[Federal Register Volume 71, Number 198 (Friday, October 13, 2006)]
[Rules and Regulations]
[Pages 60612-60634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8630]



[[Page 60611]]

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Part II





Environmental Protection Agency





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40 CFR Part 51



 Regional Haze Regulations; Revisions to Provisions Governing 
Alternative to Source-Specific Best Available Retrofit Technology 
(BART) Determinations; Final Rule

Federal Register / Vol. 71, No. 198 / Friday, October 13, 2006 / 
Rules and Regulations

[[Page 60612]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[EPA-HQ-OAR-2002-0076; FRL-8230-4]
RIN 2060-AN22


Regional Haze Regulations; Revisions to Provisions Governing 
Alternative to Source-Specific Best Available Retrofit Technology 
(BART) Determinations

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The EPA promulgated regulations to address a type of 
visibility impairment known as regional haze in 1999. These regulations 
have been judicially challenged twice. On May 24, 2002, the U.S. Court 
of Appeals for the District of Columbia Circuit issued a ruling 
vacating the Regional Haze Rule in part and sustaining it in part, 
based on a finding that EPA's prescribed methods for determining best 
available retrofit technology (BART) were inconsistent with the Clean 
Air Act (CAA). American Corn Growers Ass'n v. EPA, 291 F.3d 1 (DC Cir. 
2002). We finalized a rule on July 6, 2005 addressing the court's 
ruling in this case. On February 18, 2005, the U.S. Court of Appeals 
for the District of Columbia Circuit issued another ruling, in Center 
for Energy and Economic Development v. EPA, 398 F.3d 653(DC Cir. 2005), 
granting a petition challenging provisions of the Regional Haze Rule 
governing an optional emissions trading program for certain western 
States and Tribes (the Western Regional Air Partnership (WRAP) Annex 
Rule). We published proposed regulations to revise the provisions of 
the Regional Haze Rule governing alternative trading programs, and to 
provide additional guidance on such programs in August 2005. We 
received several comments on the August 2005 proposal. This final rule 
finalizes the proposed revisions, including changes in response to the 
public comments.

DATES: This rule is effective December 12, 2006.

ADDRESSES: The EPA has established a docket for this action under 
Docket ID No. EPA-HQ-OAR-2002-0076. 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, i.e., confidential 
business information (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 OAR Docket, EPA/DC, EPA West, Room B102, 1301 Constitution 
Ave., NW., Washington, DC. 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 and Information 
Center is (202) 566-1742. NOTE: The EPA Docket Center suffered damage 
due to flooding during the last week of June 2006. The Docket Center is 
continuing to operate. However, during the cleanup, there will be 
temporary changes to Docket Center telephone numbers, addresses, and 
hours of operation for people who wish to visit the Public Reading Room 
to view documents. Consult EPA's Federal Register notice at 71 FR 38147 
(July 5, 2006) or the EPA Web site at www.epa.gov/epahome/dockets.htm 
for current information on docket status, locations and telephone 
numbers.

FOR FURTHER INFORMATION CONTACT: Kathy Kaufman, EPA, Air Quality 
Planning Division, Geographic Strategies Group, C504-02, 919-541-0102 
or by e-mail at <a href="/cdn-cgi/l/email-protection#503b3125363d313e7e3b31243829103520317e373f26"><span class="__cf_email__" data-cfemail="aac1cbdfccc7cbc484c1cbdec2d3eacfdacb84cdc5dc">[email protected]</span></a>, or Todd Hawes, EPA, Air Quality 
Planning Division, Geographic Strategies Group, C504-02, 919-541-5591 
or by e-mail at <a href="/cdn-cgi/l/email-protection#432b223426306d372c2727032633226d242c35"><span class="__cf_email__" data-cfemail="2840495f4d5b065c474c4c684d5849064f475e">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:
    Regulated Entities. This final rule will affect the following: 
State and local permitting authorities and Indian Tribes containing 
major stationary sources of pollution affecting visibility in 
federally-protected scenic areas.
    This list is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This list gives examples of the types of entities EPA is now 
aware could potentially be regulated by this action. Other types of 
entities not listed could also be affected. To determine whether your 
facility, company, business, organization, etc., is regulated by this 
action, you should examine the applicability criteria in section II of 
this preamble. If you have any questions regarding the applicability of 
this action to a particular entity, consult the people listed in the 
preceding section.
    Outline. The contents of today's preamble are listed in the 
following outline.

I. Overview and Background
II. Revisions to Regional Haze Rule Sec.  51.308(e)(2) Governing 
Alternatives to Source-by-Source BART
    A. Establishing a BART Benchmark and Demonstrating Greater 
Reasonable Progress Than BART
    B. Comments Relating to the Final Determination That CAIR Makes 
Greater Reasonable Progress Than BART in the July 6, 2005 BART 
Guidelines Rule
    C. Minimum Elements of Cap and Trade Programs
III. Revisions to Regional Haze Rule Sec.  51.309
IV. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    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 Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect 
Energy Supply, Distribution, or Use.
    I. National Technology Transfer Advancement Act
    J. Executive Order 12898: Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act
IV. Statutory Provisions and Legal Authority

I. Overview and Background

    This rulemaking provides the following changes to the regional haze 
regulations:
    (1) Revised regulatory text in section 51.308(e)(2)(i) in response 
to the Center for Energy and Economic Development (CEED) v. EPA court's 
remand, to remove the requirement that the determination of the BART 
``benchmark'' be based on cumulative visibility analyses and to clarify 
the process for making such determinations;
    (2) New regulatory text in Sec.  51.308(e)(2)(vi), to provide 
minimum elements for cap and trade programs adopted in lieu of BART; 
and
    (3) Revised regulatory text in Sec.  51.309, to reconcile the 
optional framework for certain western States and Tribes to implement 
the recommendations of the Grand Canyon Visibility Transport Commission 
(GCVTC) with the CEED v. EPA decision.

How This Preamble Is Structured

    Section I provides background on the BART requirements of the CAA 
as codified in the Regional Haze Rule, on the decision in American Corn 
Growers in which the DC Circuit vacated and remanded parts of the rule 
addressing the BART requirements, on the June 2005 BART rule, and on 
the EPA's approval of the WRAP Annex and the

[[Page 60613]]

subsequent litigation. Section II discusses specific issues relating to 
the revisions to Sec.  51.308(e)(2) of the Regional Haze Rule governing 
alternatives to source-by-source BART. Section III discusses specific 
issues relating to the revisions to Sec.  51.309 of the Regional Haze 
Rule pertaining to the optional emissions trading program for certain 
western States and Tribes. Section IV provides a discussion of how this 
rulemaking complies with the requirements of Statutory and Executive 
Order Reviews.

The Regional Haze Rule and BART Guidelines

    In 1999, we published the Regional Haze Rule to address visibility 
impairment produced by a multitude of sources and activities which emit 
fine particles and their precursors and which are located across a 
broad geographic area (64 FR 35714). The Regional Haze Rule requires 
States to submit State implementation plans (SIPs) to address regional 
haze visibility impairment in 156 federally-protected parks and 
wilderness areas, such as the Grand Canyon and Yosemite. These 156 
scenic areas are called ``mandatory Class I Federal areas'' in the CAA 
\1\ but are referred to simply as ``Class I areas'' in today's 
rulemaking. The 1999 rule was issued to fulfill a long-standing EPA 
commitment to address regional haze under the authority and 
requirements of sections 169A and 169B of the CAA.
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    \1\ See, e.g. CAA section 169(a)(1).
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    As required by the CAA, we included in the final Regional Haze Rule 
a requirement for BART for certain large stationary sources that were 
put in place between 1962 and 1977. We discussed these requirements in 
detail in the preamble to the final rule (64 FR 35737-35743). The 
regulatory requirements for BART were codified at section 51.308(e) and 
in definitions that appear in section 51.301.
    In the preamble to the Regional Haze Rule, we committed to issuing 
further guidelines to clarify the requirements of the BART provision. 
These guidelines were issued on July 6, 2005 in a final rule entitled 
``Regional Haze Regulations and Guidelines for Best Available Retrofit 
Technology (BART) Determinations' (``the BART Rule'') (70 FR 39104). 
The purpose of the BART guidelines is to assist States as they identify 
which of their BART-eligible sources should undergo a BART analysis 
(i.e., which are ``sources subject to BART'') and select appropriate 
controls (``the BART determination'').
    We explained in the preamble to the 1999 Regional Haze Rule that 
the BART requirements in section 169A(b)(2)(A) of the CAA demonstrate 
Congress' intent to focus attention directly on the problem of 
pollution from a specific set of existing sources (64 FR 35737). The 
CAA requires that any of these existing sources ``which, as determined 
by the State, emits any air pollutant which may reasonably be 
anticipated to cause or contribute to any impairment of visibility [in 
any Class I area],'' shall install the best available retrofit 
technology for controlling emissions.\2\ In determining BART, the CAA 
requires the State to consider several factors that are set forth in 
section 169A(g)(2) of the CAA, including the degree of improvement in 
visibility which may reasonably result from the use of such technology.
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    \2\ CAA sections 169A(b)(2) and (g)(7).
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    Because the problem of regional haze is caused in large part by the 
long-range transport of emissions from multiple sources, and for 
certain technical and other reasons explained in that rulemaking, we 
had adopted in the 1999 rule an approach that required States to look 
at the contribution of all BART sources to the problem of regional haze 
in determining both applicability and the appropriate level of control 
for BART. Specifically, we had concluded that if a source potentially 
subject to BART is located in an area from which pollutants may be 
transported to a Class I area, that source ``may reasonably be 
anticipated to cause or contribute'' to visibility impairment in the 
Class I area. We had also concluded that in weighing the factors set 
forth in the statute for determining BART, the States should consider 
the collective impact of BART sources on visibility. In particular, in 
considering the degree of visibility improvement that could reasonably 
be anticipated to result from the use of such technology, we stated 
that the State should consider the degree of improvement in visibility 
that would result from the cumulative impact of applying controls to 
all sources subject to BART. We concluded that the States should use 
this analysis to determine the appropriate BART emission limitations 
for specific sources.\3\
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    \3\ See 66 FR 35737-35743 for a discussion of the rationale for 
the BART requirements in the 1999 Regional Haze Rule.
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    The 1999 Regional Haze Rule also included provisions in section 
51.309 based on the strategies developed by the GCVTC. Certain western 
States and Tribes were eligible to submit implementation plans under 
section 51.309 as an alternative method of achieving reasonable 
progress for those Class I areas covered by the GCVTC's analysis--i.e., 
the 16 Class I areas on the Colorado Plateau. In order for States and 
Tribes to be able to utilize this section, however, the rule provided 
that EPA must receive an ``Annex'' to the GCVTC's final 
recommendations. The purpose of the Annex was to provide the specific 
provisions needed to translate the GCVTC's general recommendations for 
stationary source sulfur dioxide (SO<INF>2</INF>) reductions into an 
enforceable regulatory program. The rule provided that such an Annex, 
meeting certain requirements, be submitted to EPA no later than October 
1, 2000. See section 51.309(d)(4) and (f) (2000).

American Corn Growers v. EPA

    In American Corn Growers, industry petitioners challenged EPA's 
interpretation of the BART determination process and raised other 
challenges to the rule. The court in American Corn Growers concluded 
that the BART provisions in the 1999 Regional Haze Rule were 
inconsistent with the provisions in the CAA ``giving the states broad 
authority over BART determinations.'' 291 F.3d at 8. Specifically, with 
respect to the test for determining whether a source is subject to 
BART, the court held that the method EPA had prescribed for determining 
which eligible sources are subject to BART illegally constrained the 
authority Congress had conferred on the States. Id. The court did not 
decide whether the general collective contribution approach to 
determining BART applicability was necessarily inconsistent with the 
CAA. Id. at 9. Rather, the court stated that

    ``[i]f the [Regional Haze Rule] contained some kind of a 
mechanism by which a state could exempt a BART-eligible source on 
the basis of an individualized contribution determination, then 
perhaps the plain meaning of the Act would not be violated. But the 
[Regional Haze Rule] contains no such mechanism.''

Id. at 12.

    The court in American Corn Growers also found that our 
interpretation of the CAA requiring the States to consider the degree 
of improvement in visibility that would result from the cumulative 
impact of applying controls in determining BART was inconsistent with 
the language of the CAA. 291 F.3d at 8. Based on its review of the 
statute, the court concluded that the five statutory factors in section 
169A(g)(2) ``were meant to be considered together by the states.'' Id. 
at 6.
    The final rule promulgated on July 6, 2005 responded to the 
American Corn Growers court's decision on the BART provisions by 
amending the Regional Haze Rule at Sec.  51.308 and by finalizing

[[Page 60614]]

changes to the BART guidelines at part 51, appendix Y (70 FR 39104). 
These changes eliminate the previous constraint on State discretion and 
provide States with appropriate techniques and methods for determining 
which BART-eligible sources ``may reasonably be anticipated to cause or 
contribute to any impairment of visibility in any mandatory Class I 
Federal area.'' In addition, the revised regulations list the 
visibility improvement factor with the other statutory BART 
determination factors in section 51.308(e)(1)(A), so that States will 
be required to consider all five factors, including visibility impacts, 
on an individual source basis when making each individual source BART 
determination, rather than considering the cumulative impacts of all 
BART sources on visibility (``group BART'').

The Annex Rule

    In a rule dated June 5, 2003, EPA approved the WRAP's Annex to the 
GCVTC report (68 FR 33764). In this action, referred to as the ``Annex 
rule,'' EPA approved the quantitative SO<INF>2</INF> emission reduction 
milestones and the detailed provisions of the backstop market trading 
program developed by the WRAP as meeting the requirements of section 
51.309(f), and therefore codified the Annex provisions in section 
51.309(h). Subsequently, five States and one local agency submitted 
SIPs developed to comply with all of section 51.309, including the 
Annex provisions at section 51.309(h). In accordance with section 
51.309(c) these SIPs were submitted prior to December 31, 2003.

Center for Energy and Economic Development v. EPA

    The EPA's approval of the Annex rule was challenged by CEED on, 
among other grounds, that the CAA prohibits EPA from allowing States to 
adopt alternative measures, such as a trading program, in lieu of BART. 
The court, in CEED v. EPA, affirmed our interpretation of section 
169A(b)(2) of the CAA as allowing for alternatives to BART where those 
alternatives are demonstrated to make greater progress than BART. CEED 
v. EPA, 398 F.3d at 659-660. The court, however, took issue with the 
methodology that EPA had required the States to use in that 
demonstration, pursuant to certain provisions of the Regional Haze 
Rule. As noted above, Sec.  51.308(e)(2) of the 1999 Regional Haze Rule 
required that visibility improvements under source-specific BART--the 
benchmark for comparison to the alternative program--must be estimated 
based on the application of BART controls to all sources subject to 
BART. This section was incorporated into the WRAP Annex rule by 
reference at Sec.  51.309(f). The court held that EPA could not require 
this type of ``group BART'' approach, which was vacated in American 
Corn Growers in a source-specific BART context, even in an alternative 
trading program in which State participation was wholly optional.
    The BART guidelines as proposed in May 2004 contained a section 
offering guidance to States choosing to address their BART-eligible 
sources under the alternative strategy provided for in Sec.  
51.308(e)(2). This guidance included a broad overview of the steps in 
developing an emissions trading program and criteria for demonstrating 
that such a trading program would achieve greater progress towards 
eliminating visibility impairment than would BART. In light of the D.C. 
Circuit's decision in CEED v. EPA in 2005, we did not include the 
overview of emissions trading programs in the final BART guidelines. We 
did note, however, that our authority to address BART through 
alternative means was upheld in CEED v. EPA and that we remained 
committed to providing States with that flexibility. Today's revisions 
to the Regional Haze Rule, which responds to the holding in CEED v. 
EPA, provide the flexibility that States need to implement alternatives 
to BART.

Overview of Changes to Sec. Sec.  51.308(e)(2) and 51.309 of the 
Regional Haze Rule

    The EPA continues to support State efforts to develop trading 
programs and other alternative strategies to fulfill the goals of the 
CAA. We believe such strategies have the potential to achieve greater 
progress towards the national visibility goals than more traditional 
approaches to regulation, and to do so in the most cost-effective 
manner practicable. In August 2005, we proposed amendments to the 
Regional Haze Rule to enable States to continue to develop and 
implement such programs (70 FR 44154, August 1, 2005). Today's rule 
finalizes these amendments, including changes in response to comments 
on the proposal.
    First, we are amending the generally applicable provisions at Sec.  
51.308(e)(2), which prescribe the type of analysis used to determine 
emissions reductions achievable from source-by-source BART, for 
purposes of comparing to the alternative program. These amendments 
reconcile the methodology for determining whether an alternative 
program is approvable with the court's decision in CEED v. EPA. Today's 
rule also establishes the minimum elements of an acceptable cap and 
trade program and provides for consistent application of the BART 
guidelines for electric generating units (EGUs) between source-by-
source programs and alternative cap and trade programs.
    Second, we are amending section 51.309 to enable certain western 
States and Tribes to continue to utilize the strategies contained in 
the GCVTC report as an optional means to satisfy reasonable progress 
requirements for certain Class I areas, for the first long-term 
planning period. These changes provide States and Tribes with an 
opportunity to revise and resubmit the backstop SO<INF>2</INF> 
emissions trading program absent any requirement to assess visibility 
on a cumulative basis when determining the emissions reductions 
achievable by source-by-source BART.

