Approval and Promulgation of Air Quality Implementation Plans; Indiana; Oxides of Nitrogen Regulations

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Other Related Documents

Note: EPA no longer updates this information, but it may be useful as a reference or resource.

[Federal Register: November 8, 2001 (Volume 66, Number 217)]
[Rules and Regulations]
[Page 56465-56476]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08no01-10]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[IN 131b; FRL-7077-7]

Approval and Promulgation of Air Quality Implementation Plans;
Indiana; Oxides of Nitrogen Regulations

AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.

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SUMMARY: On March 30, 2001, Indiana submitted and requested parallel
processing of its proposed plan to control emissions of oxides of
nitrogen ( NO_X) throughout the State. On July 2, 2001,
through parallel processing, EPA proposed approval of the plan provided
Indiana revise its proposed rule consistent with the discussion in
EPA's proposal. Indiana did so and submitted its final plan to EPA on
August 20, 2001 with a supplement on September 19, 2001. The plan
consists of two rules, a budget demonstration, and supporting
documentation. The plan will contribute to attainment and/or
maintenance of the 1-hour ozone standard in several 1-hour ozone
nonattainment areas including the Chicago-Gary-Lake County and
Louisville areas. Indiana developed its plan, which focuses on electric
generating units, large industrial boilers, turbines and cement kilns,
to achieve the majority of reductions required by EPA's October 27,
1998, NO_X State Implementation Plan (SIP) Call. As of May 1,
2004, Indiana's plan will also provide reductions at units currently
required to make reductions under the EPA's Clean Air Act (CAA) Section
126 rulemaking. EPA is approving this plan as a SIP revision fulfilling
the NO_X SIP Call ``Phase I'' requirements. EPA is also
finding Indiana's submittal on August 20, 2001 and supplemented on
September 19, 2001 complete in this Federal Register action. Through
this action, both the sanctions clock and EPA's Federal Implementation
Plan (FIP) obligation are terminated.

EFFECTIVE DATE: This rule will be effective December 10, 2001.

ADDRESSES: Copies of the State's submittals and materials relevant to
this rulemaking are available for public inspection during normal
business

[[Page 56466]]

hours at the following address: United States Environmental Protection
Agency, Region 5, Air and Radiation Division, 77 West Jackson
Boulevard, Chicago, Illinois 60604 (18th floor). (Please telephone Ryan
Bahr at (312) 353-4366 before visiting the Region 5 office.)

FOR FURTHER INFORMATION CONTACT: Ryan Bahr, Environmental Engineer,
Regulation Development Section, Air Programs Branch (AR-18J), U.S.
Environmental Protection Agency, Region 5, 77 West Jackson Boulevard,
Chicago, Illinois 60604, Telephone Number: (312) 353-4366, E-Mail
Address: bahr.ryan@epa.gov.

SUPPLEMENTARY INFORMATION:

Overview

The EPA is approving the Indiana Department of Environmental
Management's (IDEM's) NO_X SIP Call SIP revision. The
following table of contents describes the format for this SUPPLEMENTARY
INFORMATION section:

Table of Contents

I. Summary of the State submittal
A. When did Indiana develop and submit the NO_X
emission control plan to the EPA?
B. What are the basic components of the State's final plan?
C. How does Indiana address its statewide NO_X budget?
1. What NO_X budget did EPA determine for the State in
the NO_X SIP Call?
2. What changes did the State request to the NO_X
budget and are those changes approvable?
3. How does Indiana demonstrate that it is meeting the budget?
D. What public review opportunities did the State provide?
E. What documents did EPA use to evaluate Indiana's
NO_X control program?
F. Does Indiana's NO_X emissions control plan meet all
of the federal NO_X SIP Call requirements?
G. What changes did Indiana make to its proposed NO_X
emissions control regulations before finalizing?
1. Changes made regarding units affected under the Section 126
Rulemaking
2. The 25-ton exemptions
3. Definition of ``maximum design heat input''
4. Definition of `` NO_X budget trading program''
5. Definition of ``percent monitoring data availability''
6. Monitoring requirements
7. Indiana's new source and energy efficiency and renewable
energy ``set-asides''
8. Penalties
9. 326 IAC 10-3, Nitrogen Oxide Reduction Program for Specific
Source Categories
10. General SIP requirements
11. Definition of ``repowered natural gas-fired units''
12. Utilization correction for new units
13. Centralized recordkeeping
14. Allocation methodology
II. What are the public comments on EPA's proposal?
III. Final Action
A. What action is EPA approving today?
B. What is the impact of today's action on EPA's finding under
the Clean Air Act section 126 rule?
IV. Administrative Requirements

In the following questions and answers, whenever the term ``you''
is used it refers to the reader of this final rule and ``we,'' ``us,''
or ``our'' refers to the EPA.

I. Summary of the State Submittal

A. When Did Indiana Develop and Submit the NO_X Emission
Control Plan to the EPA?

On March 30, 2001, IDEM submitted its proposed plan and requested
parallel processing, which allows a state to submit a draft plan for
approval prior to actual adoption by the state. On July 2, 2001,
through parallel processing, EPA proposed approval of the plan. On
August 20, 2001 and September 19, 2001, IDEM submitted its final
NO_X emission control plan to the EPA.
IDEM had originated its rulemaking process on regional
NO_X reductions in 1999. EPA reviewed and provided extensive
comments on several previous drafts of the rules. The State addressed
all issues raised before adopting its final rules. The State did not,
however, address some of the issues before it proposed rules. Since our
proposal was based on the State's proposed rules, EPA discussed these
issues at length in our proposed approval. Indiana's final resolution
of each of these issues is consistent with our comments in our proposed
rule, as discussed in this Federal Register action.

B. What Are the Basic Components of the State's Final Plan?

Indiana's final plan includes a budget demonstration, supporting
materials and two NO_X rules: 326 IAC 10-3, pertaining to
cement kilns and blast furnace gas boilers, and 326 IAC 10-4, a trading
program focusing on reductions from electric generating units (EGUs)
and large boilers and turbines. The budget demonstration is discussed
in more detail in Section C, ``How does Indiana address its statewide
NO_X budget?'' The supporting materials include information
such as the number of allowances that Indiana intends EPA to allocate
to each EGU unit for 2004--2006 and each large affected non-EGU unit
for 2004--2009 and detailed inventories. The rules included in the plan
require compliance statewide by May 31, 2004. This plan constitutes
Indiana's response to ``Phase I'' of the NO_X SIP Call.
``Phase I'' NO_X budgets reflect controls on EGUs subject to
the acid rain program, large boilers and turbines, and cement kilns.
The tables below summarize the requirements of Indiana's two final
rules and highlight some key differences between 326 IAC 10-4 and the
model rule in the NO_X SIP Call (40 CFR Part 96). These
tables are not meant to be exhaustive of every requirement in Indiana's
rules. Rather, they are intended to provide a general idea of how
Indiana's rules are structured and some of the significant
requirements. For a complete understanding of the rules, please see the
applicable rulemaking package which is available at the locations
listed in the ADDRESSES section of this final approval.

Table 1.--326 Indiana Administrative Code 10-3
----------------------------------------------------------------------------------------------------------------
Cite Section title/subject
----------------------------------------------------------------------------------------------------------------
326 IAC 10-3-1..................................... Applicability--Generally Portland Cement Kilns larger than
specified size with specified exceptions and ``Blast
furnace gas boilers.''
326 IAC 10-3-2..................................... Definitions
326 IAC 10-3-3..................................... Emission limits
Technology Requirements (mid-kiln firing or low-
NO_X burners) or
Ozone Season Emission Averages 2.8-6 pounds of
NO_X per ton of clinker depending on type of kiln or
Approved alternatives to achieve 30 percent
reductions.
Blast furnace gas boilers--.17 lb/mmBtu.
326 IAC 10-3-4..................................... Monitoring and Testing Requirements.
Technology Requirements--preventative
maintenance plan.
Ozone Season Emission Averages or Approved
alternatives to achieve 30 percent reductions--initial
and subsequent annual testing or NO_X Continuous
Emission Monitoring Systems (CEMS).

