41358 Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules

1 In addition, § 73.34(c)(4) is revised to eliminate

the reference to the direct sales provisions, which

were previously removed from part 73. 61 FR

28761, 28762 (1996).

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Parts 72 and 73

[FRL–6134–2]

RIN 2060–AH60

Revisions to the Permits and Sulfur

Dioxide Allowance System Regulations

Under Title IV of the Clean Air Act

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: Title IV of the Clean Air Act

(the Act), as amended by the Clean Air

Act Amendments of 1990, authorizes

the Environmental Protection Agency

(EPA or Agency) to establish the Acid

Rain Program. The program sets

emissions limitations to reduce acidic

particles and deposition and their

serious, adverse effects on natural

resources, ecosystems, materials,

visibility, and public health.

The allowance trading component of

the Acid Rain Program allows utilities

to achieve sulfur dioxide emissions

reductions in the most cost-effective

way. Allowances are traded among

utilities and recorded in EPA’s

Allowance Tracking System for use in

determining compliance at the end of

each year. The Acid Rain Program’s

permitting, allowance trading, and

emissions monitoring requirements are

set forth in the ‘‘core rules’’

promulgated on January 11, 1993. This

proposal would amend certain

provisions in the permitting and

Allowance Tracking System rules for

the purpose of improving the operation

of the Allowance Tracking System and

the allowance market, while still

preserving the Act’s environmental

goals.

DATES: Comments. Comments on this

action must be received on or before

September 2, 1998, unless a hearing is

requested by August 13, 1998. If a

hearing is requested, written comments

must be received by September 17,

1998.

Public Hearing. Anyone requesting a

public hearing must contact the EPA no

later than August 13, 1998. If a hearing

is held it will be held on August 14,

1998, beginning at 8:30 am.

ADDRESSES: Comments. Comments

should be submitted in duplicate, to:

EPA Air Docket, Attention, Docket No.

A–98–15, U.S. Environmental

Protection Agency, 401 M Street, S.W.,

Washington, DC 20460.

Public Hearing. If a hearing is held it

will take place at the EPA Auditorium

at 401 M St., S.W., Washington DC.

Docket. Docket No. A–98–15,

containing supporting information used

in developing the proposed rule, is

available for public inspection and

copying between 8:30 a.m. and 3:30

p.m., Monday through Friday, at EPA’s

Air Docket Section, Waterside Mall,

room 1500, 1st Floor, 401 M Street,

S.W., Washington, DC 20460. A

reasonable fee may be charged for

copying.

FOR FURTHER INFORMATION CONTACT:

Donna Deneen, Permits and Allowance

Market Branch, Acid Rain Division

(6204J), U.S. Environmental Protection

Agency, 401 M Street S.W., Washington,

DC 20460 (202–564–9089).

SUPPLEMENTARY INFORMATION: The

information in this preamble is

organized as follows:

I. Affected Entities

II. Background

III. Revisions

A. Allowance Transfer Deadline

B. Compliance Determination

C. Signature Requirement for Transfer

Requests

D. Impacts of Revisions on Acid Rain

Permits

IV. Administrative Requirements

A. Executive Order 12866

B. Paperwork Reduction Act

C. Unfunded Mandates Act

D. Regulatory Flexibility

E. Applicability of Executive Order 13045:

Children’s Health Protection

I. Affected Entities

Entities potentially regulated by this

action are fossil-fuel fired boilers or

turbines that serve generators producing

electricity, generate steam, or cogenerate

electricity and steam. Regulated

categories and entities include:

Category Examples of regulated entities

Industry ..................... Electric service providers, boilers from

a wide range of industries.

This table is not intended to be

exhaustive, but rather provides a guide

for readers regarding entities likely to be

regulated by this action. This table lists

the types of entities that EPA is now

aware could potentially be regulated by

this action. Other types of entities not

listed in the table could also be

regulated. To determine whether your

facility is regulated by this action, you

should carefully examine the

applicability criteria in § 72.6 and § 74.2

and the exemptions in §§ 72.7, 72.8, and

72.14 of title 40 of the Code of Federal

Regulations. If you have questions

regarding the applicability of this action

to a particular entity, consult the

persons listed in the preceding FOR

FURTHER INFORMATION CONTACT section.

II. Background

On January 11, 1993, EPA

promulgated the ‘‘core’’ regulations that

implemented the major provisions of

title IV of the Clean Air Act (CAA or the

Act), as amended on November 15,

1990, including the Permits rule (40

CFR part 72) and the Sulfur Dioxide

Allowance System rule (40 CFR part

73). Since promulgation, these rules

have been applied to three compliance

years, 1995, 1996, and 1997 for which

affected units were required to meet the

annual allowance holding requirements

established by the rules. During this

time, the Agency has gained experience

in implementing these requirements and

believes that certain provisions in the

rules should be revised to improve the

operation of the Allowance Tracking

System and the allowance market. This

proposal contains changes to the

allowance transfer deadline and

compliance determinations and clarifies

the signature requirements for

allowance transfer requests.1 These

revisions and the reasons for their

proposal are summarized below.

III. Revisions

A. Allowance Transfer Deadline

The ‘‘allowance transfer deadline’’ is

the last day on which allowance

transfers may be submitted to EPA for

recordation in a compliance subaccount

for use in meeting a unit’s sulfur

dioxide (SO2) emissions limitation

requirements for the year. 40 CFR 72.2

(definition of ‘‘allowance transfer

deadline’’). EPA is proposing to extend

the allowance transfer deadline from the

current date of January 30 to March 1 (or

February 29 in any leap year). As

explained below, this proposed change

reflects the Agency’s experience in

operating the Allowance Tracking

System, particularly following the 1995,

1996, and 1997 compliance years, and

the technological advances that have

been made regarding the submission of

continuous emissions monitoring

system (CEMS) data.

EPA’s reasoning for selecting the

current date of January 30 for the

allowance transfer deadline is laid out

in the preamble to the January 11, 1993

core rules. 50 FR 3590, 3617 (1993). As

the Agency explained, it was

anticipated that this date would provide

utilities with ample time to transact and

submit allowance transfers at the end of
Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules 41359

2EPA also expressed concern that designated

representatives might need time between the

allowance transfer deadline and March 1 to

complete and submit excess emission offset plans.

56 63002, 63050 (1991). However, no utility has yet

had to submit an offset plan. Further, under part 77,

as amended, any offset plan would simply state that

allowances are to be immediately deducted, except

in an extraordinary case when it could be shown

that immediate deduction would interfere with

electric reliability. See 61 FR 68340, 68363 (1996).

