I
107TH CONGRESS
2D SESSION
H. R. 5266
To amend the Clean Air Act to reduce air pollution through expansion
of cap and trade programs, to provide an alternative regulatory classifica-
tion for units subject to the cap and trade program, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 26, 2002
Mr. BARTON of Texas (for himself and Mr. TAUZIN) (both by request) intro-
duced the following bill; which was referred to the Committee on Energy
and Commerce
A BILL
To amend the Clean Air Act to reduce air pollution through
expansion of cap and trade programs, to provide an
alternative regulatory classification for units subject to
the cap and trade program, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Clear Skies Act of 2002’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
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Sec. 1. Short title, table of contents.
Sec. 2. Emission Reduction Programs.
‘‘TITLE IV—EMISSION REDUCTION PROGRAMS
‘‘PART A—GENERAL PROVISIONS
‘‘Sec. 401. (Reserved)
‘‘Sec. 402. Definitions.
‘‘Sec. 403. Allowance system.
‘‘Sec. 404. Permits and compliance plans.
‘‘Sec. 405. Monitoring, reporting, and recordkeeping requirements.
‘‘Sec. 406. Excess emissions penalty; general compliance with other provi-
sions; enforcement.
‘‘Sec. 407. Election of additional units.
‘‘Sec. 408. Clean coal technology regulatory incentives.
‘‘Sec. 409. Auctions.
‘‘Sec. 410. Evaluation of limitations on total sulfur dioxide, nitrogen oxides,
and mercury emissions that start in 2018.
‘‘PART B—SULFUR DIOXIDE EMISSION REDUCTIONS
‘‘Subpart 1—Acid Rain Program
‘‘Sec. 411. Definitions.
‘‘Sec. 412. Allowance allocations.
‘‘Sec. 413. Phase I sulfur dioxide requirements.
‘‘Sec. 414. Phase II sulfur dioxide requirements.
‘‘Sec. 415. Allowances for states with emission rates at or below .8 lbs/
mmbtu.
‘‘Sec. 416. Election for additional sources.
‘‘Sec. 417. Auctions, Reserve.
‘‘Sec. 418. Industrial sulfur dioxide emissions.
‘‘Sec. 419. Termination.
‘‘Subpart 2—Sulfur Dioxide Allowance Program
‘‘Sec. 421. Definitions.
‘‘Sec. 422. Applicability.
‘‘Sec. 423. Limitations on total emissions.
‘‘Sec. 424. Allocations.
‘‘Sec. 425. Disposition of sulfur dioxide allowances allocated under subpart
1.
‘‘Sec. 426. Incentives for sulfur dioxide emission control technology.
‘‘Subpart 3—Western Regional Air Partnership
‘‘Sec. 431. Definitions.
‘‘Sec. 432. Applicability.
‘‘Sec. 433. Limitations on total emissions.
‘‘Sec. 434. Allocations.
‘‘PART C—NITROGEN OXIDES EMISSIONS REDUCTIONS
‘‘Subpart 1—Acid Rain Program
‘‘Sec. 441. Nitrogen Oxides Emission Reduction Program.
‘‘Sec. 442. Termination.
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‘‘Subpart 2—Nitrogen Oxides Allowance Program
‘‘Sec. 451. Definitions.
‘‘Sec. 452. Applicability.
‘‘Sec. 453. Limitations on total emissions.
‘‘Sec. 454. Allocations.
‘‘Subpart 3—Ozone Season NOX Budget Program
‘‘Sec. 461. Definitions.
‘‘Sec. 462. General Provisions.
‘‘Sec. 463. Applicable Implementation Plan.
‘‘Sec. 464. Termination of Federal Administration of NOX Trading Pro-
gram.
‘‘Sec. 465. Carryforward of Pre-2008 Nitrogen Oxides Allowances.
‘‘PART D—MERCURY EMISSION REDUCTIONS
‘‘Sec. 471. Definitions.
‘‘Sec. 472. Applicability.
‘‘Sec. 473. Limitations on total emissions.
‘‘Sec. 474. Allocations.
‘‘PART E—NATIONAL EMISSION STANDARDS; RESEARCH; ENVIRONMENTAL
ACCOUNTABILITY; MAJOR SOURCE PRECONSTRUCTION REVIEW AND BEST
AVAILABLE RETROFIT CONTROL TECHNOLOGY REQUIREMENTS
‘‘Sec. 481. National emission standards for affected units.
‘‘Sec. 482. Research, environmental monitoring, and assessment.
‘‘Sec. 483. Major source preconstruction review and best availability retrofit
control technology requirements.’’
Sec. 3. Other amendments.
SEC. 2. EMISSION REDUCTION PROGRAMS.
Title IV of the Clean Air Act (relating to acid deposi-
tion control) (42 U.S.C. 7651, et seq.) is amended to read
as follows:
‘‘TITLE IV—EMISSION
REDUCTION PROGRAMS
‘‘PART A—GENERAL PROVISIONS
‘‘SEC. 401. (Reserved)
‘‘SEC. 402. DEFINITIONS.
‘‘As used in this title—
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‘‘(1) The term ‘affected EGU’ shall have the
meaning set forth in section 421, 431, 451, or 471,
as appropriate.
‘‘(2) The term ‘affected facility’ or ‘affected
source’ means a facility or source that includes one
or more affected units.
‘‘(3) The term ‘affected unit’ means—
‘‘(A) under this part, a unit that is subject
to emission reduction requirements or limita-
tions under part B, C, or D or, it applicable,
under a specified part or subpart; or
‘‘(B) under subpart 1 of part B or subpart
1 of part C, a unit that is subject to emission
reduction requirements or limitations under
that subpart.
‘‘(4) The term ‘allowance’ means—
‘‘(A) an authorization, by the Adminis-
trator under this title, to emit one ton of sulfur
dioxide, one ton of nitrogen oxides, or one
ounce of mercury; or
‘‘(B) under subpart 1 of part B, an au-
thorization by the Administrator under this
title, to emit one ton of sulfur dioxide.
‘‘(5)(A) The term ‘baseline heat input’ means,
except under subpart 1 of part B and section 407,
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the average annual heat input used by a unit during
the three years in which the unit had the highest
heat input for the period 1997 through 2001.
‘‘(B) Notwithstanding subparagraph (A)—
‘‘(i) if a unit commenced operation during
2000, then ‘baseline heat input’ means the av-
erage annual heat input used by the unit during
2000–2001; and
‘‘(ii) if a unit commenced or commences
operation during 2001–2004, then ‘baseline
heat input’ means the manufacturer’s design
heat input capacity for the unit multiplied by
eighty percent for coal-fired units, fifty for com-
bined cycle combustion turbines, and five per-
cent for simple cycle combustion turbines.
‘‘(C) A unit’s heat input for a year shall be the
heat input—
‘‘(i) required to be reported under section
405 for the unit, if the unit was required to re-
port heat input during the year under that sec-
tion;
‘‘(ii) reported to the Energy Information
Administration for the unit, if the unit was not
required to report heat input under section 405;
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‘‘(iii) based on data for the unit reported
to the State where the unit is located as re-
quired by State law, if the unit was not re-
quired to report heat input during the year
under section 405 and did not report to the En-
ergy Information Administration; or
‘‘(iv) based on fuel use and fuel heat con-
tent data for the unit from fuel purchase or use
records, if the unit was not required to report
heat input during the year under section 405
and did not report to the Energy Information
Administration and the State.
‘‘(D) By July 1, 2003, the Administrator shall
promulgate regulations, without notice and oppor-
tunity for comment, specifying the format in which
the information under subparagraphs (B)(ii) and
(C)(ii), (iii), or (iv) shall be submitted. By January
1, 2004, the owner or operator of any unit under
subparagraph (B)(ii) or (C)(ii), (iii), or (iv) to which
allowances may be allocated under section 424, 434,
454, or 474 shall submit to the Administrator such
information. The Administrator is not required to al-
locate allowances under such sections to a unit for
which the owner or operator fails to submit informa-
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tion in accordance with the regulations promulgated
under this subparagraph.
‘‘(6) The term ‘clearing price’ means the price
at which allowances are sold at an auction conducted
by the Administrator or, if allowances are sold at an
auction conducted by the Administrator at more
than one price, the lowest price at which allowances
are sold at the auction.
‘‘(7) The term ‘coal’ means any solid fuel classi-
fied as anthracite, bituminous, subbituminous, or
lignite.
‘‘(8) The term ‘coal-derived fuel’ means any
fuel (whether in a solid, liquid, or gaseous state)
produced by the mechanical, thermal, or chemical
processing of coal.
‘‘(9) The term ‘coal-fired’ with regard to a unit
means, except under subpart 1 of part B, subpart 1
of part C, and sections 424 and 434, combusting
coal or any coal-derived fuel alone or in combination
with any mount of any other fuel in any year.
‘‘(10) The term ‘cogeneration unit’ means, ex-
cept under subpart 1 of part B and subpart 1 of
part C, a unit that produces through the sequential
use of energy:
‘‘(A) electricity; and
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‘‘(B) useful thermal energy (such as heat
or steam) for industrial, commercial, heating, or
cooling purposes.
‘‘(11) The term ‘combustion turbine’ means any
combustion turbine that is not self-propelled. The
term includes, but is not limited to, a simple cycle
combustion turbine, a combined cycle combustion
turbine and any duct burner or heat recovery device
used to extract heat from the combustion turbine ex-
haust, and a regenerative combustion turbine. The
term does not include a combined turbine in an inte-
grated gasification combined cycle plant.
‘‘(12) The term ‘commence operation’ with re-
gard to a unit means start up the unit’s combustion
chamber.
‘‘(13) The term ‘compliance plan’ means
either—
‘‘(A) a statement that the facility will com-
ply with all applicable requirements under this
title, or
‘‘(B) under subpart 1 of part B or subpart
1 of part C, a schedule and description of the
method or methods for compliance and certifi-
cation by the owner or operator that the facility
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is in compliance with the requirements of that
subpart.
‘‘(14) The term ‘continuous emission moni-
toring system’ (CEMS) means the equipment as re-
quired by section 405, used to sample, analyze,
measure, and provide on a continuous basis a per-
manent record of emissions and flow (expressed in
pounds per million British thermal units (lbs/
mmBtu), pounds per hour (lbs/hr) or such other
form as the Administrator may prescribe by regula-
tions under section 405.
‘‘(15) The term ‘designated representative’
means a responsible person or official authorized by
the owner or operator of a unit and the facility that
includes the unit to represent the owner or operator
in matters pertaining to the holding, transfer, or dis-
position of allowances, and the submission of and
compliance with permits, permit applications, and
compliance plans.
‘‘(16) The term ‘duct burner’ means a combus-
tion device that uses the exhaust from a combustion
turbine to burn fuel for heat recovery.
‘‘(17) The term ‘facility’ means all buildings,
structures, or installations located on one or more
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adjacent properties under common control of the
same person or persons.
‘‘(18) The term ‘fossil fuel’ means natural gas,
petroleum, coal, or any form of solid, liquid, or gas-
eous fuel derived from such material.
‘‘(19) The term ‘fossil fuel-fired’ with regard to
a unit means combusting fossil fuel, alone or in com-
bination with any amount of other fuel or material.
‘‘(20) The term ‘fuel oil’ means a petroleum-
based fuel, including diesel fuel or petroleum deriva-
tives.
‘‘(21) The term ‘gas-fired’ with regard to a unit
means, except under subpart 1 of part B and sub-
part 1 of part C, combusting only natural gas or
fuel oil, with natural gas comprising at lease ninety
percent, and fuel oil comprising no more than ten
percent, of the unit’s total heat input in any year.
‘‘(22) The term ‘gasify’ means to convert car-
bon-containing material into a gas consisting pri-
marily of carbon monoxide and hydrogen.
‘‘(23) The term ‘generator’ means a device that
produces electricity and, under subpart 1 of part B
and subpart 1 of part C, that is reported as a gener-
ating unit pursuant to Department of Energy Form
860.
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‘‘(24) The term ‘heat input’ with regard to a
specific period of time means the product (in
mmBtu/time) of the gross calorific value of the fuel
(in mmBtu/lb) and the fuel feed rate into a unit (in
lb of fuel/time) and does not include the heat derived
from preheated combustion air, recirculated flue
gases, or exhaust.
‘‘(25) The term ‘integrated gasification com-
bined cycle plant’ means any combination of equip-
ment used to gasify fossil fuels (with or without
other material) and then burn the gas in a combined
cycle combustion turbine.
‘‘(26) The term ‘oil-fired’ with regard to a unit
means, except under section 424 and 434, com-
busting fuel oil for more than ten percent of the
unit’s total heat input, and combusting no coal or
coal-derived fuel, in any year.
‘‘(27) The term ‘owner or operator’ with regard
to a unit or facility means, except for subpart 1 of
part B and subpart 1 of part C, any person who
owns, leases, operates, controls, or supervises the
unit or the facility.
‘‘(28) The term ‘permitting authority’ means
the Administrator, or the State or local air pollution
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control agency, with an approved permitting pro-
gram under title V of the Act.
‘‘(29) The term ‘potential electrical output’ with
regard to a generator means the nameplate capacity
of the generator multiplied by 8,760 hours.
‘‘(30) The term ‘source’ means, except for sec-
tions 410, 481, and 482, all buildings, structures, or
installations located on one or more adjacent prop-
erties under common control of the same person or
persons.
‘‘(31) The term ‘State’ means—
‘‘(A) one of the 48 contiguous States,
Alaska, Hawaii, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Is-
lands, Guam, Amercian Samoa, or the Com-
monwealth of the Northern Mariana Islands; or
‘‘(B) under subpart 1 of part B and sub-
part 1 of part C, one of the 48 contiguous
States or the District of Columbia; or
‘‘(C) under subpart 3 of part B, Arizona,
California, Colorado, Idaho, Nevada, New Mex-
ico, Oregon, Utah, and Wyoming.
‘‘(32) The term ‘unit’ means—
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‘‘(A) a fossil fuel-fired boiler, combustion
turbine, or integrated gasification combined
cycle plan; or
‘‘(B) under subpart 1 of part B and sub-
part 1 of part C, a fossil fuel-fired combustion
device.
‘‘(33) The term ‘utility unit’ shall have the
meaning set forth in section 411.
‘‘(34) The term ‘year’ means calendar year.
SEC. 403. ALLOWANCE SYSTEM.
‘‘(a) ALLOCATIONS IN GENERAL.—
‘‘(1) For the emission limitation programs
under this title, the Administrator shall allocate an-
nual allowances for an affected unit, to be held or
distributed by the designated representative of the
owner or operator in accordance with this title as
follows—
‘‘(A) sulfur dioxide allowances in an
amount equal to the annual tonnage emission
limitation calculated under section 413, 414,
415, or 416 except as otherwise specifically pro-
vided elsewhere in subpart 1 of part B, or in an
amount calculated under section 424 or 434,
‘‘(B) nitrogen oxides allowances in an
amount calculated under section 454, and
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‘‘(C) mercury allowances in an amount cal-
culated under section 474.
‘‘(2) Notwithstanding any other provision of
law to the contrary, the calculation of the allocation
for any unit, and the determination of any values
used in such calculation, under sections 424, 434,
454, and 474 shall not be subject to judicial review.
‘‘(3) Allowances shall be allocated by the Ad-
ministrator without cost to the recipient, and shall
be auctioned or sold by the Administrator, in accord-
ance with this title.
‘‘(b) ALLOWANCE TRANSFER SYSTEM.—Allowances
allocated, auctioned, or sold by the Administrator under
this title may be transferred among designated representa-
tives of the owners or operators of affected facilities under
this title and any other person, as provided by the allow-
ance system regulations promulgated by the Adminis-
trator. With regard to sulfur dioxide allowances, the Ad-
ministrator shall implement this subsection under 40 CFR
part 73 (2001), amended as appropriate by the Adminis-
trator. With regard to nitrogen oxides allowances and mer-
cury allowances, the Administrator shall implement this
subsection by promulgating regulations not later than
twenty-four months after the date of enactment of the
Clear Skies Act of 2002. The regulations under this sub-
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section shall establish the allowance system prescribed
under this section, including, but not limited to, require-
ments for the allocation, transfer, and use of allowances
under this title. Such regulations shall prohibit the use
of any allowance prior to the calendar year for which the
allowance was allocated or auctioned and shall provide,
consistent with the purposes of this title, for the identifica-
tion of unused allowances, and for such unused allowances
to be carried forward and added to allowances allocated
in subsequent years, except as otherwise provided in sec-
tion 425. Such regulations shall provide, or shall be
amended to provide, that transfers of allowances shall not
be effective until certification of the transfer, signed by
a responsible official of the transferor, is received and re-
corded by the Administrator.
‘‘(c) ALLOWANCE TRACKING SYSTEM.—The Admin-
istrator shall promulgate regulations establishing a system
for issuing, recording, and tracking allowances, which
shall specify all necessary procedures and requirements for
an orderly and competitive functioning of the allowance
system. Such system shall provide, by January 1, 2008,
for one or more facility-wide accounts for holding sulfur
dioxide allowances, nitrogen oxides allowances, and, if ap-
plicable, mercury allowances for all affected units at an
affected facility. With regard to sulfur dioxide allowances,
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the Administrator shall implement this subsection under
40 CFR part 73 (2001), amended as appropriate by the
Administrator. With regard to nitrogen oxides allowances
and mercury allowances, the Administrator shall imple-
ment this subsection by promulgating regulations not later
than twenty-four months after the date of enactment of
the Clear Skies Act of 2002. All allowance allocations and
transfers shall, upon recordation by the Administrator, be
deemed a part of each unit’s or facility’s permit require-
ments pursuant to section 404, without any further permit
review and revision.
‘‘(d) NATURE OF ALLOWANCES.—A sulfur dioxide al-
lowance, nitrogen oxides allowance, or mercury allowance
allocated, auctioned, or sold by the Administrator under
this title is a limited authorization to emit one ton of sul-
fur dioxide, one ton of nitrogen oxides, or one ounce of
mercury, as the case may be, in accordance with the provi-
sions of this title. Such allowance does not constitute a
property right. Nothing in this title or in any other provi-
sion of law shall be construed to limit the authority of
the United States to terminate or limit such authorization.
Nothing in this section relating to allowances shall be con-
strued as affecting the application of, or compliance with,
any other provision of this Act to an affected unit or facil-
ity, including the provisions related to applicable National
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Ambient Air Quality Standards and State implementation
plans. Nothing in this section shall be construed as requir-
ing a change of any kind in any State law regulating elec-
tric utility rates and charges or affecting any State law
regarding such State regulation or as limiting State regu-
lation (including any prudency review) under such a State
law. Nothing in this section shall be construed as modi-
fying the Federal Power Act or as affecting the authority
of the Federal Energy Regulatory Commission under that
Act. Nothing in this title shall be construed to interfere
with or impair any program for competitive bidding for
power supply in a State in which such program is estab-
lished. Allowances, once allocated or auctioned to a person
by the Administrator, may be received, held, and tempo-
rarily or permanently transferred in accordance with this
title and the regulations of the Administrator without re-
gard to whether or not a permit is in effect under title
V or section 404 with respect to the unit for which such
allowance was originally allocated and recorded.
‘‘(e) PROHIBITION.—
‘‘(1) It shall be unlawful for any person to hold,
use, or transfer any allowance allocated, auctioned,
or sold by the Administrator under this title, except
in accordance with regulations promulgated by the
Administrator.
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‘‘(2) It shall be unlawful for any affected unit
or for the affected units at a facility to emit sulfur
dioxide, nitrogen oxides, and mercury, as the case
may be, during a year in excess of the number of al-
lowances held for that unit or facility for that year
by the owner or operator as provided in sections
412(c), 422, 432, 452, and 472.
‘‘(3) The owner or operator of a facility may
purchase allowances directly from the Administrator
to be used only to meet the requirements of sections
422, 432, 452, and 472, as the case may be, for a
specified year. Not later than thirty-six months after
the date of enactment of the Clear Skies Act of
2002, the Administrator shall promulgate regula-
tions providing for direct sales of sulfur dioxide al-
lowances, nitrogen oxides allowances, and mercury
allowances to an owner or operator of a facility. The
regulations shall provide that—
‘‘(A) such allowances may be used only to
meet the requirements of section 422, 432, 452,
and 472, as the case may be, for such facility
and for a year specified by the Administrator,
‘‘(B) each such sulfur dioxide allowance
shall be sold for $4,000, each such nitrogen ox-
ides allowance shall be sold for $4,000, and
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each such mercury allowance shall be sold for
$2,187.50, with such prices adjusted for infla-
tion based on the Consumer Price Index on the
date of enactment of the Clear Skies Act of
2002 and annually thereafter,
‘‘(C) the proceeds from any sales of allow-
ances under subparagraph (B) shall be depos-
ited in the United States Treasury,
‘‘(D) the allowances directly purchased for
use for a specified year shall be taken from,
and reduce, the amount of sulfur dioxide allow-
ances, nitrogen oxides allowances, or mercury
allowances, as the case may be, that would oth-
erwise be auctioned under section 423, 453, or
473 starting for the year after the specified
year and continuing for each subsequent year
as necessary,
‘‘(E) if an owner or operator does not use
any such allowance in accordance with para-
graph (A)—
‘‘(i) the owner or operator shall hold
the allowance for deduction by the Admin-
istrator, and
‘‘(ii) the Administrator shall deduct
the allowance, without refund or other
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form of recompense, and offer it for sale in
the auction from which it was taken under
subparagraph (D) or a subsequent relevant
auction as necessary, and
‘‘(F) if the direct sales of allowances result
in the removal of all sulfur dioxide allowances,
nitrogen oxides allowances, or mercury allow-
ances, as the case may be, from auctions under
section 423, 453, or 473 for three consecutive
years, the Administrator shall conduct a study
to determine whether revisions to the relevant
allowance trading program are necessary and
shall report the results to the Congress.
‘‘(4) Allowances may not be used prior to the
calendar year for which they are allocated or auc-
tioned. Nothing in this section or in the allowance
system regulations shall relieve the Administrator of
the Administrator’s permitting, monitoring and en-
forcement obligations under this Act, nor relieve af-
fected facilities of their requirements and liabilities
under the Act.
