![[logo] US EPA](http://www.epa.gov/epafiles/images/logo_epaseal.gif){kind=logo}
Approval and Promulgation of Implementation Plans; New Jersey; Open Market Emissions Trading Program; Revised Interpretation of Operating Permit Requirements for Emissions Trades
Related Material
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: January 9, 2001 (Volume 66, Number 6)]
[Proposed Rules]
[Page 1795-1805]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ja01-32]
[[Page 1795]]
-----------------------------------------------------------------------
Part V
Environmental Protection Agency
-----------------------------------------------------------------------
40 CFR Part 52
Approval and Promulgation of Implementation Plans; New Jersey; Open
Market Emissions Trading Program; Revised Interpretation of Operating
Permit Requirements for Emissions Trades; Proposed Rule
[[Page 1796]]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[Region II Docket No. NJ34-1-193, FRL-6929-3]
Approval and Promulgation of Implementation Plans; New Jersey;
Open Market Emissions Trading Program; Revised Interpretation of
Operating Permit Requirements for Emissions Trades
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Environmental Protection Agency is proposing to
conditionally approve New Jersey's State Implementation Plan (SIP)
revision for ozone. This SIP revision relates to New Jersey's Open
Market Emissions Trading Program, which provides a more cost-effective
mechanism for sources to meet regulatory requirements for reducing
oxides of nitrogen and volatile organic compound emissions. This action
proposes a conditional approval of the regulations which implement New
Jersey's Open Market Emissions Trading Program, and will help to meet
the national ambient air quality standard for ozone. This action also
proposes a revised interpretation that the permits provisions of the
Clean Air Act do not mandate that emissions quantification requirements
resulting from the application of emissions trading program be included
in the SIPs.
DATES: Written comments must be received on or before March 12, 2001.
Representatives from EPA and New Jersey will hold public information
sessions to meet with members of the public and discuss the proposed
rule as follows:
Wednesday, February 7, 2001, 3:00 p.m. to 5:00 p.m., and 7:00 p.m.; and
Thursday February 15, 2001, 3:00 p.m. to 5:00 p.m., and 7:00 p.m.
ADDRESSES: All comments should be addressed to:
Raymond Werner, Chief, Air Programs Branch, Environmental
Protection Agency, Region II Office, 290 Broadway, 25th Floor, New
York, New York 10007-1866.
The public information session for February 7, 2001 will be held at
the New Jersey Department of Environmental Protection Building, First
Floor Hearing Room, 401 East State Street, Trenton, New Jersey; and the
public information session for February 15, 2001 will be held at Newark
City Hall, Room B29, 920 Broad Street, Newark, New Jersey.
Copies of the state submittal and supporting documents are
available for inspection during normal business hours, at the following
addresses:
Environmental Protection Agency, Region II Office, Air Programs Branch,
290 Broadway, 25th Floor, New York, New York 10007-1866.
New Jersey Department of Environmental Protection, Office of Air
Quality Management, Bureau of Air Quality Planning, 401 East State
Street, CN418, Trenton, New Jersey 08625.
FOR FURTHER INFORMATION CONTACT: Richard Ruvo, Air Programs Branch,
Environmental Protection Agency Region II, 290 Broadway, 25th Floor,
New York, New York 10007-1866, (212) 637-4014.
SUPPLEMENTARY INFORMATION:
Overview
The Environmental Protection Agency (EPA) is proposing to
conditionally approve the New Jersey State Department of Environmental
Protection's (New Jersey's) Open Market Emissions Trading (OMET)
Program.
The following table of contents describes the format for this
SUPPLEMENTARY INFORMATION section:
EPA's Proposed Action
What Action Is EPA Proposing Today?
Why Is EPA Proposing This Action?
What Is Emissions Trading?
What Is Open Market Emissions Trading?
What Are EPA's Proposed Conditions For Approval?
1. Using Approved Emission Quantification Protocols
2. Providing for Monetary Penalties
3. Claiming Ownership of Discrete Credits
4. Notifying Metropolitan Planning Organizations
5. Notifying the Federal Land Manager
6. Accounting for Discrete Credits in Emission Inventory
7. Including Toxic Disclosure Information in Notices
What Other Clarifications Should New Jersey Make in Their Program?
How Can New Jersey Get Full Approval for Their Program?
What Guidance Did EPA Use to Evaluate New Jersey's Program?
What Is EPA's Evaluation of New Jersey's Program?
New Jersey's Open Market Emissions Trading Program
How Do Sources Generate Credits?
How Do Sources Use Credits?
What Are the Other Requirements of New Jersey's Program?
How Does New Jersey's Program Protect the Environment?
How Is New Jersey's Program Enforced?
How Does New Jersey's Program Interact With Title V Permits?
How Does New Jersey's Program Provide for Emissions Quantification
Protocols?
When Was New Jersey's Program Proposed and Adopted?
When Was New Jersey's Program Submitted to EPA and What Did it
Include?
Other Significant Items Related to New Jersey's Program
How Does New Jersey's Program Avoid Adverse Local Impacts of
Hazardous Air Pollutant Emissions?
How Does EPA's Proposed Action Affect Earlier Credits?
How Will New Jersey Audit the Program?
What is the Basis for Today's Proposal?
How Will New Jersey Address Future EPA Trading Guidance?
What is the Status of the 1994 Economic Incentive Program?
Conclusion
Administrative Requirements
EPA's Proposed Action
What Action Is EPA Proposing Today?
EPA is proposing a conditional approval of New Jersey's revision to
the ozone State Implementation Plan (SIP) submitted to EPA on October
27, 1998 and supplemented on April 27, 2000. This SIP revision relates
to New Jersey's new Subchapter 30 regulation for New Jersey's Open
Market Emissions Trading (OMET) Program.
Why Is EPA Proposing This Action?
EPA is proposing this action to:
Give the public the opportunity to submit written comments
on EPA's proposed action, as discussed in the DATES and ADDRESSES
sections
Fulfill New Jersey's and EPA's requirements under the
Clean Air Act (the Act)
Make New Jersey's OMET Program federally-enforceable.
What Is Emissions Trading?
Air emission trading is a program where one source, for example a
power plant, reduces its emissions below the level it is required to
meet. This source then sells or trades these reductions as credits to
another source which continues to release emissions above its required
levels. In return for this flexibility, the second source must purchase
additional credits beyond those needed to comply, therefore reducing
overall emissions. Emissions trading uses market forces to reduce the
overall cost of compliance for sources, while maintaining emission
reductions and environmental benefits.
What Is Open Market Emissions Trading?
In an open market emission trading program, a source generates
short-term emission reduction credits, called discrete emission
reduction credits or DER's (discrete credits) by reducing its
[[Page 1797]]
emissions. The source can then use these discrete credits at a later
time, or trade them to another source to use at a later time. Open
market programs rely on many sources continuing to generate new
discrete credits to balance with other sources using previously
generated discrete credits.
