Revisions to Regional Haze Rule To Incorporate Sulfur Dioxide Milestones and Backstop Emissions Trading Program for Nine Western States and Eligible Indian Tribes Within That Geographic Area

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

[Federal Register: June 5, 2003 (Volume 68, Number 108)]
[Rules and Regulations]
[Page 33763-33791]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05jn03-17]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 51
[FRL-7504-4]

Revisions to Regional Haze Rule To Incorporate Sulfur Dioxide
Milestones and Backstop Emissions Trading Program for Nine Western
States and Eligible Indian Tribes Within That Geographic Area

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

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SUMMARY: The purpose of this rule is to revise EPA's regional haze rule
to incorporate certain provisions for Western States and eligible
Indian Tribes.
The Western Regional Air Partnership (WRAP) submitted an Annex to
the 1996 report of the Grand Canyon Visibility Transport Commission
(GCVTC) to EPA on September 29, 2000. This submittal was required under
the regional haze rule in order for nine Western States (and Indian
Tribes within the same geographic region) to have the option of
submitting plans implementing the GCVTC recommendations. The Annex
contains recommendations for implementing the regional haze rule in
nine Western States, including a set of recommended regional emissions
milestones. The milestones address, for the time period between 2003
and 2018, emissions of sulfur dioxide (SO₂), a key precursor
to the formation of fine particles and regional haze.

DATES: The regulatory amendments announced herein take effect on August
4, 2003.

ADDRESSES: The EPA has established an official public docket for this
action under Docket No. OAR-2002-0076. The official public docket is
the collection of materials that is available for public viewing at the
Air Docket in the EPA Docket Center, Room B102, 1301 Constitution Ave.,
NW., Washington, DC. The EPA Docket Center Public Reading Room is open
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal
holidays.

FOR FURTHER INFORMATION CONTACT: Tim Smith (telephone 919-541-4718),
Environmental Protection Agency, Air Quality Strategies and Standards
Division, C504-02, Research Triangle Park, NC 27711 or Thomas Webb
(telephone 415-947-4139), EPA Region 9 (AIR-5), 75 Hawthorne Street,
San Francisco, CA 94105. Internet addresses: smith.tim@epa.gov and
webb.thomas@epa.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. General Information
A. Regulated Entities
B. How can I get copies of this document and other related
information?
II. Overview of the Stationary Source SO₂ Reduction
Program Covered by this Rule
A. What is the regional haze rule?
B. What are the special provisions for Western States and
eligible Indian Tribes in 40 CFR 51.309 of the regional haze rule?
C. What was required to be included in the Annex to the GCVTC
report?
D. What are the next steps in implementing this program?
E. What topics were covered in EPA's May 6, 2002 proposal?
F. What public comments were received on the proposal?
G. What topics are covered in this preamble?
III. Discussion of Issues Raised in Comments on the May 6, 2002
Proposal
A. General and Overarching Issues
B. Milestones
C. Annual Process for Determining Whether a Trading Program is
Triggered
D. Requirements for the Backstop Trading Program
E. Provisions Related to Time Period After 2018
F. Provisions Related to Indian Tribes
IV. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review
B. Paperwork Reduction Act
C. Regulatory Flexibility Act
D. Unfunded Mandates Reform Act
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation and Coordination with
Indian Tribal Governments
G. Executive Order 13045: Protection of Children from
Environmental Health and Safety Risks
H. Executive Order 13211: Actions that Significantly Affect
Energy Supply, Distribution, or Use
I. National Technology Transfer Advancement Act
J. Executive Order 12898: Federal Actions to Address
Environmental Justice in Minority Populations and Low-Income
Populations
K. Congressional Review Act

I. General Information

A. Regulated Entities

Entities potentially regulated by this action are nine States in
the Western United States (Arizona, California, Colorado, Idaho,
Nevada, New Mexico, Oregon, Utah and Wyoming) and Indian Tribes within
that same geographic area. This action, and an earlier action taken by
EPA in 1999, provides these States and Tribes with an optional program
to protect visibility in Federally protected scenic areas. The portion
of the program addressed by today's action is a program for stationary
sources of SO₂, involving a set of regional annual emissions
milestones for the years between 2003 and 2018 that would apply to the
total SO₂ emissions from all stationary sources emitting
more than 100 tons of SO₂ per year. Examples of potentially
affected sources currently emitting at this level are listed in the
following table.

Examples of Regulated Entities

Coal-fired power plants
Industrial boilers
Petroleum refineries
Natural gas processing facilities with sulfur recovery plants
Cement kilns
Paper mills

B. How Can I Get Copies of This Document and Other Related Information?

1. Docket. The EPA has established an official public docket for
this action under Docket No. OAR-2002-0076. The official public docket
consists of the documents specifically referenced in this action, any
public comments received, and other information related to this action.
Although a part of the official docket, the public docket does not
include confidential business information (CBI) or other information
whose disclosure is restricted by statute. The official public docket
is the collection of materials that is available for public viewing at
the Air Docket in the EPA Docket Center, Room B102, 1301 Constitution
Ave., NW., Washington, DC. The EPA Docket Center Public Reading Room is
open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding
legal holidays. The telephone number for the Reading Room is (202) 566-
1744, and the telephone number for the Air Docket is (202) 566-1742. A
reasonable fee may be charged for copying.
2. Electronic Access. You may access this Federal Register document
electronically through the EPA Internet under the ``Federal Register''
listings at http://www.epa.gov/fedrgstr/. An electronic version of the
public docket is available through EPA's electronic public docket and
comment system, EPA Dockets. You may use EPA Dockets at http://www.epa.
gov/edocket/ to view public comments, access the index listing
of the contents of the official public docket, and to access those
documents in the public docket that are available electronically.
Although not all docket materials may be available electronically, you
may still access any of the publicly available docket materials through
the docket facility identified above. Once in the system, select
``search,'' then key in the

[[Page 33765]]

appropriate docket identification number.

II. Overview of the Stationary Source SO₂ Reduction Program
Covered by This Rule

The purpose of this rule is to revise 40 CFR 51.309 of the regional
haze rule to incorporate additional provisions to address visibility
impairment in 16 Class I areas on the Colorado Plateau.

A. What Is the Regional Haze Rule?

Section 169A of the CAA establishes a national goal for protecting
visibility in Federally-protected scenic areas. These ``Class I'' areas
include national parks and wilderness areas. The national visibility
goal is to remedy existing impairment and prevent future impairment in
these Class I areas, consistent with the requirements of sections 169A
and 169B of the CAA.
Regional haze is a type of visibility impairment caused by air
pollutants emitted by numerous sources across a broad region. The EPA
uses the term regional haze to distinguish this type of visibility
problem from those which are more local in nature. In 1999, EPA issued
a regional haze rule requiring States to develop implementation plans
that will make ``reasonable progress'' toward the national visibility
goal, (64 FR 35714, July 1, 1999). The first State plans for regional
haze are due between 2003 and 2008. The regional haze rule provisions
appear at 40 CFR 51.308 and 40 CFR 51.309.

B. What Are the Special Provisions for Western States and Eligible
Indian Tribes in 40 CFR 51.309 of the Regional Haze Rule?

The regional haze rule at 40 CFR 51.308 sets forth the requirements
for State implementation plans (SIPs) under the regional haze program.
The rule requires State plans to include visibility progress goals for
each Class I area, as well as emissions reductions strategies and other
measures needed to meet these goals. The rule also provides an optional
approach, described in 40 CFR 51.309, that may be followed by the nine
Western States (Arizona, California, Colorado, Idaho, Nevada, New
Mexico, Oregon, Utah, and Wyoming) that comprise the transport region
analyzed by the GCVTC during the 1990's. This optional approach is also
available to eligible Indian Tribes within this geographic region. The
regulatory provisions at 40 CFR 51.309 are based on the final report
issued by the GCVTC in 1996,\1\ which included a number of recommended
emissions reductions strategies designed to improve visibility in the
16 Class I areas on the Colorado Plateau.
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\1\ Recommendations for Improving Western Vistas. GCVTC, June
10, 1996.
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In developing the regional haze rule, EPA received a number of
comments on the proposed rule encouraging the Agency to recognize
explicitly the work of the GCVTC. In addition, in June 1998, Governor
Leavitt of Utah provided comments to EPA on behalf of the Western
Governors Association (WGA), further emphasizing the commitment of
Western States to implementing the GCVTC recommendations. The WGA's
comments also suggested the translation of the GCVTC's recommendations
into specific regulatory language. The EPA issued a Notice of
Availability during the fall of 1998 requesting further comment on the
WGA proposal and regulatory language based upon the WGA's
recommendations. Based on the comments received on this Federal
Register notice, EPA developed the provisions set forth in 40 CFR
51.309 that allow the nine Transport Region States and eligible Tribes
within that geographic area to implement many of the GCVTC
recommendations within the framework of the national regional haze
rule.
The provisions in 40 CFR 51.309 comprise a comprehensive long-term
strategy for addressing sources that contribute to visibility
impairment within this geographic region. The strategy addresses the
time period between the year 2003,\2\ when the implementation plans are
due, and the year 2018. The provisions address emissions from
stationary sources, mobile sources, and area sources such as emissions
from fires and windblown dust.
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\2\ Indian Tribes are given the flexibility under EPA
regulations to submit implementation plans and opt into the program
after the 2003 deadline.
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One element of the GCVTC's strategy to address regional haze is a
program to reduce stationary source emissions of SO₂. This
program calls for setting a series of declining caps on emissions of
SO₂. These declining caps on emissions are referred to as
emissions milestones and provide for a reduction in SO₂
emissions over time. In designing this program, the GCVTC intended for
these milestones to be reduced through voluntary measures, but also
included provisions for an enforceable market-based program that would
serve as a ``backstop'' if voluntary measures did not succeed. At the
time the regional haze rule was published, however, it was broadly
recognized that the specific emission milestones, and the details of
how both the voluntary and enforceable phases of the program would be
implemented, were necessary elements of a regulatory program.
Accordingly, the regional haze rule, in 40 CFR 51.309(f), required the
development of an ``Annex'' to the report of the GCVTC that would fill
in these details. The regional haze rule provided that the option
afforded by 40 CFR 51.309 would only be available if an Annex,
addressing the specific requirements of 40 CFR 51.309(f), were
submitted to EPA by October 1, 2000. The EPA required the submission of
an Annex by this date to ensure that EPA would be able to act on it
before the December 31, 2003 deadline for SIPs under 40 CFR 51.309(c).

C. What Was Required To Be Included in the Annex to the GCVTC Report?

The regional haze rule required the GCVTC (or a regional planning
body formed to implement the Commission recommendations, such as the
Western Regional Air Partnership (WRAP) to provide recommendations to
fill in the details for two main aspects of the program:

--Emissions reductions milestones for stationary source
SO₂ emissions for the years 2003, 2008, 2013, and 2018.
The milestones must provide for ``steady and continuing emissions
reductions'' for the 2003-2018 time period. In addition, the
milestones must ensure greater reasonable progress than would be
achieved by application of best available retrofit technology (BART)
pursuant to Sec. 51.308(e)(2).
--Documentation setting forth the details for how a market trading
program would be implemented in the event that voluntary measures
are not sufficient to meet the required milestones. This
documentation must include model rules, memoranda of understanding,
and other documentation describing in detail how emissions
reductions progress will be monitored, what conditions will result
in the activation of the market trading program, how allocations
will be performed, and how the program will operate.

The EPA received the Annex from the WRAP in a timely manner, on
September 29, 2000. The EPA recognizes the significant amount of work
that was devoted to developing the Annex and we commend the WRAP
participants for their efforts. Under 40 CFR 51.309(f)(3), if EPA finds
that the Annex meets the requirements of the regional haze rule, EPA
committed to revise the regional haze rule based on the Annex to
incorporate provisions requiring compliance with the milestones and
backstop trading program. Along with the existing elements of 40 CFR
51.309, these new

[[Page 33766]]

provisions would also be addressed in the 2003 SIPs by the 9 Western
States.

D. What Are the Next Steps in Implementing This Program?

Today's rule modifies the requirements in 40 CFR 51.309 of the
regional haze rule. As a result, 40 CFR 51.309 provides a complete
regulatory framework to be used by Western States and Tribes in
developing regional haze implementation plans. The EPA will continue to
work closely with the States and Tribes to support their efforts to
develop plans that meet the applicable requirements of the regional
haze rule. Once State and tribal plans that meet the applicable
requirements of the regional haze rule are reviewed and approved by
EPA, they will be federally enforceable.

E. What Topics Were Covered in EPA's May 6, 2002 Proposal?

The May 6, 2002 proposal addressed the following topics:
? The proposed regional SO₂ milestones and WRAP's
determination that the milestones meet the criteria for approval in the
regional haze rule. The EPA reviewed the WRAP's methodology for
developing specific milestones for SO₂ for the years between
2003 and 2018. The EPA proposed to approve the milestones as satisfying
the requirements of the regional haze rule. The EPA noted its
conclusion that the milestones provide for ``steady and continuing
emissions reductions.'' The EPA also proposed to conclude that the
milestones provide for ``greater reasonable progress'' than the BART
emission limits that would otherwise be required by the regional haze
rule.
? Ways in which the milestones may be adjusted in the future.
The proposal discusses the limited circumstances under which the
milestones may be adjusted in the future and the proposed
administrative process for making those changes.
? The stationary sources of SO₂ that are included
in the program. The proposal discussed the stationary sources of
SO₂ that would be required to participate in the program,
and whose cumulative emissions would be compared to the milestones.
? The annual process for determining whether a milestone is
exceeded, thereby triggering the trading program. The proposal
described the steps to be followed in evaluating emissions data at the
State, tribal and regional levels. It also described a mechanism by
which States and Tribes can activate the trading program in 2013 if
evidence indicates that the 2018 milestone will not be reached without
such action.
? Key trading program elements that are required in SIPs and
tribal implementation plans (TIPs). The preamble discussed proposed
requirements regarding the backstop trading program, and discussed
trading program elements such as: Issuance of and compliance with
allowances; emissions quantification protocols and tracking system; the
annual reconciliation process; and penalty provisions.
? Status of the program after 2018. The proposal discussed
EPA's understanding of what happens to the milestones and backstop
trading program at the completion of the first implementation period,
in 2018.

The preamble to the May 6, 2002 proposal described each of these
programmatic areas in detail, including EPA's review of the relevant
portion of the WRAP submittal.

F. What Public Comments Were Received on the Proposal?

On May 6, 2002 (67 FR 30418), the proposed rule was published in
the Federal Register. The EPA requested written comments on the
proposal and held a public hearing. The public hearing was held in
Phoenix, Arizona on June 4, 2002. A transcript for this public hearing
is available in the public docket for the regulation (Docket OAR-2002-
0076). The EPA received eleven written comments on the package,
primarily from Western stakeholder groups.

G. What Topics Are Covered in This Preamble?

The EPA has made a number of changes to the proposed rule in
response to the comments we received. The comments on the proposal were
limited to a relatively small subset of the broad range of topics
discussed in detail in the proposal. Accordingly, EPA believes that it
is not necessary to repeat the comprehensive discussion contained in
the preamble to the proposal. Instead, EPA has limited the discussion
in this preamble to issues raised by commenters, and changes made to
the final rule based on those issues.

III. Discussion of Issues Raised in Comments on the May 6, 2002
Proposal

A. General and Overarching Issues

1. Impact of May 24, 2002 American Corn Growers Decision
On May 24, 2002, the U.S. Court of Appeals for the D.C. Circuit
issued a decision in American Corn Growers et al. v. EPA, 291 F.3d 1
(D.C. Cir., 2002) that invalidated part of EPA's regional haze rule.
Because the WRAP Annex would be incorporated into the regional haze
rule, a number of commenters asked whether the court's decision would
have an impact on this rulemaking regarding the Annex. Some commenters
recommended that EPA not proceed with the final rule until EPA has
addressed the issues raised by the court regarding the regional haze
rule in general. In contrast, a number of commenters agreed with the
position that EPA took in a June 7 letter \3\ that the Annex is fully
consistent with the court's ruling. A number of commenters requested
that EPA clarify its position and rationale on this issue. The EPA
continues to believe that the decision in American Corn Growers does
not in any way affect the WRAP Annex or EPA's ability to incorporate
the Annex into its regional haze rule.
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\3\ June 7, 2002 letter from Lydia Wegman, EPA, to Rick Sprott
and Julie Simpson, co-chairs, WRAP Initiatives Oversight Committee.
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In order to better understand EPA's conclusion regarding the Annex,
EPA believes it is helpful to review the history of the GCVTC and the
WRAP. In its 1996 report to EPA, the GCVTC recommended a wide range of
control strategies to address regional haze, including strategies to
reduce emissions of SO₂ from large stationary sources. Thus,
the GCVTC specifically recognized that stationary sources would need to
be an important part of an overall visibility strategy and, in
particular, that controlling sulfates from these sources was a key
strategy for addressing haze. As part of this overall strategy, the
GCVTC also concluded that interim targets that provided for ``steady
and continuing emission reductions'' over the entirety of the planning
period might also be needed.
In 1997, EPA proposed the regional haze rule, and in 1998, the WGA
submitted comments to EPA requesting the addition of specific language
to the rule to address the recommendations of the GCVTC. In these
comments, the WGA reemphasized the commitment of the Western governors
to the GCVTC recommendations. Following public notice and an
opportunity to comment on the WGA's proposal, EPA issued the final
regional haze rule (64 FR 35714, July 1, 1999). In 40 CFR 51.309 of the
rule, EPA established a specific set of SIP requirements for the States
and Tribes that participated in the GCVTC. As EPA noted in the preamble
to the rule, these requirements acknowledged and gave effect to the
substantial body of work already completed by the GCVTC and the WRAP.

