Federal Implementation Plans To Reduce the Regional Transport of Ozone

Related Material

Other Related Documents

[Federal Register: October 21, 1998 (Volume 63, Number 203)]
[Proposed Rules]
[Page 56393-56427]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21oc98-25]

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_______________________________________________________________________

Part III

Environmental Protection Agency

_______________________________________________________________________

40 CFR Parts 52 and 98

Federal Implementation Plans To Reduce the Regional Transport of Ozone;
Proposed Rule

[[Page 56394]]

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52 and 98

[FRL-6170-5]
RIN 2060-AH87

Federal Implementation Plans To Reduce the Regional Transport of
Ozone

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking (NPR).

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

SUMMARY: In accordance with the Clean Air Act (CAA), EPA is proposing
Federal implementation plans (FIPs) that may be needed if any State
fails to revise its State implementation plan (SIP) to comply with the
nitrogen oxides (NO_X) SIP call just completed by EPA. The
NO_X SIP call includes emission budgets which are designed to
eliminate specified amounts of emissions of NO_X--one of the
precursors to ozone (smog) pollution--for the purpose of reducing
NO_X and ozone transport across State boundaries in the
eastern half of the United States. This notice supplements the shorter
notice of proposed rulemaking for the FIPs appearing separately in the
September 29, 1998 Federal Register at 63 FR 52213.

DATES: Comments may be submitted until November 30, 1998, as previously
announced in a shorter notice of proposed rulemaking published in the
Federal Register on September 30, 1998.
Comments must be postmarked by the last day of the comment period
and sent directly to the Docket Office listed in ADDRESSES (in
duplicate form if possible). The public hearings for the section 126
and FIP proposals will be held on October 28 and 29, 1998, as
previously announced in a shorter notice of proposed rulemaking
published in the Federal Register on September 30, 1998.

ADDRESSES: Comments may be submitted to the Air and Radiation Docket
and Information Center (6102), Attention: Docket No. A-97-43 for the
section 126 proposal and Docket No. A-98-12 for the FIP proposal, U.S.
Environmental Protection Agency, 401 M Street SW, room M-1500,
Washington, DC 20460, telephone (202) 260-7548. Comments and data may
also be submitted electronically by following the instructions under
SUPPLEMENTARY INFORMATION of this document. No confidential business
information (CBI) should be submitted through e-mail.
The public hearing will be held at the EPA Auditorium, 401 M St.,
SW., Washington, DC. Documents relevant to this matter are available
for inspection at the Air and Radiation Docket and Information Center
(6102), Attention: Docket No. A-98-12, U.S. Environmental Protection
Agency, 401 M Street SW, Room M-1500, Washington, DC 20460, telephone
(202) 260-7548, between 8:00 a.m. and 4:00 p.m., Monday through Friday,
excluding legal holidays. A reasonable fee may be charged for copying.
Comments and data may also be submitted electronically by following the
instructions under SUPPLEMENTARY INFORMATION of this document. No
Confidential Business Information (CBI) should be submitted through e-
mail.

FOR FURTHER INFORMATION CONTACT: General questions concerning today's
action should be addressed to Doug Grano, Office of Air Quality
Planning and Standards, Air Quality Strategies and Standards Division,
MD-15, Research Triangle Park, NC 27711, telephone (919) 541-3292.
Please refer to SUPPLEMENTARY INFORMATION below for a list of contacts
for specific subjects described in today's action.

SUPPLEMENTARY INFORMATION:

Technical Analyses

The Agency will ensure that all comments and technical analyses
received on this proposal notice are made publicly available in the
docket to this rulemaking.

Availability of Related Information

The official record for this rulemaking, as well as the public
version, has been established under docket number A-98-12 (including
comments and data submitted electronically as described below). A
public version of this record, including printed, paper versions of
electronic comments, which does not include any information claimed as
CBI, is available for inspection from 8 a.m. to 4 p.m., Monday through
Friday, excluding legal holidays. The official rulemaking record is
located at the address in ADDRESSES at the beginning of this document.
A copy of today's FIP proposal notice is available at http://
www.epa.gov/ttn/oarpg under ``recent actions'' and ``actions sorted by
CAA title'' (under title I).
Electronic comments can be sent directly to EPA at: A-and-R-
Docket@epamail.epa.gov. Electronic comments must be submitted as an
ASCII file avoiding the use of special characters and any form of
encryption. Comments and data will also be accepted on disks in
WordPerfect in 5.1 file format or ASCII file format. All comments and
data in electronic form must be identified by the docket number A-98-
12. Electronic comments on this proposed rule may be filed online at
many Federal Depository Libraries.
The EPA has conducted a separate rulemaking action that contains
actions and information related to this NPR, ``Finding of Significant
Contribution and Rulemaking for Certain States in the Ozone Transport
Assessment Group Region for Purposes of Reducing Regional Transport of
Ozone,'' (see proposals at 62 FR 60318, November 7, 1997; 63 FR 25902,
May 11, 1998, and final rule just issued). This rulemaking action is
referred to as the NO_X SIP call. Documents related to the
NO_X SIP call rulemaking, including the notice of final
rulemaking, are available for inspection in Docket No. A-96-56 at the
address and times given above. In addition, the NO_X SIP call
rulemaking and associated documents are located at http://www.epa.gov/
ttn/oarpg/otagsip.html. The rulemaking docket for the NO_X
SIP call contains information and analyses that are relied upon in
today's proposal on the NO_X FIPs. Therefore, EPA is
incorporating by reference the entire NO_X SIP call record
for purposes of the NO_X FIPs proposed rulemaking. Although
EPA is incorporating by reference the entire NO_X SIP call
docket, the only portions that form the basis for the FIP rulemaking
are the portions that address feasibility and cost effectiveness of
control measures and the projection of emissions reductions that
various control measures would achieve.
The EPA is now conducting a separate rulemaking action that
contains actions and information related to this NPR, ``Finding of
Significant Contribution and Rulemaking on Section 126 Petitions for
Purposes of Reducing Interstate Ozone Transport,'' (see advanced notice
of proposed rulemaking at 63 FR 24058, April 30, 1998, and the proposal
notice in a separate Federal Register). This rulemaking action is
hereafter referred to as the section 126 rulemaking. Documents related
to the section 126 rulemaking, including the proposed rulemaking
notice, are available for inspection in Docket No. A-97-43 at the
address and times given above. A copy of the section 126 proposal
notice is available at http://www.epa.gov/ttn/oarpg under ``recent
actions'' and ``actions sorted by CAA title'' (under title I).
Additional information relevant to this NPR concerning the Ozone
Transport Assessment Group (OTAG) is available on the Agency's Office
of Air

[[Page 56395]]

Quality Planning and Standards' (OAQPS) Technology Transfer Network
(TTN) via the web at http://www.epa.gov/ttn/. If assistance is needed
in accessing the system, call the help desk at (919) 541-5384 in
Research Triangle Park, NC. Documents related to OTAG can be downloaded
directly from OTAG's webpage at http://www.epa.gov/ttn/otag. The OTAG's
technical data are located at http://www.iceis.mcnc.org/OTAGDC.

For Additional Information

For legal questions, please contact Amey Marrella, United States
Environmental Protection Agency, Office of General Counsel, 401 M
Street SW, MC-2344, Washington, DC, 20460, telephone (202) 260-7987.
For questions concerning the economic analyses, please contact Scott
Mathias, Office of Air Quality Planning and Standards, Air Quality
Strategies and Standards Division, MD-15, Research Triangle Park, NC
27711, telephone (919) 541-5310. For questions concerning the trading
program, please contact Kevin Culligan, Office of Atmospheric Programs,
Acid Rain Division, MC-6201J, 401 M Street SW, Washington, DC 20460,
telephone (202) 564-9172. For questions concerning non-electric utility
generating units, please contact Doug Grano, Office of Air Quality
Planning and Standards, Air Quality Strategies and Standards Division,
MD-15, Research Triangle Park, NC 27711, telephone (919) 541-3292.

Outline

I. Summary
II. Background
A. History
B. Ozone Impacts
C. New Ozone NAAQS
D. Section 126 Petitions
E. NO_X SIP Call
III. FIP Process
A. Legal Framework
B. Timing of FIP Action
C. FIP Control Measures
D. Authority To Order the State To Implement Specific Measures
E. Section 105 Grants
F. Findings of Failure
G. Sanctions
H. Transitional Areas
IV. Emissions Decreases To Meet the NO_X SIP Call
A. General Approach for Calculating Budgets
B. Electric Generating Units (EGUs)
C. Industrial Boilers and Turbines
D. Stationary Internal Combustion Engines
E. Cement Manufacturing
F. Other Point Source Categories
G. Area, Mobile, and Nonroad Sources
H. State-by-State Emissions Budgets
1. EGUs
2. Non-EGU Point Sources
3. Mobile and Area Sources
4. Statewide Budgets
V. Emissions Reporting
VI. Federal NO_X Budget Trading Program
A. Program Summary
1. Purpose of the Federal NO_X Budget Trading Program
2. Relationship of Trading Program under FIP to Trading Program
Under Section 126 Petitions and NO_X SIP Call
B. Federal NO_X Budget Trading Program
1. Program Overview
2. Elements of Federal NO_X Budget Trading Program
That Are the Same as the State NO_X Budget Trading Program
for SIPs
a. General Provisions
b. Authorized Account Representative
c. Permits
d. Compliance Certification
e. NO_X Allowance Tracking System
f. Banking
g. NO_X Allowance Transfers
h. Audits
3. Elements of the Federal NO_X Budget Trading Program
that Differ from the State NO_X Budget Trading Program
a. General Provisions
b. Compliance Certification
c. Aggregate NO_X Emissions Levels and Allowance
Allocations
1. State-by-State Emissions Levels
2. Development of State Trading Program Budget
3. Timing Provisions
4. NO_X Allowance Allocation Methodology
(a) EGUs
(b) Non-EGUs
(c) Treatment of New Sources
d. Compliance Supplement Pool
1. Size of the Compliance Supplement Pool
2. Distribution of the Compliance Supplement Pool to Sources
e. Emissions Monitoring and Reporting
f. Opt-Ins
g. Program Administration
C. New Source Review (NSR)
VII. Non-Trading Sources Emissions Limits
A. Introduction
B. Permits
C. Stationary Internal Combustion Engines
1. Rule Requirements
2. Background
D. Cement Manufacturing
1. Rule Requirements
2. Background
a. Mid-Kiln Firing
b. Low-NO_X Burner
c. Selective Noncatalytic Reduction
VIII. Administrative Requirements
A. Regulatory Impact Analysis
B. Impact on Small Entities
1. Regulatory Flexibility Act
2. Outreach to Small Entity Representatives
3. Potentially Affected Small Entities
4. Panel Findings and EPA Actions
a. Exemptions
b. Continuous Emissions Monitoring Systems
c. Trading Program Opt-In
d. Cement Kilns
e. EGUs
f. Industrial Boilers
g. EPA Guidance to States on Small Entities
C. Unfunded Mandates Reform Act
D. Paperwork Reduction Act
1. Statewide Emissions Budgets
2. Trading Program
3. Non-Trading Sources Regulated
E. Executive Order 13045: Protection of Children from
Environmental Health Risks and Safety Risks
1. Applicability
2. Children's Health Protection
F. Executive Order 12898 Environmental Justice
G. Executive Order 12875: Enhancing the Intergovernmental
Partnership
H. Executive Order 13084: Consultation and Coordination with
Indian Tribal Governments
I. National Technology Transfer and Advancement Act

I. Summary

In accordance with the CAA, EPA today proposes FIPs that may be
needed if any State fails to revise its SIP to comply with the
NO_X SIP call just promulgated by EPA. The NO_X SIP
call final rulemaking notice and support material in that docket should
be reviewed for background information relevant to this FIP action. The
NO_X SIP call includes emission budgets which are designed to
eliminate specified amounts of emissions of NO_X--one of the
precursors to ozone (smog) pollution--for the purpose of reducing
NO_X and ozone transport across State boundaries in the
eastern half of the United States.
Today's action is a proposed FIP under section 110(c) intending to
meet requirements imposed by the NO_X SIP call final rule
under section 110(a)(2)(D) and section 110(k)(5) for the 1-hour ozone
NAAQS, coupled with a requirement under section 110(a)(1) for
submission of SIP provisions meeting the requirements of section
110(a)(2)(D) for the 8-hour ozone NAAQS. In the NO_X SIP
call, EPA has found that emissions from 23 jurisdictions contribute
significantly to ozone nonattainment problems downwind and has required
those jurisdictions to submit SIP provisions that eliminate those
emissions through any combination of control measures. If EPA finds
that a State has not submitted the required plan revision, EPA is
required to promulgate a FIP in accordance with section 110(c).
Ozone has long been recognized, in both clinical and
epidemiological research, to affect public health. There is a wide
range of ozone-induced health effects, including decreased lung
function (primarily in children active outdoors), increased respiratory
symptoms (particularly in highly sensitive individuals), increased

[[Page 56396]]

hospital admissions and emergency room visits for respiratory causes
(among children and adults with pre-existing respiratory disease such
as asthma), increased inflammation of the lung, and possible long-term
damage to the lungs.
Today's action to propose FIPs includes proposed rule language
establishing the emissions requirements for certain stationary source
categories and the cost analyses supporting the proposal. The FIP
requirements for stationary sources include use of a Federal
NO_X Budget Trading Program proposed in a separate Federal
Register concerning petitions under section 126 of the CAA. The FIP
proposal is intended to achieve the NO_X emissions reductions
required by the NO_X SIP call rulemaking in the 23
jurisdictions, a portion of whose emissions are found to significantly
contribute to nonattainment of the ozone NAAQS, or interfere with
maintenance of the NAAQS, in downwind States. The NO_X SIP
call final rule explains EPA's basis for determining significant
contribution to downwind nonattainment or maintenance problems.
Specifically, the 23 jurisdictions with sources whose emissions have
been found to make a significant contribution to downwind nonattainment
for both the 1-hour and 8-hour NAAQS and interfere with maintenance of
the 8-hour NAAQS, and are, therefore, the subject of this FIP proposal,
are:

Alabama
Connecticut
Delaware
District of Columbia
Georgia
Illinois
Indiana
Kentucky
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New York
North Carolina
Ohio
Pennsylvania
Rhode Island
South Carolina
Tennessee
Virginia
West Virginia
Wisconsin

For large boilers and turbines, EPA proposes to promulgate a
Federal NO_X Budget Trading Program, proposed in a separate
Federal Register concerning petitions under section 126 of the CAA, to
achieve emissions decreases in a very cost-effective manner. The
proposed trading program will allow the owners of boilers and turbines
the flexibility to develop their own compliance approach in order to
achieve the needed ozone season emissions reductions. The FIP proposal
also includes regulations to decrease ozone season NO_X
emissions from stationary internal combustion engines and cement
manufacturing. These emissions reductions requirements are to be
achieved by May 1, 2003.
In order to meet the requirements of section 110(c), this notice
proposes a FIP for each of the 23 jurisdictions required by the
NO_X SIP call to reduce emissions of NO_X. The
proposed FIP requirements for each of the 23 jurisdictions are
identical. Thus, the term ``FIP'' or ``FIPs'' as used in this notice
refers to one set of requirements that is proposed for each of 23
jurisdictions. Final rulemaking on the proposed FIPs may address only
one State or may address several of the 23 jurisdictions, depending on
how the 23 jurisdictions respond to the NO_X SIP call.
The FIP rulemaking does not invite comments on issues covered in
the NO_X SIP call, including sections II, EPA's Analytical
Approach; III, Determination of Budgets; IV, Air Quality Assessment;
and V, NO_X Control Implementation and Budget Achievement
Dates, except for the portions of those sections that address the
feasibility and cost effectiveness of control measures and the
projections of the emissions reductions that various control measures
would achieve. The reader is referred to the NO_X SIP call
for explanation of the issues.
If a State adopts and submits to EPA an approvable SIP revision in
response to the NO_X SIP call by September 1999, EPA would
not promulgate this Federal program for that State at that time.
However, if a State fails to respond to the NO_X SIP call by
adopting and submitting to EPA a complete revised SIP by September
1999, EPA intends to take final rulemaking action on the FIP
immediately thereafter. In addition, if a State submits a SIP that EPA
does not find approvable, EPA intends to promulgate a FIP concurrently
with finalization of its disapproval of the SIP. For more information
on the rationale for and requirements of the NO_X SIP call
final rule, see the final remaking notice as well as the proposal
notices and support documents contained in the docket for that rule and
section II, Background, of this notice.
Today's notice provides background information in section II,
covering relevant portions of the CAA and the NO_X SIP call
final rule. Section III explains EPA's duty to develop the FIPs, the
timing of the FIP process, and how the FIPs interface with sanction
provisions in the CAA, as well as with EPA's ``transitional areas''
policy under the new 8-hour ozone standard. In section IV, EPA
describes how the rule requirements contained in the FIP proposal are
designed to meet the emissions decreases required by the NO_X
SIP call. Emissions reporting requirements are described in section V.
The Federal NO_X Budget Trading Program is addressed in
section VI. Regulations covering stationary sources not in the trading
program are outlined in section VII. Section VIII covers several
administrative requirements, including the Regulatory Impact Analyses
associated with the FIP. Finally, the rule contains proposed
regulations which are designed to meet the emissions decreases required
by the NO_X SIP call.

II. Background

A. History

For almost 30 years, Congress has focused major efforts on curbing
ground-level (tropospheric) ozone. In 1990, Congress amended the CAA to
better address, among other things, continued nonattainment of the 1-
hour ozone NAAQS, the requirements that would apply if EPA revised the
1-hour standard, and transport of air pollutants across State
boundaries.
The 1990 Amendments reflect general awareness by Congress that
ozone is a regional, and not merely a local, problem. Ozone and its
precursors may be transported long distances across State lines to
combine with ozone and precursors downwind, thereby worsening the ozone
problems downwind. This transport phenomenon is a major reason for the
persistence of the ozone problem, notwithstanding the imposition of
numerous controls, both Federal and State, across the country.
Section 110(a)(2)(D) provides one of the most important tools for
addressing the problem of transport. This provision, which applies by
its terms to all SIPs for each pollutant covered by a NAAQS, and for
all areas regardless of their attainment designation, provides that a
SIP must contain provisions prohibiting its sources from contributing
significantly to nonattainment problems in or interfering with
maintenance by downwind States. Section 110(k)(5) authorizes EPA to
find that a SIP is substantially inadequate to meet any CAA
requirement. It further authorizes EPA to require a State with such a
SIP to submit, within a specified period, any SIP revision necessary to
correct the inadequacy.

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The CAA further addresses interstate transport of pollution in
section 126, which Congress clarified in 1990. Subparagraph (b) of that
provision authorizes each State (or political subdivision) to petition
EPA for a finding that emissions from ``any major source or group of
stationary sources'' in an upwind State contribute significantly to
nonattainment in, or interfere with maintenance by, the downwind State.
In addition, in 1995, the Environmental Council of States (ECOS)
and EPA organized the OTAG. The OTAG was a partnership among EPA, the
37 easternmost States and the District of Columbia, industry
representatives and environmental groups. This effort created an
opportunity for the development of an Eastern United States ozone
strategy to address transport and to assist in attainment of the 1-hour
ambient ozone standard. The EPA believes that the OTAG process has been
invaluable in demonstrating the types of regional ozone precursor
reductions that are needed to enable areas in the Eastern United States
to attain and maintain the ambient air quality standards for ozone.
Shortly after OTAG began its work, EPA began to indicate that it
intended to issue a NO_X SIP call to require States to
implement the reductions necessary to address the ozone transport
problem. On January 10, 1997 (62 FR 1420), EPA published a Notice of
Intent that articulated this goal and indicated that before taking
final action, EPA would carefully consider the technical work and any
recommendations of OTAG. The EPA just completed final rulemaking on the
NO_X SIP call and established emissions budgets for
NO_X that each of the identified States must meet through
enforceable SIP measures. The NO_X SIP call is summarized
later in section II.E of this notice.

B. Ozone Impacts

Ground-level ozone, the main harmful ingredient in smog, is
produced in complex chemical reactions when its precursors, volatile
organic compounds (VOC) and NO_X, react in the presence of
sunlight. The chemical reactions that create ozone take place while the
pollutants are being blown through the air by the wind, which means
that ozone can be more severe many miles away from the source of
emissions than it is at the source. At ground level, ozone can cause a
variety of ill effects to human health, crops and trees. Specifically,
ground-level ozone induces the following health effects:

Decreased lung function, primarily in children active
outdoors,
Increased respiratory symptoms, particularly in highly
sensitive individuals,
Hospital admissions and emergency room visits for
respiratory causes, among children and adults with pre-existing
respiratory disease such as asthma,
Inflammation of the lung,
Possible long-term damage to the lungs or even death.

Detailed information on the benefits and costs of changes in
NO_X emissions is contained in the Regulatory Impact Analysis
(RIA) contained in the NO_X SIP call docket, which also
serves as the RIA for the FIP proposal. In addition to helping attain
public health standards for ozone, decreases in emissions of
NO_X are helpful in reducing acid deposition, greenhouse
gases, nitrates in drinking water, stratospheric ozone depletion,
excessive nitrogen loadings to aquatic and terrestrial ecosystems, and
ambient concentrations of nitrogen dioxide, particulate matter and
toxics (see ``Nitrogen Oxides: Impacts on Public Health and the
Environment,'' EPA-452/R-97-002, August 1997.)

C. New Ozone NAAQS

On July 18, 1997 (62 FR 38856), EPA issued its final action to
revise the NAAQS for ozone. The EPA's decision to revise the standard
was based on the Agency's review of the available scientific evidence
linking exposures to ambient ozone to adverse health and welfare
effects at levels allowed by the pre-existing 1-hour ozone standards.
The 1-hour primary standard was replaced by an 8-hour standard at a
level of 0.08 parts per million (ppm), with a form based on the 3-year
average of the annual fourth-highest daily maximum 8-hour average ozone
concentration measured at each monitor within an area. The new primary
standard will provide increased protection to the public, especially
children and other at-risk populations, against a wide range of ozone-
induced health effects. The EPA retained the applicability of the 1-
hour NAAQS for existing nonattainment areas until such time as EPA
determines that an area has attained the 1-hour NAAQS (40 CFR 50.9).
The new standard results in more areas and larger areas with monitoring
data indicating nonattainment. Thus, it will be even more critical to
implement regional control strategies which will eliminate specified
amounts of emissions of NO_X which would otherwise be
transported across State boundaries into areas in violation of the new
standard.

