[Federal Register Volume 74, Number 197 (Wednesday, October 14, 2009)]
[Proposed Rules]
[Pages 52717-52723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-24705]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52 and 97

[EPA-R04-OAR-2009-0765; FRL-8968-7]


Approval and Promulgation of Air Quality Implementation Plans; 
Tennessee; Clean Air Interstate Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve revisions to the Tennessee State 
Implementation Plan (SIP) submitted by the State of Tennessee through 
the Tennessee Department of Environment and Conservation on July 13, 
2009. This revision incorporates provisions related to the 
implementation of EPA's Clean Air Interstate Rule (CAIR), promulgated 
on May 12, 2005, subsequently revised on April 28, 2006, and December 
13, 2006, and the CAIR Federal Implementation Plan (FIP) concerning 
Sulfur Dioxide (SO<INF>2</INF>), Nitrogen Oxides (NO<INF>X</INF>) 
annual, and NO<INF>X</INF> ozone season emissions for the State of 
Tennessee, promulgated on April 28, 2006, and subsequently revised 
December 13, 2006. Although the District of Columbia Circuit Court 
found CAIR to be flawed, the rule was remanded without vacatur and thus 
remains in place. EPA is continuing to approve CAIR provisions into 
SIPs as appropriate. EPA previously approved an ``abbreviated SIP'' for 
Tennessee, primarily consisting of rules governing allocation of 
allowances to electric generating units (EGUs) for use in the trading 
programs established pursuant to CAIR and providing for voluntary opt-
in to these programs on August 20, 2007 (72 FR 46388), effective on 
October 19, 2007. Tennessee has now requested, in a revised submittal 
dated September 21, 2009, and a clarification letter dated September 
24, 2009, that EPA act on a portion of the July 13, 2009, submittal as 
an abbreviated SIP.

[[Page 52718]]

Consequently, EPA is proposing to approve a SIP revision that addresses 
the transition of the State's NO<INF>X</INF> Budget Trading Program 
(Tennessee Air Pollution Control Regulations [TAPCR] Rule 1200-03-
27-.06) to the State's CAIR NO<INF>X</INF> Ozone Season Trading Program 
(TAPCR 1200-03-27-.11); the expansion of the current applicability 
provisions in the CAIR NO<INF>X</INF> Ozone Season Trading program to 
include units that are not otherwise subject to the trading program but 
are subject to the States NO<INF>X</INF> Budget Trading Program; and 
the methodology to be used to allocate ozone season NO<INF>X</INF> 
allowances to these units under the CAIR FIPs. Tennessee is also 
seeking approval of technical corrections to the CAIR NO<INF>X</INF> 
Ozone Season Trading Program opt-in provisions, as noted in the August 
20, 2007, approval. EPA is not making any changes to the CAIR FIP, but 
is amending the appropriate appendices to note EPA's approval of 
Tennessee's SIP revision.

DATES: Comments must be received on or before November 13, 2009.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R04-
OAR-2009-0765, by one of the following methods:
    1. http://www.regulations.gov: Follow the online instructions for 
submitting comments.
    2. E-mail: <a href="/cdn-cgi/l/email-protection#e280878c88838f8b8ccc8e9b8c8d908387a2879283cc858d94"><span class="__cf_email__" data-cfemail="6002050e0a010d090e4e0c190e0f120105200510014e070f16">[email protected]</span></a>.
    3. Fax: 404-562-9019.
    4. Mail: EPA-R04-OAR-2009-0765, Regulatory Development Section, Air 
Planning Branch, Air, Pesticides and Toxics Management Division, U.S. 
Environmental Protection Agency, Region 4, 61 Forsyth Street, SW., 
Atlanta, Georgia 30303-8960.
    5. Hand Delivery or Courier: Lynorae Benjamin, Chief, Regulatory 
Development Section, Air Planning Branch, Air, Pesticides and Toxics 
Management Division, U.S. Environmental Protection Agency, Region 4, 61 
Forsyth Street, SW., Atlanta, Georgia 30303-8960. Such deliveries are 
only accepted during the Regional Office's normal hours of operation. 
The Regional Office's official hours of business are Monday through 
Friday, 8:30 to 4:30, excluding Federal holidays.
    Instructions: Direct your comments to Docket ID No. EPA-R04-OAR-
2009-0765. EPA's policy is that all comments received will be included 
in the public 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 through http://www.regulations.gov or e-mail, information that you consider to be CBI 
or otherwise protected. The http://www.regulations.gov Web site 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 http://www.regulations.gov, 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 contact 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 should 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 electronic docket are listed in the 
http://www.regulations.gov index. Although listed in the index, some 
information is not publicly available, i.e., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically in http://www.regulations.gov or in hard copy at the Regulatory Development 
Section, Air Planning Branch, Air, Pesticides and Toxics Management 
Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth 
Street, SW., Atlanta, Georgia 30303-8960. EPA requests that if at all 
possible, you contact the person listed in the FOR FURTHER INFORMATION 
CONTACT section to schedule your inspection. The Regional Office's 
official hours of business are Monday through Friday, 8:30 to 4:30, 
excluding Federal holidays.

