Rulemaking on Section 126 Petition From North Carolina To Reduce Interstate Transport of Fine Particulate Matter and Ozone; Federal Implementation Plans To Reduce Interstate Transport of Fine Particulate Matter and Ozone; Revisions to the Clean Air Interstate Rule; Revisions to the Acid Rain Program, 49708-49833 [05-15529]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 70, Number 163 (Wednesday, August 24, 2005)]
[Proposed Rules]
[Pages 49708-49833]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-15529]



[[Page 49707]]

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Part II





Environmental Protection Agency





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40 CFR Part 51, et al.



Rulemaking on Section 126 Petition From North Carolina To Reduce 
Interstate Transport of Fine Particulate Matter and Ozone; Federal 
Implementation Plans To Reduce Interstate Transport of Fine Particulate 
Matter and Ozone; Revisions to the Clean Air Interstate Rule; Revisions 
to the Acid Rain Program; Proposed Rule

Federal Register / Vol. 70, No. 163 / Wednesday, August 24, 2005 / 
Proposed Rules

[[Page 49708]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 72, 73, 74, 78, 96, and 97

[OAR-2004-0076; FRL-7948-3]
RIN 2060-AM99


Rulemaking on Section 126 Petition From North Carolina To Reduce 
Interstate Transport of Fine Particulate Matter and Ozone; Federal 
Implementation Plans To Reduce Interstate Transport of Fine Particulate 
Matter and Ozone; Revisions to the Clean Air Interstate Rule; Revisions 
to the Acid Rain Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking (NPR).

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SUMMARY: Today, EPA is proposing actions to address the interstate 
transport of emissions of nitrogen oxides (NOX) and sulfur 
dioxide (SO2) that contribute significantly to nonattainment 
and maintenance problems with respect to the national ambient air 
quality standards (NAAQS) for fine particulate matter 
(PM2.5) and 8-hour ozone. As one part of today's action, EPA 
is proposing its response to a petition submitted to EPA by the State 
of North Carolina under section 126 of the Clean Air Act (CAA). The 
petition requests that EPA find that SO2 and/or 
NOX emissions from electric generating units (EGUs) in 13 
States are significantly contributing to PM2.5 and/or 8-hour 
ozone nonattainment and maintenance problems in North Carolina, and 
requests that EPA establish control requirements to prohibit such 
significant contribution. The EPA's proposed response is based on 
extensive analyses conducted for the recently issued Clean Air 
Interstate Rule (CAIR). The EPA is proposing to deny the petition for 
sources in States not shown to be linked to nonattainment and 
maintenance problems in North Carolina under the CAIR. For sources in 
States that are linked to North Carolina under the CAIR, EPA is 
proposing in the alternative to deny the petition if EPA promulgates 
Federal implementation plans (FIPs) to address the interstate transport 
no later than the final section 126 response or to grant the petition 
if EPA does not promulgate the FIPs prior to or concurrently with the 
section 126 response. The EPA's preferred option is to promulgate the 
FIP concurrently with the final section 126 response.
    In today's action, EPA is also proposing FIPs for all jurisdictions 
that are covered by the CAIR. The FIPs would regulate EGUs in the 
affected States and achieve the emissions reductions requirements 
established by the CAIR until States have approved State implementation 
plans (SIPs) to achieve the reductions. The EPA intends the FIP to 
satisfy the concerns cited in the section 126 petition and provide a 
Federal backstop for the CAIR. In no way should the FIP for CAIR be 
viewed as a sign of any concern about States meeting the SIP 
responsibilities under CAIR.
    As the control requirements for both the section 126 action and the 
FIP, EPA is proposing Federal NOX and SO2 trading 
programs that provide emissions reductions equal to those required 
under the CAIR in affected States.
    The Section 126 and FIP actions would not constrain States in their 
selection of control strategies to meet the CAIR. The EPA intends to 
withdraw section 126 or FIP requirements in a State if that State 
submits and EPA approves a SIP meeting the requirements of CAIR.
    Today's action also proposes revisions to the CAIR in order to 
address the interaction between the EPA-administered Federal CAIR 
trading programs proposed today and the EPA-administered State CAIR 
trading programs that will be created by any State that elects to 
submit a SIP establishing such a trading program to meet the 
requirements of the CAIR. In addition, EPA is proposing revisions to 
the CAIR to correct certain minor errors.
    Today's action also proposes revisions to the Acid Rain Program in 
order to make the administrative appeals procedures, which currently 
apply to final determinations by the Administrator under the EPA-
administered State CAIR trading programs, also apply to the EPA-
administered trading programs under the section 126 and FIP actions. In 
addition, we are proposing certain minor revisions to the Acid Rain 
Program that would apply to all affected units.

DATES: Comments must be received on or before October 24, 2005. Public 
hearings will be held on September 15, 2005 in Washington, DC and on 
September 14, 2005 in Research Triangle Park, North Carolina. Please 
refer to SUPPLEMENTARY INFORMATION for additional information on the 
comment period and the public hearings.

ADDRESSES: Submit your comments, identified by Docket ID No. OAR-2004-
0076, by one of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the on-line instructions for submitting comments.
     Agency Web site: https://www.epa.gov/edocket. EDOCKET, 
EPA's electronic public docket and comment system, is EPA's preferred 
method for receiving comments. Follow the on-line instructions for 
submitting comments.
     E-mail: A-and-R-Docket@epa.gov.
     Mail: Air Docket, Attention: Docket No. OAR-2004-0076, 
Environmental Protection Agency, Mailcode: 6102T, 1200 Pennsylvania 
Ave., NW., Washington, DC 20460.
     Hand Delivery: EPA Docket Center, 1301 Constitution 
Avenue, NW., Room B102, Washington, DC. Such deliveries are only 
accepted during the Docket's normal hours of operation, and special 
arrangements should be made for deliveries of boxed information
    Instructions: Direct your comments to Docket ID No.: OAR-2004-0076. 
The EPA's policy is that all comments received will be included in the 
public docket without change and may be made available online at http:/
/www.epa.gov/edocket, including any personal information provided, 
unless the comment includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Do not submit information that you consider to 
be CBI or otherwise protected through EDOCKET, regulations.gov, or e-
mail. The EPA EDOCKET and the Federal regulations.gov Web sites are 
``anonymous access'' systems, which means EPA will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an e-mail comment directly to EPA without 
going through EDOCKET or regulations.gov, your e-mail address will be 
automatically captured and included as part of the comment that is 
placed in the public docket and made available on the Internet. If you 
submit an electronic comment, EPA recommends that you include your name 
and other contact information in the body of your comment and with any 
disk or CD-ROM you submit. If EPA cannot read your comment due to 
technical difficulties and cannot contact you for clarification, EPA 
may not be able to consider your comment. Electronic files should avoid 
the use of special characters, any form of encryption, and be free of 
any defects or viruses. For additional information about EPA's public 
docket visit EDOCKET on-line or see the Federal Register of May 31, 
2002 (67 FR 38102). For additional instructions on submitting comments, 
go to the

