enforceable consent decree annual tonnage limit and the Transport Rule NOX annual program . The consent decree systemwide annual tonnage limit is 3 , 000 tons in calendar year 2012. The NOX allowance heat input -based allocation (as described in the final Transport Rule ( 76 FR 482 88 - 90 )) for the two units in calendar year*** E.O. 12866 Review

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Page **56** of **96** 2012 is 4 , 000 allowances to Unit 1 and 2 , 000 allowances to Unit 2

– a total of 6 , 000 allowances. Because the total of the allowances allocated to the two units is higher than the annual tonnage limit, EPA needs to calculate unit - level caps for Unit 1 and Unit 2. Step 2a
– The consent decree system-wide annual tonnage limit of 3 , 000 tons is divided by the systemwide he at input -based allocations of 6 , 000 tons resulting in a ratio of 0.5, or 50 percent . Step 2b
– EPA calculates the unit - level cap for Unit 1 as 4 , 000 allowances x 50 percent , or 2 , 000 allowances, and for Unit 2 as 2 , 000 allowances x 50 percent , or 1 , 000 all owances. EPA would apply this additional unit - level constraint when calculati ng existing unit - level allocations under the f inal Transport Rule FIPs . This additional unit level constraint would be applied in steps 9 and 10 of the methodology described i n the preamble to the final Transport Rule (76 FR 48290) . This additional constraint would be applied in step 9 to limit allocations to existing units covered by consent decrees. This constraint would be applied in step 10 to ensure that any allowances that*** E.O. 12866 Review

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Page **57** of **96** cannot be allocated to existing units (because all existing units are subject to either the constraint on maximum historical emissions or this additional constraint) would be directed to the state’s new unit set aside. For example, EPA has determined that , if this additional constraint is finalized as proposed, all the units in the state of Tennessee would be constrained by either historical emissions or a unit - level cap for the Transport Rule SO 2 Group 1 program in calendar years 2013, 2018, 2019 , and each year thereafter. As described above , the new unit set aside for the state of Tennessee would increase in 2013, 2018, 2019 , and each year thereafter , by 8 , 460, 3 , 173 and 5 , 225 tons respectively. EPA is not seeking comment on any aspects of the allo cation methodology in the final Transport Rule ( 76 FR 48290) . EPA is only seeking comment on the addition of the constraint described above to steps 9 and 10 of that methodology . S ee “Assessment of Impact of Consent Decree Annual Tonnage Limits on Transport Rule Allocations TSD ” in the docket for this rulemaking for further information on the proposed addition of the new constraint for purposes of determining unit - level allocations .*** E.O. 12866 Review

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Page **58** of **96** C. Amend the assurance penalty provisions to make them effective starting in 2014 EPA is also proposing in this action to amend the effective date of the Transport Rule assurance provisions to make them effective beginning on January 1, 2014. During outreach discussions with various stakeholders, the application of assurance penalties at the outset of the program has been raised as a major concern for compliance and market development in the early years of the program. Several stakeholders have expressed concern that Transport Rule allowance market development may be delayed b y uncertainty over how each state will transition from 2010 and 2011 emission levels to meet the projected Transport Rule assurance levels in 2012 and 2013. Under the assurance provisions, a state’s emissions for any control period in a given year must not exceed the state assurance level, i.e., the state budget plus the state’s variability limit. In order to implement this requirement, EPA first determines whether, for the control period, any state’s total emissions exceeded the state’s assurance level. If a state had emissions exceeding the state assurance level, then EPA applies additional criteria to determine which owners and operators of units in the*** E.O. 12866 Review

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Page **59** of **96** state will be subject to the assurance penalty, which is a requirement to surrender additional allowances. In applying the additional criteria, EPA identifies which groups of units with a common designated representative (DR) in the state had emissions exceeding the respective common DR’s share of the state assurance level , and calculates what percentage each such group’s emissions above the common DR’s share comprise of the state’s emissions above the state assurance level. The assurance penalty applied to the owners and operators of each of those groups of units is the surrender of an amount of allowances equal to the state’s emissions above the state assurance level multiplied by the group’s percentage and multiplied by two (in order to reflect the penalty of two allowances for each ton of the state’s excess emissions). EPA implements the assurance penalty provisions through a series of notices of data availability that make available the necessary calculations and provide an opportunity for public objections to the calculations. The requirements that owners and operators comply with the assurance p rovisions, including where appropriate the assurance penalty, and the procedures followed by the Administrator are set forth in 40 CFR 97.406(c)(2) and 97.425 (for the TR*** E.O. 12866 Review

