[Federal Register Volume 72, Number 88 (Tuesday, May 8, 2007)]
[Proposed Rules]
[Pages 26040-26045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-8665]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R07-OAR-2007-0347; FRL-8309-6]


Approval And Promulgation of Implementation Plans; Iowa; Clean 
Air Interstate Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a revision to the Iowa State 
Implementation Plan (SIP) submitted on August 15, 2006. This revision 
addresses the requirements of EPA's Clean Air Interstate Rule (CAIR) 
promulgated on May 12, 2005, and subsequently revised on April 28, 
2006, and December 13, 2006. EPA is proposing to determine that the SIP 
revision fully implements the CAIR requirements for Iowa. Therefore, as 
a consequence of the SIP approval, EPA will also withdraw the CAIR 
Federal Implementation Plans (FIPs) concerning SO<INF>2</INF>, 
NO<INF>X</INF> annual, NO<INF>X</INF> ozone season emissions for Iowa. 
The CAIR FIPs for all States in the CAIR region were promulgated on 
April 28, 2006, and subsequently revised on December 13, 2006.
    CAIR requires States to reduce emissions of sulfur dioxide 
(SO<INF>2</INF>) and nitrogen oxides (NO<INF>X</INF>) that 
significantly contribute to, and interfere with maintenance of, the 
national ambient air quality standards for fine particulates and/or 
ozone in any downwind state. CAIR establishes State budgets for 
SO<INF>2</INF> and NO<INF>X</INF> and requires States to submit SIP 
revisions that implement these budgets in States that EPA concluded did 
contribute to nonattainment in downwind states. States have the 
flexibility to choose which control measures to adopt to achieve the 
budgets, including participating in the EPA-administered cap-and-trade 
programs. In the SIP revision that EPA is proposing to approve, Iowa 
would meet CAIR requirements by participating in the EPA-administered 
cap-and-trade programs addressing SO<INF>2</INF>, NO<INF>X</INF> 
annual, and NO<INF>X</INF> ozone season emissions.

DATES: Comments must be received on or before June 7, 2007.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R07-
OAR-2007-0347, by one of the following methods:
    1. http://www.regulations.gov: Follow the on-line instructions for 
submitting comments.
    2. E-mail: <a href="/cdn-cgi/l/email-protection#ff959e86d192969c979e9a93bf9a8f9ed1989089"><span class="__cf_email__" data-cfemail="e288839bcc8f8b818a83878ea2879283cc858d94">[email protected]</span></a>.
    3. Mail: Michael Jay, Environmental Protection Agency, Air Planning 
and Development Branch, 901 North 5th Street, Kansas City, Kansas 
66101.
    4. Hand Delivery or Courier: Deliver your comments to: Michael Jay, 
Environmental Protection Agency, Air Planning and Development Branch, 
901 North 5th Street, Kansas City, Kansas 66101. Such deliveries are 
only accepted during the Regional Office's normal hours of operation. 
The Regional Office's official hours of business are Monday through 
Friday, 8 a.m. to 4:30 p.m., excluding Federal holidays.
    Instructions: Direct your comments to Docket ID No. EPA-R07-OAR-
2007-0347. EPA's policy is that all comments received will be included 
in the public docket without change and may be made available online at 
http://www.regulations.gov, including any personal information 
provided, unless the comment includes information claimed to be 
Confidential Business Information (CBI) or other information whose 
disclosure is restricted by statute. Do not submit through http://www.regulations.gov or e-mail,

[[Page 26041]]

information that you consider to be CBI or otherwise protected. The 
http://www.regulations.gov Web site is an ``anonymous access'' system, 
which means EPA will not know your identity or contact information 
unless you provide it in the body of your comment. If you send an e-
mail comment directly to EPA without going through http://www.regulations.gov, your e-mail address will be automatically captured 
and included as part of the comment that is placed in the public docket 
and made available on the Internet. If you submit an electronic 
comment, EPA recommends that you include your name and other contact 
information in the body of your comment and with any disk or CD-ROM you 
submit. If EPA cannot read your comment due to technical difficulties 
and cannot contact you for clarification, EPA may not be able to 
consider your comment. Electronic files should avoid the use of special 
characters and any form of encryption and should be free of any defects 
or viruses.
    Docket: All documents in the electronic docket are listed in the 
http://www.regulations.gov index. Although listed in the index, some 
information is not publicly available, i.e., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically in http://www.regulations.gov or in hard copy at the Environmental Protection 
Agency, Air Planning and Development Branch, 901 North 5th Street, 
Kansas City, Kansas 66101. EPA requests that you contact the person 
listed in the FOR FURTHER INFORMATION CONTACT section to schedule your 
inspection. The interested persons wanting to examine these documents 
should make an appointment with the office at least 24 hours in 
advance.

