9278 Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Proposed Rules

• Notice of Emission Averaging

(NOA) Review Procedures, including

State-Approved NOA Form; and

• General Program Evaluation

Procedures.

Conclusion

EPA is proposing to approve the

Michigan SIP revision for ozone, carbon

monoxide, sulfur dioxide, nitrogen

dioxide, particulate matter and lead.

This SIP revision implements

Michigan’s Emission Averaging and

Emission Reduction Credit Trading

Rules.

EPA is requesting public comment on

the issues discussed in today’s action.

EPA will consider all public comments

before taking final action. Interested

parties may participate in the federal

rulemaking procedure by submitting

written comments to the EPA Regional

office listed in the ADDRESSES section.

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 proposed action merely

approves 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

(Pub. L. 104–4). For the same reason,

this proposed rule also does not

significantly or uniquely affect the

communities of tribal governments, as

specified by Executive Order 13084 (63

FR 27655, May 10, 1998). This proposed

rule will not have substantial direct

effects on the states, on the relationship

between the national government and

the states, or on the distribution of

power and responsibilities among the

various levels of government, as

specified in Executive Order 13132 (64

FR 43255, August 10, 1999), because it

merely approves 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 rule 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, Carbon monoxide,

Emission trading, Hydrocarbons, Lead,

Incorporation by reference,

Intergovernmental relations, Nitrogen

dioxide, Ozone, Particulate matter,

Reporting and recordkeeping

requirements, Sulfur dioxide, Volatile

organic compounds.

Authority: 42 U.S.C. 7401–7671(q).

Dated: January 19, 2001.

David A. Ullrich,

Acting Regional Administrator, Region 5.

[FR Doc. 01–3164 Filed 2–6–01; 8:45 am]

BILLING CODE 6560–50–U

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[NH035–1–7161b; A–1–FRL–6942–4]

Approval and Promulgation of Air

Quality Implementation Plan; New

Hampshire; Discrete Emissions

Reductions Trading Program

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: The Environmental Protection

Agency is proposing to conditionally

approve a State Implementation Plan

(SIP) revision submitted by the State of

New Hampshire. This revision

establishes regulations for an emissions

trading program Env–A 3100, Discrete

Emissions Reductions Trading Program,

which provides a more cost-effective

mechanism for sources to meet

regulatory requirements for reducing

oxides of nitrogen and volatile organic

compound emissions. This action is

being taken under the Clean Air Act

(CAA). Public comments on this

document are requested and will be

considered before taking final action on

this SIP revision.

DATES: Comments must be received on

or before March 9, 2001.

ADDRESSES: Comments may be mailed to

Susan Studlien, Deputy Director, Office

of Ecosystem Protection (mail code

CAA), U.S. Environmental Protection

Agency, Region I, JFK Federal Bldg.,

Boston, MA 02203. Copies of the State

submittal and EPA’s technical support

document are available for public

inspection during normal business

hours, by appointment at the Office of

Ecosystem Protection, U.S.

Environmental Protection Agency,

Region I, One Congress Street, 11th

floor, Boston, MA and at the Air

Resources Division, Department of

Environmental Services, 6 Hazen Drive,

PO Box 85, Concord, New Hampshire

03302–0095.

FOR FURTHER INFORMATION CONTACT:

Donald Dahl at (617) 918–1657, or by

electronic mail at

Dahl.Donald@EPA.GOV.

SUPPLEMENTARY INFORMATION:

Overview

The Environmental Protection Agency

(EPA) is proposing to conditionally

approve a State Implementation Plan

(SIP) revision submitted by the State of

New Hampshire. This revision

establishes regulations for an emissions

trading program Env–A 3100, Discrete

Emissions Reductions Trading Program.

Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Proposed Rules 9279

The following table of contents

describes the format for this

SUPPLEMENTARY INFORMATION section:

EPA’s Proposed Action

What Action Is EPA Proposing Today?

Why Is EPA Proposing This Action?

What Is Emissions Trading?

What Is Discrete Emissions Reduction

Trading?

What Are EPA’s Proposed Conditions For

Approval?

1. Using Approved Emission

Quantification Protocols

2. Delayed Trading

3. Claiming Ownership of Discrete Credits

4. Notifying Metropolitan Planning

Organizations

5. Notifying the Federal Land Manager

6. Accounting for Discrete Credits in

Emission Inventory

7. Rule May Allow Use of Credits to Avoid

Permitting Requirements

8. Rule Allows for Trading NOX Emission

Reductions to Meet VOC Reduction

Requirements

What Other Clarifications Should New

Hampshire Make in Their Program?

How Can New Hampshire Get Full

Approval for Their Program?

What Guidance Did EPA Use to Evaluate

New Hampshire’s Program?

What Is EPA’s Evaluation of New

Hampshire’s Program?

New Hampshire’s Open Market

Emissions Trading Program

How Do Sources Generate Credits?

How Do Sources Use Credits?

What Are the Other Requirements of

New Hampshire’s Program?

How Does New Hampshire’s Program

Protect the Environment?

How Is New Hampshire’s Program

Enforced?

How Does New Hampshire’s Program

Interact With Title V Permits?

How Does New Hampshire’s Program

Provide for Emissions Quantification

Protocols?

When Was New Hampshire’s Program

Proposed and Adopted?

When Was New Hampshire’s Program

Submitted to EPA and What Did it

Include?

Other Significant Items Related to New

Hampshire’s Program

How Does New Hampshire’s Program

Avoid Adverse Local Impacts of

Hazardous Air Pollutant Emissions?

How Does EPA’s Proposed Action

Affect Earlier Credits?