[[Page 49709]]

SUPPLEMENTARY INFORMATION section of this document.
    Docket: All documents in the docket are listed in the EDOCKET index 
at https://www.epa.gov/edocket. Although listed in the index, some 
information is not publicly available, i.e., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically in EDOCKET or in hard 
copy at the EPA Docket Center, EPA West, Room B102, 1301 Constitution 
Avenue, NW., Washington, DC. The Public Reading Room is open from 8:30 
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The 
telephone number for the Public Reading Room is (202) 566-1744, and the 
telephone number for the Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT: For general questions concerning 
today's section 126 action, please contact Carla Oldham, U.S. EPA, 
Office of Air Quality Planning and Standards, Air Quality Strategies 
and Standards Division, C539-02, Research Triangle Park, NC 27711, 
telephone (919) 541-3347, e-mail at oldham.carla@epa.gov. For general 
questions concerning today's FIP action, please contact Tom Coda, U.S. 
EPA, Office of Air Quality Planning and Standards, Air Quality 
Strategies and Standards Division, C539-02, Research Triangle Park, NC 
27711, telephone (919) 541-3037, e-mail at coda.tom@epa.gov. For legal 
questions concerning the section 126 action, please contact Steven 
Silverman, U.S. EPA, Office of General Counsel, Mail Code 2344A, 1200 
Pennsylvania Avenue, NW., Washington, DC 20460, telephone (202) 564-
5523, e-mail at silverman.steven@epa.gov. For legal questions 
concerning the FIP action, please contact Sonja Petersen, U.S. EPA, 
Office of General Counsel, Mail Code 2344A, 1200 Pennsylvania Avenue, 
NW., Washington, DC, 20460, telephone (202) 564-4097, e-mail at 
petersen.sonja@epa.gov. For questions regarding the cap and trade 
programs and emissions budgets, please contact Meg Victor, U.S. EPA, 
Office of Atmospheric Programs, Clean Air Markets Division, Mail Code 
6204J, 1200 Pennsylvania Avenue, NW., Washington, DC, 20460, telephone 
(202) 343-9193, e-mail at victor.meg@epa.gov. For questions regarding 
the revisions to the CAIR and Acid Rain Programs, please contact Dwight 
Alpern, U.S. EPA, Office of Atmospheric Programs, Clean Air Markets 
Division, Mail Code 6204J, 1200 Pennsylvania Avenue, NW., Washington, 
DC, 20460, telephone (202) 343-9151, e-mail at alpern.dwight@epa.gov. 
For questions regarding analyses required by statutes and executive 
orders, please contact Ron Evans, U.S. EPA, Office of Air Quality 
Planning and Standards, Air Quality Strategies and Standards Division, 
Mail Code C339-01, Research Triangle Park, NC, 27711, telephone (919) 
541-5488, e-mail at evans.ron@epa.gov.

SUPPLEMENTARY INFORMATION:

I. Does This Action Apply to Me?

    Categories and entities potentially regulated by this action 
include the following:

------------------------------------------------------------------------
                                      NAICS     Examples of potentially
             Category                code \1\      regulated entities
------------------------------------------------------------------------
Industry..........................     221112  Fossil fuel-fired
                                                electric utility steam
                                                generating units.
Federal government................        \2\  Fossil fuel-fired
                                       221122   electric utility steam
                                                generating units owned
                                                by the Federal
                                                government.
State/local/Tribal government.....        \2\  Fossil fuel-fired
                                       221122   electric utility steam
                                                generating units owned
                                                by municipalities.
                                       921150  Fossil fuel-fired
                                                electric utility steam
                                                generating units in
                                                Indian Country.
------------------------------------------------------------------------
\1\ North American Industry Classification System.
\2\ Federal, State, or local government-owned and operated
  establishments are classified according to the activity in which they
  are engaged.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. To determine whether your facility could potentially be 
affected by this action, you should examine the definitions and 
applicability criteria in Sec. Sec.  72.2, 72.6, 72.7, 72.8, and 74.2 
for purposes of the Acid Rain Program revisions and proposed Sec. Sec.  
97.102, 97.104, 97.105, 97.202, 97.204, 97.205, 97.302, 97.304, and 
97.305 for purposes of the section 126 and FIP actions. If you have any 
questions regarding the applicability of this action to a particular 
entity, consult the person listed in the preceding section under FOR 
FURTHER INFORMATION CONTACT.

II. What Should I Consider as I Prepare My Comments for EPA?

    1. Submitting CBI. Do not submit comments that include CBI to EPA 
through EDOCKET, regulations.gov or e-mail. Clearly mark the part or 
all of the information that you claim to be CBI. For CBI information in 
a disk or CD-ROM that you mail to EPA, mark the outside of the disk or 
CD-ROM as CBI and then identify electronically within the disk or CD-
ROM the specific information that is claimed as CBI. In addition to one 
complete version of the comment that includes information claimed as 
CBI, a copy of the comment that does not contain the information 
claimed as CBI must be submitted for inclusion in the public docket. 
Information so marked will not be disclosed except in accordance with 
procedures set forth in 40 CFR part 2. Send or deliver information 
identified as CBI only to the following address: Roberto Morales, U.S. 
EPA, Office of Air Quality Planning and Standards, Mail Code C404-02, 
Research Triangle Park, NC 27711, telephone (919) 541-0880, e-mail at 
morales.roberto@epa.gov, Attention Docket ID No. OAR-2004-0076.
    2. Tips for Preparing Your Comments. When submitting comments, 
remember to:
    i. Identify the rulemaking by docket number and other identifying 
information (subject heading, Federal Register date and page number).
    ii. Follow directions--The agency may ask you to respond to 
specific questions or organize comments by referencing a Code of 
Federal Regulations (CFR) part or section number.
    iii. Explain why you agree or disagree; suggest alternatives and 
substitute language for your requested changes.
    iv. Describe any assumptions and provide any technical information 
and/or data that you used.
    v. If you estimate potential costs or burdens, explain how you 
arrived at your estimate in sufficient detail to allow for it to be 
reproduced.

[[Page 49710]]

    vi. Provide specific examples to illustrate your concerns, and 
suggest alternatives.
    vii. Explain your views as clearly as possible, avoiding the use of 
profanity or personal threats.
    viii. Make sure to submit your comments by the comment period 
deadline identified.

