[Federal Register Volume 66, Number 103 (Tuesday, May 29, 2001)]
[Proposed Rules]
[Pages 29064-29066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13414]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[PA 169--4116; FRL-6986-8]


Approval and Promulgation of Air Quality Implementation Plans; 
Pennsylvania; Nitrogen Oxides Budget Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a State Implementation Plan (SIP) 
revision submitted by the Commonwealth of Pennsylvania on October 30, 
2000 and April 4, 2001. This revision responds to the EPA's regulation 
entitled, ``Finding of Significant Contribution and Rulemaking for 
Certain States in the Ozone Transport Assessment Group Region for 
Purposes of Reducing Regional Transport of Ozone,'' otherwise known as 
the ``NO<INF>X</INF> SIP Call.'' This revision establishes and requires 
a nitrogen oxides (NO<INF>X</INF>) allowance trading program for large 
electric generating and industrial units, beginning in 2003. The 
intended effect of this action is to propose approval the Pennsylvania 
NO<INF>X</INF> Budget Trading Program because it addresses the 
requirements of the NO<INF>X</INF> SIP Call Phase I that will 
significantly reduce ozone transport in the eastern United States. EPA 
is proposing to approve this revision in accordance with the 
requirements of the Clean Air Act.

DATES: Written comments must be received on or before June 28, 2001.

ADDRESSES: Written comments should be mailed to David L. Arnold, Chief, 
Air Quality Planning and Information Services Branch, Mailcode 3AP21, 
U.S. Environmental Protection Agency, Region III, 1650 Arch Street, 
Philadelphia, Pennsylvania 19103. Copies of the documents relevant to 
this action are available for public inspection during normal business 
hours at the Air Protection Division, U.S. Environmental Protection 
Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103; 
and Pennsylvania Department of Environmental Protection, Bureau of Air 
Quality, P.O. Box 8468, 400 Market Street, Harrisburg, Pennsylvania 
17105.

FOR FURTHER INFORMATION CONTACT: Cristina Fernandez, (215) 814-2178, or 
by e-mail at <a href="/cdn-cgi/l/email-protection#f99f9c8b9798979d9c83d79a8b908a8d909798b99c8998d79e968f"><span class="__cf_email__" data-cfemail="a5c3c0d7cbc4cbc1c0df8bc6d7ccd6d1cccbc4e5c0d5c48bc2cad3">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: On October 30, 2000 and April 4, 2001, the 
Pennsylvania Department of Environmental Protection (PADEP) submitted a 
revision to the Pennsylvania SIP to address the requirements of the 
NO<INF>X</INF> SIP Call Phase I. The information in this section is 
organized as follows:

I. EPA's Action

A. What action is EPA proposing today?
B. Why is EPA proposing this action?
C. What are the general NO<INF>X</INF> SIP Call requirements?
D. What is EPA's NO<INF>X</INF> budget trading program?
E. What guidance did EPA use to evaluate Pennsylvania's submittal?

II. Pennsylvania's NO<INF>X</INF> Budget Trading Program

A. When did Pennsylvania submit the SIP revision to EPA in response 
to the NO<INF>X</INF> SIP Call?
B. What is the Pennsylvania NO<INF>X</INF> Budget Trading Program?
C. What is the result of EPA's evaluation of Pennsylvania's program?

III. Proposed Action

A. NO<INF>X</INF> SIP Call Requirements
B. One-Hour Attainment Demonstration Plans

IV. Administrative Requirements

I. EPA's Action

A. What Action Is EPA Proposing Today?

    EPA is proposing to approve the Pennsylvania SIP revision 
concerning the adoption of its NO<INF>X</INF> Budget Trading Program, 
submitted on October 30, 2000 and April 4, 2001.