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Page **60** of **96** NOX annual program), 97.506(c)(2) and 97.525 (for the TR NOX ozone season program), 9 7.606(c)(2) and 97.625 (for the TR SO 2 Group 1 program), and 97.706(c)(2) and 97.725 (for the TR SO 2 Group 2 program). EPA proposes to determine that amending the assurance provisions to take effect starting in 2014 is appropriate. EPA believes that a limited postponement of the effectiveness of these provisions is justified in order to smooth the transition from the existing CAIR programs to the new T ransport Rule programs. In line with the Court’s remand of CAIR, EPA designed the Transport Rule to achi eve necessary emission reductions by relevant NAAQS attainment deadlines and to ensure that necessary reductions will be achieved within each covered state. As explained in the final Transport Rule, EPA determined that it was appropriate for the Transport Rule programs to address emissions in 2012 and beyond in order to ensure that the deadlines in the rule were aligned, as legally required, with the downwind nonattainment deadlines ( 76 FR 48277 - 48279 ). CAIR remains in effect to address emission s through the end of the 2011 control periods, and the Transport Rule programs address emissions in 2012 and beyond.*** E.O. 12866 Review

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Page **61** of **96** EPA took several steps in the final Transport Rule to ease the transition from the CAIR programs to the Transport Rule trading programs. The Transport Rule maintain s programmatic elements that were successfully implemented and recognizable to sources from compliance experiences under CAIR while also addressing that rule’s legal shortcomings identified by the Court. Under both CAIR and the Transport Rule, individual units have the flexibility to supplement their own emission reductions with the acquisition from the marketplace of any additional allowances needed to cover emissions under the Transport Rule programs. Robust markets (e.g., markets with a high level of liquidity and accessibility of price information ) for the CAIR annual NOX , CAIR ozone - season NOX , and Acid Rain (SO 2 ) program allowances have been in existence for many years. Sources covered by CAIR have relied on the availability of the se robust markets when developing compliance plans. The Transport Rule (TR) creates new TR SO 2 Group 1 , TR SO 2 Group 2 , TR NOX , and TR ozone - season NOX allowances. Markets for these allowances are developing now , and EPA is beginning to record the allowances in allowance accounts and introduce the allowances into the marketplace over a year before the*** E.O. 12866 Review

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Page **62** of **96** Transport Rule programs’ first compliance deadlines (December 1, 2012 , for the 2012 ozone - season NOX program , and March 1, 2013 , for the 2012 annual NOX and SO 2 programs). However, with the allocation revisions proposed in this rulemaking and the potential for additional revisions based on additional information that might be submitted in response to this rulemaking, some allowances would be recorded and int roduced into the marketplace at later dates. Based on observed compliance planning behavior among sources anticipating the 2012 control periods, and in light of the proposed revisions in this rulemaking and the potential for additional revisions based on additional information , EPA believes that amending the effective date of the assurance provisions to apply in 2014 would ease the transition from CAIR to Transport Rule compliance for parties across the board by promoting the liquidity of , and accessibili ty of price information in, new Transport Rule allowance markets and instilling confidence that utilities can flexibly comply through a variety of unit - level operational strategies that are not limited by initial Transport Rule unit - level allowance allocat ions.*** E.O. 12866 Review

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Page **63** of **96** EPA believes that this change would accelerate the development of robust Transport Rule allowance markets and facilitate a smooth transition to the Transport Rule programs. If , in response to concerns about when robus t markets will develop , utiliti es were to artificially constrain 2012 operational plans to not exceed initially allocated allowances, the volume of early trading activity might be unnecessarily limited. Early trading activity is important for demonstrating market liquidity and assisting in price discovery to inform compliance planning by affected sources. Actions by utilities to limit early trading activity , therefore , could have negative impacts not only on those utilities, but on all participants in the Transport Rule trading programs. EPA believes that amending the effectiveness of the assurance provisions in 2012 and 2013 would encourage greater confidence among utilities for engaging immediately in cost - effective compliance planning that takes into account the flexibility of a robust market for acquiring allowances to cover emissions to the extent use of allowances is the most economic approach for compliance under the Transport Rule programs.*** E.O. 12866 Review

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Page **64** of **96** Amending the assurance provisions would not affect, in any way, the requirements of the rule in 2014 and beyond. EPA is proposing only a short postponement of the assurance penalty provision s to ensure a smooth transition from CAIR to the Transport Rule programs. EPA believes that , notwithstanding postponement of the assurance penalty provi sions, the states covered by the Transport Rule programs will sti ll achieve the emission reductions in 2012 and 2013 necessary to eliminate each state’s significant contribution to nonattainment and interference with maintenance identified in the final Transport Rule (with the revisions included in this proposal). The highly detailed state - specific bas e s on which individual state budgets were determined using the approach and methodologies developed in the final Transport Rule, and included in the record for the Transport Rule, together with the derivation of the variability limits from historic data reflecting state - level year - to - year variation in power sector emissions , support EPA’s belief . EPA noted in the Transport Rule proposal that knowledge about i nstalled air pollution control equipment “...provides greater certainty of where [near - term] reductions will occur and how these reductions should impact air quality in downwind areas ...*** E.O. 12866 Review