3Under § 72.90, the annual compliance

certification report is required to be submitted

within 60 days after the end of the calendar year.

the year, while giving EPA adequate

time to complete its administrative

duties before the date (60 days after the

end of the year) that excess emissions

offset plans were due. EPA’s

administrative duties involve reviewing,

recording, and notifying the authorized

account representatives of any transfers,

and, if the authorized account

representatives review the notifications

and submit error claims, reviewing and

resolving each error claim. The Agency

noted that extending the allowance

transfer deadline to March 1 would

leave no time for these activities and

was therefore not a viable option. Id.2

Now, based on nearly four years of

experience with the Allowance Tracking

System, EPA believes that changing the

allowance transfer deadline to March 1

is a viable option. The allowance

transfer processing activities cited in the

January 11, 1993 preamble as an

obstacle to changing the deadline have

turned out to have little or no impact on

the designated representative’s ability to

submit or the Agency’s ability to review

excess emissions offset plans or

compliance certifications, which are

also due on March 1 (or February 29 in

any leap year).3 The primary reason EPA

sends out transfer notifications to

authorized account representatives is so

they can check whether EPA made an

error in processing transfer requests.

EPA notes that although it has

processed over 2500 private transfers of

allowances since the Allowance

Tracking System first opened for

business, only one claim of error by EPA

has been submitted. Moreover, if EPA

makes an error, EPA is obligated to

correct the error and make the change

effective as of the date the authorized

account representative originally

submitted the transfer form. This makes

it unnecessary for the notification and

error claim process to take place prior

to the excess emissions offset plan and

compliance certification deadline. Once

authorized account representatives have

sent to EPA their final allowance

transfer requests, they have all the

information they need to determine

whether their units are in compliance

and whether an excess emissions offset

plan is needed. Of course, a transfer

notification from EPA could be used as

a check on those determinations;

however, that is not the only way

authorized account representatives can

ensure their determinations are correct.

For example, they can set up internal

procedures in their companies to ensure

accurate allowance accounting and can

access the Agency web site via the

internet for current allowance account

balances in the Allowance Tracking

System. Moreover, authorized account

representatives that find the transfer

notification useful for cross-checking

allowance balances can still submit

their last transfer requests ahead of

March 1 so they can use the

notifications to make this check.

EPA considered extending the

allowance transfer deadline by two

weeks, rather than a month. However,

EPA believes that making the deadline

coincide with the deadline for other

acid rain submissions (i.e., the

compliance certification report and any

excess emissions offset plan) would

reduce potential confusion because

persons responsible for complying with

the requirements could focus on one

deadline for all of their end-of-year

allowance-related submissions.

The 1 month extension also provides

companies with additional time to make

last minute adjustments to allowance

holdings in order to reflect the actual

level of emissions during the prior

calendar year. Under the current rule,

the allowance transfer deadline

coincides with the fourth-quarter

monitoring report deadline, leaving

little or no time for such adjustments.

This makes it difficult for utilities to

cross-check what they believe to be the

final emissions results with feedback

from EPA on the fourth-quarter report

and then make allowance adjustments,

as necessary. The additional time will

be particularly useful because

designated representatives who submit

their emissions reports electronically

now receive immediate electronic

feedback on the substantive portion of

their submissions. (In the past,

designated representatives did not

receive this feedback, on fourth quarter

reports submitted around the report

deadline, until April because the

Agency performed this review

manually.) This feedback will identify

problems with submitted data, which

could affect how the utility should

allocate its allowances among its units’

accounts. The extension will help to

ensure utilities have the time they need

to resolve any emissions data problems

and transfer allowances among their

units’ accounts as needed.

The extension also helps utilities that

are contemplating changes to their

monitoring systems that could

temporarily affect their reported

emissions rate. For example, while

correcting a problem (e.g., with monitor

data availability), a utility or its software

vendor may take corrective actions that

cause a different problem (e.g., actions

that fail to account for missing data in

the hourly record data base) and result

in the unit’s emissions being underreported. Under the current rule, such

an oversight could have a significant

effect on reported emissions, especially

if a company takes corrective actions in

the last quarter of the year. The fourthquarter monitoring report is due January

30 and any feedback from a report

submitted on that date would provide

the company with little or no time to

make the necessary adjustments among

its accounts for the reporting year. With

the proposed extension of the allowance

transfer deadline, companies that take

corrective actions at the end of the year

would have an opportunity to make any

necessary allowance adjustments after

receiving EPA feedback on their

monitoring reports, and companies that

might normally delay making such

changes until after the end of the year

would no longer need to do so. In

addition, the extension would provide

some additional time for correcting any

inadvertent errors (whether or not

associated with corrective monitoring

actions) concerning allowance holdings,

e.g., in how allowances were distributed

by a utility among its units’ accounts.

In sum, EPA believes the allowance

transfer deadline should be extended to

March 1 because this would: reduce

potential confusion over end-of-year

submission deadlines; allow authorized

account representatives to make final

transfer decisions after receiving

feedback on their fourth-quarter

monitoring reports; and give utilities

additional time to avoid inadvertent

errors. Moreover, EPA believes that it

can successfully administer the

Allowance Tracking System and carry

out its other end-of-year administrative

duties without any delay between the

allowance transfer deadline and the

March 1 deadline for utilities’

submissions of compliance

certifications. EPA requests comment on

the proposed allowance transfer

deadline and, specifically, whether the

allowance transfer deadline should be

extended from January 30 to March 1 (or

February 29 in any leap year).

B. Compliance Determination

Today’s proposed revisions also

change how excess emissions are

determined at a unit at the end of a
41360 Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules

4 In addition, the definitions of ‘‘allowance

transfer deadline,’’ ‘‘compliance subaccount,’’ and

‘‘current year subaccount’’ are revised to be

consistent with proposed § 73.35(b)(3).

5 ‘‘Maximum deduction from other units’’ is the

maximum number of allowances that may be

deducted for the year for which compliance is being

established, for a unit otherwise having excess

emissions from the compliance subaccounts of

other units at the same source, rounded to the

nearest allowance. ‘‘Excess emissions if no

deduction from other units’’ is the tons of excess

emissions that a unit would otherwise have if no

allowances were deducted for the unit from other

units under proposed § 73.35(b)(3). ‘‘Excess

emissions penalty’’ is the applicable dollar amount

of the penalty for one ton of excess emissions of

sulfur dioxide under § 77.6(b). ‘‘Average allowance

price’’ is a dollar amount (which the Administrator

will publish in the Federal Register by October 15

of each year) equaling the total proceeds from the

spot allowance auction (including EPA Reserve

compliance year. The proposed

revisions would effectively reduce the

number of tons of excess emissions a

unit would otherwise have after

deductions for compliance are made

under § 73.35(b)(2) by allowing up to a

certain number of allowances for that

unit to be deducted from the

compliance subaccounts of other units

at the same source that have unused

allowances.

EPA is proposing these revisions

because of concern that (even with an

extended allowance transfer deadline)

inadvertent, minor accounting mistakes

by utilities, which under the proposed

revision would have no significant

environmental impact, could lead to

excessively high excess emissions

penalty payments. Currently, the excess

emissions penalty of $2000, adjusted for

inflation since 1990 (i.e., over $2500),

per ton is more than 10 times the

current market value of an allowance

and applies to all excess emissions at a

unit even if they result from

inadvertent, minor errors. As a result,

companies have the potential of making

enormous excess emissions penalty

payments (i.e., the excess emissions

penalty times excess emissions) for

what may be unintentional, minor

mistakes when performing their end-ofyear accounting of emissions and

allowances. Under the circumstances in

which the proposed revisions would

apply, imposition of such penalty

payments does not seem necessary or

desirable, given the nature of such

potential mistakes. For example, a

company may have acquired enough

allowances to cover all the emissions at

a source, but distributed them

erroneously among the units at the

source because of a mistake in

determining how many allowances were

needed in each unit’s account or in

designating the amounts transferred

among the units’ accounts. In light of

the potential for such mistakes,

especially in Phase II when the number

of units subject to the allowance holding

requirement will more than quadruple,

the Agency believes that the proposed

revisions offer a more reasonable

approach than the existing rule for

ensuring that allowance holding

requirements under the Acid Rain

Program are met.