D. Section 126 Petitions

On August 14-15, 1997, EPA received eight section 126 petitions
submitted individually by eight Northeastern States. The petitioning
States are Connecticut, Maine, Massachusetts, New Hampshire, New York,
Pennsylvania, Rhode Island, and Vermont. Each petition requests EPA to
make a finding that sources in certain categories of stationary sources
in upwind States emit or would emit NO_X in violation of the
prohibition in section 110(a)(2)(D)(i) on emissions that contribute
significantly to nonattainment, or interfere with maintenance, in the
petitioning State. All of the petitions seek a finding and relief under
the 1-hour standard; Massachusetts, Pennsylvania, and Vermont also seek
a finding and relief with respect to the 8-hour standard.
The petitions vary as to the type and geographic location of the
source categories identified as significant contributors. All the
petitions identified source categories; some petitions also provided
lists of sources within the specified categories. The source categories
include electric generating plants, fossil fuel-fired boilers and other
indirect heat exchangers, and certain other related stationary sources
that emit NO_X. All the petitions target sources in the
Midwest; some also target sources in the South and Northeast.
In a separate rulemaking, EPA is proposing to make a technical
determination that certain major stationary source categories
identified in the section 126 petitions are significantly contributing
to nonattainment in, or interfering with maintenance by, one or more
petitioning State (hereafter referred to as a positive or affirmative
technical determination). On the basis of the proposed affirmative
technical determination, EPA is proposing that the petitions naming
these sources and source categories be granted or denied, at certain
later dates, pending certain actions by the States and EPA regarding
State submittals and FIPs in response to the final NO_X SIP
call. The schedule and conditions under which the applicable final
findings on the petitions would be triggered are discussed in that
proposal notice. For information on the interaction of the section 126,
FIP, and NO_X SIP call actions, see the section 126 proposal
notice, section II.A.2.

E. NO_X SIP Call

The EPA proposed the NO_X SIP call on November 7, 1997
(62 FR 60318), issued a supplemental notice on May 11, 1998 (63 FR
25902), and just issued a final rulemaking. In that action, EPA
determined that NO_X emissions from sources and emitting
activities in 23 jurisdictions significantly contribute to

[[Page 56398]]

nonattainment of the 1-hour and 8-hour ozone NAAQS, or interfere with
maintenance of the 8-hour NAAQS, in one or more downwind States
throughout the Eastern United States. The EPA based these proposals on
data generated by OTAG, public comments, and other relevant
information.
The NO_X SIP call requires that the 23 jurisdictions
adopt and submit by September 24, 1999, remedial SIP revisions. The 23
jurisdictions are: Alabama, Connecticut, Delaware, District of
Columbia, Georgia, Illinois, Indiana, Kentucky, Massachusetts,
Maryland, Michigan, Missouri, North Carolina, New Jersey, New York,
Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia,
West Virginia, and Wisconsin. The SIP revisions must contain measures
that will assure that sources in the State reduce their NO_X
emissions sufficiently to eliminate the amounts of NO_X
emissions that contribute significantly to nonattainment, or that
interfere with maintenance, downwind. By eliminating these amounts of
NO_X emissions, the control measures will assure that the
remaining NO_X emissions will not exceed the level that EPA
identifies in the NO_X SIP call as the State's NO_X
emissions budget. After prohibiting the significant amounts of
NO_X, the remaining amounts emitted by sources in the covered
States will not ``significantly contribute to nonattainment, or
interfere with maintenance by,'' a downwind State, under section
110(a)(2)(D)(i)(I).
For purposes of the FIP rulemaking, the reader is encouraged to
review the NO_X SIP call final rulemaking, which is organized
as follows: section II.C, Weight-of-Evidence Determination of Covered
States, describes how EPA determined which States include sources that
emit NO_X in amounts of concern (the ``covered'' States);
sections II.D, Cost Effectiveness of Emission Reductions; II.E,
Comparison of Upwind and Downwind Costs; and III, Determination of
Budgets, describe how EPA determined the significant amounts of
emissions and the resulting statewide emissions budgets for the States
identified above. Section IV, Air Quality Assessment, discusses air
quality analyses conducted by EPA to help confirm the decisions and
requirements set forth in this rulemaking. Section V, NO_X
Control Implementation and Budget Achievement Dates, primarily
discusses the dates by which (1) the States must submit SIP revisions
in response to today's action, (2) the sources must implement the
required SIP controls, and (3) the States must achieve the required
budget levels. Section VI, SIP Criteria and Emissions Reporting
Requirements, describes the SIP requirements themselves.
The SIP requirements permit each State to determine what measures
to adopt to prohibit the significant amounts and, hence, meet the
necessary emissions budget. Consistent with OTAG's recommendations to
achieve NO_X emissions decreases primarily from large
stationary sources in a trading program, EPA encourages States to
consider electric generating and non-electric generating boiler and
turbine controls under a cap-and-trade program as a highly cost-
effective strategy. The recommended cap-and-trade program is described
in more detail in section VII, NO_X Trading program. Section
VIII, Interaction with Title IV NO_X Rule, describes the
relationship between this rulemaking and the title IV NO_X
rule. The remaining parts of the NO_X SIP call include
section IX, Nonozone Benefits of NO_X Reductions, and section
X, Administrative Requirements.

III. FIP Process

A. Legal Framework

The Administrator is required to promulgate a FIP within 2 years
of: (1) Finding that a State has failed to make a required submittal,
(2) finding that a submittal received does not satisfy the minimum
completeness criteria established under section 110(k)(1)(A), or (3)
disapproving a SIP submittal in whole or in part. Section 110(c)(1)
mandates EPA promulgation of a FIP unless EPA has approved, within the
2-year time period, a SIP revision that corrects the deficiency
identified by EPA in its NO_X SIP call.
The 1990 Amendments make explicit a principle that was implicit in
the preceding Act--that a FIP corrects or fills a void in a deficient
State plan. The amended CAA defines a FIP as a plan to fill a gap or
``correct all or a portion of an inadequacy in a State implementation
plan.'' (42 U.S.C. 7602(y) (Supp. II. l990) (emphasis added).) When
forced by a State planning delinquency to promulgate a FIP, EPA has
wide-ranging authority under section 110(c) to fill the gaps left by
the State failure. The EPA's authority to prescribe FIP measures is of
three types. First, EPA may promulgate any measure which it is
expressly permitted to issue under any circumstances pursuant to pre-
existing independent statutory authority--for example, explicit
provisions of title II. That is, EPA may promulgate any measure which
it has authority to issue in a non-FIP context, without reliance on
section 110(c). Second, EPA may invoke section 110(c)'s general FIP
authority and act to cure a planning inadequacy in any way not clearly
prohibited by statute. Third, under section 110(c), the courts have
held that EPA may exercise all authority that the State may exercise
under the Act.
The second type of authority, EPA's general authority under section
110(c), is essentially remedial, and EPA has broad power under that
section to cure a defective State plan. Thus, in promulgating a FIP,
EPA may exercise its own, independent regulatory authority under the
CAA in any way not clearly prohibited by an explicit provision of the
Act. When EPA has promulgated a FIP, courts have not required explicit
authority for specific measures: ``We are inclined to construe
Congress'' broad grant of power to the EPA as including all enforcement
devices reasonably necessary to the achievement and maintenance of the
goals established by the legislation.'' (South Terminal Corp. v. EPA,
504 F.2d 646, 669. (1st Cir. 1974)). See also City of Santa Rosa v.
EPA, 534 F.2d 150, 153-154 (9th Cir. 1976) (upholding the
Administrator's authority to promulgate a FIP imposing gas-rationing in
Los Angeles on a massive scale). ``The authority to regulate pollution
carries with it the power to do so in a manner reasonably calculated to
reach that end.'' Id. at 155.
In addition, when a State's failure to discharge the primary
responsibility to protect its air quality compels EPA to assume this
task, the powers of the defaulting State accrue to EPA. As the Ninth
Circuit recently held, when EPA acts in place of the State pursuant to
a FIP under section 110(c), EPA ``stands in the shoes of the defaulting
State, and all of the rights and duties that would otherwise fall to
the State accrue instead to EPA,'' Central Arizona Water Conservation
District v. EPA, 990 F.2d 1531, at 1541 9th Cir. 1993). The First
Circuit, in an early FIP case, agreed:

the Administrator must promulgate promptly regulations setting forth
an implementation plan for a State should the State itself fail to
propose a satisfactory one. The statutory scheme would be unworkable
were it read as giving to EPA when promulgating an implementation
plan for a State, less than those necessary measures allowed by
Congress to a State to accomplish Federal clean air goals. We do not
adopt any such crippling interpretation.

South Terminal Corporation v. EPA, 504 F.2d 668 (1st Cir. 1974).

B. Timing of FIP Action

As described in the NO_X SIP call final rulemaking and
summarized in section II.E of this notice, EPA is requiring

[[Page 56399]]

specific States to develop, adopt and submit revisions to their SIPs by
September 1999. As part of the NO_X SIP call rulemaking, EPA
received a few comments supporting the position that EPA should propose
FIPs at the same time as taking final action on the NO_X SIP
call rulemaking. The Agency also received a few comments suggesting it
was more appropriate to delay the FIP proposal until some time after
the States have had time to respond to the NO_X SIP call
rulemaking. As described in that final notice, EPA agreed with certain
commenters that the timing of the FIP proposal should allow for
promulgation in time to require NO_X emissions reductions by
sources at about the same time, both in States that comply with the
NO_X SIP call and States that do not. Under a delayed FIP
proposal approach, industry in the non-complying States might
experience an unfair competitive advantage over industry in States
which elected to reduce their NO_X emissions and reduce
interstate transport of ozone and ozone precursors in an earlier
timeframe, consistent with the requirements of the NO_X SIP
call rulemaking. More importantly, delaying the FIP proposal would
delay reductions of ozone pollution and NO_X emissions in the
non-complying States which would unnecessarily jeopardize public
health. Therefore, proposing a FIP today will ensure that EPA can
promulgate a FIP soon after the time the SIPs are due, in the event of
any State's failure to comply.
The EPA views seriously its responsibility to address the issue of
regional transport of ozone and ozone precursor emissions. Decreases in
NO_X emissions are needed in the States named in the
NO_X SIP call rulemaking to enable the downwind States to
develop and implement plans to achieve the NAAQS in order to achieve
clean air for their citizens. Thus, although the CAA allows EPA up to 2
years to promulgate a FIP after a finding of a State's failure to
submit a complete, approvable plan, EPA intends to expedite the FIP
promulgation to help assure that the downwind States realize the air
quality benefits of regional NO_X reductions as soon as
practicable. This is consistent with Congress' intent that attainment
occur in these downwind nonattainment areas ``as expeditiously as
practicable'' (sections 181(a), 172(a)). Therefore, EPA is proposing
FIPs today in conjunction with final action on the NO_X SIP
call. Furthermore, EPA intends to make a finding and promulgate a FIP
immediately after the SIP submittal due date for each upwind State that
fails to submit a complete SIP that meets the terms of the
NO_X SIP call. The EPA also intends to approve expeditiously
SIP revisions that meet the NO_X SIP call rulemaking
requirements. For States that fail to make the required submittal or
fail to submit a complete SIP revision response, EPA would promulgate a
FIP as described in the above section. Where the SIP is complete but
EPA disapproves it, EPA would also promulgate a FIP. The EPA intends to
move quickly to promulgate a FIP where necessary.
In order to meet the requirements of section 110(c), this notice
proposes a FIP for each of the 23 jurisdictions required by the
NO_X SIP call to reduce emissions of NO_X. The
proposed FIP requirements for each of the 23 jurisdiction are
identical. Final rulemaking on the proposed FIPs may address only one
State or may address several of the 23 jurisdictions, depending on how
the 23 jurisdictions respond to the NO_X SIP call.

C. FIP Control Measures

In contrast to the SIP process--where selection and implementation
of control measures is the primary responsibility of the State--in the
case of a FIP, it is EPA's responsibility to select the control
measures for each source sector and assure compliance with those
measures. Thus, while the FIP would be designed by EPA to achieve the
same total statewide emissions decrease as that described in the
NO_X SIP call, the specific control measures assigned in the
FIP could be different from what a State might choose.
In selecting the specific control measures for the FIP, EPA used
the same method used in the NO_X SIP call for calculating the
required emissions reductions. As in the NO_X SIP call, the
FIP rules proposed in this notice require the same amount of emissions
reduction from the source categories to which highly cost-effective
measures can be applied. See the discussion in section III,
Determination of Budgets, of the NO_X SIP call. The EPA is
incorporating by reference the technical basis and supporting rationale
for EPA's conclusions as to the highly cost-effective strategy
developed for the NO_X SIP call budgets.

D. Authority To Order the State To Implement Specific Measures

The EPA's authority to promulgate measures in a FIP which require
the State to enact legislation or expend State funds may be somewhat
limited under prior case law. In general, EPA may require the State to
implement FIP measures, including requirements for legislation and
expenditure of funds, if the measures affect the pollution-creating
activities of the State. However, in Brown v. EPA, 521 F.2d 827 (9th
Cir. 1975), vacated on other grounds, 431 U.S. 99 (1977) (Brown), the
court held that section 113 of the CAA did not provide statutory
authority for EPA to bring an enforcement action against the State (or
other municipal authority) for failing to implement a motor vehicle
inspection and maintenance program. The court reasoned that the CAA
authorized Federal enforcement if the State did not implement
regulations to control its own pollution creating activities, ``but not
against a State that chooses not to govern polluters as the
Administrator directs.'' Id. at 832. In a subsequent decision, the
court rejected EPA's argument that ownership of the roads and highways
made the State responsible for the pollution created from their use
(Brown v. EPA, 566 F.2d 665 (9th Cir. 1977), vacated on other grounds,
431 U.S. 99 (1977)).
The same court, however, held in City of Santa Rosa v. EPA, 534
F.2d 150 (9th Cir. 1976), that the EPA may require gas rationing under
its FIP authority. The court found that the Administrator of EPA has
authority to limit gas delivery to retail outlets and may require the
citizens of the State to curtail their gas usage. The FIP measure in
City of Santa Rosa did not require the State to implement the gas
rationing scheme, and the court distinguished Brown because the
petitioners had challenged the effect of gas rationing, not EPA's
authority to order rationing. Id. at 155.
The Brown holding was similarly distinguished and limited by the
Sixth Circuit Court of Appeals in United States v. Ohio Department of
Highway Safety, 635 F.2d 1195 (6th Cir. 1980). The court upheld EPA's
enforcement against the State under section 113 of the CAA for
registering motor vehicles which did not pass an inspection and
maintenance program promulgated by EPA. The court held that the State
was interfering with EPA's implementation of a measure that had been
promulgated under its Federal authority. See also Pennsylvania v. EPA,
500 F.2d 246 (3d Cir. 1974).
The court in Brown did not reach constitutional issues raised under
the commerce clause. It is unclear, but unlikely, that requiring the
State to implement FIP measures which mandate legislation and
expenditure of funds would be struck down under the commerce clause.
See Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528
(1985) (holding that the Federal government may require States to pay
minimum wages and overtime

[[Page 56400]]

pursuant to the Fair Labor Standards Act). However, even assuming that
the commerce clause poses no such obstacle, nothing in the enactment of
the 1990 Amendments casts doubt on the continued vitality of the Brown
holdings with respect to the statutory limits on EPA's FIP authority.
Thus, the constraints discussed above still apply. In short, EPA may
require the State to legislate or expend funds that affect the State's
own pollution creating activities. Although EPA may not require the
State to legislate or spend money to govern the pollution creating
activities of others, EPA may promulgate and implement such measures
directly in a FIP, and the State may not interfere with EPA's
enforcement of those measures.
While EPA may not have the authority to require States to enact
legislation or expend State funds to implement control measures, beyond
those required to reduce emissions generated by the State itself, EPA
believes that title V of the CAA requires a State to include all
applicable requirements, including requirements of a FIP, in the title
V permit. The regulations governing State permitting under title V
define an ``applicable requirement,'' which must be reflected in a
title V operating permit, as including ``[a]ny standard or other
requirement provided for in the applicable implementation plan approved
or promulgated by EPA through rulemaking under title I of the CAA that
implements the relevant requirements of the Act, including any
revisions to the plan promulgated in part 52 of this chapter'' (40 CFR
70.2). Since today's proposed rule is being promulgated under title I
(i.e., under section 110), both the requirements of the Federal trading
program (part 97) and the rules governing stationary internal
combustion engines and cement plants (part 98) are applicable
requirements under 40 CFR 70.2 and must be reflected in the title V
operating permit of any sources affected by this rulemaking that are
required to have such a permit.

E. Section 105 Grants

The EPA provides annual funding to States under section 105 of the
CAA to carry out Act-related programs. Where a State fails to
adequately respond to the NO_X SIP call, EPA must adopt and
implement a FIP. In such cases, the Agency will withhold all or a
portion of the State's section 105 allotment to the extent necessary to
implement the FIP provisions promulgated by EPA and in accordance with
the procedural requirements of section 105.

F. Findings of Failure

As noted in section III.A. of this notice, EPA is required to
promulgate a FIP after finding that a State has failed to adequately
respond to a NO_X SIP call. If EPA makes such a finding, it
would be a final Agency action but would not be subject to the notice-
and-comment requirements of the Administrative Procedure Act (APA), 5
U.S.C. 553(b). The EPA believes that because of the limited time
provided to make findings of failure to submit and findings of
incompleteness regarding SIP submissions or elements of SIP submission
requirements, Congress did not intend such findings to be subject to
notice-and-comment rulemaking. However, to the extent such findings are
subject to notice-and-comment rulemaking, EPA intends, consistent with
past practice (for example, 61 FR 36294), to invoke the good cause
exception pursuant to the APA, 5 U.S.C. 553(b)(3)(B). Notice and
comment are unnecessary because no significant EPA judgment is involved
in making a nonsubstantive finding of failure to submit elements of SIP
submissions required by the CAA. Furthermore, providing notice and
comment would be impracticable because of the limited time provided
under the statute for making such determinations. Finally, notice and
comment would be contrary to the public interest because it would
divert agency resources from the critical substantive review of
complete SIPs. See 58 FR 51270, 51272, (October 1, 1993); 59 FR 39832,
39853 (August 4, 1994).

G. Sanctions

If a State fails to submit the required SIP provisions, the CAA
provides for EPA to issue a finding of State failure under section
179(a). (EPA is using the phrase ``failure to submit'' to cover both
the situation where a State makes no submission and the situation where
the State makes a submission that EPA finds is incomplete in accordance
with section 110(k)(1)(B) and 40 CFR part 51, Appendix V.) Such a
finding starts an 18-month sanctions clock; if the State fails to make
the required submittal which EPA determines is complete within that
period, one of two sanctions will apply. If 6 months after the sanction
is imposed, the State still has not made a complete submittal, the
second sanction will apply. The two sanctions are: a requirement that
new or modified sources subject to a section 173 new source review
program obtain reductions in existing emissions in a 2:1 ratio to
offset their new emissions and withholding of certain Federal highway
funds, (section 179(b)). These requirements are in addition to EPA's
FIP obligation described above.

H. Transitional Areas

As described in the November 7, 1997 NO_X SIP call
proposal notice, the Presidential Directive includes goals of early
attainment of the health-based ozone standards while minimizing
planning and regulatory burdens for State and local governments and
businesses where air quality problems are regional in nature. To
achieve these goals, the implementation plan includes a policy for
areas that attain the 1-hour standard but not the new 8-hour standard
in which EPA will follow a flexible implementation approach that
encourages cleaner air sooner, responds to the fact that ozone is a
regional as well as local problem, and eliminates unnecessary planning
and regulatory burdens for State and local governments.
A primary element of the policy will be the establishment under
section 172(a)(1) of the CAA of a special ``transitional''
classification both for areas that participate in the NO_X
regional strategy proposed in this rulemaking and for those that opt to
submit early plans addressing the new 8-hour standard. See the
NO_X SIP call NPR (November 7, 1997) and the Presidential
Directive for detailed discussions about the transitional
classification. On August 18, 1998, EPA issued proposed guidance for
public comment to explain the implementation policy in further detail
and to provide details on SIP requirements for transitional areas
(Federal Register Notice of Availability published August 24, 1998, 63
FR 45060). The EPA expects to finalize the August 1998 draft guidance,
as well as guidance for areas other than transitional, by December
1998.¹
---------------------------------------------------------------------------

\1\ For a complete listing of the guidance and other actions EPA
plans to issue to implement the revised ozone and PM NAAQS, see a
table on EPA's implementation website: http://ttnwww.rtpnc.epa.gov/
implement/actions.htm.
---------------------------------------------------------------------------

It should be noted, however, that under EPA's intended approach,
promulgation by EPA of a FIP under this rulemaking would not allow the
area to be eligible for the transitional area classification. Such
areas in States that fail to comply with the NO_X SIP call
would not be eligible for the transitional classification.

[[Page 56401]]

IV. Emissions Decreases to Meet the NO_X SIP Call

A. General Approach for Calculating Budgets

In the final NO_X SIP call, EPA determined that
NO_X emissions from sources in the 23 jurisdictions
contribute significantly to nonattainment problems and interfere with
maintenance in downwind areas in the OTAG region. Accordingly, EPA
established a NO_X budget for each of these jurisdictions.
The budgets reflect the aggregate amount of NO_X emissions
that will remain when the States eliminate the specific amount of
NO_X emissions that contribute significantly to nonattainment
problems and interfere with maintenance in downwind areas. These
budgets cover all NO_X emissions from a State, including
area, nonroad, stationary, and mobile sources. More detail on the State
budgets can be found in the NO_X SIP call final rulemaking
notice and support material. The FIP is designed to achieve the same
State emissions budgets on the same schedule as that established in the
NO_X SIP call final rule, with the same highly cost-effective
measures forming the basis for the budgets. Therefore, the FIP rules
use the same source cutoff levels, categories, and control levels as
were used to develop the final NO_X SIP call budgets and
require that the emissions decreases be implemented by May 1, 2003.
Because this FIP rulemaking does not establish the State emissions
budgets, but instead proposes the way EPA would ensure that the budgets
are achieved, EPA is not requesting comment on establishment of the
budgets or the schedule for implementing the emissions reductions. For
the FIP rulemaking, EPA invites comment specifically on the feasibility
and cost effectiveness of control measures and the projection of
emissions reductions that various control measures would achieve as
outlined in the FIP and described in detail in the NO_X SIP
call rulemaking. The EPA summarizes below the conclusions from the
relevant parts of the NO_X SIP call rulemaking.

B. Electric Generating Units (EGUs)

The control level for this category of NO_X sources was
determined by applying a uniform NO_X emission rate of 0.15
lb/mmBtu regionwide for EGUs greater than 25 MWe or 250 mmBtu/hr. The
cost effectiveness for each control level was determined using the
Integrated Planning Model. Details regarding the methodologies used can
be found in the NO_X SIP call rulemaking and support
materials.

C. Industrial Boilers and Turbines

The EPA examined the category of large (greater than 250 mmBtu/hr)
industrial boilers and turbines to determine the most emissions
reductions from controls that would cost less than $2,000 per ton on
average. For this source category, EPA determined that controls are
available that would achieve a 60 percent reduction from uncontrolled
levels at average costs less than $2,000 per ton. For those sources
that participate in the trading program, EPA believes that the costs
would be further reduced. Details regarding the methodologies used can
be found in the NO_X SIP call rulemaking and support
materials.

D. Stationary Internal Combustion Engines

The EPA examined the category of large (emitting more than one ton
per day) stationary internal combustion engines to determine the most
emissions reductions from controls that would cost less than $2,000 per
ton on average. For this source category, EPA determined that controls
are available that would achieve a 90 percent reduction from
uncontrolled levels at average costs less than $2,000 per ton. Details
regarding the methodologies used can be found in the NO_X SIP
call rulemaking and support materials.

E. Cement Manufacturing

The EPA examined the category of large (emitting more than one ton
per day) cement manufacturing plants to determine the most emissions
reductions from controls that would cost less than $2,000 per ton on
average. For this source category, EPA determined that controls are
available at all types of cement manufacturing facilities that would
achieve a 30 percent reduction from uncontrolled levels at average
costs less than $2,000 per ton. Details regarding the methodologies
used can be found in the NO_X SIP call rulemaking and support
materials.

