Approval and Promulgation of Air Quality Implementation Plans; Virginia Nitrogen Oxides Budget Trading Program

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

[Federal Register: July 8, 2003 (Volume 68, Number 130)]
[Rules and Regulations]
[Page 40520-40528]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy03-12]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[VA127-5064; FRL-7523-2]

Approval and Promulgation of Air Quality Implementation Plans;
Virginia Nitrogen Oxides Budget Trading Program

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

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SUMMARY: EPA is approving a State Implementation Plan (SIP) revision
submitted by the Commonwealth of Virginia which consists of its
nitrogen oxides (NO_X) allowance trading program for large
electric generating and industrial units, with the exception of the
programs's NO_X allowance banking provisions, which EPA is
conditionally approving. The effect of this action is to approve the
Virginia NO_X Budget Trading Program, with conditions on the
approval of its allowance banking provisions, because the program
substantively addresses the requirements of Phase I of the
NO_X SIP Call which will significantly reduce ozone transport
in the eastern United States.

EFFECTIVE DATE: This final rule is effective on August 7, 2003.

[[Page 40521]]

ADDRESSES: Copies of the documents relevant to this action are
available for public inspection during normal business hours at the Air
Protection Division, U.S. Environmental Protection Agency, Region III,
1650 Arch Street, Philadelphia, Pennsylvania 19103; the Air and
Radiation Docket and Information Center, U.S. Environmental Protection
Agency, 1301 Constitution Avenue, NW., Room B108, Washington, DC 20460;
and the Virginia Department of Environmental Quality, 629 East Main
Street, Richmond, Virginia 23219.

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

SUPPLEMENTARY INFORMATION:

I. Background

On November 12, 2002 (67 FR 68542), EPA published a notice of
proposed rulemaking (NPR) for the Commonwealth of Virginia. The NPR
proposed approval of Virginia's NO_X Budget Trading Program,
with the exception of its NO_X allowance banking provisions,
for which EPA proposed conditional approval. The formal SIP revision
was submitted by the Virginia Department of Environmental Quality
(VADEQ) on June 25, 2002 to address the requirements of the
NO_X SIP Call Phase I. Virginia's SIP revision to address the
NO_X SIP Call Phase I consists of the addition of 9 VAC
Chapter 140, part I--NO_X Budget Trading Program. Detailed
descriptions of this SIP revision, the general NO_X SIP Call
requirements, and EPA's rationale for approving Virginia's
NO_X Budget Trading Program while conditionally approving the
program's allowance banking provisions were provided in the November
12, 2002 NPR and will not be restated here. The terms of the
conditional approval require that Virginia revise its banking provision
to amend the flow control trigger date from 2006 to 2005, and submit
the amendment as a SIP revision within one year from the effective date
of today's final rulemaking action.
On May 13, 2003, the VADEQ submitted a letter to EPA committing to
adopt the necessary regulatory amendment to 9 VAC 5 Chapter 140 to
change the flow control date from 2006 to 2005. In the May 13, 2003
letter, the VADEQ also commits to submit this regulatory amendment as a
SIP revision as expeditiously as possible but no later than one year
from the effective date of EPA's final conditional approval of its
NO_X Budget Trading Program's allowance banking provisions.
The May 13, 2003 letter from the Commonwealth has been included in the
administrative record (docket) of this final rulemaking.
Six comment letters were received; all comments pertained to EPA's
proposed conditional approval of Virginia's NO_X allowance
banking provisions. The comments opposed EPA's requirement that full
approval of these provisions is conditioned upon Virginia revising the
flow control trigger date from 2006 to 2005. A summary of the comments
and EPA's responses is provided in Section II below.