How Will New Hampshire Audit the

Program?

What is the Basis for Today’s

Proposal?

How Will New Hampshire Address

Future EPA Trading Guidance?

What is the Status of the 1994

Economic Incentive Program?

Conclusion

Administrative Requirements

EPA’s Proposed Action

What Action Is EPA Proposing Today?

EPA is proposing a conditional

approval of New Hampshire’s Env–A

3100. On January 9, 1997, the New

Hampshire Air Resources Division

(ARD) submitted Env–A 3100 to EPA for

approval into the New Hampshire SIP.

Additional documentation was

submitted to EPA by DES on February

24, 1998. This revision establishes

regulations for an emissions trading

program Env–A 3100, Discrete

Emissions Reductions Trading Program

(DER).

Why Is EPA Proposing This Action?

EPA is proposing this action to:

• Give the public the opportunity to

submit written comments on EPA’s

proposed action, as discussed in the

DATES and ADDRESSES sections,

• Fulfill New Hampshire’s and EPA’s

requirements under the Clean Air Act

(the Act),

• Make New Hampshire’s DER

Program federally-enforceable.

What Is Emissions Trading?

Air emission trading is a program

where one source, for example a power

plant, reduces its emissions below the

level it is required to meet. This source

then sells or trades these reductions as

credits to another source which

continues to release emissions above its

required levels. In return for this

flexibility, the second source must

purchase additional credits beyond

those needed to comply, therefore

reducing overall emissions. Emissions

trading uses market forces to reduce the

overall cost of compliance for sources,

while maintaining emission reductions

and environmental benefits.

What Is Discrete Emissions Reduction

Trading?

New Hampshire’s Discrete Emissions

Reduction Trading Program (DER

Program) is similar to an Open Market

Emission Trading Program as described

in EPA’s model Open Market Trading

Rule (OMTR) which was proposed on

August 25, 1995 (60 FR 44290). In a

Discrete Emissions Reduction trading

program, a source generates short-term

emission reduction credits, called

discrete emission reductions (DERs) by

reducing its emissions. The source can

then use these discrete credits at a later

time, or trade them to another source to

use at a later time. The trading program

relies on many sources continuing to

generate new discrete credits to balance

with other sources using previously

generated discrete credits.

For example, a power plant adds on

additional controls that reduce oxides of

nitrogen ( NOX) emissions beyond Clean

Air Act requirements. This emission

reduction could generate discrete

credits. The power plant trades these

discrete credits to an industrial

manufacturer that operates boilers to

generate process steam. In the future,

the manufacturer can use the discrete

credits to meet its NOX control

requirements. While the manufacturer is

using the discrete credits, the power

plant and other sources are also

reducing emissions and generating

discrete credits. But the manufacturer

must also purchase an additional

amount, 10 percent, of discrete credits

above the number of credits they would

otherwise need to comply. The

manufacturer, or any other source, will

never use this additional amount for

compliance. This is known as a

retirement of credit to benefit the

environment. The total effect is to

reduce emissions.

What Are EPA’s Proposed Conditions

for Approval?

EPA is proposing the following

conditions that would need to be met

before EPA can approve New

Hampshire’s DER Trading Program.

These areas of New Hampshire’s DER

Program do not fully satisfy EPA’s

guidance. A Technical Support

Document (TSD), prepared in support of

this proposed action, contains a full

description of EPA’s conditions for

approval. A copy of the TSD is available

upon request from the EPA Regional

Office listed in the ADDRESSES section.

1. Using Approved Emission

Quantification Protocols

With regard to New Hampshire, the

credit quantification protocol provisions

of Env–A 3100 mirror EPA’s August

1995 proposed model rule language

concerning protocols. However, since

the proposal there have been some

changes made to EPA’s guidance

regarding emission quantification

protocols in trading programs. See

EPA’s proposal to grant conditional

approval of New Jersey’s open market

trading program, 66 FR 1796. One of the

recent changes addresses the procedures

for adopting alternative protocols in

existing guidance. The notice for New

Jersey’s program states that EPA

approval is required prior to allowing a

source to deviate from an established

EPA emission quantification protocol.

ENV–A 3107.02(b) states that EPA

approval is not needed in advance when

a source wants to deviate from

9280 Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Proposed Rules

established protocols in calculating

emission credits. In order to receive full

approval, New Hampshire must require

that deviations to existing protocols first

be approved by EPA prior to their use.

2. Delayed Trading

EPA guidance requires emission

trading programs to require sources to

purchase credits prior to the source

having to use those credits to comply

with their emission limits. ENV-A

3104.11 allows a source, when credits

are unavailable, to delay the purchase of

credits after the period the source

needed them to comply with emission

limits resulting from New Hampshire’s

Reasonable Available Control

Technology requirements. If a source is

dependent on using emission credits to

comply with RACT requirements, it is

the source’s responsibility to ensure that

credits will be available when it makes

it’s choice not to add emission controls

to comply with the RACT requirements.

Therefore, for full approval New

Hampshire must require source’s to

have sufficient emission credits prior to

the intended use period.

3. Claiming Ownership of Discrete

Credits

Env-A 3100 states that a source is

eligible to generate discrete credits.

However, New Hampshire’s DER

Program is unclear in a situation when

different parties try to claim the same

emission reduction from a source as a

credit. This issue is significant because

the rights to credits generated by a

particular credit generation strategy will

be unclear in some cases. For instance,

a manufacturer of a device or fuel

additive that reduces automobile

emissions might attempt to register

credits based on the sale of the device

or fuel additive within New Hampshire.