[[Page 56467]]

Blast furnace gas boilers--monitor fuel usage
and percentage heat input.
326 IAC 10-3-5..................................... Recordkeeping and Reporting
(a) Recordkeeping--Begin May 31, 2004, and keep records at
the unit for 5 years.
Technology Requirements--record maintenance,
startup, shutdown, and malfunction information.
Ozone Season Emission Averages or Approved
Alternatives to achieve 30 percent reductions--
emissions in pounds per ton of clinker.
Blast furnace gas units--fuel information and
emissions in lb/mmBtu.
For any of the above--startup, shutdown, and
malfunction information and any CEMS data if CEMS are
used.
(b-e) Reporting
For cement kilns, by May 31, 2004 submit
initial information to IDEM.
For cement kilns and blast furnace gas boilers,
by October 31, 2004 and before October 31 each year
after submit NO_X emission information.
----------------------------------------------------------------------------------------------------------------

In addition to the specific rule for cement kilns and blast furnace
gas boilers, 326 IAC 10-3, Indiana adopted a rule to implement the
Nitrogen Oxides Budget Trading Program at 40 CFR part 96.

Table 2.--326 IAC 10-4 Nitrogen Oxides Budget Trading Program
----------------------------------------------------------------------------------------------------------------
Comparable section in 40 CFR part 96
Cite/section Title/subject model rule/note
----------------------------------------------------------------------------------------------------------------
326 IAC 10-4-1........................ Applicability................. Sec. 96.4--Indiana's rule includes same
core sources (EGUs, including EGUs not
subject to the acid rain program, and
large non utility boilers and turbines)
as the NO_X SIP Call, except for blast
furnace gas boilers covered under 326
IAC 10-3 and internal combustion
engines which will be addressed under
Phase II of the NO_X SIP Call. It allows
for opt-ins. It also contains 2
additional 25-ton exemptions.
326 IAC 10-4-2........................ Definitions................... Sec. 96.2--Indiana adds pertinent
definitions, including a definition for
``energy efficient or renewable energy
projects.'' Indiana also adjusts some
definitions to account for 2004
compliance date and units affected
under Section 126 rulemaking.
326 IAC 10-4-3........................ Retired Unit Exemption........ Sec. 96.5.
326 IAC 10-4-4........................ Standard Requirements......... Sec. 96.6.
326 IAC 10-4-5........................ Computation of time........... Sec. 96.7--Indiana clarified that the
ozone control period always begins and
ends on the calendar dates specified in
the definition.
326 IAC 10-4-6........................ NO_X Authorized Account Sec. 96.10, Sec. 96.11, Sec. 96.12,
Representative. Sec. 96.13, Sec. 96.14.
326 IAC 10-4-7........................ Permit Requirements........... Sec. 96.20, Sec. 96.21, Sec. 96.22,
Sec. 96.23, Sec. 96.24, Sec. 96.25--
Indiana is implementing the permitting
requirements with its existing
permitting programs.
326 IAC 10-4-8........................ Compliance Certification...... Sec. 96.30, Sec. 96.31.
326 IAC 10-4-9........................ Allowance Allocations......... Sec. 96.40, Sec. 96.41, Sec. 96.42--
IDEM is establishing a total trading
program budget of 53,960 tons of NO_X
per control period. IDEM requested
changes to the SIP Call budget as
discussed in the budget demonstration.
The State also provides a mechanism
which could potentially allow for a
transition from the Section 126
petitions to the SIP Call. The State
has developed an allocation
methodology, utilizing the flexibility
under the NO_X SIP Call.
326 IAC 10-4-10....................... NO_X allowance tracking system. Sec. 96.50, Sec. 96.51, Sec. 96.52,
Sec. 96.53, Sec. 96.54, Sec. 96.56,
Sec. 96.57.
326 IAC 10-4-11....................... NO_X allowance transfers....... Sec. 96.60, Sec. 96.61, Sec. 96.62.
326 IAC 10-4-12....................... NO_X monitoring and reporting Sec. 96.70, Sec. 96.71, Sec. 96.72,
requirements. Sec. 96.73, Sec. 96.74, Sec. 96.75,
Sec. 96.76.
326 IAC 10-4-13....................... Individual opt-ins............ Sec. 96.80, Sec. 96.81, Sec. 96.82,
Sec. 96.83, Sec. 96.84, Sec. 96.85,
Sec. 96.86, Sec. 96.87, Sec. 96.88.
326 IAC 10-4-14....................... NO_X Allowance Banking......... Sec. 96.55 (a) and (b).
326 IAC 10-4-15....................... Compliance Supplement Pool.... Sec. 96.55(C)--The State has made
several changes to this section to
allow for an easier transition from the
Section 126 rulemaking.
----------------------------------------------------------------------------------------------------------------

Two sections of the 40 CFR part 96 model rule, namely 40 CFR 96.1
and 40 CFR 96.3, were not addressed by a specific section in Indiana's
rule. 40 CFR 96.1 describes the purpose of the model rule and
establishes the general framework. It provides that a unit needs to
comply only after a state with proper jurisdiction adopts and submits a
rule

[[Page 56468]]

and the EPA approves that rule as part of the SIP. 40 CFR 96.1 also
requires that, to the extent a state adopts specified parts of the
rule, that state needs to authorize the EPA to assist in the
implementation. Indiana addressed this requirement in its rule's
definition of EPA in 326 IAC 10-4-2(73), where it authorizes EPA to
assist in operating the trading program. 40 CFR 96.3 is simply a list
of acronyms that were used in the model rule. Unlike the model rule,
instead of defining the acronyms in one section, Indiana's rule usually
defines those acronyms the first time they are used in the document.

