Document ID: EPA-R05-OAR-2007-0405-0001
Agency: epa
Document Type: Proposed Rule
Title: Proposed Approval of Wisconsin's Clean Air Interstate Rule submittal
Posted Date: 2007-07-31T04:00Z

[Federal Register: July 31, 2007 (Volume 72, Number 146)]
[Proposed Rules]               
[Page 41669-41676]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31jy07-23]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52 and 97

[EPA-R05-OAR-2007-0405; FRL-8446-5]

 
Approval of Implementation Plans; Wisconsin; Clean Air Interstate 
Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to partially approve and partially disapprove 
a revision to the Wisconsin State Implementation Plan (SIP) submitted 
on June 19, 2007. This revision incorporates provisions related to the 
implementation of EPA's Clean Air Interstate Rule (CAIR), promulgated 
on May 12, 2005, and subsequently revised on April 28, 2006, and 
December 13, 2006, and the CAIR Federal Implementation Plan (FIP) which 
concerns sulfur dioxide (SO2), oxides of nitrogen 
(NOX) annual, and NOX ozone season emissions for 
the State of Wisconsin, promulgated on April 28, 2006, and subsequently 
revised December 13, 2006. EPA is not proposing to make any changes to 
the CAIR FIP, but is proposing, to the extent EPA approves Wisconsin's 
SIP revision, to amend the appropriate appendices in the CAIR FIP 
trading rules simply to note that approval.
    The SIP revision that EPA is proposing to approve is an abbreviated

[[Page 41670]]

SIP revision that addresses the methodology to be used to allocate 
annual and ozone season NOX allowances under the CAIR FIP, 
except for allowances in the compliance supplement pool. The portions 
of Wisconsin's submittal (those associated with the compliance 
supplement pool and Superior Environmental Performance) that EPA is 
proposing to disapprove are inconsistent with CAIR and/or otherwise 
inappropriate to include in a CAIR SIP and must, therefore, be 
disapproved.

DATES: Comments must be received on or before August 30, 2007.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R05-
OAR-2007-0405, by one of the following methods:
    1. http://www.regulations.gov: Follow the on-line instructions for 

submitting comments.
    2. E-mail: mooney.john@epa.gov.
    3. Fax: (312) 886-5824.
    4. Mail: John M. Mooney, Chief, Criteria Pollutant Section, Air 
Programs Branch (AR-18J), U.S. Environmental Protection Agency, 77 West 
Jackson Boulevard, Chicago, Illinois 60604.
    5. Hand Delivery: John M. Mooney, Chief, Criteria Pollutant 
Section, Air Programs Branch (AR-18J), U.S. Environmental Protection 
Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604. Such 
deliveries are only accepted during the Regional Office normal hours of 
operation, and special arrangements should be made for deliveries of 
boxed information. The Regional Office official hours of business are 
Monday through Friday, 8:30 a.m. to 4:30 p.m. excluding Federal 
holidays.
    Instructions: Direct your comments to Docket ID No. EPA-R05-OAR-
2007-0405. EPA's policy is that all comments received will be included 
in the public docket without change and may be made available online at 
http://www.regulations.gov, including any personal information provided, 

unless the comment includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Do not submit through http://www.regulations.gov or e-

mail, information that you consider to be CBI or otherwise protected. 
The http://www.regulations.gov Web site is an ``anonymous access'' system, 

which means EPA will not know your identity or contact information 
unless you provide it in the body of your comment. If you send an e-
mail comment directly to EPA without going through http://www.regulations.gov, 

your e-mail address will be automatically captured and included as part 
of the comment that is placed in the public docket and made available 
on the Internet. If you submit an electronic comment, EPA recommends 
that you include your name and other contact information in the body of 
your comment and with any disk or CD-ROM you submit. If EPA cannot read 
your comment due to technical difficulties and cannot contact you for 
clarification, EPA may not be able to consider your comment. Electronic 
files should avoid the use of special characters and any form of 
encryption and should be free of any defects or viruses. For additional 
information about EPA's public docket, visit the EPA Docket Center 
homepage at http://www.epa.gov/epahome/dockets.htm.

    Docket: All documents in the electronic docket are listed in the 
http://www.regulations.gov index. Although listed in the index, some 

information is not publicly available, i.e., CBI or other information 
the disclosure of which is restricted by statute. Certain other 
material, such as copyrighted material, is not placed on the Internet 
and will be publicly available only in hard copy form. Publicly 
available docket materials are available either electronically in 
http://www.regulations.gov or in hard copy at the Environmental Protection 

Agency, Region 5, Air and Radiation Division, 77 West Jackson 
Boulevard, Chicago, Illinois 60604. This Facility is open from 8:30 
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. We 
recommend that you telephone Douglas Aburano, Environmental Engineer, 
at (312) 353-6960, before visiting the Region 5 office.

