I 
108TH CONGRESS 
1ST SESSION 
H. R. 999
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 
FEBRUARY 27, 2003
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 2003’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
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. 410. Evaluation of limitations on total sulfur dioxide, nitrogen oxides, 
and mercury emissions that start in 2018. 
‘‘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—Clear Skies 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. 
‘‘Subpart 2—Clear Skies 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. Exemption from 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—
‘‘(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, if 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,
the average annual heat input used by a unit during 
the 3 years in which the unit had the highest heat 
input for the period 1998 through 2002. 
‘‘(B) Notwithstanding subparagraph (A), if a 
unit commenced or commences operation during the 
period 2001 through 2004, then ‘baseline heat input’ 
means the manufacturer’s design heat input capacity 
for the unit multiplied by 80 percent for coal-fired 
units, 50 percent for boilers that are not coal-fired, 
50 percent for combustion turbines other than sim-
ple cycle turbines, and 5 percent 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; 
‘‘(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) Not later than 3 months after the enact-
ment of the Clear Skies Act of 2003, the Adminis-
trator shall promulgate regulations, without notice 
and opportunity for comment, specifying the format 
in which the information under subparagraphs 
(B)(ii) and (C)(ii), (iii), or (iv) shall be submitted. 
Not later than 9 months after the enactment of the 
Clear Skies Act of 2003, 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 allocate allowances under such sec-
tions to a unit for which the owner or operator fails 
to submit information in accordance with the regula-
tions 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 amount 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
‘‘(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 ei-
ther—
‘‘(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, where applicable, a schedule and 
description of the method or methods for com-
pliance and certification by the owner or oper-
ator that the facility 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
‘‘(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 10 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
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 ‘simple cycle combustion tur-
bine’ means a combustion turbine that does not ex-
tract heat from the combustion turbine exhaust 
gases. 
‘‘(31) The term ‘source’ means, except for sec-
tions 410, 481, and 482, all buildings, structures, or 
installations located on one or more contiguous or 
adjacent properties under common control of the 
same person or persons. 
‘‘(32) 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, American 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. 
‘‘(33) The term ‘unit’ means—
‘‘(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. 
‘‘(34) The term ‘utility unit’ shall have the 
meaning set forth in section 411. 
‘‘(35) 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 
provided 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 
‘‘(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 or facility, and the determination of any 
values used in such calculation, under sections 424, 
434, 454, and 474 shall not be subject to judicial re-
view. 
‘‘(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 (2002), 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 24 
months after the date of enactment of the Clear Skies Act 
of 2003. The regulations under this subsection shall estab-
lish the allowance system prescribed under this section, 
including, but not limited to, requirements for the alloca-
tion, 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 pur-
poses of this title, for the identification of unused allow-
ances, and for such unused allowances to be carried for-
ward and added to allowances allocated in subsequent 
years, except as otherwise provided in section 425. Such 
regulations shall provide, or shall be amended to provide, 
that transfers of allowances shall not be effective until cer-
tification of the transfer, signed by a responsible official 
of the transferor, is received and recorded by the Adminis-
trator. 
‘‘(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, not later than the com-
mencement date of the nitrogen oxides allowance require-
ment under section 452, for one or more facility-wide ac-
counts for holding sulfur dioxide allowances, nitrogen ox-
ides allowances, and, if applicable, mercury allowances for 
all affected units at an affected facility. With regard to 
sulfur dioxide allowances, the Administrator shall imple-
ment this subsection under 40 CFR part 73 (2002), 
amended as appropriate by the Administrator. With re-
gard to nitrogen oxides allowances and mercury allow-
ances, the Administrator shall implement this subsection 
by promulgating regulations not later than 24 months 
after the date of enactment of the Clear Skies Act of 2002. 
All allowance allocations and transfers shall, upon record-
ing by the Administrator, be deemed a part of each unit’s 
or facility’s permit requirements 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 
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.—
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. 
‘‘(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 Regu-
latory Commission under any provision of law re-
specting unfair methods of competition or anti-
competitive acts or practices. 
‘‘(2) As used in this section, ‘antitrust laws’ means 
those Acts set forth in section 1 of the Clayton 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 6 
years after the enactment of the Clear Skies Act of 2003, 
the Administrator shall furnish to the Congress a study 
evaluating the environmental and economic consequences 
of amending this title to permit trading sulfur dioxide al-
lowances for nitrogen oxides allowances and nitrogen ox-
ides allowances for sulfur dioxide allowances. 
‘‘(j) INTERNATIONAL TRADING.—Not later than 24 
months after the date of enactment of the Clear Skies Act 
of 2003, the Administrator shall furnish to the Congress 
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) exceeding 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 inconsistent with the re-
quirements 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 
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 
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) Recording 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-
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 
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.—
‘‘(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 time 
lines as that provided by CEMS, and for record-
keeping and reporting of information from such sys-
tems. Such regulations may include limitations on
‘‘(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. 
‘‘(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 clause (v), the regu-
lations 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. 
‘‘(b) DEADLINES.—
‘‘(1) NEW UTILITY UNITS.—Upon commence-
ment of commercial operation of each new utility 
unit under subpart I of part B, the unit shall comply 
with the requirements of subsection (a)(1). 
‘‘(2) DEADLINE FOR AFFECTED UNITS UNDER 
SUBPART 2 OF PART B FOR INSTALLATION AND OP-
ERATION OF CEMS.—By the later of the date 12 
months before the commencement date of the sulfur 
dioxide allowance requirement of section 422, 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) DEADLINE FOR AFFECTED UNITS UNDER 
SUBPART 3 OF PART B FOR INSTALLATION AND OP-
ERATION OF CEMS.—By the later of January 1 of 
the year before 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 as-
sure the data, and keep records and reports in ac-
cordance with the regulations issued under para-
graph (a)(2) with regard to sulfur dioxide and volu-
metric flow. 