For example, a power plant burns a cleaner fuel for a summer to
reduce oxides of nitrogen (NOX) emissions. This emission
reduction could generate discrete credits. The power plant trades these
discrete credits to a paperboard manufacturer. In the future, the
paperboard manufacturer can use the discrete credits to meet its
NOX control requirements. While the paperboard manufacturer
is using the discrete credits, other sources are also reducing
emissions and generating discrete credits. But the paperboard
manufacturer must also purchase an additional amount, 10 percent, of
discrete credits above the number of credits they would otherwise need
to comply. The paperboard source, or any other source, will never use
this additional amount for compliance. This is known as a retirement of
credit to benefit the environment. The total effect is to reduce
emissions.
What Are EPA's Proposed Conditions for Approval?
EPA is proposing the following seven conditions for approving New
Jersey's OMET Program. These areas of New Jersey's OMET Program do not
fully satisfy EPA's guidance. A Technical Support Document (TSD),
prepared in support of this proposed action, contains a full
description of EPA's conditions for approval. A copy of the TSD is
available upon request from the EPA Regional Office listed in the
ADDRESSES section and on EPA Region II's website at http://www.epa.gov/
region02/air/air.htm.
1. Using Approved Emission Quantification Protocols
New Jersey's OMET Program contains emission quantification protocol
development criteria in Subchapter 30.20. This provision is consistent
with the approach outlined in Option 1 of EPA's proposed policy on open
market trading programs (60 Federal Register (FR) 39668, August 3,
1995) and model open market trading rule (60 FR 44290, August 25,
1995), and the first requirement contained in EPA's proposed action for
the State of Michigan's Emissions Averaging and Emission Reduction
Credit Trading Rules (62 FR 48972, September 18, 1997).
New Jersey's OMET Program also requires mobile source generators
and users to use a protocol which complies with EPA guidance.
Therefore, with respect to mobile sources, New Jersey's OMET Program is
consistent with Option 1 and Option 2 of EPA's proposed model rule and
the first and second requirements contained in EPA's proposed action
for Michigan.
With respect to stationary sources, New Jersey's OMET Program does
not directly require protocols to comply with all applicable EPA
guidance. New Jersey's adoption documents state it will review any EPA-
approved protocols or guidance for stationary sources to determine
whether it needs to incorporate it by reference, similar to what the
State did with mobile sources. In addition, subchapter 30 already
contains the requirement that discrete credits be real, surplus and
properly quantified. The generator bears the burden of proving that it
has in fact generated discrete credits in accordance with the rules and
certified the discrete credits are real, surplus and properly
quantified (Subchapter 30.21). Also, based on its experience in
emissions trading programs, New Jersey has included protocol
development criteria in subchapter 30.20 which addresses the general
elements that would be characteristic to stationary sources and,
therefore, contained in the stationary source protocol.
However, to further ensure that the criteria of real, surplus and
quantified in New Jersey's OMET Program are met, New Jersey must also
incorporate into subchapter 30.20 a requirement that if an EPA-approved
protocol exists, sources must use that protocol for quantifying
emission reductions at applicable stationary sources, and to allow
sources to deviate from the EPA protocol only if they first get the
approval of EPA.
2. Providing for Monetary Penalties
New Jersey's OMET Program establishes at subchapter 30.22 that any
person who fails to comply with any provision of the OMET Program is
subject to both civil administrative penalties and applicable criminal
penalties. However, there are two provisions in subchapter 30 which
provide for the temporary relief from monetary penalties.
Subchapter 30.11(f) requires a user source to hold the full
quantity of discrete credits needed for compliance before using them,
and must continue to hold them until the Notice of Use is due. But this
provision also allows the source to purchase additional credits it may
need for compliance, provided this additional amount is multiplied by
three. Subchapter 30.11(h) allows a 60-day period for sources to
substitute good credits when New Jersey or EPA determines the credits
are invalid for any reason. While these two provisions require the
source to make up for the credits used, they provide an exception from
the principle that a user source must be potentially subject to
monetary penalties at any time when the user does not hold sufficient
valid credits prior to the use of the credits.
New Jersey must revise subchapter 30 to include the potential for
monetary penalties at any time when the user does not hold sufficient
valid credits. Section 113 of the Act requires that all violations of
the Act be potentially subject to monetary penalties equivalent to
$10,000 per violation per day under State law and $27,500 per violation
per day under Federal rules. Every requirement under a trading program
is a requirement of the Act. Therefore, any violation of the trading
provisions must be potentially subject to monetary penalties from the
very first day of the violation.
A source committing a violation must be potentially subject to a
monetary penalty. Whether the regulatory agency actually imposes a
monetary penalty depends on enforcement discretion which covers
considerations such as:
The amount of money the source saved by committing the
violation
The amount of environmental damage caused by the violation
Evidence of knowledge that the act was a violation
Evidence of intentional fraud.
EPA recognizes New Jersey includes the independent verifier
requirement to provide confirmation of the correct generation and
quantification of discrete credits to prevent the generation and use of
invalid credits. However, while the verification step may minimize the
likelihood of the use of invalid credits, there is still the
possibility of sources using invalid credits. Under subchapters
30.11(f) and (h) it is possible for a source to buy credits that may
not be valid, to claim to have bought valid credits that may be invalid
credits, or to buy fewer credits than the amount needed for compliance.
When New Jersey determines the source is holding invalid credits or
when the source discovers it needs additional credits for compliance
after the use of the credits, the source only has to buy the additional
valid credits which they should have bought in the first place (only
now the source can buy the credits at a later date).
Trading programs should encourage sources to ensure that they hold
[[Page 1798]]
sufficient credits in advance of use and that they use valid credits.
The potential for Federal and state penalties immediately upon the
discovery of a violation is an incentive which the regulatory agency
cannot achieve by merely requiring the purchase of replacement credits.
Therefore, New Jersey must revise subchapter 30, to address sections
30.11(f) and (h), and include the potential for monetary penalties at
any time when the user does not hold sufficient valid credits.
New Jersey should also revise subchapter 30 (or Subchapter 3 at
N.J.A.C. 7:27A) to clarify what constitutes a violation and provide the
potential to assess daily penalties. In some cases, a user's failure to
comply with subchapter 30 may prevent the use of discrete credits for
compliance with an emission limit. In such cases, if the user exceeds
the emission limit it would be in violation of existing provisions and
the existing rules contain penalties for such violations. Also, the
general sections at subchapter 3.5 specify that each violation
constitutes a separate and distinct offense, and each day during which
a violation continues will constitute an additional, separate, and
distinct offense. However, New Jersey should clarify that during a
particular compliance period, if a source does not hold sufficient
valid credits at any time, the source is subject to a violation. New
Jersey should also clarify that if the source is using credits to
comply with a requirement over an extended compliance period, such as a
30-day rolling average, then the source could be subject to a violation
of the entire compliance period.
3. Claiming Ownership of Discrete Credits
Subchapter 30.4(a) states the owner or operator of a source is
eligible to generate discrete credits and claim ownership. In addition,
a person that does not own or operate a source may generate discrete
credits by reducing emissions from either (1) a reduction in mobile
source activity levels in an activity reduction plan approved by EPA
and the State, or (2) a reduction in an electric generator's activity
level resulting from electrical energy efficiency measures.