FOR FURTHER INFORMATION CONTACT: Douglas Aburano, Environmental 
Engineer, Criteria Pollutant Section, Air Programs Branch (AR-18J), 
Environmental Protection Agency, Region 5, 77 West Jackson Boulevard, 
Chicago, Illinois 60604, (312) 353-6960, aburano.douglas@epa.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. What Action Is EPA Proposing To Take?
II. What Is the Regulatory History of CAIR and the CAIR FIPs?
III. What Are the General Requirements of CAIR and the CAIR FIPs?
IV. What Are the Types of CAIR SIP Submittals?
V. Analysis of Wisconsin's CAIR SIP Submittal
    A. Nature of Wisconsin's Submittal
    B. Summary of Wisconsin's Rules
    C. State Budgets for Allowance Allocations
    D. CAIR Cap-and-Trade Programs
    E. Applicability Provisions for Non-EGU NOX SIP Call 
Sources
    F. NOX Allowance Allocations
    G. Allocation of Allowances From Compliance Supplement Pool 
(CSP)
    H. Individual Opt-In Units
    I. Additional Provisions Found in Wisconsin's Abbreviated CAIR 
SIP Submittal
VI. Proposed Action
VII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing to Take?

CAIR SIP Partial Approval and Partial Disapproval

    EPA is proposing to partially approve and partially disapprove a 
revision to Wisconsin's SIP, submitted on June 19, 2007, which would 
modify the application of certain provisions of the CAIR FIP concerning 
SO2, NOX annual and NOX ozone season 
emissions. (As discussed below, this less comprehensive CAIR SIP is 
termed an abbreviated SIP.) Wisconsin is subject to the CAIR FIP that 
implements the CAIR requirements by requiring certain EGUs to 
participate in the EPA-administered Federal CAIR SO2, 
NOX annual, and NOX ozone season cap-and-trade 
programs. The SIP revision provides a methodology for allocating 
NOX allowances for the NOX annual and 
NOX ozone season trading programs. The CAIR FIP provides 
that this methodology, if approved as EPA is proposing, will be used to 
allocate NOX allowances to sources in Wisconsin, instead of 
the Federal allocation methodology otherwise provided in the FIP. The 
SIP revision also provides a methodology for allocating the CSP in the 
CAIR NOX annual trading program. Consistent with the 
flexibility provided in the FIP, these provisions, if approved, will be 
used to replace or supplement, as appropriate, the corresponding 
provisions in the CAIR FIP for Wisconsin. EPA is not proposing to make 
any changes to the CAIR FIP, but is proposing, to the extent EPA 
approves Wisconsin's SIP revision, to amend the appropriate appendices 
in the CAIR FIP trading rules simply to note that approval.
    EPA is proposing to disapprove a portion of Wisconsin's submittal. 
Certain separable provisions of Wisconsin's abbreviated SIP are not 
approvable. These provisions include NR 432.04 ``Compliance supplement 
pool'' and NR 432.08 ``Superior environmental performance.'' As 
discussed below, NR 432.04 includes provisions that would be 
inconsistent with CAIR. NR 432.08 would grant regulatory flexibility to 
sources that voluntarily reduce emissions beyond what is required under 
State and Federal regulations. The scope of

[[Page 41671]]

regulatory flexibility provided by NR 432.08 is ambiguous. To the 
extent this flexibility relates to state-only regulatory requirements, 
the regulatory provisions are not appropriately included in a SIP. To 
the extent this flexibility relates to Federal requirements reflected 
in state regulations, this type of flexibility is not allowed under 
CAIR, and it is inappropriate to simply assume that other Federal 
requirements allow such flexibility. Therefore, the regulatory 
flexibility provisions cannot be included in Wisconsin's CAIR 
abbreviated SIP revision and cannot be approved.