However, an owner of a vehicle fleet

might also attempt to register credits

based on his or her installation of those

same devices or use of fuel within the

fleet. Registration of both sets of credits

would double count the emission

reductions, leading to the generation of

excess credits.

For full approval, New Hampshire

must address the issue of ownership

claims in its regulation and make

provisions for reporting ownership

claims in the Notice and Certification of

Generation.

4. Notifying Metropolitan Planning

Organizations

To avoid double-counting the

emission reductions generated by

mobile sources in trading programs, the

state must ensure coordination between

the emission trading program and the

conformity analyses in the area in

which the trading program takes place.

Metropolitan Planning Organizations

should not use any reductions they

receive notice about, for transportation

conformity. Similarly, the trading

program should not allow use of

reductions that the Metropolitan

Planning Organizations rely on in a

transportation conformity

determination. New Hampshire should

require a generator of mobile-source

emission reductions to notify the

Metropolitan Planning Organizations in

the area, and the State Department of

Transportation of the generator’s

intention to generate emission

reductions. The generator must provide

enough information to the Metropolitan

Planning Organizations about the likely

emission reductions from the activity to

allow the Metropolitan Planning

Organizations to adjust its regional

conformity analyses appropriately. Once

notified, the Metropolitan Planning

Organizations may not use these

emission reductions to satisfy the

requirement for transportation

conformity.

5. Notifying the Federal Land Manager

EPA has a policy of providing special

protection for Class I areas (pristine

environments such as international

parks, large national parks and

wilderness areas), as required under

sections 160 through 169 of the Act.

New Hampshire has two Class I areas—

the Great Gulf Wilderness Area and

Presidential Range-Dry River

Wilderness Area. This policy includes

keeping Federal Land Managers

informed of activities that could affect

air quality in Class I areas. In

accordance with this policy, New

Hampshire must revise Env-A 3100, or

submit procedures as part of the SIP,

which requires New Hampshire to send

a notification to the relevant Federal

Land Manager at least 30 days prior to

any discrete credit use activity occurs

approximately within 100 kilometers of

a Class I area.

6. Accounting for Discrete Credits in

Emission Inventory

The Act requires states to have an

emissions inventory that specifically

accounts for actual emissions of all

major stationary sources and minor/area

source categories. EPA’s General

Preamble guidance to the Act also

requires the inventory to consider

credits available for use as if they are in

the air for all attainment

demonstrations. Therefore all

attainment modeling demonstrations

must include all unused credits, that

sources can eventually use, as actual

emissions. While this can inflate an

area’s actual emissions inventory above

the level of what will probably occur, it

does not inflate emissions above what

could potentially occur. For emission

trading purposes, EPA has and

continues to require that attainment,

reasonable further progress and rate-ofprogress demonstrations use a worstcase emissions scenario. This is to

discourage the accumulation of large

banks of credits that could potentially

ruin any attainment plan or

demonstration if the credits were all

used at the same time. For full approval

of Env–A 3100, New Hampshire must

submit to EPA additional information

on how the emission inventories

account for unused credits under New

Hampshire’s DER Program.

7. Rule May Allow Use of Credits To

Avoid Permitting Requirements

Env–A 3104.10 contains a list of

situations where DERs cannot be used.

Env–A.3104.10(b) correctly states that

DERs cannot be used to avoid the

applicability of NSR requirements. This

is consistent with EPA’s policy that

emission credits cannot be used to avoid

the applicability of a Clean Air Act

Requirement. Credits can only be used

to comply with requirements. However,

New Hampshire’s rule does not prohibit

the use of DERs to avoid a source’s

applicability to New Hampshire’s title V

operating permit program (state

regulation Env–A 609). For full

approval, New Hampshire must add to

Env–A 3104.10 a prohibition on using

DERs to avoid the title V operating

permit program.

8. Rule Allows for Trading NOX

Emission Reductions To Meet VOC

Reduction Requirements

Env–A 3104.10(f) allows for NOX

reductions to be used to meet VOC

reduction requirements using a NOX to

VOC ratio of 1:1. EPA recognizes that

inter-precursor trading can be done

under very limited circumstances. First,

the pollutants being traded must impact

the environment in the same way. In

New Hampshire’s rule, inter-precursor

trading is limited to trading NOX

emission decreases for VOC emission

increases. Science and the Clean Air Act

(CAA) recognize that both NOX and

VOC emissions combine in the

atmosphere to create ozone and that in

some areas reducing one of these

pollutants is more important. In fact,

CAA § 182(c)2(C) provides for states

with ozone problems to substitute NOX

reductions for VOC reductions in their

Attainment and Reasonable Further

Progress Plans. Second, EPA believes

that any proposed inter-precursor

Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Proposed Rules 9281

emission trade should be analyzed for

the extent of impact from each pollutant

involved in the trade. For example, it

would not make sense to allow a trade

of a decrease of 1 ton of pollutant A for

an increase of one ton of pollutant B if

pollutant B has a greater environmental

impact than pollutant A. New

Hampshire’s rule allows for a one ton

decrease in NOX to be traded for a one

ton increase of VOC. Both VOC and

NOX impact the concentration of ozone.

Based on this policy, in 1997, EPA

told New Hampshire that in order for

EPA to accept New Hampshire’s trading

program, an analysis would have to be

performed to demonstrate that NOX

emissions impact ozone formation more

than or the same as VOC emissions. On

February 24, 1998, New Hampshire

submitted to EPA an analysis of trading

NOX for VOC emissions. The analysis is

based on a series of urban airshed

modeling runs which demonstrate that

NOX emissions have a greater effect than

VOC reductions on reducing ground

level ozone in New Hampshire. Based

on this supporting documentation, EPA

finds that a 1:1 ratio of NOX for VOC is

supportable in New Hampshire. This

means that a one ton decrease in NOX

emissions can be used for a one ton

increase of VOC emissions.