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Page **65** of **96** Consequently, EPA believes that there is a high level of certainty that emissions reductions projected for 2012

– 2013 with interstate trading would be achieved within the states where they are projected to occur, making imposition of the assurance provisions during 2012

– 2013 unnecessary” ( 75 FR 45314 - 45315 ). In the final Transport Rule, EPA did not disavow the proposal’s rationale for starting the assurance provisions in 2014; however, the Agency chose to ma ke the ass urance provisions effective starting in 2012 with the intent to err on the side of providing “ even further assurance ” of securing the targeted emission reductions in upwind states (76 FR 48296) . EPA, therefore, has never concluded that starting the assurance provisions in 2014 would fail to meet the 110(a)(2)(D) obligation to eliminate significant contribution or interference with maintenance in 2012 and 2013 . Moreover, this proposal’s revisions to pollution control technology assumptions involve only 1 7 units of the approximately 3,600 units whose known controls inform the Transport Rule budgets. EPA continues to believe that, because the immediate - term Transport Rule state budgets for 2012 and 2013 (in contrast with the budgets for 2014 and thereafter) are uniquely based on the ability of the known*** E.O. 12866 Review

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Page **66** of **96** existing fleet of EGUs and known existing or soon - to -be installed pollution control equipment to deliver emission reductions in specific upwind states , there is a high level of certainty that the state assuran ce levels will not be exceeded in 2012 and 2013 . EPA believes that this near term certainty allows the Agency to postpone the effectiveness of the Transport Rule’s assurance penalty provisions until 2014 without sacrificing the Transport Rule’s ability to ensure necessary near - term emission reductions in each upwind state , supported by the calculation of each upwind state’s emission reduction potential (informing the determination of state budgets) under the rule. With the proposed , temporary postponement of the assurance provisions , EPA believes that, in the near term (as well as in the long term), Transport Rule allowance markets would provide compliance flexibility at the unit level and incentivize cost - effective , unit - level emission reductions . In the aggregate , these flexibilities and reductions at the unit level would result in achievement in each state of the state - level cost - effective emission reductions projected in the final Transport Rule (with the revisions included in this proposal). In o ther words, EPA*** E.O. 12866 Review

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Page **67** of **96** is only proposing to postpone temporarily the assurance penalty provisions to address the ability of owners and operators of individual units to make the cost - effective emission reductions in 2012 and 2013 on which EPA’s state level emission projections relied in determining each state’s amount of significant contribution and interference with maintenance under the final Transport Rule. Consequently , EPA believes that this propos al to postpone temporarily the assurance provisions will not yield substantially different state - level emission outcomes under the Transport Rule programs in 2012 or 2013 than the state level emissions reflected in the state - specific budgets and assurance levels in the respective Transport Rule program . EPA believes that a two year postponement of the effective date of the assurance penalty provisions is sufficient to guarantee robust market development, is consistent with the D.C. Circuit's decision leaving CAIR in place during the transition to a new rule, and will not interfere with the air quality objectives of the program. EPA does not, at this time, believe a longer postponement would be justified. EPA requests comment on all aspects of this proposal including the length of the postponement.*** E.O. 12866 Review

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Page **68** of **96** Since under th is proposal , the assurance provisions would continue to be effective for 2014 and thereafter, EPA maintains that the Transport Rule, revised consistent with this proposal, would continue to address and meet the Court’s concerns in North Carolina . Any revisions to state budgets from this proposal that are finalized would also include corresponding revisions to the relevant assurance levels that would apply in 2014 with this proposed postponement. D . Correct Typographical Errors EPA is proposing to correct typographical errors in certain sections of rule text in part s 52 and 97 in the final Transport Rule. Specifically, EPA proposes to change an errone ous reference in 40 CFR 52.39(i)( 1)(ii) to “TR SO 2 Group 1 allowances” to refer instead to “TR SO 2 Group 2 allowan ces” and to redesignate section s 52.745 and 52.746 in 40 CFR part 52, subpart O as sections 52.731 and 52.732 and redesignate section 52.2241 in 40 CFR part 52, subpart VV as section 52.2441. EPA also proposes to remove some redundant words in 40 CFR 97.4 06(e)(2), 97.606(e)(2), and 97.706(E)(2). EPA requests comment concerning only the specific corrections and not concerning any other aspect of the provisions in which these corrections would be made.*** E.O. 12866 Review