III. Availability of Related Information

    The EPA has conducted a separate rulemaking that contains actions 
and information related to this proposal, ``Rule to Reduce Interstate 
Transport of Fine Particulate Matter and Ozone (Clean Air Interstate 
Rule)'' (see proposal at 69 FR 4566, January 30, 2004; supplemental 
proposal at 69 FR 32684, June 10, 2004; notice of data availability at 
69 FR 47828, August 6, 2004; and final rule at 70 FR 25162; May 12, 
2005). Documents related to the CAIR are available for inspection in 
docket OAR-2003-0053 at the address and times given above. The EPA has 
established a Web site for the CAIR at https://www.epa.gov/
cleanairinterstaterule or more simply https://www.epa.gov/cair/ which 
will also include information on the section 126 rulemaking actions. 
The rulemaking docket for the CAIR contains information and analyses 
that are relied upon in today's proposed actions. Therefore, EPA is 
including by reference the entire CAIR record for purposes of the 
section 126 and FIP rulemakings. The EPA is not accepting comment on 
the CAIR or otherwise reopening any issue decided in the CAIR for 
reconsideration or comment, except that we are taking comment 
specifically on the revisions to CAIR that EPA is proposing in today's 
action. Section VII in this preamble discusses the proposed changes to 
CAIR.

IV. Public Hearing

    The EPA will be holding two public hearings on today's proposal. On 
September 14, 2005, a public hearing will be held at the EPA, Building 
C, Room C111A-B, 109 T.W. Alexander Drive, Research Triangle Park, 
North Carolina 27709. On September 15, 2005, a public hearing will be 
held at EPA Headquarters, 1200 Pennsylvania Ave, NW., Room 1117 (EPA 
East), Washington, DC. The metro stop is Federal Triangle. Because 
these hearings are being held at U.S. government facilities, everyone 
planning to attend one of the hearings should be prepared to show valid 
picture identification to the security staff in order to gain access to 
the meeting room.
    The public hearings will begin at 9 a.m. and continue until 5 p.m., 
if necessary, depending on the number of speakers. The EPA may end the 
hearing early if all registered speakers have had an opportunity to 
speak, but no earlier than 2 p.m. Persons wishing to present oral 
testimony that have not made arrangements in advance should register by 
2 p.m. the day of the hearing. Oral testimony will be limited to 5 
minutes per commenter. The EPA encourages commenters to provide written 
versions of their oral testimonies either electronically (on computer 
disk or CD-ROM) or in paper copy. Verbatim transcripts and written 
statements will be included in the rulemaking docket. If you would like 
to present oral testimony at the hearing, please notify Joann Allman, 
U.S. EPA, Office of Air Quality Planning and Standards, C539-02, 
Research Triangle Park, NC 27711, telephone (919) 541-1815, e-mail 
allman.joann@epa.gov, by September 8, 2005. For updates and additional 
information on the public hearings, please check EPA's Web site for 
this rulemaking at https://www.epa.gov/cair.
    The public hearings will provide interested parties the opportunity 
to present data, views, or arguments concerning the proposed rules. The 
EPA may ask clarifying questions during the oral presentations, but 
will not respond to the presentations or comments at that time. Written 
statements and supporting information submitted during the comment 
period will be considered with the same weight as any oral comments and 
supporting information presented at a public hearing.

Outline

I. Background and Summary of Proposal
    A. Summary of Proposal
    B. General Background on PM2.5 and Ozone
    1. The PM2.5 Problem
    2. The 8-Hour Ozone Problem
    3. Other Environmental Effects Associated with SO2 
and NOX Emissions
    C. What Is the Statutory and Regulatory Background for Today's 
Action?
    1. What Is the ``Good Neighbor'' Provision?
    2. What Is the CAA Section 126 Provision?
    3. What Is EPA's Previous Section 126 Rulemaking?
    4. What Is the Clean Air Interstate Rule?
    5. What Are the Findings of Failure to Submit for the Section 
110(a)(2)(D) Plans?
    D. Summary of North Carolina Section 126 Petition
    1. What Sources Does the Petition Target?
    2. What Control Remedy Does the Petition Request?
    3. What Is the Technical Support for the Petition?
    E. What Is the Litigation on Section 126 Rulemaking Schedule?
    F. How Is EPA Addressing the Section 126-Related Comments 
Received During the CAIR Rulemaking?
II. What Is EPA's Legal and Analytical Approach for the Section 126 
Petition?
III. What Is EPA's Proposed Action on the Section 126 Petition?
    A. What Is EPA's Proposed Action With Respect to the 8-Hour 
Ozone NAAQS?
    B. What Is EPA's Proposed Action With Respect to the 
PM2.5 NAAQS?
    C. What Are the Proposed Requirements for Sources for Which EPA 
Makes a Section 126(b) Finding?
    D. When and How Would EPA Withdraw Section 126 Findings and 
Control Requirements in a State if EPA Approves a SIP to Meet the 
CAIR?
IV. What Is the Proposed Federal Implementation Plan for the CAIR?
    A. What Is the Legal Framework for the Proposed FIP?
    B. What Is the Timing and Scope of the CAIR FIP Action?
    C. What Are the FIP Control Measures?
    D. When and How Would EPA Remove the FIP Requirements if EPA 
Approves a SIP to Meet the CAIR?
V. Emission Reduction Requirements for the Proposed CAIR FIP and 
Proposed Section 126 Response
    A. Overview of Emission Reduction Requirements
    B. What Is EPA's Approach for Determining Regionwide 
NOX and SO2 Emissions Caps and State Emissions 
Budgets?
    1. Determination of Regionwide Caps for SO2 and 
NOX
    2. Determination of State by State Emissions Budgets for 
SO2 and NOX
    a. Determination of State SO2 Emissions Budgets
    b. Determination of State Annual and Ozone Season NOX 
Emissions Budgets
    C. What Are the State EGU Emission Budgets for the CAIR FIP and 
the Section 126 Response?
    1. What Are the Annual State EGU SO2 Emissions 
Budgets?
    2. What Are the Annual State EGU NOX Emissions 
Budgets?
    a. For States Affected by the CAIR FIP
    b. For States Affected by the Section 126 Response
    3. What Are the Ozone Season EGU NOX Emissions 
Budgets?
    a. For States Affected by the CAIR FIP
    b. For States Affected by the Section 126 Response
    4. What Are the Amounts of Allowances Available in the State 
Annual NOX Compliance Supplement Pools?
VI. Proposed Federal CAIR NOX and SO2 Cap and 
Trade Programs for EGUs
    A. Purpose of Federal CAIR NOX and SO2 Cap 
and Trade Programs and Relationship to the Section 126 Petition and 
the CAIR
    B. Overall Structure of the Proposed Federal CAIR Cap and Trade 
Programs
    1. SO2 Program
    2. NOX Program
    3. Ozone Season NOX Program
    C. Sources Affected Under the Proposed Federal CAIR Cap and 
Trade Programs
    D. Allocation of NOX Emission Allowances to Sources
    E. Allocation of SO2 Emission Allowances to Sources

[[Page 49711]]

    F. Allowance Banking
    G. Incentives for Early Reductions
    1. SO2 Program
    2. NOX Program
    3. Ozone Season NOX Program
    H. Monitoring and Reporting Requirements
    I. Differences Between the Proposed Federal CAIR Cap and Trade 
Programs and the CAIR SIP Rules
    J. Coordination Between the Proposed Federal CAIR Cap and Trade 
Programs and CAIR SIPs
    K. Relationship of Emissions Trading Programs to Section 126 
Relief
    L. Interactions with Other CAA Programs
VII. What Are the Revisions to the CAIR?
VIII. What Are the Revisions to the Acid Rain Program?
IX. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination with 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children from 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions that Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer Advancement Act
    J. Executive Order 12898: Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations

I. Background and Summary of Proposal

A. Summary of Proposal

    Today, EPA is proposing two actions to address the interstate 
transport of emissions of NOX and SO2 that 
contribute significantly to nonattainment and maintenance problems with 
respect to the NAAQS for PM2.5 and 8-hour ozone. First, EPA 
is proposing its response to a petition submitted to EPA by the State 
of North Carolina under section 126 of the CAA. The petition requests 
that EPA establish control requirements for EGUs in 13 States based on 
findings that these sources are significantly contributing to 
PM2.5 and/or 8-hour ozone nonattainment and maintenance 
problems in North Carolina. (See Petition, Docket No. OAR-2004-0076-
0002.)
    The EPA's proposed response is based on extensive analyses 
conducted for the CAIR (70 FR 25162; May 12, 2005). The EPA is 
proposing to deny the petition for sources in States not shown in the 
CAIR to be linked to (that is, to significantly contribute to) 
nonattainment and maintenance problems in North Carolina. For sources 
in States that are linked to North Carolina under the CAIR for the 
PM2.5 NAAQS, EPA is proposing in the alternative (1) to deny 
the petition in the event that EPA promulgates FIPs no later than the 
final section 126 response to address the interstate transport or (2) 
to grant the petition if EPA does not promulgate a FIP prior to or 
concurrently with the section 126 response. The EPA's preferred 
approach is to promulgate the FIP concurrently with the final section 
126 response and deny the petition. The FIP would control the 
significant transport from sources in States named in the petition as 
well as from sources in the other CAIR States, in the event that the 
States do not have approved SIPs meeting the CAIR requirements. The 
States named in the petition with respect to the PM2.5 NAAQS 
are: Alabama, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio, 
Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia. 
Of these, Illinois and Michigan are not linked to North Carolina in the 
final CAIR. The EPA is proposing to deny the petition with respect to 
the 8-hour ozone NAAQS, because there are no States linked to North 
Carolina under the CAIR for that NAAQS. The States named in the 
petition with respect to the 8-hour ozone NAAQS are: Georgia, Maryland, 
South Carolina, Tennessee, and Virginia.
    In today's action, EPA is also proposing FIPs to address interstate 
transport of NOX and SO2 under section 
110(a)(2)(D) for all jurisdictions that are covered by the CAIR. In the 
CAIR, EPA determined that 28 States and the District of Columbia 
contribute significantly to nonattainment of the NAAQS for 
PM2.5 and/or 8-hour ozone in downwind States. The CAIR 
explains EPA's basis for determining significant contribution to 
downwind nonattainment and maintenance problems. In that rule, the EPA 
required the affected upwind States to revise their SIPs to include 
control measures to reduce emissions of SO2 and/or 
NOX. Sulfur dioxide is a precursor to PM2.5 
formation, and NOX is a precursor to both ozone and 
PM2.5 formation.
    In an action published on the same day as the final CAIR, EPA 
proposed to find that Delaware and New Jersey contribute significantly 
to PM2.5 nonattainment and maintenance problems in downwind 
States considering these States as a single entity (70 FR 25408; May 
12, 2005). These States were included in the final CAIR only with 
respect to their impacts on downwind 8-hour ozone problems. Today's FIP 
proposal includes emissions reductions requirements for Delaware and 
New Jersey that would address their significant contribution to 
nonattainment or maintenance problems for the PM2.5 NAAQS if 
EPA ultimately finds that these States significantly contribute to 
PM2.5 problems in downwind States based on the approach in 
the proposed rule cited above.
    The FIPs would regulate EGUs in the affected States and achieve the 
emissions reductions required by the CAIR until States have approved 
SIPs to achieve the reductions. The CAIR emissions budgets were based 
on control requirements that are highly cost effective for EGUs.
    The EPA intends the CAIR FIPs to satisfy the concerns cited in the 
section 126 petition and to provide a Federal backstop for CAIR. In no 
way should the FIPs for CAIR be viewed as a sign of any concern about 
States meeting the SIP responsibilities under CAIR. There are no 
sanctions associated with these FIPs and EPA does not intend CAIR FIPs 
to have any other negative consequences for the affected States. The 
EPA is proposing FIP approaches that are flexible and intended to 
provide States options for getting their SIPs in place.
    As the control remedy for both the section 126 action (should EPA 
make positive findings under section 126(b)) and the FIP, EPA is 
proposing Federal NOX and SO2 cap and trade 
programs that provide the emissions reductions required by the CAIR. 
The trading programs are designed after the model cap and trade 
programs that EPA provided as a control option for States to meet the 
CAIR. The EPA intends to integrate the Federal trading programs with 
the EPA-administered State CAIR trading programs that are based on the 
model rules so that sources could trade with one another under the 
respective emissions caps.
    The EPA emphasizes that the section 126 response and FIP would not 
limit the options available to States to meet the requirements of the 
CAIR. We do not intend to record NOX allocations in sources' 
allowance accounts (or take any other steps to implement the section 
126 or FIP requirements that could impact a State's ability to regulate 
their sources in a different manner) until more than a year after the 
CAIR SIP submission deadline.\1\ This would allow EPA time

[[Page 49712]]

to take rulemaking action to approve timely SIPs and, thus, the FIP or 
section 126 requirements would not go into place. In addition, States 
could replace the FIP or section 126 requirements at a later time.
---------------------------------------------------------------------------

    \1\ The CAIR requires affected sources to begin monitoring one 
year before the initial control periods (i.e., sources begin 
monitoring in 2008 for the NOX programs and begin 
monitoring in 2009 for the SO2 program). Note that EPA 
would take any necessary actions to implement the monitoring 
provisions of the proposed Federal trading rules in time for 
monitoring to begin in 2008. To the extent that a State chooses to 
control EGUs to meet its CAIR obligations, the monitoring 
requirements would be identical whether EPA regulated EGUs through 
the proposed Federal trading programs or the State regulated EGUs 
through their SIP.
---------------------------------------------------------------------------

    In today's action, EPA is also proposing revisions to the CAIR in 
order to address the interaction of EPA-administered NOX and 
SO2 trading programs under the CAIR and under the section 
126 and FIP actions. In addition, EPA is proposing some revisions to 
the CAIR in order to correct certain minor errors.
    The EPA is also proposing revisions to the Acid Rain Program in 
order to make the administrative appeals procedures (in 40 CFR part 
78), which currently apply to final determinations by the Administrator 
under the EPA-administered States CAIR trading programs, also apply to 
the EPA-administered trading programs under the section 126 and FIP 
actions. In addition, EPA is proposing some minor revisions that would 
apply to all affected units under the Acid Rain Program.
    For purposes of the section 126 and FIP rulemakings, the EPA is not 
accepting comment on the CAIR or otherwise reopening any issue decided 
in the CAIR for reconsideration or comment, except that we are taking 
comment specifically on revisions to the CAIR that EPA is proposing in 
today's action. Section VII of this preamble discusses the proposed 
changes to the CAIR.