II. Public Comments and EPA Responses

Comment: All commenters disagreed with EPA's proposed approval of
Virginia's NO_X SIP Rule conditioned on adoption of a 2005
flow control date. The commenters expressed support for the 2006 flow
control date currently in Virginia's rule.
EPA's Response: The NO_X SIP Call includes a limitation
(referred to as ``flow control'') on the use of banked allowances for
compliance with the requirement to hold allowances covering emissions.
EPA rejects the commenters' claims and maintains that approval of
Virginia's NO_X SIP Call rule should be conditioned on
establishing 2005 as the earliest ozone season (referred to as the
``flow control date'') for which the limitation on use of banked
allowances may be triggered.
First, allowing 2006 to be the flow control date in Virginia could
result in an unfair advantage for units in the Commonwealth over units
in other states with an earlier flow control date. EPA has approved
NO_X Budget Trading Program rules under the NO_X
SIP Call for 15 other states and the District of Columbia. None of the
approved rules provide for a flow control date later than 2005.\1\ The
flow control limitation on use of banked allowances is triggered for an
upcoming ozone season if the total amount of banked allowances held in
allowance accounts as of the allowance transfer deadline (November 30
or, if it is not a business day, the next business day) for the prior
ozone season exceeds 10 percent of the total trading budgets for all
state programs for the upcoming ozone season. For the 2005 ozone
season, banked allowances held for Virginia's units or by Virginia
companies as of November 30, 2004 could be a contributing factor for
triggering flow control in 2005 for all states with trading programs
that are in effect. If Virginia units were to be a factor in triggering
flow control in 2005, but would not be subject to the flow control
limitation on use of banked allowances in 2005, those Virginia units
would have an unfair advantage over units in the other states with a
flow control date earlier than 2006.\2\
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\1\ In approving trading program rules for Connecticut,
Delaware, the District of Columbia, Maryland, Massachusetts, New
Jersey, New York, and Rhode Island, EPA approved flow control dates
of 2004. The NO_X SIP Call established May 1, 2003 as the
commencement date for the NO_X Budget Trading Program and
required the flow control provisions to apply starting in the second
year (2004) of the program. 40 CFR 51.121(b)(1)(ii) and
(b)(2)(ii)(E). EPA's approval of the 2004 flow control date was
based on the NO_X SIP Call. (EPA notes that it erroneously
approved 2005 as the flow control date for Pennsylvania, whose
program also begins in 2003.) Subsequently, the United States Court
of Appeals for the District of Columbia Circuit established May 31,
2004 as the commencement date for the NO_X Budget Trading
Program, and so 2005 became the second year of the program, and the
mandated flow control date, for state trading programs starting in
2004. While Sec. 51.121 and Part 96 were not revised, EPA has
implemented the new flow control date through the notice and comment
rulemakings for approval of the SIPs. EPA approved 2005 as the flow
control date for states (i.e., Alabama, Illinois, Indiana, Kentucky,
North Carolina, South Carolina, and West Virginia) whose programs
begin in 2004. EPA also has outstanding a proposed approval of a
2005 flow control date for Tennessee and a proposed approval for
Ohio with the understanding that a 2005 flow control date will be
adopted.
\2\ Although EPA approved several state trading programs with a
2004 flow control date (see n.1), those states will not be
disadvantaged by the fact that the other states have a 2005 flow
control date. This is because 2005 is the earliest year that flow
control is likely to be triggered for states with a 2004 flow
control date. For 2004, the calculation for triggering flow control
is the total number of banked allowances in accounts as of December
1, 2003 (i.e., only the unused allowances allocated for 2003 plus
the compliance supplement pool allowances for those states with
trading programs beginning in 2003) divided by the total trading
budgets for the states with programs in effect in 2004 (i.e.,
virtually all states in the NO_X SIP Call region).
Because, for this calculation for 2004, the number of states
reflected in the numerator is so much smaller than the number of
states reflected in the denominator, 2005 is effectively the flow
control date for all states whose programs begin in 2003.
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Further, should a 2006 flow control date be approved for Virginia,
this would allow some companies to circumvent the earlier flow control
dates established by other states. A company with affected units in
both Virginia and a state with an earlier flow control date would be
particularly advantaged in this regard. Such a company could circumvent
the earlier flow control date by exchanging banked allowances held for
its units in the state with the earlier flow control date for 2005
allowances held for its units in Virginia. All of these banked
allowances could be used in Virginia in 2005 without application of
flow control. However, a company with only units in states with earlier
flow control dates could also circumvent, to some extent, the flow
control provisions of those states. To the extent that the latter
company could purchase 2005

[[Page 40522]]

