Document ID: EPA-R02-OAR-2007-0233-0014
Agency: epa
Document Type: Rule
Title: Approval and Promulgation of Implementation Plans; New Jersey: Clean Air Interstate Rule
Posted Date: 2007-10-01T04:00Z

[Federal Register: October 1, 2007 (Volume 72, Number 189)]
[Rules and Regulations]               
[Page 55666-55672]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01oc07-6]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52 and 97

[EPA-R02-OAR-2007-0233; FRL-8472-5]

 
Approval and Promulgation of Implementation Plans; New Jersey: 
Clean Air Interstate Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is taking final action to approve a revision to New 
Jersey's State Implementation Plan (SIP) submitted on February 6, 2007, 
and subsequently revised on July 9, 2007. This revision incorporates 
provisions related to the implementation of EPA's Clean Air Interstate 
Rule (CAIR), and the CAIR Federal Implementation Plan (CAIR FIP) 
concerning SO2, NOX annual, NOX ozone 
season emissions for the State of New Jersey. The SIP revision that EPA 
is fully approving is an ``abbreviated'' SIP revision that addresses 
the methodology to be used to allocate annual and ozone season NOX 
allowances under the CAIR FIPs. The SIP revision that EPA is approving 
will also satisfy New Jersey's 110(a)(2)(D)(i) obligations to submit a 
SIP revision that contains adequate provisions to prohibit air 
emissions from adversely affecting another state's air quality through 
interstate transport. EPA is not making any changes to the CAIR FIP, 
but is amending the appropriate appendices in the CAIR FIP trading 
rules simply to note approval of New Jersey's SIP revision.

DATES: This rule is effective on October 31, 2007.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-R02-OAR-2007-0233. All documents in the docket are available 
online at http://www.regulations.gov. Although listed in the index, 

some information is not publicly available,

[[Page 55667]]

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 in http://www.regulations.gov
 or in hard copy at the Air Programs Branch, 

Environmental Protection Agency, Region 2 Office, 290 Broadway, 25th 
Floor, New York, New York 10007-1866.

FOR FURTHER INFORMATION CONTACT: For information, contact Mr. Kenneth 
Fradkin, Environmental Protection Agency, Region 2 Office, 290 
Broadway, 25th Floor, New York, New York 10007-1866, phone number (212) 
637-3702 or by e-mail at: fradkin.kenneth@epa.gov.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. What Action Is EPA Taking?
II. What Is the Regulatory History of CAIR and the CAIR FIPs?
III. What Are the General Requirements of CAIR and the CAIR FIPs?
IV. What Is the Result of EPA's Evaluation of New Jersey's CAIR SIP 
Submittal?
    A. State Budgets for Allowance Allocations
    B. CAIR Cap-and-Trade Programs
    C. Applicability Provisions for Non-EGUs NOX SIP Call 
Sources
    D. NOX Allowance Allocations
    E. Allocation of NOX Allowances From the Compliance 
Supplement Pool
    F. Individual Opt-in Units
    G. Satisfying Section 110(a)(2)(D)(i) of the Clean Air Act
V. Final Action
VI. Statutory and Executive Order Reviews