The major revisions for carrying out

the proposed new approach are to the

compliance provisions of § 73.35.

Among other things, the proposed

revisions to § 73.35 adjust the

application of the ‘‘Acid Rain emissions

limitation for sulfur dioxide’’ when

used to determine a unit’s excess

emissions. The term ‘‘excess emissions’’

is defined in § 72.2 as ‘‘[a]ny tonnage of

sulfur dioxide emitted by an affected

unit during a calendar year that exceeds

the Acid Rain emissions limitation for

sulfur dioxide for the unit’’. The

adjustment in § 73.35 of the application

of the Acid Rain emissions limitation

for sulfur dioxide has the effect of

adjusting the definition of excess

emissions.

To make this adjustment, the key

provision that has been added is

proposed § 73.35(b)(3).4 This new

provision requires that, after completing

the annual compliance deductions in

§ 73.35(b)(2) for all affected units at the

same source, the Administrator may

deduct, for a unit that would otherwise

have excess emissions, up to a certain

amount of allowances from the

compliance subaccounts of other units

at the same source that would otherwise

have unused allowances. This second

deduction of allowances would reduce

the number of excess emissions at the

unit by an equivalent amount. The

owners and operators of such unit

would still be subject to the excess

emissions penalty and offset

requirements, but for only the excess

emissions remaining for the unit after

the second deduction.

The Agency considered allowing a

unit that would otherwise have excess

emissions to use the unused allowances

at other units at the same source to

completely eliminate all excess

emissions without any penalty. It

rejected that approach, however,

because of the Act’s pervasive unit-byunit orientation, particularly with

regard to SO2 emissions. For example,

under sections 402 (e.g., the definitions

of ‘‘existing unit’’ and ‘‘utility unit’’),

403(b), 403(e), 404(a), and 405, the

applicability of title IV is determined on

a unit-by-unit basis. Further, section

403(a)(1) requires allocation of

allowances to, and sections 403(e), 404,

405, 406, 409, and 410 set annual SO2

emission limitations for, individual

units, and not sources. Under section

411(a), excess emissions and penalties

are determined for each individual unit.

Moreover, section 412(a) requires unitby-unit monitoring of emissions.

Allowing in all cases the use of

allowances from other unit compliance

subaccounts to completely eliminate a

unit’s excess emissions would

effectively change the unit allowance

holding requirement to a source

allowance holding requirement.

Therefore, balancing, on one hand, the

goal of retaining in the regulations the

general unit-by-unit orientation to

compliance reflected in title IV and, on

the other hand, the perceived need for

some compliance flexibility to account

for inadvertent, minor errors, EPA

proposes to allow a large portion (but

not all) of the allowances required to be

deducted to come from subaccounts of

other units at the source. This approach

would provide some flexibility but also

maintain a strong incentive for owners

and operators to hold a sufficient

number of allowances in each unit

compliance subaccount. EPA is also

open to comment on other ways of

implementing this objective.

The number of allowances that could

be deducted under proposed

§ 73.35(b)(3) would be related to the

average price of an allowance. The

average allowance price is defined in

§ 73.35(b)(3) as the average price paid

for a spot allowance at the auction held

under § 73.70 during the year for which

compliance is being determined. The

Agency proposes using the average price

paid for a spot allowance at the auction

to determine the average price of

allowances at the time that compliance

is being determined because a spot

allowance is usable in the year it is

auctioned and the auction is an annual

event authorized under the Clean Air

Act and results in allowance prices that

are generally available to the public.

Advance allowances, which are also

auctioned, are not usable for 7 years.

The Agency will publish the average

price paid for a spot allowance (as

defined in § 73.35(b)(3)) in the Federal

Register by October 15 of each

compliance year.

The formula for determining the

number of allowances that can be

deducted from other unit accounts is

proposed in § 73.35(b)(3) and

incorporates the average price of an

allowance as follows:

Maximum deduction from other units =

Excess emissions if no deduction from other

units¥[Excess emissions if no deduction

from other units × 3 (Average allowance

price)/Excess emissions penalty] 5
Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules 41361

allowances and any privately offered allowances)

held under § 73.70 during the year divided by the

number of allowances sold at such auction,

rounded to the nearest dollar.

6When actually applying the formula, the term

(without rounding to the nearest ton) is subtracted

from the ‘‘tons of excess emissions if no allowance

deduction from other units’; rounding takes place

afterwards.

7When this number is subtracted from the tons

of excess emissions the unit would otherwise have

if no allowances could be deducted from other

units, the result is the maximum number of

allowances that can be deducted from other units.

8For 1998, the inflation-adjusted penalty is

$2,581 per ton of excess emissions.

9The relationship is approximate because the

formula requires rounding to the nearest allowance.

10See Senate Rep. No. 101–228 at 336, December

20, 1989, (explaining that ‘‘[t]he [excess emissions]

fee, adjusted annually to keep pace with inflation,

is designed to be high enough that pollution control

options [e.g., acquiring allowances] will always be

cheaper than continuing to emit more pollution

than lawfully permitted.’’

The formula applies to any unit that

would otherwise have excess emissions

under the existing rule, with two

exceptions. First, if the amount

calculated is less than zero, the

maximum allowance deduction from

other units equals zero (i.e., a negative

number of allowances cannot be

deducted). Second, if the amount

calculated results in less than 10 tons of

excess emissions, the amount that can

be deducted from other accounts must

be adjusted so that 10 tons of excess

emissions, or the tons of excess

emissions that would result if no

allowances could be deducted from

other unit accounts, whichever is less,

remain for the unit. This provision

ensures that any unit that would have

excess emissions under the existing rule

would continue to have some excess

emissions under the proposed rule.

For all other cases, the formula in

proposed § 73.35(b)(3) would apply if a

unit fails to hold enough allowances in

its unit subaccount to cover its

emissions. Using the formula, the

number of allowances that could be

deducted from other unit compliance

subaccounts at the same source would

equal the tons of excess emissions that

a unit would otherwise have without

applying § 73.35(b)(3) minus a

calculated value. The calculated value

(i.e., the term after the ‘‘¥’’ sign in the

formula) represents 6 the number of tons

emitted by a unit which cannot be offset

by allowances from other unit

accounts.7 This value also represents,

assuming the maximum allowances

under the formula are deducted from

other units’ accounts, the tons of excess

emissions at the unit. These excess

emissions would be subject to the

excess emissions penalty ($2000 in 1990

dollars per ton of excess emissions,

adjusted for inflation each year).8

Because there are fewer tons subject to

the penalty (i.e., because the tons for

which allowances were deducted from

other unit accounts are not subject to

the penalty), the total penalty payment

would be less than the total penalty

payment under the existing rule. EPA

proposes that the maximum allowance

deduction be based on three times the

allowance price (with a 10 ton

minimum for excess emissions) because

the Agency believes the resulting

penalty would provide adequate

incentive for compliance while reducing

the penalty payment for inadvertent,

minor errors.