allowances and sell banked allowances, it could also avoid the
application of the flow control limitation in 2005. In short, allowing
a 2006 flow control date for Virginia would allow erosion of the
effectiveness of flow control for states with a flow control date
before 2006 and would provide for an unfair advantage to some
companies.\3\
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\3\ Companies in states with a 2004 flow control date are not
similarly disadvantaged by the 2005 flow control date for the
remaining states. See n. 2.
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Comment: A number of commenters asserted that the 2006 flow control
date adopted by Virginia is supported by the rationale in the preamble
of the January 18, 2000 Section 126 rule (Part 97), the accompanying
December 1999 response-to-comments document, and the preamble of the
April 30, 2002 revision of Part 97 for extension of the flow control
date. Commenters also stated that the possibility of different dates
under different programs would not affect the trading program and that
Part 96 should not be relied on for determination of approvability of
the flow control date.
EPA's Response: EPA first notes that, at the time Part 97 was
promulgated, the potential existed that a number of states would be
subject to the trading program under Section 126 as well as that a
number of states would be subject to the trading program under the
NO_X SIP Call. This was due to uncertainty as to whether all
states would be able to establish SIP approved programs under the
NO_X SIP Call. While the NO_X SIP Call established
statewide NO_X emissions budgets, it allowed states the
flexibility to adopt whatever NO_X control measures were
shown to meet their respective budgets (including the option of
participating in the NO_X Budget Trading Program based on the
model rule in Part 96). The states in the NO_X SIP Call
region chose to adopt, or are in the process of adopting, trading
programs based on Part 96. As long as a state fully meets its
obligations under the NO_X SIP Call, EPA does not intend to
apply the Section 126 rule to units in that state. The existing rule
provision withdrawing the Section 126 findings for any state is keyed
to the NO_X SIP Call compliance date of 2003. EPA has already
withdrawn the Section 126 findings for Connecticut, Maryland, New
Jersey, and New York on that basis. EPA has proposed to revise the
Section 126 rule to withdraw the Section 126 findings for states with a
May 31, 2004 compliance date. 65 FR 16644 (Apr. 2, 2003). In short,
Part 97 (including the later flow control date of 2006) will likely no
longer apply to any states in the NO_X SIP Call region.\4\
Only the NO_X SIP Call and Part 96 will likely be applicable.
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\4\ EPA has proposed, but not finalized, revisions to the
NO_X SIP Call concerning its application to Georgia and
Missouri. All other states in the NO_X SIP Call region
either have approved programs or are in the process of developing
programs meeting NO_X SIP Call requirements. It seems
likely that all states that are subject to the NO_X SIP
Call will meet its requirements. In any event, Part 97 does not
apply to Georgia and Missouri.
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Moreover, in light of this change in circumstances and upon
reconsideration of the discussion in the January 18, 2000 and April 30,
2002 preambles for Part 97 (and echoed in the December 1999 response-
to-comments document) concerning the flow control date, EPA concludes
that such discussion is not complete and is no longer applicable. In
the January 18, 2000 Part 97 preamble, EPA stated that it was extending
the flow control date to 2005 in response to some sources' concern
``regarding the feasibility of installing the NO_X control
equipment required . . . without any risk to electricity reliability''
and their resulting concern that ``there would not be enough allowances
for compliance in the initial years of the Federal NO_X
Budget Trading Program'' under Part 97. See 65 FR 2674, 2717 (Jan. 18,
2000). That preamble explained that those concerns had been
``heightened'' by the triggering of an analogous flow control