I. What Action Is EPA Taking?

CAIR SIP and 110(a)(2)(D)(i) Approval

    EPA is taking final action to approve a revision to New Jersey's 
SIP, submitted on February 6, 2007, as revised. In response to EPA's 
comments provided during New Jersey's rulemaking and in the proposed 
approval, New Jersey adopted new rules regarding the Clean Air 
Interstate Rule (CAIR) NOX Trading Program on June 19, 2007. 
The State submitted these rules to EPA on July 9, 2007. The adoption 
was published in the New Jersey Register on July 16, 2007 (39 N.J.R. 
2637(a)). The SIP revision modifies the application of certain 
provisions of the CAIR FIPs that require emission reductions of 
SO2, NOX annual, and NOX ozone season 
emissions. This less comprehensive CAIR SIP is termed an abbreviated 
SIP. This revision includes a new regulation, N.J.A.C. 7:27-30, Clean 
Air Interstate Rule (CAIR) NOX Trading Program. As part of 
the revision, New Jersey has also adopted N.J.A.C. 7:27-31.23 to 
provide the date when New Jersey's CAIR NOX Trading Program 
will replace New Jersey's NOX Budget Trading Program 
(Subchapter 31). New Jersey has also adopted ``7:27A-3.10 Civil 
administrative penalties for violation of the rules adopted pursuant to 
the Act.''
    New Jersey is subject to the CAIR FIPs that implement the CAIR 
requirements by requiring certain Electric Generating Units (EGUs) to 
participate in the EPA-administered Federal CAIR SO2, 
NOX annual, and NOX ozone season cap-and-trade 
programs. The SIP revision provides a methodology for allocating 
NOX allowances for the NOX annual, and NOX 
ozone season trading programs. The CAIR FIPs provide that this 
methodology, upon approval by EPA, will be used to allocate NOX 
allowances to sources in New Jersey, instead of the federal allocation 
methodology otherwise provided in the FIPs. The SIP revision also 
retires rather than allocates allowances from the NOX annual 
Compliance Supplement Pool (CSP).
    EPA has determined that New Jersey's CAIR NOX Trading 
Program, as finalized in the New Jersey Register on July 16, 2007 ((39 
N.J.R. 2637(a)), satisfies the applicable requirements for an 
abbreviated CAIR SIP revision. Consistent with the flexibility provided 
in the FIPs, the provisions of New Jersey's CAIR NOX Trading 
Program will be used to replace or supplement, as appropriate, the 
corresponding provisions in the CAIR FIPs for New Jersey. EPA will not 
make any changes to the CAIR FIP, but will amend the appropriate 
appendices in the CAIR FIP trading rules simply to note approval of the 
New Jersey CAIR NOX Trading Program.
    EPA is also approving ``N.J.A.C. 7:27-31.23 Replacement of the 
NOX Budget Program'' which establishes a transition date for 
the replacement of the State's NOX Budget Program 
(Subchapter 31), beginning with the 2009 control period, with the New 
Jersey CAIR program.
    In addition, EPA is also approving a revision to New Jersey's SIP 
to address the requirements of section 110(a)(2)(D)(i) of the Clean Air 
Act (CAA). This section of the CAA requires each state to submit a SIP 
that contains adequate provisions to prohibit sources in the state from 
emitting any air pollutants in amounts which will: (1) Contribute 
significantly to downwind nonattainment of the NAAQS, (2) interfere 
with maintenance of the NAAQS, (3) interfere with provisions to prevent 
significant deterioration of air quality, and (4) interfere with 
efforts to protect visibility.
    On July 3, 2007, EPA proposed full approval of New Jersey's SIP 
revision provided that New Jersey's final rule was consistent with the 
modifications provided in EPA's comments during rulemaking and in its 
proposal (72 FR 36406). EPA has determined that New Jersey's revised 
CAIR rule, adopted June 19, 2007, has addressed the concerns, discussed 
in its comments during rulemaking and in the proposed approval, 
regarding shutdown units, correction of allocations to new and existing 
units, and prorating for the New Source/Growth Reserve. The comment 
period for the EPA proposal closed on August 2, 2007. No comments were 
received. EPA is finalizing full approval based on the rationale stated 
in the proposal and in this final action.

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

    The Clean Air Interstate Rule (CAIR) was published by EPA on May 
12, 2005 (70 FR 25162). In this rule, EPA determined that 28 states and 
the District of Columbia contribute significantly to nonattainment and 
interfere with maintenance of the National Ambient Air Quality 
Standards (NAAQS) for fine particles (PM2.5) and/or 8-hour 
ozone in downwind states in the eastern part of the country. As a 
result, EPA required those upwind states to revise their SIPs to 
include control measures that reduce emissions of SO2, which 
is a precursor to PM2.5 formation, and/or NOX, 
which is a precursor to both ozone and PM2.5 formation. For 
jurisdictions that contribute significantly to downwind PM2.5 
nonattainment, CAIR sets annual 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 for 
NOX for the ozone season (May 1st to September 30th). Under 
CAIR, states may implement these emission budgets by participating in 
the EPA-administered cap-and-trade programs or by adopting any other 
control measures.
    CAIR explains to subject states what must be included in SIPs to 
address the requirements of section 110(a)(2)(D) of the CAA with regard 
to interstate transport with respect to the 8-hour ozone and PM2.5 
NAAQS. EPA made national findings, effective May 25, 2005, that the 
subject states had failed to submit SIPs meeting the requirements of 
section 110(a)(2)(D). The SIPs were