B. General Background on PM2.5 and Ozone

1. The PM2.5 Problem
    In an action published on July 18, 1997, we revised the NAAQS for 
particulate matter (PM) to add new standards for fine particles, using 
as the indicator particles with aerodynamic diameters smaller than a 
nominal 2.5 micrometers, termed PM2.5 (62 FR 38652). We 
established health- and welfare-based (primary and secondary) annual 
and 24-hour standards for PM2.5. The annual standard is 15 
micrograms per cubic meter, based on the 3-year average of annual mean 
PM2.5 concentrations. The 24-hour standard is 65 micrograms 
per cubic meter, based on the 3-year average of the annual 98th 
percentile of 24-hour concentrations. The annual standard is generally 
considered the more limiting.
    Fine particles are associated with a number of serious health 
effects including premature mortality, aggravation of respiratory and 
cardiovascular disease (as indicated by increased hospital admissions, 
emergency room visits, absences from school or work, and restricted 
activity days), lung disease, decreased lung function, asthma attacks, 
and certain cardiovascular problems. (See EPA, Air Quality Criteria for 
Particulate Matter (EPA/600/P-99/002bF, October 2004) at 9.2.2.3). The 
EPA has estimated that attainment of the PM2.5 standards 
would prolong tens of thousands of lives and would prevent, each year, 
tens of thousands of hospital admissions as well as hundreds of 
thousands of doctor visits, absences from work and school, and 
respiratory illnesses in children.
    Individuals particularly sensitive to fine particle exposure 
include older adults, people with heart and lung disease, and children. 
More detailed information on health effects of fine particles can be 
found on EPA's Web site at: https://www.epa.gov/ttn/naaqs/standards/pm/
s_pm_index.htm1.
    The secondary or welfare-based PM2.5 standards are 
designed to protect against major environmental effects caused by PM 
such as visibility impairment--including in Class I areas which include 
national parks and wilderness areas across the country--soiling, and 
materials damage.
    As discussed in other sections of this preamble, SO2 and 
NOX emissions both contribute to fine particle 
concentrations. In addition, NOX emissions contribute to 
ozone concentrations, described in the next section.
    The PM2.5 ambient air quality monitoring for the 2001-
2003 period shows that areas violating the standards are located across 
much of the eastern half of the United States and in parts of 
California and Montana. The EPA published the PM2.5 
attainment and nonattainment designations on January 5, 2005 (70 FR 
944).
2. The 8-Hour Ozone Problem
    In an action published on July 18, 1997, we promulgated identical 
revised primary and secondary ozone standards that specified an 8-hour 
ozone standard of 0.08 parts per million (ppm). Specifically, under the 
standards, the 3-year average of the fourth highest daily maximum 8-
hour average ozone concentration may not exceed 0.08 ppm. In general, 
the revised 8-hour standards are more protective of public health and 
the environment and more stringent than the pre-existing 1-hour ozone 
standards.
    Short-term (1- to 3-hour) and prolonged (6- to 8-hour) exposures to 
ambient ozone have been linked to a number of adverse health effects. 
Short-term exposure to ozone can irritate the respiratory system, 
causing coughing, throat irritation, and chest pain. Ozone can reduce 
lung function and make it more difficult to breathe deeply. Breathing 
may become more rapid and shallow than normal, thereby limiting a 
person's normal activity. Ozone also can aggravate asthma, leading to 
more asthma attacks that require a doctor's attention and the use of 
additional medication. Increased hospital admissions and emergency room 
visits for respiratory problems have been associated with ambient ozone 
exposures. Longer-term ozone exposure can inflame and damage the lining 
of the lungs, which may lead to permanent changes in lung tissue and 
irreversible reductions in lung function. A lower quality of life may 
result if the inflammation occurs repeatedly over a long time period 
(such as months, years, a lifetime). Recent epidemiological studies 
have shown a correlation between acute ozone exposures and increased 
risk of premature death.
    People who are particularly susceptible to the effects of ozone 
include people with respiratory diseases, such as asthma, and people 
with unusual sensitivity to ozone. Those who are exposed to higher 
levels of ozone include adults and children who are active outdoors.
    In addition to causing adverse health effects, ozone affects 
vegetation and ecosystems, leading to reductions in agricultural crop 
and commercial forest yields; reduced growth and survivability of tree 
seedlings; and increased plant susceptibility to disease, pests, and 
other environmental stresses (e.g., harsh weather). In long-lived 
species, these effects may become evident only after several years or 
even decades and have the potential for long-term adverse impacts on 
forest ecosystems. Ozone damage to the foliage of trees and other 
plants can also decrease the aesthetic value of ornamental species used 
in residential landscaping, as well as the natural beauty of our 
national parks and recreation areas. The economic value of some welfare 
losses due to ozone can be calculated, such as crop yield loss from 
both reduced seed production (e.g., soybean) and visible injury to some 
leaf crops (e.g., lettuce, spinach, tobacco), as well as visible injury 
to ornamental plants (i.e., grass, flowers, shrubs). Other types of 
welfare loss may not be quantifiable (e.g., reduced aesthetic value of 
trees growing in heavily visited national parks). More detailed 
information on health effects of ozone can be found at the following 
EPA Web

[[Page 49713]]

site: https://www.epa.gov/ttn/naaqs/standards/ozone/s_o3_index.html.
    Presently, wide geographic areas, including most of the nation's 
major population centers, experience ozone levels that violate the 
NAAQS for 8-hour ozone. These areas include much of the eastern part of 
the United States and large areas of California. The EPA published the 
8-hour ozone attainment and nonattainment designations in the Federal 
Register on April 30, 2004 (69 FR 23858).
3. Other Environmental Effects Associated With SO2 and 
NOX Emissions
    In addition to the enumerated human health and welfare benefits 
resulting from reductions in ambient levels of PM2.5 and 
ozone, reductions in NOX and SO2 will contribute 
to substantial visibility improvements in many parts of the eastern 
United States. Reductions in these pollutants will also reduce 
acidification and eutrophication of water bodies in the region. In 
addition, reducing emissions of NOX and SO2 from 
EGUs can be expected to reduce emissions of mercury. Reduced mercury 
emissions in turn may reduce mercury loadings in lakes and thereby 
potentially decrease both human and wildlife exposure to fish 
containing mercury.

