Approval and Promulgation of Air Quality Implementation Plans; Pennsylvania; Clean Air Interstate Rule; NOX, 48695-48702 [E9-23052]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 74, Number 184 (Thursday, September 24, 2009)]
[Proposed Rules]
[Pages 48695-48702]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-23052]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2009-0370; FRL-8962-6]


Approval and Promulgation of Air Quality Implementation Plans; 
Pennsylvania; Clean Air Interstate Rule; NOX SIP Call Rule; Amendments 
to NOX Control Rules

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a revision to the Pennsylvania 
State Implementation Plan (SIP). The revision addresses the 
requirements of EPA's Clean Air Interstate Rule (CAIR) and modifies 
other requirements in Pennsylvania's SIP that interact with CAIR 
including: The termination of Pennsylvania's NOX Budget 
Trading Program; statewide provisions for large, stationary internal 
combustion engines; statewide provisions for large cement

[[Page 48696]]

kilns; provisions for small sources of NOX in the 
Pennsylvania portion of the Philadelphia 8-hour ozone nonattainment 
area; and emission reduction credits. Although the DC Circuit found 
CAIR to be flawed, the rule was remanded without vacatur and remains in 
place. Thus, EPA is continuing to take action on CAIR SIPs as 
appropriate. CAIR, as promulgated, requires States to reduce emissions 
of sulfur dioxide (SO2) and nitrogen oxides (NOX) 
that significantly contribute to, or interfere with maintenance of, the 
national ambient air quality standards (NAAQS) for fine particulates 
and/or ozone in any downwind State. CAIR establishes budgets for 
SO2 and NOX for States that contribute 
significantly to nonattainment in downwind States and requires the 
significantly contributing States to submit SIP revisions that 
implement these budgets. States have the flexibility to choose which 
control measures to adopt to achieve the budgets, including 
participation in EPA-administered cap-and-trade programs addressing 
SO2, NOX annual, and NOX ozone season 
emissions. In the SIP revision that EPA is proposing to approve, 
Pennsylvania will meet CAIR requirements by participating in these cap-
and-trade programs. EPA is proposing to approve the SIP revision, as 
interpreted and clarified herein, as fully implementing the CAIR 
requirements for Pennsylvania. Of note, a final approval action of this 
SIP revision will result in the automatic withdrawal of the CAIR FIP in 
Pennsylvania.

DATES: Written comments must be received on or before October 26, 2009.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2009-0370 by one of the following methods:
    A. https://www.regulations.gov. Follow the online instructions for 
submitting comments.
    B. E-mail: fernandez.cristina@epa.gov.
    C. Mail: EPA-R03-OAR-2009-0370, Cristina Fernandez, Chief, Air 
Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection 
Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address. 
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. EPA-R03-OAR-
2009-0370. EPA's policy is that all comments received will be included 
in the public docket without change, and may be made available online 
at https://www.regulations.gov, 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 https://www.regulations.gov or e-mail. The https://www.regulations.gov Web site 
is an ``anonymous access'' system, 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 https://www.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.
    Docket: All documents in the electronic docket are listed in the 
https://www.regulations.gov index. 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 https://www.regulations.gov or in hard copy during normal business hours at the 
Air Protection Division, U.S. Environmental Protection Agency, Region 
III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the 
State submittal are available at the Pennsylvania Department of 
Environmental Protection, Bureau of Air Quality Control, P.O. Box 8468, 
400 Market Street, Harrisburg, Pennsylvania 17105.

FOR FURTHER INFORMATION CONTACT: Marilyn Powers, (215) 814-2308, or by 
e-mail at powers.marilyn@epa.gov.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. What Action Is EPA Proposing?
II. What Is the Regulatory History of CAIR and the CAIR Federal 
Implementation Plans (FIPs)?
III. What Are the General Requirements of CAIR and the CAIR FIPs?
IV. What Are the Types of CAIR SIP Submittals?
V. Analysis of Pennsylvania's CAIR SIP Submittal
    A. State Budgets for Allowance Allocations
    B. CAIR Cap-and-Trade Programs
    C. Applicability Provisions
    D. NOX Allowance Allocations
    E. Allocation of NOX Allowances From Compliance 
Supplement Pool
    F. Individual Opt-In Units
    G. Clarifications and Interpretations
    H. Other Requirements in This SIP Revision
VI. Proposed Action
VII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing?

    EPA is proposing to approve the SIP revision submitted by 
Pennsylvania on May 23, 2008, as meeting the applicable CAIR 
requirements by requiring certain electric generating units (EGUs) to 
participate in the EPA-administered CAIR cap-and-trade programs 
addressing SO2, NOX annual, and NOX 
ozone season emissions. The SIP revision also includes provisions that 
terminate Pennsylvania's NOX Budget Trading Program under 
the NOX SIP Call and establishes emission caps for the non-
EGUs that were affected by the NOX Budget Trading Program. 
EPA is also proposing to approve revisions that address NOX 
ozone season emission reduction requirements for internal combustion 
engines and cement kilns statewide, and small sources of NOX 
in the five counties that comprise the Pennsylvania portion of the 
Philadelphia 8-hour ozone nonattainment area, all of which were 
originally approved as part of the Pennsylvania SIP on September 29, 
2006.