requirement in the second year of the Ozone Transport Commission (OTC)
NO_X trading program, the predecessor program in the Ozone
Transport Region. Id.
However, the basis for any potential need for allowances to
supplement the trading budget in the initial years of the
NO_X SIP Call and Section 126 trading programs is that some
units might experience difficulties in installing NO_X
emission controls (e.g., selective catalytic reduction (SCR) before the
commencement of the programs and might need to use additional
allowances to cover their emissions in the initial years of the
programs until the installations are completed. [See 63 FR 57356,
57428-32 (Oct. 27, 1998) explaining that EPA addressed these concerns
in establishing the compliance deadline, banking as limited by flow
control, and the compliance supplement pool of 200,000 additional
allowances]. The triggering of flow control in the second year (2000)
of the OTC program provides no basis for ``heightened'' concern that
units under the Section 126 program or the NO_X SIP Call
program might have difficulties in installing NO_X controls
and thus in meeting the compliance deadline. The OTC flow control was
triggered in 2000 because of the presence of extra allowances (in
addition to the amount allocated for 1999) awarded in 1999 for early
reductions and because OTC units were able to install sufficient
NO_X controls to meet the OTC program's 1999 compliance
deadline. This is demonstrated by the fact that without the 24,635
early reduction allowances, the bank would not have exceeded 10% of the
total trading budget and so would not have triggered flow control; \5\
and the fact that, in 1999, total emissions for units participating in
the OTC program were less than the total number of regular allowances
allocated by states participating in that program.\6\ Thus, contrary to
the January 18, 2000 Part 97 preamble, the triggering of flow control
in 2000 in the OTC program does not provide a logical basis for
concluding that there will be a greater level of control-installation
difficulties than already addressed in the NO_X SIP Call
(which has a 2005 flow control date) and that the flow control date
should therefore be extended to 2006.\7\
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\5\ The allowance bank as of November 30, 1999 equaled 43,585
allowances. If the 24,635 early reduction allowances had not been
provided, the bank would have been 18,950 allowances, which would
have been less than the flow control trigger level of 10% of the
2000 trading budget (i.e., 10% of 195,401 allowances or 19,540
allowances). See 1999 and 2000 OTC NO_X Budget Program
Compliance Reports (March 27, 2000 and May 9, 2001).
\6\ Total emissions in 1999 for participating units in the OTC
program were 174,843 tons, as compared to a total trading budget in
1999 of 194,103 allowances for participating states. Id.
\7\ The January 18, 2000 Part 97 preamble also stated that the
2006 flow control date ``gives sources greater assurance that they
will be able to use compliance supplement pool allowances for
compliance and before such allowances expire.'' 65 FR 2717. As
discussed in a subsequent comment, it is unlikely that compliance
supplement pool allowances will expire before being used for
compliance. Units in states with a 2005 flow control date can use
all such allowances in 2004, before flow control applies.
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Further, there is an additional factor that was not considered in
the January 18, 2000 and April 30, 2002 Part 97 preambles and that
affects the applicability of the preamble rationale for the flow-
control-date extension to the NO_X SIP Call. The likelihood
of there being insufficient allowances in the initial years of the
NO_X SIP Call trading program has been reduced because, in
addition to the compliance supplement pool (which was considered in the
January 18, 2000 Part 97 preamble and represents about 1/3 of the
trading budget), the availability of allowances in those years has been
effectively augmented by U.S. Court of Appeal's extension of the
commencement of the program from May 1, 2003 to May 31, 2004. See
Michigan v. EPA, 213 F.3d