C. What Is the Statutory and Regulatory Background for Today's Action?

1. What Is the ``Good Neighbor'' Provision?
    Following promulgation of new or revised NAAQS, the CAA requires 
all areas, regardless of their designation as attainment, 
nonattainment, or unclassifiable, to submit SIPs containing provisions 
specified under section 110(a)(2). Among these requirements are those 
specified by the so-called ``good neighbor'' provision section 
110(a)(2)(D) which addresses interstate transport of air pollution.
    Section 110(a)(2)(D) requires that a SIP contain adequate 
provisions--

    (i) Prohibiting, consistent with the provisions of this title, 
any source or other type of emissions activity within the State from 
emitting any air pollutant in amounts which will--
    (I) Contribute significantly to nonattainment in, or interfere 
with maintenance by, any other State with respect to [any] national 
primary or secondary ambient air quality standard, or
    (II) Interfere with measures required to be included in the 
applicable implementation plan for any other State under part C to 
prevent significant deterioration of air quality or to protect 
visibility.
    (ii) Insuring compliance with the applicable requirements of 
sections 126 and 115 (relating to interstate and international 
pollution abatement);

    Section 110(a)(2)(D) is the underlying provision for EPA's CAIR and 
today's proposed section 126 and FIP actions. Under the CAIR, EPA 
established the amount of SO2 and NOX emissions 
that each CAIR-affected State must prohibit through SIP revisions to 
address interstate transport with respect to the PM2.5 and 
8-hour ozone NAAQS.
2. What Is the CAA Section 126 Provision?
    Subsection (a) of section 126 requires, among other things, that 
SIPs require major proposed new (or modified) stationary sources to 
notify nearby States for which the air pollution levels may be affected 
by the fact that such sources have been permitted to commence 
construction. Subsection (b) provides:

    Any State or political subdivision may petition the 
Administrator for a finding that any major source or group of 
stationary sources emits or would emit any air pollutant in 
violation of the prohibition of section 110(a)(2)(D)(ii) * * * or 
this section.* * *

Subsection (c) of section 126 states that--

    [I]t shall be a violation of this section and the applicable 
implementation plan in such State [in which the source is located or 
intends to locate]--
    (1) For any major proposed new (or modified) source with respect 
to which a finding has been made under subsection (b) to be 
constructed or to operate in violation of this section and the 
prohibition of section 110(a)(2)(D)(ii) \2\ or this section, or
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    \2\ While the text of section 126 refers to section 
110(a)(2)(D)(ii), EPA believes that this cross-reference is a 
scrivener's error that occurred during the 1990 Amendments to the 
CAA and that Congress intended to refer to section 110(a)(2)(D)(i). 
(See 64 FR 28267.) The EPA's interpretation was upheld in 
Appalachian Power Co. v. EPA, 249 F. 3d 1032, 1040-44 (DC Cir. 
2001).
---------------------------------------------------------------------------

    (2) For any major existing source to operate more than three 
months after such finding has been made with respect to it.

    However, subsection (c) further provides that EPA may permit the 
continued operation of such major existing sources beyond the 3-month 
period, if such sources comply with EPA-promulgated emissions limits 
within 3 years of the date of the finding.
3. What Is EPA's Previous Section 126 Rulemaking?
    The EPA has previously taken action under section 126 to address 
interstate ozone transport (64 FR 28250; May 25, 1999) and (65 FR 2674; 
January 18, 2000). Because there are many parallels between that 
earlier action and today's proposal, we briefly discuss our earlier 
action here.
    Like the present rulemaking, EPA's previous section 126 rulemaking, 
dealing with interstate transport of NOX, occurred 
essentially in conjunction with an EPA rulemaking dealing with 
interstate transport of the same pollutants, the NOX SIP 
Call (62 FR 60318; November 7, 1997). As in today's rule, EPA concluded 
that section 126 and section 110(a)(2)(D)(i) are integrally connected 
(due to the reference to the section 110(a)(2)(D) prohibition found in 
section 126(b)). Thus, the interstate transport problem at issue could 
be addressed under either provision, and once the underlying section 
110(a)(2)(D) SIP deficiency is eliminated, there no longer is a basis 
for EPA to make a positive finding under section 126. (See sections II 
and III below for a more detailed discussion.) In the earlier 
rulemaking, we therefore concluded that emissions reductions sufficient 
to eliminate a section 110(a)(2)(D) SIP deficiency would also be 
sufficient to satisfy section 126. The NOX SIP Call required 
SIP revisions eliminating the amount of emissions that contribute 
significantly to nonattainment in downwind States, the amount of 
emissions reductions corresponding to the quantity of emissions that 
could be eliminated by the application of highly cost-effective 
controls on specified sources in each upwind State. The section 126 
remedy consequently called for the same set of highly cost-effective 
controls for the section 126 source categories, based on the record of 
the NOX SIP Call. We are adopting this same conceptual 
approach in today's rulemaking.
    There are also parallels between our earlier section 126 action and 
this action with regard to timing of actions in the section 126 
proceeding and in the closely-related interstate transport proceeding 
under section 110(a)(2)(D). Because a section 126 finding turns on the 
existence of a section 110(a)(2)(D) deficiency, in the May 1999 Section 
126 Rule, we determined which petitions had technical merit, but we 
stopped short of granting the findings for the petitions. Instead, we 
stated that because we had promulgated the NOX SIP Call, as 
long as an upwind State remained on track to comply with that rule, EPA 
would defer making the section 126 findings. Thus, the Section 126 Rule 
included a provision under which the rule would be automatically 
withdrawn for sources in a State once that State submitted and EPA 
fully approved a SIP that complied with the NOX SIP Call or 
if EPA promulgated a FIP to achieve the emissions reductions. (See 64 
FR 28271-28274.) The reason

[[Page 49714]]