[[Page 33767]]

One of the requirements in 40 CFR 51.309 addressed the GCVTC's
recommendation that the States establish a cap on regional emissions of
SO₂ from stationary sources. Under 40 CFR 51.309(f) of the
regional haze rule, the WRAP was required to submit an annex to the
GCVTC Report that would contain specific emission reduction milestones
for the years 2003, 2008, 2013, and 2018. This provision explicitly
references the recommendations of the GCVTC for ``steady and continuing
emissions reductions * * * consistent with the Commission's definition
of reasonable progress'' and its goal of 50 to 70 percent reduction in
emissions of SO₂ between 1990 and 2040. In the preamble to
the final regional haze rule, EPA explained that the WRAP would have to
take into account four specific factors in setting these milestones.
The preamble specifically noted that ``[t]he first factor affecting the
selection of interim milestones is the GCVTC's definition of reasonable
progress.'' (64 FR 35756). The other factors listed in the rule are:
(1) The ultimate target in 2040 of a 50 to 70 percent reduction in
emissions of SO₂ from stationary sources; (2) the
requirement that the emissions cap provide for greater progress than
would be achieved through source-specific BART requirements; and (3)
the timing of progress assessment and the identification of mechanisms
to address the cases where emissions exceed milestones.
In the regional haze rule, EPA concluded that the specific SIP
requirements in 40 CFR 51.309 provide for reasonable progress toward
the national visibility goal. The WRAP's plan for capping
SO₂ emissions from stationary sources is a part of the
Western States' and Tribes' long-term strategy for achieving reasonable
progress. As described above, the SO₂ program grew out of
the GCVTC's recommendations for measures to remedy adverse impacts on
visibility.
Some commenters expressed concerns that the WRAP's program for
controlling SO₂ emissions in the West, as further defined by
the Annex to the GCVTC's Report, is a ``BART provision'' subject to the
American Corn Growers court remand. For several reasons, EPA believes
that this is not the case.
Under the CAA, the BART provisions require the installation of
control technology on specific sources that were built between 1962 and
1977. Nothing in the Annex requires specific controls on any individual
source. A key component of the Annex's SO₂ program is the
goal that all reductions called for by the program remain voluntary. If
the reductions are achieved through voluntary measures, then there will
be no requirements of any kind. Even if the SO₂ milestones
are not achieved through voluntary actions, the Annex does not provide
for source-specific controls. Rather, the failure to achieve these
milestones would trigger a ``backstop'' emissions trading program. Such
a program, by its very nature, does not dictate that any particular
source install control technology or otherwise reduce its emissions.
The EPA also notes that the Annex covers all stationary sources
that emit more than 100 tons per year of SO₂--not just
sources built between 1962 and 1977--and thus goes well beyond the
scope of the statutory BART provisions. For this reason (and others
noted above), EPA believes that the SO₂ program is a
component of the WRAP's strategy for ensuring reasonable progress, an
aspect of the regional haze program that was not addressed by the
American Corn Growers decision.
The EPA approved the WRAP's long-term strategy for addressing
visibility consistent with the broad discretion afforded States by
section 169A and title I of the CAA in developing strategies to meet
reasonable progress goals and national standards. See Union Electric
Co. v. EPA, 427 U.S. 246 (1976); Train v. NRDC, 421 U.S. 60 (1975). The
SO₂ program, which caps emissions of SO₂ from all
large stationary sources, reflects the WRAP States' and Tribes'
judgement as to one appropriate means for addressing haze and ensuring
reasonable progress. The decision to limit emissions from this category
of sources is well within the discretion of the States and Tribes. The
court's decision in American Corn Growers, which addresses only the
BART provisions, does not in any way limit the general authority of the
States to choose appropriate control measures to ensure reasonable
progress. Any suggestion that the decision requires States to undertake
a source specific analysis of a source's contribution to the problem of
regional haze before the State can subject a source to regulation would
go far beyond the actual holding in the case.
As discussed above, 40 CFR 51.309 does not require participating
States to assess and impose BART on individual sources. Best available
retrofit technology is only relevant as one of four factors that the
WRAP must consider in establishing the appropriate emission reduction
milestones for SO₂--i.e., the level of the cap. The regional
haze rule requires that the milestones in the Annex to the GCVTC Report
``must be shown to provide for greater reasonable progress than would
be achieved by application of best available retrofit technology (BART)
pursuant to Sec. 51.308(e)(2).'' 40 CFR 51.309(f)(1)(i). This is not a
requirement for BART. The requirement that the milestones ``provide for
greater reasonable progress'' than BART is based on the decision by EPA
to provide States with the flexibility to adopt alternative measures in
lieu of the BART requirements set forth in statute so long as these
alternative measures were ``better than BART.'' See 40 CFR
51.308(e)(2). In short, the SO₂ program described in the
regional haze rule, as further defined by the Annex, does not impose
controls on specific sources but rather ensures that greater reasonable
progress is made than would be through installation of source specific
controls on the BART sources. The regional haze rule accordingly
authorizes States to achieve improvements in visibility through the
most cost-effective measures available.
The American Corn Growers court decision did not address the
provisions in the regional haze rule allowing States to adopt a trading
program or other alternative measures in place of source specific
control measures for BART sources. The EPA finds nothing in the court's
decision that would invalidate the trading program alternative to BART,
as provided for in 40 CFR 51.308(e)(2). In the preamble to the regional
haze rule, EPA sets forth the basis for its decision to allow States
this flexibility and describes the process for States to make a showing
that the alternative measures provide for greater reasonable progress.
Significantly, nothing in the D.C. Circuit's opinion suggests that such
an alternative is in conflict with the requirements of the visibility
provisions of the CAA. An approach that allows States to adopt
alternative measures in lieu of BART fully comports with the court's
view of the States' broad authority in this area. Accordingly, the
Annex meets the requirements set out in 40 CFR 51.309(f), and EPA
believes that it may approve the proposed revisions to the regional
haze rule incorporating the emission reduction milestones and other
measures set forth in the Annex.
2. Whether the December 31, 2003 SIP Deadline Should Be Extended
Under 40 CFR 51.309 of the regional haze rule, SIPs for the
optional program for the nine Western States are due by December 31,
2003. The EPA received a number of comments on the proposed rule with
respect to this deadline. Four commenters, including the State of
Colorado and three industry trade

[[Page 33768]]

groups, requested that EPA extend the deadline for SIPs under 40 CFR
51.309. One commenter, representing an environmental organization,
recommended that this deadline should not change.
The primary argument of those recommending an extension of the
December 31, 2003 deadline, is that the American Corn Growers decision
creates additional uncertainty for States deciding whether to submit
regional haze SIPs under 40 CFR 51.309 or 40 CFR 51.308. Some
commenters requested that EPA extend the deadline by the amount of time
it takes to resolve the remanded portions of the regional haze rule.
The environmental group commenter opposed to the extension stated that
there is no legal or policy basis for an extension because the deadline
is required by the rule. In addition, this commenter noted that States
have had several years to prepare SIPs under 40 CFR 51.309, and that
the market-based alternative to BART is unaffected by the court
decision. Finally, this commenter believed that delays in the SIP
submittals could undermine EPA's finding that the 40 CFR 51.309 program
constitutes greater reasonable progress than BART.
In the final rule, EPA retains the December 31, 2003 deadline for a
number of reasons. First, as noted above, EPA does not believe that the
American Corn Growers decision affects the WRAP States' ability to move
forward in implementing 40 CFR 51.309. While the court decision may
affect a State's decision on whether to pursue the optional program
under 40 CFR 51.309, EPA does not believe that this is an adequate
justification for delaying the program. Second, EPA believes that the
2003 deadline is a fundamental element of the overall optional strategy
provided by 40 CFR 51.309. The strategy was supportable under the
regional haze rule in large part because it was an early strategy that
would be in place well before SIPs under 40 CFR 51.308. The fact that
it was received early and contained comprehensive strategies was an
important part of the rationale for its acceptance. The EPA believes
that the longer the strategy is delayed in its implementation, the less
valid this rationale becomes.
3. Procedural Issues
One commenter stated that EPA cannot approve the Annex because of
procedural flaws related to 40 CFR 51.309(f)(1) of the regional haze
rule. The commenter asserted that EPA's rulemaking to approve the Annex
is procedurally flawed because EPA did not publish the Annex upon its
receipt. Additionally, the commenter notes that EPA did not amend the
regional haze rule within 1 year after receipt of the Annex.
The EPA disagrees with the assertions that this rulemaking is
procedurally flawed. The EPA published a Notice of Availability in the
Federal Register for the Annex on November 15, 2000 (65 FR 68999),
indicating where the Annex could be found on EPA's Web site. The
commenter is correct that EPA established a deadline for itself of 1
year for the Agency to incorporate the provisions of the Annex if EPA
found that the Annex met the requirements of the rule. Although the
statement that EPA ``will act'' within 1 year signaled EPA's intentions
to act within that time period, nothing in the regional haze rule
precludes EPA from acting after this self-imposed deadline. In
particular, action within the 1-year deadline should not be interpreted
as a prerequisite for approving the Annex or for incorporating the
Annex into the regional haze rule. It is clear from the commenter's
statements, however, that the statement that EPA will act within 1 year
has created confusion as to the meaning of the provision. The EPA is
clarifying this provision by removing the phrase ``1 year'' from
section 309(f)(3).

B. Milestones

A central feature of the program in the WRAP annex, and in EPA's
proposed rule, is a set of emissions milestones for SO2 from stationary
sources for the time period between 2003 and 2018. In the proposed
rule, EPA included the Annex milestones. In the final rule, EPA
includes the same milestones as proposed.
In addition, the proposed rule included specific language to allow
for future adjustments to the milestones. In the Annex, the WRAP
described a limited set of future circumstances that would necessitate
adjustments to the milestones. For each of these circumstances, the
Annex included a detailed description of how the milestone would be
adjusted, including a discussion of the administrative process for
making each adjustment. In the proposed rule, EPA included regulatory
language for each adjustment, closely following the provisions of the
Annex. In the final rule, EPA has made a few changes to the adjustments
based upon comments received.
In this unit of the preamble, we discuss comments received related
to the milestones and the adjustments.
1. Whether Milestones Satisfy Requirements in the Regional Haze Rule
Proposed rule. In the proposal, EPA indicated its agreement with
the WRAP's conclusion that the emissions milestones meet the
requirements of the CAA and the regional haze rule. The EPA devoted a
significant portion of the preamble of the proposed rule to a
discussion of its rationale for this proposed finding, (67 FR 30420-
30426). In this discussion, EPA concluded that the WRAP's program for
SO2 was appropriate in lieu of source specific BART limits because the
milestone for the year 2018 provided for ``greater reasonable
progress'' in visibility improvement than WRAP States would obtain by
implementing the requirement for source-specific BART. In addition, the
preamble to the proposal discusses EPA's finding that the milestones
for the years between 2003 and 2017 provide for ``steady and
continuing'' progress.
With respect to EPA's findings on BART, the preamble discussion for
the proposed rule focused largely on the demonstration provided by the
WRAP in Attachment C of the Annex. The EPA noted the WRAP used the
following procedure to identify the year 2018 milestone:
? Developed an estimate of baseline SO2 emissions for the
year 2018, (i.e., the predicted SO2 emissions in the year 2018 in the
absence of a program to reduce SO₂ emissions);
? Developed a list of BART-eligible sources in the region;
? Developed an estimate of the emissions reductions that BART
sources could achieve, and
? Selected a year 2018 milestone that reduces the baseline
emissions by an amount that would achieve greater reasonable progress
in improving visibility than by requiring each BART-eligible source to
install BART.
In the proposal, EPA discussed the data and methods relied on by
the WRAP for each of these steps. The EPA agreed with the conclusion
reached by the WRAP that the 2018 milestone meets the requirements of
the regional haze rule, taking into account the uncertainties inherent
in the calculations of predicted emissions in 2018.
Public Comments. Public comments, with one exception, were
supportive of EPA's finding that the year 2018 milestone represented
``greater reasonable progress'' than BART. One commenter, representing
the trucking industry, disagreed with this finding, citing a number of
areas where it believed that the demonstration was lacking or
inadequate.

[[Page 33769]]

The WRAP commented that EPA's preamble discussion did not
completely capture the scope and methodology of the year 2018 milestone
decision. In their comments, the WRAP agreed that EPA had correctly
described the method the WRAP used to determine that the program
achieved greater reasonable progress than BART. However, the WRAP's
comments stress that while the milestones were informed by these
calculations, the milestones were negotiated numbers reflecting a
broader view of the backstop trading program and the relevant factors
in the CAA. In addition, the WRAP notes that individual elements of the
calculations do not represent a consensus position in isolation from
the balanced package in the Annex.
The commenter from the trucking industry was critical of EPA's
acceptance of the year 2018 milestones. The commenter noted that in the
preamble EPA appeared to have concerns with: (1) How the WRAP
identified BART-eligible sources, (2) how the WRAP calculated emissions
reductions from those sources, and (3) the WRAP's inclusion of the
35,000 tons for ``headroom and uncertainty.'' This commenter believed
that taken overall, EPA should have considered the WRAP's milestone for
year 2018 to be deficient. The commenter was also critical of the
provision for a backstop trading program, arguing that such a program
would allow for emissions reductions far away from the Colorado Plateau
to be substituted for more effective reductions at a closer distance.
The comments, with one exception, supported EPA's proposed
conclusion that the milestones for the years 2003 through 2017
represented ``steady and continuing'' progress. Comments from the
trucking industry were critical of this finding. In their view, the
milestones do not provide for steady and continuing progress because
some of the early year milestones exceed year 2000 actual emissions
levels.
Final rule. The final rule retains the milestones contained in the
proposed rule. The EPA continues to believe that the milestones provide
for ``greater reasonable progress than BART'' and for ``steady and
continuing progress.'' The EPA disagrees with comments that the
milestones are deficient in this regard. The EPA agrees with
stakeholders that it is a critical consideration that the WRAP's
milestones provide a ``cap'' on emissions which may not be exceeded.
Any program providing for case-by-case controls on a specific set of
sources does not establish such a ``cap'' for the region. Moreover,
this cap applies to a population of sources that includes all sources
in the region emitting more than 100 tons of SO₂, which is a
much broader population than if only the BART-eligible sources were
included. The EPA continues to conclude that the WRAP milestones are
reasonable in light of the inherent uncertainties that exist in any
forecast to the year 2018. Modeling results showed predicted visibility
improvements equivalent to, or greater than, those that would result
from a ``command and control'' scenario.
The EPA disagrees with comments that the milestones cannot be
considered to provide for ``steady and continuing'' reductions if
actual emissions were allowed to increase in the early years. As noted
in the proposal, EPA believes that the WRAP appropriately used the
GCVTC goal of a 13 percent reduction in emissions between 1990 and 2000
as a starting point or frame of reference, rather than an estimate of
actual emissions for the year 2000. Given that a greater than expected
degree of reduction has already occurred, EPA agrees that the region
should not be effectively penalized for achieving early reductions in
emissions.
2. Adjustments for States and Tribes That Choose Not To Participate
Proposed rule. When developing the Annex, the WRAP understood that
some States and Tribes may choose not to participate in the optional
program provided by 40 CFR 51.309. Thus, the WRAP provided to EPA
individual opt-out amounts for each State and Tribe and for each year
from 2003 to 2018. These opt-out amounts represented the amount of
emissions that would be deducted from the milestones for each State and
Tribe that does not participate. The EPA included a table in the
proposed rule (67 FR 30446, May 6, 2002) that shows these opt-out
amounts for each State and Tribe. The proposed rule noted, as the WRAP
recommended, that the emissions amounts budgeted in this table are only
for the purpose of determining the milestones at the beginning of the
program if some States and Tribes choose not to participate. The EPA
cautioned that the amounts budgeted to each State and Tribe in this
table are not necessarily the amounts that will be allocated to sources
within the relevant State's or Tribe's jurisdiction if a trading
program is triggered.
The proposal described the process by which the milestones would be
adjusted to take into account the individual State and tribal opt-out
amounts. For States, SIPs for all participating States are due by the
December 31, 2003 deadline. Accordingly, EPA assumed in the proposal
that after this deadline has passed it will be known which States are
participating and which are not. Thus, the proposal called for SIPs to
provide for deducting the State-specific amounts in Table 2 (67 FR
30446, May 6, 2002) for ``opt-out States'' from the amounts in Table 1
(67 FR 30425, May 6, 2002) at the outset of the program. For Tribes,
the proposed rule provides flexibility for opting into the program
after the 2003 SIP submission deadline. Under the proposal, for Tribes
that have not opted into the program by the 2003 deadline, the amounts
in Table 2 (67 FR 30446, May 6, 2002) would be deducted from the
amounts in Table 1 at the outset of the program. For Tribes that opt
into the program at a later date, the proposal required these amounts
to be automatically added to the amounts in Table 1 (67 FR 30425, May
6, 2002), beginning with the first year after a TIP implementing 40 CFR
51.309 is approved by EPA.
In the proposal, EPA stated that for the program under 40 CFR
51.309 to achieve the WRAP and GCVTC objectives, a sufficient number of
States must participate in the program. The EPA proposed to defer to
the WRAP's judgment on the issue of how many States would constitute a
``critical mass'' for the program, and we requested comment on this
issue.
Public Comments. A few comments were received on issues related to
the proposed opt-out amounts and discussion.
Two commenters agreed with EPA's clarification that the opt-out
amounts did not necessarily represent the amount of allocations that a
State's or Tribe's sources would receive if the backstop trading
program were triggered. One commenter recommended that the State opt-
out amounts should be treated as the amount of allocations for a given
State, because: (1) The opt-out amounts represent the best estimate of
emissions reductions for the BART-eligible sources in each State or
Tribe, and (2) inclusion of the tables may create a perception that any
State that issues fewer allocations than the opt-out amounts is
treating the sources within the State inequitably.
Several commenters agreed with EPA's recommendation to defer
judgments on ``critical mass'' issues to the WRAP. One environmental
group commenter recommended that, in evaluating whether there are
enough States and Tribes participating in 40 CFR 51.309, EPA must
thoroughly consider the extent to which the SO₂ declining
cap will effectively prevent

[[Page 33770]]

degradation from the visibility impairing emissions from new source
growth across the region.
Subsequent to the comment period, the Western States Air Resources
Council (WESTAR) Model Rule/MOU Working Group noted \4\ that as States
and Tribes follow their process for adopting SIPs and TIPs under 40 CFR
51.309, the States and Tribes will not necessarily be aware of which
other States and Tribes will choose to participate in the program.
Accordingly, the WESTAR Working Group believed that States and Tribes
would need to include all of Table 2 and calculation procedures in
their SIP/TIP submittals, such that the SIP/TIP submittal could account
for all possibilities of participation by other States and Tribes.
Further, the WESTAR Working Group noted that in the initial years of
the program, EPA may not have approved the SIP for all participating
States before the date of the annual determination of whether the
milestone is exceeded. Lastly, Tribes are not required to submit a TIP
by 2003 and can choose to participate in the program at anytime.
Accordingly, the WESTAR Working Group recommended that EPA clarify
whether the comparison of emissions to the milestones would take into
account all States that have submitted SIPs, or only those with
approved SIPs as of the date of the determination.
---------------------------------------------------------------------------

\4\ See memorandum from Lily Wong, EPA Region 9, to Docket OAR-
2002-0076. March 2003.
---------------------------------------------------------------------------

