Into Assurance section starting on p 366

The requirement that owners and operators surrender 

allowances under the assurance provisions will be triggered only 

if two criteria are met: (1) the group of sources and units with 

a common DR are located in a state where the total state EGU 

emissions for a control period exceed the state assurance level; 

and (2) that group with the common DR had emissions exceeding 

the respective DR’s share of the state assurance level. The 

share of the assurance penalty borne by the owners and operators 

will be based on the amount by which the total emissions for the 

units in the group exceed the common DR’s share of the state 

assurance level as a percentage of the total calculated for all 

such groups of sources and units in the state. Thus, the owners 

and operators of each such group of sources and units must 

surrender an amount of allowances equal to the excess of state 

EGU emissions over the state assurance level multiplied by the 

owners’ and operators’ percentage and multiplied by two (to 

reflect the penalty of two allowances for each ton of the 

state’s excess EGU emissions). See Table VII.E-1 below for an 

illustrative example.

This approach in the final rule of implementing the 

assurance provisions on a common designated representative basis 
contrasts with the approach in the proposed rule of implementing 

the assurance provisions on an owner basis. In the January 7, 

2011 NODA, EPA requested comment on the alternative of basing 

the assurance provision penalty using common designated 

representatives, and some commenters supported this alternative. 

The common designated representative approach is simpler and 

avoids the need to collect information on percentage ownership 

(which information is not used in any other provisions of the 

Transport Rule trading programs). 

In addition, the common designated representative approach 

provides additional flexibility to owners and operators who have 

only one or a few units in a given state but have the option of 

selecting a common designated representative with owners and 

operators of other units in the state. EPA expects companies in 

various states will readily be able to manage their emissions to 

stay collectively below their state’s assurance levels as they 

track emissions quarterly throughout the year and manage their 

generation units and pollution control efforts accordingly. 

However, if the state appears to be approaching its assurance 

level, this final rule also gives companies the ability to 

further ensure that they will not have excess emissions by 

combining multiple units under a common DR. This flexibility 

allows utilities to re-balance allowances and emissions to 
mitigate penalty risk if the state violates its assurance level. 

In a state that does not appear to risk violating its assurance 

level in a given period, utilities would not need to consider 

the assurance aspect of selecting DRs. However, EPA anticipates 

that in the event utilities desire additional certainty or 

mitigation of assurance penalty risk, they will take advantage 

of this common DR provision or pursue similar private 

arrangements with each other to cover their emissions at the 

lowest possible cost. 

While the DR provision could benefit utilities by allowing 

them to pool their penalty risk, the utilities would still be 

subject to the antitrust laws. As with any joint venture 

between competitors, the efficiency benefits of pooling risk 

would be weighed against any anticompetitive harm associated 

with DRs. 

This new feature in the final rule, in conjunction with the 

simplifications to the final rule’s variability limits described 

in section VI.E, will give companies under the air qualityassured trading program greater flexibility in each state to 

determine the most cost-effective pattern of emission reductions 

while EPA ensures each state meets its assurance level needed to 

address the significant contribution in each state