[[Page 40523]]

663 (D.C. Cir. 2000), cert. den., 121 S. Ct. 1225 (2001) (August 30,
2000 order amending June 22, 2000 order lifting stay of state's SIP
submission deadline). Under the Court's decision, the first year for
state trading programs commencing in 2004 includes only 4 months (May
31-September 30, 2004). Despite this, EPA retained the full ozone
season trading budget for 2004 reflecting 5 months of emissions, an
effective increase of about 20%.
Finally, one utility claimed that the 2005 flow control date will
``seriously impair the construction schedules to which * * * sources
have already committed'' and ``could compromise their ability to
achieve compliance during 2005.'' The commenter alleged that
``[u]tilities * * * have been planning outages and related construction
activities based on the submittals by the state * * *'' However, the
commenter failed to provide any support for these speculative claims,
for example, by discussing any specific unit's NO_X control
construction schedule, showing that such schedule requires reliance by
the owner or operator on the use of banked allowances for compliance
for 2005, and showing that such schedule and such reliance were based
on there being a 2006 flow control date.
Moreover, it is difficult to see how companies could have
reasonably relied on a 2006 flow control date in scheduling
installation of controls. First, since 1998, the NO_X SIP
Call has called for a 2004 (or 2005, after the Court-mandated
compliance date delay) flow control date and every state has been
developing, through a public notice and comment procedure,
NO_X SIP Call rules aimed at avoiding application of the
Section 126 rule with a later flow control date. Second, the January
18, 2000 Part 97 preamble reiterated that the NO_X SIP Call
continued to have a 2005 flow control date. See 65 FR 2718. Third,
except for Virginia and Ohio, no state's NO_X SIP Call rule
used a 2006 flow control date, and the Virginia and Ohio NO_X
SIP Call rules with a 2006 flow control date were not promulgated until
mid-2002. In short, commenters fail to show that the rationale for
extending the flow control date stated in the January 18, 2000 Part 97
preamble is applicable here or that utilities reasonably relied on such
an extension in the NO_X SIP Call in setting compliance
schedules.
Commenters also noted that, in the January 18, 2000 Part 97
preamble, EPA stated that a ``one-year difference'' in flow control
dates for sources subject to the NO_X SIP Call and Section
126 trading programs ``will not interfere with the trading of
NO_X allowances'' and that there is ``no need to restrict
trading between'' sources in the two programs. 65 FR 2718; see also 67
FR 21522, 21526 (April 30, 2002). However, neither the January 18, 2000
nor the April 30, 2002 Part 97 preamble considered the problems
discussed above that can result from some States having a later flow
control date than other States. See response to comment concerning the
potential for unfair advantage for some companies and the potential for
erosion of the earlier flow control date provisions. The Part 97
preambles also did not address the issue of consistency with the
general objective under the Clean Air Act of expeditious as practicable
achievement of attainment. See response to comment concerning
availability of 2006 date for any of the NO_X SIP Call
states.
Comment: A number of commenters stated that revision of the
Virginia rule to require a 2005 flow control date could have the effect
of ``deeply discounting'' the compliance supplement pool should flow
control be triggered in 2005.
EPA's Response: The compliance supplement pool may be used in the
first two years of a state NO_X SIP Call trading program, and
the compliance supplement pool allowances are treated as banked
allowances for purposes of triggering and applying flow control. 40 CFR
51.121(b)(2)(iii)(D) and (E). While compliance supplement pool
allowances in states with trading programs beginning in 2003 or 2004
may be subject to flow control in 2005, a unit has the flexibility to
use those allowances for compliance before 2005 in lieu of regular
allowances and thereby to avoid application of flow control to the
compliance supplement pool allowances. EPA recognizes, of course, that
such a strategy may result in regular allowances (i.e., those allocated
for 2003, in states with programs beginning in 2003, and for 2004)
being banked and subject to flow control. However, whether compliance
supplement pool or regular allowances are subject to flow control, that
result was intended under the NO_X SIP Call.
In the NO_X SIP Call, EPA noted that banking of
allowances may ``inhibit or prohibit achievement of the desired
emissions budget in a given [ozone]
season'' since the use of banked
allowances for compliance for a specific ozone season may result in
total emissions for affected units exceeding the trading budget for
that ozone season. See 63 FR 25902, 25935 (May 11, 1998). The trading
budget reflects the emission reductions mandated, and found to be
highly cost effective, under the NO_X SIP Call in order to
prevent significant contribution to nonattainment in downwind states.
Flow control addresses the potential problem caused by banking by
continuing to allow banking but discouraging the ``excessive use'' of
banked allowances for compliance. Id.; see also 63 FR 57473. Excessive
use of banked allowances is discouraged by requiring that banked
allowances above a certain amount be used on a 2-allowances-for-1-ton-
of-emissions basis. All other allowances are used for compliance on a
1-for-1 basis. Because of this difference in use for compliance,
commenters apparently are claiming that application of flow control
``discounts'' the allowances subject to flow control.
However, the NO_X SIP Call not only required SIPs to
include the flow control provisions, but also required that these
provisions apply starting in the second year of the program, which was
2004 in the NO_X SIP Call and which became 2005 for many
states after the Court's order delaying the commencement of the trading
program. In short, the ``deep discount'' claimed by the commenters
results from the intentional curbing under the NO_X SIP Call
of excessive use of banked allowances and so that claim is not a basis
for allowing a 2006 flow control date.\8\
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\8\ Some commenters made a related claim that a 2005 flow
control date will discourage early reductions as compared to a 2006
flow control date. However, in establishing flow control in the
NO_X SIP Call, EPA balanced the considerations for and
against flow control, including the impact on early reductions, and
determined a 2005 flow control date should be established. As
discussed above, EPA maintains that the determination (and the
underlying balancing of these considerations and the underlying
rationale) in the Section 126 rule to set a later flow control date
are not applicable here. Further, even with the possibility of
triggering flow control in 2005, there is still an incentive to make
early reductions and obtain compliance supplement pool allowances
since, under flow control, the use of banked allowances for
compliance is not barred but rather is on a 2-for-1 basis.
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Comment: A number of commenters believe that the 2006 date should
be available to any of the NO_X SIP Call states.
EPA's Response: EPA disagrees. First, allowing all states to use
2006 as the flow control date would be contrary to the NO_X
SIP Call, which, as discussed above, requires the flow control
provisions to apply starting in the second year of the program.
Second, the Clean Air Act rests on an ``overarching'' principle
that the national ambient air quality standards (NAAQS) be achieved as
expeditiously as possible. See 63 FR 57449. For example, under section
181 of the Clean Air Act, the ``primary standard

