Document ID: EPA-R06-OAR-2005-TX-0029-0063
Agency: epa
Document Type: Rule
Title: TX035.46 September 6, 2006 (71 FR 52703) Final Rule Federal Register -- Texas; Discrete Emission Credit Banking and Trading Program. 6 pages
Posted Date: 2006-09-06T04:00Z

[Federal Register: September 6, 2006 (Volume 71, Number 172)]
[Rules and Regulations]               
[Page 52703-52708]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06se06-35]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R06-OAR-2005-TX-0029; FRL-8216-5]

 
Approval and Promulgation of State Implementation Plans; Texas; 
Discrete Emission Credit Banking and Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule; conditional approval.

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SUMMARY: EPA is finalizing our conditional approval of revisions to the 
Texas State Implementation Plan (SIP) concerning the Discrete Emission 
Credit Banking and Trading Program.

DATES: This rule is effective on October 6, 2006.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-R06-OAR-2005-TX-0029. All documents in the docket are listed on 
the http://www.regulations.gov web site. Although listed in the index, some 

information is not publicly available, e.g., 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 through 
http://www.regulations.gov or in hard copy at the Air Permitting Section (6PD-

R), Environmental Protection Agency, 1445 Ross Avenue, Suite 700, 
Dallas, Texas 75202-2733. The file will be made available by 
appointment for public inspection in the Region 6 FOIA Review Room 
between the hours of 8:30 a.m. and 4:30 p.m. weekdays except for legal 
holidays. Contact the person listed in the FOR FURTHER INFORMATION 
CONTACT paragraph below to make an appointment. If possible, please 
make the appointment at least two working days in advance of your 
visit. There will be a 15-cent per page fee for making photocopies of 
documents. On the day of the visit, please check in at the EPA Region 6 
reception area at 1445 Ross Avenue, Suite 700, Dallas, Texas.
    The State submittal related to this SIP revision, and which is part 
of the EPA docket, is also available for public inspection at the State 
Air Agency listed below during official business hours by appointment:
    Texas Commission on Environmental Quality, Office of Air Quality, 
12124 Park 35 Circle, Austin, Texas 78753.

FOR FURTHER INFORMATION CONTACT: Adina Wiley, Air Permitting Section 
(6PD-R), EPA Region 6, 1445 Ross Avenue, Dallas, Texas 75202-2733, 
telephone 214-665-2115, wiley.adina@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document wherever ``we,'' 
``us,'' or ``our'' is used, we mean EPA.

Outline

I. What Action Is EPA Taking?
II. What is a conditional approval?
III. What future actions are necessary for the DERC rule to fully 
meet EPA's expectations?
IV. What is the background for this action?
V. What are EPA's responses to comments received on the proposed 
action?
VI. What does Federal approval of a State regulation mean to me?
VII. Statutory and Executive Order Reviews

