Document ID: EPA-R05-OAR-2007-0183-0002
Agency: epa
Document Type: Rule
Title: Direct Final Approval of Illinois Emission Reduction Market System
Posted Date: 2008-01-30T05:00Z

[Federal Register: January 30, 2008 (Volume 73, Number 20)]
[Rules and Regulations]               
[Page 5435-5439]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ja08-10]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R05-OAR-2007-0183; FRL-8514-5]

 
Approval and Promulgation of Air Quality Implementation Plans; 
Illinois; Revisions to Emission Reduction Market System

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: In 1997, Illinois adopted and submitted rules establishing a 
cap and trade program regulating emissions of volatile organic 
compounds (VOC). The program, known as the Emission Reduction Market 
System (ERMS), was designed to address VOC sources in the Chicago area 
with potential to emit at least 25 tons per year. Then, in 2004, the 
Chicago ozone nonattainment area was in effect reclassified from severe 
to moderate, which according to EPA guidance revised the applicable 
definition of major sources from 25 tons per year to 100 tons per year. 
This ``reclassification'' could have resulted in the program no longer 
including sources with potential to emit more than 25 but less than 100 
tons per year. Instead, Illinois adopted rule revisions, submitted to 
EPA on January 10, 2007, which required that these sources remain part 
of the program. Illinois' rule revisions also address other 
ramifications of the ``reclassification.'' EPA is approving these rule 
revisions.

DATES: This direct final rule will be effective March 31, 2008, unless 
EPA

[[Page 5436]]

receives adverse comments by February 29, 2008. If adverse comments are 
received, EPA will publish a timely withdrawal of the direct final rule 
in the Federal Register informing the public that the rule will not 
take effect.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R05-
OAR-2007-0183, by one of the following methods:
    1. http://www.regulations.gov: Follow the on-line instructions for 

submitting comments.
    2. Email: mooney.john@epa.gov.
    3. Fax: (312) 886-5824.
    4. Mail: John M. Mooney, Chief, Criteria Pollutant Section, Air 
Programs Branch (AR-18J), U.S. Environmental Protection Agency, 77 West 
Jackson Boulevard, Chicago, Illinois 60604.
    5. Hand Delivery: John M. Mooney, Chief, Criteria Pollutant 
Section, Air Programs Branch (AR-18J), U.S. Environmental Protection 
Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604. Such 
deliveries are only accepted during the Regional Office normal hours of 
operation, and special arrangements should be made for deliveries of 
boxed information. The Regional Office official hours of business are 
Monday through Friday, 8:30 a.m. to 4:30 p.m. excluding Federal 
holidays.
    Instructions: Direct your comments to Docket ID No. EPA-R05-OAR-
2007-0183. 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 website 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 docket are listed in the 
http://www.regulations.gov index. 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, will be publicly available only in hard copy. 
Publicly available docket materials are available either electronically 
in http://www.regulations.gov or in hard copy at the Environmental Protection 

Agency, Region 5, Air and Radiation Division, 77 West Jackson 
Boulevard, Chicago, Illinois 60604. This Facility is open from 8:30 
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. We 
recommend that you telephone John Summerhays, Environmental Scientist, 
at (312) 886-6067 before visiting the Region 5 office.

FOR FURTHER INFORMATION CONTACT: John Summerhays, Environmental 
Scientist, Criteria Pollutant Section, Air Programs Branch (AR-18J), 
Environmental Protection Agency, Region 5, 77 West Jackson Boulevard, 
Chicago, Illinois 60604, (312) 886-6067, summerhays.john@epa.gov.

SUPPLEMENTARY INFORMATION: This supplementary information section is 
arranged as follows:

I. Description and Review of Illinois' Submittal
II. What Action is EPA Taking?
III. Statutory and Executive Order Reviews