[[Page 55668]]

due in July 2000, 3 years after the promulgation of the 8-hour ozone 
and PM2.5 NAAQS. These May 25, 2005 findings started a 2-
year clock for EPA to promulgate a Federal Implementation Plan (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 August 
17, 2006, EPA issued guidance for SIP submissions states should make to 
address the requirements of section 110(a)(2)(D)(i) for the 8-hour 
ozone and PM2.5 NAAQS.
    On April 28, 2006, EPA promulgated FIPs for all states covered by 
CAIR in order to ensure the emissions reductions required by CAIR are 
achieved on schedule. Each CAIR state is subject to the FIPs until the 
state fully adopts, and EPA approves, a SIP revision meeting the 
requirements of CAIR. The CAIR FIPs require certain EGUs to participate 
in the EPA-administered CAIR SO2, NOX annual, and 
NOX ozone-season model trading programs, as appropriate. The 
CAIR FIP SO2, NOX annual, and NOX 
ozone season trading programs impose essentially the same requirements 
as, and are integrated with, the respective CAIR SIP trading programs. 
The integration of the CAIR FIP and SIP trading programs means that 
these trading programs will work together to create effectively a 
single trading program for each regulated pollutant (SO2, 
NOX annual, and NOX ozone season) in all states 
covered by a CAIR FIP or SIP trading program for that pollutant. The 
CAIR FIPs also allow states to submit abbreviated SIP revisions that, 
if approved by EPA, will automatically replace or supplement the 
corresponding CAIR FIP provisions (e.g., the methodology for allocating 
NOX allowances to sources in the state), while the CAIR FIP 
remains in place for all other provisions.
    On April 28, 2006, EPA published CAIR-related final rules that 
added the states of Delaware and New Jersey to the list of states 
subject to CAIR for PM2.5.

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 Is the Result of EPA's Evaluation of New Jersey's CAIR SIP 
Submittal?

A. State Budgets for Allowance Allocations

    The CAIR FIP established the EGU budgets for New Jersey as 12,670 
tons for the years 2009-2014 (Phase I) and 10,558 tons for the years 
2015 and beyond (Phase II) for NOX annual emissions; 6,654 
tons for the years 2009-2014 (Phase I) and 5,545 tons for the years 
2015 and beyond (Phase II) for NOX ozone season emissions; 
and 32,392 tons for the years 2010-2014 (Phase I) and 22,674 tons for 
the years 2015 and beyond (Phase II) for SO2 emissions. New 
Jersey's SIP revision does not affect these budgets, which are the 
total amount of allowances available for allocation for each year under 
the EPA-administered cap-and-trade program under the CAIR FIP. In 
short, the abbreviated SIP revision only affects allocations of 
allowances under the established budgets.