II. What Is the Regulatory History of CAIR and the CAIR FIPs?

    EPA published CAIR on May 12, 2005 (70 FR 25162). In this rule, EPA 
determined that 28 States and the District of Columbia contribute 
significantly to nonattainment and interfere with maintenance of the 
NAAQS for fine particles (PM2.5) and/or 8-hour ozone in 
downwind States in the eastern part of the country. As a result, EPA 
required those upwind States to revise their SIPs to include control 
measures that reduce emissions of SO2, which is a precursor 
to PM2.5 formation, and/or NOX, which is a 
precursor to both ozone and PM2.5 formation. For 
jurisdictions that contribute significantly to downwind 
PM2.5 nonattainment, CAIR sets annual State-

[[Page 48697]]

wide emission reduction requirements (i.e., budgets) for SO2 
and annual State-wide emission reduction requirements for 
NOX. Similarly, for jurisdictions that contribute 
significantly to 8-hour ozone nonattainment, CAIR sets State-wide 
emission reduction requirements or budgets for NOX for the 
ozone season (May 1st to September 30th). Under CAIR, States may 
implement these reduction requirements by participating in the EPA-
administered cap-and-trade programs or by adopting any other control 
measures.
    CAIR explains to subject States what must be included in SIPs to 
address the requirements of section 110(a)(2)(D) of the Clean Air Act 
(CAA) with regard to interstate transport with respect to the 8-hour 
ozone and PM2.5 NAAQS. EPA made national findings, effective 
on May 25, 2005, that the States had failed to submit SIPs meeting the 
requirements of section 110(a)(2)(D). The SIPs were due in July 2000, 3 
years after the promulgation of the 8-hour ozone and PM2.5 
NAAQS. These findings started a 2-year clock for EPA to promulgate a 
FIP to address the requirements of section 110(a)(2)(D). Under CAA 
section 110(c)(1), EPA may issue a FIP anytime after such findings are 
made and must do so within two years unless a SIP revision correcting 
the deficiency is approved by EPA before the FIP is promulgated.
    On April 28, 2006, EPA promulgated FIPs for all States covered by 
CAIR in order to ensure the emissions reductions required by CAIR are 
achieved on schedule. The CAIR FIPs require EGUs to participate in the 
EPA-administered CAIR SO2, NOX annual, and 
NOX ozone season trading programs, as appropriate. The CAIR 
FIP SO2, NOX annual, and NOX ozone 
season trading programs impose essentially the same requirements as, 
and are integrated with, the respective CAIR SIP trading programs. The 
integration of the FIP and SIP trading programs means that these 
trading programs will work together to create effectively a single 
trading program for each regulated pollutant (SO2, 
NOX annual, and NOX ozone season) in all States 
covered by the CAIR FIP or SIP trading program for that pollutant. 
Further, as provided in a rule published by EPA on November 2, 2007, a 
State's CAIR FIPs are automatically withdrawn when EPA approves a SIP 
revision, in its entirety and without any conditions, as fully meeting 
the requirements of CAIR. Where only portions of the SIP revision are 
approved, the corresponding portions of the FIPs are automatically 
withdrawn and the remaining portions of the FIP stay in place. Finally, 
the CAIR FIPs also allow States to submit abbreviated SIP revisions 
that, if approved by EPA, will automatically replace or supplement 
certain CAIR FIP provisions (e.g., the methodology for allocating 
NOX allowances to sources in the State), while the CAIR FIP 
remains in place for all other provisions.
    On April 28, 2006, EPA published two additional CAIR-related final 
rules that added the States of Delaware and New Jersey to the list of 
States subject to CAIR for PM2.5 and announced EPA's final 
decisions on reconsideration of five issues, without making any 
substantive changes to the CAIR requirements.
    On October 19, 2007, EPA amended CAIR and the CAIR FIPs to clarify 
the definition of ``cogeneration unit'' and thus the applicability of 
the CAIR trading program to cogeneration units.
    EPA was sued by a number of parties on various aspects of CAIR, and 
on July 11, 2008, the U.S. Court of Appeals for the District of 
Columbia Circuit issued its decision to vacate and remand both CAIR and 
the associated CAIR FIPs in their entirety. North Carolina v. EPA, 531 
F.3d 836 (DC Cir. Jul. 11, 2008). However, in response to EPA's 
petition for rehearing, the Court issued an order remanding CAIR to EPA 
without vacating either CAIR or the CAIR FIPs. North Carolina v. EPA, 
550 F.3d 1176 (DC Cir. Dec. 23, 2008). The Court thereby left CAIR in 
place in order to ``temporarily preserve the environmental values 
covered by CAIR'' until EPA replaces it with a rule consistent with the 
Court's opinion. Id. at 1178. The Court directed EPA to ``remedy CAIR's 
flaws'' consistent with its July 11, 2008 opinion, but declined to 
impose a schedule on EPA for completing that action. Id. Therefore, 
CAIR and the CAIR FIP are currently in effect in Pennsylvania.