‘‘(f) COMPETITIVE BIDDING FOR POWER SUPPLY.—
Nothing in this title shall be construed to interfere with
or impair any program for competitive bidding for power
supply in a State in which such program is established.
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‘‘(g) APPLICABILITY OF THE ANTITRUST LAWS.—
‘‘(1) Nothing in this section affects—
‘‘(A) the applicability of the antitrust laws
to the transfer, use, or sale of allowances, or
‘‘(B) the authority of the Federal Energy
Regulatory Commission under any provision of
law respecting unfair methods of competition or
anticompetitive acts or practices.
‘‘(2) As used in this section, ‘antitrust laws’
means those Acts set forth in section 1 of the Clay-
ton Act (15 U.S.C. 12), as amended.
‘‘(h) PUBLIC UTILITY HOLDING COMPANY ACT.—
The acquisition or disposition of allowances pursuant to
this title including the issuance of securities or the under-
taking of any other financing transaction in connection
with such allowances shall not be subject to the provisions
of the Public Utility Holding Company Act of 1935.
‘‘(i) INTERPOLLUTANT TRADING.—Not later than
July 1, 2009, the Administrator shall furnish to the Con-
gress a study evaluating the environmental and economic
consequences of amending this title to permit trading sul-
fur dioxide allowances for nitrogen oxides allowances.
‘‘(j) INTERNATIONAL TRADING.—Not later than 24
months after the date of enactment of the Clear Skies Act
of 2002, the Administrator shall furnish to the Congress
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a study evaluating the feasibility of international trading
of sulfur dioxide allowances, nitrogen oxides allowances,
and mercury allowances.
‘‘SEC. 404. PERMITS AND COMPLIANCE PLANS.
‘‘(a) PERMIT PROGRAM.—The provisions of this title
shall be implemented, subject to section 403, by permits
issued to units and facilities subject to this title and en-
forced in accordance with the provisions of title V, as
modified by this title. Any such permit issued by the Ad-
ministrator, or by a State with an approved permit pro-
gram, shall prohibit—
‘‘(1) annual emissions of sulfur dioxide, nitro-
gen oxides, and mercury in excess of the number of
allowances required to be held in accordance with
sections 412(c), 422, 432, 452, and 472,
‘‘(2) exceedances of applicable emissions rates
under section 441,
‘‘(3) the use of any allowance prior to the year
for which it was allocated or auctioned, and
‘‘(4) contravention of any other provision of the
permit. No permit shall be issued that is incon-
sistent with the requirements of this title, and title
V as applicable.
‘‘(b) COMPLIANCE PLAN.—Each initial permit appli-
cation shall be accompanied by a compliance plan for the
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facility to comply with its requirements under this title.
Where an affected facility consists of more than one af-
fected unit, such plan shall cover all such units, and such
facility shall be considered a ‘facility’ under section
502(c). Nothing in this section regarding compliance plans
or in title V shall be construed as affecting allowances.
‘‘(1) Submission of a statement by the owner or
operator, or the designated representative of the
owners and operators, of a unit subject to the emis-
sions limitation requirements of sections 412(c),
413, 414, and 441, that the unit will meet the appli-
cable emissions limitation requirements of such sec-
tions in a timely manner or that, in the case of the
emissions limitation requirements of sections 412(c),
413, and 414, the owners and operators will hold
sulfur dioxide allowances in the amount required by
section 412(c), shall be deemed to meet the proposed
and approved compliance planning requirements of
this section and title V, except that, for any unit
that will meet the requirements of this title by
means of an alternative method of compliance au-
thorized under section 413 (b), (c), (d), or (f), sec-
tion 416, and section 441 (d) or (e), the proposed
and approved compliance plan, permit application
and permit shall include, pursuant to regulations
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promulgated by the Administrator, for each alter-
native method of compliance a comprehensive de-
scription of the schedule and means by which the
unit will rely on one or more alternative methods of
compliance in the manner and time authorized under
subpart 1 of part B or subpart 1 of part C.
‘‘(2) Submission of a statement by the owner or
operator, or the designated representative, of a facil-
ity that includes a unit subject to the emissions limi-
tation requirements of sections 422, 432, 452, and
472 that the owner or operator will hold sulfur diox-
ide allowances, nitrogen oxide allowances, and mer-
cury allowances, as the case may be, in the amount
required by such sections shall be deemed to meet
the proposed and approved compliance planning re-
quirements of this section and title V with regard to
subparts A through D.
‘‘(3) Recordation by the Administrator of trans-
fers of allowances shall amend automatically all ap-
plicable proposed or approved permit applications,
compliance plans and permits.
‘‘(c) PERMITS.—The owner or operator of each facil-
ity under this title that includes an affected unit subject
to title V shall submit a permit application and compliance
plan with regard to the applicable requirements under sec-
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tions 412(c), 422, 432, 441, 452, and 472 for sulfur diox-
ide emissions, nitrogen oxide emissions, and mercury emis-
sions from such unit to the permitting authority in accord-
ance with the deadline for submission of permit applica-
tions and compliance plans under title V. The permitting
authority shall issue a permit to such owner or operator,
or the designated representative of such owner or oper-
ator, that satisfies the requirements of title V and this
title.
‘‘(d) AMENDMENT OF APPLICATION AND COMPLI-
ANCE PLAN.—At any time after the submission of an ap-
plication and compliance plan under this section, the ap-
plicant may submit a revised application and compliance
plan, in accordance with the requirements of this section.
‘‘(e) PROHIBITION.—
‘‘(1) It shall be unlawful for an owner or oper-
ator, or designated representative, required to sub-
mit a permit application or compliance plan under
this title to fail to submit such application or plan
in accordance with the deadlines specified in this
section or to otherwise fail to comply with regula-
tions implementing this section.
‘‘(2) It shall be unlawful for any person to oper-
ate any facility subject to this title except in compli-
ance with the terms and requirements of a permit
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application and compliance plan (including amend-
ments thereto) or permit issued by the Adminis-
trator or a State with an approved permit program.
For purposes of this subsection, compliance, as pro-
vided in section 504(f), with a permit issued under
title V which complies with this title for facilities
subject to this title shall be deemed compliance with
this subsection as well as section 502(a).
‘‘(3) In order to ensure reliability of electric
power, nothing in this title or title V shall be con-
strued as requiring termination of operations of a
unit serving a generator for failure to have an ap-
proved permit or compliance plan under this section,
except that any such unit may be subject to the ap-
plicable enforcement provisions of section 113.
‘‘(f) CERTIFICATE OF REPRESENTATION.—No per-
mit shall be issued under this section to an affected unit
or facility until the designated representative of the own-
ers or operators has filed a certificate of representation
with regard to matters under this title, including the hold-
ing and distribution of allowances and the proceeds of
transactions involving allowances.
‘‘SEC. 
405. 
MONITORING, 
REPORTING, 
AND 
RECORD-
KEEPING REQUIREMENTS.
‘‘(a) APPLICABILITY.—
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‘‘(1)(A) The owner and operator of any facility
subject to this title shall be required to install and
operate CEMS on each affected unit subject to sub-
part 1 of part B or subpart 1 of part C at the facil-
ity, and to quality assure the data, for sulfur diox-
ide, nitrogen oxides, opacity, and volumetric flow at
each such unit.
‘‘(B) The Administrator shall, by regulations,
specify the requirements for CEMS under subpara-
graph (A), for any alternative monitoring system
that is demonstrated as providing information with
the same precision, reliability, accessibility, and
timelines as that provided by CEMS, and for record-
keeping and reporting of information from such sys-
tems. Such regulations may include limitations on
the use of alternative compliance methods by units
equipped with an alternative monitoring system as
may be necessary to preserve the orderly functioning
of the allowance system, and which will ensure the
emissions reductions contemplated by this title.
Where 2 or more units utilize a single stack, a sepa-
rate CEMS shall not be required for each unit, and
for such units the regulations shall require that the
owner or operator collect sufficient information to
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permit reliable compliance determinations for each
such unit.
‘‘(2)(A) The owner and operator of any facility
subject to this title shall be required to install and
operate CEMS to monitor the emissions from each
affected unit at the facility, and to quality assure
the data for—
‘‘(i) sulfur doxide, opacity, and volumetric
flow for all affected units subject to subpart 2
of part B at the facility,
‘‘(ii) nitrogen oxides for all affected units
subject to subpart 2 of part C at the facility,
and
‘‘(iii) mercury for all affected units subject
to part D at the facility.
‘‘(B)(i) The Administrator shall, by regulations,
specify the requirements for CEMS under subpara-
graph (A), for any alternative monitoring system
that is demonstrated as providing information with
the same precision, reliability, accessibility, and
timeliness as that provided by CEMS, for record-
keeping and reporting of information from such sys-
tems, and if necessary under section 474, for moni-
toring, recordkeeping, and reporting of the mercury
content of fuel.
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‘‘(ii) Notwithstanding the requirements of
clause (i), the regulations under clause (i) may
specify an alternative monitoring system for deter-
mining mercury emissions to the extent that the Ad-
ministrator determines that CEMS for mercury with
appropriate vendor guarantees are not commercially
available.
‘‘(iii) The regulations under clause (i) may in-
clude limitation on the use of alternative compliance
methods by units equipped with an alternative moni-
toring system as may be necessary to preserve the
orderly functioning of the allowance system, and
which will ensure the emissions reductions con-
templated by this title.
‘‘(iv) Except as provided in clausse (v), the reg-
ulations under clause (i) shall not require a separate
CEMS for each unit where two or more units utilize
a single stack and shall require that the owner or
operator collect sufficient information to permit reli-
able compliance determinations for such units.
‘‘(v) The regulations under clause (i) may re-
quire a separate CEMS for each unit where two or
more units utilize a single stack and another provi-
sion of the Act requires data under subparagraph
(A) for an individual unit.
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‘‘(b) DEADLINES.—
‘‘(1) Upon commencement of commercial oper-
ation of each new utility unit under subpart I of
part B, the unit shall comply with the requirements
of subsection (a)(1).
‘‘(2) By the later of January 1, 2009, or the
date on which the unit commences operation, the
owner or operator of each affected unit under sub-
part 2 of part B shall install and operate CEMS,
quality assure the data, and keep records and re-
ports in accordance with the regulations issued
under paragraph (a)(2) with regard to sulfur diox-
ide, opacity, and volumetric flow.
‘‘(3) By the later of January 1 of the year be-
fore the first covered year or the date on which the
unit commences operation, the owner or operator of
each affected unit under subpart 3 of part B shall
install and operate CEMS, quality assure the data,
and keep records and reports in accordance with the
regulations issued under paragraph (a)(2) with re-
gard to sulfur dioxide and volumetric flow.
‘‘(4) By the later of January 1, 2007 or the
date on which the unit commences operation, the
owner or operator of each affected unit under sub-
part 2 of part C shall install and operate CEMS,
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quality assure the data, and keep records and re-
ports in accordance with the regulations issued
under paragraph (a)(2) with regard to nitrogen ox-
ides, and
‘‘(5) By the later of January 1, 2009 or the
date on which the unit commences operation, the
owner or operator of each affected unit under part
D shall install and operate CEMS, quality assure
the data, and keep records and reports in accord-
ance with the regulations issued under paragraph
(a)(2) with regard to mercury.
‘‘(c) UNAVAILABILITY
OF
EMISSIONS
DATA.—If
CEMS data or data from an alternative monitoring system
approved by the Administrator under subsection (a) is not
available for any affected unit during any period of a cal-
endar year in which such data is required under this title,
and the owner or operator cannot provide information,
satisfactory to the Administrator, on emissions during
that period, the Administrator shall deem the unit to be
operating in an uncontrolled manner during the entire pe-
riod for which the data was not available and shall, by
regulation, prescribe means to calculate emissions for that
period. The owner or operator shall be liable for excess
emissions fees and offsets under section 406 in accordance
with such regulations. Any fee due and payable under this
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subsection shall not diminish the liability of the unit’s
owner or operator for any fine, penalty, fee or assessment
against the unit for the same violation under any other
section of this Act.
‘‘(d) With regard to sulfur dioxide, nitrogen oxides,
opacity, and volumetric flow, the Administrator shall im-
plement subsections (a) and (c) under 40 CFR part 75
(2001), amended as appropriate by the Administrator.
With regard to mercury, the Administrator shall imple-
ment subsections (a) and (c) by issuing regulations not
later than January 1, 2008.
‘‘(e) PROHIBITION.—It shall be unlawful for the
owner or operator of any facility subject to this title to
operate a facility without complying with the requirements
of this section, and any regulations implementing this sec-
tion.
‘‘SEC. 406. EXCESS EMISSIONS PENALTY; GENERAL COMPLI-
ANCE WITH OTHER PROVISIONS; ENFORCE-
MENT.
‘‘(a) EXCESS EMISSIONS PENALTY.—
‘‘(1) The owner or operator of any unit subject
to the requirements of section 441 that emits nitro-
gen oxides for any calendar year in excess of the
unit’s emissions limitation requirement shall be lia-
ble for the payment of an excess emissions penalty,
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except where such emission were authorized pursu-
ant to section 110(f). That penalty shall be cal-
culated on the basis of the number of tons emitted
in excess of the unit’s emissions limitation require-
ment multiplied by $2,000.
‘‘(2) The owner or operator of any unit subject
to the requirements of section 412(c) that emits sul-
fur dioxide for any calendar year before 2008 in ex-
cess of the sulfur dioxide allowances the owner or
operator holds for use for the unit for that calendar
year shall be liable for the payment of an excess
emissions penalty, except where such emissions were
authorized pursuant to section 110(f). That penalty
shall be calculated as follows:
‘‘(A) the product of the unit’s excess emis-
sions (in tons) multiplied by the clearing price
of sulfur dioxide allowances sold at the most re-
cent auction under section 417, if within thirty
days after the date on which the owner or oper-
ator was required to hold sulfur dioxide
allowances—
‘‘(i) the owner or operator offsets the
excess emissions in accordance with para-
graph (b)(1); and
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‘‘(ii) the Administrator receives the
penalty required under this subparagraph.
‘‘(B) if the requirements of clause (A)(i) or
(A)(ii) are not met, three hundred percent of
the product of the unit’s excess emissions (in
tons) multiplied by the clearing price of sulfur
dioxide allowances sold at the most recent auc-
tion under section 417.
‘‘(3) If the units at a facility that are subject
to the requirements of section 412(c) emit sulfur di-
oxide for any calendar year after 2007 in excess of
the sulfur dioxide allowances that the owner or oper-
ator of the facility holds for use for the facility for
that calendar year, the owner or operator shall be
liable for the payment of an excess emissions pen-
alty, except where such emissions were authorized
pursuant to section 110(f). That penalty shall be
calculated under paragraph (4)(A) or (4)(B).
‘‘(4) If the units at a facility that are subject
to the requirements of section 422, 432, 452, or 472
emit sulfur dioxide, nitrogen oxides, or mercury for
any calendar year in excess of the sulfur dioxide al-
lowances, nitrogen oxides allowances, or mercury al-
lowances, as the case may be, that the owner or op-
erator of the facility holds for use for the facility for
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that calendar year, the owner or operator shall be
liable for the payment of an excess emissions pen-
alty, except where such emissions were authorized
pursuant to section 110(f). That penalty shall be
calculated as follows:
‘‘(A) the product of the units’ excess emis-
sions (in tons or, for mercury emissions, in
ounces) multiplied by the clearing price of sul-
fur dioxide allowances, nitrogen oxides allow-
ances, or mercury allowances, as the case may
be, sold at the most recent auction under sec-
tion 423, 453, or 473, if within thirty days
after the date on which the owner or operator
was required to hold sulfur dioxide, nitrogen ox-
ides allowance, or mercury allowances as the
case may be—
‘‘(i) the owner or operator offsets the
excess emissions in accordance with para-
graph (b)(1); and
‘‘(ii) the Administrator receives the
penalty required under this subparagraph.
‘‘(B) if the requirements of clause (A)(i) or
(A)(ii) are not met, three hundred percent of
the product of the units’ excess emissions (in
tons or, for mercury emissions, in ounces) mul-
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tiplied by the clearing price of sulfur dioxide al-
lowances, nitrogen oxides allowances, or mer-
cury allowances, as the case may be, sold at the
most recent auction under section 423, 453, or
473.
‘‘(5) Any penalty under paragraph 1, 2, 3, or
4 shall be due and payable without demand to the
Administrator as provided in regulations issued by
the Administrator. With regard to the penalty under
paragraph 1, the Administrator shall implement this
paragraph under 40 CFR 77 (2001), amended as
appropriate by the administrator. With regard to the
penalty under paragraphs 2, 3, and 4, the Adminis-
trator shall implement this paragraph by issuing
regulations no later than twenty-four months after
the date of enactment of the Clear Skies Act of
2002. Any such payment shall be deposited in the
United States Treasury. Any penalty due and pay-
able under this section shall not diminish the liabil-
ity of the unit’s owner or operator for any fine, pen-
alty or assessment against the unit for the same vio-
lation under any other section of this Act.
‘‘(b) EXCESS EMISSIONS OFFSET.—
‘‘(1) The owner or operator of any unit subject
to the requirements of section 412(c) that emits sul-
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fur dioxide during any calendar year before 2008 in
excess of the sulfur dioxide allowances held for the
unit for the calendar year shall be liable to offset the
excess emissions by an equal tonnage amount in the
following calendar year, or such longer period as the
Administrator may prescribe. The Administrator
shall deduct sulfur dioxide allowances equal to the
excess tonnage from those held for the facility for
the calendar year, or succeeding years during which
offsets are required, following the year in which the
excess emissions occurred.
‘‘(2) If the units at a facility that are subject
to the requirements of section 412(c) emit sulfur di-
oxide for a year after 2007 in excess of the sulfur
dioxide allowances that the owner or operator of the
facility holds for use for the facility for that calendar
year, the owner or operator shall be liable to offset
the excess emissions by an equal amount of tons in
the following calendar year, or such longer period as
the Administrator may prescribe. The Administrator
shall deduct sulfur dioxide allowances equal to the
excess emissions in tons from those held for the fa-
cility for the year, or succeeding years during which
offsets are required, following the year in which the
excess emissions occurred.
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‘‘(3) If the units at a facility that are subject
to the requirements of section 422, 432, 452, or 472
emit sulfur dioxide, nitrogen oxides, or mercury for
any calendar year in excess of the sulfur dioxide al-
lowances, nitrogen oxides allowances, or mercury al-
lowances, as the case may be, that the owner or op-
erator of the facility holds for use for the facility for
that calendar year, the owner or operator shall be
liable to offset the excess emissions by an equal
amount of tons or, for mercury, ounces in the fol-
lowing calendar year, or such longer period as the
Administrator may prescribe. The Administrator
shall deduct sulfur dioxide allowances, nitrogen oxide
allowances, or mercury allowances, as the case may
be, equal to the excess emissions in tons or, for mer-
cury, ounces from those held for the facility for the
year, or succeeding years during which offsets are
required, following the year in which the excess
emissions occurred.
‘‘(c) PENALTY ADJUSTMENT.—The Administrator
shall, by regulation, adjust the penalty specified in sub-
section (a)(1) for inflation, based on the Consumer Price
Index, on November 15, 1990, and annually thereafter.
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‘‘(d) PROHIBITION.—It shall be unlawful for the
owner or operator of any unit or facility liable for a pen-
alty and offset under this section to fail—
‘‘(1) to pay the penalty under subsection (a); or
‘‘(2) to offset excess emissions as required by
subsection (b).
‘‘(e) SAVINGS PROVISION.—Nothing in this title shall
limit or otherwise affect the application of section 113,
114, 120, or 304 except as otherwise explicitly provided
in this title.
‘‘(f) Except as expressly provided, compliance with
the requirements of this title shall not exempt or exclude
the owner or operator of any facility subject to this title
from compliance with any other applicable requirements
of this Act. Notwithstanding any other provision of the
Act, no State or political subdivision thereof shall restrict
or interfere with the transfer, sale, or purchase of allow-
ances under this title.
‘‘(g) Violation by any person subject to this title of
any prohibition of, requirement of, or regulation promul-
gated pursuant to this title shall be a violation of this Act.
In addition to the other requirements and prohibitions
provided for in this title, the operation of any affected unit
or the affected units at a facility to emit sulfur dioxide,
nitrogen oxides, or mercury in violation of section 412(c),
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422, 432, 452, and 472, as the case may be, shall be
deemed a violation, with each ton or, in the case of mer-
cury, each ounce emitted in excess of allowances held con-
stituting a separate violation.
‘‘SEC. 407. ELECTION FOR ADDITIONAL UNITS.
‘‘(a) APPLICABILITY.—The owner or operator of any
unit that is not an affected EGU under subpart 2 of part
B and subpart 2 of part C and whose emissions of sulfur
dioxide and nitrogen oxides are vented only through a
stack or duct may elect to designate such unit as an af-
fected unit under subpart 2 of part B and subpart 2 of
part C. If the owner or operator elects to designate a unit
that is coal-fired and emits mercury vented only through
a stack or duct, the owner or operator shall also designate
the unit as an affected unit under part D.
‘‘(b) APPLICATION.—The owner or operator making
an election under subsection (a) shall submit an applica-
tion for the election to the Administrator for approval.
‘‘(c) APPROVAL.—If an application for an election
under subsection (b) meets the requirements of subsection
(a), the Administrator shall approve the designation as an
affected unit under subpart 2 of part B and subpart 2
of part C and, if applicable, under part D, subject to the
requirements in subsections (d) through (g).
‘‘(d) ESTABLISHMENT OF BASELINE.—
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‘‘(1) After approval of the designation under
subsection (c), the owner or operator shall install
and operate CEMS on the unit, and shall quality as-
sure the data, in accordance with the requirements
of paragraph (a)(2) and subsections (c) through (e)
of section 405, except that, where two or more units
utilize a single stack, separate monitoring shall be
required for each unit.
