Document ID: EPA-R05-OAR-2006-0976-0039
Agency: epa
Document Type: Rule
Title: Final Approval of Ohio's NOx Budget Trading Program
Posted Date: 2008-02-13T05:00Z

[Federal Register: February 13, 2008 (Volume 73, Number 30)]
[Rules and Regulations]               
[Page 8197-8200]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13fe08-10]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R05-OAR-2006-0976; FRL-8526-8]

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

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is granting final approval to Ohio's request for the 
retirement and withdrawal of 240 oxides of nitrogen (NOX) 
allowances from the State's 2005 new source set aside. Retiring 240 new 
source set aside allowances will provide surplus emission reductions to 
help compensate for the discontinuation of Ohio's motor vehicle 
inspection and maintenance program (known as ``E-Check'') in the 
Cincinnati and Dayton areas for the year 2006. (Ohio is in the process 
of seeking approval of the removal of E-Check as an active program from 
the State Implementation Plan (SIP), which will be addressed in a 
separate action.) EPA received adverse comments and one positive 
comment on our proposed rulemaking on the allowance retirement. These 
comments are addressed in this notice. As a result of this action, 240 
NOX allowances from the State's 2005 new source set aside 
will be withheld and permanently retired.

DATES: This final rule is effective on March 14, 2008.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-R05-OAR-2006-0976. 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, i.e., Confidential Business 
Information (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 

Environmental Protection Agency, Region 5, Air and Radiation Division, 
77 West Jackson Boulevard, Chicago,

[[Page 8198]]

Illinois 60604. This facility is open from 8:30 a.m. to 4:30 p.m., 
Monday through Friday, excluding Federal holidays. We recommend that 
you telephone Anthony Maietta, Life Scientist, at (312) 353-8777 before 
visiting the Region 5 office.

FOR FURTHER INFORMATION CONTACT: Anthony Maietta, Life Scientist, 
Criteria Pollutant Section, Air Programs Branch (AR-18J), Environmental 
Protection Agency, Region 5, 77 West Jackson Boulevard, Chicago, 
Illinois 60604, (312) 353-8777, maietta.anthony@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document whenever ``we,'' 
``us,'' or ``our'' is used, we mean EPA. This supplementary information 
section is arranged as follows:

I. What did EPA propose?
II. What is EPA's response to comments?
III. What action is EPA taking today?
IV. Statutory and Executive Order Reviews

I. What did EPA propose?

    On October 6, 2006, Ohio submitted revisions to Ohio Administrative 
Code (OAC) Chapters 3745-72-01 and 3745-14-05. These rules provide a 
revised start date for the use of low-volatility gasoline and provide 
the necessary quantity of interim, surplus NOX emission 
reductions through the permanent retirement of new source set aside 
allowances from the State's NOX budget trading program. 
Revisions to OAC 3745-72-01 were addressed in a separate rulemaking 
published on May 25, 2007, at 72 FR 29269.
    On September 13, 2007 (at 72 FR 52320), EPA proposed to approve the 
revisions to OAC 3745-14-05. The revision to OAC 3745-14-05 permanently 
withholds and retires 240 NOX allowances from Ohio's 2005 
new source set aside.
    By retiring these new source set aside allowances, Ohio guarantees 
that these allowances will not be reallocated to participating Ohio 
NOX SIP Call utilities and boilers the following year. This 
action allows EPA to consider the corresponding reduction of 240 tons 
of emissions of NOX to be surplus. These 240 tons of surplus 
NOX emission reductions, corresponding to reductions 
resulting from emission control devices installed on electrical 
generation units in the Cincinnati and Dayton areas before 2006, can be 
considered to provide 240 tons of NOX emission reduction in 
compensation for the equivalent emission increase resulting from 
discontinuation of the E-Check program in those areas in 2006.

