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Page **1** of **81 ENVIRONMENTAL PROTECTION AGENCY** 
**40 CFR Part s**  **52 and 97**

**[ EPA** **- HQ** **- OAR** **- 200**  **9 -**  **0 491**  **; FRL -**  **]**

**RIN 2060**  **- AR22**  **Revisions to Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and**  **Ozone**

**AGENCY:** Environmental Protection Agency (EPA).

**ACTION:** Proposed rule .
**SUMMARY :**  EPA is proposing or seeking comment on revisions to the final Transport Rule promulgated on August 8, 2011 . These revisions address discrepancies in unit specific modeling assumptions that affect the proper calculation of Transport Rule state budgets and assurance levels in Florida, Louisiana, Michigan, Mississippi, Nebraska, New Jersey, New York, Texas , and Wisconsin, as*** E.O. 12866 Review

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Page **2** of **81** well as new unit set - asides in Arkansas and Texas . EPA is also proposing to revise allowance allocation s to specific units covered by certain consent decrees that restrict the use of those allowances . These important technical fixes maintain the Transport Rule’s ability to achieve the air quality goal of eliminating significant contribution and interference with maintenance as quantified by the proper application of these methodologies. EPA is also proposing to amend the assurance penalty provisions of the rule to make them effective beginning January 1, 2014 in order . to promote the development of allowance market liquidity as these revisions are finalized . EPA be l ieves that deferring the effective date of the assurance provisions would provide additional confidence and would in no way compromise the air quality goals of the program. In addition, we are propo sing to correct typographical errors in the rule . **DATES :**  Comments. Comment s must be received on or before [INSERT DATE 30 DAYS FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER] unless a public hearing is requested in which event comments must be received on or before [INSERT*** E.O. 12866 Review

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Page **3** of **81** DATE 45 DAYS FROM DATE OF PUBLICATION OF NOTICE OF PUBLIC HEARING]. Public Hearing. On [INSERT DATE OF PUBLICATION OF NOTICE OF PUBLIC HEARING IN THE FEDERAL REGISTER], EPA published a notice announcing that if a public hearing on this proposal is requested by [INSERT DATE 7 DAYS AFTER PUBLICATION OF NOTICE OF PUBLIC HEARING IN THE FEDERAL REGISTER], it will be held on October 28, 2011, at 9 a.m. at USEPA . Please refer to the public hearing notice published at [INSERT CITATION TO PUBLICATION OF NOTICE OF PUBLIC HEARING IN THE FEDERAL REGISTER] for additional information on the public hearing. EPA will provide further information about the hearing on its webpage if a hearing is requested. Oral testimony will be limited to the subject matter of the proposal, the scope of which is discussed below. Any member of the public may file a written statement by the close of the comment period. **ADDRESSES:** Submit your comments, identified by Docket ID No. EPA- HQ - OAR- 2009 - 0 491 , by one of the following methods:

 http://www.regulations.gov : Follow the on - line instructions for submitting comments.

 Mail: Air and Radiation Docket and Information Center,*** E.O. 12866 Review

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Page **4** of **81** U.S. Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania Avenue, NW, Washington, D.C. 20460.

 Hand Delivery: Air and Radiation Docket, EPA West Building, Room 3334, 1301 Constitution Avenue, NW, Washington, D.C. 20460 . Such deliveries are only accepted during the Docket’s normal hours of operation, and special arrangements should be made for deliveries of boxed information. Instructions: Direct your comments to Docket ID No. EPAHQ - OAR- 2009 - 0 491 . 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 information that you consider to be CBI or otherwise protected through www.regulations.gov or e -mail. The http:// www.regulations.gov website is an “anonymous access” system, which means EPA will not know your identity o r 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 www.regulations.gov*** E.O. 12866 Review

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Page **5** of **81** 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 canno t 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, any form of encryption, and be free of any defects or vi ruses. For additional information about EPA’s public docket visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm. Docket: All documents in the docket are listed in the http:// www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in ha rd copy. Publicly available docket materials are available either electronically in http:// www.regulations.gov or in hard copy at the Air and Radiation Docket, EPA West Building,*** E.O. 12866 Review

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Page **6** of **81** Room 3334, 1301 Constitution Avenue , NW, Washington, D.C. 20460 . 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 is (202) 566 - 1742. **FOR FURTHER INFORMATION CONTACT:** Gabrielle Stevens **,** U.S. Environmental Protection Agency, Clean Air Markets Division, MC 6204J, Ariel Rios Building, 1200 Pennsylvania Ave., NW, Washington, D.C. 20460, telephone (202) 343 - 9 2 5 2 , e -mail at stevens.gabrielle @epa.gov. Electronic copies of this document can be accessed through the EPA Website at: http://epa.gov/cro ssstaterule .
I. General Information A. Does this action apply to me? Regulated Entities . Entities regulated by this action primarily are fossil fuel - fired boilers, turbines, and combined cycle units that serve generators that produce electricity for sale or cogenerate electricity for sale and steam. Regulated categories and entities include:
**Category NA** **ICS code Examples of**  **potentially regulated industries** *** E.O. 12866 Review

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Page **7** of **81** Industry 2211 , 22 12, 2213 Electric service providers This table is not intended to be exhaustive, but rather to provide a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities which EPA is now aware could potentially be regulated by this action. Other types of entities not listed in this table could also be regulated. To determine whether your facility, company, business, organization, etc., is regulated by thi s action, you should carefully examine the applicability criteria in §§ 97 . 404 , 97 . 504 , and 97 . 604 of title 40 of the Code of Federal Regulations. If you have questions regarding the applicability of this action to a particular entity, consult the person l isted in the preceding **FOR FURTHER INFORMATION CONTACT** section. B. Where can I get a copy of this document and other related information? In addition to being available in the docket, an electronic copy of this proposal will also be available on the World Wide Web. Following signature by the EPA Administrator, a copy of this action will be posted on the transport rule Web site http://www.epa.gov/airtransport . C. What should I consider as I prepare my comments for EPA?*** E.O. 12866 Review

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Page **8** of **81** 1. Submitting CBI . Do not submit this in formation to EPA through http://www.regulations.gov or e -mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD

–ROM that you mail to EPA, mark the outside of the disk or CD

–ROM as CBI and then identify electronically within the disk or CD
–ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claime d as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. Send or deliver information identified as CBI only to the following address: Roberto Morales, OAQPS Document Control Officer (C404

– 02), U.S. EPA, Research Triangle Park, NC 27711, Attention Docket ID No. EPA
–HQ
–OAR
– 2009

– 0491. 2. Tips for preparing your comments . When submitting comments, remember to: • Identify the rulemaking by docket number and other identifying information (subject heading, **Federal Register**  date and page number).*** E.O. 12866 Review

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Page **9** of **81** • Follow directions

— The agency may ask you t o respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or s ection number. • Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.
• Describe any assumptions and provide any technical information and/ or data that you used. • If you estimate potential costs or burdens, explain how you arrived at your e stimate in sufficient detail to allow for it to be reproduced. • Provide specific examples to illust rate your concerns, and suggest alternatives. • Explain your views as clearly as possible, avoiding the use of profanity or personal threats.
• Make sure to submit your comments by the comment period deadline identified. D . How is this Preamble Organized? I . General Information A. Does this action apply to me? B. Where can I get a copy of this document and other relate d information? C. What should I consider as I prepare my comments for EPA? D . How is the preamble organized?*** E.O. 12866 Review

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Page **10** of **81** II . Summary of Proposed Rule and Background III . Specific Revisions A. Budgets/New Unit S et - aside Revis ions B. Allowance Allocation Revisions to Units Covered by Existing Utility Consent Decrees C. Amend the Assurance Penalty P rovisions to Make Them E ffective S tarting in 2014 D. Correct Typographical Errors IV . Recordation of Transport Rule Allowances V . Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act (RFA) 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 Sign ificantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer Advancement Act*** E.O. 12866 Review

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Page **11** of **81** J. Executive Order 12898: Federal Actions t o Address Environmental Justice in Mino rity Populations and LowIncome Populations II . Summary of Proposed Rule and Background EPA has identified errors or potential errors in unit specific modeling assumptions that affect the proper calculation of Transport Rule state budgets in Florida, Louisiana, Michigan, Mississippi, Nebraska, New Jersey, New York, Texas , and Wisconsi n, as well as new unit set - asides in Arkansas and Texas . EPA is proposing to take the following distinct actions to revise individual state budgets and new-unit set asides: (1) revise Michigan’s annual NOX budget to account for an erroneously assumed selective catalytic reduction (SCR) emi ssion control device at one unit ; (2) revise Nebraska’s annual NOX budget to account for an erroneously assumed SCR emission control device at one unit ; (3) revise the Texas SO 2 budget to account for erroneously assumed flue gas desulphurization (FGD, or scrubber) emission control devices at three units and revised assumptions regarding flue gas treatment in existing scrubbers at seven units ; ( 4 ) revise the Arkansas ozone - season new unit set - aside to account for erroneously omitted projected emi ssions from one new unit; ( 5 ) revise*** E.O. 12866 Review