FOR FURTHER INFORMATION CONTACT: If you have questions concerning this 
proposal, please contact Michael Jay at (913) 551-7460 or by e-mail at 
<a href="/cdn-cgi/l/email-protection#660c071f480b0f050e07030a2603160748010910"><span class="__cf_email__" data-cfemail="660c071f480b0f050e07030a2603160748010910">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: Throughout this document whenever ``we,'' 
``us,'' or ``our'' is used, we mean EPA.

Table of Contents

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

I. What Action Is EPA Proposing to Take?

    EPA is proposing to approve a revision to Iowa's SIP submitted on 
August 15, 2006. In its SIP revision, Iowa would meet CAIR requirements 
by requiring certain electric generating units (EGUs) to participate in 
the EPA-administered State CAIR cap-and-trade programs addressing 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
emissions, as finalized in the Iowa Administrative Bulletin on June 7, 
2006 (567-20.1(455B,17A), 21.1(4), and Chapter 34). Iowa's regulations 
adopt by reference most of the provisions of EPA's SO<INF>2</INF>, 
NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season model trading 
rules, with certain changes discussed below. EPA is proposing to 
determine that the SIP as revised will meet the applicable requirements 
of CAIR. Any final action approving the SIP will be taken by the 
Regional Administrator for Region 7. If EPA approves this revision, the 
Administrator of EPA will also issue a final rule to withdraw the FIPs 
concerning SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> 
ozone season emissions for Iowa. This action would delete and reserve 
40 CFR 52.840 and 40 CFR 52.841, relating to the CAIR FIP obligations 
for Iowa. The withdrawal of the CAIR FIPs for Iowa is a conforming 
amendment that must be made once the SIP is approved because EPA's 
authority to issue the FIPs was premised on a deficiency in the SIP for 
Iowa. Once a SIP is fully approved, EPA no longer has authority for the 
FIPs. Thus, EPA will not have the option of maintaining the FIPs 
following full SIP approval. Accordingly, EPA does not intend to offer 
an opportunity for a public hearing or an additional opportunity for 
written public comment on the withdrawal of the FIPs.

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

    The Clean Air Interstate Rule (CAIR) was published by EPA on May 
12, 2005 (70 FR 25162). In this rule, EPA determined that 28 States and 
the District of Columbia contribute significantly to nonattainment and 
interfere with maintenance of the national ambient air quality 
standards (NAAQS) for fine particles (PM<INF>2.5</INF>) and/or 8-hour 
ozone in downwind States in the eastern part of the country. As a 
result, EPA required those upwind States to revise their SIPs to 
include control measures that reduce emissions of SO<INF>2</INF>, which 
is a precursor to PM<INF>2.5</INF> formation, and/or NO<INF>X</INF>, 
which is a precursor to both ozone and PM<INF>2.5</INF> formation. For 
jurisdictions that contribute significantly to downwind 
PM<INF>2.5</INF> nonattainment, CAIR sets annual State-wide emission 
reduction requirements (i.e., budgets) for SO<INF>2</INF> and annual 
State-wide emission reduction requirements for NO<INF>X</INF>. 
Similarly, for jurisdictions that contribute significantly to 8-hour 
ozone nonattainment, CAIR sets State-wide emission reduction 
requirements for NO<INF>X</INF> for the ozone season (May 1 to 
September 30). Under CAIR, States may implement these reduction 
requirements by participating in the EPA-administered cap-and-trade 
programs or by adopting any other control measures.
    CAIR explains to subject States what must be included in SIPs to 
address the requirements of section 110(a)(2)(D) of the Clean Air Act 
(CAA) with regard to interstate transport with respect to the 8-hour 
ozone and PM<INF>2.5</INF> NAAQS. EPA made national findings, effective 
on May 25, 2005, that the States had failed to submit SIPs meeting the 
requirements of section 110(a)(2)(D). The SIPs were due in July 2000, 3 
years after the promulgation of the 8-hour ozone and PM<INF>2.5</INF> 
NAAQS. These findings started a 2-year clock for EPA to promulgate a 
Federal Implementation Plan (FIP) to address the requirements of 
section 110(a)(2)(D). Under CAA section 110(c)(1), EPA may issue a FIP 
anytime after such findings are made and must do so within two years 
unless a SIP revision correcting the deficiency is approved by EPA 
before the FIP is promulgated.
    Iowa submitted its SIP in response to EPA's section 110(a)(2)(D) 
finding, which EPA approved in a rule published March 8, 2007 (72 FR 
10380). In that rule, EPA stated that Iowa had met its obligation with 
regard to interstate transport by adoption of the CAIR model rule. EPA 
also stated that it would review and act on Iowa's CAIR rule in a 
separate rulemaking. This document proposes action on Iowa's CAIR rule 
as explained below.
    On April 28, 2006, EPA promulgated FIPs for all States covered by 
CAIR in order to ensure the emissions reductions required by CAIR are 
achieved on schedule. Each CAIR State is subject to the FIPs until the 
State fully adopts, and EPA approves, a SIP revision meeting the 
requirements of CAIR. The CAIR