B. CAIR Cap-and-Trade Programs

    The CAIR NOX annual and ozone-season FIPs both largely 
mirror the structure of the NOX SIP Call model trading rule 
in 40 CFR part 96, subparts A through I. While the provisions of the 
NOX annual and ozone-season FIPs are similar, there are some 
differences. For example, the NOX annual FIP (but not the 
NOX ozone season FIP) provides for a Compliance Supplement 
Pool (CSP), discussed below, under which allowances may be awarded for 
early reductions of NOX annual emissions. As a further 
example, the NOX ozone season FIP reflects the fact that the 
CAIR NOX ozone season trading program replaces the 
NOX SIP Call trading program for EGUs after the 2008 ozone 
season and is coordinated with the NOX SIP Call program. 
States also have the option of continuing to meet their NOX 
SIP Call non-EGU reduction obligations by participating in the CAIR 
NOX ozone season trading program and including all their 
NOX SIP Call trading sources in that program. In addition, 
the NOX ozone season FIP provides incentives for early 
emissions reductions by allowing banked, pre-2009 NOX SIP 
Call allowances to be used for compliance in the CAIR NOX 
ozone-season trading program.
    The provisions of the CAIR SO2 FIP are also similar to 
the provisions of the NOX annual and ozone season FIPs. 
However, the SO2 FIP is coordinated with the ongoing Acid 
Rain SO2 cap-and-trade program under CAA title IV. The 
SO2 FIP uses the title IV allowances for compliance, with 
each allowance allocated for 2010-2014 authorizing only 0.50 ton of 
emissions and each allowance allocated for 2015 and thereafter 
authorizing only 0.35 ton of emissions. Banked title IV allowances 
allocated for years before 2010 can be used at any time in the CAIR 
SO2 cap-and-trade program, with each such allowance 
authorizing 1 ton of emissions. Title IV allowances are to be freely 
transferable among sources covered by the Acid Rain Program and sources 
covered by the CAIR SO2 cap-and-trade program.
    EPA used the CAIR model trading rules as the basis for the trading 
programs in the CAIR FIPs. The CAIR FIP trading rules are virtually 
identical to the CAIR model trading rules, with changes made to account 
for federal rather than state implementation. The CAIR model 
SO2, NOX annual, and NOX ozone season 
trading rules and the respective CAIR FIP trading rules are designed to 
work together as integrated SO2, NOX annual, and 
NOX ozone season trading programs.
    New Jersey is subject to the CAIR FIPs for ozone and 
PM2.5 and the CAIR FIP trading programs for SO2, 
NOX annual, and NOX ozone season apply to sources 
in New Jersey. Consistent with the flexibility it gives to states, the 
CAIR FIPs provide that states may submit abbreviated SIP revisions that 
will replace or supplement, as appropriate, certain provisions of the 
CAIR FIP trading programs. The submission by New Jersey on February 6, 
2007, as subsequently revised and submitted on

[[Page 55669]]

July 9, 2007, is such an abbreviated SIP revision.

C. Applicability Provisions for non-EGU NOX SIP Call Sources

    States have the option of bringing in, for the CAIR NOX 
ozone season program only, those units in a state's NOX SIP 
Call trading program that are not EGUs as defined under CAIR. EPA 
advises states exercising this option to use provisions for 
applicability that are substantively identical to the provisions in 40 
CFR 96.304 and add the applicability provisions in the State's 
NOX SIP Call trading rule for non-EGUs to the applicability 
provisions in 40 CFR 96.304 in order to include in the CAIR 
NOX ozone season trading program all units required to be in 
the State's NOX SIP Call trading program that are not 
already included under 40 CFR 96.304. Under this option, the CAIR 
NOX ozone season program must cover all large industrial 
boilers and combustion turbines, as well as any small EGUs (i.e. units 
serving a generator with a nameplate capacity of 25 MWe or less), that 
the State currently requires to be in the NOX SIP Call 
trading program.
    Consistent with the flexibility given to states in the CAIR FIP, 
New Jersey has chosen not 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. New 
Jersey's non-EGUs and small electric generating units (EGUs) will be 
subject to Reasonable Available Control Technology (RACT) or state of 
the art rules.

