Federal Register / Vol. 71, No. 172 / Wednesday, September 6, 2006 / Rules and Regulations 52703 

EPA APPROVED REGULATIONS IN THE TEXAS SIP—Continued 

State citation Title/subject State approval/ 

submittal 

Explanation approval 

date Explanation 

Chapter 116 (Reg 6)—Control of Air Pollution by Permits for New Construction or Modification 

Subchapter A—Definitions 

Section 116.10 ................................. General Definitions .......................... 06/17/98 [Insert date of FR 

publication] [Insert 

FR page number 

where document 

begins].

The SIP does not include subsections 

116.10(1), (2), (3), 

(6), (8), (9), (10), 

and (14). 

* * * * * * * 

[FR Doc. 06–7413 Filed 9–5–06; 8:45 am] 

BILLING CODE 6560–50–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R06–OAR–2005–TX–0029; FRL–8216–

5] 

Approval and Promulgation of State 

Implementation Plans; Texas; Discrete 

Emission Credit Banking and Trading 

Program 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Final rule; conditional approval. 

SUMMARY: EPA is finalizing our 

conditional approval of revisions to the 

Texas State Implementation Plan (SIP) 

concerning the Discrete Emission Credit 

Banking and Trading Program. 

DATES: This rule is effective on October 

6, 2006. 

ADDRESSES: EPA has established a 

docket for this action under Docket ID 

No. EPA–R06–OAR–2005–TX–0029. All 

documents in the docket are listed on 

the www.regulations.gov web site. 

Although listed in the index, some 

information is not publicly available, 

e.g., CBI or other information whose 

disclosure is restricted by statute. 

Certain other material, such as 

copyrighted material, is not placed on 

the Internet and will be publicly 

available only in hard copy form. 

Publicly available docket materials are 

available either electronically through 

www.regulations.gov or in hard copy at 

the Air Permitting Section (6PD–R), 

Environmental Protection Agency, 1445 

Ross Avenue, Suite 700, Dallas, Texas 

75202–2733. The file will be made 

available by appointment for public 

inspection in the Region 6 FOIA Review 

Room between the hours of 8:30 a.m. 

and 4:30 p.m. weekdays except for legal 

holidays. Contact the person listed in 

the FOR FURTHER INFORMATION CONTACT

paragraph below to make an 

appointment. If possible, please make 

the appointment at least two working 

days in advance of your visit. There will 

be a 15-cent per page fee for making 

photocopies of documents. On the day 

of the visit, please check in at the EPA 

Region 6 reception area at 1445 Ross 

Avenue, Suite 700, Dallas, Texas. 

The State submittal related to this SIP 

revision, and which is part of the EPA 

docket, is also available for public 

inspection at the State Air Agency listed 

below during official business hours by 

appointment: 

Texas Commission on Environmental 

Quality, Office of Air Quality, 12124 

Park 35 Circle, Austin, Texas 78753. 

FOR FURTHER INFORMATION CONTACT: 

Adina Wiley, Air Permitting Section 

(6PD–R), EPA Region 6, 1445 Ross 

Avenue, Dallas, Texas 75202–2733, 

telephone 214–665–2115, 

wiley.adina@epa.gov. 

SUPPLEMENTARY INFORMATION: 

Throughout this document wherever 

‘‘we,’’ ‘‘us,’’ or ‘‘our’’ is used, we mean 

EPA. 

Outline 

I. What Action Is EPA Taking? 

II. What is a conditional approval? 

III. What future actions are necessary for the 

DERC rule to fully meet EPA’s 

expectations? 

IV. What is the background for this action? 

V. What are EPA’s responses to comments 

received on the proposed action? 

VI. What does Federal approval of a State 

regulation mean to me? 

VII. Statutory and Executive Order Reviews 

I. What action is EPA taking? 

EPA is conditionally approving, as 

part of the Texas SIP, the Discrete 

Emission Credit Banking and Trading 

program, also referred to as the Discrete 

Emission Reduction Credit (DERC) 

program, enacted at Texas 

Administrative Code (TAC) Title 30, 

Chapter 101 General Air Quality Rules, 

Subchapter H, Division 4, sections 

101.370–101.374, 101.376, 101.378, and 

101.379. These revisions were provided 

in SIP revisions dated July 22, 1998 

(state effective date December 23, 1997); 

December 20, 2000 (state effective date 

January 18, 2001); July 15, 2002 (state 

effective date April 14, 2002); January 

31, 2003 (state effective date January 17, 

2003), and December 06, 2004 (state 

effective date December 2, 2004). 