F. Other Point Source Categories

As described in the NO_X SIP call rulemaking and support
materials, EPA reviewed the emissions and control cost information for
several non-EGU source categories. The EPA's analysis determined that,
for large sources (emitting more than one ton per day), the following
non-EGU source categories appeared to have controls available only at
cost-effectiveness levels above $2,000 per ton: glass manufacturing,
process heaters, and commercial and industrial incinerators. Therefore,
EPA did not calculate emissions budget decreases nor is the Agency
proposing FIP rules for these source categories.
For other non-EGU source categories, NO_X controls may be
available for large sources at costs less than $2,000 per ton. However,
as described in the NO_X SIP call rulemaking and support
materials, each of these source categories include a relatively small
number of sources with a small amount of emissions. The EPA believes
that controlling these sources for purposes of achieving State budgets
would be inefficient because of the relatively high administrative
costs of developing regulations for these source categories. As
described in the NO_X SIP call rulemaking, there are many
sources in the emissions inventory which lack information EPA would
need to determine potentially applicable control techniques (63 FR
25909). This group of sources is diverse and does not fit within the
categories set out by EPA, but total emissions are low for this group.
Therefore, for purposes of today's action, EPA is not proposing FIP
rules to decrease emissions for these sources.
In addition, EPA determined in the NO_X SIP call final
rulemaking that municipal waste combustors should not be required to
reduce emissions beyond that already required by the maximum available
control technology (MACT) rules for NO_X required under
sections 111 and 129 of the CAA. Therefore, EPA is not proposing
additional emissions decreases and FIP rules for municipal waste
combustors.
Thus, for non-EGU sources the FIP proposes rules only for boilers
and turbines (60 percent decrease), stationary internal combustion
engines (90 percent decrease), and cement plants (30 percent decrease).
The EPA's analysis determined that these source categories have
controls available at cost-effectiveness levels below an average of
$2,000 per ton and total emissions from each of these source categories
are high relative to other non-EGU source categories.

G. Area, Mobile, and Nonroad Sources

As described in the NO_X SIP call final rulemaking, EPA
did not identify additional controls beyond those in the 2007 baseline
case for the area, mobile and nonroad source categories at average
costs less than $2,000 per ton. Therefore, EPA did not calculate
additional emissions budget decreases nor propose FIP rules for these
source categories.

[[Page 56402]]

H. Projection That Proposed FIP Measures Would Achieve State-by-State
Emissions Budgets

Consistent with 40 CFR 51.121(b) and (g), the control measures
described above and contained in the FIP rules are designed to achieve
the State emissions budgets established in the NO_X SIP call.
The tables below result from application of the FIP measures and
demonstrate compliance of the FIP with the NO_X SIP call
budgets.
1. EGU
As described in section III.B.3. of the NO_X SIP call,
the EGU budget component is calculated based on applying a 0.15 lb/
mmBtu emission limit to sources greater than 25 MWe. This limit is
applied uniformly across all States that are covered by this
NO_X SIP call. The higher of 1995 or 1996 heat input, grown
to 2007, is used to calculate the budget component. The final percent
reduction from the 2007 base case to the budget is shown in Table III-4
of the NO_X SIP call, which is reproduced below.

Table III-4.--Final NOX Budget Components and Percent Reduction for Electricity Generating Units
[Tons/season]
----------------------------------------------------------------------------------------------------------------
Percent
State Final base Final budget reduction
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 76,900 29,051 62
Connecticut..................................................... 5,600 2,583 54
Delaware........................................................ 5,800 3,523 39
District of Columbia............................................ *0 207 NA
Georgia......................................................... 86,500 30,255 65
Illinois........................................................ 119,300 32,045 73
Indiana......................................................... 136,800 49,020 64
Kentucky........................................................ 107,800 36,753 66
Maryland........................................................ 32,600 14,807 55
Massachusetts................................................... 16,500 15,033 9
Michigan........................................................ 86,600 28,165 67
Missouri........................................................ 82,100 23,923 71
New Jersey...................................................... 18,400 10,863 41
New York........................................................ 39,200 30,273 23
North Carolina.................................................. 84,800 31,394 63
Ohio............................................................ 163,100 48,468 70
Pennsylvania.................................................... 123,100 52,000 58
Rhode Island.................................................... 1,100 1,118 -2
South Carolina.................................................. 36,300 16,290 55
Tennessee....................................................... 70,900 25,386 64
Virginia........................................................ 40,900 18,258 55
West Virginia................................................... 115,500 26,439 77
Wisconsin....................................................... 52,000 17,972 65
-----------------------------------------------
Total....................................................... 1,501,800 543,825 64
----------------------------------------------------------------------------------------------------------------
* The base case for DC is actually projected to be 30 tons per season. The base case values in this table are
rounded to the nearest 100 tons.

2. Non-EGU Point Sources
As described in the NO_X SIP call, the following
emissions decreases from uncontrolled levels were assumed:
i. Non-EGU boilers and turbines--60 percent decrease.
ii. Stationary internal combustion engines--90 percent decrease.
iii. Cement manufacturing plants--30 percent decrease.
These controls result in an overall reduction in emissions from all
large non-EGU point sources of almost 40 percent (187,800 tons per
season decrease). These resulting budget components are shown in Table
III-6 in the NO_X SIP call, and are reproduced below.

Table III-6.--Final NOX Budget Components and Percent Reduction for Non-Electricity Generating Point Sources
[Tons/season]
----------------------------------------------------------------------------------------------------------------
Percent
Final base Final budget reduction
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 49,781 37,696 24
Connecticut..................................................... 5,273 5,056 4
Delaware........................................................ 1,781 1,645 8
District of Columbia............................................ 310 292 6
Georgia......................................................... 33,939 27,026 20
Illinois........................................................ 55,721 42,011 25
Indiana......................................................... 71,270 44,881 37
Kentucky........................................................ 18,956 14,705 22
Maryland........................................................ 10,982 7,593 31
Massachusetts................................................... 9,943 9,763 2
Michigan........................................................ 79,034 48,627 38
Missouri........................................................ 13,433 11,054 18
New Jersey...................................................... 22,228 19,804 11

[[Page 56403]]

New York........................................................ 25,791 24,128 6
North Carolina.................................................. 34,027 25,984 24
Ohio............................................................ 53,241 35,145 34
Pennsylvania.................................................... 73,748 65,510 11
Rhode Island.................................................... 327 327 0
South Carolina.................................................. 34,740 25,469 27
Tennessee....................................................... 60,004 35,568 41
Virginia........................................................ 39,765 27,076 32
West Virginia................................................... 40,192 31,286 22
Wisconsin....................................................... 22,796 17,973 21
-----------------------------------------------
Total....................................................... 757,281 558,618 26
----------------------------------------------------------------------------------------------------------------

3. Mobile and Area Sources
As discussed in the NO_X SIP call rulemaking, EPA's
highway budget components are based on projected highway vehicle
emissions in 2007 from a base year of 1990, assuming implementation of
those measures incorporated in existing SIPs, such as inspection and
maintenance programs and reformulated fuels, measures already
implemented federally, and those additional measures expected to be
implemented federally by 2007. Similarly, as discussed in the
NO_X SIP call rulemaking, EPA's nonroad mobile source budget
components are based on projected nonroad mobile source emissions in
2007 from a base year of 1990 and assume implementation of those
measures incorporated in existing SIPs, measures already implemented
federally, and those additional measures expected to be implemented
federally. For area sources, no highly cost-effective control measures
were identified in the NO_X SIP call rulemaking. Thus, EPA is
not proposing any FIP measures in these categories. These resulting
budget components are shown in Tables III-7,8 & 9 in the NO_X
SIP call NFR, and are reproduced below:

Table III-7. Final NOX Budget Components for Stationary Area Sources
[Tons/season]
----------------------------------------------------------------------------------------------------------------
Proposed
budget Final budget Percent change
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 25,229 25,225 0
Connecticut..................................................... 4,587 4,588 0
Delaware........................................................ 1,035 963 -7
District of Columbia............................................ 741 741 0
Georgia......................................................... 11,901 11,902 0
Illinois........................................................ 7,270 7,822 8
Indiana......................................................... 25,545 25,544 0
Kentucky........................................................ 38,801 38,773 0
Maryland........................................................ 8,123 4,105 -49
Massachusetts................................................... 10,297 10,090 -2
Michigan........................................................ 28,126 28,128 0
Missouri........................................................ 6,626 6,603 0
New Jersey...................................................... 11,388 11,098 -3
New York........................................................ 15,585 15,587 0
North Carolina.................................................. 9,193 10,651 16
Ohio............................................................ 19,446 19,425 0
Pennsylvania.................................................... 17,103 17,103 0
Rhode Island.................................................... 420 420 0
South Carolina.................................................. 8,420 8,359 -1
Tennessee....................................................... 11,991 11,990 0
Virginia........................................................ 25,261 18,622 -26
West Virginia................................................... 4,901 4,790 -2
Wisconsin....................................................... 10,361 8,160 -21
-----------------------------------------------
Total....................................................... 302,350 290,689 -4
----------------------------------------------------------------------------------------------------------------

Table III-8.--Final NOX Budget Components and Percent Reduction for Nonroad Sources
[Tons/season]
----------------------------------------------------------------------------------------------------------------
Proposed
budget Final budget Percent change
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 18,727 16,594 -11
Connecticut..................................................... 9,581 9,584 0

[[Page 56404]]

Delaware........................................................ 4,262 4,261 0
District of Columbia............................................ 3,582 3,470 -3
Georgia......................................................... 22,714 21,588 -5
Illinois........................................................ 56,429 47,035 -17
Indiana......................................................... 27,112 22,445 -17
Kentucky........................................................ 22,530 19,627 -13
Maryland........................................................ 18,062 17,249 -4
Massachusetts................................................... 19,305 18,911 -2
Michigan........................................................ 24,245 23,495 -3
Missouri........................................................ 19,102 17,723 -7
New Jersey...................................................... 21,723 21,163 -3
New York........................................................ 30,018 29,260 -3
North Carolina.................................................. 18,898 17,799 -6
Ohio............................................................ 42,032 37,781 -10
Pennsylvania.................................................... 29,176 25,554 -12
Rhode Island.................................................... 2,074 2,073 0
South Carolina.................................................. 12,831 11,903 -7
Tennessee....................................................... 47,065 44,567 -5
Virginia........................................................ 25,357 21,551 -15
West Virginia................................................... 10,048 10,220 2
Wisconsin....................................................... 15,145 12,965 -14
-----------------------------------------------
Total....................................................... 500,018 456,818 -9
----------------------------------------------------------------------------------------------------------------

Table III-9.--Final NOX Budget Components and Percent Reduction for Highway Vehicles
[Tons/season]
----------------------------------------------------------------------------------------------------------------
Proposed
budget Final budget Percent change
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 56,601 50,111 -11
Connecticut..................................................... 17,392 18,762 8
Delaware........................................................ 8,449 8,131 -4
District of Columbia............................................ 2,267 2,082 -8
Georgia......................................................... 77,660 86,611 12
Illinois........................................................ 77,690 81,297 5
Indiana......................................................... 66,684 60,694 -9
Kentucky........................................................ 46,258 45,841 -1
Maryland........................................................ 28,620 27,634 -3
Massachusetts................................................... 23,116 24,371 5
Michigan........................................................ 81,453 83,784 3
Missouri........................................................ 55,056 55,230 0
New Jersey...................................................... 39,376 34,106 -13
New York........................................................ 94,068 80,521 -14
North Carolina.................................................. 73,056 66,019 -10
Ohio............................................................ 92,549 99,079 7
Pennsylvania.................................................... 73,176 92,280 26
Rhode Island.................................................... 5,701 4,375 -23
South Carolina.................................................. 49,503 47,404 -4
Tennessee....................................................... 67,662 64,965 -4
Virginia........................................................ 79,848 70,212 -12
West Virginia................................................... 21,641 20,185 -7
Wisconsin....................................................... 41,651 49,470 19
-----------------------------------------------
Total....................................................... 1,179,477 1,173,163 -1
----------------------------------------------------------------------------------------------------------------

4. Statewide Budgets
The statewide budgets are shown in Table III-10 of the
NO_X SIP call final rulemaking are reproduced below.

[[Page 56405]]

Table III-10.--Revised Statewide NOX Budgets
[Tons/season]
----------------------------------------------------------------------------------------------------------------
Percent
State Base Budget reduction
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... 218,610 158,677 27
Connecticut..................................................... 43,807 40,573 7
Delaware........................................................ 20,936 18,523 12
District of Columbia............................................ 6,603 6,792 -3
Georgia......................................................... 240,540 177,381 26
Illinois........................................................ 311,174 210,210 32
Indiana......................................................... 316,753 202,584 36
Kentucky........................................................ 230,997 155,698 33
Maryland........................................................ 92,570 71,388 23
Massachusetts................................................... 79,815 78,168 2
Michigan........................................................ 301,042 212,199 30
Missouri........................................................ 175,089 114,532 35
New Jersey...................................................... 106,995 97,034 9
New York........................................................ 190,358 179,769 6
North Carolina.................................................. 213,296 151,847 29
Ohio............................................................ 372,626 239,898 36
Pennsylvania.................................................... 331,785 252,447 24
Rhode Island.................................................... 8,295 8,313 0
South Carolina.................................................. 138,706 109,425 21
Tennessee....................................................... 252,426 182,476 28
Virginia........................................................ 191,050 155,718 18
West Virginia................................................... 190,887 92,920 51
Wisconsin....................................................... 145,391 106,540 27
-----------------------------------------------
Total....................................................... 4,179,751 3,023,113 28
----------------------------------------------------------------------------------------------------------------

V. Emissions Reporting

The EPA believes it is essential that compliance with the regional
control strategy be verified. Tracking emissions is the principal
mechanism to ensure compliance with the budget and to assure the
downwind States and EPA that the ozone transport problem is being
mitigated. The new emissions control requirements for stationary
sources proposed in the FIP include requirements that the affected
sources directly report emissions data to EPA. This includes data used
for determining compliance with the requirements of the Federal
NO_X Budget Trading Program and specific reporting
requirements for stationary internal combustion engines and cement
manufacturing facilities. Therefore, under the FIP, EPA will already be
collecting the data that can be used to determine compliance with the
emissions decreases required by the proposed FIP. For each FIP, EPA
will use that data as well as other analyses in order to determine
compliance with the Statewide NO_X emissions budget.

VI. Federal NO_X Budget Trading Program

A. Program Summary

1. Purpose of the Federal NO_X Budget Trading Program
In today's FIP notice, EPA proposes to regulate any fossil fuel-
fired unit (boiler, turbine, or combined cycle) that serves a generator
with a nameplate capacity greater than 25 MWe, and any fossil fuel-
fired unit (boiler, turbine, or combined cycle) that has a maximum
design heat input of greater than 250 mmBtu/hr, using a capped market-
based program. This type of program is a proven method for achieving
the highly cost-effective emissions reductions described above while
providing sources compliance flexibility. (See 63 FR 25918-19,
discussing OTAG's conclusions concerning advantages of market-based
systems.)
The Federal NO_X Budget Trading Program is proposed in a
new part 97 in title 40 of the Code of Federal Regulations. The
regulatory text of part 97 is proposed in the rulemaking on the section
126 action. Participation in the NO_X Budget Trading Program
would be mandatory for all soources covered by the finalization of this
proposed FIP, except IC engines and cement kilns. It would also be
mandatory for any sources affected by a triggering of the section 126
remedy.
Because EPA is proposing to implement the Federal NO_X
Budget Trading Program, both if a FIP is appropriate and in response to
the section 126 petitions, EPA intends to finalize part 97 in whichever
of these actions is finalized first. (The EPA expects part 97 will be
finalized in the section 126 rulemaking because it is on a tighter
timeframe.) In finalizing part 97, EPA intends to respond to the
comments it receives on both rulemaking actions regarding part 97.
Therefore, commenters who have identical comments in both rulemakings
may submit their comments to one docket and merely reference such
comments in their submission to the other docket. However, to the
extent comments on part 97 are solely related to how it would be
applied through a FIP, commenters should be sure to submit such
comments in the docket for this FIP NPR.
The EPA requests comment on whether it is appropriate to use a
common trading program for both the FIP and the section 126 remedy, as
well as for purposes of the NO_X SIP call. If not, EPA
requests specific comment on what should be different and why.
2. Relationship of Trading Program Under FIP to Trading Program Under
Section 126 Petitions and NO_X SIP Call
The sources that EPA is proposing to include in the Federal
NO_X Budget Trading Program in today's FIP are the same
sources included in the State NO_X Budget Trading Program
(part 96) that EPA promulgated as a model trading rule which States may
elect to use in responding to the final NO_X SIP call. The
sources identified in this FIP are the sources for which EPA assumed
emissions reductions in calculating the budgets for States in the
NO_X SIP call. The NO_X SIP call established an
emissions budget for all sources of NO_X

[[Page 56406]]

emissions in all States determined by EPA to significantly contribute
to nonattainment or interfere with maintenance of the ozone NAAQS in
any other jurisdiction. The FIP sets specific stationary source rules
to decrease NO_X emissions sufficiently to achieve the
NO_X SIP call budget. The section 126 proposed action, on the
other hand, is limited to major sources or groups of stationary sources
that are named in the section 126 petitions, and that EPA finds emit or
would emit in violation of the prohibition in section 110(a)(2)(D)
relative to a petitioning State. Despite this difference in the scope
of the proposed section 126 action and the final NO_X SIP
call or proposed FIP, all 3 actions are aimed at reducing the transport
of ozone by controlling emissions from sources in a given State that
are found to be contributing to nonattainment or maintenance problems
in another State.
The EPA believes that the State NO_X Budget Trading
Program--if selected by States to meet their NO_X SIP call
obligations--could be coordinated and integrated with a Federal
NO_X Budget Trading Program promulgated in a final FIP or in
a final section 126 rulemaking. Integration is possible because, as
noted above, the NO_X SIP call, the corresponding FIP, and
the section 126 petitions all seek to mitigate the ozone transport
problem by reducing emissions from upwind sources that hinder
attainment or maintenance of the ozone NAAQS downwind. Further, the
sources covered in the model cap-and-trade program in the
NO_X SIP call include a majority of the sources named by
petitioning States in the section 126 action, and are identical in size
and categorization to sources for which EPA proposes to issue rules in
the section 126 and FIP proposed actions.
In order to be eligible to participate in a cap-and-trade program,
the EPA believes that there are two principal criteria that sources
must meet, as stated in the supplemental notice for the proposed
NO_X SIP call (62 FR 25923). The first criterion requires
that sources be able to account accurately and consistently for all of
their emissions to ensure the trading program goal of maintaining
emissions within a cap. The second criterion for participation in a
trading program is the ability to identify a responsible party for each
regulated source who would be accountable for demonstrating and
ensuring compliance with the program's provisions. Assuming that these
criteria are met, and consistent control levels are used in setting
emissions requirements for the covered sources, EPA supports the
establishment of a common trading program.
The resulting multistate trading program could include all sources
in States found to be significantly contributing to nonattainment or
interfering with maintenance of the ozone standard in another State.
Under this common trading program, sources subject to the Federal
program under the FIP or the section 126 rulemaking, and sources in
States choosing to participate in the State NO_X Budget
Trading Program in response to the NO_X SIP call, could trade
with one another under a NO_X cap across participating
States. The EPA's analyses in conjunction with the NO_X SIP
call demonstrate that implementation of a single trading program with a
uniform control level results in no significant changes in location of
emissions reductions as compared to a non-trading scenario. Therefore,
the common trading program meeting the requirements of either part 96
or part 97 will achieve the intended emissions reductions while
providing flexibility and cost savings to the covered sources.
Integration of the trading programs reduces the possibility of
inconsistent or conflicting deadlines or requirements, increases the
potential cost savings for sources, and streamlines program
administration. Inconsistency could hamper the sources' ability to plan
and achieve the needed reductions as cost effectively as possible. In
addition, if a State subsequently elects to submit a SIP including a
trading program after EPA has already established a Federal program
under a FIP or section 126, disruptions to sources that would shift
from regulation under a FIP or section 126 to regulation under a SIP
would be minimized.
The sources included in the trading program for purposes of the
NO_X SIP call or a FIP may vary from sources included for
purposes of the section 126 remedy. The EPA does not foresee this to be
problematic since sources would face consistent control requirements
regardless of which rulemaking includes the sources in the common
trading program. That the requirements would be consistent follows from
the similar nature of the rulemakings and the comparable level of
control which EPA has determined to be cost effective for each source
category across all three actions.
The EPA proposes, in part 97, to establish the geographic
boundaries of the common trading program as those States submitting
SIPs in response to the final NO_X SIP call or subject to
FIPs, and/or the sources in States for which EPA makes a finding for
the section 126 petitions. The EPA would administer this common trading
program in collaboration with affected States.
The EPA is proposing a Federal NO_X Budget Trading
Program as part of the FIP or section 126 remedy which mirrors, to the
extent feasible, the State NO_X Budget Trading Program (set
forth in part 96) which is the model trading program that is available
for States to adopt in response to the NO_X SIP call. While
EPA is proposing to keep the programs as similar as possible, there are
several differences which are more fully described below. These
differences arise primarily from the need for Federal implementation of
the program rather than State implementation. For example, EPA must
determine the NO_X allowance allocations for each unit in the
Federal NO_X Budget Trading Program, rather than simply
provide a recommended methodology for States to use to determine
allocations in the State NO_X Budget Trading Program.