‘‘(4) DEADLINE FOR AFFECTED UNITS UNDER 
SUBPART 2 OF PART C FOR INSTALLATION AND OP-
ERATION OF CEMS.—By the later of the date 12 
months before the commencement date of the nitro-
gen oxides allowance requirement under section 452, 
or the date on which the unit commences operation, 
the owner or operator of each affected unit under 
subpart 2 of part C 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 nitrogen ox-
ides. 
‘‘(5) DEADLINE FOR AFFECTED UNITS UNDER 
PART
D
FOR
INSTALLATION
AND
OPERATION
OF 
CEMS.—By the later of the date 12 months before 
the commencement date of the mercury allowance 
requirement of section 472, or the date on which the 
unit commences operation, the owner or operator of 
each affected unit under part D shall install and op-
erate CEMS, quality assure the data, and keep 
records and reports in accordance with the regula-
tions 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 
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) IMPLEMENTATION.—With regard to sulfur diox-
ide, nitrogen oxides, opacity, and volumetric flow, the Ad-
ministrator shall implement subsections (a) and (c) under 
40 CFR part 75 (2002), amended as appropriate by the 
Administrator. With regard to mercury, the Administrator 
shall implement subsections (a) and (c) by issuing pro-
posed regulations not later than 36 months before the 
commencement date of the mercury allowance requirement 
under section 472 and final regulations not later than 24 
months before that commencement date. 
‘‘(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) AMOUNT FOR OXIDES OF NITROGEN.—The 
owner or operator of any unit subject to the require-
ments of section 441 that emits nitrogen oxides for 
any calendar year in excess of the unit’s emissions 
limitation requirement shall be liable for the pay-
ment of an excess emissions penalty, except where 
such emission were authorized pursuant to section 
110(f). That penalty shall be calculated on the basis 
of the number of tons emitted in excess of the unit’s 
emissions limitation requirement multiplied by 
$2,000. 
‘‘(2) AMOUNT FOR SULFUR DIOXIDE BEFORE 
2008.—The owner or operator of any unit subject to 
the requirements of section 412(c) that emits sulfur 
dioxide for any calendar year before 2008 in excess 
of the sulfur dioxide allowances the owner or oper-
ator holds for use for the unit for that calendar year 
shall be liable for the payment of an excess emis-
sions penalty, except where such emissions were au-
thorized 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 allow-
ances—
‘‘(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, 300 percent of the product 
of the unit’s excess emissions (in tons) multi-
plied by the clearing price of sulfur dioxide al-
lowances sold at the most recent auction under 
section 417. 
‘‘(3) AMOUNT
FOR
SULFUR
DIOXIDE
AFTER 
2007.—If the units at a facility that are subject to 
the requirements of section 412(c) emit sulfur diox-
ide for any calendar 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 
for the payment of an excess emissions penalty, ex-
cept where such emissions were authorized pursuant 
to section 110(f). That penalty shall be calculated 
under paragraph (4)(A) or (4)(B).
‘‘(4) UNITS SUBJECT TO SECTIONS 422, 432, 452, 
OR 472.—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 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)(2) or (b)(3), as applicable; 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, 300 percent of the product 
of the units’ excess emissions (in tons or, for 
mercury emissions, in ounces) multiplied by the 
clearing price of sulfur dioxide allowances, ni-
trogen oxides allowances, or mercury allow-
ances, as the case may be, sold at the most re-
cent auction under section 423, 453, or 473. 
‘‘(5) PAYMENT.—Any penalty under paragraph 
1, 2, 3, or 4 shall be due and payable without de-
mand to the Administrator as provided in regula-
tions issued by the Administrator. With regard to 
the penalty under paragraph 1, the Administrator 
shall implement this paragraph under 40 CFR part 
77 (2002), amended as appropriate by the Adminis-
trator. With regard to the penalty under paragraphs 
2, 3, and 4, the Administrator shall implement this 
paragraph by issuing regulations no later than 24 
months after the date of enactment of the Clear 
Skies Act of 2003. Any such payment shall be de-
posited in the United States Treasury. Any penalty 
due and payable under this section shall not dimin-
ish the liability of the unit’s owner or operator for 
any fine, penalty or assessment against the unit for 
the same violation 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-
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. 
‘‘(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. 
‘‘(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) OTHER REQUIREMENTS.—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 this Act, no State or political subdivision 
thereof shall restrict or interfere with the transfer, sale, 
or purchase of allowances under this title.
‘‘(g) VIOLATIONS.—Violation by any person subject 
to this title of any prohibition of, requirement of, or regu-
lation promulgated pursuant to this title shall be a viola-
tion 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 sul-
fur dioxide, nitrogen oxides, or mercury in violation of sec-
tion 412(c), 422, 432, 452, and 472, as the case may be, 
shall be deemed a violation, with each ton or, in the case 
of mercury, each ounce emitted in excess of allowances 
held constituting 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.—
‘‘(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 
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 
50 percent of the following amounts, as adjusted 
under paragraph (2)—
‘‘(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
dioxide, nitrogen oxides, or mercury appli-
cable to the year on which the unit’s base-
line 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-
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 21 year and 
each year thereafter. The Administrator shall make 
corresponding increases in the amounts of allow-
ances 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-
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 5 years or less, and which com-
plies 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 
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. 
‘‘SEC. 409. AUCTIONS. 
‘‘(a) IN GENERAL.—(1) Commencing in 2005 and in 
each year thereafter, the Administrator shall conduct auc-
tions, as required under sections 423, 424, 426, 434, 453, 
454, 473, and 474, at which allowances shall be offered 
for sale in accordance with regulations promulgated by the 
Administrator no later than 24 months after the date of 
enactment of the Clear Skies Act of 2003. 
‘‘(2) Such regulations shall promote an efficient auc-
tion outcome and a competitive market for allowances. 