Env–A 3104.10(f), however, also

allows the state to increase the ratio of

NOX to VOC from 1:1 to something

greater, based on another analysis. The

state rule requires any additional

analysis to follow some general criteria.

The problem with this provision is that

inter-precursor emission trades using a

ratio different from 1:1 could occur

without the opportunity for EPA or

public review. It is critical that the

public and EPA are given the

opportunity to review any analysis used

to support inter-precursor emission

trading.

Therefore, for full approval, New

Hampshire must revise Env–A

3104.10(f) to remove the ability for the

state to allow for inter-precursor trading

at a ratio greater than a 1:1 ratio of NOX

for VOC emissions. In the future, if New

Hampshire demonstrates that a different

ratio is more appropriate, New

Hampshire should revise Env–A 3100 to

reflect the new analysis and submit the

rule change to EPA for approval as a

revision to the New Hampshire SIP.

What Other Clarifications Should New

Hampshire Make in Their Program?

In addition to the issues which EPA

is conditionally approving Env–A 3100,

there is one area of the rule that New

Hampshire should clarify. New

Hampshire should clarify in Env–A

3110 that it is a violation for each and

every day within an averaging period if

a source does not meet the requirements

of the trading rule (e.g., have sufficient

discrete emission reductions, keep

records, etc) for that averaging period.

That is, a source will have 30 days of

violations if a monthly averaging limit

is not met and 365 days of violations if

an annual limit is not met. While EPA

understands that this is what New

Hampshire meant in Env–A 3110, this

provision is not an approval issue, and

clarification would make the DER

program more understandable.

How Can New Hampshire Get Full

Approval for Their Program?

EPA is proposing conditional

approval of New Hampshire’s DER

Program, provided New Hampshire

commits to correct the deficiencies

discussed in the ‘‘What are EPA’s

Proposed Conditions for Approval?’’

section, in writing, on or before March

9, 2001. New Hampshire must then

correct the deficiencies and submit

them to EPA within one year of EPA’s

final action on the DER Trading Program

SIP revision.

If New Hampshire submits a

commitment to comply with EPA’s

conditions, EPA will publish a final

conditional approval of New

Hampshire’s DER Program. EPA will

consider all information submitted prior

to any final rulemaking action as a

supplement or amendment to the

January 9, 1997 and February 24, 1998

submittals. If New Hampshire does not

make the required commitment to EPA,

EPA is proposing to disapprove the DER

Program.

What Guidance Did EPA Use To

Evaluate New Hampshire’s Program?

EPA’s basis for evaluating New

Hampshire’s DER Program is whether it

meets the SIP requirements described in

section 110 of the Act. In 1994, EPA

issued Economic Incentive Program

(EIP) rules and guidance (40 CFR part

51, subpart U), which outlined

requirements for establishing EIPs that

States are required to adopt in some

cases to meet the ozone and carbon

monoxide standards in designated

nonattainment areas. There is no

requirement for New Hampshire to

submit an EIP, so its DER Program need

not necessarily follow the EIP rule.

However, since subpart U also contains

guidance on the development of

voluntary EIPs, New Hampshire did

follow certain aspects of the EIP

guidance in the development and

submittal of its DER Program. Lastly, on

September 15, 1999 EPA proposed

changes to the 1994 EIP.

EPA also published on August 3,

1995, a proposed policy on open market

trading programs and on August 25,

1995, a model open market trading rule.

EPA’s proposed policy describes the

elements of an open market trading

program that EPA considers to be

desirable and necessary for a program to

be approvable as a SIP revision. The

proposed policy also allowed States to

adopt rules that varied from the

proposed model rule. In a March 10,

1998-letter from Richard D. Wilson,

Acting Assistant Administrator for Air

and Radiation to Congressman Thomas

J. Bliley, EPA clarified its policy on

open market trading. The letter said that

EPA will work with states to develop

open market programs tailored to their

individual circumstances and use the

August 1995 proposal as guidance.

Also available for reference is EPA’s

September 18, 1997 Proposed Action on

the State of Michigan’s Trading Rules

and EPA’s January 9, 2001 Proposed

Action on the State of New Jersey’s

Trading Rules.

For further discussion of how these

documents provide the basis of today’s

proposed action, see the section ‘‘What

is the Basis for Today’s Proposal?’

What Is EPA’s Evaluation of New

Hampshire’s Program?

EPA has determined New

Hampshire’s new Env–A 3100

regulation for New Hampshire’s DER

Program is consistent with EPA’s

guidance, except for the deficiencies

discussed in the ‘‘What are EPA’s

Proposed Conditions for Approval?’’

section. New Hampshire’s DER Program

is based upon and is consistent with

EPA’s proposed Open Market Policy

and Model Rule of 1995, EPA’s proposal

of 1997 on Michigan’s Program, EPA’s

proposal of 2001 on New Jersey’s

Program, and EPA’s proposal of 1999 to

revise the EIP.

New Hampshire’s Env–A 3100

contains provisions for definitions,

generation, transfer, verification and use

of discrete credits, the registry,

geographic restrictions, recordkeeping,

public availability, demonstrating

compliance and penalties.

