## “Withdrawal **of the Prior Determination or Presumption that Compliance w**  **ith the CAIR or the NO** **x** 

## SIP Call Constitutes **RACT or RACM for the 1997 8 -**  **Hour Ozone and 1997 Fine Particle NAAQS; and Revision to RACT Guidance and RFP**  **Requirements for the 1997 Fine Particle NAAQS”** 

Briefing for Office of Management and Budget and Interagency Review Panel January 9, 2012

# Overview

• This proposed action was developed in response to both a court decision and petitions for reconsideration of several issues pertaining to the implementation rules for the 1997 8 - hour ozone NAAQS and the 1997 fine particle (PM 2.5 

## ) NAAQS.
• Litigation on issues covered in this proposal has been stayed for now, provided that the rule moves forward.
• To date, there are no court-ordered deadlines.

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# Overview (Cont) This proposal contains three main components: 1. Proposes to withdraw from the implementation rules for the 1997 8 - hour ozone and 1997 PM 2.5 

### NAAQS, the prior presumptions and/or determinations that compliance with the NO x 

### SIP Call and/or the Clean Air Interstate Rule (“the CAIR”) constitutes reasonably available control technology (RACT) or reasonably available control measures (RACM) for oxides of nitrogen (NO x

### ) or sulfur dioxide (SO 2 

### ) emissions from electric oxides of nitrogen (NO x

### ) or sulfur dioxide (SO 2 

### ) emissions from electric generating unit (EGU) sources participating in these regional cap -and -trade programs. 2. Proposes to revise guidance in the preamble for the final PM 2.5 

### Implementation Rule regarding criteria for determining economic feasibility of RACT controls. 3. Proposes to revise guidance in the preamble for the final PM 2.5 

### Implementation Rule regarding the geographic area from which states can take credit for emissions reductions necessary to fulfill an area’s Reasonable Further Progress (RFP) requirements for the 1997 PM 2.5 

### NAAQS. 3

# Withdrawal of CAIR and NO x 

# SIP Call

RACT and RACM Presumptions Ozone Implementation Rule
• In the Phase 2 Ozone Implementation Rule (as amended by a final action on reconsideration) EPA:

– Determined that the regional NO x emissions reductions that result from compliance (in certain circumstances) with the NO x SIP Call would meet the NO x RACT requirement for EGUs located in states included wi thin the respective NO x SIP Call geographic region.

– Determined that for some states, compliance wi th the CAIR would meet the NO x RACT requirement for EGUs located in the state. (The states covered by this determination are those in which a technical analysis demonstrated that reductions associated wi th CAIR would be greater than those associated with source- by-source RACT – assuming RACT was low- NO x burners).

– Established a presumption that compliance wi th the CAIR would meet the NO x RACT requirement for EGUs located in states not covered by the CAIR=RACT determination. 4

# Withdrawal of CAIR and NO x 

# SIP Call RACT and RACM Presumptions (Cont)

• Several parties filed petitions for review of the Phase 2 Ozone Implementation Rule and the amendments to that rule made in the Final Action on Reconsideration.

– Among other things, petitioners challenged EPA’s determination that compliance with the NOx SIP Call could satisfy NOx RACT requirements for EGUs in nonattainment areas, and EPA’s specific determinations for some areas and general presumption for other areas, that compliance with the CAIR could satisfy NOx RACT for EGUs in ozone nonattainment areas. 

### • In July 2009, the United States Court of Appeals for the District of Columbia Circuit issued its decision on this case and remanded the provision of the Phase 2 Ozone Implementation Rule determining that the NOx 

### SIP Call satisfies NOx 

### RACT for EGUs. The Court emphasized that, under the Clean Air Act, “the RACT requirement calls for reductions in emissions from sources in the area.” 5

# Withdrawal of CAIR and NO x 

# SIP Call RACT and RACM Presumptions (Cont)

• Because the CAIR had been remanded, the Court deferred consideration of the litigant’s challenge insofar as it related to the CAIR program. A new “case” was created (number 09 - 1198) by the Court in 2009, which covered this issue.
• The new “case” covering the CAIR presumption and/or determination was held in abeyance until July 2011, when CAIR was replaced by the Cross - State Air Pollution Rule (“the CSAPR”)
• In October 2011, the Court granted EPA's subsequent motion to continue holding the case the abeyance.

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# Withdrawal of CAIR and NO x 

# SIP Call RACT and RACM Presumptions (Cont) PM 2.5 

### Implementation Rule
• Through guidance in the preamble to the final PM 2.5 

### Implementation Rule, EPA established a presumption that compliance with the CAIR would satisfy RACT/RACM requirements for SO 2 

### and NO x 

### emissions from EGUs in states participating in the CAIR.
• In June 2007, EPA received a petition for reconsideration of this issue in the PM 2.5 

### Implementation Rule.

– The petitioner argued that under the CAA, compliance with a regional trading program, such as the CAIR, should not be presumed to satisfy RACT/RACM requirements for individual EGU sources located in nonattainment areas. The petition also asserts that EPA failed to seek public comment on this presumption. 