As discussed in our proposed action 

at 70 FR 58164–58166, we conclude that 

the DERC program is consistent with 

section 110(l) of the Clean Air Act. 

The DERC program that we are 

conditionally approving today into the 

Texas SIP includes numerous crossreferences to different State rules. In 

order to be able to conditionally 

approve (or fully approve) a revision 

into a SIP, we also must conditionally 

approve (or fully approve) any crossreferenced rules that are integral to the 

establishment, implementation, and 

enforcement of the SIP revision. Our 

detailed evaluation of all the crossreferences in the State’s DERC rule 

language to other State rules not part of 

Subchapter H, Division 4, sections 

101.370–101.374, 101.376, 101.378, and 

101.379 can be found in the ‘‘Review of 

Cross-References in the DERC Program’’

discussion in Section IV of the 

Technical Support Document (available 

in the rulemaking docket EPA–R06–

OAR–2005–TX–0029). 

Today, EPA finds that the crossreferences in the following sections of 

the DERC program have already been 

approved into the Texas SIP: 

101.370(29) at 65 FR 70792; 

101.372(b)(3) at 63 FR 11835; 

101.372(d)(1)(A) at 66 FR 57244; 

101.372(d)(1)(B) at 60 FR 12438, 62 FR 

27964, 65 FR 18003, 66 FR 36917, and 

66 FR 54688; 101.372(f)(4) at 66 FR 

36917; 101.373(b)(1) at 67 FR 58697; 

and 101.376(d)(2)(A) at 66 FR 57244. 

Additionally, the cross-references in 

sections 101.370(28) and 101.376(c)(5) 

have been approved by the EPA into the 

Texas Federal Operating Permits 

Program on December 06, 2001, and 

March 31, 2005. The cross-reference in 

section 101.376(b)(3) is addressed in a 


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52704 Federal Register / Vol. 71, No. 172 / Wednesday, September 6, 2006 / Rules and Regulations 

corresponding action on the Texas Mass 

Emissions Cap and Trade program 

published separately in today’s Federal 

Register. 

We are not approving section 

101.376(c)(4) into the Texas SIP because 

the cross-references to 30 TAC Chapter 

106 Permit by Rule, sections 106.261 (3) 

or (4) or section 106.262(3) are incorrect 

and do not exist in State law, the Texas 

SIP, or the Texas Federal Operating 

Permits program. Consequently, unless 

and until the State adopts and submits 

a revision to EPA for approval as a SIP 

revision and EPA approves it, the use of 

discrete emission credits to exceed the 

provisions in certain types of preconstruction permits termed Permits by 

Rule is not available under the Texas 

SIP. 

In our proposed conditional approval 

of the DERC program, we also proposed 

approving section 115.950 in 30 TAC 

Chapter 115, Control of Air Pollution 

from Volatile Organic Compounds, 

which cross-references the DERC 

program, and we proposed approving 

the definition of ‘‘facility’’ published at 

30 TAC Chapter 116, Control of Air 

Pollution by Permits for New 

Construction or Modification, 

Subchapter A, section 116.10. Our final 

action on those two provisions is not 

included in this final rule, but is instead 

in our final action on the Emission 

Credit Banking and Trading program, 

referred to as the Emission Reduction 

Credit (ERC) program. Our approval of 

sections 115.950 and the definition of 

‘‘facility’’ in 116.10 is not affected by 

the conditions on our approval of the 

DERC program. 

II. What is a conditional approval? 

Under section 110(k)(4) of the Clean 

Air Act, EPA may conditionally approve 

a plan based on a commitment from the 

State to adopt specific enforceable 

measures by a date certain that is no 

more than one year from the date of 

conditional approval. If EPA determines 

that the revised rule is approvable, EPA 

will propose approval of the rule. If the 

State fails to meet its commitment 

within the one-year period, the approval 

is treated as a disapproval. There are at 

least two ways that the conditional 

approval may be converted to a 

disapproval. 

• If the State fails to adopt and submit 

the specified measures by the date it 

committed to do so, or fails to submit 

anything at all, EPA will issue a finding 

of disapproval, but will not have to 

propose the disapproval. No proposal is 

required, because in the original 

proposed and final conditional approval 

EPA will have provided notice and an 

opportunity for comment on the fact 

that EPA would directly make the 

finding of disapproval (by letter) if the 

State failed to submit anything. 

Therefore, under this scenario, after the 

date by which the state committed to 

adopt and submit the measures, the 

Regional Administrator (RA) would 

send a letter to the State finding that it 

failed to meet its commitment and that 

the SIP submittal was therefore 

disapproved. The 18-month clock for 

sanctions and the two-year clock for a 

Federal Implementation Plan (FIP) 

would start as of the date of the letter. 