for this withdrawal would be the fact that the affected State's SIP 
revision or EPA's promulgated FIP would fulfill the section 
110(a)(2)(D) requirements, so that there would no longer be any basis 
for the section 126 finding with respect to that State. Later judicial 
action staying the NOX SIP Call rule resulted in EPA 
granting the section 126 petitions at issue, but the new rule retained 
the basic linkage between section 126 and section 110(a)(2)(D) by 
providing that EPA would withdraw the section 126 findings upon EPA 
approval of a SIP satisfying the emission reduction requirements of the 
NOX SIP Call rule or upon EPA's promulgation of a FIP that 
achieved the emissions reductions. (See 65 FR at 2683 and Appalachian 
Power v. EPA, 249 F. 3d 1032, 1039 (DC Cir. 2001).) Similarly, in 
today's rulemaking, we are proposing to deny the section 126 petition 
if we approve SIPs which satisfy the emission reduction requirements of 
the CAIR, or if we promulgate a FIP which includes the emission 
reduction requirements of the CAIR.
    Finally, in the earlier section 126 rule, EPA adopted as a remedy 
for section 126 a Federal NOX cap and trade program 
patterned after the model NOX cap and trade program that EPA 
developed for States as an option to meet their NOX SIP Call 
requirements. The EPA is proposing the same approach here in the event 
that it grants North Carolina's section 126 petition.
4. What Is the Clean Air Interstate Rule?
    The EPA developed the Clean Air Interstate Rule (CAIR) to address 
interstate pollution transport with respect to the newly adopted 
PM2.5 and 8-hour ozone NAAQS. The EPA published the 
proposals for CAIR (previously referred to as the Interstate Air 
Quality Rule) on January 30, 2004 (69 FR 4566) and June 10, 2004 (69 FR 
32684), a notice of data availability on August 6, 2004 (69 FR 47828), 
and the final rule on May 12, 2005 (70 FR 25162). The EPA is providing 
this description of the CAIR to help place today's proposal in context. 
As stated above, EPA is not accepting comment on the CAIR or otherwise 
reopening any issue decided in the CAIR for reconsideration or comment, 
except that EPA is taking comment specifically on the revisions to CAIR 
that EPA is proposing in today's action (Section VII in this preamble 
discusses the proposed changes to CAIR).
    In the CAIR, based on air quality modeling analyses and cost 
analyses, EPA concluded that SO2 and NOX 
emissions in certain States in the eastern part of the country, through 
the phenomenon of air pollution transport,\3\ contribute significantly 
to PM2.5 and/or 8-hour ozone nonattainment and maintenance 
problems in downwind States. The CAIR establishes emission reduction 
requirements for the affected upwind States under CAA section 
110(a)(2)(D). The affected States and the District of Columbia have 
until September 11, 2006 to adopt and submit SIP revisions to achieve 
these required reductions. The SIP revision must contain measures that 
will assure that sources in the State reduce their SO2 and/
or NOX emissions sufficiently to eliminate the amounts of 
SO2 and NOX that contribute significantly to 
nonattainment downwind. Reducing upwind precursor emissions will assist 
the downwind PM2.5 and 8-hour ozone areas in achieving and 
maintaining the NAAQS. Moreover, attainment will be achieved in a more 
equitable, cost-effective manner than if each nonattainment area 
attempted to achieve attainment by implementing local emissions 
reductions alone.
---------------------------------------------------------------------------

    \3\ When we use the term ``transport'' we mean to include the 
transport of both fine particles (PM2.5) and their 
precursor emissions and/or transport of both ozone and its precursor 
emissions.
---------------------------------------------------------------------------

    The EPA specified that the CAIR emissions reductions be implemented 
in two phases. The first phase of NOX reductions starts in 
2009 (covering 2009-2014) and the first phase of SO2 
reductions starts in 2010 (covering 2010-2014); the second phase of 
reductions for both NOX and SO2 starts in 2015 
(covering 2015 and thereafter). The emissions reduction requirements 
are based on controls that are known to be highly cost effective for 
EGUs, however States have the flexibility to determine what measures to 
adopt to achieve the necessary reductions. In the CAIR, EPA provided 
model SO2 and NOX trading programs for EGUs that 
States can choose to adopt to meet the emissions reduction requirements 
in a flexible and highly cost-effective manner.
    If EPA ultimately includes Delaware and New Jersey in the CAIR with 
respect to the PM2.5 NAAQS (see proposal at 70 FR 25408), 
EPA estimates that the CAIR would reduce SO2 emissions by 
3.6 million tons in 2010 and by 3.9 million tons in 2015; and would 
reduce annual NOX emissions by 1.2 million tons in 2009 and 
by 1.5 million tons in 2015. (These numbers reflect the annual 
SO2 and NOX requirements.) If all these States 
(including Delaware and New Jersey for the PM2.5 NAAQS) 
choose to achieve these reductions through EGU controls, then EGU 
SO2 emissions in the affected States would be capped at 3.7 
million tons in 2010 and 2.6 million tons in 2015; \4\ and EGU annual 
NOX emissions would be capped at 1.5 million tons in 2009 
and 1.3 million tons in 2015.
---------------------------------------------------------------------------

    \4\ It should be noted that the banking provisions of the cap 
and trade program which encourage sources to make significant 
reductions before 2010 also allow sources to operate above these cap 
levels until all of the banked allowances are used, therefore EPA 
does not project that these caps will be met in 2010 or 2015.
---------------------------------------------------------------------------

    Based on the promulgated CAIR (70 FR 25162), EPA estimates that the 
required SO2 and NOX emissions reductions would, 
by themselves, bring into attainment 52 of the 79 counties that are 
otherwise projected to be in nonattainment for PM2.5 in 
2010, and 57 of the 74 counties that are otherwise projected to be in 
nonattainment for PM2.5 in 2015. The EPA further estimates 
that the required NOX emissions reductions would, by 
themselves, bring into attainment 3 of the 40 counties that are 
otherwise projected to be in nonattainment for 8-hour ozone in 2010, 
and 6 of the 22 counties that are projected to be in nonattainment for 
8-hour ozone in 2015. In addition, the CAIR will improve 
PM2.5 and 8-hour ozone air quality in the areas that would 
remain nonattainment for those two NAAQS after implementation of the 
CAIR. Because of CAIR, the States with those remaining nonattainment 
areas will find it less burdensome and less expensive to reach 
attainment by adopting additional controls. The CAIR will also reduce 
PM2.5 and 8-hour ozone levels in attainment areas, providing 
significant health and environmental benefits in all areas of the 
eastern United States.
    For a more complete description of the CAIR and its impacts, the 
reader is encouraged to review the preamble to the CAIR.
5. What Are the Findings of Failure To Submit for the Section 
110(a)(2)(D) Plans?
    In a final rule published on April 25, 2005 (70 FR 21147), we made 
national findings that States have failed to submit SIPs required under 
section 110(a)(2)(D) to address interstate transport with respect to 
the 8-hour ozone and PM2.5 NAAQS.
    The April 25, 2005 findings started a 2-year clock for EPA to 
promulgate a Federal implementation plan (FIP) to address the 
requirements of section 110(a)(2)(D). Under section 110(c)(1), EPA may 
issue a FIP any time after such findings are made and must do so unless 
a SIP revision correcting the deficiency is approved by EPA before the 
FIP is promulgated. The EPA

[[Page 49715]]

intends to issue guidance regarding how States outside the CAIR region 
could satisfy the section 110(a)(2)(D) requirement. For States affected 
by CAIR, an approved SIP meeting the CAIR requirements would satisfy 
the requirement and turn off the FIP clock. As discussed below in 
section IV, EPA is today proposing a FIP for States affected by the 
CAIR. The EPA intends to promulgate the CAIR FIP by March 15, 2006 
along with the final section 126 response. However, EPA intends to 
withdraw the FIP in a State in coordination with approval of a SIP for 
the State that meets the CAIR requirements.
    The findings do not start a sanctions clock pursuant to section 179 
because the findings do not pertain to a part D plan for nonattainment 
areas required under section 110(a)(2)(I) and because the action is not 
a SIP Call pursuant to section 110(k)(5).