FOR FURTHER INFORMATION CONTACT: Steven Scofield, Regulatory 
Development Section, Air Planning Branch, Air, Pesticides and Toxics 
Management Division, U.S. Environmental Protection Agency, Region 4, 61 
Forsyth Street, SW., Atlanta, Georgia 30303-8960. The telephone number 
is (404) 562-9034. Mr. Scofield can also be reached via electronic mail 
at <a href="/cdn-cgi/l/email-protection#bac9d9d5dcd3dfd6de94c9cedfccdffadfcadb94ddd5cc"><span class="__cf_email__" data-cfemail="5c2f3f333a35393038722f28392a391c392c3d723b332a">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. What Action Is EPA Proposing to Take?
II. What Is the Regulatory History of CAIR and the CAIR FIPs?
III. What Are the General Requirements of CAIR and the CAIR FIPs?
IV. What Are the Types of CAIR SIP Submittals?
V. Analysis of Tennessee's CAIR SIP Submittal
    A. Elements of Tennessee's Submittal
    B. State Budgets for Allowance Allocations
    C. CAIR Cap-and-Trade Programs
    D. Applicability Provisions
    E. NO<INF>X</INF> Allowance Allocations
    F. Individual Opt-in Units
VI. Proposed Action
VII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing To Take?

    EPA is proposing to approve a revision to Tennessee's SIP, 
submitted by Tennessee on July 13, 2009, as clarified herein, that 
would modify the application of certain provisions of the CAIR FIP 
concerning NO<INF>X</INF> Ozone season emissions. (As discussed below, 
this less comprehensive CAIR SIP is termed an abbreviated SIP). 
Tennessee is subject to the CAIR FIPs that implement the CAIR 
requirements by requiring certain EGUs to participate in the EPA-
administered CAIR cap-and-trade programs addressing SO<INF>2</INF>, 
NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season emissions. This 
SIP revision provides a methodology for allocating NO<INF>X</INF> 
allowances for the NO<INF>X</INF> ozone season trading program for 
NO<INF>X</INF> SIP Call trading sources that are not EGUs as defined by 
CAIR, but are subject to the CAIR NO<INF>X</INF> ozone season trading 
program. The CAIR FIPs provide that this methodology, if approved, will 
be used to allocate NO<INF>X</INF> Ozone Season allowances to sources 
in Tennessee. Consistent with the flexibility provided in the FIPs, 
these provisions will also be used to replace or supplement, as 
appropriate, the corresponding provisions in the CAIR FIP for 
Tennessee. EPA is also proposing to approve technical corrections to 
the CAIR NO<INF>X</INF> Ozone Season Trading Program opt-in provisions, 
as noted in the August 20, 2007, approval. Since EPA will no longer 
administer the NO<INF>X</INF> Budget Trading Program, Tennessee has 
chosen to terminate its NO<INF>X</INF> Budget Trading program rules 
(TAPCR Rule 1200-03-27-.06). EPA is, therefore, proposing to approve 
provisions which terminate the State's NO<INF>X</INF> Budget

[[Page 52719]]

Trading Program because those requirements are now addressed by the 
CAIR NO<INF>X</INF> Ozone Season FIP, as modified by the State's 
abbreviated SIP. Finally, EPA is not making any changes to the CAIR 
FIP, but is amending the appropriate appendices to note EPA's approval 
of Tennessee's SIP revision.