II. Revisions to Regional Haze Rule Sec.  51.308(e)(2) Governing 
Alternatives to Source-by-Source BART

    In this section of the preamble, we discuss changes or 
clarifications to the provisions proposed in August, 2005. Where 
relevant, we also respond to significant comments received during the 
comment periods on our earlier BART proposals. For each provision that 
we are changing or clarifying, where relevant, we provide discussion of 
comments received on the proposal(s), changes or clarifications we are 
finalizing, and the reasons for these changes or clarifications.

A. Establishing a BART Benchmark and Demonstrating Greater Reasonable 
Progress Than BART

    The Regional Haze Rule provides States with the authority to 
implement an emissions trading program or other alternative measures in 
lieu of meeting the requirements for source-by-source BART. Under this 
provision of the Regional Haze Rule, States have the flexibility to 
design programs to reduce emissions from stationary sources in a more 
cost-effective manner so long as they can demonstrate that the 
alternative approach will achieve greater reasonable progress towards 
improving visibility than would have been achieved by implementation of 
the BART requirements.
    As described in the preamble to the August proposal, the 1999 
Regional Haze Rule had specified a methodology for comparing an 
alternative trading or other type program against source-by-source 
BART. These regulations were challenged following a rulemaking by EPA 
to revise the Regional Haze Rule to incorporate an optional emissions 
trading program for certain Western States and Tribes (the Annex rule). 
The

[[Page 60615]]

court in CEED v. EPA, granted petitioner's challenge to the Annex rule 
because EPA's regional haze regulations had required the States 
submitting the Annex to consider ``the impact of all emissions 
reductions to estimate visibility progress'' in establishing a BART 
benchmark against which to compare their BART alternative program. In 
the August proposal, we proposed to revise the method for comparing an 
alternative trading or other type program against source-by-source 
BART. Specifically, we proposed to amend the regional haze regulations 
to provide that States estimate the emission reductions that could be 
achieved by BART in the same manner as in making source-by-source BART 
determinations.
    Today's final rule revises section 51.308(e)(2) to make clear that 
the emissions reductions that could be achieved through implementation 
of the BART provisions at section 51.308(e)(1) serve as the benchmark 
against which States can compare an alternative program. In short, to 
demonstrate that a trading program or other alternative program makes 
greater reasonable progress than BART, the State can develop an 
estimate of BART emissions reductions using the same approach that it 
would use to establish source-by-source BART emissions limitations 
under the BART guidelines. As discussed in more detail below, today's 
rule also makes clear that where a trading program or other similar 
alternative program has been designed primarily to meet a Federal or 
State requirement other than BART, the State can use a more simplified 
approach to demonstrating that the alternative program will make 
greater reasonable progress than BART. Such an approach may be 
appropriate where the State believes the alternative program is clearly 
superior to BART and a detailed BART analysis is not necessary to 
assure that the alternative program will result in greater reasonable 
progress than BART.
Framework for Demonstrating That an Alternative Program Provides for 
Greater Reasonable Progress
    The development of a BART benchmark using the approach for source-
by-source BART determinations will require States to identify those 
existing sources which are BART-eligible, to determine which of those 
sources are subject to BART, and to then determine the level of control 
that would be BART for these sources. Once the State has established a 
BART benchmark, it can then compare the benchmark against the 
alternative program it has developed. This approach could entail 
separate visibility analyses in as many as three distinct stages: (1) 
Determining which BART-eligible sources are subject to BART; (2) 
determining what BART is for each source subject to BART; and (3) 
determining the overall visibility improvement anticipated from the 
application of BART to all sources subject to BART. The following 
sections discuss the comments received on the visibility analyses in 
the first two steps, as well as comments on additional issues for 
determining which sources are subject to BART and the determination of 
BART for such sources.
Sources Subject to BART
    Proposal. In the proposal, we noted that the BART guidelines 
finalized on July 6, 2005 provide States with guidance on how to 
determine which BART-eligible sources are reasonably anticipated to 
cause or contribute to visibility. The Guidelines explain that States 
may consider all BART-eligible sources to meet this threshold and 
therefore subject all these sources to review, or, alternatively, that 
States may determine which BART-eligible sources are subject to BART 
using the methods for modeling source specific impacts on visibility 
discussed in the guidance. We noted that by considering all BART-
eligible sources to be subject to BART in the context of setting the 
BART benchmark, States could ease their administrative burden and 
maximize the number of BART-eligible sources included in the benchmark 
analysis. Where a State takes this approach, the opportunity for 
assessing source-by-source visibility impact would still remain at the 
next step of setting the benchmark--the BART determination analysis.
    Comments. Several commenters stated that allowing States to 
consider all BART-eligible sources to be ``subject to BART'' (i.e., 
subject to a BART determination analysis) is contrary to the CAA as 
interpreted by the D.C. Circuit in American Corn Growers. Two 
commenters have indicated that they plan to challenge this provision of 
the BART guidelines in a petition for review before the D.C. Circuit 
and are opposed to it in the context of BART alternative programs as 
well. One of these commenters also stated that it is unclear from the 
preamble discussion where in the proposed revisions to the regulations 
this option is authorized.
    Final Rule. We are reiterating here, as we pointed out in the 
proposal, that the language in section 169A(b)(2) of the CAA 
establishing the threshold for BART review provides a State with the 
discretion to consider all BART-eligible sources to be subject to BART 
and to make BART determinations for all its BART-eligible sources. In 
other words, as noted in the BART guidelines, once a State has 
identified its BART-eligible sources, it must decide whether (1) to 
make BART determinations for all of them, or (2) to consider exempting 
some of them from BART because they may not reasonably be anticipated 
to cause or contribute to any visibility impairment in any Class I 
area. As explained in the 1999 Regional Haze Rule, given the nature of 
regional haze, it would be reasonable for a State to determine that 
where the State as a whole contributes to visibility impairment at a 
Class I area, any large stationary source in the State that emits 
SO<INF>2</INF> or other visibility-impairing pollutants would emit air 
pollutants that would ``reasonably be anticipated to cause or 
contribute to any impairment of visibility in [any Class I area].'' CAA 
Section 169A(b)(2).
    This approach is authorized by the regulations through the cross 
reference to Sec.  51.308(e)(1) in Sec.  51.308(e)(2). By providing 
that the BART-benchmark should be established by conducting BART 
determinations in accordance with Sec.  51.308(e)(1), we provide the 
State with the same options as are available in those provisions for 
determining source-by-source BART. In the context of subject-to-BART 
determinations, this includes either considering all BART-eligible 
sources to be subject to BART or, using the methods described in the 
BART guidelines or other reasonable approaches, to exempt sources which 
the State determines are not reasonably anticipated to cause or 
contribute to any visibility impairment.\4\
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    \4\ We are also clarifying an unintended ambiguity in the 
regulatory provisions pertaining to BART determinations under 
51.308(e)(1). Specifically, as discussed in the preamble to the BART 
Rule, consistent with our proposal in 2004, we revised the regional 
haze regulations to allow States to ``exclude from the BART 
determination process potential emissions from a source of less than 
forty tons per year for SO<INF>2</INF> or NO<INF>X</INF>, or 15 tons 
per year for PM<INF>10</INF>.'' 70 FR at 39117 (emphasis added). The 
regulatory text at 51.308(e)(1)(ii)(C), however, did not clearly 
state that the de minimis level for PM<INF>10</INF> should be based 
on a source's potential to emit. In this rulemaking we are 
clarifying that States are not required to determine BART for BART-
eligible sources with a potential to emit less than 15 tons per year 
of PM<INF>10</INF>.
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The BART Determination
    Proposal. The CAA identifies five factors that States are to 
consider in making BART determinations. One of these factors is ``the 
degree of improvement in visibility which may reasonably be anticipated 
to result from

[[Page 60616]]

the use of [BART].'' Today's rulemaking, in large part, is focused on 
how States should handle consideration of this factor in establishing a 
BART benchmark.
    In the proposal, we stated that one way to handle the visibility 
improvement element of the BART determination for all BART sources 
covered by the program would be to conduct individualized assessments 
of the visibility improvement expected from each BART source under 
various control scenarios, as described in the BART guidelines. We 
noted that such an approach could impose significant resource burdens 
on the States and solicited recommendations on more streamlined 
approaches for estimating BART sources' individual impacts that might 
be appropriate in the context of assessing alternative programs. One 
area of consideration that we identified is the type of model used. We 
requested comment on whether regional scale models might be used to 
consolidate individual source impact analyses into one or a few model 
runs, and whether this would significantly ease the burden on States.
    In the proposal, we also made clear our belief that in determining 
whether an alternative program provides for greater reasonable progress 
than would source-by-source BART, States have the discretion to employ 
a cumulative visibility analysis for purposes of estimating the 
potential visibility impacts of BART. Based on our analysis of American 
Corn Growers and CEED, we stated that although EPA may not require 
States to use a cumulative visibility approach to estimating the 
improvement achievable from BART, States are not barred from using such 
an approach if they so choose.
    Finally, in the proposal preamble, we discussed the situation where 
emissions reductions at BART-eligible sources are required by CAA 
requirements other than BART (or to fulfill requirements of a State law 
or regulation not required by the CAA). We noted that in such cases, a 
State may wish to evaluate whether the emissions reductions from the 
program would result in greater reasonable progress towards the 
national visibility goal than would the installation of BART. We noted 
that EPA had made such a determination with respect to the Clean Air 
Interstate Rule (CAIR) for EGUs in States which participate in the CAIR 
cap and trade program.
    We noted that such a situation affects the type of analysis that is 
permissible to show that the alternative program makes greater 
reasonable progress than BART. Specifically, where a requirement other 
than BART determines the level of emissions reductions required from 
BART-eligible sources (along with other sources), a most-stringent case 
BART may be used as the BART benchmark. (This most-stringent case BART 
is essentially a form of ``group BART,'' because is assumes that every 
BART-eligible source will apply controls). The reason for this is that 
if it is shown that implementation of another requirement results in 
greater progress than would the most stringent BART for all the BART-
eligible sources, then it can safely be said that this most-stringent-
BART benchmark is not the determinative factor in establishing the 
emission reductions requirement. Therefore, there can be no concern 
that the group-BART analysis would lead States to adopt an unduly 
stringent alternative approach.
(1) Types of Models
    Comments. The comments submitted supported EPA's proposal that 
States could use the approach in the Guidelines in making 
individualized visibility assessments for BART determinations. In 
response to our request for recommendations for more streamlined 
approaches to assessing source specific visibility impacts, we received 
several comments supporting regulations that would allow for this.
    One commenter pointed out that streamlined approaches, such as the 
use of photochemical grid models, would significantly ease the burden 
on States and Tribes. The commenter also pointed out that Sec.  
51.308(e)(1), cross-referenced as the guiding provision for BART 
determinations in proposed Sec.  51.308(e)(2)(i)(C), does not 
explicitly recognize streamlined approaches for determining BART. Thus, 
the commenter believes, EPA should ``take care to ensure that a 
streamlined approach for the purpose of determining [the BART 
benchmark] is clear, permissible, and not legally unsound in the final 
rule.''
    Another commenter said that a streamlined approach ``is an 
appropriate option that should be explicitly recognized and more fully 
developed in the final rule.'' According to the commenter, either the 
CMAQ or CAMx regional photochemical models would be suitable for 
streamlined visibility assessments for BART determinations, but also 
stated that none of the models is capable of consistently producing 
unbiased results for all chemical constituents responsible for haze. 
One State commenter said that States in EPA Region 5 are using the 
CALPUFF model and it would prefer to continue doing so. The State would 
not object to allowing other models to be used so long as they are 
optional.
    Another commenter submitted comments detailing the reasons it 
believes CALPUFF is superior to photochemical grid models for purposes 
of source-by-source BART analysis. In brief, commenter explained that 
with grid models, the concentration of pollutants from a point source 
is automatically diluted evenly across the grid in which the source is 
located. This dilution effect can be partially redressed by employing 
smaller grid sizes or by using a hybrid model which employs Lagrangian 
methods (as used in CALPUFF) close to the source and switches to a grid 
method farther downstream. However, both of these methods are resource 
intensive. The commenter therefore believed that CALPUFF, which can use 
meteorological data bases developed for CMAQ and CAMx, should be the 
preferred option.
    Final Rule. Section 308(e)(1)(ii)(B) requires that, for fossil 
fuel-fired power plants with a total generating capacity of greater 
than 750MW, BART determinations be made pursuant to the BART 
guidelines. With respect to the type of air quality model used for the 
BART determination, the guidelines instruct States to use CALPUFF or 
another appropriate dispersion model to determine the visibility 
improvement expected at a Class I area from the BART control technology 
being evaluated (70 FR 39170).
    We maintain that CALPUFF is the best model currently available for 
predicting visibility impacts from single sources. The use of regional 
scale photochemical grid models may have merit, but to date, such 
models have not been evaluated for single source applications (70 FR 
39123). As the science and structure of regional photochemical grid 
models are improved and demonstrated to successfully predict impacts 
from single sources (e.g. plume in grid or source tagging techniques) 
at least as well as CALPUFF, such models may become more useful in 
streamlining the BART benchmark determination. All modeling 
applications in making BART determinations call for the development of 
a modeling protocol for all modeling, and States should consult with 
EPA and the relevant regional planning organization (RPO) before 
conducting any modeling.
(2) State Discretion to Consider Cumulative Visibility Impacts
    Comments. Several commenters said that the Agency's position 
described in the preamble to the proposed rule--that

[[Page 60617]]