II. What is EPA's response to comments?

    EPA received both supportive and adverse comments in response to 
our proposed rulemaking on OAC 3745-14-05. EPA received comments from 
the Regional Air Pollution Control Agency (RAPCA) in support of our 
proposed action on October 18, 2007.
    Adverse comments were sent dated January 12, February 15, March 13, 
and October 15, 2007, from Shumaker, Loop, and Kendrick, LLP, a law 
firm representing the Ohio Electric Utility Institute as well as 
various utilities in the State (hereafter described as ``the 
Utilities''). Despite some comments being sent even before EPA had 
published the proposed rulemaking, we are treating the early comments 
as pertaining to today's action, and we address them in this action.
    Comment: The Utilities believe that withholding and permanently 
retiring 240 NOX allowances has not and will not create 
emissions reductions in the Cincinnati and Dayton areas, specifically 
because:
    (a) NOX allowances are not emissions reductions;
    (b) If an Ohio source wanted to emit more, it could purchase 
allowances from outside the state, or it could transfer allowances from 
a facility it owns in another state;
    (c) If no Ohio sources needed the withheld allowances for the 
purposes of compliance, then withholding and retiring the 240 
allowances will not result in decreased emissions in the Ohio or 
Cincinnati/Dayton areas; and,
    (d) No evidence exists to support that withholding these allowances 
resulted in reductions in the Cincinnati/Dayton areas.
    Response: Under the cap and trade program known as the 
NOX SIP Call, EPA issues a finite number of allowances and 
allows each subject source an amount of emissions based on the quantity 
of allowances the source holds. The quantity of allowances thus 
corresponds to the total emissions allowed across the area covered by 
the NOX SIP Call. Consequently, by retiring 240 allowances, 
Ohio has unquestionably reduced the total allowable emissions across 
the NOX SIP Call area by 240 tons of NOX 
emissions. Ohio may use utility NOX emission reductions to 
compensate for discontinuing E-Check only if the reductions are surplus 
relative to existing requirements, and the retirement of 240 allowances 
provides 240 tons of NOX emission reductions that are 
surplus to the reductions mandated by the existing NOX SIP 
Call.
    EPA further believes that Ohio can reasonably claim that the 240 
tons of surplus NOX emission reduction that they have 
mandated compensates for 240 tons of NOX emission increase 
(or the equivalent quantity of increase in volatile organic compound 
emissions) resulting from discontinuation of E-Check. As stated in our 
notice of proposed rulemaking, ``substantial emission reductions have 
occurred in the Cincinnati/Dayton area,'' and ``EPA believes that Ohio 
has latitude to attribute 240 tons of the 2006 NOX emission 
reductions in the Cincinnati/Dayton area to its retirement of 240 
allowances.''
    The comments do not directly address the rationale for these views 
that EPA provided in its notice of proposed rulemaking. The following 
responds more directly to the submitted comments:
    (a) Retirement of NOX allowances does mandate a net 
emission reduction.
    (b) Purchasing or transferring allowances from another location 
reduces allowable emissions at that other location, retaining the net 
emission reduction.
    (c) EPA is concluding that 240 tons of the emission reductions that 
are known to have occurred in the Cincinnati and Dayton areas can be 
attributed to Ohio's retirement of 240 allowances. Ohio sources will 
not need these allowances precisely because they have implemented 
emission reductions mandated by the limited availability of allowances.
    (d) Ohio provided for 240 tons of emission reduction, and Ohio can 
reasonably attribute this reduction to a small fraction of the over 
10,000 tons of NOX reductions that have occurred in the 
Cincinnati and Dayton areas.\1\ The commenter seeks evidence of a 
causal link between the allowance retirement and specific emission 
reductions, which would presumably require that Ohio or EPA examine the 
motivations underlying utility control decisions. EPA believes that 
such a survey is unnecessary, and believes that Ohio has adequate basis 
for associating the surplus reductions created by the rule revision 
with 240 tons of reductions that

[[Page 8199]]