‘‘(2) The baselines for heat input and sulfur di-
oxide, nitrogen oxides, and mercury emission rates,
as the case may be, for the unit shall be the unit’s
heat input and the emission rates of sulfur dioxide,
nitrogen oxides, and mercury for a year starting
after approval of the designation under subsection
(c). The Administrator shall issue regulations requir-
ing all the unit’s baselines to be based on the same
year and specifying minimum requirements con-
cerning the percentage of the unit’s operating hours
for which quality assured CEMS data must be avail-
able during such year.
‘‘(e) EMISSION LIMITATIONS.—After approval of the
designation of the unit under paragraph (c), the unit shall
become:
‘‘(1) an affected unit under subpart 2 of part
B, and shall be allocated sulfur dioxide allowances
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under paragraph (f), starting the later of January 1,
2010, or January 1 of the year after the year on
which the unit’s baselines are based under sub-
section (d);
‘‘(2) an affected unit under subpart 2 of part
C, and shall be allocated nitrogen oxides allowances
under paragraph (f), starting the later of January 1,
2008, or January 1 of the year after the year on
which the unit’s baselines are based under sub-
section (d); and
‘‘(3) if applicable, an affected unit under part
D, and shall be allocated mercury allowances, start-
ing the later of January 1, 2010, or January 1 of
the year after the year on which the unit’s baselines
are based under subsection (d).
‘‘(f) ALLOCATIONS AND AUCTION AMOUNTS.—
‘‘(1) The Administrator shall promulgate regu-
lations determining the allocations of sulfur dioxide
allowances, nitrogen oxides allowances, and, if appli-
cable, mercury allowances for each year during
which a unit is an affected unit under subsection (e).
The regulations shall provide for allocations equal to
fifty percent of the following amounts, as adjusted
under paragraph (2)—
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‘‘(A) the lesser of the unit’s baseline heat
input under subsection (d) or the unit’s heat
input for the year before the year for which the
Administrator is determining the allocations;
multiplied by
‘‘(B) the lesser of—
‘‘(i) the unit’s baseline sulfur dioxide
emission rate, nitrogen oxides emission
rate, or mercury emission rate, as the case
may be;
‘‘(ii) the unit’s sulfur dioxide emission
rate, nitrogen oxides emission rate, or mer-
cury emission rate, as the case may be,
during 2002, as determined by the Admin-
istrator based, to the extent available, on
information reported to the State where
the unit is located; or
‘‘(iii) the unit’s most stringent State
or federal emission limitation for sulfur di-
oxide, nitrogen oxides, or mercury applica-
ble to the year on which the unit’s baseline
heat input is based under subsection (d).
‘‘(2) The Administrator shall reduce the alloca-
tions under paragraph (1) by 1.0 percent in the first
year for which the Administrator is allocating allow-
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ances to the unit, by an additional 1.0 percent of the
allocations under paragraph (1) each year starting
in the second year through the twentieth year, and
by an additional 2.5 percent of the allocations under
paragraph (1) each year starting in the twenty-first
year and each year thereafter. The Administrator
shall make corresponding increases in the amounts
of allowances auctioned under sections 423, 453,
and 473.
‘‘(g) WITHDRAWAL.—The Administrator shall pro-
mulgate regulations withdrawing from the approved des-
ignation under subsection (c) any unit that qualifies as
an affected EGU under subpart 2 of part B, subpart 2
of part C, or part D after the approval of the designation
of the unit under subsection (c).
‘‘(h) The Administrator shall promulgate regulations
implementing this section within 24 months of the date
of enactment of the Clear Skies Act of 2003.
‘‘SEC. 408. CLEAN COAL TECHNOLOGY REGULATORY INCEN-
TIVES.
‘‘(a) DEFINITION.—For purposes of this section,
‘clean coal technology’ means any technology, including
technologies applied at the precombustion, combustion, or
post combustion stage, at a new or existing facility which
will achieve significant reductions in air emissions of sul-
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fur dioxide or oxides of nitrogen associated with the utili-
zation of coal in the generation of electricity, process
steam, or industrial products, which is not in widespread
use as of the date of enactment of this title.
‘‘(b) REVISED REGULATIONS
FOR CLEAN COAL
TECHNOLOGY DEMONSTRATIONS.—
‘‘(1) APPLICABILITY.—This subsection applies
to physical or operational changes to existing facili-
ties for the sole purpose of installation, operation,
cessation, or removal of a temporary or permanent
clean coal technology demonstration project. For the
purposes of this section, a clean coal technology
demonstration project shall mean a project using
funds appropriated under the heading ‘Department
of Energy—Clean Coal Technology’, up to a total
amount of $2,500,000,000 for commercial dem-
onstration of clean coal technology, or similar
projects funded through appropriations for the Envi-
ronmental Protection Agency. the Federal contribu-
tion for qualifying project shall be at least 20 per-
cent of the total cost of the demonstration project.
‘‘(2) TEMPORARY PROJECTS.—Installation, op-
eration, cessation, or removal of a temporary clean
coal technology demonstration project that is oper-
ated for a period of five years or less, and which
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complies with the State implementation plans for the
State in which the project is located and other re-
quirements necessary to attain and maintain the na-
tional ambient air quality standards during and
after the project is terminated, shall not subject
such facility to the requirements of section 111 or
part C or D of title I.
‘‘(3) PERMANENT PROJECTS.—For permanent
clean coal technology demonstration projects that
constitute repowering as defined in section 411, any
qualifying project shall not be subject to standards
of performance under section 111 or to the review
and permitting requirements of part C for any pol-
lutant the potential emissions of which will not in-
crease as a result of the demonstration project.
‘‘(4) EPA REGULATIONS.—Not later than 12
months after November 15, 1990, the Administrator
shall promulgate regulations or interpretive rulings
to revise requirements under section 111 and parts
C and D, as appropriate, to facilitate projects con-
sistent in this subsection. With respect to parts C
and D, such regulations or rulings shall apply to all
areas in which EPA is the permitting authority. In
those instances in which the State is the permitting
authority under part C or D, any State may adopt
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and submit to the Administrator for approval revi-
sions to its implementation plan to apply the regula-
tions or rulings promulgated under this subsection.
‘‘(c) EXEMPTION
FOR
REACTIVATION
OF
VERY
CLEAN UNITS.—Physical changes or changes in the meth-
od of operation associated with the commencement of com-
mercial operations by a coal-fired utility unit after a pe-
riod of discontinued operation shall not subject the unit
to the requirements of section 111 or part C of the Act
where the unit—
‘‘(1) has not been in operation for the two-year
period prior to November 15, 1990, and the emis-
sions from such unit continue to be carried in the
permitting authority’s emissions inventory on No-
vember 15, 1990,
‘‘(2) was equipped prior to shut-down with a
continuous system of emissions control that achieves
a removal efficiency for sulfur dioxide of no less
than 85 percent and a removal efficiency for particu-
lates of no less than 98 percent,
‘‘(3) is equipped with low-NOX burners prior to
the time of commencement, and
‘‘(4) is otherwise in compliance with the re-
quirements of this Act.
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‘‘SEC. 409. AUCTIONS.
‘‘(a) Commencing in 2005 and in each year there-
after, the Administrator shall conduct auctions, as re-
quired under sections 423, 424, 426, 453, 454, 473, and
474, at which allowances shall be offered for sale in ac-
cordance with regulations promulgated by the Adminis-
trator no later than twenty-four months after the date of
enactment of the Clear Skies Act of 2002. Such regula-
tions may provide allowances to be offered for sale before
or during the year for which such allowances may be used
to meet the requirement to hold allowances under section
422, 452, and 472. Such regulations shall specify the fre-
quency and timing of auctions and may provide for more
than one auction of sulfur dioxide allowances, nitrogen ox-
ides allowances, or mercury allowances during a year.
Each auction shall be open to any person. A person wish-
ing to bid for allowances in the auction shall submit to
the Administrator (by a date set, and on a bid schedule
provided, by the Administrator) offers to purchase speci-
fied numbers of allowances at specified prices. Allowances
purchased at the auction may be used for any purpose
and at any time after the auction, subject to the provisions
of this title.
‘‘(b) DEFAULT AUCTION PROCEDURES.—If the Ad-
ministrator is required to conduct an auction of allowances
under subsection (a) before regulations have been promul-
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gated under that subsection, such auction shall be con-
ducted as follows:
‘‘(1) The auction shall be held on the first busi-
ness day in October of the year in which the auction
is required or, in the absence of such a requirement,
of the year before the first year for which the allow-
ances may be used to meet the requirements of sec-
tion 403(e)(2).
‘‘(2) The auction shall be open to any person.
‘‘(3) In order to bid for allowances included in
the auction, a person shall submit, and the Adminis-
trator must receive by the date three business days
before the auction, one or more offers to purchase
a specified amount of such allowances at a specified
price on a sealed bid schedule to be provided by the
Administrator. The bidder shall state in the bid
schedule that the bidder is willing to purchase at the
specified price fewer allowances than the specified
amount and shall identify the account in the Allow-
ance Tracking System under section 403(c) in which
the allowances purchased are to be placed. Each bid
must include a certified check or, using a form to be
provided by the Administrator, a letter of credit for
the specified amount of allowances multiplied by the
bid price payable to the U.S. EPA. The bid sched-
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ule, and check or letter of credit, shall be sent to the
address specified on the bid schedule.
‘‘(4) The Administrator shall auction the allow-
ances by—
‘‘(A) determining whether each bid meets
the requirements of paragraph (3);
‘‘(B) listing the bids (including the speci-
fied amounts of allowances and the specified bid
prices) meeting the requirements of paragraph
(3) in order, from highest to lowest bid price;
‘‘(C) for each bid price, summing the
amounts of allowances specified in the bids list-
ed under subparagraph (B) with the same or a
higher bid price;
‘‘(D) identifying the bid price with the
highest sum of allowances under subparagraph
(C) that does not exceed the total amount of al-
lowances available for auction;
‘‘(E) setting as the sales price in the
auction—
‘‘(i) the bid price identified under sub-
paragraph (D) if that bid price has a sum
of allowances under subparagraph (C)
equal to the total amount of allowances
available for auction; or
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‘‘(ii) the next lowest bid price after
the bid price identified under subpara-
graph (D), if the bid price identified under
subparagraph (D) has a sum of allowances
under subparagraph (C) less than the total
amount of allowances available for auction;
and
‘‘(F) starting with the first bid listed
under subparagraph (B) and ending with the
bid listed immediately before the bid with a bid
price equal to the sales price, selling the
amounts of allowances specified in each bid to
the person who submitted the bid.
‘‘(i) If the amount of remaining allow-
ances available for auction equals or is less
than the amount of allowances specified in
the bid with a bid price equal to the sales
price, the Administrator shall sell the
amount of remaining allowances to the
person who submitted that bid.
‘‘(ii) If there is more than one bid
with a bid price equal to the sales price
and the amount of remaining allowances
available for auction is less than the total
of the amounts of allowances specified in
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such bids, the Administrator shall sell the
amount of the remaining allowances to the
persons who submitted those bids on a pro
rata basis.
‘‘(5) After the auction, the Administrator will
publish the names of winning and losing bidders,
their bids, and the sales price. The Administrator
will provide the successful bidders notice of the al-
lowances that they have purchased within thirty
days after payment is collected by the Adminis-
trator. After the conclusion of the auction, the Ad-
ministrator will return payment to unsuccessful bid-
ders and the appropriate portion of payment to suc-
cessful bidders who offered to purchase a larger
amount of allowances than the amount that they are
sold or to pay a bid price exceeding the sales price
and will add any unsold allowances to the next rel-
evant auction.
‘‘(c) The Administrator may by delegation or contract
provide for the conduct of auctions under the Administra-
tor’s supervision by other departments or agencies of the
United States Government or by nongovernmental agen-
cies, groups, or organizations.
‘‘(d) The proceeds from any auction conducted under
this title shall be deposited in the United States Treasury.
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‘‘SEC. 410. EVALUATION OF LIMITATIONS ON TOTAL SUL-
FUR DIOXIDE, NITROGEN OXIDES, AND MER-
CURY EMISSIONS THAT START IN 2018.
‘‘(a) EVALUATION.—
‘‘(1) The Administrator, in consultation with
the Secretary of Energy, shall study whether the
limitations on the total annual amounts of allow-
ances available starting in 2018 for sulfur dioxide
under section 423, nitrogen oxides under section
453, and mercury under section 473 should be ad-
justed.
‘‘(2) As part of the study, the Administrator
shall address the following factors concerning the
pollutants under paragraph (a)(1)—
‘‘(A) the need for further emission reduc-
tions from affected EGUs under subpart 2 of
part B, subpart 2 of part C, or part D and
other sources to attain or maintain the national
ambient air quality standards;
‘‘(B) whether the benefits of the limita-
tions on the total annual amounts of allowances
available starting in 2018 justify the costs and
whether adjusting any of the limitations would
provide additional benefits which justify the
costs of such adjustment, taking into account
both quantifiable and non-quantifiable factors;
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‘‘(C) the marginal cost effectiveness of re-
ducing emissions for each pollutant;
‘‘(D) the relative marginal cost effective-
ness of reducing sulfur dioxide and nitrogen
oxide emissions from affected EGUs under sub-
part 2 of part B and subpart 2 of part C, as
compared to the marginal cost effectiveness of
controls on other sources of sulfur dioxide, ni-
trogen oxides and other pollutants that can be
controlled to attain or maintain national ambi-
ent air quality standards;
‘‘(E) the feasibility of attaining the limita-
tions on the total annual amounts of allowances
available starting in 2018 given the available
control technologies and the ability to install
control technologies by 2018, and the feasibility
of attaining alternative limitations on the total
annual amounts of allowances available starting
in 2018 under paragraph (a)(1) for each pollut-
ant, including the ability to achieve alternative
limitations given the available control tech-
nologies, and the feasibility of installing the
control technologies needed to meet the alter-
native limitation by 2018;
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‘‘(F) the results of the most current re-
search and development regarding technologies
and strategies to reduce the emissions of one or
more of these pollutants from affected EGUs
under subpart 2 of part B, subpart 2 of part
C, or part D, as applicable and the results of
the most current research and development re-
garding technologies for other sources of the
same pollutants;
‘‘(G) the projected impact of the limita-
tions on the total annual amounts of allowances
available starting in 2018 and the projected im-
pact of adjusting any of the limitations on the
total annual amounts of allowances available
starting in 2018 under paragraph (a)(1) on the
safety and reliability of affected EGUs under
subpart 2 of part B, subpart 2 of part C, or
part D and on fuel diversity within the power
generation section;
‘‘(H) the most current scientific informa-
tion relating to emissions, transformation and
deposition of these pollutants, including studies
evaluating—
‘‘(i) the role of emissions of affected
EGUs under subpart 2 of part B, subpart
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2 of part C, or part D in the atmospheric
formation of pollutants for which national
ambient air quality standards exist;
‘‘(ii) the transformation, transport,
and fate of these pollutants in the atmos-
phere, other media, and biota;
‘‘(iii) the extent to which effective
control programs in other countries would
prevent air pollution generated in those
countries from contributing to nonattain-
ment, or interfering with the maintenance
of any national ambient air quality stand-
ards;
‘‘(iv) whether the limitations starting
in 2010 or 2018 will result in an increase
in the level of any other pollutant and the
level of any such increase; and
‘‘(v) speciated monitoring data for
particulate matter and the effect of various
elements of fine particulate matter on pub-
lic health;
‘‘(I) the most current scientific information
relating to emissions, transformation and depo-
sition 
of 
mercury, 
including 
studies
evaluating—
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‘‘(i) known and potential human
health and environmental effects of mer-
cury;
‘‘(ii) whether emissions of mercury
from affected EGUs under part D con-
tribute significantly to elevated levels of
mercury in fish;
‘‘(iii) human population exposure to
mercury; and
‘‘(iv) the relative marginal cost effec-
tiveness of reducing mercury emissions
from affected EGUs under part D, as com-
pared to the marginal cost effectiveness of
controls on other sources of mercury;
‘‘(J) a comparison of the extent to which
sources of mercury not located in the United
States contributed to adverse affects on terres-
trial or aquatic systems as opposed to the con-
tribution from affected EGUs under part D,
and the extent to which effective mercury con-
trol programs in other countries could minimize
such impairment; and
‘‘(K) an analysis of the effectiveness and
efficiency of the sulfur dioxide allowance pro-
gram under subpart 2 of part B, the nitrogen
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oxides allowance program under subpart 2 of
part C, and the mercury allowance program
under part D.
‘‘(3) As part of the study, the Administrator
shall take into account the most current information
available pursuant to the review of the air quality
criteria for particulate matter under section 108.
‘‘(b) PEER REVIEW PROCEDURES.—The draft results
of the study under subsection (a) and related technical
documents shall be subject to an independent and external
peer review in accordance with this section. Any docu-
ments that are to be considered by the Administrator in
the study must be independently peer reviewed no later
than July 1, 2008. The peer review required under this
section shall not be subject to the Federal Advisory Com-
mittee Act (5 U.S.C. App.). The Administrator shall—
‘‘(1) conduct the peer review in an open man-
ner. Such peer review shall—
‘‘(A) be conducted through a formal panel
that is broadly representative and involves
qualified specialists who—
‘‘(i) are selected primarily on the basis
of their technical expertise relevant to the
analyses required under this section and to
the decision whether or not to adjust the
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total annual amounts of allowances avail-
able starting in 2018 under paragraph
(a)(1);
‘‘(ii) are independent of the agency;
‘‘(iii) disclose to the agency prior tech-
nical or policy positions they have taken on
the issues under consideration; and
‘‘(iv) disclose to the agency their
sources of personal and institutional fund-
ing from the private or pubic sectors;
‘‘(B) contain a balanced presentation of all
considerations, including minority reports;
‘‘(C) provide adequate protections for con-
fidential business information and trade secrets,
including requiring panel members or partici-
pants to enter into confidentiality agreements;
‘‘(D) afford an opportunity for public com-
ment; and
‘‘(E) be complete by no later than January
1, 2009.
‘‘(2) respond, in writing, to all significant peer
review and public comments; and
‘‘(3) certify that—
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‘‘(A) each peer review participant has the
expertise an independence required under this
section; and
‘‘(B) the agency has adequately responded
to the peer review comments as requires under
this section.
‘‘(c) RECOMMENDAITON
TO CONGRESS.—The Ad-
ministrator, in consultation with the Secretary of Energy,
should submit to Congress no later than July 1, 2009,
a recommendation whether to revise the limitations on the
total annual amounts of allowances available starting in
2018 under paragraph (a)(1). The recommendation shall
include the final results of the study under subsections (a)
and (b) and shall address the factors described in para-
graph (a)(2). The Administrator may submit separate rec-
ommendations addressing sulfur dioxide, nitrogen oxides,
or mercury at any time after the study has been completed
under paragraph (a)(2) and the peer review process has
been completed under subsection (b).
‘‘PART B—SULFUR DIOXIDE EMISSION
REDUCTIONS
‘‘Subpart 1—Acid Rain Program
‘‘SEC. 411. DEFINITIONS.
‘‘For purposes of this subpart:
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‘‘(1) The term ‘actual 1985 emission rate’, for
electric utility units means the annual sulfur dioxide
or nitrogen oxides emission rate in pounds per mil-
lion Btu as reported in the NAPAP Emissions In-
ventory, Version, 2 National Utility reference File.
For nonutility units, the term ‘actual 1985 emission
rate’ means the annual sulfur dioxide or nitrogen ox-
ides emission rate in pounds per million Btu as re-
ported in the NAPAP Emission Inventory, Version
2.
‘‘(2) The term ‘allowable 1985 emissions rate’
means a federally enforceable emissions limitation
for sulfur dioxide or oxides of nitrogen, applicable to
the unit in 1985 or the limitation applicable in such
other subsequent year as determined by the Admin-
istrator if such a limitation for 1985 does not exist.
Where the emissions limitation for a unit is not ex-
pressed in pounds of emissions per million Btu, or
the averaging period of that emissions limitation is
not expressed on an annual basis, the Administrator
shall calculate the annual equivalent of that emis-
sions
‘‘(3) The term ‘alternative method of compli-
ance’ means a method of compliance in accordance
with one or more of the following authorities—
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‘‘(A) a substitution plan submitted and ap-
proved in accordance with subsections 413(b)
and (c); or
‘‘(B) a Phase I extension plan approved by
the Administrator under section 413(d), using
qualifying phase I technology as determined by
the Administrator in accordance with that sec-
tion.
‘‘(4) The term ‘baseline’ means the annual
quantity of fossil fuel consumed by an affected unit,
measured in millions of British Thermal Units
(‘mmBtu’s’), calculated as follows:
‘‘(A) For each utility unit that was in com-
mercial operation prior to January 1, 1985, the
baseline shall be the annual average quantity of
mmBtu’s consumed in fuel during calendar
years 1985, 1986, and 1987, as recorded by the
Department of Energy pursuant to Form 767.
For any utility unit for which such form was
not filed, the baseline shall be the level specified
for such unit in the 1985 National Acid Pre-
cipitation 
Assessment 
Program 
(NAPAP)
Emissions Inventory, Version 2, National Util-
ity Reference File (NURF) or in a corrected
data base as established by the Administrator
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pursuant to paragraph (3). For non-utility
units, the baseline in the NAPAP Emissions In-
ventory, Version 2. The Administrator, in the
Administrator’s sole discretion, may exclude pe-
riods during which a unit is shutdown for a
continuous period of four calendar months or
longer, and make appropriate adjustments
under this paragraph. Upon petition of the
owner or operator of any unit, the Adminis-
trator may make appropriate baseline adjust-
ments for accidents that caused prolonged out-
ages.
‘‘(B) For any other nonutility unit that is
not included in the NAPAP Emissions Inven-
tory, Version 2, or a corrected data base as es-
tablished by the Administrator pursuant to
paragraph (3), the baseline shall be the annual
average quantity, in mmBtu consumed in fuel
by that unit, as calculated pursuant to a meth-
od which the Administrator shall prescribe by
regulation to be promulgated not later than
eighteen months after November 15, 1990.
‘‘(C) The Administrator shall, upon appli-
cation or on his own motion, by December 31,
1991, supplement data needed in support of
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this subpart and correct any factual errors in
data from which affected Phase II units’ base-
lines or actual 1985 emission rates have been
calculated. Corrected data shall be used for pur-
poses of issuing allowances under this subpart.