II. What Is the Regulatory History of the CAIR and the CAIR FIPs?

    EPA published CAIR on May 12, 2005 (70 FR 25162). In this rule, EPA 
determined that 28 States and the District of Columbia contribute 
significantly to nonattainment and interfere with maintenance of the 
national ambient air quality standard (NAAQS) for fine particles 
(PM<INF>2.5</INF>) and/or 8-hour ozone in downwind states in the 
eastern part of the country. As a result, EPA required those upwind 
States to revise their SIPs to include control measures that reduce 
emissions of SO<INF>2</INF>, which is a precursor to PM<INF>2.5</INF> 
formation, and/or NO<INF>X</INF>, which is a precursor to both ozone 
and PM<INF>2.5</INF> formation. For jurisdictions that contribute 
significantly to downwind PM<INF>2.5</INF> nonattainment, CAIR sets 
annual state-wide emission reduction requirements (i.e., budgets) for 
SO<INF>2</INF> and annual state-wide emission reduction requirements 
for NO<INF>X</INF>. Similarly, for jurisdictions that contribute 
significantly to 8-hour ozone nonattainment, CAIR sets State-wide 
emission reduction requirements or budgets for NO<INF>X</INF> for the 
ozone season (May 1 to September 30). Under CAIR, states may implement 
these reduction requirements by participating in the EPA-administered 
cap-and-trade programs or by adopting any other control measures.
    CAIR explains to subject states what must be included in SIPs to 
address the requirements of section 110(a)(2)(D) of the Clean Air Act 
(CAA) with regard to interstate transport with respect to the 8-hour 
ozone and PM<INF>2.5</INF> NAAQS. EPA made national findings, effective 
on May 25, 2005, that the states had failed to submit SIPs meeting the 
requirements of section 110(a)(2)(D). The SIPs were due in July 2000, 3 
years after the promulgation of the 1997 8-hour ozone and 
PM<INF>2.5</INF> NAAQS. These findings started a 2-year clock for EPA 
to promulgate a FIP to address the requirements of section 
110(a)(2)(D). Under CAA section 110(c)(1), EPA may issue a FIP anytime 
after such findings are made and must do so within two years unless a 
SIP revision correcting the deficiency is approved by EPA before the 
FIP is promulgated.
    On April 28, 2006, EPA promulgated FIPs for all states covered by 
CAIR in order to ensure the emissions reductions required by CAIR are 
achieved on schedule. The CAIR FIPs require EGUs to participate in the 
EPA-administered CAIR SO<INF>2</INF>, NO<INF>X</INF> annual, and 
NO<INF>X</INF> ozone season trading programs, as appropriate. The CAIR 
FIP SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone 
season trading programs impose essentially the same requirements as, 
and are integrated with, the respective CAIR SIP trading programs. The 
integration of the FIP and SIP trading programs means that these 
trading programs will work together to effectively create a single 
trading program for each regulated pollutant (SO<INF>2</INF>, 
NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season) in all states 
covered by the CAIR FIP or SIP trading program for that pollutant. The 
CAIR FIPs also allow states to submit abbreviated SIP revisions that, 
if approved by EPA, will automatically replace or supplement the 
corresponding CAIR FIP provisions (e.g., the methodology for allocating 
NO<INF>X</INF> allowances to sources in the state), while the CAIR FIP 
remains in place for all other provisions.
    On April 28, 2006, EPA published two additional CAIR-related final 
rules that added the States of Delaware and New Jersey to the list of 
states subject to CAIR for PM<INF>2.5</INF> and announced EPA's final 
decisions on reconsideration of five issues, without making any 
substantive changes to the CAIR requirements. On October 19, 2007, EPA 
amended CAIR and the CAIR FIPs to clarify the definition of 
``cogeneration unit'' and thus the applicability of the CAIR trading 
program to cogeneration units.
    EPA was sued by a number of parties on various aspects of CAIR, and 
on July 11, 2008, the U.S. Court of Appeals for the District of 
Columbia Circuit issued its decision to vacate and remand both CAIR and 
the associated CAIR FIPs in their entirety. North Carolina v. EPA, 531 
F.3d 836 (DC Cir. Jul. 11, 2008). However, in response to EPA's 
petition for rehearing, the Court issued an order remanding CAIR to EPA 
without vacating either CAIR or the CAIR FIPs. North Carolina v. EPA, 
550 F.3d 1176 (DC Cir. Dec. 23, 2008). The Court thereby left CAIR in 
place in order to ``temporarily preserve the environmental values 
covered by CAIR'' until EPA replaces it with a rule consistent with the 
Court's opinion. Id. at 1178. The Court directed EPA to ``remedy CAIR's 
flaws'' consistent with its July 11, 2008, opinion, but declined to 
impose a schedule on EPA for completing that action. Id. Therefore, 
CAIR and the CAIR FIP are currently in effect in Tennessee.

III. What Are the General Requirements of CAIR and the CAIR FIPs?

    CAIR establishes state-wide emission budgets for SO<INF>2</INF> and 
NO<INF>X</INF> and is to be implemented in two phases. The first phase 
of NO<INF>X</INF> reductions starts in 2009 and continues through 2014, 
while the first phase of SO<INF>2</INF> reductions starts in 2010 and 
continues through 2014. The second phase of reductions for both 
NO<INF>X</INF> and SO<INF>2</INF> starts in 2015 and continues 
thereafter. CAIR requires states to implement the budgets by either: 
(1) Requiring EGUs to participate in the EPA-administered cap-and-trade 
programs; or (2) adopting other control measures of the state's 
choosing and demonstrating that such control measures will result in 
compliance with the applicable state SO<INF>2</INF> and NO<INF>X</INF> 
budgets.
    The May 12, 2005, and April 28, 2006, CAIR rules provide model 
rules that states must adopt (with certain limited changes, if desired) 
if they want to participate in the EPA-administered trading programs. 
With two exceptions, only states that choose to meet the requirements 
of CAIR through methods that exclusively regulate EGUs are allowed to 
participate in the EPA-administered trading programs. One exception is 
for states that adopt the opt-in provisions of the model rules to allow 
non-EGUs individually to opt into the EPA-administered trading 
programs. The other exception is for states that include all non-EGUs 
from their NO<INF>X</INF> SIP Call trading programs in their CAIR 
NO<INF>X</INF> ozone season trading programs.