B. Federal NO_X Budget Trading Program

1. Program Overview
In part 97, EPA proposes a cap-and-trade program as a means of
controlling NO_X mass emissions from any fossil fuel-fired
unit (boiler, turbine, or combined cycle) that serves a generator with
a nameplate capacity greater than 25 MWe, and any fossil fuel-fired
unit (boiler, turbine, or combined cycle) that has a maximum design
heat input of greater than 250 mmBtu/hr, in a State for which a FIP is
promulgated.
The EPA requests comment as to whether additional stationary
sources that are not included in the core applicability of the Federal
NO_X Budget Trading Program, but emit to a stack, can monitor
NO_X mass emissions using the protocols in part 75, and are
located in a State where EPA promulgates a FIP, should be able to
voluntarily opt in to the trading program. In today's notice, EPA
proposes providing these individual stationary sources the opportunity
to opt in to enable further cost savings from the Federal
NO_X Budget Trading Program. These opt-in provisions would be
very similar to the opt-in provisions allowed under the model trading
program in part 96 (see section VI.B.3.e of this FIP notice for further
explanation).
The NO_X allowances--each allowance representing a
limited authorization to emit one ton of NO_X--would be the
currency used in the trading program. A fixed number of NO_X
allowances would be allocated to sources for each ozone season equal to
the total amount of a State's trading program budget under the FIP. The
EPA has included in

[[Page 56407]]

today's proposal several alternative methodologies that EPA could use
to allocate NO_X allowances to units. Appendices A and B of
the section 126 rulemaking set forth the allocation for each unit based
on the first 2 of the 3 proposed methodologies, explained in section
VI.B.3.c.4 of this preamble. Allocations resulting from the third
methodology can be found in the docket to this rulemaking.
The control period for the trading program (i.e., the period during
which a source must hold sufficient NO_X allowances to cover
emissions) would extend from May 1 through September 30, which is the
same as the control period under the NO_X SIP call and the
section 126 proposal. The EPA's proposed trading program is based on
the application of a uniform control level to the covered universe of
sources. Based on analyses done in connection with the proposed
NO_X SIP call (63 FR 25921) and the final NO_X SIP
call, EPA maintains that trading could occur across States included in
a NO_X Budget Trading Program without restrictions, other
than the requirement to comply with emission limits under title I and
title IV of the CAA, as well as any other State limitations.
Under part 97 as proposed, sources in the Federal NO_X
Budget Trading Program would be required to monitor and report their
emissions in accordance with relevant portions of 40 CFR part 75. The
EPA has promulgated revisions to part 75 that establish NO_X
mass monitoring requirements and provide greater flexibility to
regulated sources. Consistent and accurate monitoring of emissions is
necessary for accountability regarding compliance with the requirement
to hold NO_X allowances and to ensure that a ton of emissions
attributed to one source in one State is equivalent to a ton attributed
to another source in the same or another State.
Under part 97 as proposed, EPA would be responsible for all aspects
of program implementation, with the exception of permitting. As further
explained in section VI.B.2.c., the State and local agencies would be
the permitting authorities for the majority of NO_X Budget
sources with title V permits, for which the trading program
requirements would be applicable requirements. If a source does not
have a federally enforceable permit, the requirements of the
NO_X Budget Trading Program rule would be federally
enforceable of its own accord.
As discussed herein, EPA proposes to make the Federal and State
NO_X Budget Trading Programs as similar as possible and has
modeled proposed part 97 after part 96 just finalized. The EPA notes
that discussion of the evolution of the NO_X Budget Trading
Program is set forth in the supplemental notice of the proposed
NO_X SIP call rule at 63 FR 25921-23 and in the final
NO_X SIP call rule.
2. Elements of the Federal NO_X Budget Trading Program That
Are the Same as the State NO_X Budget Trading Program
Under part 97, as proposed, the following sections would be
virtually identical to the corresponding sections in part 96, which
sets forth the State NO_X Budget Trading Program. The EPA
proposes to retain and rely on the analyses and considerations
undertaken in the NO_X SIP call process to determine these
program elements. Moreover, the provisions in part 97 would be numbered
in the same sequence as the corresponding provisions in part 96, so
that, for example, Sec. 97.2 and Sec. 96.2 or Sec. 97.81 and Sec. 96.81
would address the same subject matter. The major differences between
the part 97 sections listed below and their corresponding part 96
sections would be the renumbering of cross references to other
regulatory provisions so that a section in part 97 would reference the
appropriate section in that part, as opposed to the section in part 96.
More detailed information on the rationale for the part 96 provisions
themselves can be found in the preamble accompanying the proposed part
96 (63 FR 25917-43) and the final part 96.

Subpart A--Federal NO_X Budget Trading Program General
Provisions

Sec.
97.3 Measurements, abbreviations, and acronyms.
97.5 Retired unit exemption.
97.7 Computation of time.

Subpart B--Authorized Account Representative for NO_X Budget
Sources

97.10 Authorization and responsibilities of the NO_X
authorized account representative.
97.11 Alternate NO_X authorized account representative.
97.12 Changing the NO_X authorized account representative
and alternate NO_X authorized account representative;
changes in the owners and operators.
97.13 Account certificate of representation.
97.14 Objections concerning the NO_X authorized account
representative.

Subpart C--Permits

97.20 General NO_X Budget permit requirements.
97.21 Submission of NO_X Budget permit applications.
97.22 Information requirements for NO_X Budget permit
applications.
97.23 NO_X Budget permit contents.
97.24 Effective date of initial NO_X Budget permit.
97.25 NO_X Budget permit revisions.

Subpart D--Compliance Certification

97.30 Compliance certification report.

Subpart F--NO_X Allowance Tracking System

97.50 NO_X Allowance Tracking System accounts.
97.51 Establishment of accounts.
97.52 NO_X Allowance Tracking System responsibilities of
NO_X authorized account representative.
97.53 Recordation of NO_X allowance allocations.
97.54 Compliance.
97.55 Banking.
97.56 Account error.
97.57 Closing of general accounts.

Subpart G--NO_X Allowance Transfers

97.60 Scope and submission of NO_X allowance transfers.
97.61 EPA recordation.
97.62 Notification.

The EPA requests comment on whether any of the part 97 provisions
listed above should differ substantively from the corresponding
provisions in part 96. If a commenter believes substantive differences
in the rules are appropriate, the commenter should describe the favored
changes and explain why these changes are appropriate. The EPA is
proposing these part 97 provisions for the reasons set forth both in
the proposed NO_X SIP call and final NO_X SIP call
and in order to minimize differences between the Federal and State
NO_X Budget Trading Programs.
a. General Provisions. Under part 97, EPA is proposing to use the
same measurements, abbreviations, and acronyms, the same retired unit
exemption, and the same provisions for computation of time as those
that apply in part 96, with cross references to the appropriate
sections in part 97, rather than to sections in part 96 (63 FR 25923-
27).
b. Authorized Account Representative. The NO_X Authorized
Account Representative (NO_X AAR) is the individual who is
authorized to represent the owners and operators of each NO_X
budget unit at a NO_X budget source in matters pertaining to
the NO_X Budget Trading Program. Subpart B of part 97
addresses, among other things, the process for designating and changing
the NO_X AAR and the responsibilities of the NO_X
AAR and alternate NO_X AAR. These provisions are the same as
those in part 96, with cross references to the appropriate sections of
part 97 (63 FR 25927).
c. Permits. The regulations governing State permitting under title
V define an

[[Page 56408]]

``applicable requirement,'' which must be reflected in a title V
operating permit, as including ``[a]ny standard or other requirement
provided for in the applicable implementation plan approved or
promulgated by EPA through rulemaking under title I of the CAA that
implements the relevant requirements of the Act, including any
revisions to that plan promulgated in part 52 of this chapter'' (40 CFR
70.2). Since today's proposed rule is being promulgated under title I
(i.e., under section 110), the requirements of this rule would be
applicable requirements under Sec. 70.2 and would be reflected in the
title V operating permit of NO_X budget sources required to
have such a permit. The EPA believes that the majority of
NO_X budget sources will be required to have a title V
permit. Further, all State and local air permitting authorities
currently have EPA-approved title V operating permits programs. These
State and local agencies would be the permitting authorities for the
majority of NO_X budget sources with title V permits, for
which the trading program requirements would be applicable
requirements. For any sources that do not have a title V permit, such a
permit is not required. If a source does not have a federally
enforceable permit, the requirements of the Federal NO_X
Budget Trading Program rule would be federally enforceable of its own
accord.
Subpart C of part 97 addresses, among other things, the
administration of a permit, permit applications, permit contents,
effective date, and permit revisions. These provisions are the same as
those in part 96, with cross references to the appropriate sections in
part 97 (63 FR 25927-29).
d. Compliance Certification. The NO_X AAR must certify at
the end of each control period that the unit was in compliance with the
emissions limitation and other requirements of the Federal
NO_X Budget Trading Program. Proposed Sec. 97.30 sets forth
the same provisions for compliance certification reports as those in
part 96, with cross references to the appropriate sections in part 97
(63 FR 25929).
e. NO_X Allowance Tracking System. The NO_X
Allowance Tracking System is an automated system used to track
NO_X allowances held by NO_X budget units under the
NO_X Budget Trading Program, as well as those allowances held
by other organizations and individuals. Subpart F of part 97 addresses,
among other things, NO_X allowance tracking system accounts,
the account responsibilities of the NO_X AAR, the recordation
of NO_X allowance allocations, the compliance process,
account error, and account closing. These provisions are the same as
those in part 96, with cross references to the appropriate sections in
part 97 (63 FR 25933-37).
f. Banking. The EPA proposes to include banking as a feature in the
Federal NO_X Budget Trading Program for the reasons set forth
in the final NO_X SIP call. Proposed Sec. 97.55 sets forth
the same provisions for banking and the management of banked allowances
as specified in part 96. In accordance with these provisions,
NO_X allowances held by units subject to the Federal
NO_X Budget Trading Program may be banked for future use
starting in 2003 (except as noted in section VI.B.3.e.ii. of this
preamble). However, as in the State NO_X Budget Trading
Program, the Federal NO_X Budget Trading Program contains a
flow control mechanism to limit the variability associated with
banking. This mechanism allows unlimited banking by units subject to
the Federal NO_X Budget Trading Program, but discourages the
``excessive'' use of banked allowances by establishing a discount rate
on the use of banked allowances over a certain level. Proposed
Sec. 97.55 establishes a flow control mechanism which applies a 2-for-1
discount ratio to the use of banked allowances above a certain level
when the total number of banked allowances in the program exceeds 10
percent of the allowable NO_X emissions for all sources
covered by the Federal trading program (63 FR 25934-37).
g. NO_X Allowance Transfers. Subpart G of part 97
addresses, among other things, submission, recordation, and
notification of transfers of NO_X allowances under the
NO_X Budget Trading Program. These provisions are the same as
those in part 96, with cross references to the appropriate sections in
part 97 (63 FR 25937-38).
h. Audits. While program audits are not explicitly required by
today's rule, EPA intends to perform the same types of audits discussed
concerning the proposed NO_X SIP call (63 FR 25942) and the
final NO_X SIP call.
3. Elements of the Federal NO_X Budget Trading Program that
Differ from the State NO_X Budget Trading Program
The EPA proposes that the following sections in part 97 incorporate
certain differences from the corresponding sections in part 96 to
provide for Federal implementation of the NO_X Budget Trading
Program.

Subpart A--Federal NO_X Budget Trading Program General
Provisions

Sec.
97.1 Purpose.
97.2 Definitions.
97.4 Applicability.
97.6 Standard Requirements.

Subpart D--Compliance Certification

97.31 Administrator's action on compliance certifications.

Subpart E--NO_X Allowance Allocations

97.40 Trading program budget.
97.41 Timing requirements for NO_X allowance allocations.
97.42 NO_X allowance allocations.

Subpart H--Monitoring and Reporting

97.70 General requirements.
97.71 Initial certification and recertification procedures.
97.72 Out of control periods.
97.73 Notifications.
97.74 Recordkeeping and reporting.
97.75 Petitions.
97.76 Additional requirements to provide data for allocations
purposes.

Subpart I--Individual Unit Opt-Ins

97.80 Applicability.
97.81 General.
97.82 NO_X authorized account representative.
97.83 Applying for NO_X Budget opt-in permit.
97.84 Opt-in process.
97.85 NO_X Budget opt-in permit contents.
97.86 Withdrawal from NO_X Budget Trading Program.
97.87 Change in regulatory status.
97.88 NO_X allowance allocations to opt-in units.

a. General Provisions. Proposed Sec. 97.1 explains that proposed
part 97 sets forth the provisions for the Federal NO_X Budget
Trading Program addressing interstate transport of ozone and
NO_X. As discussed above, this program would be activated
either under section 126 or under a FIP.
For part 97, EPA is proposing to use the same definitions as those
that apply in part 96, with cross references to the appropriate
sections in part 97, with three exceptions. First, the definition of
the term ``NO_X Budget Trading Program'' would be altered to
reflect the fact that the Federal trading program is established
pursuant to part 52, as opposed to part 51.121, as is the case with the
State NO_X Budget Trading Program under part 96. Secondly,
the definition for the term ``State'' would be altered to reference
only those States that would be covered by any final section 126 or FIP
action, and to reflect the fact that the Federal trading program would
be promulgated for a State, as opposed to adopted by the State as is
the case with the State NO_X Budget Trading Program. Last,
the term ``State trading program budget'' would be replaced with the
term ``trading program budget.'' For purposes of the FIP, the trading
program budget would be the aggregated budget for all sources

[[Page 56409]]

affected by the requirements to participate in the trading program in a
given State under the FIP. For purposes of the section 126 action, the
trading program budget would be the ``126 trading program budget for
the State.'' The term ``126 trading program budget for the State'' is
used to clarify the fact that the budget for the Federal NO_X
Budget Trading Program is not aggregated to a State level for the
purposes of the section 126 action except for the allocation
calculation, since the focus in the remedy is sources rather than
States.
The following example illustrates the approach taken concerning the
unchanged definitions: the term ``NO_X Budget Unit'' is
defined under part 97 as ``a unit that is subject to the NO_X
Budget Trading Program emissions limitation under Sec. 97.4 and
Sec. 97.80,'' while that term has the same definition under part 96
except that appropriate sections in part 96 are referenced (63 FR
25923).
The EPA proposes in part 97 that the Federal NO_X Budget
Trading Program under the FIP would apply to any fossil fuel-fired unit
(boiler, combustion turbine, or combined cycle) that serves a generator
with a nameplate capacity greater than 25 MWe, and any fossil fuel-
fired unit (boiler, combustion turbine, or combined cycle) that has a
maximum design heat input of greater than 250 mmBtu/hr. This
applicability is identical to the core group applicability in the model
trading program for SIPs.
In the NO_X SIP call, EPA offered States the option of
allowing units with a very low federally enforceable permit limitation
(i.e., 25 tons per season) to be exempt from the trading program, even
though they were above the applicability threshold (63 FR 25926). The
EPA proposes in part 97 to include this provision in the Federal
NO_X Budget Trading Program and seeks comment on the
appropriateness of such inclusion.
Under the Federal NO_X Budget Trading Program, the
NO_X budget units and their owners, operators, and
NO_X AARs must meet certain standard requirements that
incorporate the full range of program requirements by referencing other
sections of the Federal NO_X Budget Trading Program rule.
These provisions are the same as the related provisions in part 96,
with cross references to the appropriate sections of part 97, except
that the Administrator, rather than the permitting authority, would
allocate NO_X allowances under the Federal NO_X
Budget Trading Program. This reflects the fact that the Federal
NO_X Budget Trading Program would be federally run, rather
than run by the State as under the NO_X SIP call.
b. Compliance Certification. Proposed Sec. 97.31 is the same as
Sec. 96.31 except that the Administrator has the sole responsibility
for reviewing and auditing compliance certifications and other
submissions under the Federal NO_X Budget Trading Program.
This reflects the fact that the part 97 program would be federally run
rather than run by the State as under the NO_X SIP call. The
EPA is proposing these part 97 provisions for the reasons set forth
both in the proposed NO_X SIP call (63 FR 25929) and the
final NO_X SIP call and in order to minimize differences
between the Federal and State NO_X Budget Trading Programs.
c. Aggregate NO_X Emissions Levels and Allowance
Allocations. This section discusses the calculation of State-specific
aggregate emission levels and the methodology and timing for issuance
of NO_X budget unit allocations.
1. State-by-State Emissions Levels. The EPA calculated the State
specific aggregate emission levels that would remain after the
application of reasonable and highly cost-effective NO_X
controls to upwind sources which contribute significantly to
nonattainment or maintenance problems in downwind States. The level of
control that was determined to be reasonable and cost effective is
identical to the level used in the NO_X SIP call for purposes
of calculating the State budgets. The determination of reasonable and
highly cost-effective NO_X controls for the source categories
covered by the trading program is discussed more fully in the
NO_X SIP call.
For reasons explained in the final NO_X SIP call, EPA has
calculated each State's summer season large EGU emissions level using a
specific NO_X emission rate and the projected summer season
utilization of the year 2007. Specifically, EPA calculated each State's
large EGU NO_X emissions level by multiplying: Each State's
summer activity level in mmBtu (EPA selected the higher of each State's
overall 1995 or 1996 summer utilization), by each State's projected
growth between 1996 and 2007 (using the IPM model), by a NO_X
rate of 0.15 lb/mmBtu. The resulting figure, in lbs, was divided by
2000 (lbs per ton) to determine tons.
The EPA incorporated growth in industrial activity when determining
the large EGU emissions level, and thus accommodates new sources into
the FIP. Specifically, EPA projected each State's change in utilization
from current levels to the year 2007 and set an emissions level based
on that future year's utilization. This was the approach taken in the
final NO_X SIP call in determining various State emissions
levels.
For reasons also explained in the final NO_X SIP call,
EPA is proposing to calculate each State's summer season large non-EGU
emissions level by reducing each State's uncontrolled non-EGU
NO_X emissions levels (in tons) by 60 percent and assuming
growth through the year 2007. Appendix C of the section 126 rulemaking
includes the State aggregate emission levels for both EGUs and non-
EGUs.
2. Development of State trading program budget. Proposed Sec. 97.40
provides that the trading program budget in each State would equal the
sum of the aggregate emission levels for large EGUs and large non-EGUs
in each State, calculated as discussed in section VI.B.3.c.1 of this
preamble and listed in Appendix C of the section 126 rulemaking. In the
Federal NO_X Budget Trading Program being proposed under the
part 97, NO_X ``emission limitations'' take the form of
NO_X ``allowance allocations'' and are assigned based on the
aggregate emission levels for the subcategories in the trading program.
The approach to issuing allocations under part 97 is similar to that
under the NO_X SIP call, with the exception that under
Sec. 96.40, the State permitting authority, rather than the
Administrator, determines, through the SIP, the total amount of
allowable NO_X emissions apportioned to NO_X budget
units.
3. Timing Provisions. Proposed Sec. 97.41 sets forth the provisions
for when the Administrator will issue allocations of NO_X
allowances to NO_X budget units. Under the Federal trading
program, the Administrator (rather than the State permitting authority)
determines the NO_X allowance allocations and records them in
the NO_X Allowance Tracking System. Thus, proposed Sec. 97.41
does not provide, or set deadlines, for the permitting authority's
submission of allocations to EPA. However, as discussed in the final
NO_X SIP call, EPA believes it is important to issue the
allocations at least a couple years into the future to provide some
predictability for sources in their control planning and to build
confidence in the market. Therefore, under part 97, the Administrator
will issue NO_X allowances in EPA's NO_X Allowance
Tracking System (NATS) by April 1 of every year for the control period
that is 3 years later. For example, EPA would issue the allocations for
the 2003 control period by April 1, 2000 and EPA would issue the
allocations for the 2004 control period by April 1, 2001; thus, the
allocations are always known 3 years in advance. These

[[Page 56410]]

provisions are consistent with the minimum timing requirements
specified in the final NO_X SIP call rulemaking.
As stated in the previous paragraph, EPA will issue allocations in
the NATS on an annual basis 3 years prior to the relevant control
period. However, EPA proposes to use the same allocations for the first
3 years of the program (based upon one of the proposed methodologies
described below), unless a State replaces the FIP with its own
allocations in an approved SIP. The EPA proposes constant allocations
for the first three control periods to provide more consistency and
certainty and to build market confidence during the start-up phase of
the program. Therefore, while the Agency will not record the
allocations in unit accounts until April 1 of the year 3 years
preceding each relevant control period, the allocations for 2004 and
2005 will be the same as the allocations for the 2003 control period.
However, if a State, as part of an approved SIP, submits allocations
for the 2004 control period to EPA prior to April 1, 2001, or for the
2005 control period prior to April 1, 2002, the State's allocations
will replace the allocations EPA planned to issue for the relevant
control season. By issuing allocations into accounts 1 year at a time,
EPA is providing States the ability to replace a FIP with an approved
SIP while still ensuring that sources receive allocations at least 3
years prior to the relevant control season.
After the initial 3 year period, EPA may update its allocations on
an annual basis 3 years prior to the relevant control season. As
discussed in the final NO_X SIP call, updating allocations on
an annual basis (3 years ahead) is intended to allow the allocation
system to accommodate changes in market conditions.
4. NO_X Allowance Allocation Methodology. The EPA
proposes that part 97 include the methodology that the Administrator
will use for allocating NO_X allowances to NO_X
budget units. While, in part 96, the Agency lays out an optional
allocation methodology that may be used by a State permitting authority
for issuing allocations, part 97 will prescribe the methodology that
the Administrator would use.
a EGUs. The EPA requests comment on three separate methodologies
that the Administrator could use for the initial allocation period (the
control periods in 2003 through 2005) for EGUs. In whichever of these
methodologies the Agency finalizes, the total number of allowances
issued would equal the portion of the trading program budget in the
State attributed to large EGUs (calculated as described in section
VI.B.3.c.1. of this preamble by multiplying a specified emission rate
by a State's summer activity level projected to 2007). The first option
is to allocate allowances based on the product of an emission rate in
pounds of NO_X/mmBtu and the mmBtus of energy utilized for
all units in the Federal NO_X Budget Trading Program; the
proposed part 97 describes this approach. The second option is to
allocate allowances to fossil fuel-fired EGUs in the Federal
NO_X Budget Trading Program based on the product of an
emission rate in pounds of NO_X/kwh and the kwh of
electricity generated. A third option considered by EPA would allocate
allowances to all large EGUs, regardless of fuel type, in the States
affected by the FIP rulemaking based on their electricity generated.
For the second and third options, EPA would use a surrogate for
electricity generation data where electricity generation data are not
available. The EPA solicits comment on these three methodologies.
With regard to the allocation methodology to be used by the
Administrator for the control periods starting in 2006, EPA requests
comment on the same three general methodologies mentioned in the
previous paragraph. To facilitate the use of the second and third
approaches for the control periods in 2006 and thereafter, EPA proposes
to work with stakeholders to design a system based on electricity
generation that could be used after the initial allocation period. The
EPA plans to propose an allocation system based on electricity
generation in 1999 and finalize the approach in 2000. Appropriate data
could then be measured and collected at NO_X budget units
during the control periods in the years 2001 and 2002. When it becomes
available, this approach could be incorporated into part 97 if the
Agency decides to allocate allowances based on electricity generation.
For whichever of these three allocation methods the Agency selects,
EPA proposes to use the average of the data for the two highest control
periods for the years 1995, 1996, and 1997 in determining an EGU's
allocation for the control periods in 2003, 2004, and 2005. This
approach using data from 1995, 1996, and 1997 differs slightly from the
way the aggregate emission level was calculated for the EGU
subcategory. As explained in section VI.B.3.c.1. of this preamble, EPA
calculated the aggregate emission level based upon the greater of the
State heat input data from 1995 or 1996. However, the Agency believes
it is useful to base the first 3 years of allocations to individual
units on operating data reflecting the average of the highest of 2 out
of the 3 most recent years. In this way, the initial allocations better
represent the operation of particular units.
Once several years of allocations have been built into the system,
the Agency believes it is possible to move to an annually updating
allocation system that calculates allocations based on operating data
from a single year. Using data from a single year as a basis for
allocations enables the Agency to develop an updating allocation system
that can reflect changes in utilization or electricity generation. By
this time, the trading market should be more established and companies
will have several years of experience with the program. Therefore,
companies will better be able to accommodate variations in single year
allocations through the trading market and company-wide compliance
strategies. Thus, after the initial period of allocations, EPA would
use data measured during the control period of the year that is 4 years
before the year for which allocations are being calculated.
Furthermore, for reasons discussed in the final NO_X SIP
call, EPA proposes in part 97 the establishment of an allocation set-
aside account, to be used in whichever allocation methodology EPA
adopts, equaling 5 percent of the State trading program budget in 2003,
2004, and 2005 for new units (units that commence operation during or
after the period on which general NO_X allowance allocations
are based) and 2 percent of the trading program budget in the State in
the subsequent years. The Agency believes that if a new source set-
aside is employed, it should be large enough to provide allocations to
all new units entering the Federal trading program. Based on analyses
EPA conducted using the Integrated Planning Model (IPM) and on the
Agency's proposal to reallocate by April 1, 2003 for the control period
in 2006, 5 percent appears to be a reasonable portion of NO_X
allowances to set-aside for new units in the initial 3 years of the
program and 2 percent for the subsequent years.
However, while 5 percent (and 2 percent) may be an appropriate
regionwide average, an individual State may experience either more or
less growth in new sources during the relevant time period. The EPA
calculated the State-specific aggregate emission levels for each
subcategory using State-specific growth rates (see rulemaking docket).
Therefore, EPA solicits comment on using State-specific growth rates to
determine the appropriate size of a State new source

[[Page 56411]]

set-aside. Additionally, the 5 percent (and 2 percent) numbers were
calculated based upon estimated growth in utilization by new sources
and, therefore, may be more appropriate when the first proposed
allocation methodology is employed. The EPA solicits comment on the use
of a different percentage for the set-aside if the Agency adopts an
electricity generation-based allocation system.
Using each of the three allocation methodologies on which EPA
solicits comment, the Agency has calculated unit specific allocations.
The allocations for each unit, based on the first two proposed
methodologies, are in Appendices A and B of part 97. The allocations
resulting from the third methodology can be found in the docket to this
rulemaking. The EPA is providing these unit specific allocations to
solicit comment on the underlying data used in these allocations and
the methodologies employed in determining the allocations. The Agency
will select and describe a set of allocations in the final notice. The
EPA would issue the finalized set of the 2003 control period
allocations in the NATS by April 1, 2000 for those units that are
subject to a FIP.
For the first allocation approach in part 97, EPA determined
initial unadjusted allocations to existing electric generating
NO_X budget units by multiplying a NO_X emission
rate of 0.15 lb/mmBtu by the units' historical heat input calculated by
taking the average of the heat input for the two highest control
periods for the years 1995, 1996, and 1997. The Agency used the heat
input data reported to EPA in quarterly reports during the ozone season
for utilities affected under the Acid Rain Program. For non-utility
electricity generators, EPA used heat input information reported to
Energy Information Administration (EIA) on EIA Form 867.
After determining the initial unadjusted unit allocations, EPA
adjusted the allocation for each unit upward or downward to match the
portion of the trading program budget in the State attributed to large
EGUs. Then, the Agency adjusted the allocation for each unit in the
State proportionately so that the total allocations equaled 95 percent
of the portion of the trading program budget in the State attributed to
large EGUs. This created a new source set-aside of 5 percent.
For the second allocation approach, EPA multiplied the unit heat
input in mmBtu and the generator heat rate ² associated with
the generation for that unit, in Btu/kWh, to determine each unit's
associated historical electrical generation in kWh.³ For
non-utility electricity generators, EPA used heat input from OTAG's
database (1995 data) and the average heat rate values found below in
Table 1. The Agency used this indirect approach to calculate electrical
output because EPA did not have access to unit-specific generation data
for non-utility electricity generators. The EPA used average heat rate
values for generators for which heat rates were not publicly available,
as shown in the table below.
---------------------------------------------------------------------------

\2\ Utilities report their generator-specific heat rates to EIA
on EIA Form 860.
\3\ The EPA used the average generation for the ozone season
during the highest two of the years from 1995 through 1997, similar
to the approach with heat input.