[[Page 40524]]

attainment date for ozone shall be as expeditiously as practicable but
not later than [certain statutorily prescribed attainment dates].'' 42
U.S.C. 7511; see also 42 U.S.C. 7502(a)(2)(A). As discussed above, the
state trading budgets under the NO_X SIP Call reflect the
emission reductions mandated under the NO_X SIP Call in order
to prevent significant contribution to nonattainment in downwind
states. Flow control reduces the likelihood of total emissions in any
given ozone season in the NO_X SIP Call region exceeding the
total of the state trading budgets by more than 10% and in that way
promotes achievement of attainment as expeditiously as practicable. The
later the flow control date, the greater the number of ozone seasons
that lack this provision preventing, or at least minimizing, excessive
use of banked allowances and total emissions in excess of the state
budgets. Moreover, emission reductions in 2005 and 2006 may both help
some nonattainment areas achieve attainment and help some areas achieve
reasonable further progress toward attainment. See 63 FR 57449-50.\9\
The NO_X SIP Call balanced various factors, including the
potential benefits of banking and the potential problems from excessive
banking, and determined that flow control protection should begin in
the second year of the trading program. See 63 FR 25934-44; and 40 CFR
51.121(b)(2)(iii)(D) and (E).\10\ Allowing a later flow control date
would run contrary to the overarching objective of expeditious as
practicable attainment.\11\
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\9\ EPA notes that the NO_X SIP Call covers a larger
number of states, and its emission limitations are aimed at
preventing significant contribution to a larger number of states
with nonattainment areas, than the Section 126 rule.
\10\ In the January 18, 2000 Part 97 preamble, EPA stated that
adoption of the third year of the program as the flow control date
``strikes an appropriate balance'' between concerns over the
feasibility of installing controls by May 1, 2003 and the
environmental goal of the program. 65 FR 2717. This is echoed in the
December 1999 response-to-comments document (at 71), which stated
that a 2006 flow control date will not ``jeopardize the
environmental goal'' of this program. As discussed above, EPA
maintains that the determination (and the underlying balancing of
these considerations and the underlying rationale) in the Section
126 rule to set a later flow control date are not applicable here.
See, e.g., n.8.
\11\ Commenters' claim that, since EPA does not expect flow
control to be triggered in 2005, the potential effect of a 2006 flow
control date on expeditious attainment should be ignored. This claim
is without merit. Despite EPA's expectations, there is the potential
for flow control to be triggered in 2005. In fact, commenters stated
that they believe that such triggering in 2005 is ``relatively
likely'; indeed, if they did not believe it might occur, they would
not be objecting to a 2005 flow control date.
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Comment: A number of commenters suggested that if EPA continues to
apply the NO_X SIP Call to Georgia and Missouri, and sets
dates for the commencement of their emission control requirements (such
as a trading program based on Part 96), those states will have flow
control dates later than 2005 and that this supports allowing Virginia
to have a flow control date later than 2005.
EPA's Response: EPA rejects this claim as entirely speculative. In
addressing whether and, if so, how to apply the NO_X SIP Call
to Georgia and Missouri, EPA will address how to handle the flow
control requirements and will take into account the problems discussed
above that would result from some states having later flow control
dates than other states.

III. Final Action

EPA is approving the Commonwealth of Virginia's Regulation for
Emissions Trading, 9 VAC Chapter 140, part I--NO_X Budget
Trading Program submitted as a SIP revision on June 25, 2002, with the
following exception: the provisions of Virginia's NO_X
allowance banking regulation set forth in 9 VAC 5-140-550 are
conditionally approved. Except as noted, EPA is approving Virginia's
NO_X Budget Trading Program because it substantively
satisfies the requirements of the NO_X SIP Call Phase I. For
Virginia's NO_X allowance banking provisions to become fully
approvable, Virginia must correct the deficiency identified in this
action and submit the change as a SIP revision within one year from the
effective date of today's action. Because the VADEQ has begun the
regulatory process to change the flow control trigger date from 2006 to
2005, and has provided a written commitment to EPA that the so revised
regulation will be submitted as a SIP revision within the one year
deadline, EPA will record, as soon as practicable after EPA's
conditional approval becomes effective, the allowance allocations
provided under Virginia's rule. If Virginia fails to fulfil its
commitment, the conditional approval of the allowance banking
provisions will convert to a disapproval, and EPA will, at that time,
address the effect of that disapproval on the Commonwealth's
NO_X Budget Trading Program.

IV. General Information Pertaining to SIP Submittals From the
Commonwealth of Virginia

In 1995, Virginia adopted legislation that provides, subject to
certain conditions, for an environmental assessment (audit)
``privilege'' for voluntary compliance evaluations performed by a
regulated entity. The legislation further addresses the relative burden
of proof for parties either asserting the privilege or seeking
disclosure of documents for which the privilege is claimed. Virginia's
legislation also provides, subject to certain conditions, for a penalty
waiver for violations of environmental laws when a regulated entity
discovers such violations pursuant to a voluntary compliance evaluation
and voluntarily discloses such violations to the Commonwealth and takes
prompt and appropriate measures to remedy the violations. Virginia's
Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-
1198, provides a privilege that protects from disclosure documents and
information about the content of those documents that are the product
of a voluntary environmental assessment. The Privilege Law does not
extend to documents or information (1) that are generated or developed
before the commencement of a voluntary environmental assessment; (2)
that are prepared independently of the assessment process; (3) that
demonstrate a clear, imminent and substantial danger to the public
health or environment; or (4) that are required by law.
On January 12, 1997, the Commonwealth of Virginia Office of the
Attorney General provided a legal opinion that states that the
Privilege law, Va. Code Sec. 10.1-1198, precludes granting a privilege
to documents and information ``required by law,'' including documents
and information ``required by Federal law to maintain program
delegation, authorization or approval,'' since Virginia must ``enforce
Federally authorized environmental programs in a manner that is no less
stringent than their Federal counterparts. * * *'' The opinion
concludes that ``[r]egarding Sec. 10.1-1198, therefore, documents or
other information needed for civil or criminal enforcement under one of
these programs could not be privileged because such documents and
information are essential to pursuing enforcement in a manner required
by Federal law to maintain program delegation, authorization or
approval.''
Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides that
``[t]o the extent consistent with requirements imposed by Federal
law,'' any person making a voluntary disclosure of information to a
state agency regarding a violation of an environmental statute,
regulation, permit, or administrative order is granted immunity from
administrative or civil penalty. The Attorney General's January 12,
1997 opinion states that the quoted language renders this statute
inapplicable to