Subsequently, a notice to that effect 

would be published in the Federal 

Register, and appropriate language 

inserted in the Code of Federal 

Regulations (CFR). Similarly, if EPA 

receives a submittal addressing the 

commitment but determines that the 

submittal is incomplete, the RA will 

send a letter to the State making such a 

finding. As with the failure to submit, 

the sanctions and FIP clocks will begin 

as of the date of the finding letter. 

• Where the State does make a 

complete submittal by the date it 

committed to do so, EPA will evaluate 

that submittal to determine if it may be 

approved and will take final action on 

the submittal within 12 months after the 

date EPA determines the submittal is 

complete. If the submittal does not 

adequately address the deficiencies that 

were the subject of the conditional 

approval, and is therefore not 

approvable, EPA must go through 

notice-and-comment rulemaking to 

disapprove the submittal. The 18-month 

clock for sanctions and the two-year 

clock for a FIP start as of the date of 

final disapproval. 

In either instance, whether EPA 

finally approves or disapproves the rule, 

the conditional approval remains in 

effect until EPA takes its final action. 

Note that EPA will conditionally 

approve a certain rule only once. 

Subsequent submittals of the same rule 

that attempt to correct the same 

specifically identified problems will not 

be eligible for conditional approval. 

III. What future actions are necessary 

for the DERC rule to fully meet EPA’s 

expectations? 

TCEQ has submitted a commitment 

letter to Region 6 outlining the steps 

that will be taken to achieve full 

approval. This letter, dated September 

8, 2005, can be found in the DERC 

administrative record, EPA–R06–OAR–

2005–TX–0029. The commitments are: 

(1) Revising the language in section 

101.373: 

a. To prohibit the future generation of 

discrete emission reduction credits from 

permanent shutdowns; and 

b. To allow discrete emission 

reduction credits generated from 

permanent shutdowns before September 

30, 2002, to remain available for use for 

no more than five years from the date 

of the commitment letter. 

(2) TCEQ will perform a credit audit 

to remove from the emissions bank all 

discrete emission reduction credits 

generated from permanent shutdowns 

after September 30, 2002. 

(3) Revising the language in sections 

101.302(f), 101.372(f)(7), and 

101.372(f)(8) to clarify that EPA 

approval is required for individual 

transactions involving emission 

reductions generated in another state or 

nation, as well as those transactions 

from one nonattainment area to another 

or from attainment counties into 

nonattainment areas. 

(4) TCEQ will revise Form DEC–1, 

Notice of Generation and Generator 

Certification of Discrete Emission 

Credits; Form MDEC–1, Notice of 

Generation and Generator Certification 

of Mobile Discrete Emission Credits; 

and Form DEC–2, Notice of Intent to 

Use Discrete Emission Credits, to 

include a waiver to the Federal statute 

of limitations defense for generators and 

users of discrete emission credits. 

(5) TCEQ will maintain its current 

policy of preserving all records relating 

to discrete emission credit generation 

and use for a minimum of five years 

after the use strategy has ended. 

Additionally, TCEQ has agreed to 

comply with these commitments during 

the conditional approval period. 

Specifically, TCEQ will not approve any 

trades involving the types of reductions 

described in item (3) above, will not 

approve any use of discrete shutdown 

credits that were generated after 

September 30, 2002, will only allow 

shutdown DERCs generated before 

September 30, 2002, to be used for up 

to five years from the date of the 

commitment letter, and will require the 

waiver described in item (4) above for 

generators and users of discrete 

emission credits. TCEQ must submit 

revised rules satisfying the above 

conditions to EPA on or before 

December 01, 2006. The conditional 

approval will automatically become a 

disapproval if the revisions are not 

completed and submitted to EPA by this 

date. 

IV. What is the background for this 

action? 

The DERC rules establish a type of 

Economic Incentive Program (EIP), in 

particular an open market emissions 

trading program as described in EPA’s 

EIP Guidance document, Improving Air 

Quality with Economic Incentive 


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Programs’ (EPA–452/R–01–001, January 

2001). This program provides flexibility 

for sources in complying with certain 

State and Federal requirements. In an 

open market trading program, a source 

generates emission credits by reducing 

its emissions during a discrete period of 

time. These credits, called discrete 

emission credits, or DECs, in the Texas 

program, are quantified in units of mass. 