Table 1.--Average Utility Generator Heat Rates
------------------------------------------------------------------------
Generator size Average heat
Unit and fuel type (MW) rate (Btu/kWh)
------------------------------------------------------------------------
Combustion Turbine (gas or No. 2 fuel
oil/diesel)............................ 50
>50 14,250
13,200
Combined Cycle Turbine (gas or No. 2
fuel oil/diesel)....................... 100
>100 11,100
8,500
Oil- or Gas-fired Steam Boiler.......... 400
1>400 10,600
10,000
Coal-fired Boiler....................... 500
>500 10,400
9,800
------------------------------------------------------------------------

Some units are cogenerators, which are electrical generators that
divert part of their steam to provide steam output, rather than to
generate electricity. The Agency calculated output from cogenerating
units as described in the previous paragraph. That approach assumes
that heat input is converted into electricity at a particular
efficiency. The EPA's proposed approach does not account for the fact
that steam generation is generally more efficient than electricity
generation. The EPA encourages commenters to provide the Agency
electrical output data and steam output data to determine the
efficiency of cogenerating units.
To determine the individual unit allocations, EPA determined the
total electricity generation from all affected EGUs within each State,
as estimated in the previous paragraphs, and calculated each unit's
share of the total State electricity generation. Each unit was then
assigned an allocation based upon its share of electricity generation.
For example, if the Agency calculated that a unit contributed 0.4
percent of a State's total electricity generation, then it would
receive 0.4 percent of the trading program budget in the State
attributed to large fossil-fuel-fired EGUs. After determining the
initial unadjusted allocation, the Agency adjusted the allocation for
each unit proportionately so that the total allocation equaled 95
percent of the portion of the trading program budget in the State
attributed to large fossil-fuel-fired EGUs (to create the new source
set-aside).
The EPA is also proposing a third allocation approach which would
provide allowances to all electricity generators in the 23-jurisdiction
region regardless of the energy source. For fossil fuel-fired power
plants, EPA used the approach described above in determining the
electrical generation from individual combustion units. For nuclear
power plants and hydroelectric plants, EPA used electrical generation
reported by utilities to EIA on EIA Form 759. The Agency was unable to
find data for all plants. The Agency solicits comment on these methods
for determining electricity generation data. The EPA also requests
comment on the data and solicits any additional information for the
plants for which EPA has not found data.
The Agency determined the initial unadjusted allocations in the
same manner as described for the electricity generation-based
allocations to fossil-fuel-fired units only. That is, the Agency
determined the total electricity generation within each State,
calculated each unit's share of the total electricity generation, and
calculated an allocation

[[Page 56412]]

based upon that share of the trading program budget in the State
attributed to large EGUs. The Agency then adjusted the allocation for
each unit proportionately so that the total allocation equaled 95
percent of the portion of the trading program budget in the State
attributed to large EGUs.
For each of these three allocation methodologies, the Agency
solicits comment on the data used to determine the allocations.
Electricity generators, and utilities in particular, already report
many of these data to Federal or State government agencies. The
necessary data and their sources include:
For each plant:

--Plant name as reported to U.S. EPA and EIA; if not currently
reporting to Federal government, then as reported to the State
environmental agency
--ORISPL number, if available (or other unique identification number
for the plant, if no ORISPL number exists) as reported to U.S. EPA and
EIA; if not currently reporting to Federal government, then as reported
to the State environmental agency
--State postal abbreviation and county FIPS code as reported to U.S.
EPA and EIA; if not currently reporting to Federal government, then as
reported to the State environmental agency
--Monitoring locations at the plant (e.g., stacks or fuel pipes where
monitoring equipment would be located) for existing monitoring
equipment, as reported to U.S. EPA, or to the State environmental
agency.

For each unit (boiler or combustion turbine) at the plant:

--An identification designation (e.g., 1, CT2) as reported to U.S. EPA
and EIA; if not currently reporting to Federal government, then as
reported to the State environmental agency
--A description of each unit (e.g., combustion turbine, coal-fired wet-
bottom boiler) as reported to U.S. EPA and EIA; if not currently
reporting to Federal government, then as reported to the State
environmental agency or State utility commission
--Fuel or energy source used as reported to the EIA or to the State
utility commission
--Heat input (mmBtu) in May 1 through September 30 of 1995, 1996 and
1997 as reported to U.S. EPA and EIA;
--Estimated historical NO_X mass emissions in May 1 through
September 30 of 1995, 1996 and 1997 (as reported to the U.S. EPA or the
State environmental agency).

For each electrical generator at the plant:

--Generation identification designation as reported to U.S. EPA and
EIA; if not currently reporting to Federal government, then as reported
to the State utility commission
--Nameplate capacity in MWe as reported to U.S. EPA and EIA; if not
currently reporting to Federal government, then as reported to the
State utility commission
--Electrical generation (MWh)in May 1 through September 30 of 1995,
1996 and 1997 as reported to EIA.
For each steam turbine at the plant that is used to
generate steam output instead or in addition to electricity:

--An identification designation
--Capacity, in mmBtu/hr output rate
--Steam output (mmBtu) (not used for electrical generation) in May 1
through September 30 of 1995, 1996 and 1997.

The Agency believes these data are needed both to determine the
output of each source and to establish a unique identity for each
source and its units. The EPA requests comment on the specific data as
well as the type of data supporting the proposed allocations under part
97.
b Non-EGUs. For any allocation methodology adopted, the total
number of allocations issued to non-EGUs would equal the portion (less
the 5 percent set-aside discussed below) of the trading program budget
in the State attributed to large non-EGUs (calculated as described in
section VI.B.3.c.1. of this preamble by reducing each State's
uncontrolled non-EGU NO_X emissions level by 60 percent and
assuming activity growth through 2007). At this time, the Agency
proposes in part 97 to use heat input as the basis for determining
allocations for large non-EGUs in the Federal NO_X Budget
Trading Program. The EPA proposes this basis for both the initial
allocation period of 2003 through 2005 and for subsequent years of the
program. This differs from the method used to determine the aggregate
emission level for non-EGUs (a percentage reduction from historical
emissions) because at the time the aggregate level was determined
(during the NO_X SIP call proposal process), heat input data
for individual units were not available. Distributing allocations on a
heat-input basis provides a fuel-neutral method of allocating to the
units in the trading program similar to the allocation approaches
proposed for the EGUs. Heat-input-based allocations also allow for
reallocating in the future (to accommodate new units) whereas
allocations based upon a specific percentage reduction do not. Heat
input data are now available for use in developing allocations, and the
Agency solicits comment on the data as well as the use of heat input in
developing allocations.
At this time, the Agency is not aware of any databases on steam
output information for industrial boilers. Therefore, for combustion
sources other than electrical generators, EPA finds that it is most
appropriate to base allocations upon heat input. However, EPA requests
comment on any methods for distributing allowances on an output basis
to non-EGUs. Comments should address the availability, quality, and
appropriateness of the data for regulatory purposes and/or methods to
obtain such data.
For the non-EGUs subject to the Federal trading program, EPA
proposes in part 97 to use 1995 heat input data in the allocation
calculation for the control periods in 2003, 2004, and 2005; 1995 data
are the most recent data the Agency knows are currently available for
non-EGUs. After this initial period of allocations, as with the EGUs,
the Agency will use data measured during the control period of the
year, that is, 4 years before the year for which allocations are being
calculated.
As was done for EGUs, the Agency has calculated unit specific
allocations for large non-EGUs. These unit specific allocations are
provided in Appendices A and B of part 97. The EPA solicits comment on
the underlying data used in these allocations and the methodology
employed in determining the allocations. The EPA will determine the
final allocations for the control period in 2003 and place them in the
NATS by April 1, 2000 for those units that are subject to a FIP.
For the non-EGU allocations proposed in today's notice, EPA
determined initial unadjusted allocations to existing non-electric
generating NO_X budget units by multiplying a NO_X
emission rate of 0.17 lb/mmBtu (the average emission rate for existing
non-electricity generating budget units after controls are in place) by
the units' historical heat input (described above as 1995 control
season data).
After determining the initial unadjusted unit allocations, EPA
adjusted the allocation for each unit upward or downward to match the
portion of the trading program budget in the State attributed to large
non-EGUs. Then, the Agency adjusted the allocation for each unit in the
State proportionately so that the total allocations equaled 95 percent
of the portion of the trading program budget in the State attributed to
large non-EGUs.
The Agency proposes in part 97 to set-aside 5 percent of the non-
EGU allocations to be consistent with the

[[Page 56413]]

allocation for EGUs. The EPA solicits comment on this approach and the
proposed size of the set-aside.
c. Treatment of New Sources. As discussed in previous sections, the
Agency has proposed in part 97 a set-aside for new sources consistent
with the provisions of part 96. New EGUs and non-EGUs required to
participate in the Federal NO_X Budget Trading Program will
have access to this set-aside. In 2003, 2004, and 2005, each State set-
aside would initially hold NO_X allowances equal to 5 percent
of the NO_X allowances in the trading program budget in the
State. Starting in 2006, each State set-aside would originally hold 2
percent of the NO_X allowances in the trading program budget
in the State. At the end of each relevant control period, EPA will
return any allowances remaining in the account on a pro-rata basis to
the units that had received an original allocation that had been
adjusted to create the new source set-aside in the State.
The NO_X allowances in the allocation set-aside would be
available to any unit that would otherwise be eligible for an
allocation in a control period but did not receive one because the unit
commenced operation during or after the period on which the
NO_X allowance allocations for existing units were based. To
receive NO_X allowances from the allocation set-aside, the
NO_X Authorized Account Representative for a unit would
submit a NO_X allowance request to the Administrator. The
request could be for no more than 5 consecutive control periods,
starting with the control period during which the unit is projected to
commence operation and ending with the control period preceding the
control period for which it has sufficient data to receive an
allocation with existing budget units. For the 6th year or later (and
possibly earlier), there would be sufficient operating data for the
unit to be incorporated into the NO_X allowance allocations
with existing budget units. The NO_X allowance request would
need to be submitted prior to May 1 of the first control period for
which NO_X allowances are requested and after the date on
which the State issues a permit to construct the new unit.
Consistent with part 96, the allowances would be issued to new
units on a first-come, first-served basis. For the first allocation
approach proposed for EGUs, allowances to new electric generation units
would be issued at a rate of 0.15 lb/mmBtu multiplied by the unit's
maximum design heat input. Following each control period, the unit
would be subject to a reduced utilization calculation. The EPA would
deduct NO_X allowances following each control period based on
the unit's actual utilization. Because the allocation for a new unit
from the set-aside is based on maximum design heat input, this
procedure adjusts the allocation by actual heat input for the control
period of the allocation. This adjustment is a surrogate for the use of
actual utilization in a prior baseline period which is the approach
used for allocating NO_X allowances to existing units.
For new non-EGUs, allowances would be issued at the average
emission rate (e.g., .17 lbs/mmBtu) for existing budget units (after
controls are in place) multiplied by the budget unit's maximum design
heat input. Following each control period, the source would be subject
to a reduced utilization calculation similar to that described above
for EGUs.
For the second and third allocation approaches proposed for EGUs,
allowances to new EGUs would be issued at the average emission rate (in
lbs/kwh) for existing budget units (after controls are put in place)
multiplied by the maximum design electrical generation derived from
operation of the new budget unit. Following each control period, the
budget unit would be subject to a reduced utilization calculation
similar to that described above under the first approach.
d. Compliance Supplement Pool. This notice proposes to establish
Federal emissions limits for sources found to significantly contribute
to ozone nonattainment problems in a petitioning State. These sources
would be required to comply with the emissions limits by May 1, 2003.
As discussed in the final NO_X SIP call and the technical
support document ``Feasibility of Installing NO_X Control
Technologies By May 2003,'' EPA believes that this compliance date is a
feasible and reasonable deadline. However, EPA received comments for
the NO_X SIP call expressing concern that some sources may
encounter unexpected problems installing controls by this deadline
that, in turn, could cause unacceptable risk for a source and its
associated industry. Commenters explicitly expressed concern related to
the electricity industry, stating that the deadline could adversely
impact the reliability of the electricity supply.
In the NO_X SIP call, EPA addressed these compliance
concerns by providing additional flexibility for sources to comply with
the requirements. The EPA is proposing that similar flexibility
mechanisms be provided in part 97. First, EPA is proposing that part 97
include banking provisions as discussed in section III.B.2.h. Second,
EPA is proposing that part 97 include a compliance supplement pool that
may be used by sources to cover excess emissions during the 2003 and
2004 ozone seasons that are unable to meet the compliance deadline. The
proposed part 97 includes a separate compliance supplement pool that
would be available to the sources in each State identified in this
proposal.
1. Size of the Compliance Supplement Pool. The EPA proposes to use
the same compliance supplement pools on a State-by-State basis as were
included in the final NO_X SIP call. The justification for
the size of the State pools is included in the final NO_X SIP
call. Table 2 shows the compliance supplement pool that would be
available to sources in each State identified in this proposal.

Table 2.--Compliance Supplement Pools
[Tons of NOX]
------------------------------------------------------------------------
Compliance
State supplement
pool
------------------------------------------------------------------------
Alabama.................................................... 10,361
Connecticut................................................ 559
Delaware................................................... 417
District of Columbia....................................... 0
Georgia.................................................... 10,919
Illinois................................................... 17,455
Indiana.................................................... 19,738
Kentucky................................................... 13,018
Maryland................................................... 3,662
Massachusetts.............................................. 285
Michigan................................................... 15,359
Missouri................................................... 10,469
New Jersey................................................. 1,722
New York................................................... 1,831
North Carolina............................................. 10,624
Ohio....................................................... 22,947
Pennsylvania............................................... 13,716
Rhode Island............................................... 0
South Carolina............................................. 5,062
Tennessee.................................................. 12,093
Virginia................................................... 6,108
West Virginia.............................................. 16,937
Wisconsin.................................................. 6,717
------------------------------------------------------------------------

2. Distribution of the Compliance Supplement Pool to Sources. In
the final NO_X SIP call, EPA provides States with two options
for distributing the pool to sources. One option is for a State to
distribute some or all of the pool to sources that generate early
reductions during ozone seasons prior to May 1, 2003. The second option
is for a State to run a public process to provide tons to sources that
demonstrate a need for a compliance extension. Tons that are not
distributed by a State prior to May 1, 2003 will be retired by EPA. A
State wishing to use the compliance supplement pool under the
NO_X SIP call may divide the pool and make some of

[[Page 56414]]

it available to sources through both options, or may use only one of
the options for distributing the pool to sources prior to May 1, 2003.
Based on these options, EPA is soliciting comment on a number of
approaches for distributing the pool to sources under part 97.
First, EPA solicits comment as to whether the compliance supplement
pool should be distributed by EPA to sources or distributed by EPA to
the States that have sources included in this proposal. If the pools
were distributed to States, the States would then be able to distribute
the pool to sources. Part 97 is primarily designed to be implemented
and administered directly by EPA. For this reason, it may be most
efficient for EPA to retain the responsibility of distributing the pool
to sources. However, it may be possible to provide more flexibility in
the use of the pool for different sources if States were provided the
distribution responsibility.
Second, provided that EPA decides to retain the responsibility of
distributing the pool to sources, EPA solicits comment on two options
for distribution. First, EPA solicits comment on distributing the
compliance supplement pool only for early reductions. Under this
option, the Agency would distribute allowances from the compliance
supplement pool based upon the optional methodology the Agency laid out
in the final NO_X SIP call. Using that methodology, the
Agency could issue early reduction credits for the 2001 and 2002 ozone
season to units that have installed part 75 monitoring by the 2000
control season, have reduced their emission rate in 2001 or 2002
relative to their rate in 2000 by at least 20 percent, and are
operating in the year(s) in which they are applying for early reduction
credits at an emission rate below .25 lb/mmBtu. Provided it meets all
of these criteria, a unit could request early reduction credits equal
to the difference between .25 lb/mmBtu and the unit's actual emissions
rate multiplied by the unit's actual heat input for the applicable
control period. The Agency laid out the reasons for adopting each of
these criteria for early reduction credits in the final NO_X
SIP call. Part 97 currently describes this option.
Under this option, if the tons of NO_X in the State's
compliance supplement pool exceed the number of valid early reduction
credit requests in that State, the Agency would issue one allowance for
each ton of early reduction credit requested. Any allowances remaining
in the compliance supplement pool after all valid requests have been
granted would be retired by the Agency. If, however, the amount of
valid requests are more than the size of the State's pool, the Agency
would reduce the amount in the credit requests on a pro-rata basis so
that the requests equal the size of the State's pool. After the
requests have been reduced, the Agency would then issue allowances
based on the remaining size of each credit request.
With this option, sources in States in the Ozone Transport
Commission (OTC) that are subject to this rulemaking would be allowed
to bring their banked allowances into the Federal NO_X Budget
Trading Program as early reduction credits provided the sum of the
banked allowances in any State does not exceed the size of the State's
compliance supplement pool. As is the case under this option for States
outside of the OTC, any remaining credits in the compliance supplement
pool would be retired. If the NO_X budget units in an OTC
State hold banked allowances from the OTC program in excess of the
amount of credits in the State's pool, the Agency would reduce the
amount of allowances eligible for early reduction credit on a pro-rata
basis.
The Agency solicits comment on the methodology for issuing early
reduction credits in this option as well as the approach that limits
the use of the compliance supplement pool for early reduction credits.
Specifically, the Agency solicits comment on alternative methods for
calculating early reduction credits. In addition, EPA solicits comment
on the approach specified for integration with the OTC program.
The Agency also solicits comment on a second option for
distribution of the compliance supplement pool. Under this second
option, the Agency proposes that a portion of the compliance supplement
pool be given out as early reduction credits and the remaining portion
be reserved for sources that demonstrate a need for the compliance
supplement. As described in the preamble to the final NO_X
SIP call, sources would be responsible for demonstrating to the Agency
and the public that achieving compliance by May 1, 2003 would create
undue risk either to its own operation or associated industry. The
administrator of the compliance supplement pool would provide the
public an opportunity to comment on the validity of the need for this
``direct distribution'' of the compliance supplement.
Under this option, the Agency would grant early reduction credits
using the method described in the first option (or some variation of
that approach) before allowing sources access to the direct
distribution credits from the compliance supplement pool. The Agency
proposes to address OTC banked allowances held by sources subject to
this rulemaking as suggested in the first option. To ensure that the
compliance supplement is only provided to sources that truly need a
compliance extension, the remaining credits in the compliance
supplement pool would be given out to an owner or operator of a source
that demonstrates the following:

The process of achieving compliance by May 1, 2003
would create undue risk for the source or its associated industry.
For electric generating units, the demonstration should show that
installing controls would create unacceptable risks for the
reliability of the electricity supply during the time of
installation. This demonstration would include a showing that it was
not feasible to import electricity from other systems during the
time of installation. Non-electric generating sources may also be
eligible for the compliance supplement based on a demonstration of
risk comparable to that described for the electricity industry.
It was not possible to compensate for delayed
compliance by generating early reduction credits at the source or by
acquiring credits generated by other sources.
It was not possible to acquire allowances or credits
for the 2003 ozone season from sources that will make reductions
beyond required levels during the 2003 ozone season.