In general, the extent to which the

total penalty payment is reduced as a

result of the revisions depends on the

average market price of an allowance

and the excess emissions per ton

penalty. For instance, if three times the

average market price of an allowance is

14 percent of the per ton excess

emissions penalty, then the total penalty

payment for the unit would be about 9

14 percent of the payment that would

have resulted without the revisions. An

exception is where three times the

average market price of an allowance is

equal to or greater than the per ton

excess emissions penalty, in which case

no allowances would be deducted from

other unit accounts and the total penalty

payment would be the same as under

the existing rule. A second exception is

where three times the market price of an

allowance, when used in the formula,

results in less than 10 tons of excess

emissions. In that case, the allowable

allowance deduction from other unit

accounts would be adjusted so that the

lesser of 10 tons of excess emissions or

the number of tons of excess emissions

that would result if no allowances could

be deducted from other units would

remain for the unit.

This approach would reduce the total

excess emissions penalty payment owed

for the unit while still ensuring, as

intended by Congress, that compliance

would be always cheaper than emitting

more pollution than lawfully

permitted.10 It would also encourage use

of the proposed provisions only in

extraordinary or extenuating

circumstances and not as a matter of

course. EPA is soliciting comment on

the formula in proposed § 73.35(b)(3)

and on any alternative formulas that

could be used to determine the number

of allowances that could be deducted

from other unit compliance subaccounts

at the same source. Comment is

specifically requested concerning:

whether the limit (in the proposed

formula) on the number of allowances

used from other units should be based

on three times the market price of an

allowance (and incorporate a 10 ton

minimum); whether the limit should be

raised or lowered; and whether, with

the limit, there would continue to be

appropriate incentives for compliance.

The allowances deducted under

proposed § 73.35(b)(3) are limited to

those that are in the compliance

subaccounts of other units at the same

source as the unit with excess

emissions. This same-source limitation

ensures that only one designated

representative is involved in the

deduction of allowances from other unit

compliance subaccounts and that

changes necessary to existing contracts

involving allowance agreements among

different owners of units are minimized.

This approach also limits the extent of

deviation from title IV’s general unit-byunit orientation by allowing a unit to

use only allowances held for other units

that are at the same geographic location,

i.e., at the same plant.

In § 73.35(b)(3)(i), EPA proposes two

options for implementing the provisions

allowing, for a unit with excess

emissions, deductions of allowances

from the compliance subaccounts of

other units at the source. EPA would

implement only one of the two options.

The options are described below.

1. Option 1

Under Option 1, deductions from

other unit compliance subaccounts are

automatic unless the authorized account

representative requests that no such

deductions be made. This would allow

the Agency to make these deductions

immediately after all other compliance

deductions are made and would reduce

the risk of delay of final compliance

determinations. The proposed provision

also specifies the order of unit

compliance subaccounts for which

allowances would be deducted from

other unit compliance subaccounts and

the order of the other unit compliance

subaccounts from which the allowances

would be deducted, allowing authorized

account representatives to know in

advance the sequence of deduction. The

sequence is based on the Allowance

Tracking System account numbers of

the units involved. Allowances would

be deducted first for the unit that has

the lowest account number of the units

at the source and then for each

subsequent unit, in order of increasing

account number and ending with the

unit with the highest account number at

the source. Likewise, allowances would

be deducted from the unit with unused

allowances that has the lowest account

number at the source and then for each

unit that has unused allowances, in
41362 Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules

order of increasing account numbers at

that source. Under this ordering scheme,

alphabetical characters would have

values increasing in alphabetical order

and lower values than all numeric

characters, and the sort would begin on

the left-most character and end on the

right-most character of each 12 character

account number. This order is

consistent with how alphabetical and

numeric characters are internally

represented and sorted in the Agency’s

mainframe computer that runs the

Allowance Tracking System, making

this a cost effective approach for

handling the deductions. An example of

the order of unit compliance

subaccounts from which (or for which)

allowances would be deducted is as

follows: 00038700PFLG, 00038700PFL4,

000387004GT2. Within a compliance

subaccount, allowances would be

deducted under § 73.35(b)(3) on a firstin, first-out (FIFO) accounting basis.

EPA considered that, under this

approach in Option 1, authorized

account representatives would not have

the discretion to choose the order of the

compliance subaccounts for which and

from which allowances are to be

deducted. This may be a concern

especially where the owners or their

ownership shares are different for

different units at a source. If, however,

an authorized account representative

objects to the order described above

(which is set forth in proposed

§ 73.35(b)(3)), a notification may be

submitted at any time by the allowance

transfer deadline that identifies the

units for which § 73.35(b)(3) is not to be

applied. If such notification is

submitted for a unit and the unit fails

to meet the unit allowance holding

requirement reflected in § 73.35(b)(1)

and (2), none of the allowances from

other unit compliance subaccounts

would be used to reduce the total

amount of excess emissions at the unit.

If no notification is submitted, the

Agency would automatically make the

deductions from the other units at the

source, and the tons of excess emissions

would be reduced.

2. Option 2

EPA is also proposing a second option

for deducting allowances from other

units at the sources. Under Option 2, the

authorized account representative

would be allowed to submit for a unit,

within 15 days of receiving notice from

the Agency of a unit’s failure to hold

sufficient allowances in its unit account,

the identification of the serial numbers

of the allowances (held in compliance

subaccounts of other units at the source)

that are to be deducted under

§ 73.35(b)(3) and the compliance

subaccounts from which those

allowances would be deducted. Like the

first alternative, the authorized account

representative could choose not to have

allowances deducted from other

compliance subaccounts. A

disadvantage of this alternative is that it

would likely delay the Agency’s end of

year compliance determination and

extend the allowance freeze by at least

two weeks because of the time it would

take to mail notification and wait for a

response. The Agency is soliciting

comment on both Option 1 and Option

2.

The changes in today’s proposal

allowing allowances to be deducted for

a unit from other unit accounts are

consistent with the provisions in title IV

governing excess emissions, i.e.,

sections 403(g), 411(a) and (b), and 414

of the Act. Section 403(g) is a general

prohibition barring an affected unit from

emitting sulfur dioxide in excess of the

number of allowances ‘‘held for that

unit for that year by the owner or

operator of the unit’’ (42 U.S.C.