Discrete emission credit (DEC) is a 

generic term that encompasses 

reductions from stationary sources 

(discrete emission reduction credits, or 

DERCs), and reductions from mobile 

sources (mobile discrete emission 

reduction credits, or MDERCs). The 

DERC program was first adopted by the 

State at 30 TAC section 101.29 on 

December 23, 1997. Effective January 

18, 2001, section 101.29 was repealed 

and Chapter 101, Subchapter H, 

Divisions l, 3, and 4 were created. This 

action created separate divisions for the 

ERC, Mass Emissions Cap and Trade 

(MECT) in the Houston/Galveston/ 

Brazoria (HGB) area, and DERC 

programs. Amendments to the MECT 

were adopted on October 18, 2001; these 

amendments also included changes 

made primarily for clarification to 

sections 101.370, 101.372, and 101.373 

in the DERC program. As of April 14, 

2002, TCEQ amended the program to 

include the provisions in Texas Senate 

Bill 1561 for air emissions trading 

across international boundaries. 

Effective January 17, 2003, TCEQ 

reorganized the DERC and ERC program 

rules into more standardized formats 

parallel to each other, with a rule 

structure which followed a process of 

recognizing, quantifying, and certifying 

reductions as credits while explaining 

the guidelines for trading and using 

creditable reductions. The most recent 

submittal, of December 06, 2004, 

amended sections 101.370, 101.373, 

101.373, and 101.376. The DERC 

program adoption and the subsequent 

revisions were submitted to EPA for 

approval into the SIP; however, today’s 

approval is the first time we have acted 

on this program. In doing so we are 

acting on the original submission of July 

22, 1998, and all subsequent revisions 

through the December 6, 2004, 

submittal. 

The DERC program contains several 

features that EPA feels are important 

enough to discuss here. The DERC 

program provides at section 101.372(f) 

that emission reductions from another 

county, state, or nation may be used 

subject to certain conditions. The 

current wording of the rule is unclear as 

to when prior approval from EPA will 

be required. To improve this aspect of 

the rule, on completion of the condition 

outlined above the rule will more 

clearly require prior EPA approval for 

all transactions involving emission 

reductions generated in another state or 

nation, as well as those transactions 

from one nonattainment area to another, 

or from attainment counties into 

nonattainment counties. 

EPA has addressed the possibility of 

cross-jurisdictional trades, such as those 

in section 101.372, in Appendix 16.16 

of the EIP Guidance. Satisfaction of the 

provisions of Appendix 16.16 will 

ensure that cross-jurisdictional trades 

are consistent with the fundamental 

integrity, equity, and environmental 

benefit principles described in the EIP 

Guidance. The EPA review and 

approval authority in section 101.372(f), 

as revised in accordance with EPA’s 

conditions for approval, will be the 

mechanism by which EPA ensures that 

inappropriate trades do not take place. 

In particular, EPA intends to require a 

further SIP revision (either a detailed 

trading program, such as an MOU, or a 

trade-specific submission) before 

approving any international trade, 

interstate trades, or intrastate trades that 

involve increases in a nonattainment 

area and reductions from beyond that 

nonattainment area. 

Among these types of trades requiring 

a further SIP revision, international 

trades present an especially difficult 

case. For instance, currently there is no 

approvable mechanism for 

demonstrating that reductions made in 

another country are surplus or 

enforceable. Nonetheless, emission 

reductions in other countries could 

potentially offer substantial air quality 

benefits in the United States. In 

approving the DERC program, EPA is 

recognizing the concept of international 

trading and describing a framework (i.e., 

the submission of a SIP revision 

demonstrating, among other things, the 

validity and enforceability of foreign 

reductions) for such trading, in the 

event that a suitable and approvable 

mechanism is ever developed for 

resolving concerns including 

enforceability and surplus. Until such a 

mechanism is developed and approved 

by EPA, however, EPA will not approve 

international trades under the DERC 

rule. 

EPA is also approving a provision in 

section 101.372(d) that allows 

generators and users of DERCs to use an 

alternate quantification protocol that is 

different from one of the approved 

protocols in Chapter 115 or Chapter 117 

(Control of Air Pollution from Volatile 

Organic Compounds and Control of Air 

Pollution from Nitrogen Compounds) of 

the Texas rules. Generators/users 

wanting to use other quantification 

protocols must follow the quantification 

requirements at section 

101.372(d)(1)(C), which include a 

requirement for EPA adequacy review of 

such alternate protocols. TCEQ has 

agreed to clarify the provisions of 

section 101.372(d)(1)(C) by December 1, 

2006, to clarify that a proposed alternate 

quantification protocol may not be used 

if the TCEQ Executive Director receives 

a letter from EPA that objects to the use 

of the protocol during the 45-day 

adequacy review period or if EPA 

proposes disapproval of the protocol in 

the Federal Register. See also 70 FR 

58157 for a description of the approval 

process for alternate quantification 

protocols. 

