6560-50-P

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[FRL - ]

Proposed Revisions to Regional Haze Rule to Incorporate

Sulfur Dioxide Milestones and Backstop Emissions Trading

Program for Nine Western States and Eligible Indian Tribes

Within that Geographic Area

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

SUMMARY: The purpose of this proposal is to request comment

on revisions to 40 CFR 51.309 of the EPA’s regional haze

rule to incorporate certain provisions for Western States

and eligible Indian Tribes. 

The Western Regional Air Partnership (WRAP) submitted

an Annex to the 1996 report of the Grand Canyon Visibility

Transport Commission (GCVTC) to EPA on September 29, 2000. 

This submittal was required under 40 CFR 51.309 of the

regional haze rule in order for nine Western States (and

Indian Tribes within the same geographic region) to have the

option of submitting plans implementing the GCVTC

recommendations. The Annex contains recommendations for

implementing the regional haze rule in the West, including a

set of recommended regional emissions milestones for 2003-
2

2018 sulfur dioxide (SO2), a key precursor to the formation

of fine particles and regional haze.

In this proposal, EPA proposes to approve the

provisions of the Annex submitted by the WRAP as meeting the

requirements of the regional haze rule and applicable

requirements under the Clean Air Act (CAA). In this

proposal, we include specific proposed changes to 40 CFR

51.309 of the regional haze rule to incorporate

recommendations from the Annex.

DATES: Comments: We are requesting written comments by

[Insert date 60 days from date of publication of this

proposed rule]. The EPA intends to hold a public hearing on

this proposed rule in Phoenix, Arizona on June 4, 2002.

Public Hearings. The public hearing will be held on June 4,

2002 at 2:00 p.m, rooms 1709 and 1710, Arizona Department of

Environmental Quality, 3033 North Central, Phoenix, Arizona,

located on the South Mall. If you wish to attend the

public hearing or wish to present oral testimony, please

send notification no later than one week prior to the date

of the public hearing to Ms. Marty Robin, Air Division (AIR1), U.S. EPA Region 9, 75 Hawthorne Street, San Francisco,

CA 94105, telephone (415) 947-4143, email

robin.marty@epa.gov.
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Oral testimony will be limited to 5 minutes each. The

hearing will be strictly 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. Written statements (duplicate

copies preferred) should be submitted to docket number A2000-51 at the address listed above for submitting comments. 

The hearing schedule, including lists of speakers, will be

posted on EPA’s webpage at

http://www.epa.gov/air/visibility/whatsnew.html. 

A verbatim transcript of the hearings and written statements

will be made available for copying during normal working

hours at the Air and Radiation Docket and Information Center

at the address listed above. 

Addresses: Comments: You should submit comments on today’s

proposal and the materials referenced herein (in duplicate

if possible) to the Air and Radiation Docket and Information

Center (6102), Attention: Docket No. A-2000-51, U.S. EPA,

1200 Pennsylvania Avenue, NW, Washington, DC 20460. You may

also submit comments to EPA by electronic mail at the

following address: A-and-R-Docket@epamail.epa.gov. 

Electronic comments must be submitted as an ASCII file

avoiding the use of special characters and any form of

encryption. All comments and data in electronic form must
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be identified by the docket number [A-2000-51]. Electronic

comments on this proposed rule also may be filed online at

many Federal Depository Libraries.

Docket: Information related to this proposal is available

for inspection at the Air and Radiation Docket and

Information Center, docket number A-2000-51. The docket is

located at the U.S. EPA, 401 M Street, SW, Room M-1500,

Washington, DC 20460, telephone (202) 260-7548. The docket

is available for public inspection and copying between

8:00 a.m. and 5:30 p.m., Monday through Friday, excluding

legal holidays. A reasonable fee may be charged for

copying.

FOR FURTHER INFORMATION CONTACT: Tim Smith (telephone 919-

541-4718) , Mail Code C504-02 , EPA, Air Quality Strategies

and Standards Division, Research Triangle Park, North

Carolina, 27711, or Steve Frey (telephone 415-972-3990), EPA

Region 9 (AIR-5), 75 Hawthorne Street, San Francisco, CA

94105. Internet addresses: smith.tim@epa.gov and 

frey.steve@epa.gov. 

SUPPLEMENTARY INFORMATION: We are providing the public with

the opportunity to comment on EPA’s incorporation of SO2

milestones and a backstop emissions trading program for nine

Western states and eligible Indian Tribes within that

geographic area.
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TABLE OF CONTENTS

I. Overview of the Proposed Stationary Source SO2

Reduction Program

A. What is the Regional Haze Rule?

B. What are the Special Provisions for Western States and

Eligible Indian Tribes in 40 CFR 51.309 of the Regional

Haze Rule?

C. What was Required to be Included in the Annex to the

GCVTC Report?

D. What Topics are Covered in this Preamble?

E. What is the Next Step if the Regional Haze Rule is

Revised?

II. Proposed Program Details

A. What are the Proposed Regional SO2 Emission Milestones?

B. What Future Adjustments to the Milestones are Allowed

by the Proposed Rule?

C. What is the Annual Process for Determining Whether a

Trading Program is Triggered?

D. What Must Each Participating State and Tribe’s

Implementation Plan Include for Administering the

Trading Program, if it is Triggered?

E. What Additional Provisions Must the SIP or TIP Include

Regarding the Market Trading Program?

F. What Happens to the Program After the Year 2018?

III. Implementation of the Regional SO2 Emissions Reductions 

Program in Indian Country

A. Current Stationary Source SO2 Emissions in the Region

B. "Set-Aside" for Tribes in the Market Trading Program

C. Background on Provisions for Tribal Air Quality

Programs in the CAA and in EPA Regulations

D. Discussion of the TAR as it Relates to Tribal

Participation in the SO2 Reduction Program

E. Current Thinking on Tribal Program Assistance

IV. Administrative Requirements

A. Executive Order 12866: Regulatory Planning and Review

by the Office of Management and Budget

B. Regulatory Flexibility Act

C. Paperwork Reduction Act -- Impact on Reporting

Requirements

D. Unfunded Mandates Reform Act

E. Executive Order 12898: Environmental Justice 

F. Executive Order 13045: Protection of Children from

Environmental Health Risks and Safety Risks 
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G. Executive Order 13132: Federalism

H. Executive Order 13175: Consultation and Coordination

with Indian Tribal Governments

I. National Technology Transfer and Advancement Act

J. Executive Order 13211: Actions Concerning Regulations

That Significantly Affect Energy Supply, Distribution,

or Use

I. Overview of the Proposed Stationary Source SO2

Reduction Program

The purpose of this rulemaking is to propose revisions

to 40 CFR 51.309 of the regional haze rule to incorporate

additional provisions to address visibility impairment in

the 16 Class I areas on the Colorado Plateau. 

A. What is the Regional Haze Rule?

The CAA, in section 169A establishes a national goal

for protecting visibility in 156 scenic areas. These 156

"Class I" areas are federally protected areas and include

national parks and wilderness areas. The national

visibility goal is to remedy existing impairment and prevent

future impairment in these Class I areas, consistent with

the requirements of sections 169A and 169B of the CAA.

Regional haze is a type of visibility impairment caused

by air pollutant emissions from a broad region. The EPA

uses the term regional haze to distinguish these types of

visibility problems for those which are more local in

nature. In 1999, EPA issued a regional haze rule requiring

States to develop implementation plans designed to make
7

1

Recommendations for Improving Western Vistas. Grand Canyon

Visibility Transport Commission, June 10, 1996.

“reasonable progress” toward the national visibility goal. 

The first State plans for regional haze are due between 2003

and 2008, (64 FR 35714, July 1, 1999). The regional haze

rule provisions appear at 40 CFR 51.308 and 40 CFR 51.309. 

B. What are the Special Provisions for Western States and

Eligible Indian Tribes in 40 CFR 51.309 of the Regional Haze

Rule?

The regional haze rule at 40 CFR 51.308 sets forth the

requirements for State implementation plans (SIPs)under the

regional haze program. The rule requires State plans to

include visibility progress goals for each Class I area, as

well as emissions reductions strategies and other measures

needed to meet these goals. The rule also provides an

optional approach, described in 40 CFR 51.309, that may be

followed by the nine Western States (Arizona, California,

Colorado, Idaho, Nevada, New Mexico, Oregon, Utah, and

Wyoming) that comprise the transport region analyzed by the

GCVTC during the 1990's. This optional approach is also

available to eligible Indian Tribes within this geographic

region. The regulatory provisions at 40 CFR 51.309 are

based on the final report issued by the GCVTC in 1996,1

which included a number of recommended emissions reductions
8

strategies designed to improve visibility at the 16 Class I

areas on the Colorado Plateau. 

In developing the regional haze rule, EPA received a

number of comments on the proposed rule encouraging the

Agency to recognize explicitly the work of the GCVTC. In

addition, in June 1998, Governor Leavitt of Utah provided

comments to EPA on behalf of the Western Governors

Association (WGA), further emphasizing the commitment of

Western States to implementing the GCVTC recommendations. 

The WGA comments also suggested the translation of the GCVTC

recommendations into a separate section of the rule. The

EPA issued a Notice of Availability during the fall of 1998

requesting further comment on the WGA proposal and a draft

translation into regulatory language. Based on the comments

received on this Federal Register notice, EPA developed the

provisions set forth in 40 CFR 51.309 that allow the nine

Transport Region States and eligible Tribes within that 

geographic area to implement many of the GCVTC

recommendations within the framework of the national

regional haze rule. 

The provisions in 40 CFR 51.309 comprise a

comprehensive long-term strategy for addressing sources that

contribute to visibility impairment within this geographic

region. The strategy addresses the time period between the
9

2

 As explained in unit III of this preamble, Indian Tribes

are given the flexibility under EPA regulations to submit

implementation plans and opt into the program after the 2003

deadline.

year 2003,2 when the implementation plans are due, and the

year 2018. The provisions address emissions from stationary

sources, mobile sources, and area sources such as emissions

from fires and windblown dust. 

One element of the GCVTC's strategy to address regional

haze is a program to reduce stationary source emissions of

SO2. This program calls for setting a series of declining

caps on emissions of SO2. These declining caps on emissions

are referred to as emissions milestones and provide for a

reduction in SO2 emissions over time. In designing this

program, the GCVTC intended for these milestones to be

reduced through voluntary measures, but also included

provisions for an enforceable market-based program that

would serve as a "backstop" if voluntary measures did not

succeed. At the time the regional haze rule was published,

however, it was broadly recognized that the specific

emission milestones, and the details of how both the

voluntary and enforceable phases of the program would be

implemented, were necessary elements of a regulatory

program. Accordingly, the regional haze rule, in 40 CFR

51.309(f), required the development of an "Annex" to the
10

report of the GCVTC that would fill in these details. The

regional haze rule provided that the option afforded by 40

CFR 51.309 would only be available if an Annex addressing

the specific requirements of 40 CFR 51.309(f) was submitted

to EPA by October 1, 2000. The EPA required the submission

of an Annex by this date to ensure that EPA would be able to

act on it before the December 31, 2003 deadline for SIPs

under 40 CFR 51.309(c).

C. What was Required to be Included in the Annex to the

GCVTC Report? 

The regional haze rule required the GCVTC (or a

regional planning body formed to implement the Commission

recommendations, i.e., the WRAP) to provide recommendations

to fill in the details for two main aspects of the program: 

- Emissions reductions milestones for stationary source

SO2 emissions for the years 2003, 2008, 2013, and 2018. The

milestones must provide for “steady and continuing emissions

reductions” for the 2003-2018 time period. In addition, the

milestones must ensure greater reasonable progress than

would be achieved by application of best available retrofit

technology (BART) pursuant to section 51.308(e)(2). 

- Documentation for implementing a market trading

program in the event that voluntary measures are not

sufficient to meet the required milestones. This
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documentation must include model rules, memoranda of

understanding, and other documentation describing in detail

how emissions reductions progress will be monitored, what

conditions will require the market trading program to be

activated, how allocations will be performed, and how the

program will operate.

The EPA received the Annex from the WRAP in a timely

manner, on September 29, 2000. The EPA recognizes the

significant amount of work that was devoted to developing

the Annex and we commend the WRAP participants for their

efforts. Under 40 CFR 51.309(f)(3), if EPA finds that the

Annex meets the requirements of the regional haze rule, EPA

committed to revise the regional haze rule based on the

Annex to incorporate provisions requiring compliance with

the milestones and backstop trading program. Along with the

existing elements of 40 CFR 51.309, these new provisions

would also be addressed in the 2003 SIPs by the Transport

Region States. This proposed rule is the first step in

revising section 51.309 based on the Annex.

D. What Topics are Covered in this Preamble?

The preamble addresses the following topics:

C The proposed regional SO2 milestones and WRAP’s

determination that the milestones meet the criteria for

approval in the regional haze rule. The EPA has
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reviewed the WRAP’s methodology for developing specific

milestones for SO2 for the years between 2003 and 2018. 

The EPA proposes to approve the milestones as

satisfying the broad requirements of the regional haze

rule. The EPA believes that the milestones provide for

“steady and continuing emissions reductions." The EPA

also believes that the milestones provide for “greater

reasonable progress" than the BART emission limits that

would otherwise be required by the regional haze rule.

C Ways in which the milestones may be adjusted in the

future. The preamble discusses the limited

circumstances under which the milestones may be

adjusted in the future and the proposed administrative

process for making those changes. 

C The stationary sources of SO2 that are included in the

program. This unit of the preamble discusses the

stationary sources of SO2 that would be required to

participate in the program, and whose cumulative

emissions would be compared to the milestones.

C The annual process for determining whether a milestone

is exceeded, thereby triggering the trading program.

This section describes the steps to be followed in

evaluating emissions data at the State, tribal and

regional levels. It also describes a mechanism by
13

which States and Tribes can activate the trading

program in 2013 if evidence indicates that the 2018

milestone will not be reached without such action.

C Key trading program elements that are required in SIPs

and Tribal implementation plans (TIPs). This unit of

the preamble covers issuance of and compliance with

allowances, emissions quantification protocols and

tracking system, the annual reconciliation process, and

penalty provisions. 

C Status of the program after 2018. This unit of the

preamble discusses what happens to the milestones and

backstop trading program at the completion of the first

implementation period, in 2018. 

Unit II of the preamble describes each of these programmatic

areas in detail, including EPA’s review of the relevant

portion of the WRAP submittal. Unit III discusses issues 

related to implementation of this program in Indian country. 

Unit IV documents that this proposal complies with the

administrative requirements of various Executive Orders and

statutes.

E. What is the Next Step if the Regional Haze Rule is

Revised?

If this proposal is finalized, it will modify the

requirements in 40 CFR 51.309 of the regional haze rule. As
14

a result, 40 CFR 51.309 will then provide the complete

regulatory framework to be used by Western States and Tribes

in developing regional haze implementation plans. The EPA

will continue to work closely with the States and Tribes to

support their efforts to develop plans that meet the

applicable requirements of the regional haze rule. Once

State and tribal plans that meet the applicable requirements

of the regional haze rule are reviewed and approved by EPA,

they will be federally enforceable.

 The requirements in 40 CFR 51.309, if revised, will be

the product of a substantial effort by many States, Tribes,

Federal agencies, and other interested parties, extending

over a number of years from the work of the GCVTC to that of

the WRAP. The EPA recognizes, however, that the States and

Tribes do have the option of implementing the regional haze

rule under 40 CFR 51.308 rather than 40 CFR 51.309. Because

the objective of 40 CFR 51.309 is to provide a regional

approach to protecting air quality at the 16 Class I areas

on the Colorado Plateau, EPA believes that there must be a

“critical mass” of States participating for 40 CFR 51.309

SIPs to be approvable. 

II. Proposed Program Details

Today’s proposal closely follows the provisions of the

Annex submitted by the WRAP on September 29, 2000, and the
15

3

Supplementary Submittal to EPA in Support of the SO2 Annex

to the Grand Canyon Visibility Transport Commission Report.

Submitted to EPA by the Western Regional Air Partnership,

June 1, 2001. 

4

The WRAP submitted a satisfactory Annex, which included all

of the elements listed in 40 CFR 51.309(f)(1) (i) and (ii). 

This enabled EPA to begin work immediately on assessing the

substance of the WRAP’s strategy for addressing visibility

impairment in the 16 Class I areas covered by 40 CFR

51.309(f). The October 1, 2000 deadline was accordingly

met. The supplemental information submitted by the WRAP

after the October 1, 2000 deadline has served to improve the

clarity of today's proposal and will improve the

implementation of the program. 

supplement to the Annex submitted on June 1, 20013 4. The

EPA proposes to incorporate those provisions into 40 CFR

51.309 of the regional haze rule by adding a new paragraph

(h), by adding language to refer to this new paragraph, and

by adding a few new definitions.

In this section of the preamble, we discuss the details

of the proposed regional emission tracking and backstop

trading program for stationary source SO2 emissions. For

each provision of the program, we provide:

– an overview of the provision,

– the requirements that apply to the provision in 40

CFR 51.309(f)(1) of the regional haze rule,

– the section of the Annex and/or supporting documents

where the WRAP discusses the provision and its rationale, 

– a discussion of EPA’s proposed finding that the
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5

In 40 CFR 51.309 of the regional haze rule issued on July

1, 1999, we defined the term “milestone” as a reduction in

emissions relative to a 1990 actual emissions baseline. In

discussions of the WRAP, and in the Annex itself, the term

almost has most often been used to mean an emissions cap for

the region that reflects a reduction in emissions. To avoid

any confusion, EPA is proposing to revise the definition of

“milestone” to more closely conform to the way it is used in

the Annex.

provision meets the requirements of the CAA and the regional

haze rule, and

– a description of how EPA proposes to incorporate the

provision into the regional haze rule.

A. What are the Proposed Regional SO2 Emission 

Milestones?5

A key provision of the WRAP's SO2 reduction program is

a set of SO2 emissions milestones. The Annex includes a set

of milestones, which represent targets for the total annual

amounts of SO2 emissions that may be emitted from stationary

sources of SO2 within the nine-State region. The program is

designed to ensure that these milestones will be met. The

EPA agrees with the WRAP's conclusion that these milestones

meet the requirements of the CAA and the regional haze rule,

and EPA proposes to amend the regional haze rule to

incorporate the milestones into the rule. The rationale for

EPA's position is set forth in this unit of the preamble. 
17

6

In the regional haze rule, EPA uses the term "BART-eligible

source" to refer to sources meeting criteria (1) to (3), and

uses the term "sources subject to BART" to refer to sources

meeting all four criteria.

1. Background. Requirement in the Regional Haze Rule

that the Milestones Must Provide for "Greater Reasonable

Progress" than BART and for "Steady and Continuing"

Progress. 

The regional haze rule, in 40 CFR 51.309(f)(1)(i),

requires the Annex to contain milestones for the years 2003,

2008, 2013, and 2018. Moreover, paragraph 40 CFR

51.309(f)(1)(i) requires that the milestones "must be shown

to provide for greater reasonable progress than would be

achieved by application of best available retrofit

technology (BART) pursuant to §51.308(e)(2)."

In order to understand the implications of these

requirements for "greater reasonable progress... than ...

BART," it is important to understand the basic provisions

for BART in the CAA and in the regional haze rule. The CAA,

in section 169A(b)(2) requires that SIPs for visibility

protection must apply BART to certain large-emitting

sources. More specifically, BART is required for sources

that:6

(1) are in one of 26 specific listed source categories;
18

(2) were in existence as of August 1977 but were not in

operation in August of 1962;

(3) have the potential to emit 250 tons per year; and

(4) emit an air pollutant that "may reasonably be

anticipated to cause or contribute to any impairment of

visibility" in any of 156 protected scenic areas. 

When EPA published its regulations for regional haze

SIPs in 1999, we included a requirement for BART. In their

regional haze SIPs, States must identify sources subject to

the BART requirement, and for these sources there are two

options. The first option, set forth in 40 CFR

51.308(e)(1), is to establish case-by-case BART emissions

limits for each source subject to BART. The second option,

set forth in 40 CFR 51.308(e)(2), is to develop an

alternative program, such as an emission trading program,

that provides for "greater reasonable progress" in

visibility improvement than would be achieved through the

case-by-case imposition of BART. The BART requirements of

the regional haze rule are described in detail in the

preamble to the regional haze rule, (64 FR 35737, July 1,

1999). Additionally, the EPA has proposed guidelines for

implementing the BART requirement, (66 FR 38108, July 20,

2001).
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Paragraph 40 CFR 51.309(f)(1)(i) requires that the

milestones:

must provide for steady and continuing emissions

reductions for the 2003-2018 time period consistent

with the Commission’s definition of reasonable

progress, its goal of 50 to 70 percent reduction in

sulfur dioxide emissions from 1990 actual emission

levels by 2040, applicable requirements under the CAA,

and the timing of implementation plan assessments and

identification of deficiencies which will be due in the

years 2008, 2013, and 2018.

The requirement for "steady and continuing" emissions

reductions originated in a recommendation of the 1996 report

of the GCVTC (Recommendations for Improving Western Vistas. 

Report of the Grand Canyon Visibility Transport Commission

to the United States EPA, p. 34). 

The Annex includes the WRAP's recommended milestones. 

The milestones are listed Table 1 in section III (page 55)

of the Annex, and are also listed and discussed further in

section II (pages 9-15) of the Annex and in Attachment C of

the Annex. The WRAP has concluded that the milestones meet

the requirements of the regional haze rule discussed above. 

The EPA agrees with the WRAP's conclusions and is proposing

to amend the regional haze rule to incorporate these

milestones into the rule. The following discussion sets

forth the technical analysis and rationale for (1) EPA's

proposed conclusion that the year 2018 milestone provides

for "greater reasonable progress than BART," and (2) EPA's
20

7

You will find complete information on discussions related

to this milestone at the WRAP’s website

(http://www.wrapair.org. These discussions generally took

place within the WRAP’s Market Trading Forum.

conclusion that the milestones provide for "steady and

continuing progress." 

2. Milestone for the Year 2018. Rationale for EPA’s

Proposal that the Year 2018 Milestone Represents “Greater

Reasonable Progress” than BART.

Attachment C to the Annex discusses (1) the WRAP’s

process for developing a regional emissions milestone for

SO2 for the year 2018, and (2) the WRAP’s determination that

the regional milestone will provide for greater reasonable

progress than would be achieved by BART. Considerable

discussions, technical analyses, and negotiations were held

within the WRAP to develop the year 2018 milestone.7 

To identify the year 2018 milestone, the WRAP:

– Estimated the baseline SO2 emissions for the year

2018, (e.g., the predicted SO2 emissions in the year 2018 in

the absence of a program to reduce SO2 emissions);

– Developed a list of BART-eligible sources in the

region;

- Estimated the emissions reductions that BART sources

could achieve, and 

– Selected a year 2018 milestone that reduces the
21

baseline emissions by an amount that would achieve greater

reasonable progress in improving visibility than by

requiring each BART-eligible source to install BART.

The EPA agrees with the WRAP that these are appropriate

steps for demonstrating that the year 2018 milestone is

consistent with the regional haze rule requirement for

achieving greater reasonable progress than BART if sourcespecific BART is not applied.