‘‘(3) Such regulations 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, 432, 452, and 472, as the 
case may be. Such regulations shall specify the frequency 
and timing of auctions and may provide for more than 
one auction of sulfur dioxide allowances, nitrogen oxides 
allowances, or mercury allowances during a year. Allow-
ances purchased at the auction may be used for any pur-
pose and at any time after the auction, subject to the pro-
visions of this title. 
‘‘(4) The regulations shall provide that each auction 
shall be open to any person. A person wishing to bid for 
allowances in the auction shall submit bids according to 
auction procedures, a bidding schedule, a bidding means, 
and requirements for financial guarantees specified in the 
regulations. Winning bids, and required payments, for al-
lowances shall be determined in accordance with the regu-
lations. For any winning bid, the Administrator shall 
record the allowances in the Allowance Tracking System 
under section 403(c) only after the required payment for 
such allowances is received. 
‘‘(b) DEFAULT AUCTION PROCEDURES.—If the Ad-
ministrator is required to conduct an auction of allowances 
under subsection (a) before regulations have been promul-
gated under that subsection, such auction shall be con-
ducted as follows: 
‘‘(1) The auction shall begin on the first busi-
ness day in October of the year in which the auction 
is required or, of the year before the first year for 
which the allowances may be used to meet the re-
quirements of section 403(e)(2). 
‘‘(2) The auction shall be open to any person.
‘‘(3) The auction shall be a multiple-round auc-
tion in which sulfur dioxide allowances, nitrogen ox-
ides allowances, and mercury allowances are offered 
simultaneously. 
‘‘(4) 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 initial bids to pur-
chase a specified quantity of sulfur dioxide allow-
ances, nitrogen oxides allowances, and mercury al-
lowances, as the case may be, at a reserve price 
specified by the Administrator. The bidder shall 
identify the account in the Allowance Tracking Sys-
tem under section 403(c) in which the such allow-
ances that are purchased are to be recorded. Each 
bid must be guaranteed by a certified check, a funds 
transfer, or, in a form acceptable to the Adminis-
trator, a letter of credit for such quantity multiplied 
by the reserve price payable to the U.S. EPA. 
‘‘(5) The procedures in paragraph (4) shall con-
stitute the first round of the auction. 
‘‘(6) In each round of the auction, the Adminis-
trator shall—
‘‘(A) announce current round reserve 
prices for sulfur dioxide allowances, nitrogen 
oxides allowances, and mercury allowances; 
‘‘(B) receive bids comprising nonnegative 
quantities for sulfur dioxide allowances, nitro-
gen oxides allowances, and mercury allowances, 
as the case may be; 
‘‘(C) determine whether bids are acceptable 
as meeting auction requirements; 
‘‘(D) for sulfur dioxide allowances, nitro-
gen oxides allowances, and mercury allowances, 
as the case may be, determine whether the sum 
of the acceptable bids exceeds the quantity of 
such allowances available for auction; 
‘‘(E) if the sum of the acceptable bids for 
sulfur dioxide allowances, nitrogen oxides allow-
ances, and mercury allowances, as the case may 
be, exceeds the quantity of such allowances 
available for auction, increase the reserve price 
for the next round based on the amount by 
which the sum of such acceptable bids exceeds 
the quantity of such allowances; and 
‘‘(F) if the sum of the acceptable bids for 
sulfur dioxide allowances, nitrogen oxides allow-
ances, and mercury allowances, as the case may
be, does not exceed the quantity of such allow-
ances available for auction, declare that round 
the last round of the auction for such allow-
ances. 
‘‘(7) In the second and all subsequent rounds of 
the auction, the Administrator shall require that, for 
sulfur dioxide allowances, nitrogen oxides allowances, 
and mercury allowances, as the case may be, a bid-
der’s quantity bid may not exceed the bidder’s quan-
tity bid for such allowances in the first round of the 
auction. 
‘‘(8) After the auction, the Administrator shall 
publish the names of winning and losing bidders, 
their quantities awarded, and the final prices. The 
Administrator shall provide the successful bidders 
notice of the allowances that they have purchased 
within thirty days after payments equaling the quan-
tity awarded multiplied by the corresponding final 
reserve price is collected by the Administrator. After 
the conclusion of the auction, the Administrator 
shall return payment to unsuccessful bidders and 
add any unsold allowances to the next relevant auc-
tion.
‘‘(9) The Administrator may specify by regula-
tions, without notice and opportunity for comment, 
the following auction requirements and procedures: 
‘‘(A) reserve prices for sulfur dioxide allow-
ances, nitrogen oxides allowances, and mercury 
allowances, as the case may be; 
‘‘(B) procedures for adjusting reserve 
prices in each round; 
‘‘(C) procedures limiting a bidder’s bids 
based on his or her bids in previous rounds; 
‘‘(D) rationing procedures to treat tie bids; 
‘‘(E) procedures allowing bids at inter-
mediate prices between previous reserve prices 
and current reserve prices; 
‘‘(F) procedures allowing bid withdrawals 
before the final round of the auction; 
‘‘(G) anti-collusion rules; 
‘‘(H) market share limitations on a bidder 
or associated bidders; 
‘‘(I) aggregate information made available 
to bidders during the auction; 
‘‘(J) proxy bidding or procedures for facili-
tating participation by small bidders; 
‘‘(K) levels and details of financial guaran-
tees;
‘‘(L) technical specifications for electronic 
bidding; and 
‘‘(M) bidding schedules and other adminis-
trative requirements and procedures of the auc-
tion. 
‘‘(c) DELEGATION
OR CONTRACT.—The Adminis-
trator may by delegation or contract provide for the con-
duct of auctions under the Administrator’s supervision by 
other departments or agencies of the United States Gov-
ernment or by nongovernmental agencies, groups, or orga-
nizations. 