D. NOX Allowance Allocations

    Under the NOX allowance allocation methodology in the 
CAIR model trading rules and in the CAIR FIPs, NOX annual 
and NOX ozone season allowances are allocated to units that 
have operated at least 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 FIPs also provide a new unit set-aside from 
which units without five years of operation are allocated allowances 
based on the units' prior year emissions. The CAIR FIPs provide states 
the flexibility to establish a different NOX allowance 
allocation methodology that will be used to allocate allowances to 
sources in the states if certain requirements are met concerning the 
timing of submission of units' allocations to the Administrator for 
recordation and the total amount of allowances allocated for each 
control period.
    New Jersey has chosen to replace the provisions of the CAIR 
NOX annual and ozone season FIP concerning allowance 
allocations with its own methodology. New Jersey will distribute 
NOX annual and ozone season allowances to CAIR units based 
upon historical electrical and thermal output. Allowances will be 
distributed and not auctioned. The distribution of allowances will be 
based on the previous three years of data. New Jersey has established 
set-asides for new source/growth (``New Source/Growth Reserve''), and 
energy efficiency and renewable energy programs or techniques 
(``Incentive Reserve''). Each year, New Jersey is allocating ten 
percent of the State's CAIR NOX annual and CAIR 
NOX ozone season budgets to the New Source/Growth Reserve, 
and five percent of the State's CAIR NOX annual and CAIR 
NOX ozone season budgets to the Incentive Reserve. 
Additional details regarding New Jersey's NOX allocation 
methodology can be found in EPA's proposal to approve New Jersey's SIP 
revision, which was published in the Federal Register on July 3, 2007 
(72 FR 36406).
    In the proposal published on July 3, 2007, EPA stated that several 
provisions of New Jersey's NOX allocation proposal were 
inconsistent with the NOX allocation timing requirements of 
the abbreviated SIP revision requirements and the CAIR FIP trading 
programs. EPA further stated that full approval of New Jersey's 
proposed regulation was contingent upon New Jersey modifying their 
proposed rule in order to clarify that EPA's NOX allocation 
timing requirements will be met under New Jersey's program. Sections 
51.123(p)(1)(ii)(B) and (ee)(2)(ii)(C) of CAIR require that the State 
determines and notifies the Administrator of each existing unit's 
allowance allocation at least 3 years in advance of the CAIR FIP 
NOX annual and ozone season programs. Sections 
51.123(p)(1)(ii)(C) and (ee)(2)(ii)(D) require that the state 
determines, and notifies the Administrator of each new unit's 
allowances by October 31 (for the CAIR NOX annual trading 
program) or July 31 (for the CAIR NOX ozone season trading 
program) of the year for which the allowances are being allocated.
    As we indicated in our July 3, 2007 proposal, New Jersey's proposed 
regulation did not meet NOX allocation timing requirements 
for existing or new units that must surrender and transfer allowances 
to EPA for retirement for the year in which the unit shuts down and any 
year thereafter. As written in New Jersey's proposed rule, the owner or 
operator of an existing unit that is required to surrender allowances 
will no longer be able to buy or sell allowances, or undertake other 
allowance market activities, that were provided three years in advance 
and already recorded into their compliance account. EPA indicated that 
it was not clear from New Jersey's proposal what the timing would be 
for surrendering the allowances, and whether the State intended for 
recorded allowances to be surrendered.
    In response to EPA's comment, New Jersey modified its rule 
concerning allocations for shutdown units. EPA has determined that the 
modification is acceptable because it terminates future allocations 
once a unit is permanently shut down, but does not take back any 
allowances that were previously allocated to the unit.
    EPA also indicated, in our July 3, 2007 proposal, that New Jersey's 
regulation as proposed did not meet NOX allocation timing 
requirements with regard to the provision in New Jersey's rule that 
provides the state may determine that existing (or new) units for 
current or past years had been erroneously allocated too many or too 
few allowances based on inaccurate data or projections. As written in 
the proposed rule, it was unclear how long after determination and 
recordation of an allocation New Jersey may determine that the 
allocation was incorrect.
    In response to EPA's comment, New Jersey modified its rule 
concerning the correction of allocations for existing and new units. 
EPA has determined that the modification is acceptable because it 
allows corrections only before, and not after, the EPA Administrator 
records the allocations. This removes the potential for taking back 
units' allocations after recordation.
    EPA also indicated in our July 3, 2007 proposal that New Jersey's 
proposed rule also provided that if the sum of new unit allocations 
(determined by October 31 or July 31 of the year for which allocations 
are made) and the existing unit growth allocations (determined by the 
end of the year for which allocations are made) exceeded the total 
amount of the New Source/Growth Reserve for the year, all the 
allocations from the reserve will be reduced on a pro-rata basis so 
that the total amount allocated to these new and existing units does 
not exceed the reserve. We stated that New Jersey should clarify that 
the allocation-proration provisions will be applied to new unit 
allocations before the October 31 deadline for NOX annual 
submission, or before the July 31 deadline for the NOX ozone 
season submission of new unit allocations to EPA and applied to the 
existing unit growth allocations

[[Page 55670]]

before the March 1 deadline for submission of those allocations to EPA.
    New Jersey modified the proposed rule concerning allocations from 
the New Source/Growth Reserve so that the application of pro-rata 
distribution of such allocations is performed separately for new units 
and for existing units with growth and the process for new units is 
performed before new-unit allowances are allocated. EPA has determined 
that the modification is acceptable because it removes the potential 
for take back of new units' allocations.
    EPA is taking final action to approve New Jersey's methodology for 
allocating NOX allowances for the NOX annual and 
NOX ozone season trading programs because the methodology is 
consistent with the flexibility that CAIR provides states with regard 
to allocation methodologies.

