Document ID: EPA-R03-OAR-2007-0381-0001
Agency: epa
Document Type: Proposed Rule
Title: Approval and Promulgation of Air Quality Implementation Plans; Virginia; Clean Air Interstate Rule Budget Trading Programs
Posted Date: 2007-09-25T04:00Z

[Federal Register: September 25, 2007 (Volume 72, Number 185)]
[Proposed Rules]               
[Page 54385-54390]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25se07-20]                         

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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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[[Page 54385]]

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2007-0381; FRL-8472-9]

 
Approval and Promulgation of Air Quality Implementation Plans; 
Virginia; Clean Air Interstate Rule Budget Trading Programs

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: EPA is proposing to approve a revision to the Virginia State 
Implementation Plan (SIP) submitted on March 30, 2007 and supplemented 
on April 30, 2007 and June 11, 2007. This revision addresses the 
requirements of EPA's Clean Air Interstate Rule (CAIR), promulgated on 
May 12, 2005 and subsequently revised on April 28, 2006 and December 
13, 2006. EPA is proposing to determine that the SIP revision fully 
implements the CAIR requirements for Virginia. Therefore, as a 
consequence of the SIP approval, EPA will also withdraw the CAIR 
Federal Implementation Plans (FIP) that address sulfur dioxide 
(SO2), nitrogen oxides (NOX) annual, and NOX 
ozone season emissions in Virginia. The CAIR FIPs for all States in the 
CAIR region were promulgated on April 28, 2006 and subsequently revised 
on December 13, 2006. The CAIR requires affected States to reduce 
emissions of SO2 and NOX that significantly 
contribute to, and interfere with maintenance of, the national ambient 
air quality standards (NAAQS) for fine particulates and/or ozone in any 
downwind state. The CAIR establishes State budgets for SO2 
and NOX and requires States to submit SIP revisions that 
implement these budgets in States that EPA determined contribute to 
nonattainment in downwind states. States have the flexibility to choose 
which control measures to adopt to achieve the budgets, and may choose 
whether or not to participate in the EPA-administered cap-and-trade 
programs. In the SIP revision that EPA is proposing to approve, 
Virginia would meet CAIR requirements by participating in the EPA-
administered cap-and-trade programs addressing SO2, NOX 
annual, and NOX ozone season emissions.

DATES: Written comments must be received on or before October 25, 2007.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2007-0381 by one of the following methods:
    A. http://www.regulations.gov. Follow the on-line instructions for 
submitting comments.
    B. E-mail: powers.marilyn@epa.gov.
    C. Mail: EPA-R03-OAR-2007-0381, Marilyn Powers, Acting Chief, Air 
Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection 
Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address. 
Such deliveries are only accepted during the Docket's normal hours of 
operation, and special arrangements should be made for deliveries of 
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-
2007-0381. EPA's policy is that all comments received will be included 
in the public docket without change, and may be made available online 
at http://www.regulations.gov, including any personal information 
provided, unless the comment includes information claimed to be 
Confidential Business Information (CBI) or other information whose 
disclosure is restricted by statute. Do not submit information that you 
consider to be CBI or otherwise protected through http://
www.regulations.gov or e-mail. The http://www.regulations.gov Web site 
is an ``anonymous access'' system, which means EPA will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an e-mail comment directly to EPA without 
going through http://www.regulations.gov, your e-mail address will be 
automatically captured and included as part of the comment that is 
placed in the public docket and made available on the Internet. If you 
submit an electronic comment, EPA recommends that you include your name 
and other contact information in the body of your comment and with any 
disk or CD-ROM you submit. If EPA cannot read your comment due to 
technical difficulties and cannot contact you for clarification, EPA 
may not be able to consider your comment. Electronic files should avoid 
the use of special characters, any form of encryption, and be free of 
any defects or viruses.
    Docket: All documents in the electronic docket are listed in the 
http://www.regulations.gov index. Although listed in the index, some 
information is not publicly available, i.e., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically in http://
www.regulations.gov or in hard copy during normal business hours at the 
Air Protection Division, U.S. Environmental Protection Agency, Region 
III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the 
State submittal are available at the Virginia Department of 
Environmental Quality, 629 East Main Street, Richmond, Virginia 23219.