I. What action is EPA taking?

    EPA is conditionally approving, as part of the Texas SIP, the 
Discrete Emission Credit Banking and Trading program, also referred to 
as the Discrete Emission Reduction Credit (DERC) program, enacted at 
Texas Administrative Code (TAC) Title 30, Chapter 101 General Air 
Quality Rules, Subchapter H, Division 4, sections 101.370-101.374, 
101.376, 101.378, and 101.379. These revisions were provided in SIP 
revisions dated July 22, 1998 (state effective date December 23, 1997); 
December 20, 2000 (state effective date January 18, 2001); July 15, 
2002 (state effective date April 14, 2002); January 31, 2003 (state 
effective date January 17, 2003), and December 06, 2004 (state 
effective date December 2, 2004).
    As discussed in our proposed action at 70 FR 58164-58166, we 
conclude that the DERC program is consistent with section 110(l) of the 
Clean Air Act.
    The DERC program that we are conditionally approving today into the 
Texas SIP includes numerous cross-references to different State rules. 
In order to be able to conditionally approve (or fully approve) a 
revision into a SIP, we also must conditionally approve (or fully 
approve) any cross-referenced rules that are integral to the 
establishment, implementation, and enforcement of the SIP revision. Our 
detailed evaluation of all the cross-references in the State's DERC 
rule language to other State rules not part of Subchapter H, Division 
4, sections 101.370-101.374, 101.376, 101.378, and 101.379 can be found 
in the ``Review of Cross-References in the DERC Program'' discussion in 
Section IV of the Technical Support Document (available in the 
rulemaking docket EPA-R06-OAR-2005-TX-0029).
    Today, EPA finds that the cross-references in the following 
sections of the DERC program have already been approved into the Texas 
SIP: 101.370(29) at 65 FR 70792; 101.372(b)(3) at 63 FR 11835; 
101.372(d)(1)(A) at 66 FR 57244; 101.372(d)(1)(B) at 60 FR 12438, 62 FR 
27964, 65 FR 18003, 66 FR 36917, and 66 FR 54688; 101.372(f)(4) at 66 
FR 36917; 101.373(b)(1) at 67 FR 58697; and 101.376(d)(2)(A) at 66 FR 
57244. Additionally, the cross-references in sections 101.370(28) and 
101.376(c)(5) have been approved by the EPA into the Texas Federal 
Operating Permits Program on December 06, 2001, and March 31, 2005. The 
cross-reference in section 101.376(b)(3) is addressed in a

[[Page 52704]]

corresponding action on the Texas Mass Emissions Cap and Trade program 
published separately in today's Federal Register.
    We are not approving section 101.376(c)(4) into the Texas SIP 
because the cross-references to 30 TAC Chapter 106 Permit by Rule, 
sections 106.261 (3) or (4) or section 106.262(3) are incorrect and do 
not exist in State law, the Texas SIP, or the Texas Federal Operating 
Permits program. Consequently, unless and until the State adopts and 
submits a revision to EPA for approval as a SIP revision and EPA 
approves it, the use of discrete emission credits to exceed the 
provisions in certain types of pre-construction permits termed Permits 
by Rule is not available under the Texas SIP.
    In our proposed conditional approval of the DERC program, we also 
proposed approving section 115.950 in 30 TAC Chapter 115, Control of 
Air Pollution from Volatile Organic Compounds, which cross-references 
the DERC program, and we proposed approving the definition of 
``facility'' published at 30 TAC Chapter 116, Control of Air Pollution 
by Permits for New Construction or Modification, Subchapter A, section 
116.10. Our final action on those two provisions is not included in 
this final rule, but is instead in our final action on the Emission 
Credit Banking and Trading program, referred to as the Emission 
Reduction Credit (ERC) program. Our approval of sections 115.950 and 
the definition of ``facility'' in 116.10 is not affected by the 
conditions on our approval of the DERC program.