E. Allocation of NOX Allowances From the Compliance Supplement Pool

    The Compliance Supplement Pool (CSP) provides an incentive for 
early reductions in NOX annual emissions. The CSP consists 
of 200,000 CAIR NOX annual allowances of vintage 2009 for 
the entire CAIR region, and a state's share of the CSP is based upon 
the state's share of the projected emission reductions under CAIR. The 
CAIR NOX annual FIP establishes specific methodologies for 
allocations of CSP allowances. States may choose an allowed, 
alternative CSP allocation methodology to be used to allocate CSP 
allowances to sources in those states. EPA had allocated to New Jersey 
allowances equal to 660 tons of NOX annual emissions for 
possible distribution.
    New Jersey has chosen to modify the provisions of the CAIR 
NOX annual FIP concerning the allocation of allowances from 
the CSP. New Jersey has chosen to retire all of the CSP allowances 
budgeted for New Jersey by not allocating them to CAIR units. EPA is 
taking final action to approve New Jersey's retirement of the CSP 
allowances budgeted to New Jersey since this is consistent with the 
flexibility provided to states under CAIR.

F. Individual Opt-In Units

    The opt-in provisions allow for certain non-EGUs (i.e., boilers, 
combustion turbines, and other stationary fossil-fuel-fired devices) 
that do not meet the applicability criteria for a CAIR trading program 
to participate voluntarily in (i.e., opt into) the CAIR trading 
program. A non-EGU may opt into one or more of the CAIR trading 
programs. In order to qualify to opt into a CAIR trading program, a 
unit must vent all emissions through a stack and be able to meet 
monitoring, recordkeeping, and recording requirements of 40 CFR part 
75. The owners and operators seeking to opt a unit into a CAIR trading 
program must apply for a CAIR opt-in permit. If the unit is issued a 
CAIR opt-in permit, the unit becomes a CAIR unit, is allocated 
allowances, and must meet the same allowance-holding and emissions 
monitoring and reporting requirements as other units subject to the 
CAIR trading program. The opt-in provisions provide for two 
methodologies for allocating allowances for opt-in units, one 
methodology that applies to opt-in units in general and a second 
methodology that allocates allowances only to opt-in units that the 
owners and operators intend to repower before January 1, 2015.
    States have several options concerning the opt-in provisions. The 
rules for each of the CAIR FIP trading programs include opt-in 
provisions that are essentially the same as those in the respective 
CAIR SIP model rules, except that the CAIR FIP opt-in provisions become 
effective in a state only if the state's abbreviated SIP revision 
adopts the opt-in provisions. The state may adopt the opt-in provisions 
entirely or may adopt them but exclude one of the allowance allocation 
methodologies. The state also has the option of not adopting any opt-in 
provisions in the abbreviated SIP revision and thereby providing for 
the CAIR FIP trading program to be implemented in the State without the 
ability for units to opt into the program.
    New Jersey has chosen not to allow non-EGUs meeting the FIP 
specified requirements to participate in the CAIR NOX annual 
trading program, the CAIR NOX ozone season trading program, 
and the SO2 trading program.