The Agency solicits comment on this option that distributes the
compliance supplement pool both through early reduction credits as well
as direct distribution. Specifically, the Agency requests comment on
the number of credits to reserve for direct distribution, the
methodology used for direct distribution, and options for public review
of the direct distribution. The Agency also solicits comment on the
appropriate administrator of the direct distribution.
Under any of the options described above, the Agency proposes that
NO_X allowances issued from the compliance supplement pool
would only be available for sources to use for compliance in the 2003
or 2004 control periods. Any NO_X allowances issued from the
compliance supplement pool that is not used for compliance in 2003,
would be considered to be ``banked'' for the 2004 control period. The
Agency proposes to retire any NO_X allowance issued from the
compliance supplement pool that is not used in either the 2003 or 2004
control period at the end of the 2004 true-up period for the reasons
cited in the preamble to the final NO_X SIP call.
e. Emissions Monitoring and Reporting. Subpart H of part 97
addresses monitoring and reporting requirements including, among other
things, general requirements, initial

[[Page 56415]]

certification and recertification procedures, out of control periods,
notifications, recordkeeping and reporting, and petitions. These
provisions are essentially the same as the monitoring-related
provisions of part 96, with cross references to the appropriate
sections of part 97. The differences between the provisions reflect the
fact that administration of the monitoring requirements is overseen by
EPA, rather than by EPA and the permitting authority in the model state
trading program. As a result, for example, monitoring certification
applications are submitted to the Administrator and the appropriate EPA
Regional Office in addition to the permitting authority, and the
Administrator, not the permitting authority, will act on the
applications. Further, the Administrator handles all audit
decertifications and all petitions for alternatives to the monitoring
requirements.
Another difference is that in the State NO_X Budget
Trading Program, EPA included heat input monitoring requirements that
States might choose to adopt if they were basing their allocation
methodologies on heat input. The proposed Federal NO_X Budget
Trading Program bases its allocation approach on heat input. Therefore,
EPA has included the heat input monitoring and reporting requirements
in proposed part 97. Note that as explained in section III.3.c.5 of the
section 126 proposal, EPA is taking comment on three different
allocation methodologies. Depending on the methodology chosen,
monitoring and reporting requirements would vary.
The EPA is proposing these part 97 provisions for the reasons set
forth both in the proposed NO_X SIP call (63 FR 25938-40) and
the final NO_X SIP call and in order to minimize differences
between the Federal and State NO_X Budget Trading Programs.
In particular, for the reasons set forth in the NO_X SIP
call, EPA proposes that NO_X budget units be required to meet
the monitoring and reporting requirements in a new subpart H of 40 CFR
part 75, the Acid Rain Program regulations (63 FR 25938-40). The EPA
has promulgated these revisions to part 75 to establish NO_X
mass monitoring requirements and provide greater flexibility to
regulated sources in conjunction with the final NO_X SIP call
rule.
f. Opt-Ins. Subpart I of part 97 addresses the opt-in process and
procedures applicable to operating units that are not NO_X
budget units under Sec. 97.4, but are located in a State that is
included in the Federal NO_X Budget Trading Program and wish
to voluntarily enter (i.e., opt-in to) the trading program. The opt-in
provisions can further reduce the cost of achieving NO_X
reductions by allowing these units to join the NO_X Budget
Trading Program and make incremental, lower cost reductions, freeing
NO_X allowances for use by other NO_X budget units.
There are potentially individual sources not included in the trading
program that may emit significant amounts of NO_X and are
able to achieve cost-effective reductions; allowing these sources to
join the program would reduce the overall cost of compliance for the
program. The EPA proposes in subpart I to allow individual combustion
sources that vent to a stack the opportunity to opt-in to the program
for purposes of the FIP. The EPA solicits comment on the
appropriateness of these opt-in provisions.
Subpart I addresses, among other things, the applicability
requirements, allocations, procedures for applying for a NO_X
budget opt-in permit, the process of reviewing and approving or denying
the permit, contents of the permit, procedures for withdrawing as a
NO_X budget opt-in source, and changes in regulatory status.
The provisions of this subpart are similar to the opt-in provisions in
part 96, with cross references to the appropriate sections in part 97,
though the Administrator plays a greater role than in part 96 with
regard to actions on opt-in permits, allocations, and other related
opt-in submissions. For example, under the Federal trading program,
opt-in permit applications are submitted to both the Administrator and
the permitting authority, but only the Administrator may determine
whether the unit qualifies as a NO_X budget opt-in source.
Furthermore the Administrator, rather than the permitting authority,
allocates allowances to sources in the Federal NO_X Budget
Trading Program. The EPA is proposing these part 97 provisions for the
reasons set forth both in the proposed NO_X SIP call (63 FR
25940-42) and the final NO_X SIP call, and in order to
minimize differences between the Federal and State NO_X
Budget Trading Programs.
g. Program Administration. As discussed above, the Federal
NO_X Budget Trading Program would be run by EPA. The EPA
would identify the units covered by the program, determine and record
the NO_X allowance allocations, receive and review monitoring
plans and monitoring certification applications, and take the lead in
enforcement. As discussed above, States would still be responsible for
permitting.

C. New Source Review (NSR)

As discussed in the proposed and final NO_X SIP call, EPA
believes that nonattainment NSR offset requirements of the CAA can be
met using the mechanism of the State NO_X Budget Trading
Program under part 96. However, because the Agency is continuing to
evaluate a number of complex issues involved with integrating NSR and
the trading program, it will not be providing guidance at this time.
The EPA intends to provide such guidance as soon as possible. At that
time, the EPA will also address whether EPA should integrate NSR with
the trading program under part 97.

VII. Non-Trading Sources Emissions Limits

A. Introduction

In this section of the notice, EPA summarizes information used in
establishing the proposed regulations for the non-trading source
categories. The regulations themselves appear at the end of the notice.
The EPA encourages readers to provide information and regulatory
suggestions to allow EPA to improve the proposed rules' clarity and
provide for least-cost compliance approaches. In many cases, affected
sources are already subject to existing State and local emissions
reduction requirements, and the responsible State and local agencies
may be developing further regulatory initiatives as part of their
ongoing SIP efforts. The EPA invites comment on approaches to craft the
FIP rules in a manner which, to the extent possible, matches the format
of State or local regulations and minimizes conflict between the
Federal regulatory regime and current or proposed State and local
requirements. However, it is important that the projected emissions
decreases from the FIP rules are adequate to achieve the emissions
budget assigned in the NO_X SIP call final rulemaking.

B. Permits

As mentioned earlier, the regulations governing State permitting
under title V define an ``applicable requirement,'' which must be
reflected in a title V operating permit, as including any standard or
other requirement provided for in the applicable implementation plan
approved or promulgated by EPA, through rulemaking under title I of the
CAA, that implements the relevant requirements of the CAA, including
any revisions to that plan promulgated in part 52 of this chapter (40
CFR 70.2). Since today's proposed rule is being promulgated under title
I, the

[[Page 56416]]

requirements of this rule are applicable requirements under Sec. 70.2
and must be reflected in the title V operating permit of sources
subject to the FIP that are required to have such a permit. The EPA
believes that the large stationary internal combustion engines and
cement kilns subject to the FIP are required to have a title V permit.
Further, all State and local air permitting authorities currently have
EPA-approved title V operating permits programs. Consequently, these
State and local agencies would be the permitting authorities for the
sources subject to the FIP.

C. Stationary Internal Combustion Engines

1. Rule Requirements
As described in the NO_X SIP call, EPA's budget
calculation includes a 90 percent decrease from uncontrolled levels for
the large sources in this category. The FIP rules proposed today are
designed to achieve that 90 percent emissions decrease, averaged over a
rolling 30-day period, using control technologies that are estimated to
be less than $2,000 per ton of NO_X removed on average. The
requirements are contained in the regulatory section of this notice. To
ensure that the rules apply only to large sources, the regulation
includes a size cutoff of between 2,400 and 4,400 brake horsepower,
depending on the fuel.
2. Background
The control level selected for spark ignited rich-burn engines is a
limit of 110 parts per million by volume (ppmv) NO_X at 15
percent oxygen (O2) for engines that are 2400 brake
horsepower (hp) or larger. This represents non-selective catalytic
reduction (NSCR) control. The NSCR provides the greatest NO_X
reduction of all technologies considered in the Alternative Control
Techniques (ACT) document for ``NO_X emissions from
Stationary Reciprocating Internal Combustion Engines'' (EPA-453/R-93-
032) and is capable of providing a 90 to 98 percent reduction in
NO_X emissions. The range of controlled NO_X is
reported to be 0.3 to 1.6 grams per brake horsepower-hour (g/hp-hr), or
20 to 110 ppmv (at 15 percent O2) in the ACT document. The
lower end of the range represents 98 percent control and the upper end
represents 90 percent control. According to the ACT document, one NSCR
supplier guarantees 98 percent reduction. However, an alternative
limitation of 90 percent reduction was selected because 98 percent
reduction is based on a single supplier's guarantee. Engines that are
2400 hp or larger have the potential to emit 1 ton of NO_X
per day.
The control level selected for spark ignited lean-burn engines is a
limit of 125 ppmv NO_X at 15 percent O2 for
engines that are 2400 hp or larger. This represents selective catalytic
reduction (SCR) control. The SCR provides the greatest NO_X
reduction of all technologies considered in the ACT document for lean-
burn engines and is capable of providing a 90 percent reduction in
NO_X emissions. Engines that are 2400 hp or larger have the
potential to emit 1 ton or more of NO_X per day.
The control level selected for diesel engines is a limit of 175
ppmv NO_X at 15 percent O2 for engines that are
3100 hp or larger. This represents SCR control. The SCR provides the
greatest NO_X reduction of all technologies considered in the
ACT document for diesel engines and is capable of providing a 90
percent reduction in NO_X emissions. Engines that are 3100 hp
or larger have the potential to emit 1 ton or more of NO_X
per day.
The control level selected for dual fuel engines is a limit of 125
ppmv NO_X at 15 percent O2 for engines that are
4400 hp or larger. This represents SCR control which provides the
greatest NO_X reduction of all technologies considered in the
ACT document for dual fuel engines. The SCR is capable of providing a
90 percent reduction in NO_X emissions from dual fuel
engines. Dual fuel engines that are 4400 hp or larger have the
potential to emit 1 ton of NO_X per day.
To ensure compliance with these post-combustion controls, EPA is
proposing requiring affected sources to install continuous emissions
monitoring systems (CEMS). The CEMS must meet the requirements of 40
CFR part 60. The EPA is proposing the part 60 requirements rather than
the part 75 requirements because the rule does not regulate mass
emissions, but instead regulates on a volumetric (parts per million)
basis.
The EPA invites comment on alternative approaches to monitoring
emissions, including CEMS meeting the requirements of 40 CFR part 75.
The EPA specifically requests comments on the use of predictive
emissions monitoring systems (PEMS). The EPA will give greater
consideration to comments that provide data demonstrating the accuracy
of alternative methods such as PEMS, particularly if the data provide a
comparison of the alternative method to simultaneous data gathered
using either a CEM or using EPA reference method testing. More
consideration will also be given to data that provide complete
information about the range of unit operating parameters that the
method was tested over. If commenters do not have these data available,
EPA requests comments explaining why the alternative methods would be
valid over the range of operating conditions that the unit could be
expected to be operating.

D. Cement Manufacturing

1. Rule Requirements
As described in the NO_X SIP call, EPA's budget
calculation includes a 30 percent decrease from uncontrolled levels for
the large sources in this category. The FIP rules proposed today are
designed to achieve that 30 percent emissions decrease using control
technologies that are estimated to be less than $2,000 per ton of
NO_X removed. The requirements are to install and operate
low-NO_X burners, mid-kiln firing, or alternative control
techniques, subject to EPA approval, that achieve at least the same
emissions decreases as low-NO_X burners or mid-kiln firing.
These requirements are contained in the regulatory section of this
notice. To ensure that the rules apply only to large sources, the rule
applies only to kilns with process rates of at least the following:

Long dry kilns--12 tons per hour (TPH)
Long wet kilns--10 TPH
Preheater kilns--16 TPH
Precalciner and preheater/precalciner kilns--22 TPH

For the purpose of determining alternative control techniques that
EPA would consider, it should be noted that EPA expects the following
emissions limits can be met by low-NO_X burners or mid-kiln
firing:
(i) For any long wet kiln, 6.0 lbs/ton of clinker produced when
averaged over any 30 consecutive days.
(ii) For any long dry kiln, 5.1 lbs/ton of clinker produced when
averaged over any 30 consecutive days.
(iii) For any preheater kiln, 3.8 lbs/ton of clinker produced when
averaged over any 30 consecutive days.
(iv) For any preheater/precalciner or precalciner kiln, 2.8 lbs/ton
of clinker produced when averaged over any 30 consecutive days.
2. Background
There are 4 types of cement kilns: long wet, long dry, preheater,
and precalciner, as described in the ACT document for ``NO_X
emissions from Cement Manufacturing'' (EPA-453/R-94-004). For purposes
of developing this rule, EPA is using the average of the standard EPA
emission factor (see

[[Page 56417]]

Volume I: ``Stationary Point and Area Sources,'' Chapter 11, ``Mineral
Products Industry Compilation of Air Pollutant Emission Factors,'' AP-
42, Fifth Edition, EPA) and ACT document uncontrolled emission factors.
Available NO_X controls with cost effectiveness less than
$2,000/ton (expressed in 1992 dollars) and which achieved the most
reductions are:
a. Mid-Kiln firing. Cost effectiveness of $430-610/ton. Applicable
for long wet and long dry kilns. Ten long kilns have been modified for
mid-kiln firing. Two emission tests show NO_X reductions of
18 and 36 percent.
b. Low-NO_X burner. Cost effectiveness of $830-1,330/ton.
Applicable for all kilns. Experimental tests show NO_X
reductions of 20-30 percent. Subsequent to the ACT document, one test
at an indirect fired-coal system with a low-NO_X burner shows
reduction of 28 percent.
c. Selective noncatalytic reduction. Cost effectiveness of $440-
1,240/ton. Applicable for preheater and precalciner kilns. Two
experimental tests--NO_X reductions of 27-40 percent.
The definitions in the proposed rule are generally from the cement
ACT document and the Mojave Desert, California rule for portland cement
(AQMD Rule 1161). The compliance determination, monitoring and
recordkeeping requirements, exemptions, and test method sections are
adapted primarily from the Mojave Desert rule. In addition, cement
rules from the following areas were examined: Santa Barbara County
(California), States of Florida, New Hampshire, Maine, Massachusetts,
Northeast States for Coordinated Air Use Management and Sacramento
Metropolitan (California).
To ensure compliance with these requirements and to determine the
emissions reductions, EPA is proposing requiring affected sources to
complete an initial performance test and subsequent annual testing. The
EPA is proposing this approach rather than requiring CEMS because EPA
is not requiring these sources to meet an emission limit, either on a
rate basis as IC engines are, or on a mass basis as units subject to
the trading program are. Rather, cement kilns are required to
demonstrate that controls have been installed and are being properly
operated. The proposed combustion controls, once installed and
operating, are expected to be effective over the ozone season and are
not subject to as much uncertainty as some post-combustion controls,
where, for example, the amount of reagent injected by the operator on a
daily or hourly basis is critical. Any cement manufacturing units that
choose to opt-in to the trading program would need to install and
operate CEMS consistent with the requirements of 40 CFR part 75. The
part 75 requirements are necessary in a trading program because
consistent and accurate monitoring of emissions is necessary for
accountability regarding compliance with the requirement to hold
NO_X allowances and to ensure that a ton of emissions
attributed to one source in one State is equivalent to a ton attributed
to another source in the same or another State.
The EPA invites comment on alternative approaches to monitoring
emissions for this industry, including CEMS meeting the requirements of
40 CFR part 60 or part 75. The EPA specifically requests comments on
the use of PEMS. The EPA will give greater consideration to comments
that provide data demonstrating the accuracy of alternative methods
such as PEMS, particularly if the data provide a comparison of the
alternative method to simultaneous data gathered using either a CEM or
using EPA reference method testing.

VIII. Administrative Requirements

A. Regulatory Impact Analysis

Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether the regulatory action is ``significant''
and, therefore, subject to Office of Management and Budget (OMB) review
and the requirements of the Executive Order. The Order defines
``significant regulatory action'' as one that is likely to result in a
rule that may:
1. Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities;
2. Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
3. Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
4. Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
The EPA believes that this action is a ``significant regulatory
action'' because it would have an annual effect on the economy of
approximately $1.7 billion. The EPA has estimated benefits from this
proposal in the range of $1.1-4.2 billion, with EPA's best estimate
being $3.4 billion. Therefore, the NPR was submitted to OMB for review.
Any written comments from OMB to EPA and any written EPA response to
those comments are included in the docket. The docket is available for
public inspection at the EPA's Air Docket Section, which is listed in
the ADDRESSES section of this preamble. Detailed information on the
benefits and costs of changes in NO_X emissions is contained
in the RIA in the NO_X SIP call docket, which also serves as
the RIA for the FIP proposal.
The EPA is proposing to regulate NO_X emissions from
stationary sources in the following catgegories located in 22 States
and the District of Columbia: electric power generating units,
industrial boilers and turbines, cement manufacturing and internal
combustion engines. This will lead to the placement of NO_X
controls on operating units in these categories. Therefore, EPA has
estimated the NO_X emissions reductions and costs resulting
from this proposal.
Analytical limitations prevented EPA from estimating the costs of a
single, State-specific cap-and-trade program for the large EGUs and
non-EGU point sources. Therefore, the Agency estimated the impacts of a
regional cap-and-trade program only for the EGUs at this time. For non-
EGUs in the core trading program, EPA assumed a least-cost analysis as
described in the NO_X SIP call. Finally, EPA assumed
emissions decreases from large cement plants and stationary internal
combustion engines using a command-and-control type approach since
trading may not be immediately available as an option for these
sources.

B. Impact on Small Entities

1. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), as amended by the Small
Business Regulatory Enforcement Fairness Act (SBREFA), provides that
whenever an agency is required to publish a general notice of proposed
rulemaking, it must prepare and make available an initial regulatory
flexibility analysis, unless it certifies that the proposed rule, if
promulgated, will not have ``a significant economic impact on a
substantial number of small entities.''
In the process of developing this rulemaking, EPA worked with the
Small Business Administration (SBA) and the Office of Management and
Budget (OMB) and obtained input from small businesses, small
governmental jurisdictions, and small organizations. On June 23, 1998,
EPA's Small Business

[[Page 56418]]

Advocacy chairperson convened a Small Business Advocacy Review Panel
under section 609(b) of the RFA as amended by SBREFA. For this
proposal, in addition to its chairperson, the Panel consisted of EPA's
Deputy Director of the Office of Air Quality Planning and Standards
within the Office of Air and Radiation, the Administrator of the Office
of Information and Regulatory Affairs within the OMB, and the Chief
Counsel for Advocacy of the SBA.
As described below, this Panel conducted an outreach effort and
completed a report on the FIP proposal. The report provides background
information on the proposed rule being developed and the types of small
entities that would be subject to the proposed rule, describes efforts
to obtain the advice and recommendations of representatives of those
small entities, summarizes the comments that have been received to date
from those representatives, and presents the findings and
recommendations of the Panel; the completed report, comments of the
small entity representatives, and other information are contained in
the docket for this rulemaking.
It is important to note that the Panel's findings and discussion
are based on the information available at the time this report was
drafted. The EPA is continuing to conduct analyses relevant to the
proposed rule, and additional information may be developed or obtained
during the remainder of the rule development process. The Panel makes
its report at a preliminary stage of rule development and its report
should be considered in that light. At the same time, the report
provides the Panel and the Agency with an opportunity to identify and
explore potential ways of shaping the proposed rule to minimize the
burden of the rule on small entities while achieving the rule's
statutory purposes. Any options the Panel identifies for reducing the
rule's regulatory impact on small entities may require further analysis
and/or data collection to ensure that the options are practicable,
enforceable, environmentally sound and consistent with the statute
authorizing the proposed rule.
2. Outreach to Small Entity Representatives
In consultation with the SBA, EPA invited 36 small entity
representatives to participate in its outreach efforts on this
proposal. The EPA, OMB, and SBA held an initial outreach meeting with a
group of small-entity representatives in Washington, DC on April 14,
1998. The purpose of this meeting was to familiarize the small-entity
representatives with the substance of the rulemaking and the kinds of
sources being considered for regulation, and to solicit comment on
these topics. Subsequent to the meeting, the representatives submitted
follow-up comments in writing. The primary outreach was accomplished by
a meeting with the small-entity representatives in Washington, D.C. on
August 4, 1998. The purpose of this meeting was to present the results
of EPA's analysis on small-entity impacts, and to solicit comment on
this analysis and on suggestions for impact mitigation. Subsequent to
the meeting, the representatives submitted follow up comments in
writing.
To define small entities, EPA used the SBA industry-specific
criteria published in 13 CFR section 121. The SBA size standards have
been established for each type of economic activity under the Standard
Industrial Classification (SIC) System. Due to their NO_X-
emitting properties, the following industries have the potential to be
affected by the NO_X FIP rulemaking:
SIC Codes in Division D: Manufacturing
2611--Pulp mills
2819--Industrial Inorganic Materials
2821--Plastics Materials, Synthetic Resins, and Nonvulcanizable
Elastomers
2869--Industrial Organic Chemicals
3211--Flat Glass
3221--Glass Containers
3229--Pressed and Blown Glass and Glassware
3241--Cement, Hydraulic
3312--Steel Works, Blast Furnaces, and Rolling Mills
3511--Steam, Gas, and Hydraulic Turbines
3519--Stationary Internal Combustion Engines
3585--Air-Conditioning and Warm-Air Heating Equipment and Commercial
and Industrial Refrigeration Equipment
SIC Codes in Division E: Transportation, Communications, Electric, Gas,
and Sanitary Services
SIC Major Group 49: Electric, Gas, and Sanitary Services,
including:

4911--Electric Utilities
4922--Natural Gas Transmission
4931--Electric and other Gas Services
4961--Steam and Air Conditioning Supply
3. Potentially Affected Small Entities
The primary topic of the Panel discussion was the applicability of
the FIP to the various categories of NO_X-emitting sources,
the costs the rule would impose, and the possibility of further
reducing rule applicability. Secondary topics included emissions
monitoring and other potentially duplicative Federal rules. These
discussions are summarized below.
The FIP rulemaking is potentially applicable to all stationary-
source, NO_X-emitting entities in the 23-jurisdiction area
covered by the FIP. The EPA estimates that the total number of such
entities is approximately 5300, of which about 1200 are small entities.
Based primarily on considerations of overall cost effectiveness and
administrative efficiency, EPA is considering reducing this
applicability based on several factors including input from this Panel.
Specifically, EPA is proposing to exempt (i.e., not regulate) a number
of source categories from being subject to this regulation based on
factors such as low relative emissions and lack of an identified
NO_X control technology. Additional categories of sources are
being considered for exemption because they may not be highly cost
effective to control, with EPA considering an average cost
effectiveness of $2000 per ton of NO_X removed as the upper
limit for highly cost-effective reductions. These factors are discussed
in detail in section IV.F, Other Point Source Categories, of this
notice.
If EPA takes final action as proposed today with this reduced-
applicability approach, the FIP will apply only to the following types
of sources: EGUs, industrial boilers and combustion turbines, and
internal combustion engines and cement manufacturers. The stringency
levels of control EPA currently intends to propose for these types of
sources is as follows: for EGUs, an emission rate of 0.15 pounds of
NO_X per million BTU; for industrial boilers and combustion
turbines, an emission reduction of 60 percent; for internal combustion
engines, an emission reduction of 90 percent; and for cement
manufacturers, an emission reduction of 30 percent. At these stringency
levels, the estimated number of small entities that would be affected
is as follows:
Electric Generating Units--114 small entities.
Industrial Boilers and/or Combustion Turbines--31 small
entities.
Internal Combustion Engines and Cement Manufacturers--8
small entities.
EPA has further estimated that, of these affected small entities,
the following would experience compliance costs equal or greater to 1
percent of their revenues:
Electric Generating Units--32 small entities.
Industrial Boilers and Combustion Turbines--7 small
entities.
Internal Combustion Engines and Cement Manufacturers--3
small entities.