Final Rule. The final rule retains the opt-out tables from the
proposal. The EPA continues to agree with the WRAP that the opt-out
tables do not necessarily represent the amounts that would be allocated
to a given State or Tribe under a trading program. The WRAP has
developed a detailed methodology for determining and establishing
trading program allocations for each source. This methodology is
described in detail in sections II.D and III.D.7 of the Annex. It is
this methodology that will result in allocations should the trading
program be needed. The EPA believes that establishing the amounts in
the opt-out tables as the amounts for trading program allocations would
unnecessarily constrain the WRAP from implementing its methodology.
The EPA continues to believe, as discussed in the proposal, that
judgments on the issue of ``critical mass'' are best left to the WRAP.
Regarding the comment that the SO₂ declining cap may not
effectively prevent degradation of visibility from new sources
throughout the region if not enough States and Tribes participate, EPA
notes that visibility progress issues as a general matter will need to
be addressed in SIPs submitted under 40 CFR 51.308. Accordingly, EPA
does not believe that this comment warrants any change to the proposed
rule language.
The EPA agrees with the WESTAR Working Group that States and Tribes
submitting their SIPs and TIPs under 40 CFR 51.309 should include Table
2 and the calculation procedures in their SIP or TIP regulations in
order to account for all possibilities of participation by other States
and Tribes. The EPA also agrees with the WESTAR Working Group
recommendation to add to the final rule clarification that the opt-out
adjustment under 40 CFR 51.309(h)(1)(i) will include the States and
Tribes for which SIPs and TIPs have not been approved by EPA as of the
date of the determination.
3. Adjustments for Smelter Operations
Proposed rule. At the time the WRAP was submitted to EPA, two
copper smelters in the region, the Phelps Dodge Hidalgo smelter and the
BHP San Manuel smelter, had suspended operations. In the Annex, the
WRAP recommended that the program specifically account for the
possibility that these smelters could come back on line should economic
conditions change. Accordingly, the Annex contained a specific set of
complex decision criteria to adjust the milestones in the future for a
number of specific scenarios related to the two smelters. The EPA in
the proposal attempted to clarify the WRAP's adjustments with a series
of ``if-then'' tables, and we requested comment on whether these tables
accurately reflect the decision criteria in the Annex.
Public comments. Commenters agreed that the EPA's proposed table
accurately reflected the Annex. Two commenters noted that subsequent to
the development of the Annex, a third smelter, the Phelps Dodge Chino
smelter, suspended operations. These two commenters recommended that
the regional haze rule should recognize this without reopening the
negotiated agreement on the milestones. Further, the commenters
recommended that the regional haze rule should provide some assurance
that when the Chino Smelter comes back on line again, its 16,000
allowances will be available to it without prematurely triggering the
program.
Final rule. The final rule retains the smelter adjustment tables as
proposed. The EPA considered whether the final rule should contain
contingencies for the Chino Smelter similar to those for Hidalgo and
San Manuel. For example, one approach would be to deduct the amount
from the Chino smelter from the milestones and to develop a series of
adjustments to account for the possibility that it may come back on
line, similar to the approach for the other two smelters. The EPA has
not taken this approach, because of the complexity that would be added
to the adjustments, and because this scenario was not specifically
discussed as the WRAP was negotiating the Annex.
4. Adjustments for Utility Boilers Opting To Use More Refined Flow Rate
Methods
Proposed rule. The proposed rule requested comment on the specific
method and process for adjusting the milestones for sources using a
refined method for measuring stack flow rates. This was seen as a
significant issue, because the flow rate affects the determination of
emissions rate from a continuous emissions monitoring system (CEMS).
In 1999, EPA adopted revisions to EPA's Reference Method 2, the
standard method for measuring stack flow rates (64 FR 26484, May 14,
1999). The revisions provided three new procedures: Methods 2F, 2G, and
2H. The new procedures, if used for a given source, allow for a more
detailed assessment of the stack flow rates to provide more accurate
flow rate results. The changes addressed concerns raised by utilities
that Reference Method 2 may over-estimate flow in certain cases, such
as when the flow is not going straight up the stack. If the flow rate
is over-estimated, this would also lead to the overestimation of
SO₂ emissions because the facility's continuous flow rate
monitor is calibrated to correspond to the flow test method. Facilities
subject to the acid rain program under title IV of the CAA must perform
these flow tests at least once a year to determine the accuracy of
their continuous flow monitors. Facilities have an option to use either
the old Method 2, or one or more of the new methods.
When the WRAP made its emission projections for purposes of
developing the milestones, the new methods were not yet in place.
Accordingly, if a source owner chooses to use the new flow methods, and
if as expected it results in a reduced flow rate for the same level of
operation, then there will be a corresponding decrease in the measured
emissions. In the preamble to the proposal, EPA agreed with the WRAP
that this would create the possibility of a ``paper'' decrease relative
to the milestone if the milestone reflects the old method. As discussed
in section III.A.5 of the Annex, the WRAP notes

[[Page 33771]]

that a protocol is needed for adjusting the milestones to reflect
changes in the baseline emission for utility boilers any time that a
source opts to change its CEMs method. The WRAP addressed this issue in
greater detail in a supplemental paper entitled ``Emissions Tracking
Prior to Triggering the Backstop Trading Program,'' which was submitted
to EPA on June 1, 2001.
The WRAP has identified three possible technical procedures for
developing an ``adjustment factor'' for the new flow method. The EPA
agrees that any of these three procedures would be acceptable. Under
the first procedure, there would be a side-by-side comparison of flow
rates using both the new and the old flow reference methods. For
example, if the new method measured 760,000 cubic feet per minute, and
the old method measured 800,000 cubic feet per minute, the adjustment
factor would be (760,000/800,000), or 0.95. The second method would use
annual average heat rate, which is reported to the Energy Information
Administration (EIA), as a surrogate for the flow rate. Under this
method, the flow adjustment factor would be calculated using the annual
average heat rate using acid rain heat input data (MMBtu) and total
generation (MWHrs)reported to EIA, calculated as the following ratio:

[GRAPHIC]
[TIFF OMITTED]
TR05JN03.004

The third method would use data reported to EPA's acid rain program.
Under this method, there would be a comparison of the standard cubic
feet per minute (CFM) per megawatt(MW) before and after the new flow
reference method based on CEMs data, calculated as the following ratio:

[GRAPHIC]
[TIFF OMITTED]
TR05JN03.005

In the supplemental information paper, the WRAP identified three
possible approaches for using the adjustment factors for making a
correct comparison of emissions to the milestones. The WRAP did not
indicate a preference for any single approach. The three options are as
follows:
(a) Using one of the options described above for determining the
flow adjustment factor, revise the source's baseline emissions forecast
for 2003, 2008 and 2013. For each year following the adoption of the
new flow reference method through 2017, reduce the interim milestone by
the corresponding amount. To illustrate how this approach would work,
the proposal used an example where the adjustment factor for a given
stack is 0.95. As discussed above, this means that the emissions with
the new method is deemed to be 0.95 times the emissions with the old
method. For this example, for option (a) this means that the previous
baseline emissions for that source would be multiplied by 0.95. The
annual compliance check would then be done by comparing regional
SO₂ emissions (unadjusted, as reported to EPA's acid rain
program) to the revised milestone.
(b) Using one of the options described above for determining the
flow adjustment factor, revise the source's reported emissions on an
annual basis, and do not adjust the milestone. For the example noted
above, under option (b) the emissions reported to EPA's acid rain
program would be adjusted upward by multiplying the amount times (1/
0.95). For each year following the adoption of the new flow reference
method through 2017, the annual compliance check would be done by
comparing the adjusted regional SO₂ emissions to the
unadjusted milestones.
(c) Use a combination of the two approaches. Under this approach,
interim milestones would be adjusted only every 5 years (using option
(a) above) and the reported emissions for additional sources making the
change in the intervening years are adjusted for comparison to the
milestones (using option (b) above).
In the proposal, EPA stated that any one of these three approaches
would be acceptable, but that a specific approach needs to be selected
for the final rule. The EPA also noted its view that these adjustments
to the milestone or to the reported emissions would not necessarily
require SIP or TIP revisions, because the precise method for making the
adjustment, and the publicly available data elements that will be used
for making the adjustment, could be specifically identified in the
final rule.
Public comments. Commenters generally agreed with EPA's assessment
that any of the three approaches for determining an adjustment factor
would be acceptable.
The WRAP noted in its comments that the 2018 milestone already
included assumptions about the effect of this flow rate adjustment. The
WRAP recognized that the preamble to the rule implies this distinction
but the WRAP recommended that this be reflected in the regulatory text
as well.
Regarding the three options related to the process for using the
adjustment factors, the WRAP recommended option (c) in its comments.
That is, the milestones would be adjusted every 5 years with the
periodic SIP revisions, and adjustments would be made to the reported
emissions for the interim period. Other commenters, while supporting
the concept of adjusting the milestones with the SIP revisions, did not
address whether the reported emissions should be adjusted in the
interim period. The EPA infers from these comments that these
commenters are likely recommending that emission adjustments need not
be made in the interim period.
Final rule. The final rule includes regulatory language agreeing
with the WRAP's recommendations regarding the flow rate adjustment.
States are required in the SIPs to provide for reporting of
``adjusted'' emission rates pending an update to the milestones, which
would occur at the time of the plan revisions required under 40 CFR
51.309(d)(10).
5. Adjustments for Enforcement Actions
Proposed rule. The proposed rule included a provision in the Annex
for adjustments to the milestones for ``illegal emissions.'' In
developing the milestones, the WRAP identified the baseline emissions
for each source during the base year, and ``forecasted'' emissions for
the source during the 2003 to 2018 time period, taking into
consideration growth, utilization, retirement, and the absence of any
additional requirements. The

[[Page 33772]]

compilation of these source-specific baseline emissions resulted in the
baseline emission inventory totals, which serve as a ``starting point''
for measuring progress from the program. The WRAP recognized in the
Annex that if a source was in violation of applicable requirements
during the base year when its emissions were determined, the baseline
emissions during 2003-2018 would be overestimated.
In the proposal, EPA included this provision with general
regulatory language providing for the adjustment of baseline emissions
for illegal emissions, and we requested comment on possible ways of
clarifying the provision in the final rule. The EPA noted in the
preamble to the proposal that there are instances where it may be
unclear whether under the approach in the Annex, emissions would be
considered as ``illegal,'' for example where:

--Disputing parties resolve their differences through (1) A consent
decree that is either entered through Federal or State courts, or (2)
an administrative enforcement proceeding by either a State, Tribe, or
EPA; or
--A State disagrees with EPA or a citizens' group over whether or not a
particular alleged violation occurred.

The EPA requested comment on how these situations should affect the
milestones. Specifically, EPA requested comment on the following
possible options:
Option 1. Under this option, the rule would require that if there
is any resolution \5\ to alleged illegal SO₂ emissions, then
all of the reductions resulting from the resolution would be considered
as ``illegal emissions.'' Taking into account these reductions, the
State or Tribe would then ``re-forecast'' the source's emissions and
its effect on the milestone. ``Re-forecast'' means to re-apply the
forecasting process, that is the process the WRAP originally used to
project future emissions and develop the milestones, using the
corrected baseline SO₂ emissions for the affected source. A
comparison of this re-forecast of emissions with the previous forecast
of emissions would determine the amount of the adjustment for each year
up through 2018.
---------------------------------------------------------------------------

\5\ For option 1, the proposal used the broad term
``resolution'' to refer to all types of emissions reductions
resulting from enforcement actions.
---------------------------------------------------------------------------

Option 2. Under this option, the rule would allow for case-by-case
judgments on the appropriateness of adjusting baseline emissions
following resolution of allegations of illegal SO₂
emissions. The rule would, however, clarify the entity responsible for
deciding whether a case involves illegal emissions warranting an
adjustment to the milestones. Under this option, we requested comment
on which entity should be responsible for this determination, that is,
whether the rule should clarify whether the parties entering into a
settlement, the States, the Tribes, the WRAP, or EPA would determine
the settlement's impact on the milestones.
The EPA noted that under any of the proposed options, adjustments
to the milestone would occur only after the source in the enforcement
case has achieved the requisite reduction of SO₂ emissions.
Consequently, adjustments to the milestones would have no effect on any
other facility's operation because all of the reductions would be
achieved by the source subject to the enforcement action.
The EPA also solicited comments in the proposal on how to treat any
extra SO₂ emissions reductions that a facility might achieve
as a result of a settlement. The EPA will often allow a company that is
settling through a consent decree or settlement agreement to perform a
supplementary environmental project and allow the expenditures on this
project to partially offset penalties that the company would otherwise
be assessed. The EPA noted in the preamble to the proposal that if the
milestones are not reduced by the amount of extra emissions reductions
from this type of project, then the environment may see little benefit,
since another company would be allowed more SO₂ emissions.
Thus, in the proposal, EPA sought input on whether these ``extra''
emissions reductions should be considered part of this ``illegal
emission'' adjustment and factored into a recalculation of the
milestone.
Public Comments. The EPA received a number of comments on this
provision.
A few commenters recommended that this provision be deleted from
the rule entirely. Some commenters criticized this provision because it
would lower the milestones and reduce the potential pool of allowances
under the backstop trading program. Accordingly, these commenters
believed that the provision would serve to punish the ``non-violators''
in the program at large. Another commenter believed that any adjustment
for ``illegal emissions'' is not appropriate unless it has been
demonstrated that the provision would improve visibility.
Other commenters supported the provision but recommended that the
term ``adjustments for illegal emissions'' be replaced with the term
``adjustments due to enforcement actions.'' Some commenters requested
clarification on whether these adjustments would only apply to
enforcement actions that would have affected the assumptions used in
baseline emissions projections. One commenter recommended that the
proposed adjustment for illegal emissions should apply only to
emissions reductions resulting from consent decrees or administrative
orders where the EPA or authorized State has commenced the enforcement
action, and not where emissions reductions arise out of ``voluntary
settlements'' initiated by the company.
Regarding the two options for clarifying this provision, the WRAP
and other commenters recommended the second option. These commenters
noted that case-by-case judgments will be needed to determine whether
and the degree to which the milestones should be adjusted. Responding
to EPA's request to clarify the entity responsible for calculating the
adjustment, the WRAP recommended that the entity responsible should be
the parties entering into a settlement, in conjunction with the
relevant State or Tribe. The commenters envisioned that EPA would have
an oversight role in the SIP approval process to determine that the
adjustment agreed to through the enforcement process is properly
reflected in the milestone adjustment.
The WRAP comments recommended that specific language be added to
the final rule requiring States and Tribes to document, and include in
the administrative record,\6\ a discussion of whether any adjustments
to the milestones are appropriate based upon administrative or judicial
enforcement actions, and to include an explanation of the basis for the
State's or Tribe's decision.
---------------------------------------------------------------------------

\6\ The EPA interprets the term ``administrative record'' in the
WRAP's comments to refer to information made available in support of
the State's or Tribe's implementation plan submittal to EPA under 40
CFR 51.309(d)(10).
---------------------------------------------------------------------------

Regarding EPA's request for comment on how ``extra'' emissions
reductions in enforcement actions should be treated, the WRAP and other
commenters believed that these extra emissions reductions should also
be treated on a case-by-case basis. The WRAP commenters recommended
that EPA include a provision in the rule requiring States or Tribes to
address in the periodic SIP revision whether SO₂ allowances
should be retired or confiscated \7\ as a result of an

[[Page 33773]]

administrative or judicial enforcement action and the rationale for the
State's or Tribe's decision.
---------------------------------------------------------------------------

\7\ This comment responded to EPA's question on how the
milestones should be adjusted with a recommendation on whether
allowances should be retired or confiscated. The EPA interprets this
comment as addressing both the milestones and the allowances, which
add up to the milestones.
---------------------------------------------------------------------------

Final rule. The EPA has retained this provision in the final rule.
The EPA agrees with the WRAP that this provision is necessary to ensure
that the ``baseline,'' the starting point for the milestone
calculations, reflects compliance with regulations. So long as the
reductions to the milestones do not occur before the date a source
comes back into compliance, EPA does not believe that this adjustment
has the effect of ``penalizing'' the other sources. Regarding the
comment that this provision is deficient due to a lack of demonstrated
visibility improvements, EPA believes that the WRAP was not required to
make a demonstration of the visibility improvements of this specific
provision, which is part of the WRAP's overall program for
SO₂ reductions from stationary sources.
The final rule reflects EPA's agreement with recommendations of
commenters to replace the term ``adjustments for illegal emissions''
with the term ``adjustments due to enforcement actions.'' The EPA
agrees that this terminology better encompasses the types of situations
that the provision would address. The EPA interprets the term
``enforcement action'' in these comments to be used broadly to include
any type of enforcement action including administrative orders,
settlements, consent decrees, court orders, and compliance schedules in
title V permits.
As recommended by some commenters, we have added language
consistent with Option 2. The EPA agrees with commenters that there
will be case-by-case considerations in enforcement actions that could
affect whether an adjustment to the milestones is appropriate. The EPA
generally agrees with comments suggesting that the entity responsible
for calculating the amount of the adjustment should be the parties
entering into the settlement, and that where those parties do not
include the State or Tribe, the State or Tribe should be consulted to
assure that correct assumptions are used for the adjustment. Further,
EPA believes that if the parties involved in the action are responsible
for recommending the amount of the adjustment, or whether an adjustment
is appropriate, this would allow a source entering a voluntary
settlement to negotiate whether or not an adjustment should be made.
The EPA believes it is useful to clarify a few points regarding
actions where EPA or a citizens' group is the plaintiff in the
enforcement action. Such cases would be brought to the U.S. District
Court. Pursuant to longstanding Department of Justice policy, in any
such case members of the public, including an interested State or
Tribe, would have an opportunity to review and comment on the proposed
consent decree settling the enforcement case. See 28 CFR 50.7. For any
such case before the U.S. District Court, EPA intends to provide the
State or Tribe an opportunity to review and comment on the proposed
settlement. If a settlement or order from the U.S. District Court is
issued and contains an adjustment to the milestones, such a settlement
or order from the court is binding and the State and Tribe would be
required to adjust the milestones as directed by the court. For
instances where such court actions are silent on reforecasting the
baseline emissions and adjusting the milestones, EPA believes the State
or Tribe must determine whether such a reforecast and adjustment is
appropriate.
The EPA agrees with the WRAP's recommendations that the State or
Tribe should provide documentation of these adjustments for enforcement
cases in the administrative record for the 5-year SIP or TIP revision.
Specifically, the rule requires the following documentation:

--Identification of each source that has reduced SO₂
emissions under an administrative or judicial enforcement action,
--Whether the milestones were adjusted in response to the reduction in
SO₂ emissions under the enforcement action,
--The rationale for the State's or Tribe's decision on the milestone
adjustment,
--If extra SO₂ emissions reductions (over and above those
reductions needed for compliance) were part of the settlement, whether
those reductions resulted in any adjustment to the milestones or
allowance allocations.