EPA is also approving a provision in 

section 101.376 that allows DECs to be 

used as new source review (NSR) 

offsets. Section 101.376 outlines criteria 

for DEC usage and NSR permits that 

must be satisfied for DECs to be used as 

NSR offsets. With these restrictions and 

the environmental benefit provisions of 

the DERC program, we feel that the use 

of DECs as NSR offsets is consistent 

with sections 171 and 173 of the Clean 

Air Act and the EIP Guidance. See 70 

FR 58160 for our more detailed 

discussion of DECs as NSR offsets. 

Additionally, EPA is approving the 

use of DECs in lieu of allowances in the 

Houston/Galveston/Brazoria (HGB) 

MECT program for emissions of nitrogen 

oxides (NOX). Section 101.376 of the 

DERC program enables the use of DECs 

in the MECT, but the rule language 

providing the detailed usage 

requirements for DECs under the MECT 

is in section 101.356(h) of the MECT 

program, which we are approving 

elsewhere in today’s Federal Register. 

Because of the interaction between the 

DERC and MECT programs, the 

conditional approval commitments of 

the DERC program must be interpreted 

with respect to the use of DECs in the 

MECT. DECs can be used as allowances 

in the MECT subject to the requirements 

of section 101.356(h), and only if the 

DECs meet the conditions outlined 

above. Therefore, the TCEQ will not 

approve the use of any DERCs that were 

generated from shutdowns since 

September 30, 2002, and the use of 

banked shutdown DERCs generated 

before September 30, 2002, must occur 

within 5 years from the date of the 

commitment letter. In addition, with 

respect to all DECs that are to be used 

in the MECT programs, both generators 

and users of such DECs must certify to 

a waiver of the Federal statute of 

limitations. EPA approval is also 

required when DECs generated in 

another state or nation, and in either 


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52706 Federal Register / Vol. 71, No. 172 / Wednesday, September 6, 2006 / Rules and Regulations 

1 During the comment period, EPA did not 

receive comments regarding environmental justice 

and the DERC program. However, during the 

finalization process we have reevaluated our 

interpretation of the definition of Environmental 

Justice as found in Executive Order 12898. In our 

proposed approval of the DERC program, we stated 

that ‘‘environmental justice concerns arise when a 

trading program could result in disproportionate 

impacts on communities populated by racial 

minorities, people with low incomes, or Tribes.’’

On further review, we believe the following 

description is more consistent with E.O. 12898: 

‘‘Environmental justice concerns can arise when a 

final rule, such as a trading program, could result 

in disproportionate burdens on particular 

communities, including minority or low income 

communities.’’ This revised language does not alter 

our determination that the DERC program does not 

raise environmental justice concerns. 

attainment or nonattainment areas 

(other than the HGB nonattainment 

areas) are requested for use in the MECT 

program. Also, as provided in the MECT 

rule, the DECs used as allowances under 

the MECT program are not charged the 

10 percent environmental contribution 

because of the use ratios implemented 

in section 101.356(h). 

V. What are EPA’s responses to 

comments received on the proposed 

action? 

EPA’s responses to comments 

submitted by Galveston-Houston 

Association for Smog Prevention 

(GHASP), Environmental Defense 

(Texas Office), the Lone Star Chapter of 

the Sierra Club, and Public Citizen 

(Texas Office) on November 4, 2005, are 

as follows. EPA has summarized the 

comments below; the complete 

comments can be found in the DERC 

administrative record (EPA–R06–OAR–

2005–TX–0029). In commenting on the 

DERC program, the commenters raise no 

concerns about pollutants other than 

VOCs (including highly reactive VOCs, 

or HRVOCs).1

Comment 1: There are problems with 

the inventory of VOC and HRVOC 

emissions in the HGB nonattainment 

area. 

Response to Comment 1: While EPA 

acknowledges that there have been past 

VOC emission inventory problems from 

sources associated with the 

petrochemical industry (see our 

proposed approval of the revisions to 

the HGB attainment demonstration, 70 

FR 58119), EPA believes that the 

emissions inventory developed by 

TCEQ for the HGB nonattainment area 

is an acceptable approach to 

characterizing the emissions in the HGB 

nonattainment area. In addition, we are 

incorporating by reference our 

responses to comments provided in our 

approval of the attainment 

demonstration for the HGB ozone 

nonattainment area (EPA–R06–OAR–

2005–TX–0018). Those responses more 

specifically address GHASP’s concerns 

regarding the development and use of 

the imputed inventory, characterization 

of other VOCs in the inventory, and 

appropriate emissions monitoring 

techniques for flares, fugitive emissions, 

and upsets. 