7651b(g)), section 411(a) establishes the

owner or operator’s liability for an

excess emissions penalty and offset if

sulfur dioxide is emitted at a unit in

excess of the allowances ‘‘the owner or

operator holds for use for the unit for

that calendar year’’ (42 U.S.C. 7651j(a)),

and section 414 states that the operation

of an affected unit to emit sulfur dioxide

in excess of allowances ‘‘held for the

unit’’ is deemed a violation of the Act

and that each ton emitted in excess of

allowances held constitutes a separate

violation (42 U.S.C. 7651m). In all three

provisions, the Act refers to holding

allowances ‘‘for’’ a unit but does not

specifically dictate the account in which

those allowances must be held. See also

42 U.S.C. 7651b(f) and 7651j(b).

Under the January 11, 1993 Acid Rain

core rules, these statutory provisions

were generally interpreted to mean

allowances for a unit could be held only

in the compliance subaccount of the

unit for which allowances were being

deducted. The Agency, however,

believes this interpretation should be

reconsidered and revised to provide

some compliance flexibility while

balancing the need for compliance

flexibility with the general unit-by-unit

orientation of title IV. Because of the

multiple references to allowances held

‘‘for’’ a unit, the Agency believes the

language is broad enough to support

today’s proposed interpretation, which

allows most (but not all) of the

allowances to be deducted from the

compliance subaccount of other units at

the same source and thus establishes a

limited departure from the general unitby-unit orientation for compliance.

Allowing a unit to use allowances

from the compliance subaccounts of

other units at the same source is

consistent with the limited exception to

unit-by-unit compliance currently

allowed for units sharing a common

stack but not individually monitoring

emissions under part 75. Under existing

§ 73.35(e), the authorized account

representative for affected units that

share a common stack and lack

individual-unit monitoring may

arbitrarily assign a percentage of

allowances to be deducted from the

compliance subaccount for each unit.

This assignment, which can be

submitted as late as 60 days after the

end of the year when the annual

compliance report is due, can result in

100 percent of the required allowance

deduction coming from the compliance

subaccount of only one of the units

sharing the common stack. Such a single

deduction would not necessarily

represent the emissions from each unit,

because each unit sharing the common

stack may have discharged some portion

of the emissions measured. Thus, under

the existing regulations, allowances

already can be deducted, under limited

circumstances, from the compliance

subaccounts of other units at the same

source. This limited exception to unitby-unit compliance is allowed in order

to avoid requiring monitoring of the

ducts of each common stack unit, which

may not be physically possible, and to

minimize the need for redesigning stack

and duct configurations to make

individual-unit monitoring possible.

See, e.g., Docket # A–90–51, Response to

Public Comment on the Core Rules of

the Acid Rain Program, Volume III at p.

M–393 (October 1992). Although there

are a number of affected units under the

Acid Rain Program that are subject to

the common stack provision (i.e., 23

percent of the affected units operating in

1996 reported SO2 or NOX data that

included the emissions from two or

more units), EPA has seen no adverse

effects on the functioning of the Acid

Rain Program during the first three years

of compliance determinations.

Like the common stack provisions,

today’s revisions would permit

allowances to be deducted for a unit

that would otherwise have excess

emissions from the compliance

subaccounts of other units at the same

source even though the emissions

involved did not come from those other

units. However, unlike the common

stack provision, the proposed revisions

would limit the number of allowances

that could be deducted from the

compliance subaccounts of other units.

The reason for this difference is that the
Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules 41363

11Binding future authorized account

representatives to the statement ensures that the

reduced burden resulting from submitting a

signature in advance is not lost automatically when

an authorized account representative changes.

12The two-signature requirement, required in

section 403(b) of the Act, was apparently intended

to protect the transferor and transferee during the

transfer process, but it is the parties’ private

agreement, not the allowance transfer form

submitted to EPA, that protects the transferor and

transferee.

common stack provisions address

primarily situations where it may not be

feasible to monitor the emissions from

individual units sharing a common

stack. In contrast, today’s revisions

would address primarily cases where

feasibility of monitoring is not at issue,

but because of inadvertent, minor errors

in accounting for emissions or in

handling allowances, a unit fails to hold

enough allowances in its compliance

subaccount at the end of the year.

Because today’s revisions apply to units

that, absent inadvertent, minor errors,

could have complied with the

individual unit allowance holding

requirement, the Agency believes it is

appropriate to strike a balance between,

on one hand, compliance flexibility to

reduce total excess emission penalty

payments for failing to hold enough

allowances because of inadvertent,

minor errors and, on the other hand,

maintenance of the general unit-by-unit

orientation of title IV. Today’s proposed

revision reflects this balancing of

objectives by allowing deductions of

allowances from other units but limiting

the extent of such deductions so that

significant excess emissions penalty

payments would still result from failing

to hold sufficient allowances in the

unit’s own compliance subaccount. This

approach would ensure that utilities

would continue to strive to meet the

unit allowance holding requirement.

Today’s proposed changes, while

designed primarily to address the

consequences of making inadvertent,

minor errors, would apply to all

allowance holding violations and would

not require a demonstration concerning

the nature of the error. The Agency

maintains that it would be difficult, and

costly in terms of time and resources, to

investigate and determine why a unit

compliance subaccount failed to hold

sufficient allowances and to distinguish

between unintentional, minor errors and

other errors. Since the proposed

allowance deduction flexibility is not

limited to inadvertent, minor errors, that

is an additional reason for limiting that

flexibility, i.e., by limiting the number

of allowances that can be deducted from

other units at a source. This limitation

would provide an incentive to avoid any

errors and would minimize any abuse of

this flexibility. EPA believes that

generally the total amount of excess

emissions penalty payment (i.e., which,

at the 1997 auction price of an

allowance, would be about 14 percent of

the penalty payments under the existing

rule) that would remain even if unused

allowances were available from other

units at the source would deter

companies from using this provision

except in extraordinary situations.

In sum, the adjustment to the

allowance holding requirement in

today’s proposal addresses the potential

for inadvertent, minor errors by utilities

regulated under the Acid Rain Program

and provides a reasonable approach for

addressing such errors. EPA requests

comment on all aspects of this proposed

revision, including the options

presented concerning notification by the

authorized account representative and

the effect, if any, of the revision on the

auction or market price of allowances

traded during the year or on trading

behavior. EPA also requests comment

on how Option 1 and Option 2 would

apply to a source that has two

authorized account representatives

under § 74.4(c) (i.e., one for the utility

units, and one for the opt-in units, at the

same source).

C. Signature Requirement for Transfer

Requests

Under the current rule, § 73.50(b)(1)

requires authorized account

representatives seeking recordation of

an allowance transfer to submit a

request for the transfer that contains,

among other things, signatures of the

authorized account representatives for

both the transferor and the transferee

accounts. The Agency proposes to add

§ 73.50(b)(2) to clarify that the

authorized account representative for a

transferee account can meet the

signature requirement by submitting,

along with or in advance of a transfer

request from the authorized account

representative for any transferor

account, a signed statement identifying

the accounts into which any transfer of

allowances, on or after the date of EPA’s

receipt of the statement, is authorized.

The signed statement would state that,

upon receipt by the Administrator, the

authorization is binding on the

authorized account representative and

on any new authorized account

representative 11 for all such allowance

transfers into the specified accounts

until such time as EPA receives a signed

statement from the authorized account

representative retracting the

authorization. Proposed § 73.50(b)(2)

sets forth the specific language that

would be included in the statement.