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Page **69** of **96** IV . Recordation of Transport Rule Allowances Impacts on Allocations to Existing Units EPA recognizes that successful implementation of the Transport Rule programs in 2012 depends in part on the development of robust allowance markets, in which covered sources can locate and purchase any additional allowances necessary to comply with the rule. As such, EPA intends to allocate as many 2012 Transport Rule allowances as possible as early as possible to assist implementation and compliance planning. While none of the actions presented in this proposal would re duce any state’s total number of allowances issued under that state’s budgets , some of the actions presented in this proposal would slightly alter unit level allocations. For example, as described above , allocations to certain units covered by consent dec rees would be limited. EPA does not believe it would be prudent or reasonable to record in allowance accounts , before taking final action on this proposal, allowance allocations in excess of the amount any given unit would receive if this proposal is fina lized as proposed. EPA will record by November 7, 2011 for each unit, the lesser of the amount that unit would receive under the allocation scheme finalized in the Transport Rule or the amount the unit*** E.O. 12866 Review

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Page **70** of **96** would receive if this proposal is finalize d as proposed. This approach will allow EPA to allocate over 99.7 percent of all existing unit allowances under the state budgets established in the final Transport Rule by that rule’s November 7 deadline (76 FR 48398, 48424, 48450, and 48475, Augus t 8, 2011 ) . During this timeframe, the only units that will receive substantially fewer allowances under this approach than under the allocations as finalized in the Transport Rule are units already subject to legally binding consent decrees that limit their emissions; therefore, EPA does not believe this approach will have any negative impact on compliance planning at sources in anticipation of the implementation of the Transport Rule programs. EPA is proposing to allocate the remaining 0.3 percent of the allowances no later than 7 days after finalization of this action is legally effective . In addition, i f EPA finalizes the proposed actions that yield increases to state budgets, the Agency will act swiftly to record these additional allowances and thereby put them into the marketplace as quickly as possible following this rule’ s finalization, so that the allowances would be available significantly in advance of the compliance deadlines for the 2012 control periods (i.e., the allowance transfer deadlines of December*** E.O. 12866 Review

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Page **71** of **96** 1, 2012 (for the NOX ozone season program ) and March 1, 2013 (for the NOX and SO 2 annual programs) ) . See the “Transport Rule Allowance Recordation Schedule TSD” in the docket for this rulemaking for a demonstration of how many allowances EPA will record by November 7, 2011 in each state.

V . Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review
Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is a "significant regulatory action.” Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any changes made in response to OMB recommendations have been documented in the docket for this action. B. Paperwork Reduction Act This action does not impose any new information collection burden. This action makes relatively minor revisions to the emission budgets and allowance allocations or allowance allocations only in certain states in the*** E.O. 12866 Review

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Page **72** of **96** final Transport Rule and corrects minor technical errors which are ministerial . However, the Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the final Transport Rule under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2060 - 0667 . The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9. C. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organization s, and small governmental jurisdictions. For purposes of assessing the impacts of today’s rule on small entities, small entity is defined as: (1) a small business as defined by the Small Business Administration’s (SBA) regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city,*** E.O. 12866 Review

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Page **73** of **96** county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not - for -profit enterprise which is independently owned and ope rated and is not dominant in its field. After considering the economic impacts of today’s action on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. The small entities dire ctly regulated by this action are electric power generators whose ultimate parent entity has a total electric output of 4 million megawatt -hours (MWh) or less in the previous fiscal year. We have determined that the changes considered in this proposed rul emaking pose no additional burden for small entities. The proposed revision to the new unit set - aside s in Arkansas and Texas would yield an extremely small change in unit - level allowance allocations to existing units, including small entities, such that i t would not affect the analysis conducted on small entity impacts under the finalized Transport Rule . In all other states, the revisions proposed in this rulemaking would yield additional allowance allocations to all units, including small entities, without increasing program*** E.O. 12866 Review

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Page **74** of **96** stringency, such that it is not possible for the impact to small entities to be any larger than that already considered and reviewed in the finalized Transport Rule. D. Unfunded Mandates Reform Act This action does not contain a Fede ral mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. This action is increasing the budgets and increasing the total number of allowances or ma intaining the same budget but revising unit - level allocations in several other states in the Transport Rule. Thus, this rule is not subject to the requirements of sections 202 or 205 of UMRA. In developing the final Transport Rule, EPA consulted with small governments pursuant to a plan established under section 203 of UMRA to address impacts of regulatory requirements in the rule that might significantly or uniquely affect small governments. E. Executive Order 13132: Federalism This action does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and*** E.O. 12866 Review