II. What Is the Regulatory History of CAIR and the CAIR FIPs?

    The CAIR was published by EPA on May 12, 2005 (70 FR 25162). In 
this rule, EPA determined that 28 states and the District of Columbia 
contribute significantly to nonattainment and interfere with 
maintenance of the NAAQS for fine particles (PM2.5) and/or 
8-hour ozone in downwind states in the eastern part of the country. As 
a result, EPA required those upwind states to revise their SIPs to 
include control measures that reduce emissions of SO2, which 
is a precursor to PM2.5 formation, and/or NOX, 
which is a precursor to both ozone and PM2.5 formation. For 
jurisdictions that contribute significantly to downwind PM2.5 
nonattainment, CAIR sets annual statewide emission reduction 
requirements (i.e., budgets) for SO2 and annual statewide 
emission reduction requirements for NOX. Similarly, for 
jurisdictions that contribute significantly to 8-hour ozone 
nonattainment, CAIR sets statewide emission reduction requirements for 
NOX for the ozone season (May 1st to September 30th). Under 
CAIR, states may implement these emission budgets by participating in 
the EPA-administered cap-and-trade programs or by adopting any other 
control measures.
    CAIR sets forth what subject states must include in SIPs to address 
the requirements of section 110(a)(2)(D) of the Clean Air Act (CAA) 
with regard to interstate transport with respect to the 8-hour ozone 
and PM2.5 NAAQS. EPA made national findings, effective May 
25, 2005, that the states had failed to submit SIPs meeting the 
requirements of section 110(a)(2)(D). The SIPs were due in July 2000, 
three years after the promulgation of the 8-hour ozone and PM2.5 
NAAQS. These findings started a two-year clock for EPA to promulgate a 
FIP to address the requirements of section 110(a)(2)(D). Under CAA 
section 110(c)(1), EPA may issue a FIP anytime after such findings are 
made and must do so within two years unless a SIP revision correcting 
the deficiency is approved by EPA before the FIP is promulgated.
    On April 28, 2006, EPA promulgated FIPs for all states covered by 
CAIR in order to ensure the emissions reductions required by CAIR are 
achieved on schedule. Each CAIR state is subject to the FIPs until the 
state fully adopts, and EPA approves, a SIP revision meeting the 
requirements of CAIR. The CAIR FIPs require certain EGUs to participate 
in the EPA-administered CAIR SO2, NOX annual, and 
NOX ozone-season model trading programs, as appropriate. The 
CAIR FIP SO2, NOX annual, and NOX 
ozone season trading programs impose essentially the same requirements 
as, and are integrated with, the respective CAIR SIP trading programs. 
The integration of the CAIR FIP and SIP trading programs means that 
these trading programs will work together to effectively create a 
single trading program for each regulated pollutant (SO2, 
NOX annual, and NOX ozone season) in all states 
covered by CAIR FIP or SIP trading program for that pollutant. The CAIR 
FIPs also allow states to submit abbreviated SIP revisions that, if 
approved by EPA, will automatically replace or supplement the 
corresponding CAIR FIP provisions (e.g., the methodology for allocating 
NOX allowances to sources in the state), while the CAIR FIP 
remains in place for all other provisions.
    On April 28, 2006, EPA published two more CAIR-related final rules 
that added the States of Delaware and New Jersey to the list of states 
subject to CAIR for PM2.5 and announced EPA's final 
decisions on reconsideration of five issues without making any 
substantive changes to the CAIR requirements.

III. What Are the General Requirements of CAIR and the CAIR FIPs?

    CAIR establishes statewide emission budgets for SO2 and 
NOX and is to be implemented in two phases. The first phase 
of NOX reductions starts in 2009 and continues through 2014, 
while the first phase of SO2 reductions starts in 2010 and 
continues through 2014. The second phase of reductions for both 
NOX and SO2 starts in 2015 and continues 
thereafter. CAIR requires states to implement the budgets by either: 
(1) Requiring EGUs to participate in the EPA-administered cap-and-trade 
programs; or, (2) adopting other control measures of the state's 
choosing and demonstrating that such control measures will result in 
compliance with the applicable state SO2 and NOX 
budgets.
    The May 12, 2005, and April 28, 2006, CAIR rules provide model 
rules that states must adopt (with certain limited changes, if 
desired), if they want to participate in the EPA-administered trading 
programs.
    With two exceptions, only states that choose to meet the 
requirements of CAIR through methods that exclusively regulate EGUs are 
allowed to participate in the EPA-administered trading programs. One 
exception is for states that adopt the opt-in provisions of the model 
rules to allow non-EGUs individually to opt into the EPA-administered 
trading programs. The other exception is for states that include all 
non-EGUs from their NOX SIP Call trading programs in their 
CAIR NOX ozone season trading programs.

IV. What Are the Types of CAIR SIP Submittals?

    States have the flexibility to choose the type of control measures 
they will use to meet the requirements of CAIR. EPA anticipates that 
most states will choose to meet the CAIR requirements by selecting an 
option that requires EGUs to participate in the EPA-administered CAIR 
cap-and-trade programs. For such states, EPA has provided two 
approaches for submitting and obtaining approval for CAIR SIP 
revisions. States may submit full SIP revisions that adopt the model 
CAIR cap-and-trade rules. If approved, these SIP revisions will fully 
replace the CAIR FIPs. Alternatively, states may submit abbreviated SIP 
revisions. These SIP revisions will not replace the CAIR FIPs; however, 
the CAIR FIPs provide that, when approved, the provisions in these 
abbreviated SIP revisions will be used instead of, or in conjunction 
with, as appropriate, the corresponding provisions of the CAIR FIPs 
(e.g., the NOX allowance allocation methodology).
    A state submitting an abbreviated SIP revision may submit limited 
SIP revisions to tailor the CAIR FIP cap-and-trade program as it 
applies in their state. Specifically, an abbreviated SIP revision may 
establish certain applicability and allowance allocation provisions 
that will be used instead of, or in conjunction with, the corresponding 
provisions in the CAIR FIP rules in that state. Specifically, the 
abbreviated SIP revisions may:
    1. Include NOX SIP Call trading sources that are not 
EGUs under CAIR in the CAIR FIP NOX ozone season trading 
program;
    2. Provide for allocation of NOX annual or 
NOX ozone season allowances by the state, rather than the

[[Page 41672]]

Administrator, using a methodology chosen by the state;
    3. Provide for allocation of NOX annual allowances from 
the CSP by the state, rather than by the Administrator, using the 
state's choice of allowed, alternative methodologies; or
    4. Allow units that are not otherwise CAIR units to opt 
individually into the CAIR FIP cap-and-trade programs under the opt-in 
provisions in the CAIR FIP rules.