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

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. What Action Is EPA Proposing To Take?
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 Are the Types of CAIR SIP Submittals?
V. Analysis of Virginia's CAIR SIP Submittal
    A. State Budgets for Allowance Allocations
    B. CAIR Cap-and-Trade Programs
    C. Applicability Provisions for Non-EGU NOX SIP Call 
Sources
    D. NOX Allowance Allocations
    E. Allocation of NOX Allowances From Compliance 
Supplement Pool (CSP)
    F. Individual Opt-in Units
VI. Information Pertaining to SIP Submittals From the Commonwealth 
of Virginia
VII. Proposed Actions
VIII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing To Take?

    EPA is proposing to approve a revision to Virginia's SIP, submitted 
on March 30, 2007 and supplemented on April 30, 2007 and June 11, 2007. 
In its SIP revision, Virginia would meet CAIR

[[Page 54386]]

requirements by requiring certain electric generating units (EGUs) to 
participate in the EPA-administered CAIR cap-and-trade programs 
addressing SO2, NOX annual, and NOX 
ozone season emissions. EPA is proposing to determine that the Virginia 
SIP, as revised, will meet the applicable requirements of CAIR. Any 
final action approving Virginia's SIP revision will be taken by the 
Regional Administrator for Region 3. As a consequence of the SIP 
approval, the EPA Administrator will issue a final rule to withdraw the 
FIPs addressing SO2, NOX annual, and NOX 
ozone season emissions for Virginia, which will delete and reserve 40 
CFR 52.2440 and 2441. The withdrawal of the CAIR FIPs for Virginia is a 
conforming amendment that must be made once the SIP is approved because 
EPA's authority to issue the FIPs was premised on a deficiency in the 
SIP for Virginia. Once the SIP to implement CAIR is fully approved, EPA 
no longer has authority for the FIPs. Thus, EPA will not have the 
option of maintaining the FIPs following the full SIP approval. 
Accordingly, EPA does not intend to offer an opportunity for a public 
hearing or an additional opportunity for written public comment on the 
withdrawal of the FIPs.

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

    The 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 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 reduction requirements by 
participating in the EPA-administered cap-and-trade programs or by 
adopting any other control measures.
    Section 110(a)(2)(D) of the CAA requires states to reduce emissions 
that significantly contribute to nonattainment or interfere with 
maintenance of the NAAQS in downwind states. CAIR explains to subject 
States what must be included in their SIPs to address the requirements 
of section 110(a)(2)(D) with respect to the 8-hour ozone and PM2.5 
NAAQS. EPA made national findings, effective on May 25, 2005, that the 
States had failed to submit SIPs meeting the requirements of section 
110(a)(2)(D). The SIPs were due in July 2000, three years after the 
promulgation of the 8-hour ozone and PM2.5 NAAQS. These 
findings started a 2-year clock for EPA to promulgate a FIP to address 
the requirements of section 110(a)(2)(D). Under CAA section 110(c)(1), 
EPA may issue a FIP anytime after such findings are made and must do so 
within two years unless a SIP revision correcting the deficiency is 
approved by EPA before the FIP is promulgated.
    On April 28, 2006 (71 FR 25328), 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 EGUs 
to participate in the EPA-administered CAIR SO2, NOX 
annual, and NOX ozone season trading programs, as 
appropriate. The SO2, NOX annual, and NOX 
ozone season trading programs of the CAIR FIPs impose essentially the 
same requirements as, and are integrated with, the respective CAIR SIP 
trading programs. The integration of the FIP and SIP trading programs 
means that these trading programs will work together to create, 
effectively, a single trading program for each regulated pollutant 
(SO2, NOX annual, and NOX ozone 
season) in all States covered by the CAIR FIP or SIP trading program 
for that pollutant. The CAIR FIP also allows States to submit 
abbreviated SIP revisions that, if approved by EPA, will automatically 
replace or supplement certain CAIR FIP provisions (e.g., the 
methodology for allocating NOX allowances to sources in the 
State), while the CAIR FIP remains in place for all other provisions.
    On April 28, 2006 (71 FR 25287 and 71 FR 25303), EPA published two 
additional CAIR-related final rules that added the States of Delaware 
and New Jersey to the list of States subject to CAIR for 
PM2.5, and announced EPA's final decisions on 
reconsideration of five issues, without making any substantive changes 
to the CAIR requirements.

