Document ID: EPA-R03-OAR-2009-0033-0001
Agency: epa
Document Type: Proposed Rule
Title: Approval and Promulgation of Air Quality Implementation Plans: West Virginia; Clean Air Interstate Rule
Posted Date: 2009-06-11T04:00Z

[Federal Register Volume 74, Number 111 (Thursday, June 11, 2009)]
[Proposed Rules]
[Pages 27731-27737]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-13725]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2009-0033; FRL-8916-8]

Approval and Promulgation of Air Quality Implementation Plans; 
West Virginia; Clean Air Interstate Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a revision to the West Virginia 
State Implementation Plan (SIP). This revision addresses the 
requirements of

[[Page 27732]]

EPA's Clean Air Interstate Rule (CAIR), and recodifies and revises 
provisions pertaining to internal combustion engines and cement kilns 
that are subject to the nitrogen oxides (NOX) SIP Call. 
Although the D.C. Circuit found CAIR to be flawed, the rule was 
remanded without vacatur and thus remains in place. Thus, EPA is 
continuing to take action on CAIR SIPs as appropriate. CAIR, as 
promulgated, requires States to reduce emissions of sulfur dioxide 
(SO2) and nitrogen oxides (NOX) that 
significantly contribute to, or interfere with maintenance of, the 
national ambient air quality standards (NAAQS) for fine particulates 
and/or ozone in any downwind state. CAIR establishes budgets for 
SO2 and NOX for States that contribute 
significantly to nonattainment in downwind States and requires the 
significantly contributing States to submit SIP revisions that 
implement these budgets. States have the flexibility to choose which 
control measures to adopt to achieve the budgets, including 
participation in EPA-administered cap-and-trade programs addressing 
SO2, NOX annual, and NOX ozone season 
emissions. In the SIP revision that EPA is proposing to approve, West 
Virginia will meet CAIR requirements by participating in these cap-and-
trade programs. EPA is proposing to approve the SIP revision, as 
interpreted and clarified herein, as fully implementing the CAIR 
requirements for West Virginia.

DATES: Written comments must be received on or before July 13, 2009.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2009-0033 by one of the following methods:
    A. http://www.regulations.gov. Follow the on-line instructions for 
submitting comments.
    B. E-mail: fernandez.cristina@epa.gov.
    C. Mail: EPA-R03-OAR-2009-0033, Cristina Fernandez, Chief, Air 
Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection 
Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address. 
Such deliveries are only accepted during the Docket's normal hours of 
operation, and special arrangements should be made for deliveries of 
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-
2009-0033. 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 information that you 
consider to be CBI or otherwise protected through http://www.regulations.gov or e-mail. 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, any form of encryption, and be free of 
any defects or viruses.
    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 
whose disclosure 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 during normal business hours at the 
Air Protection Division, U.S. Environmental Protection Agency, Region 
III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the 
State submittal are available at the West Virginia Department of 
Environmental Protection, Division of Air Quality, 601 57th Street, 
SE., Charleston, West Virginia 25304.

FOR FURTHER INFORMATION CONTACT: Marilyn Powers, (215) 814-2308, or by 
e-mail at powers.marilyn@epa.gov.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. What Action Is EPA Proposing?
II. What Is the Regulatory History of CAIR and the CAIR Federal 
Implementation Plans (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 West Virginia's CAIR SIP Submittal
    A. State Budgets for Allowance Allocations
    B. CAIR Cap-and-Trade Programs
    C. Applicability Provisions
    D. NOX Allowance Allocations
    E. Allocation of NOX Allowances from Compliance 
Supplement Pool
    F. Individual Opt-in Units
    G. Additional Interpretations
VI. Proposed Action
VI. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing?