Under existing §§ 72.23 (a) and (b), any

new authorized account representative

would, in fact, be bound by such a

statement. Once the statement is

received and an allowance transfer

request is received and processed, EPA

would still send both authorized

account representatives transfer

confirmation reports of any recorded

transfer so that the authorized account

representatives of both accounts have

the opportunity to review the transfer

after it has been recorded.

The Agency believes the existing rules

already allow for this approach. Existing

§ 73.50(b)(1) allows the Administrator to

specify a format for submitting a transfer

request, which means the Administrator

can already allow information from each

authorized account representative to

come in separately. Further, under

existing § 73.50(b)(1), the transferee

authorized account representative

certifies the transfer by attesting to the

language in the allowance transfer form,

which is also set forth in § 72.21(b). This

is the same language to which he or she

would attest when authorizing transfers

in advance. Moreover, existing

§ 73.50(b)(1)(iii) through (v) specifies

the information (i.e., the signatures and

identification numbers of the authorized

account representatives and the date of

the signatures) that must be submitted

by both authorized account

representatives, but does not require the

information from both individuals to

come in simultaneously. Therefore, the

Administrator is not precluded from

accepting a signature from an

authorized account representative for

the transferee account that is submitted

prior to the submission of the signature

of the authorized account representative

for the transferor account. In light of the

minimal, if any, protection that

simultaneously submitted signatures

would provide to the parties,12 it is

unnecessary for both signatures to come

in at the same time. Hence, under the

existing regulations, EPA can allow a

signature of the transferee authorized

account representative to be submitted

prior to the signature of the transferor

authorized account representative.

Nevertheless, EPA believes that

clarifying, through specific rule

language, that this approach can be used

would be helpful to authorized account

representatives who wish to authorize,

in advance, future transfers into an

account and reduce their burden by

eliminating the need for each party to

the transfer to see and sign the

allowance transfer form. Proposed
41364 Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules

13EPA considered completely eliminating the

signature requirement for the authorized account

representative for the transferee account; however,

the Agency is constrained from doing so by

statutory language in section 403(b) of the Act,

which states that ‘‘[t]ransfers of allowances shall

not be effective until written certification of the

transfer, signed by a responsible official of each

party to the transfer, is received and recorded by the

Administrator.’’ 42 U.S.C. 7651b(b).

§ 73.50(b)(2) is added to make this

clarification.

Today’s clarification is spurred by a

desire to put in place a system that

allows for submitting transfer requests

electronically to the Agency. According

to comments received from both

industry and environmental

organizations, such a system would

increase efficiency, reduce personnel

requirements, reduce data entry errors

and paperwork, make the Allowance

Tracking System more attractive to

users, and result in a more vibrant and

active market. See, e.g., Docket # A–91–

43, Response to Public Comment on the

Core Rules of the Acid Rain Program,

Volume I at p. A–27. In response, the

Agency has been working with utility

representatives in an effort to put in

place Electronic Data Interchange (EDI)

technology, a uniform standard set by

the American National Standards

Institute for electronic interchange of

business transactions, to address this

issue. Comments by experts familiar

with established protocols for EDI have

indicated that requiring two signatures

on the same submission makes

implementation of the EDI technology

much more difficult. Proposed

§ 73.50(b)(2) would make it clear to

utilities that they have the option of

submitting a signature in advance,

which would remove this obstacle and

make it easier to use EDI.13 In the

meantime, in light of the Agency’s

existing authority to do so, the Agency

has begun to accept signature statements

from authorized account representatives

who want to take advantage of this

option immediately for transfer requests

submitted either in hard copy or

electronically.

The streamlining benefit of having the

signature of the authorized account

representative for the transferee account

submitted prior to any specific transfer

request is consistent with the general

purposes of section 403(d) of the statute.

This provision requires that the

Administrator specify ‘‘all necessary

procedures and requirements for an

orderly and competitive functioning of

the allowance system.’’ 42 U.S.C.

7651b(d). Because an advance signature

authorization from the authorized

account representative for the transferee

account would make subsequent

allowance transfers less burdensome

(both EDI-initiated and hard copyinitiated transfers), it would enhance

the operation of the Allowance Tracking

System and the allowance market as a

whole.

For the above reasons, the Agency has

added § 73.50(b)(2) to clarify that a

signature statement from the authorized

account representative for the transferee

account can be submitted prior to the

signature of the authorized account

representative for the transferor account.

D. Impacts of Revisions on Acid Rain

Permits

Today’s proposed revisions are

designed so that the contents of existing

acid rain permits and the State

regulations required to issue acid rain

permits would not have to be changed

in order for the revisions to become

effective. With the exception of changes

in the definitions of ‘‘allowance transfer

deadline,’’ ‘‘compliance subaccount,’’

and ‘‘current year subaccount,’’ all of

today’s revisions are made in 40 CFR

part 73. Forty CFR part 73 governs

EPA’s operation of the Allowance

Tracking System and does not contain

any requirements for permitting or any

other activities for which State

permitting authorities are responsible.

For this reason, 40 CFR part 73 has not

been, and is not required to be, adopted

by State permitting authorities under

§ 72.72. Thus, it would be unnecessary

for State permitting authorities to revise

the acid rain permits they have issued

or regulations they have adopted to

reflect today’s proposed changes to 40

CFR part 73.

Similarly, the proposed changes could

go into effect without State permitting

authorities revising acid rain permits or

regulations to reflect the two revised

definitions in 40 CFR part 72. Under

existing § 72.50(b), each Acid Rain

permit is deemed to incorporate the

definitions in § 72.2. Consequently,

even if an acid rain permit would be

issued before the proposed changes to

the § 72.2 definitions would be adopted

and become effective, the Agency would

propose to apply the final revised

definitions to the units covered by the

permit in determining end-of-year

compliance for all calendar years for

which the existing allowance transfer

deadline (January 30) is on or after the

effective date of the revised definitions.

Moreover, the revised definitions would

not affect the permitting activities of

State permitting authorities under 40

CFR part 72 and would be adopted in

the federal rules to implement changes

made in EPA’s operation of the

Allowance Tracking System under 40

CFR part 73.

While the final revised definitions in

§ 72.2 would be applied for any

calendar year ending on or after the

effective date of the federal rule

revision, State permitting authorities

should revise their own regulations to

reflect such new definitions after they

are finalized. This would avoid any

potential confusion on the part of

regulated entities and the public as to

how end-of-year compliance would be

determined.

IV. Administrative Requirements

A. Executive Order 12866

Under Executive Order 12866 (58 FR

51735 (October 4, 1993)), the Agency

must determine whether the regulatory

action is ‘‘significant’’ and therefore

subject to Office of Management and

Budget (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 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 impact 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’’ because the rule seems to raise

novel legal or policy issues. As such,

this action was submitted to OMB for

review. Any written comments from

OMB to EPA, any written EPA response

to those comments, and any changes

made in response to OMB suggestions or

recommendations are included in the

docket. The docket is available for

public inspection at the EPA’s Air

Docket Section, which is listed in the

ADDRESSES section of this preamble.