II. What is a conditional approval?

    Under section 110(k)(4) of the Clean Air Act, EPA may conditionally 
approve a plan based on a commitment from the State to adopt specific 
enforceable measures by a date certain that is no more than one year 
from the date of conditional approval. If EPA determines that the 
revised rule is approvable, EPA will propose approval of the rule. If 
the State fails to meet its commitment within the one-year period, the 
approval is treated as a disapproval. There are at least two ways that 
the conditional approval may be converted to a disapproval.
     If the State fails to adopt and submit the specified 
measures by the date it committed to do so, or fails to submit anything 
at all, EPA will issue a finding of disapproval, but will not have to 
propose the disapproval. No proposal is required, because in the 
original proposed and final conditional approval EPA will have provided 
notice and an opportunity for comment on the fact that EPA would 
directly make the finding of disapproval (by letter) if the State 
failed to submit anything. Therefore, under this scenario, after the 
date by which the state committed to adopt and submit the measures, the 
Regional Administrator (RA) would send a letter to the State finding 
that it failed to meet its commitment and that the SIP submittal was 
therefore disapproved. The 18-month clock for sanctions and the two-
year clock for a Federal Implementation Plan (FIP) would start as of 
the date of the letter. Subsequently, a notice to that effect would be 
published in the Federal Register, and appropriate language inserted in 
the Code of Federal Regulations (CFR). Similarly, if EPA receives a 
submittal addressing the commitment but determines that the submittal 
is incomplete, the RA will send a letter to the State making such a 
finding. As with the failure to submit, the sanctions and FIP clocks 
will begin as of the date of the finding letter.
     Where the State does make a complete submittal by the date 
it committed to do so, EPA will evaluate that submittal to determine if 
it may be approved and will take final action on the submittal within 
12 months after the date EPA determines the submittal is complete. If 
the submittal does not adequately address the deficiencies that were 
the subject of the conditional approval, and is therefore not 
approvable, EPA must go through notice-and-comment rulemaking to 
disapprove the submittal. The 18-month clock for sanctions and the two-
year clock for a FIP start as of the date of final disapproval.
    In either instance, whether EPA finally approves or disapproves the 
rule, the conditional approval remains in effect until EPA takes its 
final action. Note that EPA will conditionally approve a certain rule 
only once. Subsequent submittals of the same rule that attempt to 
correct the same specifically identified problems will not be eligible 
for conditional approval.

III. What future actions are necessary for the DERC rule to fully meet 
EPA's expectations?

    TCEQ has submitted a commitment letter to Region 6 outlining the 
steps that will be taken to achieve full approval. This letter, dated 
September 8, 2005, can be found in the DERC administrative record, EPA-
R06-OAR-2005-TX-0029. The commitments are:
    (1) Revising the language in section 101.373:
    a. To prohibit the future generation of discrete emission reduction 
credits from permanent shutdowns; and
    b. To allow discrete emission reduction credits generated from 
permanent shutdowns before September 30, 2002, to remain available for 
use for no more than five years from the date of the commitment letter.
    (2) TCEQ will perform a credit audit to remove from the emissions 
bank all discrete emission reduction credits generated from permanent 
shutdowns after September 30, 2002.
    (3) Revising the language in sections 101.302(f), 101.372(f)(7), 
and 101.372(f)(8) to clarify that EPA approval is required for 
individual transactions involving emission reductions generated in 
another state or nation, as well as those transactions from one 
nonattainment area to another or from attainment counties into 
nonattainment areas.
    (4) TCEQ will revise Form DEC-1, Notice of Generation and Generator 
Certification of Discrete Emission Credits; Form MDEC-1, Notice of 
Generation and Generator Certification of Mobile Discrete Emission 
Credits; and Form DEC-2, Notice of Intent to Use Discrete Emission 
Credits, to include a waiver to the Federal statute of limitations 
defense for generators and users of discrete emission credits.
    (5) TCEQ will maintain its current policy of preserving all records 
relating to discrete emission credit generation and use for a minimum 
of five years after the use strategy has ended.
    Additionally, TCEQ has agreed to comply with these commitments 
during the conditional approval period. Specifically, TCEQ will not 
approve any trades involving the types of reductions described in item 
(3) above, will not approve any use of discrete shutdown credits that 
were generated after September 30, 2002, will only allow shutdown DERCs 
generated before September 30, 2002, to be used for up to five years 
from the date of the commitment letter, and will require the waiver 
described in item (4) above for generators and users of discrete 
emission credits. TCEQ must submit revised rules satisfying the above 
conditions to EPA on or before December 01, 2006. The conditional 
approval will automatically become a disapproval if the revisions are 
not completed and submitted to EPA by this date.