Comment 2: The VOC and HRVOC 

trading programs use unreliable data, 

which cannot be replicably measured. 

There are problems with current 

methods for measurement of HRVOC 

and VOC emissions; therefore, the VOC 

and HRVOC trading programs do not 

meet EPA’s EIP Guidance for 

quantification. 

Response to Comment 2: EPA 

disagrees. The proposed DERC rule, at 

70 FR 58154, describes the basis for 

EPA’s conclusion that the DERC rule 

satisfies the EIP Guidance criteria on 

quantifiability, which are found in 

Chapter 4 (‘‘Fundamental Principles of 

All EIPs’’). 

Emissions and emission reductions 

attributed to an EIP are quantifiable if 

they can be reliably and replicably 

measured: The source must be able to 

reliably calculate the amount of 

emissions and emission reductions from 

the EIP strategy, and must be able to 

replicate the calculations. Under the 

DERC program, sources address the 

element of quantification by using a 

quantification protocol that has been 

approved by TCEQ and EPA. Both 

agencies have important roles in 

ensuring these protocols provide 

reliable and replicable emission 

measurements. The approved 

quantification protocols for VOC DERC 

generation and use are contained in 30 

TAC Chapter 115, Control of Air 

Pollution from Volatile Organic 

Compounds. These methods are all 

reliable and replicable, either because 

EPA has promulgated regulations or 

published guidance listing them as 

appropriate methods for measuring VOC 

emissions, or because the American 

Society for Testing and Materials 

(ASTM) has determined that they are 

appropriate standard methods. EPA 

approval is required before an alternate 

quantification protocol can be used. See 

section 101.372(1)(C). Examples of the 

approved quantification methods for 

VOC DERC generation and use include: 

• Test Methods 1–4 (40 CFR 60, 

Appendix A) for determining flow rates; 

• Test Method 18 (40 CFR part 60, 

Appendix A) for determining gaseous 

organic compound emissions by gas 

chromatography; 

• EPA guidance in ‘‘Procedures for 

Certifying Quantity of Volatile Organic 

Compounds (VOC) Emitted by Paint, 

Ink, and Other Coating,’’ EPA–450/3–

84–019; and 

• Determination of true vapor 

pressure using ASTM Methods D323–

89, D2879, D4953, D5190, or D5191 for 

the measurement of Reid Vapor 

pressure. 

Comment 3: TCEQ and EPA lack 

confidence in current methods for 

measuring emissions. This lack of 

confidence increases the risks 

associated with a market-based trading 

program until the TCEQ is able to 

reconcile ambient monitoring with 

industry emission inventories. For 

example, trading could exacerbate the 

challenge of identifying the cause of any 

program failures because comparisons 

of ambient monitoring trend data to 

emission inventory data will require 

consideration of the timing and 

magnitude of trades. 

Response to Comment 3: EPA 

disagrees. We have discussed above in 

response to Comments 1 and 2 our 

conclusion that the methods used for 

measuring emissions under the DERC 

program are consistent with EPA policy 

and guidance, and that the emissions 

inventory developed by TCEQ is an 

acceptable approach to characterizing 

the emissions in the HGB nonattainment 

area. Sources that generate and use 

DERCs must notify the TCEQ. The 

TCEQ is then responsible for certifying 

that the generation or use strategy is 

appropriate. Through the certification 

process TCEQ is made aware of trades 

before they happen. This advance 

knowledge of trades could then be 

applied to the reconciliation process 

and actually provide additional data 

instead of being a hindrance. 

Comment 4: EPA should find that it 

is premature for TCEQ to allow trading 

of unquantifiable emissions of VOC in 

the HGB nonattainment area. If either 

the source or the recipient incorrectly 

estimates the emissions involved in a 

trade, the region is at risk of a net 

increase in emissions as a result of the 

trade. Until refineries and chemical 

plants are able to routinely quantify 

their VOC emissions, EPA should not 

allow trading of these VOC emissions. 