B. Unfunded Mandates Act

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), P.L. 104–

4, 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,

EPA generally must prepare a written

statement, including a cost-benefit
Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules 41365

analysis, before promulgating a

proposed or final rule that includes a

federal mandate that may result in

expenditure by State, local, and tribal

governments, in aggregate, or by the

private sector, of $100 million or more

in any one year. Section 205 generally

requires that, before promulgating a rule

for which a written statement must be

prepared, EPA identify and consider a

reasonable number of regulatory

alternatives and adopt the least costly,

most cost-effective, or least burdensome

alternative that achieves the objectives

of the rule. The provisions of section

205 do not apply when they are

inconsistent with applicable law.

Moreover, section 205 allows EPA to

adopt an alternative other than the least

costly, most cost-effective, or least

burdensome alternative if the

Administrator explains why that

alternative was not adopted. Finally,

section 203 requires that, before

establishing any regulatory

requirements that may significantly or

uniquely affect small governments, EPA

must have developed a small

government agency plan. The plan must

provide for notifying any potentially

affected small governments to have

meaningful and timely input in the

development of EPA regulatory

proposals with significant federal

intergovernmental mandates, and

informing, educating, and advising

small governments on compliance with

the regulatory requirements.

Because the proposed rule is

estimated to result in the expenditure by

State, local, and tribal governments or

the private sector of less than $100

million in any one year, the Agency has

not prepared a budgetary impact

statement or specifically addressed the

selection of the least costly, most costeffective, or least burdensome

alternative. Because small governments

will not be significantly or uniquely

affected by this rule, the Agency is not

required to develop a plan with regard

to small governments.

The proposed revisions to parts 72

and 73 will potentially reduce the

burden on regulated entities by

streamlining the allowance transfer

process, extending the allowance

transfer deadline, and providing more

flexible allowance holding

requirements. The revisions will not

otherwise have any significant impact

on State, local, and tribal governments.

C. Paperwork Reduction Act

This action proposing revisions to

parts 72 and 73 will not impose any

new information collection burden

subject to the Paperwork Reduction Act

(44 U.S.C. 3501, et seq.). In fact, if

anything, the revisions reduce burden

by clarifying that the signature of the

authorized account representative for a

transferee account can be submitted in

advance of an allowance transfer form,

eliminating the need for that authorized

account representative to see and sign

future allowance transfer forms. To the

extent any new information will be

required by proposed revisions

concerning the holding of allowances in

other units’ compliance subaccounts,

the Agency projects that less than ten

companies per year will be affected by

those revisions. Overall, the revisions

will result in no material change in the

type or amount of information collected

under the existing ICR. OMB has

previously approved the relevant

information collection requirements

contained in parts 72 and 73 under the

provisions of the Paperwork Reduction

Act and has assigned OMB control

number 2060–0258. 58 FR 3590, 3650

(1993).

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 collection of

information; and transmit or otherwise

disclose the information.

Copies of the ICR may be obtained

from the Director, Regulatory

Information Division; EPA; 401 M St.

SW (mail code 2137); Washington, DC

20460 or by calling (202) 564–2740.

Include the ICR and/or OMB number in

any correspondence.

D. Regulatory Flexibility

The Regulatory Flexibility Act (RFA),

5 U.S.C. 601, et seq., generally requires

an agency to conduct a regulatory

flexibility analysis of any rule subject to

notice and comment rulemaking

requirements 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 not-forprofit enterprises, and small government

jurisdictions.

This proposed rule would not have a

significant impact on a substantial

number of small entities. As discussed

above, the revisions would reduce the

burden on regulated entities by

streamlining and adding flexibility to

the regulations. Therefore, I certify that

this action will not have a significant

economic impact on a substantial

number of small entities.

E. Applicability of Executive Order

13045: Children’s Health Protection

This proposed rule is not subject to

Executive Order 13045, entitled

Protection of Children from

Environmental Health Risks and Safety

Risks (62 FR 19885 (1997)), because it

does not involve decisions on

environmental health risks or safety

risks that may disproportionately affect

children.

List of Subjects in 40 CFR Parts 72 and

73

Environmental protection, Acid rain,

Administrative practice and procedure,

Air pollution control, Compliance

plans, Electric utilities, Penalties,

Reporting and recordkeeping

requirements, Sulfur dioxide.

Dated: July 28, 1998.

Carol M. Browner,

Administrator, U.S. Environmental Protection

Agency.

For the reasons set out in the

preamble, title 40, chapter I of the Code

of Federal Regulations is proposed to be

amended as follows:

PART 72—[AMENDED]

1. The authority citation for part 72

continues to read as follows:

Authority: 42 U.S.C. 7601 and 7651, et seq.

§ 72.2 [Amended]

2. Section 72.2 is amended by:

i. Removing from the definition of

‘‘Allowance transfer deadline’’ the

words ‘‘January 30 or, if January 30’’

and adding, in their place, the words

‘‘March 1 (or February 29 in any leap

year) or, if such day’’; and removing the

word ‘‘unit’s’’, after the words ‘‘meeting

the’’;

ii. Removing from the definition of

‘‘Compliance subaccount’’ the word

‘‘unit’s’’, after the words ‘‘meeting the’’;

and

iii. Adding to the definition of

‘‘Current year subaccount’’ the words ‘‘,

or any other affected unit at the same

source to the extent provided under

§ 73.35(b)(3),’’ after the words ‘‘for use

by the unit’’ and removing from the

same definition the word ‘‘its’’ and

adding, in its place, the word ‘‘the’’.

3. Section 72.40 is amended by

adding to paragraph (a)(1) the words ‘‘,

or in the compliance subaccount of

another affected unit at the same source
41366 Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules

to the extent provided in § 73.35(b)(3),’’

after the words ‘‘under § 73.34(c) of this

chapter)’’.

PART 73—[AMENDED]

4. The authority citation for part 73

continues to read as follows:

Authority: 42 U.S.C. 7601 and 7651, et seq.

§ 73.34 [Amended]

5. Section 73.34 is amended by

removing from paragraph (c)(4) the

words ‘‘or direct sale pursuant to

subpart E of this part’’.

6. Section 73.35 is amended by

revising paragraph (a)(2) and adding

paragraph (b)(3) to read as follows:

§ 73.35 Compliance.

(a) * * *

(2) Such allowance is:

(i) Recorded in the unit’s compliance

subaccount; or

(ii) Transferred to the unit’s

compliance subaccount, with the

transfer submitted correctly pursuant to

subpart D for recordation in the

compliance subaccount for the unit by

not later than the allowance transfer

deadline of the calendar year following

the year for which compliance is being

established in accordance with subpart

D of this part; or

(iii) Held in the compliance

subaccount of another affected unit at

the same source in accordance with

paragraph (b)(3) of this section.

Option 1

(b) * * *

(3)(i) If, after the Administrator

completes the deductions under

paragraph (b)(2) of this section for all

affected units at the same source, a unit

would otherwise have excess emissions

and one or more other affected units at

the source would otherwise have

unused allowances in their compliance

subaccounts and available for such

other units under paragraphs (a)(1) and

(a)(2)(i) and (ii) of this section for the

year for which compliance is being

established, the Administrator will

deduct such allowances from the

compliance subaccounts of the units

otherwise having unused allowances,

and reduce the tons of excess emissions

otherwise at the unit by an equal

amount, up to the amount calculated as

follows:

Maximum deduction from other units =

Excess emissions if no deduction from other

units¥[Excess emissions if no deduction

from other units × 3 (Average allowance

price) / Excess emissions penalty]

Where:

‘‘Maximum deduction from other units’’ is

the maximum number of allowances that

may be deducted, for the year for which

compliance is being established, for a unit

otherwise having excess emissions from the

compliance subaccounts of other units at the

same source, rounded to the nearest

allowance.