IV. What is the background for this action?

    The DERC rules establish a type of Economic Incentive Program 
(EIP), in particular an open market emissions trading program as 
described in EPA's EIP Guidance document, Improving Air Quality with 
Economic Incentive

[[Page 52705]]

Programs' (EPA-452/R-01-001, January 2001). This program provides 
flexibility for sources in complying with certain State and Federal 
requirements. In an open market trading program, a source generates 
emission credits by reducing its emissions during a discrete period of 
time. These credits, called discrete emission credits, or DECs, in the 
Texas program, are quantified in units of mass. Discrete emission 
credit (DEC) is a generic term that encompasses reductions from 
stationary sources (discrete emission reduction credits, or DERCs), and 
reductions from mobile sources (mobile discrete emission reduction 
credits, or MDERCs). The DERC program was first adopted by the State at 
30 TAC section 101.29 on December 23, 1997. Effective January 18, 2001, 
section 101.29 was repealed and Chapter 101, Subchapter H, Divisions l, 
3, and 4 were created. This action created separate divisions for the 
ERC, Mass Emissions Cap and Trade (MECT) in the Houston/Galveston/
Brazoria (HGB) area, and DERC programs. Amendments to the MECT were 
adopted on October 18, 2001; these amendments also included changes 
made primarily for clarification to sections 101.370, 101.372, and 
101.373 in the DERC program. As of April 14, 2002, TCEQ amended the 
program to include the provisions in Texas Senate Bill 1561 for air 
emissions trading across international boundaries. Effective January 
17, 2003, TCEQ reorganized the DERC and ERC program rules into more 
standardized formats parallel to each other, with a rule structure 
which followed a process of recognizing, quantifying, and certifying 
reductions as credits while explaining the guidelines for trading and 
using creditable reductions. The most recent submittal, of December 06, 
2004, amended sections 101.370, 101.373, 101.373, and 101.376. The DERC 
program adoption and the subsequent revisions were submitted to EPA for 
approval into the SIP; however, today's approval is the first time we 
have acted on this program. In doing so we are acting on the original 
submission of July 22, 1998, and all subsequent revisions through the 
December 6, 2004, submittal.
    The DERC program contains several features that EPA feels are 
important enough to discuss here. The DERC program provides at section 
101.372(f) that emission reductions from another county, state, or 
nation may be used subject to certain conditions. The current wording 
of the rule is unclear as to when prior approval from EPA will be 
required. To improve this aspect of the rule, on completion of the 
condition outlined above the rule will more clearly require prior EPA 
approval for all transactions involving emission reductions generated 
in another state or nation, as well as those transactions from one 
nonattainment area to another, or from attainment counties into 
nonattainment counties.
    EPA has addressed the possibility of cross-jurisdictional trades, 
such as those in section 101.372, in Appendix 16.16 of the EIP 
Guidance. Satisfaction of the provisions of Appendix 16.16 will ensure 
that cross-jurisdictional trades are consistent with the fundamental 
integrity, equity, and environmental benefit principles described in 
the EIP Guidance. The EPA review and approval authority in section 
101.372(f), as revised in accordance with EPA's conditions for 
approval, will be the mechanism by which EPA ensures that inappropriate 
trades do not take place. In particular, EPA intends to require a 
further SIP revision (either a detailed trading program, such as an 
MOU, or a trade-specific submission) before approving any international 
trade, interstate trades, or intrastate trades that involve increases 