Given the documentation in the SIP

submittal and the provisions of New

Hampshire’s DER Program, EPA

believes New Hampshire has

demonstrated the State’s other

regulations will achieve at least the

same quantity of NOX and volatile

organic compound (VOC) emission

reductions, with or without the DER

Program. Furthermore, given the extra

reductions inherent in New

Hampshire’s reasonably available

control technology (RACT) program, the

9282 Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Proposed Rules

State will continue to meet the

reasonable further progress and SIP

attainment requirements. Based upon

these analyses and documentation, and

a requirement to conduct a periodic

program audit, EPA believes that New

Hampshire’s DER Program will not

interfere with any applicable

requirement concerning attainment and

reasonable further progress, or any other

applicable requirement of the Act.

EPA has also determined, with the

exceptions discussed in the ‘‘What are

EPA’s Proposed Conditions for

Approval?’’ section, the emission

quantification protocol criteria,

monetary penalty structure, geographic

scope of trading, early reduction credit,

and program audit provisions of New

Hampshire’s DER Program are

consistent with EPA’s guidance.

A TSD, prepared in support of this

proposed action, contains the full

description of New Hampshire’s

submittal and EPA’s evaluation. A copy

of the TSD is available upon request

from the EPA Regional Office listed in

the ADDRESSES section.

New Hampshire’s Open Market

Emissions Trading Program

How Do Sources Generate Credits?

Sources participating in the DER

Program generate discrete credits by

reducing emissions below a baseline

over a discrete time period. The

generation baseline is established by

existing requirements, and is

determined by the lower of allowable

emissions or actual past emissions.

Sources which generate discrete credits

must submit a ‘‘Notice’’ to the state,

which includes information about the

source generating the reductions, the

methods of generating the reductions,

the amount of reductions, and the

methods used to measure the

reductions. An official representative of

the source must certify the following:

• Information in the Notice is true,

accurate and complete,

• Emission reductions generated are

real and surplus,

• The emission quantification

protocol used to calculate the emissions

reductions, and

• A prohibited generation strategy is

not the basis for the emission reduction.

How Do Sources Use Credits?

New Hampshire’s DER Program

requires discrete credits to be assigned

a unique serial number by the state

before they are used. The source using

the credits must hold the credits prior

to the compliance period for which the

credits are going to be used. The user

must submit a notice of intent to use the

credits at least 30 days prior to the use

period. Sources that wish to trade or use

discrete credits must provide notices to

the state with information about the

source’s intent to use discrete credits, as

well as the source’s use of the discrete

credits. The notices must also include:

• Number of discrete credits to be

used,

• The requirements the source will

comply with through the use of discrete

credits,

• Copy of the generation Notice for

the discrete credits used,

• Statements that the discrete credits

were not previously used or retired, and

• Certifications similar to the other

Notices.

A generating source can use discrete

credits at a later time, or trade them to

another source to use at a later time. The

source using discrete credits must

purchase an additional 10 percent of

discrete credits above the number of

credits they would otherwise need to

comply. This additional amount is not

used for compliance, but retired to

benefit the environment.

What Are the Other Requirements of

New Hampshire’s Program?

New Hampshire’s DER Program also

contains requirements on the geographic

scope of trading, recordkeeping, public

availability of information, and

quantification protocols.

Sources can trade VOC or NOX

discrete credits. Discrete credits must be

designated as either ozone season (May

1 through September 30) or non-ozone

season credits. Discrete credits

generated outside of the ozone season

cannot be used during the ozone season.

How Does New Hampshire’s Program

Protect the Environment?

New Hampshire submitted these rules

as a SIP revision to allow sources which

emit ozone precursors—NOX and

VOCs—flexibility in complying with

requirements already in the SIP. The

program provides emissions sources

with a financial incentive to reduce

emissions below levels required by

applicable Federal and State

requirements and below the source’s

actual emissions of the recent past.

Sources that make these extra

reductions going beyond requirements

generate discrete credits that they can

use later or sell to other sources.

Discrete credits may be used by sources

to comply with emissions limits. The

program is not a means of limiting

emissions; instead, trading is meant to

provide an opportunity to comply with

existing emission limits in a more cost

effective manner.

However, the DER Program protects

the environment in several ways:

• New Hampshire has demonstrated

that in each ozone season the number of

discrete credits generated will be equal

to or greater than the number used,

• The calculation of the number of

discrete credits needed for use is

conservative since the source must

retire an additional 10 percent of

credits, and

• The DER Program specifically

requires credits to be surplus to

reductions already relied on in the SIP.

How Is New Hampshire’s Program

Enforced?

New Hampshire’s DER Program

divides compliance responsibilities

between the generator and user of

discrete credit. In general, the generator

and user are responsible for actions

within his or her control, and a

generator or user is in violation of Env–

A 3100 if they do not fulfill their

respective responsibilities.

The generator is responsible for

ensuring that it has created discrete

credits according to the DER Program

and that the discrete credits are real,

surplus, and properly quantified.

The user is responsible for ensuring

that its use of discrete credits complies

with the provisions of the DER Program,

including the prohibitions on use (Env–

A 3104.10). A user is also responsible

for ensuring a discrete credit is not used

unless the credit is verified, the credit

was not previously used or retired, and

the discrete credit is valid. In any

enforcement action, the generator and

user bear the burden of proof on each

of their respective responsibilities

How Does New Hampshire’s Program

Interact With Title V Permits?

The purpose of the Title V permitting

program, codified in 40 CFR Part 70, is

to ensure that a single document

identifies all applicable requirements

under the Act for sources that are

‘‘major sources’’ or are otherwise

required to obtain a federally

enforceable operating permit. Part 70

contains provisions designed to

streamline the process of modifying

operating permits for facilities that wish

to participate in an emissions trading

program like the New Hampshire’s DER

program. See, e.g., 40 C.F.R.