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Page **75** of **96** responsibilities among the various levels of government, as specifi ed in Executive Order 13132. This action makes relatively minor revisions to the emissions budgets and allowance allocations or allowance allocations only in certain states in the final Transport Rule. Thus, Executive Order 13132 does not apply to this ru le. EPA did provide information to state and local officials during development of both the proposed and final Transport Rule. F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments This action does not have tribal impli cations, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). This action makes relatively minor revisions to the emissions budgets and allowance allocations in several states in the final Transport Rule and helps ease the transition from CAIR. Indian country new unit set - asides will increase slightly or remain unchanged in the states affected by this action. Thus, Executive Order 13175 does not apply to this action. EPA consulted with tribal officials during the process of promulgating the final Transport Rule to permit them to have meaningful and timely input into its development.*** E.O. 12866 Review

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Page **76** of **96** G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks This action is not subject to EO 13045 (62 FR 19885, April 23, 1 997) because it is not economically significant as defined in EO 12866, and because the Agency does not believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. Analyses by EPA that show how the emission reductions from the strategies in the final Transport Rule will further improve air quality and children’s health can be found in the final Transport Rule RIA. H. Executive Order 13211: Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use This action is not a “significant energy action” as defined in Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. EPA believes that there is no meaningful impact to the energy supply beyond that which is reported for the Transport Rule program in the final Transport Rule. I. National Technology Transfer and Advancement Act*** E.O. 12866 Review

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Page **77** of **96** Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law No. 104 - 113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impract ical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. As described in section XII.I of the preamble to the final Transport Rule, the Transport Rule program require s all sources to meet the applicable monitoring requirements of 40 CFR part 75. Part 75 already incorporates a number of voluntary consensus standards. This action , however, does not involve technical standards. Therefore, EPA did not consider the use of any voluntary consensus standards. J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and LowIncome Populations*** E.O. 12866 Review

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Page **78** of **96** Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive policy on environmental justi ce. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health o r environmental effects of their programs, policies, and activities on minority populations and low- income populations in the United States. EPA has determined that this action will not have disproportionately high and adverse human health or environment al effects on minority or low- income populations because it does not affect the level of protection provided to human health or the environment. EPA believes that the vast majority of communities and individuals in areas covered by the Transport Rule program inclusive of this action , including numerous low- income, minority, and tribal individuals and communities in both rural areas and inner cities in the eastern and central U.S., will see significant improvements in air quality and resulting improvements in health. EPA’s assessment of the effects of the final Transport Rule program on these communities is*** E.O. 12866 Review

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Page **79** of **96** detailed in section XII.J of the preamble to the final Transport Rule. List of Subjects **40 CFR Part 52** Administrative practice and procedure, Air pollut ion control, Incorporation by reference, Intergovernmental relations, Nitrogen oxides, Ozone, Particulate matter, Regional haze, Reporting and recordkeeping requirements, Sulfur dioxide.
**40 CFR Pa r** **t 97** Administrative practice and procedure, Air pollution control, Electric utilities, Nitrogen oxides, Reporting and recordkeeping requirements, Sulfur dioxide.*** E.O. 12866 Review

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Page **80** of **96 Revisions to Federal Implementation Plans to Reduce**  **Interstate Transport of Fine Particulate Matter and Ozone** (page 83 of 84 )

Dated: ______________

______

______________________________________________________ **Lisa P. Jackson** Administrator . For the reasons set forth in the preamble, part s 52 and 97 of chapter I of title 40 of the Code of Federal Regulations are proposed to be amended as follows: PART 52
— [AMENDED] 1 . The authority citation for Part 52 continues to read as follows: Authority: 42 U.S.C. 7401, et seq. **Subpart A --** **General Provisions** 2 . Section 52.39 is amended by revising paragraph*** E.O. 12866 Review

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Page **81** of **96** (i)(1)(ii) by removing the words "Group 1" and adding, in their place, the words "Group 2". **Subpart O --**  **Illinois** 3 . Section 52.745 is redesignated as § 52.731. 4 . Section 52.746 is redesignated as § 52.732. **Subpart VV --** **Virginia** 5 . Section 52.2241 is redesignated as § 52.2441. PART 97
— [AMENDED] 6 . The authority citation for Part 97 continues to read as follows: Authority: 42 U.S.C. 7401, 7403, 7410, 7426, 7601, and 7651, et seq. 7. Section 97.406 is amended by: a. Revising paragraph (c)(3) by removing the words “paragraphs (c)(1) and (2)”, adding in their place the words “paragraph (c)(1)”, and designating the first sentence as paragraph (i); b. Adding a new paragraph (c)(3)(ii); and c. Revising paragraph (e)(2) by removing the words “or or” and adding, in their place, the word “or” to read as follows:*** E.O. 12866 Review