‘‘Excess emissions if no deduction from

other units’’ is the tons of excess emissions

that a unit would otherwise have if no

allowances were deducted for the unit from

other units under this paragraph (b)(3)(i) or

paragraph (b)(3)(ii) of this section. ‘‘Excess

emissions penalty’’ is the applicable dollar

amount of the penalty for one ton of excess

emissions of sulfur dioxide for the year under

§ 77.6(b) of this chapter.

‘‘Average allowance price’’ is a dollar

amount (which the Administrator will

publish in the Federal Register by October 15

of each year) equaling the total proceeds from

the spot allowance auction (including EPA

Reserve allowances and any privately offered

allowances) held under § 73.70 during the

year divided by the number of allowances

sold at such auction, rounded to the nearest

dollar.

(ii) Notwithstanding paragraph

(b)(3)(i) of this section,

(A) If the amount calculated is less

than or equal to zero, the maximum

allowance deduction from other units

will equal zero; and

(B) If the amount calculated is greater

than zero and results in less than 10

tons of excess emissions, the maximum

allowance deduction from other units

shall be adjusted so that 10 tons of

excess emissions, or the tons of excess

emissions that would result if no

allowances could be deducted from

other units, whichever is less, remain

for the unit.

(iii) Beginning with the unit having

the lowest Allowance Tracking System

account number and ending with the

unit having the highest account number

(with account numbers sorted beginning

on the left-most character and ending on

the right-most character of each 12

character account number and with the

letter characters assigned values in

alphabetical order and less than all

numeric characters), the Administrator

will deduct allowances in accordance

with paragraphs (b)(3)(i) and (ii) of this

section:

(A) For each unit, at the source,

otherwise having excess emissions; and

(B) From each unit, at the source,

otherwise having unused allowances in

its compliance subaccount.

(iv) Allowances in a compliance

subaccount will be deducted under

paragraphs (b)(3)(i) and (ii) of this

section on a first-in, first-out (FIFO)

accounting basis in accordance with

paragraph (c)(2) of this section.

(v) Notwithstanding paragraphs

(b)(3)(i) and (ii) of this section, if the

Administrator receives a written

notification by the authorized account

representative for a source, on or before

the allowance transfer deadline for the

year for which compliance is being

established, that the provisions in

paragraphs (b)(3)(i) and (ii) of this

section are not to be applied to specified

units at the source, the Administrator

will not make any deductions under

paragraphs (b)(3)(i) and (ii) of this

section for the specified units at the

source.

Option 2

(b) * * *

(3)(i) If, after the Administrator

completes the deductions under

paragraph (b)(2) of this section for all

affected units at the same source, a unit

would otherwise have excess emissions

and one or more other affected units at

the source would otherwise have

unused allowances in their compliance

subaccounts and available for such

other units under paragraph (a)(1) and

(a)(2)(i) and (ii) of this section for the

year for which compliance is being

established, the Administrator will

notify in writing the authorized account

representative that he or she may

specify which of such allowances are to

be deducted from the compliance

subaccounts of the units otherwise

having unused allowances in order to

reduce the tons of excess emissions

otherwise at the unit by an equal

amount, up to the amount calculated as

follows:

Maximum deduction from other units =

Excess emissions if no deduction from other

units¥[Excess emissions if no deduction

from other units × 3 (Average allowance

price) / Excess emissions penalty]

Where:

‘‘Maximum deduction from other units’’ is

the maximum number of allowances that

may be deducted for the year for which

compliance is being established, for a unit

otherwise having excess emissions from the

compliance subaccounts of other units at the

same source, rounded to the nearest

allowance.

‘‘Excess emissions if no deduction from

other units’’ is the tons of excess emissions

that a unit would otherwise have if no

allowances were deducted for the unit from

other units under this paragraph (b)(3)(i) or

paragraph (b)(3)(ii) of this section. ‘‘Excess

emissions penalty’’ is the applicable dollar

amount of the penalty for one ton of excess

emissions of sulfur dioxide under § 77.6(b) of

this chapter.

‘‘Average allowance price’’ is a dollar

amount (which the Administrator will

publish in the Federal Register by October 15

of each year) equaling the total proceeds from

the spot allowance auction (including EPA

Reserve allowances and any privately offered

allowances) held under § 73.70 during the

year divided by the number of allowances

sold at such auction, rounded to the nearest

dollar.

(ii) Notwithstanding paragraph

(b)(3)(i) of this section,
Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Proposed Rules 41367

(A) If the amount calculated is less

than or equal to zero, the maximum

allowance deduction from other units

will equal zero; and

(B) If the amount calculated is greater

than zero and results in less than 10

tons of excess emissions, the maximum

allowance deduction from other units

shall be adjusted so that 10 tons of

excess emissions, or the tons of excess

emissions that would result if no

allowances could be deducted from

other units, whichever is less, remain

for the unit.

(iii) If the authorized account

representative submits within 15 days of

receipt of a notification under paragraph

(b)(3)(i) of this section a written request

specifying allowances to be deducted in

accordance with paragraph (b)(3)(i) of

this section, the Administrator will

deduct such allowances, and reduce the

tons of excess emissions otherwise at

the unit by an equal amount, up to the

amount calculated under paragraph

(b)(3)(i) of this section.

7. Section 73.50 is amended by

redesignating paragraph (b)(2) as (b)(3)

and adding new paragraph (b)(2) as

follows:

§ 73.50 Scope and submission of

transfers.

* * * * *

(b) * * *

(2)(i) The authorized account

representative for the transferee account

can meet the requirements in

paragraphs (b)(1)(ii) and (iii) of this

section by submitting, in a format

prescribed by the Administrator, a

statement signed by the authorized

account representative and identifying

each account into which any transfer of

allowances, submitted on or after the

date on which the Administrator

receives such statement, is authorized.

Such authorization shall be binding on

any authorized account representative

for such account and shall apply to all

transfers into the account that are

submitted on or after such date of

receipt, unless and until the

Administrator receives a statement in a

format prescribed by the Administrator

and signed by the authorized account

representative retracting the

authorization for the account.

(ii) The statement under paragraph

(b)(2)(i) of this section shall include the

following: ‘‘By this signature, I

authorize any transfer of allowances

into each Allowance Tracking System

account listed herein, except that I do

not waive any remedies under 40 CFR

part 73, or any other remedies under

State or federal law, to obtain correction

of any erroneous transfers into such

accounts. This authorization shall be

binding on any authorized account

representative for such account unless

and until a statement signed by the

authorized account representative

retracting this authorization for the

account is received by the

Administrator.’’

* * * * *

[FR Doc. 98–20605 Filed 7–31–98; 8:45 am]

BILLING CODE 6560–50–U