    EPA is proposing to approve the SIP revision submitted by West 
Virginia on April 22, 2008, as interpreted and clarified herein, as 
meeting the applicable CAIR requirements by requiring certain electric 
generating units (EGUs) to participate in the EPA-administered CAIR 
cap-and-trade programs addressing SO2, NOX 
annual, and NOX ozone season emissions. EPA is also 
proposing to approve recodification and revision of provisions that 
address NOX ozone season emission reduction requirements for 
internal combustion engines and cement kilns, updated only to revise 
NOX SIP Call references to CAIR references. These provisions 
for internal combustion engines and cement kilns were previously 
approved as part of West Virginia regulation 45CSR1. 45CSR1 set forth 
the requirements for both: non-EGUs that were part of the 
NOX Budget Trading Program, and non-EGUs that were not part 
of the trading program but instead had specific emission requirements. 
EPA will no longer administer the NOX Budget Trading program 
after 2008, therefore West Virginia chose to sunset its NOX 
Budget Trading Program rules by repealing 45CSR1 and 45CSR26 (which 
applied to EGUs) in their entirety. The units that participated in the 
NOX Budget Trading Program in 45CSR1 and 45CSR26 will now be 
subject to the requirements of the CAIR trading program, as proposed in 
this action. The provisions for internal combustion engines and cement 
kilns have been recodified into separate sections of 45CSR40 (sections 
45-40-90 and 45-40-100, respectively).

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

    EPA published CAIR 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

[[Page 27733]]

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 State-wide emission 
reduction requirements (i.e., budgets) for SO2 and annual 
State-wide emission reduction requirements for NOX. 
Similarly, for jurisdictions that contribute significantly to 8-hour 
ozone nonattainment, CAIR sets State-wide emission reduction 
requirements or budgets for NOX for the ozone season (May 
1st to September 30th). Under CAIR, States may implement these 
reduction requirements by participating in the EPA-administered cap-
and-trade programs or by adopting any other control measures.
    CAIR explains to subject States what must be included 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 
on 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, 3 
years after the promulgation of the 8-hour ozone and PM2.5 
NAAQS. These findings started a 2-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. The CAIR FIPs require EGUs to participate in the 
EPA-administered CAIR SO2, NOX annual, and 
NOX ozone season 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 FIP and SIP trading programs means that these 
trading programs will work together to create effectively a single 
trading program for each regulated pollutant (SO2, 
NOX annual, and NOX ozone season) in all States 
covered by the CAIR FIP or SIP trading program for that pollutant. 
Further, as provided in a rule published by EPA on November 7, 2007, a 
State's CAIR FIPs are automatically withdrawn when EPA approves a SIP 
revision, in its entirely and without any conditions, as fully meeting 
the requirements of CAIR. Where only portions of the SIP revision are 
approved, the corresponding portions of the FIPs are automatically 
withdrawn and the remaining portions of the FIP stay in place. Finally, 
the CAIR FIPs also allow States to submit abbreviated SIP revisions 
that, if approved by EPA, will automatically replace or supplement 
certain 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 additional 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.
    On October 19, 2007, EPA amended CAIR and the CAIR FIPs to clarify 
the definition of ``cogeneration unit'' and thus the applicability of 
the CAIR trading program to cogeneration units. There are no sources in 
West Virginia that are affected by the clarification of this 
definition, however, West Virginia must still revise their rules to 
address this clarification and submit the revised rule as a SIP 
revision.
    EPA was sued by a number of parties on various aspects of CAIR, and 
on July 11, 2008, the U.S. Court of Appeals for the District of 
Columbia Circuit issued its decision to vacate and remand both CAIR and 
the associated CAIR FIPs in their entirety. North Carolina v. EPA, 531 
F.3d 836 (DC Cir. Jul. 11, 2008). However, in response to EPA's 
petition for rehearing, the Court issued an order remanding CAIR to EPA 
without vacating either CAIR or the CAIR FIPs. North Carolina v. EPA, 
550 F.3d 1176 (DC Cir. Dec. 23, 2008). The Court thereby left CAIR in 
place in order to ``temporarily preserve the environmental values 
covered by CAIR'' until EPA replaces it with a rule consistent with the 
Court's opinion. Id. at 1178. The Court directed EPA to ``remedy CAIR's 
flaws'' consistent with its July 11, 2008 opinion, but declined to 
impose a schedule on EPA for completing that action. Id. Therefore, 
CAIR and the CAIR FIP are currently in effect in West Virginia.