With approval of an abbreviated SIP revision, the CAIR FIP remains in 
place, as tailored to sources in the state by that approved SIP 
revision.
    Abbreviated SIP revisions can be submitted in lieu of, or as part 
of, CAIR full SIP revisions. States may want to designate part of their 
full SIP as an abbreviated SIP for EPA to act on first when the timing 
of the state's submission might not provide EPA with sufficient time to 
approve the full SIP prior to the deadline for recording NOX 
allocations. This will help ensure that the elements of the trading 
programs where flexibility is allowed are implemented according to the 
state's decisions. Submission of an abbreviated SIP revision does not 
preclude future submission of a CAIR full SIP revision. In this case, 
the June 19, 2007, submittal from Wisconsin has been submitted as an 
abbreviated SIP revision.

V. Analysis of Wisconsin's CAIR SIP Submittal

A. Nature of Wisconsin's Submittal

    On June 19, 2007, Wisconsin submitted a request to process their 
draft rules for addressing CAIR requirements. The Wisconsin Department 
of Natural Resources (WDNR) held hearings on these proposed rules on 
October 10 and October 12, 2006. The 30-day public comment period for 
the proposed rules ended on October 23, 2006.

B. Summary of Wisconsin's Rules

    Chapter NR 432 of the Wisconsin Administrative Code Chapters 
Related to Air Pollution Control, entitled ``Allocation of Clean Air 
Interstate Rule NOX Allowances,'' includes provisions 
addressing utility emissions of NOX. These rules are 
designed to address the requirements of the CAIR.
    Chapter NR 432 includes eight subparts:

1. NR 432.01 Applicability; purpose
2. NR 432.02 Definitions
3. NR 432.03 CAIR NOX allowance allocation
4. NR 432.04 Compliance supplement pool
5. NR 432.05 CAIR NOX ozone season allowance allocation
6. NR 432.06 Timing requirements for allocations of CAIR NOX 
allowances and CAIR NOX ozone season allowances
7. NR 432.07 CAIR renewable units
8. NR 432.08 Superior environmental performance

    Subchapter NR 432.01 entitled, ``Applicability; purpose'' 
consolidates the applicability and purpose section for both the annual 
and ozone season trading programs. While the FIP already contains an 
applicability section, the state is required to adopt this section to 
satisfy its own rulemaking requirements. Wisconsin is adopting the 
applicability section to apply only to the allocation methodology in 
their rule but this does not affect the applicability of the CAIR FIP.
    Subchapter NR 432.02 entitled, ``Definitions'' adopts many of the 
CAIR FIP definitions but is rewritten in a format to conform to the 
state's regulatory writing style requirements. While the FIP already 
contains a definitions section, the state is required to adopt this 
section to satisfy its own rulemaking requirements. Wisconsin is 
adopting the definition section to apply only to the allocation 
methodology in their rule but this does not affect the applicability of 
the CAIR FIP. Additionally, WDNR has added definitions not found in the 
CAIR FIP. These definitions are included to address the fact that 
Wisconsin's rule allocates allowances to renewable energy sources, 
which the FIP does not do, and to address the fact that Wisconsin 
allocates allowances to emitting sources based on energy output rather 
than heat input. The CAIR FIP uses a heat input based allocation 
methodology.
    Subchapter NR 432.03 entitled, ``CAIR NOX allowance 
allocation'' contains the state's annual NOX allowance 
allocation methodology. The state rule uses gross electrical output as 
the basis for calculating the number of allowances existing sources 
should be allocated. Also included in the allocation methodology are 
renewable energy units.
    Subchapter NR 432.04 entitled, ``Compliance supplement pool'' 
allocates a limited number of allowances to sources that make early 
reductions and to sources that can make a demonstration that electric 
reliability will be compromised.
    Subchapter NR 432.05 entitled, ``CAIR NOX ozone season 
allowance allocation'' contains the state's ozone season NOX 
allowance allocation methodology. The state rule uses gross electrical 
output as the basis for calculating the number of allowances existing 
sources that should be allocated. Also included in the allocation 
methodology are renewable energy units.
    Subchapter NR 432.06 entitled, ``Timing requirements for 
allocations of CAIR NOX allowances and CAIR NOX 
ozone season allowances'' consolidates the timing requirements for 
issuance of NOX allowances for both the annual and ozone 
season programs.
    Subchapter NR 432.07 entitled, ``CAIR renewable units'' was added 
by Wisconsin to address renewable energy units. Under the CAIR FIP, EPA 
did not allocate allowances for renewable energy units. Wisconsin has 
chosen to allocate both NOX annual and NOX ozone 
season allowances to renewable units. NR 432.07 requires renewable 
units to comply with the same trading requirements that the regulated 
EGUs comply with, such as designating an account representative who 
represents the unit in any trading activity, and establishing accounts 
for the NOX trading programs and the process for requesting 
NOX allowances.
    Subchapter NR 432.08 entitled, ``Superior environmental 
performance'' offers regulatory flexibility to sources that enter into 
voluntary agreements to reduce emissions of NOX, 
SO2, mercury, carbon dioxide, or heavy metals beyond levels 
required by Federal and state laws.