However, New Jersey's OMET Program does not include a requirement
specifying which parties are eligible to generate discrete credits in
situations where more than one party has a potential claim. This issue
is significant because the rights to credits generated by a particular
credit generation strategy will be unclear in some cases. For instance,
a manufacturer of a device that reduces automobile emissions might
attempt to register credits based on the sale of the device within New
Jersey. However, an owner of a vehicle fleet might also attempt to
register credits based on his or her installation of those same devices
within the fleet. Registration of both sets of credits would double
count the emission reductions, leading to the generation of excess
credits.
New Jersey must address the issue of ownership claims in its
regulation and make provisions for reporting ownership claims in the
Notices of Discrete Credit Generation.
4. Notifying Metropolitan Planning Organizations
New Jersey must require notification of the relevant Metropolitan
Planning Organizations and Departments of Transportation in the event
of mobile source generation activities. To avoid double-counting the
emission reductions generated by mobile sources in trading programs,
the state must ensure coordination between the emission trading program
and the conformity analyses in the area in which the trading program
takes place. Metropolitan Planning Organizations should not use any
reductions they receive notice about, for transportation conformity.
Similarly, the trading program should not use reductions the
Metropolitan Planning Organizations rely on in a transportation
conformity determination. New Jersey should require a generator of
mobile-source emission reductions to notify the Metropolitan Planning
Organizations in the area, and the State Department of Transportation
of the generator's intention to generate emission reductions. The
generator must provide enough information to the Metropolitan Planning
Organizations about the likely emission reductions from the activity to
allow the Metropolitan Planning Organizations to adjust its regional
conformity analyses appropriately. Once notified, the Metropolitan
Planning Organizations may not use these emission reductions to satisfy
the requirement for transportation conformity.
5. Notifying the Federal Land Manager
EPA has a policy of providing special protection for Class I areas
(pristine environments such as international parks, large national
parks and wilderness areas), as required under sections 160 through 169
of the Act. New Jersey contains a Class I area--the Brigantine National
Wildlife Refuge. This policy includes keeping Federal Land Managers
informed of activities that could affect air quality in Class I areas.
In accordance with this policy, New Jersey must revise subchapter 30,
or submit procedures as part of the SIP, which require 30-day prior
notification to the relevant Federal Land Manager before any discrete
credit use activity occurs approximately within 100 km of a Class I
area.
6. Accounting for Discrete Credits in Emission Inventory
The Act requires states to have an emissions inventory that
specifically accounts for actual emissions of all major stationary
sources and minor/area source categories. EPA's General Preamble
guidance to the Act also requires the inventory to consider credits
available for use as if they are ``in the air'' for all attainment
demonstrations. Therefore all attainment modeling demonstrations must
include all unused credits, that sources can eventually use, as actual
emissions. While this can ``inflate'' an area's actual emissions
inventory above the level of what will probably occur, it does not
inflate emissions above what could potentially occur. For emission
trading purposes, EPA has and continues to require that attainment,
reasonable further progress and rate-of-progress demonstrations use a
worst-case emissions scenario. This is to discourage the accumulation
of large banks of credits that could potentially ruin any attainment
plan or demonstration if the credits were all used at the same time.
New Jersey must submit to EPA additional information on how the
emission inventories account for unused credits under New Jersey's OMET
Program.
7. Including Toxic Disclosure Information in Notices
Subchapter 30.7(b)(1) and 30.14(b)(4) require the Notices which
document the generation and use of discrete credits to include
information on any increase in emissions of any hazardous air pollutant
as a result of generating or using discrete credits. However, EPA's
proposed open market policy also requires the Notices to include
information on any forgone emission reductions in hazardous air
pollutants due to the generation or the use of discrete credit, instead
of non-discrete credit compliance with otherwise applicable
requirements. New Jersey must revise the provisions on Notice
requirements to include information on forgone emission reductions.
[[Page 1799]]
What Other Clarifications Should New Jersey Make in Their Program?
New Jersey should clarify the following provisions in Subchapter
30. While these provisions are not approval issues, clarification would
make the OMET program more understandable and enforceable.
Subchapter 30.20(f)(2)(i) and (ii) reference alternative
monitoring plans and test methods approved by New Jersey. New Jersey
should clarify that these references are already part of the SIP, and
are not Director discretion issues.
Subchapter 30.4(a)(1) and the ``curtailment'' definition
refer to mobile source activity level reductions approved by New
Jersey. New Jersey should specify that while these actions may be
eligible to generate discrete credit, the generation strategy must
still comply with any applicable EPA guidance concerning mobile source
emission quantification protocols.
New Jersey should revise the definition of ``SIP'' as a
plan developed by the State and approved by EPA.
New Jersey should clarify the definition of ``surplus''
includes emission reductions in excess of an established program
baseline which are not required by SIP requirements or State
regulations, relied upon in any applicable attainment plan or
demonstration, or credited in any reasonable further progress or
milestone demonstration so as to prevent the double-counting of
emission reductions.
New Jersey should clarify that in the definition of
``Volatile organic compound,'' EPA, not the State, has the final
decision on an acceptable VOC test method.
New Jersey should clarify the units for the definitions of
``activity'' and ``economic output'' correspond to the applicable
emission rate.
New Jersey should clarify the provisions for determining
the baseline period to be consistent with how New Jersey historically
determines normal source operation in the State's rules.
How Can New Jersey Get Full Approval for Their Program?
EPA is proposing conditional approval of New Jersey's OMET Program,
provided New Jersey commits to correct the deficiencies discussed in
the ``What are EPA's Proposed Conditions for Approval?'' section, in
writing, on or before February 8, 2001. New Jersey must then correct
the deficiencies and submit them to EPA within one year of EPA's final
action on the OMET SIP revision.
If New Jersey submits a commitment to comply with EPA's conditions,
EPA will publish a final conditional approval of New Jersey's OMET
Program. EPA will consider all information submitted prior to any final
rulemaking action as a supplement or amendment to the October 27, 1998
submittal. If New Jersey does not make the required commitment to EPA,
EPA is proposing to disapprove the OMET Program.
What Guidance Did EPA Use To Evaluate New Jersey's Program?
In 1994, EPA issued Economic Incentive Program (EIP) rules and
guidance (40 CFR part 51, subpart U), which outlined requirements for
establishing EIPs that States are required to adopt in some cases to
meet the ozone and carbon monoxide standards in designated
nonattainment areas. There is no requirement for New Jersey to submit
an EIP, so its OMET Program need not necessarily follow the EIP rule.
However, since subpart U also contains guidance on the development of
voluntary EIPs, New Jersey did follow certain aspects of the EIP
guidance in the development and submittal of its OMET Program.
EPA also published an August 3, 1995 proposed policy on open market
trading programs and an August 25, 1995 model open market trading rule.
EPA's proposed policy describes the elements of an open market trading
program that EPA considers to be desirable and necessary for a program
to be approvable as a SIP revision. The proposed policy also allowed
States to adopt rules that varied from the proposed model rule. In a
March 10, 1998-letter from Richard D. Wilson, Acting Assistant
Administrator for Air and Radiation to Congressman Thomas J. Bliley,
EPA clarified its policy on open market trading. The letter says EPA
will work with states to develop open market programs tailored to their
individual circumstances and use the August 1995 proposal as guidance.