States have the discretion to require a cumulative visibility approach 
in setting the BART benchmark--violates the American Corn Growers 
decision. Most commenters opposed to EPA's proposed interpretation, 
however, were also careful to point out that this did not indicate 
opposition to the policy of allowing a ``group BART'' benchmark to be 
used in the special case of evaluating emissions reductions required by 
other CAA or State law requirements.
    Commenters that objected to EPA's statement that States have the 
discretion to use ``group BART'' in setting the BART benchmark 
referenced the courts' opinions in American Corn Growers and CEED v. 
EPA to argue that such a statement was inconsistent with the CAA. 
Several commenters cited the American Corn Growers court's statement 
that ``the state must consider the degree of improvement in visibility 
in national parks and wilderness areas that would result from the 
source's installing and operating the retrofit technology [in making a 
BART determination].'' See American Corn Growers, 291 F.3d at 7. One 
commenter emphasized that the court had used the singular noun (``the 
source's'') rather than the plural as a clear indication that the 
visibility factor must be assessed on a source-by-source basis. Another 
commenter pointed to the court's statement, in regard to the approach 
in the 1999 Regional Haze Rule which separated the visibility factor 
from the other BART factors, that ``[t]o treat one of the five 
statutory factors in such a dramatically different fashion distorts the 
judgment Congress directed the states to make for each BART-eligible 
source.'' (291 F.3d at 6). No comments were received that explicitly 
supported EPA's proposed interpretation of the DC Circuit's decisions 
on this point. Several commenters also claimed that the flexibility to 
use ``group BART,'' described in the preamble, was not actually 
provided for in the proposed regulatory text, which cross-referenced to 
the source-by-source BART determinations prescribed in Sec.  
51.308(e)(1). One commenter that strongly opposed EPA's proposed 
position on this issue noted that ``it is nevertheless true that states 
can use simplifying assumptions or even apply some type of ``weight of 
evidence'' test in determining the amount of emissions reductions that 
BART-eligible sources may be required to undertake as part of a 
regional trading program'' The commenter did not elaborate on examples 
of appropriate simplifying assumptions or methods by which weight of 
evidence could be taken into account.
    Where an independent requirement determines the emissions 
reductions required of BART sources in a trading program or other type 
of similar program, however, commenters appeared to agree that a BART 
benchmark can be used that does not depend on source specific 
visibility assessments. In other words, for BART alternatives that are 
required by or that satisfy another CAA provision, the BART benchmark 
to be used in a ``better-than-BART'' test may be established using a 
group BART approach. In particular, several commenters representing 
electric utilities and other industries submitted comments agreeing 
with our interpretation of section 169A of the CAA as allowing other 
programs to substitute for BART, and agreeing that where an independent 
requirement determines the emissions reductions required of BART 
sources, a most-stringent BART benchmark could be used without raising 
the concerns at issue in the American Corn Growers and CEED v. EPA 
cases. These commenters particularly agreed with and supported the 
application of this rationale to the CAIR, as was finalized in the July 
6 BART Guidelines rulemaking. One commenter urged EPA to adopt specific 
regulatory language, as was done in the case of the CAIR, to implement 
this option both with respect to the WRAP's program and to other 
programs which may be developed elsewhere.
    Final Rule. We have carefully considered the comments on the 
discussion in the NPRM addressing the discretion of the States in 
establishing a BART benchmark and concluded that this rulemaking should 
focus on the type of alternative program that we anticipate that some 
States may submit in lieu of BART. In providing States with the 
flexibility to adopt an alternative program, EPA has assumed that 
States would adopt trading programs, or other substantially similar 
programs--such as the WRAP's backstop market trading program--as 
alternatives to source-by-source BART. While it is possible that a 
State could design a trading program under the authority of section 
169A(b)(2)(A) of the CAA (the BART provision), we believe that it is 
far more likely that a State designing its regional haze plan would 
adopt a trading program under the broader authority of section 
169A(b)(2)(B) (the long-term strategy for making reasonable progress). 
As such, the regulations promulgated today provide a basic framework 
for States to demonstrate that any type of alternative program provides 
greater reasonable progress than BART, but provide greater detail as to 
how that demonstration might be done for a trading program (or other 
substantially similar program) designed to fulfill requirements other 
than BART.
    Generally, the comments received criticizing the statement that 
States have discretion to consider visibility in a cumulative manner in 
determining whether or not an alternative makes greater reasonable 
progress than would BART appear to be premised on the argument that any 
type of program that could be characterized as a BART program--even an 
alternative program--is bounded by the requirements in section 
169A(b)(2)(A). Thus, for example, several commenters cited the American 
Corn Growers court's statement interpreting the definition of BART as 
grounds for limiting a State's ability to take a different approach in 
developing an alternative program. In other words, in determining the 
amount of emissions reductions that sources in a trading program 
alternative must achieve to demonstrate that the trading program is 
``better'' than source-by-source BART, these commenters argued that the 
States are limited to designing a program that begins with source 
specific visibility analyses. Applying the same logic, however, States 
would need to undertake source specific assessments of the other four 
factors in the BART definition: the costs of control, the energy and 
nonair quality environmental impacts, any existing pollution control 
technology in use at the source, and the remaining useful life of the 
source. Only once the State had ascertained what BART would be at each 
source subject to BART--based on a thorough source specific analysis of 
these five factors--could the State then show that its trading program 
achieves greater reasonable progress. Although the States may certainly 
adopt such an approach under this final rule, we think it unlikely that 
States would conduct such an extensive assessment only to then go 
through the additional, resource intensive steps of establishing a 
trading program.
    The concern underlying these comments appears to be that EPA should 
not explicitly authorize States to design a program more stringent than 
required for BART in establishing a BART alternative program under 
section 169A(b)(2)(A) of the CAA.\5\ Obviously,

[[Page 60618]]

under EPA's interpretation of the CAA, upheld by the CEED v. EPA court, 
the alternative program must achieve greater reasonable progress than 
would BART, presumably in most cases by achieving greater emissions 
reductions over time. However, the commenters opposed to what they 
label a ``group BART'' approach argue that States must consider source-
specific visibility impacts to avoid setting too high a bar for the 
program. Although the commenters have not suggested that the other 
simplifying approaches that we have suggested in the past for assessing 
the costs of control were an inappropriate form of ``group-BART,'' if 
the CAA requires visibility impacts to be considered on a case-by-case 
basis, then it would also seem to require that the costs of control and 
other factors be considered on a case-by-case basis. In other words, 
these commenters argue that the BART benchmark for an alternative 
program under section 169A(b)(2)(A) must be based on a case-by-case 
analysis of what BART would be for each source subject to BART.
---------------------------------------------------------------------------

    \5\ The comments criticizing the statement by EPA that States 
have the discretion to require a cumulative visibility analysis do 
not appear to challenge the general principle that a State may adopt 
measures in a SIP more stringent than required under the CAA, except 
where explicitly prohibited. See Union Electric Co. v. EPA, 427 U.S. 
246, 263-264 (1976); see also Summary of Comments on the Revisions 
to Provisions Governing Alternative to Source-specific Best 
Available Retrofit Technology (BART) Determinations, Docket ID No. 
EPA-HQ-OAR-2002-0076, www.regulations.gov.
---------------------------------------------------------------------------

    The DC Circuit in CEED v. EPA was not absolutely clear as to 
whether its decision was based solely on the fact that EPA had required 
a ``group BART'' approach, or whether the fact the Annex contained such 
an analysis was in itself a sufficient reason to invalidate the Annex 
approval. As EPA explained in the proposed rule, we believe that the 
CEED v. EPA decision is limited to circumstances where EPA requires or 
induces States to adopt cumulative approaches that result in programs 
more stringent than required by the CAA. However, we did not receive 
comments from any States explicitly supporting our interpretation of 
the court's holdings, and as we do not anticipate that States will 
submit plans with trading programs designed only to meet the 
requirements of section 169A(b)(2), we have concluded that the issue of 
whether the CAA provides States with the discretion in designing such 
programs to employ some type of cumulative approach or simplifying 
assumptions in the process of estimating emissions reductions 
achievable by source-by-source BART is not relevant to today's 
rulemaking.
    The regulations finalized today provide that as a general matter, 
States must undertake source specific BART analyses under Sec.  
51.308(e)(1) for each source subject to BART in order to estimate the 
emissions reductions achievable under the source-by-source BART 
requirements. The use of such a BART benchmark enables a State to 
design an alternative program that is ``better than BART'' based on a 
precise estimation of the emissions reductions that could be achieved 
under BART.
    For trading programs where the emissions reductions are required to 
fulfill CAA requirements other than BART (or to fulfill requirements of 
a State law or regulation not required by the CAA), we are amending the 
regulations to make clear that States may establish a BART benchmark 
based on a simplified BART analysis in such a situation. We agree with 
commenters that a BART benchmark based on such an analysis raises none 
of the concerns that were at issue in the American Corn Growers and 
CEED v. EPA cases. Where a trading program is designed to fulfill other 
requirements, including the requirement to make reasonable progress, an 
independent requirement determines the level of reductions achieved and 
the BART analysis serves only to ensure that the program meets the 
requirement that a BART alternative make greater reasonable progress 
than BART. In other words, there is no need to develop a precise 
estimate of the emissions reductions that could be achieved by BART in 
order simply to compare two programs. As EPA did in the CAIR, States 
should have the ability to develop a BART benchmark based on 
simplifying assumptions as to what the most-stringent BART is likely to 
achieve. The regulations finalized today therefore provide that where 
an emissions trading program has been designed to meet a requirement 
other than BART, including the reasonable progress requirement, the 
State may establish a BART benchmark based on an analysis that includes 
simplifying assumptions about BART control levels for sources within a 
source category.
    We do agree with commenters that EPA should issue regulatory 
language expressly allowing for the use of a BART benchmark based on a 
simplified BART analysis for demonstrating that emissions reductions 
required by other provisions also make greater reasonable progress than 
BART and may be used to substitute for BART. We have finalized such a 
provision at Sec.  51.308(E)(2)(i)(C). This will help clarify that in 
such cases, the BART benchmark is not the ``driver'' of emissions 
reductions and is therefore not subject to the concerns on which the DC 
Circuit decided American Corn Growers and CEED.

Role of BART Guidelines for EGUs in Determinations Proposal

    The BART guidelines establish control levels or emission rates as 
presumptive standards for EGUs greater than 200 MW capacity at plants 
with a total generating capacity in excess of 750 MW. We proposed that 
the States apply these presumptive standards contained in the final 
BART guidelines in developing a BART benchmark for a trading program or 
other alternative that includes such EGUs. In other words, when States 
are estimating emission reductions achievable from source-by-source 
BART, they must assume that the EGUs which would otherwise be subject 
to BART will control at the presumptive level, unless the State 
demonstrates that such presumptions are not appropriate at particular 
units. The preamble to the proposed rule explained that this would be 
accomplished by the cross reference to Sec.  51.308(e)(1) within 
proposed Sec.  51.308(e)(2)(i)(C), the provision prescribing the method 
of setting the BART benchmark. Section 51.308(e)(1), in turn, provides 
that BART determinations for EGUs of greater than 200 MW capacity at 
plants with a total generating capacity greater than 750 MW must be 
done in accordance with the BART guidelines in appendix Y to part 51.
    Comments. One commenter said that the presumptive standards for 
EGUs are too lenient and should be lowered before EPA allows States to 
use them for purposes of a ``better than BART'' demonstration. Another 
commenter supported the use of the presumptive standards in this 
context, but contested the preamble statement that the presumptive 
standards ``apply to certain EGUs on a mandatory basis'' because, 
according to the commenter, the presumptions are not mandatory in that 
they are rebuttable. Another commenter argued that the use of 
presumptive standards would make the installation of controls more 
likely, without regard to the visibility benefit expected. The 
commenter believes EPA use of presumptions is incompatible with CAA 
section 169A as interpreted in American Corn Growers and incompatible 
with EPA's authority to issue BART guidance for EGUs of 750 MW or 
greater.
    Final Rule. The final rule promulgated on July 6, 2005, addresses 
the authority of EPA to establish the presumptions in the BART 
guidelines for certain EGUs, as well as the level of control reflected 
by those presumptions. In the NPRM, EPA did not request comment on the 
presumptions established in the Guidelines, but rather whether these 
presumptions should be

[[Page 60619]]

used in establishing a BART benchmark for comparing an alternative 
program to BART.
    In today's final rule, the regulations make clear that, with one 
exception, States must follow the approach for making BART 
determinations under section 51.308(e)(1) in establishing a BART 
benchmark. This includes the requirement for States to use the BART 
guidelines in making BART determinations for EGUs at power plants of a 
certain size. As discussed above, the one exception to this general 
approach is where the alternative program has been designed to meet 
requirements other than BART; in this case, States are not required to 
make BART determinations under Sec.  51.308(e)(1) and may use 
simplifying assumptions in establishing a BART benchmark based on an 
analysis of what BART is likely to be for similar types of sources 
within a source category. Under either approach to establishing a BART 
benchmark, we believe that the presumptions for EGUs in the BART 
guidelines should be used for comparison to a trading program or other 
alternative measure, unless the State determines that such presumptions 
are not appropriate for particular EGUs. We note that this limitation 
on the use of the presumptions is most likely to apply only in a 
source-by-source determination under Sec.  51.308(e)(1). States 
establishing a BART benchmark based on simplifying assumptions as to 
the most-stringent BART for EGUs may rely on the presumptions, as EPA 
did in the CAIR rule. For States considering the appropriateness of the 
presumptions in specific cases, the same criteria discussed in the BART 
guidelines should guide them in reaching a conclusion. Thus, the 
presumptive standards are ``mandatory'' for the identified EGUs, in 
that the presumption must be applied to the specified class of EGUs; 
but the presumptive standards are rebuttable, as explained in the BART 
guidelines.
    We do not agree that EPA should revise the presumptive standards 
before allowing States to use them for purposes of establishing a BART 
benchmark. We believe it is appropriate for the States to use the same 
presumptions in developing the BART benchmark that they would use in 
making BART determinations.
    We determined in the BART final rule that the limits represented by 
the presumptions are cost effective for large EGUs at the largest power 
plants. We believe that the presumptions represent a reasonable 
estimate of a stringent case BART, particularly because in developing a 
BART benchmark they would be applied across the board to a wide variety 
of units with varying impacts on visibility, at power plants of varying 
size and distance from Class I areas.
    We do not agree that the use of presumptive standards ignores the 
visibility benefits to be expected from the control of the EGUs covered 
by the presumption. In the final BART guidelines establishing the 
presumptions, EPA took into account the degree of improvement in 
visibility that would result from the installation of the presumptive 
level of controls in finding that such controls should generally be 
found to be BART. As explained in the preamble to the BART guidelines, 
controlling the type of sources covered by the presumptions at the 
level of the presumptive standards is likely to result in a substantial 
degree of visibility improvement based on EPA's modeling analyses.
Minimum Universe of Sources Covered
    Proposal. In the 1999 Regional Haze Rule, the provisions for 
alternative programs to BART at section 51.308(e)(2) contained a 
requirement that such a program must include, at a minimum, each BART-
eligible source within the State. In the August 1, 2005 proposal, we 
noted that having had the occasion to consider BART alternative 
programs in more detail, we believed that some categories of BART 
eligible sources might not be appropriate for inclusion in a cap and 
trade program. We provided the example of the difficulty in quantifying 
emissions with sufficient accuracy to participate in a trading program 
for some source categories. We therefore proposed to allow States to 
use a trading program or alternative measure to substitute for BART for 
some source categories, while requiring source-by-source BART for BART-
eligible sources in any source categories not covered by the 
alternative program. We further proposed that for any categories which 
were included in the alternative program, we would retain the 
requirement that all BART-eligible sources in the State within that 
source category must be subject to the program. See proposed section 
51.308(e)(2)(ii). One reason for this proposed provision was to prevent 
any shifting of emissions from covered to non-covered BART eligible 
sources, which could potentially undermine the effectiveness of the 
emissions cap. In a related provision we proposed, as one of the 
minimum elements of a cap and trade program, that the applicability 
provisions must be designed to prevent any significant potential 
shifting of production and emissions within the State or multi-State 
region. See proposed section 51.308(e)(2)(vi)(A).
    Comments. Several commenters opposed the requirement to include in 
the alternative program all BART-eligible sources within a source 
category. Several of these commenters argued that such a requirement is 
a form of ``group BART'' invalidated by the DC Circuit because it would 
impose requirements on BART eligible sources without a demonstration 
that those sources are reasonably anticipated to cause or contribute to 
visibility impairment. One commenter argued that the requirement was 
unjustified as a practical matter, at least in the case of the forest 
products industry, because in order to be economically viable mills 
must be operated at near capacity. This would leave no leeway for 
production and emissions shifting. The commenter also argued that the 
provision is conceptually unjustified, considering that under a 
conventional source-by-source program, emissions shifting theoretically 
could occur to BART-eligible sources which were determined to be exempt 
from BART because they do not cause or contribute to visibility 
impairment. The commenter argued that it would be illegal to impose 
``compensating costs'' on such sources outside the trading program 
context. The implication of this comment is that it would also be 
illegal to impose such costs on these BART-eligible sources by 
requiring them to participate in the alternative program.
    In contrast, one State commented that allowing some source 
categories to add controls while others may avoid controls by buying 
reductions elsewhere would be contrary to its management principles. 
This commenter thought that the use of a trading program to address 
haze for some but not all sources subject to BART might be counter-
productive. Similarly, another commenter noted that ``carving out 
source categories would only shrink the universe of potential 
participants, the opposite of what is needed for a successful trading 
program.''
    Final Rule. Having carefully considered the comments and the 
relationship between the requirement for category-wide participation of 
BART-eligible sources and the requirements for the State to address 
emissions shifting, we are adopting final provisions that maximize the 
flexibility of the States while insuring that the BART-eligible sources 
are addressed in some fashion by the States. As we noted in 1999 in 
establishing the criteria governing BART alternative trading programs, 
the legislative history of the

[[Page 60620]]

CAA demonstrates Congress' recognition of the need to control emissions 
from a specific set of sources. We are therefore finalizing in this 
rule that States must require that each BART-eligible source in the 
State either participate in a BART alternative program or, 
alternatively, be subject to the case-by-case BART requirements under 
section 51.308(e)(1). In other words, States are not required to 
include each BART-eligible source in a source category in an 
alternative program; however, any BART-eligible sources not included in 
an alternative program would remain subject to the general requirements 
governing BART sources.
    For most trading programs, we do not anticipate that this 
requirement will have a significant impact on the scope of the program. 
Because trading programs generally include all sources within a source 
category in a trading region, trading programs designed to meet either 
reasonable progress goals or other requirements of the CAA are likely 
to have broad applicability provisions that encompass all BART-eligible 
sources in the trading region (or at least all BART-eligible sources 
within certain categories of sources for some trading programs). States 
have the inherent authority to determine the applicability of their 
regulations for programs such as those designed to meet reasonable 
progress requirements, or to attain the National Ambient Air Quality 
Standard (NAAQS), and are most likely to design programs with 
applicability provisions that are not dependent on factors such as the 
age of sources covered by the program. For example, States in the WRAP 
designed their program to apply to all stationary sources with actual 
emissions of 100 tons per year or more, regardless of the type of 
source or the age of the facility.
    We disagree that the requirement that States either require BART-
eligible sources to participate in a trading program or go through a 
BART analysis is a form of ``group BART'' that would illegally impose 
requirements on such sources without a demonstration that those sources 
emit a pollutant that may reasonably be anticipated to cause or 
contribute to visibility impairment. As noted above, for programs 
designed to meet other requirements of the CAA, we would expect that 
the States would design programs that apply broadly, and nothing in the 
BART provisions of the CAA limits a States' ability to regulate BART-
eligible sources under other provisions in the CAA. Thus, for example, 
a State need not demonstrate that an EGU built between 1962 and 1977 
has a certain measurable impact on visibility before regulating it 
under the CAIR. Rather, the BART sources would be treated in the same 
manner as other sources in the State.\6\
---------------------------------------------------------------------------