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

    CAIR establishes State-wide 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

[[Page 27734]]

NOX allowance allocation methodology).
    A State submitting a full SIP revision may either adopt regulations 
that are substantively identical to the model rules or incorporate by 
reference the model rules. CAIR provides that States may only make 
limited changes to the model rules if the States want to participate in 
the EPA-administered trading programs. A full SIP revision may change 
the model rules only by altering their applicability and allowance 
allocation provisions to:
    1. Include all NOX SIP Call trading sources that are not 
EGUs under CAIR in the CAIR NOX ozone season trading 
program;
    2. Provide for State allocation of NOX annual or ozone 
season allowances using a methodology chosen by the State;
    3. Provide for State allocation of NOX annual allowances 
from the compliance supplement pool (CSP) 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 SO2, NOX annual, or 
NOX ozone season trading programs under the opt-in 
provisions in the model rules. An approved CAIR full SIP revision 
addressing EGUs' SO2, NOX annual, or 
NOX ozone season emissions will replace the CAIR FIP for 
that State for the respective EGU emissions. As discussed above, EPA 
approval in full, without any conditions, of a CAIR full SIP revision 
causes the CAIR FIPs to be automatically withdrawn.

V. Analysis of West Virginia's CAIR SIP Submittal

A. 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 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 in 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.
    In today's action, EPA is proposing to approve West Virginia's SIP 
revision that adopts the budgets established for the State in CAIR. 
These budgets are: 74,220 tons for NOX annual emissions from 
2009 through 2014 and 61,850 tons from 2015 and thereafter; 26,859 tons 
for NOX ozone season emissions from 2009 through 2014 and 
26,525 tons from 2015 and thereafter; and 215,881 tons for 
SO2 annual emissions from 2009 through 2014 and 151,117 tons 
from 2015 and thereafter. Additionally, the CAIR NOX ozone 
season budget would be increased annually by 2,184 tons to account for 
NOX SIP Call trading sources that are not EGUs under CAIR, 
but are included in the CAIR NOX ozone season trading 
program. West Virginia's SIP revision sets these budgets as the total 
amounts of allowances available for allocation for each year under the 
EPA-administered cap-and-trade programs.
    EPA notes that, in North Carolina, id. at 916-21, the Court 
determined, among other things, that the State SO2 and 
NOX budgets established in CAIR were arbitrary and 
capricious.\1\ However, as discussed above, the Court also decided to 
remand CAIR but to leave the rule in place in order to ``temporarily 
preserve the environmental values covered by CAIR'' pending EPA's 
development and promulgation of a replacement rule that remedies CAIR's 
flaws. Id. at 1178. EPA had indicated to the Court that development and 
promulgation of a replacement rule would take about two years. Reply in 
Support of Petition for Rehearing or Rehearing en Banc at 5 (filed Nov. 
17, 2008 in North Carolina v. EPA, Case No. 05-1224, DC Cir.). The 
process at EPA of developing a proposal that will undergo notice and 
comment and result in a final replacement rule is ongoing. In the 
meantime, consistent with the Court's orders, EPA is implementing CAIR 
by approving State SIP revisions that are consistent with CAIR (such as 
the provisions setting State SO2 and NOX budgets 
for the CAIR trading programs) in order to ``temporarily preserve'' the 
environmental benefits achievable under the CAIR trading programs. 
North Carolina, 550 F.3d at 1178.
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    \1\ The Court also determined that the CAIR trading programs 
were unlawful (id. at 906-8) and that the treatment of title IV 
allowances in CAIR was unlawful (id. at 921-23). For the same 
reasons that EPA is proposing approval of the provisions of West 
Virginia's SIP revision that use the SO2 and 
NOX budgets set in CAIR, EPA is also proposing approval, 
as discussed below, of West Virginia's SIP revision to the extent 
the SIP revision adopts the CAIR trading programs, including the 
provisions addressing applicability, allowance allocations, and use 
of title IV allowances.
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B. CAIR Cap-and-Trade Programs

    The CAIR NOX annual and ozone-season model trading rules 
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 ozone-season model rules 
are similar, there are some differences. For example, the 
NOX annual model rule (but not the NOX ozone 
season model rule) 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 model rule 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 model rule 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 model rule are also 
similar to the provisions of the NOX annual and ozone season 
model rules. However, the SO2 model rule is coordinated with 
the ongoing Acid Rain SO2 cap-and-trade program under CAA 
title IV. The SO2 model rule 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 also 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

[[Page 27735]]

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.
    In the SIP revision, West Virginia chooses to implement its CAIR 
budgets by requiring EGUs to participate in EPA-administered cap-and-
trade programs for SO2, NOX annual, and 
NOX ozone season emissions. West Virginia has adopted a full 
SIP revision that adopts, with certain allowed changes discussed below, 
the CAIR model cap-and-trade rules for SO2, NOX 
annual, and NOX ozone season emissions.