D. Summary of North Carolina's Section 126 Petition

1. What Sources Does the Petition Target?
    The North Carolina petition requests relief from certain emissions 
from large EGUs located in 13 States. With respect to the 
PM2.5 NAAQS, the petition requests that EPA find that 
NOX and SO2 emissions from large EGUs in 12 
States (Alabama, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio, 
Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia) 
are significantly contributing to nonattainment in, or interfering with 
maintenance by, North Carolina. With respect to the 8-hour ozone NAAQS, 
the petition requests that EPA find that NOX emissions from 
large EGUs in 5 States (Georgia, Maryland, South Carolina, Tennessee, 
and Virginia) are significantly contributing to nonattainment in, or 
interfering with maintenance by, North Carolina (Petition, p.1.)
    The petition defines the term ``EGUs'' as all facilities meeting 
the criteria described in the proposal for the CAIR. (See 69 FR 4566, 
4610; January 30, 2004.) In the proposal for the CAIR, we defined EGUs 
as ``fossil-fuel fired boilers and turbines serving an electric 
generator with a nameplate capacity of greater than 25 megawatts (MW) 
producing electricity for sale.'' (Id.) (See section VII of today's 
preamble for clarification of the EGU definition.\5\)
---------------------------------------------------------------------------

    \5\ As noted in section VII below, EPA is proposing to amend the 
definition of EGU to remove certain ambiguities regarding the 
definition's application to solid waste incinerators and to existing 
units that formerly generated electricity for sale but have not done 
so since before November 15, 1990. We understand the North Carolina 
section 126 petition as applying only to the sources included in the 
clarified definition and not to sources we are proposing to exclude 
from the definition of EGU.
---------------------------------------------------------------------------

2. What Control Remedy Does the Petition Request?
    In its petition, North Carolina states that compliance with the 
NOX and SO2 emissions budgets in the proposal for 
the CAIR would satisfy the requirements of the petition. These 
emissions budgets were based on controls that are highly cost effective 
for EGUs. North Carolina also states that it does not oppose the 
flexibility discussed by EPA (69 FR at 4622) to allow equivalent 
reductions from other source categories in given States, so long as 
those reductions are real and enforceable (Petition, p. 24).
    In the CAIR, EPA provided model NOX and SO2 
cap and trade programs for EGUs as control options for States to choose 
to meet the CAIR emissions reductions requirements. The trading 
programs allow interstate trading among sources in all States subject 
to the CAIR that adopt the programs. In its petition, North Carolina 
said it recognizes the value of allowing sources flexibility to reduce 
their emissions in the most cost-effective manner consistent with the 
statute. However, North Carolina expressed concerns about a regional 
trading program that could operate to deprive North Carolina of the 
benefits of the control remedy in the subset of States that affect 
North Carolina (Petition, pp. 25-28). We address this issue below in 
section VI.
3. What Is the Technical Support for the Petition?
    To support its claim that EGUs outside North Carolina are 
contributing significantly to nonattainment and maintenance problems in 
the State, North Carolina relies largely on EPA's technical analyses 
for the proposed CAIR. Therefore, as discussed above, the petition 
targets sources in the same States that EPA linked to North Carolina in 
the proposed CAIR. As additional support, North Carolina cites analyses 
conducted by the Southern Appalachian Mountains Initiative (SAMI) on 
PM2.5 transport, North Carolina's further evaluation of the 
SAMI's analyses, as well as back trajectory analyses performed by the 
North Carolina Division of Air Quality from PM2.5 monitors 
in two counties. (See Petition, pp. 13-17.)

E. What Is the Litigation on the Section 126 Rulemaking Schedule?

    On March 19, 2004, EPA received a petition from the State of North 
Carolina filed under CAA section 126. Section 126(b) requires EPA to 
make the requested finding, or to deny the petition, within 60 days of 
receipt. It also requires EPA to provide a public hearing before acting 
on the petition. In addition, EPA's action under section 126 is subject 
to the procedural requirements of section 307(d) of the CAA. (See 
section 307(d)(2)-(5).) One of these requirements is that EPA conduct 
notice-and-comment rulemaking. Section 307(d)(10) provides for a time 
extension, under certain circumstances, for rulemakings subject to that 
provision. Specifically, it allows statutory deadlines that require 
promulgation in less than 6 months from proposal to be extended to not 
more than 6 months from proposal to afford the public and the Agency 
adequate opportunity to carry out the purposes of section 307(d). In an 
action published on May 26, 2004 (69 FR 30038), EPA extended the 
deadline for EPA to take action on the North Carolina petition by the 
full 6 months, to November 18, 2004.
    On February 17, 2005, the State of North Carolina and the citizen 
group Environmental Defense filed complaints against EPA seeking to 
compel EPA to take action on the State's section 126 petition: State of 
North Carolina v. Johnson, No. 5:05-CV-112 (E.D. N.C.) and 
Environmental Defense v. Johnson, No. 5:05-CV-113 (E.D.N.C.). The EPA, 
North Carolina, and Environmental Defense filed a proposed consent 
decree that would establish a schedule for EPA to act on the petitions. 
Pursuant to CAA section 113(g), the EPA solicited comments on the 
proposed consent decree, by notice dated March 2, 2005 (70 FR 10089). 
The comment period closed April 1, 2005 without EPA receiving negative 
comment. On May 9, 2005, the court entered a slightly modified version 
of the consent decree.
    The schedule in the consent decree requires that no later than 
August 1, 2005, EPA must sign for publication the proposed action to 
grant or deny the petition. If EPA proposes to approve any part of the 
petition, the proposal must include the proposed remedy. No later than 
March 15, 2006, EPA must take final action to grant or deny the 
petition. If EPA grants any part of the petition (i.e., makes a section 
126(b) finding), the final action must include the remedy. The consent 
decree also requires EPA to hold a public hearing on the proposal 
during the week of September 12, 2005 in North Carolina. Today's 
proposal meets the first deadline set forth in the consent decree. The 
EPA has scheduled two public hearings during the week of September 12, 
2005, one to be held in

[[Page 49716]]

North Carolina and the other in Virginia (see DATES above for further 
information on the hearings).

F. How Is EPA Addressing the Section 126-Related Comments Received 
During the CAIR Rulemaking?

    In the January 30, 2004 CAIR proposal, EPA set forth its general 
view of the approach it expected to take in responding to any section 
126 petition that might be submitted that relies on essentially the 
same record as the CAIR (69 FR at 4580). That approach is the one EPA 
used in addressing section 126 petitions that were submitted to EPA in 
1997 while EPA was developing the NOX SIP Call to control 
ozone transport (as discussed in section I.C.3. above).
    The EPA received comments on the CAIR proposal regarding its 
intended approach for acting on any future section 126 petitions that 
might be filed. Many commenters expressed support for the approach that 
EPA had outlined. Other commenters raised issues regarding the timing 
of emissions reductions under a new section 126 action. Some pointed 
out that the CAIR compliance date would be later than the 3 years 
allowed for compliance under section 126. Some were concerned that the 
proposed CAIR compliance date was later than many attainment dates and, 
therefore, States may need section 126 petitions in order to get 
earlier upwind reductions in order to meet their attainment dates. Some 
questi