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

    The 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. The CAIR requires States to implement the budgets by 
either: (1) Requiring EGUs to participate in the EPA-administered cap-
and-trade programs; or (2) adopting other control measures of the 
State's choosing and demonstrating that such control measures will 
result in compliance with the applicable State SO2 and 
NOX budgets.
    The May 12, 2005 and April 28, 2006 CAIR rules provide model rules 
that States must adopt (with certain limited changes, if desired) if 
they want to participate in the EPA-administered trading programs. With 
two exceptions, only States that choose to meet the requirements of 
CAIR through methods that exclusively regulate EGUs are allowed to 
participate in the EPA-administered trading programs. One exception is 
for States that adopt the opt-in provisions of the model rules to allow 
non-EGUs individually to opt into the EPA-administered trading 
programs. The other exception is for States that include all non-EGUs 
from their NOX SIP Call trading programs in their CAIR 
NOX ozone season trading programs.

IV. What Are the Types of CAIR SIP Submittals?

    States have the flexibility to choose the type of control measures 
they will use to meet the requirements of CAIR. EPA anticipates that 
most States will choose to meet the CAIR requirements by selecting an 
option that requires EGUs to participate in the EPA-administered CAIR 
cap-and-trade programs. For such States, EPA has provided two 
approaches for submitting and obtaining approval for CAIR SIP 
revisions. States may submit full SIP revisions that adopt the model 
CAIR cap-and-trade rules. If approved, these SIP revisions will fully 
replace the CAIR FIPs. Alternatively, States may submit abbreviated SIP 
revisions. These SIP revisions will not replace the CAIR FIPs; however, 
the CAIR FIPs provide that, when approved, the provisions in these 
abbreviated SIP revisions will be used instead of or in conjunction 
with, as appropriate, the corresponding

[[Page 54387]]

provisions of the CAIR FIPs (e.g., the NOX allowance 
allocation methodology).
    A State submitting a full SIP revision may either adopt regulations 
that are substantively identical to the model rules or incorporate by 
reference the model rules. The CAIR provides that States may only make 
limited changes to the model rules if the States want to participate in 
the EPA-administered trading programs. A full SIP revision may change 
the model rules only by altering their applicability and allowance 
allocation provisions to:
    1. Include NOX SIP Call trading sources that are not 
EGUs under CAIR in the CAIR NOX ozone season trading 
program;
    2. Provide for State allocation of NOX annual or ozone 
season allowances using a methodology chosen by the State;
    3. Provide for State allocation of NOX annual allowances 
from the compliance supplement pool (CSP) using the State's choice of 
allowed, alternative methodologies; or
    4. Allow units that are not otherwise CAIR units to opt 
individually into the CAIR SO2, NOX annual, or 
NOX ozone season trading programs under the opt-in 
provisions in the model rules.
    An approved CAIR full SIP revision addressing EGUs' SO2, 
NOX annual, or NOX ozone season emissions will 
replace the CAIR FIP for that State for the respective EGU emissions.

V. Analysis of Virginia's CAIR SIP Submittal

    EPA believes that Virginia clearly intends, by this SIP submittal, 
to replace the CAIR FIP with a State plan that is based on the CAIR 
model rule and allow subject sources, non-EGUs from its NOX 
SIP Call budget trading program, and opt-in units meeting the CAIR opt-
in criteria to participate in the EPA-administered regional CAIR 
trading program. However, EPA also believes that there are some 
provisions of the amendments to Virginia regulations (9 VAC 5-140) that 
could be interpreted in a way that might be inconsistent with the 
Commonwealth's intent. These specific provisions pertain to definitions 
associated with Virginia's participation in the regional CAIR trading 
program, definitions associated with the State's decision to bring its 
non-EGUs from its NOX SIP Call budget trading program into 
the CAIR trading program, and a definition of the term ``most stringent 
state of federal NOX emissions limitation'' that is based 
upon the model rule but has been expanded to include the situation 
where more than one fuel is allowed by a permit.
    On September 12, 2007, EPA sent a letter to the Virginia Department 
of Environmental Quality (VADEQ) asking the Commonwealth to confirm 
that EPA correctly understood how Virginia intended to interpret and 
implement these regulatory definitions. In response to EPA's letter, 
VADEQ sent a letter dated September 17, 2007, confirming in writing its 
interpretations of these regulatory provisions. EPA has reviewed 
VADEQ's interpretations and has determined that they clarify the 
language of the Virginia regulations and are also consistent with 
having the EPA-administered CAIR trading program become effective in 
Virginia. In addition, the letter accepts EPA's recommendation that the 
Commonwealth promulgate and codify clarifying amendments to these 
provisions of its regulations at the earliest opportunity.