III. What Are the General Requirements of CAIR and the CAIR FIPs?

    CAIR establishes State-wide emission budgets for SO2 and 
NOX and is to be implemented in two phases. The first phase 
of NOX reductions starts in 2009 and continues through 2014, 
while the first phase of SO2 reductions starts in 2010 and 
continues through 2014. The second phase of reductions for both 
NOX and SO2 starts in 2015 and continues 
thereafter. CAIR requires States to implement the budgets by either: 
(1) Requiring EGUs to participate in the EPA-administered cap-and-trade 
programs; or (2) adopting other control measures of the State's 
choosing and demonstrating that such control measures will result in 
compliance with the applicable State SO2 and NOX 
budgets.
    The May 12, 2005 and April 28, 2006 CAIR rules provide model rules 
that States must adopt (with certain limited changes, if desired) if 
they want to participate in the EPA-administered trading programs. With 
two exceptions, only States that choose to meet the requirements of 
CAIR through methods that exclusively regulate EGUs are allowed to 
participate in the EPA-administered trading programs. One exception is 
for States that adopt the opt-in provisions of the model rules to allow 
non-EGUs individually to opt into the EPA-administered trading 
programs. The other exception is for States that include all non-EGUs 
from their NOX SIP Call trading programs in their CAIR 
NOX ozone season trading programs.

IV. What Are the Types of CAIR SIP Submittals?

    States have the flexibility to choose the type of control measures 
they will use to meet the requirements of CAIR. All States are meeting 
the CAIR requirements through an option that requires EGUs to 
participate in the EPA-administered CAIR cap-and-trade programs. For 
such States, EPA has provided two approaches for submitting and 
obtaining approval for CAIR SIP revisions. States may submit full SIP 
revisions that adopt the model CAIR cap-and-trade rules. If approved, 
these SIP revisions will fully replace the CAIR FIPs. Alternatively, 
States may submit abbreviated SIP revisions. These SIP revisions will 
not replace the CAIR FIPs; however, the CAIR FIPs provide that, when 
approved, the provisions in these abbreviated SIP revisions will be 
used instead of or in conjunction with, as appropriate, the 
corresponding provisions of the CAIR FIPs (e.g., the NOX 
allowance allocation methodology).
    A State submitting a full SIP revision may either adopt regulations 
that are substantively identical to the model rules or incorporate by 
reference the model rules. CAIR provides that States may only make 
limited changes to the model rules if the States want to participate in 
the EPA-administered trading programs. A full SIP revision may change 
the model rules only by altering their applicability and allowance 
allocation provisions to:
    1. Include all NOX SIP Call trading sources that are not 
EGUs under CAIR in the CAIR NOX ozone season trading 
program;
    2. Provide for State allocation of NOX annual or ozone 
season allowances using a methodology chosen by the State;

[[Page 48698]]

    3. Provide for State allocation of NOX annual allowances 
from the compliance supplement pool (CSP) using the State's choice of 
allowed, alternative methodologies; or
    4. Allow units that are not otherwise CAIR units to opt 
individually into the CAIR SO2, NOX annual, or 
NOX ozone season trading programs under the opt-in 
provisions in the model rules.
    An approved CAIR full SIP revision addressing EGUs' SO2, 
NOX annual, or NOX ozone season emissions will 
replace the CAIR FIP for that State for the respective EGU emissions. 
As discussed above, EPA approval in full, without any conditions, of a 
CAIR full SIP revision causes the CAIR FIPs to be automatically 
withdrawn.

V. Analysis of Pennsylvania's CAIR SIP Submittal

    Pennsylvania's SIP revision is comprised of amendments to 
Pennsylvania regulations codified at 25 Pa. Code Chapters 121, 129, and 
145. These requirements were adopted by the Commonwealth to implement 
the requirements of CAIR, terminate the Commonwealth's NOX 
Budget Trading Program, require NOX emission limits for the 
non-EGUs that were trading sources in the NOX Budget Trading 
Program, revise provisions relating to the use of allowances by non-
CAIR sources and address provisions related to emission reduction 
credits. A more detailed discussion of the State's submittal may be 
found in section C of the TSD.