‘‘(d) PROCEEDS.—The proceeds from any auction 
conducted under this title shall be deposited in the United 
States Treasury. 
‘‘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 con-
sultation with the Secretary of Energy, shall study wheth-
er 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 mer-
cury under section 473 should be adjusted.
‘‘(2) In conducting the study, the Administrator shall 
include the following analyses and evaluations concerning 
the pollutants under paragraph (1) of subsection (a)(1): 
‘‘(A) An evaluation of the need for further 
emission reductions from affected EGUs under sub-
part 2 of part B, subpart 2 of part C, or part D and 
other sources to attain or maintain the national am-
bient air quality standards. 
‘‘(B) A benefit-cost analysis to evaluate whether 
the benefits of the limitations 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 ac-
count both quantifiable and non-quantifiable factors. 
‘‘(C) The marginal cost effectiveness of reduc-
ing emissions for each pollutant. 
‘‘(D) The merits of allowing trading between ni-
trogen oxides emissions and sulfur dioxide emissions. 
‘‘(E) An evaluation of the relative marginal cost 
effectiveness of reducing sulfur dioxide and nitrogen 
oxide emissions from affected EGUs under subpart 
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, nitrogen oxides and
other pollutants that can be controlled to attain or 
maintain national ambient air quality standards. 
‘‘(F) An evaluation of the feasibility of attain-
ing the limitations on the total annual amounts of 
allowances available starting in 2018 given the avail-
able 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 (1) of subsection (a) for each pol-
lutant, including the ability to achieve alternative 
limitations given the available control technologies, 
and the feasibility of installing the control tech-
nologies needed to meet the alternative limitation by 
2018. 
‘‘(G) An assessment of the results of the most 
current research and development regarding tech-
nologies 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 regarding tech-
nologies for other sources of the same pollutants. 
‘‘(H) The projected impact of the limitations on 
the total annual amounts of allowances available
starting in 2018 and the projected impact of adjust-
ing any of the limitations on the total annual 
amounts of allowances available starting in 2018 
under paragraph (1) of subsection (a) 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. 
‘‘(I) An assessment of the best available and 
most current scientific information relating to emis-
sions, transformation and deposition of these pollut-
ants, including studies evaluating—
‘‘(i) the role of emissions of affected EGUs 
under subpart 2 of part B, subpart 2 of part 
C, or part D in the atmospheric formation of 
pollutants for which national ambient air qual-
ity standards exist; 
‘‘(ii) the transformation, transport, and 
fate of these pollutants in the atmosphere, 
other media, and biota; 
‘‘(iii) the extent to which effective control 
programs in other countries would prevent air 
pollution generated in those countries from con-
tributing to nonattainment, or interfering with 
the maintenance of any national ambient air 
quality standards;
‘‘(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 particu-
late matter and the effect of various compo-
nents of fine particulate matter on public 
health. 
‘‘(J) An assessment of the best available and 
most current scientific information relating to emis-
sions, transformation and deposition of mercury, in-
cluding studies evaluating—
‘‘(i) known and potential human health 
and environmental effects of mercury; 
‘‘(ii) whether emissions of mercury from 
affected EGUs under part D contribute signifi-
cantly to elevated levels of mercury in fish; 
‘‘(iii) human population exposure to mer-
cury; and 
‘‘(iv) the relative marginal cost effective-
ness of reducing mercury emissions from af-
fected EGUs under part D, as compared to the 
marginal cost effectiveness of controls on other 
sources of mercury.
‘‘(K) A comparison of the extent to which 
sources of mercury not located in the United States 
contributed to adverse affects on terrestrial or 
aquatic systems as opposed to the contribution from 
affected EGUs under part D, and the extent to 
which effective mercury control programs in other 
countries could minimize such impairment. 
‘‘(L) An analysis of the effectiveness and effi-
ciency of the sulfur dioxide allowance program under 
subpart 2 of part B, the nitrogen oxides allowance 
program under subpart 2 of part C, and the mer-
cury allowance program under part D. 
‘‘(3) As part of the study, the Administrator shall 
take into account the best available information pursuant 
to the review of the air quality criteria for particulate mat-
ter under section 108. 
‘‘(b) PEER REVIEW PROCEDURES.—(1) The draft re-
sults of the study under subsection (a), including the ben-
efit-cost analysis, the risk assessment, technological infor-
mation and related technical documents shall be subject 
to an independent and external peer review in accordance 
with this section. Any documents that are to be considered 
by the Administrator in the study shall be independently 
peer reviewed no later than July 1, 2008. The peer review
required under this section shall not be subject to the Fed-
eral Advisory Committee Act (5 U.S.C. App.). 
‘‘(2) The Administrator shall conduct the peer review 
in an open manner. Such peer review shall—
‘‘(A) be conducted through a formal panel that 
is broadly representative and involves qualified spe-
cialists who—
‘‘(i) are selected primarily on the basis of 
their technical expertise relevant to the analyses 
required under this section; 
‘‘(ii) disclose to the agency prior technical 
or policy positions they have taken on the issues 
under consideration; and 
‘‘(iii) disclose to the agency their sources 
of personal and institutional funding from the 
private or public sectors; 
‘‘(B) contain a balanced presentation of all con-
siderations, including minority reports; 
‘‘(C) provide adequate protections for confiden-
tial business information and trade secrets, including 
requiring panel members or participants to enter 
into confidentiality agreements; 
‘‘(D) afford an opportunity for public comment; 
and
‘‘(E) be complete by no later than January 1, 
2009. 
‘‘(2) The Administrator shall respond, in writing, to 
all significant peer review and public comments and certify 
that—
‘‘(A) each peer review participant has the ex-
pertise and independence required under this sec-
tion; and 
‘‘(B) the agency has adequately responded to 
the peer review comments as required under this 
section. 