    \6\ In theory, a State could design a program to meet the 
reasonable progress or other requirements of the CAA that does not 
have sufficiently broad applicability provisions to encompass all 
BART sources. For example, a State could adopt a program that covers 
all sources with SO<INF>2</INF> emissions greater than 1000 tons per 
year. In such a case, the BART sources not subject to the trading 
program would be subject to the requirements of section 308(e)(1).
---------------------------------------------------------------------------

    In the case of programs designed solely to satisfy BART 
requirements, which may arguably be limited to BART sources only, the 
approach set forth in the final rule provides the opportunity for an 
individual source not to be regulated by a trading program. In 
particular, rather than participate in a trading program, a source may 
demonstrate that it does not meet the ``subject to BART'' test or that 
BART should be ``no control'' in its particular case, seek an exemption 
from the Administrator under section 51.308(e)(4), or install BART 
controls. This approach therefore avoids any potential problems 
involving BART-eligible sources which are not reasonably anticipated to 
cause or contribute to visibility impairment being illegally subject to 
program requirements. Rather, section 51.308(e)(2) provides BART-
eligible sources which are reasonably anticipated to cause or 
contribute to visibility the opportunity to participate in a trading 
program instead of meeting source specific control limits.
    Our concerns with emissions shifting will be addressed under the 
more general requirements applicable to trading programs. These 
provisions require States to demonstrate that the applicability 
provisions are designed to prevent any significant, potential shifting 
within the State of production and emissions from sources in the 
program to sources outside the program. This provision addresses 
emissions shifting from sources in the program to those outside the 
program, irrespective of the BART-eligibility status of the sources. 
Moreover, this demonstration will enable States to take into account 
the type of practical and economic factors raised by commenters which 
may obviate theoretical concerns with emission shifting. We also note 
that the periodic SIP updates required under Sec.  51.308(g) of the 
regional haze rule will provide an opportunity to assess whether 
emissions shifting is in fact a problem.
Comparison of BART and Alternative Scenarios
    Proposal. In the NPRM, we proposed several changes to Sec.  
51.308(e)(2)(i). As explained in the preamble, the critical revision to 
that section to bring it into compliance with the decision of the DC 
Circuit in CEED v. EPA was to remove the requirement of a bifurcated 
approach to establishing the BART benchmark. We also proposed 
additional changes in the section which were intended to establish a 
clear ``framework'' or step-by-step procedure for comparing an 
alternative program to source-by-source BART. This consisted of a five-
step procedure in proposed paragraphs (A)-(E) within Sec.  
51.308(e)(2)(i). In brief, those steps were: (A) List all BART-eligible 
sources, (B) list all BART source categories covered by the program, 
(C) analyze the degree of visibility improvement at each affected Class 
I area expected as a result of the application of BART pursuant to 
paragraph (e)(1) at each source subject to BART in each source category 
covered by the program, (D) analyze the emissions reductions and 
associated visibility improvement expected under the trading program or 
other alternative measure, and (E) compare the results of the steps in 
paragraphs (C) and (D) using the method prescribed under Sec.  
51.308(e)(3).
    Section 51.308(e)(3), which was finalized in the BART guidelines 
rulemaking, establishes criteria for determining whether an alternative 
program makes greater reasonable progress than source-by-source BART. 
First, if the distribution of emissions is similar between the two 
scenarios, the comparison may be made on the basis of emissions alone. 
In that case, the alternative program may be deemed to make greater 
reasonable progress than BART if it results in greater emissions 
reductions than source-by-source BART. If, however, the geographic 
distribution of emissions reductions is significantly different under 
the two alternatives, the State must conduct visibility modeling and 
evaluate the alternative program under a two-pronged test. The first 
prong is that the alternative program must not cause a decline in 
visibility at any Class I area. The second prong is that there is an 
overall improvement in visibility under the alternative program, 
``determined by comparing the average differences between BART and the 
alternative over all affected Class I areas.'' See section 
51.308(e)(3).
    In proposing the above-described structure of section 51.308(e)(2), 
we noted that we were proposing to add the term ``affected'' to modify 
the term ``Class I areas'' in paragraph (C). The purpose of this was to 
clarify that a State need not evaluate visibility improvement at every 
Class I area nationwide. We also noted that, as

[[Page 60621]]

described in the preamble to the final BART guidelines, States have 
discretion in defining an ``affected'' Class I area.
    Finally, while noting that section 51.308(e)(3) had been finalized, 
we sought comment on whether EPA should allow other means of 
demonstrating that an alternative program makes greater reasonable 
progress than would BART. Specifically, we solicited comments on 
whether a weight of evidence approach would be appropriate. We gave the 
following scenario as an example of a situation where such an approach 
might be appropriate: ``(1) The alternative program achieves emissions 
reductions that are within the range believed achievable from source-
by-source BART at affected sources, (2) the program imposes a firm cap 
on emissions that represents meaningful reductions from current levels 
and, in contrast to BART, would prevent emissions growth from new 
sources, and (3) the State is unable to perform a sufficiently robust 
assessment of the programs using the two pronged visibility test due to 
technical or data limitations.''
    Comments. One commenter noted that there was a contradiction 
between the terms of Sec.  51.308(e)(3) as finalized and Sec.  
51.308(e)(2) as proposed. Specifically, whereas under Sec.  
51.308(e)(3), dispersion modeling is required only if the distribution 
of emissions distribution is significantly different, under the 
alternative measure, in proposed section 51.308(e)(2), dispersion 
modeling is required as a matter of course in developing the two 
scenarios to be compared.
    Several commenters also supported the ``weight of evidence'' 
approach to demonstrate that an alterantive makes greater reasonable 
progress than BART. One commenter specified that the ``regulation 
should require a weight of evidence demonstration to include emission 
inventory, monitoring data, meteorology, and various data analysis 
studies,'' and that modeling should not necessarily be weighted more 
heavily than the other factors listed.
    With respect to the definition of an ``affected'' Class I area, one 
commenter pointed to possible inconsistent application among States and 
uncertainty as to which States should make the determination (i.e., 
only the State which contains the Class I area, or other States as 
well). The commenter therefore requested that EPA clarify when a Class 
I area is affected by emissions and the radius from a source within 
which an analysis should be done.
    Another commenter claimed that our discussion of section 
51.308(e)(3) re-opened that provision for comment in this rulemaking 
and created a renewed opportunity for judicial review. The commenter 
then raised several arguments regarding the legality of section 
51.308(e)(3) under the CAA. The commenter argued that the proposed rule 
was overly broad in failing to specify that only sources participating 
in a trading program or other alternative measure may satisfy BART for 
those sources and the specific visibility-impairing pollutant at issue. 
The commenter also argued that the test is impermissibly vague in 
providing for dispersion modeling if the distribution of emission is 
``substantially different.'' The commenter also claimed that by 
allowing States to compare ``average differences'' between BART and the 
alternative over all affected Class I areas was inconsistent with the 
CAA. Finally, the commenter responded to our request for comment on a 
weight of evidence test, stating that allowing unspecified 
``qualitative factors'' to trump other, more quantitative assessments 
would dramatically weaken the rule.
    Final Rule. We agree with commenters who pointed to the 
inconsistency between the proposed provisions of section 51.308(e)(2) 
and the existing terms of section 51.308(e)(3). This conflict was the 
result of inadvertent error, and we are correcting it in the final 
rule. Specifically, we have eliminated the clauses within section 
51.308(e)(2)(C) and section 51.308(e)(2)(D) which required that 
visibility improvement be projected at those steps in the process. 
Instead, these paragraphs call only for an assessment of emissions 
reductions under BART and alternative scenarios, respectively. We have 
also clarified in section 51.308(e)(2)(E) that visibility projections 
are required only if necessary, pursuant to section 51.308(e)(3).
    Because we have eliminated the requirement for visibility 
projections within the analysis prescribed in section 51.308(e)(2), 
there is no longer a need to define an affected Class I area in the 
context of this section. Instead, that term is defined in the context 
of section 51.308(e)(3), at the States' discretion as discussed in the 
preamble to the final BART rule. See 70 FR 39138. The EPA continues to 
believe that it is not necessary to bound the terms of that discretion 
upfront through Federal regulation. Any potential problems due to 
inconsistent application among States can be addressed through the RPO 
and inter-RPO processes already in place and ultimately through the SIP 
process. This will allow consideration of the potential effects of 
local conditions and of particular trading programs as they are 
developed. It should, therefore, produce more reasoned results than 
would the establishment of a nationwide, one-size-fits-all radius of 
influence criterion.
    We disagree with comments that EPA reopened section 51.308(e)(3) by 
discussing the provisions of this section of the rule in the proposal, 
or that today's rule has impacted the meaning of section 51.308(e)(3).
    Notwithstanding the fact that this provision was not reopened, we 
note that EPA disagrees with the substance of the comments claiming 
that section 51.308(e)(3) is overly broad and vague. The commenter's 
concerns regarding the failure of section 51.308(e)(3) to specify that 
only those sources participating in a trading program may satisfy BART 
for those sources is addressed in the regulations under section 
51.308(e)(2)(i)(B), which provides that each BART-eligible source in a 
State must be included in an alternative program, have a BART emission 
limit, or otherwise be addressed under the BART provisions. The 
commenter's concerns regarding the ``impermissibly vague'' language 
used in section 51.308(e)(3) that would allow a State to approve 
alternative measures that are less protective than BART ignore the SIP 
process. The State's discretion in this area is subject to the 
condition that it must be reasonably exercised and that its decisions 
be supported by adequate documentation of its analyses.
    We also disagree with the comments criticizing the test finalized 
in section 51.308(e)(3) for allowing States to consider the average 
differences between BART and the alternative in determining whether the 
alternative makes greater reasonable progress. In short, as explained 
in the response to comments to the BART Guideline rulemaking, EPA 
believes the test in section 51.308(e)(3) is an appropriate one:

    In addition, within a regional haze context, not every measure 
taken is required to achieve a visibility improvement at every class 
I area. BART is one component of long term strategies to make 
reasonable progress, but it is not the only component. The 
requirement that the alternative achieves greater progress based on 
the average improvement at all Class I areas assures that, by 
definition, the alternative will achieve greater progress overall. 
Though there may be cases where BART could produce greater 
improvement at one or more class I areas, the no-degradation prong 
assures that the alternative will not result in worsened conditions 
anywhere than would otherwise exist, and the possibility of BART for 
reasonably attributable visibility protects against any potential 
``hot spots.'' Taken

[[Page 60622]]

together, the EPA believes these factors make a compelling case that 
the proposed test properly defines ``greater reasonable progress.'' 
The EPA anticipates that regional haze implementation plans will 
also contain measures addressing other sources as necessary to make 
progress at every mandatory federal Class I area.\7\
---------------------------------------------------------------------------

    \7\ Summary of Comments and Responses on the 2004 and 2001 
Proposed Guidelines for Best Available Retrofit Technology 
(``BART'') Determinations under the Regional Haze Rule, Docket 
Number EPA-HQ-OAR-2002-0076, at 253.

    With respect to the use of a ``weight of evidence'' approach as an 
alternative to the methodology of section 51.308(e)(3), we support the 
use of such a test as an alternative to the methodology set forth in 
section 51.308(e)(3). ``Weight of evidence'' demonstrations attempt to 
make use of all available information and data which can inform a 
decision while recognizing the relative strengths and weaknesses of 
that information in arriving at the soundest decision possible. Factors 
which can be used in a weight of evidence determination in this context 
may include, but not be limited to, future projected emissions levels 
under the program as compared to under BART, future projected 
visibility conditions under the two scenarios, the geographic 
distribution of sources likely to reduce or increase emissions under 
the program as compared to BART sources, monitoring data and emissions 
inventories, and sensitivity analyses of any models used. This array of 
information and other relevant data may be of sufficient quality to 
inform the comparison of visibility impacts between BART and the 
alternative program. In showing that an alternative program is better 
than BART and when there is confidence that the difference in 
visibility impacts between BART and the alternative scenarios are 
expected to be large enough, a weight of evidence comparison may be 
warranted in making the comparison. The EPA will carefully consider the 
evidence before us in evaluating any SIPs submitted by States employing 
such an approach.

B. Comments Relating to the Final Determination That CAIR Makes Greater 
Reasonable Progress Than BART in the July 6, 2005 BART Guideline Rule

    In the final BART guidelines rulemaking on July 6, 2005, EPA 
determined that the CAIR makes greater reasonable progress than BART 
for certain EGUs and pollutants (70 FR 39138-39143). We did not seek 
comment on this determination, but we nonetheless received comments 
related to this final rule.
    Comments. Several organizations submitted comments regarding BART 
relief for non-EGUs in the CAIR region. They assert that the CAIR will 
achieve more reasonable progress than would BART for all BART-eligible 
sources in the CAIR region, including non-EGUs. Therefore, they urge 
EPA to amend its final determination to include BART relief for non-
EGUs and to provide supporting analysis for this demonstration.
    In contrast, another commenter disagreed with our previous 
determination that the CAIR will make greater reasonable progress than 
BART. The commenter acknowledged that that determination was not at 
issue in this rulemaking. However, this commenter was concerned that 
there would not be enough BART-eligible sources in non-CAIR States to 
support an effective BART trading program outside the CAIR region. The 
commenter was also concerned about the administrative costs that a 
trading program would impose on non-CAIR States. The commenter 
therefore urged EPA to establish an alternative mechanism, such as ``an 
exchange ratio for Acid Rain allowances held, or `BART' allowances 
generated by sources located in CAIR states'' in order to allow 
participation in an effective trading program by sources in non-CAIR 
States.
    One commenter urged EPA to clarify that where another program 
requires controls of one pollutant at BART-eligible sources, BART 
applicability for other pollutants is not affected.
    One commenter said that it does not believe EPA has the authority 
to ``circumvent'' CAA requirements for controlling specific BART 
sources that affect visibility in a Class I area. They believe that EPA 
should require States to show that all BART sources will be controlled 
first as part of any showing that an alternative program is ``better 
than BART.'' This commenter also requested clarification as to which 
CAA requirements could be included in SIPs to make a ``better than 
BART'' showing. Final Rule. The DC Circuit in CEED v. EPA upheld EPA's 
interpretation of section 169A of the CAA as allowing for an 
alternative program, such as an emissions trading program, to be 
adopted in lieu of source-by-source BART controls. It is EPA's view 
that emissions reductions required by CAA (or State) provisions other 
than BART may be used to satisfy BART, so long as the program achieves 
greater reasonable progress than would BART at the BART-eligible 
sources affected. The preponderance of comments also supported this 
position, and the comments in opposition did not raise any arguments 
that were not addressed either in the course of the CAIR rulemaking or 
in the final determination that the CAIR may substitute for BART for 
EGUs in affected States made in the July 6, 2005 rule. As previously 
explained, ``EPA does not believe that anything in the CAA or relevant 
case law prohibits a State from considering emissions reductions 
required to meet other CAA requirements when determining whether 
source-by-source BART controls are necessary to make reasonable 
progress.'' (70 FR 39143; see also 70 FR 25300-302).
    With respect to those comments specifically directed at whether the 
CAIR makes greater reasonable progress than BART and, if so, what the 
scope of BART relief should be (i.e., whether it should extend to non-
EGUs), it is important to emphasize that the determination that the 
CAIR makes greater reasonable progress than BART for SO<INF>2</INF> and 
nitrogen oxides (NO<INF>X</INF>) at EGUs in the CAIR region, and thus 
may substitute for BART for those pollutants and those sources, was 
finalized in the July 2005 BART rule. Our supporting technical analysis 
for the determination that the CAIR is ``better than BART'' addressed 
only the comparative visibility impacts of the CAIR trading programs 
with respect to EGUs versus BART for EGUs. A determination at this time 
that the CAIR trading programs for EGUs could substitute for BART at 
non-EGUs as well as for EGUs is beyond the scope of this rulemaking.
    With respect to the request that we clarify that where another 
program requires controls of one pollutant at BART-eligible sources, 
BART-eligibility for other pollutants is not affected, we note that EPA 
agrees with this interpretation of the BART requirements.\8\ As a 
general matter, if a program exists for the control of one pollutant at 
BART-eligible sources, emissions of other visibility-impairing 
pollutants merit analysis to determine if visibility impairment is such 
that additional controls would or would not be warranted. However, it 
is possible that a State could demonstrate that a trading program that 
addresses one or two visibility-impairing pollutants under an 
alternative program would provide greater reasonable progress than 
would case-by-case BART applied to all visibility-impairing pollutants. 
With respect to EPA's determination that the CAIR provides for greater 
reasonable progress than BART for EGUs, EPA found that CAIR States 
which participate in the EPA-administered

[[Page 60623]]

CAIR cap-and-trade programs for SO<INF>2</INF> and NO<INF>X</INF> would 
be allowed to treat the participation of EGUs in this program as a 
substitute for the application of BART controls for these pollutants at 
affected EGUs. EPA further explained in the preamble to the July 2005 
BART rule that a CAIR State that participates in the EPA-administered 
CAIR seasonal NO<INF>X</INF> trading program only, would still need to 
address BART for SO<INF>2</INF> emissions from EGUs. 70 FR at 39143. In 
short, EPA's determination that the EPA-administered CAIR trading 
programs provide for greater reasonable progress than BART was limited 
to the pollutants covered by the EPA-administered CAIR trading programs 
in which the State chooses to participate.
---------------------------------------------------------------------------

    \8\ The final BART Guidelines address this general question of 
applicability. 70 FR at 39161.
---------------------------------------------------------------------------

    Finally, we agree with the comment that EPA should clarify those 
CAA requirements that a State should include in its implementation plan 
if it intends to rely on its participation in the CAIR trading programs 
rather than to require BART for its EGUs. In our July 2005 BART rule, 
EPA promulgated regulations effectuating our determination that States 
which adopt the CAIR model trading rules for SO<INF>2</INF> and 
NO<INF>X</INF> would be allowed to treat the participation of EGUs in 
these programs as a substitute for application of BART controls for 
these pollutants at affected EGUs. The regulations at 40 CFR 
51.308(e)(4) (as established in the July 6, 2005 BART rule) provide the 
following:

    A State that opts to participate in the Clean Air Interstate 
Rule cap-and-trade and trade [sic] program under part 96 AAA-EEE 
need not require affected BART-eligible EGU's [sic] to install, 
operate, and maintain BART. A State that chooses this option may 
also include provisions for a geographic enhancement to the program 
to address the requirement under Sec.  51.302(c) related to BART for 
reasonably attributable impairment from the pollutants covered by 
the CAIR cap-and-trade program.