Also available for reference is EPA's September 18, 1997 Proposed
Action on the State of Michigan's Trading Rules. This proposal includes
additional Agency guidance on several open market trading provisions.
EPA's basis for evaluating New Jersey's OMET Program, is whether it
meets the SIP requirements described in section 110 of the Act. More
specifically, EPA used the EIP of 1994 as guidance for voluntary EIPs.
In those areas where the EIP does not address certain provisions in an
open market system, EPA used (as stated in the March 10, 1998 Bliley
letter) the proposed policy on open market trading as relevant
guidance, in coordination with the proposal on Michigan's Program, and
other guidance documents, to determine the approvability of New
Jersey's OMET Program. For further discussion of how these documents
provide the basis of today's proposed action, see the section ``What is
the Basis for Today's Proposal?''
What Is EPA's Evaluation of New Jersey's Program?
EPA has determined New Jersey's new subchapter 30 regulation for
New Jersey's OMET Program is consistent with EPA's guidance, except for
the deficiencies discussed in the ``What are EPA's Proposed Conditions
for Approval?'' section. New Jersey's OMET Program is based upon and is
consistent with EPA's EIP guidance of 1994, EPA's proposed open market
policy of 1995, and EPA's proposal of 1997 on Michigan's Program.
New Jersey's subchapter 30 contains provisions for definitions,
generation, transfer, verification and use of discrete credits, the
registry, geographic restrictions, recordkeeping, public availability,
demonstrating compliance and penalties.
Given the documentation in the SIP submittal and the provisions of
New Jersey's OMET Program, EPA believes New Jersey has demonstrated the
State's other regulations will achieve at least the same quantity of
NOX and volatile organic compound (VOC) emission reductions,
with or without the OMET Program, including the early reduction
strategies under the OMET Program. Furthermore, given the extra
reductions inherent in New Jersey's reasonably available control
technology (RACT) program, the State will continue to meet the
reasonable further progress and SIP attainment requirements. Based upon
these analyses and documentation, and the commitment for a periodic
program audit, EPA believes that New Jersey's OMET Program will not
interfere with any applicable requirement concerning attainment and
reasonable further progress, or any other applicable requirement of the
Act.
EPA has also determined, with the exceptions discussed in the
``What are EPA's Proposed Conditions for Approval?'' section, the
emission quantification protocol criteria, monetary penalty structure,
geographic scope of trading, early reduction credit, and program audit
provisions of New Jersey's OMET Program are consistent with EPA's
guidance.
EPA has determined the amendments and administrative changes made
to subchapters 16 (VOC RACT), 18 (emission offset program), and 19
(NOX RACT) to be consistent with Subchapter
[[Page 1800]]
30, are consistent with EPA's guidance. EPA will discuss the amendments
and administrative changes made to subchapter 22 (operating permits) in
a future proposed rule on the operating permit program revisions to
part 70.
Finally, EPA has determined the provisions submitted on April 27,
2000 as a supplement to the SIP revision, allowing municipal waste
combustors to use discrete credits to comply with certain Federal
NOX emission standards, are consistent with EPA's guidance.
A TSD, prepared in support of this proposed action, contains the
full description of New Jersey's submittal and EPA's evaluation. A copy
of the TSD is available upon request from the EPA Regional Office
listed in the ADDRESSES section and on EPA Region II's website at
http://www.epa.gov/region02/air/air.htm.
New Jersey's Open Market Emissions Trading Program
How Do Sources Generate Credits?
Sources participating in the OMET Program generate discrete credits
by reducing emissions below a baseline over a discrete time period. The
generation baseline is established by existing requirements, and is
determined by the lower of allowable emissions or actual past
emissions. Sources which generate discrete credits must submit a
``Notice'' to a private Registry identified by New Jersey, which
includes information about the source generating the reductions, the
methods of generating the reductions, the amount of reductions, and the
methods used to measure the reductions. An official representative of
the source must certify the following:
Information in the Notice is true, accurate and complete.
Emission reductions generated are real and surplus.
The source used an emission quantification protocol,
according to subchapter 30, to calculate the emissions reductions.
A prohibited generation strategy is not the basis for the
emission reduction.
How Do Sources Use Credits?
New Jersey's OMET Program requires discrete credits to be verified
by a New Jersey licensed professional engineer or certified public
accountant, before they are used. The verifier must be independent of
the generator source. In verifying a batch of discrete credits, the
verifier must make a diligent inquiry that goes beyond simply relying
on the generator's representations. The verifier must submit a Notice
to the Registry.
Sources that wish to trade or use discrete credits must provide
Notices to the Registry with information about the source's intent to
use discrete credits, as well as the source's use of the discrete
credits. The Notices must also include:
Number of discrete credits to be used.
The requirements the source will comply with through the
use of discrete credits.
Copy of the generation Notice for the discrete credits
used.
Statements that the discrete credits were not previously
used or retired.
Certifications similar to the other Notices.
A generating source can use discrete credits at a later time, or
trade them to another source to use at a later time. The source using
discrete credits must purchase an additional 10 percent of discrete
credits above the number of credits they would otherwise need to
comply. This additional amount is not used for compliance, but retired
to benefit the environment.
What Are the Other Requirements of New Jersey's Program?
New Jersey's OMET Program also contains requirements on the
geographic scope of trading, recordkeeping, public availability of
information, and quantification protocols.
Sources can trade VOC or NOX discrete credits. Discrete
credits must be designated as either ozone season (May 1 through
September 30) or non-ozone season credits. Discrete credits generated
outside of the ozone season cannot be used during the ozone season.
How Does New Jersey's Program Protect the Environment?
New Jersey submitted these rules as a SIP revision to allow sources
which emit ozone precursors--NOX and VOCs--flexibility in
complying with requirements already in the SIP. The program provides
emissions sources with a financial incentive to reduce emissions below
levels required by applicable Federal and State requirements and below
the source's actual emissions of the recent past. Sources that make
these extra reductions going beyond requirements generate discrete
credits that they can use later or sell to other sources. Discrete
credits may be used by sources to comply with emissions limits. The
program is not a means of limiting emissions; instead, trading is meant
to provide an opportunity to comply with existing emission limits in a
more cost effective manner.
However, the OMET Program protects the environment in several ways:
New Jersey has demonstrated that in each ozone season the
number of discrete credits generated will be equal to or greater than
the number used.
The calculation of the number of discrete credits needed
for use is conservative since the source must retire an additional 10
percent of credits.
The OMET Program specifically requires credits to be
surplus to reductions already relied on in the SIP.
The emission inventory must reflect the generator's
emissions before they can generate credit.
How Is New Jersey's Program Enforced?
New Jersey's OMET Program divides compliance responsibilities
between the generator, verifier and user of discrete credit. In
general, the generator, verifier and user are responsible for actions
within his or her control, and a generator, verifier or user is in
violation of subchapter 30 if they do not fulfill their respective
responsibilities.