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Page **82** of **96 §**  **97.406 Standard requirements.** 
* * * * * * (c) * * * (3) * * * (ii) A TR NOX Annual unit shall be subject to the requirements under paragraph (c)(2) of this section for the control period starting on the later of January 1, 201 4 or the deadline for meeti ng the unit's monitor certification requirements under §97.430(b) and for each control period thereafter. 8. Section 97.410 is revised to read as follows: **§ 97.410**  **State NO X**  **Annual trading budgets, new unit set** **** **asides, Indian country new unit set** **- aside,**  **a nd variability**  **limits.** (a) The State NOX Annual trading budgets , new unit set asides , and Indian country new unit set - asides for allocations of TR NOX Annual allowances for the control periods in 2012 and thereafter are as follows:
State NOX Annual trading New unit set - Indian country*** E.O. 12866 Review

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Page **83** of **96** budget (tons)* for 2012 and 2013 aside (tons) for 2012 and 2013 new unit set aside (tons) for 2012 and 2013 Alabama 72,691 1,454 --- Georgia 62,010 1,240 --- Illinois 47,872 3,830 --- Indiana 109,726 3,292 --- Iowa 3 8,335 729 38 Kansas 30,714 583 31 Kentucky 85,086 3,403 --- Maryland 16,633 333 --- Michigan 65,421 1,243 65 Minnesota 29,572 561 30 Missouri 52,374 1,571 --- Nebraska 30,039 1772 30 New Jersey 7,686 154 --- New York 21,028 400 21 North Carolina 50,587 2,984 51 Ohio 92,703 1,854 --- Pennsylvania 119,986 2,400 --- South Carolina 32,498 617 33 Tennessee 35,703 714 --- Texas 134,970 5,264 135 Virginia 33,242 1,662 --- West Virginia 59,472 2,974 --- Wisconsin 34,101 2,012 34

State NOX Annual trading

budget (tons)* for 2014 and thereafter New unit set aside (tons) for 2014 and thereafter Indian country

new unit set aside (tons) for 2014 and thereafter*** E.O. 12866 Review

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Page **84** of **96** Alabama 71,962 1,439 --- Georgia 40,540 811 --- Illinois 47,872 3,830 --- Indiana 10 8,424 3,253 --- Iowa 37,498 712 38 Kansas 25,560 485 26 Kentucky 77,238 3,090 --- Maryland 16,574 331 --- Michigan 63,040 1,198 63 Minnesota 29,572 561 30 Missouri 48,717 1,462 --- Nebraska 30,039 1,772 30 New Jersey 7,378 148 --- New York 21,028 400 21 North Carolina 41,553 2,451 42 Ohio 87,493 1,750 --- Pennsylvania 119,194 2,384 --- South Carolina 32,498 617 33 Tennessee 19,337 387 --- Texas 134,970 5,264 135 Virginia 33,242 1,662 --- West Virginia 54,582 2,729 --- Wisconsin 32,871 1,9 39 33 * Each trading budget includes the new unit set - aside and, where applicable, the Indian country new unit set - aside and does not include the variability limit. (b) The States’ variability limits for the State NOX Annual trading budgets for the contro l periods in 201 4 and thereafter are as follows:*** E.O. 12866 Review

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Page **85** of **96** State Variability limits

for 2014 and thereafter Alabama 12,953 Georgia 7,297 Illinois 8,617 Indiana 19,516 Iowa 6,750 Kansas 4,601 Kentucky 13,903 Maryland 2,983 Michigan 1 1 , 347 Minnesota 5,32 3 Missouri 8,769 Nebraska 5,407 New Jersey 1,3 2 8 New York 3, 785 North Carolina 7,480 Ohio 15,749 Pennsylvania 21,455 South Carolina 5,850 Tennessee 3,481 Texas 24, 295 Virginia 5,984 West Virginia 9,825 Wisconsin 5, 917 9. Section 97.425 is amended by, in paragraph (b)(1), removing the word “2013” and adding, in its place, the word “2015”. 10. Section 97.506 is amended by:*** E.O. 12866 Review

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Page **86** of **96** a. Revising paragraph (c)(3) by removing the words “paragraphs (c)(1) and (2)”, adding in their place the words “paragraph (c)(1)”, and designating the first sentence as paragraph (i); and b. Adding a new paragraph (c)(3)(ii) to read as follows: **§ 97.**  **5 06**  **Standard requirements.**
* * * * * * (c) * * * (3) * * * (ii) A TR NOX Ozone Season unit shall be subject to the re quirements under paragraph (c)(2) of this section for the control period starting on the later of May 1, 201 4 or the deadline for meeting the unit's monitor certification requirements under §97. 5 30(b) and for each control period thereafter. 11. Section 97. 510 is revised to read as follows: **§ 97.5**  **10 State NO** **X Ozone Season**  **trading budgets, new unit**  **set -** **asides, Indian country new unit set** **- aside,**  **and variability limits.**  (a) The State NOX Ozone Season trading budgets , new unit set - asides , and Indian country new unit set - asides for*** E.O. 12866 Review