Such corrections shall not be subject to judicial
review, nor shall the failure of the Adminis-
trator to correct an alleged factual error in such
reports be subject to judicial review.
‘‘(5) The term ‘basic Phase II allowance alloca-
tions’ means:
‘‘(A) For calendar years 2000 through
2009 inclusive, allocations of allowances made
by the Administrator pursuant to section 412
and subsections (b)(1), (3), and (4); (c)(1), (2),
(3), and (5); (d)(1), (2), (4), and (5); (e); (f);
(g) (1), (2), (3), (4), and (5); (h)(1); (i) and (j)
of section 414.
‘‘(B) For each calendar year beginning in
2010, allocations of allowances made by the Ad-
ministrator pursuant to section 412 and sub-
sections (b)(1), (3), and (4); (c)(1), (2), (3),
and (5); (d)(1), (2), (4) and (5); (e); (f); (g)(1),
(2), (3), (4), and (5); (h)(1) and (3); (i) and (j)
of section 414.
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‘‘(6) The term ‘capacity factor’ means the ratio
between the actual electric output from a unit and
the potential electric output from that unit.
‘‘(7) The term ‘commenced’ as applied to con-
struction of any new electric utility unit means that
an owner or operator has undertaken a continuous
program of construction or that an owner or oper-
ator has entered into a contractual obligation to un-
dertake and complete, within a reasonable time, a
continuous program of construction.
‘‘(8) The term ‘commenced commercial oper-
ation’ means to have begun to generate electricity
for sale.
‘‘(9) The term ‘construction’ means fabrication,
erection, or installation of an affected unit.
‘‘(10) The term ‘existing unit’ means a unit (in-
cluding units subject to section 111) that com-
menced commercial operation before November 15,
1990. Any unit that commenced commercial oper-
ation before November 15, 1990 which is modified,
reconstructed, or repowered after November 15,
1990 shall continue to be an existing unit for the
purposes of this subpart. For the purposes of this
subpart, existing units shall not include simple com-
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bustion turbines, or units which serve a generator
with a nameplate capacity of 25 MWe or less.
‘‘(11) The term ‘independent power producer’
means any person who owns or operates, in whole or
in part, one or more new independent power produc-
tion facilities.
‘‘(12) The term ‘new independent power pro-
duction facility’ means a facility that—
‘‘(A) is used for the generation of electric
energy, 80 percent or more of which is sold at
wholesale;
‘‘(B) in nonrecourse project-financed (as
such term is defined by the Secretary of Energy
within 3 months of the date of the enactment
of the Clean Air Act Amendments of 1990);
and
‘‘(C) is a new unit required to hold allow-
ances under this subpart.
‘‘(13) The term ‘industrial source’ means a unit
that does not serve a generator that produces elec-
tricity, a ‘non-utility unit’ as defined in this section,
or a process source.
‘‘(14) The term ‘life-of-the-unit, firm power
contractual arrangement’ means a unit participation
power sales agreement under which a utility or in-
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dustrial customer reserves, or is entitled to receive,
a specified amount or percentage of capacity and as-
sociated energy generated by a specified generating
unit (or units) and pays its proportional amount of
such unit’s total costs, pursuant to a contract
either—
‘‘(A) for the life of the unit;
‘‘(B) for a cumulative term of no less than
30 years, including contracts that permit an
election for early termination; or
‘‘(C) for a period equal to or greater than
25 years or 70 percent of the economic useful
life of the unit determined as of the time the
unit was built, with option rights to purchase or
release some portion of the capacity and associ-
ated energy generated by the unit (or units) at
the end of the period.
‘‘(15) The term ‘new unit’ means a unit that
commences commercial operation on or after Novem-
ber 15, 1990.
‘‘(16) The term ‘nonutility unit’ means a unit
other than a utility unit.
‘‘(17) The term ‘Phase II bonus allowance allo-
cations’ means, for calendar year 2000 through
2009, inclusive, and only for such years, allocations
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made by the Administrator pursuant to section 412,
subsections (a)(2), (b)(2), (c)(4), (d)(3) (except as
otherwise provided therein), and (h)(2) of section
414, and section 415.
‘‘(18) The term ‘qualifying phase I technology’
means a technological system of continuous emission
reduction which achieves a 90 percent reduction in
emissions of sulfur dioxide from the emissions that
would have resulted from the use of fuels which were
not subject to treatment prior to combustion.
‘‘(19) The term ‘repowering’ means replacement
of an existing coal-fired boiler with one of the fol-
lowing clean coal technologies: atmospheric or pres-
surized fluidized bed combustion, integrated gasifi-
cation combined cycle, magneto-hydrodynamics, di-
rect and indirect coal-fired turbines, integrated gas-
ification fuel cells, or as determined by the Adminis-
trator, in consultation with the Secretary of Energy,
a derivative of one or more of these technologies,
and any other technology capable of controlling mul-
tiple combustion emissions simultaneously with im-
proved boiler or generation efficiency and with sig-
nificantly greater waste reduction relative to the per-
formance of technology in widespread commercial
use as of November 15, 1990.
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‘‘(20) The term ‘reserve’ means any bank of al-
lowances established by the Administrator under this
subpart.
‘‘(21)(A) The term ‘utility unit’ means—
‘‘(i) a unit that serves a generator in
any State that produces electricity for sale,
or
‘‘(ii) a unit that, during 1985, served
a generator in any State that produced
electricity for sale.
‘‘(B) Notwithstanding subparagraph (A), a
unit described in subparagraph (A) that—
‘‘(i) was in commercial operations
during 1985, but
‘‘(ii) did not during 1985, serve a gen-
erator in any State that produced elec-
tricity for sale shall not be a utility unit
for purposes of this subpart.
‘‘(C) A unit that congenerates steam and
electricity is not a ‘utility unit’ for purposes of
this subpart unless the unit is constructed for
the purpose of supplying, or commences con-
struction after November 15, 1990 and supplies
more than one-third of its potential electric out-
put capacity of more than 25 megawatts elec-
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trical output to any utility power distribution
system for sale.
‘‘SEC. 412. ALLOWANCE ALLOCATION.
‘‘(a) Except as provided in sections 414(a)(2),
415(a)(3), and 416, beginning January 1, 2000, the Ad-
ministrator shall not allocate annual missions of sulfur di-
oxide from utility units in excess of 8.90 million tons ex-
cept that the Administrator shall not to take into account
unused allowances carried forward by owners and opera-
tors of affected units or by other persons holding such al-
lowances, following the year for which they were allocated.
If necessary to meeting he restrictions imposed in the pre-
ceding sentence, he Administrator shall reduce, pro rata,
the basic Phase II allowance allocations for each unit sub-
ject to the requirements of section 414. Subject to the pro-
visions of section 417, the Administrator shall allocate al-
lowances for each affected until at an affected source an-
nually, as provided in paragraphs (2) and(3) and section
404. Except as provided in sections 416, the removal of
an existing affected unit or source from commercial oper-
ation at any time after November 15, 1990 (whether be-
fore or after January 1, 1995, or January 1, 2000), shall
not terminate or otherwise affect the allocation of allow-
ances pursuant to section 413 or 414 to which the unit
is entitled. Prior to June 1, 1998, the Administrator shall
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publish a revised final statement of allowance allocations,
subject to the provisions of section 414(a)(2).
‘‘(b) NEW UTILITY UNITS.—
‘‘(1) After January 1, 2000 and through De-
cember 31, 2007, it shall be unlawful for a new util-
ity unit to emit an annual tonnage of sulfur dioxide
in excess of the number of allowances to emit held
for the unit by the unit’s owner or operator.
‘‘(2) Starting January 1, 2008, a new utility
unit shall be subject to the prohibition in subsection
(c)(3).
‘‘(3) New utility units shall not be eligible for
an allocation of sulfur dioxide allowances under sub-
section (a)(1), unless the unit is subject to the provi-
sions of subsection (g)(2) or (3) of section 414. New
utility units may obtain allowances from any person,
in accordance with this title. The owner or operator
of any new utility unit in violation of subsection
(b)(1) or subsection(c)(3) shall be liable for fulfilling
the obligations specified in section 406.
‘‘(c) PROHIBITIONS.—
‘‘(1) It shall be unlawful for any person to hold,
use, or transfer any allowance allocated under this
subpart, except in accordance with regulations pro-
mulgated by the Administrator.
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‘‘(2) For any year 1995 through 2007, it shall
be unlawful for any affected unit to emit sulfur diox-
ide in excess of the number of allowances held for
that unit for that year by the owner or operator of
the unit.
‘‘(3) Starting January 1, 2008, it shall be un-
lawful for the affected units at a source to emit a
total amount of sulfur dioxide during the year in ex-
cess of the number of allowances held for the source
for that year by the owner or operator of the source.
‘‘(4) Upon the allocation of allowances under
this subpart, the prohibition in paragraphs (2) and
(3) shall supersede any other emission limitation ap-
plicable under this subpart to the units for which
such allowances are allocated.
‘‘(d) In order to insure electric reliability, regulations
establishing a system for issuing, recording, and tracking
allowances under section 403(b) and this subpart shall not
prohibit or affect temporary increases and decreases in
emissions within utility systems, power pools, or utilities
entering into allowance pool agreements, that result from
their operations, including emergencies and central dis-
patch, and such temporary emissions increases and de-
creases shall not require transfer of allowances among
units nor shall it require recordation. The owners or oper-
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ators of such units shall act through a designated rep-
resentative. Notwithstanding the preceding sentence, the
total tonnage of emissions in any calendar year (calculated
at the end thereof) from all units in such a utility system,
power pool, or allowance pool agreements shall not exceed
the total allowances for such units for the calendar year
concerned, including for calendar years after 2007, allow-
ances held for such units by the owner or operator of the
sources where the units are located.
‘‘(e) Where there are multiple holders of a legal or
equitable title to, or a leasehold interest in, an affected
unit, or where a utility or industrial customer purchases
power from an affected unit (or units) under life-of-the-
unit, firm power contractual arrangements, the certificate
of representation required under section 404(f) shall
state—
‘‘(1) that allowances under this subpart and the
proceeds of transactions involving such allowances
will be deemed to be held or distributed in propor-
tion to each holder’s legal, equitable, leasehold, or
contractual reservation or entitlement, or
‘‘(2) if such multiple holders have expressly pro-
vided for a different distribution of allowances by
contract, that allowances under this subpart and the
proceeds of transactions involving such allowances
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will be deemed to be held or distributed in accord-
ance with the contract.
A passive lessor, or a person who has an equitable interest
through such lessor, whose rental payments are not based,
either directly or indirectly, upon the revenues or income
from the affected unit shall not be deemed to be a holder
of a legal, equitable, leasehold, or contractual interest for
the purpose of holding or distributing allowances as pro-
vided in this subsection, during either the term of such
leasehold or thereafter, unless expressly provided for in the
leasehold agreement. Except as otherwise provided in this
subsection, where all legal or equitable title to or interest
in an affected unit is held by a single person, the certifi-
cation shall state that all allowances under this subpart
received by the unit are deemed to be held for that person.
‘‘SEC. 413. PHASE I SULFUR DIOXIDE REQUIREMENTS.
‘‘(a) EMISSION LIMITATIONS.—
‘‘(1) After January 1, 1995, each source that
includes one or more affected units listed in table A
is an affected source under this section. After Janu-
ary 1, 1995, it shall be unlawful for any affected
unit (other than an eligible phase I unit under sec-
tion 413(d)(2)) to emit sulfur dioxide in excess of
the tonnage limitation stated as a total number of
allowances in table A for phase I, unless—
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‘‘(A) the emissions reduction requirements
applicable to such unit have been achieved pur-
suant to subsection (b) or (d), or
‘‘(B) the owner or operator of such unit
holds allowances to emit not less than the unit’s
total annual emissions, except that, after Janu-
ary 1, 2000, the emissions limitations estab-
lished in this section shall be superseded by
those established in section 414. The owner or
operator of any unit in violation of this section
be fully liable for such violation including, but
not limited to, liability for fulfilling the obliga-
tions specified in section 406.
‘‘(2) Not later than December 31, 1991, the
Administrator shall determine the total tonnage of
reductions in the emissions of sulfur dioxide from all
utility units in calendar year 1995 that will occur as
a result of compliance with the emissions limitation
requirements of this section, and shall establish a re-
serve of allowances equal in amount to the number
of tons determined thereby not to exceed a total of
3.50 million tons. In making such a determination,
the Administrator shall compute for each unit sub-
ject to the emissions limitation requirements of this
section the difference between—
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‘‘(A) the product of its baseline multiplied
by the lesser of each unit’s allowable 1985
emissions rate and its actual 1985 emissions
rate, divided by 2,000, and
‘‘(B) the product of each unit’s baseline
multiplied by 2.50 lbs/mmBtu divided by 2,000,
and sum the computations. The Administrator
shall adjust the foregoing calculation to reflect
projected calendar year 1995 utilization of the
units subject to the emissions limitations of this
subpart that the Administrator finds would
have occurred in the absence of the imposition
of such requirements. Pursuant to subsection
(d), the Administrator shall allocate allowances
from the reserve established hereinunder until
the earlier of such time as all such allowances
in the reserve are allocated or December 31,
1999.
‘‘(3) In addition to allowances allocated pursu-
ant to paragraph (1), in each calendar year begin-
ning in 1995 and ending in 1999, inclusive, the Ad-
ministrator shall allocate for each unit on Table A
that is located in the States of Illinois, Indiana, or
Ohio (other than units at Kyger Creek, Clifty Creek
and Joppa Steam), allowances in an amount equal
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to 200,000 multiplied by the unit’s pro rata share
of the total number of allowances allocated for all
units on Table A in the 3 States (other than units
at Kyger Creek, Clifty Creek, and Joppa Steam)
pursuant to paragraph (1). Such allowances shall be
excluded from the calculation of the reserve under
paragraph (2).
‘‘(b) SUBSTITUTIONS.—The owner or operator of an
affected unit under subsection (a) may include in its sec-
tion 404 permit application and proposed compliance
plan a proposal to reassign, in whole or in part, the af-
fected unit’s sulfur dioxide reduction requirements to any
other unit(s) under the control of such owner or operator.
Such proposal shall specify—
‘‘(1) the designation of the substitute unit or
units to which any part of the reduction obligations
of subsection (a) shall be required, in addition to, or
in lieu of, any original affected units designated
under such subsection;
‘‘(2) the original affected unit’s baseline, the ac-
tual and allowable 1985 emissions rate for sulfur di-
oxide, and the authorized annual allowance alloca-
tion stated in table A;
‘‘(3) calculation of the annual average tonnage
for calendar years 1985, 1986, and 1987, emitted by
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the substitute unit or units, based on the baseline
for each unit, as defined in section 411(4), multi-
plied by the lesser of the unit’s actual or allowable
1985 emissions rate;
‘‘(4) the emissions rates and tonnage limita-
tions that would be applicable to the original and
substitute affected units under the substitution pro-
posal;
‘‘(5) documentation, to the satisfaction of the
Administrator, that the reassigned tonnage limits
will, in total, achieve the same or greater emissions
reduction than would have been achieved by the
original affected unit and the substitute unit or
units without such substitution; and
‘‘(6) such other information as the Adminis-
trator may require.
‘‘(c) ADMINISTRATOR’S ACTION ON SUBSTITUTION
PROPOSALS.—
‘‘(1) The Administrator shall take final action
on such substitution proposal in accordance with
section 404(c) if the substitution proposal fulfills the
requirements of this subsection. The Administrator
may approve a substitution proposal in whole or in
part and with such modifications or conditions as
may be consistent with the orderly functioning of the
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allowance system and which will ensure the emis-
sions reductions contemplated by this title. If a pro-
posal does not meet the requirements of subsection
(b), the Administrator shall disapprove it. The owner
or operator of a unit listed in table A shall not sub-
stitute another unit or units without the prior ap-
proval of the Administrator.
‘‘(2) Upon approval of a substitution proposal,
each substitute unit, and each source with such unit,
shall be deemed affected under this title, and the
Administrator shall issue a permit to the original
and substitute affected source and unit in accord-
ance with the approved substitution plan and section
404. The Administrator shall allocate allowances for
the original and substitute affected units in accord-
ance with the approved substitution proposal pursu-
ant to section 412. It shall be unlawful for any
source or unit that is allocated allowances pursuant
to this section to emit sulfur dioxide in excess of the
emissions limitation provided for in the approved
substitution permit and plan unless the owner or op-
erator of each unit governed by the permit and ap-
proved substitution plan holds allowances to emit
not less than the unit’s total annual emissions. The
owner or operator of any original or substitute af-
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fected unit operated in violation of this subsection
shall be fully liable for such violation, including li-
ability for fulfilling the obligations specified in sec-
tion 406. If a substitution proposal is disapproved,
the Administrator shall allocate allowances to the
original affected unit or units in accordance with
subsection (a).
‘‘(d) ELIGIBLE PHASE I EXTENSION UNITS.—
‘‘(1) The owner or operator of any affected unit
subject to an emissions limitation requirement under
this section may petition the Administrator in its
permit application under section 404 for an exten-
sion of 2 years of the deadline for meeting such re-
quirement, provided that the owner or operator of
any such unit holds allowances to emit not less than
the unit’s total annual emissions for each of the 2
years of the period of extension. To qualify for such
an extension, the affected unit must either employ a
qualifying phase I technology, or transfer its phase
I emissions reduction obligation to a unit employing
a qualifying phase I technology. Such transfer shall
be accomplished in accordance with a compliance
plan, submitted and approved under section 404,
that shall govern operations at all units included in
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the transfer, and that specifies the emissions reduc-
tion requirements imposed pursuant to this title.
‘‘(2) Such extension proposal shall—
‘‘(A) specify the unit or units proposed for
designation as an eligible phase I extension
unit;
‘‘(B) provide a copy of an executed con-
tract, which may be contingent upon the Ad-
ministrator approving the proposal, for the de-
sign engineering, and construction of the quali-
fying phase I technology for the extension unit,
or for the unit or units to which the extension
unit’s emission reduction obligation is to be
transferred;
‘‘(C) specify the unit’s or units’ baseline,
actual 1985 emissions rate, allowable 1985
emissions rate, and projected utilization for cal-
endar years 1995 through 1999;
‘‘(D) require CEMS on both the eligible
phase I extension unit or units and the transfer
unit or units beginning no later than January
1, 1995; and
‘‘(E) specify the emission limitation and
number of allowances expected to be necessary
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for annual operation after the qualifying phase
I technology has been installed.
‘‘(3) The Administrator shall review and take
final action on each extension proposal in order of
receipt, consistent with section 404, and for an ap-
proved proposal shall designate the unit or units as
an eligible phase I extension unit. The Administrator
may approve an extension proposal in whole or in
part, and with such modifications or conditions as
may be necessary, consistent with the orderly func-
tioning of the allowance system, and to ensure the
emissions reductions contemplated by the subpart.
‘‘(4) In order to determine the number of pro-
posals eligible for allocations from the reserve under
subsection (a)(2) and the number of the allowances
remaining available after each proposal is acted
upon, the Administrator shall reduce the total num-
ber of allowances remaining available in the reserve
by the number of allowances calculated according to
subparagraph (A), (B) and (C) until either no allow-
ances remain available in the reserve for further al-
location or all approved proposals have been acted
upon. If no allowances remain available in the re-
serve for further allocation before all proposals have
been acted upon by the Administrator, any pending
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proposals shall be disapproved. The Administrator
shall calculate allowances equal to—
‘‘(A) the difference between the lesser of
the average annual emissions in calendar years
1988 and 1989 or the projected emissions ton-
nage for calendar year 1995 of each eligible
phase I extension unit, as designated under
paragraph (3), and the product of the unit’s
baseline miltipled by an emission rate of 2.50
lbs/mmBtu, divided by 2,000;
‘‘(B) the difference between the lesser of
the average annual emissions in calendar years
1988 and 1989 or the projected emissions ton-
nage for calendar year 1996 of each eligible
phase I extension unit, as designated under
paragraph (3), and the product of the unit’s
baseline multiplied by an emission rate of 2.50
lbs/mmBtu, divided by 2,000; and
‘‘(C) the amount by which (i) the product
of each unit’s baseline multiplied by an emis-
sion rate of 1.20 lbs/mmBtu, divided by 2,000,
exceeds (ii) the tonnage level specified under
subparagraph (E) of paragraph (2) of this sub-
section multiplied by a factor of 3.
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‘‘(5) Each eligible Phase I extension unit shall
receive allowances determined under subsection
(a)(1) or (c) of this section. In addition, for calendar
year 1995, the Administrator shall allocate to each
eligible Phase I extension unit, from the allowance
reserve created pursuant to subsection (a)(2), allow-
ances equal to the difference between the lesser of
the average annual emissions in calendar years 1988
and 1989 or its projected emission tonnage for cal-
endar year 1995 and the product of the unit’s base-
line multiplied by an emission rate of 2.50 lbs/
mmBtu, divided by 2,000. In calendar year 1996,
the Administrator shall allocate for each eligible
unit, from the allowance reserve created pursuant to
subsection (a)(2), allowances equal to the difference
between the lesser of the average annual emissions
in calendar years 1988 and 1989 or its projected
emissions tonnage for calendar year 1996 and the
product of the unit’s baseline multiplied by an emis-
sion rate of 2.50 lbs/mmBtu, divided by 2,000. It
shall be unlawful for any source or unit subject to
an approved extension plan under this subsection to
emit sulfur dioxide in excess of the emissions limita-
tions provided for in the permit and approved exten-
sion plan, unless the owner or operator of each unit
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governed by the permit and approved plan holds al-
lowances to emit not less than the unit’s total an-
nual emissions.
‘‘(6) In addition to allowances specified in para-
graph (4), the Administrator shall allocate for each
eligible Phase I extension unit employing qualifying
Phase I technology, for calendar years 1997, 1998,
and 1999, additional allowances, from any remaining
allowances in the reserve created pursuant to sub-
section (a)(2), following the reduction in the reserve
provided for in paragraph (4), not to exceed the
amount by which (A) the product of each eligible
unit’s baseline times an emission rate of 1.20 lbs/
mmBtu, divided by 2,000 exceeds (B) the tonnage
level specified under subparagraph (E) of paragraph
(2) of this subsection.