C. State Budgets for Allowance Allocations

    The CAIR NOX annual and ozone season budgets were 
developed from historical heat input data for EGUs. Using these data, 
EPA calculated annual and ozone season regional heat input values, 
which were multiplied by 0.15 lb/mmBtu for phase 1, and 0.125 lb/mmBtu 
for phase 2, to obtain regional NOX budgets for 2009-2014 
and for 2015 and thereafter, respectively. EPA derived the state 
NOX annual and NOX ozone season budgets from the 
regional budgets using state heat input data adjusted by fuel factors.
    The CAIR state SO2 budgets were derived by discounting 
the tonnage of emissions authorized by annual allowance allocations 
under the Acid Rain Program under Title IV of the CAA. Under CAIR, each 
allowance allocated under the Acid Rain Program for the years in phase 
1 of CAIR (2010 through 2014) authorizes 0.5 ton of SO2 
emissions in the CAIR trading program, and each Acid Rain Program 
allowance allocated for the years in phase 2 of CAIR (2015 and 
thereafter) authorizes 0.35 ton of SO2 emissions in the CAIR 
trading program.

[[Page 41673]]

    The CAIR FIP established the budgets for Wisconsin as 40,759 tons 
for NOX annual emissions for 2009-2014, 33,966 tons for 
NOX annual emissions for 2015 and beyond, 17,987 tons for 
NOX ozone season emissions for 2010-2014, 14,989 tons for 
NOX ozone season emissions for 2015 and beyond, 87,264 tons 
for SO2 emissions for 2010-2014, and 61,085 tons for 
SO2 emissions for 2015 and beyond. Wisconsin's SIP revision, 
proposed for approval in today's action, does not affect these budgets, 
which are total amounts of allowances available for allocation for each 
year under the EPA-administered cap-and-trade programs under the CAIR 
FIP. In short, the abbreviated SIP revision only affects allocations of 
allowances under the established budgets.

D. CAIR Cap-and-Trade Programs

    The CAIR NOX annual and NOX ozone season FIPs 
both largely mirror the structure of the NOX SIP Call model 
trading rule in 40 CFR part 96, subparts A through I. While the 
provisions of the NOX annual and NOX ozone season 
FIPs are similar, there are some differences. For example, the 
NOX annual FIP (but not the NOX ozone season FIP) 
provides for a CSP, which is discussed below and under which allowances 
may be awarded for early reductions of NOX annual emissions. 
As a further example, the NOX ozone season FIP reflects the 
fact that the CAIR NOX ozone season trading program replaces 
the NOX SIP Call trading program after the 2008 ozone season 
and is coordinated with the NOX SIP Call program. The 
NOX ozone season FIP provides incentives for early emissions 
reductions by allowing banked, pre-2009 NOX SIP Call 
allowances to be used for compliance in the CAIR NOX ozone-
season trading program. In addition, states have the option of 
continuing to meet their NOX SIP Call requirement by 
participating in the CAIR NOX ozone season trading program 
and including all their NOX SIP Call trading sources in that 
program.
    The provisions of the CAIR SO2 FIP are also similar to 
the provisions of the NOX annual and ozone season FIPs. 
However, the SO2 FIP is coordinated with the ongoing Acid 
Rain SO2 cap-and-trade program under CAA Title IV. The 
SO2 FIP uses the Title IV allowances for compliance, with 
each allowance allocated for 2010-2014 authorizing only 0.50 ton of 
emissions and each allowance allocated for 2015 and thereafter 
authorizing only 0.35 ton of emissions. Banked Title IV allowances 
allocated for years before 2010 can be used at any time in the CAIR 
SO2 cap-and-trade program, with each such allowance 
authorizing 1 ton of emissions. Title IV allowances are to be freely 
transferable among sources covered by the Acid Rain Program and sources 
covered by the CAIR SO2 cap-and-trade program.
    EPA used the CAIR model trading rules as the basis for the trading 
programs in the CAIR FIPs. The CAIR FIP trading rules are virtually 
identical to the CAIR model trading rules, with changes made to account 
for federal rather than state implementation. The CAIR model 
SO2, NOX annual, and NOX ozone season 
trading rules and the respective CAIR FIP trading rules are designed to 
work together as integrated SO2, NOX annual, and 
NOX ozone season trading programs.
    Wisconsin is subject to the CAIR FIP for ozone and 
PM2.5, and the CAIR FIP trading programs for SO2, 
NOX annual, and NOX ozone season apply to sources 
in Wisconsin. Consistent with the flexibility it gives to states, the 
CAIR FIP provides that states may submit abbreviated SIP revisions that 
will replace or supplement, as appropriate, certain provisions of the 
CAIR FIP trading programs. The June 19, 2007 submission of Wisconsin is 
such an abbreviated SIP revision.