[[Page 40525]]

enforcement of any Federally authorized programs, since ``no immunity
could be afforded from administrative, civil, or criminal penalties
because granting such immunity would not be consistent with Federal
law, which is one of the criteria for immunity.''
Therefore, EPA has determined that Virginia's Privilege and
Immunity statutes will not preclude the Commonwealth from enforcing its
[*]
program consistent with the Federal requirements. In any event,
because EPA has also determined that a state audit privilege and
immunity law can affect only state enforcement and cannot have any
impact on Federal enforcement authorities, EPA may at any time invoke
its authority under the Clean Air Act, including, for example, sections
113, 167, 205, 211 or 213, to enforce the requirements or prohibitions
of the state plan, independently of any state enforcement effort. In
addition, citizen enforcement under section 304 of the Clean Air Act is
likewise unaffected by this, or any, state audit privilege or immunity
law.

V. Statutory and Executive Order Reviews

A. General 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 (Pub. L. 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 (59 FR 22951, 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
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.).

B. Submission to Congress and the Comptroller General

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. This rule is not a
``major rule'' as defined by 5 U.S.C. 804(2).

C. Petitions for Judicial Review

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 September 8, 2003. 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 approving Virginia's NO_X Trading
Program, but conditionally approving its banking provisions, 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, Nitrogen dioxide,
Ozone, Reporting and recordkeeping requirements.

Dated: June 26, 2003.
Donald S. Welsh,
Regional Administrator, Region III.

? 40 CFR part 52 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 VV--Virginia

? 2. In Section 52.2420, the table in paragraph (c) is amended by adding
the entry Chapter 140 to 9 VAC 5, to read as follows:

Sec. 52.2420 Identification of plan.

* * * * *
(c) EPA approved regulations.

[[Page 40526]]

EPA-Approved Regulations in the Virginia SIP
----------------------------------------------------------------------------------------------------------------
State
State citation (9 VAC 5) Title/Subject effective EPA approval date Explanation (former SIP
date section)
----------------------------------------------------------------------------------------------------------------

* * * * * * *
Chapter 140.................... NO_x Budget Trading Program [Part I]
--------------------------------
Part I.--Emission Standards
--------------------------------
Article 1...................... NO_x Budget Trading Program General Provisions
5-140-10....................... Purpose............... 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-20....................... Definitions........... 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-30....................... Measurements, 7/17/02 7/08/03 and
abbreviations, and Federal Register
acronyms. page citation]
5-140-31....................... Federal Regulations 7/17/02 7/08/03 and
Incorporated by Federal Register
reference. page citation]
5-140-40....................... Applicability......... 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-50....................... Retired unit exemption 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-60....................... Standard requirements. 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-70....................... Computation of time... 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-100...................... Authorization and 7/17/02 7/08/03 and
responsibilities of Federal Register
the NO_X authorized page citation]
representative.
5-140-110...................... Alternate NO_X 7/17/02 7/08/03 and
authorized account Federal Register
representative. page citation]
5-140-120...................... Changing the NO_X 7/17/02 7/08/03 and
authorized account Federal Register
representative and page citation]
alternate NO_X
authorized account
Register
representative; page
changes in the owners
and operators.
5-140-130...................... Account certificate of 7/17/02 7/08/03 and
representation. Federal Register
page citation]
5-140-140...................... Objections concerning 7/17/02 7/08/03 and
the NO_X authorized Federal Register
account and page citation]
representative.
Article 3...................... Permits
5-140-200...................... General NO_X Budget 7/17/02 7/08/03 and
permit requirements. Federal Register
page citation]
5-140-210...................... Submission of NO_X 7/17/02 7/08/03 and
Budget permit Federal Register
applications. page citation]
5-140-220...................... Information 7/17/02 7/08/03 and
requirements for NO_X Federal Register
Budget permit page citation]
applications.
5-140-230...................... NO_X Budget permit 7/17/02 7/08/03 and
contents. Federal Register
page citation]
5-140-240...................... Effective date of 7/17/02 7/08/03 and
initial NO_X Budget Federal Register
permit. page citation]
5-140-250...................... NO_X Budget permit 7/17/02 7/08/03 and
revisions. Federal Register
page citation]
Article 4...................... Compliance Certification
5-140-300...................... Compliance 7/17/02 7/08/03 and
certification report. Federal Register
page citation]
5-140-310...................... Permitting authority's 7/17/02 7/08/03 and
and administrator's Federal Register
and action on page citation]
compliance
certifications.
Article 5...................... NO_X Allowance Allocations
5-140-400...................... State trading program 7/17/02 7/08/03 and
budget. Federal Register
page citation]
5-140-410...................... Timing requirements 7/17/02 7/08/03 and
for NO_X allowance Federal Register
allocations. page citation]
5-140-420...................... NO_X allowance 7/17/02 7/08/03 and
allocations. Federal Register
page citation]
5-140-430...................... Compliance Supplement 7/17/02 7/08/03 and
Pool. Federal Register
page citation]
Article 6...................... NO_X Allowance Tracking System
5-140-500...................... NO_X Allowance Tracking 7/17/02 7/08/03 and
System accounts. Federal Register
page citation]
5-140-510...................... Establishment of 7/17/02 7/08/03 and
accounts. Federal Register
page citation]
5-140-520...................... NO_X Allowance Tracking 7/17/02 7/08/03 and
System Federal Register
responsibilities of page citation]
NO_X authorized
account
representative.