in a nonattainment area and reductions from beyond that nonattainment 
area.
    Among these types of trades requiring a further SIP revision, 
international trades present an especially difficult case. For 
instance, currently there is no approvable mechanism for demonstrating 
that reductions made in another country are surplus or enforceable. 
Nonetheless, emission reductions in other countries could potentially 
offer substantial air quality benefits in the United States. In 
approving the DERC program, EPA is recognizing the concept of 
international trading and describing a framework (i.e., the submission 
of a SIP revision demonstrating, among other things, the validity and 
enforceability of foreign reductions) for such trading, in the event 
that a suitable and approvable mechanism is ever developed for 
resolving concerns including enforceability and surplus. Until such a 
mechanism is developed and approved by EPA, however, EPA will not 
approve international trades under the DERC rule.
    EPA is also approving a provision in section 101.372(d) that allows 
generators and users of DERCs to use an alternate quantification 
protocol that is different from one of the approved protocols in 
Chapter 115 or Chapter 117 (Control of Air Pollution from Volatile 
Organic Compounds and Control of Air Pollution from Nitrogen Compounds) 
of the Texas rules. Generators/users wanting to use other 
quantification protocols must follow the quantification requirements at 
section 101.372(d)(1)(C), which include a requirement for EPA adequacy 
review of such alternate protocols. TCEQ has agreed to clarify the 
provisions of section 101.372(d)(1)(C) by December 1, 2006, to clarify 
that a proposed alternate quantification protocol may not be used if 
the TCEQ Executive Director receives a letter from EPA that objects to 
the use of the protocol during the 45-day adequacy review period or if 
EPA proposes disapproval of the protocol in the Federal Register. See 
also 70 FR 58157 for a description of the approval process for 
alternate quantification protocols.
    EPA is also approving a provision in section 101.376 that allows 
DECs to be used as new source review (NSR) offsets. Section 101.376 
outlines criteria for DEC usage and NSR permits that must be satisfied 
for DECs to be used as NSR offsets. With these restrictions and the 
environmental benefit provisions of the DERC program, we feel that the 
use of DECs as NSR offsets is consistent with sections 171 and 173 of 
the Clean Air Act and the EIP Guidance. See 70 FR 58160 for our more 
detailed discussion of DECs as NSR offsets.
    Additionally, EPA is approving the use of DECs in lieu of 
allowances in the Houston/Galveston/Brazoria (HGB) MECT program for 
emissions of nitrogen oxides (NOX). Section 101.376 of the 
DERC program enables the use of DECs in the MECT, but the rule language 
providing the detailed usage requirements for DECs under the MECT is in 
section 101.356(h) of the MECT program, which we are approving 
elsewhere in today's Federal Register. Because of the interaction 
between the DERC and MECT programs, the conditional approval 
commitments of the DERC program must be interpreted with respect to the 
use of DECs in the MECT. DECs can be used as allowances in the MECT 
subject to the requirements of section 101.356(h), and only if the DECs 
meet the conditions outlined above. Therefore, the TCEQ will not 
approve the use of any DERCs that were generated from shutdowns since 
September 30, 2002, and the use of banked shutdown DERCs generated 
before September 30, 2002, must occur within 5 years from the date of 
the commitment letter. In addition, with respect to all DECs that are 
to be used in the MECT programs, both generators and users of such DECs 
must certify to a waiver of the Federal statute of limitations. EPA 
approval is also required when DECs generated in another state or 
nation, and in either