70 FR at 39156. Subparts AAA-EEE of part 96 set forth a portion of the 
model trading rules (which comprise subparts AAA-III of part 96) that 
States must incorporate, with some allowed modifications, into their 
SIPs to participate in the EPA-administered CAIR SO<INF>2</INF> cap-
and-trade program. Although the regulations do not specifically address 
participation in the NO<INF>X</INF> cap-and-trade program, EPA fully 
anticipated that any State choosing to adopt the annual SO<INF>2</INF> 
model trading rules would also choose to adopt the annual 
NO<INF>X</INF> model trading rules. In addition to numerous practical 
considerations that would lead States to adopt the model rules for and 
thus choose to participate in both annual trading programs (as opposed 
to the SO<INF>2</INF> program only), as noted above, the CAIR 
substitutes for BART only for those pollutants covered by the EPA-
administered CAIR trading programs in which the State chooses to 
participate. EPA agrees, however, with the comment that the BART 
requirements for SIPs should be clarified and is revising the 
regulatory text of the regional haze rule to more closely align with 
the determination regarding the relationship between CAIR and BART made 
by EPA in 2005. We are revising the regulations accordingly to make 
clear that participation in either the annual or seasonal CAIR 
NO<INF>X</INF> cap-and-trade program is a necessary condition for 
relying on EPA's determination that States can substitute CAIR for BART 
for NO<INF>X</INF>. We are also revising the regulations to clarify 
that a State that participates only in the ozone season NO<INF>X</INF> 
cap-and-trade program may rely on EPA's determination that CAIR makes 
greater reasonable progress than BART for NO<INF>X</INF>, but, as 
discussed above, such a State would still need to address BART for 
SO<INF>2</INF>. As noted above, EPA anticipates that all States opting 
to participate in the annual NO<INF>X</INF> cap-and-trade program will 
also participate in the SO<INF>2</INF> cap-and-trade program.
    In addition to clarifying the applicable SIP requirements, we are 
also revising the regulatory text to account for the rule signed by the 
Administrator on March 15, 2006 promulgating Federal implementation 
plans (FIPs) for all jurisdictions covered by the CAIR. These FIPs 
adopt the model cap-and-trade programs that EPA proposed in the CAIR as 
a control option for States, with minor adjustments to account for 
Federal rather than state implementation. Each jurisdiction in the CAIR 
region will be subject to the requirements set forth in these FIPs when 
they became effective on June 27, 2006. The EPA intends to withdraw the 
FIP in a State in coordination with EPA's approval of a SIP for that 
State that meets the CAIR requirements. However, EPA anticipates that 
some States may choose to remain subject to the CAIR FIP and either not 
submit any SIP revisions or submit abbreviated SIP revisions that 
modify certain limited provisions of the CAIR FIP trading programs. The 
EPA's determination in the 2005 BART rule that States which adopt the 
CAIR model trading rules could treat this as a substitute for BART for 
EGUs was based on our finding that, if the CAIR reductions are achieved 
through implementation of the EPA-administered trading programs in the 
model trading rules, CAIR makes greater reasonable progress than BART 
for these sources. This finding holds true whether a State chooses to 
submit a SIP under part 96, remain subject to a FIP under part 97, or 
adopt some combination of the two.

C. Minimum Elements of Cap and Trade Programs

    The August proposal discussed a set of minimum elements that any 
cap and trade program should contain, in order that it be workable and 
enforceable. We received very little comment on most of the proposed 
minimum elements. The discussion below focuses only on those provisions 
on which we received comment. Other elements on which we did not 
receive comments are finalized as they were proposed, and are not 
discussed further below.
Penalty Provisions
    Proposal. We proposed that the minimum program element for excess 
emission penalties would be a mandatory deduction, from a source's 
allowance account, of at least three times the excess emissions. We 
explained that this allowance deduction must occur automatically upon 
the State's or Tribe's determination of excess emissions, though it may 
be reversed if the source successfully appeals that determination. The 
appeal could be based on the determination of the number of allowances 
held by the source as of the allowance transfer deadline and available 
for compliance, the amount of the source's emissions, or the comparison 
of the amount of the source's emissions and the total tonnage value of 
the source's allowances held and available for compliance.
    Comments. A commenter said that in order to effectively and clearly 
deter noncompliance and preserve consistency with other cap and trade 
programs and EPA's economic incentive policies, EPA must require as a 
minimum element of all cap and trade programs the imposition of 
monetary penalties for noncompliance, in addition to the automatic 
allowance deductions prescribed. No other comments were received on 
this specific issue.
    Final Rule. The EPA agrees that cap and trade programs need to have 
swift and unambiguous penalties to deter noncompliance and to ensure 
the integrity of the market for allowances. The EPA believes that an 
automatic allowance deduction penalty of at least three times the 
amount of excess emissions, which is required under section 
51.308(e)(2)(vi)(J), is an effective deterrent for noncompliance. And 
given that allowances have monetary value, such a deduction would 
result in an

[[Page 60624]]

automatic monetary loss to the entity in question.
    The commenter asserted that EPA must require in section 
51.308(e)(2)(vi)(J) that a cap and trade program provide for both an 
automatic offset of any excess emissions (i.e., the automatic deduction 
of one allowance for each ton of emissions for which an allowance was 
not held by the source) and an automatic monetary penalty (i.e., the 
automatic requirement to pay a specified amount of money for each ton 
of excess emissions). In the proposed regulation, EPA instead took the 
approach of requiring an automatic allowance deduction of at least 
three allowances for each ton of excess emissions. This deduction 
includes both an automatic one-to-one offset and an automatic allowance 
penalty of at least two-to-one. The commenter failed to explain why 
giving up allowances in addition to a one-for-one offset provides any 
less deterrence for noncompliance than paying money in addition to a 
one-for-one offset. Each allowance has a monetary value on the 
allowance market, and the source is penalized for noncompliance by 
having to give up assets whether the assets are in the form of 
allowances or in the form of money. In short, there is nothing inherent 
in the nature of an automatic allowance deduction that would make such 
a deduction any less effective a deterrent than an automatic monetary 
penalty.
    Further, EPA believes that the cost, to a source, of a penalty for 
excess emissions should be significantly greater than the cost, to a 
source, of purchasing allowances to be in compliance. The most 
straight-forward way of ensuring a consistent relationship between the 
cost of noncompliance (i.e., the excess emissions penalty) and the cost 
of compliance is to impose an excess emissions penalty in the form of 
an automatic allowance deductions that are a fixed multiple of the 
amount of excess emissions. Here, the automatic penalty consists of at 
least a three-to-one allowance deduction, which includes the one-for-
one offset plus an additional two-for-one allowance surrender. The EPA 
notes that the commenter did not object to this level of penalty, but 
simply claimed that the penalty should have a portion in the form of 
money. The EPA believes that the level of the penalty, as well as the 
form of the penalty, specified in section 51.308(e)(2)(vi)(J) are 
reasonable.
    Finally, the commenter errs in its assertion that EPA's approach in 
section 51.308(e)(2)(vi)(J) deviates from ``long-standing'' policies in 
requiring automatic allowance deductions rather than automatic monetary 
penalties for cap and trade programs. In fact, EPA took the same 
approach in the NO<INF>X</INF> Budget Trading Program regulations 
promulgated in 1998 (63 FR 57356, 57528) (section 96.54(d)(1))) and in 
the CAIR trading program regulations recently promulgated in 2005 (70 
FR 25162, 25353, 25373-74, and 25396)(section 96.154(d)(1), section 
96.254(d)(1), and section 96.354(d)(1)) and Clean Air Mercury Rule 
(CAMR) trading program regulations promulgated in 2005 (70 FR 28606, 
28669) (section 60.4154(d)(1)). The EPA notes that, for any trading 
program established under the CAA, a source with excess emissions is 
subject to discretionary monetary penalties under section 113 of the 
CAA, in addition to the automatic penalties established by the 
respective trading program. See, e.g., 63 FR 57528 (section 96.64(d)(3) 
(stating that the automatic penalty under NO<INF>X</INF> Budget Trading 
Program does not affect liability for any other penalty under the CAA).
Emissions Monitoring
    Proposal. In the NPRM, we proposed a requirement that the 
monitoring, recordkeeping, and reporting provisions for boilers, 
combustion turbines, and cement kilns participating in a trading 
program comply with part 75, and that other sources in the program 
include monitoring, recordkeeping, and reporting provisions that result 
in information of the same precision, reliability, accessibility and 
timeliness as provided for under part 75. This proposed requirement was 
based on the need for consistent and accurate measurement of emissions 
to ensure that each allowance actually represents its specified tonnage 
value of emissions and that reported emissions are fungible across 
different sources. We also proposed that any sources that are subject 
to the cap and trade program but prohibited from selling emissions 
allowances would not be subject to the requirement that the monitoring, 
recordkeeping, and reporting provisions be consistent with, or 
equivalent to, part 75.
    Comments. Several commenters expressed concerned that the emissions 
monitoring requirement would be unduly burdensome for small sources 
which are not currently subject to monitoring requirements. One 
commenter stated that because the cost of operating continuous 
emissions monitors (CEMs) tends not to decline proportionally with 
emissions or output, the costs of CEMs for small industrial sources is 
much higher than for large EGUs on a per-ton basis. The commenter also 
argued that the superior accuracy of CEMs compared to other methods 
such as emission factors, on a percentage basis, was not worth the cost 
when applied to the total emissions from small sources. The commenter 
therefore suggested that EPA should allow States to assume, when 
establishing the BART benchmark, that individual emissions units with 
annual emission levels less than the de minimis levels would not be 
controlled, and to the extent that such sources are required to 
participate in a BART trading program, that they not be required to use 
CEMs. Another commenter, citing similar concerns, suggested that EPA 
could establish a threshold source size for each affected source 
category, and provide alternatives to Part 75 monitoring for sources 
below the threshold. The commmenter also suggested allowing 
alternatives such as parametric monitoring or periodic sources test, 
possibly with the use of a conservative adjustment factor to compensate 
for the greater uncertainty of those methods.
    Final Rule. The EPA is aware of the need to balance considerations 
of the accuracy and reliability of emissions monitoring and reporting 
with costs considerations, particularly as applicable to small sources. 
We believe the approach contained in the proposal strikes the proper 
balance and provides States with adequate flexibility to address 
sources' concerns with the cost of CEMs monitoring. First, the 
requirement to comply with part 75 only applies to boilers, combustion 
turbines and cement kilns. For all other sources, the requirement is 
that the sources ``provide information with the same precision, 
reliability, accessibility, and timeliness'' as provided by part 75. 
Any sources which are prohibited from selling allowances (including 
boilers, combustion turbines, or cement kilns) are not required either 
to comply with, or be consistent with, part 75.
    Second, even within part 75, there are alternatives to CEMs in 
appropriate circumstances. As explained in a footnote in the proposal, 
part 75 establishes requirements for CEMS, as well as other types of 
monitoring (e.g., low mass emissions monitoring under section 75.19) 
that may be used in lieu of CEMS under certain circumstances. Part 75 
also establishes a process for proposal by owners and operators, and 
approval by the Administrator, of alternative monitoring systems (under 
subpart E of part 75) that meet requirements concerning precision, 
reliability, accessibility, and timeliness. We continue to believe that 
it is essential to the integrity of any

[[Page 60625]]

emissions trading program that those sources that are allowed to sell 
allowances must either comply with or be consistent with the 
requirements of part 75 (depending on the source category). Therefore, 
we are finalizing those requirements as proposed.
    Finally, we believe there is some merit to the commenter's point 
that States should be allowed to assume, when establishing the BART 
benchmark, that individual emissions units with annual emission levels 
less than the de minimis levels would not be controlled. In the BART 
Guidelines we indicated that States may choose to set de minimis levels 
for individual pollutants at BART-eligible sources, so long as those de 
minimis levels are set at or below PSD applicability levels for those 
pollutants. We said that sources with emissions of an individual 
pollutant below de minimis levels could be excluded from BART-
eligibility. Similarly, we believe that for the purposes of an 
alternative program, de minimis levels set at or below PSD 
applicability levels for those pollutants would be appropriate. In 
other words, States could assume, when establishing the BART benchmark, 
that they need not include emissions that total less than de minimis 
amounts of an individual pollutant at a BART-eligible source.

III. Revisions to Regional Haze Rule Sec.  51.309

Support for the WRAP Program

    Comments. We received very few comments addressing our proposed 
revisions to section 51.309. One commenter stated that it agreed with 
EPA's proposed changes to this section of the Regional Haze Rule, but 
asked for clarification on several points. At the public hearing on the 
proposed rule, representatives of the WRAP and the State of Utah 
Division of Air Quality expressed general support for the proposal and 
appreciation of EPA's efforts to provide an opportunity for affected 
States and tribes to continue to utilize the extensive work of the 
GCVTC and the WRAP. The representative of Utah added:

    Any suggestion that EPA has forced Utah into protecting 
visibility in Utah's protected areas or that EPA is forcing Utah to 
participate in alternatives to BART is simply untrue * * * 
Statements that claim this rule usurps state authority are 
absolutely not true * * * In fact, Section 309 has always been, and 
continues to be, a state-driven regulation.\9\
---------------------------------------------------------------------------

    \9\ See Docket EPA-HQ-OAR-2002-0076.

Another commenter requested clarification of the potential geographic 
scope of the program in Sec.  51.309.
    Final Rule. The EPA remains committed to allowing States and Tribes 
the flexibility to use innovative approaches such as market-based 
emissions trading programs to meet CAA requirements where appropriate, 
and agrees that EPA has never attempted to coerce States and Tribes 
into adopting such alternative programs in lieu of BART. The provisions 
in the Regional Haze Rule allowing for alternatives to BART generally, 
and the WRAP backstop trading program in particular, were originally 
included at the request of the States.\10\
---------------------------------------------------------------------------

    \10\ See legacy EPA Docket A-95-38, Item number VII-G-76.
---------------------------------------------------------------------------

    As was the case in 1999 when EPA added section 51.309 to the 
Regional Haze Rule to recognize to work of the GCVTC, the option set 
out in section 51.309 is applicable to the States and Tribes of the 
GCVTC transport region: Arizona, California, Colorado, Oregon, Idaho, 
Nevada, New Mexico, Utah, and Wyoming, and all federally-recognized 
Tribes within the exterior boundaries of those States. Section 51.309 
establishes the requirements for the first regional haze plans for the 
16 Class I areas covered by the GCVTC Report, listed in section 
51.309(b)(1). The geographic scope of the program, in terms of the 
Class I areas for which reasonable progress goals are satisfied, may be 
expanded upon adequate demonstrations pursuant to section 51.309(g).