A. State Budgets for Allowance Allocations

    The CAIR NOX annual and ozone season budgets were 
developed from historical heat input data for EGUs. Using these data, 
EPA calculated annual and ozone season regional heat input values, 
which were multiplied by 0.15 lb/mmBtu, for phase 1 and 0.125 lb/mmBtu, 
for phase 2, to obtain regional NOX budgets for 2009-2014 
and for 2015 and thereafter, respectively. EPA derived the State 
NOX annual and ozone season budgets from the regional 
budgets using State heat input data adjusted by fuel factors.
    The CAIR State SO2 budgets were derived by discounting 
the tonnage of emissions authorized by annual allowance allocations 
under the Acid Rain Program under title IV of the CAA. Under CAIR, each 
allowance allocated in the Acid Rain Program for the years in phase 1 
of CAIR (2010 through 2014) authorizes 0.5 ton of SO2 
emissions in the CAIR trading program, and each Acid Rain Program 
allowance allocated for the years in phase 2 of CAIR (2015 and 
thereafter) authorizes 0.35 ton of SO2 emissions in the CAIR 
trading program.
    In today's action, EPA is proposing to approve Pennsylvania's SIP 
revision that incorporates by reference the budgets established in the 
CAIR rules. These budgets are: 99,049 tons for NOX annual 
emissions from 2009 through 2014 and 82,541 tons from 2015 and 
thereafter; 42,171 tons for NOX ozone season emissions from 
2009 through 2014 and 35,143 tons from 2015 and thereafter; and 275,990 
tons for SO2 annual emissions from 2009 through 2014 and 
193,193 tons from 2015 and thereafter. These are the total amounts of 
allowances available for allocation for each year under the EPA-
administered cap-and-trade programs.
    EPA notes that, in North Carolina, id. at 916-21, the Court 
determined, among other things, that the State SO2 and 
NOX budgets established in CAIR were arbitrary and 
capricious.\1\ However, as discussed above, the Court also decided to 
remand CAIR but to leave the rule in place in order to ``temporarily 
preserve the environmental values covered by CAIR'' pending EPA's 
development and promulgation of a replacement rule that remedies CAIR's 
flaws. Id. at 1178. EPA had indicated to the Court that development and 
promulgation of a replacement rule would take about two years. Reply in 
Support of Petition for Rehearing or Rehearing en Banc at 5 (filed Nov. 
17, 2008 in North Carolina v. EPA, Case No. 05-1224, DC Cir.). The 
process at EPA of developing a proposal that will undergo notice and 
comment and result in a final replacement rule is ongoing. In the 
meantime, consistent with the Court's orders, EPA is implementing CAIR 
by approving State SIP revisions that are consistent with CAIR (such as 
the provisions setting State SO2 and NOX budgets 
for the CAIR trading programs) in order to ``temporarily preserve'' the 
environmental benefits achievable under the CAIR trading programs. 
North Carolina, 550 F.3d at 1178.
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    \1\ The Court also determined that the CAIR trading programs 
were unlawful (id. at 906-8) and that the treatment of title IV 
allowances in CAIR was unlawful (id. at 921-23). For the same 
reasons that EPA is approving the provisions of Pennsylvania's SIP 
revision that use the SO2 and NOX budgets set 
in CAIR, EPA is also approving, as discussed below, Pennsylvania's 
SIP revision to the extent the SIP revision adopts the CAIR trading 
programs, including the provisions addressing applicability, 
allowance allocations, and use of title IV allowances.
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B. CAIR Cap-and-Trade Programs

    The CAIR NOX annual and ozone-season model trading rules 
both largely mirror the structure of the NOX SIP Call model 
trading rule in 40 CFR part 96, subparts A through I. While the 
provisions of the NOX annual and ozone-season model rules 
are similar, there are some differences. For example, the 
NOX annual model rule (but not the NOX ozone 
season model rule) provides for a CSP, which is discussed below, and 
under which allowances may be awarded for early reductions of 
NOX annual emissions. As a further example, the 
NOX ozone season model rule reflects the fact that the CAIR 
NOX ozone season trading program replaces the NOX 
SIP Call trading program after the 2008 ozone season and is coordinated 
with the NOX SIP Call program. The NOX ozone 
season model rule provides incentives for early emissions reductions by 
allowing banked, pre-2009 NOX SIP Call allowances to be used 
for compliance in the CAIR NOX ozone-season trading program. 
In addition, States have the option of continuing to meet their 
NOX SIP Call requirement by participating in the CAIR 
NOX ozone season trading program and including all their 
NOX SIP Call trading sources in that program.
    The provisions of the CAIR SO2 model rule are also 
similar to the provisions of the NOX annual and ozone season 
model rules. However, the SO2 model rule is coordinated with 
the ongoing Acid Rain SO2 cap-and-trade program under CAA 
title IV. The SO2 model rule uses the title IV allowances 
for compliance, with each allowance allocated for 2010-2014 authorizing 
only 0.50 ton of emissions and each allowance allocated for 2015 and 
thereafter authorizing only 0.35 ton of emissions. Banked title IV 
allowances allocated for years before 2010 can be used at any time in 
the CAIR SO2 cap-and-trade program, with each such allowance 
authorizing 1 ton of emissions. Title IV allowances are to be freely 
transferable among sources covered by the Acid Rain Program and sources 
covered by the CAIR SO2 cap-and-trade program.
    EPA also used the CAIR model trading rules as the basis for the 
trading programs in the CAIR FIPs. The CAIR FIP trading rules are 
virtually identical to the CAIR model trading rules, with changes made 
to account for Federal rather than State implementation. The CAIR model 
SO2, NOX annual, and NOX ozone season 
trading rules and the respective CAIR FIP trading rules are designed to 
work together as integrated SO2, NOX annual, and 
NOX ozone season trading programs. The CAIR FIP for 
Pennsylvania is in place and will be automatically withdrawn upon final 
approval of this SIP revision.

[[Page 48699]]

    Pennsylvania has chosen to implement its CAIR budgets by requiring 
EGUs to participate in EPA-administered cap-and-trade programs for 
SO2, NOX annual, and NOX ozone season 
emissions. Pennsylvania has adopted a full SIP revision that 
incorporates by reference the CAIR model cap-and-trade rules for 
SO2, NOX annual, and NOX ozone season 
emissions except for the provisions pertaining to: (1) The timing of 
allocations, (2) the new unit set aside, (3) the priority for issuance 
of allocations from its State budget, and (4) the establishment of a 
set aside for certain units.