[[Page 52706]]

attainment or nonattainment areas (other than the HGB nonattainment 
areas) are requested for use in the MECT program. Also, as provided in 
the MECT rule, the DECs used as allowances under the MECT program are 
not charged the 10 percent environmental contribution because of the 
use ratios implemented in section 101.356(h).

V. What are EPA's responses to comments received on the proposed 
action?

    EPA's responses to comments submitted by Galveston-Houston 
Association for Smog Prevention (GHASP), Environmental Defense (Texas 
Office), the Lone Star Chapter of the Sierra Club, and Public Citizen 
(Texas Office) on November 4, 2005, are as follows. EPA has summarized 
the comments below; the complete comments can be found in the DERC 
administrative record (EPA-R06-OAR-2005-TX-0029). In commenting on the 
DERC program, the commenters raise no concerns about pollutants other 
than VOCs (including highly reactive VOCs, or HRVOCs).\1\
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    \1\ During the comment period, EPA did not receive comments 
regarding environmental justice and the DERC program. However, 
during the finalization process we have reevaluated our 
interpretation of the definition of Environmental Justice as found 
in Executive Order 12898. In our proposed approval of the DERC 
program, we stated that ``environmental justice concerns arise when 
a trading program could result in disproportionate impacts on 
communities populated by racial minorities, people with low incomes, 
or Tribes.'' On further review, we believe the following description 
is more consistent with E.O. 12898: ``Environmental justice concerns 
can arise when a final rule, such as a trading program, could result 
in disproportionate burdens on particular communities, including 
minority or low income communities.'' This revised language does not 
alter our determination that the DERC program does not raise 
environmental justice concerns.
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    Comment 1: There are problems with the inventory of VOC and HRVOC 
emissions in the HGB nonattainment area.
    Response to Comment 1: While EPA acknowledges that there have been 
past VOC emission inventory problems from sources associated with the 
petrochemical industry (see our proposed approval of the revisions to 
the HGB attainment demonstration, 70 FR 58119), EPA believes that the 
emissions inventory developed by TCEQ for the HGB nonattainment area is 
an acceptable approach to characterizing the emissions in the HGB 
nonattainment area. In addition, we are incorporating by reference our 
responses to comments provided in our approval of the attainment 
demonstration for the HGB ozone nonattainment area (EPA-R06-OAR-2005-
TX-0018). Those responses more specifically address GHASP's concerns 
regarding the development and use of the imputed inventory, 
characterization of other VOCs in the inventory, and appropriate 
emissions monitoring techniques for flares, fugitive emissions, and 
upsets.
    Comment 2: The VOC and HRVOC trading programs use unreliable data, 
which cannot be replicably measured. There are problems with current 
methods for measurement of HRVOC and VOC emissions; therefore, the VOC 
and HRVOC trading programs do not meet EPA's EIP Guidance for 
quantification.
    Response to Comment 2: EPA disagrees. The proposed DERC rule, at 70 
FR 58154, describes the basis for EPA's conclusion that the DERC rule 
satisfies the EIP Guidance criteria on quantifiability, which are found 
in Chapter 4 (``Fundamental Principles of All EIPs'').
    Emissions and emission reductions attributed to an EIP are 
quantifiable if they can be reliably and replicably measured: The 
source must be able to reliably calculate the amount of emissions and 
emission reductions from the EIP strategy, and must be able to 
replicate the calculations. Under the DERC program, sources address the 
element of quantification by using a quantification protocol that has 
been approved by TCEQ and EPA. Both agencies have important roles in 
ensuring these protocols provide reliable and replicable emission 
measurements. The approved quantification protocols for VOC DERC 
generation and use are contained in 30 TAC Chapter 115, Control of Air 
Pollution from Volatile Organic Compounds. These methods are all 
reliable and replicable, either because EPA has promulgated regulations 
or published guidance listing them as appropriate methods for measuring 
VOC emissions, or because the American Society for Testing and 
Materials (ASTM) has determined that they are appropriate standard 
methods. EPA approval is required before an alternate quantification 
protocol can be used. See section 101.372(1)(C). Examples of the 
approved quantification methods for VOC DERC generation and use 
include:
     Test Methods 1-4 (40 CFR 60, Appendix A) for determining 
flow rates;
     Test Method 18 (40 CFR part 60, Appendix A) for 
determining gaseous organic compound emissions by gas chromatography;
     EPA guidance in ``Procedures for Certifying Quantity of 
Volatile Organic Compounds (VOC) Emitted by Paint, Ink, and Other 
Coating,'' EPA-450/3-84-019; and
     Determination of true vapor pressure using ASTM Methods 
D323-89, D2879, D4953, D5190, or D5191 for the measurement of Reid 
Vapor pressure.
    Comment 3: TCEQ and EPA lack confidence in current methods for 
measuring emissions. This lack of confidence increases the risks 
associated with a market-based trading program until the TCEQ is able 
to reconcile ambient monitoring with industry emission inventories. For 
example, trading could exacerbate the challenge of identifying the 
cause of any program failures because comparisons of ambient monitoring 
trend data to emission inventory data will require consideration of the 
timing and magnitude of trades.
    Response to Comment 3: EPA disagrees. We have discussed above in 
response to Comments 1 and 2 our conclusion that the methods used for 
measuring emissions under the DERC program are consistent with EPA 
policy and guidance, and that the emissions inventory developed by TCEQ 
is an acceptable approach to characterizing the emissions in the HGB 
nonattainment area. Sources that generate and use DERCs must notify the 
TCEQ. The TCEQ is then responsible for certifying that the generation 
or use strategy is appropriate. Through the certification process TCEQ 
is made aware of trades before they happen. This advance knowledge of 
trades could then be applied to the reconciliation process and actually 
provide additional data instead of being a hindrance.
    Comment 4: EPA should find that it is premature for TCEQ to allow 
trading of unquantifiable emissions of VOC in the HGB nonattainment 
area. If either the source or the recipient incorrectly estimates the 
emissions involved in a trade, the region is at risk of a net increase 
in emissions as a result of the trade. Until refineries and chemical 
plants are able to routinely quantify their VOC emissions, EPA should 
not allow trading of these VOC emissions.
    Response to Comment 4: EPA disagrees that VOC emissions should be 
ineligible for trading in the HGB nonattainment area. EPA believes that 
allowing the petrochemical industry to trade VOC emissions under the 
DERC rule is appropriate notwithstanding the commenter's concern about 
emissions estimates, because the DERC program satisfies the EIP 
Guidance criteria for quantification. For example, sources generating 
and banking VOC DERCs must either use the approved quantification 
protocols in Chapter 115 or obtain EPA approval for an alternate 
quantification method. These protocols