‘‘(c) RECOMMENDATION
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 (1) of subsection (a). The rec-
ommendation shall include the final results of the study 
under subsections (a) and (b) and shall address the factors 
described in paragraph (2) of subsection (a). The Admin-
istrator may submit separate recommendations addressing 
sulfur dioxide, nitrogen oxides, or mercury at any time 
after the study has been completed under paragraph (2) 
of subsection (a) and the peer review process has been 
completed under subsection (b).
‘‘PART B—SULFUR DIOXIDE EMISSION 
REDUCTIONS 
‘‘Subpart 1—Acid Rain Program 
‘‘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 con-
sultation with the Secretary of Energy, shall study wheth-
er 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 mer-
cury under section 473 should be adjusted. 
‘‘(2) In conducting the study, the Administrator shall 
include the following analyses and evaluations concerning 
the pollutants under paragraph (a)(1): 
‘‘(A) an evaluation of the need for further emis-
sion reductions 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 am-
bient air quality standards; 
‘‘(B) a benefit-cost analysis to evaluate whether 
the benefits of the limitations 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 ac-
count both quantifiable and non-quantifiable factors; 
‘‘(C) the marginal cost effectiveness of reducing 
emissions for each pollutant; 
‘‘(D) the merits of allowing trading between 
NOX and SO2 limitations; 
‘‘(E) an evaluation of the relative marginal cost 
effectiveness 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, nitrogen oxides and 
other pollutants that can be controlled to attain or 
maintain national ambient air quality standard; 
‘‘(F) an evaluation of the feasibility of attaining 
the limitations on the total annual amounts of allow-
ances 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 para-
graph (a)(1) for each pollutant, including the ability 
to achieve alternative limitations given the available 
control technologies, and the feasibility of installing
the control technologies needed to meet the alter-
native limitation by 2018; 
‘‘(G) an assessment of the results of the most 
current research and development regarding tech-
nologies 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 regarding tech-
nologies for other sources of the same pollutants; 
‘‘(H) the projected impact of the limitations on 
the total annual amounts of allowances available 
starting in 2018 and the projected impact of adjust-
ing 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, sub-
part 2 of part C, or part D and on fuel diversity 
within the power generation section; 
‘‘(I) an assessment of the best available and 
most current scientific information relating to emis-
sions, transformation and deposition of these pollut-
ants, including studies evaluating—
‘‘(i) the role of emissions of affected EGUs 
under subpart 2 of part B, subpart 2 of part
C, or part D in the atmospheric formation of 
pollutants for which national ambient air qual-
ity standards exist; 
‘‘(ii) the transformation, transport, and 
fate of these pollutants in the atmosphere, 
other media, and biota; 
‘‘(iii) the extent to which effective control 
programs in other countries would prevent air 
pollution generated in those countries from con-
tributing to nonattainment, or interfering with 
the maintenance of any national ambient air 
quality standards; 
‘‘(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 particu-
late matter and the effect of various elements 
of fine particulate matter on public health; 
‘‘(J) an assessment of the best available and 
most current scientific information relating to emis-
sions, transformation and deposition of mercury, in-
cluding studies evaluating— 
‘‘(i) known and potential human health 
and environmental effects of mercury;
‘‘(ii) whether emissions of mercury from 
affected EGUs under part D contribute signifi-
cantly to elevated levels of mercury in fish; 
‘‘(iii) human population exposure to mer-
cury; and 
‘‘(iv) the relative marginal cost effective-
ness of reducing mercury emissions from af-
fected EGUs under part D, as compared to the 
marginal cost effectiveness of controls on other 
sources of mercury; 
‘‘(K) a comparison of the extent to which 
sources of mercury not located in the United States 
contributed to adverse affects on terrestrial or 
aquatic systems as opposed to the contribution from 
affected EGUs under part D, and the extent to 
which effective mercury control programs in other 
countries could minimize such impairment; and 
‘‘(L) an analysis of the effectiveness and effi-
ciency of the sulfur dioxide allowance program under 
subpart 2 of part B, the nitrogen oxides allowance 
program under subpart 2 of part C, and the mer-
cury allowance program under part D. 
‘‘(3) As part of the study, the Administrator shall 
take into account the best available information pursuant
to the review of the air quality criteria for particulate mat-
ter under section 108. 
‘‘(b) PEER REVIEW PROCEDURES.—(1) The draft re-
sults of the study under subsection (a) shall be subject 
to an independent and external peer review in accordance 
with this section. Any documents that are to be considered 
by the Administrator in the study shall be independently 
peer reviewed no later than July 1, 2008. The peer review 
required under this section shall not be subject to the Fed-
eral Advisory Committee Act (5 U.S.C. App.). 
‘‘(2) The Administrator shall conduct the peer review 
in an open and rigorous manner. Such peer review shall—
‘‘(A) be conducted through a formal panel that 
is broadly representative of the relevant scientific 
and technical views and involves qualified specialists 
who— 
‘‘(i) are selected primarily on the basis of 
their technical expertise relevant to the analyses 
required under this section; 
‘‘(ii) disclose to the agency prior technical 
or policy positions they have taken on the issues 
under consideration; and 
‘‘(iii) disclose to the agency their sources 
of personal and institutional funding from the 
private or public sectors;
‘‘(B) contain a balanced presentation of all con-
siderations, including minority reports; 
‘‘(C) provide adequate protections for confiden-
tial business information and trade secrets, including 
requiring panel members or participants to enter 
into confidentiality agreements; 
‘‘(D) afford an opportunity for public comment; 
and 
‘‘(E) be complete by no later than January 1, 
2009. 
‘‘(3) The Administrator shall respond, in writing, to 
all significant peer review and public comments; and 
‘‘(4) The Administrator shall certify that—
‘‘(A) each peer review participant has the ex-
pertise an independence required under this section; 
and 
‘‘(B) the agency has adequately responded to 
the peer review comments as required under this 
section. 