Baseline emissions. The WRAP conducted a technical

analysis to calculate a best estimate of the projected

actual SO2 emissions baseline for the year 2018. Based upon

a review of the documentation of this analysis, and based

upon EPA's participation in the WRAP's technical forums and

committees, the EPA believes that the data used and

assumptions made by the WRAP for projecting the baseline are

reasonable. The EPA invites comment on these baseline

emission estimates, including whether there are any elements

of the calculations for which alternative assumptions would

be more technically appropriate. The point source SO2

emission inventory for the nine-State region can be

subdivided into four broad classes: (1) electric utility

boilers, (2) cogeneration facilities, (3) copper smelters,

and (4) other sources. Electric utility boilers are by far

the largest emitting category, comprising about two-thirds
22

8

Technical Support Documentation. Voluntary Emission

Reduction Program for Major Industrial Sources of Sulfur

Dioxide in Nine Western States and a Backstop Trading

Program. WRAP, October 16, 2000.

of the overall SO2 inventory. Copper smelters are the next

largest source of SO2 emissions. A host of smaller sources

contribute to the “other source” category, including

industrial boilers, petroleum refineries, cement kilns,

paper mills, and natural gas production plants.

For each of these broad classes, estimation of any

future year's emissions involves the estimation of actual

emissions for a year in the recent past, and then making

assumptions on how those emissions will change in the

future. We provide an overview here of how the WRAP

developed the year 2018 baseline by taking emissions

estimates for the most recently available year (generally

1998 or 1999) and by making assumptions on how those

emissions would change by the year 2018. Further details

are available in the technical support information provided

by the WRAP8. 

The WRAP estimated utility emissions for the year 2018

using, as a starting point, 1999 emissions data that the

utilities submitted to EPA to comply with the requirements

of the national acid rain program. In order to estimate how

these current emissions would change for the year 2018, the
23

WRAP took into account several considerations. The

resulting utility emissions forecast for the year 2018,

taking into account all of these considerations, is 415,000

tons.

First, the WRAP took into account for utilities the

expected future operations at coal-fired power plants. The

WRAP assumed that boilers would be shut down by the year

2018 if they had been in operation more than 60 years by

that date (that is, sources which began operation in the

year 1957 or before). For the remaining boilers, the WRAP

assumed they would continue to operate and would increase

their utilization of capacity from current rates (typically

less than 80 percent of name plate capacity) to an 85

percent utilization rate. In developing the emission

forecasts, the WRAP took into account future demand growth.

The WRAP assumed there would be an increase of 1.4 percent

per year in net generation in the GCVTC region. As noted

above, the WRAP assumed that existing sources would continue

to be used until they reached 85 percent of capacity. When

existing available generation is exhausted, new sources are

assumed to emit on average 0.02 pounds per million BTU. 

The 0.02 pounds per million BTU figure assumes that wellcontrolled coal-fired boilers would comprise 20 percent of

the new generation capacity, with the remainder of
24

9

"Voluntary Emissions Reduction Agreement between the

Colorado Air Pollution Control Division and Public Service

Company of Colorado," submitted for approval to the Air

Quality Control Commission, July 16, 1998.

generation using gas-firing (either natural gas or from coal

gasification). Documentation of the WRAP's assumptions for

power generation is found in section 2.C of the document

entitled Technical Support Documentation. Voluntary

Emissions Reduction Program for Major Industrial Sources of

Sulfur Dioxide in Nine Western States and a Backstop Trading

Program. Submitted by the WRAP to the U.S. EPA, October 16,

2000. 

Second, the WRAP considered the expected reductions in

SO2 emissions from the Mohave Generating Station in Nevada

and from a number of plants on the Colorado Front Range. 

For the Mohave Generating Station, the plant's owners and a

number of environmental organizations entered into a consent

decree on December 21, 1999. A proposed revision to the

Federal Implementation Plan (FIP) for Nevada, reflecting the

terms of the consent decree, was published in the Federal

Register on February 8, 2002, (67 FR 6130). For the

Colorado Front Range plants, reductions are expected from a

voluntary agreement between Public Service Company of

Colorado and the Colorado Air Pollution Control Division.9 
25

Third, the WRAP applied a 10,000 ton downward

adjustment to account for the expected effects of a recent

revision to the procedure for measuring the stack flow rate,

which is an integral part of the measurement of SO2

emissions using a continuous emission monitor (CEM). The

procedure in place before the revision, which was used in

the calculation of the 1999 baseline emissions, could

overestimate the flow rate for certain types of stacks, and

thus lead to an overestimate of the measured emissions. 

This same overestimate would also be present in estimates of

future year emissions for the 2003 to 2018 time period,

which used the 1999 emissions as a starting point. 

Accordingly, the new procedure, if used, would lead to a

decrease in the measured and forecasted emissions even if

the emitting characteristics of the boiler (fuel used and

sulfur content) did not change. Such a "paper" decrease

would not represent real emissions reductions. The WRAP

estimated that for the year 2018, there will be 10,000 tons

of emission decreases that will be solely due to expected

changes in the flow rate measurement method for the boiler

population. Thus, 10,000 tons were subtracted from the year

2018 milestone. 

Finally, the WRAP included an upward adjustment to

account for continued operation of three of the Colorado
26

10

For all other sources besides utility boilers, the year

1998 was the most recent year of data available to the WRAP

at the time the Annex was developed. 

Front Range boilers that would be operating more than 60

years in the year 2018. Even though the general methods

used to forecast emissions assumed that these boilers would

shut down after 60 years, the WRAP believed that planned

capital investments would likely extend the operations of

these three boilers for a longer time period. The WRAP's

estimated emissions increase, to account for these three

boilers, is 4,000 tons.

For cogeneration facilities, the WRAP assumed that year

1999 emissions of 8,000 tons would remain constant through

the year 2018, with no growth or retirement of these plants. 

For copper smelters, the WRAP used emissions data for

199810 provided by the State air quality agencies as the

starting point for projecting SO2 emissions for 2018. Since

1998, two smelters have temporarily suspended operations. 

It is difficult to predict the national and international

market conditions that would influence whether these

smelters will resume operation. Accordingly, the WRAP

decided to include two separate emissions forecasts for the

year 2018 for smelters. The first forecast assumes that the

two suspended smelters will be permanently shut down by the
27

11

For non-utility sources, the WRAP's IAS took demand growth

into account through an economic model called the Regional

Economics Model, Inc (REMI) model. The REMI model predicts

changes in economic indicators for source categories and

regions within the overall geographic area studied. The

REMI model was used to determine the degree to which

activity levels are predicted to increase for a given source

type and sub-region.

year 2018, and emissions from the remaining smelters would

be 48,000 tons. The second forecast operations at the two

currently suspended smelters will have resumed, which

results in an overall smelter emissions total of 78,000

tons.

For the broad “other source” category, the WRAP used

recent inventory data as the starting point for future

projections. To forecast emissions to the year 2018, the

WRAP used general growth and retirement rates that are

included in the Integrated Assessment System (IAS) used by

the GCVTC. The growth and retirement rates in the IAS are

annual percentages that are applied to the base year

inventory total.11 The inventory amount is reduced

according to the retirement rates, and increased according

to the growth rates. The WRAP funded a technical review of

the emissions for the "other source" category, which was

completed in July 2000. This report, Historical and Future

SO2 Emissions Analysis. 9 State Western Region Draft

Report, is included as section 2.A of the WRAP's technical
28

12

Including adjustment for new flow rate method, and including

the retirement adjustment for Colorado Front Range plants. 

This value represents the 421,000 tons for "utility

emissions" on page C-8 of the Annex, plus the 4,000 tons for

"front range adjustment" on page C-8, minus the 10,000 tons

referred to as "CEMS bias adjustment" on page C-11 of the

Annex.

support documentation. For these sources, emissions were

predicted to decline from the 1998 total of about 162,000

tons to 141,000 tons in the year 2018.

In summary, the WRAP estimates year 2018 emissions as

follows:

Electric utility boilers12 415,000

Cogeneration units 8,000 

 Copper smelters 48,000 OR 

78,000 

 Other stationary sources 141,000

---------------------

TOTAL (if suspended

 smelters remain closed) 612,000 

TOTAL (if suspended 

 smelters resume operation) 642,000 

List of BART-eligible sources. The WRAP, as described

in Appendix C of the Annex, pages C-2 and C-3, developed a

list of BART-eligible sources using the definitions in the

regional haze rule and a number of assumptions. Subsequent

to the submittal of the Annex, the EPA formally proposed
29

BART guidelines in a rulemaking proposal published on July

20, 2001 (66 FR 38108). These proposed guidelines include

proposed methods for identifying BART-eligible sources. In 

order to meet the October 2000 deadline for the Annex, the

WRAP needed to identify BART-eligible sources before the

guidelines were proposed by EPA. 

In identifying BART-eligible sources, the WRAP

identified individual emission units that have a potential

to emit more than 250 tons per year. In the proposed BART

guidelines, the EPA takes a slightly different approach. 

Using the method in the proposed BART guidelines, a source 

would be BART-eligible when the sum of the potential

emissions over all emission units built between the 1962-

1977 time period is greater than 250 tons per year. For

example, assume a plant had two emission units built within

the 1962-1977 time period, emission unit A with a potential

to emit 125 tons per year of SO2, and unit B with a

potential to emit 150 tons per year of SO2. Under the

proposed BART guidelines, you would add the potential

emissions of both units. Thus, both of these units would be

BART-eligible under EPA’s proposed BART guidelines because

their combined potential to emit exceeds 250 tons per year. 

Under the system used by the WRAP, these units would not

have been identified as BART-eligible.
30

The EPA believes that even if the BART guidelines are

finalized as proposed, the BART-eligible sources identified

by the WRAP, and the SO2 emissions resulting from those

sources, would be nearly identical to those identified under

the BART guidelines. The EPA estimates that the difference

in emissions coverage between the method used by the WRAP

and the method in EPA's proposed guidelines is at most a few

thousand tons. We request comment on this assessment.

Emissions reductions from BART-eligible sources. The

WRAP’s next step was to calculate the emissions reductions

that would be achieved by requiring the installation and

operation of BART on all BART-eligible sources in the

region. The first step in this process was to identify the

“appropriate” retrofit technologies for categories of BARTeligible sources. This is described in section C of Annex

Attachment C. The WRAP discusses in Attachment C, page C-4,

that the factors to consider for BART, including cost,

energy and non-air environmental impacts, existing pollution

controls, and remaining useful life were addressed in a

broad way through the identification of technologies that

were currently being used as retrofits in the region. The

WRAP's Market Trading Forum looked at ranges of potential

retrofit controls and established a level that it expected

to be valid as a regional average. Further documentation of
31

the technology analysis is found in section 6 of the

Technical Support Document (Technical Support Documentation. 

Voluntary Emissions Reduction Program for Major Industrial

Sources of Sulfur Dioxide in Nine Western States and a

Backstop Trading Program. Submitted by the WRAP, October

16, 2000). This technology analysis was performed on a

source category basis, as is allowed by the regional haze

rule.

The WRAP developed a series of control technology

assumptions for specific categories in the region. These

control technology assumptions are summarized in Annex Table

1, page C-5. Another table describing the types of controls

considered is included as Table 1 on pages 12-18 of Section

6.A of the Technical Support Document. The technology

determination with the greatest effect on emissions was for

utility boilers, which represent about 2/3 of projected 2018

emissions, and which also have the greatest potential for

further emissions control. For utility boilers, the WRAP

developed a three-tier system as follows. For uncontrolled

utility boilers, and for boilers currently with controls

achieving less than a 70 percent reduction in SO2 emissions,

the WRAP assumed an “appropriate” technology level of 85

percent control. For boilers currently achieving a 70 to 80

percent reduction in SO2 emissions, the WRAP assumed that
32

control efficiencies could be increased by five percent. 

For example, if a boiler is currently achieving 72 percent

reduction in SO2 emissions, the WRAP assumed it would be

controlled to 77 percent. For utility boilers currently

achieving greater than 80 percent reduction in SO2

emissions, no additional reductions were assumed.

In developing the three-tier system for boilers, the

WRAP assumed that emissions can be reduced by flue gas

desulfurization, and made broad judgments on the level of

control that this technology could achieve. These judgments

included a general discussion of whether any of the

statutory factors for BART would likely mitigate against

application of the technology. As noted in Table 1, page C5 of the Annex, the WRAP assumed controls for additional

categories as follows:

– Petroleum refineries. For sulfur recovery units, the

WRAP assumed BART was 98 percent control or the equivalent

of a 3-stage Claus unit. For catalytic crackers, the WRAP

assumed 90 percent control level. For flares, the WRAP

assumed no additional control.

- Industrial boilers. For non-utility boilers, the

WRAP used the same 3-tier assumptions as for utility

boilers.
33

13

May 22, 2000 letter from Lydia Wegman, Richard R. Long, and

Deborah Jordan, EPA to Colleen Delaney, co-chair, WRAP

Market Trading Forum.

– All other categories, including cement kilns,

recovery furnaces at kraft pulp mills, and copper smelters. 

The WRAP assumed that BART would require no additional SO2

control.

The WRAP calculated the emissions reductions for the

BART-eligible sources for the year 2018 as outlined in

section 6.B of the Technical Support Documentation. By

applying the 3-tier approach to utility boilers, and the

assumptions noted above for refineries and industrial

boilers, the WRAP calculated emissions reductions from BARTeligible sources of about 168,000 tons for the year 2018. 

Of this amount, the great majority of the reductions

(152,000 of the 168,000) were from utility boilers. 

During May 2000, EPA provided the WRAP with a technical

review of the control technology judgments made by the WRAP

for utility boilers.13 As noted in this technical review,

EPA believes that for utility boilers that are currently

uncontrolled, emissions reductions of 90 percent or better

are readily achievable. Of the total of 53 BART-eligible

utility boilers in the WRAP region, 21 are currently

uncontrolled. The EPA's technical analysis also provided
34

14

Subsequent to EPA's May 2000 analysis, the WRAP developed

refined estimates of the year 2000 emissions baseline. This

estimate of 170,000 to 190,000 tons was based on the

emissions information available at the time of EPA's May

2000 analysis.

upper and lower-bound estimates of the degree to which the

30 units with existing wet scrubbers could be upgraded. 

This technical analysis resulted in emissions reductions of

170,000 to 190,000 tons, which were about 15,000 to 35,000

tons greater than estimated by the WRAP.14

 Inclusion of an additional amount of emissions to

account for “uncertainty” and “headroom.” In calculating

the year 2018 milestone, the WRAP included 35,000 tons for

“uncertainty” and “operational headroom.” This is discussed

on pages C-9 through C-11 of Annex Attachment C. 

The WRAP uses the term “headroom” generally to mean an

amount that accounts for unexpected future events. For

example, if a WRAP-developed milestone is established at

800,000 tons, and expected emissions are 750,000 tons, then

the difference - 50,000 tons – is “headroom” that provides

additional assurances that the milestone would not be

expected to be exceeded.

The WRAP uses the term “uncertainty” generally in the

context of data parameters whose actual values in the future

may differ from current projections. All parties to the
35

WRAP discussions agree that there is a fair degree of

uncertainty in projecting emissions nearly 20 years in the

future. Projections for the year 2018 involve numerous

inherent assumptions about economic and other conditions,

and the SO2 emissions results of those conditions. For

example, the tool used for emissions forecasting, the IAS,

assumes a certain percentages of plant retirements, and

emissions reductions from those plant retirements. There is

nothing that would prohibit these sources that are assumed

to retire from continuing operating, or even increasing

their operations. Scenarios different from those projected

by the IAS would result in emission increases for the “other

source” category of several tens of thousands of tons per

year. Another example of uncertainty leading to an

unexpected increase in emissions would be an increase in the

overall average sulfur content of coal used in coal-fired

boilers. If this value increased by 5 percent, for example,

then the forecasted emission baseline for utility boilers

would increase by more than 20,000 tons. It is also

possible that boilers that are currently burning natural gas

could switch to fuel oil if the relative prices of the two

fuels were to change. Finally, there are uncertainties

regarding the number of new coal-fired utility boilers that
36

will be built in the region, and the emissions from such

boilers. 

The EPA agrees with the WRAP that long-term emissions

predictions are uncertain and that it is accordingly

difficult to predict with accuracy the level of SO2

emissions for the region in 2018. We request comment on the

WRAP’s use of the 35,000 tons per year of

“headroom/uncertainty” as an amount that is included in the

calculation of a year 2018 milestone. 

Milestones for the year 2018 selected by the WRAP. The

WRAP determined the milestone for the year 2018 by taking

the projected baseline amount, subtracting the 168,000 tons

for “appropriate” control technology, and adding the 35,000

tons for “uncertainty and headroom.” Because the WRAP

projected two cases for future smelter operations, there

were two associated milestones for the year 2018. For the

case without operation of the two smelters, the WRAP

determined that the milestone would be 612,000 - 168,000 +

35,000, or 480,000 tons (the WRAP rounded the value of

479,000 tons up to 480,000). For the case which assumes

that the two smelters will resume operation, similar

calculations yield a milestone of 510,000 tons.

Discussion of EPA's finding that the year 2018

milestone meets the requirements of the regional haze rule. 
37

The EPA believes that the year 2018 milestone fulfills the

requirement in 40 CFR 51.309(f)(1)(ii) of the regional haze

rule that "the milestones must be shown to provide for

greater reasonable progress than would be achieved by

application of BART under 51.308(e)(2)." 40 CFR

51.308(e)(2) of the regional haze regulations requires that

the analysis of whether "greater reasonable progress" would

be achieved must include the following:

-- A list of all BART-eligible sources,

-- A source-specific or category-wide analysis of

possible BART controls, taking into consideration the

technology available, the costs of compliance, the

energy and non-air quality environmental impacts of

compliance, any pollution control equipment in use, and

the remaining useful life, and

-- An analysis of the degree of visibility improvement

that would be achieved from application of BART-level

controls.

The EPA believes that the WRAP's analysis, described

above, meets these requirements. The WRAP has provided a

list of BART-eligible sources, and a sufficient categorywide analysis of the possible BART controls. The WRAP also

provided an analysis of the visibility improvement from the

SO2 emissions reduction program, in addition to a number of

possible scenarios for BART-level controls. This visibility

analysis is discussed in section F of Attachment C to the

Annex. Supplemental information, which included additional

visibility analyses, was submitted to EPA on September 24,
38

2001 in a document entitled "Sensitivity Analysis to

Quantify the Benefits Achieved by an Emission Cap." 

The EPA has reviewed the calculations, analyses and

other documentation provided by the WRAP in order to judge

whether the 2018 SO2 milestone provides for greater

reasonable progress than BART. One important consideration

in making this judgment, as noted by the WRAP in the Annex,

is that the program establishes an enforceable cap for the

Region on the emissions of SO2 from all stationary sources

in the region emitting more than 100 tons per year. In

contrast, a program that addressed only the BART sources

would result in a reduction in emissions from the sources

covered by the BART requirements, but it would not limit the

overall emissions of SO2 in the WRAP region. 

It is an inherently uncertain exercise to predict

future SO2 emissions in the absence of this program, and

there is also uncertainty in predicting what appropriate

BART-level emissions controls would be for the year 2018. 

The EPA believes that the future emissions in the WRAP

region could plausibly be greater than or less than those

forecasted by the WRAP. For the utility sector, we believe

there is a relatively low probability that existing utility

boilers will increase their use of capacity by a greater

percentage than the overall capacity factor of 85 percent
39

assumed by the WRAP. There is, however, a growing

likelihood that there will be more new coal-fired power

plants in place in 2018 than assumed when the Annex was

submitted to EPA. For copper smelters, it is unlikely that

emissions would increase by any appreciable amount above

those forecasted in the two scenarios developed by the WRAP. 

For the “other” source category incorporating all nonutility and non-smelter sources, greater use of capacity or

new source growth could plausibly lead to emissions that are

greater than the 141,000 tons forecasted by the WRAP. In

summary, taking into account all of these categories, it is

possible that future emissions could be more or less than

calculated by the WRAP.

 Likewise, the EPA believes there is some uncertainty

regarding the level of emissions control that would be

achieved by applying SO2 controls to the BART-eligible

source population on a source-by-source basis. While EPA,

as noted above, calculates a somewhat greater degree of

possible SO2 reductions than the WRAP, it is also possible

that a State-by-State, source-specific analysis of BART

would result in a lesser degree of control on some sources. 

The visibility analyses conducted by the WRAP attempted

to capture the uncertainty that exists in comparing a

program with a fixed cap on emissions to a program that
40

would achieve a given level of control on the BART

population. The emissions reductions from the trading

program are guaranteed, because they assure that emissions

will not exceed the milestones. On the other hand, the

overall effect of emissions reductions from application of

BART is best expressed as a range of results. Because of

the factors States and Tribes may consider when determining

BART for individual sources, there is no guarantee of the

amount of reductions application of BART would achieve. 

The uncertainty of the comparison is compounded to a

degree by the fact that under a trading program, it is not

possible to predict with precision where the emissions

reductions would occur. The modeling results showed that

the visibility impacts of the trading program are likely to

be very similar to those for the range of possible BART

results, and that the visibility impacts of the trading

program could be slightly greater or slightly less than a

BART-only program would achieve. 

Taking all of these uncertainties into account, EPA

believes that it is reasonable to conclude that the year

2018 milestone meets the requirements for "greater

reasonable progress" in the regional haze rule. The WRAP

has satisfied the requirements of the regional haze rule

that the milestones provided for greater reasonable progress
41

than would be achieved by BART, and the WRAP has provided

the necessary documentation to support that conclusion. 

Central to their finding of greater reasonable progress is

that the program provides for an overall cap instead of

individual emission limits which do not guarantee the same

emissions reductions. Modeling scenarios show that the

trading program is likely to achieve results equivalent to,

or greater than, an emission limit-based program. Although

not determinative of whether the program achieves better

than BART reductions, EPA believes that it is also important

to recognize that the WRAP program has resulted from a

consensus effort, which included broad-based participation

of many Western stakeholders. 

3. Milestones for the Interim Years (2003 through

2017). Rationale for EPA's Proposal that the Milestones

Represent “Steady and Continuing” Progress. 

As discussed above, 40 CFR 51.309 (f)(1)(i) of the

regional haze rule requires that the milestones in the

Annex:

must provide for steady and continuing emission

reductions for the 2003-2018 time period consistent

with the Commission’s definition of reasonable

progress, its goal of 50 to 70 percent reduction in

sulfur dioxide emissions from 1990 actual emission

levels by 2040, applicable requirements under the CAA,

and the timing of implementation plan assessments and

identification of deficiencies which will be due in the

years 2008, 2013, and 2018.
42

The WRAP discusses the milestones for these interim

years in section II.b, pages 11-15, of the Annex. The

milestones selected by the WRAP in the Annex are as follows: 

Table 1. WRAP’s Proposed Regional Dioxide Milestones for

Stationary Sources Emitting More than 100 TPY 

(amounts listed are tons per year)

Year Each

year

between

2003

through

2007

Each

year

between

2008

through

2012

Each

year

between

2013 and

2017

2018

Maximum Milestone

(smelters in)

720,000 715,000 655,000 510,000

Minimum Milestone

(smelters out)

682,000 677,000 625,000 480,000

The EPA believes that these milestones provide for “steady

and continuing” emissions reductions and the requirements of

40 CFR 51.309(f)(1)(i). Taking each phrase of 40 CFR

51.309(f)(1) separately, our rationale for this finding is

as follows.

First, 40 CFR 51.309(f)(1)(i) requires steady and

continuing progress “consistent with the Commission’s

definition of reasonable progress.” As noted in section 

II.A.1.b of the Annex, the GCVTC defined reasonable progress 

as follows: 

Reasonable progress towards the national visibility

goal is achieving continuous emission reductions
43

necessary to reduce existing impairment and attain

steady improvement of visibility in mandatory Class I

areas, and managing emissions growth so as to prevent

perceptible degradation of clean air days.

For the reasons set forth below, EPA is proposing to find

that the milestones listed above are consistent with this

definition in the Commission report.