IV. What Are the Types of CAIR SIP Submittals?

    States have the flexibility to choose the type of control measures 
they will use to meet the requirements of CAIR. EPA anticipates that 
most states will choose to meet the CAIR requirements by selecting an 
option that requires EGUs to participate in the EPA-administered CAIR 
cap-and-trade programs. For such states, EPA has provided two 
approaches for submitting and obtaining approval for CAIR SIP 
revisions. States may submit full SIP revisions that adopt the model 
CAIR cap-and-trade rules. If approved, these SIP revisions will fully 
replace the CAIR FIPs. Alternatively, states may submit abbreviated SIP 
revisions. These SIP revisions will not replace the CAIR FIPs; however, 
the CAIR FIPs provide that, when approved, the provisions in these 
abbreviated SIP revisions will be used instead of or in conjunction 
with, as appropriate, the corresponding provisions of the CAIR FIPs 
(e.g., the

[[Page 52720]]

NO<INF>X</INF> allowance allocation methodology).
    A state submitting a full SIP revision may either adopt regulations 
that are substantively identical to the model rules or incorporate by 
reference the model rules. CAIR provides that states may only make 
limited changes to the model rules if the states want to participate in 
the EPA-administered trading programs. A full SIP revision may change 
the model rules only by altering their applicability and allowance 
allocation provisions to:
    1. Include all NO<INF>X</INF> SIP Call trading sources that are not 
EGUs under CAIR in the CAIR NO<INF>X</INF> ozone season trading 
program;
    2. Provide for State allocation of NO<INF>X</INF> annual or ozone 
season allowances using a methodology chosen by the State;
    3. Provide for State allocation of NO<INF>X</INF> annual allowances 
from the compliance supplement pool (CSP) using the State's choice of 
allowed, alternative methodologies; or
    4. Allow units that are not otherwise CAIR units to opt 
individually into the CAIR SO<INF>2</INF>, NO<INF>X</INF> annual, or 
NO<INF>X</INF> ozone season trading programs under the opt-in 
provisions in the model rules.
    With the approval of an abbreviated SIP revision, the CAIR FIP 
remains in place, as tailored to sources in the State by that approved 
SIP revision.
    Abbreviated SIP revisions can be submitted in lieu of, or as part 
of, CAIR full SIP revisions, states may want to designate part of their 
full SIP as an abbreviated SIP for EPA to act on first when the timing 
of the State's submission might not provide EPA with sufficient time to 
approve the full SIP prior to the deadline for NO<INF>X</INF> 
allocations. This will help ensure that the elements of the trading 
programs where flexibility is allowed are implemented according to the 
State's decisions. Submission of an abbreviated SIP does not preclude 
future submission of a CAIR Full SIP revision. In this case the July 
13, 2009, submittal (revised on September 21, 2009, and clarified on 
September 24, 2009) from Tennessee has been submitted as an abbreviated 
SIP revision.

V. Analysis of Tennessee's CAIR SIP Submittal

A. Elements of Tennessee's Submittal

    In response to CAIR, Tennessee adopted rules that it submitted on 
September 8, 2006. These rules were intended to constitute a full SIP 
submittal, addressing the requirements under CAIR without reliance on 
the CAIR FIPs. Nevertheless, to expedite action on key provisions, 
Tennessee requested that EPA act on a subset of these rules 
constituting an abbreviated SIP (the rules defining the allocation of 
NO<INF>X</INF> allowances to EGUs under the CAIR FIP and provisions for 
sources voluntarily to opt into the SO<INF>2</INF>, NO<INF>X</INF> 
annual, and NO<INF>X</INF> ozone season trading programs), while 
deferring action on the remainder of the rules necessary to constitute 
a full SIP.
    Rulemaking on a full SIP submittal involves a broader range of 
issues than rulemaking on an abbreviated SIP submittal. EPA wished to 
expedite action on Tennessee's NO<INF>X</INF> allowance allocations and 
its rules allowing sources voluntarily to opt into the trading 
programs. Therefore, as requested by Tennessee, EPA took action on the 
abbreviated SIP portion of Tennessee's submittal and did not act on the 
remaining portions of Tennessee's September 8, 2006, submittal. EPA 
promulgated a direct final approval of these abbreviated SIP potions of 
Tennessee's rules on August 20, 2007 (72 FR 46388), which became 
effective on October 19, 2007.
    On February 11, 2009, Tennessee adopted revisions to its CAIR 
NO<INF>X</INF> Ozone Season Trading Program and on July 13, 2009, 
submitted a request to EPA for approval of these revisions into the 
SIP. That request was revised on September 21, 2009, and supplemented 
by letter to EPA dated September 24, 2009, clarifying portions of the 
submittal.