[[Page 52707]]

will ensure that sources correctly calculate the emission reduction to 
be banked as a DERC. The source using the banked reduction also must 
calculate the amount of necessary VOC DERCs using the approved 
quantification protocols. The TCEQ Executive Director will review and 
approve each requested DERC use to ensure that sources using DERCs have 
enough credit to cover their use strategy. After the DERC use has 
occurred, sources must notify TCEQ of the number of DERCs actually 
used. Sources that do not have enough DERCs to cover their actual use 
will be in violation of the DERC program. Additionally, sources that do 
not obtain sufficient DERCs in advance will be in violation of the 
program and TCEQ has the authority to pursue enforcement actions. 
Therefore, EPA believes that sources using the approved quantification 
protocols will correctly estimate the amount of DERCs generated and 
used, and we also believe that the program is designed to minimize 
incorrect emissions estimates. Further, users of VOC DERCs must also 
purchase and retire an additional ten percent VOC DERCs as an 
environmental benefit. The ten percent environmental benefit will also 
help ensure that the trading program will not negatively impact the 
nonattainment area in which the DERC is generated and used. The ten 
percent environmental benefit is not applicable to situations where VOC 
DECs are used in lieu of NOX MECT allowances. In these 
situations, the ten percent environmental benefit is replaced with the 
stringent retirement ratios found in section 101.356(h).
    EPA's response to Texas Industry Project (TIP) comments made on 
November 4, 2005, is as follows:
    Comment: TIP supports EPA's proposed approval of the DERC program 
and urges EPA to finalize its approval as soon as practicable.
    Response: EPA acknowledges the support of TIP for our approval of 
the DERC program.

VI. What does Federal approval of a State regulation mean to me?

    Enforcement of the State regulation before and after it is 
incorporated into the federally approved SIP is primarily a State 
function. However, once the regulation is federally approved, EPA and 
the public may take enforcement action against violators of these 
regulations.