C. Applicability Provisions

    In general, the CAIR model trading rules apply to any stationary, 
fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion 
turbine serving at any time, since the later of November 15, 1990 or 
the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe producing electricity for sale. 
Pennsylvania's CAIR rule adopts, by reference, the CAIR model trading 
rule applicability described in 40 CFR 96.104, 96.204 and 96.304.
    States have the option of bringing in, for the CAIR NOX 
ozone season program only, those units in the State's NOX 
SIP Call trading program that are not EGUs as defined under CAIR. EPA 
advises States exercising this option to add the applicability 
provisions in the State's NOX SIP Call trading rule for non-
EGUs to the applicability provisions in 40 CFR 96.304 in order to 
include in the CAIR NOX ozone season trading program all 
units required to be in the State's NOX SIP Call trading 
program that are not already included under 40 CFR 96.304. Under this 
option, the CAIR NOX ozone season program must cover all 
large industrial boilers and combustion turbines, as well as any small 
EGUs (i.e. units serving a generator with a nameplate capacity of 25 
MWe or less) that the State currently requires to be in the 
NOX SIP Call trading program.
    Pennsylvania has chosen not to expand the applicability provisions 
of the CAIR NOx ozone season trading program to include all non-EGUs 
that participated in the Commonwealth's NOx Budget Trading Program. 
Instead, Pennsylvania has adopted new requirements that establish 
individual emissions caps for these units, as well as an overall 
statewide emissions cap (see, Section V. H., below).

D. NOX Allowance Allocations

    Under the NOX allowance allocation methodology in the 
CAIR model trading rules and in the CAIR FIP, NOX annual and 
ozone season allowances are allocated to units that have operated for 
five years, based on heat input data from a three-year period that are 
adjusted for fuel type by using fuel factors of 1.0 for coal, 0.6 for 
oil, and 0.4 for other fuels. The CAIR model trading rules and the CAIR 
FIP also provide a new unit set-aside from which units without five 
years of operation are allocated allowances based on the units' prior 
year emissions.
    States may establish in their SIP submissions a different 
NOX allowance allocation methodology that will be used to 
allocate allowances to sources in the States if certain requirements 
are met concerning the timing of submission of units' allocations to 
the Administrator for recordation and the total amount of allowances 
allocated for each control period. In adopting alternative 
NOX allowance allocation methodologies, States have 
flexibility with regard to:
    1. The cost to recipients of the allowances, which may be 
distributed for free or auctioned;
    2. The frequency of allocations;
    3. The basis for allocating allowances, which may be distributed, 
for example, based on historical heat input or electric and thermal 
output; and
    4. The use of allowance set-asides and, if used, their size.
    Pennsylvania has chosen to adopt, by reference, the allocation 
methodology of the model rule for both the NOX annual and 
the NOX ozone season trading programs, as modified within 
the flexibilities of CAIR. Pennsylvania has chosen to replace with its 
own requirements the provisions of 40 CFR 96.141, 96.142, 96.341, and 
96.342 relating to the distribution of allocations and timing of 
allocations for the CAIR NOX annual trading program and the 
CAIR NOX ozone season trading program The SIP revision 
requires that allowances for 2010 through 2012 will be submitted to the 
Administrator by April 30, 2008,\2\ allowances for 2013 will be 
submitted by April 30, 2009, and allowances for each subsequent year 
will be submitted by April 30 of the year four years prior to the 
respective control period. While this is different from the model rule 
provisions, the requirement that allocations be made by the 
Commonwealth four years in advance of the respective control period 
meets the CAIR requirements in 40 CFR 51.123(o)(2)(ii)(B) for the 
NOX annual trading program and 40 CFR 51.123(aa)(2)(ii)(C) 
for the NOX ozone season trading program.
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    \2\ Because the Pennsylvania CAIR SIP was not in effect at the 
time, the 2009 allocations for sources in Pennsylvania were issued 
under the FIP. Allocations beginning with vintage year 2010 will be 
issued in accordance with the Commonwealth's CAIR SIP when finally 
approved.
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    Similarly, the timing for allocation to new units in Pennsylvania 
is modified. These allocations will be issued for the fifth year after 
the year the new unit first had NOX emissions. The SIP 
revision specifies that by April 30, 2011 and every April 30 
thereafter, the allowance allocation for new units will be submitted to 
the Administrator. This meets the CAIR timing requirements in 40 CFR 
51.123(o)(2)(ii)(C) for the NOX annual trading program and 
40 CFR 51.123(aa)(2)(iii)(D) for the NOX ozone season 
trading program, which require that EPA be notified of the amount of 
allowances to be allocated to new units by October 31 and July 31 of 
the year of the allocation for the NOX annual trading 
program and the NOX ozone season trading program, 
respectively.
    Also, Pennsylvania has chosen not to use a ``set-aside'' for 
allocations to new units. Instead, existing units, new units, and 
qualifying resources will be allocated from the same allowance pool. 
Allocation priority is given to new units, after which existing units 
and qualifying resources will receive allocations. New unit allowance 
allocations will be published, and opportunity for public comment 
provided, by March 31, 2011 and March 31 every year thereafter. The 
allocation to new units will be based on the previous year's emissions. 
Allowance allocations will be of a vintage year five years later than 
the year in which the emissions were generated. A new unit may also 
receive an allocation based on qualifying converted baseline heat input 
for existing units, with concurrent allocations continuing each year 
until the new unit no longer qualifies for new unit allocations. The 
new unit will no longer qualify as a new unit five years after the 
unit's first NOX emissions. After five years, the unit will 
have transitioned into regular unit status and will no longer be 
eligible for new unit allocations. Since the new units will receive 
future year allowances (vintage five years later than the year the 
emissions were generated) until the unit no longer qualifies as a new 
unit, the owners and/or operators of the new unit will need to obtain 
current or prior year (banked) allowances to comply with the current 
year compliance obligations.
    Pennsylvania has chosen this methodology to avoid oversubscription 
of the set-aside (in which case allowances are prorated and new units 
do not receive all of its requested allowances), allow new sources to 
be integrated into the allowance pool, and