In its analysis of whether the milestones provide for

“continuous” or “continuing” reductions for the 2003 to 2018

time period, the WRAP uses as its starting point, or frame

of reference, the Commission’s goal of achieving a 13

percent reduction in 1990 baseline emissions by the year

2000, rather than an estimate of actual emissions for 2000. 

A 13 percent reduction from the 1990 baseline emission of

about 830,000 tons results in emissions of about 720,000

tons. Using the emission inventory estimates for the most

recently available year at the time of the Annex, generally

from 1998 or 1999, the WRAP estimated that the total actual

emissions for the 1998-1999 time period were about 652,000

tons, roughly a 22 percent reduction from the 1990 baseline. 

Thus, the milestones, which range from 677,000 tons to

715,000 tons for the 2008-2012 time period, allow for actual

emission increases to occur between this 1998/1999 time

period and this time period. The EPA agrees that the WRAP

may use the 13 percent level, rather than current actual

emissions, as the basis for determining that “steady”
44

reductions are occurring. Otherwise, EPA believes that the

region would in essence be penalized for achieving early

reductions in emissions. Also, there is future emission

growth expected due to increased use of operating capacity

at utility boilers and other source types. Accordingly, a

relatively “flat” line between 2003 and 2012 can represent a

significant reduction in emissions that would have otherwise

been expected. The EPA requests comment on this finding.

Second, 40 CFR 51.309(f)(1)(i) requires steady and

continuing progress “consistent with ... (the

Commission's)... goal of 50 to 70 percent reduction in

sulfur dioxide emissions from 1990 actual emission levels by

2040.” Because the 1990 actual emissions of SO2 for the

region were 830,000 tons per year, the 2018 milestones

proposed by the WRAP for 2018 represent a 39 to 43 percent

reduction from 1990 baseline emissions. Emissions

reductions consistent with the 2018 milestone will achieve a

substantial portion of the Commission’s goal set by the

Commission for the 50-year period, 1990 to 2040. The EPA 

believes that the criterion for steady and continuing

emissions reductions consistent with this long-term goal of

50-70 percent reduction in SO2 emissions is clearly met. 

Third, 40 CFR 51.309(f)(1)(i) requires steady and

continuing progress “consistent with applicable requirements
45

under the CAA.” The EPA believes that the milestones

recommended by the WRAP are consistent with all applicable

requirements of the CAA. As noted above, EPA proposes that

the milestones constitute “greater reasonable progress” than

would be achieved through implementation of the BART

requirements in section 169A of the CAA.

Finally, 40 CFR 51.309(f)(1)(i) requires steady and

continuing progress "consistent with the timing of

implementation plan assessments and identification of

deficiencies which will be due in the years 2008, 2013, and

2018." In the Annex, the WRAP has established an annual

process for comparing emissions with milestones. This

annual process, discussed in greater detail below, ensures

that emissions will be compared against the milestones each

year, and not just in 2008, 2013, and 2018. The EPA

believes that this annual check is a helpful clarification

of the way the program will be implemented, and that it will 

ensure that ample information will be available at the time

of the 5-year program reviews required by 40 CFR

51.309(d)(10) of the regional haze rule. 

In summary, EPA believes that the milestones in the

Annex fulfill all of the requirements for "steady and

continuing" progress. We request comment on this proposed

finding.
46

4. How the Milestones are Listed in the Proposed

Amendments to 40 CFR 51.309.

The Annex, in sections II.A.3.b and III.A.6.b,

clarifies that the annual process for comparing emissions to

the milestones will, with one exception, involve a

comparison of multi-year averages. Because the program does

not begin until 2003, compliance with the 2003 milestone

will be based on 2003 emissions data only. Compliance with

the program in 2004 will be based on an average of 2003 and

2004 emissions data. In subsequent years, compliance with

the milestones will be determined by using a 3-year average

of emissions. The Annex also makes clear that for the 2005

through 2017 time period, compliance will be determined by

comparing 3-year averages of emissions with 3-year averages

of the milestones. For example, the milestones for 2006,

2007, and 2008 are 677,000 682,000, and 682,000 tons,

respectively (see Table 1 above, smelters out). The 3-year

average of the milestones is: (682,000 + 682,000 +

677,000)/3, or about 680,000 tons. Thus, after the end of

calendar year 2008, under the system of averaging contained

in the Annex, the participating States and Tribes will

compare the 3-year average of emissions (that is, the

average of emissions for the years 2006, 2007, and 2008)

against 680,000 tons. 
47

To minimize any confusion from this system of

averaging, EPA has included in the proposed amendments to 40

CFR 51.309 a table which sets out, for each year of the

program, the emission inventory years to be used, and the

amount of tons per year that the emissions will be compared

against. This is included in the proposed rule amendments

as Table 1 in proposed paragraph 40 CFR 51.309(f)(1). This

table also makes clear that for the year 2018, participating

States and Tribes will compare the year 2018 inventory to

the year 2018 milestone, without any averaging of previous

years. 

B. What Future Adjustments to the Milestones are Allowed by

the Proposed Rule?

The Annex provides for future adjustments to the

milestones under certain prescribed circumstances. The EPA

understands that the WRAP's negotiations succeeded largely

because the participants were able to reach agreement on

milestones that addressed stakeholder interests, met the

requirements of the CAA, provided certainty to the regulated

community, and provided interest groups with a fixed set of

milestones that would ensure long-term progress in reducing

SO2 emissions and improving visibility. However, the WRAP

did anticipate that there were a number of specific

circumstances under which the milestones should be adjusted. 
48

The EPA believes that these are the only circumstances that

should lead to changed milestones. The EPA requests comment

on the appropriateness of these adjustments and whether

additional adjustment to the milestones may be appropriate. 

These adjustments are described in sections III.A.3,

III.A.4, and III.A.5 of the Annex and are discussed further

in section II.A.2 of the Annex. The EPA believes that each

of these adjustments is consistent with the requirements of

the regional haze rule.

The WRAP identified the following seven possible

adjustments to the milestones:

(1) adjustments to be made at the outset of the program

if certain States and Tribes choose not to participate in

the program, and for Tribes that choose to opt into the

program after the 2003 deadline;

(2) adjustments to account for specific contingencies

regarding the future operations of copper smelters;

(3) adjustments for changes in emission measurement

techniques;

(4) adjustments for changes in flow rate measurement

methods;

(5) adjustments for illegal emissions;

(6) adjustments due to periodic reviews and audits; and

(7) adjustments for individual sources opting into the
49

program.

For the first adjustments (1) and (2), the specific

amounts by which the milestones would change are listed in

the proposed amendments to 40 CFR 51.309 of the regional

haze rule. For adjustment (4), a specific defined process

for calculating the adjustment can be specified in the rule. 

The specifics of each of the adjustments are described in

detail below. In addition, for three adjustments, (1) (2)

and (4), we are proposing in today’s amendments the specific

circumstances under which the adjustments would occur and

the procedures for making these types of adjustments to the

milestones. Because we are proposing the specific emission

quantities, circumstances and procedures in the rule, and

are taking comment on these specific details, we are also

proposing to allow States and eligible Tribes to make these

adjustments without triggering a requirement to revise their

SIP. For the remaining adjustments, we are proposing to

require States and eligible Tribes to revise their

implementation plans, consistent with the procedures at 40

CFR 51.102 and 40 CFR 51.103, before making the adjustment. 

1. Adjustment for States and Tribes that Choose not to

Participate in the Program, and for Tribes that Choose to

opt into the Program after 2003.
50

15

Supplementary Submittal to EPA in Support of the SO2 Annex

to the Grand Canyon Visibility Transport Commission Report.

Western Regional Air Partnership, June 1, 2001.

As noted previously, 40 CFR 51.309 of the regional haze

rule provides nine Western States with an optional program

to meet the requirements of the CAA and the regional haze

rule. States that choose to meet the requirements of 40 CFR

51.309 are assured of having an approvable long-range

visibility strategy for 16 Class I areas in the vicinity of

the Grand Canyon. It is not yet known, however, which

States will choose to exercise the option under 40 CFR

51.309. Accordingly, the Annex, including the supplemental

information submitted in June 200115, provides for

adjustments to the milestones in the event that not all

eligible States and Tribes choose to participate.

The WRAP has identified for each State, and for each

year from 2003 to 2018, the amount of emissions that would

be deducted from the milestones for each State that chooses

not to participate. The methodology and data sources for

determining these individual State opt-out amounts are

explained further in the WRAP's supplementary information

submitted to EPA in June 2001. The EPA includes in the

proposed amendments to 40 CFR 51.309 of the regional haze

rule a table (Table 2) displaying the opt-out amounts. 
51

The EPA notes that the emissions amount budgeted in

this table are only for the purpose of determining the

milestones at the outset of the program should some States

and Tribes choose not to participate. The amounts budgeted

to each State in this table are not necessarily the amounts

that will be allocated to sources in the State if a trading

program is triggered. Further discussion on the

requirements for source allocations under a trading program

are discussed below in unit II.D. of the preamble.

The EPA believes that for the program under 40 CFR

51.309 to achieve the WRAP’s objectives and the objectives

of the GCVTC, a sufficient number of States must participate

in the program. The WRAP recognizes this issue of "critical

mass" as well and has funded a study to review the results

of a number of scenarios for possible participation in the

program. The EPA proposes to defer to the WRAP's judgment

on the issue of "critical mass," and we request comment on

this proposal. 

The process for taking the State opt-out amounts into

account would happen automatically at the outset of the

program and would be reflected in the SIPs submitted in

2003. For the States that opted out, the amounts in Table 2

of the rule (included in the proposed rule in 40 CFR
52

16

If EPA promulgates a FIP implementing 40 CFR 51.309 for a

Tribe, that FIP will be treated in the same manner as a TIP

for purposes of this provision.

51.309(h)(1)(i)) would be deducted from the amounts in Table

1 for purposes of establishing the program milestones. 

As is discussed below in unit III.D of this preamble,

Tribes have the flexibility to opt into the program after

the 2003 deadline. The process for taking into account the

tribal amounts in Table 2 of the rule needs to take this

into account. For Tribes that have not opted into the

program by the 2003 date, the amounts in Table 2 will be

deducted from the amounts in Table 1 at the outset of the

program. For Tribes that opt into the program at a later

date, these amounts will be automatically added to the

amounts in Table 1, beginning with the first year after the

TIP implementing 40 CFR 51.309 is approved by EPA.16 

1. Adjustment for Smelter Operations.

Currently, two of the copper smelters in the nine-State

Visibility Transport Region are temporarily shutdown due to

economic conditions. These smelters are the Phelps Dodge

Corporation's Hidalgo Smelter in New Mexico, and the BHP

Company San Manuel Smelter in Arizona. As noted above, it

is difficult to predict whether long-term economic

conditions may lead to resumed operation of these two
53

smelters. Because of the significance of these smelters,

the Annex makes provisions to adjust the milestones upward

if either of the two smelters resume operation. The Annex

also has a provision to adjust the milestones upward if

either one, or both, of the two smelters remain shutdown,

but other smelters in the region increase copper production

such that SO2 emissions exceed the year 2000 baseline level. 

This adjustment for the currently suspended smelters is

described in section III.A.3.a. of the Annex and is

discussed further in section II.A.2.a of the Annex. 

During the last full year of operation of the two

smelters, 1998, the Phelps Dodge Hidalgo smelter emitted

22,000 tons of SO2, while the BHP San Manuel Smelter emitted

16,000 tons. These two smelters have air quality permits

from the respective State air agencies, and the Annex states

that they would be allowed to resume full operation at any

time. The Annex provides for the following adjustments if

one or both of these smelters resumes full operation

consistent with its existing permitted levels:

– 22,000 tons is added to each of the milestones if

Phelps Dodge Hidalgo resumes operation but BHP San Manuel

does not resume operation,

– 16,000 tons is added to each of the milestones if BHP
54

San Manuel resumes operation but Phelps Dodge Hidalgo does

not resume operation, and

– If both smelters resume operation, then 38,000 tons

is added to the milestones for each subsequent year up to

the year 2012, and 30,000 tons is added to each milestone

for the year 2013 through the year 2018.

The Annex describes two sets of circumstances under

which resumed operations of the smelters could result in

emissions that are less than historical levels. The first

is if a smelter were to operate in a “substantially

different” manner than it had operated in the past. For

example, if only a portion of a plant were to resume

operation, then emissions would fall below past levels. 

This would happen, for example, if the plant were to resume

operation but used the acid plant to produce acid from

elemental sulfur, rather than to resume copper production. 

The Annex states that in such a case, the State will reduce

the emissions adjustment amount to reflect such conditions

in the milestones. 

The second set of circumstances addressed in the Annex

for reducing the adjustments is when one or both of the two

smelters resumes operations in a manner that triggers new

source review requirements under parts C or D of title I of

the CAA. The Annex recognizes that this new source review
55

17

Although not stated explicitly in the Annex, EPA interprets

this to mean legally permissible increases in actual

emissions within levels allowed by permits and regulations.

process might lead to a change in the level of SO2 emission

levels as compared to past levels. The Annex states that

under such circumstances the State will determine an

“appropriate” adjustment to the milestone based upon the

emission levels allowed by the new source review permit. 

For this case, the “appropriate” emission level will be

added to the milestone for each subsequent year after the

source remains in operation at the newly permitted levels. 

The Annex clarifies that in no instances may the adjustments

exceed 22,000 tons for the Hidalgo smelter or 16,000 tons

for the San Manuel smelter.

The final consideration in the Annex for making

adjustments to the milestones to reflect future changes in

smelter operations involves those smelters in the region

other than Phelps Dodge Hidalgo or BHP San Manuel. The

Annex provides for smelter-specific adjustments to the

milestones if two conditions are met:

(1) either the Phelps Dodge Hidalgo or BHP San Manuel

smelter has not resumed operations, AND

(2) one of the remaining smelters increases its actual

emissions17 above its year 2000 baseline level. 
56

The following table illustrates the smelter-specific

adjustments provided for in the Annex.

Table 2. Smelter-specific Adjustments 

Company/

smelter

Baseline

emissions (tons

per year)

Maximum adjustment to

the milestone for any

year where emissions

exceed 2000 baseline

levels

BHP San Manuel 16,000 1,500

Asarco Hayden 23,000 3,000

Phelps Dodge

Chino

16,000 3,000

Phelps Dodge

Hidalgo

22,000 4,000

Phelps Dodge

Miami

8,000 2,000

Kennecott Salt

Lake

1,000 100

The EPA interprets the Annex as providing for an adjustment

to the milestones by the amount by which a smelter’s actual

emissions exceed the baseline levels, up to the amount

listed in the right-hand column. For example, if in the

year 2006 BHP San Manuel has not resumed operation and

Asarco Hayden’s actual emissions for that year are 25,000

tons (2,000 tons more than Asarco Hayden’s baseline

emissions), then the milestone would increase by 2,000 tons. 

If, on the other hand, Asarco Hayden’s actual emissions are

28,000 tons, (5,000 tons more than baseline emissions), the
57

milestone would be adjusted by 3,000 tons, the maximum

amount listed in the table.

40 CFR 51.309(h)(1)(ii) of the proposed rule identifies

the adjustments to the milestones under the various

operating scenarios identified in the Annex by the WRAP. 

The EPA has attempted to clarify the adjustments with a

series of “if-then” tables consistent with EPA's plain

language guidelines. We request comment on these

adjustments, and whether these tables properly interpret the

procedures in section III.A.3.a of the Annex. In addition,

EPA has included in the proposed rule a requirement that any

adjustments to the milestones made to reflect changes in

smelter operating conditions, and the basis for those

adjustments, must be clearly identified by the States and

Tribes in the annual process to determine whether the

milestone is exceeded. (This annual process is described

further in unit II.C of this preamble). 

3. Adjustment for Changes in Emissions Calculation

Methods.

 The Annex provides for adjusting the milestones if

there are changes in emissions calculation methods. Such

changes could result, for example, if States or Tribes were

to find errors in the 1998/99 inventories used to establish
58

the milestones, or based on State, tribal and EPA efforts to

improve the accuracy of emissions calculation methods.

In establishing an emissions baseline, the WRAP has

used a number of different techniques to estimate or measure

the emissions from the sources covered by the program. 

These current methods vary in their accuracy and

reliability. For example, EPA believes that the most

reliable method for measuring emissions is that currently

being used to monitor electric utility boilers under the CAA

acid rain program. This monitoring method measures the

amount of SO2 in the exhaust from the boilers and the

quantity (flow) of exhaust on a continuous basis. This

allows the hourly tracking of SO2 emissions. Another method

for calculating SO2 emissions for industrial coal-fired

boilers is to measure the amount of sulfur in the coal and

the quantity of coal burned, and to use EPA emission factors

to determine the SO2 emissions. The EPA considers this

method to be less accurate than the method for monitoring

emissions for the acid rain program because coal is a

heterogeneous mixture. As such, there are variations in the

fuel sulfur which result in inherent uncertainties in

knowing whether a given fuel sulfur measurement is

representative of the entire quantity of fuel combusted. 

The copper smelters in the WRAP region are also considered
59

18

"Mass balance" (also sometimes called "material balance")

techniques use data on the total amount of pollutant

present, along with the amount that ends up in product or

wastes, to deduce the amount that is emitted to the air. 

For some source categories, this can be a highly accurate

method for determining the emissions. For others, it is

much more uncertain.

to have a reliable method of determining their SO2

emissions, relying on a combination of monitoring and mass

balance.18 For a number of other source types -- such as

portland cement plants, fluid cat cracker regenerators and

sulfur plants, emissions are usually estimated using

emission factors (that is, multipliers that are expressed in

terms of amount emitted per amount of throughput or

production). For sources relying on emission factors or

other calculation techniques, there is a greater probability

that there will be future improvements in the emission

estimation methods. 

As the WRAP's SO2 program progresses, it is likely that

some facilities that have relied on emission factors and

other less accurate methods for determining the emissions

will improve the accuracy of the emission estimates. The

Annex provides for adjustments to the milestones when

emission calculation techniques change is to avoid the

creation of “paper” increases or decreases in emissions that

do not reflect actual changes in emissions. As an example,
60

assume that in their baseline inventory, a State in the WRAP

region estimated emissions for a portland cement plant using

an emission factor that a subsequent source test shows to be

inaccurate. If the source test indicated that the plant is

emitting 10 percent more emissions per unit of production

than predicted by the emission factor, the emission estimate

for the portland cement plant would increase even if

production levels remained the same. While the new

information shows that the emissions from the plant are more

than previously thought, this does not mean that emissions

have increased. Similarly, a new method of calculating

emissions that shows that emissions per unit of production

are less than previously estimated would not indicate that

emissions have decreased. Accordingly, in a program which

depends on long-term comparisons of emission inventories 

relative to initial expectations, EPA agrees with the WRAP

that it is important that the system avoid creating such

“paper” increases and decreases.

This provision for making these adjustments is

discussed in sections II.A.d. and III.a.4.b of the Annex,

and in a supplemental paper entitled "Emission Tracking

Prior to Triggering the Backstop Trading Program." In

summary, the Annex provides for:

- documenting the method of estimating or measuring
61

emissions that was used in developing a baseline for the

program,

– keeping track of when these emission calculations

methods change relative to the baseline,

– periodically revising the SIPs to adjust the

milestones to reflect these changes, and

– using the method in place pending the SIP revision.

The Annex provides that the implementation plan

submittals must document how the emissions were determined

for each unit that is part of the program. This information

will be used to track the changes that occur over the years

in the emission estimating and measuring techniques. As

noted below in unit II.C of this preamble, States will 

report these changes annually in "exceptions reports," which

are reports that are intended to facilitate public review of

the annual inventories by highlighting items of interest. 

 The EPA agrees with the WRAP that future adjustments to

the milestones for currently unknown changes in emissions

calculation methods should only be made through revisions of

SIPs/TIPs. The milestones are a fundamental component of

the SO2 reduction program. Accordingly, it is important

that any changes to those milestones be transparent to the

public in order to ensure the overall integrity of the

program. The implementation plan revision process assures
62

that such a public review will take place. At the same

time, we agree with the WRAP that it is not practical to

provide for SIP revisions every year to account for such

adjustments. In the supplemental paper, the WRAP recommends

that these adjustments be made every 5 years and be included

in the SIP revisions required by 40 CFR 51.309(d)(10). The

EPA believes that this is a reasonable time frame for making

these changes. The EPA notes, however, that during the time

period between the date the calculation method changes and

the date that the SIP is revised, it is equally important to

ensure that there not be "paper" emissions increases and

decreases relative to the milestones. This would occur if

emissions were reported using a new method, while the

milestone reflected baseline estimates based on the previous

method. The EPA agrees with the WRAP's suggestion that for

purposes of the annual determination, the same method be

used for reporting emissions, that is, the old method (on

which the baseline emissions were calculated), pending the

completion of the periodic SIP revision. The WRAP's process

would accomplish this by having the regional planning body

identify and account for any such "paper" increases and

decreases in the annual determination process.
63

 The EPA has incorporated the proposed adjustment for

emission calculation method changes in the proposed rule as

paragraph 40 CFR 51.309(h)(1)(iii). 

4. Adjustments for Utility Boilers Opting to Use More

Refined Flow Rate Methods.

In 1999, EPA adopted revisions to EPA's Reference

Method 2, the standard method for measuring stack flow

rates, (64 FR 26484, May 14, 1999). The revisions provided

three new procedures: Methods 2F, 2G, and 2H. The new

procedures, if used for a given source, allow for a more

detailed assessment of the stack flow rates to provide more

accurate results. The changes addressed concerns raised by

utilities that Reference Method 2 may over-estimate flow in

certain cases, such as when the flow is not going straight

up the stack. If the flow rate is over-estimated, this

would also lead to the overestimation of SO2 emissions

because the facility's continuous flow rate monitor is

calibrated to correspond to the flow test method. 

Facilities subject to the acid rain program under title IV

of the CAA must perform these flow tests at least once a

year to determine the accuracy of their continuous flow

monitors. Facilities have an option to use either the old

Method 2, or one or more of the new methods.
64

When the WRAP made its emission projections for

purposes of developing the milestones, the new methods were

not yet in place. Accordingly, if a source owner chooses to

use the new flow methods, and if as expected it results in a

reduced flow rate for the same level of operation, then

there will be a corresponding decrease in the emissions

estimate. The EPA agrees with the WRAP that this would

create the possibility of a "paper" decrease relative to the

milestone if the milestone reflects the old method. As

discussed in section III.A.5 of the Annex, the WRAP notes

that a protocol is needed for adjusting the milestones to

reflect changes in the baseline emission for utility boilers

any time that a source opts to change its CEMs method. The

WRAP addressed this issue in greater detail in a 

supplemental paper entitled "Emissions Tracking Prior to

Triggering the Backstop Trading Program," which was

submitted to EPA on June 1, 2001.

The WRAP has identified three possible technical

procedures for developing an "adjustment factor" for the new

flow method. The EPA agrees that any of these three

procedures would be acceptable. Under the first procedure,

there would be a side-by-side comparison of flow rates using

both the new and the old flow reference methods. For

example, if the new method measured 760,000 cubic feet per
65

minute, and the old method measured 800,000 feet per minute,

the adjustment factor would be (760,000/800,000), or 0.95. 