The WRAP Program as a Reasonable Progress Measure

    Proposal. The requirement in the CAA that States make reasonable 
progress towards the national visibility goal, while related to the 
BART requirement, is a separate requirement analogous to the NAAQS-
based requirements in the CAIR. For the reasons presented above in this 
preamble in the discussion of ``independent requirements'' in general, 
we proposed that for a program designed to meet reasonable progress 
requirements, the BART benchmark may be based on simplifying 
assumptions without running afoul of the DC Circuit's decision in CEED 
v. EPA. We characterized such a program as one that includes BART 
sources and has the purpose of satisfying reasonable progress 
requirements for a larger universe of sources.
    Comments. Although the preamble discussion of this issue was not 
limited to or expressly directed towards the WRAP's program, most of 
the comments received were in regard to the application of this concept 
to the WRAP. The WRAP itself submitted comments in agreement with our 
interpretation and supporting the inclusion of this option in the final 
rule. In addition, another commenter explicitly supported the use of 
this approach. In its comments, the UARG stated that the ``[u]se of the 
group-BART approach for justifying the WRAP Annex would be appropriate 
because the WRAP Annex would be the SO<INF>2</INF> portion of the 
section 169A reasonable progress program for the 16 Colorado Plateau 
Class I areas, and thus would be a BART alternative program that is 
required under another CAA provision.'' As noted previously in this 
preamble, this commenter urged EPA to include language within the rule 
itself, in addition to the preamble discussion, to allow States to use 
a ``group BART'' approach to derive the BART benchmark when the BART 
alternative program is required by another provision of law. This 
commenter also requested that EPA make it clear in regulatory language 
that this provision applies to the WRAP.
    Another commenter said that through the proposed rule, EPA was 
essentially proposing to repromulgate the WRAP Annex. The commenter, 
while not disputing the proposition that a program designed to meet 
reasonable progress could be evaluated against a group-BART benchmark, 
argued that the previous Annex milestones could not be ``recycled'' 
under this rationale because they were not developed as reasonable 
progress measures. Instead, the commenter argued, the milestones were 
derived directly from BART by the WRAP. The commenter also argued that 
the milestones cannot be justified as a reasonable progress measure 
because the modeling submitted with the Annex showed that the 
stationary source program for SO<INF>2</INF> would achieve no humanly 
perceptible visibility improvement. Finally, the commenter argued that 
the milestones cannot be ``restored'' because there is no ``coherent 
reasonable progress rationale'' underlying them.
    After the comment period closed, a commenter submitted supplemental 
comments which directly responded to the CEED's comments on the WRAP 
program. The commenter stated that in its view, ``the fact that the 
WRAP Annex (or, more precisely, its SO<INF>2</INF> milestones) were 
established based on a group-BART approach does not taint the Annex, so 
long as the Annex is required by or satisfies (in whole or in part) the 
CAA's reasonable progress requirements

[[Page 60626]]

(or some other CAA or State requirement.'' (Emphasis in original).
    The commenter also opined on the manner in which the WRAP program 
could be shown to satisfy reasonable progress requirements. First, the 
commenter cited the EPA's discussion of the purpose of section 309 in 
the preamble to the 1999 Regional Haze Rule, as meeting the reasonable 
progress requirements for the 16 Class I areas addressed by the GCVTC 
(See 64 FR 35749-51). Second, the commenter notes that it is the 
States'', not EPA's, obligation to demonstrate that the program satisfy 
reasonable progress requirements. In support of this, the commenter 
points to the provision in the proposed provision at section 
51.309(d)(2), requiring a visibility improvement projection in order to 
demonstrate that section 51.309 as a whole comprises reasonable 
progress for the 16 Class I areas on the Colorado Plateau. Therefore, 
the commenter asserts, if a ``State demonstrates to EPA, as part of its 
section 51.309 SIP submittal, that the WRAP annex satisfies part or all 
of the reasonable progress requirement, the source-specific BART 
benchmark to be used in the `better than BART' test can be established 
using a group BART approach.''
    Final Rule. Today's rule does not ``re-promulgate'' or ``pre-
approve'' the stationary source SO<INF>2</INF> trading program 
addressed by the WRAP Annex. Rather, we are amending the Regional Haze 
Rule to remove the requirement that States use a ``group BART'' 
benchmark for evaluating alternative programs and providing western 
States and tribes the opportunity to reconsider the milestones absent 
that invalid analytical requirement. The Regional Haze Rule makes clear 
that the WRAP States have the option of using source-by-source BART 
determinations to develop a BART benchmark against which to compare 
their backstop market trading program. Alternatively, if a WRAP State 
were to demonstrate as part of its SIP submittal that the backstop 
market trading program satisfies part or all of its reasonable progress 
requirement for the Class I areas at issue, then the regulations 
provide that the WRAP States could use a BART benchmark based on 
category-wide assumptions about control levels which could be expected 
to result from BART to demonstrate that the trading program makes 
greater reasonable progress than BART. In either case, a new 
demonstration is required, based on regulatory requirements and control 
technology factors as they currently exist, not as they were in 2000. 
Therefore the ``Annex'' milestones are not being ``recycled.''
    We do agree that regulatory certainty and clarity are best served 
by specifying within the regulatory provisions the circumstances in 
which a State, including a State submitting a SIP under section 51.309, 
may use simplifying assumptions to estimate BART emissions reductions 
in establishing a BART benchmark. As discussed in section II of the 
preamble, we have amended section 51.308(e)(2)(i)(C) to clarify the 
methodologies for determining the BART benchmark. The new language 
codifies the approach, discussed in the proposal preamble, which may be 
used in the case of an emissions trading or other alternative program 
designed to meet a Federal or State requirement other than BART. The 
paragraph specifies that the CAA section 169A requirement to make 
reasonable progress may be considered such a requirement.
    Although a commenter argues that we are ``recycling'' the WRAP 
Annex, we are not determining at this time that a SIP with a backstop 
market trading program identical to that approved by EPA in 2003 would 
meet the requirements of the amended Regional Haze Rule. In other 
words, it is unnecessary at this time to address the CEED's central 
argument that the backstop market trading program in the WRAP Annex 
cannot qualify as a BART alternative program designed to meet another 
CAA provision. If any SIPs are submitted under section 51.309, EPA will 
review the plans at that time based on the State's submittal and any 
additional information adduced during the public comment period.
    We do note that EPA disagrees with the commenter that a WRAP State 
could not show that a stationary source market trading program similar 
to that in the WRAP Annex was designed to satisfy the reasonable 
progress requirements. Although, as the commenter pointed out, EPA did 
not provide an analysis in the proposal of how the milestones from 2003 
could contribute to reasonable progress should any States submit SIPs 
containing a trading program based on these milestones, the history of 
the program authorized under Sec.  51.309 of the Regional Haze Rule 
suggests strongly that the stationary source program for SO2 was 
designed by the States and others in the GCVTC as a measure for 
obtaining reasonable progress. In the preamble to the 1999 Regional 
Haze Rule, we stated:

    ``The EPA finds that the GCVTC actions to date address, or 
provide a mechanism to address, the statutory factors for assessing 
reasonable progress required by the CAA. The EPA is satisfied that 
the GCVTC's strategies as set forth in section 51.309, when 
supplemented by the annex process discussed below, will provide for 
`reasonable progress' toward the national visibility goal for the 16 
parks and wilderness areas addressed by the GCVTC.'' [64 FR 35749 
emphasis added].

    In elaborating on the Annex process, we noted that the haze rule 
contained a provision calling for the submission of an Annex to the 
GCVTC report ``for the purpose of completing the program requirements 
to meet reasonable progress under the CAA, including submission of a 
complete long-term strategy and addressing the BART requirement for the 
16 Class I areas on the Colorado Plateau.'' [64 FR 35756 emphasis 
added]. Thus, from the beginning of the process, it is clear that EPA 
believed that satisfying the BART requirement was a subsidiary 
component of the reasonable progress requirement, but that the purpose 
of the Annex and of section 309 generally was to satisfy the overall 
reasonable progress requirements of western States and Tribes with 
respect to the 16 Class 1 areas on the Colorado Plateau.\11\ Based on 
this, in EPA's opinion, a WRAP State could demonstrate in a SIP 
submittal that a stationary source program similar to the WRAP Annex 
was designed to make reasonable progress. However, as one commenter 
noted, such an obligation belongs to the State, ``and the time for the 
State to provide that justification is when the State submits a section 
51.309 SIP that contains the WRAP Annex's provisions.'' In short, 
whether any SIPs submitted several years from now under section 51.309 
by the WRAP States meet the minimum requirements set forth in EPA's 
regulations will depend on the submission made by the States at that 
time.
---------------------------------------------------------------------------

    \11\ Section 51.309(a) of the Regional Haze Rule, in requiring 
submission of an implementation plan for the 16 Class I areas 
covered by the GCTVC report, states that ``[i]f a transport region 
State submits an implementation plan which is approved by EPA as 
meeting the requirements of this section, it will be deemed to 
comply with the requirements for reasonable progress for the period 
from approval of the plan to 2018.'' (64 FR 35769).
---------------------------------------------------------------------------

    We also disagree with the comments that EPA's approval of the WRAP 
Annex in 2003 was not rational as the trading program had not been 
shown to produce a ``humanly perceptible'' degree of visibility 
improvement. We determined in the 1999 rule that the analysis conducted 
by the GCVTC was the functional equivalent of the reasonable progress 
analysis required under section 51.308. Under section 308, States must 
establish reasonable progress goals by considering the uniform rate of 
progress

[[Page 60627]]

(in deciviews) to natural conditions in 2064 (i.e. the ``glide path''), 
and the statutory reasonable progress factors contained in CAA 
169A(g)(1). If the state adopts a slower rate of progress than the 
glide path, it must demonstrate that this slower rate is justified 
based on the statutory factors. In approving the GCVTC analysis as 
comparable to such an analysis, we found that the GCVTC had 
demonstrated that a faster rate of progress was not feasible, 
considering the costs and other factors. This determination does not 
necessarily reflect what would be expected in other parts of the 
country, as it is unique to the situation of the Colorado Plateau, in 
terms of air quality, pollutant concentrations, source location, and 
meteorology.
    In addition, the commenter's argument ignores the fact that there 
are two elements of national visibility goals established by Congress 
in CAA 169A(a)(1): Preventing future impairment as well as remedying 
existing impairment. It cannot be disputed that a program that prevents 
degradation for the first long-term planning period constitutes 
reasonable progress towards the goal of preventing any future 
impairment. In other words, holding the line against visibility 
degradation for the first 10-year strategy period is reasonable 
progress towards holding the line indefinitely.

Geographic Enhancements

    Proposal. The proposed rule made no mention of ``geographic 
enhancements'' because no changes were intended for the relevant 
provisions. The term geographic enhancement refers to a ``method, 
procedure, or process to allow a broad regional strategy, such as a 
milestone or backstop market trading program designed to achieve 
greater reasonable progress than BART for regional haze, to accommodate 
BART for reasonably attributable impairment.'' See 40 CFR 51.301 and 
51.309(b)(7). As explained in the preamble to the 1999 Regional Haze 
Rules, the purpose of this provision is to allow a market-based system 
to accommodate actions taken under the ``reasonably attributable'' BART 
provisions at section 51.302 to address ``hot spot'' issues. Section 
51.308(e)(2)(v) provides that States may, at their option, include 
geographic enhancements in an emissions trading program or other 
alternative measure. We proposed changes to Sec.  51.308(e)(2)(i), 
(ii), and (vi), but not to paragraph (e)(2)(v). In addition, Sec.  
51.309(f)(4) had contained a provision for optional geographic 
enhancements, similar to that in Sec.  51.308(e)(2)(v). However, as 
explained in the preamble of the August 1 proposal, the ``Annex'' 
mechanism embodied in Sec.  309(f) is no longer necessary or 
appropriate. We therefore proposed to repeal section 309(f), while 
incorporating certain still-relevant provisions into Sec.  309(d)(4).
    Comments. One commenter requested a clarification that the option 
of geographic enhancements is preserved for the WRAP program through 
the cross-reference to Sec.  51.308(e)(2) that appeared in proposed 
Sec.  51.309(d)(4)(i).
    Final Rule. We agree with the commenter that geographic 
enhancements are retained as an option under the WRAP program. The 
geographic enhancement provision is contained within Sec.  
51.308(e)(2), the general requirements for trading programs or other 
alternative measures in lieu of BART. The geographic enhancement 
provision within Sec.  51.308(e)(2) provides a mechanism which could 
affect the milestones. The proposed rule relied upon the fact that 
Sec.  51.309(d)(4) would require that the WRAP stationary source 
milestones comply with the provisions of Sec.  51.308(e)(2), which 
include the geographic enhancement provision. However, for additional 
clarity, we have added a geographic enhancement provision specific to 
the WRAP program in Sec.  51.309(d)(4)(v).

Tribal Issues

    Proposal. Throughout the preamble to the proposed rule, we referred 
to Tribes along with States in recognition that tribes may be delegated 
authority to implement CAA programs, as provided in section 301(d) of 
the CAA and the Tribal Authority Rule (Sec. Sec.  49.1 through 49.11). 
We proposed to retain, in the text of the rule at proposed Sec.  
51.309(c), the provision that Indian Tribes may submit implementation 
plans after the proposed deadline of December 17, 2007.
    Comments. One commenter included two issues related to Tribes. 
First, the commenter stated that participation in a program under this 
rule would not be ``a trivial exercise for any Tribal program to 
accomplish given most tribal programs lack the staff and expertise of 
state air programs,'' and requested that EPA recognize this reality. 
The second comment was specifically focused on the Tribal allowance 
set-aside provision of the former ``Annex'' program. The commenter 
noted that the rule as proposed did not contain a specific requirement 
for a Tribal set-aside, presumably due to the fact that the Annex rule 
had been vacated and that EPA was therefore aware of the need to avoid 
the inclusions of ``provisions of the Annex rule that were directly or 
indirectly dependent or related to the specific quantitative milestones 
contained in the Annex.'' The commenter noted that in the 2003 approval 
of the WRAP Annex, EPA had specified that the Tribal set-aside 
provision was the one element of the allocation methodology that was 
appropriate for treatment in the Federal regulation (rather than in 
SIPs and Tribal implementation plans (TIPs)). The commenter therefore 
requested that EPA clarify ``what expectations it has regarding the 
consistency of tribal set aside provisions between the section 309 SIPs 
submitted by various states, and what role, if any, EPA would play in 
assuring implementation of such provisions.''
    Final Rule. The EPA agrees that regulatory activities such as BART 
determinations and the development of trading programs is not by any 
means trivial and would be difficult to perform or participate in with 
the small staffs and limited resources typical of many nascent Tribal 
air programs. Fortunately, there are few BART-eligible sources within 
Indian country across the nation. Also, EPA has provided funding as 
well as technical and other forms of support to the five RPOs 
established to serve both State and Tribal needs in regional haze 
planning. EPA has an ongoing commitment to insure that tribal interests 
are addressed within the RPO process. Also, EPA is committed to 
fulfilling its responsibility to implement CAA provisions in Indian 
country as necessary and appropriate, in consultation with any affected 
Tribes.
    The EPA agrees with the commenter's assessment that the reason a 
tribal allowance set-aside was not included in the proposal was that 
the set-aside provision in the Annex was integrally related to the 
milestones previously submitted. The Tribal set-aside was developed 
voluntarily by the WRAP and not in response to any CAA requirement. 
Having been so developed, EPA determined at the time of the Annex rule 
approval that it was appropriate for inclusion within section 309, in 
order to provide an efficient mechanism to implement the set-aside. 
Given that the CEED v. EPA decision necessitates that States and Tribes 
be given the opportunity to revisit the milestones, that there is no 
CAA provision that requires a Tribal set-aside, and that the details of 
the WRAP's emissions trading program will be developed directly in SIPs 
and TIPs without the intermediary step of codifying detailed 
requirements in an Annex-like Federal rule, the EPA believes it would 
be inappropriate to attempt to mandate a Tribal allowance

[[Page 60628]]

set-aside at this time. However, the EPA does continue to encourage 
States and Tribes in the WRAP as well as elsewhere to develop 
mechanisms to address Tribal interests and concerns, such as allowance 
set-asides. We will review SIPs and TIPs submitted under section 309 to 
insure that the allocation methodologies, including any Tribal 
provisions, are consistent among jurisdictions and will provide the 
certainty and regularity necessary for a functioning market. What other 
role, if any, the EPA will play in assuring the implementation of any 
Tribal set-aside provisions is dependent in large part upon the nature 
of the program developed by participating states and Tribes--for 
example, whether the program would be administered by the EPA, States 
and Tribes, or a third-party contractor.