B. Why Is EPA Proposing This Action?

    EPA is proposing this action for two purposes. Pennsylvania's 
NO<INF>X</INF> Budget Trading Program regulations address the 
requirements of the NO<INF>X</INF> SIP Call Phase I. In addition, 
Pennsylvania's NO<INF>X</INF> Budget Trading Program regulations are 
part of the Pennsylvania one-hour ozone attainment demonstration plan 
for the Philadelphia-Wilmington-Trenton severe ozone nonattainment 
area. The Pennsylvania one-hour attainment demonstration plan for the 
Philadelphia-Wilmington-Trenton ozone nonattainment area relies on the 
NO<INF>X</INF> reductions associated with the NO<INF>X</INF> Budget 
Trading Program in 2003 and beyond. Therefore, EPA is proposing to 
approve Pennsylvania's NO<INF>X</INF> Budget Trading Program for two 
reasons. First, because it addresses the requirements of the 
NO<INF>X</INF> SIP Call Phase I, and secondly as a strengthening 
measure for the one-hour ozone standard attainment for Philadelphia-
Wilmington-Trenton ozone nonattainment area.

C. What Are the General NO<INF>X</INF> SIP Call Requirements?

    On October 27, 1998, EPA published a final rule entitled, ``Finding 
of Significant Contribution and Rulemaking for Certain States in the 
Ozone Transport Assessment Group Region for Purposes of Reducing 
Regional Transport of Ozone,'' otherwise known as the ``NO<INF>X</INF> 
SIP Call.'' See 63 FR 57356. The NO<INF>X</INF> SIP Call requires 22 
States and the District of Columbia to meet statewide NO<INF>X</INF> 
emission budgets during the five month period between May 1 and October 
1 in order to reduce the amount of ground level ozone that is 
transported across the eastern United States.
    EPA determined state-wide NO<INF>X</INF> emission budgets for each 
affected jurisdiction to be met by the year 2007. EPA identified 
NO<INF>X</INF> emission reductions by source category that could be 
achieved by using cost-effective measures. The source categories 
included were electric generating units (EGUs), non-electric generating 
units (non-EGUs), area sources, nonroad mobile sources and highway 
sources. However, the NO<INF>X</INF> SIP Call allowed states the 
flexibility to decide which source categories to regulate in order to 
meet the statewide budgets. In the NO<INF>X</INF> SIP Call notice, EPA 
suggested that imposing statewide NO<INF>X</INF> emissions caps on 
large fossil-fuel fired industrial boilers and electricity generating 
units would provide a highly cost effective means for States to meet 
their NO<INF>X</INF> budgets. In fact, the state-specific budgets were 
set assuming an emission rate of 0.15 pounds NO<INF>X</INF> per million 
British thermal units (lb. NO<INF>X</INF>/mmBtu) at EGUs, multiplied by 
the projected heat input (mmBtu) from burning the quantity of fuel 
needed to meet the 2007 forecast for electricity demand. See 63 FR 
57407. The calculation of the 2007 EGU emissions assumed that an 
emissions trading program would be part of an EGU control program. The 
NO<INF>X</INF> SIP Call state budgets also assumed on average a 30% 
NO<INF>X</INF> reduction from cement kilns, a 60% reduction from 
industrial boilers and combustion turbines, and a 90% reduction from 
internal combustion engines. The non-EGU control assumptions were 
applied at units where the heat input capacities were greater than 250 
mmBtu per hour, or in cases where heat input data were

[[Page 29065]]

not available or appropriate, at units with actual emissions greater 
than one ton per day.
    To assist the states in their efforts to meet the SIP Call, the 
NO<INF>X</INF> SIP Call final rulemaking notice included a model 
NO<INF>X</INF> allowance trading regulation, called ``NO<INF>X</INF> 
Budget Trading Program for State Implementation Plans,'' (40 CFR part 
96), that could be used by states to develop their regulations. The 
NO<INF>X</INF> SIP Call notice explained that if states developed an 
allowance trading regulation consistent with the EPA model rule, they 
could participate in a regional allowance trading program that would be 
administered by the EPA. See 63 FR 57458-57459.
    There were several periods during which EPA received comments on 
various aspects of the NO<INF>X</INF> SIP Call emissions inventories. 
On March 2, 2000, EPA published additional technical amendments to the 
NO<INF>X</INF> SIP Call in the Federal Register (65 FR 11222). The 
March 2, 2000 final rulemaking established the inventories upon which 
Pennsylvania's final budget is based.
    On March 3, 2000, the D.C. Circuit issued its decision on the 
NO<INF>X</INF> SIP Call ruling in favor of EPA on all the major issues. 
Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000). The Court denied 
petitioners' requests for rehearing or rehearing en banc on July 22, 
2000. However, the Court ruled against EPA on four narrow issues. The 
Court remanded certain matters for further rulemaking by EPA. EPA 
expects to publish a proposal that addresses the remanded portion of 
the NO<INF>X</INF> SIP Call Rule. Any additional emissions reductions 
required as a result of a final rulemaking on that proposal will be 
reflected in the second phase portion (Phase II) of the State's 
emissions budget. Pennsylvania will be required to submit SIP revisions 
to address the Phase II of the NO<INF>X</INF> SIP Call Rule.