§§ 70.6(a)(8), 70.7(e)(2)(B).

How Does New Hampshire’s Program

Provide for Emissions Quantification

Protocols?

A key element in the design and

implementation of trading programs,

including open market trading

programs, is methods for quantifying

Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Proposed Rules 9283

amounts of emissions. Precisely

determining these amounts would be

important to determine the amount of

emissions by which a source may be

exceeding its SIP or permit limits, and

therefore the amount of emissions

reductions the source would need to

acquire in an emissions trade in order

to meet those limits; as well as the

amount of emissions a source may

generate to sell. These methods are often

referred to as emissions quantification

protocols, or, simply, protocols.

In its notice regarding the New Jersey

Trading Program, EPA identified as an

issue the question of whether protocols

maybe included in a Title V permit in

lieu of the SIP itself. For a more

complete discussion of this, see the New

Jersey Notice, 66 FR 1796. However,

EPA proposes to approve New

Hampshire’s DER Program on the basis

that at the time New Hampshire adopted

and submitted it to EPA, New

Hampshire relied on the guidance

provided at that time. As a result, EPA

proposes to approve the provisions of

the DER Program that the SIP must

include criteria for protocol

development but not the protocols

themselves.

When Was New Hampshire’s Program

Adopted?

New Hampshire adopted the DER

program on January 13, 1997.

When Was New Hampshire’s Program

Submitted to EPA and What Did it

Include?

EPA received New Hampshire’s

submittal of its DER Program SIP

revision to EPA on January 28, 1997.

The rule was deemed administratively

and technically complete by operation

of law on July 28, 1997. Additional

information was submitted by New

Hampshire on February 24, 1998.

New Hampshire’s DER Program SIP

revision included the following

elements:

• Env–A 3100 and

• Modeling analysis to support interprecursor emission trading, specifically,

NOX emission decreases to meet VOC

emission reduction requirements.

Other Significant Items Related to New

Hampshire’s Program

How Does New Hampshire’s Program

Avoid Adverse Local Impacts of

Hazardous Air Pollutant Emissions?

In VOC trading programs, it is

important to recognize that many VOCs

are also classified as hazardous air

pollutants (HAPs). EPA is committed to

protecting the health and environment

of local communities from any negative

impacts related to VOC trading. EPA is

also committed to providing flexibility

for local decision making that can allow

for different circumstances in different

localities.

While sources involved in VOC

trading are required to meet all

applicable current and future air toxics

requirements, such as maximum

achievable control technology (MACT),

EPA believes VOC trading programs

should build in additional safeguards

for HAPs. In the September 15, 1999,

proposed revisions to the EIP guidance,

EPA outlined a draft framework for

addressing HAP-related issues in VOC

trading programs. The draft framework

says VOC trading programs must

contain the following general

safeguards:

• A program review of the trading

program to evaluate the impacts of VOC

trades involving HAPs on the health and

environment of local communities,

• Prevention and/or mitigation

measures to address any negative

impacts,

• Public participation in program

design, implementation and evaluation,

and

• Availability of sufficient

information for meaningful review and

participation.

EPA believes New Hampshire’s DER

Program is consistent with the proposed

framework for addressing HAP-related

issues in VOC trading programs as

outlined below, even though New

Hampshire adopted its DER Program

prior to the proposed revisions to the

EIP.

Periodic Program Evaluation Provisions

Env–A 3109 requires New Hampshire

to audit the DER Program and assess the

effects of toxic emission resulting from

the DER Program. This audit is made

available to the public within one year

after the audit begins. Evaluation can

also occur on a source-by-source basis

through the public accessibility of the

Notice and Certification of emission

credit generation and use.

Prevention and Mitigation Provisions

New Hampshire’s DER program is

more restrictive than EPA’s proposed

open market trading model rule with

respect to HAPs. The proposed model

rule requires a user source to disclose

the amount of HAPs emitted as a result

of the use of discrete credits and certify

compliance with the state’s ambient air

levels (AAL). AAL’s are defined in New

Hampshire’s Regulated Toxic Air

Pollutants, Env–A 1400. This state

regulation requires existing, new, or

modified sources to demonstrate that

permitted emissions from the source do

not violate the ambient air limits

established by Env–A 1400. The DER

Program requires each source to certify

that any emission trade will not effect

the source’s compliance with the AALs.

The public is further protected because

New Hampshire uses risk analysis as the

basis for developing AALs.

Public Participation Provisions

In developing the DER program, New

Hampshire created a work group called

Emission Reduction Trading Advisory

Committee, which met on a monthly

basis during program development. New

Hampshire also held a public hearing on

October 10, 1996 to discuss the rule

before finalizing the rule in 1997.

Information Availability Provisions

New Hampshire’s program requires

each generator and user of emission

credits to analyze the impact on air

toxic emissions resulting from VOC

emission trading. In cases where a

source is required to have an operating

permit, New Hampshire requires the

emission trade information to be

attached to the permit.

As of this writing, EPA believes New

Hampshire’s DER Program is consistent

with EPA’s current thinking on

addressing HAP-related issues in VOC

trading programs. As EPA develops

additional guidance, EPA will provide

this guidance to New Hampshire as the

State continues to discuss these and

other issues in the program audit and,

where appropriate, require New

Hampshire to revise the DER Program.

How Does EPA’s Proposed Action Affect

Earlier Credits?

Upon a final approval of New

Hampshire’s DER SIP revision, Env–A

3100 will be federally-enforceable.