Other Comments and Responses

    One commenter requested that EPA make explicit in the final rule 
that backstop trading programs are permissible under both Sec. Sec.  
51.309 and 51.308 for SO<INF>2</INF> and NO<INF>X</INF>. The commenter 
noted that the proposal preamble stated only that ``nothing precludes 
states outside the 9-state region from incorporating elements of the 
GCVTC strategies into their SIPs.'' While this would indicate that the 
section 309 program (including the backstop trading program) could be 
expanded geographically, it does not address the question of whether 
the backstop approach could be utilized, either inside or outside the 
GCVTC region, for NO<INF>X</INF> as well as SO<INF>2</INF>.
    We wish to clarify here that a backstop trading program (i.e., a 
system of voluntary milestones backed by an automatically required cap 
and trade program in the event the milestones are exceeded) could 
qualify as an ``other alternative measure'' under Sec.  51.308(e)(2) as 
a BART substitute. This could be accomplished for any visibility 
impairing pollutant, on a pollutant-by-pollutant basis. The key 
distinction between programs under Sec. Sec.  51.308 and 51.309 is that 
under Sec.  51.309, the reasonable progress requirements for 
SO<INF>2</INF>, with respect to the 16 Class I areas on the Colorado 
plateau, have already been defined by the GCVTC. With respect to 
SO<INF>2</INF> reductions to meet reasonable progress requirements at 
other Class I areas, and with respect to other pollutants such as 
NO<INF>X</INF>, the emission reductions requirements remain to be 
determined. This could be accomplished either according to the 
reasonable progress requirements of Sec.  51.308(d)(1), in the case of 
a program designed to meet reasonable progress goals; or through 
source-by-source BART determinations as described in this rule, for 
programs designed only to satisfy BART. Provided these requirements are 
met, it is acceptable for a State to use a backstop trading program 
under Sec.  51.308.
    Finally, we note that there was an obvious omission in the proposed 
provisions regarding the comparison of actual emissions to the 
emissions milestones. Specifically, proposed Sec.  51.309(d)(4)(i) 
provided for the use of a 3-year rolling average of actual emissions 
for this purpose. This does not account for the fact that it is not 
possible to generate a 3-year average during the first two years of 
emission tracking. Therefore, the final rule provides that for the 
first 2 years, compliance with the milestones may be measured by a 
methodology of the States' choosing, so long as all States in the 
program use the same methodology. After the first 2 years of the 
program, compliance with the annual milestones may be measured by 
comparing a 3-year rolling average of actual emissions with a rolling 
average of the emissions milestones for the same 3 years.

IV. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), 
this action is a ``significant regulatory action'' because it raises 
novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the EO. 
Accordingly, EPA submitted this action to the Office of Management and 
Budget (OMB) for review under EO 12866 and any changes made in response 
to OMB recommendations have been documented in the docket for this 
action.
    Today's rule provides States and interested Tribes with optional 
means, such as emissions trading programs, to comply with CAA 
requirements for BART. The rule requires that alternatives achieve 
greater ``reasonable progress'' towards CAA visibility goals than would 
source-by-source BART. By their nature, emissions trading programs are 
designed to achieve a given level of environmental improvement in the 
most cost-effective manner possible. Therefore, today's rule will 
achieve at least as great a societal benefit as source-by-source BART, 
at a social cost that is likely to be less than, or at worst equal to, 
the social costs of source-by-source BART.
    In the Regulatory Impact Analysis (RIA) for our recent promulgation 
of the source-by-source BART guidelines, we determined that the social 
costs of source-by-source BART for both EGUs and non-EGUs nationwide 
was between $0.3 and $2.9 billion (1999 dollars), depending on the 
level of stringency implemented by States and on the interest rate 
used. The human health benefits of BART, in contrast, ranged from $1.9 
to $12 billion (1999 dollars), depending on the same variables. These 
figures do not include many other human health benefits that could not 
be quantified or monetized, including all benefits attributable to 
ozone reduction (the benefits were based on reductions in PM only). In 
addition, economic benefits due to visibility improvement in the 
southeastern and southwestern U.S. were estimated to be from $80 
million to $420 million. Finally, BART would also produce visibility 
benefits in other parts of the country, and non-visibility ecosystem 
benefits, which were also not quantified. Therefore, the social 
benefits of BART far outweigh the social costs.
    It is not possible to perform an economic analysis of today's rule 
because the actual parameters of any trading programs in lieu of BART 
will be determined by States and Tribes. However, because trading 
program alternatives would produce comparable overall benefits (in the 
course of satisfying the requirement to achieve greater ``reasonable 
progress'' towards visibility goals) and use market forces to reduce 
costs, the benefits of today's rule would also far outweigh the costs.

B. Paperwork Reduction Act

    This action does not add any new requirements involving the 
collection of information as defined by the Paperwork Reduction Act, 44 
U.S.C. 3501 et seq. This action does not impose any new collections 
that would require an amendment to the existing approved Information 
Collection Request (ICR). The OMB has approved the information 
collection requirements contained in the final Regional Haze 
regulations (64 FR 35714, July 1, 1999) and has assigned OMB control 
number 2060-0421 (EPA ICR No. 1813.04). A copy of the OMB approved ICR 
may be obtained from Susan Auby, Collection Strategies Division; U.S. 
Environmental Protection Agency (2822T); 1200 Pennsylvania Ave., NW., 
Washington, DC 20460 or by calling (202) 566-1672.
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time

[[Page 60629]]

needed to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information. An agency may not 
conduct or sponsor, and a person is not required to respond to a 
collection of information unless it displays a currently valid OMB 
control number. The OMB control numbers for EPA's regulations are 
listed in part 9 and 48 CFR chapter 15.

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 organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of today's proposed 
rulemaking 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, 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 operated and is not dominant in its field.
    After considering the economic impacts of today's rule on small 
entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. This rule 
will not impose any requirements on small entities. This rule revises 
the provisions of the Regional Haze Rule governing alternative trading 
programs, and provides additional guidance to States, which are not 
defined as small entities. In addition, we did not receive any comments 
relating to potential impacts on small entities as a result of this 
rulemaking.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Public Law 
104-4) (UMRA), establishes requirements for Federal agencies to assess 
the effects of their regulatory actions on State, local, and Tribal 
governments and the private sector. Under section 202 of the UMRA, 2 
U.S.C. 1532, EPA generally must prepare a written statement, including 
a cost-benefit analysis, for any proposed or final rule that ``includes 
any Federal mandate that may result in the expenditure by State, local, 
and Tribal governments, in the aggregate, or by the private sector, of 
$100,000,000 or more * * * in any one year.'' A ``Federal mandate'' is 
defined under section 421(6), 2 U.S.C. 658(6), to include a ``Federal 
intergovernmental mandate'' and a ``Federal private sector mandate.'' A 
``Federal intergovernmental mandate,'' in turn, is defined to include a 
regulation that ``would impose an enforceable duty upon State, local, 
or tribal governments,'' section 421(5)(A)(i), 2 U.S.C. 658(5)(A)(i), 
except for, among other things, a duty that is ``a condition of Federal 
assistance,'' section 421(5)(A)(i)(I). A ``Federal private sector 
mandate'' includes a regulation that ``would impose an enforceable duty 
upon the private sector,'' with certain exceptions, section 421(7)(A), 
2 U.S.C. 658(7)(A).
    Before promulgating an EPA rule for which a written statement is 
needed under section 202 of the UMRA, section 205, 2 U.S.C. 1535, of 
the UMRA generally requires EPA to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, most 
cost-effective, or least burdensome alternative that achieves the 
objectives of the rule. In addition, before EPA establishes any 
regulatory requirements that may significantly or uniquely affect small 
governments, including Tribal governments, it must have developed under 
section 203 of the UMRA a small government agency plan. The plan must 
provide for notifying potentially affected small governments, enabling 
officials of affected small governments to have meaningful and timely 
input in the development of EPA regulatory proposals with significant 
Federal intergovernmental mandates, and informing, educating, and 
advising small governments on compliance with the regulatory 
requirements.
    We believe that this rulemaking is not subject to the requirements 
of UMRA. For regional haze SIPs overall, it is questionable whether a 
requirement to submit a SIP revision constitutes a Federal mandate, as 
discussed in the preamble to the Regional Haze Rule (64 FR 35761, July 
1, 1999). However, today's rule contains no Federal mandates (under the 
regulatory provisions of title II of the UMRA) for State, local or 
Tribal governments or the private sector. In addition, the program 
contained in section 51.309, including today's revisions, is an 
optional program. Because the alternative trading programs under 
Sec. Sec.  51.308 and 51.309 are options that each of the States may 
choose to exercise, these revisions to Sec. Sec.  51.308 and 51.309 do 
not establish any regulatory requirements that may significantly or 
uniquely affect small governments, including Tribal governments. The 
program is not required and, thus is clearly not a ``mandate.'' 
Moreover, as explained above, today's rule would reduce any regulatory 
burdens. Accordingly, this rule will not result in expenditures to 
State, local, and Tribal governments, in the aggregate, or the private 
sector, of $100 million or more in any given year. Thus, EPA is not 
obligated, under section 203 of UMRA, to develop a small government 
agency plan.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that 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.''
    Under section 6(b) of Executive Order 13132, EPA may not issue a 
regulation that has federalism implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the Federal government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, or EPA 
consults with State and local officials early in the process of 
developing a regulation. Under section 6(c) of Executive Order 13132, 
EPA may not issue a regulation that has federalism implications and 
that preempts State law, unless EPA consults with State and local 
officials early in the process of developing the regulation.
    We have concluded that today's rule does not have federalism 
implications. It does not have substantial direct effects on the 
States, on the relationship between the national government and

[[Page 60630]]

the States, or on the distribution of power and responsibilities among 
the various levels of government, as specified in Executive Order 
13132. As described above, this rule contains revisions to sections 
51.308 and 51.309 of the Regional Haze Rule which will reduce any 
regulatory burden on the States. In addition, these are optional 
programs for States. These revisions to sections 51.308 and 51.309, 
accordingly, will not directly impose significant new requirements on 
State and local governments. Moreover, even if today's revisions did 
have federalism implications, these revisions would not impose 
substantial direct compliance costs on State or local governments, nor 
would they preempt State law. Thus, Executive Order 13132 does not 
apply to this rule.
    Consistent with EPA policy, we nonetheless did consult with 
representatives of State and local governments in developing this final 
rule. This rule directly implements specific recommendations from the 
WRAP, which includes representatives from all the affected States.
    In addition, in the spirit of Executive Order 13132 and consistent 
with EPA policy to promote communications between EPA and State and 
local governments, EPA specifically solicited comment on today's rule 
from State and local officials.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 6, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' ``Policies that have tribal 
implications'' is defined in the Executive Order to include regulations 
that have ``substantial direct effects on one or more Indian tribes, on 
the relationship between the Federal government and the Indian tribes, 
or on the distribution of power and responsibilities between the 
Federal government and Indian tribes.''
    Tribes who participate in this rule will experience an overall 
reduction in regulatory burden. Moreover, the Sec. Sec.  51.308 (e)(2) 
and 51.309 programs are optional programs for Tribes. Accordingly, this 
rule would not have Tribal implications. In addition, this rule 
directly implements specific recommendations from the WRAP, which 
includes representatives of Tribal governments. Thus, although this 
rule does not have Tribal implications, representatives of Tribal 
governments have had the opportunity to provide input into development 
of the recommendations forming its basis.

G. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    Executive Order 13045: ``Protection of Children from Environmental 
Health and Safety Risks'' (62 FR 19885, April 23, 1997) applies to any 
rule that: (1) Is determined to be ``economically significant'' as 
defined under Executive Order 12866, and (2) concerns an environmental 
health or safety risk that EPA has reason to believe may have a 
disproportionate effect on children. If the regulatory action meets 
both criteria, the Agency must evaluate the environmental health or 
safety effects of the planned rule on children, and explain why the 
planned regulation is preferable to other potentially effective and 
reasonably feasible alternatives considered by the Agency.
    The EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that are based on health or safety risks, such that 
the analysis required under section 5-501 of the Order has the 
potential to influence the regulation. Similarly to the recently 
finalized source-specific BART revisions (70 FR 39104, July 6, 2005), 
this rule is not subject to Executive Order 13045 because it does not 
establish an environmental standard based on health or safety risks. 
Therefore, this rule does not involve decisions on environmental health 
or safety risks that may disproportionately affect children. We believe 
that the emissions reductions from the control strategies considered in 
this rulemaking will further improve air quality and will further 
improve children's health.

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution or Use

    This rule is not subject to Executive Order 13211, ``Actions that 
Significantly Affect Energy Supply, Distribution, or Use'' (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. This rule 
is not a ``significant energy action,'' because it will have less than 
a 1 percent impact on the cost of energy production and does not exceed 
other factors described by OMB that may indicate a significant adverse 
effect. (See, ``Guidance for Implementing E.O. 13211,'' OMB Memorandum 
01-27 (July 13, 2001) www.whitehouse.gov/omb/memoranda/m01-27.html.)
    This rule provides an optional cost-effective and less burdensome 
alternative to source-by-source BART as recently finalized (70 FR 
39104, July 6, 2005); we have already found that source-by-source BART 
is not likely to have a significant adverse effect on the supply, 
distribution, or use of energy. The 1999 Regional Haze Rule provides 
substantial flexibility to the States, allowing them to adopt 
alternative measures such as a trading program in lieu of requiring the 
installation and operation of BART on a source-by-source basis. This 
rule contains provisions governing these alternative measures, which 
provides an alternative to BART that reduces the overall cost of the 
regulation and its impact on the energy supply.

I. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law No. 104-113, section 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 impractical. 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. The NTTAA directs EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    This rulemaking does not involve technical standards. Therefore, 
EPA is not considering the use of any voluntary consensus standards. We 
specifically invited commenters to identify potentially-applicable 
voluntary consensus standards and to explain why such standards should 
be used in this regulation; no commenters responded.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    Executive Order 12898 requires that each Federal agency make 
achieving environmental justice part of its mission by identifying and 
addressing, as appropriate, disproportionately high and adverse human 
health or environmental effects of its programs, policies, and 
activities on minorities and low-income populations. The requirements 
of Executive Order 12898 have been previously addressed to the extent 
practicable in the RIA for the Regional Haze Rule (cited above),

[[Page 60631]]

particularly in chapters 2 and 9 of the RIA. This rule makes no changes 
that would have a disproportionately high and adverse human health or 
environmental effect on minorities and low-income populations.

K. Congressional Review Act

    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. We 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). This rule will be effective December 12, 2006.

IV. Statutory Provisions and Legal Authority

    Statutory authority for today's rule comes from sections 169A and 
169B of the CAA (42 U.S.C. 7491 and 7492). These sections require EPA 
to issue regulations that will require States to revise their SIPs to 
ensure that reasonable progress is made toward the national visibility 
goals specified in section 169A.

List of Subjects in 40 CFR Part 51

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Intergovernmental relations, Lead, Nitrogen 
dioxide, Ozone, Particulate matter, Reporting and recordkeeping 
requirements, Sulfur oxides, Volatile organic compounds.

    Dated: October 5, 2006.
Stephen L. Johnson,
Administrator.

0
For the reasons set forth in the preamble, part 51 of chapter I of 
title 40 of the Code of Federal Regulations is amended as follows:

PART 51--REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF 
IMPLEMENTATION PLANS

0
1. The authority citation for part 51 continues to read as follows:

    Authority: 23 U.S.C. 101; 42 U.S.C. 7401-7671q.

Subpart P--Protection of Visibility

0
2. Section 51.308 is amended as follows:
0
a. By revising paragraph (e)(1)(ii)(C).
0
b. By revising paragraphs (e)(2) introductory text and (e)(2)(i).
0
c. By removing and reserving paragraph (e)(1)(ii).
0
d. By adding paragraph (e)(2)(vi).
0
e. By revising paragraph (e)(4).


Sec.  51.308  Regional haze program requirements.