The generator is responsible for ensuring that it has created
discrete credits according to the OMET Program and that the discrete
credits are real, surplus, and properly quantified.
The verifier is responsible for making the Notice of Discrete
Credit Verification true, accurate and complete and using diligent
inquiry to check that the generated discrete credits are real, surplus,
and properly quantified.
The user is responsible for ensuring that its use of discrete
credits complies with the provisions of the OMET Program, including
requirements on the geographic scope of trading (subchapter 30.17) and
the prohibitions on use (subchapter 30.13). A user is also responsible
for ensuring a discrete credit is not used unless the Registry shows
that the user holds the discrete credit, the credit is verified, the
credit was not previously used or retired, and the discrete credit is
valid.
In any enforcement action, the generator, verifier and user bear
the burden of proof on each of their respective responsibilities. The
verification step does not replace the liability of the generator or
the user under the OMET Program.
How Does New Jersey's Program Interact With Title V Permits?
The purpose of the Title V permitting program, codified in 40 CFR
Part 70, is to ensure that a single document identifies all applicable
requirements under the Act for sources that are ``major sources'' or
are otherwise required to obtain subject to a federally enforceable
operating permit. Part 70 contains provisions designed to streamline
the process of modifying operating permits for facilities that wish
[[Page 1801]]
to participate in an emissions trading programs like the New Jersey
OMET program. See, e.g., 40 CFR 70.6(a)(8), 70.7(e)(2)(B). New Jersey
has revised several provisions in its operating permits regulation,
N.J.A.C. title 7, chapter 27, subchapter 22, in an effort to establish
appropriate procedures for facilities to make changes to their
operating permits so that they can participate in the OMET program.
These revisions to the New Jersey operating permits regulation will be
reviewed separately to determine whether they are consistent with the
federal operating permits regulations and the Clean Air Act.
How Does New Jersey's Program Provide for Emissions Quantification
Protocols?
A key element in the design and implementation of trading programs,
including open market trading programs, is methods for quantifying
amounts of emissions. Precisely determining these amounts would be
important to determine the amount of emissions by which a source may be
exceeding its SIP or permit limits, and therefore the amount of
emissions reductions the source would need to acquire in an emissions
trade in order to meet those limits; as well as the amount of emissions
a source may generate to sell. These methods are often referred to as
emissions quantification protocols, or, simply, protocols.
The 1992 preamble to the part 70 rulemaking (57 FR 32250, July 21,
1992) (1992 Permits Rule Preamble) discusses emission quantification
methods in the context of reviewing emissions trading within a
permitted facility to meet its SIP limits, where the approved SIP
authorizes such trading or emission averaging.
The provisions of 40 CFR 70.4(b)(12)(ii) would allow a source to
trade emissions within the permitted facility to meet its SIP limits,
where the permit does not already provide for such emissions trading
but the SIP does. This method would allow a source which had not
anticipated needing to trade emissions within the facility to take
advantage of emissions trading provisions in the SIP after a 7-day
notice, without having to modify its permit to include new compliance
provisions to enforce for the emissions trade. For trades to occur
under Sec. 70.4(b)(12)(ii), the Part 70 preamble explains that:
Any such SIP would have to include compliance requirements and
procedures for such trades * * * these procedures must assure that
any trade is quantifiable, accountable, enforceable and based on
replicable procedures for ensuring the emission reductions that the
trading program was intended to provide, including necessary test
methods, monitoring, recordkeeping, and reporting.'' See 57 FR
32250, 32268 (July 21, 1992).
Similarly, the 1992 Permits Rule Preamble allowed States to use the
minor permit modification process to make changes to operating permits
to allow facilities to participate in emissions trading programs, if
the underlying SIP or EPA rule explicitly provided that minor permit
modification procedures could be used. 57 FR at 32287. The 1992 Permits
Rule Preamble also stated that trading programs approved in SIPs and
EPA regulations would have to contain compliance requirements and
protocols to assure that market-based programs were quantifiable,
accountable, enforceable and based on replicable procedures for
determining emission reductions expected from the program. Id.
In 1995, EPA proposed guidance for state open market trading
programs submitted for EPA approval as part of the SIP. The 1995
proposal provides guidance on the emissions quantification criteria
identified in the part 70 preamble in the context of designing SIP-
based programs to allow trading among facilities. Specifically, the
1995 guidance allows for a state's SIP-approved open market trading
rule to contain only the criteria and process for sources to develop
protocols. This guidance recommends that the protocols, which contain
the specifics of quantifiable and replicable procedures, need not be
included in the SIP, but instead may be included with the permit at the
time of the emission trade.
By notice dated September 15, 1999, EPA published notice of, and
opportunity for comment on, the Draft Economic Incentive Program
Guidance. 64 FR 50086 (Draft EIP Guidance). Under this draft guidance
proposal, States with EIPs would submit protocols as SIP revisions,
although in certain limited circumstances trading could proceed on an
interim basis if specified procedures were followed before EPA took
action on those SIP submittals. Draft EIP Guidance, section 6.2(c).
The 1992 Permits Rule Preamble stated that Title V required
emissions quantification protocols to be included in the SIP in order
for intra-facility trading to be available through the seven-day notice
procedure. It could be interpreted that similar requirements would
apply for inter-facility trading. The 1992 Permits Rule Preamble also
expressed EPA's view that emissions quantification protocols should be
included in SIPs in order for the minor permit modification process to
be used to allow facilities to participate in inter-facility trading
programs, if the underlying SIP or EPA rule explicitly provided that
minor permit modification procedures could be used. Today, EPA proposes
to clarify that Title V does not require that protocols be included in
the SIP. Rather, the requirements of Title V would be satisfied with
the inclusion of protocols in the permits themselves. EPA is not,
however, proposing today to revise the provisions of the Draft EIP
Guidance, which recommend that protocols be included in the SIP to meet
the requirements of CAA section 110 (including section 110(a)(2)(A),
mandating ``enforceable emissions limitations''). In subsequent
guidance or rulemaking, which could include further action on the Draft
EIP Guidance, EPA intends to clarify the relationship between protocols
and SIP revisions for purposes of the section 110 requirements.
In addition, EPA proposes to approve New Jersey's OMET Program on
the basis that at the time New Jersey adopted and submitted it to EPA,
New Jersey relied on the guidance provided in 1995. As a result, EPA
proposes to approve the provisions of the OMET Program that the SIP
must include criteria for protocol development but not the protocols
themselves.
When Was New Jersey's Program Proposed and Adopted?
On August 2, 1995, New Jersey's Governor signed legislation
requiring the State to promulgate an open market emissions trading
program. After a public workshop on September 19, 1995, New Jersey
proposed the OMET Program on February 20, 1996 and held a public
hearing on March 7, 1996. New Jersey requested public comments by March
21, 1996. New Jersey adopted the OMET program on July 1, 1996 with an
operative date of August 2, 1996. New Jersey published Correction
Notices on August 5, 1996, November 18, 1996 and June 2, 1997.