A. State Budgets for Allowance Allocations

    The CAIR NOX annual and NOX ozone season 
budgets were developed from historical heat input data for EGUs. Using 
these data, EPA calculated annual and ozone season regional heat input 
values, which were multiplied by 0.15 lb/MMBtu, for phase 1, and 0.125 
lb/MMBtu, for phase 2, to obtain regional NOX budgets for 
2009-2014 and for 2015 and thereafter, respectively. EPA derived the 
State NOX annual and NOX ozone season budgets 
from the regional budgets using State heat input data adjusted by fuel 
factors.
    The CAIR State SO2 budgets were derived by discounting 
the tonnage of emissions authorized by annual allowance allocations 
under the Acid Rain Program under title IV of the CAA. Under CAIR, each 
allowance allocated in the Acid Rain Program for the years in phase 1 
of CAIR (2010 through 2014) authorizes 0.5 ton of SO2 
emissions in the CAIR trading program, and each Acid Rain Program 
allowance allocated for the years in phase 2 of CAIR (2015 and 
thereafter) authorizes 0.35 ton of SO2 emissions in the CAIR 
trading program.
    In today's action, EPA is proposing approval of Virginia's SIP 
revision that adopts the budgets established for the Commonwealth in 
CAIR. These budgets are: 36,074 tons for NOX annual 
emissions from 2009 through 2014, and 30,062 tons from 2015 and 
thereafter; 20,098 tons for NOX ozone season emissions from 
2009 through 2014, and 17,432 tons from 2015 and thereafter; and 63,478 
tons for SO2 emissions from 2010 through 2014, and 44,435 
tons from 2015 and thereafter. Virginia's SIP revision sets these 
budgets as the total amounts of allowances available for allocation for 
each year under the EPA-administered cap-and-trade programs. The 
NOX ozone season budget properly reflects the inclusion of 
NOX SIP Call trading program units in the CAIR 
NOX ozone season program.

B. CAIR Cap-and-Trade Programs

    The CAIR NOX annual and ozone-season model trading rules 
both largely mirror the structure of the NOX SIP Call model 
trading rule in 40 CFR part 96, subparts A through I. While the 
provisions of the NOX annual and NOX ozone-season 
model rules are similar, there are some differences. For example, the 
NOX annual model rule (but not the NOX ozone 
season model rule) provides for a CSP under which allowances may be 
awarded for early reductions of NOX annual emissions. As a 
further example, the NOX ozone season model rule reflects 
the fact that the CAIR NOX ozone season trading program 
replaces the NOX SIP Call trading program after the 2008 
ozone season and is coordinated with the NOX SIP Call 
program. The NOX ozone season model rule provides incentives 
for early emissions reductions by allowing banked, pre-2009 
NOX SIP Call allowances to be used for compliance in the 
CAIR NOX ozone-season trading program.
    In addition, States have the option of continuing to meet their 
NOX SIP Call requirement by participating in the CAIR 
NOX ozone season trading program and including all their 
NOX SIP Call trading sources in that program.
    The provisions of the CAIR SO2 model rule are also 
similar to the provisions of the NOX annual and 
NOX ozone season model rules. However, the SO2 
model rule is coordinated with the ongoing Acid Rain SO2 
cap-and-trade program under title IV of the CAA. The SO2 
model rule uses the title IV allowances for compliance, with each title 
IV allowance allocated for 2010-2014 authorizing only 0.50 ton of 
emissions and each allowance allocated for 2015 and thereafter 
authorizing only 0.35 ton of emissions. Banked title IV allowances 
allocated for years before 2010 can be used at any time in the CAIR 
SO2 cap-and-trade program, with each such allowance 
authorizing 1 ton of emissions. Title IV allowances are to be freely 
transferable among sources covered by the Acid Rain Program and sources 
covered by the CAIR SO2 cap-and-trade program.
    EPA also used the CAIR model trading rules as the basis for the 
trading programs in the CAIR FIPs. The CAIR FIP trading rules are 
virtually identical to the CAIR model trading rules, with