[[Page 48700]]

allow energy efficiency/renewable energy resources a share of 
allowances allocated from the Commonwealth's budget. CAIR 
NOX annual and CAIR NOX ozone season allocations 
for new units in Pennsylvania were allocated under the CAIR 
NOX Annual and CAIR NOX Ozone Season FIP for the 
2009 control periods.
    Pennsylvania has chosen to allocate CAIR NOX annual and 
CAIR NOX ozone season allowances to renewable energy 
qualifying resources or demand side management energy efficiency 
qualifying resources. Pennsylvania will determine the allocation of 
CAIR NOX annual and CAIR NOX ozone season 
allowances based on conversion of the certified quantity of electrical 
energy production, useful thermal energy, and the energy equivalent 
value of the measures approved under the Pennsylvania Alternative 
Energy Portfolio Standard to equivalent thermal energy. The equivalent 
thermal energy will be the unit's baseline heat input for determining 
the allowance allocations.
    Finally, Pennsylvania has chosen to allocate up to 1.3 percent of 
its CAIR NOX annual trading budget in each control period to 
certain facilities that were exempted from the Acid Rain Program (see 
CAA Section 405(g)(6)(A), 42 U.S.C. 7651d(g)(6)(A)). Because they were 
not subject to the Acid Rain Program, they received no SO2 
allowances under that program. (Acid Rain Program allowances are used 
for SO2 compliance in CAIR.) These facilities are subject to 
CAIR and receive NOX annual allowances and NOX 
ozone season allowances. The additional NOX allowances are 
distributed to these facilities for each control period beginning in 
2010 until 2015.

E. Allocation of NOX Allowances From Compliance Supplement Pool

    The CAIR establishes a CSP to provide an incentive for early 
reductions in NOX annual emissions. The CSP consists of 
200,000 CAIR NOX annual allowances of vintage 2009 for the 
entire CAIR region, and a State's share of the CSP is based upon the 
projected magnitude of the emission reductions required by CAIR in that 
State. States may distribute CSP allowances, one allowance for each ton 
of early reduction, to sources that make NOX reductions 
during 2007 or 2008 beyond what is required by any applicable State or 
Federal emission limitation. States also may distribute CSP allowances 
based upon a demonstration of need for an extension of the 2009 
deadline for implementing emission controls.
    The CAIR annual NOX model trading rule establishes 
specific methodologies for allocations of CSP allowances. States may 
choose an allowed, alternative CSP allocation methodology to be used to 
allocate CSP allowances to sources in the States.
    Pennsylvania sources are subject to the CAIR FIP for 2009 and CSP 
allowances will be distributed under those provisions.

F. Individual Opt-In Units

    The opt-in provisions of the CAIR SIP model trading rules allow 
certain non-EGUs (i.e., boilers, combustion turbines, and other 
stationary fossil-fuel-fired combustion devices) that do not meet the 
applicability criteria for a CAIR trading program to participate 
voluntarily in (i.e., opt into) the CAIR trading program. A non-EGU may 
opt into one or more of the CAIR trading programs. In order to qualify 
to opt into a CAIR trading program, a unit must vent all emissions 
through a stack and be able to meet monitoring, recordkeeping, and 
recording requirements of 40 CFR part 75. The owners and operators 
seeking to opt a unit into a CAIR trading program must apply for a CAIR 
opt-in permit. If the unit is issued a CAIR opt-in permit, the unit 
becomes a CAIR unit, is allocated allowances, and must meet the same 
allowance-holding and emissions monitoring and reporting requirements 
as other units subject to the CAIR trading program. The opt-in 
provisions provide for two methodologies for allocating allowances for 
opt-in units, one methodology that applies to opt-in units in general 
and a second methodology that allocates allowances only to opt-in units 
that the owners and operators intend to repower before January 1, 2015.
    States have several options concerning the opt-in provisions. 
States may adopt the CAIR opt-in provisions entirely or may adopt them 
but exclude one of the methodologies for allocating allowances. States 
may also decline to adopt the opt-in provisions at all.
    Pennsylvania has chosen to adopt, by reference, the provisions of 
the model rule allowing opt-ins for the NOX annual, 
NOX ozone season, and SO2 annual trading 
programs.