### • In 2009, the Court issued its decision concerning the comparable issue from the Phase 2 Ozone Implementation Rule.
• In April 2011, EPA granted the petition for reconsideration of this issue in the PM 2.5 

### Implementation Rule.
• This rulemaking is necessary to follow through and complete the process necessary for this reconsideration. 7

# Withdrawal of CAIR and NO x 

# SIP Call RACT and RACM Presumptions (Cont) Action in this Proposed Rule
• Given the ozone Court decision and explicit wording of Clean Air Act section 172(c)(1) that sources “in the area” must at a minimum adopt RACT controls for that area, EPA believes that it is no longer appropriate to address this requirement merely based upon the participation of the source in a regional cap -and -trade program.
• EPA believes that the assumptions used in the Supplemental Technical Analysis for the Phase 2 Ozone Implementation Rule - Notice of Reconsideration do not provide an adequate demonstration that participation in the CAIR is projected to achieve equal or greater annual emissions reductions from EGUs than source - by-source RACT for certain specific ozone nonattainment areas. • As a result of this proposal, states may not merely presume that for EGUs located in a nonattainment area that compliance with a cap -and -trade program, including the NO x SIP Call, the CAIR, or similar programs (such as the CSAPR), could satisfy their obligation to implement RACT or RACM for NOx or SO 2 . • States will need to conduct a technical analysis for EGUs, as for all other source categories subject to RACT or RACM. 8

# PM 2.5 

# Economic Feasibility of RACT

• In June 2007, EP

A received a petition for reconsideration of this issue in the PM 2.5 Implementation Rule.
• The petition raised objections to the guidance in the preamble regarding economic feasibility criteria for determining RACT for sources located within nonattainment areas for the 1997 PM 2.5 NAAQS.
• EP A granted reconsideration of this issue in April 201 1. granted reconsideration of this issue in April 201
• Upon reconsideration, EP A now b elieves that the guidance reflects an inappropriate departure from prior EP A guidance on how

to evaluate RACT. • Therefore, EP

A is proposing to remove the guidance in question from the preamble to the final PM 2.5 Implementation Rule, and to replace it with guidance that is consistent with historical criteria and very similar to what was included in the preamble to the proposed PM 2.5 Implementation Rule.
• Consequently, EP

A guidance wi ll maintain that, absent other indications, it is reasonable for a source to bear similar costs of emission reduction as are borne by similar sources in the same source category. 9

# Limiting RFP Credit to Within the Nonattainment Area for PM 2.5
• Under EPA’s Phase 2 Ozone Implementation Rule, certain emission reductions from sources located outside a nonattainment area could be credited toward meeting the 1997 8 - hour ozone NAAQS RFP requirement.

– In the preamble to that Rule, EPA stated that credit could be taken for volatile organic compounds (VOC) and NO x emission reductions within 100 kilometers (km) and 200 km, respectively, from outside the nonattainment area under certain circumstances. • The preamble to the PM Implementation Rule included a similar policy, 2.5 Implementation Rule included a similar policy, allowing states to take credit for reductions of NO x and SO 2 emissions up to 200 km from outside the nonattainment area (and potentially for reductions of VOC or ammonia as well) wh en certain conditions we re met.
• In November 2007, the Court vacated and remanded the portion of the Phase 2 Ozone Implementation Rule that allowed RFP credit for emission reductions of VOC and NO x from outside nonattainment areas. In July 2009, the Court issued their decision on “in the area” for RACT. (see slide 5)
• On December 22, 2010, EPA issued a proposed action revising the RFP policy in the Phase 2 Ozone Implementation Rule. 10

# Limiting RFP Credit to Within the Nonattainment Area for PM 2.5 

# (Cont)

• In June 2007, EPA received a petition for reconsideration of the RFP policy in the PM 2.5 Implementation Rule. We granted reconsideration in May 2010.
• Upon reconsideration, EPA is proposing to set aside the Agency’s earlier interpretation of its RFP policy and to interpret the CAA as not allowing states to rely on credit for emission reductions from outside the nonattainment area to meet such an area’s RFP requirements for the 1997 PM 2.5 NAAQS. Regulatory provisions require reductions from the nonattainment area emissions inventory.
• Therefore, to be creditable toward fulfilling the CAA’s RFP requirements for the 1997 PM 2.5 NAAQS, such emissions reductions must occur from sources located wi thin the nonattainment area boundary.
• EPA is also taking comment on whether there may be alternative legal rationale consistent with the CAA and recent court decisions that would permit EPA to allow R FP credit for reductions from outside the nonattainment area.
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