Response to Comment 4: EPA 

disagrees that VOC emissions should be 

ineligible for trading in the HGB 

nonattainment area. EPA believes that 

allowing the petrochemical industry to 

trade VOC emissions under the DERC 

rule is appropriate notwithstanding the 

commenter’s concern about emissions 

estimates, because the DERC program 

satisfies the EIP Guidance criteria for 

quantification. For example, sources 

generating and banking VOC DERCs 

must either use the approved 

quantification protocols in Chapter 115 

or obtain EPA approval for an alternate 

quantification method. These protocols 


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will ensure that sources correctly 

calculate the emission reduction to be 

banked as a DERC. The source using the 

banked reduction also must calculate 

the amount of necessary VOC DERCs 

using the approved quantification 

protocols. The TCEQ Executive Director 

will review and approve each requested 

DERC use to ensure that sources using 

DERCs have enough credit to cover their 

use strategy. After the DERC use has 

occurred, sources must notify TCEQ of 

the number of DERCs actually used. 

Sources that do not have enough DERCs 

to cover their actual use will be in 

violation of the DERC program. 

Additionally, sources that do not obtain 

sufficient DERCs in advance will be in 

violation of the program and TCEQ has 

the authority to pursue enforcement 

actions. Therefore, EPA believes that 

sources using the approved 

quantification protocols will correctly 

estimate the amount of DERCs generated 

and used, and we also believe that the 

program is designed to minimize 

incorrect emissions estimates. Further, 

users of VOC DERCs must also purchase 

and retire an additional ten percent 

VOC DERCs as an environmental 

benefit. The ten percent environmental 

benefit will also help ensure that the 

trading program will not negatively 

impact the nonattainment area in which 

the DERC is generated and used. The ten 

percent environmental benefit is not 

applicable to situations where VOC 

DECs are used in lieu of NOX MECT 

allowances. In these situations, the ten 

percent environmental benefit is 

replaced with the stringent retirement 

ratios found in section 101.356(h). 

EPA’s response to Texas Industry 

Project (TIP) comments made on 

November 4, 2005, is as follows: 

Comment: TIP supports EPA’s 

proposed approval of the DERC program 

and urges EPA to finalize its approval as 

soon as practicable. 

Response: EPA acknowledges the 

support of TIP for our approval of the 

DERC program. 

VI. What does Federal approval of a 

State regulation mean to me? 

Enforcement of the State regulation 

before and after it is incorporated into 

the federally approved SIP is primarily 

a State function. However, once the 

regulation is federally approved, EPA 

and the public may take enforcement 

action against violators of these 

regulations. 

VII. Statutory and Executive Order 

Reviews 

Under Executive Order 12866 (58 FR 

51735, October 4, 1993), this action is 

not a ‘‘significant regulatory action’’ and 

therefore is not subject to review by the 

Office of Management and Budget. For 

this reason, this action is also not 

subject to Executive Order 13211, 

‘‘Actions Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use’’ (66 FR 28355, May 

22, 2001). This action merely 

conditionally approves State law as 

meeting Federal requirements and 

imposes no additional requirements 

beyond those imposed by State law. If 

the conditional approval is converted to 

a disapproval under section 110(k), 

based on the State’s failure to meet the 

commitment, it will not affect any 

existing State requirements applicable 

to small entities. Federal disapproval of 

the State submittal does not affect State 

enforceability. Moreover, EPA’s 

disapproval of the submittal does not 

impose any new requirements. 

Accordingly, the Administrator certifies 

that this rule will not have a significant 

economic impact on a substantial 

number of small entities under the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.). Because this rule conditionally 

approves pre-existing requirements 

under State law and does not impose 

any additional enforceable duty beyond 

that required by State law, it 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). 

This rule also does not have tribal 

implications because it will not have a 

substantial direct effect on one or more 

Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes, 

as specified by Executive Order 13175 

(65 FR 67249, November 9, 2000). This 

action also does not have Federalism 

implications because it does 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 

responsibilities among the various 

levels of government, as specified in 

Executive Order 13132 (64 FR 43255, 

August 10, 1999). This action merely 

conditionally approves a State rule 

implementing a Federal standard, and 

does not alter the relationship or the 

distribution of power and 

responsibilities established in the CAA. 

This rule also is not subject to Executive 

Order 13045 ‘‘Protection of Children 

from Environmental Health Risks and 

Safety Risks’’ (62 FR 19885, April 23, 

1997), because it is not economically 

significant. 