C. Annual Process for Determining Whether a Trading Program Is
Triggered

The proposed rule describes an annual process to determine whether
the emissions from participating States exceed the milestones and thus
trigger the backstop trading program. This proposed process contained a
number of deadlines for steps in the annual process, and contained
special provisions for certain years. Only a few comments were received
on these provisions.
1. Date for the Annual Determination
Proposed rule. The proposed rule contained annual deadlines for
determining whether the milestone is exceeded. This proposed schedule
called for a draft determination not later than December 31 of each
year, beginning with a draft determination for the year 2003 by
December 31, 2004. The proposed schedule called for a final
determination, taking into account public comments, by the end of the
following March, beginning with a final determination by March 31, 2005
for calendar year 2003.
Public comments. In their comments on the proposal, the WRAP
recommended that this annual deadline be extended by 1 year. For
example, pursuant to this recommendation, EPA would extend the deadline
for the final determination for calendar year 2003 from March 31, 2005
to March 31, 2006. Because certain States or Tribes may have more
numerous or complex sources, the WRAP believed that additional time may
be needed to collect, validate, and analyze emissions data. In support
of this request for additional time, the WRAP notes that adding time
for the annual determination would not affect the timing for
implementing the backstop trading program. For example, even if the
annual determination for calendar year 2003 were not made until 2006,
this would not affect the date for the onset of the trading program. If
the calendar year 2003 milestone were triggered, sources would still
need to hold allowances for emissions in calendar year 2009.
Final rule. In the final rule, EPA has retained the deadline for
the annual determination as proposed. The EPA recognizes that some
States within the region may have more complex technical and
administrative procedures for collecting annual emissions inventory
data. The EPA's current judgment is that for States who have indicated
possible participation in the program under 40 CFR 51.309, these
obstacles do not exist. The EPA believes that it is not desirable to
move the deadline forward in time unless it is absolutely necessary.
While, as the WRAP correctly notes, this would not affect the deadlines
for implementation of the backstop trading program, it would have the
effect of reducing the amount of time for planning and implementation
if the trading program were triggered. If the States needing more time
do, in fact, decide to participate in the program, EPA believes that
the regional haze rule could be

[[Page 33774]]

revised at a later date to reflect this need.
2. Option for Triggering the Trading Program in the Year 2013
Proposed rule. The proposed rule provided States and Tribes with
the option at a specific point in time to consider emission projections
for the year 2018, in addition to actual emissions inventory reports
for previous years in deciding whether or not to trigger the backstop
market trading program. For this option, if States and Tribes so
choose, the emissions inventory reports for the year 2012--which are
collected in calendar year 2013--may also contain emissions projections
for the year 2018. If the projections indicate that the year 2018
milestone will be exceeded, then under the proposal, States and Tribes
may choose to implement the market trading program beginning in the
year 2018.
Public comments. One commenter representing Western business
interests recommended that the WRAP develop, and the final rule
contain, specific criteria for the option of triggering the trading
program in 2013. The commenter recommended that, for example, the final
rule should contain criteria for a specific emissions level in 2013, or
a specific level of emissions reductions yet to be achieved between
2013 and 2018.
Final rule. In the final rule, EPA has retained the 2013 option as
proposed. The EPA believes that the intent of this provision in the
Annex is to provide broad flexibility to the States and Tribes for
deciding whether this 2013 option should be exercised. The EPA does not
believe that it is desirable or feasible to develop specific decision
criteria for this purpose in the final rule.
3. Requirements for Recordkeeping
Proposed rule. The proposal, in 40 CFR 51.309(h)(iii), included a
requirement for the retention of records relevant to the annual
comparison of SO₂ emissions to the milestones for at least 5
years from the establishment of the record. For records that provided
the basis for an adjustment to the milestone, the proposed rule
required retention of records for at least 5 years after the date of
the SIP revision.
Final rule. No public comments were received on this issue during
the comment period. Following the close of the comment period, however,
the WESTAR model rule working group \8\ questioned whether this
recordkeeping requirement would be adequate in all cases, if EPA's
intent were to retain the records for 5 years after they are relevant
to the annual determination. Given the design of the program, 4 and \1/
4\ years can elapse between the creation of a record and the use of the
record in the annual comparison of regional SO₂ emissions
against the milestone. This is because for all except the first 2 years
of the program, the annual determination is based on a 3-year average
of the regional SO₂ emissions for the preceding 3-year
period. Additionally, the formal comparison with the milestone is not
accomplished until 15 months after the end of this 3-year period. Thus,
close to 5 years can pass from the establishment of a record to its
use. The working group believed that the intent of the recordkeeping
requirement was to maintain relevant records for 5 years after the
determination of whether the milestone was exceeded for a given year,
which could mean that some records relevant to the determination would
be needed for approximately 10 years from the date they were generated.
The EPA agrees that this was the intent of the recordkeeping
requirement in 40 CFR 51.309(h)(iii) of the proposed rule; accordingly,
the final rule extends the time period for the retention of records
from 5 to 10 years.
---------------------------------------------------------------------------

\8\ See note from Lily Wong, EPA Region 9, to docket OAR-2002-
0076, March 2003.
---------------------------------------------------------------------------

D. Requirements for the Backstop Trading Program

A fundamental feature of the Annex is a backstop market trading
program that would be triggered if any annual milestone is exceeded.
The Annex, as required by 40 CFR 51.309(f) of the regional haze rule,
provided documentation and details for the backstop trading program.
Attachment A to the annex was a draft model rule for use by States in
implementing the backstop trading program. In the proposal, EPA
included ten fundamental elements that SIPs under 40 CFR 51.309 must
contain, and the basic requirements for those elements to help guide
EPA's review of the SIPs. The fundamental elements described in the
proposed rule were as follows:
(1) Provisions for the allocation of allowances to each source in
the program;
(2) Emissions quantification protocols;
(3) Provisions for the monitoring, recordkeeping and reporting of
emissions;
(4) Provisions for a centralized system to track allowances and
emissions;
(5) Provisions requiring the identification of an authorized
account representative for each source in the program;
(6) Provisions requiring the account representative to demonstrate
annual compliance with allowances;
(7) Provisions for the process of transferring allowances between
parties;
(8) Provisions describing the ``banking'' of extra emissions
reductions for use in future years, if the implementation plan allows
for banked allowances;
(9) Provisions establishing enforcement penalties for noncompliance
with the trading program; and
(10) Provisions for periodic evaluation of the trading program.

In the proposed rule, EPA included basic requirements for each of
these 10 provisions, and we requested comment on whether we had
addressed each requirement in an appropriate level of detail, and on
whether the substance of the requirement was sufficient to ensure the
integrity of the trading program.
The EPA did not receive any adverse comments regarding the level of
detail of the proposed requirements for the trading program. We did
receive comment on the substance of a few of the provisions that we
discuss in this section of the preamble.
1. Allowances
Proposed rule. The proposed rule required the backstop trading
program to include allowances. An allowance authorizes a source
included within a market trading program to emit one ton of
SO₂ during a given year. At the end of the compliance
period, which is a 12-month period ending with each calendar year, a
source owner's allowances must exceed or equal its annual emissions.
The proposed rule would require States and Tribes to include
initial source-specific allowances for each source included within the
program. Under the proposal, these initial allocations must specify the
tons per year allocated for each source for each year between 2009 and
2018. The Annex contains a detailed discussion of the methodology for
distributing allowances to sources. The EPA proposed, however, that the
details of this methodology were not needed in EPA's rule. If those
allowances add up to the appropriate regional total, EPA proposed that
the objectives of the program would be met. The EPA proposed one
exception to this approach, a requirement that 20,000 tons of
allowances be reserved as a ``set-aside'' for use by Tribes.
Public comments. The EPA received comments on three issues related
to allowances. First, the WRAP and one electric utility commenter

[[Page 33775]]

recommended that the proposed rule be modified such that initial SIPs
would not be required to have source-specific amounts for each source.
Instead, these commenters recommended that EPA allow the initial SIPs
to include a formula that will be used to calculate the allowances when
the program is triggered.
Second, the WRAP and one environmental group commenter recommended
specific regulatory language for reserving a portion of allowances for
renewable energy resources such as wind, solar photovoltaic and solar
thermal technologies, geothermal, landfill gas and biomass
technologies, and hydropower projects meeting Low-impact Hydropower
Institute criteria. This regulatory language consisted of a regulatory
definition of ``eligible energy resource.'' In addition, the
recommendation included specific regulatory language for inclusion in
40 CFR 51.309(h)(4)(i) that would provide ``eligible energy resources''
with 2.5 tons of SO₂ allowances per megawatt of installed
nameplate capacity per year.
Final rule. The EPA has amended the proposed rule as requested by
the WRAP and other commenters. The EPA agrees that a clear and
definitive formula for issuing source-specific allowances is an
acceptable approach. The approach to distributing allowances described
in the Annex provides for adjustments of the allocations over time, for
example providing ``bonus'' allocations for early reductions. Because
the allocations provide for adjustments over time, it is likely that
individual source allocations could change between the date of the 2003
SIPs and the date a trading program would be triggered. Accordingly,
EPA believes that re-calculation of the source-specific allowances when
the program is triggered would be likely in any case. If the program is
triggered, the subsequent SIP revision must include the source-specific
allocations.
The EPA has also incorporated the WRAP's recommended provision
regarding renewable energy credits. Given the WRAP's desire that this
provision be a feature of the backstop trading program, EPA agrees that
regulatory language is needed to ensure that this feature is included
in SIPs. The EPA has incorporated the regulatory language recommended
by the WRAP with two modifications. First, EPA includes only the first
sentence of the WRAP's recommended definition (``Eligible renewable
energy resource, for purposes of 40 CFR 51.309, means electricity
generated by non-nuclear and non-fossil low or no air emission
technologies''). The EPA believes that it is not necessary to include,
and would be difficult to interpret, the WRAP's recommended additional
language limiting the definition to only those technologies ``using
resources that are virtually inexhaustible, reduce haze, and are
environmentally beneficial.'' The EPA agrees with the WRAP that it is
useful to clarify that this definition specifically includes:

--Electricity generated by wind energy technologies;
--Solar photovoltaic and solar thermal technologies;
--Geothermal technologies;
--Technologies based on landfill gas and biomass sources; and
--New low-impacts hydropower that meets the Low-Impact Hydropower
Institute criteria.

Similarly, EPA agrees with the WRAP that it is useful to clarify that
``biomass'' includes agricultural, food and wood wastes, but does not
include biomass from municipal solid waste, black liquor, or treated
wood, and that for purposes of this definition, low-impacts hydropower
does not include pumped storage. At the same time, EPA has concerns
that the various lists in the WRAP's proposed definition may not be
exhaustive, and that it would be preferable that the list be able to
change without necessitating a change to 40 CFR 51.309.
The EPA has also included an amendment to 40 CFR 51.309(h)(4)(i)
which requires that the backstop market trading program include the
WRAP's recommended provision for renewable energy credits. This
amendment requires SIPs under 40 CFR 51.309 to include a provision that
eligible renewable energy resources that begin operation after October
1, 2000 will receive 2.5 tons of SO₂ allowances per megawatt
of installed nameplate capacity per year. The rule also includes
language consistent with the WRAP's recommendation that allowance
allocations for renewable energy resources that begin operation prior
to the program trigger will be retroactive to the time of initial
operation. The EPA believes, however, that it is important for States
to preserve flexibility over time with respect to implementing this
provision. Accordingly, the final rule allows, but does not require,
that implementation plans may provide for an upper limit on the number
of allowances provided for eligible renewable energy resources.
2. Emissions Quantification Protocols
Proposed rule. The proposed rule required that implementation plans
under 40 CFR 51.309 must include specific emissions quantification
protocols, that is, procedures for determining actual emissions. These
procedures will be used to measure, or determine, annual emissions from
each source in the trading program if the trading program is triggered.
The proposed rule also required that States include the necessary
monitoring, recordkeeping, and reporting provisions to measure and
track results.
In the Annex, the WRAP recognized the need to have detailed and
prescribed emission quantification protocols and recommended that the
participating States and Tribes establish such provisions in the SIPs
submitted under 40 CFR 51.309. The Annex describes the WRAP's approach
to monitoring in section II, pages 39-41, in section III, item III.D.3
on page 64, and in Attachment A, Draft Model Rule section C.2.3
Monitoring Requirements, and section C9 Emissions Monitoring. In
particular, the WRAP recognized the need for emission monitoring
protocols which ensure that emissions estimates are accurate and
comparable for participating sources. For the trading program, the
emissions become a tradeable, fungible commodity. Accordingly, it is
important to the integrity of the program to ensure that one ton of
emissions from one source is equivalent to one ton of emissions from
another source.
In the Annex, the WRAP proposed that sources subject to the acid
rain program under title IV of the CAA would continue to follow the
continuous emissions monitoring procedures in the acid rain program,
which appear in 40 CFR part 75. Because continuous emissions monitoring
represents the best available method for determining emissions, EPA
would not require separate emission protocols for these sources as part
of implementing 40 CFR 51.309.
For other categories of sources not covered by part 75, the WRAP in
the Annex recognized the need to develop protocols based upon ``best
available'' monitoring techniques for each source category. In the
proposed rule, for source categories with sources in more than one
State submitting an implementation plan under 40 CFR 51.309, EPA
required each State to use the same protocol. Further, in the proposal,
EPA included criteria for determining the acceptability of these
protocols in the implementation plans. These criteria are the same
criteria listed in section 5.2 and 5.3 of EPA's Economic Incentive
Program (EIP) guidelines. These guidelines state that emission
quantification protocols:

[[Page 33776]]

--Must ensure reliable results, and that they must ensure that repeated
application of the protocol obtains results equivalent to EPA-approved
test methods;
--Must be replicable, that is, the protocol ensures that different
users will obtain the same or equivalent results in calculating the
amount of emissions and/or emissions reductions.

These EIP guidelines also specify that trading programs need to include
monitoring, recordkeeping, and reporting provisions to provide adequate
information for determining a source's compliance with the program.
Adequate monitoring, recordkeeping and reporting procedures have
several key attributes, including representativeness (characteristic of
the source category and available monitoring techniques), reliability,
replicability, frequency (that is, the monitoring is sufficiently
repeated within the compliance period), enforceability (that is, the
monitoring is independently verifiable), and timeliness.
Public comments. Comments on this provision were generally
supportive of the notion that stringent protocols are needed to ensure
the integrity of the ``currency'' for the trading program. Consistent
with this view, one commenter representing electric utilities
recommended that non-utility sources need to employ emissions
quantification protocols that are equivalent to those of electric
utilities. In the WRAP's comments, a few changes to the regulatory
language were recommended. Some comments expressed concerns that the
proposal did not provide enough flexibility in the use of
quantification protocols.
The WRAP comments recommended that the proposal be modified to
state:

For source categories with sources in more than one State
submitting an implementation plan under this section, each State
must use protocols that are ``sufficiently rigorous and comparable
to ensure that emissions in the region are measured in a reliable
and a consistent manner.

The WRAP believed that the terms ``sufficiently rigorous and
comparable'' were preferable to the word requirement of the ``same''
methodology for each State. The WRAP also sought clarification that the
proposed language in 40 CFR 51.309(h)(4)(iii) requiring that ``the
protocols must provide consistent approaches for all sources within a
given source category'' would not limit the WRAP States' and Tribes'
ability to establish different monitoring requirements within source
categories based on established criteria such as the size of an
emission unit. For example, the WRAP comments noted that it may be
appropriate to require the use of a CEMS on a large industrial boiler
while using emission factors for a smaller boiler that is used as a
backup unit.
Finally, the WRAP expressed concerns that this provision should
provide for the use of flexible monitoring options that make sense for
this particular trading program. Because smaller sources are
anticipated to have greater difficulty meeting stringent monitoring
requirements, the WRAP's market trading forum (MTF) is considering
adopting more flexible monitoring provisions for these smaller sources.
For smaller sources, the MTF goals are:

--To provide assurances that the milestone goals will still be met,
--To ensure that data are sound and reliable,
--To obtain data that are consistent with the assumptions of the Annex,
and
--To ensure the integrity of the trading program.

While these MTF discussions are still in the preliminary stages, the
WRAP comments seek assurance from EPA that the final rule will allow
consideration of different approaches.
Another commenter noted that emission quantification protocols are
continually evolving and becoming more refined. This commenter
expressed concerns that if improved protocols, different from those
used to establish the baseline, are used to determine steady and
continuing progress and if the program is triggered, this could have
the effect of penalizing sources for developing and using improved
protocols. This commenter noted that EPA should not create a
disincentive to such innovation. The commenter believed that if the
quantification protocols remain static for SO₂ measurements
until the program is triggered, at which time sources will be required
to implement different reduction programs, then sources will be better
able to adapt to the more precise measurements resulting from new
quantification protocols. This commenter also believed that as a
result, the sources will be able to factor in the need, if any, for
greater reductions resulting from improved quantification protocols.
Final rule. The EPA has retained the language as proposed. The EPA
believes that it is important to retain the requirement that sources in
similar categories use the same method for determining emissions under
the trading program. The EPA wishes to clarify that this does not
preclude the MTF from making distinctions within a given category
regarding the appropriate technique for determining emissions. However,
we believe that it is important that any such distinctions be done
consistently to ensure that the same methods are being used for similar
sources.
The EPA does not believe that the proposed rule discourages
innovation in the development of monitoring techniques. For the ``pre-
trigger'' portion of the program, that is, the time period before a
trading program, the program specifically provides for adjustments to
the milestones to ensure that changes in monitoring techniques are
appropriately considered.
3. Enforcement Penalties
Proposed rule. The proposed rule required that the backstop trading
program include specific enforcement penalties to be applied if the
emissions from a source exceed the allowances held by the source. In
the preamble, EPA noted that the Annex provides for two types of
automatic penalties when excess emissions occur:

--The automatic surrender of two future-year allowances for every ton
of excess emissions, and
--A financial penalty ($5000 per ton, indexed to inflation from the
year 2000) deemed to exceed the expected cost of allowances by a factor
of three to four.

In addition, the proposed rule required that in establishing
enforcement penalties, the State or Tribes must ensure that:

--When emissions from a source in the program exceed the allowances
held by the source, each day of the year is a separate violation, and
--Each ton of excess emissions is a separate violation.

Public comments. The WRAP and a number of industry group commenters
objected to the proposed requirements that when emissions from a source
in the program exceed the allowances held by the source, each day of
the year be considered a separate violation and that each ton of excess
emissions be considered a separate violation. First, the WRAP and some
industry comments asserted that the maximum penalty is punitive, and
cannot be justified for a program that has been established to meet a
welfare-based regional goal. Second, commenters believed that because
this provision involved greater case-by-case judgments than the
penalties in the Annex, the provision could lead to inconsistencies
between the various State and tribal agencies.