E. Applicability Provisions for Non-EGU NOX SIP Call Sources

    In general, the CAIR FIP trading programs apply to any stationary, 
fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion 
turbine serving at any time, since the latter of November 15, 1990, or 
the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe producing electricity for sale.
    States have the option of bringing in, for the CAIR NOX 
ozone season program only, those units in the state's NOX 
SIP Call trading program that are not EGUs as defined under CAIR. EPA 
advises states exercising this option to use provisions for 
applicability that are substantively identical to the provisions in 40 
CFR 96.304, and add the applicability provisions in the state's 
NOX SIP Call trading rule for non-EGUs to the applicability 
provisions in 40 CFR 96.304, in order to include in the CAIR 
NOX ozone season trading program all units required to be in 
the state's NOX SIP Call trading program that are not 
already included under 40 CFR 96.304. Under this option, the CAIR 
NOX ozone season program must cover all large industrial 
boilers and combustion turbines, as well as any small EGUs (i.e. units 
serving a generator with a nameplate capacity of 25 MWe or less), that 
the state currently requires to be in the NOX SIP Call 
trading program.
    Because Wisconsin was not included in the NOX SIP Call 
trading program, Wisconsin did not have an option of expanding the 
applicability provisions of the CAIR NOX ozone season 
trading program.

F. NOX Allowance Allocations

    Under the NOX allowance allocation methodology in the 
CAIR model trading rules and in the CAIR FIP, NOX annual and 
NOX ozone season allowances are allocated to units that have 
operated for five years, based on heat input data from a three-year 
period that are adjusted for fuel type by using fuel factors of 1.0 for 
coal, 0.6 for oil, and 0.4 for other fuels. The CAIR model trading 
rules and the CAIR FIP also provide a new unit set-aside from which 
units without five years of operation are allocated allowances based on 
the units' prior year emissions.
    The CAIR FIP provides states the flexibility to establish a 
different NOX allowance allocation methodology that will be 
used to allocate allowances to sources in the states if certain 
requirements are met concerning the timing of submission of units' 
allocations to the Administrator for recordation and the total amount 
of allowances allocated for each control period. In adopting 
alternative NOX allowance allocation methodologies, states 
have flexibility with regard to:
    1. The cost to recipients of the allowances, which may be 
distributed for free or auctioned;
    2. The frequency of allocations;
    3. The basis for allocating allowances, which may be distributed, 
for example, based on historical heat input or electric and thermal 
output; and
    4. The use of allowance set-asides and, if used, their size.
    Consistent with the flexibility given to states in the CAIR FIP, 
Wisconsin has chosen to replace the provisions of the CAIR 
NOX annual FIP concerning the allocation of NOX 
annual allowances with its own methodology. NR 432.03 contains the 
provisions for the NOX annual allowance distribution 
methodology Wisconsin has adopted. Wisconsin has chosen to distribute 
NOX annual allowances based upon gross electrical output. 
Where the CAIR FIP allocates allowances to NOX emitting 
sources only and does so on a fuel-weighted basis (as mentioned above), 
Wisconsin's rule eliminates that fuel weighting and allocates 
allowances to renewable energy units as well. For units that have 
operated for five or more consecutive years, the three highest annual 
amounts of the unit's gross electrical output will be the basis for 
determining that unit's allocations.

[[Page 41674]]

Wisconsin has created a new unit set-aside for sources that have fewer 
than five years of operating data. The new unit set-aside is equal to 
seven percent of the total trading budget. The number of NOX 
annual allocations a new unit can request from the new unit set-aside 
is limited by the number of the unit's total tons of NOX 
emissions during the calendar year immediately before the calendar year 
of the request. Updating of unit baselines for allocation purposes 
occurs every five years beginning in 2011. The initial allocation of 
allowances for the years 2009-2014 is set forth in NR 432.03.
    Consistent with the flexibility given to states in the CAIR FIP, 
Wisconsin has chosen to replace the provisions of the CAIR 
NOX ozone season FIP concerning allowance allocations with 
their own methodology. NR 432.05 contains the provisions for the 
NOX ozone season allowance distribution methodology 
Wisconsin has adopted. Wisconsin has chosen to distribute 
NOX ozone season allowances based upon gross electrical 
output where the CAIR FIP allocates allowances to NOX 
emitting sources only and does so on a fuel-weighted basis (as 
mentioned above); Wisconsin's rule eliminates that fuel weighting and 
allocates allowances to renewable energy units as well. For units that 
have operated for five or more consecutive years, the three highest 
ozone season amounts of the unit's gross electrical output will be the 
basis for determining that unit's allocations. Wisconsin has created a 
new unit set-aside for sources that have fewer than five years of 
operating data. The new unit set-aside is equal to seven percent of the 
total trading budget. The number of NOX ozone season 
allocations a new unit can request from the new unit set-aside is 
limited by the number of the unit's total tons of NOX 
emissions during the ozone season immediately before the calendar year 
of the request. Updating of unit baselines for allocation purposes 
occurs every five years beginning in 2011. The initial allocation of 
allowances for the years 2009-2014 is set forth in NR 432.05.
    Since Wisconsin has chosen to allocate both NOX annual 
and NOX ozone season allowances to renewable energy units, 
the state has adopted provisions specifically for these sources to 
comply with. These provisions are found in NR 432.07 which requires 
renewable units to comply with the same trading requirements that the 
regulated EGUs comply with, such as designating an account 
representative who represents the unit in any trading activity, and 
establishing accounts for the NOX trading programs and the 
process for requesting NOX allowances.