In reviewing SIP submissions, EPA’s 

role is to approve State choices, 

provided that they meet the criteria of 

the CAA. In this context, in the absence 

of a prior existing requirement for the 

State to use voluntary consensus 

standards (VCS), EPA has no authority 

to disapprove a SIP submission for 

failure to use VCS. It would thus be 

inconsistent with applicable law for 

EPA, when it reviews a SIP submission, 

to use VCS in place of a SIP submission 

that otherwise satisfies the provisions of 

the CAA. Thus, the requirements of 

section 12(d) of the National 

Technology Transfer and Advancement 

Act of 1995 (15 U.S.C. 272 note) do not 

apply. This rule does not impose an 

information collection burden under the 

provisions of the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501 et seq.). 

The Congressional Review Act, 5 

U.S.C. 801 et seq., as added by the Small 

Business Regulatory Enforcement 

Fairness Act of 1996, generally provides 

that before a rule may take effect, the 

agency promulgating the rule must 

submit a rule report, which includes a 

copy of the rule, to each House of the 

Congress and to the Comptroller General 

of the United States. EPA will submit a 

report containing this rule and other 

required information to the U.S. Senate, 

the U.S. House of Representatives, and 

the Comptroller General of the United 

States prior to publication of the rule in 

the Federal Register. A major rule 

cannot take effect until 60 days after it 

is published in the Federal Register. 

This action is not a ‘‘major rule’’ as 

defined by 5 U.S.C. 804(2). 

Under section 307(b)(1) of the CAA, 

petitions for judicial review of this 

action must be filed in the United States 

Court of Appeals for the appropriate 

circuit by November 6, 2006. Filing a 

petition for reconsideration by the 

Administrator of this final rule does not 

affect the finality of this rule for the 

purposes of judicial review nor does it 

extend the time within which a petition 

for judicial review may be filed, and 

shall not postpone the effectiveness of 

such rule or action. This action may not 

be challenged later in proceedings to 

enforce its requirements. (See section 

307(b)(2).) 

List of Subjects 40 CFR Part 52 

Environmental protection, Air 

pollution control, Intergovernmental 

relations, Nitrogen oxides, Ozone, 

Reporting and recordkeeping 

requirements, Volatile organic 

compounds. 


sroberts on PROD1PC70 with RULES
52708 Federal Register / Vol. 71, No. 172 / Wednesday, September 6, 2006 / Rules and Regulations 

Dated: August 24, 2006 

Richard E. Greene, 

Regional Administrator, Region 6. 

■ 40 CFR part 52 is 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 SS—Texas 

■ 2. The table in § 52.2270(c) entitled 

‘‘EPA Approved Regulations in the 

Texas SIP’’ is amended under Chapter 

101—General Air Quality Rules, 

Subchapter H—Emissions Banking and 

Trading, by adding in numerical order 

a new centered heading ‘‘Division 4—

Emission Credit Banking and Trading’’

followed by new entries for sections 

101.370, 101.371, 101.372, 101.373, 

101.374, 101.376, 101.378, and 101.379. 

The additions reads as follows: 

§ 52.2270 Identification of plan. 

* * * * * 

(c) * * * 

EPA-APPROVED REGULATIONS IN THE TEXAS SIP 

State citation Title/subject State approval/ 

submittal date EPA approval date Explanation 

Chapter 101—General Air Quality Rules 

* * * * * * * 

Subchapter H—Emissions Banking and Trading 

* * * * * * * 

Division 4—Discrete Emission Credit Banking and Trading 

Section 101.370 ............................... Definitions ........................................ 11/10/04 09/06/06 [Insert FR 

page number where 

document begins].

Section 101.371 ............................... Purpose ........................................... 12/13/02 09/06/06 [Insert FR 

page number where 

document begins].

Section 101.372 ............................... General Provisions .......................... 12/13/02 09/06/06 [Insert FR 

page number where 

document begins].

Section 101.373 ............................... Discrete Emission Reduction Credit 

Generation and Certification.

11/10/04 09/06/06 [Insert FR 

page number where 

document begins].

Section 101.374 ............................... Mobile Discrete Emission Reduction 

Credit Generation and Certification.

11/10/04 09/06/06 [Insert FR 

page number where 

document begins].

Section 101.376 ............................... Discrete Emission Credit Use ......... 11/10/04 09/06/06 [Insert FR 

page number where 

document begins].

Subsection 

101.376(c)(4) NOT 

in SIP 

Section 101.378 ............................... Discrete Emission Credit Banking 

and Trading.

12/13/02 09/06/06 [Insert FR 

page number where 

document begins].

Section 101.379 ............................... Program Audits and Reports ........... 12/13/02 09/06/06 [Insert FR 

page number where 

document begins].

* * * * * * * 

[FR Doc. 06–7414 Filed 9–5–06; 8:45 am] 

BILLING CODE 6560–50–P 


sroberts on PROD1PC70 with RULES