‘‘(c) RECOMMENDATION
TO CONGRESS.—The Ad-
ministrator, in consultation with the Secretary of Energy, 
shall 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 (2) of subsection (a). The Administrator may sub-
mit separate recommendations addressing sulfur dioxide, 
nitrogen oxides, or mercury at any time after the study 
has been completed under paragraph (2) of subsection (a) 
and the peer review process has been completed under sub-
section (b). 
‘‘SEC. 411. DEFINITIONS. 
‘‘For purposes of this subpart and subpart 1 of part 
B: 
‘‘(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—
‘‘(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 
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 4 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 18 
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 
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. 
‘‘(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-
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-
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 ei-
ther—
‘‘(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 
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. 
‘‘(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 gener-
ator in any State that produced electricity for 
sale shall not be a utility unit for purposes of 
this subpart. 
‘‘(C) A unit that cogenerates steam and elec-
tricity is not a ‘utility unit’ for purposes of this sub-
part unless the unit is constructed for the purpose 
of supplying, or commences construction after No-
vember 15, 1990 and supplies more than one-third 
of its potential electric output capacity of more than 
25 megawatts electrical 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, the 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 
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.
‘‘(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 recording. The owners or opera-
tors 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 
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—
‘‘(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—
‘‘(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 hereunder 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 
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 
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 
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-
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 
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 
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 
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 multiplied 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. 
‘‘(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 
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 
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-
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 
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 impracticability 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
‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE 
I AND THEIR SULFUR DIOXIDE ALLOWANCES 
(TONS)—Continued
State 
Plant name 
Generator 
Phase I
allowances 
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
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
‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE 
I AND THEIR SULFUR DIOXIDE ALLOWANCES 
(TONS)—Continued
State 
Plant name 
Generator 
Phase I
allowances 
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
......................................
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
100
‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE 
I AND THEIR SULFUR DIOXIDE ALLOWANCES 
(TONS)—Continued
State 
Plant name 
Generator 
Phase I
allowances 
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
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
101
‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE 
I AND THEIR SULFUR DIOXIDE ALLOWANCES 
(TONS)—Continued
State 
Plant name 
Generator 
Phase I
allowances 
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
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
102
‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE 
I AND THEIR SULFUR DIOXIDE ALLOWANCES 
(TONS)—Continued
State 
Plant name 
Generator 
Phase I
allowances 
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
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
103
‘‘TABLE A.—AFFECTED SOURCES AND UNITS IN PHASE 
I AND THEIR SULFUR DIOXIDE ALLOWANCES 
(TONS)—Continued
State 
Plant name 
Generator 
Phase I
allowances 
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-
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.—
104
‘‘(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 
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
105
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. 
‘‘(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-
106
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 
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
107
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.—
‘‘(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
108
‘‘(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 
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
109
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 
purchased from, qualified renewable energy, by 
(ii) 0.004, and dividing by 2,000. 
‘‘(G) PROHIBITIONS.—
‘‘(i) No allowances shall be allocated 
under this subsection for the implementa-
tion of programs that are exclusively infor-
mational or educational in nature. 
‘‘(ii) No allowances shall be allocated 
for energy conservation measures or renew-
able energy that were operational before 
January 1, 1992. 
‘‘(3) SAVINGS PROVISION.—Nothing in this sub-
section precludes a State or State regulatory author-
ity from providing additional incentives to utilities to 
encourage investment in demand-side resources.
110
‘‘(4) REGULATIONS.—The Administrator shall 
implement this subsection under 40 CFR part 73 
(2002), amended as appropriate by the Adminis-
trator. Such regulations shall list energy conserva-
tion measures and renewable energy sources which 
may be treated as qualified energy conservation 
measures and qualified renewable energy for pur-
poses of this subsection. Allowances shall only be al-
located if all requirements of this subsection and the 
rules promulgated to implement this subsection are 
complied with. The Administrator shall review the 
determinations 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,
111
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. Not-
withstanding the prior sentence, if allowances remain in 
the reserve one year after the date of enactment of the 
Clear Skies Act of 2003, the Administrator shall allocate 
such allowances for affected units under section 414 on 
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,
112
‘‘(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 
‘‘(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-
113
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 
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
114
(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 
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
115
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. 
‘‘(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
116
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 
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
117
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, 
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
118
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 
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/
119
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 
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
120
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 
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
121
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. 
‘‘(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, 1.20 lbs/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-
122
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 
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 1.20 
lbs/mmBtu, divided by 2,000, unless the owner 
or operator holds for use 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
123
allowances to emit not less than the total an-
nual 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 
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-
124
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 
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—
125
‘‘(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 
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
126
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 
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,
127
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. 
‘‘(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,
128
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 
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
129
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 
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
130
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 
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
131
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 
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.
132
‘‘(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 
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
133
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; 
‘‘(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
134
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. 
‘‘(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
135
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—
‘‘(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-
136
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-
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,
137
‘‘(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—
‘‘(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
138
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-
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 statewide annual sul-
fur dioxide emissions rate equal to or less than, 0.80 lbs/
139
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. 
‘‘(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
140
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. 
‘‘(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
141
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 
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,
142
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-
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 (2002), 
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
143
‘‘(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.—
‘‘(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-
144
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 
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 ................................................................
125,000
145
‘‘TABLE C.—NUMBER OF ALLOWANCES AVAILABLE FOR 
AUCTION—Continued
Year of sale 
Spot auction
(same year) 
Advance
auction 
2004–2009 ......................................................
125,000
Allowances sold in the spot sale in any year are allowances which may be used 
only in that year (unless banked for use in a later year), except as otherwise 
noted. Allowances sold in the advance auction in any year are allowances which 
may only be used in the 7th year after the year in which they are first offered 
for sale (unless banked for use in a later year). 
*Available for use only in 1995 (unless banked for use in a later year). 
