Source: https://www.federalregister.gov/documents/2002/06/24/02-15876/approval-and-promulgation-of-implementation-plans-north-carolina-nitrogen-oxides-budget-and
Timestamp: 2018-03-19 08:10:10
Document Index: 297829924

Matched Legal Cases: ['art 96', 'art 96', 'art 96', 'art 96', 'art 96', 'art 96', 'art 96', 'art 75', 'art 75', 'art 75', 'art 97']

42519-42524 (6 pages)
100-200225(a)
FRL-7236-2
E. What Guidance Did EPA Use To Evaluate North Carolina's Submittal?
F. What Is the Result of EPA's Evaluation of North Carolina's Program?
II. North Carolina's Control of NOX Emissions
A. When Did North Carolina Submit the SIP Revision to EPA in Response to the NOX SIP Call?
B. What Is the North Carolina's NOX Budget Trading Program?
What Is the Relationship of Today's Proposal to EPA's Findings Under the Section 126 Rule?
https://www.federalregister.gov/d/02-15876 https://www.federalregister.gov/d/02-15876
EPA is proposing to approve a State Implementation Plan (SIP) revision submitted by the State of North Carolina, through the North Carolina Department of Environmental and Natural Resources (NCDENR), on September 18, 2001. This revision responds to the EPA's regulation entitled, “Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone,” otherwise known as the NOX SIP Call. This revision establishes and requires a nitrogen oxides (NOX) allowance trading program for large electric generating and industrial units and internal combustion engines beginning in 2004. The revision includes a budget demonstration and initial source allocations that demonstrate that North Carolina will achieve the required NOX emission reductions in accordance with the timelines set forth in EPA's NOX SIP Call. The intended effect of this SIP revision is to reduce emissions of NOX in order to help areas in the Eastern United States attain the national ambient air quality standard for ozone. EPA is proposing to approve North Carolina's NOX reduction and trading program because it meets the requirements of the Phase I and Phase II NOX SIP Call that will significantly reduce ozone transport in the eastern United States.
North Carolina has included credits from an Inspection and Maintenance (I/M) Program as part of its SIP demonstration. North Carolina's I/M rules will be approved in a separate document and will be approved prior to the final approval of this NOX submittal.
Section 51.121 of EPA's regulations requires North Carolina to adopt rules to restrict emissions of nitrogen oxides such that the caps specified in the federal rule for North Carolina are attained and maintained. See 40 CFR 51.121. Section 51.121 originally required rules to be submitted to EPA for approval as part of the SIP by September 30, 1999. Because of a court ruling this date was delayed a year, until October 30, 2000. On October 30, 2000, NCDENR submitted temporary NOX emission control rules to the EPA for adoption. These rules were revised in North Carolina's September 18, 2001, submittal. These rules were submitted to meet the requirements of the NOX SIP Call until the permanent North Carolina NOX rules could undergo the entire process of becoming state approved and effective. Although these rules are temporary, they are fully effective and the state has met the requirements in their statute that eliminates the sunset provision. Additionally, on March 21, 2002, North Carolina submitted a response letter to EPA, providing clarification and interpretation of the temporary rules and positively addressing all of EPA's outstanding comments. Therefore, EPA can proceed to propose approving the temporary rule, as established in North Carolina's March 21, 2002 letter, to meet the NOX SIP Call.
The information in this proposal is organized as follows:
EPA is proposing to approve revisions to North Carolina's SIP concerning the adoption of its NOX Reduction and Trading Program, submitted on October 30, 2000, and revised on September 18, 2001.
EPA is proposing this action because North Carolina's NOX reduction and trading program regulations, as explained in North Carolina's March 21, 2002 letter, meet the requirements of the Phase I and Phase II NOX SIP Call. Therefore, EPA is proposing full approval of North Carolina's NOX Reduction and Trading Program.
On October 27, 1998, EPA published a final rule entitled, “Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone,” otherwise known as the NOX SIP Call. See 63 FR 57356. The NOX SIP Call requires 22 states and the District of Columbia to meet statewide NOX emission budgets during the five month period from May 1 through September 30, called the ozone season (or control period), in order to reduce the amount of ground level ozone that is transported across the eastern United States. A court decision by the United States Court of Appeals at the District of Columbia Circuit (D.C. Circuit) on March 3, 2000, concerning the NOX SIP call (Michigan v. EPA, 213 F.3d 663 (D.C. Cir 2000)) reduced the number of states from 22 to 19.