The second method would use annual average heat rate, which

is reported to the Energy Information Administration (EIA),

as a surrogate for the flow rate. Under this method, the

flow adjustment factor would be calculated using the annual

average heat rate using acid rain heat input data (MMBtu)

and total generation (MWHrs)reported to EIA, calculated as

the following ratio:

Heat Input/MW for first full year of data using new flow rate method

---------------------------------------------------------------------

Heat Input/MW for last full year of data using old flow rate method

The third method would use data reported to EPA's acid rain

program. Under this method, there would be a comparison of 

the standard cubic feet per minute (CFM) per megawatt(MW)

before and after the new flow reference method based on CEMs

data, as follows:

SCF/Unit of Generation for first full year of data using new flow rate

method

------------------------------------------------------------------------

SCF/Unit of Generation for last full year of data using old flow rate

method 

In the supplemental information paper, the WRAP

identified three possible approaches for using the

adjustment factors for making a correct comparison of

emissions to the milestones. The WRAP did not indicate a
66

preference for any single approach. The three options are

as follows:

(a) Using one of the options described above for

determining the flow adjustment factor, revise the source’s

baseline emissions forecast for 2003, 2008 and 2013. For

each year following the adoption of the new flow reference

method through 2017, reduce the interim milestone by the

corresponding amount. Using the example above where the

adjustment factor is 0.95, this means that the previous

baseline emissions for that source would be multiplied by

0.95. The annual compliance check will then be done by

comparing regional SO2 emissions (unadjusted, as reported to

EPA's acid rain program) to the revised milestone. 

(b) Using one of the options described above for

determining the flow adjustment factor, revise the source’s

reported emissions on an annual basis, and do not adjust the

milestone. For the example noted above, the emissions

reported to EPA's acid rain program would be adjusted upward

by multiplying the amount times (1/0.95). For each year

following the adoption of the new flow reference method

through 2017, the annual compliance check will be done by

comparing the adjusted regional SO2 emissions to the

unadjusted milestones. 

(c) Use a combination of the two approaches. Under
67

this approach, interim milestones would be adjusted only

every 5 years [using option (a) above] and the reported

emissions for additional sources making the change in the

intervening years are adjusted for comparison to the

milestones [using option (b) above]. 

The EPA believes that any one of these three approaches

would be acceptable, but that a specific approach needs to

be selected for the final rule. The EPA also believes that

these adjustments to the milestone or to the reported

emissions would not necessarily require SIP or TIP

revisions, because the precise method for making the 

adjustment, and the publicly available data elements that 

will be used for making the adjustment, could be

specifically identified in the final rule.

5. Adjustments for Illegal Emissions.

The Annex at section III.A.4.d. provides for future

decreases to the milestones if it is determined that "the

milestones were based on illegal emissions." The Annex also

includes a discussion of this adjustment in Attachment A,

Draft Model Rule, sections A3.3(b)(4) and C4.6. These

sections of the Annex provide a brief discussion of this

adjustment and noted that "the specific mechanism for this

adjustment needs further discussion by the WRAP.” 
68

In developing the milestones, the WRAP identified the

baseline emissions for each source during the base year, and

estimated emissions for the source during the 2003 to 2018

time period, taking into consideration growth, utilization, 

retirement, and the absence of any additional requirements. 

The compilation of these source-specific baseline emissions

resulted in the baseline emission inventory totals, which

serve as a “starting point” for measuring progress from the

program. The WRAP recognized in the Annex that if a source

was in violation during the base year when its emissions

were determined, the baseline emissions during 2003 - 2018

would be overestimated. For example, assume the baseline

emissions for a boiler were calculated based upon an

emission factor of 0.6 pounds per million BTU, and using

actual and projected fuel amounts, the baseline emissions

source were 10,000 tons in the year 1998, increasing to

20,000 tons in the year 2008 and continuing at 20,000 tons

for the years between 2008 and 2018. For this example case,

it is later discovered that the source has been in violation

since 1998 of an emission limit of 0.3 pounds per million

BTU. Based on a final enforcement action that takes place

in the year 2007, it is determined that if the source was in

compliance with its limit, baseline emissions would have

been 5000 tons in the year 1998, increasing to 10,000 tons
69

in the year 2008 and continuing at 10,000 tons for the years

between 2008 and 2018. For this example case, baseline

emissions for each year between 1998 and 2018 would be

overestimated, by amounts that vary from 5,000 to 10,000

tons.

The Annex and the WRAP's supplementary information

include this provision without any further explanation of

what should be considered as illegal emissions, who makes

the determination, or what is the process for making this

adjustment. The EPA is proposing the rule with the language 

consistent with the Annex, and we solicit comments on

whether the term "illegal emissions" should be further

clarified in the final rule.

There are many types of outcomes between plaintiffs and 

defendants when resolving a dispute over illegal emissions. 

The most obvious example is when a case goes to court and

there is a court decision that the emissions were not legal. 

This is the rarest of the dispute resolution methods. It is

more typical that the disputing parties resolve their

differences through one of the following two methods: 

-- a consent decree that is either entered through

Federal or State courts, or 

-- an administrative enforcement proceedings by either

States, Tribes, or EPA. 
70

Under these two methods of resolving an allegation of an

illegal emission, it is typical that the defendant neither

admits nor denies the alleged violation. They simply agree

to correct the situation through injunctive relief and often

pay penalties for being in violation.

Sometimes, States and EPA disagree over whether or not

a particular alleged violation was correct. This is typical

in cases when EPA files a case that a State has opted not to

pursue. There also can be disagreement when citizen groups 

pursue violations. Many of these cases are due to a

difference in the federally enforceable SIP regulations and

the current State regulations.

Because of the issues referred to above, EPA is

soliciting comment on how these types of settlements should

affect the milestones. An important consideration to note

is that under any of the options described below,

adjustments to the milestone would occur only after the

source in the enforcement case has achieved the additional

control of their SO2 emissions. Consequently, adjustments

to the milestone will have no affect on any other facility’s

operation because all of the reductions are being achieved

by the source subject to the enforcement action. We seek

comment on the following possible options:

Option 1. Under this option, the rule would require
71

that if there is any resolution to an alleged illegal SO2

emission, then all of the reductions would be considered as

"illegal emissions." Taking into account these reductions,

there would be a "re-forecast" of the source's emissions and

its effect on the milestone. "Re-forecast" means to reapply the forecasting process, that is the process the WRAP

originally used to project future emissions and develop the

milestones, using the corrected baseline sulfur dioxide

emissions for the affected source. A comparison of this reforecasted emission level with the previously forecasted

emissions would yield a calculation of the amount of the

adjustment for each year up through 2018. 

Option 2. Under this option, the rule would allow for

case-by-case judgments on the appropriateness of the

adjustment, and would clarify the entity responsible for

deciding whether a case involves illegal emissions

warranting an adjustment to the milestones. Under this

option, we also seek comment on the entity responsible for

this determination, that is whether the rule should clarify

whether the parties entering into a settlement, the States,

the Tribes, the WRAP, or EPA would determine the

settlement's impact on the milestones.

Another issue that EPA is soliciting comments on is how

to treat any extra SO2 emissions reductions that a facility
72

might achieve as a result of a settlement. The EPA will

often allow a company that is settling through a consent

decree or consent agreement to perform a “supplementary

environmental project” and allow the expenditures on this

project to partially offset penalties that the company would

be assessed. If the milestones are not reduced by the

amount of extra emissions reductions from this type project,

then the environment may see little benefit, since another 

company would be allowed more SO2 emissions. We seek input

on whether these “extra” emissions reductions should be

considered part of this "illegal emission" adjustment and

factored into a recalculation of the milestone.

In the proposed rule, EPA includes, at 40 CFR

51.309(h)(1)(v), the Annex's provision for decreasing the

milestone for illegal emissions. The EPA requests comment

on how we have incorporated this provision, including

whether the final rule should add further detail on the

timing of the adjustment, and on the administrative steps

that would be followed in making the adjustment. For

example, EPA believes it may be useful to clarify that the

adjustment to the milestone should be made beginning with

the year that the source comes into compliance, rather than

beginning with the date of the enforcement action.
73

 6. Adjustment Based Upon Findings of Future Program

Audits.

As will be discussed in greater detail below, there are

several types of program reviews and audits that are part of

this program. The Annex includes a provision to adjust the

milestones if these program reviews and audits identify

reasons for an adjustment. The Annex describes this

adjustment in section III.A.4.c. and in Attachment A, Draft 

Model Rule sections B5 and C14.2. The WRAP has further

clarified this process in the Supplemental Paper, “Emissions

Tracking Prior to Triggering the Trading Program.” 

There are three types of program reviews and audits in

this program: (1) audits of the data quality and

administrative aspects of the program if the trading program

is not triggered, (2) a review of data quality,

administrative process and other issues related to the

trading program if it is triggered, and (3) the 5-year SIP

or TIP review (due in 2008, 2013, and 2018) required by the

regional haze rule in 40 CFR 51.309(d)(10). The WRAP

recommends, and EPA agrees, that such program reviews and

independent party audits may identify the need for

adjustments to the milestones to correct errors that do not

fit into any of the other categories of adjustments

discussed above. Accordingly, the Annex and the proposed
74

19

Supplementary Submittal to EPA in Support of the SO2 Annex

to the Grand Canyon Visibility Transport Commission Report.

Submitted to EPA by the Western Regional Air Partnership,

June 1, 2001. 

rule provide a process for making such adjustments as

appropriate. 

As indicated, in a supplemental paper to the Annex,19

the pre-trigger audits of the program will be completed by

the third year of each 5-year cycle (that is, by 2006, 2011,

and 2016.) A requirement for these audits is included in

the proposed rule at 40 CFR 51.309(h)(3)(v). The timing of

these pre-trigger audits is designed to provide

participating States and Tribes with sufficient lead-time to

make any necessary changes during the general program review

due 2 years later (in 2008, 2013, and 2018, respectively). 

The EPA includes the requirement to adjust milestones

based on the results of the three types of data and program

audits described above. This provision is included in the

proposed rule as 40 CFR 51.309(h)(1)(vi). The proposed rule

also requires that if, during any audit or program review,

the WRAP finds that changes need to be made then they will

be incorporated at the time of the next SIP revision

required under 40 CFR 51.309(d)(10). 

The EPA wishes to clarify that each 5-year SIP review

under 40 CFR 51.309(d)(10) should include an evaluation of:
75

(1) key program assumptions against current findings, (2)

the adequacy of State and tribal resources to implement the

program, and (3) the effectiveness of interstate

coordination and memoranda of understanding between the

States and Tribes implementing the program.

7. Adjustments for Individual Sources Opting Into the

Program.

The Annex, in section III.A.4.a. on page 58, and in

section II.A.2.c on pages 21 and 22, provides for possible

adjustments to the milestones for small sources that choose

to participate in the program. Because the program includes

all sources whose emissions exceed 100 tons per year, any

such source opting into the program would be one that emits

less than this amount. 

The EPA does not view the individual source opt-in as

an essential element of the regional SO2 program, but we do

not object to its inclusion. We believe that if the program

allows an expansion of the universe of sources subject to

the program, it is reasonable that the milestones be

adjusted upward to account for the inclusion of additional

sources. The proposed rule, in proposed 40 CFR

51.309(h)(1)(vii), allows for adjustments to the milestones

if such sources opt into the program. In addition, the

proposed rule requires that the adjustment be done through

SIP revision procedures. 
76

C. What is the Annual Process for Determining Whether a

Trading Program is Triggered?

The regional haze rule requires the Annex to identify

the specific process for determining whether the milestones

are exceeded. The WRAP included in the Annex a discussion

of an annual process for making the determination, and in a

supplemental paper submitted to EPA in June 2001. In this

unit of the preamble, we discuss this annual process and how

EPA has incorporated this process into the proposed rule. 

Regional Haze Rule Requirements for Specifying How the

Market Trading Program Would Be Activated

The regional haze rule, in 40 CFR 51.309(f)(1)(ii)

requires that the Annex provide documentation "describing in

detail how emissions reduction progress will be monitored,

and what conditions will require the market trading program

to be activated...". In addition, 40 CFR 51.309(d)(4)(i)

requires that implementation plans submitted under 40 CFR

51.309 must

include provisions requiring the monitoring and

reporting of actual stationary source sulfur dioxide

emissions within the State. The monitoring and

reporting must be sufficient to determine whether a 13

percent reduction in actual stationary source emissions

has occurred between the years 1990 and 2000, and

whether milestones required by paragraph ..[40 CFR

51.309(f)(1)(i)] ... have been achieved for the

transport region. The plan submission must provide for

reporting of these data by the State to the

Administrator. Where procedures developed under

paragraph (f)(1)(ii) of this section and agreed upon by
77

the State include reporting to a regional planning

organization, the plan submission must provide for

reporting to the regional planning body in addition to

the Administrator. 

Finally, 40 CFR 51.309(d)(4)(ii) requires that

implementation plans submitted under 40 CFR 51.309 must

include "the criteria and procedures for activating a market

trading program or other program consistent with paragraph

(f)(1)(i) of this section if an applicable regional

milestone is exceeded,...", that is, consistent with the

Annex. 

How the Regional Haze Rule Requirements for Program

Activation are Addressed in the Annex

The WRAP addresses the requirements for documenting how

the program would be activated in the Annex, and in a June

2001 supplemental paper entitled "Emissions Tracking Prior

to Triggering the Emissions Trading Program." Regarding the

requirement to "include provisions requiring the monitoring

and reporting of actual stationary source sulfur dioxide

emissions," the Annex provides that participating States and

Tribes will compile an annual emissions report indicating

the emissions of all stationary sources with actual SO2

emissions greater than 100 tons per year, beginning with the

year 2003 inventory. Any source which reduces emissions

below 100 tons per year in later years will continue to be

subject to the program. 
78

As further described in the Annex (III.A.6.b and

II.A.3.b), participating States and Tribes must determine

annually from 2003 to 2018 whether the market trading

program is triggered by comparing the regional SO2 emissions

from stationary sources covered by the program to the

applicable milestone. Compliance with the milestone is

measured by using a 3-year average of total regional

emissions with the 3-year average of the milestones except

for the years 2003, 2004, and 2018. For 2003, the

determination is based on 2003 emissions data only. For

2004, the program will use an average of 2003 and 2004

emissions data. Compliance using a 3-year average will

begin with the 2003-05 emissions data for comparison with

the year 2005 milestone. For the year 2018, total emissions

will be compared to the 2018 milestone, not a 3-year

average. 

As outlined in greater detail in the supplemental paper

cited above, the annual process that participating States

and Tribes will use consists of the following steps: 

 1) Each participating State and Tribe will compile

annual emissions reports from all sources within their

jurisdiction that are subject to the program (this includes

all sources with actual emissions of 100 tons/year or

greater of SO2 during the year 2003 or any subsequent year),
79

 2) Each State and Tribe will solicit public comment

on its annual emissions report for stationary sources, 

 3) States and Tribes will submit their annual

emissions report to the WRAP. The annual emissions report

would be due by September 30 of the following year. (For

example, the emissions report for calendar year 2003 would

be due September 30, 2004),

 4) The WRAP will consolidate the data into a regional

emissions report, assure the integrity of the regional

reporting process and the quality of the data, and issue a

draft regional emissions report. The draft regional

emissions report will compare regional emissions to the

milestone. (Note: this function could also be carried out by

another State and tribal designee approved by EPA, for

example, a regional modeling center or other program

tracking administrator.) The draft regional emissions

report will be completed by December 31 of the following

year (for example, the draft finding for the year 2003 will

be completed by the end of calendar year 2004), and

 5) Taking into account public comment, participating

States and Tribes will review and approve the final regional

emissions report and make a formal submittal to EPA

documenting their final determination of whether the

milestone has been exceeded. The WRAP's supplementary
80

20

See preamble unit II.D below for a further discussion of the

trading program allowances.

information paper clarifies that this final submittal will

be due the following March (for example, March 2005 for the

emissions report for the year 2003), and this March deadline

is included in the proposed rule. If the regional inventory 

exceeds the applicable milestone, participating States and

Tribes will formally trigger the program by notifying EPA

and the public at the time that the final report is

submitted.

Special Provisions for the Year 2018

As discussed in sections III.A.6.c and II.A.3.c of the

Annex, the participating States and Tribes will compare the

total regional emissions of SO2 for 2018 against the year

2018 milestone. Unlike for the comparison for years before

2018, there is no averaging of the emissions for 2018 with

emissions of previous years. If emissions in 2018 are

greater than the 2018 milestone, then source-specific

penalties will be imposed if sources exceed their trading

program emissions allowances.20 

Option for Triggering the Program in the Year 2013 Based

Upon Projected Emissions for the Year 2018 

The Annex provides participating States and Tribes an

option for triggering the market trading program in the year
81

2013 even if the milestone has not been exceeded. This 2013

trigger option will be implemented by consensus of those

States and Tribes that have implementation plans under 40

CFR 51.309. Implementation of the early trigger will be

based on emissions forecasts indicating that compliance with

the 2018 milestone is not expected. The purpose of the

optional trigger is to help sources to avoid penalties for

the year 2018 by formally triggering the trading program in

advance. Triggering the trading program early would also

help ensure that actual emissions in the year 2018 will be

less than the milestone. 

Special Provisions for Mohave Electric Generation Station

for the Years Between 2003 and 2006

The Annex also provides for special provisions in the

annual emissions reporting for the Mohave Electric

Generating Station for the years between 2003 and 2006. For

this plant, controls will be installed by the year 2006

consistent with the Consent Decree for Grand Canyon Trust v.

Southern California Edison (District of Nevada CV-S-98-

00305-LDG, dated December 15, 1999).

When the interim milestones were first recommended by

the WRAP Initiatives Oversight Committee (IOC), there was an

error in the baseline emissions projection for the Mohave

Generating Station. In estimating this baseline, the WRAP
82

assumed that controls required for the Mohave Electric

Generating Station in 2006 would be in place in 2003. 

Therefore, as discussed in Annex sections III.a.6.d. and

II.A.3.d, the WRAP has included a correction for this error

that will be used when measuring compliance with the

milestones for 2003 through 2006. For these years,

emissions from the Mohave Generating Station will be

calculated using an SO2 emissions rate of 0.15 pound per

million BTU of coal input, consistent with the maximum

allowable emissions rate effective in 2006 under the Consent

Decree. These calculated emissions for Mohave will be

substituted for the actual emissions in 2003, 2004, and

2005. For the year 2006, the emissions will be calculated

based upon 05 pound per million BTU for any part of 2006

prior to the installation of the controls.

Reliance on Current Emissions Reporting Requirements

The WRAP, in the Annex, recommends that the current

inventory techniques and requirements that States are using

in the development of emissions inventories should be

sufficient for quantifying the regional SO2 emissions on an

annual basis for the pre-trigger program. Consistent with

this recommendation, the Annex does not provide for the

development of emission quantification protocols for the

pre-trigger phase of the program. The WRAP recommends that
83

this should be adequate since the large majority of

emissions come from the coal-fired power plants and the

copper smelters, which are accurately measured using current

methods. As noted above, the Annex includes adjustments to

the milestones to take into account any changes to emission

estimating or measuring techniques. If the trading program

is triggered, as discussed below, the WRAP recognizes the

need for protocols for consistent and "best available"

emission monitoring and reporting for each source category.

The EPA proposes to agree with the WRAP's recommendation

that existing emissions reporting requirements are

sufficient for the pre-trigger phase. However, EPA

recognizes that there is some measure of uncertainty in the

program because there is currently less information on the

specific methods being used for reporting emissions from the

other sources (that is, other than utilities and smelters),

and the level of accuracy with the methods for each of these

sources is not as well understood. Reliance on current

inventory techniques and requirements will also result in

sources in the same source category using different

methodologies since the inventory reporting process allows

for such variability. There will also be variability from

State to State, or Tribe to Tribe, since there is no

requirement for consistency between States or Tribes. We
84

request comment on the acceptability of reliance on current

emission inventory methods being used for sources in the

region.

Exceptions Reports

The supplemental information provided by the WRAP

indicates that the program will include a requirement for

participating States and Tribes to include what are termed

"exceptions reports." These exceptions reports will contain

the following information:

-- identification of any new or additional SO2 sources

greater than 100 tons per year that were not contained in

the previous inventory; 

-- identification of sources shut down or removed from

the previous inventory;

-- explanation for emissions variations at any covered

source that exceeds plus or minus 20 percent from the

previous year's emissions; and

-- identification and explanation of new emissions

reporting methods at any source.

Incorporation of the Annual Process Into the Proposed Rule

The EPA believes that the detailed information provided

by the WRAP in the Annex and in supplemental materials

fulfills the requirements for the Annex that are contained

in 40 CFR 51.309(f)(1)(ii) for "documentation describing in
85

detail how emissions reduction progress will be monitored."

In addition, EPA believes that State SIPs and tribal TIPs 

submitted consistent with these provisions will satisfy the

requirements of 40 CFR 51.309(d)(4)(i) for monitoring and

reporting of SO2 emissions. 

How EPA Proposes to Incorporate the Annual Process into 40

CFR 51.309 of the Regional Haze Rule

In the proposed rule, EPA includes the WRAP program's

requirements for an annual process for determining whether

the milestones are exceeded. This process appears in the

proposed rule at 40 CFR 51.309(h)(2) and (3). The EPA

proposes that the Annex (including the supplemental papers)

meets all of the requirements of 40 CFR 51.309 of the

regional haze rule for "describing in detail how emission

progress will be monitored, and what conditions will require

the market trading program to be activated." 

Proposed paragraph 40 CFR 51.309(h)(2) describes the

process for collecting emissions data each year and for the

reporting of such data by each participating State and

Tribe. This includes provisions describing which sources

must be included in the program, a requirement for States to

submit emissions reports for the previous year by September

30th of each year, a requirement that the annual emissions

report include exceptions reports, the special provisions 
86

for the Mohave Generating Stations for the years 2003

through 2006, and the option for including year 2018

emissions projections in the year 2013.

The regional haze rule requires, as noted above, that:

The plan submission must provide for reporting of these

data by the State to the Administrator. Where

procedures developed under paragraph (f)(1)(ii) of this

section and agreed upon by the State include reporting

to a regional planning organization, the plan

submission must provide for reporting to the regional

planning body in addition to the Administrator. 40

CFR 51.309(d)(4)(i).

This provision does not require participating States and

Tribes to report the relevant data to a regional planning

organization, but it does give the WRAP the ability to

include procedures in the Annex for the collection of data

by a regional planning body. Such procedure would

facilitate each State and Tribe's ability to determine

whether the milestones are exceeded. 

As indicated in the WRAP's supplemental paper

"Emissions Tracking Prior to Triggering the Emissions

Trading Program" the Annex includes a regional planning

body, that is, the WRAP, for the reporting of emissions.

Assuming that each participating State and Tribe designates

the WRAP as the "regional planning body," each State and

Tribe would report to the WRAP. The EPA, therefore, expects

that the WRAP will be compiling the information from each

participating State and Tribe. 
87

The EPA assumes at this point that the participating

States and Tribes will agree on the procedures for reporting

data to the WRAP. However, to ensure that there would be a

process in place in the unlikely instance that the

participating States and Tribes do not designate a regional

planning body for this purpose, or do not agree on the

reporting procedures, the proposed rule provides that each

State and Tribe would make the determination of whether a

milestone is exceeded based on the information submitted to

them by the other participating States and Tribes.

Proposed paragraph 40 CFR 51.309(h)(3) describes the

process for making the annual determination of whether the

milestone was met. A draft determination would be submitted

by the regional planning body (which EPA assumes will be the

WRAP) or each State or Tribe by the end of the following

year (for example, the end of 2004 for the determination for

the year 2003). The proposed rule requires a final

determination, based on comments received on the draft

determination, by the end of the following March (for

example, the end of March 2005 for the year 2003).