C. Applicability Provisions

    In general, the CAIR model trading rules apply to any stationary, 
fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion 
turbine serving at any time, since the later 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. 
Under the CAIR model trading rules, exemptions are provided for a unit 
otherwise covered by these general applicability criteria that is a 
cogeneration unit meeting a specified limit on its electricity sales or 
that is a solid waste incineration unit meeting a specified limit on 
combustion of fossil fuel. In the applicability section of each of West 
Virginia's CAIR trading rules, these exemptions are set forth in 
subsection 4.2, which begins with the phrase ``[w]ith limited 
exception'' and then goes on to state that units meeting the exemption 
criteria that are set forth are not CAIR units. EPA interprets this 
phrase to mean, in each of West Virginia's CAIR trading rules, that the 
provisions in subsection 4.2 that set forth the exemptions for 
cogeneration units and solid waste incineration units are the ``limited 
exceptions'' to the general applicability criteria in subsection 4.1 
and that these provisions are not altered by the reference to ``limited 
exception'' and are intended to be the same as the exemptions set forth 
in the CAIR model trading rules. In other words, there are no 
exceptions to the general applicability criteria other than those 
listed in subsection 4.2, and all units meeting the exemption criteria 
in subsection 4.2 are not CAIR units. In a letter submitted to EPA on 
April 30, 2008, the West Virginia Department of Environmental 
Protection adopted this interpretation.
    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 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.
    West Virginia has chosen to expand the applicability provisions of 
the CAIR NOX ozone season trading program to include all 
non-EGUs in the State's NOX SIP Call trading program, 
including the only unit (PPG Natrium Plant Unit 002) that opted into 
the State's NOX SIP Call trading program. Under 40 CFR 
51.123(aa)(2)(i), a State may include ``all non-EGUs subject to'' the 
State's NOX SIP Call trading program. EPA believes that, 
although the unit voluntarily entered the State's NOX SIP 
Call trading program, West Virginia properly included this unit in the 
CAIR NOX ozone season trading program because the unit 
became subject to that trading program in 2003, installed emission 
controls for compliance with program requirements, and has continued to 
participate in the program through 2008. Consistent with the fact 
(discussed below) that West Virginia's SIP revision does not allow for 
opt-in units in the CAIR NOX ozone season trading program, 
the SIP revision treats this unit like any other CAIR unit and does not 
give this unit the option of leaving the CAIR NOX ozone 
season trading program.
    Further, in connection with the inclusion, as CAIR units in the 
CAIR NOX ozone season trading program, of non-EGUs in the 
State's NOX SIP Call trading program, West Virginia's SIP 
revision includes (in subsection 2.37.b) a special definition of 
``commence operation'' for such non-EGUs that become CAIR units after 
they have commenced operation. Section 45-2.37.b incorrectly references 
``subsections 4.2 or 4.3,'' which were renumbered in the latest version 
of West Virginia's SIP revision as ``subsections 4.3 or 4.4.'' Because 
this appears to be a scrivener's error, EPA interprets the references 
to be to ``subsections 4.3 or 4.4.'' In a letter submitted to EPA on 
April 30, 2008, the West Virginia Department of Environmental 
Protection adopted this interpretation.

D. NOX Allowance Allocations

    Under the NOX allowance allocation methodology in the 
CAIR model trading rules and in the CAIR FIP, NOX annual and 
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.
    States may establish in their SIP submissions 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.
    West Virginia has chosen to distribute NOX annual and 
NOX ozone season allowances in a manner substantively 
identical to that in the Part 96 model rule. The State's NOX 
ozone season allocation provisions have been modified only to the 
extent necessary to add requirements associated with West Virginia's 
option to bring its non-EGUs into the CAIR NOX ozone season 
trading program.