* * * * *
    (e) * * *
    (1) * * *
    (ii) * * *
    (C) Exception. A State is not required to make a determination of 
BART for SO<INF>2</INF> or for NO<INF>X</INF> if a BART-eligible source 
has the potential to emit less than 40 tons per year of such 
pollutant(s), or for PM<INF>10</INF> if a BART-eligible source has the 
potential to emit less than 15 tons per year of such pollutant.
* * * * *
    (2) A State may opt to implement or require participation in an 
emissions trading program or other alternative measure rather than to 
require sources subject to BART to install, operate, and maintain BART. 
Such an emissions trading program or other alternative measure must 
achieve greater reasonable progress than would be achieved through the 
installation and operation of BART. For all such emission trading 
programs or other alternative measures, the State must submit an 
implementation plan containing the following plan elements and include 
documentation for all required analyses:
    (i) A demonstration that the emissions trading program or other 
alternative measure will achieve greater reasonable progress than would 
have resulted from the installation and operation of BART at all 
sources subject to BART in the State and covered by the alternative 
program. This demonstration must be based on the following:
    (A) A list of all BART-eligible sources within the State.
    (B) A list of all BART-eligible sources and all BART source 
categories covered by the alternative program. The State is not 
required to include every BART source category or every BART-eligible 
source within a BART source category in an alternative program, but 
each BART-eligible source in the State must be subject to the 
requirements of the alternative program, have a federally enforceable 
emission limitation determined by the State and approved by EPA as 
meeting BART in accordance with section 302(c) or paragraph (e)(1) of 
this section, or otherwise addressed under paragraphs (e)(1) or 
(e)(4)of this section.
    (C) An analysis of the best system of continuous emission control 
technology available and associated emission reductions achievable for 
each source within the State subject to BART and covered by the 
alternative program. This analysis must be conducted by making a 
determination of BART for each source subject to BART and covered by 
the alternative program as provided for in paragraph (e)(1) of this 
section, unless the emissions trading program or other alternative 
measure has been designed to meet a requirement other than BART (such 
as the core requirement to have a long-term strategy to achieve the 
reasonable progress goals established by States). In this case, the 
State may determine the best system of continuous emission control 
technology and associated emission reductions for similar types of 
sources within a source category based on both source-specific and 
category-wide information, as appropriate.
    (D) An analysis of the projected emissions reductions achievable 
through the trading program or other alternative measure.
    (E) A determination under paragraph (e)(3) of this section or 
otherwise based on the clear weight of evidence that the trading 
program or other alternative measure achieves greater reasonable 
progress than would be achieved through the installation and operation 
of BART at the covered sources.
    (ii) [Reserved]
* * * * *
    (vi) For plans that include an emissions trading program that 
establishes a cap on total annual emissions of SO<INF>2</INF> or 
NO<INF>X</INF> from sources subject to the program, requires the owners 
and operators of sources to hold allowances or authorizations to emit 
equal to emissions, and allows the owners and operators of sources and 
other entities to purchase, sell, and transfer allowances, the 
following elements are required concerning the emissions covered by the 
cap:
    (A) Applicability provisions defining the sources subject to the 
program. The State must demonstrate that the applicability provisions 
(including the size criteria for including sources in the program) are 
designed to prevent any significant potential shifting within the State 
of production and emissions from sources in the program to sources 
outside the program. In the case of a program covering sources in 
multiple States, the States must demonstrate that

[[Page 60632]]

the applicability provisions in each State cover essentially the same 
size facilities and, if source categories are specified, cover the same 
source categories and prevent any significant, potential shifting 
within such States of production and emissions to sources outside the 
program.
    (B) Allowance provisions ensuring that the total value of 
allowances (in tons) issued each year under the program will not exceed 
the emissions cap (in tons) on total annual emissions from the sources 
in the program.
    (C) Monitoring provisions providing for consistent and accurate 
measurements of emissions from sources in the program to ensure that 
each allowance actually represents the same specified tonnage of 
emissions and that emissions are measured with similar accuracy at all 
sources in the program. The monitoring provisions must require that 
boilers, combustion turbines, and cement kilns in the program allowed 
to sell or transfer allowances must comply with the requirements of 
part 75 of this chapter. The monitoring provisions must require that 
other sources in the program allowed to sell or transfer allowances 
must provide emissions information with the same precision, 
reliability, accessibility, and timeliness as information provided 
under part 75 of this chapter.
    (D) Recordkeeping provisions that ensure the enforceability of the 
emissions monitoring provisions and other program requirements. The 
recordkeeping provisions must require that boilers, combustion 
turbines, and cement kilns in the program allowed to sell or transfer 
allowances must comply with the recordkeeping provisions of part 75 of 
this chapter. The recordkeeping provisions must require that other 
sources in the program allowed to sell or transfer allowances must 
comply with recordkeeping requirements that, as compared with the 
recordkeeping provisions under part 75 of this chapter, are of 
comparable stringency and require recording of comparable types of 
information and retention of the records for comparable periods of 
time.
    (E) Reporting provisions requiring timely reporting of monitoring 
data with sufficient frequency to ensure the enforceability of the 
emissions monitoring provisions and other program requirements and the 
ability to audit the program. The reporting provisions must require 
that boilers, combustion turbines, and cement kilns in the program 
allowed to sell or transfer allowances must comply with the reporting 
provisions of part 75 of this chapter, except that, if the 
Administrator is not the tracking system administrator for the program, 
emissions may be reported to the tracking system administrator, rather 
than to the Administrator. The reporting provisions must require that 
other sources in the program allowed to sell or transfer allowances 
must comply with reporting requirements that, as compared with the 
reporting provisions under part 75 of this chapter, are of comparable 
stringency and require reporting of comparable types of information and 
require comparable timeliness and frequency of reporting.
    (F) Tracking system provisions which provide for a tracking system 
that is publicly available in a secure, centralized database to track 
in a consistent manner all allowances and emissions in the program.
    (G) Authorized account representative provisions ensuring that the 
owners and operators of a source designate one individual who is 
authorized to represent the owners and operators in all matters 
pertaining to the trading program.
    (H) Allowance transfer provisions providing procedures that allow 
timely transfer and recording of allowances, minimize administrative 
barriers to the operation of the allowance market, and ensure that such 
procedures apply uniformly to all sources and other potential 
participants in the allowance market.
    (I) Compliance provisions prohibiting a source from emitting a 
total tonnage of a pollutant that exceeds the tonnage value of its 
allowance holdings, including the methods and procedures for 
determining whether emissions exceed allowance holdings. Such method 
and procedures shall apply consistently from source to source.
    (J) Penalty provisions providing for mandatory allowance deductions 
for excess emissions that apply consistently from source to source. The 
tonnage value of the allowances deducted shall equal at least three 
times the tonnage of the excess emissions.
    (K) For a trading program that allows banking of allowances, 
provisions clarifying any restrictions on the use of these banked 
allowances.
    (L) Program assessment provisions providing for periodic program 
evaluation to assess whether the program is accomplishing its goals and 
whether modifications to the program are needed to enhance performance 
of the program.
* * * * *
    (4) A State that chooses to meet the emission reduction 
requirements of the Clean Air Interstate Rule (CAIR) by participating 
in one or more of the EPA-administered CAIR trading programs for 
SO<INF>2</INF> and NO<INF>X</INF> need not require BART--eligible EGUs 
subject to such trading programs in the State to install, operate, and 
maintain BART for the pollutants covered by such trading programs in 
the State. A State may choose to participate in the EPA-administered 
CAIR trading programs either by submitting a State implementation plan 
that incorporates the CAIR model trading rules in part 96 of this 
chapter, and is approved, in accordance with Sec.  51.123(o)(1) or (2) 
(for the NO<INF>X</INF> annual program) and (aa)(1) or (2) (for the 
NO<INF>X</INF> ozone season program) and Sec.  51.124(o)(1) or (2) (for 
the SO<INF>2</INF> program) or by remaining subject to the Federal 
implementation plan in part 97 of this chapter (which may be modified 
by a State implementation plan approved in accordance with Sec. Sec.  
51.123(p) and (ee) and 51.124(r)). A State that chooses to participate 
in such trading programs may also adopt provisions, consistent with 
such trading programs, for a geographic enhancement to the program to 
address the requirement under Sec.  51.302(c) related to BART for 
reasonably attributable impairment from the pollutants covered by the 
CAIR cap-and-trade programs.
* * * * *

0
3. 51.309 is amended as follows:
0
a. By revising paragraph (a).
0
b. By revising paragraphs (b)(5) and (b)(7).
0
c. By removing and reserving paragraphs (b)(9) through (b)(12).
0
d. By revising paragraph (c).
0
e. By revising paragraphs (d)(1) and (d)(4)(i) through (d)(4)(v).
0
f. By adding paragraphs (d)(4)(vi) and (d)(4)(vii).
0
g. By revising paragraph (d)(10) introductory text.
0
h. By removing and reserving paragraph (f).
0
i. By revising paragraph (g).
0
j. By removing paragraph (h).


Sec.  51.309  Requirements related to the Grand Canyon Visibility 
Transport Commission.

    (a) What is the purpose of this section? This section establishes 
the requirements for the first regional haze implementation plan to 
address regional haze visibility impairment in the 16 Class I areas 
covered by the Grand Canyon Visibility Transport Commission Report. For 
the period through 2018, certain States (defined in paragraph (b) of 
this section as Transport Region States) may choose to implement the 
Commission's recommendations within the framework of the national 
regional haze program

[[Page 60633]]

and applicable requirements of the Act by complying with the provisions 
of this section. If a Transport Region State submits an implementation 
plan which is approved by EPA as meeting the requirements of this 
section, it will be deemed to comply with the requirements for 
reasonable progress with respect to the 16 Class I areas for the period 
from approval of the plan through 2018. Any Transport Region State 
electing not to submit an implementation plan under this section is 
subject to the requirements of Sec.  51.308 in the same manner and to 
the same extent as any State not included within the Transport Region. 
Except as provided in paragraph (g) of this section, each Transport 
Region State is also subject to the requirements of Sec.  51.308 with 
respect to any other Federal mandatory Class I areas within the State 
or affected by emissions from the State.
    (b) * * *
    (5) Milestone means the maximum level of annual regional 
SO<INF>2</INF> emissions, in tons per year, for a given year, assessed 
annually, through the year 2018, consistent with paragraph (d)(4) of 
this section.
* * * * *
    (7) Base year means the year for which data for a source included 
within the program were used by the WRAP to calculate emissions as a 
starting point for development of the milestone required by paragraph 
(d)(4)(i) of this section.
* * * * *
    (c) Implementation Plan Schedule. Each Transport Region State 
electing to submit an implementation plan under this section must 
submit such a plan no later than December 17, 2007. Indian Tribes may 
submit implementation plans after this deadline.
    (d) * * *
    (1) Time period covered. The implementation plan must be effective 
through December 31, 2018 and continue in effect until an 
implementation plan revision is approved by EPA in accordance with 
Sec.  51.308(f).
* * * * *
    (4) * * *
    (i) Provisions for stationary source emissions of SO<INF>2</INF>. 
The plan submission must include a SO<INF>2</INF> program that contains 
quantitative emissions milestones for stationary source SO<INF>2</INF> 
emissions for each year through 2018. After the first two years of the 
program, compliance with the annual milestones may be measured by 
comparing a three-year rolling average of actual emissions with a 
rolling average of the emissions milestones for the same three years. 
During the first two years of the program, compliance with the 
milestones may be measured by a methodology of the States' choosing, so 
long as all States in the program use the same methodology. Compliance 
with the 2018 milestone shall be measured by comparing actual emissions 
from the year 2018 with the 2018 milestone. The milestones must provide 
for steady and continuing emissions reductions through 2018 consistent 
with the Commission's definition of reasonable progress, its goal of 50 
to 70 percent reduction in SO<INF>2</INF> emissions from 1990 actual 
emission levels by 2040, applicable requirements under the CAA, and the 
timing of implementation plan assessments of progress and 
identification of any deficiencies which will be due in the years 2013 
and 2018. The milestones must be shown to provide for greater 
reasonable progress than would be achieved by application of BART 
pursuant to Sec.  51.308(e)(2).
    (ii) Documentation of emissions calculation methods for 
SO<INF>2</INF>. The plan submission must include documentation of the 
specific methodology used to calculate SO<INF>2</INF> emissions during 
the base year for each emitting unit included in the program. The 
implementation plan must also provide for documentation of any change 
to the specific methodology used to calculate emissions at any emitting 
unit for any year after the base year.
    (iii) Monitoring, recordkeeping, and reporting of SO<INF>2</INF> 
emissions. The plan submission must include provisions requiring the 
monitoring, recordkeeping, and annual reporting of actual stationary 
source SO<INF>2</INF> emissions within the State. The monitoring, 
recordkeeping, and reporting data must be sufficient to determine 
annually whether the milestone for each year through 2018 is achieved. 
The plan submission must provide for reporting of these data by the 
State to the Administrator and to the regional planning organization. 
The plan must provide for retention of records for at least 10 years 
from the establishment of the record.
    (iv) Criteria and Procedures for a Market Trading Program. The plan 
must include the criteria and procedures for conducting an annual 
evaluation of whether the milestone is achieved and, in accordance with 
paragraph (d)(4)(v) of this section, for activating a market trading 
program in the event the milestone is not achieved. A draft of the 
annual report evaluating whether the milestone for each year is 
achieved shall be completed no later than 12 months from the end of 
each milestone year. The plan must also provide for assessments of the 
program in the years 2013 and 2018.
    (v) Market Trading Program. The implementation plan must include 
requirements for a market trading program to be implemented in the 
event that a milestone is not achieved. The plan shall require that the 
market trading program be activated beginning no later than 15 months 
after the end of the first year in which the milestone is not achieved. 
The plan shall also require that sources comply, as soon as 
practicable, with the requirement to hold allowances covering their 
emissions. Such market trading program must be sufficient to achieve 
the milestones in paragraph (d)(4)(i) of this section, and must be 
consistent with the elements for such programs outlined in Sec.  
51.308(e)(2)(vi). Such a program may include a geographic enhancement 
to the program to address the requirement under Sec.  51.302(c) related 
to BART for reasonably attributable impairment from the pollutants 
covered under the program.
    (vi) Provision for the 2018 milestone.
    (A) Unless and until a revised implementation plan is submitted in 
accordance with Sec.  51.308(f) and approved by EPA, the implementation 
plan shall prohibit emissions from covered stationary sources in any 
year beginning in 2018 that exceed the year 2018 milestone. In no event 
shall a market-based program approved under Sec.  51.308(f) allow an 
emissions cap for SO<INF>2</INF> that is less stringent than the 2018 
milestone, unless the milestones are replaced by a different program 
approved by EPA as meeting the BART and reasonable progress 
requirements established in Sec.  51.308.
    (B) The implementation plan must provide a framework, including 
financial penalties for excess emissions based on the 2018 milestone, 
sufficient to ensure that the 2018 milestone will be met even if the 
implementation of the market trading program in paragraph (d)(4)(v) of 
this section has not yet been triggered, or the source allowance 
compliance provision of the trading program is not yet in effect.
    (vii) Provisions for stationary source emissions of NO<INF>X</INF> 
and PM. The implementation plan must contain any necessary long term 
strategies and BART requirements for stationary source PM and 
NO<INF>X</INF> emissions. Any such BART provisions may be submitted 
pursuant to either Sec.  51.308(e)(1) or '51.308(e)(2).
* * * * *
    (10) Periodic implementation plan revisions. Each Transport Region 
State

[[Page 60634]]

must submit to the Administrator periodic reports in the years 2013 and 
2018. The progress reports must be in the form of implementation plan 
revisions that comply with the procedural requirements of Sec. Sec.  
51.102 and 51.103.
* * * * *
    (f) [Reserved]
    (g) Additional Class I areas. Each Transport Region State 
implementing the provisions of this section as the basis for 
demonstrating reasonable progress for mandatory Class I Federal areas 
other than the 16 Class I areas must include the following provisions 
in its implementation plan. If a Transport Region State submits an 
implementation plan which is approved by EPA as meeting the 
requirements of this section, it will be deemed to comply with the 
requirements for reasonable progress for the period from approval of 
the plan to 2018.
    (1) A demonstration of expected visibility conditions for the most 
impaired and least impaired days at the additional mandatory Class I 
Federal area(s) based on emissions projections from the long-term 
strategies in the implementation plan. This demonstration may be based 
on assessments conducted by the States and/or a regional planning body.
    (2) Provisions establishing reasonable progress goals and 
implementing any additional measures necessary to demonstrate 
reasonable progress for the additional mandatory Federal Class I areas. 
These provisions must comply with the provisions of Sec.  51.308(d)(1) 
through (4).
    (i) In developing long-term strategies pursuant to Sec.  
51.308(d)(3), the State may build upon the strategies implemented under 
paragraph (d) of this section, and take full credit for the visibility 
improvement achieved through these strategies.
    (ii) The requirement under Sec.  51.308(e) related to Best 
Available Retrofit Technology for regional haze is deemed to be 
satisfied for pollutants addressed by the milestones and backstop 
trading program if, in establishing the emission reductions milestones 
under paragraph (d)(4) of this section, it is shown that greater 
reasonable progress will be achieved for these additional Class I areas 
than would be achieved through the application of source-specific BART 
emission limitations under Sec.  51.308(e)(1).
    (iii) The Transport Region State may consider whether any 
strategies necessary to achieve the reasonable progress goals required 
by paragraph (g)(2) of this section are incompatible with the 
strategies implemented under paragraph (d) of this section to the 
extent the State adequately demonstrates that the incompatibility is 
related to the costs of the compliance, the time necessary for 
compliance, the energy and no air quality environmental impacts of 
compliance, or the remaining useful life of any existing source subject 
to such requirements.

[FR Doc. 06-8630 Filed 10-12-06; 8:45 am]
BILLING CODE 6560-50-P


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