[[Page 54388]]

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

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

    In general, the CAIR model trading rules apply to any stationary, 
fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion 
turbine serving at any time, since the later of November 15, 1990 or 
the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe producing electricity for sale.
    States have the option of bringing in, for the CAIR NOX 
ozone season program only, those units in the State's NOX 
SIP Call trading program that are not EGUs as defined under CAIR. EPA 
advises States exercising this option to add the applicability 
provisions in the State's NOX SIP Call trading rule for non-
EGUs to the applicability provisions in 40 CFR 96.304 in order to 
include in the CAIR NOX ozone season trading program all 
units required to be in the State's NOX SIP Call trading 
program that are not already included under 40 CFR 96.304. Under this 
option, the CAIR NOX ozone season program must cover all 
large industrial boilers and combustion turbines, as well as any small 
EGUs (i.e., units serving a generator with a nameplate capacity of 25 
MWe or less) that the State currently requires to be in the 
NOX SIP Call trading program.
    Virginia has chosen to expand the applicability provisions of the 
CAIR NOX ozone season trading program to include all non-
EGUs in the Commonwealth's NOX SIP Call trading program, and 
has incorporated into CAIR the definitions from its NOX SIP 
Call trading program that are required in order to cover all the large 
industrial boilers and combustion turbines that are currently or may 
become subject to the rule.

D. NOX Allowance Allocations

    Under the NOX allowance allocation methodology in the 
CAIR model trading rules and in the CAIR FIP, NOX annual and 
NOX ozone season allowances are allocated to units that have 
operated for five years, based on heat input data from a three-year 
period that are adjusted for fuel type by using fuel factors of 1.0 for 
coal, 0.6 for oil, and 0.4 for other fuels. The CAIR model trading 
rules and the CAIR FIP also provide a new unit set-aside from which 
units without five years of operation are allocated allowances based on 
the units' prior year emissions.
    States may establish in their SIP submissions a different 
NOX allowance allocation methodology that will be used to 
allocate allowances to sources in the States if certain requirements 
are met concerning the timing of submission of units' allocations to 
the Administrator for recordation and the total amount of allowances 
allocated for each control period. In adopting alternative 
NOX allowance allocation methodologies, States have 
flexibility with regard to:
    1. The cost to recipients of the allowances, which may be 
distributed for free or auctioned;
    2. The frequency of allocations;
    3. The basis for allocating allowances, which may be distributed, 
for example, based on historical heat input or electric and thermal 
output; and
    4. The use of allowance set-asides and, if used, their size.
    Virginia has retained most aspects of the NOX annual and 
NOX ozone season model trading rules pertaining to allowance 
allocations, but has changed the basis for allocating allowances, and 
the use and size of the allowance set-asides, within the flexibilities 
described. The Commonwealth uses a commencement of operation date of 
January 1, 2006 for purposes of calculating the average baseline heat 
input. The CAIR NOX units that commenced operation prior to 
this date receive allowance allocations in accordance with the model 
rule. The CAIR NOX units that commence operation after this 
date receive allocations in accordance with expanded provisions that 
allow for computation of an average heat input for units operating from 
between one to five years. Virginia chose not to adjust for fuel type 
in its computation of average heat input.
    Virginia has also chosen to modify the NOX annual and 
NOX ozone season model rule provisions pertaining to the set 
aside. It has established a new unit set aside that consists of four 
percent of the total Commonwealth budget from 2009 through 2013 and one 
percent from 2014 and after. It has also established an annual, 
voluntary public health set-aside that will be retired, and a one 
percent energy efficiency/renewable energy set-aside for each control 
period.