B. State Budgets for Allowance Allocations

    The CAIR NO<INF>X</INF> annual and ozone season budgets were 
developed from historical heat input data for EGUs. Using these data, 
EPA calculated annual and ozone season regional heat input values, 
which were multiplied by 0.15 pounds per million British thermal unit 
(lb/mmBtu) for phase 1, and 0.125 lb/mmBtu, for phase 2, to obtain 
regional NO<INF>X</INF> budgets for 2009-2014 and for 2015 and 
thereafter, respectively. EPA derived the State NO<INF>X</INF> annual 
and ozone season budgets from the regional budgets using State heat 
input data adjusted by fuel factors.
    The CAIR State SO<INF>2</INF> budgets were derived by discounting 
the tonnage of emissions authorized by annual allowance allocations 
under the Acid Rain Program under title IV of the CAA.
    Under CAIR, each allowance allocated in the Acid Rain Program for 
the years in phase 1 of CAIR (2010 through 2014) authorizes 0.50 ton of 
SO<INF>2</INF> emissions in the CAIR trading program, and each Acid 
Rain Program allowance allocated for the years in phase 2 of CAIR (2015 
and thereafter) authorizes 0.35 ton of SO<INF>2</INF> emissions in the 
CAIR trading program.
    The CAIR FIPs established budgets for Tennessee as 50,973 (2009-
2014) and 42,478 (2015-thereafter) tons for NO<INF>X</INF> annual 
emissions, 22,842 (2009-2014) and 19,035 (2015-thereafter) tons for 
NO<INF>X</INF> Ozone season emissions, and 137,216 (2010-1014) and 
96,051 (2015-thereafter) tons for SO<INF>2</INF> emissions. In 
Tennessee's SIP revision, submitted on July 13, 2009, Tennessee has 
chosen to include all NO<INF>X</INF> SIP Call trading sources that are 
not EGUs under CAIR in the CAIR NO<INF>X</INF> ozone season trading 
program. As a result of this SIP revision, the CAIR NO<INF>X</INF> 
ozone season budget will be increased annually by 5,666 tons to account 
for such NO<INF>X</INF> SIP Call trading sources. The total Tennessee 
CAIR NO<INF>X</INF> Ozone Season budgets are, therefore, 28,508 (2009-
2014) and 24,701 (2015 and thereafter) tons. EPA is proposing to 
approve Tennessee's State trading budgets under TAPCR 1200-3-
27-.11(2)(c).
    EPA notes that, in North Carolina, the Court determined, among 
other things, that the state SO<INF>2</INF> and NO<INF>X</INF> budgets 
established in CAIR were arbitrary and capricious. 531 F.3d at 916-21. 
However, as discussed above, the Court also decided to remand CAIR but 
to leave the rule in place in order to ``temporarily preserve the 
environmental values covered by CAIR'' pending EPA's development and 
promulgation of a replacement rule that remedies CAIR's flaws. Id. at 
1178. Pursuant to the Court's ruling, EPA is developing a new rule that 
will undergo notice and comment which will result in a final 
replacement rule for CAIR. In the meantime, EPA is implementing CAIR by 
approving SIP revisions that are consistent with CAIR (such as the 
provisions setting state SO<INF>2</INF> and NO<INF>X</INF> budgets for 
the CAIR trading programs) in order to ``temporarily preserve'' the 
environmental benefits achievable under the CAIR trading programs.

C. CAIR Cap-and-Trade Programs

    The CAIR NO<INF>X</INF> annual and ozone-season model trading rules 
both largely mirror the structure of the NO<INF>X</INF> SIP Call model 
trading rule in 40 CFR Part 96, subparts A through I. While the 
provisions of the NO<INF>X</INF> annual and ozone-season model rules 
are similar, there are some differences. For example, the 
NO<INF>X</INF> annual model rule (but not the NO<INF>X</INF> ozone 
season model rule) provides for a CSP, which is discussed below and 
under which allowances may be awarded for early reductions of 
NO<INF>X</INF> annual emissions. As a further example, the 
NO<INF>X</INF> ozone season model rule

[[Page 52721]]