I. Description and Review of Illinois' Submittal

    On January 10, 2007, Illinois submitted revisions to Part 205 of 
Title 35 of the Illinois Administrative Code, entitled ``Emissions 
Reduction Market System'' (ERMS). ERMS is a cap and trade program 
addressing VOC emissions in the Chicago area. Under ERMS, Illinois 
issues allowances equivalent to 12 percent less than baseline VOC 
emission levels, and requires affected sources to hold allowances 
equivalent to their VOC emissions during the ozone season. The program 
thereby requires overall VOC emission levels to be reduced to 12 
percent below baseline levels. The original rules for this program were 
adopted on November 20, 1997, and were submitted by Bharat Mathur of 
the Illinois EPA on December 16, 1997. EPA approved those rules on 
October 15, 2001, at 66 FR 52359.
    Part 205 requires participation of all major VOC sources in the 
Chicago area. More specifically, the 1997 version of Section 205.200 
that Illinois adopted in 1997 stated that ``The requirements of this 
Part shall apply to any source * * * located in the Chicago ozone 
nonattainment area that is required to obtain a [Title V permit], and 
[has VOC emissions during the ozone season of at least 10 tons].'' The 
requirement for a Title V operating permit applies to major sources. 
Since the Chicago area at that time was classified as a severe ozone 
nonattainment area, major sources were defined to include sources with 
the potential to emit 25 tons per year or more of VOC.
    In 2004, EPA classified the Chicago ozone nonattainment area as 
moderate for the 8-hour ozone standard, and effective in 2005 rescinded 
the severe classification for the 1-hour ozone standard. The definition 
of major sources for moderate ozone nonattainment areas includes 
sources with the potential to emit 100 tons per year or more of VOC. 
According to EPA guidance (see 69 FR 23951, April 30, 2004), the 
replacement of the prior classification of severe with a classification 
of moderate thus meant that sources with potential to emit at least 25 
tons per year but less than 100 tons per year of VOC would no longer be 
required to have Title V operating permits. As a result, the sources in 
the Chicago area in this size range would no longer be subject to the 
ERMS requirements, given the applicability criteria in Section 205.200 
as quoted above.
    Illinois estimated that the loss of these intermediate sized 
sources from ERMS would result in a loss of 330 tons of VOC emission 
reduction per ozone season associated with these sources. Illinois 
sought to avoid this loss of sources from the program. Consequently, 
Illinois revised Section 205.200 to redefine applicability to include 
sources with potential to emit at least 25 tons of VOC (and sources 
otherwise required to have a Title V permit) and at least 10 tons of 
VOC emissions during the ozone season. By this means, Illinois revised 
its applicability provisions to include the same set of sources as were 
included in 1997, notwithstanding the change in the classification of 
the Chicago area.
    Under the 1997 rules, Illinois established several elements of the 
ERMS program by means of Title V permits. Most notably, the source's 
Title V permit is used to specify the number of allowances to be issued 
to the source (Cf. Section 205.315) and the source-specific VOC 
monitoring methods (Cf.

[[Page 5437]]