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Page **87** of **96** allocations of TR NOX Ozone Season allowances for the control periods in 2012 and thereafter are as follows:

State NOX Ozone Season

trading budget (tons)* for 2012 and 2013 New unit set aside (tons) for 2012 and 2013 Indian country

new unit set aside (tons) for 2012 and 2013 Alabama 31,746 635 --- Arkansas 15,037 752 --- Florida 28,644 544 29 Georgia 27,944 559 --- Illinois 21,208 1,697 --- Indiana 46,876 1,406 --- Kentucky 36,167 1,447 --- Louisiana 17,663 512 18 Maryland 7,179 144 --- Mississippi 12,296 234 12 New Jersey 3,974 79 --- New York 10,242 195 10 North Carolina 22,168 1,308 22 Ohio 40,063 801 --- Pennsylvania 52,201 1,044 --- South Carolina 13,909 264 14 Tennessee 14,908 298 --- Texas 64,418 2,513 64 Virginia 14,452 723 --- West Virginia 25,283 1,264 ---

State NOX Ozone Season New unit set - Indian country*** E.O. 12866 Review

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Page **88** of **96** trading budget (tons)* for 2014 and thereafter aside (tons)

for 2014 and thereafter new unit set aside (tons) for 2014 and thereafter Alabama 31,499 630 --- Arkansas 15,037 752 --- Florida 27,825 529 28 Georgia 18,279 366 --- Illinois 21,208 1,697 --- Indiana 46,175 1,385 --- Kentucky 32,674 1,307 --- Louisiana 17,663 512 18 Maryland 7,179 144 --- Mississippi 12,296 234 12 New Jersey 3,577 72 --- New York 10,242 195 10 North Carolina 18,455 1,089 18 Ohio 37,792 756 --- Pennsylvania 51,912 1,038 --- South Carolina 13,909 264 14 Tennessee 8,016 160 --- Texas 64,418 2513 64 Virginia 14,452 723 --- West Virginia 23,291 1,165 --- * Each trading budget includes the new unit set - aside and, where applicable, the Indian country new unit set - aside and does not include the variability limit. (b) The States’ variability limits for the State NOX Ozone Season trading budgets for the control periods in 201 4 and thereafter are as follows:*** E.O. 12866 Review

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Page **89** of **96** State Variability limits

for 2014 and thereafter Alabama 6,615 Arkansas 3,158 Florida 5,843 Georgia 3,839 Illinois 4,454 Indiana 9,697 Kentucky 6,862 Louisiana 3 , 709 Maryland 1,508 Mississippi 2 , 582 New Jersey 7 51 New York 2 , 151 North Carolina 3,876 Ohio 7,936 Pennsylvania 10,902 South Carolina 2,921 Tennessee 1,683 Texas 13, 528 Virginia 3,035 West Virginia 4,891 12. Section 97.525 is amended by, in paragraph (b)(1), removing the word “2013” and adding, in its place, the word “2015”. 13. Section 97.606 is amended by: a. Revising paragraph (c)(3) by removing the words “paragraphs (c)(1) and (2)”, adding in their place the*** E.O. 12866 Review

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Page **90** of **96** words “paragraph (c)(1)”, and designating the first sentence as paragraph (i); b. Adding a new paragraph (c)(3)(ii); and c. Revising paragraph (e)(2) by removing the words “or or” and adding, in their place, the word “or” to read as follows: **§ 97.**  **6 06**  **Standard requirements.**
* * * * * * (c) * * * (3) * * * (ii ) A TR SO 2 Group 1 unit shall be subject to the requirements under paragraph (c)(2) of this section for the control period starting on the later of January 1, 201 4 or the deadline for meeting the unit's monitor certification requirements under §97. 6 30(b) and for each control period thereafter. 14. Section 97.610 is revised to read as follows: **§ 97.6**  **10 State SO** **2 Group 1**  **trading budgets, new unit set****** **asides, Indian country new unit set -** **aside, and variability limits.** *** E.O. 12866 Review

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Page **91** of **96** (a) The State SO 2 Group 1 trading budgets , new unit set asides, and Indian country new unit set - asides for allocations of TR SO 2 Group 1 allowances for the control periods in 2012 and thereafter are as follows:

State SO 2 Group 1 trading

budget (tons)* for 2012 and 2013 New unit set aside (tons) for 2012 and 2013 Indian country

new unit set aside (tons) for 2012 and 2013 Illinois 234,889 11,744 --- Indiana 285,424 8,563 --- Iowa 107,085 2,035 107 Kentucky 232,662 13,960 --- Maryland 30,120 602 --- Michigan 229,303 4,357 229 Missouri 207 ,466 4,149 --- New Jersey 7,670 153 --- New York 30,852 586 31 North Carolina 136,881 10,813 137 Ohio 310,230 6,205 --- Pennsylvania 278,651 5,573 --- Tennessee 148,150 2,963 --- Virginia 70,820 2,833 --- West Virginia 146,174 10,232 --- Wisconsin 79,480 3,099 80