[[Page 26042]]

FIPs require EGUs to participate in the EPA-administered CAIR 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
trading programs, as appropriate. The CAIR FIP SO<INF>2</INF>, 
NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season trading programs 
impose essentially the same requirements as, and are integrated with, 
the respective CAIR SIP trading programs. The integration of the FIP 
and SIP trading programs means that these trading programs will work 
together to effectively create a single trading program for each 
regulated pollutant (SO<INF>2</INF>, NO<INF>X</INF> annual, and 
NO<INF>X</INF> ozone season) in all States covered by the CAIR FIP or 
SIP trading program for that pollutant. The CAIR FIPs also allow States 
to submit abbreviated SIP revisions that, if approved by EPA, will 
automatically replace or supplement certain CAIR FIP provisions (e.g., 
the methodology for allocating NO<INF>X</INF> allowances to sources in 
the State), while the CAIR FIP remains in place for all other 
provisions.
    On April 28, 2006, EPA published two additional CAIR-related final 
rules that added the States of Delaware and New Jersey to the list of 
States subject to CAIR for PM<INF>2.5</INF> and announced EPA's final 
decisions on reconsideration of five issues, without making any 
substantive changes to the CAIR requirements.

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

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

IV. What Are the Types of CAIR SIP Submittals?

    States have the flexibility to choose the type of control measures 
they will use to meet the requirements of CAIR. EPA anticipates that 
most States will choose to meet the CAIR requirements by selecting an 
option that requires EGUs to participate in the EPA-administered CAIR 
cap-and-trade programs. For such States, EPA has provided two 
approaches for submitting and obtaining approval for CAIR SIP 
revisions. States may submit full SIP revisions that adopt the model 
CAIR cap-and-trade rules. If approved, these SIP revisions will fully 
replace the CAIR FIPs. Alternatively, States may submit abbreviated SIP 
revisions. These SIP revisions will not replace the CAIR FIPs; however, 
the CAIR FIPs provide that, when approved, the provisions in these 
abbreviated SIP revisions will be used instead of or in conjunction 
with, as appropriate, the corresponding provisions of the CAIR FIPs 
(e.g., the NO<INF>X</INF> allowance allocation methodology).
    A State submitting a full SIP revision may either adopt regulations 
that are substantively identical to the model rules or incorporate by 
reference the model rules. CAIR provides that States may only make 
limited changes to the model rules if the States want to participate in 
the EPA-administered trading programs. A full SIP revision may change 
the model rules only by altering their applicability and allowance 
allocation provisions to: (1) Include NO<INF>X</INF> SIP Call trading 
sources that are not EGUs under CAIR in the CAIR NO<INF>X</INF> ozone 
season trading program; (2) provide for State allocation of 
NO<INF>X</INF> annual or ozone season allowances using a methodology 
chosen by the State; (3) provide for State allocation of NO<INF>X</INF> 
annual allowances from the compliance supplement pool (CSP) using the 
State's choice of allowed, alternative methodologies; or (4) allow 
units that are not otherwise CAIR units to opt individually into the 
CAIR SO<INF>2</INF>, NO<INF>X</INF> annual, or NO<INF>X</INF> ozone 
season trading programs under the opt-in provisions in the model rules.
    An approved CAIR full SIP revision addressing EGUs' SO<INF>2</INF>, 
NO<INF>X</INF> annual, or NO<INF>X</INF> ozone season emissions will 
replace the CAIR FIP for that State for the respective EGU emissions.