‘‘(3) PROCEEDS.—
‘‘(A) TRANSFER.—Notwithstanding section 
3302 of title 31 of the United States Code or 
any other provision of law, within 90 days of re-
ceipt, the Administrator shall transfer the pro-
ceeds 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 allowances under this paragraph shall 
be held by any officer or employee of the United 
States or treated for any purpose as revenue to 
the United States or the Administrator. 
‘‘(B) RETURN.—At the end of each year, 
any allowances offered for sale but not sold at 
the auction shall be returned without charge, on 
a pro rata basis, to the owner or operator of the 
affected units from whose allocation the allow-
146
ances were withheld. With 170 days after the 
date of enactment of the Clear Skies Act of 
2003, 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 
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.
147
‘‘(d) TERMINATION OF AUCTIONS.—Not later than 
the commencement date of the sulfur dioxide allowance re-
quirement under section 422, the Administrator shall ter-
minate the withholding of allowances and the auction sales 
under this section. Pursuant to regulations under this sec-
tion, the Administrator may by delegation or contract pro-
vide for the conduct of sales or auctions under the Admin-
istrator’s supervision 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 (2002), 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 
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.
148
‘‘(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 
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.
149
‘‘(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—Clear Skies 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 
2003, 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 2002 or any year thereafter, ex-
cept for a cogeneration unit that produced or 
produces electricity for sale equal to or less 
than one-third of the potential electrical output 
of the generator that it served or serves during 
2002 and each year thereafter; and
150
‘‘(B) for a unit commencing service of a 
generator on or after the date of enactment of 
the Clear Skies Act of 2003, 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 or 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. 
‘‘(2) The term ‘coal-fired’ with regard to a unit 
means, for purposes of section 424, combusting coal 
or any coal-derived fuel alone or in combination with 
any amount of any other fuel in any year during 
1998 through 2002 or, for a unit that commenced
151
operation during 2001–2004, a unit designed to 
combust coal or any coal-derived fuel alone or in 
combination with any other fuel. 
‘‘(3) The term ‘Eastern bituminous’ means bi-
tuminous that is from a mine located in a State east 
of the Mississippi River. 
‘‘(4) The term ‘general account’ means an ac-
count in the Allowance Tracking System under sec-
tion 403(c) established by the Administrator for any 
person under 40 CFR § 73.31(c) (2002), amended 
as appropriate by the Administrator. 
‘‘(5) The term ‘oil-fired’ with regard to a unit 
means, for purposes of section 424, combusting fuel 
oil for more than 10 percent of the unit’s total heat 
input, and combusting no coal or coal-derived fuel, 
in any year during 1998 through 2002 or, for a unit 
that commenced operation during 2001–2004, a unit 
designed to combust oil for more than 10 percent of 
the unit’s total heat input and not to combust any 
coal or coal-derived fuel coal. 
‘‘(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) (2002), amended 
as appropriate by the Administrator.
152
‘‘SEC. 422. APPLICABILITY. 
‘‘(a) PROHIBITION.—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. 
‘‘(b) ALLOWANCES HELD.—Only sulfur dioxide al-
lowances under section 423 shall be held in order to meet 
the requirements of subsection (a), except as provided 
under section 425. 
‘‘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 EGUS 
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
2021 ................................................................
2,640,000
360,000
153
‘‘TABLE A.—TOTAL SO2 ALLOWANCES ALLOCATED OR 
AUCTIONED FOR EGUS—Continued
Year 
SO2 allow-
ances
allocated 
SO2 allow-
ances
auctioned 
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) IN GENERAL.—Not later than 24 months before 
the commencement date of the sulfur dioxide allowance re-
154
quirement of section 422, the Administrator shall promul-
gate regulations determining allocations of sulfur dioxide 
allowances for affected EGUs for each year during 2010 
through 2060. The regulations shall provide that: 
‘‘(1)(A) 95 percent of the total amount of sul-
fur dioxide allowances allocated each year under sec-
tion 423 shall be allocated based on the sulfur diox-
ide allowances that were allocated under subpart 1 
for 2010 or thereafter and are held in unit accounts 
and general accounts in the Allowance Tracking Sys-
tem 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) For each unit account and each gen-
eral account in the Allowance Tracking System, 
the Administrator shall determine the total 
amount of sulfur dioxide allowances allocated 
under subpart 1 for 2010 and thereafter that 
are recorded, as of 12:00 noon, Eastern Stand-
ard time, on the date 180 days after enactment 
of the Clear Skies Act of 2003. The Adminis-
trator shall determine this amount in accord-
ance with 40 CFR part 73 (2002), amended as
155
appropriate by the Administrator, except that 
the Administrator shall apply a discount rate of 
7 percent for each year after 2010 to the 
amounts of sulfur dioxide allowances allocated 
for 2011 or later. 
‘‘(ii) For each unit account and each gen-
eral account in the Allowance Tracking System, 
the Administrator shall determine 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 
shall allocate to each general account in the Al-
lowance Tracking System the amount of sulfur
156
dioxide allowances determined under clause (ii) 
for that general account. 
‘‘(2)(A) 31⁄2 percent of the total amount of sul-
fur dioxide allowances allocated each year under sec-
tion 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 subpart 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.
157
‘‘(iv) If the total of the amounts for all fa-
cilities under clauses (i), (ii), and (iii) exceeds 
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) 11⁄2 percent of the total amount of sul-
fur dioxide allowances allocated each year under sec-
tion 423 shall be allocated for units that are affected 
EGUs as of December 31, 2004, that commence op-
eration on or after January 1, 2001 and before Jan-
uary 1, 2005, and that are not allocated any sulfur 
dioxide allowances under subpart 1.
158
‘‘(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 input 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).