State SO 2 Group 1

trading budget (tons)* for 2014 and thereafter New unit set aside (tons) for 2014 and thereafter Indian country

new unit set aside (tons) for 2014 and thereafter*** E.O. 12866 Review

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Page **92** of **96** Illinois 124,123 6,206 --- Indiana 161,111 4,833 - -- Iowa 75,184 1,429 75 Kentucky 106,284 6,377 --- Maryland 28,203 564 --- Michigan 143,995 2,736 144 Missouri 165,941 3,319 --- New Jersey 5,574 111 --- New York 22,112 420 22 North Carolina 57,620 4,552 58 Ohio 137,077 2,742 --- Pennsylvania 11 2,021 2,240 --- Tennessee 58,833 1,177 --- Virginia 35,057 1,402 --- West Virginia 75,668 5,297 --- Wisconsin 47,883 1867 48 * Each trading budget includes the new unit set - aside and, where applicable, the Indian country new unit set - aside and does no t include the variability limit. (b) The States’ variability limits for the State SO 2 Group 1 trading budgets for the control periods in 201 4 and thereafter are as follows:

State Variability limits

for 2014 and thereafter Illinois 22,342 Indiana 29,0 00 Iowa 13,533 Kentucky 19,131 Maryland 5,077*** E.O. 12866 Review

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Page **93** of **96** Michigan 25,919 Missouri 29,869 New Jersey 1,003 New York 3, 980 North Carolina 10,372 Ohio 24,674 Pennsylvania 20,164 Tennessee 10,590 Virginia 6,310 West Virginia 13,620 Wisconsin 8,619 15. Section 97.625 is amended by, in paragraph (b)(1), removing the word “2013” and adding, in its place, the word “2015”. 16. S ection 97.706 is amended by: a. Revising paragraph (c)(3) by removing the words “paragraphs (c)(1) and (2)”, adding in their place the words “paragraph (c)(1)”, and designating the first sentence as paragraph (i); b. Adding a new paragraph (c)(3)(ii); and c. Revising paragraph (e)(2) by removing the words “or or” and adding, in their place, the word “or” to read as follows: **§ 97.**  **7 06**  **St andard requirements.** 
* * * * * **** E.O. 12866 Review

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Page **94** of **96** (c) * * * (3) * * * (ii) A TR SO 2 Group 2 unit shall be subject to the requirements under paragraph (c)(2) of this section for the control period starting on the later of January 1, 201 4 or the deadline for meeting the unit's monitor certification requirements under §97. 7 30(b) and for each control period thereafter. 14. Section 97.710 is revised to read as follows: **§ 97.710**  **State SO 2**  **Group 2 trading budgets, new unit set****** **asides, Indian country new unit set -** **aside, a nd variability**  **limits.** (a) The State SO 2 Group 2 trading budgets, new unit set asides, and Indian country new unit set - asides for allocations of TR SO 2 Group 2 allowances for the control periods in 2012 and thereafter are as follows:

State SO 2 Group 2 trading

budget (tons)* for 2012 and 2013 New unit set aside (tons) for 2012 and 2013 Indian country

new unit set aside (tons) for 2012 and 2013 Alabama 216,033 4,321 --- Georgia 158,527 3,171 ---*** E.O. 12866 Review

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Page **95** of **96** Kansas 41,528 789 42 Minnesota 41,981 798 42 Nebraska 65,052 2,537 65 South Carolina 88,620 1,683 89 Texas 314,021 15,387 314

State SO 2 Group 2

trading budget (tons)* for 2014 and thereafter New unit set aside (tons) for 2014 and thereafter Indian country

new unit set aside (tons) for 2014 and thereafter Alabama 213,258 4,265 --- Georgia 95,231 1,905 --- Kansas 41,528 789 42 Minnesota 41,981 798 42 Nebraska 65,052 2,537 65 South Carolina 88,620 1,683 89 Texas 314,021 15,387 314 * Each trading budget includes the new unit set - aside and, where applicable, the Indian country new unit set - aside and does not include the variability limit. (b) The States’ variability limits for the State SO 2 Group 2 trading budgets for the control periods in 201 4 and thereafter are as follows:

State Variability limits

for 2014 and thereafter*** E.O. 12866 Review

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Page **96** of **96** Alabama 38,386 Georgia 17,142 Kansas 7,475 Minnesota 7,557 Nebraska 11,709 South Carolina 15,952 Texas 56,524 15. Section 97.725 is amended by, in paragraph (b)(1), removing the word “2013” and adding, in its place, the word “2015”.