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Page **12** of **81** the Texas new unit set - aside to account for erroneously omitted projected emissions for SO 2 , ozone - season NOX , and annual NOX ; ( 6 ) revise New Jersey ’s ozone season NOX , annual NOX , and annual SO 2 budgets to account for an erroneously assumed scrubber and selective catalytic reduction (SCR) emission control devices at one unit , and taking into account operational constraints likely to necessitate non economic generation at six facilities in 2012 ; ( 7 ) revise Wiscon sin’s annual SO 2 and annual NOX budget s to a c count for erroneously assumed FGD and SCR device s at two unit s ; ( 8 ) revise New York’s annual SO 2 , annual NOX , and ozone season NOX budgets taking into account operational constraints likely to necessi tate non - economic generation at ten units ; ( 9 ) revise Louisiana’s ozone season NOX budget taking into account operational constraints likely to necessitate non economic generation at twelve units ; (1 0 ) revise Mississippi’s ozone season NOX budget taking into account operational constraints likely to necessitate non - economic generation at four units ; (1 1 ) revise the Texas annual NOX and ozone season NOX budgets taking into account operational constraints likely to necess itate non - economic generation at seven units ; and (12) revise Florida’s ozone - season NOX budget taking into account the unavailability of a*** E.O. 12866 Review

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Page **13** of **81** previously operating nuclear unit . S ee section III .A of this preamble for further explanation of these revi sions. These proposed revisions to state budgets also entail revisions to the affected states' assurance levels, as the variability limits for each state are calculated as a percentage of the applicable budget . See the final Transport Rule, 76 FR 48208, 48267 - 68, August 8, 2011 ( explaining variability limit derivation ) . The purpose of these revisions is to establish state budgets and new unit set - asides that are consistent with the proper application of methodologies established in the final Transport Rule. The resulting budget s maintain significant emission reductions from historic levels and are consistent with the final Transport Rule’s methodology for defining significant contribution and interference with maintenance . The changes represent the proper application of the methodology established in the final Transport Rule. No changes to that methodology are being proposed , and EPA is not reopening the methodology established in the final Transport Rule for public comment. EPA is also not proposing any change to the levels of stringency (i.e., cost per ton) selected in the final Transport Rule’s determination of significant contribution and interference*** E.O. 12866 Review

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Page **14** of **81** with maintenance and is not reopening that issue for public comment. S ee “ Significant Contributi on Assessment TS D ” in the docket for this rulemaking for a demonstration of how the revisions in this rulemaking represent the proper application of and are consistent with the methodology developed in the final Transport Rule . It is EPA ’s intent, in condu cting this rulemaking, to make the revisions in this proposal as well as to conduct a clearly defined, time - limited process by which any similarly justified revisions to the final Transport Rule state budgets are identified and effectuated in a time ly and expeditious manner. . To that end, EPA is seeking that all relevant information that may support similar revisions be submitted in full by the comment deadline on this rulemaking, such that the Agency may consider whether a subsequent and timely rulemaking should address any further revisions to the final Transport Rule state budgets. EPA believes that the likelihood of additional substantive revisions merited to the Transport Rule state budgets is limited, considering that EPA has already conducted several notice - and- comment processes through initial proposal of the Transport Rule and multiple notices of data availability (NODAs) to prompt the public to provide the*** E.O. 12866 Review

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Page **15** of **81** relevant input information that informs the calculation of the Transport Rule state budgets . Please see section III .A of this preamble for a more detailed description of the type of information EPA is requesting in comments on this rulemaking for this purpose. EPA is also proposing revisions to allowance allocations at certain units in six states that are affected by existing utility consent decrees. EPA has identified provisions in certain utility consent decrees which the Agency believes would restrict the use of Transport Rule allowances allocated to certain units and effectively make certain Transport Rule reduction requirements marginally more stringent than intended by making certain allowances intended for compliance purposes unavailable . When establishing the state budgets under the final Transport Rule, EPA successfully accounted for the emission reduction requirements of these consent decrees ; therefore, the Transport Rule state budgets sustain the environmental protection secured by those existing utility consent decrees . However, when dividing those state budgets into individual unit - level allowance allocations, EPA included allowance allocations to certain units that exceed those units’ allowable emissions under the terms of*** E.O. 12866 Review

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Page **16** of **81** the applicable consent decree . Under these conditions, the consent decree provisions of concern identified in this proposal would quantify those allowances in excess of allowable emissions at the unit in question and prevent them from being available for compliance use by any source under the Transport Rule programs . Because EPA has already secured the environmental improvements required by the consent decrees by incorporati ng their emission reductions into the Transport Rule state budgets, there is no environmental need to prevent the allowances from being used for compliance by sources subject to the Transport Rule aside from those sources whose emissions are restricted by the terms of the consent decrees to which they are subject . Therefore, EPA is proposing to revise Transport Rule unit - level allowance allocations to the specific units affected by these consent decrees to reflect the ir maximum all owable emissions , such that none of the allowances affected by the provisions of concern are unnecessarily removed from use for compliance by other units . While EPA intends to perform this revision to benefit program implementation, EPA does no t believe resolution of this issue is a necessary precondition for successful implementation of and compliance with the*** E.O. 12866 Review

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Page **17** of **81** Transport Rule programs in 2012, because as described in section IV of this preamble, notwithstanding these proposed revisions, EPA will still be able to distribute 99.7 percent of all existing unit allowances under the state budgets established in the final Transport Rule by that rule’s November 7 deadline . S ee section III .B of this preamble for further explanation of this revision. EPA is also proposing in this action to amend the assurance penalt y provisions of the Transport Rule to make them effective January 1, 2014 . This change takes account of the fact that the revisions described above are being proposed, and any information des cribed above concerning requested additional revisions may be submitted, close to the commencement of the Transport Rule programs. The proposed amendment to the assurance provisions is intended to promote the development of allowance market liquidity as these revisions are finalized, thereby smoothing the transition from the Clean Air Interstate Rule (CAIR) programs to the Transport Rule programs in 2012. S ee section III .C of this preamble for further explanation of this revision. EPA is also proposing to correct typographical errors in certain sections of rule text in part s 52 and 97 in the*** E.O. 12866 Review

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Page **18** of **81** final Transport Rule. S ee section III .D of this preamble for further explanation of these corrections. III . Specific Revisions A. Budget and New Unit Set -Aside Revi sions After the final Transport Rule was published, EPA identified discrepancies in certain data assumptions that substantially affected the calculation of a few states' budgets in the final rule. Therefore, EPA is proposing the following revis ions : (1) I ncre ase Michigan’s 2012 and 2014 annual NOX budget s in accordance with a revision to the final Transport Rule analysis that erroneously assumed that an SCR exist s at Monroe Unit 2 . EPA is proposing to revise Michigan’s 2012 and 2014 annual NOX budget s in accordance with a revision to the final Transport Rule analysis that erroneously assumed an SCR exist s at Monroe Unit 2. This SCR is planned, but is not expected to be online in 2012 or 2014. Therefore, EPA is proposing to adjust its 2012 and 2014 projections to reflect projected emissions without an SCR at this unit . This would result in a 5,228 ton increase in the state’s annual NOX budget . S ee “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for*** E.O. 12866 Review

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Page **19** of **81** a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level , new unit set - aside , and Indian country new unit set - aside, and “ Revisions to Unit Level Allocations under the FIP ” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. This revised assumption about Monroe Unit 2 would also affect the calculation of Michigan’s potential ozone - season NOX budget (as well as the state’s as surance level , new unit set - aside , Indian country new unit set - aside, and unit level allocations under the FIP) if that state is included in the Transport Rule ozone - season NOX program as previously proposed (76 FR 40662, July 11, 2011 ). EPA will address this issue, along with other public comments submitted on that rulemaking, when the Agency finalizes that rulemaking later this year. (2) I ncrease Nebraska’s 2012 and 2014 annual NOX budget s in accordance with a revision to the final Transport Rule ana lysis that erroneously assumed that an SCR exist s at Nebraska City Unit 1 . EPA is proposing to increas e Nebraska’s 2012 and 2014 annual NOX budget s in accordance with a revision to the*** E.O. 12866 Review

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Page **20** of **81** final Transport Rule analysis that erroneously assumed that an SCR exis t s at Nebraska City Unit 1. There is no SCR that is present, planned, or under construction at the unit. Therefore, EPA is proposing to adjust its baseline emission projection s for the state to reflect projected emissions without an SCR at this unit . Th is adjustment results in an increase of 3,599 tons to the state’s annual NOX budget. S ee “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as fo r the impacts this revision would have on the state’s assurance level, new unit set - aside, and Indian country new unit set - aside , and “ Revisions to Un it Level Allocations under the FIP ” in the docket to this rulemaking for a quantitative demonstration of the effect of this proposed revision on unit - level allocations under the FIP. (3) I ncrease the Texas 2012 and 2014 SO 2 budget s in accordance with a revision to the final Transport Rule analysis that erroneously assumed that scrubbers exist at W. A. Parish Unit 6, J.T. Deely Unit 1, and J.T. Deely Unit 2 , and that assumed full flue gas treatment in existing scrubbers at Martin Lake, Monticello , Sandow, W . A . Parish, and Oklaunion facilities .*** E.O. 12866 Review

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Page **21** of **81** EPA is proposing to address several revisions to the modeling assumptions affecting the calculation of the Texas SO 2 budget. In particular, EPA is proposing to increas e the Texas SO 2 budget in accordance wi th a revision to the final Transport Rule analysis that erroneously assumed f lue - gas desulfurization (FGD) technology is installed on J . T . Deely Units 1 and 2 and W . A . Parish Unit 6 by 2012 . At the time that EPA conducted its final Transport Rule analys is to determine state budgets, EPA had information showing that FGD retrofits for the se sources were originally planned or announced to be installed by 2012 1 , 2 . However, newer information shows that these FGDs are no longer scheduled to be installed in 20 12. Furthermore , as a Group 2 state, Texas is not subject to a cost threshold under the Transport Rule that is intended to incentivize the construction of new FGDs in addition to those that are already scheduled for installation. A number of facilities in Texas currently face limitations regarding the amount of flue gas that can be