EPA identified NOX emission reductions by source category that could be achieved by using highly cost-effective controls. The source categories included were large electric generating units (EGUs) and non-electric generating units (non-EGUs), internal combustion (IC) engines, and cement kilns. EPA determined state-wide NOX emission budgets based on the implementation of these cost effective controls for each affected jurisdiction to be met by the year 2007. Although states are not required to address IC engines until Phase II of the NOX SIP call, North Carolina has addressed IC engines in this revision. The NOX SIP Call allows states the flexibility to decide which source categories to regulate in order to meet the statewide budgets.
In the NOX SIP Call notice, EPA suggested that imposing statewide NOX emissions caps on large EGUs and non-EGUs would provide a highly cost effective means for states to meet their NOX budgets. In fact, the state-specific budgets were set assuming an emission rate of 0.15 pounds NOX per million British thermal units (lb. NOX/mmBtu) at EGUs, multiplied by the projected heat input (mmBtu/hr). The NOX SIP Call state budgets also assumed on average a 60 percent reduction from non-EGUs. The non-EGU control assumptions were applied at units where the heat input capacities were greater than 250 mmBtu per hour, or in cases where heat input data were not available or appropriate, at units with actual emissions greater than one ton per day. The NOX SIP Call regulation gives the state the flexibility to determine what control strategy to use to meet the statewide NOX budget.
To assist the states in their efforts to meet the SIP Call, the NOX SIP Call notice included a model NOX allowance trading regulation, called “NOX Budget Trading Program for State Implementation Plans (40 CFR part 96) that could be used by states to develop their regulations. The NOX SIP Call notice explained that if states developed an allowance trading regulation consistent with the EPA model rule, they could participate in a regional allowance trading program that would be administered by the EPA. See 63 FR 57458-57459.
There were several periods during which EPA received comments on various aspects of the NOX SIP Call emissions inventories. On March 2, 2000, EPA published additional technical amendments to the NOX SIP Call in the Federal Register (65 FR 11222). On March 3, 2000, the D.C. Circuit issued its decision on the NOX SIP Call that largely upheld EPA's position. Michigan v. EPA, 213 F.3d 663. The D.C. Circuit denied petitioners' requests for rehearing or rehearing en banc on July 22, 2000. However, the D.C. Circuit Court remanded four specific elements to EPA for further action: The definition of electric generating unit, the level of control for stationary internal combustion engines, the geographic extent of the NOX SIP Call for Georgia and Missouri, and the inclusion of Wisconsin. On March 5, 2001, the U.S. Supreme Court declined to hear an appeal by various utilities, industry groups and a number of upwind states from the D.C. Circuit's ruling on EPA's NOX SIP Call rule.
EPA published a proposal that addresses the remanded portion of the NOX SIP Call on February 22, 2002 (67 FR 8396). Any additional emissions reductions required as a result of a final rulemaking on that proposal will be reflected in the second phase portion (Phase II) of the State's emission budget. In a memo dated April 11, 2000, EPA adjusted North Carolina's NOX emission budget to reflect the Court's decision regarding internal combustion engines and cogeneration facilities. Although the Court did not order EPA to modify North Carolina's budget, the EPA believes these adjustments were consistent with the Court's decision. However, in its SIP revision, North Carolina declined to use the revised budget as set forth in the April 11, 2000 memo and chose to use the more stringent budget set forth in the March 2, 2000, document (65 FR 11222). North Carolina has agreed to revise these reductions if they differ in the final Phase II notice.
EPA's model NOX budget and allowance trading rule, 40 CFR part 96, sets forth a NOX allowance trading program for large EGUs and non-EGUs. A state can voluntarily choose to adopt EPA's model rule in order to allow sources within its borders to participate in regional allowance trading. The NOX SIP Call notice contains a full description of the EPA's model NOX budget trading program. See 63 FR 57514-57538 and 40 CFR part 96. Additionally, states can adopt a modified trading rule that will still ensure the budgets are met. North Carolina opted to modify EPA's trading rule consistent with the flexibility offered to the states.
Allowance trading, in general, uses market forces to reduce the overall cost of compliance for pollution sources, such as power plants, while maintaining emission reductions and environmental benefits. One type of market-based program is an emissions budget and allowance trading program, commonly referred to as a “cap and trade” program.
In a cap and trade program, the state (or EPA) sets a regulatory limit, or emissions budget, in mass emissions (budget) from a specific group of sources. The budget limits the total number of allowances for each source covered by the program during a particular control period. When the budget is set at a level lower than the current emissions, the effect is to reduce the total amount of emissions during the control period. After setting the budget, the state (or EPA) then assigns, or allocates, allowances to the participating entities up to the level of Start Printed Page 42521the budget. Each allowance authorizes the emission of a quantity of pollutant, e.g., one ton of airborne NOX.