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 conditionally approves State law as meeting Federal requirements 
and imposes no additional requirements beyond those imposed by State 
law. If the conditional approval is converted to a disapproval under 
section 110(k), based on the State's failure to meet the commitment, it 
will not affect any existing State requirements applicable to small 
entities. Federal disapproval of the State submittal does not affect 
State enforceability. Moreover, EPA's disapproval of the submittal does 
not impose any new requirements. 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 conditionally approves 
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).
    This rule also does not have tribal implications because it will 
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 action also does not have Federalism 
implications because it does 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 conditionally approves a 
State rule implementing a Federal standard, and does not alter the 
relationship or the distribution of power and responsibilities 
established in the CAA. This 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 is not 
economically significant.
    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 CAA. 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 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.).
    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. A major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
804(2).
    Under section 307(b)(1) of the CAA, petitions for judicial review 
of this action must be filed in the United States Court of Appeals for 
the appropriate circuit by November 6, 2006. Filing a petition for 
reconsideration by the Administrator of this final rule does not affect 
the finality of this rule for the purposes of judicial review nor does 
it extend the time within which a petition for judicial review may be 
filed, and shall not postpone the effectiveness of such rule or action. 
This action may not be challenged later in proceedings to enforce its 
requirements. (See section 307(b)(2).)

List of Subjects 40 CFR Part 52

    Environmental protection, Air pollution control, Intergovernmental 
relations, Nitrogen oxides, Ozone, Reporting and recordkeeping 
requirements, Volatile organic compounds.

[[Page 52708]]

    Dated: August 24, 2006
Richard E. Greene,
Regional Administrator, Region 6.

0
40 CFR part 52 is amended as follows:

PART 52--[AMENDED]

0
1. The authority citation for part 52 continues to read as follows:

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

Subpart SS--Texas

0
2. The table in Sec.  52.2270(c) entitled ``EPA Approved Regulations in 
the Texas SIP'' is amended under Chapter 101--General Air Quality 
Rules, Subchapter H--Emissions Banking and Trading, by adding in 
numerical order a new centered heading ``Division 4--Emission Credit 
Banking and Trading'' followed by new entries for sections 101.370, 
101.371, 101.372, 101.373, 101.374, 101.376, 101.378, and 101.379.
    The additions reads as follows:

Sec.  52.2270  Identification of plan.

* * * * *
    (c) * * *

                                                        EPA-Approved Regulations in the Texas SIP
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   State approval/
           State citation                   Title/subject           submittal date           EPA approval date                     Explanation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Chapter 101--General Air Quality Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Subchapter H--Emissions Banking and Trading
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Division 4--Discrete Emission Credit Banking and Trading
--------------------------------------------------------------------------------------------------------------------------------------------------------
Section 101.370....................  Definitions................           11/10/04  09/06/06 [Insert FR page number
                                                                                      where document begins].
Section 101.371....................  Purpose....................           12/13/02  09/06/06 [Insert FR page number
                                                                                      where document begins].
Section 101.372....................  General Provisions.........           12/13/02  09/06/06 [Insert FR page number
                                                                                      where document begins].
Section 101.373....................  Discrete Emission Reduction           11/10/04  09/06/06 [Insert FR page number
                                      Credit Generation and                           where document begins].
                                      Certification.
Section 101.374....................  Mobile Discrete Emission              11/10/04  09/06/06 [Insert FR page number
                                      Reduction Credit                                where document begins].
                                      Generation and
                                      Certification.
Section 101.376....................  Discrete Emission Credit              11/10/04  09/06/06 [Insert FR page number    Subsection 101.376(c)(4) NOT in
                                      Use.                                            where document begins].            SIP
Section 101.378....................  Discrete Emission Credit              12/13/02  09/06/06 [Insert FR page number
                                      Banking and Trading.                            where document begins].
Section 101.379....................  Program Audits and Reports.           12/13/02  09/06/06 [Insert FR page number
                                                                                      where document begins].

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------

[FR Doc. 06-7414 Filed 9-5-06; 8:45 am]

BILLING CODE 6560-50-P