[[Page 33777]]

The WRAP and other commenters recommended that EPA replace the penalty
provisions in the proposal with the provisions that were recommended in
the Annex, which were, in turn, based upon the acid rain program.
Final rule. The EPA has made a few changes to the final rule based
upon public comments received. First, EPA has decided to include in the
final rule the two specific types of automatic penalties listed in the
Annex for excess emissions. The EPA believes that by including a
requirement for these penalty provisions in the final rule, EPA can
remove any ambiguity that may exist over whether the types of
provisions envisioned by the WRAP would be acceptable to EPA for SIPs
submitted under 40 CFR 51.309. The EPA agrees with the commenters that
the program should establish sufficient penalties to deter non-
compliance. The final rule includes a requirement to forfeit two
allowances for each ton of excess emissions, and a requirement for
monetary penalties. The EPA uses the WRAP's specific $5000 per ton
amount in the final rule. At the same time, EPA believes that because
it will be a number of years before the onset of any backstop trading
program, it is possible that the appropriate $/ton figure could change
over this time period, and that there may be additional factors that
may need to be taken into account. The final rule provides for the
development of an alternative to this amount, if the value is
consistent across States and Tribes and the value substantially exceeds
the expected costs of allowances, in order to provide a strong
incentive for sources to hold allowances at least equal to their
emissions.
The EPA believes that many commenters may have misunderstood the
proposed regulatory language requiring that each day of the year be
considered a separate violation and that each ton of excess emissions
be considered a separate violation. The EPA wishes to clarify that we
view these provisions as clarifying the liabilities that exist for
violations under the CAA, and that these penalties are not automatic.
The EPA believes that it is important to recognize that while the
penalty structure devised by the WRAP will represent the principle way
to deter violations, EPA believes that it is useful to clarify that the
additional liabilities exist under the CAA. We believe this is
consistent with the acid rain program. For example, under 40 CFR
77.1(b), EPA clarifies that the automatic penalties in the acid rain
program do not negate other penalties under the CAA, as follows:

(b) Nothing in this part shall limit or otherwise affect the
application of sections 112(r)(9), 113, 114, 120, 303, 304, or 306
of the Act, as amended. Any allowance deduction, excess emission
penalty, or interest required under this part shall not affect the
liability of the affected unit's and affected source's owners and
operators for any additional fine, penalty, or assessment, or their
obligation to comply with any other remedy, for the same violation,
as ordered under the Act.

While EPA agrees with the WRAP that the penalty structure contained in
the backstop trading program, which is patterned after the acid rain
program, should be effective and should constitute the principal way
penalties would be imposed, it is nonetheless useful and important to
clarify that sources are potentially liable for other penalties under
the CAA.
The EPA also clarifies in the final rule language, as noted on page
46 of the Annex (Annex section II.D.6.f.), that in addition to excess
emissions, violations are possible with respect to other program
requirements (such as monitoring and reporting requirements). We agree
with the WRAP that CAA civil and criminal penalties would apply to such
violations, including liability for each day as an individual
violation.
4. Requirements for Periodic Evaluation
Proposed rule. The proposed rule required the backstop trading
program to include a provision for periodic evaluations of the program.
Such periodic evaluations are required as a means of determining
whether the program, in its actual implementation, would need any mid-
course corrections. The proposal included a list of nine questions that
the program evaluations should address. These proposed questions, which
were derived from EPA's guidance for EIP, section 5.3(b), were as
follows:
(A) Whether the total actual emissions could exceed the milestones,
even though sources comply with their allowances;
(B) Whether the program achieved the overall emission milestone it
was intended to reach, and a discussion of the actions that have been
necessary to reach the milestone;
(C) The effectiveness of the compliance, enforcement and penalty
provisions;
(D) The administrative costs of the program to sources and to State
and tribal regulators, including a discussion of whether States and
Tribes have enough resources to implement the trading program;
(E) Whether the market trading program has likely led to decreased
costs for reaching the milestone relative to a non-market based
approach, including a discussion of the market price of allowances
relative to control costs that might have otherwise been incurred;
(F) Whether the trading program resulted in any unexpected
beneficial effects, or any unintended detrimental effects;
(G) Whether the actions taken to reduce SO₂ have led to
any unintended increases in other pollutants;
(H) Whether there are any changes needed in emissions monitoring
and reporting protocols, or in the administrative procedures for
program administration and tracking;
(I) The effectiveness of the provisions for interstate trading, and
whether there are any procedural changes needed to make the interstate
nature of the program more effective.
Public comments. The only comments on the periodic evaluation
provision were from the WRAP. The WRAP, while supporting items (A),
(C), (H) and (I) without changes, recommended changes to items (B) and
(D) and recommended deletion of items (E), (F) and (G).
The WRAP's comments recommended deleting the phrase ``and a
discussion of the actions that have been necessary to reach the
milestones'' from the end of item (B). The WRAP noted that the backstop
trading program is intended to provide incentives for long-term
business planning. The program also allows other concerns, such as the
need to meet the PM_2.5 NAAQS, to bring about some of the
emissions reductions needed to meet the regional haze goals. The WRAP
stated that it could be difficult to determine what actions were
required to achieve all of the emissions reductions in the region,
because most of the reductions would follow from individual business
decisions. Accordingly, in its comments, the WRAP recommended that this
provision not be mandated by the rule.
The WRAP comments recommended deletion of the phrase ``the
administrative costs of the program to sources and to State and tribal
regulators'' from item (D), such that this item would be modified to
read ``a discussion of whether States and Tribes have enough resources
to implement the trading program.'' The WRAP stated that States and
Tribes will be monitoring the costs of the program as part of their on-
going internal program review, but that this should not be mandated by
EPA. Rather, the WRAP recommended that the rule should be focused on
what is needed to meet the visibility improvement goals, and that the
development of the most cost-effective

[[Page 33778]]

strategies to meet those goals should be left to the States and Tribes.
The WRAP's comments recommended deletion of item (E) from the rule.
The WRAP indicated that while States and Tribes may choose to perform
an analysis of the cost effectiveness of the program, this should not
be mandated by EPA. The WRAP also recommended deletion of items (F) and
(G) from the rule. In its comments, the WRAP explained its view that it
could be very difficult to determine what changes in emissions in the
region are due to the milestones because so many different factors will
come into play in a backstop trading program. Moreover, the WRAP
comments noted that the regional haze rule already includes provisions
for a 5-year SIP review of the entire program under 40 CFR 51.309, and
that new SIPS will be developed every 10 years. The WRAP stated that it
believes that existing requirements in the rule are adequate to ensure
that there are not any unintended consequences due to implementation of
the backstop trading program, and that the additional audit
requirements in (F) and (G) could prove to be difficult and expensive
to analyze.
Final rule. The final rule incorporates the WRAP's recommended
changes to items (B) and (D), and accepts the WRAP's recommendation to
delete item (E). The EPA has, however, retained items (F) and (G). The
EPA believes that it is important that a program evaluation of the
trading program determine whether the trading program resulted in any
unexpected beneficial effects, or any unintended detrimental effects
and whether the actions taken to reduce SO₂ have led to any
unintended increases in other pollutants. While the WRAP correctly
notes that there are SIP reviews every 5 years, and new SIPS every 10
years, EPA believes that the program evaluations should be designed to
provide information that indicate whether these SIP reviews should
contain any mid-course corrections. The EPA does not believe that it
will require a burdensome or exhaustive analysis to determine whether,
qualitatively, such effects have occurred. If it is known that these
detrimental effects have occurred, EPA believes that WRAP States should
take this into account in the SIP revisions.

E. Provisions Related to Time Period After 2018

Proposed rule. In the proposal, EPA noted that the Annex did not
attempt to address the fate of this program beyond calendar year 2018.
In the proposal, EPA believed that it is reasonable for WRAP States and
Tribes to defer until a later date any judgment on the specific levels
of SO₂ that can be achieved. Finally, in the proposal, EPA
noted its belief that any actions that occur after 2018 should not be
allowed to increase SO₂ emissions beyond the 2018 milestone.
Accordingly, EPA proposed to indicate in the language in Table 1 of the
proposed rule that any milestone developed for years after 2018 must
not allow increases over and above those for the year 2018.
Public comments. One commenter, supported by two other commenters,
believed that, because the WRAP Annex covers the period from 2003 to
2018, EPA's approval of the Annex should not be dependent on what
occurs after 2018. The EPA interprets this comment as requesting that
the final rule be silent on the time period after 2018. The WRAP's
comments recommended that the language in Table 1 of the proposed rule
be modified to read ``no more than 510,000 tons (480,000 tons if
suspended smelters do not resume operation) unless the milestones are
replaced with a different program that meets any BART and `reasonable
progress' requirements established in this rule.''
Final rule. The EPA has incorporated language similar to that
requested by the WRAP into Table 1. This ensures that the progress made
by participating States and Tribes in addressing the visibility
impairment will not be eroded in the event that the SIP revisions due
in 2018 are not in place at the beginning of 2019. At the same time,
this provision clearly indicates that this SIP revision is the expected
means of addressing visibility after that date.

F. Provisions Related to Indian Tribes

Proposed Rule. Western Indian Tribes have been directly involved
during the development of the GCVTC report and the subsequent
development of the WRAP Annex report. Through this involvement, they
have been able to ensure that unique issues of importance to Tribes
have been carefully considered by all stakeholders. The Annex addresses
issues of tribal interest, including a specific provision of the
program for Tribes in the market trading program. The EPA believes that
tribal participation is important for the success of the visibility
protection program in the Western United States and reflected this in
the proposed rule.
When developing the backstop trading program, the WRAP established
a 20,000 ton allowance amount (called the ``set-aside'') to be
allocated to Tribes. In the event that the backstop market trading
program is triggered, the set-aside would be available to Tribes to
either (1) allow for new source growth over and above the amounts
allocated for new sources by the Annex; (2) sell for revenue; or (3)
retire. Note that this set-aside amount is in addition to any
allocations to individual sources within Indian Country. For example,
if the Navajo Nation participates in the program, there would be an
allocation for the Four Corners Power Plant and for the Navajo Power
Plant, which are located on the Navajo Reservation. The WRAP's backstop
trading program includes within the overall milestones an amount for
each such existing source in addition to the tribal set-aside. For more
discussion of this issue, see 67 FR 30438, May 6, 2002.
In the proposal, EPA included the 20,000 ton tribal set-aside as a
requirement of the backstop trading program. In addition, EPA discussed
in the preamble its views of EPA's role with respect to allocation of
the 20,000 ton set-aside. In this discussion, EPA stated its view that
allocation of the 20,000 ton amount was not a critical short-term need,
because the backstop trading program would be triggered, at the
earliest, in the year 2009. The EPA indicated its expectation that
Tribes will develop the method for allocating the 20,000 tons, but that
EPA will seek to provide assistance as necessary to facilitate the
process.
In the proposed rule, EPA reiterated its position that it will
``pursue the principle of tribal `self government' and will work with
tribal governments on a `government-to-government' basis.'' The CAA
Amendments of 1990 added section 301(d) which authorizes EPA to ``treat
Tribes as States'' for the purposes of administering CAA programs. The
EPA promulgated regulations implementing section 301(d) in the Tribal
Authority Rule, which elaborates on EPA's tribal policies, on February
12, 1998, (63 FR 7254). For a more detailed discussion of EPA's tribal
policies, see the Tribal Authority Rule (63 FR 7254) and the proposed
rule (67 FR 30418).
Public Comments. The EPA received several comments relating to
tribal issues, including the set-aside for Tribes in the market trading
program and the need for providing assistance (such as developing a
model TIP) to Indian Tribes.
The WRAP's comments agreed with the proposed language in Sec.
51.309(h)(4)(i) regarding the set-aside and added that the final rule
should say that tribal participation in the market trading program
would not be affected by States that do not choose to participate in
the market trading program. The WRAP comments included an example: ``if
California opts out of the backstop trading program, all Tribes that
are located in California may

[[Page 33779]]

still participate in the distribution of the tribal set-aside.'' The
WRAP also suggested that EPA make assistance in developing a TIP a high
priority, and that EPA should develop a model implementation plan which
could be appropriately modified and used by any Tribe choosing to
participate in the market trading program.
One commenter representing industrial sources located in Indian
country expressed the concern that participation by Tribes with large
stationary sources was important for the program to reach ``critical
mass.'' Additionally, this commenter believed that EPA should work to
serve the interests of sources located in Indian country by assisting
the Tribes in developing a program under 40 CFR 51.309.
The WRAP's comments agreed with EPA's assessment that allocation of
the 20,000 ton tribal set-aside does not need to be completed in the
near-term, and strongly agreed that the distribution of the set-aside
should be determined by the Tribes and not EPA or the WRAP. However,
the WRAP recommended that the final rule contain a provision that will
require the determination of a method to allocate or manage the set-
aside by no later than 1 year after the market trading program is
triggered.
Final Rule. The EPA agrees with commenters regarding participation
of Indian Tribes in the regional SO₂ emissions reductions
program. The EPA agrees that Tribes should be allowed to participate in
the program and their participation is not dependent on the
participation of the States that surround them. As stated in the Tribal
Authority Rule (63 FR 7271)

[t]ribes * * * shall be treated in the same manner as states with
respect to all provisions of the Clean Air Act and implementing
regulations, except for those provisions identified in section 49.4
and the regulations that implement those provisions. (63 FR 7271).

Because the CAA provisions for the regional haze rule are not listed in
section 49.4, Tribes should have the opportunity to be treated in the
same manner as States for purposes of implementing 40 CFR 51.309.
Accordingly, eligible Tribes may submit a plan regardless of the
participation of neighboring States.
The EPA concurs with the comments regarding the importance of
assisting Tribes in developing TIPs. As stated in the proposal, ``For
Tribes which choose to implement 40 CFR 51.309, EPA believes there are
a number of ways that EPA can provide assistance.'' The EPA will help
those Tribes with major SO₂ sources to comply with the pre-
trigger emissions tracking requirements, and to assist Tribes
interested in participating in the backstop trading program. To this
end, EPA has met, or plans to meet, with all Tribes that have major
SO₂ sources. In these meetings, EPA is explaining the
regional haze rules and options for participating in the SO₂
reduction program.
The EPA agrees with the WRAP's comments that a model TIP could
serve to facilitate implementation of the program in Indian country.
The EPA will work with Tribes to further assess the needs for such a
model TIP. The EPA also agrees with the WRAP's recommendation to
establish a 1-year deadline for allocation of the 20,000 ton set-aside,
and we have added this language to the final rule.
EPA is committed to protecting tribal air resources, building
tribal air program capacity, and working with Tribes on a government-
to-government basis.

IV. Statutory and Executive Order Reviews

In preparing any final rule, EPA must meet the administrative
requirements contained in a number of statutes and executive orders. In
this section of the preamble, we discuss how the final rule addresses
these administrative requirements. Except where EPA committed in the
proposal to further efforts, these discussions reflect EPA's
assessments for the proposed rule. No public comments were received
regarding EPA's proposed treatment of these administrative
requirements.

A. Executive Order 12866: Regulatory Planning and Review

Under Executive Order 12866 (58 FR 51735, October 4, 1993), EPA
must determine whether the regulatory action is ``significant'' and,
therefore, subject to Office of Management and Budget (OMB) review and
the requirements of the Executive Order. The Order defines
``significant regulatory action'' as one that is likely to result in a
rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
Pursuant to the terms of Executive Order 12866, it has been
determined that this rule is a ``significant regulatory action.'' As
such, this action was submitted to OMB for review. Changes made in
response to OMB suggestions or recommendations are documented in the
public record.
Today's final rulemaking amends the regional haze rule by
incorporating a specific set of SO₂ emission targets for
regionwide stationary sources of SO₂ emissions for a nine-
State region in the Western United States. The emission targets would
affect and have potential economic impacts only for States choosing to
participate in the optional program provided by 40 CFR 51.309 of the
regional haze rule. The emissions reductions resulting from the program
vary over the 2003 to 2018 time period. If all nine States participate
in the program, the WRAP estimates that for the year 2018,
SO₂ emissions would be reduced from a projected baseline of
612,000--642,200 tons to an enforceable milestone of 480,000--510,000
tons. If the milestones are not achieved through voluntary emissions
reductions by the affected sources, then they will be achieved through
an enforceable backstop market trading program.
In order to understand the possible regulatory impacts of this
rule, it is necessary to review the previous analysis that EPA
completed for the entire regional haze program. In 1999, EPA prepared a
Regulatory Impact Analysis (RIA) for the regional haze rule (see
regional haze rule docket (A-95-38)). In that RIA, EPA assessed the
costs, economic impacts, and benefits for four illustrative progress
goals, two sets of control strategies, two sets of assumptions for
estimating benefits, and systems of nationally uniform progress goals
versus regional varying progress goals (64 FR 35760, July 1, 1999).
Because we had no way of predicting the visibility goals each State
would pick under the regional haze rule requirements, we conducted an
extensive analysis of eight ``what if'' scenarios. For each scenario,
the RIA determined the control measures needed to achieve the given
degree of visibility improvement and the associated costs. The RIA also
presented results for six specific sub-regions, such as ``Rocky
Mountain,'' ``West,'' and others. These emission reduction scenarios
are provided in the RIA in Tables 6-7 and 6-8.
The EPA believes that some of the emissions reductions from the
Annex provisions for stationary source SO₂, assuming States
choose this optional 40

[[Page 33780]]

CFR 51.309 approach, may result from environmental obligations under
the CAA. To the extent this is the case, the emissions reductions
required the WRAP's SO₂ milestones and backstop trading
program may have already been addressed in other regulatory impact
analyses for those programs.
The remainder of the emissions reductions resulting from the WRAP's
program for stationary source SO₂ would be over and above
those required to meet other environmental obligations. Where this is
the case, we believe that the control costs and other potential
economic consequences of achieving the reductions are reflected in the
RIA for the 1999 regional haze rule. The range of results for the eight
scenarios analyzed in the RIA resulted in predicted SO₂
emissions reductions that are within the range of emissions reductions
included in the Annex. Two of the eight scenarios resulted in 284,000
tons of stationary source reductions in regions containing one or more
of the WRAP Annex States. Five other scenarios include SO₂
emissions reductions ranging from 95,000 to 128,000 tons per year.
Hence, the costs and benefits associated with the WRAP's program are
captured in the RIA for the 1999 final regional haze rule.
The EPA received no public comments regarding Executive Order
12866.