1 Corporate Sustainability Report”, CPS Energy, 2010. P.57. Retrieved from http://www.cpsenergy.com/files/Sustainability_Report.pdf 2 Business Wire, (2006). NRG Announ ces Comprehensive Repowering Initiative [Press release]. Retrieved from http://phx.corporate
ir.net/phoenix.zhtml?c=121544&p=irol
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Page **22** of **81** treated in their existing FGD s . In the final Transport Rule analysis, EPA relied on the SO 2 removal efficiency that these facilities reported at their scrubbers to the Energy Information Administration (EIA). However, EPA has now determined that the facilities ’ reports only intended to address the removal efficiency for the portion of the flue gas treated in the scrubber . For this reason, that removal efficiency should not be applied to the total amount of sulfur combusted in the coal consumed (as some of the flue gas at these units must be vented without being treated in the scrubber as originally constructed). When the SO 2 removal rates are decreased to reflect the reporte d operational constraint of each affected scrubber’s flue gas treatment, the projected emission level for Texas , after all significant contribution identified in the final Transport Rule is addressed , correspondingly rises. Therefore, in accordance with the revised unit - level input assumptions regarding existing scrubbers and flue gas treatment at the Texas units described above, EPA is proposing to increas e the state’s 2012 and 2014 SO 2 budget s by 70,067 tons . S ee “Technical Revision s and Adjustments to S tate Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision , as*** E.O. 12866 Review

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Page **23** of **81** well as for the impacts this revision would have on the state’s assurance levels , new unit set - aside , and Indian country new unit set - aside . EPA acknowledges that one utility in Texas has provided limited contractual information addressing a physical constraint on the volume that the facility's rail connection can support in delivered sub -bituminous coal in 2012. EPA has included this information , in the docket for this rulemaking and is requesting additional information and comment on whether this information should support further revisions to the SO 2 state budget for Texas . ( 4 ) Increase Arkansas’ ozone - season NOX new unit se t aside in accordance with a revision to the final Transport Rule’s calculation of the new unit set - aside that erroneously omitted Plum Point Unit 1’s projected emissions . EPA is not proposing to adjust Arkansas’ ozone season NOX budget in this rulemaking. However, EPA is proposing to adjust the portion of that budget dedicated to the new unit set - aside account. In the final Transport Rule , EPA had determined a 2 percent new unit set - aside for ozone season NOX in the state. That value would be changed to 5 percent in this rulemaking. The revision is consistent with the*** E.O. 12866 Review

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Page **24** of **81** new unit set - aside methodology described in the final rule. The updated value simply reflects the revised classification of one unit to be treated as a new unit for purposes of unit - level allowance allocation . This unit , Plum Point Unit 1, commenced commercial operation on or after January 1, 2010 , and therefore should be considered a new unit under the final Transport Rule’s unit - level allocation methodology (76 FR 48290) ; however, the f inal Transport Rule erroneously omitted this unit’s projected emissions from the calculation of Arkansas’ ozone - season NOX new unit set - aside . I ncluding this unit’s projected emissions in the calculation would yield a revised new unit set - aside of 5 percent of the state’s budget instead of the previous 2 percent value . S ee the “ Technical Revision s and Adjustments to State Budgets TSD ” in the docket for this rulemaking for a quantitative demonstration of this proposed revision. This proposed revision to Ar kansas’ new unit set - aside would necessarily result in changes to allowance allocations to existing units. S ee “ Revisions to Unit Level Allocations under the FIP ” tables in the docket to this rulemaking for a quantitative demonstration of the*** E.O. 12866 Review

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Page **25** of **81** effect of th is revision on unit - level allocations under the FIP. ( 5 ) Increase Texas’ ozone - season NOX , annual NOX , and

SO 2 new unit set - asides in accordance with a revision to the final Transport Rule’s calculations of the new unit set - asides that erroneously omitted Oak Grove Unit 2 ’s projected emissions. EPA is also proposing a revision to the calculation of the new unit set - asides for ozone - season NOX , annual NOX , and SO 2 in Texas. The updated value s would simply reflect the revised classification of one unit to be treated as a new unit for purposes of unit - level allowance allocation . This unit , Oak Grove Unit 2, commenced commercial operation on or after January 1, 2010 , and therefore should be considered a new unit under the final Transport Rule’s unit - level allo cation methodology; however, the final Transport Rule erroneously omitted this unit’s projected emissions from the calculation of Texas’s ozone - season NOX , annual NOX , and SO 2 new unit set - asides . I ncluding this unit’s projected emissions in the calculati on would yield revised new unit set - asides of 4 percent of the state’s ozone - season NOX budget , 4 percent of the state’s annual NOX*** E.O. 12866 Review

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Page **26** of **81** budget , and 5 percent of the state’s SO 2 budget . S ee the

“ Technical Revision s and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision. ( 6 ) Increase New Jersey’s 2012 and 2014 ozone - season NOX , annual NOX , and SO 2 budgets in accordance with revision s to the final Transport Rule analysis that erroneously assumed that an SCR and scrubber exist at BL England Unit 1 and to reflect operational constraints likely to necessitate non - economic dispatch at six other facilities in 2012 . EPA is proposing to revise New Jersey ’s ozone - season NOX , annual NOX , and SO 2 budgets in accordance with revision s to assumed control technologies at BL England Unit 1 as well as operational constraints affecting units at six other fac ilities . The SCR and scrubber that had been planned to be installed at BL England Unit 1 , and which EPA assumed would be in place in 2012, are not actually required by a New Jersey administrative order
until December 2013 . Furthermore, the agreement limits operation of the unit to the ozone season . Therefore, EPA is proposing to adjust New Jersey’ s 2012 state budgets to*** E.O. 12866 Review

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Page **27** of **81** reflect projected emissions without an SCR or scrubber at this unit and its operation only during the ozone season . EPA is also proposing revisions to New Jersey’s state budgets based on information demonstrating that northern New Jersey is an out - of -merit - order dispatch area , meaning that units in that area are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local electricity demand with generation from outside the area. Conditions in this out - of -merit - order dispatch area are likely t o necessitate what would otherwise be non - economic generation at six New Jersey plants (Bergen, Edison, Essex, Kearny, Linden, and Seweren Generating Stations) in the immediate future . EPA did not consider these immediate - term conditions in its calculation of the New Jersey emission budgets in the final Transport Rule. EPA is proposing to adjust New Jersey’s emission budgets based on analysis of the frequency these units have recently been called to run for non - economic purposes , according to data provide d by the utility operating those units . For this proposal, EPA has calculated the net change in the state's 2012 and 2014 total emissions (that inform the state budgets) to account for increased generation (and*** E.O. 12866 Review

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Page **28** of **81** related emissions) from the specific units affected by the immediate - term non - economic constraints described above, as well as for a corresponding reduction in generation (and related emissions) at other units within the state, to maintain the electricity supply and demand equilibrium modeled in the final Transport Rule . EPA re - calculated the emissions from BL England Unit 1 and the six plants with non - economic generation to account for the input assumption changes described above. These calculations yield increa se s to the New Jersey 2012 state budget s for annual SO 2 of 2,09 6 tons, annual NOX of 420 tons, and ozone - season NOX of 592 tons ; and 2014 state budget increase s for annual NOX of 112 tons, and ozone season NOX of 195 tons . See “Techni cal Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level and new unit set aside , and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP.*** E.O. 12866 Review

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Page **29** of **81** ( 7 ) Increase Wisconsin’s 2014 SO 2 budget and 2012 and 2014 annual NOX budget in accordance with a revision to the final Transport Rule analysis that erroneously assumed that an FGD exists at Weston Unit 3 , wet FGDs ( instead of dry FGDs ) exist at Columbia Units 1 and 2, and a SCR exists at John P. Madgett Unit 1 . EPA is proposing to incre ase Wisconsin’s annual SO 2 budget by a total of 7,757 tons in accordance with revision s to the Weston Unit 3 and Columbia Units 1 and 2 FGD status in 2014. EPA had assumed that a scrubber would be available at Weston Unit 3 in 2014 in its ba se case modeling. There is no FGD expected to be online at the facility in 2014. The final Transport Rule did not assume an operating scrubber at Weston Unit 3 in 2012, but did assume the FGD would be in place and operating by 2014. Therefore, EPA is proposing to adjust Wisconsin's 2014 SO 2 budget to reflect the unit’s operation without an FGD in 2014. This would result in a 5,605 ton increase to Wisconsin’s 2014 annual SO 2 budget. EPA had also assumed that the two scrubbers being installed at Co lumbia Units 1 and 2 were wet scrubbers. Instead, dry scrubbers have been planned and approved at these units . In EPA’s modeling, the assumed removal rate*** E.O. 12866 Review