[[Page 56419]]

Of these, EPA estimates that about 18 small entities with EGUs and
4 small entities with industrial boilers or turbines would see costs
greater than 3 percent of revenues, and that no IC engines or cement
manufacturers would see costs above 3 percent of revenues.
Focusing the rule on these categories would constitute a reduction
of over 85 percent in the number of small entities affected by the
rule: out of 1200 potentially-affected small entities, over 1000 would
be exempted, with only 153 small entities remaining. The Panel received
written comments from three small-entity representatives strongly
endorsing these exemptions.
4. Panel Findings and EPA Actions
a. Exemptions. The Panel agreed with the general approach EPA is
proposing to define the scope of the rule. The Panel recommended that
the categorical exemptions noted above be included in the proposal, and
further recommended that the applicability of EPA's proposed rule be
limited to the categories shown in that section. As discussed in
section IV of this notice, EPA is proposing to limit applicability as
recommended by the Panel. Furthermore, as described below, the Panel
considered it appropriate to explore additional options for reducing
the impact of the rule.
Several of the small entity representatives suggested that EPA
exempt all small entities from this rulemaking. Although EPA does not
feel that a blanket, across-the-board exemption could be supported, EPA
is receptive to proposals for further exemptions, up to and including
exempting all small entities if that could be shown to be appropriate.
As recommended by the Panel, EPA solicits comment on additional types
of small-entity exemptions and the rational bases on which such
exemptions could be made, such as disproportionate ability to bear
costs and administrative burden. Further, where such exemptions are
recommended, EPA solicits comment on specific approaches to achieving
the total emissions reductions proposed in the FIP since additional
types of small-entity exemptions would create an emissions shortfall;
approaches could include tighter limits on certain sources affected by
the FIP or revision of the NO_X SIP call budget.
b. Continuous Emissions Monitoring Systems. The Panel received both
written and oral comments to the effect that CEMS would be
prohibitively costly for many industrial boilers, representing a
significant part of the cost of the rule. The EPA believes that to
enhance the enforceability of the emission limitation in the FIP (as
required by section 110(a)(2)(A)), it is necessary for all sources in
the trading program to be subject to accurate and consistent monitoring
requirements designed to demonstrate compliance with a mass emission
limitation, and, therefore, intends to require all large units to
monitor NO_X mass emissions using CEMS (including units
opting-in to the trading program). The EPA is currently considering
whether to require CEMS for both trading and non-trading sources in
this rule. However, EPA does believe that it is appropriate to provide
lower-cost monitoring options for units with low-NO_X mass
emissions, and, therefore, intends to allow non-CEMS alternatives for
units that have emissions of less than 50 tons per year of
NO_X. This cutoff will provide relief for boilers large
enough to be covered by the rule, but that run for a smaller number of
hours each year, including any such boilers owned by small entities.
The OMB and SBA share the commenters' concern for the potentially
high cost of CEMS requirements. Consistent with this concern, EPA
solicits comment on alternative monitoring options for non-trading
sources, such as parametric monitoring or monitoring as currently
required by the new source performance standards (NSPS) program.
c. Trading Program Opt-In. The Panel recommended that EPA encourage
non-trading sources to opt-in to the emissions trading program. In the
Panel's view, allowing these sources to opt-in to the trading program
provides an incentive to develop alternative cost-effective control
options that will allow sources to improve overall emissions reduction
cost savings. The EPA solicits comment on effective ways to accomplish
this while still maintaining the integrity of the trading system.
d. Cement Kilns. Consistent with SBREFA's goal of reducing small-
entity impacts, the Panel also proposed a number of specific ideas for
exempting or reducing burden on particular categories of small
entities. Many of these ideas were generated from comments made by
small entity advisors to this Panel. The first category the Panel
explored was cement kilns, where commenters had raised questions
regarding EPA's analyses of control efficiency and cost. The first
option explored was to propose exempting cement kilns as a source
category if it could be shown that EPA's assumed 30 percent reduction
of NO_X emissions is not feasible, and that the achievable
reductions were such that it would not be cost effective to require
controls on these sources. As recommended by the Panel, EPA solicits
comment on rational bases on which small-entity-owned cement kilns
could be exempted if further analysis shows this to be appropriate.
Examples of the kinds of factors that might be considered rational
bases for exemption are disproportionate ability to bear costs and
administrative burdens, and contributing only de minimis amounts of
emissions.
The second option considered by the Panel was to retain
applicability to cement kilns, but to grant relief if, after installing
available controls, they proved to be unable to achieve the mandated 30
percent reduction in NO_X emissions. This concept was
conceived in this case due to commenters' claims that cement kilns are
highly idiosyncratic, and that the available cost-effective
technologies (such as mid-kiln firing) may produce greatly varying
results from unit to unit. The model concept considered was that of an
Alternative Emission Limit (AEL) similar to the one used in the acid
rain NO_X reduction program (59 FR 13538, March 22, 1994),
whereby a source can apply for and receive a less stringent reduction
requirement if it can be shown that this lesser reduction is the most
that can be achieved at that particular unit. To implement this
concept, the Panel recommended that EPA solicit comment on whether
small-entity-owned cement kilns unable to achieve the mandated
reduction should be given the opportunity to apply for an AEL to be set
at a level demonstrated to be achievable at the unit in question. The
EPA solicits comment on the appropriateness and workability of this
option, particularly information that would support it.
e. Electric Generating Units. The next area considered by the Panel
was EGUs. The EPA's analysis shows that slightly more than 30 EGUs may
experience costs above 1 percent of revenues, and that 18 of these
might exceed 3 percent. From comments made by small utilities, the
Panel suspects that many of these high-cost-to-revenue situations may
involve peaking units, which run only a small percentage of the time
and thus may be inefficient to control. To address this problem, the
Panel recommended that EPA solicit comment on whether to allow EGUs to
obtain a federally enforceable NO_X emissions tonnage limit
(e.g., 25 tons during the ozone season) and thereby obtain an exemption
from FIP applicability. The EPA solicits comment on the necessity for
and appropriateness of such an option.

[[Page 56420]]

f. Industrial Boilers. Individual Panel members conceived of other
potential ways to mitigate impact on small entities, such as raising
the size cutoff for small entities and/or lessening the required
percentage reduction in NO_X emissions required from small
entities. The SBA encouraged the Agency to conduct analyses to
determine the impact of 40 percent reduction being applied solely to
small entities and 60 percent solely to large entities, and the
resulting effect on control levels for sources regulated in the FIP
proposal. The EPA solicits comment on whether requirements should be
reduced on small-entity-owned industrial boilers by some combination of
raising the size cutoff and/or lessening the required reduction; which,
if any, of these options is preferable; the necessity and
appropriateness of any such option; the appropriate level (e.g., 40
percent reduction instead of 60 percent); and information to support
any comments submitted.
g. EPA Guidance to States on Small Entities. Finally, the Panel
noted that several small entity representatives expressed concern that
regardless of the sensitivity to small-entity concerns EPA shows in the
FIP (or section 126) rulemaking, the States may nevertheless see fit to
target small entities in their SIPs. To help address this problem, the
Panel recommended that, subsequent to the FIP and 126 proposals, EPA
issue guidance that conveys to the States the kinds of options and
alternatives EPA has considered in addressing small-entity concerns,
explains the rationale behind these kinds of options, and recommended
that the States consider adopting similar alternatives in their SIPs.
The EPA intends to address this issue as it develops implementation
guidance for the States to use in developing SIPs.

C. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, 2
U.S.C. 1532, EPA generally must prepare a written statement, including
a cost-benefit analysis, for any proposed or final rule that ``includes
any Federal mandate that may result in the expenditure by State, local,
and tribal governments, in the aggregate, or by the private sector, of
$100,000,000 or more * * * in any one year.'' A ``Federal mandate'' is
defined under section 421(6), 2 U.S.C. 658(6), to include a ``Federal
intergovernmental mandate'' and a ``Federal private sector mandate.'' A
``Federal intergovernmental mandate,'' in turn, is defined to include a
regulation that ``would impose an enforceable duty upon State, local,
or tribal governments,'' section 421(5)(A)(i), 2 U.S.C. 658(5)(A)(i),
except for, among other things, a duty that is ``a condition of Federal
assistance,'' section 421(5)(A)(i)(I). A ``Federal private sector
mandate'' includes a regulation that ``would impose an enforceable duty
upon the private sector,'' with certain exceptions, section 421(7)(A),
2 U.S.C. 658(7)(A).
The EPA is taking the position that the requirements of UMRA apply
because this action could result in the establishment of enforceable
mandates directly applicable to sources (including sources owned by
State and local governments) that could result in costs greater than
$100 million in any one year. The UMRA generally requires EPA to
identify and consider a reasonable number of regulatory alternatives
and adopt the least-costly, most cost-effective or least-burdensome
alternative that achieves the objectives of the rule. The EPA's
analysis, ``Unfunded Mandates Reform Act Analysis For the Proposed
Federal Implementation Plan Rule Under the Clean Air Act Amendments
Title I,'' is in the docket for this action and examines the impacts of
the proposed FIP on EGUs and non-EGUs owned by State, local, and tribal
governments, as well as those sources owned by private entities. This
proposal potentially affects 78 EGUs that are owned by two States and
24 municipalities (Massachusetts and South Carolina own 19 units, and
the municipalities own the remaining 59 units). In addition, 7 non-EGUs
owned by 2 States and 5 municipalities are potentially affected. The
EPA has not identified any units on Tribal lands that would be subject
to the proposed requirements. The overall costs are dominated by the 78
EGUs and range from 3.2 to 3.9 percent of the total costs for all of
the EGUs potentially affected by the FIP. These State and municipality-
owned units produce approximately 2.6 percent of the electricity in the
region, which suggests that their cost impacts are only slightly higher
than their production share, in comparison to all units in the region.
Under section 203 of UMRA, 2 U.S.C. 1533, before EPA establishes
any regulatory requirements ``that might significantly or uniquely
affect small governments,'' EPA must have developed a small government
agency plan. The plan must provide for notifying potentially affected
small governments; enabling officials of affected small governments to
have meaningful and timely input in the development of EPA regulatory
proposals with significant Federal intergovernmental mandates; and
informing, educating, and advising small governments on compliance with
the regulatory requirements. The proposed requirements do not
distinguish EGUs based on ownership, either for those units that are
included within the scope of the proposed rule or for those units that
are exempted by the generating capacity cut-off. Consequently, the
proposed rule has no requirements that uniquely affect small
governments that own or operate EGUs within the SIP call region. With
respect to the significance of the rule's provisions, EPA's UMRA
analysis (cited above) demonstrates that the economic impact of the
rule will not significantly affect State or municipal EGUs or non-EGUs,
either in terms of total cost incurred and the impact of the costs on
revenue, or increased cost of electricity to consumers. Therefore,
development of a small government plan under section 203 of the Act is
not required.
Under section 204 of UMRA, 2 U.S.C. 1534, if an agency proposes a
rule that contains a ``significant Federal intergovernmental mandate'',
the agency must develop a process to permit elected officials of State,
local, and tribal governments to provide input into the development of
the proposal.'' In order to fulfill UMRA requirements that publicly-
elected officials be given meaningful and timely input in the process
of regulatory development, EPA has sent letters to five national
associations whose members include elected officials. The letters
provide background information, request the associations to notify
their membership of the proposed rulemaking, and encourage interested
parties to comment on the proposed actions by sending comments during
the public comment period and presenting testimony at the public
hearing on the proposal. Any comments will be taken into consideration
as the action moves toward final rulemaking.
In addition, during the NO_X SIP call, EPA provided
direct notification to potentially affected State and municipally-owned
utilities as part of the public comment and hearing process attendant
to proposal of the NO_X SIP call and supplemental notice of
proposed rulemaking. These procedures helped ensure that small
governments had an opportunity to give timely input and obtain
information on compliance. EPA provided the 26 State and municipality-
owned utilities and appropriate elected officials with a brief

[[Page 56421]]

summary of the proposal and the estimated impacts. The public
rulemaking also elicited numerous comments from State and municipal
utilities and groups representing utility interests.

D. Paperwork Reduction Act

The information collection requirements in this proposed rule have
been submitted for approval to the OMB under the Paperwork Reduction
Act, 44 U.S.C. 3501 et seq. An Information Collection Request (ICR)
document has been prepared by EPA (ICR No. 1883.01) and a copy may be
obtained from Sandy Farmer, by mail at OP Regulatory Information
Division, US Environmental Protection Agency (2137), 401 M St., SW,
Washington, DC 20460, by email at farmer.sandy@epamail.epa.gov, or by
calling (202) 260-2740. A copy may also be downloaded off the internet
at http://www.epa.gov/icr.
The EPA believes that it is essential that compliance with the
regional control strategy be verified. Tracking emissions is the
principal mechanism to ensure compliance with the budget and to assure
the downwind affected States and EPA that the ozone transport problem
is being addressed. The reporting requirements can be divided into
three categories: statewide emissions budgets, trading program, and
other stationary source categories regulated.
1. Statewide Emissions Budgets
The reporting and recordkeeping burden (to be incurred by EPA) for
this collection of information is described in the final NO_X
SIP call rulemaking and is summarized below:
Respondents/Affected Entities: States, along with the District of
Columbia, which are included in the NO_X SIP call.
Number of Respondents: 23.
Frequency of Response: annually, triennially.
Estimated Annual Hour Burden per Respondent: 282.
Estimated Annual Cost per Respondent: $7,942.68.
Estimated Total Annual Hour Burden: 6,486.
Estimated Total Annualized Cost: $182,682.00.
2. Trading Program
Respondents/Affected Entities: Large fossil fuel boilers, turbines
and combined cycle units which are included in the NO_X FIP.
Number of Respondents: 2313.
Frequency of Response:

--Emissions reports quarterly for some units, twice during ozone season
for others
--Test notifications and allowance transfers on an infrequent basis
--Compliance certifications on an annual basis

Estimated Annual Hour Burden per Respondent: 107.
Estimated Annual Cost per Respondent: $6,888.
Estimated Total Annual Hour Burden: 249,150.
Estimated Total Annualized Cost: $15,931,033.
Note that these are an average estimate for the first three years
of the program. EPA estimates lower costs in the first two years of the
program because less units will be participating at that time. The
units that will be participating at that time are units that are
applying for early reduction credits. EPA also estimates that the
highest compliance costs will occur in 2002, when the majority of the
units that have to install and certify new monitors to comply with the
program will do so. EPA believes that the year 2003 will be more
representative of the actual ongoing costs of the program. At that time
EPA estimates a burden of 179 hours per source and a cost of $27,670
per source.
3. Non-Trading Sources Regulated
Respondents/Affected Entities: Large stationary internal combustion
engines and cement manufacturing which are included in the
NO_X FIP.
Number of Respondents: 363.
Frequency of Response:

--emissions reports either quarterly during the ozone season or
annually

Estimated Annual Hour Burden per Respondent: 464.
Estimated Annual Cost per Respondent: $33,303.
Estimated Total Annual Hour Burden: 168,390.
Estimated Total Annualized Cost: $12,089,000.
Burden means the total time, effort, or financial resources
expended by persons to generate, maintain, retain, or disclose or
provide information to or for a Federal agency. This includes the time
needed to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements;
train personnel to be able to respond to a collection of information;
search data sources; complete and review the collection of information;
and transmit or otherwise disclose the information.
An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.
Comments are requested on the Agency's need for this information,
the accuracy of the provided burden estimates, and any suggested
methods for minimizing respondent burden, including through the use of
automated collection techniques to the Director, Office of Policy,
Regulatory Information Division, US Environmental Protection Agency
(2137), 401 M St., SW, Washington, DC 20460; and to the Office of
Information and Regulatory Affairs, Office of Management and Budget,
725 17th St., NW, Washington, DC 20503, marked ``Attention: Desk
Officer for EPA.'' Include the ICR number in any correspondence. Since
OMB is required to make a decision concerning the ICR between 30 and 60
days after October 21, 1998, a comment to OMB is best assured of having
its full effect if OMB receives it by November 20, 1998. The final rule
will respond to any OMB or public comments on the information
collection requirements contained in this proposal.

E. Executive Order 13045 : Protection of Children from Environmental
Health Risks and Safety Risks

1. Applicability
The Executive Order 13045 applies to any rule that EPA determines
is (i) ``economically significant'' as defined under Executive Order
12866, and (ii) the environmental health or safety risk addressed by
the rule has a disproportionate effect on children. If the regulatory
action meets both criteria, the Agency must evaluate the environmental
health or safety effects of the planned rule on children; and explain
why the planned regulation is preferable to other potentially effective
and reasonably feasible alternatives considered by the Agency. This
proposed rule is not subject to Executive Order 13045, entitled
``Protection of Children from Environmental Health Risks and Safety
Risks (62 FR 19885, April 23, 1997), because it does not involve
decisions on environmental health risks or safety risks that may
disproportionately affect children.
2. Children's Health Protection
In accordance with section 5(501), the Agency has evaluated the
environmental health or safety effects of the rule on children, and
found that the rule does not separately address any age

[[Page 56422]]

groups. However, the Agency has conducted a general analysis of the
potential changes in ozone and particulate matter levels experienced by
children as a result of the NO_X SIP call; these findings are
presented in the RIA. The findings include projected ozone
concentrations for every hour of the day, and projected annual average
and daily peak particulate matter nominally 10m and less
(PM10) and particulate matter nominally 15m and less
(PM2.5) concentrations in every grid cell in the modeling
domain. The EPA has mapped these concentrations to the census-derived
population projections for these cells to arrive at a population-
weighted exposure characterization. The census data for each cell have
been broken down by age, race, and socioeconomic status.

F. Executive Order 12898 Environmental Justice

Executive Order 12898 requires that each Federal agency make
achieving environmental justice part of its mission by identifying and
addressing, as appropriate, disproportionately high and adverse human
health or environmental effects of its programs, policies, and
activities on minorities and low-income populations. The Agency has
conducted a general analysis of the potential changes in ozone and PM
levels experienced by minorities and low-income populations as a result
of the NO_X SIP call; these findings are presented in the
RIA. The findings include projected ozone concentrations for every hour
of the day, and projected annual average and daily peak PM10
and PM2.5 concentrations in every grid cell in the modeling
domain. The EPA has mapped these concentrations to the census-derived
population projections for these cells to arrive at a population-
weighted exposure characterization. The census data for each cell has
been broken down by age, race, and socioeconomic status.

G. Executive Order 12875: Enhancing the Intergovernmental Partnership

Under Executive Order 12875, EPA may not issue a regulation that is
not required by statute and that creates a mandate upon a State, local
or tribal government, unless the Federal government provides the funds
necessary to pay the direct compliance costs incurred by those
governments or EPA consults with those governments. If the mandate is
unfunded, EPA must provide to the Office of Management and Budget a
description of the extent of EPA's prior consultation with
representatives of affected State, local and tribal governments, the
nature of their concerns, copies of any written communications from the
governments, and a statement supporting the need to issue the
regulation. In addition, Executive Order 12875 requires EPA to develop
an effective process permitting elected officials and other
representatives of State, local and tribal governments ``to provide
meaningful and timely input in the development of regulatory proposals
containing significant unfunded mandates.''
The EPA has concluded that this rule may create a mandate on State
and local governments and that the Federal government will not provide
the funds necessary to pay the direct costs incurred by the State and
local governments in complying with the mandate. In order to provide
meaningful and timely input in the development of this regulatory
action, EPA has sent letters to five national associations whose
members include elected officials. The letters provide background
information, request the associations to notify their membership of the
proposed rulemaking, and encourage interested parties to comment on the
proposed actions by sending comments during the public comment period
and presenting testimony at the public hearing on the proposal. Any
comments will be taken into consideration as the action moves toward
final rulemaking.
In addition, during the NO_X SIP call, EPA provided
direct notification to potentially affected State and municipally-owned
utilities as part of the public comment and hearing process attendant
to proposal of the NO_X SIP call and supplemental notice of
proposed rulemaking. These procedures helped ensure that small
governments had an opportunity to give timely input and obtain
information on compliance. EPA provided the 26 State and municipality-
owned utilities and appropriate elected officials with a brief summary
of the proposal and the estimated impacts. The public rulemaking also
elicited numerous comments from State and municipal utilities and
groups representing utility interests.

H. Executive Order 13084: Consultation and Coordination With Indian
Tribal Governments

Under Executive Order 13084, EPA may not issue a regulation that is
not required by statute, that significantly or uniquely affects the
communities of Indian tribal governments, and that imposes substantial
direct compliance costs on those communities, unless the government
provides the funds necessary to pay the direct compliance costs
incurred by the tribal governments. If the mandate is unfunded, EPA
must provide to the office of Management and Budget, in a separately
identified section of the preamble to the rule, a description of the
extent of EPA's prior consultation with representatives of affected
tribal governments, a summary of the nature of their concerns, and a
statement supporting the need to issue the regulation. In addition,
Executive Order 13084 requires EPA to develop an effective process
permitting elected and other representatives of Indian tribal
governments ``to provide meaningful and timely input in the development
of regulatory policies on matters that significantly or uniquely affect
their communities.''
Today's rule does not significantly or uniquely affect the
communities of Indian tribal governments and, in any event, will not
impose substantial direct compliance costs on such communities. The EPA
is not aware of sources located on tribal lands that could be subject
to the requirements EPA is proposing in this notice. Accordingly, the
requirements of section 3(b) of Executive Order 13084 do not apply.