The final NOX SIP Call rule included a model NOX budget trading program regulation. See 40 CFR part 96. EPA used the model rule and 40 CFR 51.121-51.122 to evaluate North Carolina's NOX reduction and trading program SIP submittal. North Carolina's submittal includes the IC engine requirements, but IC engines are not a part of North Carolina's trading program.
After review of North Carolina's September 18, 2001, NOX SIP submittal, EPA has determined that it meets the requirements of the NOX SIP Call and is therefore approvable. The North Carolina NOX reduction and trading program is consistent with EPA's guidance and meets the requirements of both the Phase I and II NOX SIP Call. EPA finds the NOX control measures (i.e. required reductions for large EGUs, non-EGUs, and IC engines) in North Carolina's NOX reduction and trading program approvable. Also, EPA finds that the submittal contains the necessary information to demonstrate that North Carolina has the legal authority to implement and enforce the control measures and that the State will appropriately distribute the compliance supplement pool. Furthermore, EPA proposes to find that the submittal demonstrates that the requirements concerning compliance dates and schedules, monitoring, recordkeeping, and emission reporting will be met.
On October 30, 2000, NCDENR submitted temporary NOX emissions control rules to meet the requirements of the Phase I and Phase II NOX SIP Call and included a schedule for adoption of the final permanent version. On September 18, 2001, NCDENR submitted a revised version of these rules to meet the requirements of the Phase I and Phase II NOX SIP Call.
North Carolina proposes, as in the model rule, to allow large EGUs, boilers and turbines to participate in the multi-state cap and trade program. North Carolina does not have any cement kilns and thus does not include them in the NOX SIP Call. North Carolina's SIP revision to meet the requirements of the NOX Budget Trading Program includes the adoption of rules 15A NCAC 2D .1401 Definitions, .1402 Applicability, .1403 Compliance Schedules, .1404 Recordkeeping, Reporting, Monitoring, .1409 Stationary Internal Combustion Engines, .1416 Emission Allocations for Utility Companies, .1417 Emission Allocations for large Combustion Sources, .1418 New Electric Generating Units, Large Boilers, and Large I/C Engines, .1419 Nitrogen Oxide Budget Trading Program, .1420 Periodic Review and Reallocations, .1421 Allocation for New Growth of Major Point Sources, .1422 Compliance Supplement Pool and Early Emission Reduction Credits, and .1423 Large Internal Combustion Engines.
North Carolina's NOX budget trading program establishes and requires a NOX allowance trading program for large EGUs and non-EGUs. The regulations under section .1400 establish a NOX cap and allowance trading program for the ozone control seasons beginning May 1, 2004.
The State of North Carolina has adopted regulations that are consistent with 40 CFR part 96. Therefore, pursuant to 40 CFR 51.121(p)(1), North Carolina's SIP revision is approved as satisfying the State's NOX emissions reduction obligations. Under section .1400, North Carolina allocates NOX allowances to the EGU and non-EGU units that are subject to the requirements of the trading program. The NOX trading program applies to EGUs with a nameplate capacity greater than 25MW that sell electricity to the grid, as well as non-EGUs that have a maximum design heat input greater than 250 mmbtu per hour. Each NOX allowance permits a source to emit one ton of NOX during the seasonal control period. NOX allowances may be bought or sold. Unused NOX allowances may be banked for future use, with certain limitations.
Section .1400 sets out the NOX budget trading program. This section, for the most part, incorporates by reference the EPA model rule, 40 CFR part 96, NOX Budget Trading Program. However, the section does contain several exceptions to the part 96 rules. These exceptions include the procedures and schedules for submitting and processing permit applications, dates and schedules for complying with monitoring requirements, the provisions on set-asides for new source allocations, and the distribution of the compliance supplement pool. These rules allow sources not covered under the NOX SIP Call to opt into the NOX Budget Trading Program. As discussed below, the NOX budget trading program cannot be used to (1) meet an emission limit if compliance with that emission limit is required as part of the SIP to attain or maintain the ambient air quality standard for ozone; and (2) obtain offsets needed to comply with the offset requirement of the nonattainment area major new source review rule.
In Rule .1403(c)(3), North Carolina deviated from the model rule to require the owner or operator of a source to submit their permit application by October 1, 2003. Rule .1403(c)(3) also requires the owner or operator to install and implement any required monitoring, recordkeeping, and reporting requirements prior to May 1, 2004. EPA has evaluated these deviations and find that they are approvable under the flexibilities provided within the model rule.