Since Env–A 3100 is a SIP flexibility

mechanism, compliance with its terms

is essential in order to avoid complying

with other applicable requirements of

the SIP. Also, the generator may have

other responsibilities related to proper

quantification of the discrete credits.

EPA suggests that the generators and

any users of the discrete credits review

these specific discrete credit generation

strategies before Env-A 3100 becomes

subject to EPA enforcement.

How Will New Hampshire Audit the

Program?

Env–A 3109 requires New Hampshire

to conduct a program audit every three

years, beginning no later than 1999.

New Hampshire has submitted a

program audit that summarizes

emission trades through 1998.

9284 Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Proposed Rules

What is the Basis for Today’s Proposal?

As discussed in the section ‘‘What

Guidance Did EPA Use to Evaluate New

Hampshire’s Program?’’ the 1994 EIP

includes requirements for mandatory

EIPs and guidance for voluntary EIPs. 40

CFR part 51, subpart U; 59 FR 16690.

EPA proposed revised guidance to

accommodate open market trading

programs, by notices dated August 3,

1995, 60 FR 39668, and August 25,

1995, 60 FR 44290. EPA received

comments on both of these proposals.

EPA proposed action on a Michigan

emission trading program by notice

dated September 18, 1997, 62 FR 48972.

EPA proposed action on a New Jersey

emission trading program by notice

dated January 9, 2001, 66 FR 1796. EPA

also proposed revisions to the EIP on

September 15, 1999, 64 FR 50086.

In addition, in a letter to Congressman

Thomas J. Bliley, dated March 10, 1998,

Richard D. Wilson, EPA’s Acting

Assistant Administrator for Air and

Radiation, stated that EPA would ‘‘work

with the States to develop open market

programs tailored to their individual

circumstances. In this process EPA and

the States are using the August 1995

[open market trading] proposal as

guidance and taking into account both

State circumstances and the many

useful comments we received in

response to the proposal.’’

New Hampshire adopted its SIP on

January 13, 1997 and submitted it to

EPA on January 21, 1997. In response to

requests by EPA, New Hampshire

supplemented the submittal with

modeling analysis to support interprecursor trading on February 24, 1998.

By notice dated September 15, 1999,

EPA proposed revised guidance for

economic incentive programs. 64 FR

50086. That proposal would revise in

certain respects the Agency guidance

provided in the 1994 EIP, the 1995 open

market trading program proposals and

the guidance provided in the 1997 EPA

proposal to approve the Michigan

program and the 2001 EPA proposal to

approve the New Jersey program. The

public comment period on the

September 15, 1999 proposal ended

December 10, 1999. EPA is currently

considering the public’s comments in

developing a final revision to the EIP

guidance.

In developing its DER SIP revision,

New Hampshire relied on EPA’s

statements that New Hampshire could

base its SIP revision on the 1995 open

market trading proposal. New

Hampshire’s submittal of the SIP

revision also accorded with EPA’s

representations to Congressman Bliley

that States could use the 1995 guidance

to assist them in developing their open

market trading programs. EPA mostly

evaluated the SIP revision against the

guidance available at the time of the

program’s development and submittal.

In light of this reliance, EPA is today

proposing to approve the New

Hampshire’s SIP revision, except for the

deficiencies discussed in the ‘‘What are

EPA’s Proposed Conditions for

Approval?’’ section. In doing so, EPA is

proposing to apply, on an interim basis,

both the 1995 open market trading

program proposals, the 1999 proposed

revisions to the EIP, and the guidance

contained in the 1997 EPA proposal to

approve the Michigan program and the

2001 EPA proposal to approve the New

Jersey program, recognizing that some

aspects of these proposals may be

further revised by the policies of the

1999 EIP proposal, if and when it is

finalized.

How Will New Hampshire Address

Future EPA Trading Guidance?

EPA believes the basis for today’s

proposed action is a reasonable

approach in the interest of supporting

trading programs. However, due to

EPA’s lack of experience with open

market trading programs and the many

issues that such programs raise, EPA

will use any future final revised EIP

guidance as a basis for re-evaluating

New Hampshire’s DER Program, in

coordination with the State, to ensure

that its operation is consistent with the

Clean Air Act and federal regulation.

EPA will notify the State of any

deficiencies in the DER Program, within

18 months after EPA issues a final

revised EIP guidance. As with any SIP,

EPA may require New Hampshire to

revise the DER Program where necessary

and re-submit the DER Program

according to the requirements and

deadlines under section 110(k)(5) of the

Act. According to section 110(k)(5),

New Hampshire may have up to 18

months to revise and re-submit the DER

Program after EPA notifies the State of

any deficiencies.

What is the Status of the 1994 Economic

Incentive Program?

The 1994 EIP established, through

notice-and-comment action, rules for

mandatory EIPs and guidance for

voluntary EIPs. Any final action that

EPA may take to approve the New

Hampshire DER Program, to the extent

that action differs from the guidance

portion of the 1994 EIP, would revise

that portion of the 1994 EIP action only

for purposes of today’s action on the

New Hampshire SIP submittal. EPA’s

proposed 1999 EIP guidance, once

completed through notice-and-comment

action, may further revise the guidance

portion of the 1994 EIP action.

Conclusion

EPA is proposing to approve

conditionally the New Hampshire SIP

revision for Env–A 3100. This SIP

revision implements New Hampshire’s

DER Program. EPA is proposing

conditional approval of New

Hampshire’s DER Program, provided

New Hampshire commits to correct the

deficiencies discussed in the ‘‘What are

EPA’s Proposed Conditions for

Approval?’’ section, in writing, on or

before March 9, 2001. New Hampshire

must then correct the deficiencies and

submit them to EPA within one year of

EPA’s final action on the DER SIP

revision.