E. Allocation of NOX Allowances From Compliance Supplement Pool (CSP)

    The CAIR establishes a CSP to provide an incentive for early 
reductions in NOX annual emissions. The CSP consists of 
200,000 CAIR NOX annual allowances of vintage 2009 for the 
entire CAIR region, and a State's share of the CSP is based upon the 
projected magnitude of the emission reductions required by CAIR in that 
State. States may distribute CSP allowances, one allowance for each ton 
of early reduction, to sources that make NOX reductions 
during 2007 or 2008 beyond what is required by any applicable State or 
Federal emission limitation. States also may distribute CSP allowances 
based upon a demonstration of need for an extension of the 2009 
deadline for implementing emission controls.
    The CAIR NOX annual model trading rule establishes 
specific methodologies for allocations of CSP allowances. States may 
choose an allowed, alternative CSP allocation methodology to be used to 
allocate CSP allowances to sources in the States.
    The CSP for Virginia is comprised of 5,134 tons of NOX. 
Virginia has chosen to distribute the CSP, but has modified the 
provisions of the CAIR NOX annual model trading rule 
concerning the allocation of allowances from the CSP. Virginia requires 
that CAIR NOX units that are part of a group of units under 
single ownership, with combined emissions of NOX that 
exceeded 40,000 tons in 2004, collectively reduce emissions in 2007 
and/or 2008 by an amount equal in number to the CSP, and establishes a 
methodology for allocating to such units from the CSP. This change is 
within the flexibility of the CAIR NOX annual model rule.

F. Individual Opt-in Units

    The opt-in provisions of the CAIR SIP model trading rules allow 
certain non-EGUs (i.e., boilers, combustion turbines, and other 
stationary fossil-fuel-fired devices) that do not meet the 
applicability criteria for a CAIR trading program to participate 
voluntarily in (i.e., opt into) the CAIR trading program. A non-EGU may 
opt into one or more of the CAIR trading programs. In order to qualify 
to opt into a CAIR trading program, a unit must vent all emissions 
through a stack and be able to meet monitoring, recordkeeping, and 
recording requirements of 40 CFR part 75. The owners and operators 
seeking to opt a unit into a CAIR trading program

[[Page 54389]]

must apply for a CAIR opt-in permit. If the unit is issued a CAIR opt-
in permit, the unit becomes a CAIR unit, is allocated allowances, and 
must meet the same allowance-holding and emissions monitoring and 
reporting requirements as other units subject to the CAIR trading 
program. The opt-in provisions provide for two methodologies for 
allocating allowances for opt-in units, one methodology that applies to 
opt-in units in general and a second methodology that allocates 
allowances only to opt-in units that the owners and operators intend to 
repower before January 1, 2015.
    States have several options concerning the opt-in provisions. 
States may adopt the CAIR opt-in provisions entirely or may adopt them 
but exclude one of the methodologies for allocating allowances. States 
may also decline to adopt the opt-in provisions at all.
    For the CAIR NOX annual trading program, the CAIR 
NOX ozone season trading program, and the CAIR 
SO2 trading program, Virginia has chosen to allow non-EGUs 
meeting certain requirements to opt into the CAIR NOX annual 
trading program. Virginia has adopted both of the methodologies for 
allocating allowances that are in the model rule.