B. Paperwork Reduction Act

The information collection requirements in today's rule have been
submitted to OMB under the Paperwork Reduction Act, 44 U.S.C. 3501 et
seq. An Information Collection Request (ICR) document has been prepared
by EPA (ICR No. 1813.05) and a copy may be obtained from Susan Auby, by
mail at Office of Environmental Information--Information Strategies
Branch, U.S. EPA (2822T), 1200 Pennsylvania Avenue, NW., Washington, DC
20460, by e-mail at auby.susan@epa.gov, or by calling (202) 566-1672. A
copy may also be downloaded off the Internet at http://www.epa.gov/icr.
The EPA has prepared burden estimates for the specific burden
impacts of today's rule. These burden estimates are calculated using
the assumption that seven eligible States and four tribes would
participate in the program. The results of the calculations indicate
16,100 hours to 19,990 hours for affected sources, 14,010 to 14,430
hours for States, 2,520 to 2,600 hours for Tribes, 1,305 to 1,375 hours
for the Federal government, and 240 hours for regional planning
organizations.
Burden means the total time, effort, or financial resources
expended by persons to generate, maintain, retain, or disclose or
provide information to or for a Federal agency. This includes the time
needed to review instructions; develop, acquire, install, and use
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements;
train personnel to be able to respond to a collection of information;
search data sources; complete and review the collection of information;
and transmit or otherwise disclose the information. An agency may not
conduct or sponsor, and a person is not required to respond to a
collection of information unless it displays a currently valid OMB
control number. The OMB control numbers for EPA's regulations are
listed in 40 CFR part 9 and 48 CFR chapter 15.
The EPA sought comments on EPA's need for this information, the
accuracy of the provided burden estimates, and any suggested methods
for minimizing respondent burden. The EPA received no comments
regarding the burden or the Paperwork Reduction Act as it applies to
today's rulemaking.

C. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedures Act or any other statute unless the agency certifies that
the rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of today's rulemaking on
small entities, small entity is defined as: (1) A small business that
is a small industrial entity as defined in the U.S. Small Business
Administration (SBA) size standards (as discussed on the SBA Web site
at http://www.sba.gov/size/indextableofsize.html); (2) a small
governmental jurisdiction that is a government of a city, county, town,
school district or special district with a population of less than
50,000; and (3) a small organization that is any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field.
After considering the potential for economic impacts of today's
rule on small entities, I certify that today's rule will not have a
significant economic impact on a substantial number of small entities.
Today's rule amends the requirements of the regional haze program to
provide nine Western States and a number of Tribes with an optional
method for complying with the requirements of the CAA. No State or
Tribe is required to submit an implementation plan meeting its
requirements. For States or Tribes that choose to submit an
implementation plan under this optional program, however, today's rule
requires those States and/or Tribes to meet a series of regional
SO₂ emission milestones. The EPA will determine whether
these milestones are met based on the actual emissions from stationary
sources with SO₂ emissions of more than 100 tons per year.
From data EPA obtained from the WRAP's Web site, it appears that there
are 194 establishments meeting the 100 tons per year of SO₂
criterion for this program, including 39 utility power plants, and 155
non-utility sources.\9\ The vast majority of these establishments--
which include sources such as power plant boilers, copper smelters,
chemical plants, petroleum refineries, natural gas production plants,
large manufacturing operations, mills--are not small entities. The EPA
estimates that 12 facilities are likely to be owned by small entities,
and 164 are owned by entities that are not small. The EPA has been
unable to determine the size of 16 entities that own 18 of the
establishments.\10\ Even if all 18 were determined to be owned by small
entities, and all nine States and those Tribes with covered sources
adopted the optional approach to complying with the visibility
requirements of the CAA, less than 30 small entities would be
potentially affected by this rule.
---------------------------------------------------------------------------

\9\ The number of power plants was obtained from ``Data
Worksheets from ICF Consulting Detailing Utility Emissions
Projections,'' Item 3 in supplemental information transmitted to Tim
Smith, EPA, from Patrick Cummins, WRAP. June 29, 2001. The non-
utility estimate was obtained from: Technical Support Documentation.
Voluntary Emissions Reduction Program for Major Industrial Sources
of Sulfur Dioxide in Nine Western States and a Backstop Market
Trading Program. Section 2.A. Revised Appendix A for the Pechan
Report, table A-1.
\10\ The EPA provides documentation of these estimates in a
technical memorandum, ``Size of Potentially Affected Entities Should
the Western Regional Air Partnership States Choose to Adopt
Regulations in Accordance with the Draft Proposed Rule Revising
Sec. 51.309(h).'' Allen Basala, EPA, October 17, 2001. This
memorandum is included in the docket for today's final rule.
---------------------------------------------------------------------------

The goal of the WRAP is for the regional SO₂ milestones
established by the rule to be met through voluntary measures and EPA
believes that

[[Page 33781]]

participating States and Tribes may be able to meet the milestones
through such measures. However, as a backstop in the event the
milestones are not met in this manner, today's rule requires the
implementation of a market trading program to ensure that emissions in
the relevant region do not exceed the milestones. Today's rule gives
the States and Tribes the discretion to allocate emissions credits to
sources, as the States and Tribes determine appropriate. Ultimately,
the impact on small entities will not be determined by this rule, but
rather by how the relevant State or Tribe exercises its discretion in
adopting the optional program and allocating emissions credits. We
encourage States and Tribes to consider the impact of its market
trading program on small entities. Nonetheless, EPA believes that no
more than 28 small entities will be affected by this rule, and most
likely less, given that EPA does not anticipate that all nine States
with the option to participate in this program will do so. We did not
receive any public comments regarding the RFA or the Small Business
Regulatory Enforcement Fairness Act of 1996. The EPA continues to
believe that today's rulemaking will not have a significant economic
impact on a substantial number of small entities.

D. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) (UMRA), establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, 2
U.S.C. 1532, EPA generally must prepare a written statement, including
a cost-benefit analysis, for any proposed or final rule that ``includes
any Federal mandate that may result in the expenditure by State, local,
and tribal governments, in the aggregate, or by the private sector, of
$100,000,000 or more * * * in any one year.'' A ``Federal mandate'' is
defined under section 421(6), 2 U.S.C. 658(6), to include a ``Federal
intergovernmental mandate'' and a ``Federal private sector mandate.'' A
``Federal intergovernmental mandate,'' in turn, is defined to include a
regulation that ``would impose an enforceable duty upon State, local,
or tribal governments,'' section 421(5)(A)(i), 2 U.S.C. 658(5)(A)(i),
except for, among other things, a duty that is ``a condition of Federal
assistance,'' section 421(5)(A)(i)(I). A ``Federal private sector
mandate'' includes a regulation that ``would impose an enforceable duty
upon the private sector,'' with certain exceptions, section 421(7)(A),
2 U.S.C. 658(7)(A).
Before promulgating an EPA rule for which a written statement is
needed under section 202 of the UMRA, section 205, 2 U.S.C. 1535, of
the UMRA generally requires EPA to identify and consider a reasonable
number of regulatory alternatives and adopt the least costly, most
cost-effective, or least burdensome alternative that achieves the
objectives of the rule.
By incorporating into the regional haze rule the provisions of the
Annex for a voluntary emissions reductions program and backstop trading
program, EPA is not directly establishing any regulatory requirements
that may significantly or uniquely affect small governments, including
tribal governments. The entire program under 40 CFR 51.309, including
today's amendments, is an option that each of the States may choose to
exercise. The program is not required and thus is clearly not a
``mandate.'' Thus, EPA is not obligated to develop a small government
agency plan, as required under section 203 of UMRA.
The EPA also believes that because today's rule provides those
States potentially subject to the rule with substantial flexibility,
today's rule meets the UMRA requirement in section 205 to select the
least costly and burdensome alternative in light of the statutory
mandate for SIPs for visibility protection that address BART. Today's
rule provides States and sources with the flexibility to achieve
regional SO₂ reductions in a way that is both cost and
administratively effective. Sources are given the opportunity to
achieve voluntary reductions. If such reductions do not occur, then the
rule provides for the establishment of a trading program to achieve
targeted emissions reductions. If a trading program is implemented,
sources have the flexibility to buy and sell allowances in order to
reach emissions reductions milestones in the most cost-effective way.
Today's rule, therefore, inherently provides for adoption of the least
costly, most-cost effective, and least-burdensome alternative that
achieves the objective of this rule.
The EPA believes that this rulemaking is not subject to the
requirements of UMRA. For regional haze SIPs overall, it is
questionable whether a requirement to submit a SIP revision constitutes
a Federal mandate, as discussed in the preamble to the regional haze
rule, (64 FR 35761, July 1, 1999). However, today's rule contains no
Federal mandates (under the regulatory provisions of title II of the
UMRA) for States, local, or tribal governments or the private sector.
The program contained in 40 CFR 51.309, including today's rule, is an
optional program.

E. Executive Order 13132: Federalism

Executive Order 13132, entitled Federalism (64 FR 43255, August 10,
1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
Under section 6(b) of Executive Order 13132, EPA may not issue a
regulation that has federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless
the Federal government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, or EPA
consults with State and local officials early in the process of
developing a regulation. Under section 6(c) of Executive Order 13132,
EPA may not issue a regulation that has federalism implications and
that preempts State law, unless EPA consults with State and local
officials early in the process of developing the regulation.
Today's rule does not have federalism implications. It will not
have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order 13132. As an optional program, today's
rule will not directly impose significant new requirements on State and
local governments. In addition, even if today's rule did have
federalism implications, it will not impose substantial direct
compliance costs on State or local governments, nor will it preempt
State law.
Consistent with EPA policy, we nonetheless consulted with State and
local officials early in the process of developing this regulation, to
provide them with an opportunity for meaningful and timely input into
its development. These consultations included a working meeting with
State and local officials and numerous discussions with committees and
forums of the WRAP. In the spirit of Executive Order 13132 and
consistent with EPA policy to promote

[[Page 33782]]

communications between EPA and State and local governments, EPA
specifically solicited comment on today's rule from State and local
officials. We received no comments regarding this executive order from
State and local officials or any other public commenters.
As required by section 8(a) of Executive Order 13132, EPA included
a certification from its Federalism Official stating that EPA had met
the Executive Order's requirements in a meaningful and timely manner,
when it sent the draft of this final rule to OMB for review pursuant to
Executive Order 12866. A copy of this certification has been included
in the public version of the official record for this final rule.

F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (59 FR 22951, November 6, 2000),
requires EPA to, among other things, ensure ``meaningful and timely
input by tribal officials in the development of regulatory policies
that have tribal implications.'' ``Policies that have tribal
implications'' is defined in the executive order to include regulations
that have ``substantial direct effects 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.''
Under section 5(b) of Executive Order 13175, EPA may not issue a
regulation that has tribal implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless
the Federal government provides the funds necessary to pay the direct
compliance costs incurred by tribal governments, or EPA consults tribal
officials early in the process of developing today's regulation. Under
section 5(c) of the Executive Order, EPA may not issue a regulation
that has tribal implications and that preempts tribal law, unless EPA
consults with tribal officials early in the process of developing
today's regulation.
Today's rule may have tribal implications, but we believe that it
will neither impose substantial direct compliance costs on the Tribes
nor preempt tribal law. The EPA sought input from potentially affected
Tribes before reaching a conclusion on whether this rule will have
tribal implications. This was due, in a large part, to the voluntary
nature of this program and the uncertainty of potential impacts on
Tribes in the event a State or Tribe chooses to participate in the
program. Possible impacts on Tribes choosing to opt into this program
are discussed above in unit III of this preamble.
The EPA notes that the WRAP consulted extensively with tribal
representatives in the development of the Annex, the document which
provided the basis for today's rulemaking. The Annex provides
recognition of Tribes throughout the document and there is a specific
discussion of tribal issues in Attachment F of the Annex. Today's
rulemaking closely mirrors the recommendations of the WRAP and
therefore reflects discussions between the WRAP and Western Tribes.
In keeping with EPA policies regarding Tribes and Executive Order
13175, prior to the issuance of the final rule, EPA provided additional
opportunities for consultation with tribal officials or authorized
representatives of tribal governments on the potential impacts of
today's rule on Tribes. After consulting with a tribal representative,
EPA provided Tribes with several opportunities to provide comments on
today's rulemaking. During the public comment period, EPA met with
tribal environmental staff at tribal environmental forums in Portland,
Oregon and Sparks, Nevada. Also, during the public comment period, EPA
sent letters to all Western Tribes describing the regional haze rules
and, in particular, today's rule, alerting them to the public comment
period and seeking their opinions on the rulemaking. Finally, EPA staff
met with Tribes in the Western United States, that have sources located
on their tribal lands, with sources potentially subject to BART
requirements. Although EPA did receive public comments on Tribal
issues, we did not receive any public comments specific to this
executive order.

G. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks

Executive Order 13045, ``Protection of Children from Environmental
Health and Safety Risks'' (62 FR 19885, April 23, 1997), applies to any
rule that: (1) Is determined to be ``economically significant'' as
defined under Executive Order 12866, and (2) concerns an environmental
health or safety risk that EPA has reason to believe may have a
disproportionate effect on children. If the regulatory action meets
both criteria, the EPA must evaluate the environmental health or safety
effects of the planned rule on children, and explain why the planned
regulation is preferable to other potentially effective and reasonably
feasible alternatives considered by EPA. The EPA interprets Executive
Order 13045 as applying only to those regulatory actions that are based
on health or safety risks, such that the analysis required under 5-501
of the Order has the potential to influence the regulation. Today's
rule to codify the SO₂ emission reduction program is not
subject to Executive Order 13045 because it does not establish an
environmental standard intended to mitigate health or safety risk.
There were no public comments received pertaining to this executive
order.

H. Executive Order 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use

Executive Order 13211, ``Actions That Significantly Affect Energy
Supply, Distribution, or Use,'' (66 FR 28355, May 22, 2001), provides
that agencies shall prepare and submit to the Administrator of the
Office of Information and Regulatory Affairs, OMB, a Statement of
Energy Effects for certain actions identified as ``significant energy
actions.'' Section 4(b) of Executive Order 13211 defines ``significant
energy actions'' as ``any action by an agency (normally published in
the Federal Register) that promulgates or is expected to lead to the
promulgation of a final rule or regulation, including notices of
inquiry, advance notices of proposed rulemaking, and notices of
proposed rulemaking: (1)(i) That is a significant regulatory action
under Executive Order 12866 or any successor order, and (ii) is likely
to have a significant adverse effect on the supply, distribution, or
use of energy; or (2) that is designated by the Administrator of the
Office of Information and Regulatory Affairs as a significant energy
action.'' Under Executive Order 13211, a Statement of Energy Effects is
a detailed statement by the agency responsible for the significant
energy action relating to: (i) Any adverse effects on energy supply,
distribution, or use including a shortfall in supply, price increases,
and increased use of foreign supplies should the proposal or rule be
implemented, and (ii) reasonable alternatives to the action with
adverse energy effects and the expected effects of such alternatives on
energy supply, distribution, and use.
While this rulemaking is a ``significant regulatory action'' under
Executive Order 12866, EPA has determined that this rulemaking is not a
significant energy action because it is not likely to have a
significant adverse effect on the supply, distribution, or use of
energy. In today's rule, if States chose to implement the option
provided by 40

[[Page 33783]]

CFR 51.309, this would lead to a regional reduction in SO₂
emissions in order to meet the WRAP's SO₂ milestones for the
2003-2018 time period. The WRAP's analysis of the program's
requirements results in the following projections: \11\
---------------------------------------------------------------------------

\11\ ICF consulting, Final Report on Regional Economic Impacts
of Annex. Transmitted to Tim Smith, EPA/OAQPS by Patrick Cummins,
WRAP Co-Project Manager, June 29, 2001.
---------------------------------------------------------------------------

? No reduction in crude oil supply;
? No reduction in fuel production;
? 0.0 percent to 0.2 percent increase in wholesale
electricity prices in 2018;
? Production cuts in coal in the Western States balanced by
increases in coal production in the Appalachian region;
? No increase in energy distribution costs;
? No significantly increased dependence on foreign supplies
of energy;
? Adverse impacts on employment, gross regional product, and
real disposable incomes in the affected Western States of less than
0.05 percent in 2018;
? Room for new sources of electrical generating capacity
within the target SO₂ emission levels.
Given the particular concern in the West regarding needed
electrical generating capacity, EPA believes it important to note the
WGA statement that ``the conclusion [* * * of their analysis * * *]
is
that sulfur dioxide emissions reductions milestones should in no way
impede the construction of new coal-fired power plants in the West \12\
* * *''
---------------------------------------------------------------------------

\12\ Memorandum from Jim Souby to Staff Council, State
Environmental Directors and State Air Directors, ``Energy and Air
Quality Issues.'' February 23, 2001.
---------------------------------------------------------------------------

Furthermore, an assessment by WGA of the effects of the WRAP Annex
indicates that it is possible to build 7000 megawatts or more of new
coal-fired generation at any time between 2001 and 2018 without
exceeding the SO₂ emission milestones in the Annex.\13\
However, the amount of megawatts that could be built is affected by
analytical assumptions regarding fuel mix and quality, capacity
utilization, control levels, and the demarcation of fuel use regions.
Additional scenarios included in the WGA analysis show that there could
be room for 19,000 megawatts of generation capacity.
---------------------------------------------------------------------------

\13\ Technical Memorandum, ``Analysis of New Coal-Fired Power
Plants Under the Proposed Sulfur Dioxide Emission Reduction
Milestones for the Nine-State Grand Canyon Visibility Transport
Region.'' February 22, 2001.
---------------------------------------------------------------------------

The EPA believes that the program contained in the Annex and in
today's rule will not result in energy reduction of 500 or more
megawatts installed production capacity. Under this program,
considerable flexibility is afforded to electricity generators on how
to comply with the program. Even if the trading program is triggered
and sources must comply with allowances, we believe that the least-cost
solutions afforded by the trading program, and the ability to secure
emissions reductions from other sources, will make it very unlikely
that the program would lead to plant shutdowns. The EPA did not receive
any public comments specifically addressing this executive order or
EPA's findings.

I. National Technology Transfer Advancement Act

Section 12(d) of the National Technology Transfer Advancement Act
of 1995 (``NTTAA''), Public Law 104-113, section 12(d) (15 U.S.C. 272
note) directs EPA to use voluntary consensus standards in its
regulatory activities unless to do so would be inconsistent with
applicable law or otherwise impractical. Voluntary consensus standards
are technical standards (e.g., materials specifications, test methods,
sampling procedures, and business practices) that are developed or
adopted by voluntary consensus standards bodies. The NTTAA directs EPA
to provide Congress, through OMB, explanations when the Agency decides
not to use available and applicable voluntary consensus standards.
However, today's rule does not incorporate any requirements to use
any particular technical standards, such as specific measurement or
monitoring techniques. Therefore, EPA is not considering the use of any
voluntary consensus standards in this rulemaking. Today's rule does
require States to develop emissions quantification protocols and
monitoring procedures for their SIPs as part of the market trading
program. However, EPA generally defers to the choices the States make
in their SIPs when the CAA does not prescribe requirements, so EPA is
not requiring the use of specific, prescribed techniques, or methods in
those SIPs. Nevertheless, while EPA believes that it is not necessary
to consider the use of any voluntary consensus standards for this
proposal, we will encourage States and Tribes to consider the use of
such standards in the development of these protocols. The EPA did not
receive any public comments concerning this executive order.