E. Allocation of NOX Allowances From Compliance Supplement 
Pool

    The CAIR establishes a CSP to provide 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 
projected magnitude of the emission reductions required by CAIR in that 
State. States may distribute CSP allowances, one allowance for each ton 
of early reduction, to sources that make NOX reductions 
during 2007 or 2008

[[Page 27736]]

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 annual NOX model trading rule 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 the States.
    West Virginia's compliance supplement pool is comprised of 4,898 
allowances. West Virginia has chosen to modify the provisions of the 
CAIR NOX annual model trading rule concerning the allocation 
of allowances from the CSP. West Virginia has chosen to distribute CSP 
allowances to any CAIR NOX Annual unit in the State whose 
average annual NOX emission rate for 2007 or 2008 is less 
than 0.25 lb/mmBtu and whose NOX averaging plan (if the unit 
is included in an Acid Rain Program NOX averaging plan under 
40 CFR 76.11) for that year has an actual weighted average 
NOX emission rate that is equal to or less than the actual 
weighted average NOX emission rate for the year before the 
unit achieves NOX emission reductions in 2007 or 2008.

F. Individual Opt-in Units

    The opt-in provisions of the CAIR SIP model trading rules allow 
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. 
States may adopt the CAIR opt-in provisions entirely or may adopt them 
but exclude one of the methodologies for allocating allowances. States 
may also decline to adopt the opt-in provisions at all. West Virginia 
has declined to adopt the opt-in provisions.

G. Additional Interpretations

1. References to NOX Emitting Equipment in Section 45-40-9
    West Virginia's SIP revision includes provisions (in sections 45-
40-90 and 45-40-100) addressing NOX ozone season emission 
reduction requirements for internal combustion engines and cement 
kilns, none of which sources are included in the CAIR NOX 
ozone season trading program. The NOX ozone season emission 
reduction requirements in these sections--which have been moved from 
the portion of West Virginia's rules addressing the NOX SIP 
Call to the portion addressing CAIR--are identical to those previously 
approved in West Virginia's SIP for purposes of meeting requirements 
under the NOX SIP Call, except that references to the 
NOX SIP Call trading program are replaced by references to 
the CAIR NOX ozone season trading program. EPA is therefore 
proposing to approve the recodification and revision of sections 45-40-
90 and 45-40-100, as interpreted and clarified below.
    Some of the language in section 45-40-90 could be interpreted as 
being inconsistent with the above-discussed CAIR trading program 
applicability provisions in section 45-40-4 in West Virginia's SIP 
revision. Specifically, subsections 90.1, 90.4.d, 90.4.g, and 90.4.i 
refer to stationary internal combustion engines and ``other significant 
NOX emitting equipment'' located at facilities controlled by 
the same owner or operator. Section 90.1 states that both of these 
categories of equipment ``will not be * * * subject to the CAIR 
NOX Ozone Season Trading Program requirements under sections 
4 through 88.'' Subsections 90.4.g and 90.4.i include similar language 
stating the ``other significant NOX emitting equipment'' 
will not be subject to trading program requirements; however, these 
sections clarify that the ``other significant NOX emitting 
equipment'' that is not subject to the trading program requirements is 
only to equipment ``that is not a CAIR NOX Ozone Season unit 
under section 4'' (i.e., section 45-40-4). Subsections 90.1 and 90.4.d 
lack this clarifying language. Section 45-40-4 does not exempt from the 
CAIR NOX ozone season trading program ``other significant 
NOX emitting equipment'' covered by section 45-40-90. 
Therefore, if subsections 90.1 and 90.4.d. were interpreted to exempt 
``other significant NOX emitting equipment'' regardless of 
whether it is covered by the CAIR trading programs, these subsections 
would be inconsistent with section 45-40-4. In order for West Virginia 
to participate in the CAIR trading program as the State clearly 
intends, the applicability of the CAIR trading program to ``significant 
NOX emitting equipment'' must be determined by section 45-
40-4 (not section 45-40-90). EPA interprets all references to ``other 
significant NOX emitting equipment'' in section 45-40-90 to 
be limited to such equipment that is not a CAIR NOX Ozone 
Season unit under section 45-40-4. In a letter submitted to EPA on 
April 30, 2008, the West Virginia Department of Environmental 
Protection adopted this interpretation.
2. Treatment of CAIR Allowances Allocated to Opt-in Units
    Having chosen not to allow units to opt into the CAIR trading 
programs, West Virginia properly removed from its CAIR trading rules 
most of the provisions that are in the CAIR model trading rules and 
address CAIR opt-in units. However, while, as discussed above, West 
Virginia has the option of participating in the CAIR trading programs 
with or without allowing units in its jurisdiction to opt into the 
trading programs, other States also have that option, and some States 
have chosen to allow units in their respective jurisdictions to opt in. 
Consequently, any CAIR SO2 unit, including those in West 
Virginia, may obtain CAIR SO2 allowances allocated to a CAIR 
opt-in unit and use them to comply with the allowance-holding 
requirements in the CAIR SO2 trading program. Under the CAIR 
SO2 model trading rule, compliance with these requirements 
is determined in two steps: First, CAIR units that are also Acid Rain 
units must show compliance consistent with the Acid Rain Program 
allowance-holding requirement and so can use only title IV allowances; 
and second, all CAIR units must then show compliance with the CAIR 
trading program allowance-holding requirement using either title IV 
allowances or CAIR SO2 allowances allocated to CAIR opt-in 
units. Language in the compliance provisions of the CAIR SO2 
model trading rule states explicitly when CAIR SO2 
allowances allocated to CAIR opt-in units can and cannot be used. West 
Virginia's SIP inadvertently omitted this language from section 45-41-
54, apparently because the language refers to the CAIR