VI. Information Pertaining to SIP Submittals From the Commonwealth of 
Virginia

    In 1995, Virginia adopted legislation that provides, subject to 
certain conditions, for an environmental assessment (audit) 
``privilege''' for voluntary compliance evaluations performed by a 
regulated entity. The legislation further addresses the relative burden 
of proof for parties either asserting the privilege or seeking 
disclosure of documents for which the privilege is claimed. Virginia's 
legislation also provides, subject to certain conditions, for a penalty 
waiver for violations of environmental laws when a regulated entity 
discovers such violations pursuant to a voluntary compliance evaluation 
and voluntarily discloses such violations to the Commonwealth and takes 
prompt and appropriate measures to remedy the violations. Virginia's 
Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-
1198, provides a privilege that protects from disclosure documents and 
information about the content of those documents that are the product 
of a voluntary environmental assessment. The Privilege Law does not 
extend to documents or information (1) that are generated or developed 
before the commencement of a voluntary environmental assessment; (2) 
that are prepared independently of the assessment process; (3) that 
demonstrate a clear, imminent and substantial danger to the public 
health or environment; or (4) that are required by law.
    On January 12, 1998, the Commonwealth of Virginia Office of the 
Attorney General provided a legal opinion that states that the 
Privilege law, Va. Code Sec. 10.1-1198, precludes granting a privilege 
to documents and information ``required by law,'' including documents 
and information ``required by Federal law to maintain program 
delegation, authorization or approval,'' since Virginia must ``enforce 
Federally authorized environmental programs in a manner that is no less 
stringent than their Federal counterparts * * *.'' The opinion 
concludes that ``[r]egarding Sec.  10.1-1198, therefore, documents or 
other information needed for civil or criminal enforcement under one of 
these programs could not be privileged because such documents and 
information are essential to pursuing enforcement in a manner required 
by Federal law to maintain program delegation, authorization or 
approval.''
    Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides that 
``[t]o the extent consistent with requirements imposed by Federal 
law,'' any person making a voluntary disclosure of information to a 
state agency regarding a violation of an environmental statute, 
regulation, permit, or administrative order is granted immunity from 
administrative or civil penalty. The Attorney General's January 12, 
1998 opinion states that the quoted language renders this statute 
inapplicable to enforcement of any Federally authorized programs, since 
``no immunity could be afforded from administrative, civil, or criminal 
penalties because granting such immunity would not be consistent with 
Federal law, which is one of the criteria for immunity.''
    Therefore, EPA has determined that Virginia's Privilege and 
Immunity statutes will not preclude the Commonwealth from enforcing its 
program consistent with the Federal requirements. In any event, because 
EPA has also determined that a state audit privilege and immunity law 
can affect only state enforcement and cannot have any impact on Federal 
enforcement authorities, EPA may at any time invoke its authority under 
the CAA, including, for example, sections 113, 167, 205, 211 or 213, to 
enforce the requirements or prohibitions of the state plan, 
independently of any state enforcement effort. In addition, citizen 
enforcement under section 304 of the CAA is likewise unaffected by 
this, or any, state audit privilege or immunity law.

VII. Proposed Action

    EPA is proposing to approve Virginia's full CAIR SIP revision 
submitted on March 30, 2007, and supplemented on April 30, 2007 and 
June 11, 2007. Under the SIP revision, Virginia is choosing to 
participate in the EPA-administered cap-and-trade programs for 
SO2, NOX annual, and NOX ozone season 
emissions. The SIP revision meets the applicable requirements in 40 CFR 
51.123(o) and (aa), with regard to NOX annual and 
NOX ozone season emissions, and 40 CFR 51.124(o), with 
regard to SO2 emissions. EPA is proposing to determine that 
the SIP revision will meet the requirements of CAIR. As a consequence 
of the SIP approval, the Administrator of EPA will issue, without 
providing an opportunity for a public hearing or an additional 
opportunity for written public comment, a final rule to withdraw the 
CAIR FIPs for SO2, NOX annual, and NOX 
ozone season emissions for Virginia. EPA is soliciting public comments 
on the issues discussed in this document. These comments will be 
considered before taking final action.

VIII. Statutory and Executive Order Reviews

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
proposed 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 proposes to approve state law as meeting Federal 
requirements and imposes no additional requirements beyond those 
imposed by state law. Accordingly, the Administrator certifies that 
this proposed 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 proposes to approve 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 proposed rule also does not have a 
substantial direct effect on one or more Indian tribes, on the 
relationship between the Federal

[[Page 54390]]

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), nor 
will it 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), because it merely proposes to approve a state rule 
implementing a Federal requirement, and does not alter the relationship 
or the distribution of power and responsibilities established in the 
CAA. This proposed rule also is not subject to Executive Order 13045 
(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 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. As required by section 3 
of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing 
this proposed rule, EPA has taken the necessary steps to eliminate 
drafting errors and ambiguity, minimize potential litigation, and 
provide a clear legal standard for affected conduct. EPA has complied 
with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining 
the takings implications of the rule in accordance with the ``Attorney 
General's Supplemental Guidelines for the Evaluation of Risk and 
Avoidance of Unanticipated Takings'' issued under the executive order. 
This action proposing approval of Virginia's CAIR budget trading 
program does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Nitrogen dioxide, 
Ozone, Reporting and recordkeeping requirements, Sulfur oxides.

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

    Dated: September 19, 2007.
William T. Wisniewski,
Acting Regional Administrator, Region III.
 [FR Doc. E7-18849 Filed 9-24-07; 8:45 am]

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