D. What Is EPA's NO<INF>X</INF> Budget Trading Program?

    EPA's model NO<INF>X</INF> budget and allowance trading rule, 40 
CFR part 96, sets forth a NO<INF>X</INF> emissions trading program for 
large EGUs and non-EGUs. A state can voluntarily choose to adopt EPA's 
model rule in order to allow sources within its borders to participate 
in regional allowance trading. The October 27, 1998 Federal Register 
document contains a full description of the EPA's model NO<INF>X</INF> 
budget trading program. See 63 FR 57514-57538 and 40 CFR part 96. In 
general, air emissions trading uses market forces to reduce the overall 
cost of compliance for pollution sources, such as power plants, while 
maintaining emission reductions and environmental benefits. One type of 
market-based program is an emissions budget and allowance trading 
program, commonly referred to as a ``cap and trade'' program. In an 
emissions budget and allowance trading program, the state or EPA sets a 
regulatory limit, or emissions budget, in mass emissions from a 
specific group of sources. The budget limits the total number of 
allocated allowances during a particular control period. When the 
budget is set at a level lower than the current emissions, the effect 
is to reduce the total amount of emissions during the control period. 
After setting the budget, the state or EPA then assigns, or allocates, 
allowances to the participating entities up to the level of the budget. 
Each allowance authorizes the emission of a quantity of pollutant, 
e.g., one ton of airborne NO<INF>X</INF>. At the end of the control 
period, each source must demonstrate that its actual emissions during 
the control period were less than or equal to the number of available 
allowances it holds. Sources that reduce their emissions below their 
allocated allowance level may sell their extra allowances. Sources that 
emit more than the amount of their allocated allowance level may buy 
allowances from the sources with extra reductions. In this way, the 
budget is met in the most cost-effective manner.

E. What Guidance Did EPA Use To Evaluate Pennsylvania's Submittal?

    The final NO<INF>X</INF> SIP Call rule included a model 
NO<INF>X</INF> budget trading program regulation. See 40 CFR part 96. 
EPA used the model rule and 40 CFR 51.121-51.122 to evaluate 
Pennsylvania's NO<INF>X</INF> Budget Trading Program.

II. Pennsylvania's NO<INF>X</INF> Budget Trading Program

A. When Did Pennsylvania Submit the SIP Revision to EPA in Response to 
the NO<INF>X</INF> SIP Call?

    On October 30, 2000 and April 4, 2001, PADEP submitted a revision 
to its SIP to address the requirements of the NO<INF>X</INF> SIP Call 
Phase I. Pennsylvania's SIP revision to address the requirements of the 
NO<INF>X</INF> SIP Call Phase I consists of the adoption of Chapter 
145--Interstate Pollution Transport Reduction and amendments to Chapter 
123--Standards for Contaminants.