reflects the fact that the CAIR NO<INF>X</INF> ozone season trading 
program replaces the NO<INF>X</INF> SIP Call trading program after the 
2008 ozone season and is coordinated with the NO<INF>X</INF> SIP Call 
program. The NO<INF>X</INF> ozone season model rule provides incentives 
for early emissions reductions by allowing banked, pre-2009 
NO<INF>X</INF> SIP Call allowances to be used for compliance in the 
CAIR NO<INF>X</INF> ozone-season trading program. In addition, states 
have the option of continuing to meet their NO<INF>X</INF> SIP Call 
requirement by participating in the CAIR NO<INF>X</INF> ozone season 
trading program and including all their NO<INF>X</INF> SIP Call trading 
sources in that program.
    The provisions of the CAIR SO<INF>2</INF> model rule are also 
similar to the provisions of the NO<INF>X</INF> annual and ozone season 
model rules. However, the SO<INF>2</INF> model rule is coordinated with 
the ongoing Acid Rain SO<INF>2</INF> cap-and-trade program under CAA 
title IV. The SO<INF>2</INF> model rule uses the title IV allowances 
for compliance, with each allowance allocated for 2010-2014 authorizing 
only 0.50 ton of emissions and each allowance allocated for 2015 and 
thereafter authorizing only 0.35 ton of emissions. Banked title IV 
allowances allocated for years before 2010 can be used at any time in 
the CAIR SO<INF>2</INF> cap-and-trade program, with each such allowance 
authorizing 1 ton of emissions. Title IV allowances are to be freely 
transferable among sources covered by the Acid Rain Program and sources 
covered by the CAIR SO<INF>2</INF> cap-and-trade program.
    EPA also used the CAIR model trading rules as the basis for the 
trading programs in the CAIR FIPs. The CAIR FIP trading rules are 
virtually identical to the CAIR model trading rules, with changes made 
to account for Federal rather than state implementation. The CAIR model 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
trading rules and the respective CAIR FIP trading rules are designed to 
work together as integrated SO<INF>2</INF>, NO<INF>X</INF> annual, and 
NO<INF>X</INF> ozone season trading programs.
    Tennessee is subject to the CAIR FIPs concerning SO<INF>2</INF>, 
NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season emissions and 
the CAIR FIP trading programs for SO<INF>2</INF>, NO<INF>X</INF> 
annual, and NO<INF>X</INF> ozone season apply to sources in Tennessee. 
Consistent with the flexibility it gives to the states, the CAIR FIPs 
provide that states may submit abbreviated SIP revisions that will 
replace or supplement, as appropriate, certain provisions of the CAIR 
FIP trading programs. The July 13, 2009, submission of Tennessee is 
such an abbreviated SIP revision.

D. Applicability Provisions

    In general, the CAIR model trading rules apply to any stationary, 
fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion 
turbine serving at any time, since the later of November 15, 1990, or 
the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 megawatt electrical (MWe) producing 
electricity for sale.
    States have the option of bringing in, for the CAIR NO<INF>X</INF> 
ozone season program only, those units in the state's NO<INF>X</INF> 
SIP Call trading program that are not EGUs as defined under CAIR. EPA 
advises states exercising this option to add the applicability 
provisions in the state's NO<INF>X</INF> SIP Call trading rule for non-
EGUs to the applicability provisions in 40 CFR 96.304 in order to 
include in the CAIR NO<INF>X</INF> ozone season trading program all 
units required to be in the state's NO<INF>X</INF> SIP Call trading 
program that are not already included under 40 CFR 96.304. Under this 
option, the CAIR NO<INF>X</INF> ozone season program must cover all 
large industrial boilers and combustion turbines, as well as any small 
EGUs (i.e., units serving a generator with a nameplate capacity of 25 
MWe or less) that the state currently requires to be in the 
NO<INF>X</INF> SIP Call trading program.
    In this SIP revision, Tennessee has chosen to expand the 
applicability provisions of the CAIR NO<INF>X</INF> ozone season 
trading program to include all units required to be in the state's 
NO<INF>X</INF> SIP Call trading program that are not already included 
under 40 CFR 96.304. EPA is proposing to approve Tennessee's CAIR 
NO<INF>X</INF> ozone season applicability provisions, under TAPCR 1200-
3-27-.11(2)(b)3. In addition, Tennessee has revised the definitions for 
``commence commercial operation'' and ``commence operation'' in order 
to support the expanded applicability. Although omitted by error from 
its original request, by a submittal dated September 21, 2009, 
Tennessee has requested that EPA approve Tennessee's revised 
definitions. Through this action, EPA is proposing to approve 
Tennessee's revised definitions, i.e., TAPCR 1200-3-27-.11(2)(a).