G. Clarifications and Interpretations

Use of ``Future'' Unallocated Allowances To Correct Any Errors in 
Allocations
    Sections 145.212(g) and 145.222(g) allow the use of ``future'' 
allowances that have not been allocated to correct errors in past 
allocation. EPA is proposing to approve this revision to the 
Pennsylvania SIP with the understanding that provisions in sections 
145.212(g) and 145.222(g) impacting ``future'' allowances that have not 
been allocated would rarely be implemented. EPA understands that any 
corrections to the allocations would be based on calculation errors and 
would not be routine. EPA understands that correcting errors in 
allowance allocations would be unlikely since the data that is used to 
determine allowance allocations is based on past emissions, heat input, 
electrical energy production, or useful thermal energy and not on data 
projections. EPA understands that any correction to the ``future'' 
allowance allocation under these provisions would not occur after the 
allowances have been recorded by the Administrator.

H. Other Requirements in This SIP Revision

1. Use of CAIR Allowances for Non-CAIR Sources, Sections 129.201, 
129.202, 129.204, Sections 145.113, 145.143
    These provisions apply to sources not regulated by Pennsylvania's 
CAIR program. Currently, owners and operators of small sources of 
NOX in the five counties that comprise the Pennsylvania 
portion of the Philadelphia 8-hour ozone non-attainment area are 
subject to emission limits that, if exceeded, require them to surrender 
NOX SIP Call allowances to the Commonwealth. These 
provisions were approved by EPA into the Pennsylvania SIP on September 
29, 2006 (71 FR 57428). Similarly, large stationary internal combustion 
engines and large cement kilns that are subject to the NOX 
SIP Call are required to surrender NOX SIP Call allowances 
to the Commonwealth if they exceed their NOX emission 
limits. Because the NOX SIP Call trading program has been 
discontinued and NOX SIP Call allowances have been converted 
to CAIR NOX ozone season allowances, these rules were 
modified to instead require CAIR NOX ozone season allowance 
and CAIR NOX allowance surrenders for emission limit 
exceedances.
    EPA is proposing to approve this SIP revision with the 
understanding that the impact of these surrendered allowances on the 
overall CAIR market will be minimal. Since these provisions were 
originally adopted by the Commonwealth, the number of NOX 
SIP Call allowances surrendered have been less than one percent of the 
Commonwealth's total CAIR NOX ozone season budget, and would 
likely

[[Page 48701]]

continue to be minimal in the CAIR trading program (See TSD at (C)(4)).
2. Chapter 145, Subchapter A, NOX Budget Trading Program; 
Section 145.8 ``Transition to CAIR NOX Trading Programs''
    EPA will not administer the NOX Budget Trading Program 
after the 2008 ozone season. The provisions in section 145.8(a) 
establish 2008 as the final year for NOX allowance 
allocations under Chapter 145, subchapter A, NOX Budget 
Trading Program. Allocations for 2009 will be made in accordance with 
the CAIR NOX Ozone Season FIP. The CAIR NOX ozone 
season allowance allocations for the control period starting May 1, 
2010, and for each control period thereafter, will be distributed in 
accordance with Chapter 145, Subchapter D, CAIR NOX Trading 
Programs once Pennsylvania's CAIR SIP is finally approved. Under 
section 145.8(b), any allowances already allocated for 2009 or later 
under the NOX Budget Trading Program are terminated. EPA 
understands that, under this provision and section 145.8(c), all 
allowances for these years under the NOX Budget Trading 
Program are terminated or retired.
    Section 145.8(c) terminates the requirements of the NOX 
Budget Trading Program by replacing that program's emissions 
limitations and monitoring requirements related to the 2010 ozone 
season (which starts on May 1, 2010) by the CAIR trading program's 
emissions limitations and monitoring and other requirements related to 
that ozone season. This section also converts leftover NOX 
Budget Trading Program allowances to CAIR NOX ozone season 
allowances and provides excess emission procedures for the final year 
of the NOX Budget Trading Program. In summary, this section 
clarifies that: For the 2008 ozone season, Pennsylvania's 
NOX Budget Trading Program applies; for the 2009 ozone 
season, the CAIR FIP applies; and beginning with the 2010 ozone season, 
Pennsylvania's CAIR NOX ozone season trading program 
applies.
    Because Pennsylvania has chosen not to expand its CAIR 
NOX ozone season trading program to include non-EGUs that 
were subject to the State's NOX Budget Trading Program, 
Pennsylvania is required to meet 40 CFR 51.121(f)(2) and (i)(4). These 
provisions require either a NOX mass emissions cap on each 
source, NOX emissions rate limit on each source assuming 
maximum operating capacity for purposes of estimating mass 
NOX emissions, or any other regulatory requirement that can 
provide emission reductions from those sources to meet the 2007 ozone 
season NOX budgets established under the NOX SIP 
Call. A State must also impose enforceable mechanisms to assure that 
collectively all such sources, including new or modified units, will 
not exceed the total ozone season NOX budget. Pursuant to 40 
CFR 51.121(i)(4), these sources must also comply with the monitoring 
provisions of 40 CFR part 75, subpart H.
    Pennsylvania has added new section 145.8(d) to address requirements 
of units subject to the NOX Budget Trading Program, but not subject to 
the CAIR NOX Ozone Season trading Program. Beginning with the 2009 
ozone season, these units will be required to meet an emissions cap and 
to continue monitoring using 40 CFR part 75 (required through 
compliance with 40 CFR part 96, Subpart HHHH and related subparts 
incorporated by reference). Pennsylvania's non-EGU NOX ozone 
season emissions trading budget under the NOX SIP Call 
totals 3,619 tons of NOX. Pennsylvania uses 3,438 tons as a 
State-wide ozone season emission limitation for these units. Each unit 
has an allowable emission rate, calculated by January 31 of each year, 
based on the previous season's heat input. If the combined 
NOX ozone season emissions from all the units subject to 
section 145.8(d) exceed the statewide ozone season emission limit 
(3,438 tons), the units that exceed their individual allowable 
emissions for that ozone season must surrender to the Commonwealth one 
CAIR NOX ozone season allowance and one CAIR NOX 
annual allowance for each ton of emissions over its allowable emission 
limit. The Commonwealth has set aside 181 tons of the non-EGU budget, 
including tons that will be retired each year to compensate for sources 
that were exempted under the ``twenty-five ton exemption'' in section 
145.4(b) \3\. The balance of tons remaining in the set aside is 
available to the Pennsylvania Department of Environmental Protection 
annually for accounting corrections. EPA understands that any unused 
amount from this set aside would be retired by the Commonwealth each 
year.
---------------------------------------------------------------------------