J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations

Executive Order 12898 requires that each Federal agency make
achieving environmental justice part of its mission by identifying and
addressing, as appropriate, disproportionately high and adverse human
health or environmental effects of its programs, policies, and
activities on minorities and low-income populations.
The EPA believes that today's rule should not raise any
environmental justice issues. The overall result of the program is
regional reductions in SO₂. Because this program would
likely reduce regional and local SO₂ levels in the air and
because there are separate programs under the CAA to ensure that
SO₂ levels do not exceed national ambient air quality
standards, it appears unlikely that this program would permit any
adverse affects on local populations. The EPA did not receive any
public comments regarding this executive order.

K. Congressional Review Act

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
U.S. The 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 U.S. 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 a ``major rule'' as defined by 5 U.S.C.
804(2). This rule will be effective on August 4, 2003.

List of Subjects in 40 CFR Part 51

Environmental protection, Administrative practice and procedure,
Air pollution control, Carbon monoxide, Nitrogen oxides, Particulate
matter, Sulfur dioxide, Volatile organic compounds.

Dated: May 21, 2003.
Christine Todd Whitman,
Administrator.

? For the reasons set forth in the preamble, part 51 of chapter I of
title 40 of the Code of Federal Regulations is amended as follows:

[[Page 33784]]

PART 51--REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF
IMPLEMENTATION PLANS

Subpart P--Protection of Visibility

? 1. The authority citation for part 51 continues to read as follows:

Authority: 42 U.S.C. 7410-7671q.

? 2. Section 51.309 is amended by:
? a. Revising paragraph (b)(5).
? b. Adding paragraphs (b)(8), (b)(9), (b)(10), (b)(11), (b)(12) and
(b)(13).
? c. Revising paragraph (c).
? d. Revising paragraphs (d)(4)(i)through(d)(4)(iv).
? e. Revising paragraph (f)(1)(i) and (f)(3).
? f. Adding paragraph (h).
The revisions and additions read as follows:

Sec. 51.309 Requirements related to the Grand Canyon Visibility
Transport Commission.

* * * * *
(b) * * *
(5) Milestone means the maximum level of annual regional sulfur
dioxide emissions for a given year, assessed annually consistent with
paragraph (h)(2) of this section beginning in the year 2003.
* * * * *
(8) Base year means the year, generally a year between 1996 and
1998, for which data for a source included within the program were used
by the WRAP to calculate base year emissions as a starting point for
development of the Annex required by paragraph (f) of this section.
(9) Forecast means the process used by the WRAP to predict future
emissions for purposes of developing the milestones required by
paragraph (f) of this section.
(10) Reforecast means a corrected forecast, based upon
reapplication of the forecasting process after correction of base year
emissions estimates.
(11) BHP San Manuel means:
(i) the copper smelter located in San Manuel, Arizona which
operated during 1990, but whose operations were suspended during the
year 2000,
(ii) The same smelter in the event of a change of name or
ownership.
(12) Phelps Dodge Hidalgo means:
(i) The copper smelter located in Hidalgo, New Mexico which
operated during 1990, but whose operations were suspended during the
year 2000,
(ii) the same smelter in the event of a change of name or
ownership.
(13) Eligible renewable energy resource, for purposes of 40 CFR
51.309, means electricity generated by non-nuclear and non-fossil low
or no air emission technologies.
(c) Implementation Plan Schedule. Each Transport Region State may
meet the requirements of Sec. 51.308(b) through (e) by submitting an
implementation plan that complies with the requirements of this
section. Each Transport Region State must submit an implementation plan
addressing regional haze visibility impairment in the 16 Class I areas
no later than December 31, 2003. Indian Tribes may submit
implementation plans after the December 31, 2003 deadline. A Transport
Region State that does not submit an implementation plan that complies
with the requirements of this section (or whose plan does not comply
with all of the requirements of this section) is subject to the
requirements of Sec. 51.308 in the same manner and to the same extent
as any State not included within the Transport Region.
* * * * *
(d) * * *
(4) * * *
(i) Sulfur dioxide milestones consistent with paragraph (h)(1) of
this section.
(ii) Monitoring and reporting of sulfur dioxide emissions. The plan
submission must include provisions requiring the annual monitoring and
reporting of actual stationary source sulfur dioxide emissions within
the State. The monitoring and reporting data must be sufficient to
determine whether a 13 percent reduction in actual emissions has
occurred between the years 1990 and 2000, and for determining annually
whether the milestone for each year between 2003 and 2018 is exceeded,
consistent with paragraph (h) (2) of this section. The plan submission
must provide for reporting of these data by the State to the
Administrator and to the regional planning organization consistent with
paragraph (h)(2) of this section.
(iii) Criteria and Procedures for a Market Trading Program. The
plan must include the criteria and procedures for activating a market
trading program consistent with paragraphs (h)(3) and (h)(4) of this
section. The plan must also provide for implementation plan assessments
of the program in the years 2008, 2013, and 2018.
(iv) Provisions for market trading program compliance reporting
consistent with paragraph (h)(4) of this section.
* * * * *
(f) * * *
(1) * * *
(i) The annex must contain quantitative emissions milestones for
stationary source sulfur dioxide emissions for the reporting years
2003, 2008, 2013 and 2018. The milestones must provide for steady and
continuing emissions reductions for the 2003-2018 time period
consistent with the Commission's definition of reasonable progress, its
goal of 50 to 70 percent reduction in sulfur dioxide emissions from
1990 actual emission levels by 2040, applicable requirements under the
CAA, and the timing of implementation plan assessments of progress and
identification of deficiencies which will be due in the years 2008,
2013, and 2018. The milestones must be shown to provide for greater
reasonable progress than would be achieved by application of best
available retrofit technology (BART) pursuant to Sec. 51.308(e)(2) and
would be approvable in lieu of BART.
(2) * * *
(3) The EPA will publish the annex upon receipt. If EPA finds that
the annex meets the requirements of paragraph (f)(1) of this section
and assures reasonable progress, then, after public notice and comment,
EPA will amend the requirements of this section to incorporate the
provisions of the annex. If EPA finds that the annex does not meet the
requirements of paragraph (f)(1) of this section, or does not assure
reasonable progress, or if EPA finds that the annex is not received,
then each Transport Region State must submit an implementation plan for
regional haze meeting all of the requirements of Sec. 51.308.
* * * * *
(h) Emissions Reduction Program for Major Industrial Sources of
Sulfur Dioxide. The first implementation plan submission must include a
stationary source emissions reductions program for major industrial
sources of sulfur dioxide that meets the following requirements:
(1) Regional sulfur dioxide milestones. The plan must include the
milestones in Table 1, and provide for the adjustments in paragraphs
(h)(1)(i) through (iv) of this section. Table 1 follows:

[[Page 33785]]

Table 1.--Sulfur Dioxide Emissions Milestones
----------------------------------------------------------------------------------------------------------------
Column 1 Column 2 Column 3 Column 4
----------------------------------------------------------------------------------------------------------------
. . . if BHP San Manuel . . . if neither BHP . . . and the emission
and Phelps Dodge San Manuel nor Phelps inventories for these
Hidalgo resume Dodge Hidalgo resumes years will determine
For the year . . . operation, the maximum operation, the minimum whether emissions are
regional sulfur dioxide regional sulfur dioxide greater than or less
milestone is . . . milestone is . . . than the milestone:
----------------------------------------------------------------------------------------------------------------
2003................................. 720,000 tons........... 682,000 tons........... 2003.
2004................................. 720,000 tons........... 682,000 tons........... Average of 2003 and
2004.
2005................................. 720,000 tons........... 682,000 tons........... Average of 2003, 2004
and 2005.
2006................................. 720,000 tons........... 682,000 tons........... Average of 2004, 2005
and 2006.
2007................................. 720,000 tons........... 682,000 tons........... Average of 2005, 2006
and 2007.
2008................................. 718,333 tons........... 680,333 tons........... Average of 2006, 2007
and 2008.
2009................................. 716,667 tons........... 678,667 tons........... Average of 2007, 2008
and 2009.
2010................................. 715,000 tons........... 677,000 tons........... Average of 2008, 2009
and 2010.
2011................................. 715,000 tons........... 677,000 tons........... Average of 2009, 2010
and 2011.
2012................................. 715,000 tons........... 677,000 tons........... Average of 2010, 2011
and 2012.
2013................................. 695,000 tons........... 659,667 tons........... Average of 2011, 2012
and 2013.
2014................................. 675,000 tons........... 642,333 tons........... Average of 2012, 2013
and 2014.
2015................................. 655,000 tons........... 625,000 tons........... Average of 2013, 2014
and 2015.
2016................................. 655,000 tons........... 625,000 tons........... Average of 2014, 2015
and 2016.
2017................................. 655,000 tons........... 625,000 tons........... Average of 2015, 2016
and 2017.
2018................................. 510,000 tons........... 480,000 tons........... Year 2018 only.
Each year after 2018................. no more than 510,000 no more than 480,000 3-year average of the
tons unless the tons unless the year and the two
milestones are milestones are previous years, or any
replaced with a replaced with a alternative provided
different program that different program that in any future plan
meets any BART and meets any BART and revisions under Sec.
reasonable progress reasonable progress 51.308(f).
requirements requirements
established in Sec. established in Sec.
51.309. 51.309.
----------------------------------------------------------------------------------------------------------------

(i) Adjustment for States and Tribes Which Choose Not to
Participate in the Program, and for Tribes that opt into the program
after the 2003 deadline. If a State or Tribe chooses not to submit an
implementation plan under the option provided in Sec. 51.309, or if
EPA has not approved a State or Tribe's implementation plan by the date
of the draft determination required by Sec. 51.309(h)(3)(ii), the
amounts for that State or Tribe which are listed in Table 2 must be
subtracted from the milestones that are included in the implementation
plans for the remaining States and Tribes. For Tribes that opt into the
program after 2003, the amounts in Table 2 or 4 will be automatically
added to the milestones that are included in the implementation plans
for the participating States and Tribes, beginning with the first year
after the tribal implementation plan implementing Sec. 51.309 is
approved by the Administrator. The amounts listed in Table 2 are for
purposes of adjusting the milestones only, and they do not represent
amounts that must be allocated under any future trading program. Table
2 follows:

Table 2.--Amounts Subtracted From the Milestones for States and Tribes Which Do Not Exercise the Option Provided by Sec. 51.309
--------------------------------------------------------------------------------------------------------------------------------------------------------
State or tribe 2003 2004 2005 2006 2007 2008 2009 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Arizona...................................... 117,372 117,372 117,372 117,372 117,372 117,941 118,511 119,080
2. California................................... 37,343 37,343 37,343 37,784 37,343 36,363 35,382 34,402
3. Colorado..................................... 98,897 98,897 98,897 98,897 98,897 98,443 97,991 97,537
4. Idaho........................................ 18,016 18,016 18,016 18,016 18,016 17,482 16,948 16,414
5. Nevada....................................... 20,187 20,187 20,187 20,187 20,187 20,282 20,379 20,474
6. New Mexico................................... 84,624 84,624 84,624 84,624 84,624 84,143 83,663 83,182
7. Oregon....................................... 26,268 26,268 26,268 26,268 26,268 26,284 26,300 26,316
8. Utah......................................... 42,782 42,782 42,782 42,782 42,782 42,795 42,806 42,819
9. Wyoming...................................... 155,858 155,858 155,858 155,858 155,858 155,851 155,843 155,836
10. Navajo Nation............................... 53,147 53,147 53,147 53,147 53,147 53,240 53,334 53,427
11. Shoshone-Bannock Tribe of the Fort Hall 4,994 4,994 4,994 4,994 4,994 4,994 4,994 4,994
Reservation....................................
12. Ute Indian Tribe of the Uintahand Ouray 1,129 1,129 1,129 1,129 1,129 1,131 1,133 1,135
Reservation....................................
13. Wind River Reservation...................... 1,384 1,384 1,384 1,384 1,384 1,384 1,384 1,384

--------------------------------------------------------------------------------------------------------------------------------------------------------
State or tribe 2011 2012 2013 2014 2015 2016 2017 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Arizona...................................... 119,080 119,080 116,053 113,025 109,998 109,998 109,998 82,302
2. California................................... 34,402 34,402 33,265 32,128 30,991 30,991 30,991 27,491
3. Colorado..................................... 97,537 97,537 94,456 91,375 88,294 88,294 88,294 57,675
4. Idaho........................................ 16,414 16,414 15,805 15,197 14,588 14,588 14,588 13,227

[[Page 33786]]

5. Nevada....................................... 20,474 20,474 20,466 20,457 20,449 20,449 20,449 20,232
6. New Mexico................................... 83,182 83,182 81,682 80,182 78,682 78,682 78,682 70,000
7. Oregon....................................... 26,316 26,316 24,796 23,277 21,757 21,757 21,757 8,281
8. Utah......................................... 42,819 42,819 41,692 40,563 39,436 39,436 39,436 30,746
9. Wyoming...................................... 155,836 155,836 151,232 146,629 142,025 142,025 142,025 97,758
10. Navajo Nation............................... 53,427 53,427 52,707 51,986 51,266 51,266 51,266 44,772
11. Shoshone-Bannock Tribe of the Fort Hall 4,994 4,994 4,994 4,994 4,994 4,994 4,994 4,994
Reservation....................................
12. Ute Indian Tribe of the Uintahand Ouray 1,135 1,135 1,135 1,135 1,135 1,135 1,135 1,135
Reservation....................................
13. Northern Arapaho and Shoshone Tribes of the 1,384 1,384 1,384 1,384 1,384 1,384 1,384 1,384
Wind River Reservation.........................
--------------------------------------------------------------------------------------------------------------------------------------------------------

(ii) Adjustment for Future Operation of Copper Smelters.
(A) The plan must provide for adjustments to the milestones in the
event that Phelps Dodge Hidalgo and/or BHP San Manuel resume operations
or that other smelters increase their operations.
(B) The plan must provide for adjustments to the milestones
according to Tables 3a and 3b except that if either the Hidalgo or San
Manuel smelters resumes operation and is required to obtain a permit
under 40 CFR 52.21 or 40 CFR 51.166, the adjustment to the milestone
must be based upon the levels allowed by the permit. In no instance may
the adjustment to the milestone be greater than 22,000 tons for the
Phelps Dodge Hidalgo, greater than 16,000 tons for BHP San Manuel, or
more than 30,000 tons for the combination of the Phelps Dodge Hidalgo
and BHP San Manuel smelters for the years 2013 through 2018. Tables 3a
and 3b follow:

Table 3a.--Adjustments to the Milestones for Future Operations of Copper
Smelters
------------------------------------------------------------------------
. . . then you
calculate the
milestone by
Scenario If this happens and this happens adding this
. . . . . . amount to the
value in column
3 of Table 1
------------------------------------------------------------------------
1.................. Phelps Dodge Phelps Dodge A. Beginning
Hidalgo resumes Hidalgo resumes with the year
operation, but production that
BHP San Manuel consistent with production
does not. past operations resumes, and
and emissions. for each year
up to the year
2012, the
milestone
increases by:
(1) 22,000 tons
PLUS
(2) Any amounts
identified in
Table 3b.
B. For the
years 2013
through 2018,
the milestone
increases by
this amount or
by 30,000
tons,
whichever is
less.
2.................. Phelps Dodge Phelps Dodge A. Beginning
Hidalgo resumes Hidalgo resumes with the year
operation, but operation in a that
BHP San Manuel substantially production
does not. different resumes, and
manner such for each year
that emissions up to the year
will be less 2012, the
than for past milestone
operations (an increases by:
example would (1) Expected
be running only emissions for
one portion of Phelps Dodge
the plant to Hidalgo (not
produce sulfur to exceed
acid only). 22,000 tons),
PLUS
(2) Any amounts
identified in
Table 3b.
B. For the
years 2013
through 2018,
the milestone
increases by
this amount or
by 30,000
tons,
whichever is
less.
3.................. BHP San Manuel BHP San Manuel A. 16,000 tons
Manuel resumes resumes PLUS
operation, but production B. Any amounts
Phelps Dodge consistent with identified in
Hidalgo does past operations Table 3b.
not. and emissions.
4.................. BHP San Manuel BHP San Manuel A. Expected
resumes resumes emissions for
operation, but operations in a BHP (not to
Phelps Dodge substantially exceed 16,000
Hidalgo does different tons) PLUS
not. manner such B. Any amounts
that emissions identified in
will be less Table 3b.
than for past
operations (an
example would
be running only
one portion of
the plant to
produce sulfur
acid only).
5.................. Both Phelps Both smelters A. Beginning
Dodge Hidalgo resume with the year
and BHP San production that
Manuel resume consistent with production
operations. past operations resumes, and
and emissions. for each year
up to the year
2012, the
milestone
increase by
38,000 tons.
B. For the
years 2013
through 2018,
the milestone
increases by
30,000 tons.

[[Page 33787]]

6.................. Both Phelps Phelps Dodge A. For the year
Dodge Hidalgo Hidalgo resumes that
and BHP San production production
Manuel resume consistent with resumes, and
operations. past operations for each year
and emissions, up to the year
but BHP San 2012, the
Manuel resumes milestone
operations in a increases by:
substantially (1) 22,000 PLUS
different (2) Expected
manner such emissions for
that emissions San Manuel
will be less (not to exceed
than for past 16,000 tons).
operations (an B. For the
example would years 2013
be running only though 2018,
one portion of the milestone
the plant to increases by
produce sulfur this same
acid only). amount, or by
30,000 tons,
whichever is
less.
7.................. Both Phelps BHP San Manuel A. For the year
Dodge Hidalgo resume that
and BHP San production production
Manuel resumes consistent with resumes, and
operations. the past for each year
operations and up to the year
emissions, but 2012,
Phelps Dodge milestone
Hidalgo resumes increases by:
operations in a (1) 16,000 PLUS
substantially (2) Expected
different Hidalgo
manner such emissions (not
that emissions to exceed
will be less 22,000 tons).
than for past B. For the
operations (an years 2013
example would though 2018,
be running only the milestone
one portion of increases by
the plant to this same
produce sulfur amount, or by
acid only). 30,000 tons,
whichever is
less.
8.................. Both Phelps ................ A. Any amounts
Dodge Hidalgo identified in
and BHP San Table 3b.
Manuel do not
resume
operations.
------------------------------------------------------------------------

Table 3b.--Adjustments for Certain Copper Smelters Which Operate Above
Baseline Levels
[In tons]
------------------------------------------------------------------------
. . . the
complies with milestone
existing increases by
permits but the difference
has actual between actual
Where it applies in table 3a, if the annual emissions and
following smelter . . . emissions that the baseline
exceed the level, or the
following following
baseline level amount,
. . . whichever is
less
------------------------------------------------------------------------
Asarco Hayden........................... 23,000 3,000
BHP San Manuel.......................... 16,000 1,500
Kennecott Salt Lake..................... 1,000 100
Phelps Dodge Chino...................... 16,000 3,000
Phelps Dodge Hidalgo.................... 22,000 4,000
Phelps Dodge Miami...................... 8,000 2,000
------------------------------------------------------------------------

(iii) Adjustments for changes in emission monitoring or calculation
methods. The plan must provide for adjustments to the milestones to
reflect changes in sulfur dioxide emission monitoring or measurement
methods for a source that is included in the program, including changes
identified under paragraph (h)(2)(iii)(D) of this section. Any such
adjustment based upon changes to emissions monitoring or measurement
methods must be made in the form of an implementation plan revision
that complies with the procedural requirements of Sec. 51.102 and
Sec. 51.103. The implementation plan revision must be submitted to the
Administrator no later than the first due date for a periodic report
under paragraph (d)(10) of this section following the change in
emission monitoring or measurement method.
(iv) Adjustments for changes in flow rate measurement methods for
affected sources under 40 CFR 72.1. For the years between 2003 and
2017, the implementation plan must provide for adjustments to the
milestones for sources using the methods contained in 40 CFR part 60,
appendix A, Methods 2F, 2G, and 2H. For any year for which such an
adjustment has not yet been made to the milestone, the implementation
plan must provide for an adjustment to the emissions reporting to
ensure consistency. The implementation plan must provide for
adjustments to the milestones by no later than the date of the periodic
plan revision required under Sec. 51.309(d)(10).
(v) Adjustments due to enforcement actions arising from
settlements. The implementation plan must provide for adjustments to
the milestones, as specified in paragraph (h)(1)(vii) and (viii) of
this section, if:
(A) an agreement to settle an action, arising from allegations of a
failure of an owner or operator of an emissions unit at a source in the
program to comply with applicable regulations which were in effect
during the base year, is reached between the parties to the action;
(B) the alleged failure to comply with applicable regulations
affects the assumptions that were used in calculating the source's base
year and forecasted sulfur dioxide emissions; and
(C) the settlement includes or recommends an adjustment to the
milestones.