V. Analysis of Iowa's CAIR SIP Submittal

A. State Budgets for Allowance Allocations

    The CAIR NO<INF>X</INF> annual and ozone season budgets were 
developed from historical heat input data for EGUs. Using these data, 
EPA calculated annual and ozone season regional heat input values, 
which were multiplied by 0.15 lb/mmBtu, for phase 1, and 0.125 lb/
mmBtu, for phase 2, to obtain regional NO<INF>X</INF> budgets for 2009-
2014 and for 2015 and thereafter, respectively. EPA derived the State 
NO<INF>X</INF> annual and ozone season budgets from the regional 
budgets using State heat input data adjusted by fuel factors.
    The CAIR State SO<INF>2</INF> budgets were derived by discounting 
the tonnage of emissions authorized by annual allowance allocations 
under the Acid Rain Program under title IV of the CAA. Under CAIR, each 
allowance allocated in the Acid Rain Program for the years in phase 1 
of CAIR (2010 through 2014) authorizes 0.5 ton of SO<INF>2</INF> 
emissions in the CAIR trading program, and each Acid Rain Program 
allowance allocated for the years in phase 2 of CAIR (2015 and 
thereafter) authorizes 0.35 ton of SO<INF>2</INF> emissions in the CAIR 
trading program.
    In this action, EPA is proposing approval of Iowa's SIP revision 
that adopts the budgets established for the State in CAIR, i.e., 32,692 
(2009-2014) and 27,243 (2015-thereafter) tons for NO<INF>X</INF> annual 
emissions, 14,263 (2009-2014) and 11,886 (2015-thereafter) tons for 
NO<INF>X</INF> ozone season emissions, and 64,095 (2010-2014) and 
44,866 (2015-thereafter) tons for SO<INF>2</INF> emissions. Iowa's SIP 
revision sets these budgets as the total amounts of allowances 
available for allocation for each year under the EPA-administered cap-
and-trade programs.
    Iowa has committed to revising a definition in all three CAIR rules 
in order to fully ensure allowances can be traded among all sources 
participating in the EPA-administered cap-and-trade programs as 
intended. EPA discovered after review of other States' rules, but after 
Iowa had adopted its CAIR rules, that there was an issue related to the 
definition of ``permitting authority'' when it is revised to refer to a 
specific State's permitting authority.
    In each of Iowa's rules for CAIR, the EPA model trading rules were 
revised to limit all references to ``permitting authority'' to refer to 
the Iowa Department of Natural Resources. This

[[Page 26043]]

change is acceptable in most, but not all, instances under the current 
model rules. In certain definitions in the model rules incorporated by 
Iowa (i.e., ``allocate'' or ``allocation,'' ``CAIR NO<INF>X</INF> 
allowance,'' ``CAIR SO<INF>2</INF> allowance,'' and ``CAIR 
NO<INF>X</INF> Ozone Season allowance''), it is important that the term 
``permitting authority'' cover permitting authorities in all States 
that choose to participate in the respective EPA-administered trading 
programs. This is necessary to ensure that all allowances issued in 
each EPA-administered trading program are fungible and can be traded 
and used for compliance with the allowance-holding requirement in any 
State in the program.
    On February 17, 2007, EPA provided a letter to Iowa that requested 
and outlined necessary definition revisions. EPA received a letter from 
Iowa on February 28, 2007, that provided a commitment to make the EPA 
suggested rule revisions as soon as is practicable upon publication of 
the final rule concerning the proposed Clean Air Mercury Rule (CAMR) 
Federal plan. On April 11, 2007, EPA received an electronic 
correspondence from Iowa stating that Iowa will, in any event, complete 
these rule revisions before January 1, 2008. The State will be able to 
simultaneously revise the ``permitting authority'' definition in all 
cap-and-trade rules for both CAIR and CAMR, and properly update the 
State's rule as necessary to meet the requirements of the EPA-
administered cap-and-trade-program for mercury.
    The final rule concerning the CAMR Federal plan is expected to be 
published before the earliest, major deadline for compliance with 
requirements for source owners and operators under the CAIR trading 
programs, i.e., the January 1, 2008, deadline for emissions monitoring 
requirements under the CAIR Annual Trading Program. EPA expects that, 
by timing adoption of the EPA requested rule revisions to be soon after 
the publication of the final rule concerning the CAMR Federal plan, the 
State will ensure the revisions to the definition of ``permitting 
authority'' will be completed prior to any of the major compliance 
deadlines for source owners and operators under the CAIR trading 
programs. In the event the final rule concerning the CAMR Federal plan 
is not published in the expected timeframe, the State will need to 
ensure the necessary State rule revisions are completed and submitted 
to EPA in advance of the January 1, 2008, monitoring deadline for the 
CAIR NO<INF>X</INF> Annual Trading Program.
    To be clear, EPA notes that it is not proposing to approve the 
State's rule to comply with CAMR as part of this rulemaking. EPA will 
propose a separate rulemaking for the Iowa rule relating to CAMR.