If New Hampshire submits a

commitment to this effect, EPA will

publish a final conditional approval of

New Hampshire’s DER Program. EPA

will consider all information submitted

prior to any final rulemaking action as

a supplement or amendment to the

January 21, 1997 submittal. If New

Hampshire does not make the required

commitment to EPA, EPA is proposing

in the alternative to disapprove the DER

Program.

EPA is requesting public comment on

the issues discussed in today’s action.

EPA will consider all public comments

before taking final action. Interested

parties may participate in the Federal

rulemaking procedure by submitting

written comments to the EPA Regional

office listed in the ADDRESSES section.

Administrative Requirements

Under Executive Order 12866 (58 FR

51735, October 4, 1993), this action is

not a ‘‘significant regulatory action’’ and

therefore is not subject to review by the

Office of Management and Budget. This

action merely approves state law as

meeting Federal requirements and

imposes no additional requirements

beyond those imposed by state law.

Accordingly, the Administrator certifies

that this 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 approves preexisting 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).

For the same reason, this rule also does

not significantly or uniquely affect the

communities of tribal governments, as

specified by Executive Order 13084 (63

Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Proposed Rules 9285

FR 27655, May 10, 1998). This rule will

not have substantial direct effects on the

States, on the relationship between the

national government and the States, or

on the distribution of power and

responsibilities among the various

levels of government, as specified in

Executive Order 13132 (64 FR 43255,

August 10, 1999), because it merely

approves 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 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 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 rule 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, Hydrocarbons,

Intergovernmental relations, Nitrogen

dioxide, Ozone, Reporting and

recordkeeping requirements, Volatile

organic compounds.

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

Dated: January 19, 2001.

Mindy S. Lubber,

Regional Administrator, EPA-New England.

[FR Doc. 01–3160 Filed 2–6–01; 8:45 am]

BILLING CODE 6560–50–P

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[DE043–1030b; FRL–6941–4]

Approval and Promulgation of Air

Quality Implementation Plans;

Approval and Promulgation of Air

Quality Implementation Plans;

Delaware; Revisions to New Source

Review

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: EPA proposes to convert its

conditional approval of Delaware’s

revised New Source Review (NSR)

regulations to a full approval and to

incorporate those regulations into the

Delaware State Implementation Plan

(SIP). In the Final Rules section of this

Federal Register. EPA is taking direct

final action to convert the conditional

approval to full approval as a direct

final rule without prior proposal

because the Agency views this as a

noncontroversial submittal and

anticipates no adverse comments. If no

adverse comments are received in

response to this action, no further

activity is contemplated. If EPA receives

adverse comments, the direct final rule

will be withdrawn and all public

comments received will be addressed in

a subsequent final rule based on this

proposed rule. EPA will not institute a

second comment period. Any parties

interested in commenting on this action

should do so at this time.

EFFECTIVE DATE: Comments must be

received in writing by March 9, 2001.

ADDRESSES: Written comments should

be addressed to Makeba Morris, Chief,

Permits and Technology Assessment

Branch, Mailcode 3AP11, 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

the Delaware Department of Natural

Resources & Environmental Control, 89

Kings Highway, P.O. Box 1401, Dover,

Delaware 19903.

FOR FURTHER INFORMATION CONTACT:

Linda Miller, (215) 814–2068, at the

EPA Region III address above, or by email at miller.linda@epa.gov.

SUPPLEMENTARY INFORMATION: For

further information on EPA’s proposed

action to convert its conditional

approval of revisions to Delaware’s New

Source Review Program to a full

approval, please see the information

provided in the direct final action, with

the same title, that is located in the

‘‘Rules and Regulations’’ section of this

Federal Register publication.

Dated: January 17, 2001.

Bradley M. Campbell,

Regional Administrator, Region III.

[FR Doc. 01–3159 Filed 2–6–01; 8:45 am]

BILLING CODE 6560–50–M

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

50 CFR Part 660

[I.D. 012301A]

Western Pacific Fishery Management

Council; Public Meetings and Hearing

AGENCY: National Marine Fisheries

Service (NMFS), National Oceanic and

Atmospheric Administration (NOAA),

Commerce.

ACTION: Notice of public meeting/public

hearing.

SUMMARY: The Western Pacific Fishery

Management Council (Council) will

hold its 108th meeting February 12

through February 15, 2001, in Honolulu,

HI.

DATES: The Council’s Standing

Committees will meet on February 12,

2001, from 7:30 a.m. to 5:30 p.m. The

full Council meeting will be held on

February 13, 2001, from 9 a.m. to 5 p.m.

and February 14 and 15, 2001, from 8:30

a.m. to 5 p.m. A public hearing will be

held on February 13, 2001, at 4 p.m. on

a framework amendment to extend the

Northwestern Hawaiian Islands (NWHI)

lobster fishery closure. See

SUPPLEMENTARY INFORMATION for specific

dates and times for these meetings and

the hearing.

ADDRESSES: The Council meeting,

Standing Committee meetings, and

public hearing will be held at the Ala

Moana Hotel, 410 Atkinson Drive,

Honolulu, HI; telephone: 808-955-4811.

FOR FURTHER INFORMATION CONTACT:

Kitty M. Simonds, Executive Director;

telephone: 808-522-8220.

SUPPLEMENTARY INFORMATION:

Dates and Times

Committee Meetings

The following Standing Committees

of the Council will meet on February 12,

2001. Enforcement/Vessel Monitoring