    \3\ Sources that were exempted under the ``25 ton exemption'' 
provisions of the NOX Budget Trading Program must 
continue to have the same Federally enforceable permits limits (as 
were required under the NOX Budget Trading Program), 
including restricting the units to burning only natural gas or fuel 
oil and NOX emissions to 25 tons or less in a control 
period.
---------------------------------------------------------------------------

    It is unlikely that the statewide NOX ozone season 
emission limitation (3,438 tons) will be exceeded. Pennsylvania's non-
EGU sources' total emissions during each of the years they were trading 
under the NOX Budget Trading Program have never exceeded 
Pennsylvania's total non-EGU trading budget (3,619 tons) or the 
statewide NOX ozone season emission limitation (3,438 tons) 
(See TSD at (C)(4)). Therefore, the provision that the non-EGUs (that 
were formerly trading sources under the NOX Budget Trading 
Program) surrender CAIR allowances when the statewide NOX 
Ozone season emission limitation budget is exceeded is unlikely to be 
invoked.
    Included in Subchapter D are provisions that integrate emission 
reduction credits (ERCs) under new source review with CAIR allowances. 
The provisions require that to the extent a CAIR unit is reducing its 
NOX emissions and generating emission reduction credits for 
use by another source to meet new source review requirements, the CAIR 
NOX annual and ozone season budgets must be reduced an 
amount equal to the ERCs. In years for which allowances have already 
been allocated, allowances must be surrendered by the owner or operator 
of the CAIR unit generating the ERC in order to reduce the budgets. In 
years for which allowances have not yet been recorded, the budgets will 
be reduced before allowances are recorded and distributed.
    EPA expects that the amount of allowances removed from the CAIR 
budgets as a result of these provisions would likely be minimal. EPA is 
therefore proposing to approve these provisions.

VI. Proposed Action

    EPA is proposing to approve Pennsylvania's full CAIR SIP revision 
submitted on May 23, 2008. The SIP revision meets the applicable 
requirements of CAIR, set forth in 40 CFR 51.123(o) and (aa), with 
regard to NOX annual and NOX ozone season 
emissions, and 40 CFR 51.124(o), with regard to SO2 
emissions. EPA is also proposing to approve revisions to other 
Pennsylvania regulations submitted as part of this SIP revision as 
discussed in this notice. EPA is soliciting public comments on the 
issues discussed in this document. These comments will be considered 
before taking final action.

VII. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a 
SIP submission that complies with the provisions of the Act and 
applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). 
Thus, in reviewing SIP submissions, EPA's role is to approve State 
choices, provided that they meet the criteria of the Clean Air Act.

[[Page 48702]]

Accordingly, this action merely proposes to approve State law as 
meeting Federal requirements and does not impose additional 
requirements beyond those imposed by State law. For that reason, this 
proposed action:
     Is not a ``significant regulatory action'' subject to 
review by the Office of Management and Budget under Executive Order 
12866 (58 FR 51735, October 4, 1993);
     Does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact 
on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.);
     Does not contain any unfunded mandate or significantly or 
uniquely affect small governments, as described in the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4);
     Does not have Federalism implications as specified in 
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based 
on health or safety risks subject to Executive Order 13045 (62 FR 
19885, April 23, 1997);
     Is not a significant regulatory action subject to 
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of Section 12(d) of the 
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) because application of those requirements would be inconsistent 
with the Clean Air Act; and
     Does not provide EPA with the discretionary authority to 
address, as appropriate, disproportionate human health or environmental 
effects, using practicable and legally permissible methods, under 
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this proposed approval of the Pennsylvania SIP 
revision to meet the requirements of CAIR and transition from the 
NOX Budget Program does not have Tribal implications as 
specified by Executive Order 13175 (65 FR 67249, November 9, 2000), 
because the SIP is not approved to apply in Indian country located in 
the State, and EPA notes that it will not impose substantial direct 
costs on Tribal governments or preempt Tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Nitrogen dioxide, 
Ozone, Particulate matter, Reporting and recordkeeping requirements, 
Sulfur oxides.

    Authority: 42 U.S.C. 7401 et seq.

    Dated: September 15, 2009.
William C. Early,
Acting Regional Administrator, Region III.
[FR Doc. E9-23052 Filed 9-23-09; 8:45 am]
BILLING CODE 6560-50-P