C. How Does Indiana Address Its Statewide NO_X Budget?

1. What NO_X Budget Did EPA Determine for the State in the
NO_X SIP Call?
EPA finalized a NO_X budget for each affected state on
October 27, 1998, in its NO_X SIP Call (63 FR 57355). Since
that time, EPA has also published two technical amendments. In
addition, the D.C. Circuit Court of Appeals rendered an opinion on
March 3, 2000, that, while generally upholding the NO_X SIP
Call, slightly changed states' NO_X SIP Call budgets. EPA
sent letters to the affected states' governors on April 11, 2000, to
specify what portion of the budget needed to be met to achieve the
reduction consistent with the amendments as upheld by the Court.
Consistent with the Court's opinion, these budgets, referred to as the
``Phase I NO_X budgets,'' reflect controls on EGUs subject to
the acid rain program, large boilers and turbines, and cement kilns.
For Indiana, the Phase I budget was 234,625 tons for each
NO_X SIP Call ozone control period. The corresponding
compliance supplement pool was 19,915 tons. The ``compliance supplement
pool'' is a voluntary provision that provides flexibility to states in
addressing concerns of full compliance by May 31, 2004. Each state will
be able to use its pool to provide additional allowances that sources
may use to cover emissions during the 2004 and 2005 ozone control
periods.
2. What Changes Did the State Request to the NO_X Budget and
Are Those Changes Approvable?
In the budget demonstration, the State took a slightly different
approach than that laid out by EPA in the phased approach, and also
requested several changes to the statewide budget. The resulting
overall budget for the State that EPA is approving in this action is
233,633 tons. These changes also affect the portion of the budget being
used to ensure that the appropriate reductions are achieved from EGUs
and large industrial boilers and turbines in the State, namely the
trading budget. The State trading portion of the budget, in its final
rule and submittal, is 53,960 tons.
In the budget demonstration, IDEM used the same inventories as the
EPA for area, on-road mobile and non-road mobile categories. IDEM also
used the inventories from the NO_X SIP Call as a starting
point for its budget demonstration for EGUs and the non-EGU point
sources.
For the EGU inventory, IDEM started with the inventory from the
March 2, 2000 technical amendment(65 FR 11222). In doing so, IDEM has
considered all the reductions assumed for EGUs, including assumed
reductions from the EGUs not currently covered under the acid rain
program. IDEM then requested moving several units at the Indianapolis
Power & Light Perry K facility, identified by EPA in the EGU inventory,
to the non-EGU inventory based on those units meeting the definition in
326 IAC 10-4-2 for ``large affected units.'' The 2007 projected
uncontrolled emissions from these units were then multiplied by 40
percent (to account for 60 percent control as non-EGU large affected
units) and added to the non-EGU portion of the budget.
In addition to the changes to the Perry K facility, IDEM determined
that 19 units that EPA had characterized as large non-EGUs, in fact,
have capacities of less than 250 mmBtu/hr. As a result, they do not
meet either EPA's or IDEM's definition for units that need to be
controlled. Therefore, IDEM requested and EPA is approving the shifting
of these units from the large non-EGU portion of the inventory to the
small non-EGU portion. More information on the inventory and these
changes is available in the Docket.
IDEM also presented inventory information that units at Bethlehem
Steel and Purdue University are larger than 250 mmBtu/hr. Since these
units meet the definition for ``large affected units,'' IDEM has
requested that they be moved to that category and with controls assumed
to be 60 percent. IDEM also noted two numerical errors in the SIP call
inventory; one affecting a New Energy unit and the other affecting two
units at SIGECO's Warrick Station. The State has submitted inventory
information to support correcting these errors. We are approving these
inventory corrections. More information on these changes is available
in the Docket.
The following table shows how IDEM's final inventories differed
from those used by EPA in the April 11, 2000, notification to states of
EPA's approach to implementing the NO_X SIP Call in light of
the March 3, 2000 court decision.

Table 3.--EPA and IDEM Inventories
----------------------------------------------------------------------------------------------------------------
EPA NO_X SIP call April 11, 2000, IDEM final SIP inventory
inventory ---------------------------------
Source category ----------------------------------
2007 Projected 2007 Projected 2007 Budget
uncontrolled 2007 Budget uncontrolled
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Point:
EGUs.................................... 136,773 47,712 136,773 46,778
Non-EGUs................................ 69,011 52,042 67,263 51,984
Area........................................ 29,070 29,070 29,070 29,070
On-road Mobile.............................. 79,307 79,307 79,307 79,307
Non-road Mobile............................. 26,494 26,494 26,494 26,494
-------------------------------------------------------------------
Total................................. 340,655 234,625 338,907 233,633
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[[Page 56469]]

EPA is approving the changes submitted by IDEM in its budget
demonstration. Based on these changes, the State's NO_X
budget is 233,633 tons.
3. How Does Indiana Demonstrate That It Is Meeting the Budget?
To meet the overall budget, Indiana is relying on reductions from
cement kilns of 30 percent (326 IAC 10-3), and reductions equivalent to
0.15 pounds of NO_X per million BTU (lb/mmBtu) heat input for
EGUs and a 60 percent reduction from industrial boilers and turbines
with maximum rated heat input greater than 250 mmBtu/hr. The reductions
from EGUs and large industrial boilers and turbines will be achieved
through the State's trading program (326 IAC 10-4). The State
demonstrates that, based on these regulations and the changes that it
requested to its 2007 NO_X budget, it is controlling
facilities to the extent necessary to ensure the budget is being met.
The following table shows that, through the implementation of controls
on EGUs, large industrial boilers and turbines and cement kilns, the
State projects, in its budget demonstration, that it will meet its 2007
budget.

Table 4.--IDEM's Final Budget Demonstration
----------------------------------------------------------------------------------------------------------------
2007 Projected Trading portion
Source category uncontrolled 2007 Budget Reductions of budget
----------------------------------------------------------------------------------------------------------------
EGUs........................................ 136,773 46,778 89,995 45,952
Non-EGUs:
10--4 Units > 250 mmBtu/hr.............. 21,616 8,008 13,608 8,008
Controlled cement kilns................. 5,572 3,900 1,672 ...............
Blast Furnace Gas Boilers............... 3,099 3,099 0 ...............
Uncontrolled............................ 36,976 36,977 0 ...............
Area........................................ 29,070 29,070 0 ...............
On-road Mobile.............................. 79,307 79,307 0 ...............
Non-road Mobile............................. 26,494 26,494 0 ...............
-------------------------------------------------------------------
Total................................. 338,907 233,633 \1\ 105,274 53,960
----------------------------------------------------------------------------------------------------------------
\1\ Slight difference due to rounding.

One of the most significant numbers in this chart is the total
trading budget since, through the trading program, this budget will
ensure that the majority of emission reductions are being obtained. As
shown below, Indiana included ``set-asides'' for new sources,
equivalent to 5 percent of the EGU portion of the budget and 1 percent
of the non-EGU portion until 2006, with 2 percent and 1 percent
respectively, thereafter. The State also included an energy efficiency
set aside of 1 percent from the non-EGU category. The concept of a set
aside was discussed in NO_X SIP Call Rulemaking Federal
Register actions. It is a tool to help states manage their budgets. A
state may establish set-asides where a portion of the trading budget is
reserved for a special purpose. In this case, the result is that the
total trading budget is 53,960, including the set-asides. The following
table illustrates the total Indiana budget, the trading portion and the
set-asides.

Table 5.--Summary of Indiana's Phase I NO_X Budget
[Tons/season (as revised in final adopted rule)]
----------------------------------------------------------------------------------------------------------------
On-road Non-road
EGU Non-EGU Area mobile mobile Total
----------------------------------------------------------------------------------------------------------------
2007 Projected Uncontrolled 136,773 67,263 29,070 79,307 26,494 338,907
Inventory..................
2007 Budget................. 46,778 51,984 29,070 79,307 26,494 233,633
NO_X Trading Budget Portion.. 45,952 8,008 ............ ............ ............ 53,960
New Source Set Aside........ 2,298 80 ............ ............ ............ 2,378
Energy Efficiency Set Aside. ............ 1,079 ............ ............ ............ 1,079
Trading Budget minus Set- 43,654 6,849 ............ ............ ............ 50,503
Asides.....................
----------------------------------------------------------------------------------------------------------------

EPA is approving the trading budget and set-asides reflected in
Table 7 above as contained in Indiana's final adopted rules and its
submitted plan.

D. What Public Review Opportunities Did the State Provide?

Indiana has led a proactive outreach effort with affected
stakeholders throughout this rulemaking process. IDEM began conducting
discussions with stakeholders prior to the publication of the
NO_X SIP Call. In April 1999, IDEM drafted language for a
NO_X rulemaking, considering options to fulfill the
NO_X SIP Call requirements and a NO_X emission
limit of 0.25 lb/mmBtu for EGUs, and began to hold monthly public
meetings to discuss issues and receive feedback on the approaches it
was developing to respond to the NO_X SIP Call. Indiana began
its formal rulemaking process for the regulations in response to the
NO_X SIP Call on July 1, 2000, opening a comment period for
30 days. (The State of Indiana requires at least three written public
comment periods for each rulemaking.) The State opened the second
comment period on December 1, 2000. Indiana preliminarily adopted the
draft rule on February 7, 2001.
The proposed rule was published in the Indiana Register on April 1,
2001, providing a third written comment period. The comment period
closed on April 23, 2001. Indiana received numerous comments from EPA
and affected stakeholders. Since preliminary adoption, IDEM has held
numerous formal and informal meetings to discuss those comments and
their resolution with affected stakeholders and EPA. IDEM and EPA
discussed several changes to the rules, significant and otherwise, that
were made in response to comments. The significant issues that were
addressed after the State's proposal are discussed in today's action.
Indiana adopted final rules on June 6, 2001. Indiana submitted its
NO_X plan to

[[Page 56470]]

EPA, including its response to comments, on August 20, 2001, with a
supplemental submittal on September 19, 2001. EPA has determined that
the State's submittal is complete and approvable.