G. Satisfying Section 110(a)(2)(D)(i) of the Clean Air Act

    Section 110(a)(2)(D)(i) of the CAA requires each state to submit a 
SIP that prohibits emissions that could adversely affect another state. 
The SIP must prevent sources in the state from emitting pollutants in 
amounts that will: (1) Contribute significantly to downwind 
nonattainment of the NAAQS, (2) interfere with maintenance of the 
NAAQS, (3) interfere with provisions to prevent significant 
deterioration of air quality, and (4) interfere with efforts to protect 
visibility.
    EPA issued guidance on August 15, 2006, relating to SIP submissions 
to meet the requirements of section 110(a)(2)(D)(i). As discussed 
below, New Jersey's SIP revision with respect to the statutory 
requirements is consistent with the guidance.
    New Jersey addresses the first two of these four elements by 
complying with the requirements of CAIR. New Jersey satisfies these 
requirements either by relying on the existing CAIR FIPs, or through 
approval of this SIP revision.
    The third element New Jersey addresses is prevention of significant 
deterioration (PSD). In accordance with the guidance issued on August 
15, 2006, states may continue to rely on their existing Nonattainment 
New Source Review (NNSR) and PSD permitting programs to prevent 
significant deterioration of air quality within their own boundaries 
and in adjacent states. For 8-hour ozone, the state has met the 
obligation by confirming that the existing ozone Nonattainment New 
Source Review (NNSR) permitting program remains in effect and applies 
to the 8-hour ozone NAAQS for the State's major stationary sources. New 
Jersey has noted that the State's current NNSR program retains the 
lower applicability levels and higher off-set ratios previously 
required under the states 1-hour ozone classification. EPA anticipates 
that the state will adopt a final attainment demonstration for the 8-
hour ozone NAAQS by September 8, 2007. For PM2.5, the State 
has confirmed that the state's NNSR and PSD programs are being 
implemented in accordance with EPA's interim guidance calling for the 
use of PM10 as a surrogate for PM2.5. New Jersey 
commits to revising its NNSR program and adopting a PSD program after 
EPA finalizes its PM2.5 implementation rule.
    It should be noted that the entire State of New Jersey is 
nonattainment for 8-hour ozone, necessitating only a NNSR program (not 
PSD) for ozone. For PM2.5 the State has both attainment and 
non-attainment areas, necessitating both NNSR and PSD programs for 
PM2.5.
    Consistent with EPA's August 15, 2006 guidance, at this time, it is 
impossible for New Jersey to accurately determine whether there is 
interference with measures in another state's SIP designed to protect 
visibility, which is the fourth element that was addressed. New Jersey 
has indicated that it will address the visibility protection 
requirements once the regional haze SIP is completed and submitted to 
EPA in December of 2007.
    EPA is taking final action finding that the SIP revision adequately 
addresses the required elements of 110(a)(2)(D)(i) with the exception 
of the requirement to protect visibility. This requirement will be re-
evaluated after the regional haze

[[Page 55671]]

SIP is completed and submitted to EPA in December 2007.

V. Final Action

    EPA is taking final action to fully approve New Jersey's 
abbreviated SIP revision submitted on February 6, 2007, and 
subsequently revised on July 9, 2007. New Jersey is covered by the CAIR 
FIPs, which require participation in the EPA-administered CAIR FIP cap-
and-trade for SO2, NOX annual, NOX 
ozone season emissions. Under this abbreviated SIP revision and 
consistent with the flexibility given to states in the FIPs, New Jersey 
has adopted under N.J.A.C. 7:27-30, the CAIR NOX Trading 
Program, provisions for allocating allowances under the CAIR FIP 
NOX annual and ozone season trading programs. In addition, 
New Jersey has also adopted at N.J.A.C. 7:27-31.23 the date when New 
Jersey's CAIR NOX Trading Program will replace New Jersey's 
NOX Budget Trading Program (Subchapter 31). New Jersey has 
also adopted in the abbreviated SIP revision provisions that retire CSP 
allowances. As provided for in the CAIR FIPs, New Jersey provisions for 
allocating NOX annual and ozone season allowances and for 
retiring CSP allowances, will replace or supplement the corresponding 
provisions of the CAIR FIPs in New Jersey. EPA has determined that New 
Jersey's abbreviated CAIR SIP revision meets the applicable 
requirements in 40 CFR 51.123(p) and (ee) with regard to NOX 
annual and NOX ozone season emissions. EPA is not making 
changes to the CAIR FIP, but is amending the appropriate appendices of 
40 CFR part 97 in the CAIR FIP trading rules simply to note approval of 
New Jersey's SIP revision.
    EPA is also taking final action regarding the required elements of 
110(a)(2)(D)(i). EPA has determined that, with the exception of the 
protection of visibility requirement, that the SIP revision adequately 
addresses the requirements of 110(a)(2)(D)(i). This requirement will be 
re-evaluated after the regional haze SIP is completed and submitted to 
EPA in December 2007.