‘‘(7) After January 1, 1997, in addition to any
liability under this Act, including under section 406,
if any eligible phase I extension unit employing
qualifying phase I technology or any transfer unit
under this subsection emits sulfur dioxide in excess
of the annual tonnage limitation specified in the ex-
tension plan, as approved in paragraph (2) of this
subsection, the Administrator shall, in the calendar
year following such excess, deduct allowances equal
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to the amount of such excess from such unit’s an-
nual allowance allocation.
‘‘(e)(1) In the case of a unit that receives authoriza-
tion from the Governor of the State in which such unit
is located to make reductions in the emissions of sulfur
dioxide prior to calendar year 1995 and that is part of
a utility system that meets the following requirements—
‘‘(A) the total coal-fired generation within the
utility system as a percentage of total system gen-
eration decreased by more than 20 percent between
January 1, 1980, and December 31, 1985; and
‘‘(B) the weighted capacity factor of all coal-
fired units within the utility system averaged over
the period from January 1, 1985, through December
31, 1987, was below 50 percent, the Administrator
shall allocate allowances under this paragraph for
the unit pursuant to this subsection. The Adminis-
trator shall allocate allowances for a unit that is an
affected unit pursuant to section 414 (but is not
also an affected unit under this section) and part of
a utility system that includes 1 or more affected
units under section 414 for reductions in the emis-
sions of sulfur dioxide made during the period
1995–1999 if the unit meets the requirements of
this subsection and the requirements of the pre-
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ceding sentence, except that for the purposes of ap-
plying this subsection to any such unit, the prior
year concerned as specified below, shall be any year
after January 1, 1995 but prior to January 1, 2000.
‘‘(2) In the case of an affected unit under this section
described in subparagraph (A), the allowances allocated
under this subsection for early reductions in any prior year
may not exceed the amount which (A) the product of the
unit’s baseline multiplied by the unit’s 1985 actual sulfur
dioxide emission rate (in lbs. per mmBtu), divided by
2,000 exceeds (B) the allowances specified for such unit
in Table A. In the case of an affected unit under section
414 described in subparagraph (A), the allowances award-
ed under this subsection for early reductions in any prior
year may not exceed the amount by which (i) the product
of the quality of fossil fuel consumed by the unit (in
mmBtu) in the prior year multiplied by the lesser of 2.50
or the most stringent emission rate (in lbs. per mmBtu)
applicable to the unit under the applicable implementation
plan, divided by 2,000 exceeds (ii) the unit’s actual ton-
nage of sulfur dioxide emission for the prior year con-
cerned. Allowances allocated under this subsection for
units referred to in subparagraph (A) may be allocated
only for emission reductions achieved as a result of phys-
ical changes or changes in the method of operation made
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after November 15, 1990, including changes in the type
or quality of fossil fuel consumed.
‘‘(3) In no event shall the provisions of this para-
graph be interpreted as an event of force majeure or a
commercial impractibility or in any other way as a basis
for excused nonperformance by a utility system under a
coal sales contract in effect before November 15, 1990.
‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE
I AND THEIR SULFUR DIOXIDE ALLOWANCES (TONS)
State
Plant name
Generator
Phase I
allowances
Alabama .......................
Colbert .........................
13,570
15,310
15,400
15,410
37,180
E.C. Gaston .................
18,100
18,540
18,310
19,280
59,840
Florida .........................
Big Bend ......................
28,410
27,100
26,740
Crist .............................
19,200
31,680
Georgia .........................
Bowen ..........................
56,320
54,770
71,750
71,740
Hammond ....................
8,780
9,220
8,910
37,640
J. McDonough .............
19,910
20,600
Wansley ........................
70,770
65,430
Yates ............................
7,210
7,040
6,950
8,910
9,410
24,760
21,480
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‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE
I AND THEIR SULFUR DIOXIDE ALLOWANCES
(TONS)—Continued
State
Plant name
Generator
Phase I
allowances
Illinois ..........................
Baldwin ........................
42,010
44,420
42,550
Coffeen .........................
11,790
35,670
Grand Tower ................
5,910
Hennepin .....................
18,410
Joppa Steam ................
12,590
10,770
12,270
11,360
11,420
10,620
Kincaid .........................
31,530
33,810
Meredosia .....................
13,890
Vermilion .....................
8,880
Indiana .........................
Bailly ............................
11,180
15,630
Breed ...........................
18,500
Cayuga .........................
33,370
34,130
Clifty Creek ..................
20,150
19,810
20,410
20,080
19,360
20,380
E. W. Stout .................
3,880
4,770
23,610
F. B. Culley .................
4,290
16,970
F. E. Ratts ..................
8,330
8,480
Gibson ..........................
40,400
41,010
41,080
40,320
H.T. Pritchard .............
5,770
Michigan City ..............
23,310
Petersburg ...................
16,430
32,380
R. Gallagher .................
6,490
7,280
......................................
6,530
......................................
7,650
Tanners Creek .............
24,820
Wabash River ...............
4,000
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‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE
I AND THEIR SULFUR DIOXIDE ALLOWANCES
(TONS)—Continued
State
Plant name
Generator
Phase I
allowances
......................................
2,860
......................................
3,750
......................................
3,670
......................................
12,280
Warrick ........................
26,980
Iowa .............................
Burlington ....................
10,710
Des Moines ..................
2,320
George Neal .................
1,290
M.L. Kapp ...................
13,800
Prairie Creek ...............
8,180
Riverside ......................
3,990
Kansas .........................
Quindaro ......................
4,220
Kentucky ......................
Coleman .......................
11,250
12,840
......................................
12,340
Cooper ..........................
7,450
15,320
E.W. Brown .................
7,110
10,910
26,100
Elmer Smith ................
6,520
14,410
Ghent ...........................
28,410
Green River ..................
7,820
H.L. Spurlock ..............
22,780
Henderson II ...............
13,340
12,310
Paradise .......................
59,170
Shawnee .......................
10,170
Maryland ......................
Chalk Point ..................
21,910
24,330
C.P. Crane ...................
10,330
9,230
Morgantown .................
35,260
38,480
Michigan ......................
J.H. Campbell ..............
19,280
23,060
Minnesota .....................
High Bridge .................
4,270
Mississippi ....................
Jack Watson ................
17,910
36,700
Missouri .......................
Asbury ..........................
16,190
James River .................
4,850
Labadie ........................
40,110
37,710
40,310
35,940
Montrose ......................
7,390
8,200
10,090
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‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE
I AND THEIR SULFUR DIOXIDE ALLOWANCES
(TONS)—Continued
State
Plant name
Generator
Phase I
allowances
New Madrid .................
28,240
32,480
Sibley ...........................
15,580
Sioux ............................
22,570
23,690
Thomas Hill .................
10,250
19,390
New Hampshire ...........
Merrimack ....................
10,190
22,000
New Jersey ..................
B.L. England ...............
9,060
11,720
New York .....................
Dunkirk .......................
12,600
14,060
Greenidge .....................
7,540
Milliken ........................
11,170
12,410
Northport .....................
19,810
24,110
26,480
Port Jefferson ..............
10,470
12,330
Ohio .............................
Ashtabula .....................
16,740
Avon Lake ....................
11,650
30,480
Cardinal .......................
34,270
38,320
Conesville .....................
4,210
4,890
5,500
48,770
Eastlake .......................
7,800
8,640
10,020
14,510
34,070
Edgewater ....................
5.050
Gen. J.M. Gavin ..........
79,080
80,560
Kyger Creek .................
19,280
18,560
17,910
18,710
18,740
Miami Fort ..................
760
11,380
38,510
Muskingum River ........
14,880
14,170
13,950
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‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE
I AND THEIR SULFUR DIOXIDE ALLOWANCES
(TONS)—Continued
State
Plant name
Generator
Phase I
allowances
11,780
40,470
Niles .............................
6,940
9,100
Picway ..........................
4,930
R.E. Burger .................
6,150
10,780
12,430
W.H. Sammis ..............
24,170
39,930
43,220
W.C. Beckjord .............
8,950
23,020
Pennsylvania ................
Armstrong ....................
14,410
15,430
Brunner Island ............
27,760
31,100
53,820
Cheswick ......................
39,170
Conemaugh ..................
59,790
66,450
Hatfield’s Ferry ...........
37,830
37,320
40,270
Martins Creek ..............
12,660
12,820
Portland .......................
5,940
10,230
Shawville ......................
10,320
10,320
14,220
14,070
Sunbury .......................
8,760
11,450
Tennessee .....................
Allen .............................
15,320
16,770
15,670
Cumberland ..................
86,700
94,840
Gallatin ........................
17,870
17,310
20,020
21,260
Johnsonville .................
7,790
8,040
8,410
7,990
8,240
7,890
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‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE
I AND THEIR SULFUR DIOXIDE ALLOWANCES
(TONS)—Continued
State
Plant name
Generator
Phase I
allowances
8,980
8,700
7,080
7,550
West Virginia ...............
Albright ........................
12,000
Fort Martin .................
41,590
41,200
Harrison .......................
48,620
46,150
41,500
Kammer .......................
18,740
19,460
17,390
Mitchell ........................
43,980
45,510
Mount Storm ...............
43,720
35,580
42,430
Wisconsin .....................
Edgewater ....................
24,750
La Crosse/Genoa ..........
22,700
Nelson Dewey ..............
6,010
6,680
N. Oak Creek ...............
5,220
5,140
5,370
6,320
Pulliam .........................
7,510
S. Oak Creek ...............
9.670
12,040
16,180
15,790
‘‘(f) ENERGY CONSERVATION AND RENEWABLE EN-
ERGY.—
‘‘(1) DEFINITIONS.—As used in this subsection:
‘‘(A) QUALIFIED ENERGY CONSERVATION
MEASURE.—The term ‘qualified energy con-
servation measure’ means a cost effective meas-
ure, as identified by the Administrator in con-
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sultation with the Secretary of Energy, that in-
creases the efficiency of the use of electricity
provided by an electric utility to its customers.
‘‘(B) QUALIFIED RENEWABLE ENERGY.—
The term ‘qualified renewable energy’ means
energy derived from biomass, solar, geothermal,
or wind as identified by the Administrator in
consultation with the Secretary of Energy.
‘‘(C) ELECTRIC UTILITY.—The term ‘elec-
tric utility’ means any person, State agency, or
Federal agency, which sells electric energy.
‘‘(2) ALLOWANCES
FOR
EMISSIONS
AVOIDED
THROUGH ENERGY CONSERVATION AND RENEWABLE
ENERGY.—
‘‘(A) IN GENERAL.—The regulations under
paragraph (4) of this subsection shall provide
that for each ton of sulfur dioxide emissions
avoided by an electric utility, during the appli-
cable period, through the use of qualified en-
ergy conservation measures or qualified renew-
able energy, the Administrator shall allocate a
single allowance to such electric utility, on a
first-come-first-served basis from the Conserva-
tion and Renewable Energy Reserve established
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under subsection (g), up to a total of 300,000
allowances for allocation from such Reserve.
‘‘(B) REQUIREMENTS
FOR
ISSUANCE.—
The Administrator shall allocate allowances to
an electric utility under this subsection only if
all of the following requirements are met:
‘‘(i) Such electric utility is paying for
the qualified energy conservation measures
or qualified renewable energy directly or
through purchase from another person.
‘‘(ii) The emissions of sulfur dioxide
avoided through the use of qualified energy
conservation measures or qualified renew-
able energy are quantified in accordance
with regulations promulgated by the Ad-
ministrator under this subsection.
‘‘(iii)(I) Such electric utility has
adopted and is implementing a least cost
energy conservation and electric power
plan which evaluates a range of resources,
including new power supplies, energy con-
servation, and renewable energy resources,
in order to meet expected future demand
at the lowest system cost.
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‘‘(II) The qualified energy conserva-
tion measures or qualified renewable en-
ergy, or both, are consistent with that
plan.
‘‘(III) Electric utilities subject to the
jurisdiction of a State regulatory authority
must have such plan approved by such au-
thority. For electric utilities not subject to
the jurisdiction of a State regulatory au-
thority such plan shall be approved by the
entity with rate-making authority for such
utility.
‘‘(iv) In the case of qualified energy
conservation measures undertaken by a
State regulated electric utility, the Sec-
retary of Energy certifies that the State
regulatory authority with jurisdiction over
the electric rates of such electric utility has
established rates and charges which ensure
that the net income of such electric utility
after implementation of specific cost effec-
tive energy conservation measures is at
least as high as such net income would
have been if the energy conservation meas-
ures had not been implemented. Upon the
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date of any such certification by the Sec-
retary of Energy, all allowances which, but
for this paragraph, would have been allo-
cated under subparagraph (B) before such
date, shall be allocated to the electric util-
ity. This clause is not a requirement for
qualified renewable energy.
‘‘(v) Such utility or any subsidiary of
the utility’s holding company owns or oper-
ates at least one affected unit.
‘‘(C) PERIOD OF APPLICABILITY.—Allow-
ances under this subsection shall be allocated
only with respect to kilowatt hours of electric
energy saved by qualified energy conservation
measures or generated by qualified renewable
energy after January 1, 1992, and before the
earlier of (i) December 31, 2000, or (ii) the
date on which any electric utility steam gener-
ating unit owned or operated by the electric
utility to which the allowances are allocated be-
comes subject to this subpart (including those
sources that elect to become affected by this
title, pursuant to section 417).
‘‘(D) DETERMINATION OF AVOIDED EMIS-
SIONS.—
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‘‘(i) APPLICATION.—In order to re-
ceive allowances under this subsection, an
electric utility shall make an application
which—
‘‘(I) designates the qualified en-
ergy conservation measures imple-
mented and the qualified renewable
energy sources used for purposes of
avoiding emissions;
‘‘(II) calculates, in accordance
with subparagraphs (F) and (G), the
number of tons of emissions avoided
by reason of the implementation of
such measures or the use of such re-
newable energy sources; and
‘‘(III) demonstrates that the re-
quirements of subparagraph (B) have
been met. Such application for allow-
ances by a State-regulated electric
utility shall require approval by the
State regulatory authority with juris-
diction over such electric utility. The
authority shall review the application
for accuracy and compliance with this
subsection and the rules under this
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subsection. Electric utilities whose re-
tail rates are not subject to the juris-
diction of a State regulatory authority
shall apply directly to the Adminis-
trator for such approval.
‘‘(E) AVOIDED
EMISSIONS
FROM
QUALI-
FIED ENERGY CONSERVATION MEASURES.—For
the purposes of this subsection, the emission
tonnage deemed avoided by reason of the imple-
mentation of qualified energy conservation
measures for any calendar year shall be a ton-
nage equal to the product of multiplying—
‘‘(i) the kilowatt hours that would
otherwise have been supplied by the utility
during such year in the absence of such
qualified energy conservation measures, by
‘‘(ii) 0.004, and dividing by 2,000.
‘‘(F) AVOIDED EMISSIONS FROM THE USE
OF
QUALIFIED
RENEWABLE
ENERGY.—The
emissions tonnage deemed avoided by reason of
the use of qualified renewable energy by an
electric utility for any calendar year shall be a
tonnage equal to the product of multiplying—
(i) the actual kilowatt hours generated by, or
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ments of this subsection and the rules promul-
gated to implement this subsection are complied
with. The Administrator shall review the deter-
minations of each State regulatory authority
under this subsection to encourage consistency
from electric utility and from State to State in
accordance with the Administrator’s rules. The
Administrator shall publish the findings of this
review no less than annually.
‘‘(g) CONSERVATION AND RENEWABLE ENERGY RE-
SERVE.—The Administrator shall establish a Conservation
and Renewable Energy Reserve under this subsection. Be-
ginning on January 1, 1995, the Administrator may allo-
cate from the Conservation and Renewable Energy Re-
serve an amount equal to a total of 300,000 allowances
for emissions of sulfur dioxide pursuant to section 411.
In order to provide 300,000 allowances for such reserve,
in each year beginning in calendar year 2000 and until
calendar year 2009, inclusive, the Administrator shall re-
duce each unit’s basic Phase II allowance allocation on
the basis of its pro rata share of 30,000 allowances.
Nothwithstanding the prior sentence, if allowances remain
in the reserve one year after the date of enactment of the
Clear Skies Act of 2002, the Administrator shall allocate
such allowances for affected units under section 414 on
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a pro rata basis. For purposes of this subsection, for any
unit subject to the emissions limitation requirements of
section 414, the term ‘pro rata basis’ refers to the ratio
which the reductions made in such unit’s allowances in
order to establish the reserve under this subsection bears
to the total of such reductions for all such units.
‘‘(h) ALTERNATIVE ALLOWANCE ALLOCATION FOR
UNITS IN CERTAIN UTILITY SYSTEMS WITH OPTIONAL
BASELINE.—
‘‘(1) OPTIONAL BASELINE FOR UNITS IN CER-
TAIN SYSTEMS.—In the case of a unit subject to the
emissions limitation requirements of this section
which (as of November 15, 1990)—
‘‘(A) has an emission rate below 1.0 lbs/
mmBtu,
‘‘(B) has decreased its sulfur dioxide emis-
sions rate by 60 percent or greater since 1980,
and
‘‘(C) is part of a utility system which has
a weighted average sulfur dioxide emissions rate
for all fossil fueled-fired units below 1.0 lbs/
mmBtu, at the election to the owner or oper-
ator of such unit, the unit’s baseline may be
calculated
‘‘(i) as provided under section 411, or
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‘‘(ii) by utilizing the unit’s average
annual fuel consumption at a 60 percent
capacity factor. Such election shall be
made no later than March 1, 1991.
‘‘(2) ALLOWANCE
ALLOCATION.—Whenever a
unit referred to in paragraph (1) elects to calculate
its baseline as provided in clause (ii) of paragraph
(1), the Administrator shall allocate allowances for
the unit pursuant to section 412(a), this section,
and section 414 (as Basic Phase II allowance alloca-
tions) in an amount equal to the baseline selected
multiplied by the lower of the average annual emis-
sion rate for such unit in 1989, or 1.0 lbs./mmBtu.
Such allowance allocation shall be in lieu of any allo-
cation of allowances under this section and section
414.
‘‘SEC. 414. PHASE II SULFUR DIOXIDE REQUIREMENTS.
‘‘(a) APPLICABILITY.—
‘‘(1) After January 1, 2000, each existing util-
ity unit as provided below is subject to the limita-
tions or requirements of this section. Each utility
unit subject to an annual sulfur dioxide tonnage
emission limitation under this section is an affected
unit under this subpart. Each source that includes
one or more affected units is an affected source. In
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the case of an existing unit that was not in oper-
ation during calendar year 1985, the emission rate
for a calendar year after 1985, as determined by the
Administrator, shall be used in lieu of the 1985 rate.
The owner or operator of any unit operated in viola-
tion of this section shall be fully liable under this
Act for fulfilling the obligations specified in section
406.
‘‘(2) In addition to basic Phase II allowance al-
locations, in each year beginning in calendar year
2000 and ending in calendar year 2009, inclusive,
the Administrator shall allocate up to 530,000
Phase II bonus allowances pursuant to subsections
(b)(2),(c)(4), (d)(3)(A) and (B), and (h)(2) of this
section and section 415.
‘‘(3) In addition to basic Phase II allowances
allocations and Phase II bonus allowance allocations,
beginning January 1, 2000, the Administrator shall
allocate for each unit listed on Table A in section
413 (other than units at Kyger Creek, Clifty Creek,
and Joppa Stream) and located in the States of Illi-
nois, Indiana, Ohio, Georgia, Alabama, Missouri,
Pennsylvania, West Virginia, Kentucky , or Ten-
nessee allowances in an amount equal to 50,000
multiplied by the unit’s pro rata share of the total
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number of basic allowances allocated for all units
listed on Table A (other than units at Kyger Creek,
Clifty Creek, and Joppa Stream). Allowances allo-
cated pursuant to this paragraph shall not be sub-
ject to the 8,900,000 ton limitation in section
412(a).
‘‘(b) UNITS EQUAL TO, OR ABOVE, 75 MWE AND
1.20 LBS/MMBTU.—
‘‘(1) Except as otherwise provided in paragraph
(3), after January 1, 2000, it shall be unlawful for
any existing utility unit that serves a generator with
nameplate capacity equal to, or greater, than 75
MWe and an actual 1985 emission rate equal to or
greater than 1.20 lbs/mmBtu to exceed an annual
sulfur dioxide tonnage emission limitation equal to
the product of the unit’s baseline multiplied by an
emission rate equal to 1.20 lbs/mmBtu, divided by
2,000, unless the owner or operator of such unit
holds allowances to emit not less than the unit’s
total annual emissions or, for a year after 2007, un-
less the owner or operator of the source that in-
cludes such unit holds allowances to emit not less
than the total annual emissions of all affected units
at the source.
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‘‘(2) In addition to allowances allocated pursu-
ant to paragraph (1) and section 412(a) as basic
Phase II allowance allocations, beginning January 1,
2000, and for each calendar year thereafter until
and including 2009, the Administrator shall allocate
annually for each unit subject to the emissions limi-
tation requirements of paragraph (1) with an actual
1985 emissions rate greater than 1.20 lbs/mmBtu
and less than 2.50 lbs/mmBtu and a baseline capac-
ity factor of less than 60 percent, allowances from
the reserve created pursuant to subsection (a)(2) in
an amount equal to 1.20 lbs/mmBtu multiplied by
50 percent of the difference, on a Btu basis, between
the unit’s baseline and the unit’s fuel consumption
at a 60 percent capacity factor.
‘‘(3) After January 1, 2000, it shall be unlawful
for any existing utility unit with an actual 1985
emissions rate equal to or greater than 1.20 lbs/
mmBtu whose annual average fuel consumption dur-
ing 1985, 1986, and 1987 on a Btu basis exceeded
90 percent in the form of lignite coal which is lo-
cated in a State in which, as of July 1, 1989, no
county or portion of a county was designated non-
attainment under section 107 of this Act for any
pollutant subject to the requirements of section 109
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of this Act to exceed an annual sulfur dioxide ton-
nage limitation equal to the product of the unit’s
baseline multiplied by the lesser of the unit’s actual
1985 emissions rate or its allowable 1985 emissions
rate, divided by 2,000, unless the owner or operator
of such unit holds allowances to emit not less than
the unit’s total annual emissions or, for a year after
2007, unless the owner or operator of the source
that includes such unit holds allowances to emit not
less than the total annual emissions of all affected
units at the source.