E. What Documents Did EPA Use To Evaluate Indiana's NO_X
Control Program?

In evaluating Indiana's NO_X rules, EPA considered a
number of documents related to the NO_X SIP Call, Section 110
of the Clean Air Act and 40 CFR Part 51. These documents include:
(1) EPA's ``Responses to Significant Comments on the Proposed
Finding of Significant Contribution and Rulemaking for Certain States
in the Ozone Transport Assessment Group (OTAG) Region for Purposes of
Reducing Regional Transport of Ozone,'' dated September 1998.
(2) EPA's ``Air Quality Modeling Technical Support Document for the
NO_X SIP Call,'' dated September 23, 1998 [Docket Number A-
96-56, VI-B-11].
(3) ``Federal Implementation Plans to Reduce the Regional Transport
of Ozone; Proposed Rule,'' published October 21, 1998. (63 FR 56393)
(4) ``Findings of Significant Contribution and Rulemaking for
Certain States in the Ozone Transport Assessment Group Region for
Purposes of Reducing Regional Transport of Ozone; Rule,'' published
October 27, 1998 (63 FR 57355). This Federal Register is referred to as
``The NO_X SIP Call'' in today's action.
(5) ``Correction and Clarification to the Finding of Significant
Contribution and Rulemaking for Purposes of Reducing Regional Transport
of Ozone,'' published December 24, 1998 (63 FR 71220).
(6) EPA's ``Responses to Significant Comments on the Proposed
Findings of Significant Contribution and Rulemaking on Section 126
Petitions for Purposes of Reducing Interstate Ozone Transport'' dated
April 1999 [Docket Number A-97-43, VI-C-01].
(7) EPA's `` NO_X SIP Call Checklist,'' (the checklist),
issued on April 9, 1999. The checklist summarizes the requirements of
the NO_X SIP Call set forth in 40 CFR 51.121 and 51.122.
(8) ``Development of Emission Budget Inventories for Regional
Transport NO_X SIP Call'' issued by the EPA Office of Air
Quality Planning and Standards May 1999 and technically-amended
December 1999.
(9) Technical amendments to the NO_X SIP Call, published
May 14, 1999 (64 FR 26298) and March 2, 2000 (65 FR 11222).
(10) The Section 126 findings and requirements as contained in the
January 18, 2000, Federal Register (63 FR 2674).
(11) The April 11, 2000 letter from EPA Administrator Carol Browner
to Indiana Governor Frank O'Bannon, regarding the phased approach to
implement the issues upheld by the United States Court of Appeals for
the District of Columbia Circuit on March 3, 2000.
(12) ``Summary of EPA's Approach to the NO_X SIP Call in
Light of the March 3rd Court Decision'' fact sheet issued April 11,
2000.
(13) EC/R, Inc., ``NO_X Control Technologies for the
Cement Industry.'' Chapel Hill, NC. September 19, 2000. This report
updates information in the ``Alternative Control Techniques Document--
NO_X Emissions from Cement Manufacturing'' (EPA-453/R-94-
004), which was the primary reference used in preparing the cement kiln
portion of the proposed Federal Implementation Plan (FIP) rulemaking.
The report includes updated information on uncontrolled NO_X
emissions from cement kilns and on the current use, effectiveness and
cost of NO_X controls.
(14) A May 3, 2001, letter from John S. Seitz, Director of the
Office of Air Quality Planning and Standards, to Lori F. Kaplan,
Commissioner, IDEM.
As noted in the EPA's NO_X SIP Call checklist, the key
elements of an approvable submittal are: A budget demonstration;
enforceable control measures; legal authority to implement and enforce
the control measures; adopted control measure compliance dates and
schedules; monitoring, recordkeeping, and emissions reporting; and
elements that apply to states that choose to adopt an emissions trading
rule in response to the NO_X SIP Call. The documents related
to the NO_X SIP Call are available to the public on EPA's
website at: http://www.epa.gov/ttn/naaqs/ozone/rto/sip/related.html.

F. Does Indiana's NO_X Emissions Control Plan Meet All of the
Federal NO_X SIP Call Requirements?

Based on EPA's review, Indiana's plan meets the Phase I
NO_X SIP Call requirements.
EPA is also finding Indiana's submittal on August 20, 2001 and
supplemented on September 19, 2001 complete in this Federal Register
action. EPA had previously determined, on December 26, 2000, that
Indiana had failed to submit a SIP in response to the NO_X
SIP Call, thus starting an 18-month clock for the mandatory imposition
of sanctions and the obligation for EPA to promulgate a FIP within 24
months(65 FR 81366). Through this action, both the sanctions clock and
EPA's FIP obligation are terminated.

G. What Changes Did Indiana Make To Its Proposed NO_X
Emissions Control Regulations Before Finalizing?

In our July 2, 2001, proposal, we discussed changes that the State
had made or intended to make to its proposed NO_X emissions
control plan including the rules at 326 IAC 10-3 and 10-4. Each of
these changes is approvable, as discussed below. For additional
information on these issues, please see the July 2, 2001, proposed
rulemaking (66 FR 34864).
1. Changes Made Regarding Units Affected Under the Section 126
Rulemaking
Today's final rulemaking does not have any direct bearing on the
applicability of the Section 126 rulemaking. We are not amending the
Section 126 rule at this time. However, based upon coordination with
EPA, Indiana made changes to its proposed NO_X rule so that
the rule could potentially supplant the Section 126 rule as of May 1,
2004. In order to make a transition of this sort, EPA would need to
complete a future proposal and final rulemaking to amend the Section
126 rule.
IDEM made the following changes to its proposed rule to make it
more compatible with the Section 126 rulemaking. These changes and how
they comport with the Section 126 rule are discussed in additional
detail in EPA's proposal.
a. IDEM's proposed rule included a provision at 326 IAC 10-1, which
stated that ``A unit subject to 40 CFR [Part]
97 shall be subject to
the requirements of this rule on May 1, 2004 and shall no longer be
subject to 40 CFR [Part]
97 as of that date.'' An Indiana State rule
can not operate to withdraw the Section 126 findings which are codified
at 40 CFR Part 97. The findings can only be modified through further
rulemaking under the Section 126 rule. In the final rule, IDEM removed
the provision pertaining to the applicability of 40 CFR Part 97.
b. Indiana's proposed rule did not contemplate how compliance
supplement pool (CSP) allowances would be allocated under the Section
126 rulemaking. In EPA's proposal, we noted that, in order for us to
contemplate a future action to amend the Section 126 rule, the State
NO_X rule would need to take into consideration the number of
CSP allowances that are available under the Section 126 rule and