have occurred in the Cincinnati and Dayton areas.
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    \1\ In a letter dated February 23, 2007, Ohio supplemented its 
submittal with information regarding NOX emission 
reductions that have occurred in the Cincinnati/Dayton area. This 
letter identifies several actions that substantially reduced 
NOX emissions starting from before the 2006 ozone season, 
which include installation of selective catalytic reduction controls 
at 3 units and installation of low NOX burners at 9 other 
units. Ohio estimates that the total emission reduction from these 
actions is over 10,000 tons per ozone season.
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    Comment: The Utilities commented that Ohio's October 6, 2006, 
submittal should be considered `incomplete' because it does not meet 
the requirements of 40 CFR part 51, Appendix V, section 2.2, paragraphs 
(c), (d), and (e). For each section, the Utilities comment that 
statements by Ohio EPA personnel (provided in an appendix to the 
comments) support their view.
    40 CFR part 51, Appendix V section 2.2(c) requires ``Quantification 
of the changes to the plan of allowable emissions from the affected 
sources, estimates of changes in current actual emissions from affected 
sources, or, where appropriate, quantification of changes in actual 
emissions from affected sources through calculations of the differences 
between certain baseline levels and allowable emissions anticipated as 
a result of the revision.'' The Utilities comment that Ohio only 
submitted the number of NOX allowances it plans to retire 
(240). Further, the Utilities state that Ohio's submittal does not 
quantify the ``allowable emissions'' from the Utilities under OAC 5745-
14-05(C)(7) because the retired allowances do not limit utilities' 
allowable emissions. The Utilities in fact believe that it is 
impossible for Ohio to calculate the allowable emissions from Ohio 
utilities.
    40 CFR part 51, Appendix V 2.2(d) requires ``The State's 
demonstration that the National Ambient Air Quality Standards (NAAQS), 
prevention of significant deterioration increments, reasonable further 
progress demonstration, and visibility, as applicable, are protected if 
the plan is approved and implemented.'' The Utilities comment that 
Ohio's calculation of 240 allowances cannot, by itself, show that the 
NAAQS are protected by OAC 3745-14-05(C)(7), despite anti-backsliding 
being the impetus for Ohio's submittal.
    40 CFR part 51, Appendix V 2.2(e) requires ``Modeling information 
required to support the proposed revision, including input data, output 
data, models used, justification of model selections, ambient 
monitoring data used, meteorological data used, justification for use 
of offsite data (where used), modes of models used, assumptions, and 
other information relevant to the determination of adequacy of the 
modeling analysis.'' The Utilities comment that Ohio's submittal does 
not contain an equivalency demonstration or a modeling demonstration, 
and that modeling is necessary when reductions are made from sources 
outside the area. The Utilities believe Ohio EPA should have conducted 
modeling to support their submittal yet did not.
    Response: EPA disagrees with the Utilities' comments on both 
substantive and process grounds. For the substance of 40 CFR part 51, 
Appendix V section 2.2(c), Ohio has specified that the rule provides 
240 tons of NOX emission reduction. This number is 
completely specific and is precisely the type of information that EPA 
seeks under this section of Appendix V. EPA believes that sections 
2.2(d) and 2.2(e) are not relevant to this submittal. EPA uses Appendix 
V to judge the completeness of a variety of submittals, and EPA must 
apply only those criteria that are germane to EPA's ultimate decision 
regarding approvability of the submittal. States routinely submit rules 
that address control requirements (e.g., to provide reasonably 
available control technology or, as here, to provide emission 
reductions to avoid backsliding) which are judged independently of 
whether the applicable areas are progressing satisfactorily toward 
attainment or whether modeling has been done to estimate the ambient 
impact. The factual statements by Ohio EPA personnel that were attached 
to the Utilities' comments (e.g., that no modeling was performed in 
support of the submittal) do not alter EPA's views that the submittal 
was complete.
    Furthermore, in absence of a completeness determination by EPA 
within 6 months of receiving the submittal, Ohio's October 6, 2006, 
submittal became complete 6 months thereafter, pursuant to section 
110(k)(1)(B) of the Clean Air Act. EPA does not have the discretion now 
to find the submittal incomplete.
    Comment: The Utilities comment that Ohio's proposed revision to OAC 
3745-14-05 does not meet the anti-backsliding requirements of 40 CFR 
51.900-51.905. The Utilities state that Ohio did not provide 
photochemical modeling. They also state that Ohio did not sufficiently 
demonstrate a benefit to the Cincinnati and Dayton areas, nor can Ohio 
demonstrate actual reductions in those areas. The Utilities state that 
EPA Region 5 sent a letter to Ohio on September 20, 2005, in which EPA 
said that Ohio could claim reductions outside the Cincinnati and Dayton 
areas so long as they ``demonstrate'' that the reductions benefit the 
Cincinnati and Dayton areas.
    Response: EPA is satisfied with Ohio's demonstration that retiring 
240 NOX allowances will make surplus 240 of the roughly 
10,000 tons of NOX reductions made from Cincinnati and 
Dayton area utilities by 2006, which clearly provides benefit to the 
Cincinnati and Dayton areas. EPA does not require modeling to know that 
creating 240 surplus allowances will allow the State to credit 240 of 
the more than 10,000 tons of NOX emission reductions toward 
compensation for loss of E-Check in 2006. Based on the information that 
Ohio EPA has provided, EPA is satisfied that the retirement of 240 
NOX allowances from the 2005 control period will benefit the 
Cincinnati and Dayton areas.
    Comment: The Utilities comment that today's action will undermine 
the Utilities' pollution control strategies and confidence in the 
NOX SIP Call rule. The Utilities state that ``random 
confiscation'' of allowances undermines the market system in a way 
similar to counterfeiting money.
    Response: EPA believes that removing 240 allowances out of a pool 
of about half a million allowances will not have an appreciable 
negative effect on the functioning of the NOX SIP Call. The 
deliberate process that Ohio and EPA have followed in retiring 
allowances that had been set aside and not issued to any source 
provided utilities ample opportunity to plan for not receiving any of 
these allowances.