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Page **30** of **81** of a new wet scrubber is 96 percent and a new dry scrubber is 92 percent . Therefore, the 2014 mode led remedy emissions from these units would be twice their current amount , if the assumption of wet scrubber s was changed to dry scrubber s for the facility. To account for this adjustment, EPA is proposing to increase the Wisconsin 2014 SO 2 emission budge t by 2,152 tons. No change is needed for 2012 since EPA did not model any scrubber s operating at those units in that year. EPA is also proposing to increase Wisconsin’s annual NOX budget in 2012 and 2014 . EPA had assumed a SCR would be installed at John P. Madgett Unit 1 in 2012 in its budget determination and remedy modeling. There is no SCR expected to be online in 2012 or 2014 at the unit. Therefore, EPA is proposing to adjust Wisconsin’s annual NOX budget s to reflect the unit’s operation without a S CR. This would result in a 2,473 ton increase to the state’s annual NOX budget. The revised assumptions about John P. Madgett Unit 1 would also affect the calculation of Wisconsi n’s potential ozone - season NOX budget (as well as the state’s assurance level, new unit set - aside, Indian country new unit set aside, and unit - level allocations under the FIP) if that*** E.O. 12866 Review

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Page **31** of **81** state is included in the Transport Rule ozone - season NOX program as previously proposed (76 FR 40662, July 11, 2011 ). EPA will address this issue, along with other public comments submitted on that rulemaking, when the Agency finalizes that rulemaking later this year. See the “Technical Revisions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level , new unit set - aside , and Indian country new unit set - aside, and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitat ive demonstration of the effect of this revision on unit - level allocations under the FIP. ( 8 ) Increase New York’s 2012 and 2014 ozone - season NOX , annual NOX , and SO 2 budgets in accordance with a revision to the final Transport Rule analysis that did not re flect operational constraints likely to necessitate non - economic dispatch at certain units . EPA is proposing to increase the New York s tate ozone season NOX , annual NOX , and SO 2 budgets in accordance with revisions to the assumed operation of several specific units in 2012, to satisfy three specific immediate - term*** E.O. 12866 Review

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Page **32** of **81** operational constraints documented by the New York Independent System Operator (NYISO) . These three constraints are referred to here as the N- 1 - 1 Contingency , the Minimum Oil Burn Rule s , and out - of -merit - order dispatch conditions, which collectively affect the likely 2012 and 2014 operations of specific units in the New York City and Long Island areas . The N- 1 - 1 Contingency requires that certain units be available to deliver generation with advance notice of only 30 seconds at certain times during the year. These specific units require several hours to reach the necessary level of generation under these contingency circumstances; therefore, the contingency requirement frequently necessi tates their ongoing operation whether or not the contingency is actually triggered at any given time. Based on information published by NYISO, EPA identified Arthur Kill Generating Station, Ravenswood, and Astoria Generating Station as needing to maintain minimum generation levels at two units in each facility to meet the N- 1 - 1 Contingency constraint . The Minimum Oil Burn Rule s require that certain units be able to immediately burn oil in the event of a natural gas supply disruption to the New York City and Long Island*** E.O. 12866 Review

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Page **33** of **81** area infrastructure . Some units are incapable of immediately switching fuel , so they must burn a minimum amount of oil on an ongoing basis when operating to comply with this requirement . EPA determined that the Minimum Oil Burn Rule s would require residual fuel oil consumption at the Arthur Kill Generati ng Station, Ravenswood, Astoria Generating Station, and Northport facilities . Based on information published by the NYISO, EPA determined that these units would burn oil in 2012 and 2014 at the same proportion of total projected heat input as shown for the share of historic heat input reported as residual fuel oil at those facilities . Data presented in the NYISO 2010 Comprehensive Area Transmission Review Study and the NYISO Operating Study, Summer 2011 , demonstrate that Long Island is an out - of merit - order dispatch area, meaning that units in that area are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local electricity demand with generation from outside the area. Conditions in this out - of -merit - order dispatch area are likely to necessitate in the immediate future what would otherwise be non - economic generation at 3 units at the Northport facility .*** E.O. 12866 Review

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Page **34** of **81** For this proposal, EPA has calculated the net change in the state's total emissions (that inform the state budgets) to account for increased generation (and related emissions) from the specific units affected by the immediate - term non - economic constraints described above , as wel l as for a corresponding reduction in generation (and related emissions) at other units within the state, to maintain the electricity supply and demand equilibrium modeled in the final Transport Rule . These calculations yield increase s to the New York 201 2 and 2014 state budget s for annual SO 2 of 3,527 tons, annual NOX of 3,485 tons, and ozone - season NOX of 1,911 tons. See “Technical Revisions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision , as well as for the impacts this revision would have on the state’s assurance levels , new unit set aside , and Indian country new unit set - aside . ( 9 ) Increase Louisiana’s 2012 and 2014 ozone - season NOX budget s in accordance with a revision to the final Transport Rule analysis to reflect operational constraints likely to necessitate non - economic dispatch at twelve units .*** E.O. 12866 Review

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Page **35** of **81** EPA is proposing revisions to Louisiana’s 2012 and 2014 state ozone season NOX budget s based on information demonstrating that the West of the Atchafalaya Basin (WOTAB), Downstream of Gypsy (DSG), and Amite South regions of Louisiana are out - of -merit - order dispatch areas, meaning that units in those areas are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local electricity demand with generation from outside the area . Conditions in these out - of -merit - order dispatch areas are likely to necessitate what would otherwise be non - economic generation at five Louisiana plants (R.S. Nelson, Nine Mile Point, Michoud, Little Gypsy, and Waterford) in the immediate future. EPA did not consider these immediate - term conditions in its calculation of the Louisiana emission budget in the final Transport Rule. EPA is proposing to adjust Louisiana’s ozone season NOX emission budget based on analysis projecting the minimum frequency these units will have to run in the immediate term for non - economic purposes , according to data provided by the utility operating those units . For this proposal, EPA has calculated the net change in the state's total emissions (that inform the state*** E.O. 12866 Review

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Page **36** of **81** budgets) to account for increased generation (and related emissions) from the specific units affected by the immediate - term non - economic constraints described above, as well as for a corresponding reduction in generation (and related emissions) at other units within the state, to maintain the electricity supply and demand equilibrium modeled in the final Transport Rule . EPA re - calculated the emissions from the five plants with non - economic generation to account for the input assumption changes described above. These calculations yield increase s to Louisiana’s 2012 and 2014 state budget s for ozone - season NOX of 4, 231 tons . See “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance leve l , new unit set - aside , and Indian country new unit set - aside , and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. (1 0 ) Increase Missi ssippi’s 2012 and 2014 ozone - season NOX budget s in accordance with a revision to the final Transport Rule analysis to reflect operational*** E.O. 12866 Review

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Page **37** of **81** constraints likely to necessitate non - economic dispatch at certain units . EPA is proposing revisions to Mississippi’s state ozone season NOX budget based on information demonstrating that the Mississippi Region is an out - of -merit - order dispatch area, meaning that units in that area are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local electricity demand with generation from outside the area . Conditions in this out - of -merit - order dispatch area are likely to necessitate what would otherwise be non economic generation at three Mississipp i plants (Rex Brown, Gerald Andrus, and Baxter Wilson) in the immediate future. EPA did not consider these immediate - term conditions in its calculation of the Mississippi emission budget in the final Transport Rule. EPA is proposing to adjust Mississippi’s 2012 and 2014 ozone season NOX emission budget s based on analysis projecting the minimum frequency these units will have to run in the immediate - term for non - economic purposes , according to data provided by the utility operating those units . For this proposal, EPA has calculated the net change in the state's total emissions (that inform the state*** E.O. 12866 Review

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Page **38** of **81** budgets) to account for increased generation (and related emissions) from the specific units affected by the immediate - term non - economic constraints described above, as well as for a corresponding reduction in generation (and related emissions) at other units within the state, to maintain the electricity supply and demand equilibrium modeled in the final Transport Rule . EPA re - calcu lated the emissions from the three plants with non - economic generation to account for the input assumption changes described above. These calculations yield increase s to Mississippi’s 2012 and 2014 state budget s for ozone - season NOX of 2, 136 tons . See “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level , new unit set - aside, and Indian country new unit set - aside, and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. ( 1 1 ) Increase Texas’s 2012 and 2014 annual and ozone season NOX budget s in accordance with a revision to the final Transport Rule analysis to reflect operational*** E.O. 12866 Review

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Page **39** of **81** constraints likely to necessitate non - economic dispatch at certain units . EPA is proposing revisions to Texas ’s 2012 and 2014 state annual and ozone season NOX budget s based on information demonstrating that the West of the Atchafalaya Basin (WOTAB) and Western Regions are out - of -merit - order dispatch areas, meaning that units in those areas are frequently dispatched out of regional economic order as a result of short - run limitations on the ability to meet local electricity demand with generation from outside the area . Conditions in these out - of -merit - order dispatch areas are likely to necessitate what wou ld otherwise be non - economic generation at two Texas plants (Lewis Creek and Sabine) in the immediate future. EPA did not consider these immediate - term conditions in its calculation of the Texas emission budget s in the final Transport Rule. EPA is proposing to adjust Texas’s emission budgets based on analysis projecting the minimum frequency these units will have to run in the immediate - term for non - economic purposes , according to data provided by the utility operating those units . For this proposal, EPA has calculated the net change in the state's total emissions (that inform the state*** E.O. 12866 Review

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Page **40** of **81** budgets) to account for increased generation (and related emissions) from the specific units affected by the immediate - term non - economic constraints described above, as well as for a corresponding reduction in generation (and related emissions) at other units within the state, to maintain the electricity supply and demand equilibrium modeled in the final Transport Rule . EPA re - calculated the emissions from the two plants with non - economic generation to account for the input assumption changes described above. These calculations yield increase s to Texas’s 2012 and 2014 state budget s for annual NOX of 1, 375 tons and ozone - season NOX of 1, 375 tons . See “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level, new unit set - aside, and Indian country new unit set aside , and “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. (12 ) Increase Florida’s 2012 ozone - season NOX budget in accordance with a revision to the final Transport Rule*** E.O. 12866 Review