On July 6, 1999, New Jersey proposed amendments to the OMET Program
and held a public hearing on August 5, 1999. New Jersey requested
public comments by August 20, 1999. New Jersey adopted the amendments
on April 7, 2000 with an operative date of June 6, 2000.
When Was New Jersey's Program Submitted to EPA and What Did It Include?
New Jersey submitted its OMET Program SIP revision to EPA on
October 27, 1998. EPA determined the submittal
[[Page 1802]]
administratively and technically complete on December 22, 1998.
New Jersey's OMET Program SIP revision included the following
elements:
New Subchapter 30
Amended Subchapters 3, 16, 18, 19 and 22
A memorandum of understanding between the States of
Connecticut and New Jersey
Ten applications for discrete credit generation strategies
from May 1, 1992 through August 2, 1996, as supporting information
A detailed evaluation of the EIP requirements, including a
summary of trading activity to date.
On April 27, 2000, New Jersey submitted a SIP revision to EPA
containing amendments to Subchapter 30. EPA is including two provisions
of the amended Subchapter 30 SIP revision as a supplement to the
October 27, 1998 SIP revision. These two specific provisions relate to
allowing municipal waste combustors to use discrete credits to comply
with certain Federal NOX emission standards, as these
Federal rules specifically acknowledge the ability of New Jersey owners
and operators to comply with the Federal NOX standard using
discrete credits.
EPA is including these provisions as part of the rulemaking for the
October 27, 1998 SIP revision to make these provisions federally-
enforceable and therefore available as an option for sources in New
Jersey to meet the December 19, 2000 final compliance date for
Increment 5 of 40 CFR 62.14108(a)(5) of subpart FFF.
Other Significant Items Related to New Jersey's Program
How Does New Jersey's Program Avoid Adverse Local Impacts of Hazardous
Air Pollutant Emissions?
In VOC trading programs, it is important to recognize that many
VOCs are also classified as hazardous air pollutants (HAPs). EPA is
committed to protecting the health and environment of local communities
from any negative impacts related to VOC trading. EPA is also committed
to providing flexibility for local decision making that can allow for
different circumstances in different localities.
While sources involved in VOC trading are required to meet all
applicable current and future air toxics requirements, such as maximum
achievable control technology (MACT), EPA believes VOC trading programs
should build in additional safeguards for HAPs. In the September 15,
1999 proposed revisions to the EIP guidance, EPA outlined a draft
framework for addressing HAP-related issues in VOC trading programs.
The draft framework says VOC trading programs must contain the
following general safeguards:
A program review of the trading program to evaluate the
impacts of VOC trades involving HAPs on the health and environment of
local communities
Prevention and/or mitigation measures to address any
negative impacts
Public participation in program design, implementation and
evaluation
Availability of sufficient information for meaningful
review and participation.
New Jersey's OMET Program is more restrictive than EPA's proposed
open market trading model rule with respect to HAPs. The proposed model
rule requires a user source to disclose the amount of HAPs emitted as a
result of the use of discrete credits. New Jersey's OMET Program
prohibits the generation or use of discrete credits which would result
in more than a ``de minimis'' increase in HAP emissions. These de
minimis levels are the same as the levels which make a source subject
to MACT requirements. New Jersey's OMET Program also requires
disclosure of smaller increases in HAP emissions resulting from
discrete credit generation or use.
EPA believes New Jersey's OMET Program is consistent with the
proposed framework for addressing HAP-related issues in VOC trading
programs as outlined below, even though New Jersey adopted its OMET
Program prior to the proposed revisions to the EIP.
Periodic Program Evaluation provisions: New Jersey's OMET Program
includes a periodic program evaluation in the form of an audit to occur
at least every three years.
New Jersey defined this program audit as part of the initial
program design and will include any appropriate analyses and/or
criteria contained in EPA guidance on audits. Evaluation can also occur
on a source-by-source basis through the public accessibility of the
Registry on the Internet at www.omet.com. Regulators and the public are
able to track the generation and use of discrete credits to review the
implementation of specific trades.
Prevention and Mitigation provisions: The prevention provision in
New Jersey's OMET Program of unacceptable impacts from potential or
actual trades or other types of transactions including HAPs is an up-
front prohibition on the generation and use of discrete credits which
are accompanied by an increase in HAPs above a de minimis level.
Retrospective mitigation will also occur through the program audit.
Public Participation provisions: New Jersey provided for public
participation in the design of the OMET Program through a public
workshop on September 19, 1995 to have an open discussion of the issues
with interested parties on open market trading. After the workshop, New
Jersey proposed their OMET Program on February 20, 1996 and held a
public hearing on March 7, 1996. After adopting the OMET program on
July 1, 1996, New Jersey established a stakeholder workgroup which has
generally met every other month since the adoption of the OMET Program.
These meetings are open to the public and discuss implementation of the
OMET Program and ways to improve its environmental and economic
effectiveness. New Jersey's program audit will also include an
opportunity for public review and comment.
Information Availability provisions: New Jersey's OMET Program
provides for the availability of sufficient information. Subchapter 30
contains numerous provisions which require the Notices filed with the
Registry to contain the sufficient and appropriate information. These
Notices specifically contain information and statements related to the
emissions of HAPs. Also, subchapter 30.19 requires all information to
be publicly available.
As of this writing, EPA believes New Jersey's OMET Program is
consistent with EPA's current thinking on addressing HAP-related issues
in VOC trading programs. As EPA develops additional guidance, EPA will
provide this guidance to New Jersey as the State continues to discuss
these and other issues in the program audit and, where appropriate,
require New Jersey to revise the OMET Program.
How Does EPA's Proposed Action Affect Earlier Credits?
New Jersey submitted ten applications for discrete credit
generation strategies from May 1, 1992 through August 2, 1996 as part
of the OMET SIP submittal. New Jersey submitted these discrete credit
generation strategies to EPA in response to EPA guidance on credits
generated prior to rule adoption, and as supplemental information to
support the OMET SIP submittal.
EPA reviewed these ten credit generation strategies, independent of
its review of the OMET SIP revision, to see how sources were
implementing the OMET Program. EPA, in its role of program oversight,
decided to conduct this review to provide a comprehensive
[[Page 1803]]
evaluation of New Jersey's OMET Program.
In the review of the ten strategies, EPA first determined whether
each strategy was consistent with the criteria contained in subchapter
30.6(b)(2) for emission reductions generated between May 1, 1992 and
August 2, 1996. EPA confirmed that each of the ten strategies met the
criteria for submitting a Notice of Certification of Discrete Credit
Generation to New Jersey by October 31, 1996. Further, EPA acknowledges
these ten strategies to be the only discrete credit generation
strategies which meet the criteria of subchapter 30.6(b)(2), and would
not expect any other pre-adoption credits to exist.
EPA determined there were varying degrees of deficiencies in each
of the ten credit generation strategies. The deficiencies in each
strategy ranged from minor calculation errors to missing information to
inconsistencies between the strategy and subchapter 30 and EPA
guidance. If EPA discovered a deficiency in any of the strategies, it
was not a deficiency with the protocol development criteria contained
in subchapter 30, but an issue with the specifics of the strategy.