Under Rule .1402(h), the State allows a unit that restricts its fuel use to only natural gas or fuel oil and limits its NOX emissions to 25 tons (through an operating hours limitation) or less during a control period (through a federally enforceable permit) to be exempted from the requirements of the trading program. The State has clearly required that the unit meet both the fuel use and the operating hours restrictions throughout section .1402. Therefore, EPA believes this section is approvable.
North Carolina rules require that all sources must comply with part 75 monitoring to participate in the trading program. Source owners will monitor their NOX emissions by using systems that meet the requirements of 40 CFR part 75, subpart H, and report resulting data to EPA electronically. Each NOX budget unit complies with the program by demonstrating at the end of each control period that actual emissions do not exceed the amount of allowances held for that period. However, regardless of the number of allowances a unit holds, it cannot emit at levels that would violate other federal or state limits, for example, reasonably available control technology (RACT), new source Start Printed Page 42522performance standards, and title IV (the Federal Acid Rain Program). North Carolina's regulation .1419(h) requires that NOX emission allocations obtained under the NOX budget trading program shall not be used to meet the emission limits for a source if compliance with that emission limit is required as part of the SIP to attain or maintain the ambient air quality ozone standard. Sources covered under rule .0531 Nonattainment Area Major Source Review of the North Carolina SIP shall not use the NOX budget trading program to comply with the requirements of rule .0531.
Rule .1423, Large Internal Combustion Engines, establishes the emission limits and the monitoring, recordkeeping, and reporting requirements for large internal combustion engines covered under Rule 15A NCAC 2D .1418. A detailed list identifies the sources covered under this Rule and gives the basic emission limitations. The rule allows adjustments to be made to the basic emission limitations to account for engine efficiency and details which monitoring procedures to use. The facilities that contain sources affected by the IC engine rule are Transcontinental Gas Pipeline Company, Station 160, in Rockingham county, Transcontinental Gas Pipeline Company, Station 150, in Iredell county, and Transcontinental Gas Pipeline Company, Station 155, in Davidson county. The rule requires IC engines to reduce emissions by 90 percent. These IC engines are not part of the NOX budget trading program.
North Carolina's submittal demonstrates that the Phase I and II emissions budgets established by EPA in the March 2, 2000, notice (65 FR 11222) will be met. North Carolina's NOX budget trading program emissions budget includes reductions based upon an I/M reduction credit. This credit is generated by North Carolina through the implementation of an expanded (I/M) Motor Vehicle Program. With the use of the Mobile 5B model, North Carolina has calculated that it will have a reduction credit to help offset emissions from EGU and non-EGU sources.
North Carolina's SIP submittal demonstrates that the Phase I and Phase II NOX emission budgets established by EPA will be met as follows:
To determine its total emissions budget for 2007, North Carolina added the total emissions for affected EGUs, combustion turbines (combustion turbine serving a generator with a nameplate capacity greater than 25 megawatts electrical and selling any amount of electricity), affected non-EGUs (those fossil fuel-fired industrial boilers with a maximum design heat input greater than 250 million Btu per hour), and internal combustion engines (including (1) rich burn stationary IC engines rated at equal or greater than 2,400 brake horsepower, (2) lean burn stationary IC engines rated at equal or greater than 2,400 brake horsepower, (3) diesel stationary IC engines rated at equal or greater than 3,000 brake horsepower, and (4) duel fuel stationary IC engines rated at equal or greater than 2,400 brake horsepower). North Carolina then subtracted from this sum the I/M reduction credit which was gained from the implementation of its expanded I/M Motor Vehicle Program, incorporating the On-Board Diagnostic testing procedure. The difference between the allocations distributed to the participants in the trading program and the total allocations available is the amount of the allocations available for new sources.
North Carolina then used the totals allocated to the State in the March 2, 2000 Federal Register Notice (65 FR 11222) for area sources, nonroad mobile sources, and highway mobile sources. The remaining emissions for North Carolina were classified as non-affected point sources (sources which are not required to implement any controls based on the NOX SIP Call)
NOX Emissions Budget
North Carolina 2007 NOX budget emissions (tons/season)
EGUs 31,821 31,451
Non-EGUs 26,434 2,205
New Permitted CT's 976
IC Engines 352
I/M Reduction Credit (4,385)
Credit Available for New Growth 3,306
Non-Affected Point Sources 24,350
Area Sources 11,067 11,067
Non-road Sources 22,005 22,005
Highway Sources 73,695 73,695
Total 165,022 165,022
In the event that the North Carolina NOX budget is inconsistent with the final budget promulgated by EPA in the Phase II notice, North Carolina will revise its SIP, as clarified in the March 21, 2001 letter.