‘‘(4) After January 1, 2000, the Administrator
shall allocate annually for each unit, subject to the
emissions limitation requirements of paragraph (1),
which is located in a State with an installed elec-
trical generating capacity of more than 30,000,000
kw in 1988 and for which was issued a prohibition
order or a proposed prohibition order (from burning
oil), which unit subsequently converted to coal be-
tween January 1, 1980 and December 31, 1985, al-
lowances equal to the difference between (A) the
product of the unit’s annual fuel consumption, on a
Btu basis, at a 65 percent capacity factor multiplied
by the lesser of its actual or allowable emissions rate
during the first full calendar year after conversion,
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divided by 2,000, and (B) the number of allowances
allocated for the unit pursuant to paragraph (1):
Provided, That the number of allowances allocated
pursuant to this paragraph shall not exceed an an-
nual total of five thousand. If necessary to meeting
the restriction imposed in the preceding sentence the
Administrator shall reduce, pro rata, the annual al-
lowances allocated for each unit under this para-
graph.
‘‘(c) COAL OR OIL-FIRED UNITS BELOW 75 MWE
AND ABOVE 1.20 LBS/MMBTU.—
‘‘(1) Except as otherwise provided in paragraph
(3), after January 1, 2000, it shall be unlawful for
a coal or oil-fired existing utility unit that serves a
generator with nameplate capacity of less than 75
MWe and an actual 1985 emission rate equal to, or
greater than, 1.20 lbs/mmBtu and which is a unit
owned by a utility operating company whose aggre-
gate nameplate fossil fuel steam-electric capacity is,
as of December 31, 1989, equal to, or greater than,
250 MWe to exceed an annual sulfur dioxide emis-
sions limitation equal to the product of the unit’s
baseline multiplied by an emission rate equal to 1.20
lbs/mmBtu, divided by 2,000 unless the owner or op-
erator of such unit holds allowances to emit not less
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than the unit’s total annual emissions or, for a year
after 2007, unless the owner or operator of the
source that includes such unit holds allowances to
emit not less than the total annual emissions of all
affected units at the source.
‘‘(2) After January 1, 2000, it shall be unlawful
for a coal or oil-fired existing utility unit that serves
a generator with nameplate capacity of less than 75
MWe and an actual 1985 emission rate equal to, or
greater than, 1.20 lbs/mmBtu (excluding units sub-
ject to section 111 of the Act or to a federally en-
forceable emissions limitation for sulfur dioxide
equivalent to an annual rate of less than 1.20 lbs/
mmBtu) and which is a unit owned by a utility oper-
ating company whose aggregate nameplate fossil fuel
steam-electric capacity is, as of December 31, 1989,
less than 250 MWe, to exceed an annual sulfur diox-
ide tonnage emissions limitation equal to the product
of the unit’s baseline multiplied by the lesser of its
actual 1985 emissions rate or its allowable 1985
emissions rate, divided by 2,000, unless the owner or
operator of such unit holds allowances to emit not
less than the unit’s total annual emissions or, for a
year after 2007, unless the owner or operator of the
source that includes such unit holds allowances to
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emit not less than the total annual emissions of all
affected units at the source.
‘‘(3) After January 1, 2000 it shall be unlawful
for any existing utility unit with a nameplate capac-
ity below 75 MWe and an actual 1985 emissions
rate equal to, or greater than, 1.20 lbs/mmBtu
which became operational on or before December 31,
1965, which is owned by a utility operating company
with, as of December 31, 1989, a total fossil fuel
steam-electric generating capacity greater than 250
MWe, and less than 450 MWe which serves fewer
than 78,000 electrical customers as of November 15,
1990, to exceed an annual sulfur dioxide emissions
tonnage limitation equal to the product of its base-
line multiplied by the lesser of its actual or allowable
1985 emission rate, divided by 2,000, unless the
owner or operator holds allowances to emit not less
than the units total annual emissions or, for a year
after 2007, unless the owner or operator of the
source that includes such unit holds allowances to
emit not less than the total annual emissions of all
affected units at the source. After January 1, 2010,
it shall be unlawful for each unit subject to the
emissions limitation requirements of this paragraph
to exceed an annual emissions tonnage limitation
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equal to the product of its baseline multiplied by an
emissions rate of 1.20 lbs/mmBtu, divided by 2,000,
unless the owner or operator holds allowances to
emit not less than the unit’s total annual emissions
or, for a year after 2007, unless the owner or oper-
ator of the source that includes such unit holds al-
lowances to emit not less than the total annual emis-
sions of all affected units at the source.
‘‘(4) In addition to allowances allocated pursu-
ant to paragraph (1) and section 412(a) as basic
Phase II allowance allocations, beginning January 1,
2000, and for each calendar year thereafter until
and including 2009, inclusive, the Administrator
shall allocate annually for each unit subject to the
emissions limitation requirements of paragraph (1)
with an actual 1985 emissions rate equal to, or
greater than, 1.20 lbs/mmBtu and less than 2.50
lbs/mmBtu and a baseline capacity factor of less
than 60 percent, allowances from the reserve created
pursuant to subsection (a)(2) in an amount equal to
1.20 lbs/mmBtu multiplied by 50 percent of the dif-
ference, on a Btu basis, between the unit’s baseline
and the unit’s fuel consumption at a 60 percent ca-
pacity factor.
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‘‘(5) After January 1, 2000, is shall be unlaw-
ful for any existing unit with a nameplate capacity
below 75 MWe and an actual 1985 emissions rate
equal to, or greater than, 1.20lbs/mmBtu which is
part of an electric utility system which, as of No-
vember 15, 1990—
‘‘(A) has at least 20 percent of its fossil-
fuel 
capacity 
controlled 
by 
flue 
gas
desulfurization devices,
‘‘(B) has more than 10 percent of its fos-
sil-fuel capacity consisting of coal-fired unites of
less than 75 MWe, and
‘‘(C) has large units (greater than 400
MWe) all of which have difficult or very dif-
ficult FGD Retrofit Cost Factors (according to
the Emissions and the FGD Retrofit Feasibility
at the 200 Top Emitting Generating Stations,
prepared for the United States Environmental
Protection Agency on January 10, 1986) to ex-
ceed an annual sulfur dioxide emissions tonnage
limitation equal to the product of its baseline
multiplied by an emissions rate of 2.5 lbs/
mmBtu, divided by 2,000, unless the owner or
operator holds allowances to emit not less than
the unit’s total annual emissions or, for a year
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after 2007, unless the owner or operator of the
source that includes such unit holds allowances
to emit not less than the total annual emissions
of all affected units at the source. After Janu-
ary 1, 2010, it shall be unlawful for each unit
subject to the emissions limitation requirements
of this paragraph to exceed an annual emissions
tonnage limitation equal to the project of its
baseline multiplied by an emissions rate of
1.20lbs/mmBtu, divided by 2,000, unless the
owner or operator holds for use allowances to
emit not less than the unit’s total annual emis-
sions or, for a year after 2007, unless the
owner or operator of the source that includes
such unit holds allowances to emit not less than
the total annual emissions of all affected units
at the source.
‘‘(d) 
COAL-FIRED
UNITS
BELOW
1.20 
LBS/
MMBTU.—
‘‘(1) After January 1, 2000, it shall be unlawful
for any existing coal-fired utility unit the lesser of
whose actual or allowable 1985 sulfur dioxide emis-
sions rate is less than 0.60 lbs/mmBtu to exceed an
annual sulfur dioxide tonnage emission limitation
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equal to the product of the unit’s baseline multiplied
by—
‘‘(A) the lesser of 0.60 lbs/mmBtu or the
unit’s allowable 1985 emissions rate, and
‘‘(B) a numerical factor of 120 percent, di-
vided by 2,000, unless the owner or operator of
such unit holds allowances to emit not less than
the unit’s total annual emissions or, for a year
after 2007, unless the owner or operator of the
source that includes such unit holds allowances
to emit not less than the total annual emissions
of all affected units at the source.
‘‘(2) After January 1, 2000, it shall be unlawful
for any existing coal-fired utility unit the lesser of
whose actual or allowable 1985 sulfur dioxide emis-
sions rate is equal to, or greater than, 0.60 lbs/
mmBtu and less than 1.20 lbs/mmBtu to exceed an
annual sulfur dioxide tonnage emissions limitation
equal to the product of the unit’s baseline multiplied
by (A) the lesser of its actual 1985 emissions rate
or its allowable 1985 emissions rate, and (B) a nu-
merical factor of 120 percent, divided by 2,000, un-
less the owner or operator of such unit holds allow-
ances to emit not less than the unit’s total annual
emissions or, for a year after 2007, unless the owner
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or operator of the source that includes such unit
holds allowances to emit not less than the total an-
nual emissions of all affected units at the source.
‘‘(3)(A) In addition to allowances allocated pur-
suant to paragraph (1) and section 412(a) as basic
Phase II allowance allocations, at the election of the
designated representative of the operating company,
beginning January 1, 2000, and for each calendar
year thereafter until and including 2009, the Admin-
istrator shall allocate annually for each unit subject
to the emissions limitation requirements of para-
graph (1) allowances from the reserve created pursu-
ant to subsection (a)(2) in an amount equal to the
amount by which—
‘‘(i) the product of the lesser of 0.60
lbs.mmBtu or the unit’s allowable 1985 emis-
sions rate multiplied by the unit’s baseline ad-
justed to reflect operation at a 60 percent ca-
pacity factor, divided by 2,000, exceeds
‘‘(ii) the number of allowances allocated
for the unit pursuant to paragraph (1) and sec-
tion 403(a)(1) as basic Phase II allowance allo-
cations.
‘‘(B) In addition to allowances allocated pursu-
ant to paragraph (2) and section 412(a) as basic
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Phase II allowance allocations, at the election of the
designated representative of the operating company,
beginning January 1, 2000, and for each calendar
year thereafter until and including 2009, the Admin-
istrator shall allocate annually for each unit subject
to the emissions limitation requirements of para-
graph (2) allowances from the reserve created pursu-
ant to subsection (a)(2) in an amount equal to the
amount by which—
‘‘(i) the product of the lesser of the unit’s
actual 1985 emissions rate or its allowable
1985 emissions rate multiplied by the unit’s
baseline adjusted to reflect operation at a 60
percent capacity factor, divided by 2,000, ex-
ceeds
‘‘(ii) the number of allowances allocated
for the unit pursuant to paragraph (2) and sec-
tion 412(a) as basic Phase II allowance alloca-
tions.
‘‘(C) An operating company with units subject
to the emissions limitation requirements of this sub-
section may elect the allocation of allowances as pro-
vided under subparagraphs (A) and (B). Such elec-
tion shall apply to the annual allowance allocation
for each and every unit in the operating company
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subject to the emissions limitation requirements of
this subsection. The Administrator shall allocate al-
lowances pursuant to subparagraphs (A) and (B)
only in accordance with this subparagraph.
‘‘(4) Notwithstanding any other provision of
this section, at the election of the owner or operator,
after January 1, 2000, the Administrator shall allo-
cate in lieu of allocation, pursuant to paragraph (1),
(2), (3), (5), or (6), allowances for a unit subject to
the emissions limitation requirements of this sub-
section which commenced commercial operation on
or after January 1, 1981 and before December 31,
1985, which was subject to, and in compliance with,
section 111 of the Act in an amount equal to the
unit’s annual fuel consumption, on a Btu basis, at
a 65 percent capacity factor multiplied by the unit’s
allowable 1985 emissions rate, divided by 2,000.
‘‘(5) For the purposes of this section, in the
case of an oil- and gas-fired unit which has been
awarded a clean coal technology demonstration grant
as of January 1, 1991, by the United States Depart-
ment of Energy, beginning January 1, 2002, the Ad-
ministrator shall allocate for the unit allowances in
an amount equal to the unit’s baseline multiplied by
1.20 lbs/mmBtu, divided by 2,000.
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‘‘(e) OIL
AND GAS-FIRED UNITS EQUAL
TO
OR
GREATER THAN 0.60 LBS/MMBTU AND LESS THAN 1.20
LBS/MMBTU.—After January 1, 2000, it shall be unlawful
for any existing oil and gas-fired utility unit the lesser of
whose actual or allowable 1985 sulfur dioxide emission
rate is equal to, or greater than, 0.60 lbs/mmBtu, but less
than 1.20 lbs/mmBtu to exceed an annual sulfur dioxide
tonnage limitation equal to the product of the unit’s base-
line multiplied by (A) the lesser of the unit’s allowable
1985 emissions rate or its actual 1985 emissions rate and
(B) a numerical factor of 120 percent divided by 2,000,
unless the owner or operator of such unit holds allowances
to emit not less than the unit’s total annual emissions or,
for a year after 2007, unless the owner or operator of the
source that includes such unit holds allowances to emit
not less than the total annual emissions of all affected
units at the source.
‘‘(f) OIL AND GAS-FIRED UNITS LESS THAN 0.60
LBS/MMBTU.—
‘‘(1) After January 1, 2000, it shall be unlawful
for any oil and gas-fired existing utility unit the less-
er of whose actual or allowance 1985 emission rate
is less than 0.60 lbs/mmBtu and whose average an-
nual fuel consumption during the period 1980
through 1989 on a Btu basis was 90 percent or less
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in the form of natural gas to exceed an annual sul-
fur dioxide tonnage emissions limitation equal to the
product of the unit’s baseline multiplied by—
‘‘(A) the lesser of 0.60 lbs/mmBtu or the
unit’s allowance 1985 emissions, and
‘‘(B) a numerical factor of 120 percent, di-
vided by 2,000, unless the owner or operator of
such unit holds allowances to emit not less than
the unit’s total annual emissions or, for a year
after 2007,
unless the owner or operator of the source that in-
cludes such unit holds allowances to emit not less
than the total annual emissions of all affected units
at the source.
‘‘(2) In addition to allowances allocated pursu-
ant to paragraph (1) as basic Phase II allowance al-
locations and section 412(a), beginning January 1,
2000, the Administrator shall, in the case of any
unit operated by a utility that furnishes electricity,
electric energy, steam, and natural gas within an
area consisting of a city and 1 contiguous county,
and in the case of any unit owned by a State author-
ity, the output of which unit is furnished within that
same area consisting of a city and 1 contiguous
county, the Administrator shall allocate for each unit
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in the utility its pro rata share of 7,000 allowances
and for each unit in the State authority its pro rata
share of 2,000 allowances.
‘‘(g) UNITS THAT COMMENCE OPERATION BETWEEN
1986 AND DECEMBER 31, 1995.—
‘‘(1) After January 1, 2000, it shall be unlawful
for any utility unit that has commenced commercial
operation on or after January 1, 1986, but not later
than September 30, 1990 to exceed an annual ton-
nage emission limitation equal to the product of the
unit’s annual fuel consumption, on a Btu basis, at
a 65 percent capacity factor multiplied by the unit’s
allowance 1985 sulfur dioxide emission rate (con-
verted, if necessary, to pounds per mmBtu), divided
by 2,000 unless the owner or operator of such unit
holds allowances to emit not less than the unit’s
total annual emissions or, for a year after 2007, un-
less the owner or operator of the source that in-
cludes such unit holds allowances to emit not less
than the total annual emissions of all affected units
at the source.
‘‘(2) After January 1, 2000, the Administrator
shall allocate allowances pursuant to section 411 to
each unit which is listed in table B of this paragraph
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in an annual amount equal to the amount specified
in table B.
‘‘TABLE B
Unit
Allowances
Brandon Shores .................................................................................
8,907
Miller 4 ...............................................................................................
9,197
TNP One 2 ........................................................................................
4,000
Zimmer 1 ........................................................................................... 18,458
Spruce 1 .............................................................................................
7,647
Clover 1 ..............................................................................................
2,796
Clover 2 ..............................................................................................
2,796
Twin Oak 2 ........................................................................................
1,760
Twin Oak 1 ........................................................................................
9,158
Cross 1 ...............................................................................................
6,401
Malakoff 1 ..........................................................................................
1,759
Notwithstanding any other paragraph of this sub-
section, for units subject to this paragraph, the Ad-
ministrator shall not allocate allowances pursuant to
any other paragraph of this subsection, provided
that the owner or operator of a unit listed on Table
B may elect an allocation of allowances under an-
other paragraph of this subsection in lieu of an allo-
cation under this paragraph.
‘‘(3) Beginning January 1, 2000, the Adminis-
trator shall allocate to the owner or operator of any
utility unit that commences commercial operation, or
has commenced commercial operation, on or after
October 1, 1990, but not later than December 31,
1992 allowances in an amount equal to the product
of the unit’s annual fuel consumption, on a Btu
basis, at a 65 percent capacity factor multiplied by
the lesser of 0.30 lbs/mmBtu or the unit’s allowable
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sulfur dioxide emission rate (converted, if necessary,
to pounds per mmBtu), divided by 2,000.
‘‘(4) Beginning January 1, 2000, the Adminis-
trator shall allocate to the owner or operator of any
utility unit that has commenced construction before
December 31, 1990 and that commences commercial
operation between January 1, 1993 and December
31, 1995, allowances in an amount equal to the
product of the unit’s annual fuel consumption, on a
Btu basis, at a 65 percent capacity factor multiplied
by the lesser of 0.30 lbs/mmBtu or the unit’s allow-
able sulfur dioxide emission rate (converted, if nec-
essary, to pounds per mmBtu), divided by 2,000.
‘‘(5) After January 1, 2000, it shall be unlawful
for any existing utility unit that has completed con-
version from predominantly gas fired existing oper-
ation to coal fired operation between January 1,
1985 and December 31, 1987, for which there has
been allocated a proposed or final prohibition order
pursuant to section 301(b) of the Powerplant and
Industrial Fuel Use Act of 1978 (42 U.S.C. 8301 et
seq, repealed 1987) to exceed an annual sulfur diox-
ide tonnage emissions limitation equal to the product
of the unit’s annual fuel consumption, on a Btu
basis, at a 65 percent capacity factor multiplied by
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the lesser of 1.20 lbs/mmBtu or the unit’s allowable
1987 sulfur dioxide emissions rate, divided by 2,000,
unless the owner or operator of such unit has ob-
tained allowances equal to its actual emissions or,
for a year after 2007, unless the owner or operator
of the source that includes such unit holds allow-
ances to emit not less than the total annual emis-
sions of all affected units at the source.
‘‘(6) Unless the Administrator has approved a
designation of such facility under section 417, the
provisions of this subpart shall not apply to a ‘quali-
fying small power production facility’ or ‘qualifying
cogeneration facility’ (within the meaning of section
3(17)(C) or 3(18)(B) of the Federal Power Act) or
to a ‘new independent power production facility’ if,
as of November 15, 1990—
‘‘(A) an applicable power sales agreement
has been executed;
‘‘(B) the facility is the subject of a State
regulatory authority order requiring an electric
utility to enter into a power sales agreement
with, purchase capacity from, or (for purposes
of establishing terms and conditions of the elec-
tric utility’s purchase of power) enter into arbi-
tration concerning, the facility;
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‘‘(C) an electric utility has issued a letter
of intent or similar instrument committing to
purchase power from the facility at a previously
offered or lower price and a power sales agree-
ment is executed within a reasonable period of
time; or
‘‘(D) the facility has been selected as a
winning bidder in a utility competitive bid solic-
itation.
‘‘(h) OIL AND GAS-FIRED UNITS LESS THAN 10
PERCENT OIL CONSUMED.—
‘‘(1) After January 1, 2000, it shall be unlawful
for any oil- and gas-fired utility unit whose average
annual fuel consumption during the period 1980
through 1989 on a Btu basis exceeded 90 percent in
the form of natural gas to exceed an annual sulfur
dioxide tonnage limitation equal to the product of
the unit’s baseline multiplied by the unit’s actual
1985 emissions rate divided by 2,000 unless the
owner or operator of such unit holds allowances to
emit not less than the unit’s total annual emissions
or, for a year after 2007, unless the owner or oper-
ator of the source that includes such unit holds al-
lowances to emit not less than the total annual emis-
sions of all affected units at the source.
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‘‘(2) In addition to allowances allocated pursu-
ant to paragraph (1) and section 412(a) as basic
Phase II allowance allocations, beginning January 1,
2000, and for each calendar year thereafter until
and including 2009, the Administrator shall allocate
annually for each unit subject to the emissions limi-
tation requirements of paragraph (1) allowances
from the reserve created pursuant to subsection
(a)(2) in an amount equal to the unit’s baseline mul-
tiplied by 0.050 lbs/mmBtu, divided by 2,000.
‘‘(3) In addition to allowances allocated pursu-
ant to paragraph (1) and section 412(a), beginning
January 1, 2010, the Administrator shall allocate
annually for each unit subject to the emissions limi-
tation requirements of paragraph (1) allowances in
an amount equal to the unit’s baseline multiplied by
0.050 lbs/mmBtu, divided by 2,000.
‘‘(i) UNITS IN HIGH GROWTH STATES.—
‘‘(1) In addition to allowances allocated pursu-
ant to this section and section 412(a) as basic Phase
II allowance allocations, beginning January 1, 2000,
the Administrator shall allocate annually allowances
for each unit, subject to an emissions limitation re-
quirement under this section, and located in a State
that—
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‘‘(A) has experienced a growth in popu-
lation in excess of 25 percent between 1980 and
1988 according to State Population and House-
hold Estimates, With Age, Sex, and Compo-
nents of Change: 1981–1988 allocated by the
United States Department of Commerce, and
‘‘(B) had an installed electrical generating
capacity of more than 30,000,000 kw in 1988,
in an amount equal to the difference between
(A) the number of allowances that would be al-
located for the unit pursuant to the emissions
limitation requirements of this section applica-
ble to the unit adjusted to reflect the unit’s an-
nual average fuel consumption on a Btu basis
of any three consecutive calendar years between
1980 and 1989 (inclusive) as elected by the
owner or operator and (B) the number of allow-
ances allocated for the unit pursuant to the
emissions limitation requirements of this sec-
tion: Provided, That the number of allowances
allocated pursuant to this subsection shall not
exceed an annual total of 40,000. If necessary
to meeting the 40,000 allowance restriction im-
posed under this subsection the Administrator
shall reduce, pro rata, the additional annual al-
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lowances allocated to each unit under this sub-
section.