[[Page 56471]]

limit source's usage of CSP allowances in a manner at least as
stringent. In its final rule, IDEM limits the number of compliance
supplement pool allowances that can be used in 2003 to 2,454--the
number of compliance supplement pool allowances available under the
Section 126 rulemaking.
c. Indiana's proposed rule only allowed sources to apply for early
reduction credits (ERCs) for reductions made in 2002 and 2003. Since
the Section 126 rulemaking allows sources to apply for ERCs for
reductions made in 2001, Indiana revised its final rule to also allow
sources to apply for ERCs based on 2001 reductions. EPA addressed a
second point regarding ERCs in our July 2, 2001 proposal. We pointed
out that if IDEM were to have sole responsibility for distribution of
the CSP and correspondingly the ERC distribution, Section 126 sources
could not be granted ERCs for reductions made in 2003 in response to
the Section 126 rule. In both the proposed and final rule, IDEM
included a restriction on ERCs that the reductions could not be
otherwise required by the Clean Air Act. In addition, as explained
below, Indiana revised its rule to specify that for units subject to
Section 126, all CSP allowances must be allocated by March 31, 2003
(i.e., before the start of the 2003 ozone control period).
d. IDEM's proposal allowed distribution of CSP allowances up to
March 31 of the year after control measures were implemented. In EPA's
proposal, we noted that for Section 126 sources making early
reductions, the State could distribute compliance supplement pool
allowances up to April 30, 2003. For all other sources making early
reductions, the State could distribute compliance supplement pool
allowances up to May 30, 2004. The State's final rule specifies that
the issuance of CSP allowances shall be completed by March 31, 2003 for
Section 126 sources and March 31, 2004, for non-Section 126 sources.
2. The 25-Ton Exemptions
Indiana's rule, 326 IAC 10-4, Nitrogen Oxides Budget Trading
Program Section, includes in subsection 10-4-1(b), the 25-ton exemption
from the NO_X SIP Call model rule and two additional
exemptions. One of these alternatives relies on Continuous Emission
Monitoring System (CEMS) data. In this exemption, units can use CEMS
data to demonstrate that the unit is not emitting more than 25 tons
during an ozone season. In Indiana's proposed rule, it was not clear
that, if units were exempted based upon CEMS, those units would be
required to continue monitoring with CEMS. For this exemption to
provide sufficient assurance that these units will not emit more than
25 tons per season, Indiana revised the final rule to require these
units to monitor according to 40 CFR Part 75, subpart H, even while
they have the exemption.
Indiana's second alternative exemption provides for consideration
of how much natural gas and/or fuel oil was burned during the ozone
control period, as opposed to assuming that all of a unit's heat input
is from the fuel with the higher emission factor. Indiana allows units
this flexibility by requiring recordkeeping verifying the amount of
each fuel being burned during the ozone control period. This satisfies
EPA's concern discussed in the proposal that this alternative must
effectively limit a unit's potential NO_X emissions to less
than 25 tons during an ozone control period.
In addition, when a unit receives a 25-ton exemption, the unit's
emissions must be removed from the trading program budget to avoid
double counting. IDEM's final rule specifies the mechanism that will be
used to ensure that the emissions from these sources are removed from
the trading budget. Indiana has accounted for this by establishing
that, once a unit is exempt, EPA will deduct a number of allowances
from a general account specified by the owner and operator equal to the
unit's permitted limit until the three-year allocation period has
ended. When Indiana determines allocations for the next three-year
period, it will deduct ``off the top'' from the trading budget a number
of tons equal to the permitted limits of the exempt units.
3. Definition of ``Maximum Design Heat Input''
Indiana's final rule revises the definition of ``maximum design
heat input'' so that it is consistent with the NO_X SIP Call
in that it is based solely on physical characteristics and not
permitted limits.
4. Definition of ``NO_X Budget Trading Program''
Indiana's final rule adds language to the definition of ``
NO_X budget trading program'' to indicate that trading may
only occur between sources that are participating in an EPA-
administered trading program.
5. Definition of ``Percent Monitoring Data Availability''
Indiana revised the definition ``percent monitoring data
availability'' so that it is based on a unit's actual total operating
hours instead of the total potential operating hours in the season. The
definition in the State's proposed rule was not correct. (EPA notes
that the definition of ``percent monitoring data availability'' in part
97 is also incorrect, and intends to take action to correct the
definition.) Under Indiana's proposed rule definition, a source would
determine the percent availability based on the assumption that it is
operating the entire ozone season. With this definition, a unit could
fail to meet the 90 percent monitoring data availability requirement
even if its monitors were available 90 percent of the time it operated.
Thus, Indiana revised the definition as described above.
6. Monitoring Requirements
In its final rule, Indiana revised the date that monitoring is
required to begin to May 1, 2003. Beginning monitoring at the beginning
of the ozone season a year before compliance is required will ensure
that when Indiana updates its allocations, it has a full year of data
to use. Requiring monitoring a year earlier than compliance also allows
sources to ensure that their monitoring and reporting systems are
working and accurate before the program begins, thus avoiding
unnecessary penalties once the trading program has begun.
7. Indiana's New Source and Energy Efficiency and Renewable Energy
``Set-Asides''
In its final rule, IDEM clarified that the allowances for the new
source and energy efficiency and renewable energy ``set-asides''
outlined in 326 IAC 10-4-9(e) come from the trading program budget.
8. Penalties
Indiana added language equivalent to the following from 40 CFR
Section 96.54(d)(3)(i) to its final rule:

For purposes of determining the number of days of violation, if
a NO_X Budget unit has excess emissions for a control
period, each day in the control period (153 days) constitutes a day
in violation, unless the owners and operators demonstrate that a
lesser number of days should be considered.

The language establishes the maximum number of days in which penalties
could be sought for a violation. However, EPA notes that if an agency
were to seek penalties for a violation, an owner or an operator may
demonstrate that a lesser number of days should be considered.

[[Page 56472]]

9. 326 IAC 10-3 Nitrogen Oxide Reduction Program for Specific Source
Categories
326 IAC 10-3 requires emission reductions at cement kilns. Model
rules for cement kilns were not a part of the NO_X SIP Call.
For this reason, the State used the proposed October 28, 1998,
NO_X Federal Implementation Plan (FIP) as a starting point in
developing its rules (63 FR 56393). Since much of the analysis and
background materials for the proposed FIP are germane to cement kilns,
as noted below, EPA also used these materials in its review of the
State's submittal.
326 IAC 10-3-1 Applicability
Indiana's proposed rule contained a provision, 326 IAC 10-3-1(b),
that would have exempted cement kilns covered by the rule from the
Clark and Floyd NO_X Reasonably Available Control Technology
(RACT) rules at 326 IAC 10-1. EPA informed Indiana that 326 IAC 10-3
can only supercede the Clark and Floyd NO_X RACT rules at 326
IAC 10-1 if the State either demonstrates that 326 IAC 10--3 is as
stringent as 326 IAC 10-1 or provides photochemical dispersion modeling
that shows the area remains in attainment without the RACT controls.
In response to EPA's comment, in the final adopted rule, Indiana
significantly narrowed the scope of the provision and asserted that,
for the group of cement kilns affected, 326 IAC 10-3 is as stringent as
326 IAC 10-1. Indiana narrowed the scope of the provision such that
only cement kiln units operating low-NO_X burners would be
exempt. Furthermore, the final adopted rule states that those units are
only exempt from the emission limit in 326 IAC 10-1 and only exempt
during the ozone control period.
Based on the expected emissions achievable for cement kilns with
low-NO_X burners installed, emissions are expected to be less
than required for the same type of kilns under 326 IAC 10-1. The
following table summarizes the emission limits in 326 IAC 10-1 compared
to the expected emissions from a cement kiln with low-NO_X
burners installed.