D. What Must Each Participating State and Tribe’s

Implementation Plan Include for Administering the Trading

Program, if it is Triggered? 
88

The regional haze rule, at 40 CFR 51.309(d)(4)(iii) and

(iv), requires that SIPs/TIPs provide for a market trading

program that would serve as a "backstop" to ensure that SO2

emissions would not exceed the milestone. The regional haze

rule, at 40 CFR 51.309(f)(1)(ii), requires that the annex

provide information on this market trading program,

consistent with 51.309(d)(4). This provision requires that

the Annex must contain "documentation" of the market trading

program, including model rules, memoranda of understanding,

and other documentation describing in detail how emissions

reduction progress will be monitored, what conditions will

require the market trading program to be activated, how

allocations will be performed, and how the program will

operate. 

The regional haze rule, in 40 CFR 51.309(d)(4)(iii)

requires that the implementation plans submitted under 40

CFR 51.309 must: 

– contain provisions to activate the market trading

program or other program within 12 months after the

emissions for the region are determined to exceed the

applicable emissions reductions milestone, and 

– must assure that all affected sources are

incompliance with allocation and other requirements

within 5 years after the emissions for the region are
89

determined to exceed the applicable emissions

reductions milestone.

Additionally, 40 CFR 51.309(d)(4)(iv) requires that the

implementation plans include provisions for market trading

program compliance reporting, and provisions requiring the

State to provide annual reports assuring that all sources

are in compliance with the market trading program.

The Annex includes documentation of the market trading

program in sections II.D and II.E of the Annex, pages 28-53,

and in section III.D of the Annex, pages 63-67. A draft

model rule is included as Appendix A to the Annex. A draft

memoranda of understanding is included as Appendix B. A few

clarifications on trading program issues are included in the

supplemental information submitted by the WRAP during June

2001.

 These sections of the Annex provide the

"documentation" required by 40 CFR 51.309(f)(2)(ii), and

they include "model rules, memoranda of understanding, and

other documentation describing in detail how emissions

reduction progress will be monitored, what conditions will

require the market trading program to be activated, how

allocations will be performed, and how the program will

operate." Therefore, EPA proposes a finding that the

information submitted in the Annex, including the Appendices
90

and supplemental information, satisfies the requirements in

40 CFR 51.309(f)(2)(ii) of the regional haze rule. 

The EPA also proposes a finding that the Annex provides

for a trading program which, if followed in the 2003 SIP

submittals, will satisfy the requirements in 40 CFR

51.309(d)(4)(iii) and (iv). The June 2001 supplemental

information makes clear that the backstop market trading

provisions will be activated within 12 months after the

emissions for the region are determined to exceed the

applicable emissions reductions milestone. The Annex also,

as clarified with the example in section II.D.1 on page 29,

provides that all affected sources must be in compliance

with allocation and other requirements within 5 years after

the emissions for the region are determined to exceed the

applicable emissions reductions milestone. The Annex

includes provisions requiring annual reports assuring that

all sources are in compliance with applicable requirements

of the market trading program.

Incorporation of Annex Trading Program Provisions in the

Proposed Rule

The EPA has incorporated the Annex provisions for a

market trading program in proposed 40 CFR 51.309(h)(4). In

the proposed rule, EPA also has included a list of

fundamental elements that the SIPs must contain, and the
91

basic requirements for those elements that will help guide

EPA's review of the SIPs. These fundamental elements are

aimed at ensuring the integrity of the market trading

program, and are consistent with the provisions of EPA's

guidance for economic incentive programs (EIPs). (Improving

Air Quality with Economic Incentive Programs EPA-452/R-01-

001, January 2001). The fundamental elements are as

follows:

(1) provisions for the allocation of allowances to each

source in the program;

(2) emissions quantification protocols;

(3) provisions for the monitoring, record keeping and

reporting of emissions;

(4) provisions for a centralized system to track

allowances and emissions;

(5) provisions requiring the identification of an

authorized account representative for each source in the

program;

(6) provisions requiring the account representative to

demonstrate annual compliance with allowances;

(7) provisions for the process of transferring

allowances between parties; 
92

(8) provisions describing the "banking" of extra

emissions reductions for use in future years, if the

implementation plan allows for banked allowances; 

(9) provisions establishing enforcement penalties for

noncompliance with the trading program; and

(10) provisions for periodic evaluation of the trading

program.

The EPA believes that the detailed draft model rule,

which is Appendix A to the Annex, addresses these general

principles. The draft model rule is intended to provide

detailed regulatory language to implement the program and

will serve as a template that individual States and Tribes

can use to develop their SIPs under 40 CFR 51.309. The EPA

intends to work together with States and Tribes to ensure

that the final model rule, and the resulting State and

tribal plans, are consistent with the requirements of the

regional haze rule, with the provisions for TIPs contained

in 40 CFR part 49, and with other requirements that are

common to all State/tribal implementation plans and EIPs. 

The EPA believes that completion of this model rule effort

in a timely manner is very important to the overall success

of the program. In a supplemental paper entitled, "State

Rulemaking Schedules for 309," the WRAP provided estimated 
93

timelines for each of the 9 States in the transport region

to complete a SIP under 40 CFR 51.309. Based on this paper,

it appears that the WRAP intends to refine and finalize the

model rule by early 2002.

The EPA believes that the Annex provisions in 40 CFR

51.309 do not require the WRAP's submittal to contain the

same level of detail that is required in the final model

rule. First, EPA believes that it need not incorporate into

40 CFR 51.309 the same level of detail regarding the trading

program that will be set forth in the model rule. Second,

the model rule addresses details that are essential to the

program, but may not be appropriate as Federal mandates. 

For example, while it is essential that the program issue

specific emissions allocations to each source under the

trading program, it is not necessary or appropriate for EPA

to dictate that a specific method be used. Finally, we

believe that if SIPs/TIPs submitted under 40 CFR 51.309

adequately address the basic fundamental criteria that we

are proposing, they will provide for a sound program

consistent with EPA regulations and policies. 

The following is a description of each of the trading

program requirements that are included in proposed 40 CFR

51.309(h)(4). For each of these proposed requirements, EPA

requests comment on whether we have addressed the
94

requirement to an appropriate level of detail, and on

whether the substance of the requirement is sufficient to

ensure program integrity for the backstop market trading

program. 

Allowances. 40 CFR 51.309(h)(4)(i) and (ii)

Allowances are a key feature of the backstop market

trading program. An allowance authorizes a source to emit

one ton of SO2 during a given year or (with some exceptions)

in a future year. At the end of the compliance period,

which is a 12-month period ending with each calendar year, a

source owner's allowances must exceed or equal its annual

emissions. For example, a source that emits 5,000 tons of

SO2 in a given year must hold at least 5,000 allowances for

that year.

Allowances are fully marketable commodities. Once

allocated, allowances may be bought, sold, traded, or (where

allowed) banked for use in future years. If the trading

program is triggered, allowances are the currency with which

compliance with the SO2 emissions requirements is achieved. 

Sources that reduce their emissions below the number of

allowances they hold may transfer allowances to other units

in their system, sell or trade allowances to other sources

or private parties on the open market, or bank them to cover 
95

21

Note that while the Annex provides for averaging of

emissions reporting and milestones for purposes of making

the annual determination of whether the milestone is

exceeded, once a trading program is in place, there is no

averaging of the milestones for purposes of the trading

program. For example, milestones for the year 2013 must add

up to 655,000 (with suspended smelters) or 625,000 tons

(without suspended smelters). There is no averaging of the

year 2013 with 2012 and 2011 as is done for the annual

determination.

emissions in future years. Allowance trading provides

incentives for energy conservation and technology innovation

that can both lower the cost of compliance and yield

pollution prevention benefits. 

The Annex includes a hypothetical timeline in section

II.D.1. on page 29 of the Annex, which clarifies how the

market trading program would be implemented. This Annex

shows sources must hold sufficient allowances to cover their

emissions by the 6th year following the calendar year for

which emissions exceed a milestone. For example, if the

milestone is exceeded in 2004, then the first calendar year

for which a source would have to comply with allowances

would be the calendar year 2010. As a result, the

milestones become an enforceable "cap" on emissions, and the

total amount of allowances issued for participating States

may not exceed this "cap." A table listing the allowance

totals by year is included in the proposed rule as Table

4.21
96

The proposed rule requires States and Tribes to include

initial source-specific allowance allocations for each

source in their implementation plans submitted under 40 CFR

51.309. These initial allocations must specify the tons per

year allocated for each source for each year between 2009

and 2018. 

The Annex, in section II.D (pages 28-37) and in section

III.D.7 (pages 63-67) contains a detailed discussion of the

methodology that the WRAP proposes for distributing

allowances to sources. This methodology outlines in detail

the parameters and considerations that States and Tribes

will use for issuing initial allowances to sources, and for

adjusting those allowances with time. The EPA proposes not

to include the details of this methodology in 40 CFR 51.309. 

So long as the SIPs/TIPs contain source-specific allowances

for each source included within the program, and those

allowances add up to the appropriate regional total, EPA

believes the objectives of the program are met. The EPA

views the choice of method, and the implementation of the

method, to be primarily an issue for States and Tribes to

address. 

There is one element of the allocation methodology that

EPA has chosen to include in the proposed rule to ensure

that it is included in the program. This element, a 20,000
97

ton "set-aside" for use by Tribes, over and above any amount

allocated in the process described above, can probably be

assured only if EPA includes a requirement in the rule. 

Accordingly, 40 CFR 51.309(h)(4) requires that before

issuing allowances to individual sources, 20,000 tons must

be subtracted from the total for use by Tribes. The EPA

believes that this 20,000 ton set-aside should not be used

for issuing initial allowances to tribal sources of SO2

included within the program, and for adjusting those

allowances with time. Further discussion of issues related

to tribal participation in the program, and use of the "setaside" for Tribes, is included below in unit III of this

preamble.

Emissions Quantification Protocol, and Monitoring, Record

keeping and Reporting Provisions. 40 CFR 51.309(h)(4)(iii)

and (iv)

The proposed rule requires that States include specific

emissions quantification protocols, that is the procedures

for determining actual emissions. These procedures will be

used to measure, or determine, annual emissions if the

trading program is triggered. The proposed rule also

requires that States include the necessary monitoring,

record keeping, and reporting provisions to measure and

track results.
98

The WRAP recognized the need to have detailed and

prescribed emission quantification protocols and proposes

that the participating States and Tribes establish such

provisions in the SIPs submitted under 40 CFR 51.309. The

Annex describes the WRAP’s approach to monitoring in section

II, pages 39-41, in section III, item III.D.3 on page 64,

and in Attachment A, Draft Model Rule section C.2.3

Monitoring Requirements, and section C9 Emissions

Monitoring. In particular, the WRAP recognized the need for

emission monitoring protocols which ensure that emissions

are accurate and comparable for participating sources. For

the trading program, the emissions amount becomes a

tradeable, fungible commodity. Accordingly, it is important

to the integrity of the program to ensure that one ton of

emissions from one source is equivalent to one ton of

emissions from another source. The WRAP plans to develop

the specific emissions quantification protocols in a

subsequent collaborative process involving States, Tribes,

and EPA. 

Under this program, the WRAP in the Annex proposes that

sources subject to the acid rain program under title IV of

the CAA will continue to follow the continuous emission

monitoring procedures in the acid rain program, which appear 
99

on 40 CFR part 75. As a result, EPA would not develop or

require separate emission protocols for these sources as

part of implementing 40 CFR 51.309. 

For the other source categories not covered by part 75,

the WRAP in the Annex recognizes the need to develop

protocols based upon "best available" monitoring techniques

for each source category. The EPA proposes that the

criteria for acceptability of these protocols in the

implementation plans are the same criteria as listed in

section 5.2 and 5.3 of the EIP guidelines. These guidelines

state that emission quantification protocols:

-- must ensure reliable results, and that they must

ensure that repeated application of the protocol obtains

results equivalent to EPA-approved test methods;

–- must be replicable, that is, the protocol ensures

that different users will obtain the same or equivalent

results in calculating the amount of emissions and/or

emissions reductions. 

These guidelines also specify that trading programs need to

include monitoring, record keeping, and reporting provisions

to provide adequate information for determining a source’s

compliance with the program. Adequate monitoring, record

keeping and reporting procedures have several key

attributes, including representativeness (characteristic of
100

the source category and available monitoring techniques),

reliability, replicability, frequency (that is, the

monitoring is sufficiently repeated within the compliance

period), enforceability (that is, the monitoring is

independently verifiable), and timeliness.

Tracking Process. 40 CFR 51.309(h)(4)(v)

The proposed rule requires that the implementation

plans submitted under 40 CFR 51.309 must include provisions

identifying a specific tracking process to track allowances

and emissions. Consistent with the EIP guidance, the

proposed rule requires that the implementation plans must

provide that all emissions, allowance, and transaction

information is transparent and publicly available in a

secure, centralized data base.

The WRAP, in the Annex and draft model rule, has

included numerous provisions detailing the system that

States and Tribes intend to use to satisfy this proposed

requirement. These provisions are outlined in detail in the

draft Model Rule section C.8 and on pages 64-65 of the

Annex. The overall program is referred to as the Western

Emission Budget, or WEB. The tracking system includes a

centralized tracking systems administrator who would be

appointed by States and Tribes as the administrator of a

"WEB allowance tracking system" and a "WEB emissions
101

tracking system." The WRAP and EPA recognize that in

assigning duties to any such tracking system administrator,

States and Tribes may not delegate any inherent governmental

responsibilities. For example, emissions data certification

and program enforcement must remain with the States and

Tribes. The WRAP envisions that the central tracking system

will serve a number of functions: to identify which sources

hold allowances in the program, to identify how many

allowances a source owner holds, and to record allowance

transactions. Another function of the tracking system

administrator in the trading system is to record allowance

transfers and to ensure at the end of the year that a

source's emissions do not exceed the number of allowances it

holds. The tracking system serves as the official record

and operates much like a bank account. 

The allowance accounts are the official records for

allowance holdings for compliance purposes. It is for that

reason that the EIP requires that these systems be secure

and allow for frequent updates (EIP, section 7.4(g)). Also

consistent with the EIP, there must be a way to uniquely

identify each allowance and there must be enforceable

procedures for recording data. 

Responsible Party. 40 CFR 51.309(h)(4)(vi)
102

The EPA believes that it is important that each source

owner or operator designate a person who is responsible for

the data reported for that source. The proposed rule

includes a requirement that the SIPs/TIPs must include such

a provision. 

The market trading program described in the Annex

includes this requirement and refers to this person as the

Authorized Account Representative (AAR). The Annex

discusses the role and responsibilities of the AAR on pages

44 and 45 and in section C3 of the Draft Model Rule. The

representative's responsibilities include performing permit,

compliance, and allowance related actions for the WEB

Program. That person will be responsible for certification

for each emissions and allowance transaction.

Requirement for Annual Demonstration of Compliance. 40 CFR

51.309(h)(4)(vii) 

The proposed rule requires that the SIPs/TIPs include a

provision requiring the responsible party for each source to

demonstrate that the source holds a quantity of allowances

equal to or greater than the amount of SO2 emitted during

that year. The responsible party must make this

determination within a specified number of days following

the end of each calendar year. The responsible party must 
103

determine the amount of SO2 emitted in accordance with the

approved emissions quantification protocols and monitoring,

record keeping and reporting provisions developed by the

participating States and Tribes or the WRAP as part of this

program. The EPA believes that 60 days should be generally

sufficient for preparing this demonstration. This time

period is consistent with the national acid rain program,

and thus has been demonstrated as a reasonable time period

for utility boiler sources covered by that program. The

WRAP has indicated that the time necessary for determining

compliance will be dependent on emission quantification

protocols adopted. As these protocols are still under

development, the WRAP believes that it is possible that a

longer time period may be warranted in some cases. The EPA

proposes that the WRAP deadline be 60 days unless a specific

need is identified. We request comment on whether EPA

should include a specific, generally applicable, deadline in

the final rule. 

Requirement for Provisions Detailing the Process for

Transferring Allowances Between Parties. 40 CFR

51.309(h)(4)(viii)

The proposed rule requires that SIPs/TIPs must contain

provisions detailing the process for transferring allowances

from one source to another. Section C6 of the Draft Model
104

Rule in the Annex provides a detailed description of

allowance transfer procedures. The program would provide

procedures for sources to request an allowance transfer, for

the Tracking System Administrator to record the requests,

and for notification of the source and the public of each

transfer and request.

Banking Provisions. 40 CFR 51.309(h)(4)(ix)

The banking of allowances occurs when allowances that

have not been used for compliance are set aside for use in a

later compliance period. Banking provides flexibility to

sources, encourages early reductions, and encourages early

application of innovative technology. However, banking also

carries an associated risk of delayed or impaired

achievement of air quality goals due to the use of banked

allowances.

The Annex discusses banking on page 64 and the Draft

Model Rule outlines the banking procedures in section C7. 

The Annex states that the use of banked allowances in the

compliance process will be regulated by management

provisions, which would act as a disincentive for sources to

use banked allowances in years where there is a substantial

bank of allowances available to use in compliance. The

purpose of these management provisions, sometimes referred 
105

to as "flow control" is to ensure that there would not be a

substantial increase in emissions in a year for which a

relatively large fraction of banked emissions were used. 

This provision, accordingly, will help to ensure that the

milestones continue to be met.

The proposed rule allows trading programs to include

provisions for banked allowances, so long as the SIPs/TIPs

clearly identify how unused allowances may be kept for use

in future years, and the restrictions for use of any such

banked allowances. Because a key objective of the Annex is

to ensure that actual emissions will not exceed the

milestone for the year 2018, the proposed rule requires that

any banking provision of the trading program must be

designed in a way that would not allow actual emissions to

exceed this milestone.

Allowing the use of banking raises a potential issue

regarding records retention. While records are normally

required to be retained for a minimum of 5 years from their

creation, banking allows for the possibility that an unused

allowance could be banked for some time before being used. 

Consequently, in order to ensure that records are retained

for a sufficient period of time to provide for

enforceability of the program, the proposed rule requires 
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22

It should be noted that EPA policy for the Administration of

Environmental Programs on Indian Reservations, reaffirmed by

the Administrator on July 11, 2001 and the EPA Office of

Enforcement and Compliance Assurance (OECA) Guidance on the

Enforcement Principles outlined in the 1984 Indian Policy

dated January 17, 2001 provide guidance on EPA's response to

noncompliance at tribal facilities. The EPA intends to act

in a manner consistent with the Indian Policy and OECA

guidance with regard to enforcement actions that would be

taken under this program against tribal facilities.

that records relating to the banked allowances must be 

retained for at least 5 years after the use of those

allowances. For example, if an unused allowance from the

year 2009 is used in 2012, the source owner or operator must

retain records relating to that allowance for 5 years after

its use, which in this example would be 2017. 

Enforcement Penalties. 40 CFR 51.309(h)(4)(x)

The proposed rule requires that the trading program

describe the specific enforcement penalties that will be

applied if a source's emissions exceed its allowances. The

EPA agrees with the WRAP that it is important to provide

automatic and stringent penalties to provide for sufficient

incentive for source owners to comply with their

allowances.22

The EPA requires all market trading programs to include

provisions for imposing penalties when a source fails to

hold enough allowances to cover emissions, violates its

record keeping obligations, or violates any other
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obligations under the program. The program must define a

violation, establish the procedure for determining the

magnitude of a violation, set potential penalties, and

maintain the ability to impose the maximum monetary penalty

consistent with the CAA. The EIP (section 7.4(h)) outlines

the compliance provisions EPA considers to be essential in

multi-source emission cap-and-trade programs. 

The EIP also outlines the provisions for assessing

liability, in section 6.1(a). Emission trading, unlike

traditional regulatory mechanisms, generally involves more

than one party. These parties can be not only the owners or

operators of the sources participating in the program but

sometimes another party who facilitated the trade (e.g., a

broker). To ensure integrity in the trading system, all

parties are normally responsible for ensuring the validity

of the trades or their use of emissions reductions.

The penalty provisions in the emissions trading program

must include mechanisms that enable the State to assess

monetary penalties and impose corrective actions against the

sources participating in the trading program.

The Annex outlines the enforcement elements developed

by the WRAP in section II.E.6.f and in Draft Model Rule

section C13. These provisions include two automatic

penalties for excess emissions. First, there would be an
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automatic surrendering of two future year allowances for

every one ton of excess emissions. Second, there would be a

financial penalty that would exceed by a factor of three to

four the projected range of prices for allowances. In

addition to these penalties for excess emissions, the Annex

provides for penalties for failure to comply with other

program requirements, such as the monitoring, record keeping

and reporting requirements, that would be consistent with

CAA civil and criminal penalties.

Provisions for Periodic Evaluation of the Trading Program. 

40 CFR 51.309(h)(4)(xi)

The proposed rule requires the backstop trading program

to include a provision for periodic evaluations of the

program. Such periodic evaluations are required as a means

of determining whether the program, in its actual

implementation, needs any mid-course corrections. The EPA,

in the proposed rule, includes a list of questions that the

program evaluations should address. These questions are

derived from the EIP, section 5.3(b). 

E. What Additional Provisions Must the SIP or TIP Include

Regarding the Market Trading Program?

As included in the proposed rule in 40 CFR

51.309(h)(5), EPA proposes to include two provisions of the

Annex that provide for integration with other CAA programs.
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The proposed language in 40 CFR 51.309(5)(i) notes that

the requirements of this program, including the backstop

market trading program, are applicable requirements of the

CAA that must be included in permits issued under title V of

the CAA. The EPA expects that most, if not all, sources

included within the program will have title V permits. The

program requires participation by all sources with actual

emissions of SO2 of more than 100 tons per year. These

sources would also have a potential to emit of more than 100

tons per year. As the requirements of title V apply to

sources with the potential to emit 100 tons per year of any

air pollutant, EPA anticipates that almost all sources in

the program would have a title V permit. The only likely

sources which may not have title V permits would be any

source that chose to opt into the program with potential

emissions of less than 100 tons per year. In the Annex in

section II.E.4., the WRAP discusses permit requirements for

the program. This discussion describes in detail the

mechanisms that would be used to ensure that any such opt-in

sources have federally enforceable permit requirements. The

EPA does not believe it is necessary in 40 CFR 51.309 to

include this same level of detail for opt-in sources. The

proposed rule does include in 40 CFR 51.309(h)(5)(i) a 
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requirement that all requirements of the program be

enforceable by EPA, and by citizens to the extent permitted

under the CAA.

As the WRAP noted in section III.D. on page 47 of the

Annex, the market trading program must not interfere with

other provisions of the CAA. The program must also provide

for provisions to ensure its integration with other

programs. For example, some sources in the market trading

program may be subject to title IV of the CAA or the

Southern California RECLAIM program and these sources would

be subject to more than one trading program. We have

included as 40 CFR 51.309(h)(5)(ii) a requirement that the

SIPs submitted in 2003 must ensure that this program does

not eliminate or interfere with any other requirements a

source may have under the CAA.

F. What happens to the program after the year 2018? 

It is EPA's understanding that the Annex did not

attempt to address the fate of this program beyond calendar

year 2018. The regional haze rule requires that SIPs be

submitted in the year 2018 for a long-term regional haze

strategy covering the time period between 2018 and 2028. 

There may be significant technological advances between now

and the time that these SIPs/TIPs are developed that affect

the possible measures for visibility protection, or the
111

reasonableness of existing measures. Accordingly, EPA

believes it is reasonable to defer until that time the

judgment on the specific levels of SO2 that can be achieved. 

At the same time, EPA believes it is important to

recognize that any actions that occur after 2018 should not

be allowed to increase SO2 emissions beyond the 2018

milestone. Accordingly, we note in the discussions of the

milestones in Table 1 of the proposed rule that any

milestone developed for years after 2018 must not allow

increases over and above those for the year 2018.