[[Page 40527]]

5-140-530...................... Recordation of NO_X 7/17/02 7/08/03 and
allowance allocations. Federal Register
page citation]
5-140-540...................... Compliance............ 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-550...................... Banking............... 7/17/02 7/08/03 and Conditionally Approved
Federal Register
page citation]
5-140-560...................... Account error......... 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-570...................... Closing of general 7/17/02 7/08/03 and
accounts. Federal Register
page citation]
Article 7...................... NO_X Allowance Transfers
5-140-600...................... Scope and submission 7/17/02 7/08/03 and
of NO_X allowance Federal Register
transfers. page citation]
5-140-610...................... EPA recordation....... 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-620...................... Notification.......... 7/17/0 7/08/03 and
Federal Register
page citation]
Article 8...................... Monitoring and Reporting
5-140-700...................... General Requirements.. 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-710...................... Initial certification 7/17/02 7/08/03 and
and recertification Federal Register
procedures. page citation]
5-140-720...................... Out of control periods 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-730...................... Notifications......... 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-740...................... Recordkeeping and 7/17/02 7/08/03 and
reporting. Federal Register
page citation]
5-140-750...................... Petitions............. 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-760...................... Additional 7/17/02 7/08/03 and
requirements to Federal Register
provide heat input page citation]
data for allocation
purposes.
Article 9...................... Individual Unit Opt-ins
5-140-800...................... Applicability......... 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-810...................... General............... 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-820...................... NO_X authorized account 7/17/02 7/08/03 and
representative. Federal Register
page citation]
5-140-830...................... Applying for NO_X 7/17/02 7/08/03 and
Budget opt-in permit. Federal Register
page citation]
5-140-840...................... Opt-in process........ 7/17/02 7/08/03 and
Federal Register
page citation]
5-140-850...................... NO_X Budget opt-in 7/17/02 7/08/03 and
permit contents. Federal Register
page citation]
5-140-860...................... Withdrawal from NO_X 7/17/02 7/08/03 and
Budget Trading Federal Register
Program. page citation]
5-140-870...................... Change in regulatory 7/17/02 7/08/03 and
status. Federal Register
page citation]
5-140-880...................... NO_X allowance 7/17/02 7/08/03 and
allocations to opt-in Federal Register
units. page citation]
Article 10..................... State Trading Program Budget and Compliance Pool
5-140-900...................... State trading program 7/17/02 7/08/03 and
budget. Federal Register
page citation]
5-140-910...................... Compliance supplement 7/17/02 7/08/03 and
pool budget. Federal Register
page citation]
5-140-920...................... Total electric 7/17/02 7/08/03 and
generating unit Federal Register
allocations. page citation]
5-140-930...................... Total non-electric 7/17/02 7/08/03 and
generating unit Federal Register
allocations. page citation]

* * * * * * *
----------------------------------------------------------------------------------------------------------------

* * * * *

? 3. Section 52.2450 is amended by adding paragraph (c) to read as
follows:

Sec. 52.2450 Conditional approval.

* * * * *
(c) Virginia's banking provision set forth in 9 VAC 5-140-550 under
its NO_X SIP Trading program is approved with the following
contingency: Virginia must correct the flow control trigger date from
2006 to 2005 and submit the

[[Page 40528]]

change as a SIP revision within one year from August 7, 2003.

[FR Doc. 03-17100 Filed 7-7-03; 8:45 am]
BILLING CODE 6560-50-P

Notices For
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994

Approval and Promulgation of Air Quality Implementation Plans; Virginia Nitrogen Oxides Budget Trading Program

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