B. CAIR Cap-and-Trade Programs

    The CAIR NO<INF>X</INF> annual and ozone season model trading rules 
both largely mirror the structure of the NO<INF>X</INF> SIP Call model 
trading rule in 40 CFR part 96, subparts A through I. While the 
provisions of the NO<INF>X</INF> annual and ozone season model rules 
are similar, there are some differences. For example, the 
NO<INF>X</INF> annual model rule (but not the NO<INF>X</INF> ozone 
season model rule) provides for a compliance supplement pool (CSP), 
which is discussed below and under which allowances may be awarded for 
early reductions of NO<INF>X</INF> annual emissions. As a further 
example, the NO<INF>X</INF> ozone season model rule reflects the fact 
that the CAIR NO<INF>X</INF> ozone season trading program replaces the 
NO<INF>X</INF> SIP Call trading program after the 2008 ozone season and 
is coordinated with the NO<INF>X</INF> SIP Call program. The 
NO<INF>X</INF> ozone season model rule provides incentives for early 
emissions reductions by allowing banked, pre-2009 NO<INF>X</INF> SIP 
Call allowances to be used for compliance in the CAIR NO<INF>X</INF> 
ozone season trading program. In addition, States have the option of 
continuing to meet their NO<INF>X</INF> SIP Call requirement by 
participating in the CAIR NO<INF>X</INF> ozone season trading program 
and including all their NO<INF>X</INF> SIP Call trading sources in that 
program.
    The provisions of the CAIR SO<INF>2</INF> model rule are also 
similar to the provisions of the NO<INF>X</INF> annual and ozone season 
model rules. However, the SO<INF>2</INF> model rule is coordinated with 
the ongoing Acid Rain SO<INF>2</INF> cap-and-trade program under CAA 
title IV. The SO<INF>2</INF> model rule uses the title IV allowances 
for compliance, with each allowance allocated for 2010-2014 authorizing 
only 0.50 ton of emissions and each allowance allocated for 2015 and 
thereafter authorizing only 0.36 ton of emissions. Banked title IV 
allowances allocated for years before 2010 can be used at any time in 
the CAIR SO<INF>2</INF> cap-and-trade program, with each such allowance 
authorizing 1 ton of emissions. Title IV allowances are to be freely 
transferable among sources covered by the Acid Rain Program and sources 
covered by the CAIR SO<INF>2</INF> cap-and-trade program.
    EPA also used the CAIR model trading rules as the basis for the 
trading programs in the CAIR FIPs. The CAIR FIP trading rules are 
virtually identical to the CAIR model trading rules, with changes made 
to account for Federal rather than State implementation. The CAIR model 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
trading rules and the respective CAIR FIP trading rules are designed to 
work together as integrated SO<INF>2</INF>, NO<INF>X</INF> annual, and 
NO<INF>X</INF> ozone season trading programs.
    In the SIP revision, Iowa has chosen to implement its CAIR budgets 
by requiring EGUs to participate in EPA-administered cap-and-trade 
programs for SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> 
ozone season emissions. Iowa has adopted a full SIP revision that 
adopts, with the changes discussed above and with certain allowed 
changes discussed below, the CAIR model cap-and-trade rules for 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
emissions.