‘‘(2) Beginning January 1, 2000, in addition to
allowances allocated pursuant to this section and
section 403(a)(1) as basic Phase II allowance alloca-
tions, the Administrator shall allocate annually for
each unit subject to the emissions limitation require-
ments of subsection (b)(1)—
‘‘(A) the lesser of whose actual or allow-
able 1980 emissions rate has declined by 50
percent or more as of November 15, 1990,
‘‘(B) whose actual emissions rate is less
than 1.2 lbs/mmBtu as of January 1, 2000,
‘‘(C) which commenced operation after
January 1, 1970,
‘‘(D) which is owned by a utility company
whose combined commercial and industrial kilo-
watt-hour sales have increased by more than 20
percent between calendar year 1980 and No-
vember 15, 1990, and
‘‘(E) whose company-wide fossil-fuel sulfur
dioxide emissions rate has declined 40 percent
or more from 1980 to 1988, allowances in an
amount equal to the difference between—
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‘‘(i) the number of allowances that
would be allocated for the unit pursuant to
the emissions limitation requirements of
subsection (b)(1) adjusted to reflect the
unit’s annual average fuel consumption on
a Btu basis for any three consecutive years
between 1980 and 1989 (inclusive) as
elected by the owner or operator, and
‘‘(ii) the number of allowances allo-
cated for the unit pursuant to the emis-
sions limitation requirements of subsection
(b)(1): Provided, That the number of al-
lowances allocated pursuant to this para-
graph shall not exceed an annual total of
5,000. If necessary to meeting the 5,000
allowance restriction imposed in the last
clause of the preceding sentence the Ad-
ministrator shall reduce, pro rata, the ad-
ditional allowances allocated to each unit
pursuant to this paragraph.
‘‘(j) 
CERTAIN
MUNICIPALLY
OWNED
POWER
PLANTS.—Beginning January 1, 2000, in addition to al-
lowances allocated pursuant to this section and section
412(a) as basic Phase II allowance allocations, the Admin-
istrator shall allocate annually for each existing munici-
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pally owned oil and gas-fired utility unit with nameplate
capacity equal to, or less than, 40 MWe, the lesser of
whose actual or allowable 1985 sulfur dioxide emission
rate is less than 1.20 lbs/mmBtu, allowances in an amount
equal to the product of the unit’s annual fuel consumption
on a Btu basis at a 60 percent capacity factor multiplied
by the lesser of its allowable 1985 emission rate or its
actual 1985 emission rate, divided by 2,000.
‘‘SEC. 415. ALLOWANCES FOR STATES WITH EMISSIONS
RATES AT OR BELOW 0.80 LBS/MMBTU.
‘‘(a) ELECTION OF GOVERNOR.—In addition to basic
Phase II allowance allocations, upon the election of the
Governor of any State, with a 1985 state-wide annual sul-
fur dioxide emissions rate equal to or less than, 0.80 lbs/
mmBtu, averaged over all fossil fuel-fired utility steam
generating units, beginning January 1, 2000, and for each
calendar year thereafter until and including 2009, the Ad-
ministrator shall allocate, in lieu of other Phase II bonus
allowance allocations, allowances from the reserve created
pursuant to section 414(a)(2) to all such units in the State
in an amount equal to 125,000 multiplied by the unit’s
pro rata share of electricity generated in calendar year
1985 at fossil fuel-fired utility steam units in all States
eligible for the election.
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‘‘(b) NOTIFICATION OF ADMINISTRATOR.—Pursuant
to section 412(a), each Governor of a State eligible to
make an election under paragraph (a) shall notify the Ad-
ministrator of such election. In the event that the Gov-
ernor of any such state fails to notify the Administrator
of the Governor’s elections, the Administrator shall allo-
cate allowances pursuant to section 414.
‘‘(c) ALLOWANCES AFTER JANUARY 1, 2010.—After
January 1, 2010, the Administrator shall allocate allow-
ances to units subject to the provisions of this section pur-
suant to section 414.
‘‘SEC. 416. ELECTION FOR ADDITIONAL SOURCES.
‘‘(a) APPLICABILITY.—The owner or operator of any
unit that is not, nor will become, an affected unit under
section 412(b), 413, or 414, that emits sulfur dioxide, may
elect to designate that unit or source to become an af-
fected unit and to receive allowances under this subpart.
An election shall be submitted to the Administrator for
approval, along with a permit application and proposed
compliance plan in accordance with section 404. The Ad-
ministrator shall approve a designation that meets the re-
quirements of this section, and such designated unit shall
be allocated allowances, and be an affected unit for pur-
poses of this subpart.
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‘‘(b) ESTABLISHMENT OF BASELINE.—The baseline
for a unit designated under this section shall be estab-
lished by the Administrator by regulation, based on fuel
consumption and operating data for the unit for calendar
years 1985, 1986, and 1987, or if such data is not avail-
able, the Administrator may prescribe a baseline based on
alternative representative data.
‘‘(c) EMISSION LIMITATIONS.—
‘‘(1) For a unit for which an election, along
with a permit application and compliance plan, is
submitted to the Administrator under paragraph (a)
before January 1, 2002, annual emissions limita-
tions for sulfur dioxide shall be equal to the product
of the baseline multiplied by the lesser of the unit’s
1985 actual or allowable emission rate in lbs/
mmBtu, or if the unit did not operate in 1985, by
the lesser of the unit’s actual or allowable emission
rate for a calendar year after 1985 (as determined
by the Administrator), divided by 2,000.
‘‘(2) For a unit for which an election, along
with a permit application and compliance plan, is
submitted to the Administrator under paragraph (a)
on or after January 1, 2002, annual emissions limi-
tations for sulfur dioxide shall be equal to the prod-
uct of the baseline multiplied by the lesser of the
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unit’s 1985 actual or allowable emission rate in lbs/
mmBtu, or, if the unit did not operate in 1985, by
the lesser of the unit’s actual or allowable emission
rate for a calendar year after 1985 (as determined
by the Administrator), divided by 4,000.
‘‘(d) ALLOWANCES
AND PERMITS.—The Adminis-
trator shall issue allowances to an affected unit under this
section in an amount equal to the emissions limitation cal-
culated under subsection (c), in accordance with section
412. Such allowance may be used in accordance with, and
shall be subject to, the provisions of section 412. Affected
sources under this section shall be subject to the require-
ments of sections 404, 405, 406, and 412.
‘‘(e) LIMITATION.—Any unit designated under this
section shall not transfer or bank allowances produced as
a result of reduced utilization or shutdown, except that,
such allowances may be transferred or carried forward for
use in subsequent years to the extent that the reduced
utilization or shutdown results from the replacement of
thermal energy from the unit designated under this sec-
tion, with thermal energy generated by any other unit or
units subject to the requirements of this subpart, and the
designated unit’s allowances are transferred or carried for-
ward for use at such other replacement unit or units. In
no case may the Administrator allocate to a source des-
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ignated under this section allowances in an amount great-
er than the emissions resulting from operation of the
source in full compliance with the requirements of this
Act. No such allowances shall authorize operation of a unit
in violation of any other requirements of this Act.
‘‘(f) IMPLEMENTATION.—The Administrator shall
implement this section under 40 CFR part 74 (2001),
amended as appropriate by the Administrator.
‘‘SEC. 417. AUCTIONS, RESERVE.
‘‘(a) SPECIAL RESERVE OF ALLOWANCES.—For pur-
poses of establishing the Special Allowance Reserve, the
Administrator shall withhold—
‘‘(1) 2.8 percent of the allocation of allowances
for each year from 1995 through 1999 inclusive; and
‘‘(2) 2.8 percent of the basic Phase II allowance
allocation of allowances for each year beginning in
the year 2000
which would (but for this subsection) be issued for each
affected unit at an affected source. The Administrator
shall record such withholding for purposes of transferring
the proceeds of the allowance sales under this subsection.
The allowances so withheld shall be deposited in the Re-
serve under this section.
‘‘(b) AUCTION SALES.—
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‘‘(1) SUBACCOUNT
FOR
AUCTIONS.—The Ad-
ministrator shall establish an Auction Subaccount in
the Special Reserve established under this section.
The Auction Subaccount shall contain allowances to
be sold at auction under this section in the amount
of 150,000 tons per year for each year from 1995
through 1999, inclusive and 250,000 tons per year
for each year from 2000 through 2009, inclusive.
‘‘(2) 
ANNUAL
AUCTIONS.—Commencing 
in
1993 and in each year thereafter until 2010, the Ad-
ministrator shall conduct auctions at which the al-
lowances referred to in paragraph (1) shall be of-
fered for sale in accordance with regulations promul-
gated by the Administrator. The allowances referred
to in paragraph (1) shall be offered for sale at auc-
tion in the amounts specified in table C. The auction
shall be open to any person. A person wishing to bid
for such allowances shall submit (by a date set by
the Administrator) to the Administrator (on a sealed
bid schedule provided by the Administrator) offers to
purchase specified numbers of allowance sat speci-
fied prices. Such regulations shall specify that the
auctioned allowances shall be allocated and sold on
the basis of bid price, starting with the highest-
priced bid and continuing until all allowances for
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sale at such auction have been allocated. The regula-
tions shall not permit that a minimum price be set
for the purchase of withheld allowances. Allowances
purchased at the auction may be used for any pur-
pose and at any time after the auction, subject to
the provisions of this subpart and subpart 2.
‘‘TABLE C.—NUMBER OF ALLOWANCES AVAILABLE FOR
AUCTION
Year of sale
Spot auction
(same year)
Advance
auction
1993 ................................................................
50,000
100,000
1994 ................................................................
50,000
100,000
1995 ................................................................
50,000
100,000
1996 ................................................................
150,000
100,000
1997 ................................................................
150,000
100,000
1998 ................................................................
150,000
100,000
1999 ................................................................
150,000
100,000
2000 ................................................................
125,000
125,000
2001 ................................................................
125,000
125,000
2002 ................................................................
125,000
125,000
2003–2009 ......................................................
125,000
‘‘(3) PROCEEDS.—
‘‘(A) Notwithstanding section 3302 of title
31 of the United States Code or any other pro-
vision of law, within 90 days of receipt, the Ad-
ministrator shall transfer the proceeds from the
auction under this section, on a pro rata basis,
to the owners or operators of the affected units
at an affected source from whom allowances
were withheld under subsection (b). No funds
transferred from a purchaser to a seller of al-
lowances under this paragraph shall be held by
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any officer or employee of the United States or
treated for any purpose as revenue to the
United States or the Administrator.
‘‘(B) At the end of each year, any allow-
ances offered for sale but not sold at the auc-
tion shall be returned without charge, on a pro
rata basis, to the owner or operator of the af-
fected units from whose allocation the allow-
ances were withheld. With 170 days after the
date of enactment of the Clear Skies Act of
2002, any allowance withheld under paragraph
(a)(2) but not offered for sale at an auction
shall be returned without charge, on a pro rata
basis, to the owner or operator of the affected
units from whose allocation the allowances were
withheld.
‘‘(4) RECORDING BY EPA.—The Administrator
shall record and publicly report the nature, prices
and results of each auction under this subsection, in-
cluding the prices of successful bids, and shall
record the transfers of allowances as a result of each
auction in accordance with the requirements of this
section. The transfer of allowances at such auction
shall be recorded in accordance with the regulations
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promulgated by the Administrator under this sub-
part.
‘‘(c) CHANGES IN AUCTIONS AND WITHHOLDING.—
Pursuant to rulemaking after public notice and comment
the Administrator may at any time after the year 1998
(in the case of advance auctions) and 2005 (in the case
of spot auctions) decrease the number of allowances with-
held and sold under this section.
‘‘(d) TERMINATION
OF AUCTIONS.—The Adminis-
trator shall terminate the withholding of allowances and
the auction sales under this section on December 31,
2009. Pursuant to regulations under this section, the Ad-
ministrator may be delegation or contract provide for the
conduct of sales or auctions under the Administrator’s su-
pervision by other departments or agencies of the United
States Government or by nongovernmental agencies,
groups, or organizations.
‘‘(e) The Administrator shall implement this section
under 40 CFR part 73 (2001), amended as appropriate
by the Administrator.
‘‘SEC. 418. INDUSTRIAL SO2 EMISSIONS.
‘‘(a) REPORT.—Not later than January 1, 1995 and
every 5 years thereafter, the Administrator shall transmit
to the Congress a report containing an inventory of na-
tional annual sulfur dioxide emissions from industrial
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sources (as defined in section 411(11)), including units
subject to section 414(g)(2), for all years for which data
are available, as well as the likely trend in such emission
over the following twenty-year period. The reports shall
also contain estimates of the actual emission reduction in
each year resulting from promulgation of the diesel fuel
desulfurization regulations under section 214.
‘‘(b) 5.60 MILLION TON CAP.—Whenever the inven-
tory required by this section indicates that sulfur dioxide
emissions from industrial sources, including units subject
to section 414(g)(2), and may reasonably be expected to
reach levels greater than 5.60 million tons per year, the
Administrator shall take such actions under the Act as
may be appropriate to ensure that such emissions do not
exceed 5.60 million tons per year. Such actions may in-
clude the promulgation of new and revised standards of
performance for new sources, including units subject to
section 414(g)(2), under section 111(b), as well as pro-
mulgation of standards of performance for existing
sources, including units subject to section 414(g)(2),
under authority of this section. For an existing source reg-
ulated under this section, ‘standard of performance’
means a standard which the Administrator determines is
applicable to that source and which reflects the degree of
emission reduction achievable through the application of
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the best system of continuous emission reduction which
(taking into consideration the cost of achieving such emis-
sion reduction, and any nonair quality health and environ-
mental impact and energy requirements) the Adminis-
trator determines has been adequately demonstrated for
that category of sources.
‘‘(c) ELECTION.—Regulations promulgated under
section 414(b) shall not prohibit a source from electing
to become an affected unit under section 417.
‘‘SEC. 419. TERMINATION.
‘‘Starting January 1, 2010, the owners or operators
of affected units and affected facilities under sections
412(b) and (c) and 416 and shall no longer be subject
to the requirements of sections 412 through 417.
‘‘Subpart 2—Sulfur Dioxide Allowance Program
‘‘SEC. 421. DEFINITIONS.
‘‘For purposes of this subpart—
‘‘(1) The term ‘affected EGU’ means—
‘‘(A) for a unit serving a generator before
the date of enactment of the Clear Skies Act of
2002, a unit in a State serving a generator with
a nameplate capacity of greater than 25
megawatts that produced or produces electricity
for sale during 2001 or any year thereafter, ex-
cept for a cogeneration unit that produced or
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produces electricity for sale equal to less than
one-third of the potential electrical output of
the generator that it served or serves during
2001 and each year thereafter; and
‘‘(B) for a unit commencing service of a
generator on or after the date of enactment of
the Clear Skies Act of 2002, a unit in a State
serving a generator that produces electricity for
sale during any year starting with the year the
unit commences service of a generator, except
for a gas-fired unit serving one or more genera-
tors with total nameplate capacity of 25
megawatts or less, or a cogeneration unit that
produces electricity for sale equal to less than
one-third of the potential electrical output of
the generator that it serves, during each year
starting with the year the unit commences serv-
ices of a generator.
Notwithstanding paragraphs (A) and (B), the term
‘affected EGU’ does not include a solid waste incin-
eration unit subject to section 129 or a unit for the
treatment, storage, or disposal of hazardous waste
subject to section 3005 of the Solid Waste Disposal
Act.
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‘‘(6) The term ‘unit account’ means an account
in the Allowance Tracking System under section
403(c) established by the Administrator for any unit
under 40 CFR § 73.31(a) and (b) (2001), amended
as appropriate by the Administrator.
‘‘SEC. 422. APPLICABILITY.
‘‘Starting January 1, 2010, it shall be unlawful for
the affected EGUs at a facility to emit a total amount
of sulfur dioxide during the year in excess of the number
of sulfur dioxide allowances held for such facility for that
year by the owner or operator of the facility.
‘‘SEC. 423. LIMITATIONS ON TOTAL EMISSIONS.
‘‘For affected EGUs for 2010 and each year there-
after, the Administrator shall allocate sulfur dioxide allow-
ances under section 424, and shall conduct auctions of sul-
fur dioxide allowances under section 409, in the amounts
in Table A.
‘‘TABLE A.—TOTAL SO2 ALLOWANCES ALLOCATED OR
AUCTIONED FOR EGU’S
Year
SO2 allow-
ances
allocated
SO2 allow-
ances
auctioned
2010 ................................................................
4,371,666
45,000
2011 ................................................................
4,326,667
90,000
2012 ................................................................
4,281,667
135,000
2013 ................................................................
4,320,000
180,000
2014 ................................................................
4,275,000
225,000
2015 ................................................................
4,230,000
270,000
2016 ................................................................
4,185,000
315,000
2017 ................................................................
4,140,000
360,000
2018 ................................................................
2,730,000
270,000
2019 ................................................................
2,700,000
300,000
2020 ................................................................
2,670,000
330,000
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‘‘TABLE A.—TOTAL SO2 ALLOWANCES ALLOCATED OR
AUCTIONED FOR EGU’S—Continued
Year
SO2 allow-
ances
allocated
SO2 allow-
ances
auctioned
2021 ................................................................
2,640,000
360,000
2022 ................................................................
2,610,000
390,000
2023 ................................................................
2,580,000
420,000
2024 ................................................................
2,550,000
450,000
2025 ................................................................
2,520,000
480,000
2026 ................................................................
2,490,000
510,000
2027 ................................................................
2,460,000
540,000
2028 ................................................................
2,430,000
570,000
2029 ................................................................
2,400,000
600,000
2030 ................................................................
2,325,000
675,000
2031 ................................................................
2,250,000
750,000
2032 ................................................................
2,175,000
825,000
2033 ................................................................
2,100,000
900,000
2034 ................................................................
2,025,000
975,000
2035 ................................................................
1,950,000
1,050,000
2036 ................................................................
1,875,000
1,125,000
2037 ................................................................
1,800,000
1,200,000
2038 ................................................................
1,725,000
1,275,000
2039 ................................................................
1,650,000
1,350,000
2040 ................................................................
1,575,000
1,425,000
2041 ................................................................
1,500,000
1,500,000
2042 ................................................................
1,425,000
1,575,000
2043 ................................................................
1,350,000
1,650,000
2044 ................................................................
1,275,000
1,725,000
2045 ................................................................
1,200,000
1,800,000
2046 ................................................................
1,125,000
1,875,000
2047 ................................................................
1,050,000
1,950,000
2048 ................................................................
975,000
2,025,000
2049 ................................................................
900,000
2,100,000
2050 ................................................................
825,000
2,175,000
2051 ................................................................
750,000
2,250,000
2052 ................................................................
675,000
2,325,000
2053 ................................................................
600,000
2,400,000
2054 ................................................................
525,000
2,475,000
2055 ................................................................
450,000
2,550,000
2056 ................................................................
375,000
2,625,000
2057 ................................................................
300,000
2,700,000
2058 ................................................................
225,000
2,775,000
2059 ................................................................
150,000
2,850,000
2060 ................................................................
75,000
2,925,000
2061 ................................................................
3,000,000
‘‘SEC. 424. EGU ALLOCATIONS.
‘‘(a) By January 1, 2007, the Administrator shall
promulgate regulations determining allocations of sulfur
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dioxide allowances for affected EGUs for each year during
2010 through 2060. The regulations shall provide that:
‘‘(1)(A) Ninety-five percent of the total amount
of sulfur dioxide allowances allocated each year to
affected EGUs under section 423 shall be allocated
based on the sulfur dioxide allowances that were al-
located under subpart 1 for 2010 or thereafter and
are held in unit accounts and general accounts in
the Allowance Tracking System under section
403(c).
‘‘(B) The Administrator shall allocate sulfur di-
oxide allowances to each facility’s account and each
general account in the Allowance Tracking System
under section 403(c) as follows:
‘‘(i) The Administrator shall determine the
amount of sulfur dioxide allowances allocated
under subpart 1 for 2010, and each subsequent
year, that are recorded in each unit account
and each general account in the Allowance
Tracking System as of 12:00 noon, Eastern
Standard time, on the date 180 days after en-
actment of the Clear Skies Act of 2002. The
Administrator shall determine this amount in
accordance with 40 CFR part 73 (2001),
amended as appropriate by the Administrator,
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except that the Administrator shall discount all
sulfur dioxide allowances allocated for 2011 or
later at a rate of 7 percent per year.
‘‘(ii) The Administrator shall determine for
each unit account and each general account in
the Allowance Tracking System an amount of
sulfur dioxide allowances equal to the allocation
amount under subparagraph (A) multiplied by
the ratio of the amount of sulfur dioxide allow-
ances determined to be recorded in that account
under clause (i) to the total amount of sulfur
dioxide allowances determined to be recorded in
all unit accounts and general accounts in the
Allowance Tracking System under clause (i).
‘‘(iii) The Administrator shall allocate to
each facility’s account in the Allowance Track-
ing System an amount of sulfur dioxide allow-
ances equal to the total amount of sulfur diox-
ide allowances determined under clause (ii) for
the unit accounts of the units at the facility and
to each general account in the Allowance Track-
ing System the amount of sulfur dioxide allow-
ances determined under clause (ii) for that gen-
eral account.
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‘‘(2)(A) Three and one-half percent of the total
amount of sulfur dioxide allowances allocated each
year for affected EGUs under section 423 shall be
allocated for units at a facility that are affected
EGUs as of December 31, 2004, that commenced
operation before January 1, 2001, and that are not
allocated any sulfur dioxide allowances under sub-
part 1.