159
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) FAILURE TO PROMULGATE.—(1) If, by the date 
18 months before January 1 of each year 2010 through 
2060, the Administrator has signed proposed regulations, 
but has not promulgated final regulations, determining al-
locations under subsection (a), the Administrator shall al-
locate, for such year, for each facility where an affected 
EGU is located, and for each general account, the amount 
of sulfur dioxide allowances specified for that facility and 
the general account in such proposed regulations. 
‘‘(2) If, by the date 18 months before January 1 of 
each year 2010 through 2060, the Administrator has not 
signed proposed regulations determining allocations under 
subsection (a), the Administrator shall—
‘‘(A) determine, for such year, for each unit 
with coal as its primary or secondary fuel or residual 
oil as its primary fuel listed in the Administrator’s 
Emissions Scorecard 2001, Appendix B, Table B1 
an amount of sulfur dioxide allowances by multi-
plying 95 percent of the allocation amount under 
section 423 by the ratio of such unit’s heat input in
160
the Emissions Scorecard 2001, Appendix B, Table 
B1 to the total of the heat input in the Emissions 
Scorecard 2001, Appendix B, Table B1 for all units 
with coal as their primary or secondary fuel or resid-
ual oil as their primary fuel; 
‘‘(B) allocate, for such year, for each facility 
where a unit under subparagraph (A) is located the 
total of the amounts of sulfur dioxide allowances for 
the units at such facility determined under subpara-
graph (A); and 
‘‘(C) auction an amount of sulfur dioxide allow-
ances equal to 5 percent of the allocation amount 
under section 423 and conduct the auction on the 
first business day in October following the respective 
promulgation deadline under paragraph (1) and in 
accordance with section 409. 
‘‘SEC. 425. DISPOSITION OF SULFUR DIOXIDE ALLOWANCES 
ALLOCATED UNDER SUBPART 1. 
‘‘(a) REMOVAL FROM ACCOUNTS.—After allocating 
allowances under section 424(a)(1), the Administrator 
shall remove from the unit accounts and general accounts 
in the Allowance Tracking System under section 403(c) 
and from the Special Allowances Reserve under section 
418 all sulfur dioxide allowances allocated or deposited 
under subpart 1 for 2010 or later.
161
‘‘(b) REGULATIONS.—The Administrator shall pro-
mulgate regulations as necessary to assure that the re-
quirement to hold allowances under section 422 may be 
met using sulfur dioxide allowances allocated under sub-
part 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.—Not later than 18 months after 
the enactment of the Clear Skies Act of 2003, 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 each of the fol-
lowing: 
‘‘(1) A statement that the owner or operator 
will install and commence operation of specified sul-
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
162
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 control technology under subpara-
graph (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 technology described in paragraph (1) and 
emissions monitored at a location at the unit down-
163
stream 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.—By order 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; 
‘‘(3) for each application listed under paragraph 
(2), multiply the amount of sulfur dioxide emission 
reductions requested by each allowance-to-emission-
164
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 
the unit during the period starting with the commence-
ment of operation of such control technology through 
2009. The installation of the CEMS and the quality assur-
165
ance of data shall be in accordance with subparagraph 
(a)(2)(B) and subsections (c) through (e) of section 405, 
except that, where two or more units utilize a single stock, 
separate monitoring shall be required for each unit. 
‘‘(e) ALLOCATIONS.—Not later than 6 months after 
the commencement date of the sulfur dioxide allowance 
requirement of section 422, for the units for which appli-
cations are approved under subsection (c), the Adminis-
trator shall allocate sulfur dioxide allowances as follows: 
‘‘(1) For each unit, the Administrator shall 
multiply the allowance-to-emission-reduction ratio of 
the last application that EPA approved under sub-
section (c) by the lesser of—
‘‘(A) the total tonnage of sulfur dioxide 
emissions reductions achieved by the unit, dur-
ing the period starting with the commencement 
of operation of the sulfur dioxide control tech-
nology under subparagraph (b)(1) through 
2009, through use of such control technology; 
or 
‘‘(B) the tonnage of sulfur dioxide emission 
reductions under paragraph (b)(3). 
‘‘(2) If the total amount of sulfur dioxide allow-
ances determined for all units under paragraph (1) 
exceeds 250,000 sulfur dioxide allowances, the Ad-
166
ministrator shall multiply 250,000 sulfur dioxide al-
lowances by the ratio of the amount of sulfur dioxide 
allowances determined for each unit under para-
graph (1) to the total amount of sulfur dioxide al-
lowances determined for all units under paragraph 
(1). 
‘‘(3) The Administrator shall allocate to each 
unit the lesser of the amount determined for that 
unit under paragraph (1) or, if the total amount of 
sulfur dioxide allowances determined for all units 
under paragraph (1) exceeds 250,000 sulfur dioxide 
allowances, under paragraph (2). The Administrator 
shall auction any unallocated allowances from the re-
serve under this section and conduct the auction by 
the first business day in October 2010 and in ac-
cordance with section 409. 
‘‘Subpart 3—Western Regional Air Partnership 
‘‘SEC. 431. DEFINITIONS. 
‘‘For purposes of this subpart—
‘‘(1) The term ‘adjusted baseline heat input’ 
means 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 from the eighth 
through the fourth year before the first covered 
year.
167
‘‘(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; 
‘‘(ii) reported to the Energy Informa-
tion Administrator for the unit, if the unit 
was not required to report heat input 
under section 405;
168
‘‘(iii) based on data for the unit re-
ported to the WRAP State where the unit 
is located as required by State law, if the 
unit was not required to report heat input 
during the year under section 405 and did 
not report to the Energy Information Ad-
ministration; 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 WRAP State. 
‘‘(2) The term ‘affected EGU’ means an af-
fected EGU under subpart 2 that is in a WRAP 
State and that—
‘‘(A) in 2000, emitted 100 tons or more of 
sulfur dioxide and was used to produce elec-
tricity for sale; or 
‘‘(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-