### 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 a llowances 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 basiscontrasts with the appro ach 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 commente rs 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).

I n 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 operator s 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 generati on 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 unit s under a common DR. This flexibility allows utilities to re

- balance allowances and emissions t omitigate 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, util ities 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 pursu e similar private arrangements with each other to cover their emissions at the lowest possible cost. While the DR provision c ould 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 quality assured trading program greater flexibility in each state to determine the most cost - effective pattern of emission reductions while EPA ensures each state meets its as surance level needed to address the significant contribution in each state