VI. 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 approves State law as meeting Federal requirements and would 
impose 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.). 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).
    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 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 approves a State rule implementing a 
Federal standard.
    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the CAA. In this 
context, in the absence of a prior existing requirement for the State 
to use voluntary consensus standards (VCS), EPA has no authority to 
disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the 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. 
section 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 30, 2007. 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, Electric 
utilities, Incorporation by reference, Intergovernmental relations, 
Nitrogen oxides, Ozone, Particulate matter, Reporting and recordkeeping 
requirements, Sulfur dioxide.

40 CFR Part 97

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

    Dated: September 18, 2007.
Alan J. Steinberg,
Regional Administrator, Region 2.

0
40 CFR parts 52 and 97 are 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.

[[Page 55672]]

Subpart FF--New Jersey

0
2. Section 52.1570 is amended by adding new paragraph (c)(83) to read 
as follows:

Sec.  52.1570  Identification of plans.

* * * * *
    (c) * * *
    (83) Revisions to the State Implementation Plan and submitted on 
February 6, 2007 as proposed, and subsequently adopted and submitted on 
July 9, 2007 by the State of New Jersey Department of Environmental 
Protection (NJDEP) that establishes rules for the allowance allocation 
of oxides of nitrogen (NOX) for the annual and ozone season 
Clean Air Interstate Rule (CAIR) NOX Cap and Trade Programs. 
The submission also establishes a date when the CAIR NOX 
Trading Programs will replace the State's NOX Budget 
Program, and satisfies New Jersey's 110(a)(2)(D)(i) obligations to 
submit a SIP revision that contains adequate provisions to prohibit air 
emissions from adversely affecting another state's air quality through 
interstate transport.
    (i) Incorporation by reference:
    (A) Title 7, Chapter 27, Subchapter 30 of the New Jersey 
Administrative Code entitled ``Clean Air Interstate Rule (CAIR) 
NOX Trading Program,'' effective July 16, 2007 and Title 7, 
Chapter 27, Subchapter 31, Section 23 of the New Jersey Administrative 
Code entitled ``NOX Budget Program,'' effective July 16, 
2007.
    (ii) Additional information:
    (A) February 2, 2007 letter from Commissioner Lisa P. Jackson, 
NJDEP, to Alan J. Steinberg, EPA, submitting proposed SIP revision, and 
request for parallel processing.
    (B) June 26, 2007 letter from Commissioner Lisa P. Jackson, NJDEP, 
to Alan J. Steinberg, EPA, submitting SIP revision.
    (C) December 29, 2006 letter from Commissioner Lisa P. Jackson, 
NJDEP, to Alan J. Steinberg, EPA, indicating how New Jersey has 
addressed the required elements of 110(a)(2)(D)(i).

0
3. In 52.1605, the table is amended by adding an entry for Subchapter 
30 and revising the entry for Subchapter 31 under the heading ``Title 
7, Chapter 27'' to read as follows:

Sec.  52.1605  EPA-approved New Jersey regulations.

----------------------------------------------------------------------------------------------------------------
       State regulation          State effective date        EPA approved date                 Comments
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
                                              Title 7, Chapter 27

                                                  * * * * * * *
Subchapter 30, ``Clean Air     July 16, 2007..........  October 1, 2007 [Insert FR
 Interstate Rule (CAIR) NOX                              page citation].
 Trading Program.''.
Subchapter 31, ``NOX Budget    July 16, 2007..........  October 1, 2007 [Insert FR
 Program.''.                                             page citation].

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

PART 97--[AMENDED]

0
1. The authority citation for part 97 continues to read as follows:

    Authority: 42 U.S.C. 7401, 7403, 7410, 7426, 7601, and 7651, et 
seq.

0
2. Appendix A to Subpart EE is amended by adding the entry for ``New 
Jersey'' in alphabetical order under paragraphs 1. and 2. to read as 
follows:

Appendix A to Subpart EE of Part 97--States With Approved State 
Implementation Plan Revisions Concerning Allocations

* * * * *
    1. * * *

New Jersey

    2. * * *

New Jersey

0
3. Appendix A to Subpart EEEE is amended by adding the entry for ``New 
Jersey'' in alphabetical order under the introductory text to read as 
follows:

Appendix A to Subpart EEEE of Part 97--States With Approved State 
Implementation Plan Revisions Concerning Allocations

* * * * *

New Jersey

[FR Doc. E7-19216 Filed 9-28-07; 8:45 am]

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