G. Allocation of NOX Allowances From the Compliance 
Supplement Pool

    The CSP provides an incentive for early reductions in 
NOX annual emissions. The CSP consists of 200,000 CAIR 
NOX annual allowances of vintage 2009 for the entire CAIR 
region, and a state's share of the CSP is based upon the state's share 
of the projected emission reductions under CAIR. States may distribute 
CSP allowances, one allowance for each ton of early reduction, to 
sources that make NOX reductions during 2007 or 2008 beyond 
what is required by any applicable state or Federal emission 
limitation. States also may distribute CSP allowances based upon a 
demonstration of need for an extension of the 2009 deadline for 
implementing emission controls.
    The CAIR NOX annual FIP establishes specific 
methodologies for allocations of CSP allowances. States may choose an 
allowed, alternative CSP allocation methodology to be used to allocate 
CSP allowances to sources in those states. See 40 CFR 51.123(p)(2) 
(requiring that State CSP provisions be consistent with the model rule 
at 40 CFR 96.143, the FIP at 40 CFR 97.143, or CAIR at 40 CFR 
51.123(e)(4)).
    Consistent with the flexibility given to states in the FIP, 
Wisconsin has chosen to modify the provisions of the CAIR 
NOX annual FIP concerning the allocation of allowances from 
the CSP. NR 432.04 contains the provisions Wisconsin has adopted for 
distribution of the CSP. Wisconsin has chosen to distribute CSP 
allowances based on early reduction credits or based on the need to 
avoid undue risk to electric reliability. The first methodology based 
on early reduction credits essentially mirrors the FIP's early 
reduction credit methodology.
    The description in Wisconsin's rule of the second methodology based 
on need is somewhat unclear. EPA interprets the provision to require a 
demonstration that a unit cannot avoid undue risk to electric 
reliability if it keeps its emissions in 2009 from exceeding its 2009 
allowance allocation. Even if the unit could obtain additional 
allowances to cover emissions above its allocation, and thereby comply 
with the requirement to hold allowances covering emissions, the unit 
could be given CSP allowances. In contrast, EPA's CSP provisions in the 
model rule, the FIP, and CAIR require a demonstration that, without 
being given CSP allowances, a unit cannot avoid undue risk while 
keeping its 2009 emissions from exceeding all the allowances it holds, 
both its 2009 allowance allocations and other allowances it can obtain 
for compliance. Thus, Wisconsin's provision is inconsistent with EPA's 
CSP provisions. Moreover, since Wisconsin's entire CSP is available for 
units meeting either the early reduction credit or the undue risk 
criteria, the early reduction credit and undue risk provisions cannot 
be administered separately, and the Wisconsin CSP must be administered 
by a single agency. Consequently, EPA proposes to disapprove all of 
Wisconsin's CSP provisions. This portion of Wisconsin's SIP submittal 
is separable from the rest of the submittal and can be disapproved 
without compromising the integrity of the portion where we are 
proposing approval.
    In the absence of approved CSP provisions in an abbreviated CAIR 
SIP, the FIP provisions for the allocation of CSP allowances would 
continue to apply. Therefore, with the disapproval of Wisconsin's CSP 
provisions providing for distribution of the CSP the FIP CSP provisions 
would continue to apply in Wisconsin.

H. Individual Opt-In Units

    The opt-in provisions allow for certain non-EGUs (i.e., boilers, 
combustion turbines, and other stationary fossil-fuel-fired devices) 
that do not meet the applicability criteria for a CAIR trading program 
to participate voluntarily in (i.e., opt into) the CAIR trading 
program. A non-EGU may opt into one or more of the CAIR trading 
programs. In order to qualify to opt into a CAIR trading program, a 
unit must vent all emissions through a stack and be able to meet 
monitoring, recordkeeping, and recording requirements of 40 CFR part 
75. The owners and operators seeking to opt a unit into a CAIR trading 
program must apply for a CAIR opt-in permit. If the unit is issued a 
CAIR opt-in permit, the unit becomes a CAIR unit, is allocated 
allowances, and must meet the same allowance-holding and emissions 
monitoring and reporting requirements as other units subject to the 
CAIR trading program. The opt-in provisions provide for two 
methodologies for allocating allowances for opt-in units, one 
methodology that applies to opt-in units in general and a second 
methodology that allocates allowances only to opt-in units that the 
owners and operators intend to repower before January 1, 2015.
    States have several options concerning the opt-in provisions. The 
rules for each of the CAIR FIP trading programs include opt-in 
provisions that