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Page **41** of **81** analysis to reflect the unavailability of Crystal River Unit 3 , a nuclear unit. EPA’s power sector analysis in the final Transport Rule that informed its calculation of Florida’s state ozone - season budget included generation from Crystal River Unit 3, a nuclear unit that has operated historically. However, utilities in Florida have notified EPA that this unit will be offline for repairs throughout 2012 and is expected to return to service in 2013. As such, EPA expects that the generation previously projected in the Transport Rule analysis from this unit in 2012 will necessarily have a different origin with different emission consequences that should be considered in the calculation of Florida’s ozone - season NOX state budget. EPA has calculated that this replacement generation would yield an increase of 81 9 tons of o zone - season NOX in 2012 and is proposing to increase Florida’s 2012 ozone - season NOX budget by 81 9 tons, accordingly. See “Technical Revis ions and Adjustments to State Budgets TSD” in the docket for this rulemaking for a quantitative demonstration of this proposed revision, as well as for the impacts this revision would have on the state’s assurance level , new unit set aside, and Indian country new unit set - aside, and*** E.O. 12866 Review

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Page **42** of **81** “Revisions to Unit Level Allocations under the FIP” in the docket for a quantitative demonstration of the effect of this revision on unit - level allocations under the FIP. EPA has also received and is making available in the public docket for this proposal additional unit - level information provided by Florida utilities addressing assumptions of each unit's ability to control ozone - season NOX . EPA requests comment on all aspects of the data in the docket, including whether the emission data provided in this information is a more accurate representation of achievable NOX emission rates in 2012, and whether using this data would be consistent with the methodology used in the Transport Rule. EPA specifically requests comment on whether this information could support a further revision to the state's ozone - season NOX budget, and if so , how such a revision should be calculated. See “Information Submitted by Florida Utilities” in the docket for this rulemaking. Further Explanation on Revisions and Request for Comments . All of the proposed revisions to state budgets and new unit set - asides described above would correspondingly affect unit - level allowance allocations in the states involved. Specifically, any changes to the*** E.O. 12866 Review

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Page **43** of **81** levels of new unit set - asides or state budgets would be carried through to unit - level allocations based on the final Transport Rule allocation methodology for existing units (including any amendments made to specific unit - level allocation s in this rulemaking , described below ). For example, if a state budget would increase, then the share of that increase going to existing units would be apportioned based on the final Transport Rule’s allocation methodology to existing units (aside from specific unit level allocation adjustments included in this proposal pertinent to utility consent decrees , discussed below in section III .B of this pre amble ) . Unit - level allocations to potential covered sources under the Transport Rule have been updated to reflect all of the proposed revisions described in this proposal and are set forth in the

“ Revisions to Unit Level Allocations under the FIP ” TSD in the docket for this rulemaking . EPA evaluated the likely air quality impacts of the revisions presented above u sing the air quality assessment tool, on a state -by- state and case -by- case basis, for the SO 2 budget increases for Texas, New Jersey, New York, and Wisconsin , and compared those estimates to the final Transport Rule air quality analysis . The results do not*** E.O. 12866 Review

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Page **44** of **81** change the conclusions that EPA made about the appropriateness of controlling upwind emissions at the cost - effective thresholds selected in the final Transport Rule to successfully quantify and eliminate significant contribution to nonattainment and interference with maintenance at downwind receptors . For more information, this evaluation can be found in the “ Significant Contribution Assessment Technical Support Document ” in the docket for this rulemaking . EPA also qualitatively assessed this proposal’s revisions to annual NOX and ozone - sea son NOX state budgets for 2014 . The annual NOX budget increases for Michigan, Nebraska, New Jersey, New York , Texas , and Wisconsin are 5,228, 3,599, 112 , 3,485 , 1,3 75 and 2,473 tons, respectively. EPA calculates that these revi sions represent increases of 1. 2 percent , 2.1 percent , 0.1 percent , 0. 8 percent, 0.1 percent , and 1.0 percent, respectively, of the total annual NOX emission inventories for those states in the final Transport Rule’s 2014 control s cenario analysis . See the “Significant Contribution Assessment TSD” in the docket for this rulemaking for more details. These increases are minimal compared to each state’s total NOX emissions.*** E.O. 12866 Review

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Page **45** of **81** The ozone - season NOX budget increases in 2014 for Louisiana, Mississippi, New Jersey, New York, and Texas are 4, 231 , 2, 136 , 195 , 1,911, and 1, 375 tons, respectively. EPA calculates that these revisions represent increases of 2. 2 percent , 2. 4 percent, 0. 2 percent , 1.0 percent , and 0. 2 percent, respectively, of the total ozone - season NOX emission inventories for those states in the final Transport Rule’s 2014 control scenario analysis . See the “Significant Contribution Assessment TSD” in the docket for this rulemaking for more det ails. These increases are minimal compared to each state’s total ozone - season NOX emissions. EPA requests comment on the revised unit - level and utility- system operational information described above and on the corresponding proposed revisions in state budgets, variability limits, new unit set - asides, Indian country new unit set - asides, and unit - level allocations resulting from the application of such revised information using the methodologies set forth in the final Transport Rule for developing state budgets, variability limits, new unit set asides, Indian country new unit set - asides, and unit - level allocations. EPA is not request ing comment on those methodologies set forth in the final Transport Rule. For*** E.O. 12866 Review

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Page **46** of **81** example, EPA is not seeking comment on the methodology by which existing unit allocations are determined with regard to any given Transport Rule state budget . Moreover, E PA recognizes that parties may be aware of other immediate - term unit - specific operational constraints not accounted for in the fina l Transport Rule whose inclusion may warrant revisions in state budgets, with associated revisions to the state assurance levels and unit - level allocations for existing units. EPA has already provided several opportunities

– - through the proposed Transport Rule and subsequent notices of data availability

-- for the public, including stakeholders, to present unit level information demonstrating constraints on immediate term operations . However, EPA will accept

– - by the deadline for comment on this proposa l
– - submission of additional unit - level operational information that would have a material impact on the calculation of Transport Rule state budgets ( with associated impacts on corresponding assurance levels and unit - level allocations for existing units ) . For this purpose, EPA intends a “material impact” to reflect a corresponding recalculation of the relevant state budget that would be at least 1 percent different from that budget’s value as calculated in the final*** E.O. 12866 Review

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Page **47** of **81** Transport Rule (76 FR 48208, August 8, 2011) . EPA remains focused on successful implementation of the Transport Rule programs and does not believe that a change of less than 1 percent in a state’s budget would be a meaningful action to further this goal. As a result, EPA en courages commenters to consider whether or not revisions to a given unit ’s or group of units’ input assumptions would yield a material impact of at least a 1 percent difference in the calculation of the relevant state budget before submitting this informat ion to EPA for review. EPA is therefore accept ing for review information provided in comments on this rulemaking specifically addressing the following topics for specific electric generating units : (1) Post - combustion pollution control equipment (such as SCRs and FGDs) assumed in the final Transport Rule analyses to be present by 2012 at the unit in question; and/or (2) Immediate - term (i.e., binding on 2012) operational requirements necessitating non - economic generation at the unit in question, including data that demonstrate why the unit in question is required to generate in the immediate term for reasons other than the regional economic sale of*** E.O. 12866 Review

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Page **48** of **81** electricity , and how often during the ozone season and during the calendar yea r that such non - economic generation is necessitated from that unit . EPA will review information provided in comments addressing the topics described above and will determine if any of the information merits a subsequent proposal of revisions to the Transpo rt Rule programs beyond the actions presented in this proposal.

B. Allowance Allocation Revisions to Units Covered by Existing Utility Consent Decrees After the final Transport Rule was published, EPA determined that while the state budgets accurately incorporated the emission reduction requirements of existing utility consent decrees, the unit - level allowance allocations under the Transport Rule FIPs did not properly account for provisions in those consent decrees that effectively require the surrender , or restrict the trading, of “excess” Transport Rule allowances . As a result , Transport Rule allowance allocations to certain units may unintentionally reduce the availability of some of those allowances to other sources , given the restrictions on the*** E.O. 12866 Review

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Page **49** of **81** us e of those allowances by the initial recipient unit imposed by the applicable consent decree. In today’s action , EPA is proposing to add a constraint on Transport Rule unit - level allowance allocations designed to reflect the maximum allowable emissions at the units affected by existing utility consent decrees which contain annual tonnage limits and require the surrender or restrict trading of Transport Rule allowances allocated in excess of annual tonnage limits . S ee “Assessment of Impact of Consent Decree Annual Tonnage Limits on Transport Rule Allocations TSD ” in the docket for this rulemaking for information on the consent decrees covered by the proposed addition of the new constraint for purposes of determining unit - level allocations . The addition of th is constraint would align unit level allocations for units described in several existing federally- enforceable consent decrees with the annual tonnage limits in those decrees . This constraint would prevent heat input -based allocations from exceeding the terms of federally- enforceable consent decree s that contain annual tonnage limits for SO 2 and/or NOX . Because existing consent decrees that establish annual tonnage limits for SO 2 and/or NOX do so at the system or facility level, EPA*** E.O. 12866 Review