I. National Technology Transfer and Advancement Act

Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (NTTAA), Public Law. 104-113, section 12(d) (15 U.S.C. 272
note) directs EPA to use voluntary consensus standards in its
regulatory activities unless to do so would be inconsistent with
applicable law or otherwise impractical. Voluntary consensus standards
are technical standards (e.g., materials specifications, test methods,
sampling procedures, and business practices) that are developed or
adopted by voluntary consensus standards bodies. The NTTAA directs EPA
to provide Congress, through OMB, explanations when the Agency decides
not to use available and applicable voluntary consensus standards.
This proposed rulemaking would require all sources that participate
in the trading program under proposed part 97 to meet the applicable
monitoring requirements of part 75. Part 75 already incorporates a
number of voluntary consensus standards. In addition, EPA's proposed
revisions to part 75 proposed to add two more voluntary consensus
standards to the rule (see 63 FR at 28116-17, discussing ASTM D5373-93
``Standard Methods for Instrumental Determination of Carbon, Hydrogen
and Nitrogen in laboratory samples of Coal and Coke,'' and API section
2 ``Conventional Pipe Provers'' from Chapter 4 of the Manual of
Petroleum

[[Page 56423]]

Measurement Standards, October 1988 edition). EPA's proposed part 75
revisions also requested comments on the inclusion of additional
voluntary consensus standards. EPA has recently finalized revisions to
part 75 addressing some of the topics raised in EPA's proposed
revisions to part 75. As part of this rule finalization, EPA
incorporated two new voluntary consensus standards, in response to
comments submitted on the proposed part 75 revisions related to other
issues:
(i) American Petroleum Institute (API) Petroleum Measurement
Standards, Chapter 3, Tank Gauging: section 1A, Standard Practice for
the Manual Gauging of Petroleum and Petroleum Products, December 1994;
section 1B, Standard Practice for Level Measurement of Liquid
Hydrocarbons in Stationary Tanks by Automatic Tank Gauging, April 1992
(reaffirmed January 1997); section 2, Standard Practice for Gauging
Petroleum and Petroleum Products in Tank Cars, September 1995; section
3, Standard Practice for Level Measurement of Liquid Hydrocarbons in
Stationary Pressurized Storage Tanks by Automatic Tank Gauging, June
1996; section 4, Standard Practice for Level Measurement of Liquid
Hydrocarbons on Marine Vessels by Automatic Tank Gauging, April 1995;
and section 5, Standard Practice for Level Measurement of Light
Hydrocarbon Liquids Onboard Marine Vessels by Automatic Tank Gauging,
March 1997; and
(ii) Shop Testing of Automatic Liquid Level Gages, Bulletin 2509 B,
December 1961 (Reaffirmed October 1992), for Sec. 75.19.
The EPA intends to finalize other revisions to part 75 in the near
future and address comments related to the proposed voluntary consensus
standards and to additional voluntary consensus standards at that time.
This proposed rulemaking would require the owners and operators of
cement kilns and stationary internal combustion engines to demonstrate
compliance with the requirements set forth in part 98 using monitoring
provisions set forth in part 60. Part 60 incorporates a number of
voluntary consensus standards. At this time, EPA is not proposing any
revisions to part 60, however EPA does periodically revise the test
procedures set forth in part 60. When EPA does revise the test
procedures set forth in part 60, EPA will address the use of any new
voluntary consensus standards that are equivalent.
This proposed rulemaking involves environmental monitoring or
measurement. Sources that participate in the trading program would be
required to meet the monitoring requirements under part 75. Consistent
with the Agency's Performance Based Measurement System (PBMS), part 75
sets forth performance criteria that allow the use of alternative
methods to the ones set forth in part 75. The PBMS approach is intended
to be more flexible and cost-effective for the regulated community; it
is also intended to encourage innovation in analytical technology and
improved data quality. EPA is not precluding the use of any method,
whether it constitutes a voluntary consensus standard or not, as long
as it meets the performance criteria specified, however any alternative
methods must be approved in advance before they may be used under part
75.
The EPA welcomes comments on this aspect of the proposed rulemaking
and, specifically, invites the public to identify potentially-
applicable voluntary consensus standards and to explain why such
standards should be used in this regulation. As part of a larger
effort, EPA is undertaking a project to cross-reference existing
voluntary consensus standards on testing, sampling, and analysis, with
current and future EPA test methods. When completed, this project will
assist EPA in identifying potentially-applicable voluntary consensus
standards which can then be evaluated for equivalency and applicability
in determining compliance with future regulations.

List of Subjects

40 CFR Part 52

Environmental protection, Acid rain program, Air pollution control,
Nitrogen dioxide, Reporting and recordkeeping requirements.

40 CFR Part 98

Environmental protection, Administrative practice and procedure,
Air pollution control, Nitrogen dioxide, Reporting and recordkeeping
requirements.

Dated: September 24, 1998.
Carol M. Browner,
Administrator.

For the reasons set forth in the preamble, parts 52 and 98 of
chapter 1 of title 40 of the Code of Federal Regulations are proposed
to be amended as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

1. The authority citation for part 52 continues to read as follows:

Authority: 42 U.S.C. 7401-7671q.

Subpart A--General Provisions

2. Subpart A is amended to add Sec. 52.35 to read as follows:

Sec. 52.35 Requirements of Federal implementation plan relating to
budgets for emissions of nitrogen oxides.

(a) Failure. The provisions of this section are applicable to
sources of emissions of nitrogen oxides (NO_X) located within
any State that is listed in 40 CFR 51.121(c) and for which EPA has
found that the State has:
(1) Failed to submit the State implementation plan revision
required by 40 CFR 51.121;
(2) Failed to submit such a plan revision meeting the minimum
criteria in 40 CFR 51.103 and Appendix V of part 51; or
(3) Submitted a plan revision that EPA has disapproved as not
meeting the requirements of 40 CFR 51.121.
(b) FIP Regulations. The provisions of parts 97 and 98 of this
chapter constitute the Federal implementation plan provisions for each
State described in paragraph (a) of this section. These provisions do
not invalidate or otherwise affect the obligations of States, emissions
sources or other persons with respect to all portions of plans approved
or promulgated under this part, nor the obligations of States under the
requirements of 40 CFR 51.121 and 51.122.

Subpart B--Alabama

3. Subpart B is amended to add Sec. 52.64 to read as follows:

Sec. 52.64 Interstate pollutant transport provisions; requirements for
decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Alabama and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart H--Connecticut

4. Subpart H is amended to add Sec. 52.377 to read as follows:

Sec. 52.377 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Connecticut and for which
requirements are set forth in parts 97 or 98 of this chapter must
comply with such applicable requirements.

[[Page 56424]]

Subpart I--Delaware

5. Subpart I is amended to add Sec. 52.425 to read as follows:

Sec. 52.425 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Delaware and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.
6. Subpart J is amended to add Sec. 52.475 to read as follows:

Sec. 52.475 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the District of Columbia and for which
requirements are set forth in parts 97 or 98 of this chapter must
comply with such applicable requirements.

Subpart L--Georgia

6a. Subpart L is amended to add Sec. 52.584 to read as follows:

Sec. 52.584 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Georgia and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart O--Illinois

7. Subpart O is amended to add Sec. 52.723 to read as follows:

Sec. 52.723 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Illinois and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart P--Indiana

8. Subpart P is amended to add Sec. 52.774 to read as follows:

Sec. 52.774 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Indiana and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart S--Kentucky

9. Subpart S is amended to add Sec. 52.939 to read as follows:

Sec. 52.939 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Kentucky and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart V--Maryland

10. Subpart V is amended to add Sec. 52.1078 to read as follows:

Sec. 52.1078 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Maryland and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart W--Massachusetts

11. Subpart W is amended to add Sec. 52.1166 to read as follows:

Sec. 52.1166 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Massachusetts and for which
requirements are set forth in parts 97 or 98 of this chapter must
comply with such applicable requirements.

Subpart X--Michigan

12. Subpart X is amended to add Sec. 52.1179 to read as follows:

Sec. 52.1179 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Michigan and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart AA--Missouri

13. Subpart AA is amended to add Sec. 52.1326 to read as follows:

Sec. 52.1326 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Missouri and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart FF--New Jersey

14. Subpart FF is amended to add Sec. 52.1582 to read as follows:

Sec. 52.1582 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of New Jersey and for which
requirements are set forth in parts 97 or 98 of this chapter must
comply with such applicable requirements.

Subpart HH--New York

15. Subpart HH is amended to add Sec. 52.1684 to read as follows:

Sec. 52.1684 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of New York and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart II--North Carolina

16. Subpart II is amended to add Sec. 52.1779 to read as follows:

Sec. 52.1779 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of North Carolina and for which
requirements are set forth in parts 97 or 98 of this chapter must
comply with such applicable requirements.

Subpart KK--Ohio

17. Subpart KK is amended to add Sec. 52.1874 to read as follows:

Sec. 52.1874 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Ohio and for which requirements are
set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

[[Page 56425]]

Subpart NN--Pennsylvania

18. Subpart NN is amended to add Sec. 52.2031 to read as follows:

Sec. 52.2031 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Pennsylvania and for which
requirements are set forth in parts 97 or 98 of this chapter must
comply with such applicable requirements.

Subpart OO--Rhode Island

19. Subpart OO is amended to add Sec. 52.2082 to read as follows:

Sec. 52.2082 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Rhode Island and for which
requirements are set forth in parts 97 or 98 of this chapter must
comply with such applicable requirements.

Subpart PP--South Carolina

20. Subpart PP is amended to add Sec. 52.2135 to read as follows:

Sec. 52.2135 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of South Carolina and for which
requirements are set forth in parts 97 or 98 of this chapter must
comply with such applicable requirements.

Subpart RR--Tennessee

21. Subpart RR is amended to add Sec. 52.2232 to read as follows:

Sec. 52.2232 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Tennessee and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart VV--Virginia

22. Subpart VV is amended to add Sec. 52.2429 to read as follows:

Sec. 52.2429 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Virginia and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.

Subpart XX--West Virginia

23. Subpart XX is amended to add Sec. 52.2529 to read as follows:

Sec. 52.2529 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of West Virginia and for which
requirements are set forth in parts 97 or 98 of this chapter must
comply with such applicable requirements.

Subpart YY--Wisconsin

24. Subpart YY is amended to add Sec. 52.2576 to read as follows:

Sec. 52.2576 Interstate pollutant transport provisions; requirements
for decreases in emissions of nitrogen oxides.

FIP Regulations. The owner or operator of each NO_X
source located within the State of Wisconsin and for which requirements
are set forth in parts 97 or 98 of this chapter must comply with such
applicable requirements.
25. Part 98 is added to read as follows:

PART 98--NITROGEN OXIDES (NO_X) BUDGET PROGRAM
REQUIREMENTS FOR STATIONARY SOURCES NOT IN THE TRADING PROGRAM

Subpart A--Emissions of NO_X From Stationary Reciprocating
Internal Combustion Engines

Sec.
98.1 Applicability.
98.2 Definitions.
98.3 Standard requirements.
98.4 Compliance determination.
98.5 Reporting, monitoring and recordkeeping.
98.6 Exemptions.

Subpart B--Emissions of NO_X From Cement Manufacturing.

98.41 Applicability.
98.42 Definitions.
98.43 Standard requirements.
98.44 Reporting, monitoring and recordkeeping.
98.45 Exemptions.

Authority: 42 U.S.C. 7401-7671q.

Subpart A--Emissions of NO_X From Stationary
Reciprocating Internal Combustion Engines

Sec. 98.1 Applicability.

(a) Any owner or operator of a rich burn stationary internal
combustion engine rated at equal to or greater than 2,400 brake
horsepower shall comply with the applicable requirements of this
section and Secs. 98.2 through 97.6.
(b) Any owner or operator of a lean burn stationary internal
combustion engine rated at equal to or greater than 2,400 brake
horsepower shall comply with the applicable requirements of this
section and Secs. 98.2 through 98.6.
(c) Any owner or operator of a diesel stationary internal
combustion engine rated at equal to or greater than 3,000 brake
horsepower shall comply with the applicable requirements of this
section and Sec. 98.2 through 98.6.
(d) Any owner or operator of a dual fuel stationary internal
combustion engine rated at equal to or greater than 4,400 brake
horsepower shall comply with the applicable requirements of this
section and Sec. 98.2 through 98.6.

Sec. 98.2 Definitions.

For the purposes of this subpart, the following definitions shall
apply.
(a) Diesel engine means a compression ignited two- or four-stroke
engine in which liquid fuel injected into the combustion chamber
ignites when the air charge has been compressed to a temperature
sufficiently high for auto-ignition.
(b) Dual fuel engine means a compression ignited stationary
internal combustion engine that is burning liquid fuel and gaseous fuel
simultaneously.
(c) Emergency standby engine means an internal combustion engine
used only when normal power line or natural gas service fails, or for
the emergency pumping of water for either fire protection or flood
relief. An emergency standby engine may not be operated to supplement a
primary power source when the load capacity or rating of the primary
power source has been either reached or exceeded.
(d) Engine rating means the output of an engine as determined by
the engine manufacturer and listed on the nameplate of the unit,
regardless of any derating.
(e) Higher heating value (HHV) means the total heat liberated per
mass of fuel burned (Btu per pound), when fuel and dry air at standard
conditions undergo complete combustion and all resultant products are
brought to their standard States at standard conditions. If
certification of the HHV is not provided by the third party fuel
supplier, it shall be determined by one of the following test methods:
ASTM D2015-85 for solid fuels; ASTM D240-87 or ASTM D2382-88 for liquid
hydrocarbon fuels; or ASTM D1826-88 or ASTM D1945-81 in conjunction
with ASTM D3588-89 for

[[Page 56426]]

gaseous fuels. These methods are all incorporated by reference as
specified at 40 CFR 52.3002.
(f) Lean-burn engine means any two-or four-stroke spark-ignited
engine that is not a rich-burn engine.
(g) Maintenance operation means the use of an emergency standby
engine and fuel system during testing, repair and routine maintenance
to verify its readiness for emergency standby use.
(h) Malfunction means any sudden and unavoidable failure of air
pollution control equipment or process equipment or of a process to
operate in a normal or usual manner. Failures that are caused entirely
or in part by poor maintenance, careless operation, or any other
preventable upset condition or preventable equipment breakdown shall
not be considered malfunctions.
(i) Output means the shaft work output from an engine plus the
energy reclaimed by any useful heat recovery system.
(j) Peak load means the maximum instantaneous operating load.
(k) Permitted capacity factor means the annual permitted fuel use
divided by the manufacturers specified maximum fuel consumption times
8,760 hours per year.
(l) Rich-burn engine means a two- or four-stroke spark-ignited
engine where the manufacturers original recommended operating air/fuel
ratio divided by the stoichiometric air/fuel ratio is less than or
equal to 1.1.
(m) Shutdown means the period of time a unit is cooled from its
normal operating temperature to cold or ambient temperature.
(n) Startup means the period of time a unit is heated from cold or
ambient temperature to its normal operating temperature as specified by
the manufacturer.
(o) Stationary internal combustion engine means any internal
combustion engine of the reciprocating type that is either attached to
a foundation at a facility or is designed to be capable of being
carried or moved from one location to another and remains at a single
site at a building, structure, facility, or installation for more than
12 consecutive months. Any engine (or engines) that replaces an engine
at a site that is intended to perform the same or similar function as
the engine replaced is included in calculating the consecutive time
period. Nonroad engines and engines used solely for competition are not
stationary internal combustion engines.
(p) Stoichiometric air/fuel ratio means the air/fuel ratio where
all fuel and all oxygen in the air/fuel mixture will be consumed.
(q) Unit means any diesel, lean-burn, or rich-burn stationary
internal combustion engine as defined in paragraph (o) of this section.

Sec. 98.3 Standard requirements.

After May 1, 2003, an owner or operator of a unit subject to the
standards of this subpart shall not operate the unit May 1 through
September 30 of 2003, and any subsequent year unless the owner or
operator complies with the requirements of paragraph (a) of this
section during May 1 through September 30 of each year.
(a) No owner or operator of a stationary internal combustion engine
shall cause to be discharged into the atmosphere any gases that contain
NO_X in excess of the following applicable limit, expressed
as NO2 corrected to 15 percent parts per million by volume
(ppmv) stack gas O2 on a dry basis, averaged over a rolling
30-day period:

(1) Rich-burn, 2400 bhp: 110 ppmv
(2) Lean-burn, 2400 bhp: 125 ppmv
(3) Diesel, 3000 bhp: 175 ppmv
(4) Dual fuel, 4400 bhp: 125 ppmv

(b) Each emission limit expressed in paragraphs (a)(1) through (4)
of this section may be multiplied by X, where X equals the engine
efficiency (E) divided by a reference efficiency of 30 percent. Engine
efficiency (E) shall be determined using one of the methods specified
in paragraph (b)(1) or (2) of this section, whichever provides a higher
value. However, engine efficiency (E) shall not be less than 30
percent. An engine with an efficiency lower than 30 percent shall be
assigned an efficiency of 30 percent.
(1)
[GRAPHIC] [TIFF OMITTED] TP21OC98.005

where energy input is determined by a fuel measuring device accurate to
5 percent and is based on the higher heating value (HHV) of
the fuel. Percent efficiency (E) shall be averaged over 15 consecutive
minutes and measured at peak load for the applicable engine.
(2)
[GRAPHIC] [TIFF OMITTED] TP21OC98.006

Where
LHV = the lower heating value of the fuel; and
HHV = the higher heating value of the fuel

Sec. 98.4 Compliance determination.

Any owner or operator of a unit subject to the requirements of
Sec. 98.3 shall determine compliance using a continuous emissions
monitoring system (CEMS) which meets the applicable requirements of
Appendices B and F of 40 CFR part 60, excluding data obtained during
periods specified in Sec. 98.6.

Sec. 98.5 Reporting, monitoring, and recordkeeping.

(a) Reporting requirements. Any owner or operator subject to the
requirements of Sec. 98.3 shall comply with the following requirements:
(1) By May 1, 2003, submit to the Administrator the identification
number and type of each unit subject to the section, the name and
address of the plant where the unit is located, and the name and
telephone number of the person responsible for demonstrating compliance
with the section.
(2) Submit a report documenting for that unit the total
NO_X emissions from May 1 through September 30 of each year
to the Administrator by October 31 of each year, beginning in 2003.
(3) Each owner or operator of a unit subject to this rule and
operating a CEMS shall submit an excess emissions and monitoring
systems performance report, in accordance with the requirements of 40
CFR 60.7(c) and 60.13.
(b) Monitoring requirements. (1) Any owner or operator subject to
the requirements of Sec. 98.3 shall not operate such equipment unless
it is equipped with one of the following:
(i) A CEMS which meets the applicable requirements of 40 CFR part
60, subpart A, and appendix B, and complies with the quality assurance
procedures specified in 40 CFR part 60, appendix F. The CEMS shall be
used to demonstrate compliance with the applicable emission limit.
(ii) An alternate calculational and recordkeeping procedure based
upon actual emissions testing and correlations with operating
parameters. The installation, implementation and use of such an
alternate calculational and recordkeeping procedure must be approved by
EPA in writing prior to implementation.
(2) The CEMS or approved alternate recordkeeping procedure shall be
operated and maintained in accordance with an on-site CEMS operating
plan approved by EPA.
(c) Recordkeeping requirements.
(1) Any owner or operator of a unit subject to this subpart shall
maintain all records necessary to demonstrate compliance with the
section for a period of 2 calendar years at the plant at which the
subject unit is located. The records shall be made available to the

[[Page 56427]]

Administrator upon request. The owner or operator shall maintain
records of the following information for each day the unit is operated:
(i) Identification and location of each engine subject to the
requirements of this section.
(ii) Calendar date of record.
(iii) The number of hours the unit is operated during each day
including startups, shutdowns, malfunctions, and the type and duration
of maintenance and repairs.
(iv) Date and results of each emissions inspection.
(v) A summary of any emissions corrective maintenance taken.
(vi) The results of all compliance tests.
(vii) If a unit is equipped with a CEMS:
(A) Identification of time periods during which NO_X
standards are exceeded, the reason for the exceedance, and action taken
to correct the exceedance and to prevent similar future exceedances.
(B) Identification of the time periods for which operating
conditions and pollutant data were not obtained including reasons for
not obtaining sufficient data and a description of corrective actions
taken.
(2) [Reserved]

Sec. 98.6 Exemptions.

(a) The requirements of Secs. 98.3, 98.4, and 98.5 shall not apply
to the following periods of operation:
(1) Start-up and shut-down periods and periods of malfunction, not
to exceed 36 consecutive hours;
(2) Regularly scheduled maintenance activities.

Subpart B--Emissions of NO_X From Cement Manufacturing

Sec. 98.41 Applicability.

The requirements of this subpart apply only to kilns with process
rates of at least the following: long dry kilns--12 tons per hour
(TPH); long wet kilns--10 TPH; preheater kilns--16 TPH; precalciner and
preheater/precalciner kilns--22 TPH.

Sec. 98.42 Definitions.

(a) Clinker means the product of a Portland cement kiln from which
finished cement is manufactured by milling and grinding.
(b) Long dry kiln means a kiln 14 feet or larger in diameter, 400
feet or greater in length, which employs no preheating of the feed. The
inlet feed to the kiln is dry.
(c) Long wet kiln means a kiln 14 feet or larger in diameter, 400
feet or greater in length, which employs no preheating of the feed. The
inlet feed to the kiln is a slurry.
(d) Low-NO_X burners means combustion equipment designed
to reduce flame turbulence, delay fuel/air mixing, and establish fuel-
rich zones for initial combustion.
(e) Malfunction means any sudden, infrequent, and not reasonably
preventable failure of air pollution control equipment, process
equipment, or a process to operate in a normal or usual manner.
Failures that are caused in part by poor maintenance or careless
operation are not malfunctions.
(f) Mid-kiln firing means the secondary firing in kilns by
injecting solid fuel at an intermediate point in the kiln using a
specially designed feed injection mechanism for the purpose of
decreasing NO_X emissions through:
(1) Burning part of the fuel at a lower temperature; and
(2) Reducing conditions at the solid waste injection point that may
destroy some of the NO_X formed upstream in the kiln burning
zone.
(g) Portland cement means a hydraulic cement produced by
pulverizing clinker consisting essentially of hydraulic calcium
silicates, usually containing one or more of the forms of calcium
sulfate as an interground addition.
(h) Portland cement kiln means a system, including any solid,
gaseous or liquid fuel combustion equipment, used to calcine and fuse
raw materials, including limestone and clay, to produce Portland cement
clinker.
(i) Precalciner kiln means a kiln where the feed to the kiln system
is preheated in cyclone chambers and utilize a second burner to calcine
material in a separate vessel attached to the preheater prior to the
final fusion in a kiln which forms clinker.
(j) Preheater kiln means a kiln where the feed to the kiln system
is preheated in cyclone chambers prior to the final fusion in a kiln
which forms clinker.
(k) Shutdown means the cessation of operation of a Portland cement
kiln for any purpose.
(l) Startup means the setting in operation of a Portland cement
kiln for any purpose.

Sec. 98.43 Standard requirements.

After May 1, 2003, an owner or operator of any Portland cement kiln
subject to this rule shall not operate the kiln during May 1 through
September 30 unless the kiln has installed and operates during May 1 to
September 30 with low-NO_X burners, mid-kiln firing, or
alternative control techniques, subject to EPA approval, that achieve
at least the same emissions decreases as low-NO_X burners or
mid-kiln firing.

Sec. 98.44 Reporting, monitoring and recordkeeping.

(a) Reporting requirements. Any owner or operator subject to the
requirements of Sec. 98.43 shall comply with the following
requirements:
(1) By May 1, 2003, submit to the Administrator the identification
number and type of each unit subject to the section, the name and
address of the plant where the unit is located, and the name and
telephone number of the person responsible for demonstrating compliance
with the section.
(2) Submit a report documenting for that unit the total
NO_X emissions from May 1 through September 30 of each year
to the Administrator by October 31 of each year, beginning in 2003.
(b) Monitoring requirements. Any owner or operator of a unit
subject to this subpart shall complete an initial performance test and
subsequent annual testing consistent with the requirements of 40 CFR
part 60, appendix A, Method 7, 7A ,7C, 7D, or 7E.
(c) Recordkeeping Requirements. Any owner or operator of a unit
subject to this subpart shall produce and maintain records which shall
include, but are not limited to:
(1) The emissions, in pounds of NO_X per ton of clinker
produced from each affected Portland cement kiln.
(2) The date, time and duration of any startup, shutdown or
malfunction in the operation of any of the cement kilns or the
emissions monitoring equipment.
(3) The results of any performance testing.
(4) Daily cement kiln production records.
(5) All records required to be produced or maintained shall be
retained on site for a minimum of 2 years and be made available to the
EPA or State or local agency upon request.

Sec. 98.45 Exemptions.

The requirements of Secs. 98.43 and 98.44 shall not apply to the
following periods of operation:
(a) Start-up and shut-down periods and periods of malfunction, not
to exceed 36 consecutive hours;
(b) Regularly scheduled maintenance activities.

[FR Doc. 98-26431 Filed 10-20-98; 8:45 am]
BILLING CODE 6560-01-P

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