B. What Is the Pennsylvania NO<INF>X</INF> Budget Trading Program?

    Pennsylvania's NO<INF>X</INF> Budget Trading Program affects 
electric generating units and certain non-electric generating units. 
The Sections of 25 PA Code Chapter 145--Interstate Pollution Transport 
Reduction which comprise Pennsylvania's SIP revision are as follows: 
Section 145.1 through 145.7, General Provisions; Section 145.10 through 
145.14, NO<INF>X</INF> Account; Section 145.30 through 145.31, 
Compliance Certification; Section 145.40 through 145.43, NO<INF>X</INF> 
Allowance Allocations; Section 145.50 through 145.57, Accounting 
Process for Deposit Use and Transfer of Allowances; Section 145.60 
through 145.62, NO<INF>X</INF> Allowance Transfers; Section 145.70 
through 145.76, Recordkeeping and Reporting Requirements; Section 
145.80 through 145.88, Opt-In Process; Section 145.90, Emission 
Reduction Credit Provisions.
    The Pennsylvania NO<INF>X</INF> Budget Trading Program establishes 
and requires a NO<INF>X</INF> allowance trading program for large 
electric generating and industrial units. It establishes a 
NO<INF>X</INF> cap and allowance trading program with a budget of 
50,843 tons of NO<INF>X</INF> for the ozone seasons of 2003 and beyond. 
The NO<INF>X</INF> budget for electric generating units and non-
electric generating units is 47,224 and 3,619 tons of NO<INF>X</INF> 
per ozone season, respectively. The Commonwealth of Pennsylvania 
voluntarily chose to follow EPA's model NO<INF>X</INF> budget and 
allowance trading rule, 40 CFR part 96, that sets forth a 
NO<INF>X</INF> emissions trading program for large EGUs and non-EGUs. 
Because the Pennsylvania NO<INF>X</INF> Budget Trading Program is based 
upon EPA's model rule, Pennsylvania sources are allowed to participate 
in the interstate NO<INF>X</INF> allowance trading program that EPA 
will administer for the participating states. The Commonwealth of 
Pennsylvania has adopted regulations that are substantively identical 
to 40 CFR part 96. Therefore, pursuant to 40 CFR 51.121(p)(1), 
Pennsylvania's SIP revision is automatically approved as satisfying the 
same portion of the State's NO<INF>X</INF> emission reduction 
obligations Pennsylvania projects such regulations will satisfy. Under 
the NO<INF>X</INF> Budget Trading Program, Pennsylvania allocates 
NO<INF>X</INF> allowances to the EGUs and non-EGUs units that are 
affected by these requirements. The NO<INF>X</INF> trading program 
applies to all fossil fuel fired EGUs with a nameplate capacity greater 
than 25 MW or more that sell any amount of electricity to the grid as 
well as any non-EGUs that have a heat input capacity equal to or 
greater than 250 mmBtu per hour. Each NO<INF>X</INF> allowance permits 
a source to emit one ton of NO<INF>X</INF> during the seasonal control 
period. NO<INF>X</INF> allowances may be bought or sold. Unused 
NO<INF>X</INF> allowances may also be banked for future use, with 
certain

[[Page 29066]]

limitations. Source owners will monitor their NO<INF>X</INF> emissions 
by using systems that meet the requirements of 40 CFR part 75, subpart 
H, and report resulting data to EPA electronically. Each budget source 
complies with the program by demonstrating at the end of each control 
period that actual emissions do not exceed the amount of allowances 
held for that period. However, regardless of the number of allowances a 
source holds, it cannot emit at levels that would violate other federal 
or state limits, for example, reasonably available control technology 
(RACT), new source performance standards, or Title IV (the federal Acid 
Rain program).
    Pennsylvania's SIP revision does not establish requirements for 
cement manufacturing facilities and stationary internal combustion 
engines. Pennsylvania will be required to submit SIP revisions to 
address any additional emission reductions required to meet the State's 
overall emissions budget. In addition, Pennsylvania's submittal does 
not rely on any additional reductions beyond the anticipated federal 
measures in the mobile and area source categories.