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Page **50** of **81** calculated unit - level annual tonnage limit equivalents (unit - level caps) for purposes of allocating allowances to individual units. EPA is not seeking comment on any elements of the allocation methodology finalized in the final Transport Rule (76 FR 482 88 - 90 ). Rather, EPA is seeking comment only on the addition of a unit - level consent decree constraint and unit - level cap apportionment methodology. The proposed additional constraint would affect unit level allocations in six states -- Alabama, Indiana, Kansas, Kentucky, Ohio , and Tennessee -- with units subject to existing federally- enforceable consent decree annual tonnage limits . These consent decree requirements have already been accounted for in the determination of budgets for these states. EPA is proposing to establish unit - level caps for 82 units covered by annual tonnage limits in federally- enforceable consent decrees in these six states. The addition of this constraint would not alter any state budget. This additional constraint also would have no impact on existing unit - level allocations in states that do not contain units covered by a federally- enforceable consent decree with annual tonnage limits.*** E.O. 12866 Review

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Page **51** of **81** EPA is proposing to revis e the Transport Rule unit level allocations for the specific units subject to these consent decrees, such that allowance allocations would be constrained by both historical emissions (as described in the final Transport Rule ( 76 FR 482 90)) and a unit - level cap derived from the annual tonnage limit in the federallyenforceable consent decree . Although these revisions would not alter the state budgets, they would have the effect of increasing the number of allowances within the budget that are available for use for compliance purposes and that would not otherwise be available without this propose d change to the allocation of allowances

– - such that the total number of allowances available would equal the state’s emission budget, as intended . These proposed revisions are thus intended to revise the application of the final Transport Rule’s unit - level allowance allocation methodology to enable the proper implementation of state budgets under the programs. While EPA intends to perform this revision to benefit program implementation, EPA does not believe resolution of this issue is a necessary precondition for successful implementation of and compliance with the Transport Rule programs in 2012, as notwithstanding these proposed revisions, EPA will still be*** E.O. 12866 Review

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Page **52** of **81** able to distribute 99.7 percent of all existing unit allowances under the state budgets establis hed in the final Transport Rule by that rule’s November 7 deadline . S ee section IV of this preamble for further information about allowance recordation . EPA calculated unit - level caps for each unit subject to an SO 2 and/or NOX annual tonnage limit contained in a federally- enforceable consent decree. A unit - level cap is an apportionment of the applicable system- or facility-wide consent decree annual tonnage limit. The apportionment of a system- or facility-wide consent decree annual tonnage limit to a unit level is solely for the purposes of Transport Rule allocations and does not modify , or create additional , consent decree requirements or limitations. EPA is not proposing to limit allocations to units covered by consent decrees that do not c ontain annual SO 2 and or NOX annual tonnage limits. The Agency determined that calculation of unit - level caps where annual tonnage limits do not exist would require the use of unit - level projections whose application in setting unit - level allocations would be difficult to support and that, in any event, adjustment of unit

—level allocations using such unit - level caps would not be necessary . Calculating a*** E.O. 12866 Review

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Page **53** of **81** unit - level cap from other consent decree directives would require projections about future utilizat ion and emissions performance of each unit involved , increasing the complexity and uncertainty of the approach. Further, EPA believes that there are few Transport Rule allowances that might be rendered unavailable for compliance by the consent decrees that contain trading restrictions or allowance surrender requirements but that do not contain annual tonnage limits . EPA is proposing to follow a two - step methodology to identify the specific unit - level allocation constraints that would be associated with this proposed additional constraint. First, EPA would determine if the annual tonnage limit in an existing federally- enforceable consent decree that is already reflected in a state budget is more restrictive than the unit - level all ocations under the Transport Rule by comparing the federally- enforceable consent decree annual tonnage limits for calendar year 2012 and thereafter to aggregate unit - level allocations (as determined using the approach finalized in the final Transport Rule ) for all units affected by the annual tonnage limit. If in 2012 or thereafter the collective unit - level allocations are greater than the federally-*** E.O. 12866 Review

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Page **54** of **81** enforceable consent decree annual tonnage limit, EPA would apply unit - level caps equal, in aggregate, to the federally- enforceable consent decree annual tonnage limit. I f a unit is shut down by a federally- enforceable consent decree or, in the case of SO 2 , repower s to natural gas or shut s down, the unit - level cap would be calculated as zero in any year following the required shut down or repower when the unit would otherwise receive allocations using the approach in the final Transport Rule ( 76 FR 48287 and 48289 - 90 ) . Second, EPA would calculate unit - level caps for 2012 and thereafter on Transport Rule allowan ces for each unit covered by a system- or facility-wide annual tonnage limit in a federally- enforceable consent decree that is more restrictive than current allocations for the units involved . To accomplish this, EPA would first calculate a ratio, express ed as a percentage, comparing the annual tonnage limit in the federally- enforceable consent decree to the aggregate allocations listed in the “ Final Transport Rule Unit Level Allocations under the FIP” ( http://www.epa.gov/crossstaterule/actions.html ) for units covered by the federally- enforceable consent decree annual tonnage limit to the annual tonnage limit. EPA would then*** E.O. 12866 Review

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Page **55** of **81** multiply this ratio by the unit - level allocation listed in the “Final Transport Rule Unit Level Allocations under the FIP” ( http://www.epa.gov/crossstaterule/actions.html ) for each unit involved . The allocations for a given year would be limited to this unit - level cap. As noted above, i n some situations the unit level cap for a 2012 or thereafter would be zero i f a federally- enforceable consent decree require s the shutdown or repowering of a unit . An example of how EPA would determine unit level caps follows: S tep 1

– EPA determines that facility ABC consists of two units subject to both a federally- enforceable consent decree annual tonnage limit and the Transport Rule NOX annual program . The consent decree systemwide annual tonnage limit is 3 , 000 tons in calendar year 2012. The NOX allowance heat input -based allocation (as described in the final Transport Rule ( 76 FR 482 88 - 90 )) for the two units in calendar year 2012 is 4 , 000 allowances to Unit 1 and 2 , 000 allowances to Unit 2

– a total of 6 , 000 allowances. Because the total of the allowances allocated to the two units is higher than the annual tonnage limit, EPA*** E.O. 12866 Review

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Page **56** of **81** needs to calculate unit - level caps for Unit 1 and Unit 2. Step 2a

– The consent decree system-wide annual tonnage limit of 3 , 000 tons is divided by the systemwide heat input -based allocations of 6 , 000 tons resulting in a ratio of 0.5, or 50 percent . Step 2b

– EPA calculates the unit - level cap for Unit 1 as 4 , 000 allowances x 50 percent , or 2 , 000 allowances, and for Unit 2 as 2 , 000 allowances x 50 per cent , or 1 , 000 allowances. EPA would apply this additional unit - level constraint when calculati ng existing unit - level allocations under the f inal Transport Rule FIPs . This additional unit level constraint would be applied in steps 9 and 10 of the methodology described in the preamble to the final Transport Rule (76 FR 48290) . This additional constraint would be applied in step 9 to limit allocations to existing units covered by consent decrees. This constraint would be applied in step 10 to ensure that any allowances that cannot be allocated to existing units (because all existing units are subject to either the constraint on maximum historical emissions or this additional constraint) would be directe d to the state’s new unit set aside. For*** E.O. 12866 Review

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Page **57** of **81** example, EPA has determined that , if this additional constraint is finalized as proposed, all the units in the state of Tennessee would be constrained by either historical emissions or a unit - level cap for the Tran sport Rule SO 2 Group 1 program in calendar years 2013, 2018, 2019 , and each year thereafter. As described above , the new unit set aside for the state of Tennessee would increase in 2013, 2018, 2019 , and each year thereafter , by 8 , 460, 3 , 173 and 5 , 225 tons respectively. EPA is not seeking comment on any aspects of the allocation methodology in the final Transport Rule ( 76 FR 48290) . EPA is only seeking comment on the addition of the constraint described above to steps 9 and 10 of that methodology . S ee “Assessment of Impact of Consent Decree Annual Tonnage Limits on Transport Rule Allocations TSD ” in the docket for this rulemaking for further information on the proposed addition of the new constraint for purposes of determining unit - level allocations . C. Amend the assurance penalty provisions to make them effective starting in 2014 EPA is also proposing in this action to amend the effective date of the Transport Rule assurance provisions to make them effective beginning on January 1, 2014.*** E.O. 12866 Review

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Page **58** of **81** During outreach discussions with various stakeholders, the application of assurance penalties at the outset of the program has been raised as a major concern for compliance and market development in the early years of the program. Several stakeholders have expressed concern that Transport Rule allowance market development may be delayed by uncertainty over how each state will transition from 2010 and 2011 emission levels to meet the projected Transport Rule assurance levels in 2012 and 2013. Under the assurance provis ions, a state’s emissions for any control period in a given year must not exceed the state assurance level, i.e., the state budget plus the state’s variability limit. In order to implement this requirement, EPA first determines whether, for the control pe riod, any state’s total emissions exceeded the state’s assurance level. If a state had emissions exceeding the state assurance level, then EPA applies additional criteria to determine which owners and operators of units in the state will be subject to the assurance penalty, which is a requirement to surrender additional allowances. In applying the additional criteria, EPA identifies which groups of units with a common designated representative (DR) in the state had emissions exceeding the respective*** E.O. 12866 Review