Independent of the review of the OMET SIP revision, EPA notified New
Jersey in an October 20, 1999 letter of the deficiencies as a result of
EPA's review. In this correspondence, EPA summarized its approach to
the review of the ten strategies, identified the deficiencies of each
strategy and described its expectations for New Jersey and the sources
to address the deficiencies. EPA clarified that the Agency is not
proposing to approve or disapprove the strategies as part of the
proposed action on subchapter 30. Rather, EPA provided this information
to give the participants in the OMET Program an opportunity to address
any deficiencies (according to the provisions of the OMET Program)
prior to final approval of the OMET SIP revision.
EPA expects the sources to address the deficiencies contained in
the correspondence prior to the verification or the use of the subject
discrete credits. In fact, verifiers should consider EPA's comments in
its review, to fulfill the requirement that the verification of
generated discrete credits be based on diligent inquiry by the
verifier.
Upon a final approval of New Jersey's OMET SIP revision, subchapter
30 will be federally-enforceable. Since subchapter 30 is a SIP
flexibility mechanism, compliance with its terms is essential in order
to avoid complying with other applicable requirements of the SIP. Also,
the generator and the verifier may have other responsibilities related
to proper quantification and verification of the discrete credits. EPA
suggests the generators, verifiers and any users of the discrete
credits review these specific discrete credit generation strategies
before subchapter 30 becomes subject to EPA enforcement.
How Will New Jersey Audit the Program?
New Jersey's October 27, 1998 SIP submittal letter contains an
enforceable commitment to meet reasonable program audit requirements
established in Federal regulations and/or guidance. New Jersey will
ensure that an audit is performed at least every three years which
meets applicable EPA guidance, and will provide timely post-audit
reports to the EPA. New Jersey recognizes its responsibility to ensure
that the OMET Program, as implemented, is consistent with the goals of
rate of progress and of attainment in New Jersey, in respect to the
national ambient air quality standard for ozone and does not result in
continued non-attainment in New Jersey and downwind areas. At a
minimum, New Jersey will include the following elements in the audit:
An evaluation of the net effect of the New Jersey OMET
Program on actual emissions
Verification that in each ozone season the number of
discrete credits generated will be equal to or greater than the number
used; and,
An evaluation of the cost savings.
Also, the audit will determine whether there is a shortfall between
the results claimed for the New Jersey OMET Program and the actual
results obtained during program implementation. If there is a
shortfall, New Jersey will submit to EPA, with the post-audit report,
measures to remedy program deficiencies and, if applicable, measures to
make up any emissions shortfall within a specified period of time
consistent with relevant reasonable further progress and attainment
requirements.
Since New Jersey's commitment to do a program evaluation includes
reference to ``any applicable EPA guidance on audits,'' New Jersey and
EPA will not only use the guidance contained in the 1995 proposed open
market policy, but could use the guidance contained in the 1999
proposed EIP as part of the program evaluation. In addition, New Jersey
should specifically evaluate the inclusion of energy efficiency
measures in the OMET Program as part of the periodic program audit.
What Is the Basis for Today's Proposal?
As discussed in the section ``What Guidance Did EPA Use to Evaluate
New Jersey's Program?'' the 1994 EIP includes requirements for
mandatory EIPs and guidance for voluntary EIPs. 40 CFR part 51, subpart
U; 59 FR 16690. EPA proposed revised guidance to accommodate open
market trading programs, by notices dated August 3, 1995, 60 FR 39668,
and August 25, 1995, 60 FR 44290. EPA proposed action on a Michigan
emission trading program by notice dated September 18, 1997, 62 FR
48972. EPA received comments on both of these proposals.
Subsequent to these proposals, in a letter to Congressman Thomas J.
Bliley, dated March 10, 1998, Richard D. Wilson, EPA's Acting Assistant
Administrator for Air and Radiation, stated that EPA would ``work with
the States to develop open market programs tailored to their individual
circumstances. In this process EPA and the States are using the August
1995 [open market trading] proposal as guidance and taking into account
both State circumstances and the many useful comments we received in
response to the proposal.''
New Jersey adopted its SIP on July 1, 1996 and submitted it to EPA
on October 27, 1998. In response to requests by EPA, New Jersey
supplemented the submittal with minor revisions on April 27, 2000.
By notice dated September 15, 1999, EPA proposed revised guidance
for economic incentive programs. 62 FR 50086. This proposal would
revise in certain respects the Agency guidance provided in the 1994
EIP, the 1995 open market trading program proposals and the guidance
provided in the 1997 EPA proposal to approve the Michigan program. The
public comment period on the September 15, 1999 proposal ended December
10, 1999. EPA is currently considering the public's comments in
developing a final revision to the EIP guidance.
In developing its OMET SIP revision, New Jersey relied on EPA's
statements that New Jersey could base its SIP revision on the 1995 open
market trading proposal. On several occasions during the adoption
process, EPA and State officials confirmed EPA's support for New
Jersey's reliance on the 1995 proposal (September 21, 1995 note to the
file regarding a public workshop in Trenton, New Jersey; and, March 15,
1996, March 21, 1996, April 30, 1996, and May 22, 1996 letters from EPA
to New Jersey.) By the same token, New Jersey's submittal of the SIP
revision accorded with EPA's representations to
[[Page 1804]]
Congressman Bliley that States could use the 1995 guidance to assist
them in developing their open market trading programs. EPA evaluated
the SIP revision against the guidance available at the time of the
program's development and submittal. This guidance included both EPA's
1995 open market trading proposal, and the guidance provided in the
Federal Register notice accompanying the 1997 EPA proposal to approve
Michigan's trading program. In light of this reliance, EPA is today
proposing to approve the New Jersey SIP revision, except for the
deficiencies discussed in the ``What are EPA's Proposed Conditions for
Approval?'' section. In doing so, EPA is proposing to apply, on an
interim basis, both the 1995 open market trading program proposals and
the guidance contained in the 1997 EPA proposal to approve the Michigan
program, in light of New Jersey's reliance on those two proposals,
recognizing that some aspects of these proposals may be further revised
by the policies of the 1999 EIP proposal, if and when it is finalized.
How Will New Jersey Address Future EPA Trading Guidance?
EPA believes the basis for today's proposed action is a reasonable
approach in the interest of supporting trading programs. However, due
to EPA's lack of experience with open market trading programs and the
many issues that such programs raise, EPA will use any future final
revised EIP guidance as a basis for re-evaluating New Jersey's OMET
Program, in coordination with the State, to ensure that its operation
is consistent with the Clean Air Act and federal regulation. EPA will
notify the State of any deficiencies in the OMET Program, within 18
months after EPA issues a final revised EIP guidance. As with any SIP,
EPA may require New Jersey to revise the OMET Program where necessary
and re-submit the OMET Program according to the requirements and
deadlines under section 110(k)(5) of the Act. According to section
110(k)(5), New Jersey may have up to 18 months to revise and re-submit
the OMET Program after EPA notifies the State of any deficiencies.
What is the Status of the 1994 Economic Incentive Program?