E. NOX Allowance Allocations

    Under the NO<INF>X</INF> allowance allocation methodology in the 
CAIR model trading rules and in the CAIR FIP, NO<INF>X</INF> annual and 
ozone season allowances are allocated to units that have operated for 
five years, based on heat input data from a three-year period that are 
adjusted for fuel type by using fuel factors of 1.0 for coal, 0.6 for 
oil, and 0.4 for other fuels. The CAIR model trading rules and the CAIR 
FIP also provide a new unit set-aside from which units without five 
years of operation are allocated allowances based on the units' prior 
year emissions.
    States may establish in their SIP submissions a different 
NO<INF>X</INF> allowance allocation methodology that will be used to 
allocate allowances to sources in the States if certain requirements 
are met concerning the timing of submission of units' allocations to 
the Administrator for recordation and the total amount of allowances 
allocated for each control period. In adopting alternative 
NO<INF>X</INF> allowance allocation methodologies, states have 
flexibility with regard to:
    1. The cost to recipients of the allowances, which may be 
distributed for free or auctioned;
    2. The frequency of allocations;
    3. The basis for allocating allowances, which may be distributed, 
for example, based on historical heat input or electric and thermal 
output; and
    4. The use of allowance set-asides and, if used, their size.
    Consistent with the flexibility given to states in the CAIR FIPs, 
Tennessee, in a SIP revision submitted to EPA on September 8, 2006, 
chose to distribute CAIR NO<INF>X</INF> annual and CAIR NO<INF>X</INF> 
ozone season allowances with its own methodology. That SIP revision was 
approved by EPA on August 20, 2007, and became effective on October 19, 
2007 (see 72 FR 46388; August 20, 2007). In today's SIP revision, 
Tennessee is seeking approval of the expansion of the current 
applicability provisions in the CAIR NO<INF>X</INF> ozone season 
trading program to include units that are not otherwise subject to the 
CAIR trading program but are subject to Tennessee's NO<INF>X</INF> SIP 
Call trading program. Consistent with the expansion of the CAIR 
NO<INF>X</INF> ozone season trading program applicability, Tennessee is 
revising the allocation methodology provisions in the CAIR 
NO<INF>X</INF> ozone season trading program to cover these units. 
Tennessee's SIP revision indicates that the units that are being 
brought into CAIR NO<INF>X</INF> ozone season as a result of the 
expansion of the CAIR NO<INF>X</INF> ozone season trading program 
applicability will be allocated allowances in the amounts specified in 
the SIP.
    EPA understands, and it is explained in a revised submission by 
Tennessee on September 21, 2009, that the reference to the SIP in 
Tennessee's SIP revision (TAPCR 1200-3-27-.11(2)(d)2.(ii)) refers to 
the allocation methodology identified in the State's NO<INF>X</INF> SIP 
Call and that the Tennessee does not intend to change the allocation 
methodology for these sources, just to

[[Page 52722]]

include it in the new rules. In addition, the allocation provisions in 
section (d)1.(ii)(I) reference the ``State trading budget under part 
(b)1. of this paragraph.'' However, the Tennessee State trading budgets 
are now located in part ``TAPCR 1200-3-27-.11(2)(c)1.'' Tennessee has 
identified the reference to the ``State budget under part (b)1.'' as a 
typographical error and explained that the reference should instead be 
to the ``State trading budget under part (c)1. of this paragraph'' in a 
letter dated September 24, 2009.
    Finally, the Tennessee revision under TAPCR 1200-3-
27-.11(2)(d)2.(iii) refers to CAIR NO<INF>X</INF> ozone season units 
identified in ``part (2)(b)2. of this rule'' that do not yet have a 
baseline heat input. Since it is Tennessee's intention to describe the 
procedure for allocating CAIR NO<INF>X</INF> ozone season allowances to 
units that are being brought into the CAIR NO<INF>X</INF> ozone season 
trading program from the NO<INF>X</INF> Budget Trading Program under 
TAPCR 1200-3-27-.11(2)(b)3., Tennessee has clarified in a letter dated 
September 24, 2009, that the reference to units identified in ``part 
(2)(b)2.'' is a typographical error and should instead reference units 
identified in ``part (2)(b)3.'' EPA is proposing to approve Tennessee's 
allocation procedures under TAPCR 1200-3-27-.11(2)(d), as explained and 
clarified in the September 24, 2009, letter.

F. Individual Opt-in Units

    The opt-in provisions allow for certain non-EGUs (i.e., boilers, 
combustion turbines, and other stationary fossil-fuel-fired devices) 
that do not meet the applicability criteria for a CAIR trading program 
to participate voluntarily in (i.e., opt into) the CAIR trading 
program. A non-EGU may opt into one or more of the CAIR trading 
programs. In order to qualify to opt into a CAIR trading program, a 
unit must vent all emissions through a stack and be able to meet 
monitoring, recordkeeping, and recording requirements of 40 CFR part 
75. The owners and operators seeking to opt a unit into a CAIR trading 
program must apply for a CAIR opt-in permit. If the unit is issued a 
CAIR opt-in permit, the unit becomes a CAIR unit, is allocated 
allowances, and must meet the same allowance-holding and emissions 
monitoring and reporting requirements as other units subject to the 
CAIR trading program. The opt-in provisions provide for two 
methodologies for allocating allowances for opt-in units, one 
methodology that applies to opt-in units in general and a second 
methodology that allocates allowances only to opt-in units that the 
owners and operators intend to repower before January 1, 2015.
    In an earlier SIP revision approved by EPA on August 20, 2007, 
Tennessee chose to allow non-affected units meeting certain 
requirements to participate in the CAIR NO<INF>X</INF> annual trading 
program, CAIR NO<INF>X</INF> Ozone Season Trading program and CAIR 
SO<INF>2</INF> Trading Program by adopting by reference EPA's model 
rule provisions for opt-in units in 40 CFR part 96, subpart II, subpart 
III and subpart IIII, respectively. In adopting by reference the CAIR 
opt-in provisions, Tennessee had included in its rule a full written 
version of those provisions, which contained some technical errors, and 
did not specifically reference the CAIR model rule provisions related 
to opt-in units in other subparts of the CAIR model trading rules. 
Because Tennessee intended to adopt entirely the CAIR model rule opt-in 
provisions and because Tennessee indicated that it would correct the 
minor errors in the rule text, in the August 20, 2007, approval, EPA 
interpreted the Tennessee provisions as substantively identical to the 
CAIR model rule opt-in. As a result, the opt-in provisions in the CAIR 
FIP trading programs apply to units in Tennessee. In this SIP revision, 
Tennessee submitted corrections to the CAIR NO<INF>X</INF> Ozone Season 
rule that had been identified in the earlier submittal approved by EPA 
on August 20, 2007. Today, EPA is proposing to approve those 
corrections to the CAIR NO<INF>X</INF> Ozone Season trading program 
opt-in provisions.