Table 6.--Low-NO_X Burner Cement Kiln Stringency
----------------------------------------------------------------------------------------------------------------
326 IAC 10-1, pounds per ton 326 IAC 10-3,
of clinker pounds per ton
-------------------------------- of clinker
---------------
Expected
emissions from
installation
Cement kiln type of low-NO_X
30 day limit Daily limit burners (based
on proposed
NO_X FIP
materials and
30 day
averaging.
----------------------------------------------------------------------------------------------------------------
Preheater kiln.................................................. 4.4 5.9 3.8
Long dry kiln................................................... 6.0 10.8 5.1
----------------------------------------------------------------------------------------------------------------

As discussed in the proposed October 28, 1998, NO_X FIP,
EPA expects that low-NO_X burners can achieve a
NO_X emission rate of 3.8 pounds per ton for any preheater
kiln, and 5.1 pounds per ton of clinker for any long dry kiln, averaged
over 30 days. The RACT rule requires 4.4 and 6.0 pounds per ton of
clinker produced on a thirty-day average basis, respectively, and 5.9
and 10.8 pounds per ton of clinker produced on a daily basis,
respectively.
On a thirty-day rolling average basis, low-NO_X burners
are expected to have lower emissions than the current requirement in
the RACT rule. The expected emission rate is also 64 percent of the
daily RACT requirement for preheater kilns and 47 percent of the daily
RACT requirement for long dry kilns. Low-NO_X burners are a
type of technology that, once installed, cannot be bypassed or taken
off-line unless the entire kiln is shut down. 326 IAC 10-3 requires
that the low-NO_X burners be installed, operated and
maintained. Keeping these burners properly maintained should ensure
that they provide a relatively constant effect on NO_X
emissions. Therefore, EPA believes that the significantly lower
expected emissions from cement kilns with low-NO_X burners
installed in Clark and Floyd Counties should ensure that 326 IAC 10-3
is as stringent as the applicable emission limits in 326 IAC 10-1.
326 IAC 10-3-3 Emission Limits
In its proposed rule, IDEM included an emission limit option at
subdivision(a)(2), in which a unit could meet emission limits that were
determined to be the equivalent of 30 percent reduction from the
industry-wide average in the FIP proposed October 21, 1998(63 FR
56393). The proposed FIP and the supporting documents have been used as
tools for evaluating cement kiln provisions in State rules. While EPA
agrees that the emission limit option can be provided, it was not
proposed as part of the FIP and certain elements need to be
incorporated into the State's rule to make it viable. The preamble to
the FIP listed these emission limits based on a 30-day average. The
State's rationale for providing seasonal limits for these sources was
based on the fact that the NO_X SIP Call addresses regional
transport on a seasonal basis. EPA has reconsidered the averaging time
for these limits and determined that a seasonal average can be
appropriate as long as the State adds compliance language to indicate
that if the limit is exceeded at any time in the season, it constitutes
a separate violation for every day in the season unless the unit can
demonstrate otherwise. IDEM's final rule includes this language.
Under 326 IAC 10-3-3(a)(3) of its proposed rule, IDEM included an
emission limit option which would allow a reduction equivalent to 30
percent subject to IDEM and EPA approval. EPA agrees that again, this
is a reasonable approach to achieving the emissions decreases intended
by the NO_X SIP Call. The approach in the State's proposed
rule is a variation of the industry-wide average emissions rate
provision described in the proposed FIP. It uses actual, measured
uncontrolled emissions to set the

[[Page 56473]]

baseline rate and then requires a 30 percent reduction from that
baseline.
While this approach provides flexibility to sources and may reduce
costs, we are concerned that the site-specific emissions baseline needs
to be carefully determined. Due to the large variability of emissions
at cement kilns cited in comments we received on the FIP proposal, and
confirmed in the September 19, 2000, EC/R Incorporated report
referenced above, we believe that short-term emissions testing is not
appropriate for establishing a baseline or a seasonal emission average
for this compliance option. An unduly high emissions reading with a
short-term test could lead to a minimal emissions reduction
requirement. Conversely, an unduly low emissions reading could lead to
an unrealistically high emissions reduction requirement. For this
reason, in our proposed rule we noted that Indiana must require sources
to establish baseline emissions with a CEMS or require in its rule that
the 30 percent reduction be measured from the industry-wide average--
the resulting emission limits being those required in 326 IAC 10-3-
3(a)(2). The State has followed the second approach in its final
adopted rule.
326 IAC 10-3-4 Monitoring and Testing Requirements
As discussed above, EPA believes IDEM's additional compliance
options at 326 IAC 10-3-3(a)(2) and (a)(3) to be reasonable, provided
reliable seasonal emission averages can be determined. If the cement
kiln is complying through subdivision (a)(2) or (a)(3), it needs to
determine the seasonal average using an agreed-upon reliable mechanism
such as CEMS data. This is due to the variability in NO_X
emissions from cement kilns, as referenced above. In discussions with
the State, it has agreed that CEMS is the only viable option for
compliance with these provisions. As a result, IDEM has included the
requirement for CEMS, if the unit is complying with one of these
emission limit options, as part of its final adopted rule.
326 IAC 10-3-5 Recordkeeping and Reporting
Under Indiana's proposed rule, sources that could comply by meeting
emission limits on a pound of NO_X per ton of clinker basis
were not required to keep daily cement kiln production records needed
to ensure compliance with the emission limits. EPA noted this
deficiency in our proposal and also noted the revised language that
Indiana had included in its final adopted rule to address this issue.
IDEM added language to its final adopted rule to require sources
meeting emission limits to report their daily cement kiln production
records.
Blast Furnace Gas Units
The final adopted rule includes the regulating of blast furnace gas
units under 326 IAC 10-3, as opposed to 326 IAC 10-4, as originally
proposed. Since these units have a relatively low emission rate on a
lb/mmBtu basis, IDEM was not anticipating requiring them to make
reductions under the trading program. Likewise, IDEM has set the
emission factor in 326 IAC 10-3 based on NO_X SIP Call
uncontrolled emissions. Since, as discussed further in the proposal,
this modification does not impact the reductions being achieved under
IDEM's rule, EPA is approving this rule modification as part of
Indiana's submittal.
10. General SIP Requirements
Indiana's final submittal fully addressed the general requirements
required under the NO_X SIP Call for a SIP revision
including: that resources are available to implement the program, that
the State meets the data availability requirements of 40 CFR 51.116,
that the SIP provides for compliance with the annual and triennial
reporting requirements set forth in 40 CFR 51.122, that the State has
the legal authority to carry out the SIP revision, and that the general
testing, inspection, enforcement and complaint mechanisms required
under 40 CFR 51.121(f)(1) and 40 CFR 51.212 are in place to support
implementation of this rule.
11. Definition of ``Repowered Natural Gas-Fired Units''
IDEM's final adopted rule adds new language to define ``repowered
natural gas-fired units.'' This term is defined for the purpose of
determining the allowance allocations for these units. Since the
addition of this term only affects the way that allowances are
allocated, this rule modification is acceptable.
12. Utilization Correction for New Units
IDEM's submitted draft rules would have required an additional
deduction of allowances from new sources. The deduction would have been
to account for actual utilization of the unit as opposed to the
projected utilization. This interpretation was more stringent than
necessary as it could have potentially removed NO_X
allowances permanently from the trading program for emissions that had
not occurred. The NO_X SIP Call model rule requires a similar
correction based on actual utilization, but intends for the excess
allowances to be returned to the set aside instead of completely
removing them from the trading program.
The State's final adopted rule takes a slightly different approach.
It requires any allowances remaining in a new NO_X budget
unit's account at the end of each season to be returned to the new
source set aside. Although this approach is different from that used in
the model trading rule, it should ensure the integrity of both the
trading program and Indiana's NO_X budget.
13. Centralized Recordkeeping
IDEM's final adopted rules allow recordkeeping at a central
location under specific conditions. EPA discussed these recordkeeping
requirements at length with the State. These provisions are only
acceptable, as indicated in our proposal, under certain circumstances,
i.e., for sources not participating in the trading program and not
exempted from the trading program based on Part 75 monitoring. The
State chose to retain the provisions throughout the rule (since it had
determined that the centralized recordkeeping could be acceptable for
the State). However, the State also added language to clarify that the
central recordkeeping provisions do not override or alter any of the
record retention requirements for a source under 40 CFR Part 75.(Since
the recordkeeping requirements in 40 CFR Part 75 need to be required
for federal SIP approval.)
These recordkeeping requirements are included in three parts of the
final adopted rule and apply to: (1) Units burning only natural gas or
fuel oil during the ozone control period with potential NO_X
mass emissions for the ozone control period of twenty-five (25) tons or
less; (2) retired units; and (3) NO_X Budget Units covered by
the trading program. As mentioned above, to the extent these units are
required to comply with 40 CFR Part 75, these centralized recordkeeping
provisions do not alter those requirements. For example, each unit
under the trading program must, as required by Part 75, maintain its
records on-site. Furthermore, any unit with an exemption based on Part
75 monitoring, demonstrating 25 tons or less of emissions, must
maintain records on-site and in accordance with Part 75. Since the
State has been explicit in its rule that the 40 CFR Part 75
requirements stay in place, EPA is approving the limited centralized
recordkeeping requirements.