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Page **59** of **81** common DR’s share of the state assurance level , and calculates what percentage each such group’s emissions above the common DR’s share comprise of the state’s emissions above the state assurance level. The assurance penalty applied to the owners and operators of each of those groups of units is the surrender of an amount of allowances equal to the state’s emissions above the state assurance level multiplied by the group’s percentage and multiplied by two (in order to reflect the penalty of two allowances for ea ch ton of the state’s excess emissions). EPA implements the assurance penalty provisions through a series of notices of data availability that make available the necessary calculations and provide an opportunity for public objections to the calculations. The requirements that owners and operators comply with the assurance provisions, including where appropriate the assurance penalty, and the procedures followed by the Administrator are set forth in 40 CFR 97.406(c)(2) and 97.425 (for the TR NOX annual program), 97.506(c)(2) and 97.525 (for the TR NOX ozone season program), 97.606(c)(2) and 97.625 (for the TR SO 2 Group 1 program), and 97.706(c)(2) and 97.725 (for the TR SO 2 Group 2 program).*** E.O. 12866 Review

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Page **60** of **81** EPA proposes to determine that amending the assurance provisions t o take effect starting in 2014 is appropriate. EPA believes that a limited postponement of the effectiveness of these provisions is justified in order to smooth the transition from the existing CAIR programs to the new T ransport Rule programs. In line with the Court’s remand of CAIR, EPA designed the Transport Rule to achieve necessary emission reductions by relevant NAAQS attainment deadlines and to ensure that necessary reductions will be achieved within each covered state. As explained in the final T ransport Rule, EPA determined that it was appropriate for the Transport Rule programs to address emissions in 2012 and beyond in order to ensure that the deadlines in the rule were aligned, as legally required, with the downwind nonattainment deadlines ( 76 FR 48277 - 48279 ). CAIR remains in effect to address emission s through the end of the 2011 control periods, and the Transport Rule programs address emissions in 2012 and beyond. EPA took several steps in the final Transport Rule to ease the transition from the CAIR programs to the Transport Rule trading programs.*** E.O. 12866 Review

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Page **61** of **81** The Transport Rule maintain s programmatic elements that were successfully implemented and recognizable to sources from compliance experiences under CAIR while also addressing that rule’s legal s hortcomings identified by the Court. Under both CAIR and the Transport Rule, individual units have the flexibility to supplement their own emission reductions with the acquisition from the marketplace of any additional allowances needed to cover emissions under the Transport Rule programs. Robust markets (e.g., markets with a high level of liquidity and accessibility of price information ) for the CAIR annual NOX , CAIR ozone - season NOX , and Acid Rain (SO 2 ) program allowances have been in existence for many years. Sources covered by CAIR have relied on the availability of these robust markets when developing compliance plans. The Transport Rule (TR) creates new TR SO 2 Group 1 , TR SO 2 Group 2 , TR NOX , and TR ozone - season NOX allowances. Markets for these a llowances are developing now , and EPA is beginning to record the allowances in allowance accounts and introduce the allowances into the marketplace over a year before the Transport Rule programs’ first compliance deadlines (December 1, 2012 , for the 2012 o zone - season NOX program , and March 1, 2013 , for the 2012 annual NOX and SO 2*** E.O. 12866 Review

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Page **62** of **81** programs). However, with the allocation revisions proposed in this rulemaking and the potential for additional revisions based on additional information that might be submitted in response to this rulemaking, some allowances would be recorded and introduced into the marketplace at later dates. Based on observed compliance planning behavior among sources anticipating the 2012 control periods, and in light of the proposed revisions in this rulemaking and the potential for additional revisions based on additional information , EPA believes that amending the effective date of the assurance provisions to apply in 2014 would ease the transition from CAIR to Transport Rule compliance for parties across the board by promoting the liquidity of , and accessibility of price information in, new Transport Rule allowance markets and instilling confidence that utilities can flexibly comply through a variety of unit - level operational strategies that are not limited by initial Transport Rule unit - level allowance allocations. EPA believes that this change would accelerate the development of robust Transport Rule allowance markets and facilitate a smooth transition to the Transport Rule programs. If , in response to concerns about when robus t*** E.O. 12866 Review

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Page **63** of **81** markets will develop , utilities were to artificially constrain 2012 operational plans to not exceed initially allocated allowances, the volume of early trading activity might be unnecessarily limited. Early trading activity is important for demonstrating market liquidity and assisting in price discovery to inform compliance planning by affected sources. Actions by utilities to limit early trading activity , therefore , could have negative impacts not only on those utilities, but on all participants in the Transport Rule trading programs. EPA believes that amending the effectiveness of the assurance provisions in 2012 and 2013 would encourage greater confidence among utilities for engaging immediately in cost - effective compliance planning that takes into account the flexibility of a robust market for acquiring allowances to cover emissions to the extent use of allowances is the most economic approach for compliance under the Transport Rule programs. Amending the assu rance provisions would not affect, in any way, the requirements of the rule in 2014 and beyond. EPA is proposing only a short postponement of the assurance penalty provision s to ensure a smooth transition from CAIR to the Transport Rule programs. EPA bel ieves that ,*** E.O. 12866 Review

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Page **64** of **81** notwithstanding postponement of the assurance penalty provisions, the states covered by the Transport Rule programs will sti ll achieve the emission reductions in 2012 and 2013 necessary to eliminate each state’s significant contribution to nonattainment and interference with maintenance identified in the final Transport Rule (with the revisions included in this proposal). The highly detailed state - specific bas e s on which individual state budgets were determined using the approach and methodologies developed in the final Transport Rule, and included in the record for the Transport Rule, together with the derivation of the variability limits from historic data reflecting state - level year - to - year variation in power sector emissions , support EPA’s belief . EPA noted in the Transport Rule proposal that “ [t] he locations of existing and planned air pollution control retrofits on EGUs are known, and this knowledge provides greater certainty of where [near - term] reductions will occur and how these reducti ons should impact air quality in downwind areas ... Consequently, EPA believes that there is a high level of certainty that emissions reductions projected for 2012

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Page **65** of **81** assurance provisions during 2012

– 2013 unnecessary” ( 75 FR 45314 - 45315 ). In the final Transport Rule, EPA did not disavow the proposal’s rationale for starting the assurance provisions in 2014; however, the Agency chose to ma ke the assurance provisions effective starting in 2012 with the intent to err on the side of providing “ even further assurance ” of securing the targeted emission reductions in upwind states (76 FR 48296) . EPA, therefore, has never concluded that starting the assurance provisions in 2014 would fail to meet the 110(a)(2)(D) obligation to eliminate significant contribution or interference with maintenance in 2012 and 2013 . Moreover, this proposal’s revisions to pollution control technology assumptions invo lve only 1 7 units of the approximately 3,600 units whose known controls inform the Transport Rule budgets. EPA continues to believe that, because the immediate - term Transport Rule state budgets for 2012 and 2013 (in contrast with the budgets for 2014 and thereafter) are uniquely based on the ability of the known existing fleet of EGUs and known existing or soon - to -be installed pollution control equipment to deliver emission reductions in specific upwind states , there is a high level of certainty that the state assurance levels will not be*** E.O. 12866 Review

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Page **66** of **81** exceeded in 2012 and 2013 . EPA believes that this near term certainty allows the Agency to postpone the effectiveness of the Transport Rule’s assurance penalty provisions until 2014 without sacrificing the Transport Ru le’s ability to ensure necessary near - term emission reductions in each upwind state , supported by the calculation of each upwind state’s emission reduction potential (informing the determination of state budgets) under the rule. With the proposed , temporary postponement of the assurance provisions , EPA believes that, in the near term (as well as in the long term), Transport Rule allowance markets would provide compliance flexibility at the unit level and incentivize cost - effective , unit - level emission reductions . In the aggregate , these flexibilities and reductions at the unit level would result in achievement in each state of the state - level cost - effective emission reductions projected in the final Transport Rule (with the revisions included in this p roposal). In other words, EPA is only proposing to postpone temporarily the assurance penalty provisions to address the ability of owners and operators of individual units to make the cost - effective emission reductions in 2012 and 2013 on which EPA’s stat e -*** E.O. 12866 Review

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Page **67** of **81** level emission projections relied in determining each state’s amount of significant contribution and interference with maintenance under the final Transport Rule. Consequently , EPA believes that this propos al to postpone temporarily the assurance provis ions will not yield substantially different state - level emission outcomes under the Transport Rule programs in 2012 or 2013 than the state level emissions reflected in the state - specific budgets and assurance levels in the respective Transport Rule program . EPA believes that a two year postponement of the effective date of the assurance penalty provisions is sufficient to guarantee robust market development, is consistent with the D.C. Circuit's decision leaving CAIR in place during the transition to a new rule, and will not interfere with the air quality objectives of the program. EPA does not, at this time, believe a longer postponement would be justified. EPA requests comment on all aspects of this proposal including the length of the postponement. Since under th is proposal , the assurance provisions would continue to be effective for 2014 and thereafter, EPA maintains that the Transport Rule, revised consistent with this proposal, would continue to address and meet the Court’s concerns in North Carolina .*** E.O. 12866 Review