VI. Proposed Action

    EPA is proposing to approve Tennessee's SIP revision that includes 
an abbreviated CAIR SIP submitted on July 13, 2009, and revised 
September 21, 2009, as clarified herein. Tennessee is covered by the 
CAIR FIPs which require participation in the EPA administered CAIR FIP 
cap and trade programs for SO<INF>2</INF>, NO<INF>X</INF> annual, and 
NO<INF>X</INF> ozone season emissions. Under this SIP revision and 
consistent with the flexibility given to the states in the FIPs, EPA is 
proposing to approve Tennessee's CAIR NO<INF>X</INF> ozone season 
provisions expanding the current applicability provisions in the CAIR 
NO<INF>X</INF> ozone season trading program to include units that are 
not otherwise subject to the trading program but are subject to 
Tennessee's NO<INF>X</INF> Budget Trading Program; revisions to the 
allocation methodology provisions (interpreted as discussed above) in 
the CAIR NO<INF>X</INF> ozone season trading program to cover these 
units; and corrections to the CAIR NO<INF>X</INF> Ozone season trading 
program opt-in provisions (as discussed above).
    As provided for in the CAIR FIPs, the provisions in the abbreviated 
SIP revision will replace or supplement the corresponding provisions of 
the CAIR FIPs in Tennessee. The abbreviated SIP revision meets the 
applicable requirements in 40 CFR 51.123(ee), with regard to 
NO<INF>X</INF> ozone season emissions. EPA is not making any changes to 
the CAIR FIP, but is amending the appropriate appendices to note EPA's 
approval of Tennessee's SIP revision.
    This action also approves the termination of the State's 
NO<INF>X</INF> Budget Trading Program as discussed in Section I.

VII. Statutory and Executive Order Reviews

    Under the CAA, the Administrator is required to approve a SIP 
submission that complies with the provisions of the Act and applicable 
Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in 
reviewing SIP submissions, EPA's role is to approve state choices, 
provided that they meet the criteria of the CAA. Accordingly, this 
proposed action merely approves state law as meeting Federal 
requirements and does not impose additional requirements beyond those 
imposed by State law. For that reason, this proposed action:
    <bullet> Is not a ``significant regulatory action'' subject to 
review by the Office of Management and Budget under Executive Order 
12866 (58 FR 51735, October 4, 1993);
    <bullet> Does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
    <bullet> Is certified as not having a significant economic impact 
on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.);
    <bullet> Does not contain any unfunded mandate or significantly or 
uniquely affect small governments, as described in the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4);
    <bullet> Does not have Federalism implications as specified in 
Executive Order 13132 (64 FR 43255, August 10, 1999);
    <bullet> Is not an economically significant regulatory action based 
on health or safety risks subject to Executive Order 13045 (62 FR 
19885, April 23, 1997);
    <bullet> Is not a significant regulatory action subject to 
Executive Order 13211 (66 FR 28355, May 22, 2001);
    <bullet> Is not subject to requirements of Section 12(d) of the 
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) because

[[Page 52723]]

application of those requirements would be inconsistent with the CAA; 
and
    <bullet> Does not provide EPA with the discretionary authority to 
address, as appropriate, disproportionate human health or environmental 
effects, using practicable and legally permissible methods, under 
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this rule does not have tribal implications as 
specified by Executive Order 13175 (65 FR 67249, November 9, 2000), 
because the SIP is not approved to apply in Indian country located in 
the state, and EPA notes that it will not impose substantial direct 
costs on tribal governments or preempt tribal law.

List of Subjects

40 CFR Part 52

    Environmental protection, Air pollution control, Electric 
utilities, Intergovernmental relations, Incorporation by reference, 
Carbon monoxide, Nitrogen oxides, Ozone, Particulate matter, Reporting 
and recordkeeping requirements, Sulfur dioxide.

40 CFR Part 97

    Environmental protection, Air pollution control, Electric 
utilities, Intergovernmental relations, Incorporation by reference, 
Nitrogen oxides, Ozone, Particulate matter, Reporting and recordkeeping 
requirements, Sulfur dioxide.

    Dated: October 5, 2009.
Beverly H. Banister,
Acting Regional Administrator, Region 4.
[FR Doc. E9-24705 Filed 10-13-09; 8:45 am]
BILLING CODE 6560-50-P


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