C. NO<INF>X</INF> Allowance Allocations

    Under the NO<INF>X</INF> allowance allocation methodology in the 
CAIR model trading rules and in the CAIR FIP, NO<INF>X</INF> annual and 
ozone season allowances are allocated to units that have operated for 
five years, based on heat input data from a three-year period that are 
adjusted for fuel type by using fuel factors of 1.0 for coal, 0.6 for 
oil, and 0.4 for other fuels. The CAIR model trading rules and the CAIR 
FIP also provide a new unit set-aside from which units without five 
years of operation are allocated allowances based on the units' prior 
year emissions.
    States may establish in their SIP submissions a different 
NO<INF>X</INF> allowance allocation methodology that will be used to 
allocate allowances to sources in the States if certain requirements 
are met concerning the timing of submission of units' allocations to 
the Administrator for recordation and the total amount of allowances 
allocated for each control period. In adopting alternative 
NO<INF>X</INF> allowance allocation methodologies, States have 
flexibility with regard to: (1) The cost to recipients of the 
allowances, which may be distributed for free or auctioned; (2) the 
frequency of allocations; (3) the basis for allocating allowances, 
which may be distributed, for example, based on historical heat input 
or electric and thermal output; and (4) the use of allowance set-asides 
and, if used, their size.
    Iowa has chosen to adopt the essential components of the CAIR 
NO<INF>X</INF> annual and CAIR NO<INF>X</INF> ozone season model 
trading rules concerning the allocation of allowances with two notable 
exceptions. Language is provided in Iowa's rules that attempts to 
clarify that allowances will be allocated in future years only ``to 
meet the minimum timing requirements'' specified in the Federal 
regulations. EPA understands that the language is intended to mean that 
allocations will be determined by

[[Page 26044]]

the dates and only for the years identified or described in 40 CFR 
96.141 and 40 CFR 96.341. Additionally, Iowa's CAIR NO<INF>X</INF> 
Annual and CAIR NO<INF>X</INF> ozone rules establish permanent 
allocations for specified units designated as ``existing units'' or 
``new units'' and do not include provisions of the EPA's model rules 
that call for adjusting the allocations for existing units to provide 
allocations for future, new units. EPA is proposing to approve these 
changes to the model rule provisions because the changes are consistent 
with the flexibility that CAIR provides States with regard to 
allocation methodologies.

D. Allocation of NO<INF>X</INF> Allowances From Compliance Supplement 
Pool

    The CAIR establishes a compliance supplement pool to provide an 
incentive for early reductions in NO<INF>X</INF> annual emissions. The 
CSP consists of 200,000 CAIR NO<INF>X</INF> annual allowances of 
vintage 2009 for the entire CAIR region, and a State's share of the CSP 
is based upon the projected magnitude of the emission reductions 
required by CAIR in that State. States may distribute CSP allowances, 
one allowance for each ton of early reduction, to sources that make 
NO<INF>X</INF> reductions during 2007 or 2008 beyond what is required 
by any applicable State or Federal emission limitation. States also may 
distribute CSP allowances based upon a demonstration of need for an 
extension of the 2009 deadline for implementing emission controls.
    The CAIR annual NO<INF>X</INF> model trading rule establishes 
specific methodologies for allocations of CSP allowances. States may 
choose an allowed, alternative CSP allocation methodology to be used to 
allocate CSP allowances to sources in the States.
    Iowa has not chosen to modify the provisions of the CAIR 
NO<INF>X</INF> annual model trading rule concerning the allocation of 
allowances from the CSP. Iowa has chosen to distribute CSP allowances 
using the allocation methodology provided in 40 CFR 96.143 and has 
adopted this section by reference.

E. Individual Opt-in Units

    The opt-in provisions of the CAIR SIP model trading rules allow 
certain non-EGUs (i.e., boilers, combustion turbines, and other 
stationary fossil-fuel-fired devices) that do not meet the 
applicability criteria for a CAIR trading program to participate 
voluntarily in (i.e., opt into) the CAIR trading program. A non-EGU may 
opt into one or more of the CAIR trading programs. In order to qualify 
to opt into a CAIR trading program, a unit must vent all emissions 
through a stack and be able to meet monitoring, recordkeeping, and 
recording requirements of 40 CFR part 75. The owners and operators 
seeking to opt a unit into a CAIR trading program must apply for a CAIR 
opt-in permit. If the unit is issued a CAIR opt-in permit, the unit 
becomes a CAIR unit, is allocated allowances, and must meet the same 
allowance-holding and emissions monitoring and reporting requirements 
as other units subject to the CAIR trading program. The opt-in 
provisions provide for two methodologies for allocating allowances for 
opt-in units, one methodology that applies to opt-in units in general 
and a second methodology that allocates allowances only to opt-in units 
that the owners and operators intend to repower before January 1, 2015.
    States have several options concerning the opt-in provisions. 
States may adopt the CAIR opt-in provisions entirely or may adopt them 
but exclude one of the methodologies for allocating allowances. States 
may also decline to adopt the opt-in provisions at all.
    Iowa has chosen to allow non-EGUs meeting certain requirements to 
opt into the CAIR trading programs by adopting by reference the 
entirety of EPA's model rule provisions for opt-in units in the CAIR 
SO<INF>2</INF>, CAIR NO<INF>X</INF> annual, and CAIR NO<INF>X</INF> 
ozone season trading programs.