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Page **68** of **81** Any revisions to state budgets from this proposal that are finalized would also include corresponding revisions to the relevant assurance levels that would apply in 2014 with this proposed postponement. D . Correct Typographical Errors EPA is proposing to corre ct typographical errors in certain sections of rule text in part s 52 and 97 in the final Transport Rule. Specifically, EPA proposes to change an errone ous reference in 40 CFR 52.39(i)( 1)(ii) to “TR SO 2 Group 1 allowances” to refer instead to “TR SO 2 Group 2 allowances” and to redesignate section s 52.745 and 52.746 in 40 CFR part 52, subpart O as sections 52.731 and 52.732 and redesignate section 52.2241 in 40 CFR part 52, subpart VV as section 52.2441. EPA also proposes to remove some redundant words in 4 0 CFR 97.406(e)(2), 97.606(e)(2), and 97.706(E)(2). EPA requests comment concerning only the specific corrections and not concerning any other aspect of the provisions in which these corrections would be made.
IV . Recordation of Transport Rule Allowances Impacts on Allocations to Existing Units EPA recognizes that successful implementation of the Transport Rule programs in 2012 depends in part on the development of robust allowance markets, in which covered*** E.O. 12866 Review

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Page **69** of **81** sources can locate and purchase any addit ional allowances necessary to comply with the rule. As such, EPA intends to allocate as many 2012 Transport Rule allowances as possible as early as possible to assist implementation and compliance planning. While none of the actions presented in this proposal would reduce any state’s total number of allowances issued under that state’s budgets , some of the actions presented in this proposal would slightly alter unit level allocations. For example, as described above , allocations to certain units covered by consent decrees would be limited. EPA does not believe it would be prudent or reasonable to record in allowance accounts , before taking final action on this proposal, allowance allocations in excess of the amount any given unit would receive if this proposal is finalized as proposed. EPA proposes to record by November 7, 2011 for each unit, the lesser of the amount that unit would receive under the allocation scheme finalized in the Transport Rule or the amount the unit would receive if this proposal i s finalized as proposed. This approach would allow EPA to allocate over 99.7 percent of all existing unit allowances under the state budgets established in the final Transport Rule by that rule’s November 7 deadline (76 FR 48398, 48424, 48450, and 48475 ,*** E.O. 12866 Review

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Page **70** of **81** August 8, 2011) . EPA is proposing to allocate the remaining 0.3 percent of the allowances no later than 7 days after finalization of this action is legally effective . In addition, i f EPA finalizes the proposed actions that yield increases to state budgets, the Agency will act swiftly to record these additional allowances and thereby put them into the marketplace as quickly as possible following this rule’ s finalization, so that the allowances would be available significantly in advance of the compliance deadlines for the 2012 control periods (i.e., the allowance transfer deadlines of December 1, 2012 (for the NOX ozone season program ) and March 1, 2013 (for the NOX and SO 2 annual programs) ) . See the “Transport Rule Allowance Recordation Schedule TSD” i n the docket for this rulemaking for a demonstration of how many allowances EPA will record by November 7, 2011 in each state.

V . Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is a "significant regulatory action.” Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive*** E.O. 12866 Review

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Page **71** of **81** Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any changes made in response to OMB recommendations have been documented in the docket for this action. B. Pape rwork Reduction Act This action does not impose any new information collection burden. This action makes relatively minor revisions to the emission budgets and allowance allocations or allowance allocations only in certain states in the final Transport Rul e and corrects minor technical errors which are ministerial . However, the Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the final Transport Rule under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2060 - 0667 . The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9. 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 economi c impact on a*** E.O. 12866 Review

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Page **72** of **81** 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 rule 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 action on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. The small entities directly regulated by this action are electric power generators whose ultimate parent entity has a total electric output of 4 million megawatt -hours (MWh) or less in the previous fiscal year. We have determined that the changes considered in this proposed rulemaking pose no additional burden for small entities. The proposed revision to the*** E.O. 12866 Review

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Page **73** of **81** new unit set - aside s in Arkansas and Texas would yield an ext remely small change in unit - level allowance allocations to existing units, including small entities, such that it would not affect the analysis conducted on small entity impacts under the finalized Transport Rule . In all other states, the revisions propos ed in this rulemaking would yield additional allowance allocations to all units, including small entities, without increasing program stringency, such that it is not possible for the impact to small entities to be any larger than that already considered and reviewed in the finalized Transport Rule. D. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531 - 1538, requires Federal agencies, unless otherwise prohibited by law, to assess the effects of their regu latory actions on State, local, and tribal governments and the private sector. Federal agencies must also develop a plan to provide notice to small governments that might be significantly or uniquely affected by any regulatory requirements. The plan must enable officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates and must*** E.O. 12866 Review

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Page **74** of **81** inform, educate, and advise small governments on compliance with the regulatory requirements. This action does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. This action is increasing the budgets and increasing the total number of allowances or maintaining the same budget but revising unit - level allocations in several other states in the Transport Rule. Thus, this rule is not subject to the requirements of sections 202 or 205 of UMRA. In developing the final Transport Rule, EPA consulted with small governments pursuant to a plan established under section 203 of UMRA to address impacts of regulatory requirements in the rule that might significantly or uniquely affect small governments. 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 regu latory policies that have federalism implications.” “Policies that have federalism implications” is defined in*** E.O. 12866 Review

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Page **75** of **81** 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.” This action does not have federalism implications. It will 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. This action makes relatively minor revisions to the emissions budgets and allowance allocations or allowance allocations only in certain states in the final Transport Rule. Thus, Executive Order 13132 does not apply to this rule. EPA did provide information to state and local officials during development of both the proposed and final T ransport Rule. F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). This action makes relatively mino r revisions to the emissions budgets and allowance allocations in several*** E.O. 12866 Review

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Page **76** of **81** states in the final Transport Rule and helps ease the transition from CAIR. Indian country new unit set - asides will increase slightly or remain unchanged in the states affected by th is action. Thus, Executive Order 13175 does not apply to this action. EPA consulted with tribal officials during the process of promulgating the final Transport Rule to permit them to have meaningful and timely input into its development. G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks This action is not subject to EO 13045 (62 FR 19885, April 23, 1997) because it is not economically significant as defined in EO 12866, and because the Agency does not believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. Analyses by EPA that show how the emission reductions from the strategies in the final Transport Rule will further improve air quality and children ’s health can be found in the final Transport Rule RIA. H. Executive Order 13211: Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use*** E.O. 12866 Review

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Page **77** of **81** This action is not subject to Executive Order 13211 (66 FR 28355 (May 22, 2001) ), because it is not a significant regulatory action under Executive Order 12866. EPA believes that there is no meaningful impact to the energy supply beyond that which is reported for the Transport Rule program in the final Transport Rule. I. National Technology Transfer and Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law No. 104 - 113, 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. NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. As described in section XII.I of the preamble to the final Transport Rule, the Transport Rule program require s all sources to meet the applicable monitoring requirements of 40 CFR part 75. Part 75 already incorporates a number of*** E.O. 12866 Review

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Page **78** of **81** voluntary consensus standards. This action , however, does not involve technica l standards. Therefore, EPA did not consider the use of any voluntary consensus standards. J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and LowIncome Populations Executive Order (EO) 12898 (59 FR 76 29 (Feb. 16, 1994)) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low- income populations in the United States. EPA has determined that this action will not have disproportionately high and adverse human health or environmental effects on minority or low- income populations because it does not affect the level of protection provided to human health or the environment. EPA believes that the vast majo rity of communities and individuals in areas covered by the Transport Rule program inclusive of this*** E.O. 12866 Review

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Page **79** of **81** action , including numerous low- income, minority, and tribal individuals and communities in both rural areas and inner cities in the eastern and central U.S ., will see significant improvements in air quality and resulting improvements in health. EPA’s assessment of the effects of the final Transport Rule program on these communities is detailed in section XII.J of the preamble to the final Transport Rule.

Li st of Subjects **40 CFR Part 52** Administrative practice and procedure, Air pollution control, Incorporation by reference, Intergovernmental relations, Nitrogen oxides, Ozone, Particulate matter, Regional haze, Reporting and recordkeeping requirements, Sulfur dioxide.
**40 CFR Pa r** **t 97** Administrative practice and procedure, Air pollution control, Electric utilities, Nitrogen oxides, Reporting and recordkeeping requirements, Sulfur dioxide.*** E.O. 12866 Review

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Page **80** of **81 Revisions to Federal Implementation Plans to Reduce**  **Interstate Transpor t of Fine Particulate Matter and Ozone**  (page 83 of 84 )

Dated: ____________________

______________________________________________________ **Lisa P. Jackson** Administrator . For the reasons set forth in the preamble, part s 52 and 97 of chapter I of t itle 40 of the Code of Federal Regulations are proposed to be amended as follows: PART 52

— [AMENDED] 1 . The authority citation for Part 52 continues to read as follows: Authority: 42 U.S.C. 7401, et seq. **Subpart A --** **General Provisions** 2 . Section 52.39 is amended by revising paragraph*** E.O. 12866 Review

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Page **81** of **81** (i)(1)(ii) by removing the words "Group 1" and adding, in their place, the words "Group 2". **Subpart O --**  **Illinois** 3 . Section 52.745 is redesignated as § 52.731. 4 . Section 52.746 is redesignated as § 52.732. **Subpart VV --** **Virginia** 5 . Section 52.2241 is redesignated as § 52.2441.
PART 97

— [AMENDED] 6 . The authority citation for Part 97 continues to read as follows: Authority: 42 U.S.C. 7401, 7403, 7410, 7426, 7601, and 7651, et seq.
7. Section 97.406 is amended by revising paragraph (e)(2) by removing the words “or or” and adding, in their place, the word “or”. 8. Section 97.606 is amended by revising paragraph (e)(2) by removing the words “or or” and adding, in their place, the word “or”. 9. Section 97.706 is amended by revising paragraph (e)(2) by removing the words “or or” and adding, in their place, the word “or”.