III. What action is EPA taking today?

    EPA is approving OAC 3745-14-05(C) as submitted by Ohio on October 
6, 2006. EPA is approving the withdrawal and permanent retirement of 
240 NOX new source set aside allowances from the 2005 
control period. This action adds a new paragraph (C)(7) to OAC 3745-14-
05, and re-orders the existing paragraphs from (C)(7) through (C)(9) to 
(C)(8) through (C)(10).

IV. Statutory and Executive Order Reviews

Executive Order 12866: Regulatory Planning and Review

    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.

Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    Because it is not a ``significant regulatory action'' under 
Executive Order 12866 or a ``significant regulatory action,'' this 
action is also not subject to Executive Order 13211, Actions Concerning 
Regulations That Significantly ``Affect Energy Supply,

[[Page 8200]]

Distribution, or Use'' (66 FR 28355, May 22, 2001).

Regulatory Flexibility Act

    This action merely approves state law as meeting federal 
requirements and imposes no additional requirements beyond those 
imposed by state law. Accordingly, the Administrator certifies that 
this rule will not have a significant economic impact on a substantial 
number of small entities under the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.).

Unfunded Mandates Reform Act

    Because this rule 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).

Executive Order 13175: Consultation and Coordination With Indian Tribal 
Governments

    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).

Executive Order 13132: Federalism

    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 approves a state rule implementing a 
federal standard, and does not alter the relationship or the 
distribution of power and responsibilities established in the Clean Air 
Act.

Executive Order 13045: Protection of Children From Environmental Health 
and Safety Risks

    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 approves a state rule implementing a 
Federal Standard.

National Technology Transfer Advancement Act

    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. In 
this context, in the absence of a prior existing requirement for the 
state to use voluntary consensus standards (VCS), EPA has no authority 
to disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the Clean Air Act. Thus, the requirements 
of section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (15 U.S.C. 272 note) do not apply.

Paperwork Reduction Act

    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.).

Congressional Review Act

    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 Clean Air Act, petitions for 
judicial review of this action must be filed in the United States Court 
of Appeals for the appropriate circuit by April 14, 2008. 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 in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by 
reference, Intergovernmental relations, Oxides of nitrogen, Oxides of 
nitrogen budget trading program.

    Dated: January 30, 2008.
Bharat Mathur,
Acting Regional Administrator, Region 5.

0
For the reasons stated in the preamble, part 52, chapter I, of title 40 
of the Code of Federal Regulations 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 KK--Ohio

0
2. Section 52.1870 is amended by adding paragraph (c)(141) to read as 
follows:

Sec.  52.1870  Identification of plan.

* * * * *
    (c) * * *
    (142) On October 6, 2006, Ohio submitted revisions to Ohio 
Administrative Code (OAC) Chapter 3745-14-05 to permanently retire 240 
new source set aside allowances from the State's oxides of nitrogen 
budget trading program.
    (i) Incorporation by reference.
    (A) Ohio Administrative Code Rule 3745-14-05 ``NOX 
Allowance Allocations,'' effective July 17, 2006.

[FR Doc. E8-2506 Filed 2-12-08; 8:45 am]

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