‘‘(B) The Administrator shall allocate each year
for the units under subparagraph (A) an amount of
sulfur dioxide allowances determined by:
‘‘(i) For such units at the facility that are
coal-fired, multiplying 0.40 lb/mmBtu by the
total baseline heat input of such units and con-
verting to tons.
‘‘(ii) For such units at the facility that are
oil-fired, multiplying 0.20 lb/mmBtu by the
total baseline heat input of such units and con-
verting to tons.
‘‘(iii) For all such other units at the facil-
ity that are not covered by clause (i) or (ii),
multiplying 0.05 lb/mmBtu by the total baseline
heat input of such units and converting to tons.
‘‘(iv) If the total of the amounts for all fa-
cilities under clauses (i), (ii), and (iii) exceeds
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the allocation amount under subparagraph (A),
multiplying the allocation amount under sub-
paragraph (A) by the ratio of the total of the
amounts for the facility under clauses (i), (ii),
and (iii) to the total of the amounts for all fa-
cilities under clause (i), (ii), and (iii).
‘‘(v) Allocating to each facility the lesser of
the total of the amounts for the facility under
clauses (i), (ii), and (iii) or, if the total of the
amounts for all facilities under clauses (i), (ii),
and (iii) exceeds the allocation amount under
subparagraph (A), the amount under clause
(iv). The Administrator shall add to the amount
of sulfur dioxide allowances allocated under
paragraph (3) any unallocated allowances under
this paragraph.
‘‘(3)(A) One and one-half percent of the total
amount of sulfur dioxide allowances allocated each
year for affected EGUs under section 423 shall be
allocated for units that are affected EGUs as of De-
cember 31, 2004, that commence operation on or
after January 1, 2001 and before January 1, 2005,
and that are not allocated any sulfur dioxide allow-
ances under subpart 1.
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‘‘(B) The Administrator shall allocate each year
for the units under subparagraph (A) an amount of
sulfur dioxide allowances determined by:
‘‘(i) For such units at the facility that are
coal-fired or oil-fired, multiplying 0.19 lb/
mmBtu by the total baseline heat imput of such
units and converting to tons.
‘‘(ii) For all such other units at the facility
that are not covered by clause (i), multiplying
0.02 lb/mmBtu by the total baseline heat input
of such units and converting to tons.
‘‘(iii) If the total of the amounts for all fa-
cilities under clauses (i) and (ii) exceeds the al-
location amount under subparagraph (A), mul-
tiplying the allocation amount under subpara-
graph (A) by the ratio of the total of the
amounts for the facility under clauses (i) and
(ii) to the total of the amounts for all facilities
under clauses (i) and (ii).
‘‘(iv) Allocating to each facility the lesser
of the total of the amounts for the facility
under clauses (i) and (ii) or, if the total of the
amounts for all facilities under clauses (i) and
(ii) exceeds the allocation amount under sub-
paragraph (A), the amount under clause (iv).
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The Administrator shall allocate to the facilities
under paragraphs (1) and (2) on a pro rata
basis (based on the allocations under those
paragraphs) any unallocated allowances under
this paragraph.
‘‘(b) For each year 2010 through 2060, if the Admin-
istrator has not promulgated the regulations determining
allocations under paragraph (a) by July 1 that is eighteen
months before January 1 of such year, then:
‘‘(1) The Administrator shall—
‘‘(A) allocate, for such year, to each unit
with coal as its primary or secondary fuel or re-
sidual oil as its primary fuel listed in the Ad-
ministrator’s Emissions Scorecard 2000, Ap-
pendix B, Table B1 an amount of sulfur dioxide
allowances determined by multiplying eighty
percent of the allocation amount under section
423 by the ratio of such unit’s heat input in the
Emissions Scorecard 2000, Appendix B, Table
B1 to the total of the heat input in the Emis-
sions Scorecard 2000, Appendix B, Table B1
for all units with coal as their primary or sec-
ondary fuel or residual oil as their primary fuel;
‘‘(B) record in each facility’s account in
the Allowance Tracking System under section
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403(c) for such year the total of the amounts
of sulfur dioxide allowances for the units at
such facility determined under subparagraph
(A); and
‘‘(C) auction an amount of sulfur dioxide
allowances equal to five percent of the alloca-
tion amount under section 423 and conduct the
auction on the first business day in October fol-
lowing the respective promulgation deadline
under subsection (b) and in accordance with
section 400.
‘‘(2) Notwithstanding any other provision of
law to the contrary, the determination of the amount
of sulfur dioxide allowances under subparagraph
(1)(A) and the recording of sulfur dioxide allowances
under subparagraph (1)(B) shall not be subject to
judicial review.
‘‘(3) Notwithstanding the provisions to the con-
trary in section 423, the Administrator shall not al-
locate or record fifteen percent of the allocation
amount under section 423 for such year.
‘‘SEC. 425. DISPOSITION OF SULFUR DIOXIDE ALLOWANCES
ALLOCATED UNDER SUBPART 1.
‘‘(a) After allocating allowances under section
424(a)(1), the Administrator shall remove from the unit
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accounts and general accounts in the Allowance Tracking
System under section 403(c) and from the Special Allow-
ances Reserve under section 418 all sulfur dioxide allow-
ances allocated or deposited under subpart 1 for 2010 or
later.
‘‘(b) The Administrator shall promulgate regulations
as necessary to assure that the requirement to hold allow-
ances under section 422 may be met using sulfur dioxide
allowances allocated under subpart 1 for 1995 through
2009.
‘‘SEC. 426. INCENTIVES FOR SULFUR DIOXIDE EMISSION
CONTROL TECHNOLOGY.
‘‘(a) RESERVE.—The Administrator shall establish a
reserve of 250,000 sulfur dioxide allowances comprising
83,334 sulfur dioxide allowances for 2010, 83,333 sulfur
dioxide allowances for 2011, and 83,333 sulfur dioxide al-
lowances for 2012.
‘‘(b) APPLICATION.—By July 1, 2004 an owner or
operator of an affected EGU that commenced operation
before 2001 and that during 2001 combusted Eastern bi-
tuminous may submit an application to the Administrator
for sulfur dioxide allowances from the reserve under sub-
section (a). The application shall include:
‘‘(1) A statement that the owner or operator
will install and commence operation of specified sul-
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fur dioxide control technology at the unit within 24
months after approval of the application under sub-
section (c) if the unit is allocated the sulfur dioxide
allowances requested under paragraph (4). The
owner or operator shall provide description of the
control technology.
‘‘(2) A statement that, during the period start-
ing with the commencement of operation of sulfur
dioxide technology under paragraph (1) through
2009, the unit will combust Eastern bituminous at
a percentage of the unit’s total heat input equal to
or exceeding the percentage of total heat input com-
busted by the unit in 2001 if the unit is allocated
the sulfur dioxide allowances requested under para-
graph (4).
‘‘(3) A demonstration that the unit will achieve,
while combusting fuel in accordance with paragraph
(2) and operating the sulfur dioxide control tech-
nology specified in paragraph (1), a specified ton-
nage of sulfur dioxide emission reductions during the
period starting with the commencement of operation
of sulfur dioxide technology under subparagraph (1)
through 2009. The tonnage of emission reductions
shall be the difference between emissions monitored
at a location at the unit upstream of the control
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technology described in paragraph (1) and emissions
monitored at a location at the unit downstream of
such control technology, while the unit is combusting
fuel in accordance with paragraph (2).
‘‘(4) A request that EPA allocate for the unit
a specified number of sulfur dioxide allowances from
the reserve under subsection (a) for the period start-
ing with the commencement of operation of the sul-
fur dioxide technology under paragraph (1) through
2009.
‘‘(5) A statement of the ratio of the number of
sulfur dioxide allowances requested under paragraph
(4) to the tonnage of sulfur dioxide emissions reduc-
tions under paragraph (3).
‘‘(c) APPROVAL OR DISAPPROVAL.—Through adju-
dicative determinations subject to notice and opportunity
for comment, the Administrator shall—
‘‘(1) determine whether each application meets
the requirements of subsection (b);
‘‘(2) list the applications meeting the require-
ments of subsection (b) and their respective allow-
ance-to-emission-reduction ratios under paragraph
(b)(5) in order, from lowest to highest, of such ra-
tios;
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‘‘(3) for each application listed under paragraph
(2), multiply the amount of sulfur dioxide emission
reductions requested by each allowance-to-emission-
reduction ratio on the list that equals or is less than
the ratio for the application;
‘‘(4) sum, for each allowance-to-emission-reduc-
tion ratio in the list under paragraph (2), the
amounts of sulfur dioxide allowances determined
under paragraph (3);
‘‘(5) based on the calculations in paragraph (4),
determine 
which 
allowance-to-emission-reduction
ratio on the list under paragraph (2) results in the
highest total amount of allowances that does not ex-
ceed 250,000 allowances; and
‘‘(6) approve each application listed under para-
graph (2) with a ratio equal to or less than the al-
lowance-to-emission-reduction 
ratio 
determined
under paragraph (5) and disapprove all the other
applications.
‘‘(d) MONITORING.—An owner or operator whose ap-
plication is approved under subsection (c) shall install, and
quality assure data from, a CEMS for sulfur dioxide lo-
cated upstream of the sulfur dioxide control technology
under paragraph (b)(1) at the unit and a CEMS for sulfur
dioxide located downstream of such control technology at
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highest heat input for the period from the eighth
through the fourth year before the first covered
year.
‘‘(A) Notwithstanding paragraph (1), if a
unit commences operation during such period
and—
‘‘(i) on or after January 1 of the fifth
year before the first covered year, then ‘ad-
justed baseline heat input’ shall mean the
average annual heat input used by the unit
during the fifth and fourth years before
the first covered year; and
‘‘(ii) on or after January 1 of the
fourth year before the first covered year,
then ‘adjusted baseline heat input’ shall
mean the annual heat input used by the
unit during the fourth year before the first
covered year.
‘‘(B) A unit’s heat input for a year shall
be the heat input—
‘‘(i) required to be reported under sec-
tion 405 for the unit, if the unit was re-
quired to report heat input during the year
under that section;
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‘‘(ii) reported to the Energy Informa-
tion Administrator for the unit, if the unit
was not required to report heat input
under section 405;
‘‘(iii) based on data for the unit re-
ported to the State where the unit is lo-
cated as required by State law, if the unit
was not required to report heat input dur-
ing the year under section 405 and did not
report to the Energy Information Adminis-
tration; or
‘‘(iv) based on fuel use and fuel heat
content data for the unit from fuel pur-
chase or use records, if the unit was not
required to report heat input during the
year under section 405 and did not report
to the Energy Information Administration
and the State.
‘‘(2) The term ‘affected EGU’ means an af-
fected EGU under subpart 2 that is in a State and
that—
‘‘(A) in 2000, emitted 100 tons or more of
sulfur dioxide and was used to produce elec-
tricity for sale; or
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‘‘(B) in any year after 2000, emits 100
tons or more of sulfur dioxide and is used to
produce electricity for sale.
‘‘(3) The term ‘coal-fired’ with regard to a unit
means, for purposes of section 434, a unit com-
busting coal or any coal-derived fuel alone or in com-
bination with any amount of any other fuel in any
year during the period from the eighth through the
fourth year before the first covered year.
‘‘(4) The term ‘covered year’ means—
‘‘(A)(i) the third year after the year 2018
or later when the total annual sulfur dioxide
emissions of all affected EGUs in the States
first exceed 271,000 tons; or
‘‘(ii) the third year after the year 2013 or
later when the Administrator determines by
regulation that the total annual sulfur dioxide
emissions of all affected EGUs in the States are
reasonably projected to exceed 271,000 tons in
2018 or any year thereafter. The Administrator
may make such determination only if all the
States submit to the Administrator a petition
requesting that the Administrator issue such
determination and make all affected EGUs in
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the States subject to the requirements of sec-
tions 432 through 434; and
‘‘(B) each year after the ‘covered year’
under subparagraph (A).
‘‘(5) The term ‘oil-fired’ with regard to a unit
means, for purposes of section 434, a unit com-
busting fuel oil for more than ten percent of the
unit’s total heat input, and combusting no coal or
coal-derived fuel, an any year during the period from
the eight through the fourth year before the first
covered year.
‘‘SEC. 432. APPLICABILITY.
‘‘Starting January 1 of the first covered year, it shall
be unlawful for the affected EGUs at a facility to emit
a total amount of sulfur dioxide during the year in excess
of the number of sulfur dioxide allowances held for such
facility for that year by the owner or operator of the facil-
ity.
‘‘SEC. 433. LIMITATIONS ON TOTAL EMISSIONS.
‘‘For affected EGUs, the total amount of sulfur diox-
ide allowances that the Administrator shall allocate for
each covered year under section 434 shall equal 271,000
tons.
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‘‘SEC. 434. EGU ALLOCATIONS.
‘‘(a) By January 1 of the year before the first covered
year, the Administrator shall promulgate regulations de-
termining, for each covered year, the allocations of sulfur
dioxide allowances for the units at a facility that are af-
fected EGUs as of December 31 of the fourth year before
the covered year by—
‘‘(1) for such units at the facility that are coal-
fired, multiplying 0.40 lb/mmBtu by the total ad-
justed baseline heat input of such units and con-
verting to tons;
‘‘(2) for such units at the facility that are oil-
fired, multiplying 0.20 lb/mmBtu by the total ad-
justed baseline heat input of such units and con-
verting to tons;
‘‘(3) for all such other units at the facility that
are not covered by paragraph (1) or (2) multiplying
0.05 lb/mmBtu by the total adjusted baseline heat
input of such units and converting to tons; and
‘‘(4) multiplying the allocation amount under
section 433 by the ratio of the total of the amounts
for the facility under paragraphs (1), (2), and (3) to
the total of the amounts for all facilities under para-
graphs (1), (2), and (3).
‘‘(b) For each covered year, if the Administrator has
not promulgated the regulations determining allocations
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tion amount under section 433 and conduct the
auction on the first business day in October fol-
lowing the respective promulgation deadline
under subsection (b) and in accordance with
section 409.
‘‘(2) Notwithstanding any other provision of
law to the contrary, the determination of the amount
of sulfur dioxide allowances under subparagraph
(1)(A) and the recording of sulfur dioxide allowances
under subparagraph (1)(B) shall not be subject to
judicial review.
‘‘(3) Notwithstanding the provisions to the con-
trary in section 433, the Administrator shall not al-
locate or record fifteen percent of the allocation
amount under section 433 for such year.
‘‘PART C—NITROGEN OXIDES EMISSION
REDUCTIONS
‘‘Subpart 1—Acid Rain Program
‘‘SEC. 441. NITROGEN OXIDES EMISSION REDUCTION PRO-
GRAM.
‘‘(a) APPLICABILITY.—On the date that a coal-fired
utility unit becomes an affected unit pursuant to sections
413 or 414, or on the date a unit subject to the provisions
of section 413(d), must meet the SO2 reduction require-
ments, each such unit shall become an affected unit for
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purposes of this section and shall be subject to the emis-
sion limitations for nitrogen oxides set forth herein.
‘‘(b) EMISSION LIMITATIONS.—
‘‘(1) The Administrator shall by regulation es-
tablish annual allowable emission limitations for ni-
trogen oxides for the types of utility boilers listed
below, which limitations shall not exceed the rates
listed below: Provided, That the Administrator may
set a rate higher than that listed for any type of
utility boiler if the Administrator finds that the
maximum listed rate for that boiler type cannot be
achieved using low NOX burner technology. The Ad-
ministrator shall implement this paragraph under 40
CFR § 76.5 (2001). The maximum allowable emis-
sion rates are as follows:
‘‘(A) for tangentially fired boilers, 0.45 lb/
mmBtu;
‘‘(B) for dry bottom wall-fired boilers
(other than units applying cell burner tech-
nology), 0.50 lb/mmBtu. After January 1,
1995, it shall be unlawful for any unit that is
an affected unit on that date and is of the type
listed in this paragraph to emit nitrogen oxides
in excess of the emission rates set by the Ad-
ministrator pursuant to this paragraph.
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‘‘(2) The Administrator shall, by regulation, es-
tablish allowable emission limitations on a lb/
mmBtu, annual average basis, for nitrogen oxides
for the following types of utility boilers:
‘‘(A) wet bottom wall-fired boilers;
‘‘(B) cyclones;
‘‘(C) units applying cell burner technology;
‘‘(D) all other types of utility boilers.
The Administrator shall base such rates on the de-
gree of reduction achievable through the retrofit ap-
plication of the best system of continuous emission
reduction, taking into account available technology,
costs and energy and environmental impacts; and
which is comparable to the costs of nitrogen oxides
controls set pursuant to subsection (b)(1). The Ad-
ministrator may revise the applicable emission limi-
tations for tangentially fired and dry bottom, wall-
fired boilers (other than cell burners) to be more
stringent if the Administrator determines that more
effective low NOx burned technology is available:
Provided, That, no unit that is an affected unit pur-
suant to section 413 and that is subject to the re-
quirements of subsection (b)(1), shall be subject to
the revised emission limitations, if any. The Admin-
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istrator shall implement that paragraph under 40
CFR §§ 76.6 and 76.7 (2001).
‘‘(c) ALTERNATIVE EMISSION LIMITATIONS.—The
permitting authority shall, upon request of an owner or
operator of a unit subject to this section, authorize an
emission limitation less stringent than the applicable limi-
tation established under subsection (b)(1) or (b)(2) upon
a determination that—
‘‘(1) a unit subject to subsection (b)(1) cannot
meet the applicable limitation using low NOX burner
technology; or
‘‘(2) a unit subject to subsection (b)(2) canot
meet the applicable rate using the technology on
which the Administrator based the applicable emis-
sion limitation.
The permitting authority shall base such determination
upon a showing satisfactory to the permitting authority,
in accordance with regulations established by the Adminis-
trator, that the owner or operator—
‘‘(A) has properly installed appropriate control
equipment designed to meet the applicable emission
rate;
‘‘(B) has properly operated such equipment for
a period of fifteen months (or such other period of
time as the Administrator determines through the
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regulations), and provides operating and monitoring
data for such period demonstrating that the unit
cannot meet the applicable emission rate; and
‘‘(C) has specified an emission rate that such
unit can meet on an annual average basis. The per-
mitting authority shall issue an operating permit for
the unit in question, in accordance with section 404
and title V—
‘‘(i) that permits the unit during the dem-
onstration period referred to in subparagraph
(2) above, to emit at a rate in excess of the ap-
plicable emission rate;
‘‘(ii) at the conclusion of the demonstra-
tion period to revise the operating permit to re-
flect the alternative emission rate demonstrated
in paragraphs (2) and (3) above.
Units subject to subsection (b)(1) for which an alternative
emission limitation is established shall not be required to
install any additional control technology beyond low NOX
burners. Nothing in this section shall preclude an owner
or operator from installing and operating an alternative
NOX control technology capable of achieving the applica-
ble emission limitation. The Administrator shall imple-
ment this subsection under 40 CFR part 76 (2001),
amended as appropriate by the Administrator.
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‘‘(d) EMISSIONS AVERAGING.—In lieu of complying
with the applicable emission limitations under subsection
(b)(1), (2), or (c), the owner or operator of two or more
units subject to one or more of the applicable emission
limitations set pursuant to these sections, may petition the
permitting authority for alternative contemporaneous an-
nual emission limitations for such units that ensure that
(1) the actual annual emission rate in pounds of nitrogen
oxides per million Btu averaged over the units in question
is a rate that is less than or equal to (2) Btu-weighted
average annual emission rate for the same units if they
had been operated, during the same period of time, in
compliance with limitations set in accordance with the ap-
plicable emission rates set pursuant to subsections (b)(1)
and (2). If the permitting authority determines, in accord-
ance with regulations issued by the Administrator that the
conditions in the paragraph above can be met, the permit-
ting authority shall issue operating permits for such units,
in accordance with section 404 and title V, that allow al-
ternative contemporaneous annual emission limitations.
Such emission limitations shall only remain in effect while
both units continue operation under the conditions speci-
fied in their respective operating permits. The Adminis-
trator shall implement this subsection under 40 CFR part
76 (2001), amended as appropriate by the Administrator.
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‘‘SEC. 442. TERMINATION.
‘‘Starting January 1, 2008, owner or operator of af-
fected units and affected facilities under section 441 shall
no longer be subject to the requirements of that section.
‘‘Subpart 2—Nitrogen Oxides Allowance Program
‘‘SEC. 451. DEFINITIONS.
‘‘For purposes of this subpart:
‘‘(1) The term ‘affected EGU’ means—
‘‘(A) for a unit serving a generator before
the date of enactment of the Clear Skies Act of
2002, a unit in a State serving a generator with
a nameplate capacity of greater than 25
megawatts that produced or produces electricity
for sale during 2001 or any year thereafter, ex-
cept for a cogeneration unit that produced or
produces electricity for sale equal to less than
one-third of the potential electrical output of
the generator that it served or serves during
2001 and each year thereafter; and
‘‘(B) for a unit commencing service of a
generator on or after the date of enactment of
the Clear Skies Act of 2002, a unit in a State
serving a generator that produces electricity for
sale during any year starting with the year the
unit commences service of a generator, except
for a gas-fired unit serving one or more genera-
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tors with total nameplate capacity of 25
megawatts or less, or a cogeneration unit that
produces electricity for sale equal to less than
one-third of the potential electrical output of
the generator that it serves, during each year
starting with the unit commences service of a
generator.
‘‘(C) Notwithstanding paragraphs (A) and
(B), the term ‘affected EGU’ does not include
a solid waste incineration unit subject to section
129 or a unit for the treatment, storage, or dis-
posal of hazardous waste subject to section
3005 of the Solid Waste Disposal Act.
‘‘(2) The term ‘Zone 1 State’ means Alabama,
Arkansas, Connecticut, Delaware, the District of Co-
lumbia, Florida, Georgia, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi,
Missouri, New Hampshire, New Jersey, New York,
North Carolina, Ohio, Oklahoma, Pennsylvania,
Rhode Island, South Carolina, Tennessee, Texas
east of Interstate 35, Vermont, Virginia, West Vir-
ginia, and Wisconsin.
‘‘(3) The term ‘Zone 2 State’ means Alaska,
American Samoa, Arizona, California, Colorado, the