VI. Proposed Actions

    EPA is proposing to approve Iowa's full CAIR SIP revision submitted 
on August 15, 2006. Under this SIP revision, Iowa is choosing to 
participate in the EPA-administered cap-and-trade programs for 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
emissions. EPA believes that the SIP revision meets the applicable 
requirements in 40 CFR 51.123(o) and (aa), with regard to 
NO<INF>X</INF> annual and NO<INF>X</INF> ozone season emissions, and 40 
CFR 51.124(o), with regard to SO<INF>2</INF> emissions. EPA is 
proposing to determine that the SIP as revised will meet the 
requirements of CAIR. If EPA finalizes this action as proposed, the 
Administrator of EPA will also issue, without providing an opportunity 
for a public hearing or an additional opportunity for written public 
comment, a final rule to withdraw the CAIR FIPs concerning 
SO<INF>2</INF>, NO<INF>X</INF> annual, and NO<INF>X</INF> ozone season 
emissions for Iowa. The Administrator's action would delete and reserve 
40 CFR 52.840 and 40 CFR 52.841.

VII. Statutory and Executive Order Reviews

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
action is not a ``significant regulatory action'' and therefore is not 
subject to review by the Office of Management and Budget. For this 
reason, this action is also not subject to Executive Order 13211, 
``Actions Concerning Regulations That Significantly Affect Energy 
Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001). This action 
merely proposes to approve State law as meeting Federal requirements 
and would impose no additional requirements beyond those imposed by 
State law. Accordingly, the Administrator certifies that this proposed 
rule would not have a significant economic impact on a substantial 
number of small entities under the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.). Because this action proposes to approve pre-existing 
requirements under State law and would not impose any additional 
enforceable duty beyond that required by State law, it does not contain 
any unfunded mandate or significantly or uniquely affect small 
governments, as described in the Unfunded Mandates Reform Act of 1995 
(Pub. L. 104-4).
    This proposal also does not have tribal implications because it 
would not have a substantial direct effect on one or more Indian 
tribes, on the relationship between the Federal Government and Indian 
tribes, or on the distribution of power and responsibilities between 
the Federal Government and Indian tribes, as specified by Executive 
Order 13175 (65 FR 67249, November 9, 2000). This proposed action also 
does not have Federalism implications because it would not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This 
action merely proposes to approve a State rule implementing a Federal 
standard and will result, as a consequence of that approval, in the 
Administrator's withdrawal of the CAIR FIP. It does not alter the 
relationship or the distribution of power and responsibilities 
established in the Clean Air Act. This proposed rule also is not 
subject to Executive Order 13045 ``Protection of Children from 
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23, 
1997), because it would approve a State rule implementing a Federal 
Standard.
    In reviewing SIP submissions, EPA's role is to approve State 
choices, provided that they meet the criteria of the Clean Air Act. In 
this context, in the absence of a prior existing requirement for the 
State to use voluntary consensus

[[Page 26045]]

standards (VCS), EPA has no authority to disapprove a SIP submission 
for failure to use VCS. It would thus be inconsistent with applicable 
law for EPA, when it reviews a SIP submission, to use VCS in place of a 
SIP submission that otherwise satisfies the provisions of the Clean Air 
Act. Thus, the requirements of section 12(d) of the National Technology 
Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. 
This proposed rule would not impose an information collection burden 
under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.).

List of Subjects in 40 CFR Part 52

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

    Dated: April 30, 2007.
John B. Askew,
Regional Administrator, Region 7.
[FR Doc. E7-8665 Filed 5-7-07; 8:45 am]
BILLING CODE 6560-50-P


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