C. What Is the Result of EPA's Evaluation of Pennsylvania's Program?

    EPA has evaluated Pennsylvania's SIP submittal and finds it 
approvable. The Pennsylvania NO<INF>X</INF> Budget Trading Program is 
consistent with EPA's guidance and addresses the requirements of the 
NO<INF>X</INF> SIP Call Phase I. EPA finds the NO<INF>X</INF> control 
measures in the Pennsylvania's NO<INF>X</INF> Budget Trading Program 
approvable. This revision will strengthen Pennsylvania's SIP for 
reducing ground level ozone by providing NO<INF>X</INF> reductions 
beginning in 2003. Furthermore, Pennsylvania's NO<INF>X</INF> Budget 
Trading Program is necessary to fulfill a requirement of the one-hour 
ozone attainment plan for the severe ozone nonattainment area of 
Pennsylvania. The Pennsylvania attainment demonstration plan for the 
Philadelphia-Wilmington-Trenton ozone nonattainment area relies on the 
NO<INF>X</INF> reductions associated with the NO<INF>X</INF> Budget 
Trading Program in 2003 and beyond. EPA finds that Pennsylvania's 
submittal is fully approvable because it addresses the requirements of 
the NO<INF>X</INF> SIP Call Phase I and it is a strengthening measure 
for the Pennsylvania one-hour ozone attainment plan for the 
Philadelphia-Wilmington-Trenton ozone nonattainment area.

III. Proposed Actions

A. NO<INF>X</INF> SIP Call Requirements

    EPA is proposing to approve the Pennsylvania SIP revision 
consisting of its NO<INF>X</INF> Budget Trading Program, submitted on 
October 30, 2000 and April 4, 2001, because it satisfies the 
requirements of the NO<INF>X</INF> SIP Call Phase I.

B. One-Hour Attainment Demonstration Plan

    EPA is also proposing to approve the Pennsylvania SIP revision 
consisting of its NO<INF>X</INF> Budget Trading Program, submitted on 
October 30, 2000 and April 4, 2001, as a SIP strengthening measure 
necessary for Pennsylvania's one-hour ozone attainment plan for the 
Philadelphia-Wilmington-Trenton severe ozone nonattainment area. As 
such, approval of this SIP revision is necessary for full approval of 
the attainment demonstration SIP for the Philadelphia-Wilmington-
Trenton ozone nonattainment area.

IV. Administrative Requirements

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
proposed action is not a ``significant regulatory action'' and 
therefore is not subject to review by the Office of Management and 
Budget. This action merely proposes to approve state law as meeting 
federal requirements and imposes no additional requirements beyond 
those imposed by state law. Accordingly, the Administrator certifies 
that this proposed rule will not have a significant economic impact on 
a substantial number of small entities under the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.). Because this rule proposes to approve pre-
existing requirements under state law and does not impose any 
additional enforceable duty beyond that required by state law, it does 
not contain any unfunded mandate or significantly or uniquely affect 
small governments, as described in the Unfunded Mandates Reform Act of 
1995 (Public Law 104-4). This proposed rule also does not have a 
substantial direct effect on one or more Indian tribes, on the 
relationship between the Federal Government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian tribes, as specified by Executive Order 13175 (65 
FR 67249, November 9, 2000), nor will it have substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government, as specified 
in Executive Order 13132 (64 FR 43255, August 10, 1999), because it 
merely proposes to approve a state rule implementing a federal 
standard, and does not alter the relationship or the distribution of 
power and responsibilities established in the Clean Air Act. This 
proposed rule also is not subject to Executive Order 13045 (62 FR 
19885, April 23, 1997), because it is not economically significant. In 
reviewing SIP submissions, EPA's role is to approve state choices, 
provided that they meet the criteria of the Clean Air Act. In this 
context, in the absence of a prior existing requirement for the State 
to use voluntary consensus standards (VCS), EPA has no authority to 
disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the Clean Air Act. Thus, the requirements 
of section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 
of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing 
this proposed rule, EPA has taken the necessary steps to eliminate 
drafting errors and ambiguity, minimize potential litigation, and 
provide a clear legal standard for affected conduct. EPA has complied 
with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining 
the takings implications of the rule in accordance with the ``Attorney 
General's Supplemental Guidelines for the Evaluation of Risk and 
Avoidance of Unanticipated Takings'' issued under the executive order. 
This action proposing to approve the Pennsylvania NO<INF>X</INF> Budget 
Trading Program does not impose an information collection burden under 
the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 
et seq.).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Nitrogen dioxide, 
Ozone, Reporting and recordkeeping requirements.

    Authority: 42 U.S.C. 7401 et seq.

    Dated: May 17, 2001.
Thomas C. Voltaggio,
Acting Regional Administrator, Region III.
[FR Doc. 01-13414 Filed 5-25-01; 8:45 am]
BILLING CODE 6560-50-U


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