[[Page 56474]]

14. Allocation Methodology
The final adopted rule incorporates several changes to the State's
NO_X allowance allocation methodology. The State has provided
more concise definitions of the projects that qualify for allowances
from the energy efficiency and renewable energy set aside, for example.
The State has also replaced the allocation methodology for existing
non-EGUs with a table specifying the allowances that will be allocated
to each non-EGU. EPA has reviewed the revisions to the allocation
methodologies and determined that they do not adversely affect the
State's demonstration that it meets the NO_X SIP Call budget.
The changes only affect how the allowances will be allocated and do not
affect the number of allowances that will be allocated. For these
reasons, these changes are being approved as part of Indiana's
NO_X SIP Call Phase I submittal.

II. What Are the Public Comments on EPA's Proposal?

EPA published a proposed rulemaking on July 2, 2001, (66 FR 34864)
to approve, as a SIP revision, the plan Indiana submitted in response
to the NO_X SIP Call. The proposal provided a 30-day public
comment period, which ended on August 1, 2001. EPA received comments
from the following parties: A citizen; Indianapolis Power and Light
Company (IPL); and the Natural Resources Defense Council and the
Hoosier Environmental Council.
Comment 1: Comment received from a citizen. The commentor asserts
that the definition of ``ozone control period'' should be inclusive of
every day in the year. The commentor notes that nitrogen dioxide and
other oxides of nitrogen are harmful at all times and it is not
appropriate to only require controls to be used during the ozone
control period. Furthermore, the commentor claims, once EGUs
demonstrate the ability to operate at 0.15 lb/mmBtu, they have an
obligation to equal or better that performance on a 365-day averaging
period. The commentor believes there is an inequity with mobile sources
which are required to maintain their controls over broad ranges of
operation.
Response 1: EPA recognizes that control of NO_X emissions
would likely produce non-ozone benefits, as well as ozone benefits.
However, the commentor's suggestion that EPA define a control period on
an annual basis is outside the scope of this rulemaking. EPA issued the
NO_X SIP call to address the failure of certain SIPs to
prohibit sources from emitting NO_X in amounts that
contribute significantly to nonattainment (or interfere with
maintenance of attainment) of the ozone National Ambient Air Quality
Standards (NAAQS) during the ozone season. Because ozone formation is a
summer season problem, the rule focuses on obtaining the necessary
reductions during those months when a potential public health problem
exists due to high concentrations of ambient ozone.
Comment 2: Comments received from Indianapolis Power and Light
(IPL). The commentor notes that changes to the Indiana SIP were made in
response to the SIP Call and that the SIP Call was based on EPA models
of regional ozone transport. The commentor claims that EPA's modeling
is unreliable and inconsistent. The commentor questions the linkage
between Indiana and New York nonattainment areas. The linkage from
Indiana to New York was found to be significant, but the linkages from
Indiana to Pittsburgh and Philadelphia (which are both closer to
Indiana than New York) were not found to be significant. The commentor
claims that ozone passes over Kentucky, Ohio, and Pennsylvania without
having a significant effect. The commentor states that the modeled
predictions for Indiana are ``statistically meaningless'' and concludes
that the Agency is ``pushing the computer-generated data beyond the
limits of its reliability.'' The commentor asserts that these issues
are at the core of the SIP Call, and that EPA is not authorized to lock
in requirements for NO_X reductions in Indiana based on this
modeling analysis.
Response 2: Most fundamentally, Indiana's obligation to submit the
present SIP revision derives from the NO_X SIP Call
rulemaking. That rulemaking was premised on air quality modeling
conclusions that were subjected to notice and comment. The U.S. Court
of Appeals for the D.C. Circuit, in Michigan v. EPA, 213 F.3d 663, 673
(D.C. Cir. 2000), cert. den., 121 S. Ct. 1225, 149 L. Ed. 135 (2001),
generally upheld the rulemaking, as well as the air quality modeling
conclusions. As a result, EPA does not consider air quality impacts to
be an open issue in the present rulemaking. In any event, IPL made a
very similar comment regarding the modeling results in the Section 126
rulemaking. EPA's response is provided on pages 79-83 of the
``Responses to Significant Comments on the Proposed Findings of
Significant Contribution and Rulemaking on Section 126 Petitions for
Purposes of Reducing Interstate Ozone Transport'' (April 1999).\1\
---------------------------------------------------------------------------

\1\ It should be noted that IPL asserts that the model predicts
that ozone passes over Kentucky, Ohio, and Pennsylvania without
causing a signficant effect. In fact, both the UAM-V model and
CAM_X model showed that Indiana emissions contribute to 1-
hour ozone exceedances in the Cincinnati-Hamilton area, which, at
thet ime, was a bi-state nonattainment area in Ohio and Kentucky. It
was the only nonattainment area in Ohio. In Kentucky, there was on
additoinal nonattainment area, the Louisville area. The Louisville
area is a bi-state area with a portion in Kentucky and a portion in
Indiana. It did not make sense to analyze contributions from Indiana
to the Louisville area since the area includes two Indiana counties.
See EPA's September 23, 1998 Air Quality Modeling Technical Support
Document Appendix C, page C-15 [Docket Number A-96-56, VI-B-11].
---------------------------------------------------------------------------

Comment 3: Comment received from IPL. The commentor claims that
Indiana statutes provide that a person who violates air pollution
control laws is liable for a civil penalty not to exceed twenty-five
thousand dollars, and that IDEM does not have the authority to
implement a rule where each ton of NO_X per day is a
violation and where that violation can be spread across the entire 153
days of the ozone control period. It was arbitrary for the EPA to
require the State to adopt these provisions.
Response 3: The State rule defines what constitutes a violation in
the same manner as the federal law at 40 CFR 96.6(c)(2) and
96.54(d)(3). Authority to incorporate these provisions into State rules
can be found in IC 13-17-3-4, which provides that the Air Pollution
Control Board (Board) shall adopt rules that are necessary to implement
the CAA, and in IC 13-17-3-11, which provides that the Board has the
authority to adopt rules under discretionary authority granted to the
State under the CAA and its regulations. Finally, IC 13-30-4-1 provides
explicitly that a person who violates any provision of a rule adopted
by the Board is liable for a penalty per day per violation (italics
added for emphasis).
EPA did not arbitrarily determine that these requirements needed to
be included in state SIPs. EPA has required the State to adopt these
provisions because of the nature and inherent flexibilities of the
NO_X SIP Call. Because the State's NO_X rule at 326
IAC 10-4 is based on a trading program that caps emissions, it is
appropriate that every ton of emissions over a source's available
allowances should be considered a separate violation. Otherwise, the
penalty might not be sufficient to remove the economic benefit of
noncompliance and deter excess emissions. Furthermore, it makes sense
that a source that emits fifty excessive tons should pay a higher