III. Implementation of the Regional SO2 Emissions Reduction

Program in Indian Country 

The provisions in 40 CFR 51.309 of the regional haze

rule provide for a regional visibility program within a

geographic area of nine Western States. Within that

geographic area, there are more than 200 federally

recognized Indian Tribes. Throughout the development of the

GCVTC report, and in the subsequent activities of the WRAP,

including the development of the Annex, Indian Tribes have

been involved in the discussions. The GCVTC and the WRAP

have clearly benefitted from their understanding of the

tribal perspective. These discussions have also served the

Tribes in ensuring that unique issues of importance to 
112

23

To date, EPA has not received any TIPs from these four

Tribes. Nothing in this preamble is intended to suggest

that these Tribes are authorized by EPA to administer CAA

regulatory programs.

Tribes have been carefully considered by both entities. The

GCVTC report included section IV, "Tribal Perspectives and

Position Regarding Recommendations." The Annex includes

specific consideration of tribal interests, including a

specific provision of the program for Tribes in the market

trading program that is described in Attachment F to the

Annex.

As demonstrated by the Tribes' participation in the

WRAP, EPA believes that continued involvement by Tribes is

important to any program for visibility protection in the

Western United States, including the program in the Annex

for stationary source SO2 emissions. In this unit of the

preamble, we discuss issues related to tribal implementation

of the SO2 program contained in the Annex.

A. Current Stationary Source SO2 Emissions in the Region

The Annex includes only those sources whose annual

emissions exceed 100 tons per year. Although as noted

previously there are more than 200 Indian reservations in

the geographic region potentially covered by the Annex, it

appears that only four currently have stationary sources

that would be affected by the program.23 The EPA is aware
113

of only six such sources located in Indian country within

the geographic area covered by the Annex, as noted in the

following table:

Reservation Source Base Year

Emissions

(tons/yr)

Navajo(NM) Four Corners Power

Plant

42,522 (1999)

Navajo (AZ) Navajo Generating

Station

 9,162 (1999)

Fort Hall(ID) Astaris-Idaho

elemental

phosphorous

production

facility

 4,994 (1998) 

Wind River (WY) Snyder Oil 147 (1998) 

Wind River (WY) Koch Sulfur

Products

 1,237 (1998) 

Uintah and Ouray

(UT)

Bonanza Power

Plant

 1,135 (1999)

 TOTAL 59,197

Together, these sources represent about nine percent of the

total base year stationary source inventory of 652,000 tons

of SO2 emissions in the region. 

B. "Set-Aside" for Tribes in the Market Trading Program

A key feature of the Annex program provides that if the

market trading program is triggered, a 20,000 ton amount

will be allocated to Tribes. This amount is in addition to
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any allocations to the six individual sources within Indian

country (see table above), and is also in addition to

specific amounts in the Annex that are allocated for new

source growth. As discussed in Attachment F to the Annex,

this 20,000 ton set-aside is intended to help ensure

equitable treatment for tribal economies and to prevent

barriers to economic development. The 20,000 ton amount of

allowances would be available to Tribes to either: (1) allow

for new source growth over and above the amounts allocated

for new sources by the Annex program, (2) sell for revenue,

such that the source owners could purchase the allowances

and increase their emissions or (3) retire the allowances,

which would mean they would not be sold and would therefore

lead to emission decreases relative to the milestones.

The process for allocating the tribal set-aside

allowances is still to be determined. In Attachment F to

the Annex, the WRAP states that:

In order to insure that all Tribes in the region have a

fair and meaningful opportunity to take part in this

determination, it must be done in the context of

government-to-government consultation between EPA and

the Tribes, during the rule making process to amend 40

CFR 51.309.

While EPA agrees with the need for meaningful consultation,

EPA proposes that the process of allocating need not be

determined during the rulemaking process to amend 40 CFR

51.309. For example, the proposed rule for participating
115

States and Tribes, as noted above, allows for initial

allocations in the SIPs/TIPs submitted in the year 2003. 

Moreover, States and Tribes could amend these initial

allocations later consistent with a methodology they include

in their SIPs/TIPs. The EPA proposes that allocation of the

additional 20,000 tons for Tribes could take place over a

more extended time frame. 

C. Background on Provisions for Tribal Air Quality Programs

in the CAA and in EPA Regulations

On November 8, 1984, the EPA adopted a policy entitled

“EPA Policy for the Administration of Environmental Programs

on Indian Reservations.” This policy, available on the

Internet at http://www.epa.gov/indian/1984.htm, establishes

a number of principles that guide EPA in the conduct of our

congressionally mandated responsibilities. In particular,

EPA will pursue the principle of tribal “self-government”

and will work with tribal governments on a “government-togovernment” basis. The EPA will work with interested tribal

governments in developing environmental programs for Indian

country. Generally, EPA will retain responsibility for

protecting tribal air quality until such time as Tribes 

administer their own air quality protection programs. 

Administrator Whitman reaffirmed the 1984 EPA Indian policy

on July 11, 2001. 
116

The CAA, as amended in 1990, added section 301(d) which

authorizes EPA to “treat Tribes as States” for the purposes

of administering CAA programs. Section 301(d) requires that

EPA promulgate regulations listing CAA provisions for which

it would be appropriate to treat Tribes as States and

establishing the criteria that Tribes must meet in order to

be eligible for such treatment under the CAA. The EPA

proposed these regulations on August 25, 1994 (59 FR 43956),

and finalized the rule on February 12, 1998 (63 FR 7254). 

Much of the regulatory language in this rule is codified in

the CFR as a new 40 CFR part 49. This rule is generally

referred to as the Tribal Authority Rule or TAR.

The TAR includes general eligibility requirements,

codified in 40 CFR 49.6, for Tribes interested in assuming

program responsibilities. Tribes may request a formal

eligibility determination using administrative procedures

contained in 40 CFR 49.7. Tribes may also use the

administrative procedures in 40 CFR 49.7 to seek approval to

implement CAA programs. As noted in 40 CFR 49.7(c), Tribes

that are interested in seeking EPA approval to implement air

quality programs under the CAA may request approval to

implement only partial elements of a CAA program, so long as

the elements of the partial program are “reasonably

severable.”
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 Section 301(d)(4) of the CAA confers discretionary

authority on EPA to provide through regulation alternative

means of air quality protection in cases where it determines

that treating Tribes as “identical“ to States would be

inappropriate or administratively infeasible. In

promulgating the TAR, EPA provided flexibility to Tribes

seeking to implement the CAA. Some flexibility is

established by virtue of EPA’s decision, under 40 CFR 49.4

of the final rule, not to treat Tribes as States for

specified provisions of the CAA. The rationale for this

approach is discussed in the preamble to the TAR (63 FR

7264-7265) and in the preamble to the proposed rule (59 FR 

43964-43968). For example, unlike States, Tribes are not

required by the TAR to adopt and implement CAA plans or

programs. Tribes are also not subject to mandatory

deadlines for submittal of implementation plans. As

discussed in the preamble previously, EPA believes that it

generally would not be reasonable to impose the same types

of deadlines on Tribes as on States. Among the CAA

provisions for which EPA has determined it will not treat

Tribes as States is section 110(c)(1) of the CAA, which

requires EPA to intervene and ensure air quality protection

within 2 years after a State either fails to adopt a SIP or

does not win EPA approval for a SIP that was determined to
118

be deficient. The EPA did not apply this provision to

Tribes because the section 110(c) obligation on EPA to

promulgate a FIP is based on failures with respect to

required submittals, and, as noted above, tribal submissions

under the TAR are voluntary, not mandatory. Instead,

pursuant to its section 301(d)(4) discretionary authority,

EPA has provided in the TAR that, where necessary and

appropriate, it will promulgate FIPs within reasonable

timeframes to protect air quality in Indian Country. See 40

CFR 49.11(a).

D. Discussion of the TAR as it Relates to Tribal

Participation in the SO2 Reduction Program

The EPA believes that clarification is needed on

whether Tribes, like States, must develop and submit

implementation plans by the end of the year 2003 in order to

exercise the option provided by 40 CFR 51.309. Regarding

this year 2003 deadline, in the preamble to the regional

haze rule we laid out the framework for waiving the

51.309(c) deadline with respect to Indian Tribes. Section

309(c) requires that, in order to exercise the option 

provided by section 309, each Transport Region State must

submit an implementation plan addressing regional haze

visibility impairment in the sixteen Class I areas by

December 31, 2003. The preamble reiterates the Agency’s
119

recognition that some Tribes have limited resources and/or

expertise to participate in regional planning efforts for

regional haze, stating:

[i]n order to encourage Tribes to develop selfsufficient programs, the TAR provides Tribes with the

flexibility of submitting programs as they are

developed, rather than in accordance with statutory

deadlines. This means that Tribes that choose to

develop programs, where necessary may take additional

time to submit implementation plans for regional haze

over and above the deadlines in the Transportation

Equity Act for the 21st Century (TEA-21) legislation as

codified in today’s final rule. (See unit III.B for

discussion of those deadlines.) (64 FR 35759, July 1,

1999).

Unit III.B of the preamble, entitled, “Timetable for

Submitting the First Regional Haze State Implementation Plan

(SIP)” includes in the summary of the timetable for

submitting SIPs, the 40 CFR 51.309 deadline of Dec. 31,

2003.

The preamble further discusses the link between the

TEA-21 legislation changing the SIP deadlines for regional

haze, and the TAR 49.4(f) provision waiving the section

169(b)(e)(2) SIP submittal deadline with regard to Indian

Tribes.

The TEA-21 legislation changed the deadlines for State

submission of SIP revisions to address regional haze, which

were originally set out in section 169(B)(e)(2) of the CAA. 

Section 49.4(a) of the TAR provides that specific plan

submittal and implementation deadlines for NAAQS-related
120

requirements do not apply to Tribes. Section 49.4(e) states

that Tribes will not be subject to specific visibility

implementation plan submittal deadlines established under

169A of the CAA. Section 49.4(f) of the TAR provides that

deadlines related to SIP submittals under section

169(B)(e)(2) do not apply to Tribes. Under section 49.4(f)

Tribes will not be treated in the same manner as States with

regard to, “[specific implementation plan submittal

deadlines related to sections 169B(e)(2), 184(b)(1) & (c)(5)

of the Act. For eligible Tribes participating as members of

such commissions, the Administrator shall establish those

submittal deadlines that are determined to be practicable

or, as with other non-participating Tribes in an affected

transport region, provide for federal implementation of

necessary measures.” 

Under 40 CFR 51.309(c), each Transport Region State

must submit an implementation plan addressing regional haze

visibility impairment in the sixteen Class I areas by

December 31, 2003. Otherwise, the State must submit SIPs

consistent with 40 CFR 51.308. Based on the above

provisions of the TAR, however, Tribes are not required to

develop and submit implementation plans by the end of the

year 2003 and may chose to opt-in to the program at a later

date. We encourage Tribes choosing to develop
121

implementation plans to make every effort to submit by the

deadlines to ensure that the plans are integrated with and

coordinated with regional planning efforts.

E. Current Thinking on Tribal Program Assistance 

For Tribes which choose to implement 40 CFR 51.309, EPA

believes there are a number of ways that EPA can provide

assistance. As discussed above, a number of major sources

of SO2 are located on areas within Indian country. The EPA

would like to help the Tribes that have major SO2 sources to

comply with the pre-trigger emission tracking requirements

of the program, and to help them develop ways to participate

in the backstop trading program. 

 The EPA also sees a possible need to help facilitate

allocation of the 20,000 tons allocated to Tribes under the

backstop market trading program. The EPA believes, however,

that the critical need for the allocation does not exist

until a trading program is triggered. As discussed above in

unit II.D of this preamble, the earliest year for compliance

with allowances is the year 2009. While it is preferable to

have any allowances in place well in advance of this date,

EPA does not see the distribution of the tribal set-aside as

a critical issue for EPA involvement in the near term. The

EPA expects that Tribes will develop a method for allocating
122

the 20,000 tons. The EPA will seek to provide assistance as

necessary to facilitate the process.

In summary, EPA is committed to ensuring protection of

tribal air resources, building tribal air program capacity

and working with Tribes on a government-to-government basis. 

We request comment from Tribes on how we can implement this

program in the best way consistent with EPA's Indian Policy.

IV. Administrative Requirements

In preparing any proposed rule, EPA must meet the

administrative requirements contained in a number of

statutes and executive orders. In this unit of the

preamble, we discuss how today’s regulatory proposal for

incorporating the provisions of the WRAP Annex addresses

these administrative requirements.

A. Executive Order 12866: Regulatory Planning and Review

by the Office of Management and Budget (OMB)

Under Executive Order 12866 (58 FR 51735, October 4,

1993) the Agency must determine whether the regulatory

action is “significant” and, therefore, subject to OMB 

review and the requirements of the Executive Order. The

Order defines “significant regulatory action” as one that is

likely to result in a rule that may:

(1) have an annual effect on the economy of $100

million or more or adversely affect in a material way the
123

economy, a sector of the economy, productivity, competition,

jobs, the environment, public health or safety, or State,

local, or tribal governments or communities;

(2) create a serious inconsistency or otherwise

interfere with an action taken or planned by another agency;

(3) materially alter the budgetary impacts of

entitlements, grants, user fees, or loan programs or the

rights and obligations of recipients thereof; or

(4) raise novel legal or policy issues arising out of

legal mandates, the President’s priorities, or the

principles set forth in the Executive Order.

Pursuant to the terms of Executive Order 12866, it has

been determined that this rule is a "significant regulatory

action." As such, this action was submitted to OMB for

review. Changes made in response to OMB suggestions or

recommendations will be documented in the public record.

Today's proposed rulemaking would amend the regional

haze rule by incorporating a specific set of SO2 emission

targets for region-wide stationary sources of SO2 emissions

for a nine-State region in the western United States. The

emission targets would affect and have potential economic

impacts only for States choosing to participate in the

optional program provided by 40 CFR 51.309 of the regional

haze rule. The emissions reductions resulting from the
124

program vary over the 2003 to 2018 time period. If all nine

States participate in the program, the WRAP estimates that

for the year 2018, SO2 emissions would be reduced from a

projected baseline of 612,000-642,000 tons to an enforceable

milestone of 480,000-510,000 tons (described above in unit

II.A.). If the milestones are not achieved through

voluntary emissions reductions by the affected sources, then

they will be achieved through an enforceable backstop market

trading program.

The EPA believes that in order to understand the

possible regulatory impacts of today's proposed rule, it is

important to review the previous analysis that EPA completed

for the regional haze program overall. In 1999, the EPA

prepared a Regulatory Impact Analysis (RIA) for the regional

haze rule (available in the docket for the regional haze

rule (A-95-38)). In that RIA, the EPA assessed "the costs,

economic impacts, and benefits for four illustrative

progress goals, two sets of control strategies, two sets of

assumptions for estimating benefits, and systems of national

uniform verus regionally varying progress goals," (64 FR

35760, July 1, 1999). Because EPA had no way of predicting

the visibility goals each State would pick under the

regional haze rule requirements, EPA conducted an extensive

analysis of "what if" scenarios. For example, one of the
125

scenarios assumed that all States would choose to achieve a

10 percent improvement in visibility (measured in deciviews)

over a 10-year period, while another of the scenarios

assumed a 1.0 deciview improvement over a 15-year period. 

For each scenario, the RIA determined the control measures

that would be needed to achieve the given degree of

visibility improvement, and the cost of those control

measures. In addition to calculating the national impacts

of the regional haze rule under the various scenarios, the

RIA also presented results for six specific sub-regions. 

Four of the sub-regions ("Rocky Mountain," "West,"

"Northwest," and "South Central") contained one or more

States within the nine-State region addressed by the WRAP

Annex. The regional approach reflected the distinction

across regions in the nature of the impairment in the Class

I areas, the causes of the visibility impairment, and the

costs of achieving the various progress objectives in each

region. Emission reductions under the various scenarios by

sub-region are provided in the RIA in tables 6-7 and 6-8. 

The EPA believes that some of the emission reductions

resulting from the Annex provisions for stationary source

SO2 (assuming that States exercise the option for this

program) may result from other environmental obligations

under the CAA. For example, SO2 reductions may be required
126

for attainment of the national ambient air quality standard

for PM2.5. To the extent that this is the case, the

emissions reductions required by the WRAP's SO2 milestones

and backstop trading program may have already been addressed

in other regulatory impact analyses for those programs. 

The remainder of the emissions reductions resulting

from the WRAP's program for stationary source SO2 would be

over and above those required to meet other environmental

obligations. Where this is the case, EPA believes that the

control costs and other potential economic consequences of

achieving the reductions are reflected in the RIA for the

1999 regional haze rule. The range of results for the

eight scenarios analyzed in the RIA resulted in predicted

sulfur dioxide emission reductions that are within the range

of emission reductions included in the Annex. Two of the

eight scenarios resulted in 284,000 tons of stationary

source reductions in regions containing one or more of the

WRAP Annex States. Five other scenarios included sulfur

dioxide emissions reductions ranging from 95,000 to 128,000

tons per year. Hence, the costs and benefits associated

with the WRAP's program are captured in the RIA for the 1999

final regional haze rule. 
127

B. Regulatory Flexibility Act (RFA), as amended by the

Small Business Regulatory Enforcement Fairness Act of 1996

(SBREFA), 5 USC 601 et. seq.

The 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

economic impact on a 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

proposed rule on small entities, small entity is defined as:

(1) a small business that is a small industrial entity as

defined in the U.S. Small Business Administration (SBA) size

standards (as discussed on the SBA website at

http://www.sba.gov/size/SIC2NAICSmain.html); (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 potential for economic impacts of

today’s proposed rule on small entities, I certify that this
128

24

 The number of power plants was obtained from "Data

Worksheets from ICF Consulting Detailing Utility Emissions

Projections," Item 3 in supplemental information transmitted

to Tim Smith, EPA, from Patrick Cummins, WRAP. June 29,

2001. The non-utility estimate was obtained from: 

Technical Support Documentation. Voluntary Emissions

Reduction Program for Major Industrial Sources of Sulfur

Dioxide in Nine Western States and a Backstop Market Trading

Program. Section 2.A. Revised Appendix A for the Pechan

Report, table A-1.

action will not have a significant economic impact on a

substantial number of small entities. Today’s proposed rule

amends the requirements of the regional haze program to

provide nine western States and a number of Tribes with an

optional method for complying with the requirements of the

CAA. No State or Tribe is required to submit an

implementation plan meeting its requirements. For States or

Tribes that choose to submit an implementation plan under

this optional program, however, today’s proposed rule

requires those States and/or Tribes to meet a series of

regional SO2 emission milestones. The EPA will determine

whether these milestones are met based on the actual

emissions from stationary sources with SO2 emissions of more

than 100 tons per year. From data EPA obtained from the

WRAP's website, it appears that there are 197 establishments

meeting the 100 tons per year of SO2 criterion for this

program, including 39 utility power plants, and 158 nonutility sources.24 The vast majority of these
129

25

The EPA provides documentation of these estimates in a

technical memorandum, "Size of Potentially Affected Entities

Should the Western Regional Air Partnership States Choose to

Adopt Regulations in Accordance with the Draft Proposed Rule

Revising Section 51.309(h)." Allen Basala, EPA, October 17,

2001. This memorandum is included in the docket for today's

proposal.

establishments -- which include sources such as power plant

boilers, copper smelters, chemical plants, petroleum

refineries, natural gas production plants, large

manufacturing operations, paper mills -- are not small

entities. The EPA estimates that 12 facilities are likely

to be small entities, and 166 are not small. The EPA has

been unable to determine the size of 16 entities at this

time.25 Even if all 16 were determined to be small

entities, and all nine States and those Tribes with covered

sources adopted the optional approach to complying with the

visibility requirements of the CAA, less than 30 small

entities would be potentially affected by this proposed

rule. The goal of the WRAP is for the regional SO2

milestones established by the rule to be met through

voluntary measures, see Annex at 23, and EPA believes that

participating States and Tribes may be able to meet the

milestones through such measures. However, as a backstop in

the event the milestones are not met in this manner, the

proposed rule requires the implementation of a market
130

trading program to ensure that emissions in the relevant

region do not exceed the milestones. The proposed rule

gives the States and Tribes the discretion to structure the

emissions trading program, including the discretion to

allocate emissions credits to sources, as the States and

Tribes determine appropriate. Thus, ultimately, the impact

on small entities will be determined not by this rule, but

rather by how the relevant State or Tribe exercises its

discretion in adopting the optional program and allocating

emissions credits. The EPA encourages the States to

consider the impact of its market trading program on small

entities in structuring the program, but EPA cannot predict

the impact of the rule on small entities. Nonetheless, EPA

believes that no more than 28 small entities will be

effected by this rule, and most likely less, given that EPA

does not anticipate that all 9 States with the option of 

adopting this program will do so. Thus, EPA believes that

this action will not have a significant economic impact on a

substantial number of small entities.

We continue to be interested in the potential impacts

of the proposed rule on small entities and welcome comments

on issues related to such impacts.

C. Paperwork Reduction Act -- Impact on Reporting

Requirements
131

The information collection requirements in this

proposal have been submitted to OMB under the Paperwork

Reduction Act, 44 U.S.C. 3501 et seq. An Information

Collection Request (ICR) document has been prepared by EPA

(ICR No. 1813.03) and a copy may be obtained from susan

auby, by mail at Collection Strategies Division; U.S. EPA

(2822T) 1200 Pennsylvania Avenue, NW, Washington, DC 20460,

by email at auby.susan@epa.gov or by calling (202)566-1672.

A copy may also be downloaded off the Internet at

http://www.epa.gov/icr. 

This ICR contains burden estimates specific to the

implementation of the WRAP's program for stationary sources

of SO2. Because this proposed rule is an amendment to the

regional haze rule, this ICR will revise the existing ICR 

for the regional haze rule (ICR 1813.02). For future ICR

renewals for the regional haze rule, EPA will incorporate

the effects of this rule. 

The EPA has prepared burden estimates for the specific

burden impacts of today's proposed rule. These burden

estimates are calculated using the assumption that seven

eligible States and 4 Tribes would participate in the

program. The results of the calculations indicate 16,100

hours to 19,990 hours for affected sources, 14,010 to 14,430

hours for States, 2520 to 2600 hours for Tribes, and 1305 to
132

1375 for the Federal government. The proposed amendments to

the regional haze rule have impacts only for States and

tribes who choose to implement section 40 CFR 51.309 of the

regional haze rule. For States and tribes who choose to

implement the program, the amendments would also affect

stationary sources owners within their jurisdictions. The

EPA estimates, on average, a total of 11,650 burden hours

for State, tribal and industry/source respondents would

result from the proposed amendments over the three year

period covered by this ICR. Average costs over the threeyear period would be $743,000. 

Burden means the total time, effort, or financial

resources expended by persons to generate, maintain, retain,

or disclose or provide information to or for a Federal

agency. This includes the time needed to review

instructions; develop, acquire, install, and utilize

technology and systems for the purposes of collecting,

validating, and verifying information, processing and

maintaining information, and disclosing and providing 

information; adjust the existing ways to comply with any

previously applicable instructions and requirements; train

personnel to be able to respond to a collection of

information; search data sources; complete and review the
133

collection of information; and transmit or otherwise

disclose the information. 

An agency may not conduct or sponsor, and a person is

not required to respond to a collection of information

unless it displays a currently valid OMB control number. 