[[Page 27737]]

opt-in unit provisions. However, West Virginia's rule still requires 
compliance initially with the Acid Rain Program requirement set forth 
in sections 73.35 and 77.5 of the Acid Rain Program rules, which 
themselves require the use of only title IV allowances. Consequently, 
EPA interprets subsections 54.2.a.1 and 54.2.a.2 to allow only for the 
use of title IV allowances. Moreover, since West Virginia's rule 
defines ``CAIR SO2 allowance'' as including allowances 
allocated to CAIR opt-in units, EPA interprets subsections 54.2.a.3, 
54.2.b, 54.2.b.2, and 54.4.a to allow for the use of title IV 
allowances and allowances allocated to CAIR opt-in units. In a letter 
submitted to EPA on April 30, 2008, the West Virginia Department of 
Environmental Protection adopted this interpretation.

VI. Proposed Action

    EPA is proposing to approve West Virginia's full CAIR SIP revision 
submitted on April 22, 2008, as interpreted and clarified herein. EPA 
is proposing to approve the recodification and revision of provisions 
(in sections 45-40-90 and 45-40-100) addressing NOX ozone 
season emission reduction requirements for internal combustion engines 
and cement kilns, none of which are included in the CAIR trading 
programs. Under the SIP revision, West Virginia is choosing to 
participate in the EPA-administered CAIR cap-and-trade programs for 
SO2, NOX annual, and NOX ozone season 
emissions. The SIP revision, as interpreted and clarified herein, meets 
the applicable requirements of CAIR, set forth in 40 CFR 51.123(o) and 
(aa), with regard to NOX annual and NOX ozone 
season emissions, and 40 CFR 51.124(o), with regard to SO2 
emissions. EPA is soliciting public comments on the issues discussed in 
this document. These comments will be considered before taking final 
action.

VII. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a 
SIP submission that complies with the provisions of the Act and 
applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). 
Thus, in reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. 
Accordingly, this action merely proposes to approve state law as 
meeting Federal requirements and does not impose additional 
requirements beyond those imposed by state law. For that reason, this 
proposed action:
     Is not a ``significant regulatory action'' subject to 
review by the Office of Management and Budget under Executive Order 
12866 (58 FR 51735, October 4, 1993);
     Does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact 
on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.);
     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);
     Does not have Federalism implications as specified in 
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based 
on health or safety risks subject to Executive Order 13045 (62 FR 
19885, April 23, 1997);
     Is not a significant regulatory action subject to 
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of Section 12(d) of the 
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) because application of those requirements would be inconsistent 
with the Clean Air Act; and
     Does not provide EPA with the discretionary authority to 
address, as appropriate, disproportionate human health or environmental 
effects, using practicable and legally permissible methods, under 
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this proposed approval of West Virginia's SIP revision 
to meet the requirements of CAIR does not have tribal implications as 
specified by Executive Order 13175 (65 FR 67249, November 9, 2000), 
because the SIP is not approved to apply in Indian country located in 
the state, and EPA notes that it will not impose substantial direct 
costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by 
reference, Nitrogen dioxide, Ozone, Particulate matter, Reporting and 
recordkeeping requirements, Sulfur oxides.

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

    Dated: May 29, 2009.
William C. Early,
Acting Regional Administrator, Region III.
[FR Doc. E9-13725 Filed 6-10-09; 8:45 am]
BILLING CODE 6560-50-P