To provide additional flexibility for complying with emission control requirements associated with the NOX SIP Call, the final NOX SIP Call rule provided each affected state with a compliance supplement pool. The compliance supplement pool is a quantity of NOX allowances that may be used to cover excess emissions from sources that are unable to meet control requirements during the 2004 and 2005 ozone season. Allowances from the compliance supplement pool will not be valid for compliance past the 2005 ozone season. The NOX SIP Call included these provisions in order to address commenters' concerns about the possible adverse effect that the control requirements might have on the reliability of the electricity supply or on other industries required to install controls as the result of a state's response to the NOX SIP Call.
A state may issue some or all of the compliance supplement pool via two mechanisms. First, a state may issue some or all of the pool to sources that establish a baseline, monitor according to part 75, and demonstrate NOX reductions in an ozone season beyond any applicable requirements of the Clean Air Act after September 30, 1999, and before May 31, 2004, (i.e., early Start Printed Page 42523reduction credits). This allows sources that cannot install controls prior to May 31, 2004, to purchase other sources' early reduction credits in order to comply. Second, a state may issue some or all of the pool to sources that demonstrate a need for an extension of the May 31, 2004, compliance deadline due to undue risk to the electricity supply or other industrial sectors, and where early reductions are not available. See 40 CFR 51.121(e)(3). Carolina Power and Light Co. and Duke Power Co. have opted to participate in the early reduction credit program.
Rule .1422, Compliance Supplement Pool and Early Emission Reduction Credits sets out the procedures for allocating the compliance supplement pool under 40 CFR 51.121(e)(3). Allocations are given based on early reductions. Carolina Power and Light and Duke Power Company are the only sources eligible for these allocations. To receive the compliance supplement pool allocations, the companies must document a reduction in emissions of nitrogen oxides between September 30, 1999 and May 1, 2003. North Carolina's rule gives the allocations to the two companies up front. The two utility companies are required to submit interim reports in 2001 and 2002 containing information related to early reductions. The rule contains procedures used to reduce the allocations for Carolina Power and Light Co. and Duke Power Co. if either or both do not earn enough early reductions to cover the allocated compliance supplement pool credits. The rule also provides procedures for using the credits in 2003, since North Carolina sources are subject to the 126 Rule. However, since EPA has finalized a rule harmonizing the compliance dates for section 126 and the NOX SIP Call, this section is moot.
North Carolina's SIP provides for new source set-asides. 15A NCAC 2D .1421, Allocation for New Growth of Major Point Sources. The Rule establishes an allocation pool from which emission allocations of nitrogen oxides may be allocated to sources permitted after October 31, 2000. It also establishes procedures for requesting allocations and for approving allocations. Eligible sources are EGUs greater than 25 megawatts electrical non-EGUs with a maximum design heat input greater than 250 million Btu per hour. The request cannot exceed the lesser of the estimated emissions during the ozone season or estimated allowable emissions during the ozone season. This section includes the procedures for approving a request for allowance allocations and allocating allowances, and describes the procedure for determining preliminary allowance allocations. (The preliminary emission allocation is primarily for the source's planning purposes and is not reported to the EPA.) The procedures for determining the final emission allocations are also included. This determination is made at the end of the season so that the allocation that the source receives offsets its actual emissions. The source receives the lesser of its actual emissions, its allowable emissions, and its preliminary allocation from the new source allocation pool. The Director is required to issue final allocations and to notify the source and EPA of the final allocations issued by November 1, and also to make available credits from the I/M motor vehicle program to the new source allocation pool each year beginning in 2008. Any remaining allowances in the new source allocation pool are carried over to the next ozone season. Once a source has made a request for a new source allocation, it does not have to resubmit that request in following years. However, once a source receives an allowance allocation under 15A NCAC 2D .1420, it is no longer eligible for an allocation under 15A NCAC 2D .1421.
EPA is proposing to approve North Carolina's SIP revision consisting of its NOX reduction and trading program, which was submitted on September 18, 2001. EPA finds that North Carolina's submittal is fully approvable because it meets the both the Phase I and Phase II requirements of the NOX SIP Call.
In the April 30, 2002, Federal Register document (67 FR 21522), EPA reset the EGU compliance date and other related dates, such as the monitoring certification date, under 40 CFR part 97, also known as the section 126 rule. The EPA also reset the dates for non-EGU sources to match the new date for EGUs. The new compliance date is May 31, 2004. The purpose of the April 30, 2002, document was to realign the section 126 Rule with the NOX SIP Call.
In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission Start Printed Page 42524that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This proposed rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).
[FR Doc. 02-15876 Filed 6-21-02; 8:45 am]