[[Page 56475]]

penalty than a source that emits one excessive ton.
Additionally, the rule provides that each day of the ozone season
constitutes a violation because the rule caps emissions on an ozone
season basis and does not assign the emissions of discrete tons to a
particular day. If the source exceeds its allowances for the ozone
season, then each day of that season is a separate violation. However,
the rule does provide flexibility by allowing the owners and operators
of the unit to demonstrate that a lesser number of days should be
considered.
EPA believes that financial penalties along with an automatic
allowance offset are sufficient and appropriate for ensuring compliance
with the NO_X budget and the emission limit. The allowance
deduction is designed to ensure that non-compliance is a more expensive
option than compliance. However, in addition to the allowance offset,
the states must also be able to impose financial penalties if necessary
in response to violations of the NO_X Budget Program. In
fact, some violations (e.g., of monitoring requirements) may not result
in any excess emissions nor any offset. In a multi-state program, it is
important that each individual state's regulation include the same
provisions in order to encourage similar treatment of similar instances
of non-compliance regardless of location and to provide a level playing
field for all NO_X Budget units. Thus, if a state chooses to
adopt the model rule's approach, the SIP submission must include the
offset provisions and the financial penalty provisions contained in the
model rule. Criteria for SIP approvability are outlined in section
VI.A.2 of the preamble to the October 27, 1998 NO_X SIP Call
(63 FR 57355).
A NO_X Budget unit with excess emissions for a control
period may be charged, under the model rule, with 153 days in
violation. However, the owners or operators of these units have the
option of demonstrating that the number of days of violation was less
than 153 days.
Comment 4: Comments received from The Natural Resources Defense
Council and Hoosier Environmental Council. The commentor states that
the Indiana NO_X SIP Call appears to waive the May 1, 2003
compliance date of the Section 126 rulemaking. The commentor requests
that EPA clarify the overlap between Section 126 and the NO_X
SIP Call.
Response 4: Final approval of the Indiana NO_X SIP call
does not amend the applicability of the Section 126 rulemaking in any
way. Units that are affected under the Section 126 rulemaking must
comply with the applicable compliance date in the Section 126
rulemaking. Only if EPA takes action to amend the Section 126 rule
would the applicability of that rule change. EPA is not taking that
action today. Because of the adjustments that IDEM made to its
NO_X rule, EPA may be able to take an action to amend the
Section 126 rule in the future so that it is only applicable to those
sources for at most one year, until May 1, 2004; at which point
Indiana's NO_X rule would take over and require reductions as
stringent as those required by the Section 126 rule.

III. Final Action

A. What Action Is EPA Approving Today?

EPA is approving revisions to Indiana's ground level ozone SIP
which Indiana submitted in final on August 20, 2001 and supplemented on
September 19, 2001. These SIP revisions include two new regulations, a
budget demonstration and supporting materials. The two new regulations
are 326 Indiana Administrative Code (IAC) 10-3, the ``Nitrogen Oxide
Reduction Program for Specific Source Categories,'' and 326 IAC 10-4,
the ``Nitrogen Oxides Budget Trading Program.'' EPA has determined that
Indiana's submittal is fully approvable as meeting the Phase I
NO_X SIP Call requirements.
EPA is also finding Indiana's submittal on August 20, 2001 and
supplemented on September 19, 2001 complete in this Federal Register
action. EPA had previously determined, on December 26, 2000, that
Indiana had failed to submit a SIP in response to the NO_X
SIP Call, thus starting a 18-month clock for the mandatory imposition
of sanctions and the obligation for EPA to promulgate a FIP within 24
months(65 FR 81366). This finding stops both the sanctions clock and
EPA's FIP obligation.

B. What Is the Impact of Today's Action on EPA's Finding Under the
Clean Air Act Section 126 Rule?

Today's action does not have any impact on EPA's finding under
Section 126 of the Clean Air Act. Indiana's submittal does require
reductions at sources covered under the Section 126 rulemaking and will
be evaluated in the future to determine if it is appropriate for EPA to
take action to amend the applicability of the Section 126 rulemaking.
However, today's action does not address this issue.

IV. Administrative Requirements

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
action is not a ``significant regulatory action'' and therefore is not
subject to review by the Office of Management and Budget. For this
reason, this action is also not subject to Executive Order 13211,
``Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001). This action
merely approves state law as meeting Federal requirements and imposes
no additional requirements beyond those imposed by state law.
Accordingly, the Administrator certifies that this rule will not have a
significant economic impact on a substantial number of small entities
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because
this rule approves pre-existing requirements under state law and does
not impose any additional enforceable duty beyond that required by
state law, it does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Public Law 104-4).
This rule also does not have tribal implications because it will
not have a substantial direct effect on one or more Indian tribes, on
the relationship between the Federal Government and Indian tribes, or
on the distribution of power and responsibilities between the Federal
Government and Indian tribes, as specified by Executive Order 13175 (65
FR 67249, November 9, 2000). This action also does not have Federalism
implications because it does 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 (64
FR 43255, August 10, 1999). This action 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. This rule also is not subject to Executive Order 13045
``Protection of Children from Environmental Health Risks and Safety
Risks'' (62 FR 19885, April 23, 1997), because it is not economically
significant.
In reviewing SIP submissions, EPA's role is to approve state
choices, provided that they meet the criteria of the Clean Air Act. In
this context, in the absence of a prior existing requirement for the
State to use voluntary consensus standards (VCS), EPA has no authority

[[Page 56476]]

to disapprove a SIP submission for failure to use VCS. It would thus be
inconsistent with applicable law for EPA, when it reviews a SIP
submission, to use VCS in place of a SIP submission that otherwise
satisfies the provisions of the Clean Air Act. Thus, the requirements
of section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not
impose an information collection burden under the provisions of the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). The
Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small
Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this rule and other
required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2).
Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action must be filed in the United States Court
of Appeals for the appropriate circuit by January 7, 2002. Filing a
petition for reconsideration by the Administrator of this final rule
does not affect the finality of this rule for the purposes of judicial
review nor does it extend the time within which a petition for judicial
review may be filed, and shall not postpone the effectiveness of such
rule or action. This action may not be challenged later in proceedings
to enforce its requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

Environmental protection, Air pollution control, Intergovernmental
relations, Incorporation by reference, Nitrogen oxides, Ozone,
Reporting and recordkeeping requirements.

Dated: September 27, 2001.
David A. Ullrich,
Acting Regional Administrator, Region 5.

Part 52, chapter I, title 40 of the Code of Federal Regulations is
amended as follows:

PART 52--[AMENDED]

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

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

Subpart P--Indiana

2. Section 52.770 is amended by adding paragraph (c)(144) to read
as follows:

Sec. 52.770 Identification of plan.

* * * * *
(c) * * *
(144) On August 20, 2001 and September 19, 2001, Indiana submitted
a plan in response to Phase I of the NO_X SIP Call. The plan
includes Indiana's Phase I NO_X Budget Demonstration and
supporting documentation including initial unit allocations and two new
rules: 326 IAC 10-3 and 326 IAC 10-4.
(i) Incorporation by reference.
(A) Indiana Administrative Code Title 326: Air Pollution Control
Board, Article 10; Ozone rules, Rule 3: Nitrogen Oxide Reduction
Program for Specific Source Categories (326 IAC 10-3). Adopted June 6,
2001. Submitted August 20, 2001 and September 19, 2001. State effective
September 16, 2001.
(B) Indiana Administrative Code Title 326: Air Pollution Control
Board, Article 10; Ozone rules, Rule 4: Nitrogen Oxides Budget Trading
Program (326 IAC 10-4). Adopted June 6, 2001. Submitted August 20, 2001
and September 19, 2001. State effective September 16, 2001.

[FR Doc. 01-27931 Filed 11-7-01; 8:45 am]
BILLING CODE 6560-50-P

Notices For
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2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
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1996
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1994

Approval and Promulgation of Air Quality Implementation Plans; Indiana; Oxides of Nitrogen Regulations

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