Section 205.330). Since ERMS included sources which under EPA's 
guidance were not subject to a requirement for a Title V permit, the 
State needed an alternative means of specifying source-specific ERMS 
provisions.
    Illinois therefore adopted Section 205.316, to provide that sources 
that are not required to obtain a Title V permit (i.e., under EPA's 
guidance, sources with potential emissions between 25 and 100 tons per 
year) shall either request a Title V permit anyway or apply for a 
federally enforceable state operating permit (FESOP). The FESOP is to 
specify the provisions (relating for example to the number of 
allowances allocated to the source and the source-specific monitoring 
requirements) that would otherwise be specified in the Title V permit.
    Title V provides for defining some operations with trivial or no 
emissions as insignificant activities. The 1997 version of Section 
205.220 of Illinois' rules exempts these activities from ERMS. The 
revised version of Section 205.220 extends this exemption to sources 
obtaining FESOPs. That is, the revised Section 205.220 provides that 
any activity meeting the criteria in Part 201 Subpart F of Title 35 of 
the Illinois Administrative Code for insignificant activities may be 
exempted from the ERMS program, whether the source is subject to a 
Title V permit or a FESOP.
    In ozone nonattainment areas classified as severe, major new 
sources and existing sources undergoing major modifications must obtain 
1.3 tons of offsets for every ton of new emissions. In ozone 
nonattainment areas classified as moderate, major new sources and 
existing sources undergoing major modifications need only obtain 1.1 
tons of offsets for every ton of new emissions. New source review rules 
require that any change in offset ratio applies only prospectively, to 
sources permitted after the change in ratio, and that sources permitted 
before the change in ratio must continue to have offsets in at least 
the ratio that applied at the time the source was permitted.
    Under Section 205.150 of the 1997 ERMS rules, major new sources and 
sources undergoing major modifications were required to obtain 1.3 
allowances for every ton of new emissions. Illinois' revised rules 
provide for modified ratios as the applicable ratios change. Section 
205.150(f)(1) of the revised rules states: ``If the nonattainment 
classification of the Chicago area for ozone is changed such that the 
required offset ratio is no longer 1.3 to 1 and a new offset ratio 
applies, as specified in 35 Ill. Adm. Code 203.302, that ratio shall 
then apply in lieu of the 1.3 to 1 ratio set forth in subsections 
(c)(2), (d)(1), and (e) of this Section. Such new ratio shall not apply 
to any part of a source or any modification already subject to the 1.3 
to 1 ratio or other previously effective offset ratio established prior 
to the effective date of the new ratio.'' Section 205.150(f)(2) 
provides that the ratio becomes 1 to 1 if the Chicago area is 
redesignated to attainment.
    These revisions address the ramifications of a revised 
classification according to EPA guidance as cited above. However, while 
Illinois was adopting these rule revisions, EPA's ozone implementation 
guidance was being challenged in court. On December 22, 2006, with 
clarification on June 8, 2007, the Court of Appeals for the District of 
Columbia Circuit ruled against elements of EPA's ozone implementation 
guidance, including the ``backsliding'' inherent in allowing an area 
originally classified as severe and subsequently classified as moderate 
to apply the less stringent major source definition for moderate areas. 
South Coast Air Quality Management Dist. v. EPA, 472 F.3d 882 (D.C. 
Cir. 2006). As stated in a memorandum from Robert Meyers to EPA's 
Regional Administrators dated October 7, 2007, the effect of the 
court's ruling is to restore the applicability thresholds and offset 
ratios of the higher, 1-hour ozone classification. The court's decision 
also signifies that operating permits under Title V of the Clean Air 
Act also must be obtained according to major source thresholds as 
defined for the 1-hour ozone classification, e.g., for sources in the 
Chicago area with potential emissions of at least 25 tons per year. 
This decision would also restore the 1.3 to 1 offset ratio for new VOC 
sources in the Chicago area. The Meyers memorandum states further that 
EPA intends two rulemakings, the first to establish applicability 
thresholds and offset ratios in accordance with the court's ruling and 
the second to develop rules that would define the circumstances under 
which the provisions associated with 1-hour classifications might be 
terminated.
    Fortunately, Illinois' rules achieve the intended effect 
notwithstanding these developments regarding applicable size thresholds 
and offset ratios. Section 205.200 provides that Part 205 requirements 
apply to sources with potential to emit at least 25 tons of VOC per 
year, without regard to whether the major source threshold is 25 or 100 
tons per year. Resumption of a 25 ton per year definition of major 
source simply means that sources with potential emissions between 25 
and 100 tons that were subject to ERMS in 1997 because they were major 
sources are again subject to ERMS because they are again major sources. 
Since any source with potential to emit more than 25 tons per year now 
by definition must obtain a Title V permit, it is a moot point whether 
the State provides a FESOP option for sources of that size that are not 
subject to the Title V permitting requirement. With respect to offsets, 
Section 205.150 simply applies required holding allowances for new 
sources in accordance with the applicable offset ratio. While the ratio 
for a time was interpreted to be 1.1 to 1, the court decision means 
that this ratio is reverting back to 1.3 to 1, and Section 205.150 
provides that the ratio used for ERMS shall indeed revert back to 1.3 
to 1. Thus, the Illinois rules accommodate the effects of the court's 
ruling, and the court's ruling does not alter the approvability of 
Illinois' Part 205 rules.
    Illinois requested that EPA defer rulemaking on Section 205.150(e). 
This section provides that new sources providing offsets by holding 
trading program allowances in the proper ratio need not also provide 
offsets in their new source permit. Illinois made a similar request for 
deferral of EPA rulemaking on this section in conjunction with its 1997 
submittal of ERMS rules. While a new source may use a shutdown for both 
purposes, purchasing the necessary allowances from a shutdown source 
and simultaneously using the shutdown in the new source permit to 
satisfy offset requirements, the deferral of rulemaking provides that 
the two requirements must be met independently.
    Illinois made a corollary change, changing the term ``Chicago ozone 
nonattainment area'' to the term ``Chicago area.'' The term ``Chicago 
area'' is defined to mean the same area as the previous term ``Chicago 
ozone nonattainment area,'' but the revised term more clearly signifies 
that the program will remain in effect even if the Chicago area is 
redesignated as an attainment area.
    In addition to the rules identified above, Illinois made conforming 
revisions to multiple other rules. These revisions generally replace 
the term ``Chicago nonattainment area'' with the term ``Chicago area'' 
or mention FESOPs as a possible vehicle for specifying source-specific 
provisions to implement the ERMS rules.
    EPA finds these changes approvable. The change in the applicability 
provisions merely assures that the original program applicability 
criteria continue to apply, notwithstanding any change in the 
classification or designation of the area. The requirement