The OMB control numbers for EPA’s regulations are listed in

40 CFR part 9 and 48 CFR chapter 15.

 Comments are requested on the Agency’s need for this

information, the accuracy of the provided burden estimates,

and any suggested methods for minimizing respondent burden,

including through the use of automated collection

techniques. Send comments on the ICR to the Director,

Collection Strategies Division; U.S. Environmental

Protection Agency (2822T); 1200 Pennsylvania Ave., NW,

Washington, DC 20460; and to the Office of Information and

Regulatory Affairs, Office of Management and Budget, 725

17th St., NW, Washington, DC 20503, marked “Attention: Desk

Officer for EPA.” Include the ICR number in any

correspondence. Since OMB is required to make a decision

concerning the ICR between 30 and 60 days after [INSERT DATE

OF PUBLICATION IN THE FEDERAL REGISTER], a comment to OMB is

best assured of having its full effect if OMB receives it by

[INSERT DATE 30 DAYS AFTER PUBLICATION IN THE FEDERAL

REGISTER]. The final rule will respond to any OMB or public
134

comments on the information collection requirements

contained in this proposal.

D. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995

(P.L. 104-4)(UMRA), establishes requirements for Federal

agencies to assess the effects of their regulatory actions

on State, local, and tribal governments and the private

sector. Under section 202 of the UMRA, 2 U.S.C. 1532, EPA

generally must prepare a written statement, including a

cost-benefit analysis, for any proposed or final rule that

“includes any Federal mandate that may result in the

expenditure by State, local, and tribal governments, in the

aggregate, or by the private sector, of $100,000,000 or more

... in any one year.” A “Federal mandate” is defined under

section 421(6), 2 U.S.C. 658(6), to include a “Federal

intergovernmental mandate” and a “Federal private sector

mandate.” A “Federal intergovernmental mandate,” in turn,

is defined to include a regulation that “would impose an

enforceable duty upon State, local, or tribal governments,”

section 421(5)(A)(i), 2 U.S.C. 658(5)(A)(i), except for,

among other things, a duty that is “a condition of Federal

assistance,” section 421(5)(A)(i)(I). A “Federal private

sector mandate” includes a regulation that “would impose an
135

enforceable duty upon the private sector,” with certain

exceptions, section 421(7)(A), 2 U.S.C. 658(7)(A).

Before promulgating an EPA rule for which a written

statement is needed under section 202 of the UMRA, section

205, 2 U.S.C. 1535, of the UMRA generally requires EPA to

identify and consider a reasonable number of regulatory

alternatives and adopt the least costly, most costeffective, or least burdensome alternative that achieves the

objectives of the rule.

By proposing to incorporate into the regional haze rule

the provisions of the Annex for a voluntary emissions

reductions program and backstop trading program, EPA is not

directly establishing any regulatory requirements that may

significantly or uniquely affect small governments,

including tribal governments. The entire program under 40

CFR 51.309, including the proposed amendments, is an option

that each of the States may choose to exercise. The program

is not required and thus is clearly not a "mandate." Thus,

EPA is not obligated to develop under section 203 of the

UMRA a small government agency plan.

The EPA also believes that because today’s proposal

provides those States potentially subject to the proposed

rule with substantial flexibility, the proposed rule meets

the UMRA requirement in section 205 to select the least
136

costly and burdensome alternative in light of the statutory

mandate for SIPs for visibility protection that address

BART. The proposed rule provides States and sources with

the flexibility to achieve regional SO2 reductions in a way

that is cost effective and administratively effective. 

Sources are given the opportunity to achieve voluntary

reductions. If such reductions do not occur, the rule

provides for the establishment of a trading program to

achieve targeted emissions reductions. If a trading program

is implemented, sources have the flexibility to buy and sell

allowances in order to reach emissions reduction milestones

in the most cost-effective way. The proposed rule

therefore, inherently provides for adoption of the least

costly, most cost-effective, or least-burdensome alternative

that achieves the objective of the rule.

The EPA believes that this rulemaking action is not

subject to the requirements of UMRA. For regional haze SIPs

overall, it is questionable whether a requirement to submit

a SIP revision constitutes a Federal mandate, as discussed 

in the preamble to the regional haze rule, (64 FR 35761,

July 1, 1999). However, today's proposed rule contains no

Federal mandates (under the regulatory provisions of title

II of the UMRA) for States, local, or tribal governments or

the private sector. The program contained in 40 CFR 51.309,
137

including today's proposed amendments, is an optional

program. 

E. Executive Order 12898: Environmental Justice 

Executive Order 12898 requires that each Federal agency

make achieving environmental justice part of its mission by

identifying and addressing, as appropriate,

disproportionately high and adverse human health or

environmental effects of its programs, policies, and

activities on minorities and low-income populations. 

The EPA believes that this proposed rule should not

raise any environmental justice issues. The overall result

of the program is regional reductions in SO2. Because this

program would likely reduce regional and local SO2 levels in

the air, and because there are separate programs under the

CAA to ensure that SO2 levels do not exceed national ambient

air quality standards, it appears unlikely that this program

would permit any adverse affects on local populations.

F. Executive Order 13045: Protection of Children from

Environmental Health Risks and Safety Risks

Executive Order 13045: “Protection of Children from

Environmental Health Risks and Safety Risks” (62 FR 19885,

April 23, 1997) applies to any rule that: (1) is determined

to be “economically significant” as defined under Executive

Order 12866, and (2) concerns an environmental health or
138

safety risk that EPA has reason to believe may have a

disproportionate effect on children. If the regulatory

action meets both criteria, the Agency must evaluate the

environmental health or safety effects of the planned rule

on children, and explain why the planned regulation is

preferable to other potentially effective and reasonably

feasible alternatives considered by the Agency. The EPA

interprets Executive Order 13045 as applying only to those

regulatory actions that are based on health or safety risks,

such that the analysis required under section 5-501 of the

Order has the potential to influence the regulation. The

proposal to codify the SO2 emissions reduction program is

not subject to Executive Order 13045 because it does not

establish an environmental standard intended to mitigate

health or safety risks.

G. 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

regulatory policies that have federalism implications.” 

“Policies that have federalism implications” is defined in

the Executive Order to include regulations that have

“substantial direct effects on the States, on the 
139

relationship between the national government and the States,

or on the distribution of power and responsibilities among

the various levels of government.” 

Under section 6(b) of Executive Order 13132, EPA may

not issue a regulation that has federalism implications,

that imposes substantial direct compliance costs, and that

is not required by statute, unless the Federal government

provides the funds necessary to pay the direct compliance

costs incurred by State and local governments, or EPA

consults with State and local officials early in the process

of developing the proposed regulation. Under section 6(c)

of Executive Order 13132, EPA may not issue a regulation

that has federalism implications and that preempts State 

law, unless the Agency consults with State and local

officials early in the process of developing the proposed

regulation.

This proposed rule 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. As an optional

program, the proposed rule will not directly impose

significant new requirements on State and local governments. 
140

In addition, even if the proposed rule did have federalism

implications, it will not impose substantial direct

compliance costs on State or local governments, nor will it

preempt State law. 

Consistent with EPA policy, EPA nonetheless consulted

with State and local officials early in the process of

developing the proposed regulation, to provide them an

opportunity for meaningful and timely input into its

development. These consultations included a working meeting

with State and local officials, and numerous discussions

with committees and forums of the WRAP.

In the spirit of Executive Order 13132, and consistent with

EPA policy to promote communications between EPA and State

and local governments, EPA specifically solicits comment on

this proposed rule from State and local officials.

H. Executive Order 13175: Consultation and Coordination

with Indian Tribal Governments

Executive Order 13175, entitled “Consultation and

Coordination with Indian Tribal Governments” (65 FR 67249,

November 6, 2000), requires EPA to, among other things,

ensure “meaningful and timely input by tribal officials in

the development of regulatory policies that have tribal

implications.” “Policies that have tribal implications” is

defined in the Executive Order to include regulations that
141

have “substantial direct effects on one or more Indian

Tribes, on the relationship between the Federal government

and the Indian Tribes, or on the distribution of power and

responsibilities between the Federal government and Indian

Tribes.” 

Under section 5(b) of Executive Order 13175, EPA may

not issue a regulation that has tribal implications, that

imposes substantial direct compliance costs, and that is not

required by statute, unless the Federal government provides

the funds necessary to pay the direct compliance costs 

incurred by tribal governments, or EPA consults with tribal

officials early in the process of developing the proposed

regulation. Under section 5(c) of the Executive Order, EPA

may not issue a regulation that has tribal implications and

that preempts tribal law, unless the Agency consults with

tribal officials early in the process of developing the

proposed regulation.

This proposed rule may have tribal implications, but

EPA believes that it will neither impose substantial direct

compliance costs on the Tribes nor preempt tribal law. The

EPA is seeking input from potentially affected Tribes before

reaching a conclusion on whether this rule will have tribal

implications. This is due, in large part, to the voluntary

nature of this program and the uncertainty of potential
142

impacts on Tribes in the event a State or Tribe chooses to

participate in the program. Possible impacts on Tribes

choosing to opt into the program are discussed above in unit

III of this preamble. The EPA specifically requests

comments from tribal governments on whether this proposed

rule, if finalized, constitutes a policy that has tribal

implications as defined in E.O. 13175.

The EPA notes that the WRAP consulted extensively with

tribal representatives in the development of the Annex, the

document which provided the basis for today's proposed

rulemaking. The Annex provides recognition of Tribes

throughout the document and a specific discussion of tribal

issues in Attachment F. Today's rulemaking closely mirrors

the recommendations of the WRAP and therefore reflects

discussions between the WRAP and Tribes. 

In any case, prior to the issuance of the final rule,

EPA will provide additional opportunities for consultation

with tribal officials or authorized representatives of

tribal governments on the potential impacts of the proposed

rule on Tribes and whether the rule has tribal implications. 

The EPA will consider concerns expressed by tribal officials

during these consultations in the development of the final

rule. This consultation will be conducted consistent with

the requirements of E.O. 13175 and afford Tribes
143

opportunities to provide additional input into the

development of this rule. In the preamble to the final

rule, EPA will include a discussion of the consultation we

have undertaken and our conclusions regarding tribal

implications. The EPA specifically solicits additional

comment on this proposed rule from tribal officials. 

I. National Technology Transfer and Advancement Act

Section 12(d) of the National Technology Transfer and

Advancement Act of 1995 (“NTTAA”), Pub. L. No. 104-113,

Section 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. The NTTAA directs EPA to provide Congress, through

OMB, explanations when the Agency decides not to use

available and applicable voluntary consensus standards.

However, this action does not incorporate any

requirements to use any particular technical standards, such

as specific measurement or monitoring techniques. 

Therefore, EPA is not considering the use of any voluntary

consensus standards in this rulemaking. The proposed rule
144

does require States to develop emissions quantification

protocols and monitoring procedures for their SIPs as part

of the market trading program. However, EPA generally

defers to the choices the States make in their SIPs when the

CAA does not prescribe requirements, so EPA is not proposing

to require the use of specific, prescribed techniques or

methods in those SIPs. Nevertheless, while EPA believes

that it is not necessary to consider the use of any

voluntary consensus standards for this proposal, we will

encourage States and tribes to consider the use of such

standards in the development of these protocols.

 We welcome comments on this aspect of the proposed

rulemaking.

J. Executive Order 13211: Actions Concerning Regulations

That Significantly Affect Energy Supply, Distribution, or

Use

Executive Order 13211, "Actions Concerning Regulations

That Significantly Affect Energy Supply, Distribution, or

Use," (66 FR 28355, May 22, 2001), provides that agencies

shall prepare and submit to the Administrator of the Office

of Information and Regulatory Affairs, OMB, a Statement of

Energy Effects for certain actions identified as

"significant energy actions." Section 4(b) of Executive

Order 13211 defines "significant energy actions" as "any
145

action by an agency (normally published in the Federal

Register) that promulgates or is expected to lead to the

promulgation of a final rule or regulation, including

notices of inquiry, advance notices of proposed rulemaking,

and notices of proposed rulemaking: (1)(i) that is a

significant regulatory action under Executive Order 12866 or

any successor order, and (ii) is likely to have a

significant adverse effect on the supply, distribution, or

use of energy; or (2) that is designated by the

Administrator of the Office of Information and Regulatory

Affairs as a significant energy action." Under Executive

Order 13211, a Statement of Energy Effects is a detailed

statement by the agency responsible for the significant

energy action relating to: (i) any adverse effects on energy

supply, distribution, or use including a shortfall in

supply, price increases, and increased use of foreign

supplies should the proposal be implemented, and (ii)

reasonable alternatives to the action with adverse energy

effects and the expected effects of such alternatives on

energy supply, distribution, and use. 

While this rulemaking is a "significant regulatory

action" under Executive Order 12866, EPA has determined that

this rulemaking is not a significant energy action because

it is not likely to have a significant adverse effect on the
146

26

ICF consulting, Final Report on Regional Economic Impacts of

Annex. Transmitted to Tim Smith, EPA/OAQPS by Patrick

Cummins, WRAP Co-Project Manager, June 29, 2001.

supply, distribution, or use of energy. In the proposed

rule, if States chose to implement the option provided by 40

CFR 51.309, this would lead to a regional reduction in SO2

emissions in order to meet the WRAP's SO2 milestones for the

2003-2018 time period. The WRAP's analysis of the program's

requirements results in the following projections:26

– No reduction in crude oil supply;

– No reduction in fuel production;

– 0.0 percent to 0.2 percent increase in wholesale

electricity prices in 2018;

– Production cuts in coal in the western States

balanced by increases in coal production in the Appalachian

region;

– No increase in energy distribution costs;

– No significantly increased dependence on foreign

supplies of energy;

– Adverse impacts on employment, gross regional

product, and real disposable incomes in the affected western

States of less than 0.05 percent in 2018;

– Room for new sources of electrical generating

capacity within the target SO2 emission levels.
147

27

Memorandum from Jim Souby to Staff Council, State

Environmental Directors and State Air Directors, "Energy and

Air Quality Issues." February 23, 2001.

28

Technical Memorandum, "Analysis of New Coal-Fired Power

Plants Under the Proposed Sulfur Dioxide Emission Reduction

Milestones for the Nine-State Grand Canyon Visibility

Transport Region." February 22, 2001.

Given the particular concern in the West regarding

needed electrical generating capacity, EPA believes it

important to note the WGA statement that "the conclusion

[... of their analysis...] is that sulfur dioxide emissions

reductions milestones should in no way impede the

construction of new coal-fired power plants in the

West27..."

Furthermore, an assessment by WGA of the effects of the

WRAP Annex indicates that it is possible to build 7000

megawatts or more of new coal fired generation at any time

between 2001 and 2018 without exceeding the SO2 emission

milestones in the Annex.28 However the amount of megawatts

that could be built is affected by analytical assumptions

regarding fuel mix and quality, capacity utilization,

control levels, and the demarcation of fuel use regions. 

Additional scenarios included in the WGA analysis show that

there could be room for 19,000 megawatts of generation

capacity.
148

The EPA believes that the program contained in the

Annex and in today's proposed rule will not result in energy

reduction of 500 or more megawatts installed production

capacity. Under this program, considerable flexibility is

afforded to electricity generators on how to comply with the

program. Even if the trading program is triggered and

sources must comply with allowances, we believe that the

least-cost solutions afforded by the trading program, and

the ability to secure emissions reductions from other 

WRAP Annex - Page 148 of 178

sources, will make it very unlikely that the program would

lead to plant shutdowns. 

List of Subjects in 40 CFR Part 51

Environmental protection, Administrative practice and

procedure, Air pollution control, Carbon monoxide, Nitrogen

dioxide, Particulate matter, Sulfur oxides, Volatile organic

compounds.

__________________________

Dated: 

__________________________

Christine Todd Whitman,

Administrator.
149

For the reasons set forth in the preamble, part 51 of

chapter I of title 40 of the Code of Federal Regulations is

proposed to be amended as follows:

PART 51 - REQUIREMENTS FOR PREPARATION, ADOPTION, AND

SUBMITTAL OF IMPLEMENTATION PLANS

Subpart P - Protection of Visibility

1. The authority citation for part 51 continues to

read as follows:

Authority: 42 U.S.C. 7410-7671q.

2. Section 51.309 is amended by:

a. Revising paragraph (b)(5).

b. Adding paragraphs (b)(8) and (b)(9).

c. Revising paragraph (c).

d. Revising paragraphs (d)(4)(i) through

(d)(4)(iv).

e. Revising paragraph (f)(1)(i).

f. Adding paragraph (h).

The revisions and additions read as follows: 

§51.309 Requirements Related to the Grand Canyon Visibility

Transport Commission.

* * * * *

(b)* * * 

(5) Milestone means the maximum level of annual

regional sulfur dioxide emissions for a given year, assessed
150

annually consistent with paragraph (h)(2) of this section

beginning in the year 2003. 

* * * * * 

(8) BHP San Manuel means:

(i) the copper smelter located in San Manuel, Arizona

which operated during 1990, but whose operations were

suspended during the year 2000,

(ii) The same smelter in the event of a change of name

or ownership. 

(9) Phelps Dodge Hidalgo means: 

(i) The copper smelter located in Hidalgo, New Mexico

which operated during 1990, but whose operations were

suspended during the year 2000,

(ii) the same smelter in the event of a change of name

or ownership.

(c) Each Transport Region State may meet the

requirements of §51.308(b) through (e) by electing to submit

an implementation plan that complies with the requirements

of this section. Each Transport Region State must submit an

implementation plan addressing regional haze visibility

impairment in the 16 Class I areas no later than December

31, 2003. Indian Tribes may submit implementation plans

after the December 31, 2003 deadline. A Transport Region

State that elects not to submit an implementation plan that
151

complies with the requirements of this section (or whose

plan does not comply with all of the requirements of this

section) is subject to the requirements of §51.308 in the

same manner and to the same extent as any State not included

within the Transport Region. 

* * * * *

(d)* * *

(4)* * *

(i) Sulfur dioxide milestones consistent with paragraph

(h)(1) of this section.

(ii) Monitoring and reporting of sulfur dioxide

emissions. The plan submission must include provisions

requiring the annual monitoring and reporting of actual

stationary source sulfur dioxide emissions within the State. 

The monitoring and reporting data must be sufficient to

determine whether a 13 percent reduction in actual emissions

has occurred between the years 1990 and 2000, and for

determining annually whether the milestone for each year

between 2003 and 2018 is exceeded, consistent with paragraph

(h) (2) of this section. The plan submission must provide

for reporting of these data by the State to the

Administrator and to the regional planning organization

consistent with paragraph (h)(2) of this section.
152

(iii) Criteria and Procedures for a Market Trading

Program. The plan must include the criteria and procedures

for activating a market trading program within 5 years

consistent with paragraph (h)(3) of this section if an

applicable milestone is exceeded. The plan must also

provide for implementation plan assessments of the program

in the years 2008, 2013, and 2018. 

(iv) Provisions for market trading program compliance

reporting consistent with paragraph (h)(3) of this section.

* * * * *

(f) * * *

(1) * * *

(i) The annex must contain quantitative emissions 

milestones for stationary source sulfur dioxide emissions

for the reporting years 2003, 2008, 2013 and 2018. The

milestones must provide for steady and continuing emissions

reductions for the 2003-2018 time period consistent with the

Commission’s definition of reasonable progress, its goal of

50 to 70 percent reduction in sulfur dioxide emissions from 

1990 actual emission levels by 2040, applicable requirements

under the CAA, and the timing of implementation plan

assessments of progress and identification of deficiencies

which will be due in the years 2008, 2013, and 2018. The 

milestones must be shown to provide for greater reasonable
153

progress than would be achieved by application of best

available retrofit technology (BART) pursuant to

§51.308(e)(2) and would be approvable in lieu of BART. 

* * * * *

(h) Emissions Reduction Program for Major Industrial

Sources of Sulfur Dioxide. The first implementation plan

submission must include a stationary source emissions

reduction program for major industrial sources of sulfur

dioxide that meets the following requirements:

(1) Regional sulfur dioxide milestones. The plan must

include the milestones in Table 1, and provide for the

adjustments in paragraphs 51.309(h)(1)(i) through (iv) of

this section. Table 1 follows:

Table 1. Sulfur Dioxide Emissions Milestones.

Column

1

Column 2 Column 3 Column 4

For the

year...

... if BHP San

Manuel and

Phelps Dodge

Hidalgo resume

operation, the

maximum regional

sulfur dioxide

milestone is...

... if neither BHP

San Manuel nor

Phelps Dodge

Hidalgo resumes

operation, the

minimum regional

sulfur dioxide

milestone is...

... and the emission

inventories for these

years will determine

whether emissions are

greater than or less than

the milestone:

2003 720,000 tons 682,000 tons 2003

2004 720,000 tons 682,000 tons Average of 2003 and 2004

2005 720,000 tons 682,000 tons Average of 2003, 2004 and

2005
154

Column

1

Column 2 Column 3 Column 4

For the

year...

... if BHP San

Manuel and

Phelps Dodge

Hidalgo resume

operation, the

maximum regional

sulfur dioxide

milestone is...

... if neither BHP

San Manuel nor

Phelps Dodge

Hidalgo resumes

operation, the

minimum regional

sulfur dioxide

milestone is...

... and the emission

inventories for these

years will determine

whether emissions are

greater than or less than

the milestone:

2006 720,000 tons 682,000 tons Average of 2004, 2005 and

2006

2007 720,000 tons 682,000 tons Average of 2005, 2006, and

2007

2008 718,333 tons 680,333 tons Average of 2006, 2007, and

2008

2009 716,667 tons 678,667 tons Average of 2007, 2008 and

2009

2010 715,000 tons 677,000 tons Average of 2008, 2009 and

2010

2011 715,000 tons 677,000 tons Average of 2009, 2010, and

2011

2012 715,000 tons 677,000 tons Average of 2010, 2011, and

2012

2013 695,000 tons 659,667 tons Average of 2011, 2012, and

2013

2014 675,000 tons 642,333 tons Average of 2012, 2013, and

2014

2015 655,000 tons 625,000 tons Average of 2013, 2014, and

2015

2016 655,000 tons 625,000 tons Average of 2014, 2015, and

2016

2017 655,000 tons 625,000 tons Average of 2015, 2016, and

2017

2018 510,000 tons 480,000 tons Year 2018 only

each

year

after

2018 

no more than

510,000 tons

no more than

480,000 tons

Three-year average of the

year and the two previous

years, or any alternative

provided in a future plan

revisions under

§51.308(f). 
155

(i) Adjustment for States and Tribes Which Choose Not

to Participate in the Program, and for Tribes that choose to

opt into the program after the 2003 deadline.If a State or

Tribe chooses not to submit an implementation plan under the

option provided in §51.309, the amounts for that State or

Tribe which are listed in Table 2 must be subtracted from

the milestones that are included in the implementation plans

for the remaining States and Tribes. For Tribes that opt

into the program after 2003, the amounts in Table 2 of 4

will be automatically added to the milestones that are

included in the implementation plans for the participating

States and Tribes, beginning with the first year after the

tribal implementation plan implementing §51.309 is approved

by the Administrator. The amounts listed in Table 2 are for

purposes of adjusting the milestones only, and they do not

represent amounts that must be allocated under any future

trading program. Table 2 follows: 

Table 2. Amounts Subtracted from the Milestones for States

and Tribes Which do not Exercise the Option Provided by

§51.309.