[[Page 33788]]

(vi) Adjustments due to enforcement actions arising from
administrative or judicial orders. The implementation plan must also
provide for adjustments to the milestones as directed by any final
administrative or judicial order, as specified in paragraph (h)(1)(vii)
and
(viii) of this section. Where the final administrative or judicial
order does not include a reforecast of the source's baseline, the State
or Tribe shall evaluate whether a reforecast of the source's baseline
emissions is appropriate.
(vii) Adjustments for enforcement actions. The plan must provide
that, based on paragraph (h)(1)(v) and (vi) of this section, the
milestone must be decreased by an appropriate amount based on a
reforecast of the source's decreased sulfur dioxide emissions. The
adjustments do not become effective until after the source has reduced
its sulfur dioxide emissions as required in the settlement agreement,
or administrative or judicial order. All adjustments based upon
enforcement actions must be made in the form of an implementation plan
revision that complies with the procedural requirements of Sec. Sec.
51.102 and 51.103.
(viii) Documentation of adjustments for enforcement actions. In the
periodic plan revision required under 51.309(d)(10), the State or Tribe
shall include the following documentation of any adjustment due to an
enforcement action:
(A) identification of each source under the State or Tribe's
jurisdiction which has reduced sulfur dioxide emissions pursuant to a
settlement agreement, or an administrative or judicial order;
(B) for each source identified, a statement indicating whether the
milestones were adjusted in response to the enforcement action;
(C) discussion of the rationale for the State or Tribe's decision
to adjust or not to adjust the milestones; and
(D) if extra SO₂ emissions reductions (over and above
those reductions needed for compliance with the applicable regulations)
were part of an agreement to settle an action, a statement indicating
whether such reductions resulted in any adjustment to the milestones or
allowance allocations, and a discussion of the rationale for the State
or Tribe's decision on any such adjustment.
(ix) Adjustment based upon program audits. The plan must provide
for appropriate adjustments to the milestones based upon the results of
program audits. Any such adjustment based upon audits must be made in
the form of an implementation plan revision that complies with the
procedural requirements of Sec. Sec. 51.102 and 51.103. The
implementation plan revision must be submitted to the Administrator no
later than the first due date after the audit for a periodic report
under paragraph (d)(10) of this section.
(x) Adjustment for individual sources opting into the program. The
plan may provide for adjustments to the milestones for any source
choosing to participate in the program even though the source does not
meet the 100 tons per year criterion for inclusion. Any such
adjustments must be made in the form of an implementation plan revision
that complies with the procedural requirements of Sec. Sec. 51.102 and
51.103.
(2) Requirements for monitoring, recordkeeping and reporting of
actual annual emissions of sulfur dioxide.
(i) Sources included in the program. The implementation plan must
provide for annual emission monitoring and reporting, beginning with
calendar year 2003, for all sources with actual emissions of sulfur
dioxide of 100 tons per year or more as of 2003, and all sources with
actual emissions of 100 tons or more per year in any subsequent year.
States and Tribes may include other sources in the program, if the
implementation plan provides for the same procedures and monitoring as
for other sources in a way that is federally enforceable.
(ii) Documentation of emissions calculation methods. The
implementation plan must provide documentation of the specific
methodology used to calculate emissions for each emitting unit included
in the program during the base year. The implementation plan must also
provide for documentation of any change to the specific methodology
used to calculate emissions at any emitting unit for any year after the
base year.
(iii) Recordkeeping. The implementation plan must provide for the
retention of records for at least 10 years from the establishment of
the record. If a record will be the basis for an adjustment to the
milestone as provided for in paragraph (h)(1) of this section, that
record must be retained for at least 10 years from the establishment of
the record, or 5 years after the date of the implementation plan
revision which reflects the adjustment, whichever is longer.
(iv) Completion and submission of emissions reports. The
implementation plan must provide for the annual collection of emissions
data for sources included within the program, quality assurance of the
data, public review of the data, and submission of emissions reports to
the Administrator and to each State and Tribe which has submitted an
implementation plan under this section. The implementation plan must
provide for submission of the emission reports by no later than
September 30 of each year, beginning with reports due September 30,
2004 for emissions from calendar year 2003. For sources for which
changes in emission quantification methods require adjustments under
paragraph (h)(1)(iii) of this section, the emissions reports must
reflect the method in place before the change, for each year until the
milestone has been adjusted. If each of the States which have submitted
an implementation plan under this section have identified a regional
planning organization to coordinate the annual comparison of regional
SO₂ emissions against the appropriate milestone, the
implementation plan must provide for reporting of this information to
the regional planning body.
(v) Exceptions reports. The emissions report submitted by each
State and Tribe under paragraph (h)(2)(ii) of this section must provide
for exceptions reports containing the following:
(A) identification of any new or additional sulfur dioxide sources
greater than 100 tons per year that were not contained in the previous
year emissions report;
(B) identification of sources shut down or removed from the
previous year emissions report;
(C) explanation for emissions variations at any covered source that
exceed plus or minus 20 percent from the previous year's emissions
report;
(D) identification and explanation of changed emissions monitoring
and reporting methods at any source. The use of any changed emission
monitoring or reporting methods requires an adjustment to the
milestones according to paragraph (h)(1)(iii) of this section.
(vi) Reporting of emissions for the Mohave Generating Station for
the years 2003 through 2006. For the years 2003, 2004, 2005, and for
any part of the year 2006 before installation and operation of sulfur
dioxide controls at the Mohave Generating Station, emissions from the
Mohave Generating Station will be calculated using a sulfur dioxide
emission factor of 0.15 pounds per million BTU.
(vii) Special provision for the year 2013. The implementation plan
must provide that in the emissions report for calendar year 2012, which
is due by September 30, 2013 under paragraph (h)(2)(iv) of this
section, each State has the option of including calendar year 2018
emission projections for each source, in addition to the actual

[[Page 33789]]

emissions for each source for calendar year 2012.
(3) Annual comparison of emissions to the milestone.
(i) The implementation plan must provide for a comparison each year
of annual SO₂ emissions for the region against the
appropriate milestone. In making this comparison, the State or Tribe
must make the comparison, using its annual emissions report and
emissions reports from other States and Tribes reported under paragraph
(h)(2)(iv) of this section.
(ii) The implementation plan must provide for the State or Tribe to
make available to the public a draft report comparing annual emissions
to the milestone by December 31 of each year. The first draft report,
comparing annual emissions in 2003 to the year 2003 milestone will be
due December 31, 2004.
(iii) The implementation plan must provide for the State or Tribe
to submit to the Administrator a final determination of annual
emissions by March 31 of the following year. The final determination
must state whether or not the annual emissions for the year exceed the
appropriate milestone.
(iv) A State or Tribe may delegate its responsibilities to prepare
draft reports and reports supporting the final determinations under
paragraphs (h)(3)(i) through (iii) of this section to a regional
planning organization designated by each State or Tribe submitting an
approvable plan under this section.
(v) Special considerations for year 2012 report. If each State or
Tribe submitting an approvable plan under this section has included
calendar year 2018 emission projections under paragraph (h)(2)(vii) of
this section, then the report for the year 2012 milestone which is due
by December 31, 2013 under paragraph (h)(3)(ii) of this section may
also include a comparison of the regional year 2018 emissions
projection with the milestone for calendar year 2018. If the report
indicates that the year 2018 milestone will be exceeded, then the State
or Tribe may choose to implement the market trading program beginning
in the year 2018, if each State or Tribe submitting an approvable plan
under this section agrees.
(vi) Independent review. The implementation plan must provide for
reviews of the annual emissions reporting program by an independent
third party. This independent review is not required if a determination
has been made under paragraph (h)(3)(iii) of this section to implement
the market trading program. The independent review shall be completed
by the end of 2006, and every 5 years thereafter, and shall include an
analysis of:
(A) the uncertainty of the reported emissions data;
(B) whether the uncertainty of the reported emissions data is
likely to have an adverse impact on the annual determination of
emissions relative to the milestone; and,
(C) whether there are any necessary improvements for the annual
administrative process for collecting the emissions data, reporting the
data, and obtaining public review of the data.
(4) Market trading program. The implementation plan must provide
for implementation of a market trading program if the determination
required by paragraph (h)(3)(iii) of this section indicates that a
milestone has been exceeded. The implementation plan must provide for
the option of implementation of a market trading program if a report
under paragraph (h)(3)(v) of this section indicates that projected
emissions for the year 2018 will exceed the year 2018 milestone. The
implementation plan must provide for a market trading program whose
provisions are substantively the same for each State or Tribe
submitting an approvable plan under this section. The implementation
plan must include the following market trading program provisions:
(i) Allowances. For each source in the program, the implementation
plan must either identify the specific allocation of allowances, on a
tons per year basis, for each calendar year from 2009 to 2018 or the
formula or methodology that will be used to calculate the allowances if
the program is triggered. The implementation plan must provide that
eligible renewable energy resources that begin operation after October
1, 2000 will receive 2.5 tons of SO₂ allowances per megawatt
of installed nameplate capacity per year. Allowance allocations for
renewable energy resources that begin operation prior to the program
trigger will be retroactive to the time of initial operation. The
implementation plan may provide for an upper limit on the number of
allowances provided for eligible renewable energy resources. The total
of the tons per year allowances across all participating States and
Tribes, including the renewable energy allowances, may not exceed the
amounts in Table 4 of this paragraph, less a 20,000 ton amount that
must be set aside for use by Tribes. The implementation plan may
include procedures for redistributing the allowances in future years,
if as the amounts in Table 4 of this paragraph, less a 20,000 ton
amount, are not exceeded. The implementation plan must provide that any
adjustment for a calendar year applied to the milestones under
paragraphs (h)(1)(i) through (vii) of this section must also be applied
to the amounts in Table 4. Table 4 follows:

Table 4.--Total Amount of Allowances by Year
------------------------------------------------------------------------
If the two If the two
smelters smelters do
resume not resume
operations, operations,
the total the total
number of number of
For this year: allowances allowances
issued by issued by
States and States and
Tribes may not Tribes may not
exceed this exceed this
amount: amount:
------------------------------------------------------------------------
2009.................................... 715,000 677,000
2010.................................... 715,000 677,000
2011.................................... 715,000 677,000
2012.................................... 715,000 677,000
2013.................................... 655,000 625,000
2014.................................... 655,000 625,000
2015.................................... 655,000 625,000
2016.................................... 655,000 625,000
2017.................................... 655,000 625,000

[[Page 33790]]

2018.................................... 510,000 480,000
------------------------------------------------------------------------

(ii) Compliance with allowances. The implementation plan must
provide that, beginning with the compliance period 6 years following
the calendar year for which emissions exceeded the milestone and for
each compliance period thereafter, the owner or operator of each source
in the program must hold allowances for each ton of sulfur dioxide
emitted by the source.
(iii) Emissions quantification protocols. The implementation plan
must include specific emissions quantification protocols for each
source category included within the program, including the
identification of sources subject to part 75 of this chapter. For
sources subject to part 75 of this chapter, the implementation plan may
rely on the emissions quantification protocol in part 75. For source
categories with sources in more than one State or tribal area
submitting an implementation plan under this section, each State or
Tribe should use the same protocol to quantify emissions for sources in
the source category. The protocols must provide for reliability
(repeated application obtains results equivalent to EPA-approved test
methods), and replicability (different users obtain the same or
equivalent results that are independently verifiable). The protocols
must include procedures for addressing missing data, which provide for
conservative calculations of emissions and provide sufficient
incentives for sources to comply with the monitoring provisions. If the
protocols are not the same for sources within a given source category,
and where the protocols are not based upon part 75 or equivalent
methods, the State or Tribes must provide a demonstration that each
such protocol meets all of the criteria of this paragraph.
(iv) Monitoring and Recordkeeping. The implementation plan must
include monitoring provisions which are consistent with the emissions
quantification protocol. Monitoring required by these provisions must
be timely and of sufficient frequency to ensure the enforceability of
the program. The implementation plan must also include requirements
that the owner or operator of each source in the program keep records
consistent with the emissions quantification protocols, and keep all
records used to determine compliance for at least 5 years. For source
owners or operators which use banked allowances, all records relating
to the banked allowance must be kept for at least 5 years after the
banked allowances are used.
(v) Tracking system. The implementation plan must provide for
submitting data to a centralized system for the tracking of allowances
and emissions. The implementation plan must provide that all necessary
information regarding emissions, allowances, and transactions is
publicly available in a secure, centralized data base. In the system,
each allowance must be uniquely identified. The system must allow for
frequent updates and include enforceable procedures for recording data.
(vi) Authorized account representative. The implementation plan
must include provisions requiring the owner or operator of each source
in the program to identify an authorized account representative. The
implementation plan must provide that all matters pertaining to the
account, including, but not limited to, the deduction and transfer of
allowances in the account, and certifications of the completeness and
accuracy of emissions and allowances transactions required in the
annual report under paragraph (h)(4)(vii) of this section shall be
undertaken only by the authorized account representative.
(vii) Annual report. The implementation plan must include
provisions requiring the authorized account representative for each
source in the program to demonstrate and report within a specified time
period following the end of each calendar year that the source holds
allowances for each ton per year of SO₂ emitted in that
year. The implementation plan must require the authorized account
representative to submit the report within 60 days after the end of
each calendar year, unless an alternative deadline is specified
consistent with emission monitoring and reporting procedures.
(viii) Allowance transfers. The implementation plan must include
provisions detailing the process for transferring allowances between
parties.
(ix) Emissions banking. The implementation plan may provide for the
banking of unused allowances. Any such provisions must state whether
unused allowances may be kept for use in future years and describe any
restrictions on the use of any such allowances. Allowances kept for use
in future years may be used in calendar year 2018 only if the
implementation plan ensures that such allowances would not interfere
with the achievement of the year 2018 amount in Table 4 in paragraph
(c)(4)(i) of this section.
(x) Penalties. The implementation plan must:
(A) provide that if emissions from a source in the program exceed
the allowances held by the source, the source's allowances will be
reduced by an amount equal to two times the source's tons of excess
emissions,
(B) provide for appropriate financial penalties for excess
emissions, either $5000 per ton (year 2000 dollars) or an alternative
amount that is the same for each participating State and Tribe and that
substantially exceeds the expected cost of allowances,
(C) ensure that failure to comply with any program requirements
(including monitoring, recordkeeping, and reporting requirements) are
violations which are subject to civil and criminal remedies provided
under applicable State or tribal law and the Clean Air Act, that each
day of the control period is a separate violation, and that each ton of
excess emissions is a separate violation. Any allowance reduction or

[[Page 33791]]

penalty assessment required under paragraphs (h)(4)(x)(A) and (B) of
this section shall not affect the liability of the source for remedies
under this paragraph.
(xi) Provisions for periodic evaluation of the trading program. The
implementation plan must provide for an evaluation of the trading
program no later than 3 years following the first full year of the
trading program, and at least every 5 years thereafter. Any changes
warranted by the evaluation should be incorporated into the next
periodic implementation plan revision required under paragraph (d)(10)
of this section. The evaluation must be conducted by an independent
third party and must include an analysis of:
(A) Whether the total actual emissions could exceed the values in
Sec. 51.309(h)(4)(i), even though sources comply with their
allowances;
(B) Whether the program achieved the overall emission milestone it
was intended to reach;
(C) The effectiveness of the compliance, enforcement and penalty
provisions;
(D) A discussion of whether States and Tribes have enough resources
to implement the trading program;
(E) Whether the trading program resulted in any unexpected
beneficial effects, or any unintended detrimental effects;
(F) Whether the actions taken to reduce sulfur dioxide have led to
any unintended increases in other pollutants;
(G) Whether there are any changes needed in emissions monitoring
and reporting protocols, or in the administrative procedures for
program administration and tracking; and
(H) The effectiveness of the provisions for interstate trading, and
whether there are any procedural changes needed to make the interstate
nature of the program more effective.
(5) Other provisions.
(i) Permitting of affected sources. The implementation plan must
provide that for sources subject to part 70 or part 71 of this chapter,
the implementation plan requirements for emissions reporting and for
the trading program under paragraph (h) of this section must be
incorporated into the part 70 or part 71 permit. For sources not
subject to part 70 or part 71 of this chapter, the requirements must be
incorporated into a permit that is enforceable as a practical matter by
the Administrator, and by citizens to the extent permitted under the
Clean Air Act.
(ii) Integration with other programs. The implementation plan must
provide that in addition to the requirements of paragraph (h) of this
section, any applicable restrictions of Federal, State, and tribal law
remain in place. No provision of paragraph (h) of this section should
be interpreted as exempting any source from compliance with any other
provision of Federal, State, tribal or local law, including an approved
implementation plan, a Federally enforceable permit, or any other
Federal regulations.

[FR Doc. 03-13255 Filed 6-4-03; 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

Revisions to Regional Haze Rule To Incorporate Sulfur Dioxide Milestones and Backstop Emissions Trading Program for Nine Western States and Eligible Indian Tribes Within That Geographic Area

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