[[Page 41675]]

are essentially the same as those in the respective CAIR SIP model 
rules, except that the CAIR FIP opt-in provisions become effective in a 
state only if the state's abbreviated SIP revision adopts the opt-in 
provisions. The state may adopt the opt-in provisions entirely or may 
adopt them but exclude one of the allowance allocation methodologies. 
The state also has the option of not adopting any opt-in provisions in 
the abbreviated SIP revision and thereby providing for the CAIR FIP 
trading program to be implemented in the state without the ability for 
units to opt into the program.
    Consistent with the flexibility given to states in the FIP, 
Wisconsin has chosen not to allow non-EGUs meeting certain requirements 
to participate in the CAIR NOX annual trading program.
    Consistent with the flexibility given to states in the FIP, 
Wisconsin has chosen not to permit non-EGUs meeting certain 
requirements to participate in the CAIR NOX ozone season 
trading program.
    Consistent with the flexibility given to states in the FIPs, 
Wisconsin has chosen not to allow certain non-EGUs to opt into the CAIR 
SO2 trading program.

I. Additional Provisions Found in Wisconsin's Abbreviated CAIR SIP 
Submittal

    In addition to the already mentioned portions of Wisconsin's rules 
that have been submitted as part of the abbreviated CAIR SIP, Wisconsin 
has two other provisions.
    NR 432.06 describes the timing requirements for allocating both 
NOX annual allowances and NOX ozone season 
allowances. These requirements are consistent with the timing 
requirements for allocating allowances under an abbreviated SIP 
scenario found in 40 CFR 51.123 and are, therefore, being proposed for 
approval.
    NR 432.08 would allow sources to make voluntary reductions beyond 
state and Federal requirements in exchange for regulatory flexibility. 
For the reasons discussed above, we are proposing to disapprove this 
portion of Wisconsin's CAIR abbreviated SIP. This portion is separable 
from the rest of Wisconsin's SIP submittal and can be disapproved 
without compromising the integrity of the portion where we are 
proposing approval.

VI. Proposed Action

    EPA is proposing to partially approve and partially disapprove 
Wisconsin's abbreviated CAIR SIP revision submitted on June 19, 2007. 
Wisconsin is covered by the CAIR FIP, which requires participation in 
the EPA-administered CAIR FIP cap-and-trade programs for 
SO2, NOX annual, and NOX ozone season 
emissions. Under this abbreviated SIP revision and consistent with the 
flexibility given to states in the FIP, Wisconsin adopts provisions for 
allocating allowances under the CAIR FIP NOX annual and 
NOX ozone season trading programs. As provided for in the 
CAIR FIP, these provisions in the abbreviated SIP revision will replace 
or supplement the corresponding provisions of the CAIR FIP in 
Wisconsin. These provisions in Wisconsin's abbreviated SIP revision 
meet the applicable requirements in 40 CFR 51.123(p) and (ee), with 
regard to NOX annual and NOX ozone season 
emissions. EPA is not proposing to make any changes to the CAIR FIP, 
but is proposing, to the extent EPA approves Wisconsin's SIP revision, 
to amend the appropriate appendices in the CAIR FIP trading rules 
simply to note that approval.
    Wisconsin's submittal also contains provisions that are 
inconsistent with requirements concerning the CSP and that grant 
unacceptable regulatory flexibility to some sources. EPA is proposing 
to disapprove these portions of Wisconsin's rule. We are able to 
propose disapproval of these specific portions of Wisconsin's submittal 
because they are separable from the rest of Wisconsin's submittal and 
disapproving only these parts has no effect on the rest of the 
submittal that we are proposing to approve.

VII. Statutory and Executive Order Reviews

    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. For this 
reason, this action is also not subject to Executive Order 13211, 
``Actions Concerning Regulations That Significantly Affect Energy 
Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001). This action 
merely proposes to approve state law as meeting Federal requirements 
and would impose no additional requirements beyond those imposed by 
state law. Accordingly, the Administrator certifies that this proposed 
rule would 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 action proposes to approve pre-existing 
requirements under state law and would 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 proposal also does not have tribal implications because it 
would 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). This proposed action also 
does not have Federalism implications because it would 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). This 
action merely proposes to approve a State rule implementing a Federal 
standard and to amend the appropriate appendices in the CAIR FIP 
trading rules to note that approval. It 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 ``Protection of Children from Environmental Health Risks 
and Safety Risks'' (62 FR 19885, April 23, 1997), because it would 
approve a State rule implementing a Federal Standard.
    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the CAA. 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. This proposed rule would 
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

40 CFR Part 52

    Environmental protection, Air pollution control, Electric 
utilities, Intergovernmental relations, Nitrogen oxides, Ozone, 
Particulate matter, Reporting and recordkeeping requirements, Sulfur 
dioxide.

[[Page 41676]]

40 CFR Part 97

    Environmental protection, Air pollution control, Electric 
utilities, Intergovernmental relations, Nitrogen oxides, Ozone, 
Particulate matter, Reporting and recordkeeping requirements, Sulfur 
dioxide.

    Dated: July 18, 2007.
Bharat Mathur,
Acting Regional Administrator, Region 5.
 [FR Doc. E7-14465 Filed 7-30-07; 8:45 am]

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