The 1994 EIP established, through notice-and-comment action, rules
for mandatory EIPs and guidance for voluntary EIPs. Any final action
that EPA may take to approve the New Jersey OMET Program, to the extent
that action differs from the guidance portion of the 1994 EIP, would
revise that portion of the 1994 EIP action only for purposes of today's
action on the New Jersey SIP submittal. EPA's proposed 1999 EIP
guidance, once completed through notice-and-comment action, may further
revise the guidance portion of the 1994 EIP action.
Conclusion
EPA is proposing to conditionally approve the New Jersey SIP
revision for Subchapter 30 and approve revisions to Subchapters 16, 18,
and 19. This SIP revision implements New Jersey's OMET Program. EPA is
proposing conditional approval of New Jersey's OMET Program, provided
New Jersey commits to correct the deficiencies discussed in the ``What
are EPA's Proposed Conditions for Approval?'' section, in writing, on
or before February 8, 2001. New Jersey must then correct the
deficiencies and submit them to EPA within one year of EPA's final
action on the OMET SIP revision.
If New Jersey submits a commitment to this effect, EPA will publish
a final conditional approval of New Jersey's OMET Program. EPA will
consider all information submitted prior to any final rulemaking action
as a supplement or amendment to the October 27, 1998 submittal. If New
Jersey does not make the required commitment to EPA, EPA is proposing
in the alternative to disapprove the OMET Program.
EPA is requesting public comment on the issues discussed in today's
action. EPA will consider all public comments before taking final
action. Interested parties may participate in the Federal rulemaking
procedure by attending the public information sessions discussed in the
DATES section, and by submitting written comments to the EPA Regional
office listed in the ADDRESSES section.
Administrative Requirements
Executive Order 12866
The Office of Management and Budget (OMB) has exempted this
regulatory action from Executive Order 12866, entitled ``Regulatory
Planning and Review.''
Executive Order 13045
Protection of Children from Environmental Health Risks and Safety
Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) Is
determined to be ``economically significant'' as defined under
Executive Order 12866, and (2) concerns an environmental health or
safety risk that EPA has reason to believe may have a disproportionate
effect on children. If the regulatory action meets both criteria, the
Agency must evaluate the environmental health or safety effects of the
planned rule on children, and explain why the planned regulation is
preferable to other potentially effective and reasonably feasible
alternatives considered by the Agency.
This rule is not subject to Executive Order 13045 because it does
not involve decisions intended to mitigate environmental health or
safety risks.
Executive Order 13084
Under Executive Order 13084, EPA may not issue a regulation that is
not required by statute, that significantly affects or uniquely affects
the communities of Indian tribal governments, and that imposes
substantial direct compliance costs on those communities, unless the
Federal government provides the funds necessary to pay the direct
compliance costs incurred by the tribal governments, or EPA consults
with those governments. If EPA complies by consulting, Executive Order
13084 requires EPA to provide to the Office of Management and Budget,
in a separately identified section of the preamble to the rule, a
description of the extent of EPA's prior consultation with
representatives of affected tribal governments, a summary of the nature
of their concerns, and a statement supporting the need to issue the
regulation. In addition, Executive Order 13084 requires EPA to develop
an effective process permitting elected officials and other
representatives of Indian tribal governments ``to provide meaningful
and timely input in the development of regulatory policies on matters
that significantly or uniquely affect their communities.''
Today's proposed rule does not significantly or uniquely affect the
communities of Indian tribal governments. This action does not involve
or impose any requirements that affect Indian Tribes. Accordingly, the
requirements of section 3(b) of Executive Order 13084 do not apply to
this rule.
Executive Order 13132
Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of
[[Page 1805]]
power and responsibilities among the various levels of government.''
Under Executive Order 13132, EPA may not issue a regulation that has
federalism implications, that imposes substantial direct compliance
costs, and that is not required by statute, unless the Federal
government provides the funds necessary to pay the direct compliance
costs incurred by State and local governments, or EPA consults with
State and local officials early in the process of developing the
proposed regulation. EPA also may not issue a regulation that has
federalism implications and that preempts State law unless the Agency
consults with State and local officials early in the process of
developing the proposed regulation.
This rule will not have substantial direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government, as specified in Executive Order 13132, because it
merely approves a state rule implementing a federal standard, and does
not alter the relationship or the distribution of power and
responsibilities established in the Clean Air Act. Thus, the
requirements of section 6 of the Executive Order do not apply to this
rule.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements unless the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. Small entities include small
businesses, small not-for-profit enterprises, and small governmental
jurisdictions.
This rule will not have a significant impact on a substantial
number of small entities because SIP approvals under section 110 and
subchapter I, part D of the Clean Air Act do not create any new
requirements but simply approve requirements that the State is already
imposing. Therefore, because the Federal SIP approval does not create
any new requirements, I certify that this action will not have a
significant economic impact on a substantial number of small entities.
Moreover, due to the nature of the Federal-State relationship under
the Clean Air Act, preparation of flexibility analysis would constitute
Federal inquiry into the economic reasonableness of state action. The
Clean Air Act forbids EPA to base its actions concerning SIPs on such
grounds. Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255-66 (1976);
42 U.S.C. 7410(a)(2).
Unfunded Mandates
Under sections 202 of the Unfunded Mandates Reform Act of 1995
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a Federal mandate that may result in estimated
costs to State, local, or tribal governments in the aggregate; or to
the private sector, of $100 million or more. Under section 205, EPA
must select the most cost-effective and least burdensome alternative
that achieves the objectives of the rule and is consistent with
statutory requirements. Section 203 requires EPA to establish a plan
for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
EPA has determined that the approval action proposed does not
include a Federal mandate that may result in estimated costs of $100
million or more to either State, local, or tribal governments in the
aggregate, or to the private sector. This Federal action proposes to
approve pre-existing requirements under State or local law, and imposes
no new requirements. Accordingly, no additional costs to State, local,
or tribal governments, or to the private sector, result from this
action.
Paperwork Reduction Act
This action does not add any information collection requirements or
increase burden under the provisions of the Paperwork Reduction Act, 44
U.S.C. 3501 et seq., and therefore is not subject to these
requirements.
National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law No. 104-113, section 12(d) (15
U.S.C. 272 note) directs EPA to use voluntary consensus standards in
its regulatory activities unless to do so would be inconsistent with
applicable law or otherwise impractical. Voluntary consensus standards
are technical standards (e.g. materials specifications, test methods,
sampling procedures, and business practices) that are developed or
adopted by voluntary consensus standards bodies. The NTTAA directs EPA
to provide Congress, through OMB, explanations when the Agency decides
not to use available and applicable voluntary consensus standards. This
rule does not involve technical standards. Therefore, EPA did not
consider the use of any voluntary consensus standards.
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Hydrocarbons,
Intergovernmental relations, Nitrogen dioxide, Ozone, Reporting and
recordkeeping requirements, Volatile organic compounds.
Authority: 42 U.S.C. 7401 et seq.
Dated: December 28, 2000.
Carol M. Browner,
Administrator.
[FR Doc. 01-564 Filed 1-8-01; 8:45 am]
BILLING CODE 6560-50-P