[[Page 5438]]

for sources with potential emissions between 25 and 100 tons per year 
to obtain FESOPs is a reasonable means of implementing the ERMS 
requirements at any time when these sources are not required to obtain 
a Title V permit. Illinois' provision for offset ratios, wherein new 
source emissions are offset at the ratio that reflects the offset ratio 
that is mandated at the time the permit authorizing the new source 
emissions is issued, properly matches offset requirements. The use of 
the term ``Chicago area'' also properly clarifies that the program 
continues even if the area is redesignated to attainment.

II. What action is EPA taking?

    EPA is approving Illinois' revisions to the ERMS program, except 
that EPA is deferring action on Section 205.150(e). EPA is publishing 
this action without prior proposal because EPA views this as a 
noncontroversial amendment and anticipates no adverse comments. 
However, in the proposed rules section of this Federal Register 
publication, EPA is publishing a separate document that will serve as 
the proposal to approve the state plan if relevant adverse written 
comments are filed. This rule will be effective March 31, 2008 without 
further notice unless EPA receives relevant adverse written comments by 
February 29, 2008. If EPA receives such comments, EPA will withdraw 
this action before the effective date by publishing a subsequent 
document that will withdraw the final action. All public comments 
received will then be addressed in a subsequent final rule based on the 
proposed action. EPA will not institute a second comment period. Any 
parties interested in commenting on this action should do so at this 
time. If EPA does not receive any comments, this action will be 
effective March 31, 2008.
    Illinois did not change every rule in part 205. The State submitted 
only those rules that it changed. Thus, the revised rules being 
approved here must be viewed in conjunction with the unrevised rules 
approved at 40 CFR 52.720(c)(158).

III. 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 That Significantly Affect Energy Supply, 
Distribution, or Use

    Because it is not a ``significant regulatory action'' under 
Executive Order 12866 or a ``significant energy action,'' 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).

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 (59 
FR 22951, 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 March 31, 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

[[Page 5439]]

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, Ozone, Reporting and 
recordkeeping requirements, Volatile organic compounds.

    Dated: December 18, 2007.
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 O--Illinois

0
2. Section 52.720 is amended by adding paragraph (c)(180) to read as 
follows:

Sec.  52.720  Identification of plan.

* * * * *
    (c) * * *
    (180) On January 10, 2007, Illinois submitted revisions to its 
rules for the Emission Reduction Market System. These revisions assure 
that sources in the Chicago area with potential emissions of VOC 
between 25 and 100 tons per year will remain subject to the program, 
irrespective of changes in the area's ozone nonattainment 
classification or designation and any associated changes in whether 
such sources are defined to be major sources. EPA is again deferring 
action on section 205.150(e).
    (i) Incorporation by reference.
    (A) The following sections of 35 Illinois Administrative Code Part 
205, as effective June 13, 2005: sections 205.120, 205.130, 205.150 
(except for 205.150(e)), 205.200, 205.205, 205.210, 205.220, 205.300, 
205.310, 205.315, 205.316, 205.318, 205.320, 205.330, 205.335, 205.337, 
205.400, 205.405, 205.410, 205.500, 205.510, 205.610, 205.700, 205.730, 
205.750, and 205.760.

 [FR Doc. E8-806 Filed 1-29-08; 8:45 am]

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