State

or

Tribe

2003 2004 2005 2006 2007 2008 2009 2010

1 Arizona 117,372 117,372 117,372 117,372 117,372 117,941 118,511 119,080
156

State

or

Tribe

2003 2004 2005 2006 2007 2008 2009 2010

2.California

37,343 37,343 37,343 37,784 37,343 36,363 35,382 34,402

3.Colorado 98,897 98,897 98,897 98,897 98,897 98,443 97,991 97,537

4.Idaho 18,016 18,016 18,016 18,016 18,016 17,482 16,948 16,414

5.Nevada 20,187 20,187 20,187 20,187 20,187 20,282 20,379 20,474

6.New

Mexico

84,624 84,624 84,624 84,624 84,624 84,143 83,663 83,182

7.Oregon 26,268 26,268 26,268 26,268 26,268 26,284 26,300 26,316

8.Utah 42,782 42,782 42,782 42,782 42,782 42,795 42,806 42,819

9.Wyoming 155,858 155,858 155,858 155,858 155,858 155,851 155,843 155,836

10.Navajo

Nation

53,147 53,147 53,147 53,147 53,147 53,240 53,334 53,427

11.Shoshon

e-Bannock

Tribe of

the Fort

Hall

Reservation

 4,994 4,994 4,994 4,994 4,994 4,994 4,994 4,994

12.Ute

Indian

Tribe

of the

Uintah

and

Ouray

Reservation

 1,129 1,129 1,129 1,129 1,129 1,131 1,133 1,135

13.Wind

River

Reservation

 1,384 1,384 1,384 1,384 1,384 1,384 1,384 1,384
157

State

or

Tribe

2011 2012 2013 2014 2015 2016 2017 2018

1.Arizona 119,080 119,080 116,053 113,025 109,998 109,998 109,998 82,302

2.California

34,402 34,402 33,265 32,128 30,991 30,991 30,991 27,491

3.Colorado 97,537 97,537 94,456 91,375 88,294 88,294 88,294 57,675

4.Idaho 16,414 16,414 15,805 15,197 14,588 14,588 14,588 13,227

5.Nevada 20,474 20,474 20,466 20,457 20,449 20,449 20,449 20,232

6.New

Mexico

83,182 83,182 81,682 80,182 78,682 78,682 78,682 70,000

7.Oregon 26,316 26,316 24,796 23,277 21,757 21,757 21,757 8,281

8.Utah 42,819 42,819 41,692 40,563 39,436 39,436 39,436 30,746

9.Wyoming 155,836 155,836 151,232 146,629 142,025 142,025 142,025 97,758

10.Navajo

Nation

53,427 53,427 52,707 51,986 51,266 51,266 51,266 44,772

11.Shosho

neBannock

Tribe of

the Fort

Hall

Reservation

4,994 4,994 4,994 4,994 4,994 4,994 4,994 4,994

12.Ute

Indian

Tribe of

the

Uintah

and Ouray

Reservation

1,135 1,135 1,135 1,135 1,135 1,135 1,135 1,135

13.Northe

rn

Arapaho

and 

Shoshone

Tribes of

the Wind

River

Reservation

1,384 1,384 1,384 1,384 1,384 1,384 1,384 1,384
158

(ii) Adjustment for Future Operation of Copper Smelters.

(A) The plan must provide for adjustments to the

milestones in the event that Phelps Dodge Hidalgo and/or BHP

San Manuel resume operations or that other smelters increase

their operations. 

(B) The plan must provide for adjustments to the

milestones according to Tables 3a and 3b except that if

either the Hidalgo or San Manuel smelters resumes operation

and is required to obtain a permit under 40 CFR 52.21 or 40

CFR 51.166, the adjustment to the milestone must be based

upon the levels allowed by the permit. In no instance may

the adjustment to the milestone be greater than 22,000 tons

for the Phelps Dodge Hidalgo, greater than 16,000 tons for 

BHP San Manuel, or more than 30,000 tons for the combination

of the Phelps Dodge Hidalgo and BHP San Manuel smelters for

the years 2013 through 2018. Tables 3a and 3b follow:

Table 3a. Adjustments to the Milestones for Future

Operations of Copper Smelters.
159

Scenario If this

happens

...

... and this

happens...

.... then you

calculate the

milestone by adding

this amount to the

value in column 3 of

Table 1:

1 Phelps

Dodge

Hidalgo

resumes

operation,

but BHP San

Manuel does

not

Phelps Dodge Hidalgo

resumes production

consistent with past

operations and

emissions

A. Beginning with the

year that production

resumes, and for each

year up to the year

2012, the milestone

increases by: 

(1) 22,000 tons PLUS

(2) Any amounts

identified in Table 3b

B. For the years 2013

through 2018, the

milestone increases by

this amount or by

30,000 tons, whichever

is less.

2 Phelps

Dodge

Hidalgo

resumes

operation,

but BHP San

Manuel does

not

Phelps Dodge Hidalgo

resumes operation in

a substantially

different manner

such that emissions

will be less than

for past operations

(an example would be

running only one

portion of the plant

to produce sulfur

acid only)

A. Beginning with the

year that production

resumes, and for each

year up to the year

2012, the milestone

increases by:

(1) Expected emissions

for Phelps Dodge

Hidalgo (not to exceed

22,000 tons), PLUS

(2) Any amounts

identified in Table 3b

B. For the years 2013

through 2018, the

milestone increases by

this amount or by

30,000 tons, whichever

is less.

3 BHP San

Manuel

resumes

operation,

but Phelps

Dodge

Hidalgo

does not

BHP San Manuel

resumes production

consistent with past

operations and

emissions

A. 16,000 tons PLUS

B. Any amounts

identified in Table 3b
160

Scenario If this

happens

...

... and this

happens...

.... then you

calculate the

milestone by adding

this amount to the

value in column 3 of

Table 1:

4 BHP San

Manuel

resumes

operation,

but Phelps

Dodge

Hidalgo

does not

BHP San Manuel

resumes operations

in a substantially

different manner

such that emissions

will be less than

for past operations

(an example would be

running only one

portion of the plant

to produce sulfur

acid only)

A. Expected emissions

for BHP San Manuel

(not to exceed 16,000

tons) PLUS

B. Any amounts

identified in Table 3b

5 Both Phelps

Dodge

Hidalgo and

BHP San

Manuel 

resume

operations

Both smelters resume

production

consistent with past

operations and

emissions

A. Beginning with the

year that production

resumes, and for each

year up to the year

2012, the milestone

increase by 38,000

tons.

B. For the years 2013

through 2018, the

milestone increases by

30,000 tons.

6 Both Phelps

Dodge

Hidalgo and

BHP San

Manuel

resume

operations

Phelps Dodge Hidalgo

resumes production

consistent with past

operations and

emissions, but BHP

San Manuel resumes

operations in a

substantially

different manner

such that emissions

will be less than

for past operations

(an example would be

running only one

portion of the plant

to produce sulfur

acid only)

A. For the year that

production resumes,

and for each year up

to the year 2012, the

milestone increases

by:

(1) 22,000 PLUS

(2) Expected emissions

for San Manuel (not to

exceed 16,000 tons)

B. For the years 2013

though 2018, the

milestone increases by

this same amount, or

by 30,000 tons,

whichever is less.
161

Scenario If this

happens

...

... and this

happens...

.... then you

calculate the

milestone by adding

this amount to the

value in column 3 of

Table 1:

7 Both Phelps

Dodge

Hidalgo and

BHP San

Manuel

resume

operations

BHP San Manuel

resumes production

consistent with past

operations and

emissions, but

Phelps Dodge Hidalgo

resumes operations

in a substantially

different manner

such that emissions

will be less than

for past operations

(an example would be

running only one

portion of the plant

to produce sulfur

acid only)

A. For the year that

production resumes,

and for each year up

to the year 2012, the

milestone increases

by:

(1) 16,000 PLUS

(2) expected Hidalgo

emissions (not to

exceed 22,000 tons)

B. For the years 2013

though 2018, the

milestone increases by

this same amount, or

by 30,000 tons,

whichever is less.

8 Both Phelps

Dodge

Hidalgo and

BHP San

Manuel do

not resume

operations

A. Any amounts

identified in table 3b
162

Table 3b. Adjustments for Certain Copper Smelters Which

 Operate Above Baseline Levels.

Where it applies

in table 3a, if

the following

smelter...

complies with

existing permits

but has actual

annual emissions

that exceed the

following baseline

level...

...the milestone

increases by the

difference between

actual emissions

and the baseline

level, OR

the following

amount, whichever

is less.

Asarco Hayden 23,000 tons 3,000 tons

BHP San Manuel 16,000 tons 1,500 tons

Kennecott Salt

Lake

1,000 tons 100 tons

Phelps Dodge Chino 16,000 tons 3,000 tons

Phelps Dodge

Hidalgo

22,000 tons 4,000 tons

Phelps Dodge Miami 8,000 tons 2,000 tons

(iii) Adjustments for changes in emission monitoring or

calculation methods. The plan must provide for adjustments

to the milestone to reflect changes in sulfur dioxide

emission monitoring or measurement methods for a source that

is included in the program, including changes identified

under paragraph(h)(2)(iii)(D) of this section. Any such

adjustment based upon changes to emissions monitoring or

measurement methods must be made in the form of an

implementation plan revision that complies with the
163

procedural requirements of §51.102 and §51.103. The

implementation plan revision must be submitted to the

Administrator no later than the first due date for a

periodic report under paragraph(d)(10) of this section

following the change in emission monitoring or measurement

method. 

(iv) Adjustments for changes in flow rate measurement

methods. The implementation plan must provide for

adjustments to the milestones for sources using the methods

contained in 40 CFR part 60, appendix A, Methods 2F, 2G, and

2H.

(v) Adjustments for illegal emissions. The

implementation plan must provide for adjustments to the

milestones if any source in the program decreases its sulfur

dioxide emissions in order to comply with applicable

regulations which were in effect prior to the calculation of

the source’s baseline sulfur dioxide emissions. The plan

must provide that the milestone must be decreased by an

appropriate amount based on a reforecasted calculation of

the source’s decreased sulfur dioxide emissions. Any such

adjustment based upon illegal emissions must be made in the

form of an implementation plan revision that complies with

the procedural requirements of §§51.102 and 51.103. 
164

(vi) Adjustment based upon program audits. The plan

must provide for appropriate adjustments to the milestones

based upon the results of program audits. Any such

adjustment based upon audits must be made in the form of an

implementation plan revision that complies with the

procedural requirements of §§51.102 and 51.103. The

implementation plan revision must be submitted to the

Administrator no later than the first due date after the

audit for a periodic report under (d)(10) of this section.

(vii) Adjustment for individual sources opting into the

program. The plan must provide for adjustments to the

milestones for any source choosing to participate in the

program even though they do not meet the 100 tons per year

criterion for inclusion. Any such adjustments must be made

in the form of an implementation plan revision that complies

with the procedural requirements of §§51.102 and 51.103. 

(2) Requirements for monitoring, record keeping and

reporting of actual annual emissions of sulfur dioxide

(i) Sources included in the program. The implementation

plan must provide for annual emission monitoring and

reporting, beginning with calendar year 2003, for all

sources whose actual emissions of sulfur dioxide are 100

tons per year or more as of 2003, and all sources whose
165

actual emissions are 100 tons or more per year in any

subsequent year. States and Tribes may include other 

sources, if the implementation plan provides for the same

procedures and monitoring as for other sources in a way that

is federally enforceable.

 (ii) Documentation of emissions calculation methods. The

implementation plan must provide documentation, consistent

with EPA's applicable guidance on preparation of emissions

inventories, of the specific methodology used to calculate

emissions for each emitting unit during the base year. The

implementation plan must also provide for documentation for

each emission unit of any change to the specific methodology

for each year after the base year.

(iii) Record keeping. The implementation plan must

provide for the retention of records for at least 5 years

from the establishment of the record. If a record will be

the basis for an adjustment to the milestone as provided for

in paragraph(h)(1) of this section, that record must be

retained for at least 5 years after the date of the SIP

revision which reflects the adjustment. 

(iv) Completion and submission of emissions reports.

The implementation plan must provide for collection of the

emissions data, quality assurance, and public review and

submission to the Administrator and to each State and Tribe
166

which has submitted an implementation plan under this

section by no later than September 30 of the following year. 

For sources for which changes in emission quantification

methods require adjustments under paragraph (h)(1)(iii) of

this section, the emissions reports must reflect the method

in place before the change, for each year until the

milestone has been adjusted. If each of the States which

have submitted an implementation plan under this section

have identified a regional planning organization to

coordinate the annual comparison with the milestone, the

implementation plan must provide for reporting of this

information to the regional planning body. 

(v) Exceptions reports. The emissions report submitted

by each State and Tribe under paragraph(h)(2)(ii) of this

section must provide for exceptions reports containing the

following:

(A) identification of new or additional sulfur dioxide

sources greater than 100 tons per year that were not

contained in the previous year emissions report;

(B) identification of sources shut down or removed from

the previous year emissions report;

(C) explanation for emissions variations at any covered

source that exceeds plus or minus 20 percent from the

previous year emissions report;
167

(D) identification and explanation of new emissions

monitoring and reporting methods at any source. The

use of any new methods requires an adjustment to the

milestones according to paragraph(h)(1)(iii) of this

section.

(vi) Reporting of emissions for the Mohave Generating

Station for the years 2003 through 2006. For the years 2003,

2004, 2005, and for any part of the year 2006 before

installation and operation of sulfur dioxide controls at the

Mohave Generating Station, emissions from the Mohave

Generating Station will be calculated using a sulfur dioxide

emission factor of 0.15 pounds per million BTU.

(vii) Special provision for the year 2013. The

implementation plan must provide that in the emissions

report for calendar year 2012, which is due by September 30,

2013 under paragraph(h)(2)(ii) of this section, each State

has the option of including calendar year 2018 emission

projections for each source, in addition to the actual

emissions for each source for calendar year 2012. 

(3) Annual comparison of emissions to the milestone.

(i) The implementation plan must provide for a

comparison each year of annual SO2 emissions for the region

against the appropriate milestone. In making this

comparison:
168

(A) Each State or Tribe must make the comparison, using

its annual emissions report and emissions reports from other

States and Tribes reported under paragraph(h)(2)(ii) of this

section, or

(B) Where each State or Tribe has designated a regional

planning organization for this purpose, the regional

planning organization makes the comparison, using

information provided by each State and Tribe.

(ii) Beginning with an initial public review draft

report due December 31, 2004 that makes the comparison for

the year 2003 milestone, the implementation plan must

provide the public with a public review draft comparison by

no later than December 31 of each year. This public review

draft must be issued by each State or Tribe or in a

coordinated report by the regional planning body.

(iii) The implementation plan must provide for a final

determination by each State or Tribe, or by the regional

planning organization designated by each State or Tribe, of

whether or not the annual milestone is exceeded. The

determination must take into account public comments on the

draft report. This determination must be submitted to the

Administrator by the end of March of the year following

issuance of the initial public review draft report. The
169

first final determination will be due to the Administrator

on March 31, 2005. 

(iv) Special considerations for year 2012 report. If

each State or Tribe has included calendar year 2018 emission

projections under paragraph(h)(2)(v) of this section, then

the report for the year 2012 milestone which is due by

December 31, 2013 under paragraph(h)(3)(ii) of this section

may also include a comparison of the regional year 2018

emissions projection with the milestone for calendar year

2018. If the report indicates that the year 2018 milestone

will be exceeded, then each State or Tribe, or the regional

planning organization may choose to implement the market

trading program beginning in the year 2018. 

(v) Independent review. The implementation plan shall

provide for reviews of the annual emissions reporting

program by an independent third party. This independent

review is not required if a determination has been made

under paragraph(h)(3)(iii) of this section to implement the

market trading program. The independent review shall be

completed by the end of 2006, and every 5 years thereafter,

and shall include an analysis of:

(A) the uncertainty of the reported emissions data;
170

(B) whether the uncertainty of the reported emissions

data is likely to have an adverse impact on the annual

determination of emissions relative to the milestone; and, 

(C) whether there are any necessary improvements for

the annual administrative process for collecting the

emissions data, reporting the data, and obtaining public

review of the data.

(4) Market trading program. The implementation plan

must provide for implementation of a market trading program

if the determination required by paragraph(h)(3)(iii) of

this section indicates that a milestone has been exceeded. 

The implementation plan must provide for the option of

implementation of a market trading program if a report under

paragraph(h)(3)(iv) of this section indicates that projected

emissions for the year 2018 will exceed the year 2018

milestone. The implementation plan must provide for a

market trading program whose provisions are the same for

each State or Tribe submitting an implementation plan under

this section. The implementation plan must include the

following market trading program provisions: 

(i) Allowances. For each source in the program, the

implementation plan must identify the specific allocation of

allowances, on a tons per year basis, for each calendar year

from 2009 to 2018. The total of the tons per year
171

allowances across all participating States and Tribes may

not exceed the amounts in Table 4 of this paragraph, less a

20,000 ton amount that must be set aside for use by Tribes. 

The implementation plan may include procedures for

redistributing the allowances in future years, so long as

the amounts in Table 4 of this paragraph, less a 20,000 ton

amount, are not exceeded. The implementation plan must

provide that any adjustment for a calendar year applied to

the milestones under paragraphs (h)(1)(i) through (v) of

this section must also be applied to the amounts in Table 4. 

Table 4 follows:

Table 4. Total amount of allowances by year.

For this year: If the two

smelters resume

operations, the

total number of

allowances issued

by States and

Tribes may not

exceed this

amount:

If the two

smelters do not

resume operations,

the total number

of allowances

issued by States

and Tribes may not

exceed this

amount:

2009 715,000 677,000

2010 715,000 677,000

2011 715,000 677,000

2012 715,000 677,000

2013 655,000 625,000

2014 655,000 625,000
172

For this year: If the two

smelters resume

operations, the

total number of

allowances issued

by States and

Tribes may not

exceed this

amount:

If the two

smelters do not

resume operations,

the total number

of allowances

issued by States

and Tribes may not

exceed this

amount:

2015 655,000 625,000

2016 655,000 625,000

2017 655,000 625,000

2018 510,000 480,000

(ii) Compliance with allowances. The implementation

plan provide that, beginning with the compliance period 6

years following the calendar year for which emissions

exceeded the milestone and for each compliance period

thereafter, each source owner must hold allowances for each

ton of sulfur dioxide emitted.

(iii) Emissions quantification protocols. The

implementation plan must include specific emissions

quantification protocols for each source category included

within the program, including the identification of sources

subject to part 75 of this chapter. For sources subject to

part 75 of this chapter, the implementation plan may rely on

the emissions quantification protocol in part 75. For

source categories with sources in more than one State
173

submitting an implementation plan under this section, each

State must use the same protocol. The protocols must

provide consistent approaches for all sources within a given

source category. The protocols must provide for reliability

(repeated application obtains results equivalent to EPAapproved test methods), and replicability (different users

obtain the same or equivalent results that are independently

verifiable). The protocols must include procedures for 

addressing missing data, which provide for conservative

calculations of emissions and provide sufficient incentives

for sources to comply with the monitoring provisions.

(iv) Monitoring and Record keeping. The implementation

plan must include monitoring provisions which are consistent

with the emissions quantification protocol. Monitoring

required by these provisions must be timely, of sufficient

frequency, and ensure the enforceability of the program. 

The implementation plan must also include requirements that

source owners or operators keep records consistent with the

emissions quantification protocols, and keep all records

used to determine compliance for at least 5 years, unless a

longer period is required by paragraph(h)(2)(iii) of this

section. For source owners or operators which use banked

allowances, all records relating to the banked allowance
174

must be kept for at least 5 years after the banked

allowances are used. 

(v) Tracking system. The implementation plan must

provide for submitting data to a centralized system for the

tracking of allowances and emissions. The implementation

plan must provide that all necessary information regarding

emissions, allowances, and transactions is publicly

available in a secure, 

centralized database. The system must ensure that each

allowance may be uniquely identified, allow for frequent

updates, and include enforceable procedures for recording

data.

(vi) Authorized account representative. The

implementation plan must include provisions requiring the

owner or operator of each source in the program to identify

an authorized account representative. The implementation

plan must provide that all matters pertaining to the

account, including, but not limited to, the deduction and

transfer of allowances in the account, and certifications of

the completeness and accuracy of emissions and allowances

transactions required in the annual report under

paragraph(h)(4)(vi) of this section shall be undertaken only

by the authorized account representative.
175

(vii) Annual report. The implementation plan must

include provisions requiring the authorized account

representative for each source in the program to demonstrate

and report within a specified time period following the end

of each calendar year that the source holds allowances for

each ton per year of SO2 emitted. The implementation plan

shall require the authorized account representative to

submit the report 

within 60 days of the end of each calendar year, unless an

alternative deadline is specified consistent with emission

monitoring and reporting procedures.

(viii) Allowance transfers. The implementation plan

must include provisions detailing the process for

transferring allowances between parties. 

(ix) Emissions banking. The implementation plan may

provide provisions for the banking of unused allowances. 

Any such provisions must state whether unused allowances may

be kept for use in future years and describe any

restrictions on the use of any such allowances. Allowances

kept for use in future years may be used in calendar year

2018 only to the extent that the implementation plan ensures

that such allowances would not interfere with the

achievement of the year 2018 amount in Table 4 in paragraph

(C)(4)(i) of this section. 
176

(x) Penalties. The implementation plan must include

specific enforcement penalties to be applied if emissions

from a source in the program exceed the allowances held by

the source. In establishing specific enforcement penalties,

the State or Tribe must ensure that: 

(A) When emissions from a source in the program exceed

the allowances held by the source, each day of the year is a

separate violation; and 

(B) Each ton of excess emissions is a separate

violation.

(xi) Provisions for periodic evaluation of the trading

program. The implementation plan must provide for an

evaluation of the trading program no later than 3 years

following the first full year of the trading program, and at

least every 5 years thereafter. Any changes warranted by

the evaluation should be incorporated into the next periodic

SIP or TIP revision required under paragraph(d)(10) of this

section. The evaluation should be conducted by an

independent third party and should include an analysis of:

(A) Whether the total actual emissions could exceed the

values in §51.309(h)(4)(i), even though sources comply with

their allowances;
177

(B) Whether the program achieved the overall emission

milestone it was intended to reach, and a discussion of

actions that have been necessary to reach the milestone;

(C) The effectiveness of the compliance, enforcement

and penalty provisions;

(D) The administrative costs of the program to sources

and to State and tribal regulators, including a discussion

of whether States and Tribes have enough resources to

implement the trading program;

(E) Whether the market trading program has likely led

to decreased costs for reaching the milestone relative to a

non-market based approach, including a discussion of the

market price of allowances relative to control costs that

might have otherwise been incurred;

(F) Whether the trading program resulted in any

unexpected beneficial effects, or any unintended detrimental

effects;

(G) Whether the actions taken to reduce sulfur dioxide

have led to any unintended increases in other pollutants;

(H) Whether there are any changes needed in emissions

monitoring and reporting protocols, or in the administrative

procedures for program administration and tracking;
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(I) The effectiveness of the provisions for interstate

trading, and whether there are any procedural changes needed

to make the interstate nature of the program more effective.

(5) What other provisions are required for the program?

The implementation plan must provide for:

(i) permitting of affected sources. For sources subject

to part 70 or part 71 of this chapter, the implementation

plan requirements for emissions reporting and for the

trading program under paragraph(h) of this section must be

incorporated into the part 70 or part 71 permit. For

sources not subject to part 70 or part 71, the requirements

must be incorporated into a permit that is enforceable as a

practical matter by the Administrator, and by citizens to

the extent permitted under the CAA.

(ii) integration with other programs. In addition to

the requirements of paragraph(h) of this section, the

restrictions of State, tribal and local rules, and State,

tribal and Federal law remain in place. No provision of

paragraph(h) of this section should be interpreted as

exempting any source from compliance with any other

provision of State, tribal or local law, the applicable and

approved implementation plan, the tribal implementation

plan, a federally enforceable permit, or implementing

regulations under the CAA.
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